United States District Court, D. Rhode Island
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge
In
October 2013, RPS Associates, LLC and McDonalds USA, LLC
entered into a Ground Lease for property located in
Providence, Rhode Island with the purpose of building and
operating a McDonald's restaurant. Three years later, the
restaurant had not been built and RPS initiated this cause of
action, alleging that McDonald's breached the lease and
that RPS is entitled to specific performance of the rent
payment obligations in addition to compensatory and
consequential damages. Presently pending before the Court is
McDonald's Motion to Dismiss the Amended Complaint
pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure for failure to state a claim upon which relief can
be granted. For the reasons set forth below, McDonald's
Motion is DENIED.
I.
Standard of Review
“To
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its
face.'”[1] “A claim has facial plausibility
when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.”[2] In addition to
reviewing the allegations stated in the complaint, the Court
may consider documents that are discussed in the complaint
and included with the complaint as exhibits.[3]
II.
Background
With
this standard squarely in mind, a review of the Amended
Complaint, the Ground Lease, and four letters exchanged
between the parties prior to the start of this litigation
reveals the following.[4] In 2013, the parties executed the lease
agreement that permitted McDonald's to build and operate
a restaurant. One of RPS's responsibilities under the
Ground Lease was to secure the zoning approvals required to
build and operate a McDonald's restaurant. Once the
zoning approvals were in place, McDonald's was,
“without unreasonable delay . . . to use due
diligence” to apply for all building permits and other
permits that would be required to operate the
restaurant.[5] The Ground Lease provided termination
rights to both parties; these rights were tied to a
contingency period, the expiration of which was extended
twice by the parties. The precise scope and timing of the
termination rights are at the center of this litigation.
The
development of the property was stalled by the zoning
approval process. After RPS applied for the applicable zoning
approvals from the Providence Zoning Board, the owner of a
Burger King franchise located across the street from the
property objected. In September 2014, the Providence Zoning
Board granted the zoning relief and approvals but the Burger
King franchise owner appealed the decision to the Rhode
Island Superior Court. The Superior Court affirmed the
decision of the Providence Zoning Board on November 6, 2015.
Soon thereafter, RPS sent a letter to McDonald's stating
that it had met its obligations to secure the necessary
zoning approvals and that it was “ready for the
applicable timelines in the lease to be reset and for the
project to move forward.”[6] McDonald's promptly replied,
stating that it would not pursue any permits before the
appeal period had run on the Superior Court's decision,
and asserting that RPS had “failed to satisfy the
conditions set forth in Article 6(A) and Article 4(A)”
of the Ground Lease.[7]
The
Burger King franchise owner filed a petition with the Rhode
Island Supreme Court to review the Superior Court's
decision; this request was denied in October 2016. While the
petition for review was pending, however, the parties
exchanged further correspondence. In May and June of 2016,
RPS affirmed its commitment to the project and asserted its
position that the Ground Lease had not been terminated, and
McDonald's made its position clear that the Ground Lease
had long ceased to be in effect.[8]
RPS
alleges that, on August 1, 2016, it communicated its desire
to move forward with the project and its willingness to
accept a retraction of McDonald's repudiation of the
Ground Lease.[9]After McDonald's declined RPS'
attempts to “get the project reset and back on track,
” RPS initiated this cause of action.[10] RPS alleges
that McDonald's did not terminate the Ground Lease prior
to the contingency period and was therefore bound by its
obligations to use commercially reasonable efforts to secure
the necessary building permits. RPS further alleges that, by
refusing to perform its obligations, McDonald's is in
material breach of the contract.
III.
Discussion
McDonald's
attacks the Amended Complaint on several fronts. It first
argues that it did not breach the contract because it
properly terminated the contract according to the unambiguous
terms of the Ground Lease by notifying RPS prior to the final
judgment regarding the requested zoning relief that it would
not move forward with the project. In addition,
McDonald's argues that RPS is not entitled to specific
performance as a remedy and that it is also not entitled to
enforce the rent obligation because, pursuant to the agreed
terms of the Ground Lease, this obligation had not yet been
triggered.
RPS
responds with several reasons why its Amended Complaint
should survive McDonald's Motion to Dismiss. Relevant to
the arguments raised by McDonald's, RPS contends that it
has plausibly pleaded that McDonald's did not terminate
the Ground Lease as required by the terms of the contract
because it did not terminate prior to December 1, 2014, the
expiration of the final contingency period negotiated by the
parties.[11] RPS also asserts that, because this case
involves a “claim of anticipatory breach, ” the
Court can - and should - order specific
performance.[12]
A.
Right of Termination and Anticipatory Repudiation
Section
6 of the Ground Lease outlines the parties' rights to
terminate; the parties focus on different parts of this
section as support for their respective positions regarding
the scope and ...