Lakeview Management v . Care Realty 07-CV-303-SM 01/22/10 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Lakeview Management, Inc.; Lakeview Neurorehabilitation Center, Inc.; and Lakeview Neurorehab Center Midwest, Inc., Plaintiffs
v. Civil N o . 07-cv-303-SM Opinion N o . 2010 DNH 012 Care Realty, LLC; and THCI Company, LLC, Defendants
O R D E R
Before the court are two motions filed by Lakeview, one for
reconsideration and one for attorney’s fees. THCI objects.
After hearing the motion for reconsideration, and considering the
motion for fees, both motions are denied.
Motion for Reconsideration
Lakeview does not contest specific factual findings, but
says the court erred in applying the installment-contract rule to
the facts, and so erred in concluding that THCI’s claim for
unpaid additional rent was not barred by the applicable statute
of limitations. THCI counters that Lakeview has not pointed to a
manifest error of law, and is merely reasserting arguments
already considered and rejected. “The granting of a motion for reconsideration is ‘an
extraordinary remedy which should be used sparingly.’ ” Palmer
v . Champion Mortg., 465 F.3d 2 4 , 30 (1st Cir. 2006) (quoting 11
CHARLES ALAN WRIGHT ET A L . , FEDERAL PRACTICE AND PROCEDURE § 2810.1 (2d ed.
1995)). “[M]otions for reconsideration are appropriate only in a
limited number of circumstances: if the moving party presents
newly discovered evidence, if there has been an intervening
change in the law, or if the movant can demonstrate that the
original decision was based on a manifest error of law or was
clearly unjust.” United States v . Allen, 573 F.3d 4 2 , 53 (1st
Cir. 2009) (citing Marie v . Allied Home Mortg. Corp., 402 F.3d 1 ,
7 n.2 (1st Cir. 2005)). “ [ A ] manifest error is ‘[a]n error that
is plain and indisputable, and that amounts to a complete
disregard of the controlling law.’ ” Venegas-Hernandez v .
Sonolux Records, 370 F.3d 183, 195 (1st Cir. 2004) (quoting
BLACK’S LAW DICTIONARY 563 (7th ed. 1999)). However, “[t]he
repetition of previous arguments is not sufficient to prevail on
a Rule 59(e) motion.” Prescott v . Higgins, 538 F.3d 3 2 , 45 (1st
Cir. 2008) (quoting United States v . $23,000 in U . S . Currency,
356 F.3d 157, 165 n.9 (1st Cir. 2004)).
In its memorandum decision (document n o . 1 3 9 ) , the court
relied upon General Theraphysical, Inc. v . Dupuis, 118 N . H . 277
(1978), and Pierce v . Metropolitan Life Insurance Co., 307 F .
2 Supp. 2d 325 (D.N.H. 2004), in determining that New Hampshire
follows the installment-contract rule and that, in this case, a
separate three-year limitations period began to run each time
Lakeview made a payment of “additional rent” in an amount less
than was owed. Lakeview’s argument for reconsideration stresses
the following points: (1) the language in Pierce that appears to
support application of the installment-contract rule in this case
is mere dictum; and (2) more recent decisions by the courts
surveyed in Pierce hold that the installment-contract rule should
not be applied in cases like this. Lakeview says that it was
manifest error not to apply a “well-established” exception to the
installment-contract rule that pertains when “a claim arises from
a dispute over whether payments are owed under a lease or
installment contract or over the formula for calculating those
payments.” (Pl.’s Memo. of Law (document n o . 142-2), at 2.)
The New Hampshire Supreme Court has not expressly adopted an
exception to the installment-contract rule, nor has it applied
the described exception in a similar factual situation.
Moreover, the statute-of-limitations argument raised in
Lakeview’s motion for reconsideration was previously raised and
rejected in a motion for summary judgment. (See document n o .
42.)
3 Relevant New Hampshire precedent is scarce, so Lakeview
understandably relies on foreign decisions. But none is
sufficiently analogous to this case to support, much less compel,
a conclusion that the New Hampshire Supreme Court would recognize
and apply an exception to the installment-contract rule to the
facts presented here. Only one case cited by Lakeview, Air
Transport Ass’n of America v . Lenkin, 711 F. Supp. 25 (D.D.C.
1989), involved a lease. The others concerned insurance
premiums, see Norwest Bank Minn. Nat’l Ass’n v . FDIC, 312 F.3d
447 (D.C. Cir. 2002); pension benefits, see Brehm v . Sargent &
Lundy, 384 N.E.2d 55 (Ill. App. C t . 1978); Kozak v . Ret. Bd. of
Firemen’s Annuity & Benefit Fund, 524 N.E.2d 1049 (Ill. App. C t .
1988); Miele v . Pension Plan of N.Y. State Teamsters Conf.
Pension & Ret. Fund, 72 F. Supp. 2d 88 (E.D.N.Y. 1999); mortgage
escrow payments, see In re Mortgage Escrow Deposit Litig., Nos.
90 C 5816, et a l . , 1994 WL 496707 (N.D. Ill. Sept. 9, 1994); and
ERISA-governed long-term disability benefits; see Miller v .
Fortis Benefits Ins. Co., 475 F.3d 516 (3d Cir. 2007), Baker v .
The Hartford Life & Accident Ins. Co., N o . 3:06-CV-1514-P, 2007
WL 2192298 (N.D. Tex. July 3 1 , 2007). The lack of analogous
landlord/tenant cases is significant, given the fact-intensive
character and application of the installment-contract rule. See
Pierce, 307 F. Supp. 2d at 329-33 (devoting considerable
4 attention to whether the installment-contract rule applies to
payment of insurance benefits).
In addition, at least three cited cases, Air Transport,
Norwest, and Mortgage Escrow, involved attempts by obligors to
recover overpayments, rather than claims by obligees that they
had been underpaid. An obligor who makes a periodic payment
after being told by the obligee how the obligee calculated the
payment amount is situated somewhat differently than an obligee
like THCI. THCI was receiving periodic payments from Lakeview,
but Lakeview represented (via the estoppel certificate and the
cover memos it sent with some of its rent checks) that it was
calculating the payment amounts as prescribed by the lease terms,
when in fact Lakeview was using a different and unauthorized
formula, to its own substantial benefit.
The events triggering application of the installment-
contract-rule exception in the cases Lakeview cites are also
readily distinguishable from the circumstances of this case.
Lakeview would have the statute of limitations begin to run on
the day when THCI first received a periodic payment of additional
rent based on the unauthorized calculation. That position,
however, ignores the estoppel certificate, in which Lakeview
disavowed any undisclosed side agreements altering the terms of
5 the lease as disclosed, and it ignores the fact that at least
some of Lakeview’s non-conforming lease payments were made under
cover memos stating that the payments were in conformity with the
lease. In other words, Lakeview ignores factors that effectively
concealed its alternative, unauthorized, calculation of
additional rent, and the alleged bases for i t .
This is not a case like Air Transport, where the party
seeking the benefit of the installment-contract rule had been put
on notice, at the time of the first alleged overpayment, of the
lease interpretation it later claimed to be wrong. See Norwest,
312 F.3d at 454 (citation omitted) (“In [Air Transport], the
district court, interpreting District of Columbia law, held that
the limitations period for a tenant’s claim of overpayment of
rent based on the landlord’s alleged misinterpretation of a lease
provision commenced when the tenant first received notice of the
landlord’s interpretation.”). In a similar vein, the event that
triggered the running of the statute of limitations in Norwest
o r , conversely, the event that prevented the plaintiff from
gaining the benefit of the installment-contract rule, was a
miscalculation of the premiums the defendant charged the
plaintiff which, in turn, was based on the defendant’s erroneous
interpretation of a statute. See 312 F.3d at 450. In Norwest,
as in Air Transport, at the time of the first contested payment,
6 the party seeking the benefit of the installment-contract rule
knew or had constructive knowledge of the specific basis for the
calculation it later challenged, which, in turn, placed that
party on notice of a dispute over contract interpretation or
statutory construction. Here, by contrast, Lakeview did not
clearly inform THCI of the specific, different, basis upon which
it was calculating additional rent, and, in fact, concealed the
actual formula it used. The bottom line is this: Lakeview has
identified no authority, controlling or otherwise, for the
proposition that an obligor purportedly operating under an
undisclosed agreement with the obligee’s predecessor in interest,
who also represents to the successor obligee that the lease-
prescribed calculation is in effect, but who in fact is not
honoring that lease provision, i s , nevertheless, entitled to the
benefit of an exception to the installment-contract rule.
Accordingly, Lakeview’s motion for reconsideration is denied.
There are two operative leases in this case — the New
Hampshire lease and the Wisconsin lease. The New Hampshire lease
is subject to the New Hampshire statute of limitations, while the
Wisconsin lease is subject to the Wisconsin statute of
limitations. Each lease independently requires Lakeview to pay
the full amount of rent for both the New Hampshire and Wisconsin
facilities. THCI is entitled to six years of unpaid additional
7 rent, for both facilities, so long as its suit under the
Wisconsin lease is not barred by Wisconsin’s six-year statute of
limitations. It is not.
The court’s application of the installment-contract rule to
the facts of this case does not “amount[] to a complete disregard
of [Wisconsin] law.” Venegas-Hernandez, 370 F.3d at 195. In
Jensen v . Janesville Sand & Gravel Co., 415 N.W.2d 559 (Wis. C t .
App. 1987), the Wisconsin Court of Appeals recognized that
state’s adherence to the installment-contract rule, id. at 561,
as well as this exception: “If a single total breach occurs, the
right to bring an action accrues at that time and the statute of
limitations begins to run.” Id. at 562 (quoting Segall v .
Hurwitz, 339 N.W.2d 333, 343 (Wis. C t . App. 1983)). The
plaintiff in Jensen brought suit against his former employer to
collect a pension more than six years after his employer told him
“that his pension had been terminated, there was no intention to
restore the pension, he was completely removed from the pension
plan, and the board had refused to restore his payments.” 415
N.W.2d at 561. The employer in Jensen was held, under Wisconsin
law, not to have committed a single total breach sufficient to
trigger application of the exception to the installment-contract
8 rule. Under that standard, Lakeview surely has not. 1
Accordingly, THCI’s action under the Wisconsin lease to recover
six years of unpaid additional rent, for both facilities, is not
barred by the Wisconsin statute of limitations.
Interest at the “Overdue Rate”
The parties have also engaged on another issue: whether THCI
is entitled to interest on the unpaid rent Lakeview owes,
calculated at the “overdue rate” defined in the lease. It i s .
The overdue rate is addressed in three provisions of the
lease, two of which are at issue here. The first provides:
3.2.3. Deficits. If the Additional Rent, as finally determined for any calendar year (or portion thereof), exceeds the sum of the quarterly payments of Additional Rent previously paid by Lessee with respect to said calendar year, within thirty (30) days after such determination is required to be made hereunder, Lessee shall pay such deficit to Lessor and, if the deficit exceeds five percent (5%) of the Additional Rent which was previously paid to Lessor with respect to said calendar year, then Lessee shall also pay Lessor interest on such deficit at the Overdue Rate from the date that such payment should have been made by Lessor [sic] to the date that Lessor receives such payment.
1 Messner Manor Associates v . Wisconsin Housing & Economic Development Authority, 555 N.W.2d 156 (Wis. C t . App. 1996), on which Lakeview relies, is inapposite. In that case, the court did not rule that the statute of limitations began to run as a result of the defendant’s breach of a contract. Rather, the court ruled that there was no breach in the first instance. See id. at 159-60.
9 (Def.’s Ex. C., at 20.) The second relevant section provides:
16.2 Remedies.
(d) In addition to all of the rights and remedies of Lessor set forth in this Lease and the other Lease Documents, if Lessee shall fail to pay any rental or other charge due hereunder (whether denominated as Base Rent, or otherwise) within ten (10) days after same shall have become due and payable, then and in such event Lessee shall also pay to Lessor (i) a late payment service charge (in order to partially defray Lessor’s administrative and other overhead expenses) equal to two hundred-fifty ($250) dollars and (ii) to the extent permitted by applicable law, interest on such unpaid sum at the Overdue Rate; it being understood, however, that nothing herein shall be deemed to extend the due date for payment of any sums required to be paid by Lessee hereunder or to relieve Lessee of its obligation to pay such sums at the time or times required by this Lease.
(Id. at 79.)
Lakeview argues that: (1) Section 3.2.3. does not apply to
the facts of this case; (2) Section 16.2(d) is a general
provision that conflicts with, and is therefore governed by, the
more specific Section 3.2.3.; and (3) recovery of interest at the
overdue rate is barred by equity, because THCI sat on its claim
for underpayment of additional rent. THCI counters that: (1) it
is entitled to the overdue rate under both Sections 3.2.3. and
10 16.2(d); (2) those provisions are not in conflict; and (3) equity
compels Lakeview’s payment of interest at the overdue rate.
It is not clear that Section 3.2.3. applies to the facts of
this case. That lease provision appears to have been intended to
encourage Lakeview to make a reliable estimate of the additional
rent due to THCI, and to penalize it for erroneous estimates made
in its own favor. THCI’s unpaid-rent claim is not that Lakeview
made erroneous quarterly estimates of the additional rent owed;
rather it claims that Lakeview made erroneous calculations of
both its quarterly and its annual additional rent obligation.
It is not necessary, however, to determine whether THCI is
entitled to the overdue interest rate under Section 3.2.3.,
because it is plainly entitled to the overdue rate under Section
16.2(d), and Section 16.2(d) is not trumped by Section 3.2.3.
Section 3.2.3. is consistent with Section 16.2(d), providing a
separate but similar incentive to make reliable quarterly
estimates upon pain of incurring interest obligations at the
overdue rate should the actual amount owed turn out to be more
than five percent greater than the quarterly estimates. Nothing
purports to limit the applicability of the overdue rate to the
situation described in Section 3.2.3. Section 16.2(d) provides a
remedy should Lakeview fail to make full rent payments in a
11 timely fashion, “in addition to all of the rights and remedies of
the Lease set forth in the Lease.” The fact that consistent
remedies are available for two similar breaches does not bring
Sections 3.2.3. and 16.2(d) into conflict and, s o , none of the
canons of construction Lakeview invokes are applicable.
Finally, regarding the equities, the court notes that the
lease is relatively clear about giving THCI the right to make a
claim for underpayment of rent, at its discretion, during the
lease term and, of course, subject to applicable legal
limitations. THCI had rational business reasons to defer, or not
to press the issue unduly, while attempting to reach overall
agreement on a number of other pending issues. Lakeview was well
aware, early on in the relationship, that its additional rent
payments were considered suspect by THCI, and was also aware that
it might well be called upon at a future date to resolve the
matter by making up any deficiencies. Lakeview was fully capable
of accelerating resolution of that issue had it chosen to do so –
either through negotiation or a declaratory judgment action.
That it chose to pursue a strategy of continuing effort to
resolve all issues in a global agreement, while not clearly
disclosing precisely how its additional rent calculations
differed from the method called for by the lease, militates
against a finding that THCI’s deferral somehow misled Lakeview or
12 induced some type of reasonable reliance by Lakeview upon the
validity or effectiveness of the unauthorized additional rent
calculations.
Accordingly, T H C I is entitled, under Section 16.2(d), to
interest on Lakeview’s late payment of additional rent at the
overdue rate.
Motion for Attorney’s Fees
Lakeview seeks to recover attorney’s fees incurred to secure
the court’s ruling that it validly extended its lease with T H C I .
A motion for attorney’s fees must “specify the . . .
statute, rule, or other grounds entitling the movant to the
award.” F E D . R . C I V . P . 54(d)(2). Here, Lakeview bases its claim
on the common law of New Hampshire. In New Hampshire, “[t]he
general rule . . . is that each party to a lawsuit is responsible
for payment of his or her own attorney’s fees.” Van Der Stok v .
Van Voorhees, 151 N . H . 679, 684 (2005) (quoting Clipper
Affiliates v . Checovich, 138 N . H . 271, 277 (1994)). An exception
to that rule applies “where an individual is forced to seek
judicial assistance to secure a clearly defined and established
right, which should have been freely enjoyed without such
intervention.” Van Der Stok, 151 N . H . at 684 (quoting Funtown
13 USA, Inc. v . Town of Conway, 129 N.H. 352, 354 (1987)). In such
cases, “an award of counsel fees on the basis of bad faith is
appropriate.” Van Der Stok, 151 N.H. at 684.
There are at least two reasons why Lakeview is not entitled
to recover attorney’s fees. First, THCI did not force Lakeview
to seek judicial assistance to secure its right to extend the
lease. It exercised its option to extend the lease five months
before it filed suit, pursuant to its rights under the lease.
Lakeview’s suit was not based upon an effort by THCI to repossess
the property at the end of the fixed term. Rather, Lakeview’s
suit seemed largely premised upon its (mistaken) belief that THCI
was obligated to proffer some sort of “acceptance” of its
exercise of its options. The circumstances of this case are
vastly different from those in which attorneys’ fees have been
awarded to plaintiffs forced to litigate to secure clearly
defined and established rights. See Funtown USA, Inc. v . Town of
Conway, 127 N.H. 312, 315-16 (1985) (water-slide developer forced
to litigate when municipality repeatedly delayed issuance of
building permit, thus buying time to pass a zoning ordinance that
would prohibit applicant’s intended u s e ) ; Harkeem v . Adams, 117
N.H. 687, 692-93 (1977) (unemployment compensation applicant
forced to litigate when state agency denied benefits for reasons
previously rejected by superior court).
14 Lakeview not forced to litigate to secure its lease
extension – it exercised its right to extend the lease before it
ever filed suit, and THCI had not moved to evict Lakeview or take
possession of the premises (it was Lakeview that insisted that
transition planning begin). And, Lakeview’s right to exercise
its option to extend the lease, under the circumstances, was
hardly “a clearly defined and established right.” Van Der Stok,
151 N.H. at 684. Under ordinary circumstances, the lease would
have given Lakeview a clearly defined and established right to
extend by notifying THCI of its intent to do so in a timely
manner. But here, given that Lakeview was in default, due to its
unilateral and undisclosed practice of paying additional rent at
a rate other than that specified by the lease documents, it
cannot be said that Lakeview’s right to extend the lease was
“clearly established” and subject to no legal doubt or reasonable
contest. The court ruled that the lease was validly extended,
but only after careful consideration of the pertinent facts and
application of equitable estoppel principles, based upon THCI’s
own manipulative conduct.
Because Lakeview was not forced to seek judicial assistance
to vindicate clear rights that ought to have been respected, and
because its right to exercise its option to extend the lease was
far from clearly defined and established under the factual
15 circumstances, Lakeview is not entitled to attorney’s fees under
the doctrine established in Harkeem v . Adams.
Conclusion
For the reasons given, Lakeview’s motion for reconsideration
(document n o . 142) and its motion for attorney’s fees (document
no. 158) are both denied. The clerk of the court shall enter
judgment in accordance with this order, and the court’s
memorandum order of March 3 1 , 2009, and close the case.
SO ORDERED.
January 2 2 , 2010
cc: Christopher H. M. Carter, Esq. Daniel M. Deschenes, Esq. Ovide M. Lamontagne, Esq. Jonathan M. Shirley, Esq. Leigh S . Willey, Esq.