2015 Va. Cir. LEXIS 8
Fairfax Cir. Ct.2015Background
- Fairfax Square, owner of a Tysons Corner retail/office complex, and tenant Hermès (original tenant since 1990) disputed ¶25 of a 1990 Lease Addendum requiring a “mix” of luxury tenants (examples: Tiffany, Fendi, Gucci).
- In Feb. 2014 Hermès notified Fairfax Square of a breach alleging the retail mix no longer met ¶25; Fairfax Square responded and then sued seeking declaratory relief and injunction to prevent Hermès from terminating its lease. Hermès counterclaimed for declaratory relief and attorneys’ fees.
- By mid-2014 eight street-level spaces were largely leased (including Tiffany, Hermès, Miele, Liljenquist & Beckstead, USAA), but only Tiffany and Hermès fit the particular iconic-brand profile referenced in ¶25.
- The Court treated ¶25 as a restrictive, material covenant but found latent ambiguities requiring parol evidence to define key terms (e.g., “mix,” “luxury,” whether examples modify “brand” or “tenant”).
- The Court concluded the parties intended a cluster of at least three iconic, internationally recognized designer-brand tenants (Tiffany/Fendi/Gucci-type), not simply any high-end or premium-goods sellers, and found Fairfax Square breached ¶25 as of Feb. 14, 2014.
- Remedy: judgment for Hermès declaring breach and permitting Hermès to terminate the lease (with equitable condition to give 60 days’ notice and continue paying rent during that period); costs awarded to Hermès but not attorneys’ fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ¶25’s requirement for a “mix” of luxury tenants was met in 2014 | Fairfax Square: the 2014 tenant roster (Tiffany, Miele, Liljenquist & Beckstead, USAA, etc.) satisfied ¶25 as ‘‘quality’’ and ‘‘luxury’’ retailers | Hermès: ¶25 contemplates iconic, internationally recognized designer-brand tenants (Tiffany/Fendi/Gucci-type); 2014 tenants (except Tiffany) do not qualify | Held for Hermès: ¶25 requires a cluster of at least three iconic luxury-brand tenants; Fairfax Square breached ¶25 in 2014 |
| Ambiguity and admissibility of parol evidence to interpret ¶25 | Fairfax Square: ¶25 is unambiguous and should be applied as written | Hermès: ¶25 is ambiguous as to ‘‘mix,’’ ‘‘luxury,’’ and whether examples limit the class, so extrinsic evidence is admissible | Held: Latent ambiguity existed; parol evidence was admissible and used to construe parties’ intent |
| Scope of ‘‘luxury’’ — whether it describes the tenant or merely goods sold | Fairfax Square: ‘‘luxury’’ modifies goods/service quality; regional or specialty high-end retailers qualify | Hermès: ‘‘luxury’’ modifies tenants — iconic international designers who sell their own brands | Held for Hermès: ‘‘luxury’’ refers to the tenant (iconic international designer-brand retailers), not merely any seller of premium goods |
| Availability of injunctive relief and remedies (including attorneys’ fees) | Fairfax Square: would be irreparably harmed if Hermès left; sought injunction and fees | Hermès: no irreparable harm; sought declaratory relief and costs/fees | Held: No injunction — no irreparable harm proven; Hermès entitled to costs but not attorneys’ fees under governing law |
Key Cases Cited
- Eure v. Norfolk Shipbuilding & Drydock Corp., 263 Va. 624 (interpret contracts by ordinary meaning and four corners)
- Scott v. Walker, 274 Va. 209 (restrictive covenants disfavored; burden on party enforcing them)
- Pocahontas Mining, L.L.C. v. CNX Gas Co., 276 Va. 346 (latent ambiguity permits parol evidence)
- VEPCO v. Norfolk S. Ry., 278 Va. 444 (parol evidence rules; latent vs. patent ambiguity)
- Clyborne v. McNeil, 201 Va. 765 (parol evidence applicable to leases)
- Dover Shopping Center, Inc. v. Cushman’s Sons, Inc., 164 A.2d 785 (N.J. Super. Ct.) (cases discussing irreparable harm in retail-anchor contexts)
- Massachusetts Mutual Life Ins. Co. v. Associated Dry Goods Corp., 786 F. Supp. 1403 (N.D. Ind.) (preliminary-injunction context for anchor-tenant departures)