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Foursome Properties, LLC v. Rite Aid of Kentucky, Inc.

Court of Appeals of Kentucky

March 23, 2018

FOURSOME PROPERTIES, LLC; ROWAN RESTAURANTS, LLC; DOWNTOWN BP, LLC; ORVILLE JACK ROE; DIANA ROE; PHILLIP M. TACKETT; ROBERT L. MCGRATH, JR.; AND WILLIAM B. FOUCH APPELLANTS
v.
RITE AID OF KENTUCKY, INC. APPELLEE

          APPEAL FROM ROWAN CIRCUIT COURT HONORABLE BETH LEWIS MAZE, JUDGE ACTION NO. 08-CI-90259

          BRIEFS FOR APPELLANT: M. Benjamin Shields Mt. Sterling, Kentucky

          BRIEF FOR APPELLEE: Karen J. Greenwell Mickey T. Webster Sharon L. Gold Hamid H. Sheikh, Jr. Lexington, Kentucky

          BEFORE: J. LAMBERT, MAZE, AND NICKELL, JUDGES.

          OPINION AFFIRMING

          LAMBERT, J., JUDGE.

         This is an appeal from a declaratory judgment action concerning the exclusivity of a provision in a lease agreement. The Rowan Circuit Court granted judgment in favor of Rite Aid. We affirm.

         This matter has already been before this Court, and we repeat the factual and procedural history laid out therein:

Appellees [appellants herein] sought a declaration of rights regarding an exclusivity provision contained in a commercial lease between Foursome Properties and Rite Aid. Because we conclude the terms of the exclusivity provision are ambiguous, summary judgment was improper. We reverse and remand for additional proceedings.
Orville Jack Roe, Tackett, McGrath, and Fouch are the members of the three business entities named in this action: Foursome Properties, Rowan Restaurants, and Downtown BP. In October 1996, Foursome Properties executed a twenty-year commercial lease with Rite Aid, wherein Rite Aid would operate a pharmacy and retail store in Morehead, Kentucky. The lease named "Foursome Properties, LLC" as the landlord, and McGrath signed the lease on behalf of Foursome Properties. The lease contained the following exclusivity provision:
ARTICLE 9-Exclusive
In the Property and within three (3) miles of the Property, the Landlord shall not, either directly or indirectly, during the term of this Lease and any renewals thereof, lease to or otherwise authorize or permit the operation of any other health and/or beauty aids store or pharmacy or authorize or permit the sale of health and/or beauty aids or prescription drugs by any other parties or entities under the control of Landlord, either directly or indirectly, Landlord further represents to Tenant that it has not heretofore granted the above rights prior hereto nor will it permit the same in any operation within the above area. Except as to the sale of prescription drugs, the provisions of the foregoing paragraph shall not be applicable to the operation of, and sales from, the BP Service Center/convenient type store premises located across U.S. 60/West Main Street from the Premises.
The provisions of the foregoing paragraph shall be a covenant which shall run with the land, and in the event of a breach thereof, Tenant shall be entitled, in addition to any other remedy available to it, to withhold rent, sue for damages, terminate the Lease and/or to obtain injunctive or other equitable relief.
In 2007, Rowan Restaurants negotiated the sale of commercial property it owned near Rite Aid to Rowan Pharmacists, LLC, which planned to open a pharmacy on the site. Also, Orville Jack Roe and his wife, Diana Roe, leased property they owned near Rite Aid to Hogan Development Company for the purpose of operating a Walgreens drug store. Rite Aid sent cease and desist letters to the Appellees, citing the exclusivity provision in the Foursome/Rite Aid lease.
In June 2008, Appellees filed a petition for declaration of rights to determine the parties' rights under Article 9 of the lease. Appellees argued the exclusivity provision applied solely to the actions of Foursome Properties, not its individual members and their related companies. In July 2009, Appellees moved for summary judgment, which the trial court denied. Appellees appealed the court's order denying summary judgment, and this Court dismissed the appeal as interlocutory in November 2009. Thereafter, Rite Aid moved for summary judgment. At a hearing on March 5, 2010, Rite Aid argued the Article 9 language "directly or indirectly" served to broaden the scope of the provision and include Foursome's individual members and their related companies. Rite Aid also opined that the lease included a specific exclusion for one Foursome-related entity, Downtown BP, indicating intent to otherwise bind the members of Foursome and their related companies, except Downtown BP, under Article 9. In contrast, Appellees contended that, although they believed their interpretation of the provision was correct, the court should deny Rite ...

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