Court Opinion

ID: 6345741
Source: CourtListenerOpinion
Date Created: 2022-06-01 15:12:54.7889+00
Date Added: 2024-06-11T09:15:02.116769
License: Public Domain

June 1, 2022

                                                          Supreme Court

                                                          No. 2021-63-Appeal.
                                                          (PC 20-4463)

         EDC Investment, LLC               :
         f/k/a EDC Pizza, LLC

                      v.                   :

                 UTGR, Inc.                :

               NOTICE: This opinion is subject to formal revision
               before publication in the Rhode Island Reporter. Readers
               are requested to notify the Opinion Analyst, Supreme
               Court of Rhode Island, 250 Benefit Street, Providence,
               Rhode Island 02903, at Telephone (401) 222-3258 or
               Email opinionanalyst@courts.ri.gov, of any typographical
               or other formal errors in order that corrections may be
               made before the opinion is published.
                                                           Supreme Court

                                                           No. 2021-63-Appeal.
                                                           (PC 20-4463)

          EDC Investment, LLC              :
          f/k/a EDC Pizza, LLC

                    v.                     :

               UTGR, Inc.                  :

            Present: Suttell, C.J., Goldberg, Lynch Prata, and Long, JJ.

                                   OPINION

      Chief Justice Suttell, for the Court. The plaintiff, EDC Investment, LLC

(EDC), appeals from a Superior Court order granting a motion to dismiss filed by

the defendant, UTGR, Inc. (UTGR). On appeal, the plaintiff argues that the hearing

justice erred in granting the defendant’s motion to dismiss because the hearing

justice “failed to follow the standard in ruling on a Rule 12(b)(6) motion.” This case

came before the Supreme Court pursuant to an order directing the parties to appear

and show cause why the issues raised in this appeal should not be summarily

decided. After considering the parties’ written and oral submissions and reviewing

the record, we conclude that cause has not been shown and that this case may be

decided without further briefing or argument. For the reasons set forth in this

opinion, we affirm the order of the Superior Court.

                                        -1-
                                          I

                                 Facts and Travel1

      The plaintiff and defendant entered into a commercial lease agreement in

2000, whereby plaintiff rented space from defendant at Twin River Casino (Twin

River) located in Lincoln, Rhode Island (the lease agreement).2 The lease agreement

specified that plaintiff would operate a Ronzio Pizza franchise at Twin River and,

according to plaintiff, provided plaintiff with exclusive vendor status for pizza and

related food items.    Although the lease agreement did not include a specific

commencement date, the commencement date was defined as “[t]he earlier of (a)

one hundred twenty (120) days from the Delivery Possession Date as defined in

Section 2.3, or (b) the date TENANT opens for business to the public.” The lease

agreement was for an initial term of five years, terminating on the fifth anniversary

of the commencement date, with one five-year renewal term and two two-year

renewal terms.

1
  We glean the facts primarily from the allegations in plaintiff’s complaint, all of
which we assume are true for purposes of our review of a grant of a motion to dismiss
under Rule 12(b)(6). See Nerney v. Town of Smithfield, 269 A.3d 753, 756 (R.I.
2022) (stating that, in applying the motion-to-dismiss standard, this Court
“assume[s] the allegations contained in the complaint to be true and view[s] the facts
in the light most favorable to the plaintiff” (quoting Crenshaw v. State, 227 A.3d 67,
71 (R.I. 2020))).
2
  At the time the lease agreement was executed, plaintiff was known as EDC Pizza
LLC, d/b/a Ronzio Pizza.

                                        -2-
      The plaintiff’s option to renew the lease agreement was set forth in Section

2.4. Section 2.4 further provided that defendant had the right to terminate any

renewal term and had the right to buy out plaintiff’s renewal right. Specifically,

Section 2.4 of the lease agreement provided:

             “LANDLORD shall have the right to terminate, without
             any liability, the first 5-year renewal term, if the total rent,
             excluding base rent, paid by TENANT during the Initial
             Term was less than $60,000 a year on average or less than
             $300,000 total. LANDLORD shall have the right to
             terminate, without any liability, the second 2-year renewal
             term, if the total rent, excluding base rent, paid by
             TENANT during the first 5-year Renewal Term, was less
             than $70,000 a year, on average, or $350,000 total.
             LANDLORD shall have the right to terminate the third
             2-year renewal term, if the total rent, excluding base rent,
             paid by TENANT during the second 2-year Renewal
             Term, was less than $70,000 a year on average, or
             $140,000 total. Landlord shall have the right to exercise
             any termination within thirty (30) days of receipt of final
             rent revenue information, if available, regardless if any
             renewal term has commenced. The Initial Term and the
             Renewal Terms are collectively referred to herein as the
             ‘Term.’ Notwithstanding the above, LANDLORD shall
             have the right to buyout the TENANT’s renewal right
             upon notice to TENANT prior to the expiration of the
             Initial Term or any of the Renewal Terms, and payment to
             TENANT of a reasonable amount based on earnings,
             which payment shall be made upon TENANT’S surrender
             of the Premises.”

In October 2006, the parties renewed the lease for five years, with the renewal term

expiring on October 16, 2011. The plaintiff alleged in its complaint that the renewed

                                          -3-
lease provided for an additional five-year renewal term, with two consecutive two-

year renewal terms.

      In June 2011, plaintiff sent notice to Michael Barlow, Vice President of Food

and Beverage for Twin River and the Regional Director of Operations for Twin

River Management Group, exercising its option to renew the lease agreement for the

additional five-year term. On or about September 1, 2011, however, defendant,

through its attorney, notified plaintiff that it was terminating the lease agreement,

and on September 9, 2011, defendant offered to buy out the lease for $90,000. Prior

to September 2011, plaintiff had also received a similar offer from Yehuda Amar,

who operated other franchises at Twin River, to buy out the lease agreement for

$90,000, which offer plaintiff had rejected.

      In October 2011, the parties entered into a termination of lease and release

agreement, which provided plaintiff with a buyout for $90,000 (the release). The

release stated that the lease term expired on October 16, 2011, and required plaintiff

to vacate on or before October 14, 2011, the new termination date. The release also

contained a waiver clause stating that:

             “As of the Termination Date, EDC Pizza shall forever
             fully release Twin River and its employees, directors,
             officers, agents and attorneys from any and all accounts,
             actions, agreements, causes of action, claims, contracts,
             costs, damages, debts, demands, dues, expenses,
             judgments, liabilities, liens, obligations, offsets,
             proceedings, rights, suits, and torts, of every kind and
             nature, both at law and in equity, whether known or

                                          -4-
             unknown, whether suspected or unsuspected, whether
             presently accrued or unaccrued, whether or not well
             founded in fact or in law, that EDC Pizza has ever had,
             now has, or may in the future have against Twin River and
             its employees, directors, officers, agents and attorneys and
             related to the Lease, this Agreement, the Premises and the
             Building.”

      In March 2019, plaintiff was contacted by the Rhode Island State Police

concerning the lease agreement, and, in December 2019, plaintiff learned that both

Barlow and Amar had been indicted. The plaintiff then became aware that Sbarro,3

also a food vendor, had contacted Barlow in January 2011 regarding the opening of

a franchise at Twin River. According to plaintiff, Barlow advised Amar of Sbarro’s

interest in opening a franchise and then notified Sbarro that Amar was the contact

person for leasing space at Twin River.

      The plaintiff also learned in 2019 that, in October 2011, defendant entered

into a lease with Shai Inc. for the operation of a Sbarro franchise; Amar signed the

lease on behalf of Shai Inc.4 The plaintiff alleged in its complaint that, before its

lease agreement with defendant was terminated and the release executed, plaintiff

had not been informed of the lease between defendant and Shai Inc., the negotiations

between Amar and Sbarro, or a financial arrangement between Barlow and Amar.

3
  We understand that “Sbarro,” as named in plaintiff’s complaint, refers to Sbarro,
LLC, a pizzeria chain specializing in New York-style pizza.
4
  The plaintiff alleged that the lease agreement between Shai Inc. and defendant
provided for a rent of 7 percent of gross monthly sales, whereas plaintiff’s lease
agreement with defendant provided for a rent of 12 percent of gross monthly sales.

                                          -5-
Barlow and Amar’s agreement, plaintiff alleged, resulted in the denial of plaintiff’s

option to renew the lease agreement.

      The plaintiff filed a complaint against defendant on June 11, 2020. The

plaintiff alleged breach of fiduciary duty (count one), breach of contract (count two),

breach of covenant of good faith and fair dealing (count three), fraud and

misrepresentation (count four), negligent misrepresentation (count five), punitive

damages (count six), and attorneys’ fees (count seven). The defendant moved,

pursuant to Rule 12(b)(6) of the Superior Court Rules of Civil Procedure, to dismiss

the complaint. In support thereof, defendant attached the lease agreement and the

release as exhibits to the memorandum in support of its motion to dismiss.

      In its motion, defendant argued that, because both the lease agreement and the

release had been sufficiently referred to throughout plaintiff’s complaint, the hearing

justice could consider both documents without converting the motion to dismiss to

a motion for summary judgment. The defendant further maintained that plaintiff had

released all claims against defendant in the release; alternatively, defendant argued

that plaintiff’s contractual allegations in the complaint were legally deficient. The

plaintiff then filed an objection to defendant’s motion to dismiss, arguing that the

release was not valid because plaintiff did not have the benefit of counsel and was

unaware of the financial arrangement between Barlow and Amar when the release

was executed.

                                         -6-
      A hearing on the motion to dismiss was held on December 18, 2020, and the

hearing justice delivered a bench decision that same day. The hearing justice

determined that the lease agreement and the release were central to plaintiff’s claims

and that the lease agreement was sufficiently referred to in plaintiff’s complaint. For

those reasons, the hearing justice did not convert the motion to dismiss to a motion

for summary judgment. After examining the lease agreement and the release, the

hearing justice determined that there was no legal basis for plaintiff’s claims. The

hearing justice therefore granted defendant’s motion to dismiss, ruling that the clear

and unambiguous language of the lease agreement gave defendant the unconditional

ability to exercise its rights under Section 2.4. An order granting defendant’s motion

to dismiss was entered on December 23, 2020. The plaintiff subsequently filed a

timely notice of appeal on January 12, 2021.

                                          II

                                Standard of Review

      “The sole function of a motion to dismiss is to test the sufficiency of the

complaint.” Pontarelli v. Rhode Island Department of Elementary and Secondary

Education, 176 A.3d 472, 476 (R.I. 2018) (brackets omitted) (quoting Narragansett

Electric Company v. Minardi, 21 A.3d 274, 277 (R.I. 2011)). “In reviewing the

grant of a motion to dismiss pursuant to Rule 12(b)(6), this Court applies the same

standard as the hearing justice.” Chariho Regional School District, by and through

                                         -7-
Chariho Regional School Committee v. State, 207 A.3d 1007, 1012 (R.I. 2019)

(Chariho) (quoting Rein v. ESS Group, Inc., 184 A.3d 695, 699 (R.I. 2018)).

Therefore, “when ruling on a Rule 12(b)(6) motion to dismiss, the trial justice must

look no further than the complaint, assume that all allegations in the complaint are

true, and resolve any doubts in a plaintiff’s favor.” Pontarelli, 176 A.3d at 476

(brackets omitted) (quoting Multi-State Restoration, Inc. v. DWS Properties, LLC,

61 A.3d 414, 416 (R.I. 2013)). “We will affirm a trial justice’s grant of a motion to

dismiss ‘when it is clear beyond a reasonable doubt that the plaintiff would not be

entitled to relief from the defendant under any set of facts that could be proven in

support of the plaintiff’s claim.’” Chariho, 207 A.3d at 1012-13 (quoting Rein, 184

A.3d at 699).

      However, “when the motion justice receives evidentiary matters outside the

complaint and does not expressly exclude them in passing on the motion, then Rule

12(b)(6) specifically requires the motion to be considered as one for summary

judgment.” Pontarelli, 176 A.3d at 476 (quoting Multi-State Restoration, Inc., 61

A.3d at 417).

      Turning to the case at bar, the hearing justice, in granting defendant’s motion

to dismiss, contemplated converting defendant’s motion to one for summary

judgment due to the existence of the lease agreement and the release, which were

outside the four corners of plaintiff’s complaint. However, the hearing justice, citing

                                         -8-
to federal caselaw, ultimately considered the lease agreement and the release as if

they were attached to the complaint because they were central to plaintiff’s claims,

and the lease agreement was sufficiently referred to in plaintiff’s complaint.

Although plaintiff did not object to the hearing justice’s consideration of the lease

agreement and the release, nor did plaintiff raise it as an issue on appeal, we

nevertheless address this issue in order to establish the appropriate legal standard of

review. See Mokwenyei v. Rhode Island Hospital, 198 A.3d 17, 21 (R.I. 2018) (“A

threshold issue before us is the appropriate legal standard under which to consider

the issue presented to us.”).

      In Mokwenyei, this Court dealt with a similar issue, where a hearing justice,

in deciding motions to dismiss, considered documents attached to the motions to

dismiss and an exhibit attached to the plaintiff’s objection to the motions.

Mokwenyei, 198 A.3d at 21. We emphasized our holding in Chhun v. Mortgage

Electronic Registration Systems, Inc., 84 A.3d 419 (R.I. 2014), wherein this Court

declined to adopt the federal courts’ “‘altered’ interpretation of the legal standard

employed with respect to a Rule 12(b)(6) motion to dismiss.” Mokwenyei, 198 A.3d

at 21 (quoting Chhun, 84 A.3d at 422).

      However, notwithstanding our general rule that, when a motion to dismiss

includes documents not expressly incorporated in a complaint, it automatically

converts to one for summary judgment, we have acknowledged a narrow exception

                                         -9-
for “documents the authenticity of which are not disputed by the parties; for official

public records; for documents central to plaintiffs’ claim; or for documents

sufficiently referred to in the complaint.” Mokwenyei, 198 A.3d at 22 (quoting Chase

v. Nationwide Mutual Fire Insurance Company, 160 A.3d 970, 973 (R.I. 2017)); see

also Beddall v. State Street Bank and Trust Company, 137 F.3d 12, 17 (1st Cir. 1998)

(“When * * * a complaint’s factual allegations are expressly linked to—and

admittedly dependent upon—a document (the authenticity of which is not

challenged), that document effectively merges into the pleadings and the trial court

can review it in deciding a motion to dismiss under Rule 12(b)(6).”). In Mokwenyei,

we ultimately held that factual allegations in the complaint were not expressly linked

to or dependent upon the documents attached to the motions to dismiss nor were they

central to the plaintiff’s claims; we thus determined that “the hearing justice should

have expressly converted the motions to dismiss to motions for summary judgment.”

Mokwenyei, 198 A.3d at 22-23; cf. Doe v. Brown University, 253 A.3d 389, 395 (R.I.

2021) (holding that a hearing justice’s consideration of the “plaintiff’s federal

complaint, the United States District Court of Rhode Island decision, the First Circuit

decision, and the filings in the First Circuit[,]” in deciding a motion to dismiss was

“within the purview of the recognized exception” because the documents were

“clearly ‘official public records’”) (brackets omitted).

                                        - 10 -
      Applying the exception to the case at bar, plaintiff explicitly referred to both

the lease agreement and the release throughout the complaint. Moreover, the

allegations in the complaint are expressly linked to and dependent upon the lease

agreement and the release, and plaintiff has not challenged the authenticity of the

documents; rather, only the release’s validity has been contested by plaintiff, based

on the later-discovered developments concerning Barlow and Amar. Accordingly,

we “examin[e] plaintiff’s arguments within the confines of the standard of review

applied to motions to dismiss.” Doe, 253 A.3d at 395.

                                         III

                                     Discussion

      On appeal, plaintiff first reiterates its argument made before the Superior

Court in response to defendant’s motion to dismiss; specifically, plaintiff argues that

the release was not valid and therefore not a bar to its recovery. The defendant

maintains that plaintiff’s claims were fully and unconditionally released pursuant to

the unambiguous language of the release. The focus of plaintiff’s argument then

turns to its claims of breach of fiduciary duty and breach of the covenant of good

faith and fair dealing. We note that the hearing justice did not base her decision on

the language of the release; rather, she concentrated on Section 2.4 of the lease

agreement in dismissing the plaintiff’s complaint. In a similar fashion, her findings

were limited to plaintiff’s claims of breach of fiduciary duty, breach of contract, and

                                        - 11 -
breach of the covenant of good faith and fair dealing. Accordingly, we confine our

review to the hearing justice’s findings.

                                            A

                             Breach of Fiduciary Duty

      The plaintiff contends that it was owed a fiduciary duty by defendant during

the negotiations concerning its option to renew the lease agreement—the renewal of

which was declined because, plaintiff argues, there was a “‘behind the scene’

agreement” between Barlow and Amar. The plaintiff relies on Joslin v. Astle, 59

R.I. 182, 194 A. 703 (1937), to support its argument that the relationship between

the parties was more than the standard landlord-tenant arrangement, and thus a

fiduciary duty existed. Specifically, plaintiff points out that the lease agreement

provided for a rent based on gross monthly sales, included an exclusive right to the

food product, and contained options to renew. The defendant, for its part, asserts

that the hearing justice properly dismissed count one because no fiduciary duty arose

from the commercial lease relationship between the parties.

      At the hearing on defendant’s motion to dismiss, the hearing justice found

there to be a distinct difference between the facts of this case and that of Joslin. We

agree in that the facts of Joslin “establish[ed] a chain of circumstances relating back

to the making of the lease,” which included a preexisting familial relationship based

on “confidence and trust.” Joslin, 59 R.I. at 197, 198, 194 A. at 709. Conversely,

                                        - 12 -
we view the facts of the present case as only establishing a rather typical commercial

landlord-tenant relationship. The exclusivity provision of the lease agreement and

the rent being based on gross sales do not elevate the parties’ relationship to one that

is similar to the familial relationship between the parties in Joslin.

      “A fiduciary duty ‘is one of trust and confidence and imposes the duty on the

fiduciary to act with the utmost good faith.’” Poletti v. Glynn, 234 A.3d 941, 945

(R.I. 2020) (quoting Notarantonio v. Notarantonio, 941 A.2d 138, 145 (R.I. 2008)).

Although this Court has acknowledged that we have “refrained from establishing a

hard-and-fast rule as to when a fiduciary relationship arises,” we have noted that the

determination of whether a duty exists “may involve a ‘variety of factors[.]’” Id.

(quoting Simpson v. Dailey, 496 A.2d 126, 129 (R.I. 1985)). Those factors may

include “the reliance of one party upon the other, the relationship of the parties prior

to the incidents complained of, the relative business capacities or lack thereof

between the parties, and the readiness of one party to follow the other’s guidance in

complicated transactions.” Simpson, 496 A.2d at 129. Unlike in Joslin, where

extraordinary circumstances created a fiduciary duty between a landlord and tenant,

Joslin, 59 R.I. at 198, 194 A. at 710, plaintiff has not established factors—other than

a typical commercial landlord-tenant association—that would impose a fiduciary

duty. Accordingly, the hearing justice did not err in dismissing plaintiff’s claim of

breach of fiduciary duty.

                                         - 13 -
                                          B

   Breaches of Contract and the Covenant of Good Faith and Fair Dealing

      In its complaint, plaintiff alleges that defendant did not inform plaintiff of its

negotiations with a successor lessee, nor was plaintiff aware of the arrangement

between Barlow and Amar prior to plaintiff receiving notice of defendant’s intent to

terminate the lease agreement and buy out plaintiff’s lease rights. As a result,

plaintiff alleges a breach of contract and a breach of the covenant of good faith and

fair dealing. The defendant maintains, on the other hand, that there is no contractual

disclosure obligation in the lease agreement, and that therefore a breach-of-contract

claim fails as a matter of law.      Consequently, defendant contends, plaintiff’s

allegation of breach of the covenant of good faith and fair dealing also must fail. In

her bench decision, the hearing justice determined that there was no breach of

contract “because the contract was clear and unambiguous[,]” and she likewise

found that there was no breach of the covenant of good faith and fair dealing.

      Our analysis turns on the language of Section 2.4 of the lease agreement. “In

determining whether language in a contract is ambiguous, ‘we give words their plain,

ordinary, and usual meaning.’” Botelho v. City of Pawtucket School Department,

130 A.3d 172, 176 (R.I. 2016) (quoting JPL Livery Services, Inc. v. Rhode Island

Department of Administration, 88 A.3d 1134, 1142 (R.I. 2014)). “The subjective

intent of the parties may not properly be considered by the Court; rather, we consider

                                        - 14 -
the intent expressed by the language of the contract.” Id. (quoting JPL Livery

Services, Inc., 88 A.3d at 1142). We “refrain from engaging in mental gymnastics

or from stretching the imagination to read ambiguity * * * where none is present.”

Young v. Warwick Rollermagic Skating Center, Inc., 973 A.2d 553, 559 (R.I. 2009)

(quoting Mallane v. Holyoke Mutual Insurance Company in Salem, 658 A.2d 18, 20

(R.I. 1995)).

      In our judgment, the language of Section 2.4 is unambiguous. The language

is comprehensive and straightforward. The plain, unambiguous terms of Section 2.4

do not require defendant to advise plaintiff as to the reasons for denial of plaintiff’s

offer to renew. Section 2.4 additionally does not require defendant to disclose to

plaintiff any agreement or negotiations between defendant and potential third-party

successor lessees. The hearing justice found that Section 2.4 solely provided that,

upon notice prior to expiration of the initial term or any renewal terms and payment

of a reasonable amount, defendant had the unconditional right to buy out plaintiff’s

renewal right. The defendant complied with Section 2.4 when it sent plaintiff notice

of its intent to terminate the lease agreement and offered a $90,000 buyout, which

plaintiff accepted. Therefore, plaintiff’s claim of breach of contract was properly

dismissed.

      Similarly, the plaintiff’s claim of breach of the covenant of good faith and fair

dealing must also fail. “It is well settled that virtually every contract contains an

                                         - 15 -
implied covenant of good faith and fair dealing between the parties.” Premier Home

Restoration, LLC v. Federal National Mortgage Association, 245 A.3d 745, 749

(R.I. 2021) (quoting Ferreira v. Child and Family Services, 222 A.3d 69, 76 (R.I.

2019)). “However, ‘the implied covenant of good faith and fair dealing does not

create an independent cause of action,’ but must be connected to a breach-of-contract

claim.” Id. at 750 (brackets omitted) (quoting Ferreira, 222 A.3d at 76). Because

the plaintiff’s breach-of-contract claim against the defendant was properly

dismissed, the hearing justice did not err in dismissing the plaintiff’s claim of breach

of the covenant of good faith and fair dealing.

                                          IV

                                     Conclusion

      For the reasons set forth in this opinion, we affirm the order of the Superior

Court. The record may be returned to the Superior Court.

      Justice Robinson did not participate.

                                         - 16 -
                                               STATE OF RHODE ISLAND
                                        SUPREME COURT – CLERK’S OFFICE
                                              Licht Judicial Complex
                                                250 Benefit Street
                                              Providence, RI 02903

                                 OPINION COVER SHEET

                                     EDC Investment, LLC f/k/a EDC Pizza, LLC v.
Title of Case
                                     UTGR, INC.
                                     No. 2021-63-Appeal.
Case Number
                                     (PC 20-4463)

Date Opinion Filed                   June 1, 2022

Justices                             Suttell, C.J., Goldberg, Lynch Prata, and Long, JJ.

Written By                           Chief Justice Paul A. Suttell

Source of Appeal                     Providence County Superior Court

Judicial Officer from Lower Court    Associate Justice Netti C. Vogel

                                     For Plaintiff:

                                     Edward R. McCormick, Esq.
Attorney(s) on Appeal
                                     For Defendant:

                                     Kyle Zambarano, Esq.

SU-CMS-02A (revised June 2020)