The Law

Fire! by Ron Davis The hopes of a Kansas shopping center owner have revived following a court ruling that he may be able to keep at least some of the $675,778 that a jury required him to pay a tenant. The shopping center, located in Overland Park, leased space to the tenant for the operation of a health club. But a fire in 2001 destroyed the tenant’s premises, and the tenant eventually had to find a suitable location for the health club elsewhere. The lease between the two parties stated, however, that the shopping center owner has two options if fire makes the tenant’s premises unfit for use: Within a six-month period, he could rebuild or he could terminate the tenant’s lease. The tenant claimed that the shopping center owner chose the first option–to rebuild–but never did. After the tenant moved from the shopping center, the center’s owner sued. In response, the tenant countersued, alleging breach of contract. A Kansas court ruled that the shopping center owner had breached the lease by failing to give written notice of its termination within six months after the fire. The shopping center owner appealed, arguing that the lease gave him the right to terminate the lease, rebuild the premises–or do nothing at all. The shopping center owner also pointed out that following the fire the tenant had received business-interruption insurance proceeds that the jury had not considered. After a jury granted the tenant the $675,778 award for lost profits, the court decided that evidence in the case was insufficient for the jury to determine lost profits. Although the judge ruled that the shopping center owner had breached the lease by failing to take any action during the six-month grace period, he nevertheless ordered a new trial to settle the issue of damages owed the tenant. The tenant naturally argued against a new trial. But the court pointed to several reasons that the case must continue. Explained the judge, “The new trial is based partially on the exclusion at trial of evidence regarding business-interruption insurance proceeds the tenant received after the fire. There also was insufficient evidence of the tenant’s lost profits to support the jury’s $675,778 verdict. Finally, the breach of lease occurred not on the day of the fire, but six months thereafter, and thus, the damages calculations were not accurate. Further, the interjection of such miscalculations could tend to confuse and prejudice the jury. Thus, there is no abuse in granting a new trial.” (Raney v. Total Fitness Athletic Center, Inc., 2005 WL 1214255 [Kan.App.]) Decision: May 2005 Published: May 2005