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Defining Character
by Ron Davis

A noncompete agreement has thrown a curve to plans for a Joe’s Crab Shack at a prime Austin, TX, commercial location.

The location, at Lake Travis in Austin, is owned by the University of Texas and leased to a company named Oyster Investment Corp. That company then subleases to third-party tenants.

One of those sublessees operates a restaurant named Chuy’s Hula Hut. Another sublessee operates a restaurant known as the Lodge at Lakeview, which is the restaurant that the owners of Joe’s Crab Shack had hoped to take over.

The Lodge at Lakeview tenant was receptive to a buyout by Joe’s Crab Shack’s owners. But when the Chuy’s Hula Hut tenant learned of the impending deal, he objected, pointing to the noncompete provision in the Lodge at Lakeview’s sublease.

That noncompete provision states that the two restaurants "shall be of substantially different character and offer substantially different menus...." And the Chuy’s Hula Hut tenant argued that, like his restaurant, Joe’s Crab Shack is "nautically themed," in character as well as in menu.

The Joe’s Crab Shack owners countered that the exact meaning of "substantially different in character" is "uncertain," thereby making the noncompete provision ambiguous.

An arbitrator subsequently ruled, however, that "a Joe’s Crab Shack restaurant is in fact substantially similar in character to the Chuy’s Hula Hut restaurant." The owners of Joe’s Crab Shack appealed.

A Texas appellant court agreed with the arbitrator, ruling, "If a contract is worded in such a manner that it can be given a definite or certain legal meaning, then it is not ambiguous. Interpreting this sublease according to its plain meaning, it is not rendered ambiguous by its use of the word ‘character.’ The character of a restaurant includes its interior and exterior appearances, its menu, its atmosphere, and the attire of employees, among other things.... We hold that the use of ‘character’ in the sublease is not uncertain nor is it reasonably susceptible to more than one meaning; the sublease is not ambiguous." (Landry’s Seafood v. Waterfront Cafe, Inc., 49 S.W.3d 544 [Tex.App.--Austin 2001])

Decision: August 2001
Published: October 2001



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