FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

 JULY 24, 2008

THOMAS K. KAHN

CLERK

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

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No. 07-11534

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D.C. Docket No. 05-01038-CV-F-N

MAC East, LLC, a Limited Liability Corporation,

Plaintiff-Appellee,

versus

SHONEY’S, a Limited Liability Company,

Defendant-Appellant.

________________________

Appeal from the United States District Court

for the Middle District of Alabama

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(July 24, 2008)

Before BLACK, CARNES, and COX, Circuit Judges.

COX, Circuit Judge:

This diversity case involves a commercial real estate lease and a proposal by

the assignee of that lease to sublease the real estate to a third party. A significant

issue in this case arises out of a consent clause in the assignment, which gives the
Shoney’s was a Tennessee corporation in 1979. It has since converted to a limited liability 1

company, and now operates under the name Sholand, LLC. We continue to refer to this entity as

Shoney’s. 

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assignor “sole discretion” to withhold consent to the assignee’s proposed sublease.

We certify this issue to the Alabama Supreme Court because it is dispositive of part

of the case and Alabama law is unclear. 

I. Background

The facts of this case are relatively simple and generally not in dispute. In

April 1979, Shoney’s, Inc., entered into a ground lease as tenant of certain property

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located in Montgomery, Alabama, at an initial annual rent of $16,000.00. (R.1-16,

Powers Aff., Ex. A at 2 ¶ 4.) Shoney’s later constructed a building on the property.

In February 2002, Shoney’s assigned its rights under the ground lease to MAC East,

LLC, which is in the commercial real estate business. (R.1-43, Pl.’s Ex. 5) (the

“Assignment Agreement”). MAC East assumed Shoney’s obligations under the

ground lease, the rent for which by then had increased to $21,120.00. (R.1-16, Powers

Aff., Ex. A at 2 ¶ 4.) Paragraph 19 of the Assignment Agreement contains the

following provision: 

Assignee [MAC East]shall not enter into any assignment or sublease of

any portion of the Property or the improvements thereon without the

prior written consent of Assignor [Shoney’s] . . . which Assignor

[Shoney’s] may withhold in its sole discretion.
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(R.1-43, Pl.’s Ex. 5, at 8 ¶ 19) (“Paragraph 19”). 

In April 2005, MAC East made a non-binding proposal to sublease the property

to City Café Diners (“City Café”), at a “Minimum Annual Rent” of $77,350.00 per

year for the first five years. (R.1-43, Pl.’s Ex. 18.) The proposal designated MAC

East as the landlord, and “City Café Diners, or entity to be satisfactory to Landlord”

as the tenant. The proposal was “subject to the provisions of the original Ground

Lease and Assignment and Assumption of Lease, and may require the approval of

third parties under those agreements.” (Id. at 2.) Jimmy Tselios, who signed the

proposal on behalf ofCityCafé, agreed to personally guarantee the proposed sublease

for five years. 

 In May 2005, MAC East informed Shoney’s in writing that it had found an

“operator” interested in subleasing the property. MAC East included in this letter

financial statements of the guarantor, Tselios, and of two similar operations doing

business as “City Café Diner.” (R.1-43, Pl.’s Ex. 12, at 5, 7.) MAC East

acknowledged that the Assignment Agreement required it to obtain Shoney’s consent

before it could sublease the property. Later that month, MAC East submitted to

Shoney’s a proposed sublease between MAC East and an entity called Pam

Enterprises, Inc. (R.1-43, Pl.’s Ex. 9.) Under the proposal, Pam Enterprises had 120
MAC East also sought a declaratory judgment challenging Shoney’s attempt to condition its 2

consent to sublease on the receipt of additional payments. The parties agree this claim is moot

because Shoney’s consented to MAC East’s subleasing the premises in June 2006 to a different

subtenant. 

On March 12, 2008, this court remanded the case to the district court for the purpose of 3

determining whether diversity jurisdiction existed. The district court, on the parties’ joint stipulation

of the facts, determined that complete diversity of citizenship exists between the parties. (R.1-55.)

MAC East’s motion was “partial” because it sought a ruling on liability, not damages.

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days to open and begin operating a restaurant—presumably a City Café Diner. At the

expiration of this period, around November 15, 2005, rent would become due at a

minimum annual rate of $77,350.00 for the first five years. (R.1-14, Ex. C.) 

In July 2005, Shoney’s notified MAC East that it was unwilling to consent to

the sublease unless MAC East paid Shoney’s $70,000 and negotiated its release from

the ground lease, or paid Shoney’s $90,000, in which case Shoney’s would remain

liable on the ground lease. (R.1-14, Surles Aff., at 2 & Ex. A.) MAC East refused the

terms of Shoney’s consent and never executed a sublease with City Café. MAC East

did not sublease the property until June 2006. 

In September 2005, MAC East filed a complaint in Alabama state court for

breach of the Assignment Agreement and for tortious interference with business

relations. Shoney’s removed the case to federal court alleging diversity of 2

citizenship jurisdiction. MAC East filed a Partial Motion for Summary Judgment, 3 4

and Shoney’s filed a Motion for Summary Judgment. On January 8, 2007, the district
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court granted MAC East’s motion and denied Shoney’s motion. The court first held

that Shoney’s breached the Assignment Agreement by unreasonably refusing to

consent to MAC East’s proposed sublease. The court said that although the

Assignment Agreement gave Shoney’s the “sole discretion” to consent to the

proposed sublease, it did not permit Shoney’s to arbitrarily and capriciously refuse

consent, in part, because the Assignment Agreement “does not explicitly express such

a standard of discretion.” (R.1-40 at 10.) Instead, the court found that under Alabama

law, Shoney’s refusal to grant consent was subject to a commercial reasonableness

standard. It then ruled that “[t]he undisputed evidence before this Court establishes

as a matter of law that Shoney’s demand for additional payment, which was an

additional term not included in Paragraph 19, was unreasonable and MAC East is

therefore entitled to summary judgment on its breach of contract claim.” (Id. at 10.)

The court also granted summary judgment to MAC East on its tortious

interference claim. The court began by noting that although MAC East never entered

into a binding contract with City Café, Alabama law permitted a tortious interference

claim when the plaintiff merely has a “business relation” with a third party. The court

said that, at a minimum, Shoney’s request of additional payments in exchange for

consent constituted coercion,meaning that Shoney’s intentionally interfered with the

business relation. The court then turned to the question of whether Shoney’s was a
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stranger to the “contract” between MAC East and City Café because “a ‘party to a

contract cannot, as a matter of law, be liable for tortious interference with the

contract.’” (Id. at 13 (quoting Bama Budweiser v. Anheuser-Busch, 611 So. 2d 238,

247 (Ala. 1992)).) The court concluded that “by requiring additionalsums of money,

an action not authorized by the contract, Shoney’s effectively became a non-party or

stranger to the business relation between MAC East and City Café.” (Id. at 14.)

Consequently, it granted summary judgment to MAC East on this claim, and denied

summary judgment to Shoney’s. 

The court held a separate damages hearing in which MAC East called three

witnesses and offered numerous exhibits. Shoney’s did not call any witnesses, but did

cross-examine MAC East’s witnesses. After the hearing, the court entered a final

judgment awarding MAC East $78,732.28, including interest from June 15, 2006.

The court also apparently awarded attorney’s fees, although the judgment did not

specify how much of the award was attributable to attorney’s fees. The court did not

enter written findings of fact regarding MAC East’s damages. 

Shoney’s appeals, challenging the district court’s denial of its motion for

summary judgment, the court’s grant of MAC East’s partial motion for summary

judgment, and the damages award in favor of MAC East. 
Shoney’s also argues that the damages awarded to MAC East for breach of the Assignment 5

Agreement are too speculative to warrant recovery. Having reviewed the transcript of the damages

hearing and the exhibits offered, we conclude that MAC East’s damages are not too speculative to

warrant recovery. Thus, the district court did not clearly errin awarding damages (if in fact Shoney’s

is deemed to have breached the Assignment Agreement). 

We address the damages issue at this time because if we do not address it, the issue we certify

to the Alabama Supreme Court would not necessarily be dispositive of the claim. 

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II. Issues on Appeal

We address in this opinion the following arguments raised by Shoney’s on

appeal: (1) that the district court erred in granting summary judgment to MAC East

on the tortious interference claim, and in denying Shoney’s motion for summary

judgment on that claim; and (2) that the district court erred in reading a commercial

reasonableness standard into Shoney’s “sole discretion” to withhold consent to a

proposed sublease or assignment.5

In addition to the above arguments, Shoney’s argues that even if “sole

discretion” includes a commercial reasonableness standard, whether its withholding

of consent was commercially reasonable is a question of fact for a jury. Given our

decision to certify a question to the Alabama Supreme Court, we find it premature to

consider this argument. We also find it unnecessary to address Shoney’s argument

that the district court erred in awarding attorney’s fees to MAC East because the

Alabama Supreme Court’s answer to the certified question may moot the issue of

attorney’s fees. 
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III. Discussion 

A. The Tortious Interference Claim

In order to establish a claim of tortious interference with contractual or

business relations under Alabama law, the plaintiff must prove (1) the existence of

a contract or business relation, (2) the defendant’s knowledge of the contract or

business relation, (3) intentional interference with the contract or business relation,

and (4) damage to the plaintiff as a result of the interference. Universal Underwriters

Ins. Co. v. Stokes Chevrolet, Inc., 990 F.2d 598, 603 n.8 (11th Cir. 1993). However,

a tortious interference claim can be maintained only when the defendant is

independent of or a stranger to the relation or contract with which he allegedly

interfered. Tom’s Food, Inc. v. Carn, 896 So. 2d 443, 454 (Ala. 2004). A defendant

is not a stranger to a contract or business relationship when

(1) the defendant is an essential entity to the purported injured relations;

(2) the allegedly injured relations are inextricably a part of or dependent

upon the defendant’s contractual or business relations;(3) the defendant

would benefit economically from the alleged injured relations; or (4)

both the defendant and the plaintiff are parties to a comprehensive

interwoven set of contract or relations.

Waddell & Reed, Inc v. United Investors Life Ins. Co., 875 So. 2d 1143, 1156 (Ala.

2003) (quoting Britt/Paulk Ins. Agency, Inc. v. Vandroff Ins. Ageny, Inc., 952 F. Supp.

1575, 1584 (N.D. Ga. 1996)) (internal quotation marks omitted). 
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The district court held that when Shoney’s conditioned its approval of the

sublease on the payment of additional sums of money, an action not authorized by the

Assignment Agreement, it “effectively became a non-party or stranger to the business

relation between MAC East and City Café.” (R.1-40 at 14.) Applying de novo

review, Holloman v. Mail-Well Corp., 443 F.3d 832, 836 (11th Cir. 2006), we

disagree. 

First, Shoney’s was an “essential entity to the purported injured relations,” the

first Waddell example, because its consent was a prerequisite to the proposed

sublease. Second, Shoney’s and MAC East are both parties to the Assignment

Agreement, the terms of which affect MAC East’s ability to sublease the premises.

Therefore, they “are parties to a comprehensive interwoven set of contract or

relations,” the fourth Waddell example. Finally, and as a practical matter, Shoney’s

cannot be a stranger to the sublease when consummation of the sublease would leave

it obligated on the covenants of the ground lease, effectively forming a business

relationship between it and City Café. (R.1-16, Power Aff., at 1 ¶ 3.)

For these reasons, the district court erred in granting MAC East summary

judgment as to liability on the tortious interference claim, and in denying Shoney’s

summary judgment on that claim. 
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B. Breach of the Assignment Agreement Claim

In granting summary judgment to MAC East, the district court first held that

Shoney’s “sole discretion” to withhold consent was subject to a commercial

reasonableness standard. It then held that Shoney’s refusal to consent was not

commercially reasonable as a matter of law.

Our analysis is guided by Homa-Goff Interiors, Inc. v. Cowden, 350 So. 2d

1035 (Ala. 1977), a splintered opinion of the Alabama Supreme Court involving a

sublease approval clause. The lease in that case provided that “[t]he Lessee shall not

assign or sublease all or any part of the . . . premises except by and with approval of

the Lessor in writing.” Id. at 1037. Two justices of the Alabama Supreme Court held

that “even where the lease provides an approval clause, a landlord may not

unreasonably and capriciously withhold his consent to a sublease agreement. The

landlord’s rejection should be judged under a test applying a reasonable commercial

standard.” Id. at 1308 (the “Jones opinion”). Four justices concurred with this part

of the Jones opinion in a special concurrence authored by Justice Beatty. Id. at 1039

(the “Beatty opinion”). 

The four justices for whom Justice Beatty wrote, however, also believed that

the parties could expressly agree “that the lessor’s decision, for whatever reason, is

binding.” Id. at 1039 (Beatty,J., concurring specially). The opinion reasoned that “if
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a reasonable and prudent businessperson would not object to the sublessee, the lessor

will not be allowed to arbitrarily disapprove of him unless the parties have expressly

bargained to give the lessor that power without regard to commercial standards.” Id.

at 1040 (Beatty, J., special concurrence extended). So, the justices for whom Justice

Beatty wrote believed that a commercial reasonableness standard applied to lease

approval clauses where the parties had not “bargained to give the lessor [the power

to arbitrarily disapprove] without regard to commercial standards.” Id.

Finally, three justices dissented in two different opinions. The dissenting

justices maintained that Alabama courts had never read a commercial reasonableness

standard into sublease approval clauses. Building on that theme, the dissenting

justices also wrote that parties could contract to any standard they wished to govern

a landlord’s refusal to grant consent to a proposed sublease or assignment. Id. at

1039-40, 1041 (the “dissenting opinions”). 

We conclude that seven justices in Homa-Goff—the justices of the Beatty and

dissenting opinions—agreed that parties are free to contract to whatever standard they

please to govern a landlord’s withholding of consent to a proposed sublease or

assignment. In the present case, unlike in Homa-Goff, the parties appear to have

contracted for a standard by which approval to sublease should be judged—the “sole

discretion” standard. So the question becomes, what does “sole discretion” mean?
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Shoney’s argues that “sole discretion” means that it has the unqualified right

to withhold consent to a sublease. MAC East argues that even under a “sole

discretion” standard, Shoney’s may not arbitrarily and capriciously refuse consent.

We find no clear, controlling precedent in Alabama law, and, on this appeal,

deciding what “sole discretion” means is determinative as to the breach of contract

claim. Because we find no controlling precedent and because this issue implicates

Alabama’s public policy interests in the alienability of commercial property, we

certify the following question to the Alabama Supreme Court under Alabama Rule

of Appellate Procedure 18:

Under Alabama law, when an assignment contract gives

the assignor “sole discretion” to withhold consent to the

assignee’s proposed sublease, is the assignor’s exercise of

that discretion subject to a commercial reasonableness

standard, or any other standard?

Our phrasing of the question is not intended to restrict the scope or inquiry by

the Alabama Supreme Court. “[I]f we have overlooked or mischaracterized any state

law issues or inartfully stated . . . the question[] we have posed, we hope the Alabama

Supreme Court will feel free to make the necessary corrections.” Tillman v. R.J.

Reynolds Tobacco, 253 F.3d 1302, 1308 (11th Cir. 2001) (quoting Spain v. Brown &

Williamson, 230 F.3d 1300, 1312 (11th Cir. 2000)). 
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IV. Conclusion 

The district court’s order granting summary judgment to MAC East as to

liability on its tortiousinterference claim is reversed, and the court is directed to enter

summary judgment in favor of Shoney’s on that claim. The question of whether a

commercial reasonableness standard, or any other standard, tempers Shoney’s “sole

discretion” to withhold consent to a proposed sublease is certified to the Alabama

Supreme Court. We find no error in the district court’s award of damages, if an

award of damages is ultimately warranted. We defer decision on attorney’s fees

pending the Alabama Supreme Court’s response to our certified question. 

REVERSED IN PART. QUESTION CERTIFIED TO THE SUPREME

COURT OF ALABAMA.