Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-01091/USCOURTS-cand-3_05-cv-01091-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

BLICKMAN TURKUS, L.P., dba BT

COMMERCIAL REAL ESTATE,

Plaintiff

 v.

EGREETINGS NETWORK, INC., et al.,

Defendants. /

No. C 05-1091 MJJ

ORDER DENYING DEFENDANTS’

SUMMARY JUDGMENT MOTION

INTRODUCTION

Before the Court is Egreetings Network, Inc. (“EGN”) and American Greetings

Corporation’s (“AGC”) (collectively “Defendants”) motion for partial summary judgment

(“Motion”). Defendants seek dismissal of the first two causes of action for breach of contract and

common count. For the following reasons, the Court DENIES Defendants’ Motion.

FACTUAL BACKGROUND

On or about April 13, 1999, EGN and the owners (“Landlord”) of a commercial office

building located at 149 Montgomery Street in San Francisco entered into a 10-year commercial lease

pertaining to certain portions of the building (“Master Lease”). In October 1999 and March 2000,

the Landlord and EGN amended the Master Lease to add more space to the leased premises. The

Master Lease permitted EGN to sublet part or all of the premises with consent of the Landlord. 
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

On or about March 19, 2001, EGN and Plaintiff entered into an Exclusive Subleasing

Agreement (“Subleasing Agreement”), which granted Plaintiff the exclusive right to procure for

EGN subleases for leased premises. The Subleasing Agreement had an original expiration date of

October 1, 2001.

In October 2001, the parties entered into an Extension of the Exclusive Subleasing

Agreement, which changed the expiration date of the Subleasing Agreement to March 31, 2002. On

or about April 18, 2002, the parties signed a second Extension of the Subleasing Agreement, which

moved the expiration date to December 31, 2002. This extension also amended paragraph 6

regarding commissions and the Schedule of Sublease Commissions. In December 2002, EGN and

Plaintiff signed a final Extension of the Subleasing Agreement (“Final Extension”), which changed

the expiration date to September 30, 2003. The Final Extension also amended paragraph 6 regarding

commissions and the Schedule of Sublease Commissions.

In March 2003, Plaintiff presented and EGN accepted a sublease proposal for Howard S.

Wright Construction Company. On or about July 31 and August 7, 2003, Plaintiff received sublease

proposals from two cooperating brokers, but EGN did not enter into either proposed sublease

arrangement. Shortly thereafter, on September 30, 2003, the Subleasing Arrangement expired on its

own terms.

In the fall of 2003, a lease dispute arose between EGN and the Landlord under the Master

Lease. On or about November 19, 2003, the Landlord’s counsel specifically stated in writing that

the Landlord had not elected to terminate the Master Lease or EGN’s right to possession of the lease

premises. As a result of the ongoing lease dispute, the Landlord filed an action against EGN in San

Francisco County Superior Court on December 19, 2003. During the litigation of that matter,

Defendants contend that the Landlord adamantly refused to terminate the Master Lease and would

not accept possession of the leased premises unless and until the parties reached a settlement. Both

parties agree that at no time did Defendants receive an abandonment notice regarding the Master

Lease and leased premises from the Landlord. The parties also agree that at no time did Defendants

receive a written acceptance of any surrender of the leased premises from the Landlord. In August

2004, EGN and the Landlord settled the lease dispute and the state court action. As part of the
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

settlement, and for the first time during the life of the Master Lease, the Landlord took possession of

the leased premises.

On February 10, 2005, Plaintiff filed a complaint for breach of contract, common count, and

fraud against Defendants in San Mateo County Superior Court. On March 16, 2005, Defendants

removed the matter to federal court based on diversity jurisdiction. Defendants now move for partial

summary judgment on the first and second causes of action for breach of contract and common

count.

LEGAL STANDARD

The summary judgment procedure is a method for promptly disposing of actions. See FED.

R. CIV. PROC. 56. The judgment sought will be granted if “there is no genuine issue as to any

material fact and [ ] the moving party is entitled to judgment as a matter of law.” FED. R. CIV. PROC.

56(c). “[A] moving party without the ultimate burden of persuasion at trial [ ] may carry its initial

burden of production by either of two methods. The moving party may produce evidence negating

an essential element of the nonmoving party’s case, or, after suitable discovery, the moving party

may show that the nonmoving party does not have enough evidence of an essential element of its

claim or defense to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co.,

Ltd., v. Fritz Companies, 210 F.3d 1099, 1102 (9th Cir. 2000). If the movant meets its burden, the

nonmoving party must come forward with specific facts demonstrating a genuine factual issue for

trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). 

If the nonmoving party fails to make a showing sufficient to establish the existence of an

element essential to that party’s case, and on which that party will bear the burden of proof at trial,

“the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S.

317, 323 (1986). In opposing summary judgment, the nonmoving party may not rest on his

pleadings. He “must produce at least some ‘significant probative evidence tending to support the

complaint.’” T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir.

1987) (quoting First Nat’l Bank v. Cities Serv. Co., 391 U.S. 253, 290 (1968)).

 The Court does not make credibility determinations with respect to evidence offered, and is

required to draw all inferences in the light most favorable to the non-moving party. See T.W. Elec.,
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

809 F.2d at 630-31 (citing Matsushita, 475 U.S. at 587 ). Summary judgment is therefore not

appropriate “where contradictory inferences may reasonably be drawn from undisputed evidentiary

facts . . ..” Hollingsworth Solderless Terminal Co. v. Turley, 622 F.2d 1324, 1335 (9th Cir. 1980). 

ANALYSIS

The goal of contract interpretation is to give effect to the parties’ mutual intent. Cal. Civ.

Code § 1636; Bank of the West v. Superior Court, 2 Cal. 4th 1254, 1264 (1992). “It is the outward

expression of the agreement, rather than a party’s unexpressed intention, which the court will

enforce.” Winet v. Price, 4 Cal. App. 4th 1159, 1166 (1999). Under California law, the threshold

question in interpreting a contract or its provisions is “whether the contested terms are ambiguous.”

City of Santa Clara v. Watkins, 984 F.2d 1008, 1012 (9th Cir. 1993). Whether a written contract is

ambiguous is a question of law to be decided by the court. Brobeck, Phleger & Harrison v. Telex

Corp., 602 F.2d 866, 871 (9th Cir. 1979).

In assessing whether a contract is ambiguous, the district court “must receive relevant

extrinsic evidence that can prove a meaning to which the language of the contract is ‘reasonably

susceptible.’” Id. (quoting Pacific Gas and Electric Co. v. G.W. Thomas Drayage Co., 69 Cal. 2d

33, 37 (1968). “If the court finds after considering this preliminary evidence that the language of the

contract is not reasonably susceptible of interpretation and is unambiguous, extrinsic evidence

cannot be received for the purpose of varying the terms of the contract.” Id. 

Summary judgment is proper only if the contract or the provision in question is

unambiguous. Id. If an ambiguity exists, the Court cannot resolve the dispute on summary

judgment. National Union Fire Ins. Co. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir. 1983). “The

rationale for this proposition is simple: ambiguity in a contract raises a question of intent, which is a

fact question precluding summary judgment.” Id.

Here, Plaintiff asserts that Defendants’ breached the terms of the Commission Agreement in

three separate ways: 1) the Landlord’s action of finding and entering into replacement leases for the

Subleased Premises directly with third party tenants demonstrates that the Landlord had

“recaptured” the subject premises within the meaning of the Commission Agreement; 2) Defendants

rejected in advance all potential subleases, thereby effectively taking the property off the market
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

To the extent that Plaintiff urges the Court to read “initiates the process” to modify the phrase

“otherwise recaptures,” the Court is unpersuaded. The Court finds it significant that the contract

language uses the disjunctive when referring to “initiates the process to terminate the lease for the

Sublease Premises, or subleases from Sublessor or otherwise recaptures the Sublease Premises.” This

disjunctive language allows the Court to consider whether the Master Landlord: 1) initiates the process

to terminate the lease for the Sublease Premises, 2) subleases from Sublessor, or 3) otherwise recaptures

the Sublease Premises. 

2

Because the term “recapture” tends to have a generally accepted meaning, the Court finds that

it is not ambiguous on its face.

5

before the expiration of the listing term; and 3) the Landlord initiated the process of terminating the

lease for the Sublease Premises within 90 days of the expiration of the Commission Agreement. The

Court will address each issue in turn.

A. “Recapture” of the Sublease Premises

Paragraph 6 of the Subleasing Agreement, as amended, states, in relevant portion, that

“Sublessor agrees to pay Broker a commission . . . (iii) if, during the 90 day period following the

expiration or sooner termination of this Agreement, the Master Landlord initiates the process to

terminate the lease for the Sublease Premises, or subleases from Sublessor or otherwise recaptures

the Sublease Premises.” (emphasis added). 

Plaintiff contends that the phrase “otherwise recaptures” was intended as a broad catchall

provision.1

 Plaintiff asserts that by reaching an understanding with EGN to lease the Sublease

Premises directly to third parties, the Landlord “recaptured” the premises within the meaning of the

Subleasing Agreement. Plaintiff further asserts that, at worst, the phrase “otherwise recaptures” is

ambiguous. Defendants respond that in order for the Landlord to have “recaptured” the Sublease

Premises, he must have retaken possession of the property. 

Having reviewed the evidence in the record concerning the meaning of the term “recaptures,”

the Court finds that no triable issue of fact exists with respect to the proper interpretation of that

term. As an initial matter, the Court notes that cases have construed “recapture” to mean the

landlord must retake possession of the property.2

 See Three Sixty Five Club v. Shostak, 104 Cal.

App. 2d 735, 737-38 (1951) (“recapture” of second floor synonomous with possession). Here, it is

undisputed that the Landlord did not take any action to take away or limit EGN’s exclusive

possession of the premises prior to December 29, 2003. Furthermore, the Court notes that Plaintiff
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

has offered no evidence to support the interpretation it urges -- that the Landlord’s ability to sublease

directly to tenants somehow equates with recapture of the leased premises. 

In National Union, the court stated that “[the plaintiff cannot rely on the mere possibility of a

factual dispute as to intent to avert summary judgment. Nor can it expect the district court to draw

inferences favorable to it when they are wholly unsupported.” 701 F.2d at 96. As in National

Union, Plaintiff has offered no support for its interpretation of “recapture,” and hence has failed to

create a genuine issue of material fact as to the proper interpretation of the term. 

B. Rejection of All Potential Subleases

Under the terms of the Commission Agreement, EGN granted Plaintiff “the exclusive right to

procure for Sublessor a sublease/subleases” during the term of the listing, which was eventually

extended to September 30, 2003. On August 26, 2003, Plaintiff alleges that a representative of EGN

informed Plaintiff to stop pursuing any future subleasing deals. Plaintiff contends that by effectively

taking the property “off the market,” Defendants violated their promise to consider the sublease

proposals presented by Plaintiff. 

Defendants respond that the express terms of the Subleasing Agreement granted EGN the

unconditional right to reject any sublease that Plaintiff proposed and to terminate any negotiations

for any proposed sublease. Paragraph 14 of the Subleasing Agreement states as follows:

Nothing contained in this Agreement shall be interpreted as obligating Sublessor

to accept or enter into a sublease or assignment or to prevent Sublessor from

accepting or entering into any sublease or assignment with any prospective

Subtenant or assignee, whether or not such sublease or assignment is proposed by

Broker. Broker acknowledges that Sublessor shall have the unqualified right, in

its sole discretion, to terminate the negotiations with any prospective Subtenant or

assignee at any time and to refuse to enter into any sublease or with any

prospective subtenant.

Based upon this contract language, Defendants contend that they had every right to refuse to

consider sublease proposals offered by Plaintiff.

Upon considering the relevant contract language, the Court finds that Defendants had the

unqualified right to refuse to enter into sublease proposals offered by Plaintiff. While Plaintiff urges

the Court to make a distinction between “entering into” and “considering” a proposed sublease

agreement, the Court is unpersuaded. The Court finds that the contract language allowing

Defendants the right “to refuse to enter into any sublease” is broad enough to allow Defendants to
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

Plaintiff also contends that Defendants violated the covenant of good faith and fair dealing by

rejecting in advance all potential subleases. Plaintiff asserts that the level of discretion reserved by

Defendants in the Subleasing Agreement ultimately deemed the contract illusory. The Court disagrees.

It is well settled that where a discretionary right in a contract in unambiguous, a party may not invoke

the implied covenant of good faith and fair dealing. See Carma Developers, Inc. v. Marathon

Development California, Inc., 2 Cal. 4th 342, 374 (1992) (“As to acts and conduct authorized by the

express provisions of the contract, no covenant of good faith and fair dealing can be implied which

forbids such acts and conduct. If parties were given the right to do what they did by the express

provisions of the contract there can be no breach.”) Furthermore, the Court finds that Defendants’

provided adequate consideration for the contract, including designating Plaintiff as the exclusive leasing

agent for the Sublease Premises.

Moreover, because the Court finds that no issues of material fact exist regarding the “off the

market” theory, the Court need not decide whether Plaintiff has failed to demonstrate contractual

damages under this theory.

7

refuse to consider any and all sublease agreements proposed by Plaintiff. Accordingly, the Court

finds that the challenged contract language is unambiguous, and concludes that Plaintiff has failed to

raise a genuine issue of material fact regarding its “off the market” theory.3

C. Initiates the Process

Paragraph 6 of the Subleasing Agreement, as amended, states, in relevant portion, that

“Sublessor agrees to pay Broker a commission . . . (iii) if, during the 90 day period following the

expiration or sooner termination of this Agreement, the Master Landlord initiates the process to

terminate the lease for the Sublease Premises . . . .” (emphasis added). Plaintiff contends that the

Landlord “initiated the process” to terminate or otherwise recapture the premises when it initiated

negotiations with EGN following EGN’s default under the lease. Defendants argue that in order to

“initiate the process” to terminate the lease, the Landlord must have taken affirmative steps to

terminate the Master Lease, such as serving an express termination notice or filing a legal action to

terminate. 

The Court finds that Defendants’ reading of “initiates the process” is overly narrow and

restrictive. To be certain, the phrase “initiates the process to terminate the lease” is reasonably

susceptible to multiple interpretations. While the Court agrees with Defendants that the filing an

unlawful detainer lawsuit could have “initiated the process to terminate the lease,” the Court is not

persuaded that such legal action was the only means available to satisfy the contractual language. It

is reasonable to conclude that simple negotiations between the Landlord and EGN regarding lease
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

According to Plaintiff, these negotiations included discussions concerning the recovery of the

Subject Premises and the leasing of the Subject Premises by the Landlord directly to a third party tenant.

(Declaration of James Chesler (“Chesler Decl.”) at ¶¶ 12 and 13). However, the Chesler Declaration

does not explicitly state that the negotiations concerned “the recovery of the Subject Premises.” Rather,

the Chesler Declaration states that the negotiations concerned the issue of whether the Landlord could

lease the EGN property directly to third party tenants. However, the Court is satisfied that the Chesler

Declaration raises an inference that the Landlord “initiated the process” to terminate the lease.

5

Because the factual basis of Plaintiff’s common count claim is the same as the contract claim,

the Court also DENIES Defendants’ motion for partial summary judgment on the common count claim.

8

termination could also satisfy the “initiation” process.4 Given that an ambiguity exists in this

contract language, the Court cannot resolve this dispute at the summary judgment stage. 

Accordingly, Defendants’ motion for summary judgment on the contract claim is DENIED.

5

 

CONCLUSION

For the reasons stated above, the Court DENIES Defendants’ motion for summary

judgment.

IT IS SO ORDERED.

Dated: September _19_, 2005 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE