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Can't Grandfather Noncompete
by Ron Davis

Eckerd Corp. has forced the owners of a Pennsylvania shopping center to pay for violating a noncompete agreement in the lease between the two parties.

Eckerd has leased space since 1989 in the Philadelphia-area shopping center to operate one of its pharmacies, and the noncompete provision allows the Eckerd store the exclusive right to sell prescription drugs dispensed by a registered pharmacist. The violation occurred when a supermarket that is also a tenant later opened a pharmacy department and hired a registered pharmacist for dispensing drugs.

The shopping centerís owners responded to Eckerdís complaints of a lease violation by pointing out that the supermarket lease predated that of the Eckerdís store lease. They therefore argued that Eckerdís noncompete provision ďsimply precludes the shopping center from prospectively entering into a new lease with another drug store.Ē

Eckerd insisted, however, that its lease is not restricted by any time element and prevents any and all other tenants from operating a licensed drug-dispensing pharmacy at the shopping center.

A Pennsylvania court ruled in favor of the shopping center, however. The judge agreed with the shopping centerís owners that Eckerdís lease terms merely prevented them from entering into a later lease with another pharmacy or drug store.

Eckerd appealed.

A Superior Court of Pennsylvania reversed the lower-court decision, explaining, ďThe supermarketís lease predated Eckerdís lease. However, this is irrelevant in light of other critical language in the Eckerd lease. The shopping centerís owners promised Eckerd that, during the term of its lease, they would not Ďpermit the use or occupancy of, any space not hereby demised to tenant, which is located with the entire premises for the operation of a drug store or a drug department.í This unambiguous language clearly was violated by the shopping centerís owners when they allowed the supermarket tenant to open its pharmacy department.Ē

In so ruling, the Superior Court judges ordered a new trial to determine the damage amount that the shopping centerís owners must pay Eckerd. (Eckerd Corp. v. Glen Eagle Retail L.P., 2004 WL 1367924 [Pa.Super.])

Decision: June 2004
Published: August 2004



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