Opinion
Civ. A. 20-1997
03-03-2022
WASHINGTON CROWN CENTER REALTY HOLDING LLC, Plaintiff, v. HOLLYWOOD THEATERS, INC., REGAL ENTERTAINMENT GROUP, and REGAL CINEMAS, INC., Defendants.
MEMORANDUM OPINION [1]
In accordance with the provisions of 28 U.S.C. § 636(c)(1), the parties have voluntarily consented to have a United States Magistrate Judge conduct proceedings in this case. Thus, the undersigned has the authority to decide dispositive motions and enter final judgment.
PATRICIA L. DODGE United States Magistrate Judge
This breach of contract action centers on a commercial lease agreement between Plaintiff Washington Crown Center Realty Holding LLC (“Washington Crown”) and Defendant Hollywood Theaters, Inc. (“Hollywood Theaters”) for property located at Washington Crown Center Mall in Washington, Pennsylvania. Among the issues in dispute is the applicability of the lease's force majeure provision.
Presently before the Court is Washington Crown's Partial Motion for Judgment on the Pleadings. (Doc. No. 29.) For the reasons discussed below, its motion is denied.
I. Relevant Procedural History
Washington Crown instituted this breach of contract action against Hollywood Theaters in December 2020. (ECF No. 1.) After Hollywood Theaters filed its Answer and Affirmative Defenses, Washington Crown sought leave to file an amended complaint, which this Court granted. (ECF Nos. 17-18.)
Washington Crown subsequently filed its Amended Complaint in which it asserted a breach of contract claim against Hollywood Theaters as well as Regal Entertainment Group and Regal Cinemas, Inc. (“Regal Defendants”). (ECF No. 19.) After all defendants filed their Answers, Washington Crown filed a Partial Motion for Judgment on the Pleadings. (ECF No. 29.) In its motion, Washington Crown seeks a judgment that Hollywood Theaters is liable to Washington Crown in the amount of $545,028.28, plus tax rent, attorneys' fees and costs and prejudgment interest. It also seeks an order striking and dismissing with prejudice the first through sixth and eighth through tenth affirmative defenses that are pleaded in the Answer and Affirmative Defenses of Hollywood Theaters and the Answer and Affirmative Defenses of the Regal Defendants. (Id.)
The deadline for fact discovery has been extended generally pending resolution of Washington Crown's motion. (ECF No. 37.)
Washington Crown's motion has been fully briefed (ECF Nos. 30; 34), and is ripe for disposition.
II. Relevant Factual Background
On March 31, 1998, Crown American Financing Partnership and Hollywood Theaters entered into a commercial lease relating to the construction and operation of a movie theater at the Washington Crown Center Mall (the “Lease”). (ECF Nos. 19 ¶¶ 1, 13; 27 ¶¶ 1, 13; 28 ¶¶ 1, 13.) Washington Crown is a successor-in-interest to the Lease. (ECF No. 19-6.) Multiple amendments of the Lease occurred thereafter (ECF Nos. 19 ¶¶ 21-24; 27 ¶¶ 21-24; 28 ¶¶ 21-24), including a “Fourth Amendment to Lease” dated April 26, 2019. (ECF Nos. 19 ¶ 25; 27 ¶ 25; 28 ¶ 25.) The Fourth Amendment extended the term of the Lease for two years, specifically, from May 9, 2019, until May 31, 2021. (ECF Nos. 19 ¶ 26; 27 ¶ 26; 28 ¶ 26.) In the Fourth Amendment, Hollywood Theaters agreed to pay base rent in the amount of $24,947.52 for May 2019 after which time the amount of base rent increased to $35,153.33. (ECF Nos. 19 ¶ 27; 27 ¶ 27; 28 ¶ 27.) Additionally, Hollywood Theaters was required to pay $1,802.42 per month for rent of the common area as well as tax rent. (ECF Nos. 19 ¶¶ 28-29; 27 ¶¶ 28-29; 28 ¶¶ 28-29.) The Fourth Amendment expressly incorporated the terms and conditions contained in the original Lease, as amended. (ECF Nos. 19 ¶ 30; 27 ¶ 30; 28 ¶ 30.)
The Lease includes the following provision:
19. Force Majeure. Delays in the performance by either Landlord or Tenant of the obligations contemplated under this Lease due to fire, flood, earthquake or unusual weather conditions, unavailability of materials, equipment or fuel, war, declaration of hostilities, revolt, civil commotion, strike, labor dispute, or epidemic, lack of or failure of transportation facilities, or because of any acts of God or for any other cause beyond the reasonable control of either Landlord or Tenant shall be deemed events of force majeure (“Force Majeure Events”) and such delays shall be excused.(See ECF No. 19-1, at § 19).
Hollywood Theaters last paid rent to Washington Crown in March 2020. (ECF Nos. 19 ¶¶ 2, 32; 27 ¶¶ 2, 32; 28 ¶¶ 2, 32). Beginning in April 2020, it ceased making payments of base rent and common area rent. (ECF Nos. 19 ¶ 31; 27 ¶ 31; 28 ¶ 31.) Hollywood Theaters closed all of its theaters, including the theater in the Washington Mall, on March 17, 2020, in response to COVID-19 pandemic. (ECF No. 27, Eighth Affirmative Defense.) Hollywood Theaters asserts that it was relieved from making rent payments as a result of an event of force majeure, which it identifies as the “epidemic clause.” (ECF No. 27 ¶¶ 3, 31, Eighth Affirmative Defense.)
The Lease includes a notice and cure provision. (ECF Nos. 10 ¶ 33; 19-1 ¶ 29; 27 ¶ 33; 28 ¶ 33.) If Hollywood Theaters does not meet its payment obligations within ten days after receiving notice that it is in default, Washington Crown can file suit against it and cancel the Lease. (ECF Nos. 19 ¶¶ 33-34; 19-1 ¶ 29; 27 ¶¶ 33-34; 28 ¶¶ 33-34.) Notice of default was sent to Hollywood Theaters on July 17, 2020, in which Washington Crown advised Hollywood Theaters that it owed four months of base and common area rent in the total amount of $147,823.04. (ECF Nos. 19 ¶ 36; 27 ¶ 36; 28 ¶ 36.) A second notice of default was sent to Hollywood Theaters on August 28, 2020, and a third on December 23, 2020. (ECF Nos. 19 ¶¶ 39, 43; 27 ¶¶ 39, 43; 28 ¶¶ 39, 43.) Hollywood Theaters made no further payments after its March 2020 payment. (ECF Nos. 19 ¶¶ 40-41; 27 ¶¶ 40-41; 28 ¶¶ 40-41.) The Lease expired on May 31, 2021, and has not been renewed or extended. (ECF No. 27 ¶ 45.)
Washington Crown alleges that both of the Regal Defendants are affiliates of Hollywood Theaters. Further, it pleads that one or both operated the movie theater at the Washington Mall along with Hollywood Theaters and “either assumed the Lease and/or is [Hollywood Theater's] alter ego.” (ECF No. 19 ¶¶ 9, 10.) The Regal Defendants deny operating the theater and aver that they never assumed any obligations under the Lease and are not alter egos of Hollywood Theaters. (ECF No. 28 ¶¶ 9, 10.)
Both Hollywood Theaters and the Regal Defendants have asserted various affirmative defenses in their respective Answers. In the Eighth Affirmative Defense in their respective Answers, Defendants allege the following:
Washington Crown's motion seeks to strike all affirmative defenses other than those that relate to the alter ego issue.
All parties utilize the facts asserted in Defendants' defenses as part of their briefing on Washington Crown's motion. Affirmative defenses are part of the pleadings. Fed.R.Civ.P. 8.
[Hollywood Theaters]'s premises closed on March 17, 2020 when Answering Defendant closed all theaters nationwide in response to the growing COVID-19 pandemic. All major movie theater circuits, including AMC, Cinemark, Cineplex Odeon, Marcus, and Harkins, and numerous smaller circuits and independent theater operators, also ceased operations on or about March 17, 2020 in response to the growing COVID-19 pandemic. When states across the nation began implementing shut-down orders in March and April, ostensibly all major studios, including Warner Brothers, Walt Disney, Sony, and NBCUniversal, began postponing or canceling the theatrical release of major films. Answering
Defendant, and other theaters, rely on the release of new movies in order to attract customers and generate revenue. COVID-19 has upended the traditional motion-picture distribution model, essentially shutting down the theater industry. There have been a small No. of major theatrical releases since March 2020 and major studios repeatedly have pushed back the dates for anticipated releases of any major films to theaters such as Answering Defendant and have released some films originally slated for theatrical release directly to in-home streaming platforms.(ECF Nos. 27; 28.) Similarly, their Ninth Affirmative Defense states:
On March 16, 2020, Pennsylvania Governor Tom Wolf issued guidance recommending that non-essential businesses in Washington County, including movie theaters, [close] due to the health risks posed by COVID-19 to the public. On March 19, 2020, Governor Tom Wolf ordered all non-life-sustaining businesses in Pennsylvania, including movie theaters, to close their physical locations. On April 1, 2020, Governor Wolf issued a statewide Stay-at-Home Order, providing that “all individuals residing in the Commonwealth are ordered to stay at home except as needed to access, support, or provide life-sustaining business, emergency, or government services.” On April 20, 2020, Governor Wolf extended the statewide Stay-at-Home Order until May 8, 2020. On May 7, 2020, Governor Wolf issued an order for the “Limited Opening of Businesses, Lifting of Stay at Home Requirements, and Continued Aggressive Mitigation Efforts, ” which provided for the limited reopening of businesses in certain counties, and extended the statewide Stay-at-Home Order for all other counties, including Washington County, until June 4, 2020. On May 28, 2020, the order for the “Limited Opening of Businesses, Lifting of Stay at Home Requirements, and Continued Aggressive Mitigation Efforts” was amended to include Washington County. The May 28, 2020 Order specifically mandated that all entertainment businesses, including movie theaters, remain closed. On June 18, 2020, Governor Wolf amended the order for the “Continued Reopening of the Commonwealth” to include Washington County. The June 18, 2020 Order specifically prohibited all entertainment businesses, including movie theaters, from operating in excess of 50% occupancy. Under the guidance issued by the Commonwealth of Pennsylvania (the “Guidance”), in addition to the general limitation that movie theaters operate at no more than 50% of the total occupancy stated on their occupancy permit, each individual movie showing is subject to limitations on the total No. of individuals permitted inside the theater. The Guidance specifically provides that all facilities and venues must enforce social distancing requirements, which may limit occupancy below the general 50% attendance limit. The Guidance also provides that businesses should include staff and employees when considering their occupancy limit or crowd gathering size. Due to the rising No. of COVID-19 cases in the Commonwealth, on July 15, 2020, Governor Wolf issued an order prohibiting indoor events and gatherings of more than 25 persons. On December 10, 2020, Governor Wolf issued a “Limited-Time Mitigation Order.” The December 10, 2020 Order specifically prohibited all entertainment businesses, including movie theaters, from operating until January 4, 2021.(ECF Nos. 27; 28.)
Defendants also assert the doctrines of impossibility, impracticability and frustration of purpose in their respective Tenth Affirmative Defense. (ECF Nos. 27; 28.)
III. Legal Standard
Federal Rule of Civil Procedure 12(c) provides that “[a]fter the pleadings are closed--but early enough not to delay trial--a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). “[J]udgment will not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law.” Yulia S. v. Hatboro-Horsham Sch. Dist., No. 2:21-cv-02011-JDW, 2021 WL 5298990, at *2 (E.D. Pa. Nov. 15, 2021) (quoting Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2021)). “A material issue of fact that will prevent a motion under Rule 12(c) from being successful may be framed by an express conflict on a particular point between the parties' respective pleadings. It also may result from the defendant pleading new matter and affirmative defenses in his answer.” Morris v. W. Manheim Twp., Civ. A. No. 1:CV-12-1647, 2014 WL 582265, at *2 (M.D. Pa. Feb. 14, 2014) (quoting Charles Alan Wright and Arthur R. Miller, Federal Practice and Procedure, § 1367). Republic Franklin Ins. Co. v. Travelers Cas. Ins. Co. of Am., Civ. A. No. 2:17-04593, 2018 WL 1420495, at *2 (D.N.J. Mar. 22, 2018) (quoting Gen. Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir. 1989)) (“[A] plaintiff is not entitled to judgment on the pleadings when the answer raises issues of fact that, if proved, would defeat recovery. Similarly, if the defendant raises an affirmative defense in his answer it will usually bar judgment on the pleadings”).
“When a plaintiff is the movant, courts must accept all factual allegations in the answer and draw all reasonable inferences in favor of the defendants, who are the non-movants in that scenario.” Yulia S., 2021 WL 5298990, at *2 (citing Lively v. WAFRA Inv. Advisory Grp., Inc., 6 F.4th 293, 305 (2d Cir. 2021)). See State Farm Fire & Cas. Co. v. Walker, Civ. A. No. 21-cv-3325, 2021 WL 5050102 (E.D. Pa Oct. 29, 2021). “[A] court may consider ‘the pleadings and attached exhibits, undisputedly authentic documents attached to the motion for judgment on the pleadings if plaintiffs' claims are based on the documents, and matters of public record.'” Burlington Ins. Co. v. Shelter Structures, Inc., 484 F.Supp.3d 237, 240 (E.D. Pa. Sept. 4, 2020) (quoting Atiyeh v. Nat'l Fire Ins. Co. of Hartford, 742 F.Supp.2d 591, 595 (E.D. Pa. 2010)). See generally Nautilus Ins. Co. v. Motel Mgmt. Servs., Inc., 781 Fed.Appx. 57, 59 n.3 (3d Cir. 2019).
IV. Discussion
In moving for judgment on the pleadings, Washington Crown argues: (1) the Lease's force majeure clause does not apply because it cannot be invoked to forever abate rent; (2) if it does apply, at minimum, Washington Crown is entitled to judgment on the pleadings in its favor against Hollywood Theaters for monies owed during the time in which Hollywood Theaters admits it could have opened its doors but chose not to do so; (3) the defenses of impossibility, impracticability, and frustration of purpose are unavailable to Defendants because the Lease includes a force majeure clause; and (4) all of the remaining defenses are various iterations of the force majeure clause and the common law defenses of impossibility, impracticability, and frustration of purpose. (ECF No. 30 at 5-6.)
Washington Crown acknowledges, however, that whether either or both of the Regal Defendants are alter egos of Hollywood Theaters or are otherwise liable as successors-in-interest to the Lease cannot be determined from the face of the pleadings. (Id..)