Oakwood Village LLC v. Albertsons, Inc.

Albertsons, Inc. (defendant) is a retail supermarket. In 1978, Albertsons signed a ground lease with Oakwood Development Company, Oakwood Village, LLC’s successor in interest (Oakwood) (plaintiff) to lease space as an anchor tenant at Oakwood Village, a planned shopping center. The lease had an initial term of 25 years, during which time Albertsons agreed to pay Oakwood a monthly rental fee of $1,667, plus tax and charges. Oakwood agreed not to lease any other space in Oakwood Village to a supermarket tenant. More than 21 years into the lease, Albertsons closed its store at Oakwood Village but continued to pay rent under the lease to Oakwood, thus preventing Oakwood from leasing the space to a new anchor tenant. At the same time, Albertsons opened another store as the anchor tenant in a nearby shopping center. The occupants of three Oakwood Village stores followed Albertsons to the nearby shopping center, and the four Oakwood Village vacancies led to a decline in Oakwood’s sales. In 2002, Oakwood sued Albertsons for breach of the lease, claiming the lease required Albertsons to operate continuously, act in good faith, and deal fairly. Oakwood asked the trial court for declaratory relief, including the ability to end the lease with Albertsons and lease the space to a new anchor tenant, in addition to over $1 million in damages. Albertsons admitted at trial that the motive behind paying rent for the Oakwood Village space while keeping it unoccupied was to restrict competition. The trial court nevertheless dismissed the case, ruling that the lease did not contain an implied covenant of continuous operation and that Albertsons did not violate an implied covenant of good faith and fair dealing.