Whole Foods Mkt. Grp., Inc. v. CBL-Friendly Ctr. CMBS, LLC, 2025 NCBC 72.
STATE OF NORTH CAROLINA I THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION COUNTY OF GUILFORD 25CV005101-400 WHOLE FOODS MARKET GROUP, INC.,
Plaintiff,
v. ORDER AND OPINION ON DEFENDANTS’ MOTIONS TO CBL-FRIENDLY CENTER DISMISS CMBS, LLC, and TRANSFORM LEASE OPCO LLC,
Defendants.
1. THIS MATTER is before the Court on Motions to Dismiss filed by both
Defendant Transform Lease Opco LLC (Transformco), (ECF No. 15), and Defendant
CBL-Friendly Center CMBS, LLC (CBL-Friendly), (ECF No. 16), (collectively, the
Motions).
2. The action arises from a controversy resulting from redevelopment work
performed by CBL-Friendly on a building adjacent to a Whole Foods store. Whole
Foods Market Group, Inc. (Whole Foods) alleges that during the redevelopment work,
asbestos both migrated to its store from the adjacent building and was released
within its store, forcing Whole Foods to close the premises for a period of two weeks,
remediate the problem, and discard some of its inventory.
3. The Court, having considered the Motions, the exhibits submitted in
support of and in opposition to the Motions, the related briefing, other relevant
matters of record, and the arguments of counsel at a hearing on the Motions held 13
August 2025, concludes for the reasons stated below that the Motions should be
DENIED. Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., by Thomas G. Hooper, Brian M. Ballay, M. David Kurtz, and Alexandra B. Rychlak, for Plaintiff Whole Foods Market Group, Inc.
Womble Bond Dickinson (US), LLP, by Michael Montecalvo and Zachary Bernstein, for Defendant Transform Lease Opco LLC.
Ellis & Winters LLP, by Curtis Shipley and Andrew S. Chamberlin, for Defendant CBL-Friendly Center CMBS, LLC.
Earp, Judge.
I. FACTUAL BACKGROUND
4. The Court does not make findings of fact when deciding a motion to dismiss
pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. It recites
below factual allegations from the complaint that are relevant to a determination of
the Motions. See, e.g., White v. White, 296 N.C. 661, 667 (1979) (stating that the
purpose of “a motion to dismiss is to test the law of a claim, not the facts which
support it” (citations omitted)).
5. Whole Foods is a Delaware corporation that maintains a registered office
in North Carolina, is duly authorized to transact business in North Carolina, and
maintains a place of business in Guilford County, North Carolina. (Compl. ¶ 4, ECF
No. 3.)
6. CBL-Friendly is a Delaware limited liability company with a registered
office in North Carolina. (Compl. ¶ 5.)
7. Transformco is a Delaware limited liability company with a registered office
in North Carolina. (Compl. ¶ 6.) 8. On 23 September 1971, Friendly Center, Inc. executed an agreement to
lease a portion of the Friendly Shopping Center, a commercial complex located in
Greensboro, North Carolina, to Sears Roebuck & Co. (Sears). (Compl. ¶ 7.) One of
the buildings leased was a two-story structure occupied by a Sears department store
(Sears Building). (Compl. ¶ 8.)
9. On 27 September 2010, Sears subleased a portion of the first floor of the
Sears Building to Whole Foods (Whole Foods Premises) to operate a grocery store.
(Compl. ¶¶ 8–10; Decl. of Michael Montecalvo [Montecalvo Decl.], Exhibit A Sublease
[Sublease] § 7.1(a)(i), ECF No. 19.1.)
10. The Sublease states in pertinent part:
(iii) The [Whole Foods] Premises shall be water-tight, free of Hazardous Materials, free and clear of all prior tenancies, tenants and occupants, and in a good, structurally sound condition . . . which completion shall be evidenced by a written certification by Landlord’s architect to [Whole Foods].
(iv) Landlord shall have removed all asbestos from the [Whole Foods] Premises and shall have provided [Whole Foods] with evidence of the completion of the same in form and substance acceptable to all applicable governing authorities as a condition to issuance to [Whole Foods] of a building permit for [Whole Foods’] Work.
(Sublease § 5.2(a)(iii)–(iv).)
11. The Sublease also provides:
If Landlord learns of the existence of Hazardous Material on the Development and same was not caused by [Whole Foods], Landlord shall immediately disclose the nature of such material to [Whole Foods]. Landlord shall make reasonable effort, at its sole cost, to remove or cause to be removed said Hazardous Material if, in [Whole Foods’] judgment, it detrimentally affects [Whole Foods’] business or its employees[,] is disclosed, and Landlord fails to remove such-material with reasonable promptness, [Whole Foods] shall have the right, at its sole option, to abate rent proportionately to the detrimental effect on [Whole Foods’] business[.]
(Sublease § 17.17(c)(iii).)
12. Section 17.17(a)(ii) of the Sublease defines “Hazardous Material” to include
asbestos.
13. In addition to Section 17.17(c)(iii), Section 4.3 of the Sublease provides for
rent abatement:
(b) Interfering Conditions Caused by Landlord. If the Interfering Condition was caused by Landlord or persons subject to Landlord’s control and such Interfering Condition persists for more than forty-eight (48) hours after Tenant gives Landlord notice (notice by telephone shall be sufficient for this purpose) of such Interfering Condition, then in addition to Tenant’s other rights under this Lease (including, without limitation, Tenant’s right to damages and to exercise its self help remedies under Section 10.4 below), Tenant shall have the right, upon written notice to Landlord, to abate Base Rent in the manner hereinafter provided:
...
(B) If Tenant does not continue operating in the [Whole Foods] Premises while such Interfering Condition persists, Tenant shall have the right to abate Base Rent entirely during the period such Interfering Condition persists.
(Sublease § 4.3(b)(B).)1
14. During occupation, the Sublease allows for “lawful, quiet and peaceful
possession and occupation” of the premises. (Sublease § 13.1(f).)
1 During the period in which Whole Foods’ relationship was with Sears, the Sublease was
amended multiple times. However, none of the provisions at issue changed. (Compl. ¶ 22; Montecalvo Decl., Exhibit C First Amendment to Lease, ECF No. 19.3; Exhibit D Second Amendment to Lease, ECF No. 19.4; Exhibit E Third Amendment to Lease, ECF No. 19.5.) 15. Section 17.10 provides that the Sublease “shall run with the land and bind
and inure to the benefit of Landlord and Tenant and their respective successors and
assigns.” (Sublease § 17.10.)
16. On 15 October 2018, Sears filed a petition for Chapter 11 bankruptcy in the
United States Bankruptcy Court for the Southern District of New York (the
Bankruptcy Court). (Compl. ¶ 20.) The Bankruptcy Court entered an Order on 8
February 2019 approving an asset purchase agreement in which Transform Holdco
LLC2 purchased various assets of Sears, including its interest in the Sublease.
(Compl. ¶ 21; Montecalvo Decl., Exhibit B In re Sears Holdings Corporation, et al.,
Case No. 18-23538 (RDD) (Bankr. S.D.N.Y. 2019) [Bankruptcy Order], ECF No. 19.2.)
17. On 9 September 2019, Whole Foods and Transform Operating Stores
entered into a fourth amendment to the Sublease in which they ratified and
confirmed the unamended portions of the Sublease in its entirety. (Compl. ¶ 24;
Montecalvo Decl., Exhibit F Fourth Amendment to Lease [Fourth Amendment] § 6(d),
ECF No. 19.6.) None of the relevant provisions changed. The parties also agreed
that “as of the date of this Amendment, no default by the other exists under the Lease
and no notice of default has been given or received by such party.” (Fourth
Amendment § 6(a).)
18. The Sears department store closed in spring 2023. Prior to its closing, CBL-
Friendly and Transformco began discussions regarding redevelopment of the vacant
2 Whole Foods alleges that Transform Operating Stores, LLC (Transform Operating Stores)
acquired the interest to the Sublease from Transform Holdco, LLC, and that, subsequently, the named Defendant, Transformco, acquired the interest. (Compl. ¶¶ 23, 25.) portion of the Sears Building that was not occupied by Whole Foods (the CBL-
Friendly Premises). (Compl. ¶¶ 26–27.) In preparation for the redevelopment, CBL-
Friendly recaptured the vacant parcel from Transformco and hired D.H. Griffin
Construction Co., LLC (D.H. Griffin) as its contractor. (Compl. ¶¶ 28–29.) D.H.
Griffin hired Demolition & Asbestos Removal, Inc. (DARI) to remove the asbestos.
(Compl. ¶ 39.)
19. D.H. Griffin and CBL-Friendly agreed to a Scope of Work (SOW) that
detailed plans for the demolition and reconstruction of the CBL-Friendly Premises.
(Compl. ¶¶ 29–30; Montecalvo Decl., Exhibit H, Operating Agreement, Scope of Work
[Scope of Work], ECF No. 19.8.)
20. On 5 April 2023, Whole Foods, CBL-Friendly, and Transformco entered into
an Operating Agreement outlining the terms by which CBL-Friendly would redevelop
the CBL-Friendly Premises. (Compl. ¶ 31; Montecalvo Decl., Exhibit H Operating
Agreement [Operating Agreement], ECF No. 19.8.)
21. Whole Foods alleges that CBL-Friendly and Transformco were aware that
Whole Foods was to remain open throughout the redevelopment project. (Compl.
¶ 33.) For this reason, the Operating Agreement imposed restrictions on the
redevelopment work, including:
a. [CBL-Friendly] will at all times act reasonably and with due consideration for the interests of Whole Foods and will cause as little disturbance to the operations of Whole Foods, Whole Foods’ customers, and Whole Foods’ employees as is reasonably practical including taking all reasonable mitigation measures to reduce noise, dust, debris and vibrations to the Whole Foods Premises[.] (Operating Agreement § 3; Compl. ¶ 34a.) b. No modifications are to be done to any area of the current Whole Foods tenant space, and all precautions taken to limit any interference with their business operations. (Scope of Work ¶ 1; Compl. ¶ 34b.)
c. All work shall be completed with due diligence and in a manger [sic] consistent with a first-class shopping center or first-class commercial [or] residential property. (Operating Agreement § 14; Compl. ¶ 34c.)
22. In addition, CBL-Friendly committed to perform the following work at its
sole cost and expense: “(i) construct a rear exterior wall to ensure that the Whole
Foods Premises remains intact, watertight and structurally sound, [and] (ii) separate
(including separately metering) all utilities and building systems from the Whole
Foods Premises[.]” (Operating Agreement § 3; Compl. ¶ 35a.)
23. Whole Foods alleges that all parties were aware of asbestos-containing
material (ACM) in the CBL-Friendly Premises. Accordingly, paragraph 3 of the Scope
of Work provides, “[a]batement of ACM in fully demolished structures will be
completed prior to demolition.” (Compl. ¶ 35b; Scope of Work ¶ 3.)
24. In light of the Operating Agreement, Transformco, as successor in interest
to Sears, executed a Fifth Amended Lease Agreement in which Transformco and
Whole Foods again ratified and confirmed the relevant provisions of the Sublease.
(Compl. ¶¶ 36–37; Montecalvo Decl., Exhibit G Fifth Amendment to Lease [Fifth
Amendment] § 25, ECF No. 19.7.)
25. The Fifth Amendment provides that “[t]o Tenant’s actual knowledge: (a) no
event of default has occurred, and (b) no event has occurred that, with the giving of notice, the passage of time, or both, could constitute an event of default by Tenant or
Landlord[.]” (Fifth Amendment, Exhibit B at 2.)
26. Whole Foods alleges that CBL-Friendly was aware of the risk that asbestos
could migrate into the Whole Foods Premises during the abatement process, so CBL-
Friendly hired an industrial hygienist to place monitors near the demising wall that
separated the Whole Foods Premises from the CBL-Friendly Premises. (Compl.
¶ 40.) Monitoring began on 25 July 2023. (Compl. ¶ 41.)
27. In late August 2023, DARI pressure-washed the construction area near the
demising wall. (Compl. ¶ 42.) In early September 2023, DARI again pressure-washed
the area. (Compl. ¶ 43.) On both occasions, water leaked into the Whole Foods
Premises. (Compl. ¶¶ 42–43.)
28. On 11 September 2023, the asbestos monitors detected asbestos in the
Whole Foods Premises for the first time. (Compl. ¶ 49.) Whole Foods alleges that
asbestos migrated into the store as a result of the water leaks. (Compl. ¶ 44.)
29. Whole Foods also alleges that the redevelopment work caused vibrations in
its store, jarring loose asbestos that still existed on or near the ceiling at the back of
the store close to the demising wall. (Compl. ¶¶ 45–48.)
30. Whole Foods alleges that it did not cause asbestos to be in its store, and
until these events, it was unaware that Sears had failed to remove all asbestos from
the Whole Foods Premises before tendering possession in 2010. (Compl. ¶¶ 46–47.) 31. Whole Foods further alleges that CBL-Friendly became aware of the
asbestos on 12 September 2023, but that it failed to notify Whole Foods of the problem
for another three days. (Compl. ¶¶ 50–51.)
32. On 20 September 2023, CBL-Friendly’s industrial hygienist recommended
that the Whole Foods Premises be closed to remediate the asbestos as soon as
possible. Whole Foods closed its store on 21 September 2023, and it remained closed
until 4 October 2023. (Compl. ¶¶ 52–53.)
33. Whole Foods alleges that it reported the presence of asbestos to its landlord,
Transformco, but Transformco refused to remove it. (Compl. ¶ 54.) Consequently,
Whole Foods undertook to clean the store itself. (Compl. ¶ 53.)
34. In addition to the expense it incurred to remediate the asbestos, Whole
Foods alleges that it lost profits and was forced to discard a large amount of
perishable inventory. (Compl. ¶ 55.) It seeks damages for these losses.
II. PROCEDURAL BACKGROUND
35. Whole Foods filed suit on 5 March 2025 in Guilford County Superior Court,
asserting claims for (1) breach of contract against CBL-Friendly; (2) breach of
contract against Transformco; and (3) declaratory judgment against Transformco.
(See generally Compl.)
36. On 8 April 2025, the case was designated to the Business Court and
assigned to the undersigned. (ECF Nos. 1–2.)
37. On 28 May 2025, Transformco and CBL-Friendly filed the Motions. (ECF
Nos. 15–16.) After full briefing, the Court held a hearing on the Motions on 13 August 2025, at which all parties were represented by Counsel. (Not. of Hr’g, ECF No. 41.)
The Motions are now ripe for disposition.
III. LEGAL STANDARD
38. Both Defendants move to dismiss Plaintiff’s claims in their entirety
pursuant to Rule 12(b)(6). “A motion to dismiss under Rule 12(b)(6) ‘tests the legal
sufficiency of the complaint.’ ” Design Gaps, Inc. v. Hall, 2024 NCBC LEXIS 64, at
*6 (N.C. Super. Ct. May 1, 2024) (quoting Isenhour v. Hutto, 350 N.C. 601, 604 (1999)).
Dismissal of a claim is proper if “(1) the complaint on its face reveals that no law
supports the plaintiff’s claim; (2) the complaint on its face reveals the absence of facts
sufficient to make a good claim; or (3) the complaint discloses some fact that
necessarily defeats the plaintiff’s claim.” Corwin v. Brit. Am. Tobacco, PLC, 371 N.C.
605, 615 (2018) (citations omitted); see Sutton v. Duke, 277 N.C. 94, 103 (1970) (“[A]
complaint should not be dismissed for insufficiency unless it appears to a certainty
that plaintiff is entitled to no relief under any state of facts which could be proved in
support of the claim.”) (citation and emphasis omitted).
39. When deciding a motion to dismiss, the Court views the allegations in the
“light most favorable to the non-moving party.” Sykes v. Health Network Sols., Inc.,
372 N.C. 326, 332 (2019). Nevertheless, the Court is not required “to accept as true
allegations that are merely conclusory, unwarranted deductions of fact, or
unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. HHS, Div. of Facility Servs.,
174 N.C. App. 266, 274 (2005) (citation and internal quotation marks omitted). 40. The Court “may properly consider documents which are the subject of a
plaintiff’s complaint and to which the complaint specifically refers even though they
are presented by the defendant.” Oberlin Cap., L.P. v. Slavin, 147 N.C. App. 52, 60
(2001).
IV. ANALYSIS
A. Breach of Contract Against CBL-Friendly
41. CBL-Friendly first argues that Whole Foods does not state a breach of
contract claim against it because the complaint does not contain allegations tracing
a legal injury to CBL-Friendly. (CBL-Friendly Center CMBS, LLC’s Br. Supp. Mot.
Dismiss [CBL-Friendly Br.] 11, ECF No. 17.) Specifically, CBL-Friendly contends
that Whole Foods has alleged that Transformco, as the successor to Sears, was
responsible for removing asbestos from the Whole Foods Premises but allegedly failed
to do so. (CBL-Friendly Br. 11.) Thus, CBL-Friendly concludes that Whole Foods’
allegations trace the presence of asbestos to Sears/Transformco, and not to it. (CBL-
Friendly Br. 11.)
42. Whole Foods responds that CBL-Friendly’s argument implicates its
standing to sue, not whether it has stated a viable claim. It maintains that it is
required only to allege a legal injury to have standing. Whole Foods argues that it
has more than met this requirement by alleging that CBL-Friendly committed over
ten breaches of the Operating Agreement, each of which constitutes a legal injury.
Even if that were not the case, Whole Foods argues, it has alleged actual injury in the
form of remediation expenses, lost profits, and lost inventory. (Mem. L. Opp’n CBL- Friendly Center CMBS, LLC’s Mot. Dismiss [Whole Foods Opp’n Br. CBL-Friendly
Mot.] 9–11, ECF No. 36.)
43. To state a valid breach of contract claim, Plaintiff need only allege “(1)
existence of a valid contract and (2) breach of the terms of that contract.” Poor v. Hill,
138 N.C. App. 19, 26 (2000). “When these elements are alleged, ‘it is error to dismiss
a breach of contract claim under Rule 12(b)(6),’ and our appellate courts routinely
reverse trial court orders that require anything more.” Vanguard Pai Lung, LLC v.
Moody, 2019 NCBC LEXIS 39, at *10 (N.C. Super. Ct. June 19, 2019) (quoting
Woolard v. Davenport, 166 N.C. App. 129, 134 (2004) (collecting cases)).
44. Furthermore, “claims for breach of contract are ‘not subject to heightened
pleading standards.’ ” Id. (quoting AYM Techs., LLC v. Rodgers, 2018 NCBC LEXIS
14, at *52 (N.C. Super. Ct. Feb. 9, 2018)). “Rather, they must meet the usual, liberal
standard of Rule 8, which requires only a ‘short and plain statement of the claim’
sufficient to put the court and parties on notice of the events giving rise to the claim.”
Id. (quoting N.C. R. Civ. P. 8(a)(1)). “[A]ll of this means that stating a claim for breach
of contract is a relatively low bar.” Id. at *11.
45. Whole Foods alleges that “migration, disturbance, and displacement of
asbestos” caused it to close its store. (Compl. ¶ 53.) To the extent that migration,
disturbance, and displacement occurred “as a result of the water leaking from the
[CBL-Friendly Premises] into the store[,]” (Compl. ¶ 44), or as a result of vibrations
caused by construction activity, (Compl. ¶ 48), Whole Foods adequately pleads that it
resulted from CBL-Friendly’s breach of the Operating Agreement. Whole Foods alleges, among other things, that CBL-Friendly failed to complete all abatement of
asbestos-containing material prior to demolition, failed to act at all times reasonably
and with due consideration to Whole Foods’ interests, and failed to act in a way so as
to cause as little disturbance to the operations of Whole Foods as was reasonably
practical. (Compl. ¶ 62d–f.)
46. As for CBL-Friendly’s argument that Whole Foods has not sufficiently pled
standing, Whole Foods’ allegations that a valid contract existed between the parties
and that it was breached by CBL-Friendly are sufficient. See Soc’y for the Hist. Pres.
of the Twenty-Sixth N.C. Troops, Inc. v. City of Asheville, 385 N.C. 744, 751 (2024)
(“Where a party alleges the existence of a valid contract and that such contract has
been breached, that party has alleged a legal injury that gives rise to standing.”).
Moreover, to the extent Whole Foods is required to allege that its legal injury is
traceable to CBL-Friendly, it has done so. (Compl. ¶¶ 2, 48, 53.)
47. Relatedly, CBL-Friendly argues that only one injury is alleged, and that
Whole Foods’ pleading amounts to an assertion of joint and several liability. Citing
Crescent University City Venture, LLC v. AP Atlantic, Inc., 2019 NCBC LEXIS 46
(N.C. Super. Ct. Aug. 8, 2019), CBL-Friendly contends that, under North Carolina
law, it cannot be jointly and severally liable with Transformco for breaches of
separate contracts. (CBL-Friendly Br. 12–13.)
48. Whole Foods responds that it has not alleged that Defendants are jointly
and severally liable; consequently, it maintains that CBL-Friendly’s argument is
nothing but a straw man. (Whole Foods Opp’n Br. CBL-Friendly Mot. 14.) In addition, Whole Foods distinguishes Crescent on the basis that it was decided at the
summary judgment stage, not on a Rule 12(b)(6) motion, and contends that it is
premature to address CBL-Friendly’s argument regarding joint and several liability.
(Whole Foods Opp’n Br. CBL-Friendly Mot. 14–15.)
49. The Court agrees that CBL-Friendly’s argument that Whole Foods cannot
assert joint and several liability with respect to its contract claims is premature and
would be more appropriately considered at the summary judgment stage. See
Crescent, 2019 NCBC LEXIS 46, at *71–72 (determining at the summary judgment
stage that the plaintiff “may not hold its subcontractors jointly and severally liable
for merely breaching independent contracts” without evidence of concerted action).3
50. Focusing next on Whole Foods’ allegation that CBL-Friendly breached the
Operating Agreement by failing to construct a water-tight wall between the CBL-
Friendly Premises and the Whole Foods Premises, CBL-Friendly argues that Whole
Foods’ claim “reflects a fundamental misreading of the Operating Agreement”
because it “conflates two different walls[.]” (CBL-Friendly Br. 17.) CBL-Friendly
argues that the demising wall, through which the water leaks occurred, was
constructed by Sears years ago in accordance with Exhibit E to the 2010 Sublease.
(Sublease, Exhibit E § 1.2(b).) According to CBL-Friendly, Exhibit E makes it clear
that waterproofing the demising wall was Whole Foods’ responsibility. (CBL-
Friendly Br. 18.)
3 The Court also observes that, in Crescent, the plaintiff expressly alleged that the defendants
were jointly and severally liable for damages resulting from breaches of contract. Id. at *67. The same is not true here. In addition, the parties in this case, unlike those in Crescent, contracted for an indemnity provision. 51. According to CBL-Friendly, the wall referenced in the Operating
Agreement is a new wall, also referenced in its Scope of Work with D.H. Griffin, and
was not required to be built until after the demolition process was completed. (CBL-
Friendly Br. 18–19; Scope of Work ¶¶ 11–14.)
52. Whole Foods responds that there is nothing in the Operating Agreement
specifying that the wall it references is the same wall that is described in the Scope
of Work cited by CBL-Friendly. Whole Foods contends that, at best, references to the
construction of one wall or multiple walls in these documents creates an ambiguity
that cannot be resolved at this stage of the litigation. (Whole Foods Opp’n Br. CBL-
Friendly Mot. 26.) The Court agrees.
53. The Scope of Work at issue requires D.H. Griffin to “[i]nstall a CMU and
brick veneer masonry wall to repair and close the existing remaining building along
column lines 8, J, and 13 where structures are removed.” (Scope of Work ¶¶ 11–14.)
A reasonable fact finder could conclude, as CBL-Friendly argues, that this work could
not be completed until after the demolition was finished.
54. On the other hand, the Operating Agreement provides that “[u]pon the
occurrence of the Recapture,” CBL-Friendly was to “construct a rear exterior wall to
ensure that the Whole Foods Premises remains intact, watertight and structurally
sound[.]” (Operating Agreement § 3 (emphasis added).) A reasonable fact finder
could conclude that the language of this provision contemplates construction of a wall
prior to the demolition process. 55. Given the words used in the relevant agreements, whether the parties
contracted for multiple walls or one and, if one, when that wall was to be built, and
who was responsible for ensuring that it was watertight, are questions that cannot
be decided at this stage of the litigation. See LFF IV Timber Holding LLC v.
Heartwood Forestland Fund IV LLC, 2024 NCBC LEXIS 119, at *23 (N.C. Super. Ct.
Sep. 6, 2024) (“It is well settled that a contract interpretation issue cannot be resolved
at the Rule 12(b)(6) stage where each party has shown that the provision at issue is
reasonably susceptible to materially different interpretations.”).
56. Lastly, CBL-Friendly argues that Whole Foods cannot recover
consequential damages because it has not pled that, at the time they agreed to the
terms of the Operating Agreement, the parties were aware that “legacy asbestos”
remained in the Whole Foods Premises.4 To the contrary, CBL-Friendly argues that
Whole Foods has affirmatively alleged that it was unaware in 2023 that Sears had
failed to remove the asbestos before tendering possession of the premises to Whole
Foods. Thus, CBL-Friendly argues, Whole Foods’ pleading has foreclosed the
possibility that the parties contemplated damage caused by the presence of asbestos
at the time of contracting. (CBL-Friendly Br. 14–16.)
4 CBL-Friendly also contends that Whole Foods’ claim fails because its allegation that CBL-
Friendly failed to take “reasonable mitigation measures to reduce . . . vibrations” is conclusory and does not sufficiently allege how the measures that CBL-Friendly took were unreasonable or what additional measures it should have undertaken. (CBL-Friendly Br. 14.) Given that breach of contract claims are not required to be pled with particularity and because Whole Foods has alleged the existence of a contract and breach of its terms, CBL- Friendly’s argument is unavailing. See Woolard, 166 N.C. App. at 134 (“[W]here the complaint alleges [(1) the existence of a valid contract and (2) breach of the terms of that contract], it is error to dismiss a breach of contract claim under Rule 12(b)(6).”). 57. Whole Foods responds that it has alleged that CBL-Friendly was aware
that (a) demolition would take place in the same building in which Whole Foods was
operating a grocery store, and (b) the store was to remain open during the
redevelopment work. Consequently, the Operating Agreement imposed restrictions
on that work. (Compl. ¶¶ 32–35.) Among other things, those restrictions included
CBL-Friendly’s agreement to “cause as little disturbance to the operations of Whole
Foods . . . as is reasonably practical including taking all reasonable mitigation
measures to reduce . . . vibrations to the Whole Foods Premises[.]” (Compl. ¶ 34a.)
Similarly, the Scope of Work attached to the Operating Agreement provided that “all
precautions [would be] taken to limit any interference with . . . [Whole Foods’]
business operations.” (Compl. ¶ 34b.)
58. As for the presence of asbestos in the store, Whole Foods argues that it has
adequately alleged that, when they agreed to the terms of the Operating Agreement,
the parties contemplated the possibility that asbestos could pose a problem. (Whole
Foods Opp’n Br. CBL-Friendly Mot. 23.) Otherwise, it argues, there would have been
no need for CBL-Friendly to have retained an industrial hygienist to monitor for the
presence of asbestos in the store. (Whole Foods Opp’n Br. CBL-Friendly Mot. 23;
Compl. ¶¶ 40–41.)
59. Thus, Whole Foods concludes, the parties foresaw that if the redevelopment
work was not performed consistent with the terms of the Operating Agreement, the
store might have to be closed, resulting in lost profits, lost inventory, and asbestos
remediation. It points to its allegation that “CBL-Friendly’s breaches . . . directly, naturally, foreseeably, and proximately caused Whole Foods to sustain damages.
These damages included, but are not limited to, lost profits, costs associated with lost
inventory, and remediation costs.” (Compl. ¶ 63.)
60. As stated above, Whole Foods has alleged the existence of a contract, the
Operating Agreement, between itself and CBL-Friendly. It has also alleged that
CBL-Friendly breached the Operating Agreement by:
a. failing to construct a rear exterior wall to ensure that the Whole Foods Premises remained watertight;
b. failing to separate all work described in Exhibit C to the Operating Agreement, which included work described in the Scope of Work, from the Whole Foods Premises;
c. failing to take all precautions to limit any interference with Whole Foods’ business operations in the Demised Premises;
d. failing to complete all abatement of asbestos-containing materials prior to demolition;
e. failing to act at all times reasonably and with due consideration for Whole Foods’ interests;
f. failing to act in such a way so as to cause as little disturbance to the operations of Whole Foods, Whole Foods’ customers, and Whole Foods’ employees as was reasonably practical;
g. failing to take all reasonable mitigation measures to reduce noise, dust, debris, and vibrations to the Whole Foods Premises;
h. failing to perform all construction, renovation, and restoration work in a good and workmanlike manner;
i. failing to complete all work in a manner consistent with a first-class commercial or residential property; and
j. breaching the implied covenant of good faith and fair dealing by otherwise failing to perform contractual obligations in good faith, failing to make reasonable efforts to perform its obligations under the Operating Agreement, failing to act upon principles of good faith and fair dealing to accomplish the Operating Agreement’s purposes, and injuring Whole Foods’ right to receive the Operating Agreement’s benefits.
(Compl. ¶ 62.)
61. Allegations that the threat of asbestos, regardless of its source, was
contemplated by the parties, coupled with an allegation that CBL-Friendly’s alleged
breach foreseeably and proximately caused Whole Foods to sustain damages in the
form of lost profits, costs associated with lost inventory, and asbestos remediation
costs, is enough, at this stage, to allow Whole Foods’ claim to proceed. See Brakebush
Bros., Inc. v. Certain Underwriters at Lloyd’s of London, 2021 NCBC LEXIS 98, at
*41 (N.C. Super. Ct. Nov. 1, 2021) (determining that the Rule 12(b)(6) stage of the
litigation was “too early” to determine whether plaintiff would be entitled to recover
consequential damages); see also Poor, 138 N.C. App. at 26 (to plead breach of
contract, a plaintiff need only allege “(1) existence of a valid contract and (2) breach
of the terms of that contract”).
62. Accordingly, CBL-Friendly’s Motion to Dismiss Plaintiff’s Breach of
Contract claim shall be DENIED.
B. Breach of Contract Against Transformco
63. Transformco argues that Whole Foods is statutorily barred from seeking
recourse against it because the Bankruptcy Order specifies that it acquired the
Sublease from Sears in February 2019 free and clear of any liability, including
successor liability. (Mem. Supp. Def. Transform Lease Opco LLC’s Mot. Dismiss
[Transformco Mem.] 13–15, ECF No. 23; Bankruptcy Order § M.) 64. Transformco further contends that Whole Foods is contractually barred
from pursuing it because Whole Foods certified in the Fourth and Fifth Amendments
to the Sublease that Transformco was not in default, including for failure to ensure
that the Whole Foods’ Premises were free from asbestos, thereby expressly waiving
its right to sue. (Transformco Mem. 16–17.)
65. Whole Foods responds that Section 365(f) of the Bankruptcy Code has
specific rules governing the rights and liabilities flowing from assignment of an
unexpired lease. It argues that before such a lease may be assigned to a third-party
during bankruptcy, the debtor must assume the obligations of the lease, along with
its benefits, and that it passes both obligations and benefits to the third party. (Mem.
L. Opp’n Transform Lease Opco LLC’s Mot. Dismiss [Whole Foods Opp’n Br.
Transformco Mot.] 8, ECF No. 37.) Consequently, Whole Foods maintains that
Transformco assumed the obligation to, among other things, remove Hazardous
Materials and provide Whole Foods with quiet and peaceful possession and
occupation pursuant to Sections 17.17(c)(iii) and 13.1(f), respectively. (Whole Foods
Opp’n Br. Transformco Mot. 8.)
66. In addition, Whole Foods contends that Transformco contractually
obligated itself to the relevant terms of the Sublease when, after it acquired the
Sublease through bankruptcy and before the redevelopment project began, it agreed
in both the Fourth and Fifth Amendments to ratify its terms. (Whole Foods Opp’n
Br. Transformco Mot. 8–9.) 67. The Bankruptcy Code provides that “[a] debtor in bankruptcy
may . . . assign its rights and obligations under an executory contract to others[.]”
Anytime Fitness, L.L.C. v. Thornhill Bros. Fitness, L.L.C. (In re Thornhill Bros.
Fitness, L.L.C.), 85 F.4th 321, 325 (5th Cir. 2023) (citing 11 U.S.C. § 365(f)(1)).
However, before doing so, the debtor must first assume the agreement in accordance
with Section 365. See id. And “[w]hen an executory contract or lease is assumed, it
must be assumed cum onere, with all of its benefits and burdens.” In re E-Z Serve
Convenience Stores, Inc., 289 B.R. 45, 49 (Bankr. M.D.N.C. 2003) (citing NLRB v.
Bildisco & Bildisco, 465 U.S. 513, 531 (1984)); see also Three Sisters Partners, L.L.C.
v. Harden (In re Shangra-La, Inc.), 167 F.3d 843, 849 (4th Cir. 1999) (same).
68. Likewise, assignments of such agreements to third parties are “all-or-
nothing.” Anytime Fitness, 85 F.4th at 326 (“So too with assignments under § 365(f).
If the trustee (or debtor) could use the Code to assign a fraction of a contract that
could not be assigned outside of bankruptcy, the trustee (or debtor) would arrogate to
itself property it did not have before the petition.”).
69. The Sublease was an executory contract; consequently, when Transformco
assumed the Sublease from Sears in bankruptcy, Section 365(f) specifies that it did
so subject to all of its obligations.
70. Even were this not true, in both the Fourth and Fifth Amendments to the
Sublease, which followed the Bankruptcy Order, Transformco expressly ratified as
its own the obligations of the Sublease, including those in Sections 5.2(a)(iv) and
17.17(c)(iii). 71. “Ratification is defined as the affirmance by a person of a prior act which
did not bind him but which was done or professedly done on his account, whereby the
act, as to some or all persons, is given effect as if originally authorized by him.” Bell
Atl. Tricon Leasing Corp. v. DRR, Inc., 114 N.C. App. 771, 776 (1994) (citation and
internal quotation marks omitted). By agreeing to ratify and confirm terms of the
Sublease, Transformco contractually accepted responsibility for the obligations at
issue.
72. Transformco argues that even though it ratified these obligations, Whole
Foods waived its right to pursue a breach of contract claim because it agreed in the
Fourth and Fifth Amendments that Transformco was not in default. (Transformco
Mem. 16.) Whole Foods responds that it did not waive its right to sue by
acknowledging in the amendments that it was unaware of any default by
Transformco. According to Whole Foods, the earliest date it discovered a default was
in September 2023, when it was informed that asbestos had been detected, some six
months after the effective date of the Fifth Amendment. Therefore, Whole Foods
contends that waiver does not apply because it could not have voluntarily and
intentionally relinquished its right to sue. (Whole Foods Opp’n Br. Transformco Mot.
12–15.)
73. Waiver requires “(1) the existence, at the time of the alleged waiver, of a
right, advantage or benefit; (2) the knowledge, actual or constructive, of the existence
thereof; and (3) an intention to relinquish such right, advantage or benefit.”
Davenport v. Travelers Indem. Co., 283 N.C. 234, 239 (1973) (citation and internal quotation marks omitted). “Knowledge of the existence of the right, benefit, or
advantage on the part of the party claimed to have made the waiver is an essential
prerequisite to its relinquishment.” Danville Lumber & Mfg. Co. v. Gallivan Bldg.
Co., 177 N.C. 103, 107 (1919).
74. At the time it agreed to the Fourth and Fifth Amendments to the Sublease,
Whole Foods alleges that it was unaware that Sears had failed to remove the asbestos
prior to tendering possession of the premises. (Compl. ¶ 46.) Without knowledge of
the defect, waiver cannot occur. See Salem Realty Co. v. Batson, 256 N.C. 298, 308
(1962) (“The acceptance of work which has been defectively done, the defects being
unknown and not discoverable by inspection, does not amount to a waiver of the
imperfect performance.”) (citation and internal quotation marks omitted); Tisdale v.
Elliott, 13 N.C. App. 598, 601 (1972) (“[A]cceptance with knowledge of a defective
performance may be deemed a waiver of the defective performance. But acceptance
where the defect is unknown, or latent, does not waive the defective performance.”).
75. Next, Transformco argues that Whole Foods’ pleading is conclusory because
it fails to specify the provisions of the Sublease that were allegedly breached.
(Transformco Mem. 19–24.) Further, citing a provision in the Operating Agreement
by which CBL-Friendly agreed to “indemnify, defend and hold Transformco and
Whole Foods harmless from any and all losses [except as may be caused by
Transformco or Whole Foods],” Transformco argues that Whole Foods contractually
agreed that CBL-Friendly, and not it, would be solely liable for any damage resulting
from the redevelopment. (Transformco Mem. 17–19.) Transformco also points to the complaint’s allegations that it was CBL-Friendly’s agent that dislodged the ACM
allegedly still existing within the ceiling of the Whole Foods store, not Transformco:
“Thus, to whatever extent Whole Foods asserts a breach of contract claim against
Transformco rooted in CBL’s failure to prevent ACM from leaking into the Whole
Foods store and to prevent its work from dislodging ACM in the Whole Foods store,
that part of Whole Foods’s [claim] must be dismissed.” (Transformco Mem. 19.)
76. Whole Foods responds that it is suing Transformco for breaching the
Sublease, not the Operating Agreement and, even if that were not true, the indemnity
provision binds CBL-Friendly, not Whole Foods. (Whole Foods Opp’n Br.
Transformco Mot. 15–16.) The Court agrees. Whole Foods’ allegations give
Transformco sufficient notice of its alleged breaches of Sections 5.2(a)(iv), 17.17(c)(iii),
13.1(f), and 4.3(b). (Compl. ¶¶ 46, 54–55, 67–69); see also Vanguard Pai Lung, LLC,
2019 NCBC LEXIS 39, at *10 (claims for breach of contract only need to meet the
liberal pleading standard of Rule 8). In addition, Transformco’s argument against
Whole Foods with respect to the indemnity provision binding CBL-Friendly is
unavailing.5
77. Transformco next argues that Whole Foods has failed to allege facts to
support a claim for breach of Section 13.1(f) of the Sublease, which requires it to
provide Whole Foods with “lawful, quiet and peaceful possession and occupation of
the Demised Premises[.]” It further contends that Whole Foods’ allegations that it
5 Transformco has filed a cross-claim against CBL-Friendly for indemnification and for declaratory relief under the Uniform Declaratory Judgment Act, N.C.G.S. § 1-253 et seq. requesting a declaratory judgment with respect to this indemnity provision. (Transformco Answer Complaint and Cross-Claim, ECF No. 51.) reported the presence of asbestos to Transformco and that Transformco failed to
remove it are conclusory and not sufficient to allege a breach of Section 17.17(c)(iii)
of the Sublease. (Transformco Mem. 23.)
78. Whole Foods responds that not only are its allegations of breach sufficient,
but it has also adequately alleged that Transformco’s refusal to remove the asbestos
with “reasonable promptness” forced Whole Foods to close its store for two weeks,
amounting to its constructive eviction. (Whole Foods Opp’n Br. Transformco Mot.
24.) Whole Foods argues that it has adequately alleged a breach of Section
17.17(c)(iii) because (a) it is not required to plead a breach of contract claim with
particularity, and (b) it has alleged that Transformco was informed of the presence of
asbestos and refused to remove it, requiring Whole Foods to undertake that task.
(Whole Foods Opp’n Br. Transformco Mot. 19–20.)
79. The complaint describes the circumstances that Whole Foods claims led to
the disturbance and migration of ACM into the store. (Compl. ¶¶ 42–49.) Whole
Foods then alleges that Transformco was notified of the existence of asbestos in the
store and, after learning of its existence, failed to make efforts to remove it. (Compl.
¶¶ 54, 69a.) Given these allegations, the Court cannot conclude with certainty that
there are no facts that could be proved to support Whole Foods’ claim. State ex rel.
Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 444 (2008) (internal quotation
marks and citation omitted).
80. Similarly, Whole Foods has adequately alleged a claim for constructive
eviction resulting from the need to close the store and undertake asbestos remediation. See Marina Food Assocs., Inc. v. Marina Restaurant, Inc., 100 N.C. App.
82, 92 (1990) (constructive eviction resulted when “[t]he landlord’s breach of the lease
rendered the premise unfit for plaintiff’s purposes”). Transformco’s arguments to the
contrary are unconvincing.
81. Finally, Transformco argues that Whole Foods has failed to assert a breach
of the implied covenant of good faith and fair dealing. (Transformco Mem. 24.) “In
every contract there is an implied covenant of good faith and fair dealing that neither
party will do anything which injures the right of the other to receive the benefits of
the agreement.” Bicycle Transit Auth., Inc. v. Bell, 314 N.C. 219, 228 (1985) (citation
omitted). When the breach of contract and implied covenant are based on the same
acts, “the fate of an implied covenant claim rises and falls with the fate of the breach
of contract claim[.]” Intersal, Inc. v. Wilson, 2023 NCBC LEXIS 29, at *68 (N.C.
Super. Ct. Feb. 23, 2023).
82. Here, Whole Foods has a viable breach of contract claim, so its breach of the
implied covenant of good faith and fair dealing claim does not fail on that basis. In
addition, Whole Foods alleges that Transformco “breach[ed] the implied covenant of
good faith and fair dealing by otherwise failing to perform its contractual obligations
in good faith, failing to make reasonable efforts to perform its obligations under the
Sublease, as amended, failing to act upon principles of good faith and fair dealing to
accomplish the Sublease’s purposes, and injuring Whole Foods’ right to receive the
Sublease’s benefit.” (Compl. ¶ 69d.) 83. As this Court has observed, “‘[e]vasion of the spirit of the bargain, lack of
diligence and slacking off, willful rendering of imperfect performance, abuse of a
power to specify terms, and interference with or failure to cooperate in the other
party’s performance’ may constitute breach of the implied covenant.” Intersal, Inc.,
2023 NCBC LEXIS 29, at *67 (quoting Restatement (Second) of Contracts § 205 cmt.
d (1981)). Whole Foods’ allegations satisfy the pleading requirements for this claim.
84. Accordingly, Transformco’s Motion with respect to Whole Foods’ claim for
breach of contract shall be DENIED.
C. Declaratory Judgment Against Transformco
85. Whole Foods requests that the Court enter a judgment declaring that (a) it
has the right to withhold rent in an amount equal to the rent due for the period of
time during which its store was closed to remove the asbestos; and (b) it has the right
to withhold rent “proportionately to the detrimental effect on Whole Foods’ business
of the asbestos that Transformco refused and failed to remove from the Whole Foods
Store.” (Compl. ¶ 81.)
86. Transformco argues that the Declaratory Judgment Act has no application
because Whole Foods has not alleged the existence of an actual controversy regarding
the validity or construction of the rent abatement provisions (Sections 4.3(b) and
17.17(c)(iii)) of the Sublease. Instead, according to Transformco, Whole Foods has
alleged a dispute that turns solely on issues of fact. (Transformco Mem. 26.)
87. Whole Foods responds that it has alleged an actual controversy because it
has pled that it is entitled to rent abatement due to Transformco’s failure to remove the asbestos, while Transformco denies any responsibility for the asbestos under the
Sublease. (Whole Foods Opp'n Br. Transformco Mot. 26–27.)
88. The Declaratory Judgment Act (Act) provides that “[a]ny person interested
under a . . . written contract . . . or whose rights, status or other legal relations are
affected by a . . . contract . . . may have determined any question of construction or
validity arising under the . . . contract . . . and obtain a declaration of rights, status,
or other legal relations thereunder.” N.C.G.S. § 1-254 (emphasis added).
89. The Act “is to be liberally construed and administered.” N.C.G.S. § 1-264.
However, as this Court, quoting the Supreme Court, has observed, “a trial court
[may], in the exercise of its discretion . . . decline a request for declaratory relief when
(1) the requested declaration will serve no useful purpose in clarifying or settling the
legal relations at issue; or (2) the requested declaration will not terminate or afford
relief from the uncertainty, insecurity, or controversy giving rise to the proceeding.”
PHE, Inc. v. Dolinksy, 2022 NCBC LEXIS 123, at *19–20 (N.C. Super. Ct. Oct. 19,
2022) (quoting Augur v. Augur, 356 N.C. 582, 588–89 (2002)).
90. In this case, the complaint alleges that Whole Foods, as tenant, and
Transformco, as landlord, are parties to the Sublease. Whole Foods alleges that the
Sublease provides for rent abatement in the event an “Interfering Condition was
caused by Landlord or persons subject to Landlord’s control and such Interfering
Condition persists for more than forty-eight (48) hours after [Whole Foods] gives
Landlord notice” that it exists. (Compl. ¶ 17 (quoting Sublease § 4.3(b)).) 91. In addition, Whole Foods alleges that the Sublease provides for rent
abatement in the event the landlord fails to remove Hazardous Material (defined to
include asbestos) that detrimentally affects its business with “reasonable
promptness.” (Compl. ¶ 18 (quoting Sublease § 17.17(c)(iii)).)
92. Whole Foods alleges that it reported the presence of asbestos in its store
and requested that Transformco remove it, but Transformco refused. (Compl. ¶ 54.)
Whole Foods further asserts that it was required to close its store and remove the
asbestos itself. (Compl. ¶¶ 53, 56.) It seeks a declaratory judgment that it has the
right to withhold rent pursuant to Sections 4.3 and 17.17(c)(iii) of the Sublease.
(Compl. ¶ 81.)
93. Although Whole Foods does not allege that a dispute exists regarding the
validity or interpretation of the rent abatement provisions themselves, Whole Foods
does allege the existence of a more fundamental dispute regarding Transformco’s
liability under the Sublease. Transformco argues that the dispute turns on factual
issues “as to whether Transformco . . . created an interfering condition” and
maintains that the continued existence of asbestos in the Whole Foods store was the
responsibility of Sears—not Transformco. (Transformco Mem. 26.) Whole Foods
disagrees and alleges otherwise.
94. Accepting the allegations in the complaint as true for purposes of this
Motion, and giving consideration to the purpose of the Act, the Court concludes that
Whole Foods has sufficiently stated a claim for declaratory judgment. Transformco’s
arguments are better saved for another day with a more comprehensive record. See BIOMILQ, Inc. v. Guiliano, 2023 NCBC LEXIS 24, at *32 (N.C. Super. Ct. Feb. 10,
2023) (“The question is not whether the plaintiff will prevail on their claim, ‘[i]t is
only whether they have identified an actual, genuine controversy.’ ” (quoting Bennett
v. Bennett, 2019 NCBC LEXIS 19, at *32 (N.C. Super. Ct. Mar. 15, 2019))).
95. Accordingly, Transformco’s Motion with respect to Whole Food’s claim for
declaratory judgment shall be DENIED.
V. CONCLUSION
96. WHEREFORE, the Court ORDERS as follows:
a. Defendant CBL-Friendly Center CMBS, LLC’s Motion to Dismiss is
DENIED.
b. Defendant Transform Lease Opco LLC’s Motion to Dismiss is likewise
c. Defendant CBL-Friendly Center CMBS, LLC shall file a response to
Defendant Transform Lease Opco LLC’s Crossclaim, (ECF No. 51), within
thirty (30) days.
SO ORDERED, this the 17th day of November, 2025.
/s/ Julianna T. Earp Julianna T. Earp Special Superior Court Judge for Complex Business Cases