Aeroground, Inc. v. CenterPoint Properties Trust
2013 U.S. App. LEXIS 25572
| 7th Cir. | 2013Background
- In 2007 Menzies (tenant) and CenterPoint (landlord) executed a 10‑year lease for an O’Hare warehouse; Menzies operates heavy forklifts.
- The warehouse has a six‑inch concrete slab that began exhibiting cracking, scaling, and raveling by Jan. 2009; repairs attempted cost ~$92,000 but slab must be replaced at an estimated $966,000–$1.23M.
- Lease allocated repair responsibilities: Section 7.1 makes Tenant responsible for “all floors”; Section 7.2 makes Landlord responsible for “foundation” and structural portions; Section 9.1 requires Landlord to repair or rebuild Improvements damaged or destroyed.
- Menzies sued, claiming the slab damage was Landlord’s obligation; district court found the slab had a dual nature but the damage related to its function as a floor, so Tenant was responsible; CenterPoint’s counterclaim failed for lack of timely notice.
- On appeal under Illinois law, the Seventh Circuit reviewed contract interpretation de novo and factual findings for clear error and affirmed the district court judgment for CenterPoint.
Issues
| Issue | Menzies' Argument | CenterPoint's Argument | Held |
|---|---|---|---|
| Whether slab damage is Landlord’s responsibility under Section 7.2 (foundation) or Tenant’s under Section 7.1 (floor) | Slab failure was structural/foundation damage and thus Landlord must pay | Slab functions principally as the interior floor; damage was to the floor, not foundation, so Tenant is responsible | Court: factual finding that damage affected slab’s function as a floor; Section 7.1 applies (Tenant liable) |
| Whether Section 9.1 (Landlord must repair Improvements damaged/destroyed) overrides Section 7.1 | Section 9.1 makes Landlord responsible for “damage” and thus covers this loss | Section 7.1 is the more specific provision allocating floor repairs to Tenant and therefore controls over the general rebuilding provision | Court: specific (Section 7.1) prevails over general (Section 9.1); Tenant remains responsible |
| Whether lease ambiguity and contra‑proferentem require construing repairs against Landlord | Ambiguities should be resolved against Landlord; Tenant should not bear uninsured, structural repair risk | Lease is a negotiated, joint document between sophisticated parties and plainly shifts many repair obligations to Tenant | Court: anti‑drafter rule is last resort and waived by Section 34.8; lease plainly assigns repair obligations to Tenant |
| Whether district court improperly applied a “functionality” test or committed clear‑error on factual findings about slab’s role | District court misapplied a functionality test and erred in finding damage related only to floor function | District court permissibly used functional meanings and its factual finding is supported by evidence and not clearly erroneous | Court: functionality approach implements parties’ terms; factual findings sustained on clear‑error review |
Key Cases Cited
- Egan Marine Corp. v. Great Am. Ins. Co. of New York, 665 F.3d 800 (7th Cir. 2011) (bench‑trial factual findings reviewed for clear error)
- Winforge, Inc. v. Coachmen Indus., 691 F.3d 856 (7th Cir. 2012) (party alleging clear error bears burden)
- United States v. United States Gypsum Co., 333 U.S. 364 (U.S. 1948) (standard for clear error articulation)
- Gallagher v. Lenart, 226 Ill.2d 208 (Ill. 2007) (contract interpretation begins with plain and ordinary meaning and considers the contract as a whole)
- Grevas v. U.S. Fidelity & Guar. Co., 152 Ill.2d 407 (Ill. 1992) (specific contract provision governs over general conflicting provision)
- United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union v. NLRB, 544 F.3d 841 (7th Cir. 2008) (specific provision can qualify a general one as an exception)
- Kaufman v. Shoe Corp. of Am., 24 Ill. App. 2d 431 (Ill. App. Ct. 1960) (landlord presumptively responsible for structural repairs; shifting that responsibility must be plainly expressed)
- Rickher v. Home Depot, Inc., 535 F.3d 661 (7th Cir. 2008) (discussion of the meaning of “damage” in lease contexts)