I N THE COURT OF APPEALS OF TENNESSEE
EASTERN SECTI ON FILED June 6, 1997
Cecil Crowson, Jr. KEI TH HARDWARE, I NC. , ) C/ A NO. 03A01-Appellate C ourt Clerk 9610- CH- 00339 ) Pl a i nt i f f - Appe l l a nt , ) WASHI NGTON CHANCERY ) v. ) HON. LEW S W M I . AY, ) CHANCELLOR DOUGLAS L. W TE a nd wi f e , HI ) CAROLYN L. W TE, HI ) ) De f e nda nt s - Appe l l e e s . ) REMANDED
M STANLEY GI VENS, ANDERSON, FUGATE, GI VENS, COUNTS & BELI SLE, . J o h n s on Ci t y, f or Pl a i nt i f f - Appe l l a nt .
J OHN S. TAYLOR, M KI NNON, FOW c LER, FOX & TAYLOR, J ohns on Ci t y , f o r De f e nda nt s - Appe l l e e s .
O P I N I O N
Fr a nks . J .
The i s s ue on t hi s i nt e r l oc ut or y a ppe a l gr a nt e d
p u r s u a nt t o T. R. A. P. Rul e 9, i s whe t he r t he l e a s e be t we e n t he
p a r t i e s i s t oo br oa d t o be e nf or c e a bl e , a s wa s he l d by t he
Tr i a l Cour t .
Si nc e 1994, a p pe l l a nt ha s be e n a t e na nt i n
a p p e l l e e s ’ s hoppi ng c e nt e r , a nd t he l e a s e c ont a i ns t he
f o l l o wi ng c l a us e :
Dur i ng t he t e r m of t hi s Le a s e , t he Te na nt s ha l l h a v e t he e xc l us i ve a nd s ol e r i ght t o ope r a t e a r e t a i l s t or e i n t he s hoppi ng c e nt e r , t he pr i nc i pa l bus i ne s s of whi c h i s t h e s e l l i ng of a ny one of t he f ol l owi n g c l a s s e s o f me r c ha ndi s e , t o wi t : ha r dwa r e , hous e wa r e s , a ut omobi l e s uppl i e s , e l e c t r i c a l pl umbi ng, t oys , home f ur ni s hi ngs , s por t i ng goods , a ppl i a nc e s a nd pa i nt s . No ot he r r e t a i l s t or e i n t h e s hoppi ng c e nt e r s ha l l de vot e mor e t ha n t we nt y- f i v e pe r c e nt ( 25% of i t s s a l e s t o t he a ggr e ga t e of t h e ) f or e goi ng c l a s s e s of me r c ha ndi s e . I n 1996, a ppe l l a nt wa s ma de a wa r e t ha t
a p p e l l e e s ha d r e nt e d s pa c e i n t he s hoppi ng c e nt e r t o a Dol l a r
Ge n e r a l St or e a nd Aut o Zone . Appe l l a nt f i l e d s ui t t o pr e ve n t
wh a t wa s s e e n a s a vi ol a t i on of i t s l e a s e by t he l a ndl or d.
On t he he a r i ng f or a n i nj unc t i on, a ppe l l a nt ’ s own e r
t e s t i f i e d t ha t t he p r oduc t s s ol d a t Dol l a r Ge ne r a l St or e
o v e r l a ppe d wi t h 68% of t he me r c ha ndi s e s ol d a t hi s s t or e , s u c h
a s e l e c t r i c a l e qui pme nt , l a wn a nd ga r de n f ur ni t ur e ,
a p p l i a nc e s , pa i nt , s por t i ng goods , a nd t oys . He a l s o
t e s t i f i e d t ha t 7. 9 % o f a ppe l l a nt ’ s s a l e s c a me f r om a ut omot i ve
p r o d u c t s , whi c h he be l i e ve d woul d be ne ga t i ve l y a f f e c t e d by
t he c o mpe t i t i on o f Aut o Zone . Appe l l e e s ’ wi t ne s s e s t e s t i f i e d
t h a t t he r e s t r i c t i ve c ov e na nt wa s br oa de r t ha n t ha t i n a
t yp i c a l c omme r c i a l l e a s e a nd t ha t , i n t he i r opi ni on, t h e
a d d i t i ona l bus i ne s s e s woul d br i ng e xt r a t r a f f i c t o a ppe l l a nt
a n d i mpr ove i t s bus i ne s s .
The Tr i a l Cour t de ni e d a ppe l l a nt ’ s a ppl i c a t i on f or
a n i n j unc t i on, f i ndi ng t ha t t he c l a us e i n t he l e a s e wa s t oo
b r o a d t o be e nf or c e a bl e a nd t ha t t he r e ha d be e n ?no
d e mo n s t r a t i on t ha t t he Pl a i nt i f f woul d s uf f e r i r r e pa r a bl e h a r m
f r o m t hi s t i me u nt i l we t r y t hi s l a ws ui t . ?
Re s t r i c t i ve c ove na nt s a r e f r e que nt l y i ns e r t e d i nt o
s h o p p i ng c e nt e r l e a s e s , f or t he pur pos e of pr ot e c t i ng t he
t e n a n t a ga i ns t c ompe t i t i on wi t hi n t he c e nt e r . 49 Am. J ur 2d
La n d l or d a nd Te na nt § 70 ( 1995) . W ha ve be e n r e f e r r e d t o n o e
2 Te nn e s s e e whi c h h a s a ddr e s s e d t he i r e nf or c e a bi l i t y. Howe ve r ,
ma n y o t he r s t a t e s ha ve c ons i de r e d s uc h c l a us e s a nd f ound t he m
e n f o r c e a bl e s o l ong a s t he y a r e r e a s ona bl e i n s c ope .
C. K. &J . K. , I nc . v . Fai r v i e w Shoppi ng Ce nt e r Cor p. , 407 N. E. 2 d
5 0 7 ( Ohi o 1980) ; Al e x an de r ’ s De p’ t St or e s v . Ar nol d Cons t a b l e
Co r p . , 250 A. 2d 792 ( N. J . Supe r . Ct . Ch. Di v. 1969) ;
Na t i o n al Supe r M k e t s , I nc . v . M ar agna Tr us t Co. , 5 70 N. E. 2d
1 1 9 1 ( I l l . App. Ct . 1991 ) ; M nde l l v . Gol de n- Far l e y of e
Ho p k i ns v i l l e , I nc . , 573 S. W 2d 346 ( Ky. Ct . App. 1978) . . The
r a t i o n a l e be hi nd t he s e de c i s i ons i s t he r e c ogni t i on t ha t
r a t h e r t ha n r e s t r i c t i ng c ompe t i t i on, s uc h c ove na nt s s e r ve t o
f a c i l i t a t e t r a de a nd i nduc e t e na nt s t o r e nt i n a pa r t i c ul a r
s h o p p i ng c e nt e r .
The r e a s ona bl e ne s s of a r e s t r i c t i ve c ove na nt i s
e xa mi n e d i n t e r ms o f i t s s c ope a nd e f f e c t . C. K. &J . K. , I nc .
Th e r e s t r i c t i on i n t hi s c a s e i s not unr e a s ona bl y br oa d by
t he s e c r i t e r i a . I n t e r ms of e f f e c t , t he r e s t r i c t i on a f f e c t s
o n l y a s i ngl e s hoppi ng c e nt e r . I t i s r e a s ona bl e f or t he
p l a i nt i f f t o wa nt t o a v oi d c ompe t i t i on wi t hi n t hi s c e nt e r .
Th e publ i c ’ s i nt e r e s t i s not a dve r s e l y a f f e c t e d, a s t he ma r k e t
a s a whol e i s u na f f e c t e d whe r e t he r e a r e s e ve r a l s hoppi ng
c e n t e r s a va i l a bl e i n a c ommuni t y. I n t e r ms of s c ope ,
d e f e n d a nt s ’ e xpe r t opi ne d t ha t t hi s c l a us e wa s muc h br oa de r
t h a n t hos e he ha d de a l t wi t h i n hi s e xpe r i e nc e . I t i s t r ue
t h a t t he c l a us e doe s c o nt a i n a r a t he r l e ngt hy l i s t of i t e ms
wh i c h ot he r s t or e s wi t hi n t he c e nt e r ma y not c a r r y i n
s i g n i f i c a nt a mount s . Howe ve r , c our t s ha ve e xpe r i e nc e d
d i f f i c ul t y i nt e r pr e t i ng c l a us e s whi c h de s c r i be d c ompe t i t or s
wi t h l e s s s pe c i f i c i t y. Se e e . g. , Ri t e Ai d of Ohi o, I nc . ,
3 M r c ’ s Var i e t y St or e , I nc . , 638 N. E. 2d 1056 ( Ohi o Ct . App. a
1994) ; Sny de r ’ s Dr ug St or e s , I nc . , v . She e hy Pr ope r t i e s ,
I nc . , 266 N. W 2d 882 ( M nn. 1978) . . i
I f t he c l a us e me r e l y ba r r e d s i mi l a r ?ha r dwa r e ? s t or e s
o r n a me d s pe c i f i c c ompe t i t or s , i t woul d be i gnor i ng t he f a c t
t h a t a ppe l l a nt ’ s bus i ne s s de pe nds on mor e t ha n s i mpl y t he s a l e
o f h a r dwa r e 1 . The l i s t of goods , a l t hough r a t he r nume r ous ,
s e r v e s t o c l a r i f y a ny a mbi gui t y t ha t mi ght ot he r wi s e e xi s t i n
t he c l a us e . I t i s l i mi t e d t o i t e ms whi c h pr ovi de s i gni f i c a n t
p o r t i ons of pl a i nt i f f ’ s s a l e s a nd i s not s o ove r l y br oa d i n
s c o p e a s t o r e nde r i t un e nf or c e a bl e .
I f t he l a ngua ge of a c ont r a c t i s c l e a r a nd
u n a mb i guous , i t mus t be c ons t r ue d a s wr i t t e n. Cummi ngs v .
Va u g h n, 911 S. W 2d 739, 742 ( Te nn. App. 1995) . . Thi s l e a s e
Free access — add to your briefcase to read the full text and ask questions with AI
I N THE COURT OF APPEALS OF TENNESSEE
EASTERN SECTI ON FILED June 6, 1997
Cecil Crowson, Jr. KEI TH HARDWARE, I NC. , ) C/ A NO. 03A01-Appellate C ourt Clerk 9610- CH- 00339 ) Pl a i nt i f f - Appe l l a nt , ) WASHI NGTON CHANCERY ) v. ) HON. LEW S W M I . AY, ) CHANCELLOR DOUGLAS L. W TE a nd wi f e , HI ) CAROLYN L. W TE, HI ) ) De f e nda nt s - Appe l l e e s . ) REMANDED
M STANLEY GI VENS, ANDERSON, FUGATE, GI VENS, COUNTS & BELI SLE, . J o h n s on Ci t y, f or Pl a i nt i f f - Appe l l a nt .
J OHN S. TAYLOR, M KI NNON, FOW c LER, FOX & TAYLOR, J ohns on Ci t y , f o r De f e nda nt s - Appe l l e e s .
O P I N I O N
Fr a nks . J .
The i s s ue on t hi s i nt e r l oc ut or y a ppe a l gr a nt e d
p u r s u a nt t o T. R. A. P. Rul e 9, i s whe t he r t he l e a s e be t we e n t he
p a r t i e s i s t oo br oa d t o be e nf or c e a bl e , a s wa s he l d by t he
Tr i a l Cour t .
Si nc e 1994, a p pe l l a nt ha s be e n a t e na nt i n
a p p e l l e e s ’ s hoppi ng c e nt e r , a nd t he l e a s e c ont a i ns t he
f o l l o wi ng c l a us e :
Dur i ng t he t e r m of t hi s Le a s e , t he Te na nt s ha l l h a v e t he e xc l us i ve a nd s ol e r i ght t o ope r a t e a r e t a i l s t or e i n t he s hoppi ng c e nt e r , t he pr i nc i pa l bus i ne s s of whi c h i s t h e s e l l i ng of a ny one of t he f ol l owi n g c l a s s e s o f me r c ha ndi s e , t o wi t : ha r dwa r e , hous e wa r e s , a ut omobi l e s uppl i e s , e l e c t r i c a l pl umbi ng, t oys , home f ur ni s hi ngs , s por t i ng goods , a ppl i a nc e s a nd pa i nt s . No ot he r r e t a i l s t or e i n t h e s hoppi ng c e nt e r s ha l l de vot e mor e t ha n t we nt y- f i v e pe r c e nt ( 25% of i t s s a l e s t o t he a ggr e ga t e of t h e ) f or e goi ng c l a s s e s of me r c ha ndi s e . I n 1996, a ppe l l a nt wa s ma de a wa r e t ha t
a p p e l l e e s ha d r e nt e d s pa c e i n t he s hoppi ng c e nt e r t o a Dol l a r
Ge n e r a l St or e a nd Aut o Zone . Appe l l a nt f i l e d s ui t t o pr e ve n t
wh a t wa s s e e n a s a vi ol a t i on of i t s l e a s e by t he l a ndl or d.
On t he he a r i ng f or a n i nj unc t i on, a ppe l l a nt ’ s own e r
t e s t i f i e d t ha t t he p r oduc t s s ol d a t Dol l a r Ge ne r a l St or e
o v e r l a ppe d wi t h 68% of t he me r c ha ndi s e s ol d a t hi s s t or e , s u c h
a s e l e c t r i c a l e qui pme nt , l a wn a nd ga r de n f ur ni t ur e ,
a p p l i a nc e s , pa i nt , s por t i ng goods , a nd t oys . He a l s o
t e s t i f i e d t ha t 7. 9 % o f a ppe l l a nt ’ s s a l e s c a me f r om a ut omot i ve
p r o d u c t s , whi c h he be l i e ve d woul d be ne ga t i ve l y a f f e c t e d by
t he c o mpe t i t i on o f Aut o Zone . Appe l l e e s ’ wi t ne s s e s t e s t i f i e d
t h a t t he r e s t r i c t i ve c ov e na nt wa s br oa de r t ha n t ha t i n a
t yp i c a l c omme r c i a l l e a s e a nd t ha t , i n t he i r opi ni on, t h e
a d d i t i ona l bus i ne s s e s woul d br i ng e xt r a t r a f f i c t o a ppe l l a nt
a n d i mpr ove i t s bus i ne s s .
The Tr i a l Cour t de ni e d a ppe l l a nt ’ s a ppl i c a t i on f or
a n i n j unc t i on, f i ndi ng t ha t t he c l a us e i n t he l e a s e wa s t oo
b r o a d t o be e nf or c e a bl e a nd t ha t t he r e ha d be e n ?no
d e mo n s t r a t i on t ha t t he Pl a i nt i f f woul d s uf f e r i r r e pa r a bl e h a r m
f r o m t hi s t i me u nt i l we t r y t hi s l a ws ui t . ?
Re s t r i c t i ve c ove na nt s a r e f r e que nt l y i ns e r t e d i nt o
s h o p p i ng c e nt e r l e a s e s , f or t he pur pos e of pr ot e c t i ng t he
t e n a n t a ga i ns t c ompe t i t i on wi t hi n t he c e nt e r . 49 Am. J ur 2d
La n d l or d a nd Te na nt § 70 ( 1995) . W ha ve be e n r e f e r r e d t o n o e
2 Te nn e s s e e whi c h h a s a ddr e s s e d t he i r e nf or c e a bi l i t y. Howe ve r ,
ma n y o t he r s t a t e s ha ve c ons i de r e d s uc h c l a us e s a nd f ound t he m
e n f o r c e a bl e s o l ong a s t he y a r e r e a s ona bl e i n s c ope .
C. K. &J . K. , I nc . v . Fai r v i e w Shoppi ng Ce nt e r Cor p. , 407 N. E. 2 d
5 0 7 ( Ohi o 1980) ; Al e x an de r ’ s De p’ t St or e s v . Ar nol d Cons t a b l e
Co r p . , 250 A. 2d 792 ( N. J . Supe r . Ct . Ch. Di v. 1969) ;
Na t i o n al Supe r M k e t s , I nc . v . M ar agna Tr us t Co. , 5 70 N. E. 2d
1 1 9 1 ( I l l . App. Ct . 1991 ) ; M nde l l v . Gol de n- Far l e y of e
Ho p k i ns v i l l e , I nc . , 573 S. W 2d 346 ( Ky. Ct . App. 1978) . . The
r a t i o n a l e be hi nd t he s e de c i s i ons i s t he r e c ogni t i on t ha t
r a t h e r t ha n r e s t r i c t i ng c ompe t i t i on, s uc h c ove na nt s s e r ve t o
f a c i l i t a t e t r a de a nd i nduc e t e na nt s t o r e nt i n a pa r t i c ul a r
s h o p p i ng c e nt e r .
The r e a s ona bl e ne s s of a r e s t r i c t i ve c ove na nt i s
e xa mi n e d i n t e r ms o f i t s s c ope a nd e f f e c t . C. K. &J . K. , I nc .
Th e r e s t r i c t i on i n t hi s c a s e i s not unr e a s ona bl y br oa d by
t he s e c r i t e r i a . I n t e r ms of e f f e c t , t he r e s t r i c t i on a f f e c t s
o n l y a s i ngl e s hoppi ng c e nt e r . I t i s r e a s ona bl e f or t he
p l a i nt i f f t o wa nt t o a v oi d c ompe t i t i on wi t hi n t hi s c e nt e r .
Th e publ i c ’ s i nt e r e s t i s not a dve r s e l y a f f e c t e d, a s t he ma r k e t
a s a whol e i s u na f f e c t e d whe r e t he r e a r e s e ve r a l s hoppi ng
c e n t e r s a va i l a bl e i n a c ommuni t y. I n t e r ms of s c ope ,
d e f e n d a nt s ’ e xpe r t opi ne d t ha t t hi s c l a us e wa s muc h br oa de r
t h a n t hos e he ha d de a l t wi t h i n hi s e xpe r i e nc e . I t i s t r ue
t h a t t he c l a us e doe s c o nt a i n a r a t he r l e ngt hy l i s t of i t e ms
wh i c h ot he r s t or e s wi t hi n t he c e nt e r ma y not c a r r y i n
s i g n i f i c a nt a mount s . Howe ve r , c our t s ha ve e xpe r i e nc e d
d i f f i c ul t y i nt e r pr e t i ng c l a us e s whi c h de s c r i be d c ompe t i t or s
wi t h l e s s s pe c i f i c i t y. Se e e . g. , Ri t e Ai d of Ohi o, I nc . ,
3 M r c ’ s Var i e t y St or e , I nc . , 638 N. E. 2d 1056 ( Ohi o Ct . App. a
1994) ; Sny de r ’ s Dr ug St or e s , I nc . , v . She e hy Pr ope r t i e s ,
I nc . , 266 N. W 2d 882 ( M nn. 1978) . . i
I f t he c l a us e me r e l y ba r r e d s i mi l a r ?ha r dwa r e ? s t or e s
o r n a me d s pe c i f i c c ompe t i t or s , i t woul d be i gnor i ng t he f a c t
t h a t a ppe l l a nt ’ s bus i ne s s de pe nds on mor e t ha n s i mpl y t he s a l e
o f h a r dwa r e 1 . The l i s t of goods , a l t hough r a t he r nume r ous ,
s e r v e s t o c l a r i f y a ny a mbi gui t y t ha t mi ght ot he r wi s e e xi s t i n
t he c l a us e . I t i s l i mi t e d t o i t e ms whi c h pr ovi de s i gni f i c a n t
p o r t i ons of pl a i nt i f f ’ s s a l e s a nd i s not s o ove r l y br oa d i n
s c o p e a s t o r e nde r i t un e nf or c e a bl e .
I f t he l a ngua ge of a c ont r a c t i s c l e a r a nd
u n a mb i guous , i t mus t be c ons t r ue d a s wr i t t e n. Cummi ngs v .
Va u g h n, 911 S. W 2d 739, 742 ( Te nn. App. 1995) . . Thi s l e a s e
r e qu i r e s t ha t s t or e s whi c h l e a s e i n t he c e nt e r ma y not ha ve
o n e o f t he na me d i t e ms a s t he i r pr i nc i pa l bus i ne s s . Nor ma y
a pp e l l e e s l e a s e t o a s t or e whi c h c a r r i e s s e ve r a l of t he na me d
c a t e g o r i e s , i f t he s um of t hos e pr oduc t s a mount s t o mor e t h a n
2 5 % o f i t s ove r a l l bus i n e s s .
W c onc l ude t he l e a s e i s e nf or c e a bl e a ga i ns t e
a pp e l l e e s a nd t he c a us e i s r e ma nde d t o t he Tr i a l Cour t t o
p r o c e e d i n t hi s c a us e c o ns i s t e nt wi t h t hi s opi ni on.
The c os t o f t he a ppe a l i s a s s e s s e d t o a ppe l l e e s .
1 M . Ke i t h t e s t r i f i e d t h a t h a r d wa r e s a l e s p r o v i d e o n l y 2 0 % o f h i s s t or e ’ s r e ve nue . Ot h e r a r e a s o f s i g n i f i c a n t r e v e n u e we r e l a wn / f a r m/ g a r d e n a t 2 2 . 4 %, a u t o mo t i v e p r o d u c t s a t 7 . 9 %, e l e c t r i c a l a t 7 . 9 %, p l u mb i n g a t 1 3 . 8 %, p a i n t a n d s u n d r i e s a t 1 2 . 7 %, a n d s p o r t i n g g o o d s a t 7 %.
4 ________________________ He r s c he l P. Fr a nks , J .
CONCUR:
_ _ _ _ _ ___________________ ___ Ho u s t o n M Godda r d, P. J . .
_ _ _ _ _ _ __________________ ___ Do n T. M M r a y, J . c ur
5 I N THE COURT OF APPEALS OF TENNESSEE
Cecil Crowson, Jr. Appellate C ourt Clerk
KEI TH HARDWARE, I NC. , ) C/ A NO. 03A01- 9610- CH- 00339 ) Pl a i nt i f f - Appe l l a nt , ) WASHI NGTON CHANCERY ) v. ) ) DOUGLAS L. W TE a nd wi f e , HI ) CAROLYN L. W TE, HI ) ) De f e nda nt s - Appe l l e e s . )
O R D E R
Thi s c a us e wa s r e gul a r l y he a r d a nd c ons i de r e d by t h e
c our t . I T I S NOW ORDERED t ha t t he j udgme nt of t he Tr i a l Co u r t
i s r e ve r s e d, a nd t he c a us e r e ma nde d. The c os t s of a ppe a l a r e
a d j u d g e d t o a ppe l l e e s , f or whi c h e xe c ut i on ma y i s s ue i f
n e c e s s a r y.
PER CURI UM