Do Wal-Mart Coolers Violate Lease?
by Ron Davis
Supermarket chain Bi-Lo, will have to prove that its lease at a Georgia shopping center prevents another retailer from installing food-cooler units. The other retailer at the Augusta shopping center is a Wal-Mart store, and the food-cooler units, if used for the sale of groceries, could violate a noncompete clause in Bi-Lo’s lease.
Bi-Lo claims that its lease gives it the exclusive right to sell groceries at the shopping center. That lease, which Bi-Lo signed before Wal-Mart became a tenant, does, however, make some exceptions. For example, tenants selling standard items sold in drug stores or preparing ready-to-eat food items do not violate of the lease.
Wal-Mart began operations at the shopping center selling bagged candy, chips, and beverages. Then Wal-Mart began selling canned goods and coffee, and an allied tenant, Sam’s Club, later became a tenant at the shopping center and installed a butcher shop and a produce department there.
At first, Bi-Lo didn’t object–and even signed a letter as part of a lease renewal, stating that Bi-Lo was not aware of any current or potential defaults occurring under its lease with the shopping center.
When Wal-Mart later added the food-cooler units to one of its aisles, however, Bi-Lo notified the shopping center owner of a lease violation. Then when the shopping center owner refused to take any action against Wal-Mart, Bi-Lo sued.
In response, the shopping center owner argued that Bi-Lo had previously surrendered its right to enforce the food-exclusion provision of the lease. That’s because, the owner explained, Bi-Lo had not required compliance when Wal-Mart and Sam’s Club initially began selling food products.
Bi-Lo replied that the lease contained a “no-waiver” provision, stating that the failure of Bi-Lo to insist on strict compliance in one instance doesn’t prevent later insistence on strict compliance in any other instance.
A state court agreed with Bi-Lo that it did not forfeit its right to strict compliance of the lease and that the shopping center owner had violated the lease’s noncompete provision. On appeal, however, an appellate court ruled that a jury must decide what the installation of food coolers at the Wal-Mart store really means. Explained the judges, “On the one hand, a jury could conclude from the evidence that the existence of the cooler units indicates that Wal-Mart will sell groceries, meats and/or other items generally sold by supermarkets. On the other hand, the jury could determine that the mere existence of cooler units, without additional evidence of what in fact they were being used for, is insufficient to trigger Bi-Lo’s rights under the lease.” (Glimcher Properties, L.P. v. Bi-Lo, LLC, 2005 WL 120497 [Ga.App.])
Decision: January 2005
Published: February 2005