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Michaels Stores, Inc. v. Castle Ridge Plaza Associates

6 F. Supp.2d 360 (D. N.J. 1998)

LEASES; RESTRICTIVE COVENANTS—A shopping center tenant may intervene in an action brought by another tenant against its landlord where a declaration is sought that would permit the second tenant to use its own premises for a purpose that would conflict with an exclusive use right in the first tenant’s lease.

An existing commercial shopping center lease contained a use clause, permitting the tenant to use the premises for the retail sale of linens and for any other lawful retail use provided that such other retail use did not conflict with or violate certain restrictions or exclusive rights granted to other tenants in the shopping center. One of the pre-existing uses at the shopping center was noted in the lease to be a fabric store. The fabric store’s lease that gave that store the exclusive right to operate an arts and crafts store at the shopping center. The linen store tenant then assigned its lease to the operator of an arts and crafts store. After the landlord received notice of the proposed assignment, it notified the linen store tenant and its intended assignee that the assignee would not be permitted to operate an arts and crafts store in the leased premises because to do so would be a violation of the terms of the lease. In response, the assignee alleged that its use of the premises as an arts and crafts store was not the same as that of a fabric store (as was listed in its lease as a prohibited use) and therefore the sale of arts and crafts was not one of the prohibited uses listed in the lease. The fabric store, however, pointed to its lease and contended that it had received the exclusive right to operate an arts and crafts store at the shopping center. When the assignee sent the rent check to the landlord, the landlord refused to accept it and returned it to the assignee. Thereupon, the assignee sought a judicial declaration that its intended use of the leased premises as an arts and crafts store was a permitted use under the lease. The fabric store tenant then sought to intervene in the matter to protect its position with respect to the landlord as well as with respect to the assignee and the original linen store tenant. Because the assignee sought declaration that it could use its space to sell arts and crafts, the fabric store believed that it had a direct interest in the outcome of the lawsuit.

Federal rules permit intervention when an applicant has an interest relating to the subject matter of an action, where there is a practical impairment of the applicant’s ability to protect an interest, and where the applicant’s interests would not otherwise be adequately represented by the existing parties. In addition, a federal court may exercise its discretion and grant permissive intervention where adding the additional party will be the most efficient method of handling the case. There was no question that the fabric store timely filed its application. As to the sufficiency of its interests, the fabric store demonstrated there was a tangible threat to a legally cognizable interest and that its interest was a legal interest as distinguished from a general or indefinite interest. With respect to the requirement that the fabric store had a sufficiently definite interest that was likely to be affected by the disposition of the action, all that the fabric store needed to show was that the fabric store’s interest “might become affected or impaired, as a practical matter, by the disposition of the action in [its absence].” The Court concluded that if the assignee had a right to use the retail space as an arts and crafts store, the fabric store’s interest would have been harmed. With respect to whether or not the fabric store’s interest would not have been adequately represented by the landlord, the Court recognized that the landlord’s interest was not directly adverse to that of the fabric store. Nevertheless, in the Court’s view, the impact on the shopping center owner of a successful outcome of the assignee would not be the same impact as it would have had on the fabric store. The landlord would simply have been required to permit the assignee to proceed with its tenancy and then presumably face a lawsuit from the fabric store with a resulting, potential money judgment. On the other hand, the fabric store tenant faced the prospect of having to deal with an undesired competitor and an undesired lawsuit against its landlord if the assignee prevailed. Consequently, the interests of the landlord and the fabric store were clearly not congruent and the fabric store was permitted to intervene.


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