# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 2- 33 08

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Co m m erci al Res ou rce Gro up , LLC

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

The J.M . Sm

uc ke r Co m

pa ny

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll ee

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of No rth Dako ta - Farg o

__ __ __ __ __ __

Su bm it te d: Octo be r 23 , 20 13
Fil ed : M ay

30 , 20 14 (Co rrec te d: 06 /2 5/ 20 14 )

__ __ __ __ __ __

Befo re RI LEY, Chi ef J ud ge , COLLOTO N, and KELLY , Cir cu it Ju dg es

.

__ __ __ __ __ __

KELLY, Cir cu it Ju dg e.

J.M

. Sm uc ke r Co

. (“ Sm

uc ke r” ) le as ed a co m

m ercial bu il di ng fro m Co m m erci al

Res ou rce Gro up (“ CRG”)

. The le as e pr ov id ed th at

, aft er it s in i t i a l t e r m, it wou ld

au to m at ic al ly ren ew un le ss Sm uc ke r pr ov id ed writ te n no ti ce of it s in te nt to te rm in at e

th e le as e 18 0 da y s pr io r to th e en d of th e cu rren t te rm

. Sm uc ke r se nt a te rm in at io n

no ti ce to CRG th at arri ve d aft er th e de ad li ne

. CRG refu se d to acce pt th e no ti ce an d

fil ed su it in fed eral co ur t ba se d on di ve rs it y juri sd ic ti on to reco ve r ren t fo r th ead di ti on al te rm

. The di st ric t co ur t fo un d th at be c au se Sm uc ke r ha d su bs ta nt ia ll y

pe rfo rm ed it s l eas e o bl ig at io ns , it wou ld be un co ns ci on ab le to ho ld Sm uc ke r to th e

ren ewal . CRG ap pe al s. With juri sd ic ti on un de r 28 U.S.C. § 1 29 1, we re ve rs e.

I. Ba ck gr ou nd

In Marc h 2 00 1, Sm

uc ke r le as ed a co m

m erci al bu il di ng in W es t Farg o, Nort h

Dak ot a, fro m CRG. The pa rti es ne go ti at ed an am en dm en t to th e le as e in 20 05

. The

am en dm en t pro vi de d th at th e le as e wou ld co nt in ue fo r an in it ia l two -y ear term

, an d

it ga ve Sm

uc ke r an op ti on to ren ew th e le as e fo r up to fo ur ad di ti on al on e-year te rm s.

Afte r th e in it ia l te rm , th e le as e was se t to ren ew au to m at ic al ly on Ju ly 1s t of each y ear

un le ss Sm

uc ke r pr ov id ed CRG writ te n no ti ce of it s in te nt to te rm in at e 18 0 da y s pr io r, i.e., by Ja nu ary 1s t. The or ig in al le as e sp eci fie d th e ad dr es s to whi ch th e writ te n

n ot ic e sh ou ld be se nt (“ or ig in al ad dr es s” ). On Sep te m be r 15

, 20 06

, C R G ’s

m an ag em en t co m

pa ny inf or m ed Sm

uc ke r of CRG’s ch an ge of a dd res s an d n ot ifi ed

Sm uc ke r th at “ al l fu tu re ren t pa y m en ts an d le as e co rres po nd en ce” sh ou ld be se nt to

th e ne w ad dr es s (“ 20 06 ad dr es s” ). Sm uc ke r rece iv ed th is no ti ce an d be ga n se nd in g

ren t paym en ts to th e ne w ad dr es s. The le as e was no t m od ifi ed to refl ect th e ch an ge

of ad dr es s.

In la te 20 09

, Sm

u c ke r de ci de d to cl os e do wn it s W es t Farg o faci li ty. On

Decem be r 22

, 20 09

, Sm

uc ke r se nt a no ti ce of te rm in at io n to CRG by way of Fed eral
Exp res s (“ Fed Ex” ); ho wev er, Sm uc ke r se nt th e no ti ce to th e or ig in al ad dr es s in st ead

of th e 20 06 ad dr es s. On Decem be r 23

, 20 09

, Sm

uc ke r rece iv ed an em ai l fro m Fed Ex

st at in g “ Fed Ex at te m

pt ed

, bu t was un ab le to co m pl et e de li ve ry [o f th e Decem be r 22

, 20 09

, no ti ce].” Fed Ex “ [r]eco m m en de d” th at Sm

uc ke r “ [c]on ta ct [Fed Ex] to pr ov id e

co rrec t de li ve ry ad dr es s an d/ or ad di ti on al de li ve ry in f o rm at io n.” Sm

uc ke r to ok no

act io n. Fed Ex se nt a se co nd em ai l a week la te r, on Decem be r 30

, 20 09

. The se co nd

em ai l st at ed

, “ Fed Ex at te m pt ed

, bu t was un ab le to co m pl et e de l i v e r y .” Thi s em ai l

in st ru ct ed th at “ [n ]o act io n i s re qu ire d” be cau se “ [t]he pa ck ag e is be in g re tu rn ed to

-2

-th e sh ip pe r.” Sm uc ke r to ok no ad di ti on al act io n pr io r to th e Ja nu ary 1s t de ad li ne fo r

te rm in at in g t he lea se

.

Afte r th e de ad li ne pa ss ed

, Sm uc ke r se nt a se co nd te rm in at io n no ti ce to CRG,

th is ti m e to th e 20 06 ad dr es s. The no ti ce was da te d J an ua ry 4, 2 01 0, an d it arri ve d

on Ja nu ary 5, 20 10

. Thi s se co nd no ti ce st at ed Sm uc ke r wan te d to te rm in at e th e le as e.

It al so ex pl ai ne d th at Sm uc ke r ha d se nt a ti m el y t e r mina ti on no ti ce to th e or ig in al

ad dr es s, bu t th at no ti ce ha d be en ret ur ne d “ as un de li ve rab le .” The pa rti es di sa gr ee

as to whet he r th is sec on d n ot ic e eff ect iv el y ter m in at ed th e le as e.

The di st ric t co ur t fo un d th at Sm uc ke r ha d su bs ta nt ia ll y pe rfo rm ed th e co nt ract

an d sh ou ld no t be he ld res po ns ib le fo r a “ m in or de la y ” th at was th e r e s u l t o f “an

ho ne st m is ta ke in m ai li ng .” The co ur t em ph as iz ed th at Sm

uc ke r “ m ad e a go od fai th

at te m pt ” an d “ act ed pr om

pt ly to co rrec t [it s m is ta ke ]. ” As su ch

, th e di st ric t co ur t he ld

th at “ [t]o pu ni sh Sm

uc ke r in th e fo rm of hu nd red s of th ou sa nd s of do ll ars

. . . wou ld

be an un co ns ci on ab le res ul t . . . esp eci al ly w he re t im e was no t o f th e es se nc e to th e

co nt ract an d whe re th e un ti m el y no ti ce di d no t res ul t in an y de m on st rab le in jury to

CRG.” The refo re, th e di st ric t co ur t gr an te d Sm uc ke r su m

m ary jud gm en t on th e ba si s

of su bs ta nt ia l p erfo rm an ce.

II . Dis cus si on

W e rev ie w th e di st ric t co ur t’s gr an t of su m m ary jud gm en t de no vo , gi vi ng th e

“ no nm ov in g pa rty th e be ne fit of al l rel ev an t in fere nc es .” Nels on v. C o r r

. Med

. Serv s., 58 3 F.3 d 52 2, 52 7 (8 th Ci r. 20 09 ) (en ba nc ) (q uo ta ti on om it te d)

. The pa rti es

ag ree th at th e l eas e was to ren ew au to m at ic al ly un le ss Sm uc ke r pr ov id ed writ te n

no ti ce to CRG o f it s in te nt to te rm in at e th e le as e by J an ua ry 1, 20 10

. The re is al so

no di sp ut e th at Sm

uc ke r’s no ti ce fai le d to arri ve by th at da te

. Rat he r, at is su e in th is

cas e is whe th er th e di st ric t co ur t erre d by: (1 ) fai li ng to tre at t h e l e a se can cel la ti on

-3

-pr ov is io n as an op ti on to te rm in at e; an d (2 ) al lo win g Sm uc ke r eq ui ta bl e rel ie f de sp it e

fai lu re t o s tri ct ly com

pl y wit h t he ter m s o f th e o pt io n.

A. Opti on to T ermina te the Lea se

The di st ric t co ur t tre at ed th e le as e can cel la ti on pr ov is io n as a st an da rd co nt ract

pr ov is io n an d fo un d th at : ( 1 ) S mu ck er ha d su bs ta nt ia ll y pe rfo rm ed it s ob li ga ti on s

un de r t h e le as e; an d (2 ) ti m e was no t of th e es se nc e to th e le as e. CRG cl ai m s th e
le as e can cel la ti on pr ov is io n was an op ti on to te rm in at e th e le as e an d as su ch req ui red

st ric t co m pl ia nc e, in cl ud in g s tri ct co m pl ia nc e wit h t he ti m e p ro vi si on s.

As a cas e br ou gh t un de r di ve rs it y juri sd ic ti on , th e di st ric t co ur t ap pl ie d Nor th

Dak ot a la w. See, e.g ., Sh ad y Gro ve Ort h op ed ic Ass oc s., P.A. v. All st at e In s. Co

.,

1

55 9 U.S. 39 3, 41 7 (2 01 0) (St ev en s, J., co nc ur rin g) (“ It is a lo ng -rec og ni zed pr in ci pl e

th at fed eral co ur ts si tt in g in di ve rs it y ap pl y s t a t e su bs ta nt iv e la w

. . . .” (q uo ta ti on

om it te d) ). Und er Nor th Dak ot a la w, a le as e is a co nt ract be t w e e n two pa rti es , an d

“ [t]he ru le s of co nt ract co ns t r u c t i on are

. . . ap pl ie d to le as es .” Lan ge r v.

Bart ho lo m ay , 74 5 N.W .2d 64 9, 65 5 (N.D. 20 08 ); Kol li ng v. Goo dyear Tire & Ru bb er

Co

., 27 2 N.W .2d 54

, 6 0 ( N

. D. 19 78 ) (“ [T]he ru le s of co ns tru ct io n rel at in g to

co nt ract s ge ne ral ly ap pl y to th e co ns tru ct io n of le as es .”). As wit h ot he r co nt ract s,

“ [w]het he r or no t a [le as e] req ui res p e r f o r man c e at th e ex act ti m e sp eci fie d in th e [ le as e] de pe nd s on whe th er or no t ti m e is of th e es se nc e.” Lan ge r, 74 5 N.W .2d a t

65 7. “ [U]nle ss th e in te nt th at ti m e is of t he ess en ce is m an ife st fro m th e face of th e [le as e], whe th er the pa rti es in te nd ed ti m e to be of th e es se nc e is a qu es ti on of fact .”

Id

. “ W he re ti m e is no t of th e es se n c e , [ i

. e., is no n- m at eri al ,] a reas on ab le de la y in

pe rfo rm an ce do es no t co ns ti tu te a br each of co nt ract .” Id

. In st ead

, un de r th e do ct rin e

of “ su bs ta nt ia l pe rfo rm an ce,” a pa rty is rel ie ve d of ex act co m pl ia nc e wit h th e te rm s

W e no te th e le as e al so co nt ai ns a sp eci fic ch oi ce-o f-l a w pr ov is io n in whi ch 1

th e p art ie s ch os e Nor th Dako ta law t o g ov ern th is di sp ut e.

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-of a le as e if th e br each of th e le as e te rm s is no n- m at eri al

. See VND, LLC v. Leev ers

Fo od s, In c., 67 2 N.W .2d 44 5, 44 9, 45 3 (N.D. 20 03 ) (ci ti ng Res ta te m en t (Sec on d) of

Co nt ract s § 24 1 (1 97 7) an d Kol li ng , 27 2 N.W .2d at 60 ); se e al so Res ta te m en t (Sec on d) of Co nt ract s §§ 24 1 & cm t. b, 23 7 & cm t. d. In th is cas e, th e di st ric t co ur t

he ld th at ti m e was no t of th e es se nc e to th e co nt ract

, an d th eref or e Sm uc ke r’s sl ig ht

de la y was n ot a m at eri al bre ach

.

Howev er, op ti on co nt ract s are tre at ed di ffer en tl y th an reg ul ar c on tra ct s.

Lan ge r, 74 5 N.W .2d at 65 7. A n op ti on is an irr ev oc ab le of fer by th e of

fero r to

pe rfo rm

. Mat rix Pro ps

. Co rp

. v. TAG In vs ., 60 9 N.W .2d 73 7, 74 2 (N.D. 20 00 ). See

ge ne ral ly Res ta te m en t (Sec on d) of Co nt ract s § 25

. “ Co ur ts ge ne ral ly co ns tru e th e

at te m pt to ex erci se an op ti on st ric tl y an d req ui re ex act co m pl ia nc e b e c a u s e th e

op ti on ee is free to ex erci se th e op ti o n i f h e c h oo se s, bu t an op ti on or is bo un d to

pe rfo rm if th e op ti on is pr op erl y ex erci se d.” Lan ge r, 74 5 N.W .2d at 65 7– 58

. “ As a

m at te r of la w

. . . ti m e [is ] of th e es se nc e” in ex erci si ng an op ti on co nt ract

. Id

. at 65 8.

“ [T]he op ti on ee m

us t pe rfo rm th e te rm s of th e op ti on wit hi n t he sp eci fie d ti m e an d

up on th e te rm s an d co nd it io ns pr ov id ed in th e ag reem en t.” Id

. at 65 7. Nor th Dak ot a

ap pl ie s th e sa m e ru le s to an op ti on in a le as e as to an op ti on to bu y pr op ert y , whe th er

fo r an op ti on to ren ew a le as e o r an op ti on to ter m in at e. Id . at 6 57 –5 8.

The le as e in th is cas e co nt ai ne d an op ti on t o t e r mina te

, no t si m pl y a le as e

can cel la ti on pr ov is io n. W hi le th e or ig in al le as e pr ov id ed an op ti on to ren ew th e le as e

fo r up to th ree ye a r s , th e am en dm en t to th e le as e m ad e ren ewal au to m at ic an d

te rm in at io n o pt io na l. The am en dm en t re ad s:

[T]his C o m

m erci al le as e sh al l be au to m at ic al ly ex te nd ed fo r fo ur (4 )

su cces si ve on e-year pe rio ds

, un le ss Ten an t de li ve rs writ t e n n o ti ce to
Lan dl or d of Ten an t’s in te nt io n to no t ex te nd th e te rm fo r sa id ad di ti on al

pe rio d, sa id n o t i c e t o be de li ve red no la te r th an 18 0 da y s pr io r to th e

ex pi rat io n o f an op ti on ter m

.

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-Throug h the pr ovi sio n fo r au to m at ic ex te ns io ns , CRG, th e le ss or , m ad e an irr ev oc ab le

of fer to ex te nd th e le as e an d no lo ng er ha d th e ab il it y to te rm in at e th e le as e at th e en d

of th e cu rren t te rm

—t he le as e wou ld au to m at ic al ly ren ew ba se d so le ly on th e act io ns

of th e le ss ee, Sm

uc ke r. The le as e co ul d on ly b e can cel l e d by Sm uc ke r, an d on ly i f

Sm uc ke r pr ov id ed writ te n no ti ce to CRG b y a s p e c i f i ed da te

. As a res ul t, aft er th e

am en dm en t, Sm

uc ke r he ld an op ti on to ter m in at e th e le as e.

As an op ti on to te rm in at e th e le as e, th e can cel la ti on pr ov is io n m us t be “ st ric tl y

co ns tru ed ” an d “ req ui re[s ] ex act co m pl ia nc e.” Lan ge r, 74 5 N.W .2d at 65 8. Als o, “ as

a m at te r of la w

. . . ti m e [is ] of th e es se nc e” to th e op ti on

. Id

. Giv en th e si gn ifi can t

di ffer en ces be twe en a st an da rd le as e can cel la ti on pr ov is io n an d an op ti on to

te rm in at e, we fin d th e di st ric t co ur t erre d in fai li ng to tre at th e can cel la ti on pr ov is io n

in th is cas e as an op ti on to ter m in at e.

B. Equi ta bl e Rel ie f

In fin di ng th at Sm

uc ke r ha d s u b s t an ti al ly pe rfo rm ed it s co nt ract

, th e di st ric t

co ur t es se nt ia ll y fo un d al l th e fact or s rel ev an t to eq ui ta bl e rel ie f fo r fai lu re to ti m el y

ex erci se an op ti on

. CRG argu es th at th es e fin di ng s were in erro r an d th at eq ui ta bl e
rel ie f sh ou ld no t be gr an te d in t h i s c a s e

. In pa rti cu la r, CRG as se rts th at ho ld in g

Sm uc ke r to th e le as e fo r an ot he r y ear i s n ot un co ns ci on ab le

.

The S u p r e me Co ur t of Nor th Dak ot a ha s twi ce su gg es te d th e po ss ib il it y th at

eq ui ta bl e rel ie f m ay be av ai la bl e whe n a pa rty fai ls to ti m el y ex erci se an op ti on

. See

Lan ge r, 74 5 N.W .2d at 65 8– 59 ; W es te rn Tire

, In c. v. S k r e d e, 30 7 N.W .2d 55 8,

5 6 2

– 6 3 (N.D. 19 81 )). In Lan ge r, th e co ur t reco gn iz ed th at “ so m e co ur ts ha ve

in vo ke d th ei r eq ui ta b l e po wers an d al lo wed an op ti on to be ex erci se d whe n th e

req ui rem en ts fo r th e op ti on ha ve no t be en m et .” 74 5 N.W .2d at 65 8. Gen eral ly, “ [a]

co ur t m ay in vo ke it s eq ui ta bl e po wers an d an op ti on m ay n e v e r t h e l e s s be en fo rced

ev en if th e ho ld er fai le d to ex erci se it wit h i n t h e s p eci fie d ti m e if: (1 ) th e de la y is

-6

-sl ig ht [;] (2 ) th e de la y ha s n ot pr ejud ic ed th e ot he r pa rty[;] an d (3 ) a fai lu re to gr an t

rel ie f wou ld res ul t in su ch ha rd sh ip as to m ak e li te ral en fo r c em en t of th e op ti on

un co ns ci on ab le .” Id

. The Su pr em e Co ur t of Nor th Dak ot a ha s al so no te d, ho wev er,

th at co ur ts ge ne ral ly li m it eq ui ta bl e rel ie f to a ve ry pa rti cu la r si tu at io n: “ [e]qu it ab le

rel ie f is ge ne ral ly gran te d i n c as es wher e a l es se e h as m ad e v al ua bl e im pr ov em en ts

to th e pr op ert y in ex pe ct at io n of ren ewin g a le as e, bu t th e le ss ee’s no ti ce to ren ew is

sl ig ht ly pa st th e de ad li ne , an d th e rel ie f is ne ces sa r y t o av oi d th e in eq ui ta bl e

fo rfei tu re o r li te ral co m

pl ia nc e is un co ns ci on ab le .” Id . at 6 58 –5 9.

W hi le t h e d is tri ct co ur t in th is cas e di d no t ex pl ic it ly gr an t eq ui ta bl e rel ie f,

rel y in g in st ead on th e th eo ry of su bs ta nt ia l pe rfo rm an ce, th e di st ric t co ur t es se nt ia ll y

ap pl ie d th e eq ui ta bl e rel ie f te st ou tl in ed in Lan ge r. The di st ric t co ur t fo un d th at

“ [u ]pon di sc ov ery of th e m is ta ke

, Sm uc ke r act ed pr om

pt ly to co rrec t it

, whi ch cau se d

th e no ti ce to arri ve sh or tl y aft er the de ad li ne sp eci fie d in th e co nt ract .” The di st ric t

co ur t al so he ld t ha t “ [t]o pu ni sh Sm uc ke r in th e fo rm of hu nd red s of th ou sa nd s of

do ll ars

. . . wou ld be an un co ns ci on ab le res ul t

. . . es pe ci al ly

. . . whe re the un ti m el y

no ti ce di d no t r e s u l t i n an y de m on st rab le in jury to CRG.” Thu s, th e di st ric t co ur t

fo un d th at (1 ) th e de la y was sl ig ht (th e n ot ic e arr iv ed “ sh or tl y aft er”) ; (2 ) th e de la y
di d no t pr ejud ic e CRG (n o “ de m on st rab le in jury”); an d (3 ) en fo rcem en t of th e le as e

wou ld be un co ns ci on ab le (“ wou ld be an un co ns ci on ab le res ul t” ).

Ass um in g wit ho ut de ci di ng th at eq ui ta bl e rel ie f is an av ai la bl e rem ed y in th is

cas e, we fin d th ere is no sh owi ng of un c o n s c i o n a bi li ty up on en fo rcem en t of th e
le as e. In Nor th Dak ot a, “ [t]he de te rm in at io n whe th er a pa rti cu la r c on tra ct ua l 2

It is an op en qu es ti on whe th er Nor th Dako ta wou ld all ow eq ui ta bl e rel ie f in 2

a cas e su ch as th is

. See Lan ge r, 74 5 N.W .2d at 65 8– 59 (d is cu ss in g th e po ss ib il it y of

eq ui ta bl e rel ie f); W es te rn Tire

, 30 7 N.W .2d at 56 2– 63 (d en y in g eq ui ta bl e rel ie f). It
is al so an op en qu es ti on whe th er Nor th Dak ot a wou ld req ui re a sh owi n g o f b ot h

p r o ced ur al an d su bs ta nt iv e un co ns ci on ab il it y in th is co nt ex t. See, e.g ., R ut he r f o r d

v. BNSF Ry

. Co

., 76 5 N.W .2d 70 5, 71 3– 15 (N.D. 20 09 ) (req ui rin g a sh owi ng of bo th

-7

-pr ov is io n is un co ns ci on ab le is a qu es ti on of la w fo r th e co ur t.” St ran d v. U.S. Ban k

Nat’l Ass ’n ND, 69 3 N.W .2d 91 8, 92 1 (N.D. 20 05 ). W e co nc lu de

, as a m at te r of la w,
th at th e ha rm su ffer ed by Sm uc ke r is no t so gr eat as to ris e to th e le ve l of su bs ta nt iv e

un co ns ci on ab il it y

. The re is no ev id en ce th at Sm uc ke r was at ris k of lo si ng an y th in g

ot he r th an on e y ear’s ren t if th e le as e were en fo rced

. See Lan ge r, 74 5 N.W .2d at 65 8.

In ad di ti on , th e r e h a s b e e n no sh owi ng th at pa y m en t of on e y ear’s ren t, in an d of

it se lf, co ns ti tu te s a fo rfei tu re or ot he rwis e un co ns ci on ab le re sul t. In de ed

, in ex ch an ge

fo r th e ren t pa id

, Sm

uc ke r rece iv ed th e le as e to

, an d th us th e us e of

, th e bu il di ng fo r

an ad di ti on al y ear. On th i s r e co rd

, th ere is in su ffi ci en t ev id en ce to co nc lu de as a

mat t e r o f la w th at en fo rci ng th e te rm s of th e le as e ag ai ns t Sm uc ke r wil l cau se

Sm uc ke r “ su ch ha rd sh ip as to m ak e li te ral e n f o r c em en t of th e op ti on

un co ns ci on ab le .” Id

.

II I. Co ncl us io n

Fo r th e reas on s ab ov e, we rev ers e th e di st ric t co ur t’s or de r gr an ti ng su m m ary jud gm en t to Sm

uc ke r an d rem an d fo r f u rth er pr oc eed in gs co ns is te nt wit h th is

op in io n.

COLLOTON, Ci rcu it Ju dg e, di ss en ti ng

.

The qu es ti on pr es en te d on th is ap pe al is whe th er The J.M

. Sm uc ke r Co m

pa ny
is en ti tl ed to eq ui ta bl e re l i e f f r o m st ric t en fo rcem en t of a le as e wit h Co m m erci al

Res ou rce Gro up , LLC on a c o mm e r ci al bu il di ng in W es t Farg o, Nor th Dak ot a.

Sm uc ke r in te nd ed to te rm in at e th e le as e on Ju ne 30

, 20 10

, bu t du e to wha t th e di st ric t

pr oc ed ur al an d su b s t a n t i ve un co ns ci on ab il it y at th e ti m e th e le as e was en te red ).

Bec au se we fin d th e le as e is no t su bs ta nt iv el y un co ns ci on ab le

, we ne ed no t co ns id er whe th er i t i s p ro ced ur al ly unc on sc io na bl e.

-8

-co ur t de sc rib ed as “ an ho ne st m is ta ke in m ai li ng ,” Sm uc ke r’s no ti ce t o t erm in at e

arri ve d fo ur da y s aft er th e Ja nu ary 1 de ad li ne se t by th e le as e. App lying Nor t h

Dak ot a la w, th e di st ric t co ur t gr an te d eq ui ta bl e r e l i e f

, ob se rv in g th at th e no ti ce

arri ve d sh or tl y aft er th e de ad li ne , C o mm e r ci al Res ou rce Gro up su ffer ed no
de m on st rab le in

jury fro m th e sl i g h t de la y , an d an or de r req ui rin g Sm uc ke r to pa y

h u n d r ed s of th ou sa nd s of do ll ars in ba ck ren t an d ut il it ie s wou ld be an

un co ns ci on ab le res ul t. The di st ric t co ur t’s eq ui ta bl e r ul in g acco rd s wit h Nor th

Dak ot a la w and sh ou ld be affi rm ed

.

W e kn ow th at Nor th Dak ot a is li ke ly to al lo w eq ui ta bl e rel ie f fro m op ti on

co nt ract s in ap pr op ria te cas es , be cau se th e st at e su pr em e co ur t sa id so in two

de ci si on s. In W

es te rn Ti re
, I

n c

. v. Sk re de

, 30 7 N.W .2d 55 8 (N.D. 19 81 ), th e co ur t

ob se rv ed th at de ci si on s fro m ot he r juri sd ic ti on s ha ve gr an te d eq ui ta bl e rel ie f to

pa rti es who fai le d ti m el y to ex erci se an op ti on to ren ew a le as e, whe re “ th e d el ay is

sl ig ht

, th e de la y ha s no t pr ejud ic ed th e la nd lo rd

, an d th e fai lu re to gr an t rel ie f wou ld

res ul t in s u c h h a r d sh ip to th e te na nt as to m ak e li te ral en fo rcem en t of th e ren ewal

pr ov is io n un co ns ci on ab le .” Id

. at 56 2 (ci ti ng Flet ch er v. Fri sb ee , 40 4 A.2d 11 06
(N.H. 19 79 ); L.S. Tell ie r, Ann ot at io n, Eff ect of Les se e’s Fai lu re or Dela y in Givi ng

N o t i c e W it hi n Sp eci

fi ed Ti me, of In te nt io n to Ren ew Lea se , 44 A.L.R.2d 13 59
(1 95 5) ). The c o u r t i n Wes te rn Ti re reject ed a le ss ee’s cl ai m an d di st in gu is he d

au th or it ie s gr an ti ng rel ie f, bu t ga ve no in di cat io n th at eq ui ta bl e rel ie f is cat eg or ic al ly

un av ai la bl e in Nort h Dak ot a.

In La ng er v. Bar th ol oma y , 74 5 N

. W.2d 64 9 (N.D. 20 08 ), th e Nor th Dak ot a

co ur t sa id m or e ex pl ic it ly th at eq ui ta bl e rel ie f is av a i l a b l e in ap pr op ria te

ci rcu m st an ces :

A co ur t m ay in vo ke it s eq ui ta bl e po wers an d an op ti on m ay ne ve rth el es s be en fo rced ev en if t he ho ld er fai le d to ex erci se it wit hi n th e sp eci fie d
ti m e if: (1 ) th e de la y is sl ig ht

, (2 ) th e de la y ha s no t pr ejud ic ed th e ot he r

-9

-pa rty, an d (3 ) a fai lu re to gr an t rel ie f wou ld res ul t in su ch ha rd sh ip as to

m ak e li te ral en fo rcem en t o f th e o pt io n u nc on sc io na bl e.

Id

. at 65 8. The Nor th Dak ot a co ur t th us fo ll owe d th e an al y si s of th e Co rb in tre at is e

on co nt ract s co nc ern in g m is se d de ad li ne s in op ti on co nt ract s. Se e 1 Jo se ph M.

Peri ll o, Co rb in on Co nt ra ct s § 2.1 5, at 20 3 (rev

. ed

. 19 93 ). “ [T]he de te rm in at io n of

th e co ur t tu rn s no t o n a s i n g l e fact or bu t on ba la nc in g th e eq ui ti es be twee n th e

pa rti es .” Id

. (in te rn al qu ot at io n om it te d)

. Equ it ab le rel ie f “ is of te n fo r th e pu rp os e

of av oi di ng an in eq ui ta bl e fo rfei tu re, bu t ev en whe re no in eq ui ta bl e fo rfei tu r e wil l

oc cu r, sp eci fic pe rfo rm an ce or ot he r ap pr op ria te rem ed y wil l n ev ert he le ss be gi ve n

if th ere ha s be en su ch rel ia nc e on th e pr om is e as to m ak e li te ral co m pl ia nc e wit h th e

op ti on li m it at io n u nc on sc io na bl e.” Id . at 2 02

.

The re is no ge nu in e di sp ut e he re on th e fir st two el em en ts of Sm uc ke r’s cl ai m

fo r eq ui ta bl e rel i e f u n de r th e te st ou tl in ed in La ng er

. Sm uc ke r’s de la y in gi vi ng

no ti ce t o t e r mi n a t e th e le as e was sl ig ht

. The fo ur -d ay de la y di d no t pr ejud ic e

Co m m erci al Res ou rce Gro up

. The di sp os it iv e qu es ti o n is whe th er fai lu re to gr an t

rel ie f wou ld res ul t in su ch ha rd sh ip as to m ak e li te ral en fo rcem en t of t h e d e a d l in e

un co ns ci on ab le

.

W ha t so rt of ha rd sh ip wou ld th e Nor th Dak ot a co ur t co ns id er un co ns ci on ab le ?

The be st in di cat io n co m es f r o m a ut ho rit ie s ci te d by th at co ur t in ex pl ai ni ng th e

eq ui ta b l e r u l e. W he n a le ss ee gi ve s un ti m el y no ti ce to ren ew a le as e, li te ral

co m pl ia nc e may be un co ns ci on ab le whe re th e le ss ee ha s m ad e “ va lu ab le

im pr ov em en ts to th e pr op ert y ” th at wou ld be lo st if th e le ss ee were req ui red to

rel oc at e. La ng er , 74 5 N.W .2 d a t 6 5 8

. The lo ss of a st rat eg ic lo cat io n, as so ci at ed

go od wil l, th ree pi eces of un m ov ab le eq ui pm en t, an d $2 5,0 00 in m ov i n g c o s ts was

en ou gh to sh ow su bs ta nt ia l ha rm jus ti fy in g rel ie f. Flet ch er , 40 4 A.2d at 11 09 (ci te d

in W es te rn Ti re , 30 7 N.W .2d at 56 2)

. So to o w a s th e in ab il it y to reco up a le ss ee’s

fu ll in ve st m en t in eq ui pm en t th at h a d b e e n o pe rat ed fo r te n y ears of th e fif te en

-1 0-req ui red

, si gn ifi can t red uc ti on in va lu e of pe rs on al pr op ert y th at ha d to be rem ov ed

,

an d lo ss of go od wil l es ta bl is he d ov er te n y ears

. Tr ol le n v. Ci ty of W ab as ha

, 28 7

N.W .2d 64 5, 64 8 (Mi nn

. 19 79 ) (ci te d in La ng er , 74 5 N.W .2d at 65 8)

. Ano th er

ex am pl e of un co ns ci on ab le ha rd sh ip in vo lv ed a lo ss of $ 14 2,0 38 in im pr ov em en ts

, th e po ss ib le in ab il it y to us e fo r ta x pu rp os es up to $1 00 ,00 0 in op erat in g lo ss es an d

de pr eci at io n, an d th e co nt in ui ng li ab il it y fo r ou ts ta nd in g lo an s an d m or tg ag es in th e

am ou nt of at le as t $1 12 ,00 0. Aick in v. Ocea n View In vs

. Co

. , 93 5 P.2 d 99 2, 99 4 n.3

& 1 00 1 (Ha w. 19 97 ) (ci te d i n La ng er , 74 5 F .3d at 6 58 ). Se e a ls o Am. Hou se s, In c.

v. Sc hn ei de r , 21 1 F.2 d 88 1, 88 3- 84 (3 d Ci r. 19 54 ) ($ 25 0,0 00 in lo ss es , in cl ud in g lo st

im pr ov em en ts an d m ov in g ex pe ns es ) (ci te d in Ann ot ation

, 44 A

. L

. R. 2d at 13 62 ); JNA

Rea lt y Co rp

. v. Cr os s Bay Ch el se a, In c. , 36 6 N.E.2d 13 13

, 13 16 -1 8 (N.Y. 19 77 ) (lo ss

of $5 5,0 00 in pr op ert y im pr ov em en ts an d “ a co ns id erab le am ou nt ” of cu st om er go od

wil l) (ci te d in Flet ch er , 40 4 A.2d at 1 1 0 9) ; Gal vi n v. Si mon s , 25 A.2d 64

, 65 -6 6
(Co nn

. 19 42 ) ($ 60 0 in co st s pl us in co nv en ie nc e of m ov in g an d in ab il it y to fin d a ne w
lo cat io n in th e sa m e area ) (ci te d in Ann ot at io n, 4 4 A.L.R.2 d at 13 64 ); Xan th ak ey v. Hay es , 14 0 A. 80 8, 81 1 (Co nn

. 19 28 ) (lo ss of bu si ne ss go od wil l a n d $4 ,00 0 in

im pr ov em en ts ) (ci te d i n An no ta ti on , 44 A.L.R.2d at 1 36 4)

.

The ha rd sh ip su ffer ed by Sm uc ke r m eas ur es up to th at de em ed su ffi ci en t to jus t i f y e q u it ab le rel ie f in th e au th or it ie s refe ren ced by th e Nor th Dak ot a Su pr em e

Co ur t. Und er th e m ajor it y ’s ap pr oa ch

, Sm uc ke r i s r eq ui red to pa y $2 79 ,45 0.5 5 in

ren t pa y m en ts an d ut il it y co st s on a bu il di ng fo r whi ch it ha s no us e. As of Decem be r

20 09

, Sm uc ke r no ti fie d Com

m erci al Res ou rce Gro up an d ot he rs th at it wou ld cl os e

th e pl an t in W es t Farg o an d co ns ol id at e it s op erat io ns in on e m an uf act ur in g faci li ty.

Pro du ct io n h a d dr op pe d of f an d de m an d no lo ng er jus ti fie d op erat in g th e pl an t; a pl an t in Ken tu ck y co ul d ta ke ov er al l pr od uc ti on

. Sm uc ke r ceas ed op erat io ns in W es t
Farg o in Apr il 20 10

, al lo w i n g two m on th s to sh ut do wn an d di sa ss em bl e th e pl an t

be fo re th e ex pi rat io n of th e le as e te rm in Ju ne 20 10

. So m e pa rts of th e bu il di ng an d

it s im pr ov em en ts were di sa ss em bl ed an d se nt to Ken tu ck y. Ano th er fif ty to si xt y

-1 1-pi eces of eq ui pm en t were so ld at au ct io n. By Ju ne 30 , 2 01 0, Sm uc ke r ha d va cat ed

th e b ui ld in g.

Und er th es e c i r c u ms ta nc es , th e di st ric t co ur t ap tl y co nc lu de d th at to req ui re

Sm uc ke r to pa y hu nd red s of th ou sa nd s of do ll ars in ba ck r e nt an d ut il it ie s— whe n

CRG su ffer ed no d e mo n s t rab le pr ejud ic e fro m a sl ig ht fo ur -d ay de la y in rece ip t of

Sm uc ke r’s no ti ce to te rm in at e—wo u l d b e an un co ns ci on ab le res ul t th at jus ti fie s

eq ui ta bl e rel ie f un de r Nor th Dako ta law as be st it can be di sc ern ed . I wou ld affi rm

th e jud gm en t o f th e d is tri ct co ur t.

__ __ __ __ __ __ __ __ __ __ __ __ _

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