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Snyder Development Co. v. Autozone, Inc.

United States District Court, S.D. Ohio, Eastern Division

December 10, 2019

AUTOZONE, INC., et al., Defendants/Third-Party Plaintiff

          Vascura Magistrate Judge.

          OPINION & ORDER


         This matter comes before the Court on Plaintiff/Counterclaim Defendant Snyder Development Company's (“Snyder”) Motion to Dismiss Defendants/Counterclaimants AutoZone, Inc.'s and AutoZone Development LLC's[1] Restated Counterclaim against Snyder. (ECF No. 37; 58).[2] Snyder's first motion to dismiss (ECF No. 37) is MOOT. For the reasons that follow, Snyder's second motion to dismiss (ECF No. 58) is DENIED.

         I. BACKGROUND

         In October of 2002, Snyder agreed to lease to AutoZone a unit in a strip mall located on Agler Road in Gahanna, Ohio. (ECF No. 2 at 2). They entered into a lease agreement for five years with three separate options to extend the lease for renewal periods of five years. Id. at 12. AutoZone exercised those first two of those options to renew. Id. at 5. The lease agreement included a clause requiring Snyder's prior written consent should AutoZone wish to assign or sublet the unit. (ECF No. 58 at 3).

         In April of 2015, however, AutoZone entered into a lease agreement for a rental unit on the other side of the strip mall with FD Gahanna Ohio Agler Road LLC (“FD Gahanna”). FD Gahanna owned the other half of the strip mall on Agler Road and was allegedly attempting to purchase Snyder's half at a reduced “fire sale” price. (ECF No. 53 at 12). To do so, FD Gahanna was purportedly engaging in sly tactics-it offered AutoZone a fifteen-year lease and agreed to assume and pay off AutoZone's existing lease with Snyder so that the unit that AutoZone was renting would become vacant. (Id. at 12; ECF No. 58 at 3). In December 2015, AutoZone vacated the Snyder unit and stopped paying rent pursuant to its new lease with FD Gahanna. FD Gahanna did not make payments to Snyder, arguing that because Snyder never gave its consent to the assignment, it was never obligated to pay. (ECF No. 53 at 11-12).

         Thereafter, Snyder brought this case alleging claims of breach of contract and negligence in relation to the lease with AutoZone. (ECF No. 2). In response, AutoZone brought a third-party complaint against FD Gahanna and two counterclaims against Snyder for breach of contract and tortious interference with contract. (ECF No. 25; ECF No. 53). Snyder now moves to dismiss the counterclaims brought against it by AutoZone, arguing: (1) that it has not breached the contract between them because the express terms of that contract gave Snyder sole discretion to permit or refuse assignment of the lease; and (2) that AutoZone failed to plead plausibly lack of justification in its tortious interference with contract claim. (ECF No. 37; 58). AutoZone opposes the motion to dismiss arguing that Snyder's arguments are impermissible attempts to try this case at the pleading stage and that it has sufficiently pled both causes of action. (ECF No. 40).


         Under Federal Rule of Civil Procedure 12(b)(6), the Court may dismiss a cause of action for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Such a motion “is a test of the plaintiff's cause of action as stated in the complaint, not a challenge to the plaintiff's factual allegations.” Golden v. City of Columbus, 404 F.3d 950, 958-59 (6th Cir. 2005). Thus, the Court “must construe the complaint in the light most favorable to the plaintiff” and “accept all well-pled factual allegations as true[.]” Ouwinga v. Benistar 419 Plan Servs., Inc., 694 F.3d 783, 790 (6th Cir. 2012). If more than one inference may be drawn from an allegation, the Court must resolve the conflict in favor of the plaintiff. Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). The Court cannot dismiss a complaint for failure to state a claim “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id.

         Generally, a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The allegations need not be detailed but must “give the defendant fair notice of what the claim is, and the grounds upon which it rests.” Nader v. Blackwell, 545 F.3d 459, 470 (6th Cir. 2008) (quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)). A complaint's factual allegations “must be enough to raise a right to relief above the speculative level, ” and must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). A claim is plausible when it contains “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court is not required to accept as true mere legal conclusions unsupported by factual allegations. Id. (citing Twombly, 550 U.S. at 555).

         III. LAW & ANALYSIS

         A. Breach of Contract

         AutoZone's first claim is for breach of contract. AutoZone argues Snyder materially breached the terms of their lease by refusing to consent to its attempt to assign the lease to FD Gahanna because this refusal violated the “implied duty of good faith and fair dealing inherent in the Snyder lease.” (ECF No. 53 at 13). Additionally, AutoZone claims that Snyder acted in a “commercially unreasonable” manner by refusing the assignment because Snyder had no legitimate basis to refuse consent since the assignment would not have eliminated AutoZone's underlying liability on the lease and would have only added another obligor (FD Gahanna). Id. In response, Snyder argues that it did not breach the lease agreement because it had an “absolute and exclusive right” to withhold written consent to the lease and that its refusal to give consent was not only commercially reasonable but an “astute and sensible business decision[] and conduct.” (ECF No. 58 at 7).

         At issue is whether the implied covenant of good faith and fair dealing applies to the contractual provision permitting AutoZone to assign its lease only with Snyder's permission. Snyder argues that it did not breach the implied covenant of good faith and fair dealing because that covenant cannot be used to override the express terms of lease agreement, which vest it with the exclusive ability to withhold consent to assignment. Id. at 8. AutoZone acknowledges that there is a rift in Ohio law regarding whether a landlord is required to act in a commercially reasonable manner in deciding to consent to a lease assignment. (ECF No. 40 at 6-7) (citing Littlejohn v. Parrish, 839 N.E.2d 49, 54 (Ohio App. 1st Dist. 2005) and F & L Ctr. Co. v. Cunningham Drug Stores, Inc., 19 Ohio App.3d 72, 75, 482 N.E.2d 1296, 1299 (1984)). AutoZone urges this court to follow the Littlejohn decision, which criticized the approach used in F&L and determined ...

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