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Fayette Middle Anchor, LLC v. Kinnucan Enterprises, Inc.

United States District Court, E.D. Kentucky, Central Division, Lexington

December 6, 2019

FAYETTE MIDDLE ANCHOR, LLC, agent of CBL & ASSOCIATES MANAGEMENT, INC., Plaintiff,
v.
KINNUCAN ENTERPRISES, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Joseph M. Hood, Senior U.S. District Judge.

         This matter comes before the Court on Plaintiff Fayette Middle Anchor, LLC's (“Middle Anchor”) Motion for Summary Judgment [DE 11]. Having considered the matter fully, and being otherwise sufficiently advised, Middle Anchor's Motion for Summary Judgment [DE 11] will be granted in part, insofar as it pertains to Kinnucan Enterprises, Inc. (“Kinnucan”) breaching the Shopping Center Lease Agreement (“Lease”), Middle Anchor's request for damages pertaining to unpaid rent and related charges for rental payments that have become due, and Middle Anchor's request for attorneys' fees. However, Middle Anchor's Motion [DE 11] will be denied in part, insofar as it requests damages for unpaid rental payments that have yet to become due and costs and expenses related to Kinnucan's breach. Furthermore, the Court will direct the Parties to provide further briefing pertaining to the damages in this matter.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         The facts in this case are undisputed. On November 10, 2015, Kinnucan agreed to lease certain premises in Fayette Mall from Middle Anchor, the landlord, for a period of ten (10) years. [DE 1-1, 2; DE 11-1]. Kinnucan failed to pay rent and the associated late charges and interest under the terms of the Lease for the month of December 2018. [DE 1-1, at 4; DE 11, at 3]. On December 21, 2018, Middle Anchor sent Kinnucan a Notice of Default NonPayment (“December Notice”) [DE 11-3] informing Kinnucan of its failure to pay rent for the month of December 2018. Id. On January 8, 2019, Kinnucan abandoned the leased premises. Id. On January 10, 2019, Middle Anchor sent Kinnucan another Notice of Default Non-Payment (“January Notice”) [DE 11-4] detailing Kinnucan's missed rental payments for both December 2018 and January 2019 and the associated late charges and interest. Id. Kinnucan failed to cure its defaults under the Lease. Id.

         On August 23, 2019, Middle Anchor moved for summary judgment, requesting the Court find Kinnucan breached the lease and award Middle Anchor damages of $3, 211, 547.43 for rent and $5, 967.50 in attorneys' fees and costs associated with this action. [DE 11]. In response, Kinnucan does not dispute that the Lease is a binding enforceable contract or that it breached the Lease. [DE 14]. However, Kinnucan contends that a genuine issue of material fact exists regarding the amount of damages. Id.

         II. STANDARD OF REVIEW

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A genuine dispute exists on a material fact, and thus summary judgment is improper, if the evidence shows ‘that a reasonable jury could return a verdict for the nonmoving party.'” Olinger v. Corporation of the President of the Church, 521 F.Supp.2d 577, 582 (E.D. Ky. 2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). Stated another way, “[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. “The central issue is ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Pennington, 553 F.3d at 450 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

         The moving party has the initial burden of demonstrating the basis for its motion and identifying those parts of the record that establish the absence of a genuine issue of material fact. Chao v. Hall Holding Co., Inc., 285 F.3d 415, 424 (6th Cir. 2002). The movant may satisfy its burden by showing “that there is an absence of evidence to support the non-moving party's case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the movant has satisfied this burden, the non-moving party must go beyond the pleadings and come forward with specific facts demonstrating the existence of a genuine issue for trial. Fed.R.Civ.P. 56; Hall Holding, 285 F.3d at 424 (citing Celotex, 477 U.S. at 324). Moreover, “the nonmoving party must do more than show there is some metaphysical doubt as to the material fact. It must present significant probative evidence in support of its opposition to the motion for summary judgment.” Hall Holding, 285 F.3d at 424 (internal citations omitted).

         The Court “must construe the evidence and draw all reasonable inferences in favor of the nonmoving party.” Pennington v. State Farm Mut. Automobile Ins. Co., 553 F.3d 447, 450 (6th Cir. 2009) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). However, the Court is under no duty to “search the entire record to establish that it is bereft of a genuine issue of material fact.” In re Morris, 260 F.3d 654, 655 (6th Cir. 2001). Rather, “the nonmoving party has an affirmative duty to direct the court's attention to those specific portions of the record upon which it seeks to rely to create a genuine issue of material fact.” Id.

         III. DISCUSSION

         Kinnucan does not dispute that it breached the Lease, so the Court will find Middle Anchor is entitled to summary judgment on this issue without further discussion. On the other hand, the issues involving damages are not so easily determined.

         A. DAMAGES FOR RENT

         Instead of solely seeking Kinnucan's missed rental payments and related charges, Middle Anchor also wishes to be compensated for accelerated rent and related charges from the time of the default, December 2018, to the end of the lease term, April 30, 2026. [DE 11, at 6; DE 11-5]. While the Court agrees Middle Anchor is entitled to damages for unpaid rent and related charges, for the reasons stated below, the Court is not persuaded to grant Middle Anchor the full $3, 211, 547.43 it requests.

         In Kentucky, “the measure of damages for breach of contract is ‘that sum which will put the injured party into the same position he would have been in had the contract been performed.'” Hogan v. Long, 922 S.W.2d 368, 371 (Ky. 1995) (quoting Perkins Motors, Inc. v. Autotruck Federal Credit Union, 607 S.W.2d 429, 430 (Ky. Ct. App. 1980)).

         Here, Middle Anchor claims it “is entitled to recover [$3, 211, 547.43], as it will place Middle Anchor in the position in which it would have been had Kinnucan not breached the Lease.” [DE 11, at 6]. Kinnucan correctly asserts the Lease requires Middle Anchor to “‘use reasonable efforts to relet the Leased Premises . . ., '” [DE 14, at 2 (emphasis omitted) (quoting [DE 11-1])], and “[t]his is consistent with Kentucky law which requires a landlord to mitigate damages when a tenant breaches a lease, ” [DE 14, at 2 (citing Dulworth v. Hyman, 246 S.W.2d 993, 996 (Ky. 1952); Deskins v. Estep, 314 S.W.3d 300, 305 (Ky. Ct. App. 2010); Morgan v. Scott, 291 S.W.3d 622, 640 (Ky. 2009))]; see also Fifth Third Bank v. Waxman, 726 F.Supp.2d 742, 750 (E.D. Ky. 2010) (citing Smith v. Ward, 256 S.W.2d 385, 388 (Ky. 1953); Davis v. Fischer Single Family Homes, Ltd., 231 S.W.3d 767, 780 (Ky. Ct. App. 2007) (“Under Kentucky law, non-breaching parties are required to take reasonable efforts to mitigate their damages.”)). “[I]t is well established that the ‘duty to mitigate is not absolute; recovery is diminished only to the extent that the plaintiff fails to mitigate the damages as they would be mitigated by an ordinary, reasonable person under similar circumstances.'” Waxman, 726 F.Supp.2d at 750-51 (quoting Morgan, 291 S.W.3d at 641 n.49). “It is well-settled that the party claiming a failure to mitigate has the burden of proof on that issue.” Alliant Tax Credit Fund 31-A, Ltd. V. Murphy, 494 Fed.Appx. 561, 572-73 (6th Cir. 2012) (citing Waxman, 726 F.Supp.2d at 751).

         In the present case, Middle Anchor insists, “Despite its diligent efforts to do so, Middle Anchor has been unable to successfully locate a new tenant for the Premises, and therefore, is not receiving any rental payments.” [DE 11, at 6]. Kinnucan contends, “Whether Middle Anchor has used ‘reasonable efforts' to relet the premises, and thereby mitigated its damages, is a question of fact, not law.” [DE 14, at 3 (citing Nohr v. Hall's Rentals, LLC, No. 2011-CA-000646-MR, 2013 WL 462004 (Ky. Ct. App. Feb. 8, 2013))]. While the question of whether a plaintiff has used reasonable efforts to mitigate their damages can, and often does, present factual issues, Kinnucan has failed to satisfy its burden of proof by presenting evidence of reasonable efforts Middle Anchor should have used to mitigate its damages. See Waxman, 726 F.Supp.2d at 751 (finding that since the defendants failed to present evidence of reasonable efforts the plaintiff should have taken to mitigate damages, a jury could not reasonably determine the plaintiff failed to use reasonable efforts to mitigate); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986) (“[T]he [nonmoving party] must present affirmative evidence in order to defeat a properly supported motion for summary judgment.”).

         Instead of presenting evidence of Middle Anchor's alleged failure to use reasonable efforts to mitigate its damages, Kinnucan asserts, “Testimony from factual witnesses and expert real estate agents on the leasing opportunities for the premises, the anticipated period of time for re-leasing the premises and the expected rent amount to be received are all factual issues that need to be presented and resolved . . . .” [DE 14, at 3]. Not only has Kinnucan failed to present any evidence to support this conclusory statement, Kinnucan did not respond to Middle Anchor's Interrogatory No. 9 asking Kinnucan to describe the factual basis for its assertion that Middle Anchor failed to mitigate its damages. [DE 15, at 4 n.3 (citing [DE 15-1, at 10])]. Also, when the Parties submitted their March 27, 2019 Joint Rule 26 Report [DE 8], they stated that they did not “anticipate that the use of experts will be necessary in this case.” [DE 8, at 3]. A conclusory statement, such as Kinnucan's assertion, without some supporting evidence, cannot create a genuine issue of material fact sufficient to defeat summary judgment. Alexander v. CareSource, 576 F.3d 551, 560 (6th Cir. 2009) (citing Lewis v. Philip Morris Inc., 355 F.3d 515, 533 (6th Cir. 2004); Doren v. Battle Creek Health System, 187 F.3d 595, 598-599 (6th Cir. 1999) (“Conclusory statements unadorned with supporting facts are insufficient to establish a factual dispute that will defeat summary judgment.”)).

         Although Middle Anchor is entitled to summary judgment on damages for rent, and Middle Anchor's alleged failure to use reasonable efforts to mitigate does not create a genuine issue of material fact, Middle Anchor is not entitled to the $3, 211, 547.43 it seeks. Since Kinnucan failed to support its mitigation of damages argument with facts, the Court will grant Middle Anchor's Motion for Summary Judgment [DE 11], insofar as it pertains to Middle Anchor's request for damages for unpaid rent from the time of default in December 2018 to the date of this order. However, as Kinnucan correctly asserts, “Middle Anchor is seeking not only past due rent and related charges, but also accelerated rent and related charges through the remainder of the lease term which does not end until April 30, 2026.” [DE 14, at 2]. In relevant part, Section 11.2 of the Lease states the following:

The exercise by Landlord of any right granted in this Section shall not relieve Tenant from the obligation to make all rental payments, and to fulfill all other covenants required by this Lease, at the time and in the manner provided herein, and, if Landlord so desires, all current and that portion of future rent and other monetary obligations due hereunder which exceeds the fair market value of such rent and charges shall become immediately due and payable. Tenant throughout the remaining Term hereof shall pay Landlord, no later than the last day of each month during the Term, the then current excess, if any, of the sum of the unpaid rentals and costs to Landlord ...

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