L.P. v. Developers Diversified Realty Corp..

715 F.Supp.2d 871

BEST BUY STORES, L.P., Plaintiff,

v.DEVELOPERS DIVERSIFIED REALTY CORPORATION, Benderson-Wainberg Associates, LP, DDR MDT Cool Springs Point LLC, DDRA Ahwatukee Foothills, LLC, DDR Flatiron LLC, DDRA Community Centers Four, LP, DDR MDT Lakepointe Crossing, LP, DDR MDT Great Northern, LLC, DDR MDT Shoppers World, LLC, DDR MDT Riverdale Village Outer Ring, LLC, DDR Hendon Nassau Park II, LP, DDRC PDK Salisbury LLC, DDR MDT Fayetteville Spring Creek, LLC, DDR MDT Turner Hill Marketplace, LLC, JDN Realty Corporation, JDN Development Company, Inc., BG Boulevard III, LLC and John Doe # 1, Defendants.

Civil No. 05-2310 (DSD/JJG).

United States District Court,D. Minnesota.

May 25, 2010.

Thomas C. Mahlum, Esq., Joel A. Mintzer, Esq. and Robins, Kaplan, Miller & Ciresi, Minneapolis, MN, and Robert A. Machson, Esq., Weston, CT, counsel for plaintiff.

James L. DeFeo, Esq., Jennifer A. Fleming, Esq., Steven S. Kaufman, Esq., Thomas L. Feher, Esq. and Thompson Hine, LLP., Cleveland OH; Marc J. Zwillinger, Esq., Washington, D.C. and D. Charles Macdonald, Esq., Martin S. Chester, Esq. and Faegre & Benson, Minneapolis, MN, counsel for defendants.

ORDER

DAVID S. DOTY, District Judge.

This matter is before the court upon the motion of plaintiff Best Buy Stores, L.P. (“Best Buy”) for voluntary dismissal without prejudice and entry of judgment. Based upon a review of the file, record and proceedings herein, and for the following reasons, the court grants Best Buy's motion in part.

BACKGROUND

This damages dispute arises following the court's grant of summary judgment in favor of Best Buy against defendants Developers Diversified Realty Corporation (“DDRC”) and fourteen owners of shopping centers (the “landlord defendants”) ¹ (collectively, “Defendants”). The underlying commercial landlord-tenant dispute concerned leases between the landlord defendants and Best Buy. ² With minor variation, each lease agreement required the landlord defendant to obtain property and liability insurance for the common areas of the shopping center and allowed the landlord defendant to charge Best Buy its pro rata share of the cost of that insurance. ( See Mintzer Decl. [Doc. No. 655] Exs. 1 arts. 9(F), 9(H); 2 art. 22.2; 3 art. 22.6; 4 art. 22.2; 5 art. 22.2; 6 arts. 4, 19; 7 art. 22.2; 8 art. 22.2; 9 art. 23.2; 10 art. 22.2; 11 art. 22.2; 12 art. 12.7; 13 art. 13(A); 14 art. 23(b); 15 art. 22.2.)

DDRC owned the landlord defendants and managed the properties. As property manager, DDRC procured blanket insurance policies with high deductibles-typically $100,000-from third-party commercial insurance companies, and then charged the landlord defendants a pro rata share of that coverage. As a result, DDRC was responsible for losses below the deductible, and it also charged the landlord defendants for retaining that risk (the “first-dollar and captive-coverage programs”). ³ The landlord defendants in turn charged Best Buy its pro rata share of the cost of the insurance and first-dollar and captive-coverage programs. On September 30, 2005, Best Buy began this action against DDRC and two landlords. Following several amended complaints, the action included claims of breach of contract, breach of fiduciary duty and fraud and a request for a declaratory judgment against the present Defendants. ( See Fifth Am. Compl. [Doc. No. 357].)

On July 14, 2009, 636 F.Supp.2d 869 (D.Minn.2009), the court granted Best Buy's motion for summary judgment on its breach of contract and declaratory judgment claims. The court determined that the sole issue for summary judgment was “whether Best Buy was properly charged under the lease agreements for the first-dollar and captive premiums.” (Order, 636 F.Supp.2d at 878.) The court found that “the first dollar program and captive coverage were not commercial insurance policies” and that Defendants breached the lease agreements by charging Best Buy for the first-dollar and captive-coverage programs. ( See id. at 880; see also id. at 880-81, 881-83, 883-85.) Accordingly, the court determined that “under the plain meaning of the agreement[s], Best Buy is responsible solely for its share of the actual insurance that the lease agreement[s] required [the landlord defendants] to maintain.” ( Id. at 880; see also id. at 880, 881-82, 883, 884.) Thereafter, the parties failed to resolve the value of damages. Best Buy brought the instant motion seeking voluntary dismissal and entry of judgment for damages and interest, additional damages for lease years after 2005 and a declaration that future insurance should be “commercially reasonable.” The court now considers Best Buy's motion.

DISCUSSION

I. Dismissal of Claims

Best Buy seeks dismissal of its fraud claims and all claims that accrued before April 11, 2000. A plaintiff may only dismiss claims after a motion for summary judgment upon stipulation by the parties or by court order on terms the court considers proper. Fed.R.Civ.P. 41(a)(1)(A)(ii), (a)(2). The primary purpose of Rule 41(a)(2) is to prevent voluntary dismissals that unfairly affect defendants. See Paulucci v. City of Duluth, 826 F.2d 780, 782 (8th Cir.1987). The court assesses fairness to the defendant by considering:

(1) the defendant's effort and the expense involved in preparing for trial, (2) excessive delay and lack of diligence on the part of the plaintiff in prosecuting the action, (3) insufficient explanation of the need to take a dismissal, and (4) the fact that a motion for summary judgment has been filed by the defendant.

Id. at 783.

Best Buy argues that it has neither delayed prosecution of the action, nor is it attempting to avoid a summary judgment motion by Defendants. Defendants argue that they have spent significant time and money defending against Best Buy's claims, and urge the court either to dismiss the claims with prejudice or award costs and fees. This breach of contract action began in 2005, and the court finds that Defendants' years of effort and expense requires dismissing Best Buy's claims with prejudice at this stage. Therefore, the court grants in part Best Buy's motion to dismiss its remaining claims, and dismisses those claims with prejudice.

II. Entry of Judgment

Best Buy argues that it is entitled to damages ⁴ in the amount it paid for the first-dollar and captive-coverage programs:

( See Second Mintzer Decl. Ex. E at E-2.) ⁵ Defendants argue that Best Buy's motion is untimely, and that material issues of fact remain over the value of damages.

A. Timeliness of Motion

Defendants first argue that the instant motion is an untimely summary judgment motion in violation of the court's December 11, 2008, scheduling order. According to Defendants, the July 14, 2009, order only addressed liability, not damages. Best Buy counters that no fact issues remain and that entry of judgment under Rule 58 of the Federal Rules of Civil Procedure is proper following summary judgment. The court agrees that entry of judgment is proper, and addresses Defendants' arguments about disputed facts below.

B. Damages

As an initial matter, the court must determine which state's law applies to the issue of damages for breach of the lease agreements. In diversity cases, the court applies the forum state's conflict-of-laws analysis to questions of substantive law. Schwan's Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 595-96 (8th Cir.2007). Minnesota courts first “determine that a conflict exists between the laws” of different states relevant to the issue. Nodak Mut. Ins. Co. v. Am. Family Mut. Ins. Co., 604 N.W.2d 91, 93-94 (Minn.2000) (citation omitted). “A conflict exists if the choice of one forum's law over the other will determine the outcome of the case.” Id. at 94.

Minnesota measures damages for breach of contract as the amount that will place Best Buy in the same position as if Defendants had complied with the contracts. See Logan v. Norwest Bank Minn., N.A., 603 N.W.2d 659, 663 (Minn.Ct.App.1999). Defendants agree that the other potentially applicable states' law uses the same standard. ⁶ Therefore, no outcome-determinative difference exists, and the court applies Minnesota law to the issue of contractual damages. See Davis by Davis v. Outboard Marine Corp. 415 N.W.2d 719, 723 (Minn.Ct.App.1987) (applying forum law absent actual conflict of laws).

Defendants first argue that the amount that Best Buy expected to pay for insurance is in dispute. In support. Defendants state that Best Buy required “100% assurance ... at a commercially reasonable rate” for claims related to the common areas of the shopping centers. (Defs.' Reply [Doc. No. 709] 6.) Accordingly, Defendants argue that Best Buy expected that it would pay for the first-dollar and captive-coverage programs in order to be fully insured. In response, Best Buy argues that it never expected to pay for these programs. Rather, Best Buy asserts that the integrated, final lease agreements represent the intent of the parties, and that the agreements do not cover payment for the first-dollar and captive-coverage programs.

In granting summary judgment, the court determined that the lease agreements unambiguously contemplated only commercial insurance. ( See, e.g., Order, 636 F.Supp.2d at 881, 882.) While the lease agreements allowed the landlord defendants to charge Best Buy for insurance, the lease agreements did not include the first-dollar or captive-coverage programs, and the court has determined that these programs are not insurance. ( See id. at 880, 881-83, 883-84, 884-85.) Therefore, the lease agreements did not authorize the landlord defendants to charge Best Buy for the first-dollar and captive-coverage programs. Where a contract is unambiguous, the court will not consider extrinsic evidence of intent. See Hous. & Redevelopment Auth. of Chisholm v. Norman, 696 N.W.2d 329, 337 (Minn.2005). Therefore, based on the unambiguous language of the lease agreements, Defendants' argument fails.

Defendants next argue that they...