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SCP Tuscaloosa LLC v. University House Tuscaloosa LLC

United States District Court, N.D. Alabama, Western Division

April 15, 2019



          L. Scott Coogler United States District Judge

         Before the Court is Defendants University House Tuscaloosa, LLC (“UHT”) and Scion Group, LLC's (“Scion”) (collectively “Defendants”) motion for summary judgment. (Doc. 67.) The motion has been briefed and is ripe for review. For the reasons stated below, Defendants' motion for summary judgment (doc. 67) is due to be GRANTED in PART and DENIED in PART.

         I. Background[1]

         This case arises from an agreement between Plaintiff SCP Tuscaloosa, LLC (“SCP”) and University House Communities Acquisitions, LLC (“UHC”) for the sale of a student housing apartment community known as “South 10” in Tuscaloosa, Alabama. On July 2, 2015, pursuant to a Purchase Sale Agreement (the “PSA”), UHC acquired South 10 from SCP for $56, 625, 000.00. Approximately two months later, UHC assigned its rights and obligations under the PSA to Defendant UHT.

         The PSA provided that “[i]n addition to the Purchase Price [SCP] shall have the right to earn additional compensation” for finding tenants that executed leases for South 10's vacant retail spaces. (See Doc. 69-2 at 10.) According to the terms of the PSA, this agreement was to be memorialized in a separate Earn-Out Agreement. SCP and UHT executed the Earn-Out Agreement on October 1, 2015. Under the Earn-Out Agreement, SCP was entitled to receive compensation for any leases executed with retail tenants at the time of closing as well as for any leases with tenants that were signed within eighteen months of the time of closing (the “Earn-Out Period”). SCP could also receive compensation if, within ninety days after the Earn-Out Period expired, UHT entered into a lease with a tenant that SCP had been actively negotiating with during the Earn-Out Period. Specifically, the Earn-Out Agreement stated:

During the Earn-Out Period, SCP on [UHT's] behalf, shall have the non-exclusive right together with [UHT], its agents and brokers, to market the Vacant Retail Space, and to negotiate and reach preliminary agreement with prospective retail tenants as to the definitive lease terms for new Retail Leases for the Vacant Retail Space . . ., which definitive lease terms must comply [with] the requirements of this Agreement, including, but not limited to, the retail leasing criteria set forth on Exhibit B attached hereto . . . except as approved by [UHT]

(See Doc. 69-4 at 3.) It also required UHT to execute all compliant retail space leases: “[UHT] shall be obligated to enter all Vacant Space Leases that shall comply with the provisions of this Agreement, including, but not limited to, the Retail Leasing Criteria.” (See id.) While the Earn-Out Agreement specified deadlines for certain matters, such as delivery of payment, and stated that “time is of the essence, ” it did not provide a deadline by which UHT had to execute a complying lease forwarded by SCP.

         Any costs of improvement of the retail space, including leasing commissions and locator fees, fell upon SCP up to a certain amount per square-foot. During the Earn-Out Period, SCP incurred approximately $430, 000 in improvement costs after it contracted with Genoa Construction to complete build-out work at South 10.

         In December 2015, a prospective tenant, BOBA, contacted Joe Strauss (“Strauss”), a real estate agent working on behalf of SCP, and expressed interest in leasing space at South 10. BOBA's representatives, two college students, wanted to use the retail space as a small coffee shop. On April 12, 2016, BOBA executed a letter of intent, which stated that it contained the basic terms and conditions upon which UHT would be willing to enter a formal lease with BOBA. The letter of intent included two contingencies: (1) UHT's approval of BOBA and its guarantor's financial statement; and (2) the mutual execution of a lease document. A few days after the execution of the letter of intent, BOBA sent Strauss its financial statement, which consisted of the students' “parents' partial saving deposits from three major banks in China.” (See Doc. 70-3 at 4.)

         On April 22, 2016, SCP sent UHT an email attaching: (1) a standard form lease modified for the South 10 project; (2) the BOBA letter of intent; and (3) a form lease modified to the BOBA letter of intent. (See Doc. 70-4.) Sometime prior to April 27, 2016, Jeff Lohmann, a UHT employee, told SCP's Vice President Charles Welch (“Welch”) that Defendant Scion would need to review these documents.[2] In a May 3rd email with Welch, Lohmann stated that “the lease form you sent is fine.” (See Doc. 70-6 at 2.) On June 21, 2016, Scion entered into a Property Management Agreement with UHT, with respect to South 10. Among Scion's duties under the Property Management Agreement is to “take . . . actions in the name of and on behalf of [UHT] that are customarily within the scope of property management and leasing services for properties of a similar type, size and quality to the Property . . . .” (See Doc. 69-6 at 11.)

         After Lohmann's May 3rd email, SCP continued to negotiate the terms of the lease with BOBA. On June 6, 2016, SCP sent a revised lease to BOBA, which BOBA executed by June 10th. On June 13, 2016, Welch forwarded the revised lease to UHT along with a “redline[] against the original form lease.” (See Doc. 72-1 at 3.) Mitchell Smith (“Smith”), Scion's Chief Operating Officer, contacted Welch on July 15, 2016 and asked that he forward him the BOBA lease so that Scion's counsel could review it. Once it reviewed the BOBA lease, Scion provided SCP with a redlined version of the lease, which included Defendants' revisions and comments, and requested a copy of BOBA's guarantor's financial statements. After some back and forth between Welch and Scion regarding the need to continue to negotiate the terms of the lease, Welch sent Scion's revisions to Strauss and BOBA on August 4, 2016. That same day, Welch provided UHT with U.S. bank statements from BOBA, which indicated that BOBA's owners had around $40, 000 in funds within their personal bank accounts.

         SCP received the revised executed lease from BOBA on August 26, 2016. Welch then mailed the lease to Scion. The lease arrived at Scion on September 9, 2016, but was not discovered by Scion until September 21st because Welch sent the lease in a non-descript white plan tube and FedEx delivered the lease to Smith's office while he was out of town. Once Scion located the revised lease, it contacted SCP and requested a summary of Tuscaloosa's retail market so that it could show its investors how BOBA's lease terms compared to other retail spaces in Tuscaloosa. On October 6, Scion asked for clearer copies of BOBA's financial statements. On October 13, 2016, one of BOBA's founders emailed Strauss to inform him that it was no longer interested in leasing space at South 10. Later that day, Strauss forwarded the email to Welch stating that “[t]his deal took way too long to get any responses.” (See Doc. 73-8 at 2.) Welch, however, did not inform Defendants that BOBA had withdrawn its interest in the lease, and Scion eventually executed the BOBA lease on November 4, 2016.

         During the time SCP and Scion were negotiating the BOBA lease, another SCP real estate agent, Tracy Gatewood (“Gatewood”), was actively searching for potential retail tenants for South 10. On December 2, 2016, Waitr, an online restaurant delivery service, contacted Gatewood about its interest in a potential lease. Welch sent a Waitr letter of intent to Scion on February 17, 2017. On February 22, 2017, Scion emailed Waitr a reply to the letter of intent, which included a cover letter, signed letter of intent, and signed addendum to the letter of intent. One way in which the addendum differed from the letter of intent was that it stated that a general contractor would “perform all Tenant improvements, under a contract between Tenant and the contractor” (See Doc. 74-3 at 7.).

         On March 7, 2017, Waitr informed its retail broker that it had decided to move on from South 10 and look elsewhere for retail space. The reason given for Waitr's withdrawal was that “[w]e don't want to have to hire our own contractors etc.” (See Doc. 74-4 at 3.) However, on March 21, 2017, Waitr sent its retail broker final architectural drawings of the South 10 space, which led Gatewood to believe that negotiations with Waitr were back on track. Moreover, when the Earn-Out Period expired on April 1, 2017, SCP listed Waitr as one of the potential tenants with which it was actively negotiating. But by May 2017 it was apparent to Gatewood and SCP that Waitr would not be leasing space at South 10. Waitr eventually moved its business to Birmingham, Alabama, and as of January 2019, no retail tenant had leased space at South 10.

         II. Standard

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact[3] and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute is genuine if “the record taken as a whole could lead a rational trier of fact to find for the nonmoving party.” Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir. 2004). A genuine dispute as to a material fact exists “if the nonmoving party has produced evidence such that a reasonable factfinder could return a verdict in its favor.” Greenberg v. BellSouth Telecomms., Inc., 498 F.3d 1258, 1263 (11th Cir. 2007) (quoting Waddell v. Valley Forge Dental Assocs., 276 F.3d 1275, 1279 (11th Cir. 2001)). The trial judge should not weigh the evidence, but determine whether there are any genuine issues of fact that should be resolved at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

         In considering a motion for summary judgment, trial courts must give deference to the non-moving party by “view[ing] the materials presented and all factual inferences in the light most favorable to the nonmoving party.” Animal Legal Def. Fund v. U.S. Dep't of Agric., 789 F.3d 1206, 1213-14 (11th Cir. 2015) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). However, “unsubstantiated assertions alone are not enough to withstand a motion for summary judgment.” Rollins v. TechSouth, Inc., 833 F.2d 1525, 1529 (11th Cir. 1987). Conclusory allegations and “mere scintilla of evidence in support of the nonmoving party will not suffice to overcome a motion for summary judgment.” Melton v. Abston, 841 F.3d 1207, 1219 (11th Cir. 2016) (per curiam) (quoting Young v. City of Palm Bay, Fla., 358 F.3d 859, 860 (11th Cir. 2004)). In making a motion for summary judgment, “the moving party has the burden of either negating an essential element of the nonmoving party's case or showing that there is no evidence to prove a fact necessary to the nonmoving party's case.” McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1236, 1242 (11th Cir. 2013). Although the trial courts must use caution when granting motions for summary judgment, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).

         III. Discussion

         As an initial matter, the Court will address Defendants' request that all of SCP's asserted facts be stricken. Rather than respond to Defendants' statement of undisputed material facts, SCP admitted Defendants' facts and supplemented those facts with its own statement of facts. Moreover, SCP has dispersed various factual assertions throughout its brief opposing summary judgment that are not contained within its supplemental statement of facts. SCP's failure to include these factual assertions within a discrete section of its brief does not comply with the Uniform Initial Order entered in this case. (See Doc. 13 at 16-17.) Because SCP has stated that it accepts Defendants' statement of undisputed facts, the Court considers these facts to be true. However, the Court still must view this evidence in the light most favorable to SCP. Regarding the ...

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