Jo-Ann Stores LLC v. Sound Properties LLC

District Court, W.D. Washington·Decided June 7, 2021·No. 2:19-cv-01831·Unknown

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE

JO-ANN STORES, LLC, CASE NO. C19-1831JLR Plaintiff, ORDER GRANTING MOTION v. FOR SUMMARY JUDGMENT SOUND PROPERTIES, LLC, Defendant.

Before the court is Plaintiff Jo-Ann Stores, LLC’s (“Jo-Ann Stores” or “Tenant”) motion for summary judgment. (MSJ (Dkt. # 28); Reply (Dkt. # 35).) Defendant Sound Properties, LLC (“Sound” or “Landlord”) opposes the motion. (Resp. (Dkt. # 31).) The court has reviewed the motion, the submissions filed in support of and in opposition to //

//

// the motion, the relevant portions of the record, and the applicable law. Being fully advised,1 the court GRANTS the motion.

Jo-Ann Stores is “the nation’s leading retailer of fabric and crafting supplies.” (Beegle Decl. (Dkt. # 30) ¶ 3.) In 1996, it entered into a commercial lease for premises (the “Premises”) at the Auburn Shopping Center in Auburn, Washington (the “Shopping Center”). (Id. ¶¶ 4-5, Ex. 1 (“Lease”).) At that time, Jo-Ann Stores signed the lease with John V. Farrell and Leeann Farrell (collectively, the “Farrells”). (See id.) In 2004, the

Farrells sold the Shopping Center, and ultimately, Sound bought the property on July 16, 2013. (Kirkland Decl. (Dkt. # 33) ¶¶ 4-5.) Around that time, the Shopping Center had various tenants, including a dance studio, laundry and cleaning service businesses, and a financial services business. (Pharmer Decl. (Dkt. # 32) ¶¶ 8-9, Ex. E.) After Sound purchased the Shopping Center, it received an Estoppel Certificate

from Jo-Ann Stores, certifying that to Jo-Ann Stores’s knowledge, “the Landlord is not currently in default under the Lease.” (Id. ¶ 10, Ex. E (“Estoppel Cert.”) ¶ 4.) However, Jo-Ann Stores stated that it “has not inspected the Shopping Center . . . to verify the Landlord is in compliance with its obligation with respect thereto, and Tenant hereby reserves all rights regarding the same.” (Id.) Furthermore, the certification provided that

“[n]othing contained herein will . . . waive or estop any claims, defenses, rights or remedies of Tenant[] or . . . relieve the Landlord from any of its obligations under the

1 Sound requests oral argument (see Resp. at 1), but the court finds that oral argument would not be helpful to its disposition of the motion, see Local Rules W.D. Wash. LCR 7(b)(4). Lease.” (Id. ¶ 9.) Jo-Ann Stores “acknowledge[d] that [Sound is] relying upon this Estoppel Certificate and the accuracy of the information contained herein,” but reaffirmed that it “will not be liable to any party for damages of any kind whatsoever . . .

resulting from any statement in this certificate.” (Id. ¶ 12.) Jo-Ann Stores and Sound executed a “Third Lease Modification and Extension Agreement” (the “Lease”) on November 8, 2013. (Beegle Decl. ¶ 4.) Under the Lease, the fixed minimum rent was $10,080 per month for February 1, 2019, to January 31, 2021. (Id. ¶ 6.) The Lease also contained the following covenant of the Landlord:

The Shopping Center shall be maintained, operated and managed as a first-class retail project in compliance with all laws, regulations and orders and shall be used and occupied only for normal retail uses customarily conducted in first-class shopping centers; and in no event shall the Shopping Center or any portion thereof be used as or for [listing prohibited uses].

(Lease § 26(a)(vii).) The parties agreed that in event of breach by Sound, Jo-Ann Stores had the right: (i) to terminate this Lease at any time during the period or such breach; (ii) to pay Substitute Rent during the period of such breach; and/or (iii) to refrain from making any payment of Rent during the period of such breach provided that business cannot reasonably be conducted from the Premises on a profitable basis of such breach.

(Id. § 26(b).) Substitute Rent was defined as $1,000 per month, invokable on a retroactive basis back to the date the breach first occurred. (Id. §§ 14, 38.) The Lease additionally included the following section entitled “No Waiver of Default”: No waiver by either party of any of the . . . covenants . . . and no waiver of any legal or equitable relief or remedy shall be implied by the failure of either party to assert any rights, or to declare any forfeiture, or for any other reason, and no waiver of any of said . . . covenants . . . shall be valid unless it shall be in writing signed by both parties hereto. No waiver by either party or forgiveness of performance by either party in respect to one or more tenants of the Shopping Center shall constitute a waiver or forgiveness of performance in favor of Tenant, Landlord or any other tenant, nor shall the waiver or the forgiveness of performance of any one or more of the terms . . . of this Lease be claimed or pleaded by Tenant or Landlord to excuse a subsequent failure of performance of any of the . . . covenants. (Id. § 31.) The Lease is governed by Washington state law. (Id. § 41.) In November 2018, Sound leased space in the Shopping Center to Ideal Option, PLLC (“Ideal Option”), a “counseling-based business that helps individuals overcome addiction-related problems.” (Kirkland Decl. ¶ 7; see Riojas Decl. (Dkt. # 29) ¶ 2, Ex. A (“Ideal Option Lease”).) The lease with Ideal Option specified that Ideal Option: shall use the Premises solely for the purpose of conducting the business of a medical addiction treatment clinic . . . and for no other use without Landlord’s consent. (Ideal Option Lease § 5.1.) The lease further specified that Ideal Option “agrees not to use the Premises for the sale of merchandise . . . without Landlord’s prior written consent.” (Id. § 5.3.) After Sound leased space to Ideal Option, Jo-Ann Stores notified Sound on December 4, 2018, that Sound was in breach of the Lease, which, it argued, entitled Jo-Ann Stores to pay Substitute Rent retroactive to November 1, 2018. (Beegle Decl. ¶ 7, Ex. 2; Kirkland Decl. ¶ 8.) Sound responded on December 6, 2018, acknowledging “the occupancy by Ideal Option as a retail counseling and therapy center” but “reject[ing] [Jo-Ann Stores’s] assertion that representations and covenants are not being met” because Sound was “continu[ing] to maintain, operate and manage the [Shopping Center] as a first class retail project.” (Kirkland Decl. ¶ 9, Ex. A at 1.) Jo-Ann Stores replied on January 3, 2019, disagreeing “with the assertion that the addiction treatment center is a retail use that is normally found in first-class shopping centers.” (Beegle Decl. ¶ 8, Ex. 3 at 1.) It declared its intent to pay Substitute Rent for so long as Ideal Option continues to

operate in the Shopping Center. (Id.) The parties continued to correspond over the matter. On March 20, 2019, Sound acknowledged that Ideal Option is “not presently retailing[,] as-such [sic] the Landlord is working closely with them exploring a retail use that they can implement.” (Beegle Decl. ¶ 9, Ex. 4 at 1; see also Riojas Decl. ¶ 3, Ex. B at 14 (stating in interrogatory answer that

“Ideal Option is primarily a service-based business”).) Sound expressed its “intent to assist [Ideal Option] to institute retail such that there is no technical violation of [the] Lease.” (Id.) However, although Sound “attempted to [sic] with Ideal Option to expand its services into retail, including but not limited to supplements and vitamins,” there is no evidence that Ideal Option ever did so. (See Riojas Decl. ¶ 3, Ex. B at 14.) Reaching no

resolution, Sound threatened to evict Jo-Ann Stores on April 16, 2019, due to outstanding rent of $45,158.40—the full rent minus the Substitute Rent Jo-Ann Stores had been paying. (Beegle Decl. ¶ 10, Ex. 5 at 1.) To preserve its continued use of the space, Jo-Ann Stores paid the outstanding amount and agreed to pay the full rent moving forward, with the expectation that if a

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