Court Opinion

ID: 873134
Source: CourtListenerOpinion
Date Created: 2013-05-30 00:00:14.912653+00
Date Added: 2024-06-11T09:07:01.003078
License: Public Domain

12-3466-bk
Gator Monument Partners, LLLP v. Great Atl. & Pac. Tea Co.

                                 UNITED STATES COURT OF APPEALS
                                     FOR THE SECOND CIRCUIT

                                                  SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 29th day of May, two thousand thirteen.

PRESENT: CHESTER J. STRAUB,
         REENA RAGGI,
         CHRISTOPHER F. DRONEY,
                    Circuit Judges.

----------------------------------------------------------------------
IN RE: THE GREAT ATLANTIC & PACIFIC TEA
COMPANY, INC., ET AL.,
                                 Debtors.
----------------------------------------------------------------------
GATOR MONUMENT PARTNERS, LLLP, GATOR
GARWOOD PARTNERS, LTD., GATOR SOUTH
AVENUE PARTNERS, LTD.,
                                 Appellants,

                               v.                                              No. 12-3466-bk

THE GREAT ATLANTIC & PACIFIC TEA COMPANY,
INC., ET AL.,
                                 Appellees.
----------------------------------------------------------------------

APPEARING FOR APPELLANTS:                                    DAVID M. KOHANE, Cole, Schotz, Meisel,
                                                             Forman & Leonard, P.A., Hackensack, New
                                                             Jersey (Neal W. Cohen, Halperin Battaglia
                                                             Raicht, LLP, New York, New York; Matthew C.
                                                             Blickensderfer, Frost Brown Todd LLC,
                                                             Cincinnati, Ohio, on the brief).
APPEARING FOR APPELLEES:                   ANDREW M. GENSER (Paul M. Basta, on the
                                           brief), Kirkland & Ellis LLP, New York,
                                           New York.

       Appeal from a judgment of the United States District Court for the Southern District

of New York (Vincent L. Bricetti, Judge; Robert D. Drain, Bankruptcy Judge).

       UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment entered on July 30, 2012, is AFFIRMED.

       Gator Monument Partners, LLLP, Gator Garwood Partners, Ltd., and Gator South

Avenue Partners, Ltd. (collectively, “Gator”), appeal from the affirmance of a bankruptcy

court order allowing lessee Great Atlantic & Pacific Tea Company, operating under the trade

name Pathmark (“Pathmark”), to assume an unexpired supermarket lease during a Chapter

11 reorganization. See 11 U.S.C. § 365(a). Gator had contested that assumption based on

Pathmark’s purported prepetition breach of the lease by failing to obtain Gator’s consent to

the sublease of a storefront on the leased premises to Dunkin’ Donuts. See id. § 365(c)(5)

(prohibiting assumption of unexpired lease “of nonresidential real property [that] has been

terminated under applicable nonbankruptcy law” before commencement of bankruptcy case).

Gator now submits that the bankruptcy and district courts erred in construing the lease at

issue not to require its consent to such a sublease. The construction of the lease presents us

with a question of law that we review de novo, paying particular attention to the bankruptcy

court decision. See ReGen Capital I, Inc. v. Halperin (In re U.S. Wireless Data, Inc.), 547
F.3d 484, 492 (2d Cir. 2008). We assume the parties’ familiarity with the facts and record

of prior proceedings, which we reference only as necessary to explain our decision to affirm

the challenged order and judgment allowing assumption of the lease.
1.     Assumption

       Pennsylvania law, which governs the parties’ dispute, holds that leases are “to be

interpreted according to contract principles,” and that when a lease’s language is “clear and

unambiguous,” its plain meaning controls. Mace v. Atl. Ref. Mktg. Corp., 567 Pa. 71, 80

(2001). The language here at issue appears in lease paragraph 16(b), which states that the

“[l]essee may sublet all or any part of the Premises” during the lease’s initial term (called the

“Primary Term”) without first obtaining the lessor’s consent. Lease Agmt. ¶ 16(b), J.A. 161

(emphasis added). The very next sentence qualifies the lessee’s sublet authority as follows:

“Lessee shall not sublet the Premises for any portion of an Extended Term [i.e., a renewal

term] without the prior written consent of Lessor, which consent shall not be unreasonably

withheld.” Id. The bankruptcy and district courts concluded that the consent requirement

for subletting “the Premises” during a renewal term applied to subletting “all,” not “any

part,” of the Premises, because the first paragraph of the lease defines the term Premises to

apply to the whole of what was being transferred under the lease. See id. at 1, J.A. 130

(describing “Premises” as “consisting of (i) the land (the Land) described in Schedule A,

(ii) all buildings and other improvements (including, but without limitation, the attachments

and other affixed property), now or hereafter located on the Land, and the air space above

the surface of the Land . . . , and (iii) the respective easements, rights and appurtenances

relating to the Land and the Improvements”).

       In urging otherwise, Gator cites to a dictionary definition of “premises,” which

recognizes the phrase as “elastic and inclusive,” Black’s Law Dictionary (6th ed. 1990), as

well as to cases holding that the meaning of “premises” in a lease “must vary as the context
in which the term appears may vary,” Bradlees Tidewater, Inc. v. Walnut Hill Inv., Inc., 239
Va. 468, 475 (1990) (holding that lessee satisfied covenant to use “Demised Premises” for

business activity by so using portion of premises, notwithstanding lease’s express definition

of “Demised Premises” to mean entire property). These principles would not, however,

control if in fact the first paragraph of the lease is correctly construed to reflect the parties’

intent to afford “Premises” a particular definition. See Madison Constr. Co. v. Harleysville

Mut. Ins. Co., 557 Pa. 595, 608 (1999) (resorting to plain-meaning analysis, including

dictionary definitions, only because contract “d[id] not define the terms in question”); City

of Philadelphia v. Phila. Transp. Co., 345 Pa. 244, 251 (1942) (stating that, in construing

Pennsylvania contracts, “specific provisions ordinarily will be regarded as qualifying the

meaning of broad general words in relation to a particular subject”). While Gator submits

that the lease’s drafters knew how to use the term “entire premises” in relation to a sublease

when that is what they meant, as is evident from paragraph 16(b)’s allowance for a novation

where “aggregate rents payable under a sublease of the entire Premises during an Extended

Term” exceed rent owed by the lessee, Lease Agmt. ¶ 16(b), J.A. 162, this hardly settles the

question given that the drafters specifically chose not to repeat the expansive language they

used to identify the lessee’s subletting authority during the initial term—“all or any part of

the Premises”—in then qualifying that authority for a renewal term—“the Premises,” id., J.A.

161.

       In sum, even if Gator’s arguments have some force, they at best illustrate ambiguity

as to the scope of paragraph 16(b)’s consent requirement. As the bankruptcy and district

courts correctly recognized, Pennsylvania law requires that this ambiguity be resolved in
Pathmark’s favor. See Williams v. Notopolos, 259 Pa. 469, 476 (1918) (referencing “settled

rule that any uncertainty as to the meaning of a clause in a lease is to be determined in favor

of the lessee”); see also, e.g., Kline v. Marianne Germantown Corp., 438 Pa. 41, 45 (1970);

Northway Village No. 3, Inc. v. Northway Props., Inc., 430 Pa. 499, 504 (1968). That

conclusion is further supported by the principle that restraints on the transfer of real property

“will be kept as minimized as the language of the restraint allows.” BC&H Corp. v. Acme

Mkts., Inc., 19 Pa. D.&C.3d 419, 429 (Ct. Com. Pl. 1980) (construing covenant not to assign

“lease” without consent as “prohibition upon an assignment of the lease as a whole” (citing

Restatement (Second) of Property: Landlord & Tenant § 15.2 cmt. e (1977)); see also

8 Summ. Pa. Jur. 2d Property § 27:24 (2d ed.) (calling lessee’s right to sublease “full and

unrestricted . . . , except to the extent clearly and properly prohibited by the lease contract”).

       Gator contends that applying these principles to the lease at issue would allow the

lessee to circumvent the consent requirement by omitting, for example, “a tiny corner of the

parking lot from a sublease of everything else.” Appellants’ Reply Br. 7. This contention

elides the fact that the lessor could have protected itself by predicating sublease of “all or

substantially all” of the Premises on the lessor’s consent. Such language is common to many

commercial contracts, see, e.g., Sharon Steel Corp. v. Chase Manhattan Bank, N.A., 691 F.2d
1039, 1045 (2d Cir. 1982), and, indeed, appears in the last sentence of paragraph 16(a) of the

lease, see Lease Agmt. ¶ 16(a), J.A. 161 (“Lessee shall, within 20 days after the execution

of any sublease of all or substantially all of the Premises, deliver a conformed copy thereof

to Lessor.”). In any event, Gator does not—and cannot—suggest that the subleased

storefront constitutes substantially all of the Premises, rendering its argument academic.
       Nor can Gator avoid application of these tenets of Pennsylvania law by citing to

paragraph 16(a) of the lease, which states that a “sublease or assignment not expressly

permitted by this paragraph 16 shall be null and void,” Lease Agmt., J.A. 161, given that the

same paragraph also states that the lessee “may sublet the Premises” if it complies with the

remainder of paragraph 16, id., J.A. 160.

       Finally, we impute no determinative significance to Pathmark’s taking the position,

in unrelated litigation between the parties, that any renewal-term sublease requires Gator’s

consent. While the prior court stated that “[d]uring the Extended Term . . . the landlord’s

consent to a sublease is required,” Pathmark Stores, Inc. v. Gator Monument Partners, LLP,

No. 08-3082, 2009 WL 5184483, at *2 (E.D. Pa. Dec. 21, 2009), because the parties there

had assumed the existence of a consent requirement, the issue was not “actually litigated and

decided in the prior proceeding” as would be required for collateral estoppel to bar its

relitigation here, Central Hudson Gas & Elec. Corp. v. Empresa Naviera Santa S.A., 56 F.3d
359, 368 (2d Cir. 1995). Nor was the district court’s statement about consent “essential to

that judgment.” Id. at 368. Rather, as the bankruptcy court observed, it was dictum. Further,

this is not a case where “the risk of inconsistent results with its impact on judicial integrity

is certain,” warranting judicial estoppel. DeRosa v. Nat’l Envelope Corp., 595 F.3d 99, 103

(2d Cir. 2010) (internal quotation marks omitted). In sum, while Pathmark’s reversal of

course on consent might perplex, it was not barred by prior litigation from urging a narrower

construction of the sublease consent requirement in the bankruptcy court.

       Because Gator’s attempt at prepetition termination failed as a matter of law, the

district court appropriately upheld the challenged bankruptcy court order allowing lease

assumption.
2.     Cure

       Gator contends that the bankruptcy court erred in failing to conduct a hearing before

identifying no cure costs relating to the lease assumption at issue. See Order Authorizing the

Debtors to Assume Certain Unexpired Leases and Related Subleases of Nonresidential Real

Property 4, No. 10-24549 (RDD) (S.D.N.Y. Bankr. Dec. 23, 2011), ECF No. 3090. We are

not persuaded. See generally 11 U.S.C. § 102(1)(A) (defining “notice and a hearing” or

similar phrase in Bankruptcy Code to mean, inter alia, “such opportunity for a hearing as is

appropriate in the particular circumstances”); C-TC 9th Ave. P’ship v. Norton Co. (In re

C-TC 9th Ave. P’ship), 113 F.3d 1304, 1313 (2d Cir. 1997) (identifying no abuse of

discretion in bankruptcy court’s declining to hold hearing where “record provided ample

evidence on which the court could make [its] decision”). Gator does not dispute that, in

reaching the challenged decision, the bankruptcy court had the benefit of briefing by the

parties, if not oral argument. Nor does Gator dispute that it did not request a further hearing

in the bankruptcy court on the matter.

       Even if the bankruptcy court could have provided a fuller explanation in denying costs

associated with the lease assumption, Gator does not argue that the court’s substantive

conclusion is erroneous. We note also that Gator’s underlying arguments pertaining to costs

were conclusively rejected on the merits in pre-bankruptcy proceedings between the parties.

See Pathmark Stores, Inc. v. Gator Monument Partners, LLP, 2009 WL 5184483, at *5–10.

Whether or not this estopped Gator’s claim, it renders any complaint about an inadequate

hearing meritless.
     The judgment of the district court is AFFIRMED. Appellees’ motion to strike is

DENIED as moot.

                              FOR THE COURT:
                              CATHERINE O’HAGAN WOLFE, Clerk of Court