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Grand Union Co. v. Cord Meyer Development Co.

May 13, 1985

THE GRAND UNION COMPANY, PLAINTIFF-APPELLEE-CROSS-APPELLANT,
v.
CORD MEYER DEVELOPMENT COMPANY AND KING KULLEN GROCERY COMPANY, INC., DEFENDANTS-APPELLANTS-CROSS-APPELLEES



Appeal from a judgment of the Eastern District of New York, Leonard D. Wexler, Judge, nullifying a lease, restricting the negotiation and execution of a similar lease and awarding attorneys' fees.

Lumbard, Mansfield and Pierce, Circuit Judges.

LUMBARD, Circuit Judge:

All parties appeal from an August 8, 1984 judgment of the Eastern District of New York, Leonard D. Wexler, Judge, which, based on the court's construction of an ambiguous contract provision: 1) nullified a lease between Cord Meyer Development Co. and King Kullen Grocery Co.; 2) enjoined Cord Meyer from negotiating with any supermarket wishing to lease space in its Bay Terrace Shopping Center until August 9, 1985 and from entering into a lease with such a supermarket giving the tenant any rights, even for purposes of renovation, prior to February 9, 1986; and 3) directed Cord Meyer to pay Grand Union's costs and attorneys' fees. Each party argues that the court misinterpreted the contract provision at issue. In addition, Cord Meyer asserts that the district court exceeded its authority in granting Grand Union relief.

We agree with Judge Wexler's interpretation of the contract and with the equitable relief he granted. Accordingly, we affirm the judgment of the district court to the extent that it nullified the Cord Meyer-King Kullen lease and restricted Cord Meyer's authority to negotiate and execute a replacement lease. We reverse only that part of the judgment requiring Cord Meyer to pay Grand Union's attorneys' fees.

Grand Union, a supermarket chain, operates a food store in Cord Meyer's Bay Terrace Shopping Center in Bayside, Queens. It operates the store as a successor in interest to Sunrise Supermarkets Corporation under a lease dated September 22, 1958 between Sunrise Supermarkets and Cord Meyer. The original lease commenced February 9, 1960 and ran for 15 years. Article 40 of the lease gave the tenant an option to renew for 10 years under the same conditions but at a higher rent. In 1974, Grand Union exercised that option, extending its lease to February 9, 1985.

Article 39(b) of the lease, as originally drafted, prohibited Cord Meyer from renting any other space in the shopping center "as a supermarket, grocery, fruit, vegetable, dairy and/or non-Kosher butcher" during the term of Grand Union's tenancy. On June 3, 1975 Grand Union and Cord Meyer modified Articles 39(b) and 40. Pursuant to the modification, Grand Union was granted options to renew for two additional five-year terms, and in return Cord Meyer received the right, subject to certain restrictions, to lease, after February 9, 1985, the part of the shopping center then used as a bowling alley or any new structures as a supermarket. The Modification Agreement, which Grand Union claims prohibits Cord Meyer from negotiating with any other supermarkets until August 9, 1984, reads, in relevant part, as follows:

3. Paragraph 40 of the Lease shall be deemed amended so as to give

Tenant the right and option to extend the demised term for two

additional periods of five (5) years each (the "Extended Terms") on

the same terms, provisions and conditions (except that the minimum

rental shall be adjusted as provided in Article 40) as contained in

the Lease. Tenant may exercise either or both of the said options

to extend the demised term by giving to Landlord a written notice

thereof not less than six (6) months prior to the scheduled date

for termination of the then applicable demised term or first

Extended Term . . . .

4. In the event that Tenant exercises either or both of its options

for an Extended Term or Extended Terms as set forth ...


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