Hamilton Mill Theatre Dev., LLC v. Regal Cinemas, Inc.

877 S.E.2d 832

HAMILTON MILL THEATRE DEVELOPMENT, LLC

v.REGAL CINEMAS, INC.

A22A0715

Court of Appeals of Georgia.

August 26, 2022

Reconsideration Denied November 14, 2022

James W. Hawkins, Cary Ichter, Atlanta, for Appellant.

John Gregory Perry, Jennifer Saffold Collins, Atlanta, for Appellee.

Hodges, Judge This case involves a lease dispute between a landlord, Hamilton Mill Theatre Development, LLC ("Landlord") and its tenant, Regal Cinemas, Inc., which arises from the disruption caused to the film industry as a result of the COVID-19 pandemic. The parties disagree as to how much rent is owed to Landlord pursuant to the lease agreement between them. Landlord sued Regal claiming an underpayment of rent both before and during the pandemic.¹ The parties filed cross-motions for summary judgment, and the trial court granted Regal's motion and denied Landlord's motion, concluding that Regal did not underpay rent to Landlord. We agree, and affirm the trial court.

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." OCGA § 9–11–56 (c). Thus, to prevail on a motion for summary judgment, the moving party must demonstrate that there is no genuine issue of material fact, so that the party is entitled to judgment as a matter of law[.] A defendant may do this by either presenting evidence negating an essential element of the plaintiff's claims or establishing from the record an absence of evidence to support such claims. Thus, the rule with regard to summary judgment is that a defendant who will not bear the burden of proof at trial need not affirmatively disprove the nonmoving party's case, but may point out by reference to the evidence in the record that there is an absence of evidence to support any essential element of the nonmoving party's case. Where a defendant moving for summary judgment discharges this burden, the nonmoving party cannot rest on its pleadings, but rather must point to specific evidence giving rise to a triable issue. Summary judgments enjoy no presumption of correctness on appeal, and an appellate court must satisfy itself de novo that the requirements of OCGA § 9–11–56 (c) have been met. In our de novo review of the grant of a motion for summary judgment, we must view the evidence, and all reasonable inferences drawn therefrom, in the light most favorable to the nonmovant.

(Citations and punctuation omitted.) Cowart v. Widener , 287 Ga. 622, 623-624 (1) (a), 697 S.E.2d 779 (2010).

So viewed, the record demonstrates that Landlord and Regal's predecessor entered a lease agreement in 2007. The lease provides that "[t]he Demised Premises is undeveloped on the Effective Date of this Lease but Landlord shall cause a theatre building containing approximately 51,533 square feet of Floor Area (defined below) ("Theatre Building" ) and related improvements to be developed and constructed on the Demised Premises ...." Under this lease, Regal paid Landlord rent based upon certain earnings. Specifically, the lease provides that:

[Regal] agrees to pay "Rent" on a monthly basis to the Landlord in lawful money of the United States in the amount of fifteen percent (15%) of the total of (i) [Regal's] "Gross Box Office Receipts: and (ii) [Regal's] "Concession Receipts" during the Lease Term .... [Regal] shall furnish to Landlord along with the Rent payment for each month, a statement itemizing in reasonable detail all Gross Box Office Receipts and Concession Receipts ....

The lease defines "Gross Box Office Receipts" as "the aggregate gross box office receipts from the sale or issuance of theatre tickets for the admission to the theatres for viewing of motion pictures or other forms of entertainment." "Concession Receipts" is defined as

the aggregate receipts from the sale of candies, popcorn, soft drinks, confections, and any other food and drink items, records, books, magazines, toys, novelties, video tapes, video disks, audio games, T-shirts and similar items, screen advertising, receipts from video games and any and all other merchandise sold in the Theatre Building or otherwise in the Demised Premises.

The lease contains a limitation on the business operations of Regal. It states that "[s]ubject to the provisions of this Lease, the Demised Premises shall only be used for the following ("Permitted Use") : the conduct of a fourteen (14) screen motion picture theatre for the presentation of first run motion pictures and providing a first class family operation (but not for operation of a ‘dollar’ or ‘discount’ theatre) ...." The parties agree that presentation of first run motion pictures means newly released blockbuster movies. The lease further provides that

[Regal] covenants, at its sole cost and expense, at all times during the Lease Term ... [t]o use the Demised Premises only for the Permitted Use as set forth above and for no other purpose; to operate its business in the Demised Premises for the display on all fourteen (14) screens in the Theatre Building of first run movies and providing a first class family operation; and to conduct its business at all times in a high grade and reputable manner so as to produce the maximum volume of Gross Box Office Receipts and Concession Receipts[.]

Despite the above language, the lease does provide for certain contingencies.

[Regal] shall continuously operate the Demised Premises for the Permitted Use during the Lease Term .... If at any time after the expiration of the tenth (10th) full lease Year of continuous operation of the Demised Premises for the Permitted Use ... [Regal] desires to cease operating the Demised Premises ... and to "go dark" or to change the Permitted Use, then, provided [Regal's] desire is based upon material adverse changes in the financial performance of the first run movie theatre operated by [Regal] on the Demised Premises and [Regal] provides reasonably satisfactory evidence thereof to Landlord, [Regal] shall be entitled to "go dark" or, if authorized under this Lease, to change the Permitted Use by giving Landlord written notice of [Regal's] election. Notwithstanding the foregoing, [Regal] shall not be entitled to "go dark" or, if authorized under this Lease, to change the Permitted Use until the Market Base Rent Rate (defined below) has been determined in accordance with the procedure set forth below, and [Regal] gives Landlord prior written notice of the month during which [Regal] will commence paying the Fixed Base Rent (defined below) ... [Regal] shall be entitled to "go dark" on the first (1st) day of the month during which [Regal] commences paying such Fixed Base Rent. Because the Rent due under this Lease is Percentage Rent and Landlord will not receive any Percentage Rent for any months during which the Demised Premises is not being operated for the Permitted Use, [Regal] acknowledges and agrees that [Regal] shall not be entitled to "go dark" for any period of time after [Regal's] election but prior to establishing the Market Base Rent Rate and commencing to pay the Fixed Base Rent as provided herein..... If [Regal] gives Landlord notice of [Regal's] desire to establish the Market Base Rent Rate in order to "go dark" or, if authorized under this Lease, to change the Permitted Use, then at any time thereafter Landlord shall be entitled to terminate this Lease and reclaim possession of the Demised Premises ... by not less than thirty (30) days prior written notice to [Regal]. If Landlord does not elect to terminate this Lease and reclaim possession of the Demised Premises within such thirty (30) day period, [Regal] shall be entitled, at its election, to "go dark" or, if authorized under this Lease, to change the Permitted Use. ...

The lease does not define the term "go dark." It does, however, define "Market Base Rent Rate," which is

Landlord's reasonable determination of the base rental rate per rentable square foot then being charged for first class retail space of comparable size within a ten (10) mile radius of the Demised Premises, excluding the Mall of Georgia ("Market Area"). Landlord shall provide written notice of the Market Base Rent Rate reasonably determined by Landlord not less than twenty (20) days after [Regal] gives Landlord written notice of [Regal's] desire to "go dark."

Once Market Based Rent has been established, that rate is multiplied by the square footage of the property to establish the Fixed Base Rent.

The lease also contains a force majeure clause, which provides that

[i]f either party to this Lease, as the result of any (i) strikes, lockouts or labor disputes, (ii) inability to obtain labor or materials or reasonable substitutes therefor, (iii) acts of God, governmental action, condemnation, civil commotion, fire or other casualty, or (iv) other conditions similar to those enumerated in this Section beyond the reasonable control of the party obligated to perform (other than the failure to timely pay monies required to be paid under this Lease), fails punctually to perform any obligation on its part to be performed under this Lease, than such failure shall be a "Force Majeure" event and shall be excused and not be a breach of this Lease by the party in question, but only to the extent occasioned by such event; and for the period for the commencement and completion thereof shall be extended for a period equal to such delay.

The dispute here first arose at the beginning of the COVID-19 pandemic. In late March 2020, Regal sent a letter to all of its landlords nationwide informing them that all of its theatre operations were being ceased due to the pandemic and that it was uncertain when operations could resume. It requested that landlords contact it to discuss "working together to address the challenges we face." In May of 2020, after the governor lifted the stay-at-home order in Georgia which shuttered...