Walgreen v. Sara Creek Property

United States Court of Appeals for the Seventh Circuit · 1992 · Contracts

966 F.2d 273

Updated July 9, 2026

contractsinjunctive reliefspecific performanceexclusivity clausesbreach of contractpermanent injunctionadequate remedy at lawexclusivity clause

Facts

Walgreen had operated a pharmacy in Southgate Mall since 1951 under a lease containing a clause by which landlord Sara Creek promised not to lease mall space to another pharmacy or store containing a pharmacy. In 1990, after its anchor tenant failed, Sara Creek planned to replace that tenant with Phar-Mor, a discount chain whose 100,000-square-foot store would include a 12,000-square-foot pharmacy the same size as Walgreen's and located within a couple hundred feet of Walgreen. Walgreen sued for breach of the exclusivity clause and requested an injunction against leasing the anchor space to Phar-Mor. Sara Creek argued damages were adequate because Walgreen's losses could be estimated, while Walgreen argued the losses would be difficult to compute over the remaining ten years of the lease and would include intangibles such as goodwill.

Issue

When a landlord breaches an exclusivity clause in a shopping-center lease by proposing to lease space to a competing pharmacy, may a court grant a permanent injunction rather than limit the tenant to damages? More specifically, did the district court abuse its discretion in finding that damages were an inadequate remedy and that a permanent injunction was appropriate?

Rule

In deciding whether to grant a permanent injunction in a contract case, the court must balance the costs and benefits of injunctive relief against those of damages. The plaintiff bears the burden of showing that damages are inadequate; when the balance is even, the injunction should be withheld. Relevant considerations include the difficulty, inaccuracy, and litigation cost of calculating damages, as well as the costs of injunctions such as continuing judicial supervision, effects on third parties, and bargaining costs from bilateral monopoly.

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

Riverfront Books leased space in a shopping center in St. Louis from Benton Square Properties. The lease gave Riverfront the exclusive right to operate a bookstore in the center for eight more years, but Benton later signed a lease with Cedar Pages, another bookstore, for nearby space. Riverfront's projected losses would depend on uncertain future sales trends and customer traffic, while the requested order would simply bar Benton from leasing that space to Cedar Pages during Riverfront's lease term.

If Riverfront seeks a permanent injunction, which is the strongest argument for granting it?

Explanation. The governing approach is a case-by-case balancing of the costs and benefits of injunction versus damages, with the plaintiff bearing the burden to show damages are inadequate. Where damages would be difficult, inaccurate, and expensive to calculate over time, and the injunction would be a straightforward negative order requiring little supervision, a permanent injunction is favored. The majority rejected any categorical rule and cautioned against using 'irreparable harm' as the standard for permanent injunctions.