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An Interest-ing Decision
by Ron Davis
A Florida jury had little trouble deciding that a Jacksonville shopping center owner had violated the exclusivity provision of a tenant’s lease.
But when it came to the matter of determining the amount owed the tenant for the violation, both the jury and the judge in the case ran into difficulty.
The shopping center is Mission Square, whose owners had leased space to the tenant, O’Malley’s, Inc., to operate a restaurant and bar there. And the exclusivity provision in the lease prohibited the shopping center owners from leasing to any other tenants who were in the bar or restaurant business without first obtaining O’Malley’s written consent.
So when the shopping center owner leased space to the owners of a restaurant known as Hala Cafe, O’Malley’s sued. And a jury subsequently decided in favor of O’Malley’s and determined that the shopping center owners must pay for breaching the O’Malley’s lease.
To calculate how much O’Malley’s would get, the jury relied on certain testimony by expert witnesses. One expert estimated the total future damages that O’Malley’s would suffer from the breach, then reduced that amount to its present value, and the jury agreed with that award. But then the court tacked on an amount for interest from the time of the lease violation.
The shopping center owners appealed.
A Florida appellate court upheld the jury verdict regarding the lease violation and the award based on the present value of future damages. But the judges rejected the notion that the shopping center owner must pay interest from the time of the lease violation.
The judges explained, "Because present value actually replaces future losses and takes into account an interest rate, it would be incongruent to add to the present value figure an additional interest rate representing a time prior to the time future losses begin to occur.... In this case, O’Malley’s is entitled to interest on those losses that occurred as a result of the breach of lease before the trial, but is not entitled to prejudgment interest on the present value of future damages." (Mission Square, Inc. v. O’Malley’s, Inc., 783 So.2d 1151 [Fla.App.1 Dist. 2001])
Decision: May 2001
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