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Print Page Giant Faces Down Sam's Club
by Ron Davis

Planners of a Sam’s Club addition to a Pennsylvania shopping center have encountered a determined opponent.

The shopping center is Silver Spring Commons, located in the Harrisburg area. And the opponent of the Sam’s Club addition is Giant Food Stores, a grocery-store chain with a unit leasing space as one of the center’s tenants.

Currently, Giant Food merely maintains a presence at the shopping center through a 20-year lease that the company signed in 1992. In 2001, Giant Food vacated the leased space and moved its grocery operation to an unrelated retail space across the highway from Silver Spring Commons. That lease, however, contained a noncompete restriction that prevents the shopping center’s owners from leasing to another grocery vendor.

Later, the tenant did agree to allow a Wal-Mart store at Silver Spring Commons to expand its space and become a Wal-Mart Super Center. As such, the expanded Wal-Mart would sell grocery items. But when the shopping center’s owners decided to allow construction of an addition to the center to house a Sam’s Club operation, the tenant vetoed those plans, noting that Sam’s Club is a grocery vendor.

The center’s owners contended that since Sam’s Club is a subsidiary of Wal-Mart, they could lease the addition to Wal-Mart, which would in turn “assign” that lease to Sam’s Club. To support that position, the owners pointed out that an amendment to the lease with Giant Food states that the grocery-sales restriction “shall not apply to Wal-Mart, its successors or assigns.”

Giant Food responded by suing the shopping center’s owners, claiming that a Sam’s Club operation at the shopping center violates the terms of the lease.

A Pennsylvania court agreed with Giant Food, noting the express language of the agreement between the two parties. That agreement showed that they intended to contain the application of any exception to the supermarket restriction to the land then owned by Wal-Mart. The shopping center’s owners appealed.

A Pennsylvania appellate court concurred with the lower court, explaining, “We are satisfied that the contracting parties intended only the portion of the shopping center occupied by Wal-Mart…to be exempted from the supermarket restriction. Otherwise, there would be no reason to identify the particular parcel in the various contract documents, including the lease amendment. Viewed in that context, the term ‘successor and assigns’ refers to only subsequent owners and lessors of the Wal-Mart parcel.” (Giant Food Stores, LLC v. THF Silver Spring Development, I.P., 2008 WL 4603488 [Pa.Super])

Decision: October 2008
Published: November 2008

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