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Beverage Warehouse Inc. v. Central Station (Ky), LLC

United States District Court, W.D. Kentucky, Louisville Division

March 26, 2019

BEVERAGE WAREHOUSE, INC., ET AL. Plaintiffs
v.
CENTRAL STATION (KY), LLC, ET AL. Defendants

          MEMORANDUM OPINION AND ORDER

          REBECCA GRADY JENNINGS DISTRICT JUDGE

         Plaintiffs Beverage Warehouse, Inc. and Gregory Anastas brought this action against Defendants Central Station (KY), LLC, (“Central Station”) and The Kroger Company (“Kroger”) seeking relief for violations of state law. [DE 1-1, Compl.]. Defendants removed the case to this Court on diversity of citizenship jurisdiction. [DE 1]. Beverage Warehouse moved for a permanent injunction. [DE 20]. Timely responses and replies were filed. [DE 27; DE 28]. Defendants then moved for Summary Judgment. [DE 26]. Plaintiffs responded [DE 29], and Defendants replied [DE 31]. These matters are ripe for judgment. For the reasons below, the Court DENIES Plaintiffs' Motion for Permanent Injunction [DE 20]; and GRANTS Defendants' Motion for Summary Judgment [DE 26].

         BACKGROUND

         In 2006, Beverage Warehouse entered a lease agreement (“Retail Lease Agreement”) with Central Retail, LLC for retail space in a Louisville, Kentucky shopping center (“Shopping Center”). Defendant Central Station is the successor in interest to Central Retail. [DE 1-1 at ¶¶ 6-7]. Under the lease, Beverage Warehouse has a right to use the retail space to sell packaged liquor. Id. at ¶ 8. The Retail Lease Agreement also includes a restrictive covenant barring Central Station from leasing other portions of the Shopping Center to tenants whose primary business is the sale of packaged liquor, except for tenants existing at the time of execution of the Retail Lease Agreement. Id. at ¶ 9.

         The Retail Lease Agreement also includes a provision for common area maintenance (“CAM”) fees. [DE 26-1 at 528]. It states that Central Station would “proportionately allocate all Common Area Maintenance between the Anchor [Kroger] and Minor Tenants [Beverage Warehouse] based on leasable square feet.” Id. (quoting DE 26-8 at 5). At some point after execution of the lease, Central Station “indicated to Beverage Warehouse that its share of the common area maintenance was going to increase because the unimproved [space in the Shopping Center] was no longer going to be improved and/or leased, thus lowering the total square footage of the shopping center and increasing each tenant's respective share of the CAM.” [DE 1-1 at ¶ 11]. Beverage Warehouse paid the additional CAM charges based on Central Station's representations. Id.

         In early 2017, Beverage Warehouse discovered that Kroger intended to build and operate a Wine and Spirits Shop in the Shopping Center. Id. at ¶ 12. Shortly thereafter, Beverage Warehouse notified Central Station and Kroger that this action would violate the restrictive covenant of the Retail Lease Agreement. Id. at ¶ 13. In response, Central Station acknowledged that Kroger intended to build the Wine and Spirits Shop and claimed that the shop would not violate the terms of Beverage Warehouse's lease. Id.

         Beverage Warehouse filed a Complaint against Kroger and Central Station alleging breach of contract, misrepresentation, and tortious interference with contractual interests. [DE 1-1]. Defendants removed the case to federal court on diversity of citizenship jurisdiction [DE 1], Beverage Warehouse moved to enjoin Kroger permanently from opening its Wine and Spirits Shop. [DE 20]. Defendants then moved for Summary Judgment. [DE 26].

         DISCUSSION

         A. Motion for Permanent Injunction [DE 20]

         I. Legal Standard

         Beverage Warehouse seeks to permanently enjoin Kroger from operating the Wine and Spirits Shop within the Shopping Center. [DE 20-1 at 141]. A permanent injunction is “an extraordinary remedy and will not be granted except upon a clear showing of an existing equitable right.” Oscar v. Ewing, Inc. v. Melton, 309 S.W.2d 760, 761 (Ky. 1958). While Kentucky case law on permanent injunctions is scarce, courts have established that a plaintiff is entitled to a temporary injunction if (1) there is a substantial probability that the movant will ultimately prevail on the merits of the case; (2) the movant's remedy will be irreparably impaired without the extraordinary relief; and (3) that an injunction will not be inequitable, i.e., will not unduly harm other parties or disserve the public. Price v. Paintsville Tourism Comm'n, 261 S.W.3d 482, 484 (Ky. 2008). The United States Supreme Court has noted that the “the standard for a preliminary injunction is essentially the same as for a permanent injunction.” Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531, 546 n.12 (1987). But while a temporary injunction requires that the plaintiff “show a likelihood of success on the merits, ” a plaintiff seeking a permanent injunction must show that they will succeed on the merits of their case. Am. Civil Liberties Union of Ky. v. McCreary Cty., 607 F.3d 439, 445 (6th Cir. 2010). The plaintiff bears a higher burden because a permanent injunction “is necessarily granted by a final judgement which ultimately disposes of the action.” Permanent Injunctions, 5 Ky. Prac. Methods of Prac. § 40:4; see also Ky. R. Civ. P. 65.01.

         Here, Beverage Warehouse seeks “a dipositive determination on the contractual dispute as well as the relief of permanent injunction.” [DE 28 at 742]. The Kentucky Supreme Court has cautioned that “a permanent injunction should be granted by means of summary judgment only in those cases where the showing [of an existing equitable right] is very clear and convincing.” LaVielle v. Seay, 412 S.W.2d 587, 591 (Ky. 1966).

         II. Actual Success on the Merits

         Beverage Warehouse has the burden to prove that Central Station will violate the restrictive covenant of the Retail Lease Agreement by allowing Kroger to open its Wine and Spirits Shop. As Beverage Warehouse cannot show a violation of its ...


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