United States District Court, N.D. West Virginia, Martinsburg
MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S
MOTION FOR SUMMARY JUDGMENT
M. GROH, CHIEF UNITED STATES DISTRICT JUDGE
pending before the Court is the Plaintiff's Motion for
Summary Judgment [ECF No. 154], the Defendant's Motion
for Summary Judgment [ECF No. 162], and both parties'
responses and replies to the respective motions. ECF No. 196,
194, 231 and 230. For the reasons stated herein, the
Plaintiff's motion for summary judgment [ECF No. 154] is
GRANTED on all issues.
Plaintiff in this case, Orgill, Inc. (“Orgill”),
is a company engaged in the wholesale distribution of
hardware home improvement products. ECF No. 154-2 at 14. In
1999, Orgill built a distribution center on real property
located at 4925 Tabler Station Road, in Inwood, West Virginia
(“Inwood Facility”). ECF No 162-5 at 1-2. Orgill
subsequently sold that property in a
“sale-leaseback” transaction to a California
based entity, Sierra Crest Equities, LLC. ECF No. 154-2 at
28. Between 2004 and 2005, the Defendant, Distribution
Centers of America (“DW”), began looking for
financing to purchase the Inwood Facility. ECF No. 162-5 at
3. Ultimately, DW obtained a mortgage loan through Eurohypo
Bank (“Eurohypo Loan”), and on April 21, 2005, DW
acquired the Inwood Facility. Id. Pursuant to the
sale and the lender's requirements, DW entered into an
Amended and Restated Lease Agreement (“Amended
Lease”) with Orgill. Id. The lease is dated
April 15, 2005. Id. DW became the landlord under the
new lease. Id.
parties operated under this lease without issue until May
2015, at which time, Orgill's base rent declined from
$195, 341 to $178, 898 per month, and DW began collecting
“management fees, ” as “Additional
Rent” under the lease agreement. ECF No. 154-2 at 119.
Orgill agreed to make the additional rent payments for the
remainder of the year, in return for an amendment to the
lease specifying the nature and extent of permissible
“additional rent” charges going forward. ECF No.
154-4 at 133-36.
in April 2016, DW renewed its demands for additional rent
dating back to 2014 and continuing forward. Id. At
that point, Orgill declined to pay and instituted the action
before the Court seeking declaratory relief. Id. In
its answer, DW alleged several counterclaims against Orgill
for breach of contract. ECF No. 11 at 11.
Standard of Review
judgment as to a given subject is appropriate under Federal
Rule of Civil Procedure 56 when there is no genuine issue as
to any material fact and the moving party is thus entitled to
judgment in its favor as a matter of law. Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986). A genuine issue of
fact exists “if the evidence is such that a reasonable
jury could return a verdict for the non-moving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). Therefore, the Court must conduct “the
threshold inquiry of determining whether there is the need
for a trial-whether, in other words, there are any genuine
factual issues that properly can be resolved only by a finder
of fact because they may reasonably be resolved in favor of
either party.” Id. at 250.
party opposing summary judgment “must do more than
simply show that there is some metaphysical doubt as to the
material facts.” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986). That is,
once the movant has met its burden to show an absence of
disputed material facts, the party opposing summary judgment
must then come forward with affidavits or other evidence
demonstrating there is a genuine issue for trial.
Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 323-35;
Anderson, 477 U.S. at 248. “If the evidence is
merely colorable, or is not significantly probative, summary
judgment may be granted.” Anderson, 477 U.S.
at 249 (citations omitted).
Amended Lease contains a choice of law provision specifying
that any disputes arising under the lease will be governed by
West Virginia law. ECF No. 162-2 at 50. Under West Virginia
law, a court must determine whether a contract is ambiguous
before it attempts to interpret it. Whether a contract is
ambiguous is a legal determination well suited for summary
judgment. Payne v. Weston, 466 S.E.2d 161, 166 (
W.Va. 1995). A contract is ambiguous if it is
“reasonably susceptible to two different
meanings” or if “reasonable minds might be
uncertain or disagree as to its meaning.” Id.
(citing syl. Pt. 1, in part, Shamblin v. Nationwide Mut.
Ins. Co., 332 S.E.2d 639 ( W.Va. 1985)). Contract
language may also be considered ambiguous if “the
agreement's terms are inconsistent on their face or where
the phraseology can support reasonable differences of opinion
as to the meanings of words employed and obligations
undertaken.” In re Joseph G., 589 S.E.2d 507,
512 ( W.Va. 2003).
at all parts of the document together, if the court finds
that the contract terms are clear and unambiguous, the
contract is “not subject to judicial construction or
interpretation, ” and “the Court will apply, not
interpret, the plain and ordinary meaning.”
Payne, 466 S.E.2d at 166 ( W.Va. 1995). However, if
the court determines that the contract “cannot be given
a certain and definite legal meaning” and “is
therefore ambiguous, ” a question of fact may be
submitted to the jury as to the meaning of the contract.
Id. Specifically, a jury may be called upon to
determine the intent of the parties through extrinsic
evidence. Id. However, if the extrinsic evidence is
not in dispute, “the duty remains with the court to
construe the writing.” Stewart v. Blackwood
Electric Steel Corporation, 130 S.E. 447, 449 ( W.Va.
1925); see also Lee Enterprises, Inc. v. Twentieth
Century-Fox Film Corp., 303 S.E.2d 702 ( W.Va. 1983).
the extrinsic evidence is not in dispute, the court may
interpret the contract using extrinsic evidence to show
“the situation of the parties, the surrounding
circumstances when the writing was made, and the practical
construction given to the contract by the parties themselves
either contemporaneously or subsequently.” Lee
Enterprises, Inc., 303 S.E.2d at 705 (internal citations
omitted). The court may also use proof of usage or custom to
interpret any ambiguity in the contract. Cotiga
Development Co. v. United Fuel Gas Co., 128 S.E.2d 626,
635 ( W.Va. 1962) (internal citations omitted). Ultimately,
the resolution will typically turn on the parties' intent
at the time of contracting. Fraternal Order of Police,
Lodge No. 69 v. City of Fairmont, 468 S.E.2d 712, 716
n.7 ( W.Va. 1996).
are four claims raised in the parties' summary judgment
motions. ECF No. 154 and 162. These include whether Orgill is
liable to DW, under the terms of the lease, for: (1)
additional rent in the form of direct and indirect property
management fees (“Additional Rent”); (2)
litigation expenses related to a lawsuit filed in California
(“Novakovic Litigation”); (3) necessary repairs
to the leased property (“Maintenance and
Repairs”); and (4) failure to give notice of
alterations to the leased property (“Alterations and
Improvements”). Each claim will be discussed in turn.
the parties dispute whether Orgill is liable to DW for direct
and indirect management fees arising under the
“Additional Rent, ” provision of the Amended
Lease. Specifically, DW seeks to pass on to Orgill certain
management fees that it incurs pursuant to its obligations
under its loan. Under the Eurohypo Loan, DW was required to
enter into a management agreement with respect to the Inwood
Facility. ECF No. 160-3 at 39. In accordance with that
obligation, DW entered into a management agreement with DCA
Management Company, LLC (“DCA”). In 2006, DCA
changed its name to Center Investors Group
(“CIG”). ECF No. 154-2 at 102. DW paid DCA and
CIG a management fee of 0.5% of “Gross Monthly Receipts
derived from the operation of the Property, ” and
additional fees if certain metrics were met. ECF No. 162-4 at
1. DW did not pass these fees through to Orgill, stating in
this litigation that, “it just wasn't worth
it.” ECF No. 154-2 at 119-20.
2014, DW refinanced its loan with UBS Real Estate Securities,
Inc. (“UBS Loan”). ECF No. 162-8. Pursuant to the
UBS loan, DW engaged a separate management company, Center
Real Estate Management, LLC (“CR”). ECF No. 162-9
at 5. Under that agreement, DW pays CR a fee equal to 3% of
the gross revenue of the Inwood Facility to directly manage
the Inwood Facility (“direct management fees”).
Id. DW has attempted to pass on these “direct
management fees” from CR since May of 2015.
also engaged the services of The Center Companies, LLC
(“CE”) to provide services for DW including
bookkeeping, financial reports, cash flow management, and
monitoring of insurance claims and requirements. ECF No.
162-5 at 4. Because CE performs services for other DW
affiliates, CE's direct and overhead costs are shared
between all DW affiliates. 162-12 at 23. Since DW generates
approximately 92.5% of all revenue generated among the
affiliates, CE allocates 92.5% of its overhead costs to DW
(“indirect management fees”). DW seeks to pass
through these “indirect management fees” to
argues that the Additional Rent provision does not permit DW
to charge these management fees. Specifically, Orgill argues
that the Additional Rent provision is ambiguous, but that
extrinsic evidence shows management fees are not contemplated
under the provision. DW argues that the provision is
“clear and unambiguous” and accordingly, the
Court should give full effect to the plain meaning intended.
However, if the Court finds that the “Additional
Rent” provision is ambiguous, DW argues in the
alternative that management fees are still recoverable.
to the well-established principles of contract law, the Court
must first determine whether the contract provision at issue
is ambiguous. While DW urges the Court to find that the
contract is not ambiguous, looking at the document as a
whole, it is unclear whether ...