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Cigar Masters Providence, Inc. v. Omni Rhode Island, LLC

United States District Court, D. Rhode Island

September 14, 2017

CIGAR MASTERS PROVIDENCE, INC., Plaintiff,
v.
OMNI RHODE ISLAND, LLC, Defendant.

          ORDER

          William E. Smith, Chief Judge.

         Magistrate Judge Patricia A. Sullivan filed a Report and Recommendation (“R&R”) on August 18, 2017 (ECF No. 50), recommending the Court grant Defendant's Motion for Preliminary Injunction (ECF No. 23) to the extent set out in the R&R. After careful review of the papers related to Defendant's Motion and of the R&R, and having heard no objections, the Court ACCEPTS the R&R and adopts its recommendations and reasoning. Defendant's Motion for Preliminary Injunction (ECF No. 23) is therefore GRANTED to the extent set out in the R&R.

         Plaintiff is therefore ordered to:

(1) Hire immediately a competent engineering firm (preapproved by Defendant) at Plaintiff's expense;
(2) Cause the engineering firm, also at Plaintiff's expense, immediately to implement the filter change protocol set out in Exhibit Z -- changing the pre-filters at least once a month, and the charcoal filters at least every six weeks -- and to continue to change the filters on that schedule (or more frequently) for as long as this Order remains in effect; and
(3) Cause the engineering firm, within a reasonable period of time (not to exceed thirty days), at Plaintiff's expense, to examine the existing ventilation system and to make recommendations regarding what other maintenance or changes to the ventilation system or to the premises within Plaintiff's control are reasonably necessary to bring Plaintiff into compliance with the Lease and Rhode Island law.

         In addition, and as stated in Magistrate Judge Sullivan's R&R, if Plaintiff fails to perform any of the above three requirements, Defendant may return to the Court -- after five days' notice and with evidence of such failure -- for an injunction prohibiting Plaintiff from permitting any smoking or other use of tobacco products on its premises. IT IS SO ORDERED.

         UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

         CIGAR MASTERS PROVIDENCE, INC., Plaintiff,

         v.

         OMNI RHODE ISLAND, LLC, Defendant.

         C.A. No. 16-471S

         REPORT AND RECOMMENDATION

          PATRICIA A. SULLIVAN, United States Magistrate Judge.

         In this dispute over the Lease between a landlord, Defendant Omni Rhode Island, Inc., and its tenant, Plaintiff Cigar Masters Providence, Inc., Omni has filed a motion (ECF No. 23) asking the Court to preliminarily enjoin Cigar Masters from permitting the smoking of any tobacco products on the leased premises. Omni grounds its motion in the likelihood that it will succeed on the merits of its claims that the tobacco smoke and related odors escaping from Cigar Masters' business constitute a trespass and a private and public nuisance, as well as that Cigar Masters has breached its Lease-based promise to “install and maintain throughout the Term a ventilation system designed to remove, to the extent technologically feasible, smoke and related odors from the interior of the Premises and from any exhaust to the outside of the Premises and into any Common Areas.” In arguing that the equities favor interim relief, Omni asks the Court to focus not only on the significant adverse impact on its other tenants (a restaurant known as “Fleming's” and luxury condominiums known as the “Residences”) and on its own guests, staff and reputation, but also on the harm to members of the general public, who are unwittingly exposed to the air laced with secondhand smoke emitted by Cigar Masters.

         Cigar Masters counters that the injunction Omni seeks is a death-knell to its business, which is the operation of a smoking bar specializing in providing a comfortable space for customers who wish to smoke tobacco products. Pointing out that both Rhode Island law and the express language of the Lease permit it to operate a smoking bar, Cigar Masters also contends that the escape of tobacco smoke and odors from its premises is beyond its control because the out-migration of smoke-laden air is caused by air pressure imbalances and gaps and openings in building spaces controlled by Omni and its other tenants, yet Omni has failed to do anything to correct these causes. Accordingly, it contends, the equities lean unambiguously toward denial of Omni's motion for preliminary injunction.

         The motion was referred to me for report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). After the motion was initially filed on January 19, 2017, the parties agreed to a discovery schedule to explore the issues raised by the motion. When discovery and briefing was completed, the Court held an evidentiary hearing on April 24, 2017. Post-hearing briefing closed on May 24, 2017. Consistent with the proposed findings of fact and conclusions of law that follow, I recommend that the Court enter a preliminary injunction that is more limited than the draconian order sought by Omni. Instead of a death-knell order, my proposed findings support the conclusion that, until this case is resolved, Cigar Masters should be ordered to strictly comply with its basic obligations as set out in the Lease and in the applicable Rhode Island statute and regulation. If it declines to do so or fails to comply, in that event, I recommend that all smoking on its premises be banned.

         I. PROPOSED FINDINGS OF FACT[1]

         A. The Hearing

         These proposed findings of fact are based on the pleadings, evidence and testimony received during the evidentiary hearing, which is briefly summarized here. Omni called four witnesses: Allen Potter, who was employed by Omni's predecessor, PRI XVIII, L.P. (referred to as “the Procaccianti Group”), and dealt with Cigar Masters on its behalf from November 2008 until the end of 2012, after which he continued to deal with Omni about Cigar Masters in his capacity as director of operations on behalf of the Residences; Ronan Sweeney, Omni's director of finance, who dealt with Cigar Masters from April 2014 to the present; Michael Shurtleff, who testified by deposition (Ex. D2) as a Fed.R.Civ.P. 30(b)(6) witness on behalf of Phalanx Engineering (“Phalanx”), the entity that installed Cigar Masters' ventilation system and maintained it until May 2016; and Richard Ecord, an industrial hygienist, who was qualified and testified as an expert regarding the conclusions he reached based on testing for nicotine and nicotine markers, as well as regarding the general health effects of the particulates found during testing. Cigar Masters called one witness, Jack Dakermanji, who has been employed by Cigar Masters since 2011, has worked at its Providence location since 2014 and became the general manager at the Providence location in May 2016. All of these witnesses presented credible testimony that was relevant to the issues and helpful to the Court.

         B. The Parties

         Cigar Masters is a Rhode Island corporation with its principal place of business in Providence, Rhode Island. Counterclaim, ECF No. 7 ¶ 2. Since at least 2006, Cigar Masters has operated a “cigar bar” in Providence, Rhode Island; the sale and on-premises use of tobacco products, and particularly cigars, is integral to its business. Tr. 186. To operate legally in Rhode Island, Cigar Masters' retail establishment is registered with the Rhode Island Division of Taxation pursuant to R.I. Gen. Laws § 23-20.10-2(15)(a), which permits the operation of “an establishment whose business is primarily devoted to the serving of tobacco products for consumption on the premises, ” provided that revenues generated by tobacco products must be greater than 50% of the total for the establishment.

         Omni is a limited liability company organized and existing under the law of Delaware, with its principal place of business in Dallas, Texas. Counterclaim, ECF No. 7 ¶ 1. In late 2012, Omni acquired from the Procaccianti Group certain real estate located at 1 West Exchange Street, Providence, Rhode Island, including a building that houses a hotel (hereinafter the “Hotel”). Tr. 75-77; Exs. A-B. In the east tower of the building, there are various retail tenants, including a fine-dining steak restaurant called “Fleming's, ” a parking garage, Hotel rooms, hallways and common areas, and over a hundred luxury condominium units on the upper floors operating as “the Residences.” Tr. 14-16, 75-76. During the period prior to the sale to Omni, the Procaccianti Group owned and operated both the Hotel (under a different name) and the Residences. Tr. 15-16. After Omni assumed ownership, the Residences became an independent entity occupying the east tower of Omni's building. Tr. 14-16.

         Other than in the premises occupied by Cigar Masters, smoking is not permitted in the public areas of the premises occupied by Omni and its tenants, including Fleming's, the guest rooms and common areas of the Hotel and the common areas of the Residences. Tr. 15, 76; Ex. 5A. The Residences includes a no-smoking rule in its condominium documents and considers its status as a non-smoking facility to be an important selling point when marketing its condominium units. Tr. 15. The Omni prides itself on operating non-smoking hotels throughout the United States - it features its smoke-free atmosphere in its advertising to attract guests to its properties throughout the nation, including the Hotel. Tr. 76.

         C. The Lease

         On December 28, 2006, the Procaccianti Group entered into a predecessor lease with Cigar Masters, which contemplated that Cigar Masters would occupy a retail location within the Hotel. Ex. A at 1. On August 21, 2007, the Procaccianti Group and Cigar Masters entered into the Lease that is in issue in this case (Ex. A), granting Cigar Masters the exclusive right to occupy retail space located on the first floor of the east tower for the purpose of operating a “cigar café, ” selling alcoholic beverages, light food and tobacco products, as well as permitting both on-site consumption of food and beverages and the use of tobacco products by retail customers. Ex. A §§ 6.1, 18.4. In addition, at some time between October 2007 and June 2009[2](the exact date is not in the record), the Procaccianti Group rented space adjacent to the space occupied by Cigar Masters to Fleming's. See Counterclaim, ECF No. 7 ¶ 5; Ex. 6.

         The Lease provided Cigar Masters with an initial five-year term and options to extend for additional terms. Ex. A §§ 1(f), 2.4. After Omni acquired the real estate and became the owner and operator of the Hotel, it executed an amendment to the Lease with Cigar Masters dated August 20, 2013; the amendment transferred the rights and obligations of landlord from the Procaccianti Group to Omni, adjusted the rent, and extended the term of the Lease to February 28, 2018, with Cigar Master retaining the option to extend for two successive five-year terms. Ex. B § 1. Otherwise, the original Lease terms were ratified. Ex. B § 10.

         The provisions of the Lease on which the parties' dispute is principally focused are found in Article 18. Ex. A at 14-15. Most critical to the matter in issue is § 18.3, which addresses “Odor Control.” This section imposes on Cigar Masters the absolute duty to:

[I]nstall and maintain a ventilation system designed to remove, to the extent technologically feasible, smoke and related odors from the Premises and from any exhaust to the outside of the Premises and into any Common Areas.

Ex. A § 18.3. Also in § 18.3, Cigar Masters acknowledges that tobacco smoking is strictly regulated by the State of Rhode Island and is objectionable to the public, and that, “as such [Cigar Masters] has a duty to eliminate the odor and smoke from its premises and from any Common Areas.” Id. In addition, § 18.3 saddles Cigar Masters with the duty to respond “promptly and without delay” to any complaints by making “whatever improvements that may be needed, . . . to minimize if not eliminate such smoke and odors.” Id. The latter obligation - to make “improvements” - is subject to Omni's right to approve any improvements before they are made. In § 18.4, Cigar Masters agrees to abide by Rhode Island's rules and regulations, particularly with respect to the use of tobacco products; this obligation echoes a related provision in § 6.2 of the Lease, which also dictates that Cigar Masters must comply with all applicable laws and regulations. Finally, in a provision whose meaning is disputed, Cigar Masters' affirmative duty to address the smoke and odor generated by its operations is mirrored in Omni's duty to prevent “objectionable odors” generated in other areas of the Hotel, Fleming's or the Residences (such as the parking garage) from emanating or being dispelled beyond the premises where they are generated. Ex. A § 18.2(b). Read holistically, a central purposes of the Lease is to ensure that tobacco smoke and odor generated by Cigar Masters' operation does not interfere with the landlord's Hotel or with its other tenants.

         Other Lease language that is important to the matter in issue appears in § 19.7. That provision states that waiver or indulgence by the landlord (either the Procaccianti Group or Omni) of a Cigar Masters default neither alters the terms of the Lease nor operates as a waiver of a subsequent default. Ex. A § 19.7. This section makes clear that no custom or practice of the parties that is at variance with the Lease obligations can constitute a waiver of the landlord's right to demand exact compliance. Id. Also pertinent is § 6.2, which provides that Cigar Masters shall not operate its business “in any manner to create a nuisance or trespass.”

         D. Physical Attributes of the Space

         The physical configuration of the space in and adjacent to the east tower affects the dispute so I pause briefly to describe it.

         Pursuant to the Lease, Cigar Masters occupies the corner of West Exchange and Francis Streets, on the ground floor. Ex. A. Embedded in the wall facing West Exchange Street that borders the public sidewalk, and approximately twelve feet from the ground, is the vent exhausting air from Cigar Masters to the outside. Tr. 23-24. Immediately adjacent to Cigar Masters' exhaust panel is the entrance to the parking garage for the Residences. Tr. 23. This parking garage has a large door that opens and closes constantly throughout the day and night. Tr. 19. Just above the Cigar Masters exhaust panel is a much larger panel of louvers that allow outside air to be sucked into the parking garage when powerful fans on the opposite wall are activated by rising carbon monoxide levels. Tr. 19. Around the corner in both directions from Cigar Masters and its exhaust panel are the front and back entrances to the Residences and to Fleming's.[3] Tr. 26.

         The contiguity of the interior space on the first floor of the east tower is similarly pertinent. Specifically, on the other side of the interior walls enclosing Cigar Masters' premises are the common areas of the east tower, including halls and access to elevators that serve the floors above, where there are both Hotel rooms and over a hundred condominium units. Tr. 14- 15; Ex. A at 22; Ex. 2 at 8. ...


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