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34 Partners, L.L.C. v. Danabe Corporation

A-0052-01T2 (N.J. Super. App. Div. 2002) (Unpublished)

LEASES; EXCLUSIVE USE— Without the protection of an exclusive use right provision in its lease, a tenant may rightfully be exposed to a competition from another, newer shopping center tenant in the same business.

A video store leased space at a shopping center. Its lease did not grant the video store exclusive use rights. Subsequently, the landlord leased other space at the shopping center to a national chain video store retailer. In the lease with the national chain, the landlord gave the new tenant “exclusive rights to operate a video store in the mall” and the landlord agreed to “use good faith efforts to cause [the existing video store] to cease operating” before the chain store was scheduled to open its store. The landlord was unsuccessful in doing so and the chain store opened. “Perhaps, but not necessarily, because of the competition” the original video store went out of business. Its lease required it to pay rent until the landlord found a replacement tenant for the space. When the landlord sued for the unpaid rent, the lower court denied relief to the landlord because it felt to do so “would reward [the landlord] for obtaining ‘exactly the result [the landlord], in contracting with [the chain store], sought…, ‘that is’ [the small store’s] vacation of the premises.’” That left the landlord with a rather small award, and the landlord only received about one-third of the counsel fees that it had expended in the matter. On appeal, the Appellate Division reversed, saying, it said, “[w]e do not fault the trial court for its appropriate sensitivity to the centrality in our jurisprudential universe of fairness and of the need to be vigilant against overreaching, which is represented by such doctrines as the covenant of good faith and fair dealing.” On the other hand, the Court would not allow those principles to “obscure their inapplicability to the facts of this case as a matter of law.” The Court saw this as a straightforward lease arrangement where the tenant would be liable for ordinary damages. There was no suggestion that the landlord failed to deliver what the lease required. “Significantly, [the original video store] had no expectation of protection against competition because ... they never secured an exclusive right to operate a video store at this mall.” Consequently, the original video store was subject to the forces of competition at the time that it vacated the premises just as it had been when it originally signed the lease.


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