Hand Cut Steaks Acquisitions v. Lone Star Steakhouse
298 Neb. 705
| Neb. | 2018Background
- Hand Cut Steaks Acquisitions, Inc. (HCS, Arkansas) leased a restaurant property in Omaha to Lone Star Steakhouse & Saloon of Nebraska, Inc. (Lone Star) under a 66‑month lease; LSF5 Cactus L.L.C. (Cactus) executed an unconditional guaranty of Lone Star’s lease obligations.
- Lone Star ceased operations, surrendered the premises in May 2013, and stopped paying rent after February 2013; HCS demanded surrender but expressly stated it was not terminating the lease.
- HCS received multiple leasing inquiries and offers but pursued negotiations to sell the property to an ultimate buyer; a letter of intent (LOI) was signed on June 13, 2013, purchase agreement finalized September 2013, and closing occurred April 2014.
- HCS sued Lone Star and Cactus for unpaid rent and other lease charges; the parties tried damages on stipulated facts before the district court.
- The district court found HCS had not accepted surrender, awarded damages only through the LOI date (June 13, 2013), and dismissed Cactus for lack of personal jurisdiction; HCS appealed and the guarantor’s dismissal was reversed by the Supreme Court.
Issues
| Issue | Plaintiff's Argument (HCS / claimant) | Defendant's Argument (Lone Star / Cactus) | Held |
|---|---|---|---|
| Whether HCS accepted Lone Star’s surrender, terminating the lease | HCS did not accept surrender; it retook possession to mitigate damages | Lone Star: HCS accepted surrender by retaking and selling, terminating lease | Court: HCS did not accept surrender; its conduct and explicit statements showed intent to mitigate, not terminate |
| Whether selling (rather than reletting) can satisfy landlord’s duty to mitigate and when damages stop | Sale is a permissible mitigation; damages continue until sale only if mitigation efforts are commercially reasonable in time | Lone Star: HCS unreasonably delayed sale and rejected bona fide leases, so damages should stop earlier or be excused | Court: Landlord may sell to mitigate; HCS’s efforts were reasonable through LOI (June 13, 2013) but post‑LOI delay to closing was not commercially reasonable, so damages limited to LOI date |
| Personal jurisdiction over out‑of‑state guarantor (Cactus) | Cactus purposefully availed itself of Nebraska by guaranteeing performance of a Nebraska lease, being named on the lease/insurance, and agreeing Nebraska law would govern | Cactus argued insufficient contacts with Nebraska to satisfy due process | Court: Reversed dismissal; Cactus had sufficient minimum contacts with Nebraska for specific jurisdiction |
| Enforceability of contractual attorney‑fee provision in lease | HCS sought fees as prevailing party under lease provision | Lone Star argued courts should not enforce such contractual fee provisions absent statute | Court: Nebraska follows American Rule; contractual prevailing‑party fee clauses not judicially enforced absent statutory authorization; fee request denied |
Key Cases Cited
- Klein v. Oakland/Red Oak Holdings, 294 Neb. 535 (Neb. 2016) (standards for appellate review on stipulated facts)
- Quality Pork Internat. v. Rupari Food Servs., 267 Neb. 474 (Neb. 2004) (personal jurisdiction analysis for contract‑based claims considering negotiations, contemplated consequences, terms, and course of dealing)
- McGee v. International Life Ins. Co., 355 U.S. 220 (U.S. 1957) (contract with substantial connection to forum supports jurisdiction)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (specific jurisdiction where defendant purposefully availed itself of forum by contract and expected consequences)
- Properties Inv. Group v. JBA, Inc., 242 Neb. 439 (Neb. 1993) (recognizing selling or leasing can both be reasonable mitigation steps for a landlord)