875 F. Supp. 2d 1058
N.D. Cal.2012Background
- Dollar Tree operated a store in the Shopping Center in Newark, CA under a 2003 Original Lease with Toyama.
- ARL in 2008 replaced the Original Lease, governing Dollar Tree’s relocation to a new Major 3 site with specified delivery conditions and liquidated damages for failure to deliver.
- SNDA and financing arrangements preceded redevelopment, including Comerica’s secured and unsecured loans and a promissory note.
- Construction disruption and Center redevelopment coincided with Dollar Tree’s decline in sales and cash contribution, culminating in a July 2008 vacate date and September 15, 2008 turnover.
- Sale and transfer of the Shopping Center from Toyama to Capella in 2011, with Exhibit B and a Second Amendment addressing Dollar Tree’s lease and potential assumption disputes.
- Foreclosure activity by Comerica and a 2010-2011 settlement/post-sale structure affected Toyama’s ability to perform and Dollar Tree’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the liquidated damages clause is enforceable under Cal. Civ. Code §1671(b). | Dollar Tree | Toyama | Unenforceable; penalty collapse; damages undefined. |
| Remedies if liquidated damages are unenforceable. | Dollar Tree seeks monetary damages under ARL P.2. | Remedies limited to cancellation if LD clause invalid. | Dollar Tree entitled to money damages; D.l.c.1 severed; cancellation not sole remedy. |
| Whether Dollar Tree can pursue money damages despite non-recourse provisions. | Remedy not limited by non-recourse. | Non-recourse bars recovery beyond Landlord’s interest. | Not ripe; pre-judgment issue; remains for trial if judgment obtained. |
| Whether Capella assumed the ARL and is liable for breach. | Exhibit B/Original Agreement intended Capella to assume; Second Amendment contested. | Exhibit B unsigned; Second Amendment negates assumption. | Disputed; summary judgment denied on this issue. |
| Whether Dollar Tree can pursue fraudulent conveyance under UFTA. | ARL and sale structure could be transferred assets. | ARL not an asset; value and intent contested. | Theory 1: ARL not an asset; theory 2: facts disputed; partial denial of summary judgment. |
Key Cases Cited
- Ridgley v. Topa Thrift & Loan Ass’n, 17 Cal.4th 970 (Cal. 1998) (recovery of actual damages when liquidated damages are unenforceable)
- Armendariz v. Foundation Health Psychcare Servs., Inc., 24 Cal.4th 83 (Cal. 2000) (severance and interpretation of contract terms; interdependence of remedies)
- Linear Technology Corp. v. Applied Materials, Inc., 152 Cal.App.4th 115 (Cal. App. 2007) (UCL claim based on contract not involving public or consumers may fail)
- Sybron Corp. v. Clark Hosp. Supply Co., 76 Cal.App.3d 896 (Cal. App. 1978) (penalty vs. liquidated damages; improper fixed sums for varying breaches)
- Cook v. King Manor & Convalescent Hosp., 40 Cal.App.3d 782 (Cal. App. 1974) (actual damages awarded when liquidated damages unenforceable)
- Fong v. Am. Airlines, Inc., 626 F.2d 759 (2d Cir. 1980) (federal rule on admissibility of evidence in contract disputes)