Walgreen v. Sara Creek Property

United States District Court for the Eastern District of Wisconsin · Contracts

ContractsLease exclusivity clausesAnticipatory breachPermanent injunctionsexclusive use provisionshopping mall leaseanticipatory breachwaiver

Facts

Walgreen leased space at Southgate Mall under a 1971 lease containing an exclusivity clause barring the landlord from allowing another store in the mall to operate a drug store, prescription pharmacy, or a business whose principal portion was the sale of health and beauty aids and drug sundries, subject to stated exceptions. Sara Creek later became successor landlord, and Phar-Mor proposed to lease space at the mall and intended to operate a pharmacy there; Phar-Mor's proposed operation did not fall within any express exception to the clause. Walgreen had previously consented only to Pill & Puff operating in a specific former National Food Stores space, and the court found that this limited consent did not waive Walgreen's rights under the exclusivity clause. The court also found that Walgreen failed to prove that Phar-Mor's proposed store would devote fifty percent or more of its shelf space or sales to health and beauty aids and drug sundries.

Issue

Whether Sara Creek breached or anticipatorily repudiated Walgreen's lease by agreeing to lease space to Phar-Mor for a store that would operate a pharmacy at Southgate Mall, and if so whether Walgreen was entitled to permanent injunctive relief rather than money damages. The court also considered whether Walgreen had waived the restriction or whether the exclusivity clause was unenforceable as against public policy.

Rule

Under Wisconsin law, a plaintiff claiming breach of contract must prove a contract, violation of its express language, and a material breach causing or threatening injury. Anticipatory breach requires a definite and unequivocal manifestation of intent not to perform. A tenant may obtain permanent injunctive relief to enforce a lease exclusivity clause when the tenant succeeds on the merits, no adequate remedy at law exists, and the balance of equities favors relief; damages are inadequate where lost profits are difficult to calculate, injury to goodwill or a real estate interest is not readily measurable, or the wrong is continuing and would require multiple lawsuits.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Columbus, Ohio, Riverfront Plaza leases space to Nora Patel, who operates a pharmacy under a lease providing that no other space in the plaza may be used for a drug store or prescription pharmacy during her term. The landlord signs a binding lease with Elm Street Retail, and Elm Street announces it will open a store in the plaza with a prescription counter staffed by a licensed pharmacist next spring.

If Nora sues before Elm Street opens, which is the strongest basis for finding the landlord liable now?

Explanation. The majority opinion states that anticipatory breach requires a definite and unequivocal manifestation of intent not to render promised performance. By executing a lease that will permit another pharmacy to operate, the landlord has intentionally repudiated the exclusivity obligation. Actual opening is unnecessary where the repudiation is definite. The separate pharmacy ban does not depend on proving a 50% health-and-beauty-aids showing.