Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-02277/USCOURTS-azd-2_11-cv-02277-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Inland Western Avondale McDowell,

L.L.C.,

 Plaintiff,

vs.

Mark J. Wattles,

 Defendant.

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No. CV-11-02277-PHX-PGR 

 ORDER

 

 

Pending before the Court is Plaintiff’s Motion for Summary Judgment (Doc.

22). Having considered the parties’ memoranda in light of the record, the Court finds

that the motion should be denied.

Plaintiff Inland Western Avondale McDowell, L.L.C. removed this breach of

contract action to this Court solely on the basis of diversity of citizenship jurisdiction.

The complaint seeks damages from defendant Mark J. Wattles for breach of a

personal guaranty (“Guaranty”) he entered into on January 25, 2010, wherein he

guaranteed the obligations incurred by Ultimate Acquisition Partners, L.P. d/b/a

Ultimate Electronics (“Ultimate”) under a commercial real estate lease. The

complaint alleges that the defendant has defaulted on his obligations under the

Guaranty by failing to make the payments demanded from him after Ultimate

Case 2:11-cv-02277-PGR Document 42 Filed 03/25/13 Page 1 of 7
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1

 Ultimate only paid the first two months of its rent obligations. It apparently

never opened its store at the leased premises, and it filed for bankruptcy in January,

2011; it formally rejected the lease as part of the bankruptcy proceedings in March

2011. Ultimate’s bankruptcy does not affect the defendant’s obligations under the

Guaranty.

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defaulted on its rent and other payments required of it under its lease.1

 

The Court concludes that summary judgment is not appropriate because the

Court cannot determine as a matter of law from the record before it that the plaintiff

is a proper party to maintain this action. See American Triticale, Inc. v. Nytco

Services, Inc., 664 F.2d 1136, 1141 (9th Cir.1981) (Whether a plaintiff is the real

party in interest under Fed.R.Civ.P. 17(a) in a federal diversity suit depends on

whether the plaintiff is a proper party to maintain the action under the applicable

state law.) The Guaranty provides that it is to be enforced pursuant to the laws of

Arizona. Under Arizona law, it is axiomatic that to prevail on a breach of contract

claim the initial element that the plaintiff must prove is that a contract existed

between it and the defendant. Goodman v. Physical Resource Engineering, Inc., 270

P.3d 852, 855 (Ariz.App.2011); Stratton v. Inspiration Consolidated Copper Co., 683

P.2d 327, 330 (Ariz.App.1984) (Without privity of contract, a plaintiff has no claim for

a personal judgment sounding in breach of contract.) 

Although the defendant has not raised it as an issue, the record does not

establish that the plaintiff is in privity of contract with the defendant for purposes of

enforcing the Guaranty. The issue here is that the plaintiff is seeking to enforce a

contract to which it is not a named party. The Guaranty, which is part of the record,

is solely between the defendant and a non-party to this action, Inland Southwest

Management LLC, which is defined in the Guaranty as the “Landlord;” the plaintiff

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2

 The first sentence of the Guaranty states: “This PERSONAL GUARANTY

(“this Guaranty”), dated as of January 25, 2010, is made by MARK J. WATTLES

(“Guarantor”) in favor of INLAND SOUTHWEST MANAGEMENT LLC, a Delaware

limited liability company (the “Landlord”), and its permitted successors and assigns,

with reference to the facts set forth below.”

 All of the defendant’s obligations under the Guaranty are to the Landlord,

i.e. Inland Southwest Management LLC. The Guaranty provides, by way of brief

example, that the defendant was agreeing to guaranty Ultimate’s obligations to the

Landlord under the store lease as an inducement to and in consideration for the

Landlord to enter into the lease with Ultimate, and that the Landlord could bring a

separate action against the defendant under the Guaranty without proceeding

directly against Ultimate. 

 The Court notes that while the complaint alleges that the lease underlying

the Guaranty was between Ultimate and “Plaintiff, as landlord,” that is not correct.

While the plaintiff is a named party to the lease, it is solely in the capacity as “Owner”

of the shopping center where Ultimate’s store was to be located. The lease

designates the “Landlord” as Inland Southwest Management LLC, acting as agent

for the owner. All of the substantive provisions of the lease are between Inland

Southwest Management, as the landlord, and Ultimate. 

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is nowhere mentioned in the Guaranty.2

 Neither the plaintiff’s complaint, its

summary judgment memoranda, or its statement of facts makes any reference to the

plaintiff being a successor or assign of Inland Southwest Management LLC, or that

it is a third-party beneficiary of the Guaranty, or that it is a proper party to bring this

action in some other legally cognizable capacity. The plaintiff is thus not entitled to

entry of summary judgment in its favor because on the present record it has failed

to make a showing sufficient to establish the existence of an essential element on

which it bears the burden of proof.

But even if the plaintiff is deemed to be the proper party to bring this action,

based on relevant facts not presented to the Court, the Court further concludes that

summary judgment on damages is not appropriate due to the issue of the

reasonableness of the plaintiff’s efforts to mitigate its damages. In Arizona, “[a]

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3

 The Court notes that the Ninth Circuit has deemed the failure to mitigate

damages to be an affirmative defense notwithstanding that it is not enumerated as

such in Fed.R.Civ.P. 8(c)(1). 999 v. C.I.T, Corp., 776 F.2d 866, 870 n.2 (9th

Cir.1985); Biltmore Bank of Arizona v. First National Mortgage Sources, L.L.C., 2008

WL 564833, at *9 and n.9 (D.Ariz. Feb. 26, 2008). The defendant did not allege

mitigation as a defense in his answer. Normally such a failure would constitute a

waiver of that defense, but the Court will allow it here because the plaintiff has not

objected to the defense on the basis of waiver and because the plaintiff is not

prejudiced given that the defendant raised the issue of mitigation of damages as an

issue in the parties’ Joint Case Management Report (Doc. 10, at 2) (“Defendant

does not concede liability at this time but anticipates the amount of damages, given

Plaintiff’s mitigation requirements, to be an issue in this case.”) See Apache Survival

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basic principle of the law of damages is that one who claims to have been injured by

a breach of contract must use reasonable means to avoid or minimize the damages

resulting from the breach[,]” and the party who fails to do so is precluded from

recovering damages that were avoidable. West Pinal Family Health Center, Inc. v.

McBryde, 785 P.2d 66, 68-69 (Ariz.App.1989). In the case of a breached lease, this

duty to mitigate damages means that the landlord is required to make reasonable

efforts to rent the abandoned premises at a fair rent; the landlord is entitled to the full

amount of the rent due under the lease if it makes a reasonable effort to relet the

premises, even if that effort is unsuccessful. Tempe Corporate Office Building v.

Arizona Funding Services, Inc., 807 P.2d 1130, 1135 (Ariz.App.1991). The

defendant, as the party in breach, has the burden of proving that mitigation of

damages was reasonably possible but was not reasonably attempted. Fairway

Builders, Inc. v. Malouf Towers Rental Co., 603 P.2d 513, 526 (Ariz.App.1979). The

gist of the defendant’s mitigation-related argument is that the plaintiff failed to act

reasonably to mitigate its damages because it took at least 16 months to negotiate

an agreement with Ross Dress for Less to take over the premises abandoned by

Ultimate, while failing to reasonably consider other potentially suitable tenants.3

 

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Coalition v. United States, 21 F.3d 895, 910 (9th Cir.1994) (Matters raised in

opposition to a summary judgment motion that are outside of the scope of a pleading

are to be construed as request pursuant to Fed.R.Civ.P. 15 to amend the pleading

out of time.)

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The issues of whether the plaintiff used reasonable means under the

circumstances to avoid or minimize its damages stemming from Ultimate’s breach

of the lease and how much its damages could have been minimized by reasonable

mitigation efforts is a question of fact, not one of law. Britt v. Red Mesa Unified

School Dist. No. 27, 799 P.2d 9,11 (Ariz.App.1990); Biltmore Bank of Arizona v. First

National Mortgage Sources, L.L.C., 2008 WL 564833, at *9 (D.Ariz. Feb. 26, 2008)

(same). The defendant has submitted some evidence supporting its contention that

it was unreasonable for the plaintiff to take more than 90 days to negotiate with a

tenant to replace Ultimate and that the plaintiff unduly concentrated on getting Ross

Dress for Less as the replacement tenant. The Court concludes that this evidence

of record, together with all reasonable inferences supported by that evidence, all

construed in the light must favorable to the defendant, is sufficient, albeit marginally

so, to show that a genuine dispute of material fact exists regarding the

reasonableness of the plaintiff’s mitigation efforts. While the plaintiff argues in its

reply that it is “simply not true” that it is unreasonable for a commercial lease to take

16 months to negotiate and has submitted some evidence related to its mitigation

efforts that may cast significant doubt about the merits of the defendant’s mitigationrelated contentions, that is not an issue that the Court can resolve on summary

judgment. The Court also cannot resolve on summary judgment the related issue

of whether the reasonably mitigated damages owed by the defendant equal or

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4

 The Guaranty provides that “[i]n no event shall Guarantor’s obligation

exceed $675,000.00 plus costs of collection (hereinafter defined as “Guarantor’s

Maximum Liability.”) The Court notes that it cannot determine from the record

whether the defendant’s maximum liability is actually $675,000 because that figure

can be reduced given that the immediately following Guaranty provision states that

“Guarantor’s Maximum Liability shall be reduced monthly beginning with the second

(2nd) month following the commencement date of the Lease by an amount equal to

the sum of the monthly Minimum Rent and the monthly Additional Rent then payable

pursuant to the Lease.” The plaintiff does not explain whether this latter provision

has any application to the calculation of the defendant’s maximum liability. 

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exceed his maximum liability under the Guaranty.4

Another reason why the Court is not willing to resolve through summary

judgment the issue of the damages the plaintiff may be entitled to is the question of

whether the defendant has obtained all of the discovery he may be entitled to on the

issue of damages. The Court agrees with the plaintiff that the denial of its summary

judgment motion as a discovery-related sanction is not appropriate based on the

arguments and evidence submitted by the defendant, given that the discoveryrelated problems raised by the defendant are partially the result of his own dilatory

discovery requests. Nevertheless, the Court is not convinced that discovery

problems are irrelevant here, despite the defendant’s failure to properly file a motion

for discovery-related sanctions or to properly raise a Fed.R.Civ.P. 56(d) issue. 

Because the Court is not granting summary judgment for either party, the

Court will set a status hearing wherein the Court will review with counsel the various

issues that need to be resolved in this action before a trial date can be set, which

include the issues of the plaintiff’s capacity to bring this action and whether all

relevant requested discovery has been produced. The Court expects the parties’

counsel to personally discuss all remaining issues and to make a reasonable attempt

to resolve them prior to the status conference, as well as to discuss a proposed

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schedule for bringing this action to trial readiness. The Court will also require the

parties to file a joint status report prior to the status conference that sets forth the

results of their discussions and their proposed schedule.

Therefore,

IT IS ORDERED that Plaintiff’s Motion for Summary Judgment (Doc. 22) is

denied.

IT IS FURTHER ORDERED that the parties shall file a joint status report no

later than May 6, 2013.

IT IS FURTHER ORDERED that a status conference shall be held on

Monday, May 13, 2013, at 11:30 a.m., in Courtroom 601.

DATED this 25th day of March, 2013.

. 

Case 2:11-cv-02277-PGR Document 42 Filed 03/25/13 Page 7 of 7