275 A.3d 537
R.I.2022Background
- EDC (formerly EDC Pizza) operated a Ronzio Pizza franchise at Twin River under a commercial lease that tied rent to gross sales, granted certain exclusivity, and included renewal options and a landlord buyout/termination clause (Section 2.4).
- EDC notified UTGR in June 2011 that it was exercising its option to renew for a five-year term. UTGR notified EDC in September 2011 that it would terminate and offered a $90,000 buyout; the parties executed a termination-and-release agreement in October 2011.
- The release recited termination effective October 16, 2011, required vacation of the premises, and contained a broad waiver of known and unknown claims related to the lease and premises.
- In 2019 EDC learned of alleged undisclosed negotiations between UTGR, Twin River employees, and a third party (Sbarro/Shai Inc.) and of indictments relating to those negotiations; EDC then sued UTGR in 2020 asserting fiduciary-duty, contract, covenant of good faith, fraud, negligent misrepresentation, punitive damages, and attorneys’ fees claims.
- UTGR moved to dismiss under Rule 12(b)(6), attaching the lease and release. The Superior Court treated those documents as properly considered on the motion, concluded Section 2.4 unambiguously permitted UTGR’s actions, found no fiduciary duty, and dismissed EDC’s claims.
- The Supreme Court affirmed: documents were central and sufficiently referenced, the landlord–tenant relationship did not create a fiduciary duty, Section 2.4 unambiguously authorized UTGR’s termination/buyout, and the implied covenant claim failed because the underlying breach-of-contract claim failed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can the court consider the lease and release on a Rule 12(b)(6) motion without converting to summary judgment? | EDC did not object to consideration but later contended the release was invalid; nevertheless, documents are central. | UTGR: lease and release are central and their authenticity is undisputed; they may be considered. | Court: Documents were sufficiently referred to and central; consideration on 12(b)(6) was proper. |
| Does the release bar EDC’s claims? | EDC contends the release is invalid because it lacked counsel and was unaware of relevant undisclosed facts when signing. | UTGR: the release is broad and unambiguous and releases all claims. | Court: Although not the primary basis of dismissal, the release was properly considered and EDC’s later-discovered facts did not defeat the operative contract rights. |
| Did a fiduciary duty arise between landlord and tenant based on the lease terms? | EDC: exclusivity, percentage rent, and renewal option created a special relationship that imposed fiduciary duties (relying on Joslin). | UTGR: relationship was a standard commercial landlord–tenant arrangement; no fiduciary duty. | Court: No fiduciary duty; facts here do not match exceptional circumstances in Joslin. |
| Did UTGR breach the lease or the covenant of good faith and fair dealing by failing to disclose negotiations and by exercising Section 2.4? | EDC: UTGR should have disclosed negotiations/arrangements and could not deny the renewal in bad faith. | UTGR: Section 2.4 unambiguously permitted termination or buyout without any disclosure obligation; it complied by giving notice and offering $90,000. | Court: Section 2.4 is plain and unambiguous; no contractual disclosure duty; breach-of-contract and covenant claims fail. |
Key Cases Cited
- Pontarelli v. Rhode Island Department of Elementary and Secondary Education, 176 A.3d 472 (R.I. 2018) (motion to dismiss tests sufficiency of complaint)
- Mokwenyei v. Rhode Island Hospital, 198 A.3d 17 (R.I. 2018) (documents outside complaint convert to summary judgment unless exception applies)
- Chhun v. Mortgage Electronic Registration Systems, Inc., 84 A.3d 419 (R.I. 2014) (declining to adopt altered federal standard for 12(b)(6))
- Beddall v. State Street Bank and Trust Company, 137 F.3d 12 (1st Cir. 1998) (documents central to claim and authentic may be reviewed on motion to dismiss)
- Joslin v. Astle, 194 A. 703 (R.I. 1937) (fiduciary duty may arise in extraordinary landlord–tenant contexts)
- Simpson v. Dailey, 496 A.2d 126 (R.I. 1985) (factors for finding fiduciary relationship)
- Botelho v. City of Pawtucket School Department, 130 A.3d 172 (R.I. 2016) (contract language interpreted by plain meaning)
- Premier Home Restoration, LLC v. Federal National Mortgage Association, 245 A.3d 745 (R.I. 2021) (implied covenant is not an independent cause of action)