Petition for Writ of Certiorari — Mitchell's Formal Wear, Inc. v. Kentucky Oaks Mall Co.
Supreme Court brief1991
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IN THE SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1990
MITCHELL’S FORMAL WEAR, INC., Petitioner,
V.
KENTUCKY OAKS MALL COMPANY, Respondent. .
PETITION FOR A WRIT OF CERTIORARI TO THE
SUPREME COURT OF OHIO
PETITION FOR A WRIT OF CERTIORARI
Archer D. Smith, III
HARMON, SMITH, BRIDGES
& WILBANKS
1795 Peachtree Road, N.E.
Suite 350
Atlanta, Georgia 30309-2303
(404) 881-1200
Counsel of Record
Jeffrey B. Fleck
Mary DeGenaro
FLECK, MOSTOV &
SCHWARTZ
1100 Wick Building
Youngstown, Ohio 44503
(216) 743-3344
Counsel for Petitioner
QUESTION PRESENTED
Did the Supreme Court of Ohio err in holding it constitutionally
permissible for Ohio courts to assert personal jurisdiction over a
nonresident Georgia corporation even though the nonresident
corporations’s only contacts with the State of Ohio were entering
into a lease that contained a choice-of-law clause providing that
Kentucky law would govern, with an Ohio limited partnership for
retail space located in Kentucky, negotiating terms of the lease by
telephone between Georgia and Ohio, and mailing rent checks to
Ohio, as required by the lease?
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LIST OF PARTIES AND
RULE 29.1 LIST
-
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The parties to the proceedings below were the petitioner Mitchell’s
Formal Wear, Inc. and the respondent Kentucky Oaks Mall
Company. Mitchell’s Management Corporation, a Georgia Cor-
poration, owns one hundred percent of the stock of Mitchell’s
Formal Wear, Inc., a Georgia corporation. Mitchell’s Formal
Wear, Inc. has no other ownership interests in any other corpora-
tion.
TABLE OF CONTENTS ‘
Page
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PR II binctictepnnitininenenninnnnitinannennnnnnanniiannntinamennnaninnnentiiis 2
CONSTITUTIONAL PROVISION AND STATUTES IN-
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ECCT TU BUTE SIMI cncenncetenenncensscscasesecisscseccnnentnenienanesi 6
REASONS FOR GRANTING THE WRIT .........cceccesseseseseeeeeees 10
I. The Ohio Supreme Court's assertion that Ohio courts
may exercise personal jurisdiction over a nonresident
lessee violates the Due Process Clause of the Fourteenth
Amendment to the United States Constitution and
conflicts with decisions of this Court and courts of other
states.
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EIT, sieshiccnassinnescpinicbaiciteinedeceiitesiamnininesgtigatnaistileialiicinabdeniihiing la
TABLE OF AUTHORITIES
7
Cases: Page
Advance Realty Associates v. Krupp, 636 F. Supp
hE et a ee 16
Anilas, Inc. v. Kern, 31 Ohio St.3d 163, 509 N.E.2d
EERE EE ices et Se 7,8
Arthur, Ross & Peters v. Housing, Inc., 508 F.2d
EE ER GUINTEED ceshttiincicienhscceciateansintelieniietieshievicienvenanionnice 16
ill
ee i
- -
Eh SC SSS SS ee teen
Page |
Burger King Corp. v. Rudzewicz, 471 U.S. 462
(RT ace tae Ren 7, 8, 10, 12-15, 17, 18
DelBello v. Japanese Steak House, Inc. 43 A.D.2d 455,
352 N.Y.S.2d 537 (N.Y. App. Div. 1974) ........ceccceceeees 16
Grossman v. Wal-Mart Stores, Inc., 682 F. Supp.
6 16
Hanson v. Denkla, 357 U.S. 235 (1958) .........cccceseeeseeeees 8, 11,15
International Shoe Co. v. Washington, 326 U:S.
we EST | Fe eS
Kulko v. Superior Court, 436 U.S. 84 (1978) .......ccccceceseeeeeeees il
McGee v, International Life Ins. Co., 355 U.S. 220
Tr swenseseattonnen 7,10
Milliken v. Meyer, 311 U.S. 457 (1940) ........ceccccceeseeseeseeeseees 11
558 F. Supp. 1118 TE 16
Ohio State Tie & Timber v. Paris Lumber Co., 8 Ohio
App.3d 236, 456 N.E.2d 1309 (1982) ..........ccccseseeseeeseesenes 7
Rush v. Savchuk, 444 U.S. 320 (1980) ........cccccccccesseesseeeeseeeees 11
Shaffer v. Heitner, 433 U.S. 186 (1977) .0.......ccccceccecseeeseees 7,8, 11
Signet Bank/ Virginia v. Tillis, 196 Ga. App. 433 (1990) .... 12, 17
Travelers Health Assn. v. Virginia, 339 U.S. 643 (1950) .......... 18
World-Wide Volkswagen Corp. v Woodson, 444 U.S.
| TTS A A 7, 8,10, 13
Wri ’ Vv. vrolet, Ine.
689 F. Supp 788 (S.D. Ohi0 1988) 0.0... ecceeeeeteeeeeseees 11
Statutes:
Page
Ohio Rev. Code Ann. § 2307.382
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iv
f
IN THE SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1990
MITCHELL’S FORMAL WEAR, INC., Petitioner,
V.
KENTUCKY OAKS MALL COMPANY, Respondent.
PETITION FOR A WRIT OF CERTIORARI TO THE
SUPREME COURT OF OHIO
The petitioner Mitchell’s Formal Wear, Inc. respectfuliy
prays that a writ of certiorari issue to review the judgment and
opinion of the Supreme Court of Ohio, entered in the above-
entitled proceeding on August 8, 1990.
OPINIONS BELOW
The opinion of the Supreme Court of Ohio is reported at 53
Ohio St.3d 73 (1990), and is reprinted in the appendix hereto, p. 3a,
infra
The journal entry and opinion of the Court of Appeals of
Ohio, Seventh Appellate District, Mahoning County unreported.
It is reprinted in the appendix hereto, p. 11a, infra.
The judgment entry of the Common Pleas Court of Mahon-
ing County, Ohio is unreported. It is reprinted in the appendix
hereto, p. 17a, infra.
JURISDICTION
In January, 1988, the Ohio respondent brought this suit
against the Georgia petitioner in the Common Pleas Court of Ma-
honing County, Ohio. On September 20, 1988, the court granted
petitioner's motion to dismiss the complaint against it on the
grounds that Ohio courts lacked in personam jurisdiction over
petitioner. See p. 17a, infra.
Respondent appealed to the Ohio Court of Appeals for the
Seventh Appellate District, Mahoning County, Ohio. That court
affirmed the Common Pleas Court’s decision on June 29, 1989. See
p- 11a, infra.
Respondent then appealed to the Supreme Court of Ohio,
which, on August 8, 1990, reversed and remanded the case to the
trial court for further proceedings. See p. 2a, infra. No petition for
rehearing was sought.
Subsequently, petitioner filed a motion for stay in the Court
of Common Pleas, Mahoning County, Ohio. Respondent filed a
memorandum opposing motion to stay on or about October 4,
1990. The court denied the motion to stay on October 18, 1990.
The jurisdiction of this Court to review the judgment of the
Supreme Court of Ohio is invoked pursuant to 28 U.S.C. §
1257(a).
CONSTITUTIONAL PROVISION AND f
STATUTES INVOLVED
Section 1. All persons born or naturalized in the United States
and subject to the jurisdiction thereof, are citizens of the United
States and of the State wherein they reside. No State shall make or
enforce any law which shall abridge the privileges or immunities
of citizens of the United States; nor shall any State deprive any
person of life, liberty, or property, without due process of law; nor
deny to any person within its jurisdiction the equal protection of
the laws.
Ohio Rev. Code Ann. § 2307.382 (Anderson Supp. 1989).
Personal jurisdiction.
(A) A court may exercise personal jurisdiction over a
person who acts directly or by an agent, as to a cause of action
arising from the person’s:
(1) Transacting any business in this state;
(2) Contracting to supply services or goods in
this state;
(3) Causing tortious injury by an act or omission
in this state;
(4) Causing tortious injury in this state by an act or
omission outside this state if he regularly does or solicits
business, or engages in any other persistent course of
conduct, or derives substantial revenue from goods used
or consumed or services rei./ered in this state;
(5) Causing injury in this state to any person by
breach of warranty expressly or impliedly made in the sale
of goods outside this state when he might reasonably have
expected such person to use, consume, or be affected by the
goods in this state, provided that he also regularly does or
solicits business, or engages in any other persistent course
of conduct, or derives substantial revenue form goods used
or consumed or services rendered in this state;
(6) Causing tortious injury in this state to any
person by an act outside this state committed with the
purpose of injuring persons, when he might reasonably
have expected that some pons would be injured thereby
in this state;
(7) Causing tortious injury to any person by a
criminal act, any element of which takes place in this state,
which he commits or in the commission of which he is
guilty of complicity;
(8) Having an interest in, using, or possessing real
property in this state;
(9) Contracting to insure any person, property, or
risk located within this state at the time of contracting.
(B) Forpurposes of this section, a person who enters into an
agreement, as a principal, with a sales representative for the
solicitation of orders in this state is transacting business in this
state. As used in this division, “principal” and “sales representa-
tive” have the same meanings as in section 1335.11 of the Revised
Code.
(C) When jurisdiction over a person is based solely upon
this section, only a cause of action arising from acts enumerated in
this section may be asserted against him.
(A) When service , permitted. Service of process may be
made outside of this state, as provided herein, in any action in this
state, upon a person who at the time of service of process is a
nonresident of this state or is a resident of this state who 1s absent
from this state. The term “person” included an individual, his ex-
ecutor, administrator, or other personal representative, or a corpo-
ration, partnership, association, or any other legal or commercial
entity, who, acting directly or by an agent, has caused an event to
occur out of which the claim which is the subject of the complaint
arose, from the person’s:
(1) Transacting any business in this state;
(2) Contracting to supply services or goods in
this state;
(3) Causing tortious injury by an act or omission in
this state including but not limited to actions arising out of
the ownership, operation, or use of a motor vehicle or
aircraft in this state;
(4) Causing tortious injury in this state by an act or
omission outside this state if he regularly does or solicits
business, or engages in any other persistent course of
conduct or derives substantial revenue from goods used or
consumed or services rendered in this state;
(5) Causing injury in this state to any person by
breach of warranty expressly or impliedly made in the sale
of goods outside this state when he might reasonably have
expected such person to use, consume, orbe affected by the
goods in this state, provided that he also regularly does or
solicits business, or engages in any other persistent course
of conduct, or derives substantial revenue form goods used
or consumed or services rendered in this state;
(6) Having an interest in, using, or possessing real
property in this state;
(7) Contracting to insure any person, property, or
risk located within this state at the time of contracting;
(8) Living in the marital relationship within this
state notwithstanding subsequent departure from this
state, as to all obligations arising for alimony, custody,
child support, or property settlement, if the other party to
the marital relationship continues to reside in this state;
(9) Causing tortious injury in this state to any
person by an act outside this state committed with the
purpose of injuring persons, when he might reasonably
have expected that some person would be injured thereby
in this state;
(10) Causing tortious injury to any person bya
criminal act, any element of which takes place in this state,
which he commits or in the commission of which he is
guilty of complicity.
STATEMENT OF THE CASE
Petitioner is a Georgia corporation which operates retail
stores for the sale and rental of formal wear. All of petitioner's
stores and agents are located exclusively throughout the South-
eastern United States. Petitioner has never operated any stores in
Ohio.' Respondent is an Ohio limited partnership which owns
and operates the Kentucky Oaks Mall located in Paducah, Ken-
tucky. Respondentis an entity controlled by the Cafaro Company,
one of the largest developers of retail shopping malls in the United
States.
In 1985, petitioner and respondent entered into a lease
whereby petitioner leased from respondent unit number 640 of the
Kentucky Oaks Mali. (The lease is reproduced at p. 31a, infra.) Pe-
titioner never entered Ohio to negotiate the terms of the lease; all
negotiations were conducted by telephone and mail between
petitioner in Georgia and respondent in Ohio. Petitioner signed
the lease in Georgia and mailed it to respondent in Ohio. There-
fore, according to clause 43 of the lease (p. 71a, infra), which
provides that the lease became effective upon its delivery by
respondent to petitioner, the lease became effective in Georgia. Pe-
titioner’s only contacts with the State of Ohio were the negotiations
by telephone and mail and the mailing of rental payments to Ohio,
as required by the lease.
In spite of the Kentucky location of the leased property and
a choice-of-law clause providing that Kentucky law governs the
lease (clause 44, p. 72a, infra), in January, 1988, respondent sued
petitioner in the Court of Common Pleas of Mahoning County,
Ohio for an alleged breach of the lease. Petitioner immediately
moved to dismiss the complaint on the grounds that Ohio lacked
personal jurisdiction over petitioner. In its motion and brief and
supplemental brief, petitioner raised the issue that an Ohio court’s
exercise of personal jurisdiction over petitioner would violate
petitioner's due process rights and would contravene this Court's
decisions in International Shoe Co. v. Washington, 326 U.S. 310
The only states in which petitioner has ever operated its stores are:
Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North
Carolina, South Carolina, Tennessee and Virginia.
6
> sot lll
(1945) and its progeny. See p. 18a, infra.
On September 20, 1988, the Court of Common Pleas sus-
tained petitioner's motion to dismiss and ordered respondent's
complaint dismissed. See p. 17a, infra. In its judgment entry,
theCourt of Common Pleas did not specifically rely on Interna-
tional Shoe, but instead relied on Ohio State Tie & Timber, Inc. v.
Paris Lumber Co., 8 Ohio App.3d 236, 456 N.E.2d 1309 (1982) to de-
termine that “the contract between Defendant and the State of
Ohio [was] insufficient to make it fair and reasonable for the out-
of-state corporation to defend a suit in this jurisdiction.” P. 17a,
infra.
Respondent appealed the decision to the Ohio Court of
Appeals for the Seventh District, Mahoning County, Ohio. In its
brief, the respondent argued that petitioner was amenable to Ohio
jurisdiction pursuant to Ohio’s long-arm statute, that the exercise
of such jurisdiction comported with due process and that the
exercise of such jurisdiction would be consistent with this Court's
decisions in International Shoe v. Washington, 326 U.S. 310 (1945),
McGee v. International Life Ins. Co., 355 U.S. 220 (1957), Shaffer v.
Heitner, 433 U.S. 186 (1977), World-Wide Volkswagen Corp. v.
Woodson, 444 U.S. 286 (1980) and Burger King Corp. v. Rudzewicz,
471 U.S. 462 (1985).
The Court of Appeals affirmed the Court of Common
Pleas’ decision. In affirming, the court primarily relied on two
decisions, Anilas, Inc. v. Kern, 31 Ohio St.3d 163, 509 N.E.2d 1267
(1987) and Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985). In
its opinion, the court stated:
In the case of Burger King Corp. v. Rudzewicz
(1985), 471 U.S. 462, the United States Supreme
Court imposed jurisdiction on an out-of-state liti-
gant based upon the test that ‘he manifestly has
availed himself of the privilege of conducting busi-
ness there, and b e his activities are shielded
by the benefits and protection of the forum’s laws,
itis presumptively not unreasonable to require him
to submit to the burdens of litigation in that forum
as well.’
In the instant case, based upon the contract be-
tween the parties, the appellee’s activities, very
specifically, were not shielded by the benefits and
protections of Ohio law. The parties very specifi-
cally provided that the conditions of the lease would
be governed by and construed in accordance with
the laws of the State of Kentucky.
p. 15a, infra (emphasis supplied by the Court of Appeals). The
court held that because the parties had agreed that Kentucky law
would control the lease, it was not foreseeable that petitioner
would be haled into court in Ohio for litigation concerning the
lease. The court went on to state that because “ foreseeability is one
of the primary factors to be considered in determining whether
there are sufficient minimum contacts,” Anilas, Inc. v. Kern, 31
Ohio St.3d 163, 164, 509 N.E.2d 1267 (1987), to force petitioner to
litigate in Ohio would violate the principles of Anilas, Inc. v. Kern,
31 Ohio St.3d 163,509 N.E.2d 1267 (1987), and the cases cited inthat
decision, including International Shoe, Hanson v. Denkla, 357 U.S.
235 (1958), Shaffer v. Heitner, 433 U.S. 186 (1977), World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), Travelers
Health Assn. v. Virginia, 339 U.S. 643 (1950) and Burger King Corp.
v. Rudzewicz, 471 U.S. 462 (1985). Anilas at 164, p. 14a-15a, infra.
On July 28, 1989, respondent appealed to the Supreme
Court of Ohio. On August 8, 1990, the Supreme Court of Ohio
reversed the decision of the court of appeals and remanded the
case for further proceedings. The Ohio Supreme Court first
decided that petitioner’s activities with respondent reached the
level of“ transacting business” in Ohio pursuantto Ohio Rev. Code
Ann. § 2307.382 (Anderson Supp. 1989) and Ohio Civ. R. 4.3. The
court stated:
Accordingly, we hold that a commercial
- nonresident lessee, for purposes of personal juris-
diction, is “transacting any business” within the
plain and common meaning of this phrase, where
the lessee negotiates, and through the course of
dealing becomes obligated, to make payments to
its lessor in Ohio.
p. 6a, infra. Next, the court considered “whether the assertion of
personal jurisdiction by an Ohio court over Mitchell’s comports
with the Due Process Clause of the Fourteenth Amendment.” p.
6a, infra. The court conciuded that merely because petitioner
conducts business outside Georgia and entered into a lease with an
Ohio-based limited partnership, an Ohio court's exercise of juris-
diction over petitioner comports with due process.
REASONS FOR GRANTING THE WRIT
I.
The Ohio Supreme Court's assertion that Ohio
courts may exercise personal jurisdiction over a
nonresident lessee violates the Due Process Clause
of the Fourteenth Amendment to the United States
Constitution and conflicts with decisions of this
Court and courts of other states.
The Supreme Court of Ohio has attempted to expand the
“permissible scope of state jurisdiction over foreign corporations
and other nonresidents,” ee v. Internatio ife Ins. Co., 255
U.S. 220, 222 (1957), by slighting constitutional considerations, to
allow a landlord to sue its tenant in the landlord’s home state, with
little consideration of the tenant’s connections with the state. By
equating a “lease agreement” with a “franchise agreement,” the
court has ignored the minimum contacts analysis it was required
ta pursue in order to exercise long-arm jurisdiction, without
violating due process concerns, over petitioner. In doirg this, the
court has violated the principles of International Shoe Co. v.
Washington, 326 U.S. 310 (1945) and its progeny including Burger
King Corp. v. Rudzewicz, 471 U.S. 462 (1985). If this decision is al-
lowed to stand, all landlord-tenant cases will be litigated in the
landlord’s home state, regardless of the location of the leased
premises.
In World-Wide Volkswagen Corp. v. Woodson, 44 US.
286 (1980), this Court stated that “[t]he Due Process Clause, by
ensuring the ‘orderly administration of the laws,’ gives a degree of
predictability to the legal system that allows potential defendants
to structure their primary conduct with some minimum assurance
as to where that conduct will and will not render them liable to
suit.” Id. at297 (quoting [nt tional Shoe Co. v. Washington, 326
U.S. 310, 319 (1945)).
This Court established the modern due process require-
ments for the exercise of personal jurisdiction over a nonresident
defendant in International Shoe Co. v. Washington, 326 U.S. 310
10
(1945), holding that “due process requires only that in order to
subject a defendant to a judgmentin personam, if he be not present
within the territory of the forum, he have certain minimum
contacts with it such that the maintenance of the suit does not
offend ‘traditional notions of fair play and substantial justice.”” Id.
at 316 (emphasis supplied) (quoting Milliken v. Meyer, 311 U.S.
457, 463 (1940)). Subsequently, the Court has refined this stan-
dard.
For example, in Hanson v. Denkla, 357 U.S. 235 (1958), this
Court stressed that it is the defendant’s contacts with the forum
which are important and that the “unilateral activity of those who
claim some relationship with a nonresident defendant cannot
satisfy the requirement of contact with the forum State.” Id. at 253.
Similarly, in Shaffer v. Heitner, 433 U.S. 186 (1977), Kulko v.
Superior Court, 436 U.S. 84 (1978), and Rush v. Savchuk, 444 U.S.
320 (1980), this Court emphasized that the defendant's relation-
ship with the forum is more important than the defendant’s mere
ownership of property in the forum (Shaffer), the forum state’s
interests in resolving the litigation (Kulkg), and the plaintiff's ties
with the forum (Rush).
The conflict between Lianson, Shaffer, Kulko and Rush and
the instant case could not be more complete. In the case at bar, the
Supreme Court of Ohio stressed the respondent's interests in
resolving the litigation in Ohio and the State of Ohiv’s interests in
providing its citizens with a forum over the petitioner's interests.
Of particular relevance is the following quote from the opinion:
[A]ppellant’s and the forum state’s interest
in adjudicating the dispute is strong. The General
Assembly, pursuant to R.C. 2307.382(A)(1), intended
to provide a forum for Ohio residents. Likewise, ’.
.. Ohio has an interest in resolving suits brought by
one of its residents and has a substantial interest in
seeing that its residents get the benefit of tneis
bargain. . .”
p. 10a, infra (quoting Wright Int’l Express, Inc. v. Roger Dean
Chevrolet Inc., 689 F. Supp 788, 791 (S.D. Ohio 1988)). The court’s
focus on the respondent's interests and the respondent's contacts
with the State of Ohio is again apparent in its listing of petitioner's
11
purported contacts. In its opinion the court states:
Mitchell’s conducted negotiations of the
lease terms by telephone contact to Ohio with
appellant, an Ohio-based limited partnership.
Mitchell’s intentionally and purposefully directed
activities at Ohio when it agreed to the contract
terms, signed the document in Georgia and sent it
to Ohio to be signed by appellant. The ten-year
lease requires that Mitchell’s submit to appellant
on 2 monthly or annual basis rental payments,
maintenance costs, association fees and sales re-
ports. If Mitchell’s refuses to make the contractu-
ally required payments in Ohio, as alleged by
appellant, such refusal will undoubtedly cause
foreseeable injuries. Further, Mitchell’s is not pro-
vided with unfettered control of its retail sale and
rental operation. The lease calls for appellant's ap-
proval in many areas and aiso restricts or regulates
many activities. Mitchell’s is also aware that all
communications need be directed to appellant in
Ohio.
p. 8a-9a, infra. Upon examination of the criteria recited by the Ohio
Supreme Court, it is clear that this list is merely a list of respon-
dent's ties to Ohio; these regulations of petitioner’s conduct are in-
cidental to the purpose of the contract -- to establish a Mitchell’s
Formal Wear store in Paducah, Kentucky. Such contact based
upon the mere fortuitous consequence of respondent's place of
residence is insufficient to support a finding that petitioner has
purposefully established such meaningful contacts and connec-
tions with Ohio that it should reasonably be expected to appear
there to defend an action based upon its alleged failure to perform
its part of the contract in Georgia. See, Signet Bank/ Virginia v.
Tillis, 196 Ga. App. 433 (1990). Respondent’s locationis irrelevant;
the object of the contract is unit number 640 located in the Ken-
tucky Oaks Mall, Paducah, Kentucky.
Equally in conflict with the decision below is Burger King
Corp. v. Rudzewicz, 471 U.S. 462 (1985), the case the Supreme
Court of Ohio relied on most heavily in its opinion. The decision
12
below conflicts with Burger King in three respects: first, the Ohio
Supreme Court considered factors, other than the petitioner's
contacts with the forum, more important in determining whether
it was constitutionally permissible to exercise jurisdiction over
petitioner; second, the Ohio Supreme Court equated the lease
agreementin the instant case with the franchise agreement at issue
in Burger King, ignoring the realities of the situation; third, the
Supreme Court of Ohio ignored Burger King’s directives concern-
ing the jurisdictional effect of choice-of-law provisions in con-
tracts. In Burger King, Justice Brennan wrote:
Once it has been decided that a defendant
purposefully established minimum contacts within
the forum State, these contacts may be considered
in light of other factors to determine whether the
assertion of personal jurisdiction would comport
with ‘fair play and substantial justice.’ Interna-
tional Shoe Co. v. Washington, 326 U.S. at 320, 66
S.Ct. at 160. Thus, courts in ‘appropriate case[s]’
may evaluate ‘the burden on the defendant,’ ‘the
forum State’s interests in adjudicating the dispute,’
‘the plaintiff's interest in obtaining convenient and
effective relief,’ ‘the interstate judicial system’s
interest in obtaining the most efficient resolution of
controversies, and the ‘shared interest of the sev-
eral States in furthering fundamental substantive
social policies.’
Burger King at 476-477 (quoting World-Wide Volkswagen Corp.
v. Woodson, 444 U.S. 286, 292 (1980)). Justice Brennan made it
clear that the “other factors” should be considered only after it has
been decided that adefendant purposefully established minimum
contacts within the forum state. The Supreme Court of Ohio’s
consideration of the “other factors” such as the respondent's
interest in litigating in Ohio, the forum State’s interests, and the
burdens on the petitioner, took on paramount importance, over
and above its consideration of petitioner's purposefully establish-
ing contacts with the forum, in its decision to exercise jurisdiction
over petitioner.
Similarly, the Supreme Court of Ohio ignored the realities of
petitioner's relationship with the respondent and the forum and
instead equated the lease agreement at issue in this case with the
franchise agrement at issue in Burger King. Based on this faulty
assumption, the court concluded that petitioner had established
sufficient contacts with Ohio so that Ohio courts might exercise
jurisdiction over petitioner. In its opinion the cc urt states that it
considers the Burger King decision because that case “involved a
contract dispute substantially similar to the issue presented before
us today.” p.7a, infra. This is not so. The purpose of the franchise
agreement in Burger King was to establish one more Burger King
restaurant. The store in Michigan was known as a Burger King -
- both the franchisor and the franchisee had the same identity. The
Florida franchisor regulated virtually every aspect of the opera-
tion. In the instant case, the purpose of the lease agreement was
to establish a Mitchell’s Formal Wear store in Kentucky; any
regulation of the petitioner by the respondent was incidental to
this purpose. Respondent’s only connecticn with petitioner's
purpose was that it owned the Kentucky real estate. Thus,
although the Supreme Court of Ohio heavily relies on Burger King
inits analysis of the facts of the case, the contracts at issue in the two
cases are factually dissimilar.
Finally, the Supreme Court of Ohio ignored the directives
in Burger King concerning the jurisdictional importance of choice-
of-law provisions. In Burger King, one of the defendant's contacts
with the State of Viorida was that the franchise agreement specifi-
cally provid’ < <nat Florida law would govern any disputes con-
cerning the franchise agreement. In discussing the importance of
the choice-of-law provision, this Court stated:
Moreover, we believe the Court of Appeals gave insuffi-
cient weight to provisions in the various franchise documents pro-
viding that all disputes would be governed by Florida law. The
franchise agreement, for example, stated:
‘This Agreement shall become valid when exe-
cuted and accepted by BKC at Miami, Florida; it
shall be deemed made and entered into in the State
of Florida and shall be governed and construed
under and in accordance with the laws of the State
14
of Florida. . .’
The Court of Appeals reasoned that choice-of-law provisions are
irrelevant to the question of personal jurisdiction, relying on
Hanson v. Denkla for the proposition that ‘the center of gravity for
choice-of-law purposes does not necessarily confer the sovereign
prerogative to assert jurisdiction.’ 724 F.2d at 1511-1512, n.10,
citing 357 U.S., at 254, 78 S.Ct., at 1240. This reasoning misper-
ceives the import of the quoted propositicn. The Court in Hanson
and subsequent cases has emphasized that choice-of-law analysis
-- which focuses on all elements of a transaction, and not simply on
the defendant’s conduct — is distinct from minimum-contacts
jurisdictional analysis -- which focuses at the threshold solely on
the defendant’s purposeful connection to the forum. Nothing in
ourcases, however, suggests that a choice-of-law provision should
be ignored in considering whether a defendant has ‘purposefully
invoked the benefits and protections of a State’s laws’ for jurisdic-
tional purposes.
Burger King at 481-482. The Supreme Court of Ohio gives no
weight to the fact that the parties had agreed that Kentucky law
would govern their disputes. Instead, the court merely states that
itis “satisfied that the guidelines set forthin Burger King have been
met.” p. 9a,infra. The court ignores the fact that it was unforesee-
able to petitioner that it would be haled into court in Ohio when it
had agreed that Kentucky law would govern the lease and the
leased premises were located in Kentucky. In fact, the court asserts
that merely because petitioner conducts its retail operations out-
side of Georgia, because petitioner “elected to establish a store
bordering appellant's state and considering today’s modern means
of transportation, it is not unreasonable for Mitchell’s to defend
itselfin Ohio.” p. 9a, infra. Itis abundantly clear that the Supreme
Court of Ohio did not consider whether it was foreseeable for
petitioner to be haled into court in Ohio. It is equally clear that the
court did not consider, as it was required to do, the fairness of
forcing petitioner to defend a suit in Ohio. See, International Shoe
Co. v. Washington, 326 U.S. 310 (1945). In essence, the court held
that because petitioner is a business, petitioner was subject to the
Ohio courts’ jurisdiction. The obvious implication is that a busi-
ness can be haled into court in any state, regardless of the business’
15
contacts with the state.
The decision of the Supreme Court of Ohio conflicts with
decisions ofother jurisdictions. Directly on point with the decision
below is Grossman v. Wal-Mart Stores, Inc, 682 F. Supp. 752
(S.D.N.Y 1988). In Grossman, the defendant, a Delaware corpora-
tion with its principal place of business in Arkansas, operated
retail stores throughout various states. The defendant operated no
stores in New York. However, the defendant purchased goods in
New York for resale elsewhere and maintained an office in New
York for the convenience of its buying agents, when they were on
buying trips in New York. The plaintiff, a resident of New York,
and the out-of-state defendant entered into a lease agreement for
retail space in Tennessee. The plaintiff sued the defenuant in New
York foran alleged breach of the lease. The court held that itlacked
jurisdiction over the nonresident debtor. See, also, Advance
Realty Associates v. Krupp, 636 F. Supp 316 (S.D.N.Y. 1986) (New
York court had no jurisdiction over Massachusetts defendant in
lawsuit arising out of New York plaintiff's sale of Illinois property
to defendant) and DelBello v. Japanese Steak House, Inc., 43
A.D.2d 455, 352 N.Y.S.2d 537 (N.Y. App. Div. 1974) (New York
courts had no jurisdiction over Florida franchisor in lawsuit aris-
ing out of New York franchisee’s attempt to rescind the franchise
contract). In Northern Trust Co. v. Randolph C. Dillon, Inc., 558
F. Supp. 1118 (N.D. Ill. 1983), the court held that it had no
jurisdiction over a California corporation in an action involving a
lease entered into with an Illinois corporation for equipment
located outside of Illinois. In that case, the contract was accepted
in Illinois, the contract contained a choice-of-law clause that pro-
vided Illinois law would govern, e t ed in tele-
one calls with the Illinois plaintiff and the defendant made
payments on the lease to the plaintiffin Illinois. Nevertheless, the
court held that “[t]hese contacts are not sufficient to satisfy the
requirements of due process.” Id. at 1122.
Similarly, in Arthur, Ross & Peters v. Housing, Inc., 508
F.2d 562 (5th Cir. 1975), the Fifth Circuit held that the District Court
for the Southern District of Texas had properly dismissed the
lawsuit against the defendant for lack of in personam jurisdiction.
The lawsuit arose from the defendant's alleged breach of an agree-
16
ment involving the purchase of real estate and the formation of a’
limited partnership between the North Carolina defendant and
the Texas plaintiff. The real estate was not located in Texas. The
plaintiff alleged that the defendant was subject to jurisdiction in
Texas because it entered into a contract by mail with a Texas resi-
dent, part of the contract vas to be performed in Texas, negotia-
tions forthe agreements were carried on by mail between the Texas
and North Carolina parties and the contract was mailed to plain-
tiffs Texas place of business for signing. In dismissing, the court
stated, “After considering the facts alleged in the pleadings,
memoranda and affidavits filed herein, the quality, nature and
extent of the contacts that the defendant has with the State of Texas
are not sufficient, individually or together, to satisfy the require-
ment that the defendant purposefully invoke the benefits or
protection of the law of Texas.” Id. at 565 (quoting the unreported
opinion of the district court which was attached to the Fifth
Circuit’s opinion as an appendix).
In Signet Bank/ Virginia v. Tillis, 196 Ga. App. 433 (1990)
the Georgia Court of Appeals affirmed the trial court’s refusal to
domesticate a Virginia judgment, ruling that the Georgia defen-
dant had insufficient contacts with Virginia such that he could
reasonably be expected to defend a lawsuit there. The Virginia
plaintiff had extended a contract fora credit card to the defendant.
The defendant signed the contract, mailed it to Virginia, used the
credit card and mailed payments to Virginia. The court held that
the defendant’s contacts in Virginia were insufficient for the
Virginia court to exercise personal jurisdiction over him.
In light of these cases, it is clear that the Supreme Court of
Ohio has- created a confusing precedent, likely to generate even
further confusion among other courts. The precedent violates the
principles of Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985),
in three ways: first, the Ohio Supreme Court considered factors,
other than the petitioner's contacts with the forum, more impor-
tant in determining whether it was constitutionally permissible to
exercise jurisdiction over petitioner; second, the Ohio Supreme
Court equated the lease agreement in the instant case with the
franchise agreement at issue in Burger King, ignoring the realities
of the situation, third, the Supreme Court of Ohio ignored Burger
17
King’s directives concerning the jurisdictional effect of choice-of-
law provisions in contracts. It is equally clear that the decision is
in conflict with decisions of other states.
If the decision is allowed to stand, it will have far-reaching
effects. Forexample, according to the instant decision, ifan Alaska
corporation leases California property from a Florida corporation,
the Florida corporation will be able to sue the Alaska corporation
in Florida, even if the parties had stipulated that California law
would govern, and even if the Alaska corporation’s only contacts
with Florida were through the mails and by telephone. Similarly,
a landlord that leases to various tenants property located through-
out the United States will be able to merely maintain a post office
box in a community in which it feels beneficial to litigate and sue
its tenant in that community. Although this is an extreme case, its
facts are not outside the realm of the instant decision. Plenary
consideration by this Court is essential in order to give other courts
guidance in determining when it is constitutionally permissible to
exercise jurisdiction over a nonresident defendant.
18
CONCLUSION i
For these various reasons, this petition for certiorari should
be granted.
Respectfuily submitted,
Archer D. Smith, III
HARMON, SMITH, BRIDGES
& WILBANKS
1795 Peachtree Road, N.E.
Suite 350
Atlanta, Georgia 30309-2303
(404) 881-1200
Counsel of Record
Jeffrey B. Fleck |
Mary DeGenaro
FLECK, MOSTOV & SCHWARTZ
1100 Wick Building
Youngstown, Ohio 44503
(216) 743-3344
Counsel for Petitioner
19
APPENDIX
THE SUPREME COURT OF OHIO
1990 TERM
To wit: August 8, 1990
Kentucky Oaks Mall Company, :
Appellant, - : Case No. 89-1337
v. : JUDGMENT ENTRY
Mitchell’s Forrnal Wear, Inc. : APPEAL FROM THE
Appellee. : COURT OF APPEALS
This cause, here on appeal from the Court of Appeals for
Mahoning County, was considered in the manner prescribed by
law. On consideration thereof, the judgment of the court of
appeals is reversed and the cause is remanded to the trial court tor
further proceedings consistent with the opinion rendered herein.
It is further ordered that the appellant recover from the
appellee its costs herein expended; and that a mandate be sent to
the Court of Common Pleas for Mahoning County to carry this
judgment into execution; and that a copy of this entry be certified
to the Clerk of the Court of Appeals for Mahoning County for
entry.
(Court of Appeals No. 88C A183)
/S/
THOMAS J. MOYER
Chief Justice
IN THE SUPREME COURT OF OHIO
KENTUCKY OAKS MALL COMPANY, APPELLANT, v.
MITCHELL’S FORMAL WEAR, INC., APPELLEE. ,
[Cite as Kentucky Oaks Mall Co. v. Mitchell’s Formal Wear, Inc.
(1990), 53 Ohio St. 3d 73.]
Civil procedure ~- Personal jurisdiction -- Commercial
nonresident lessee is “transacting any business” within the
plain and common meaning of the phrase when through
the course of dealing it becomes obligated to make pay-
ments to its lessor in Ohio -- R.C. 2307.382(A)(1) and Civ.
R. 4.3(A)(1), construed and applied.
O.Jur 3d Courts § 280.
A commercial nonresident lessee, for purposes of personal
jurisdiction, is “transacting any business” within the plain
and common meaning of the phrase where the lessee nego-
tiates, and through the course of dealing becomes obli-
gated, to make payments to its lessor in Ohio. (R.C.
2307.382[A][1] and Civ. R. 4.3[A][{1], construed and ap-
lied.)
ENO. 89-1337 -- Submitted June 6, 1990 -- Decided August
8, 1990.)
Appeal from the Court of Appeals for Mahoning county,
No. 88 C.A.183
Appellee, Mitchell’s Formal Wear, Inc. (“Mitcheil’s”), a
Georgia corporation, allegedly defaulted on a lease agreement
between itand appeliant, Kentucky Oaks Mall Company, an Ohio-
based limited partnership. Appellant sued Mitchell’s in the Court
of Common Pleas of Mahoning County, Ohio, to recover “lease-
hold charges” due and owing appellant.
The lease agreement between appellant as lessor, and
Mitchell’s as lessee, concerned a storeroom known as Unit No. 640
in the Kentucky Oaks Mall, Paducah, Kentucky. Mitchell's is
engaged in the retail sale and rental of formal wear. Mitchell’s op-
erates one hundred one stores in eleven states primarily in the
Southeastern United States. [tis undisputed that atleast part of the
negotiations concerning the lease were conducted by telephone
calls to and from Ohio. Mitchell’s signed the lease in Georgia and
mailed the document to Ohio where, it appears from the record,
-™
appellant signed the contract. The lease is for a term of ten years
and requires that all communications be sent to appellant’s home
office in Youngstown, Ohio. All lease payments are to be sent to
a Cleveland, Ohio address. In addition, Mitchell’s is required on
a periodic basis to pay a “common area maintenance” cost and
“merchants association” fee to appellant. Rental payments consist
ofa minimum yearly amount to be paid monthly and a percentage
of gross sales if sales reach a fixed level. As a result, Mitchell!’s is
required to submit monthly and annual sales reports to appellant.
The lease, among other matters, requires Mitchell’s to obtain
approvals from appellant and restricts or regulates many activi-
ties. Furthermore, clause 44 of the lease states that the lease shall
be governed and construed by Kentucky law.
On January 8, 1988, appellant filed its complaint against
Mitchell’s. The trial court granted Mitchell’s motion to dismiss for
lack of personal jurisdiction.
Appellant appealed to the Court of Appeals for Mahoning
County. The court of appeals affirmed the trial court and reasoned
in part:
“In the instant case, based upon the contract between the
parties, the appellee’s activities, very specifically were not shielded
by the benefits and protections of Ohio law. The parties very spe-
cifically provided that the conditions of the lease would be gov-
erned by and construed in accordance with the laws of the State of
Kentucky.
“Based upon the agreement as to the pertinent law, itis our
opinion that under the test of foreseeability, it could not be said
that the appellee, upon the execution of the subject lease, should
have reasonably anticipated being haled into a court within the
State of Ohio.”
The cause is now before this court pursuant to the allow-
ance of a motion to certify the record.
David A. Fantauzzi and Daniel P. Daniluk, for appellant.
Fleck, Mostov & Schwartz, Jeffrey B. Fleck, Mary DeGe-
naro, Harmon, Smith & Bridges and Archer D. Smith, IIL, for ap-
pellee.
Douglas, J. Pursuant to Civ. R. 12(B)(2), Mitchell’s moved
to dismiss appellant’s complaint for lack of personal jurisdiction.
The trial court, on that basis, dismissed the complaint and the court
of appeals affirmed. Thus, we must first decide whether Mitchell's
conduct falls within Ohio’s “long-arm statute” or applicable civil
rule, and if the statute or civil rule confers personal jurisdiction,
4a
.
:
then we must determine whether granting jurisdiction comports
with the Due Process Clause of the Fourteenth Amendment to the
United States Constitution. See Fallang v. Hickey (1988), 40 Ohio
St. 3d 106, 532 N.E.2d 117.
In this appeal, personal jurisdiction over a nonresident de-
fendantis governed byR.C. 2307.382, which states in relevant part:
“(A) A court may exercise personal jurisdiction over a
person who acts directly or by an agent, as to a cause of action
arising from the person’s:
“(1) Transacting any business in this state;
“*ee*
“(C) When jurisdiction over a person is based solely upon
this section, only a cause of action arising from acts enumerated in
this action may be asserted against him.” (Emphasis added.)
Likewise, the applicable civil ruleis Civ. R.4.3(A)(1), which
authorizes out-of-state service of process on a defendant who is “*
* * (t]ransacting any business in this state{.]” Mitchell’s argues
that, pursuant to Section 5(B), Article IV of the Oh o Constitution,’
Civ. R. 4.3(A)(1) supersedes R.C.2307.382(A)(1). We disagree and
find that the statute and civil rule are consistent and in fact
complement each other. R.C. 2307.382(A)(1) authorizes a court to
exercise personal jurisdiction over a nonresident defendant, whereas
Civ. R. 4.3(A)(1) provides for service of process to effectuate that
jurisdiction. Both require that the nonresident be “transacting any
business” in Ohio.
Appellant asserts that the negotiations prior to the signing
of the lease, and the subsequent duties and obligations created by
the agreement, are sufficient to establish that Mitchell's is transact-
ing business in Ohio. Mitchell’s, on the other hand, contends that
because the physical location of the leased storeroom is in Ken-
tucky, it is Kentucky, not Ohio, where all business is transacted.
We again disagree.
It is clear that R.C. 2307.382(A)(1) and Civ. R. 4.3(A)(1) are
very broadly worded and permit jurisdiction over nonresident
defendants who are transacting any business in Ohio. “Transact,”
Section 5(B), Article I V of the Ohio Constitution states in relevant part:
“*** All laws in conflict with such rules shall be of no further force or effect af-
ter such rules have taken effect.”
as defined by Black’s Law Dictionary (5 Ed. 1979) 1341, “*** means
to prosecute negotiations; to carry on business; to have dealings *
**. The word embraces in its meaning the carrying on or prosecu-
tion of business negotiations but itis abroaderterm than the word
which have been
either wholly or coaly brought to a conclusion * * *.” (Emphasis
added.)
In the case at bar, Mitchell’s negotiated the lease by tele-
phone contact to Ohio with an Ohio-based limited partnership.
Mitchell’s intentionally and voluntarily entered into a ten-year
contract by signing the document in Georgia and mailing it to
Ohio. The document creates ongoing duties and obligations for
the life of the contract. Undoubtedly, both parties sought the
benefit of each other’s bargain in hopes of realizing a pecuniary
gain. The fact that Mitchell’s maintained no physical presence in
Ohio does not preclude a finding that it transacted business in this
state.
Thus, we are convinced that Mitchell’s conduct falls un-
equivocally within the plain and broad language of R.C.
2307.382(A)(1) and Civ. R. 4.3(A)(1). Similarly, our finding is
reinforced by the fact other courts have passed on this issue
reaching the same result, to-wit: that a lease agreement, in certain
circumstances, is “transacting business” within the forum state’s
long-arm statute. See, e.g., Wright Internat. Express, Inc. v. Roger
Dean Chevroiet, Inc. (S.D. Ohio 1988), 689 F. Supp. 788; Vena v.
Western General Agency, Inc. (N.D. Ill. 1982), 543 F. Supp. 779;
Klippel v. Heintz (1982), 231 Kan. 312, 644 P. 2d 428; Schanno
Transp..Inc, v. Smith (Minn. 1981), 312 N.W. 2d 114; SD Leasing,
Inc. v. Al Spain & Assoc., Inc. (1982), 277 Ark. 178, 640S.W. 2d 451.
Accordingly, we hold that a commercial nonresident les-
see, for purposes of personal jurisdiction, is “transacting any
business” within the plain and common meaning of the phrase,
where the lessee negotiates, and through the course of dealing
becomes obligated, to make payments to its lessor in Ohio.
II
Once having decided that Mitchell’s conduct falls within
the purview of R.C. 2307.382(A)(1) and Civ. R. 4.3(A)(1), the
question becomes whether the assertion of personal jurisdiction
by an Ohio court over Mitchell’s comports with the Due Process
Clause of the Fourteenth Amendment.
Over forty years ago, in International Shoe Co. v. Washington;
(1945), 326 U.S. 310, the court announced that a state may assert
personal jurisdiction over a nonresident defendant if the nonresi-
dent has “* ** certain minimum contacts with it such that mainte-
nance of the suit does not offend ‘traditional notions of fair play
and substantial justice.”” (Citation omitted.) Id. at 316. Since 1945,
the court, on numerous occasions, has elected to address the Due
Process Clause as it pertains to personai jurisdiction over a non-
resident defendant. In particular, for purposes of this appeal, we
turn our attention to Burger King Corp. v. Rudzewicz (1985), 471
U.S. 462, which involved a contract dispute substantially similarto
the issue presented before us today.
In Burger King, Rudzewicz, a franchisee residing in Michi-
gan, was sued in Fiorida by Burger King, a Florida-based corpora-
tion, for breach of contract and trademark infringement. The
contract was negotiated with both the Florida-based headquarters
of Burger King and its Michigan district office. The twenty-year
lease provided that the relationship would be governed by Florida
law and it required that all monthly fees and relevant notices be
sent to the Florida headquarters. The court ruled that the assertion
of jurisdiction did not offend due process and stated:
“*** Rudzewicz established a substantial and continuing
relationship with Burger King’s Miami headquarters, received fair
notice from the contract documents and the course of dealing that
he might be subject to suit in Florida, and has failed to demonstrate
how jurisdiction in that forum would otherwise be fundamentally
unfair ** *” Id. at 487.
Justice Brennan, in writing for the majority of the court,
reviewed prior cases and concluded that “* * * the constitutional
touchstone remains whether the defendant purposefully estab-
lished ‘minimum contacts’ in the forum State. International Shoe
Co. v. Washington, supra, at 316.” (Emphasis added.) Id. at 474.
The nonresident defendant has purposefully established mini-
mum contacts “** * where the contacts proximately result from ac-
tions by the defendant himself that create a ‘substantial connec-
tion’ with the forum State * * * where the defendant ‘deliberately’
has engaged in significant activities within a State * * * or has
created ‘continuing obligations’ between himselt and residents of
the forum * ** he manifestly has availed himself of the privilege of
conducting business there, and because his activities are shielded
by ‘the benefits and protections’ of the forum’s laws itis presump-
tively not unreasonable to require him to submit to the burdens of
litigation in the forum as well.” (Citations omitted and emphasis
7a
added inpart.) Id. at 475-476. Furthermore, minimum contacts are
satisfied when the defendant foreseeably causes injury in the
forum state if “* * * the defendant’s conduct and connection with
the forum State are such that he should reasonably anticipate being
haled into court there.’ ** *” Id. at 474 (quoting World-Wide
Volkswagen Corp. v. Woodson [1980], 444 U.S. 286, 297).
Justice Brennan also noted that the question of whether
personal jurisdiction exists does not end with a finding that the
nonresident defendant has purposely established minimum con-
tacts and stated:
“Once it has been decided that a defendant purposefully
established minimum contacts within the forum State, these con-
tacts may be considered in light of other factors to determine
whether the assertion of personal jurisdiction would comport with
‘fair play and substantial justice. **** Thus courts in ‘appropriate
cases{s]’ may evaluate ‘the burden on the defendant,’ ‘the forum
State’s interest imi adjudicating the dispute,’ ‘the plaintiff's interest
in obtaining convenient and effective relief,’ ‘the interstate judicial
system’s interest in obtaining the most efficient resolution of
controversies,’ and the ‘shared interest of the several States in
furthering fundamental substantive social policies.’ * * * These
considerations sometimes serve to establish the reasonableness of
jurisdiction upon a lesser showing of minimum contacts than
would otherwise be required. * * * On the other hand, where a
defendant who purposefully has directed his activities at forum
residents seeks to defeat jurisdiction, he must present a compel-
ling case that the presence of some other considerations would
renderjurisdiction unreasonable.” (Citations omitted and empha-
sis added.) Id. at 476-477.
In light of the guidelines articulated above, and after a
thorough review of the record before us, it is apparent that
Mitchell’s purposefully directed activities at an Ohio-based lim-
ited partnership, so that it could reasonably anticipate being haled
into an Ohio court. Moreover, it is equally evident that the
assertion of personal jurisdiction over Mitchell’s comports with
fair play and substantial justice.
Mitchell’s conducted negotiations of the lease terms by
telephone contact to Ohio with appellant, an Ohio-based limited
partnership. Mitchell’s intentionally and purposefuily directed
activities at Ohio when it agreed to the contract terms, signed the
document in Georgia and sent it to Ohio to be signed by appellant.
The ten-year lease requires that Mitchell’s submit to appellant on
a monthly or annual basis rental payments, maintenance costs,
association fees and sales reports. If Mitchell’s refuses to make the :
contractually required payments in Ohio, as alleged by appellant,
such refusal will undoubtedly cause foreseeable injuries. Further,
Mitchell’s is not provided with unfettered control of its retail sale
and rental operation. The lease calls for appellant’s approval in
many areas and also restricts or regulates many activities. Mitch-
ell’s is also aware that all communications need be directed to
appellant in Ohio.
Mitchell’s, as does the court of appeals, urges that because
the lease explicitly states that Kentucky law controls the rights of
the parties, Mitchell’s is not shielded by the benefits and protec-
tions of Ohio law, and, therefore, it could not reasonably have
anticipated being haled into an Ohio court. We disagree.
Although the lease contains a choice-of-law provision, this,
standing alone, does not automatically defeat a finding that mini-
mum contacts exist. Burger King, supra, at 478. Whether a non
resident defendant purposefully established minimum contacts
with the forum depends upon the dealings between the parties
prior to and following the document's execution, contemplated
future consequences, along with the terms of the contract. Id. at
479. We are aware that the choice-of-law provision may be a
significant factor in the overall picture; however, considering
Mitchell’s dealings and the creation of continuing duties and
obligations with appellant, we are satisfied that the guidelines set
forth in Burger King have been met.
Having found that Mitchell’s purposefully established
minimum contacts with Ohio, it now remains only to inquire
whether the assertion of jurisdiction comports with “ fair play and
substantial justice.”
Initially, we find that the burden on Mitchell’s is not
excessive. Again, in Burger King, supra, the court noted that “**
* because ‘modem transportation and communications have made
it much less burdensome for a party sued to defend himself ina
State where he engages in economic activity,’ it usually will not be
unfair to subject him to the burdens of litigating in another forum
for disputes relating to such activity. McGee v. International Life
Insurance Co, [(1957), 355 U.S. 220] ***.” Id. at 474. Mitchell's, a
Georgia corporation, operates one hundred one stores throughout
the Southeastern United States and Kentucky. Based on Mitchell’s
extensive operations, the fact that it elected to establish a store
bordering appellant's state and considering today’s moder: means
of transportation, it is not unreasonable for Mitchell’s to defend
itself in Ohio.
Ya
Finally, appellant’s and the forum state’s interest in adjudicating
the dispute is strong. The General Assembly, pursuant to R.C.
2307.382(A)(1), intended to provide a forum for Ohio residents.
Likewise, “* * * Ohio has an interest in resolving suits brought by
one of its residents and has a substantial interest in seeing that its
residents get the benefit of their bargains. ** *” Wright Internatl.
supra, at 791.
Accordingly, we reverse the judgment of the court of
appeals and find that the trial court had an adequate basis upon
which to assert personal jurisdiction over Mitchell’s. The cause is
remanded to the trial court for further proceedings consistent with
this opinion.
Judgment reversed and cause remanded.
Moyer, C.J., Sweeney, Homes, Wright, H. Brown and
Resnick, JJ., concur.
10a
[ENTERED JUNE 29, 1989]
STATE OF OHIO _ ) IN THE COURT OF APPEALS OF OHIO
MAHONING
COUNTY ) SS: SEVENTH DISTRICT
KENTUCKY OAKS MALL CO.,_ )
PLAINTIFF-APPELLANT, )CASE NO. 88C.A. 183
-VS- ) JOURNAL ENTRY
MITCHELL’S FORMAL WEAR,
INC., )
DEFENDANT-APPELLEE. )
For the reasons stated in the opinion rendered
herein, the assignment of error is overruled and it is the final
judgment and order of this court that the judgment of the Common
Pleas court of Mahoning County, Ohio, is affirmed. Costs to be
taxed against appellant.
/s/ Joseph E. O’Neill
/s/ Joseph Donofrio
/s/ Edward A. Cox
JUDGES.
lla
STATE OF OHIO, MAHONING COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
KENTUCKY OAKS MALL CO.,_ )
PLAINTIFF-APPELLANT, )CASE NO. 88C.A. 183
- VS- ) OPINION
MITCHELL’S FORMAL WEAR,
INC., )
DEFENDANT-APPELLEE. )
CHARACTER OF
PROCEEDINGS: Civil Appeal from Ma-
honing County Common
Pleas Court Case
no. 88-cv-57
JUDGMENT: Affirmed.
APPEARANCES:
For Plaintiff-Appellant: Daniel P. Daniluk
Jay Blackstone _
2445 Belmont Avenue
Youngstown, Ohio
44505-0186
12a
For Defendant-Appellee: Jeffrey B. Fleck
Mary DeGenero
1100 Wick Building
Youngstown, Ohio 44503
and
Archer D. Smith, III
Harmon, Smith &
Bridges
1759 Peachtree
Road, N.E.
Atlanta, Georgia 30309
[UDGES:
Hon. Joseph E. O’Neill
Hon. Joseph Donofrio
Hon. Edward A. Cox
DATED: June 29, 1989.
13a
O’NEILL, P.J.
The appellant filed a complaint in the lower court alleging
that it and the appellee had entered into a lease on or about March
28, 1985, in Youngstown, Ohio, whereby the appellee leased from
the appellant certain premises in the Kentucky Oaks Mall in
Paducah, Kentucky. Basically, the complaint alleged that the
appellee had breached the lease and prayed fora money judgment
against the appellee along with the costs of the action, including
court costs and attorney fees.
The appeilee responded to this complaint by filing and
serving a motion to dismiss contending that Mahoning County
was an improper venue for the case and, further, that the lower
court lacked in personam jurisdiction of the appellee.
After both parties had filed briefs and after the conduct of
an evidentiary hearing, the trial judge found for the appellee and
dismissed the complaint.
The trial judge ruled in part that, based upon the evidence
and upon the contract, it was not “fair and reasonable for the out-
of-state corporation to defend a suit in this jurisdiction.”
A timely notice of appeal was filed from this judgment.
In disposition of this case, we find very pertinent hereto a
postion of the opinion of the Ohio Supreme Court as set forth in the
case of Anilas, Inc. v. Kern (1987), 31 Ohio St. 3d 163. It is set forth
by the Supreme Court, at page 164:
“It is well established that ’*** due process requires
only that in order to subject a defendant to a judgment
in personam, if he be not present within the terri-
tory of the forum, he have certain minimum con-
tacts with it such that the maintenance of the suit
does not offend “traditional notions of fair play and
substantial justice.”’ International Shoe Co. v.
Washington (1945), 326 U.S. 310, 316. Ordinarily,
this requires that a party ‘purposefully * * * [avail]
itself of the privilege of conducting activities within
the forum State ***.’ Hanson v. Denckla (1985), 357
U.S. 235, 253. Injudging minimum contacts, a court
properly focuses on ‘the relationship among the
defendant, the forum, and the litigation * * *.’
Shaffer v. Heitner (1977), 433 U.S. 186, 204.
“Courts have consistently held that foreseeability
is one of the primary factors to be considered in
determining whether there are sufficient minimum
l4a
See baa,
contacts. “* * *[T]he foreseeability that is critical to
due process analysis * * * is that the defendant's
conduct and connection with the forum State are
such that he should reasonably anticipate being
haled into court there.’ World-Wide
Volkswagen Corp. v. Woodson (1980), 444 U.S.
286, 297. Thus, where the defendant ‘has himself
created “continuing obligations” between himself
and residents of the forum, Travelers Health Assn.
v. Virginia [1950], 339 U.S. at 648, *** he manifestly
has availed himself of the privilege of conducting
business there, and because his activities are shielded
by “the benefits and protections” of the forum’s
laws, it is presumptively not unreasonable to re-
quire him to submit to the burdens of litigation in
that forum as well. Jurisdiction in these circum-
stances may not be avoided merely because the de-
fendant did not physically enter the forum State.’
(Emphasis sic.) Burger King Corp. v. Rudzewicz
(1985), 471 U.S. 462, 475-476.”
At the evidentiary hearing, which the trial court con-
ducted, there was introduced and admitted a Joint Exhibit 1 which
was a copy of the lease involved. Paragraph 44 of that lease
specifically provides:
“***This lease shall be governed by and construed
in accordance with the applicable laws of the state
where the demised premises are located.”
In the case of Burger King Corp. v. Rudzewicz (1985), 471
U.S. 462, the United States Supreme Court imposed jurisdictionon
an out-of-state litigant based upon the test that “he manifestly has
availed himself of the privilege of conducting business there, and
because his activities are shielded by the benefits and protection of
the forum’s laws, it is presumptively not unreasonable to require
him to submit to the burdens of litigation in that forum as well.”
(Emphasis added).
In the instant case, based upon the contract between the
parties, the appellee’s activities, very specifically, were not shielded
by the benefits and protections of Ohio law. The parties very spe-
cificaily provided that the conditions of the lease would be gov-
erned by and construed in accordance with the laws of the State of
Kentucky.
Based upon the agreement as to pertinent law, it is our
opinion that, under the test of foreseeability, it could not be said
15a
that the appellee, upon the execution of the subject lease, should
have reasonably anticipated being haled into a court within the
State of Ohio.
Accordingly, the judgment of the trial court is affirmed.
Donofrio, J., concurs.
Cox, J., concurs. APPROVED:
osep!. E. O’ Neill
PRESIDING JUDGE.
16a
STATE OF OHIO =} IN THE COURT OF COMMON PLEAS
} ss: CASE NO. 88 CV 57
MAHONING
COUNTY } DATE September 20, 1988
KENTUCKY OAKS MALL CO.,
PLAINTIFF JUDGMENT ENTRY
VS.
MITCHELL’S FORMAL WEAR, INC.,
DEFENDANT
This cause is before the Court on Defendant’s Motion to
Dismiss. Defendant contends that the action is improperly ve-
nued and that this Court lacks in personam jurisdiction over the
Defendant.
Upon review of the evidence presented, briefs of counsel
and applicable law, the Court finds the contract between Defen-
dant and the State of Ohio insufficient to make it fair and reason-
able for the out-of-state corporation to defend a suit in this jurisdic-
tion. See, Ohio State Tie & Timber vs. Paris Lumber, 8 Ohio App.
3d 236 (1982).
Defendant’s Motion To Dismiss is sustained and Plaintiff's
Complaint is hereby ordered dismissed at Plaintiff's costs.
APPROVED:
Attorney for Plaintiff
/s/ William G. Houser
Attorney for Defendant JUDGE
17a
[FILED APRIL 21, 1988]
IN THE COURT OF COMMON PLEAS
MAHONING COUNTY, OHIO
KENTUCKY OAKS
MALL CO. ) CASE NUMBER 88 CV 57
PLAINTIFF ) JUDGE WILLIAM HOUSER
vs. ) MOTION TO DISMISS
MITCHELL’S FORMAL
WEAR, INC. )
DEFENDANT )
Now comes the Defendant, Mitchell’s Formal Wear, Inc., by
and through its counsel, and pursuant to Rule 12(B) of the Ohio
Rules of Civil Procedure, moves this Court foran Order dismissing
Plaintiff's Complaint on the grounds of improper venue and lack
ofin personam jurisdiction. The reasons for this motion are stated
more fully in the brief attached hereto and incorporated herein as
though fully rewritten.
Respectfully submitted,
/s/
JEFFREY B. FLECK, Esq.
MARY DeGENARO, ESQ.
FLECK, MOSTOV & SCHWARTZ
1100 Wick Building
Youngstown, Ohio 44503 ;
216/743-3344
Attorneys for Defendant
18a
5
a
3
4
a
BRIEF
On or about March 28, 1985, Plaintiff (hereinafter referred
to as “Cafaro”) and Defendant (hereinafter referred to as “ Mitch-
ell’s”) entered into a lease agreement concerning property located
in Paducah, Kentucky. One of the inducements to Mitchell’s to
enter into said lease agreement, was that Cafaro represented that
a department store, or anchor store would be located at the end of
the mall where Mitchell was leasing space. Based upon this
representation, Mitchell’s entered into said lease. However, there
was no such anchor store, and as a result, Mitchell’s sustained
significant business loss due io its location within the mall.
Due to a substantial loss of income, in 1986 in the approxi-
mately amount of $40,000.00, Mitchell’s attempted to negotiate
with Cafaro mutually acceptable ground upon which to terminate
said lease. These negotiations continued through October, 1987
with various agents of Cafaro who appeared to have actual
authority to enter into some sort of settlement agreement.
Sometime in October, 1987 Cafaro and Mitchell’s reached
an agreement as to terms under which the lease agreement would
be cancelled. (Exhibit “A”). Cafaro persuaded Mitchell’s to
remain as tenants through the end of 1987. Mitchell’s was then to
vacate the premises by January 8, 1988 and present Cafaro with a
check in the amount of $7,000.00 to fully release it of any obliga-
tions under the lease. On or about November 23, 1987 Mitchell’s
executed said agreement and forwarded it to Cafaro. On or about
December 28, 1987, Mitchell’s forwarded to Cafaro a check in the
amount of $7,000.00 (Exhibit “B”) pursuant to the oral agreement
reached between the parties. Cafaro is still in possession of said
check and, contrary to the oral agreement reached by Cafaro and
Mitchell’s, instituted this action.
Cafaro’s Complaint must be dismissed, as not only does
this Court lack in personam jurisdiction over Defendant, addition-
ally, this action is improperly venued. Paragraph 44 of the lease
agreement provides as follows:
“44. Governing Law. This lease shall be governed
by and construed in accordance with the applicable
laws of the state where the Demised Premises are
located.”
The demised premises are twcated in the Kentucky Oaks Mall in
Paducah, Kentucky. Pursuant to Rule 3(B)(2), (3), (5) and (6), of the
Ohio Rules of Civil Procedure and Kentucky Rev. Statutes Sections
19a
a
452.400 and 452.450, the proper form for this action is the county
where the Defendant has its principal place of business, conducted
the activity which gave rise to the claim for relief or where the
property which is the subject of the action is located. In this case
on all three grounds the proper form is McCracken County,
Kentucky and not Mahoning County, Ohio. As there is an avail-
able forum pursuant to the above-quoted sections of both Ohio
and Kentucky Civil Rules, Plaintiff cannot avail itseif of Ohio Civ.
R. 3(B)(10) which provides that an action may be commenced in the
county in which a Plaintiff has its principal place of business.
Further, as Defer:dant is a Georgia Corporation with its
principal place of business located in Atlanta, Georgia, this Court
lacks in personam jurisdiction over the Defendant. rule 4.3(A) of
the Ohio Rules of Civil Procedure outlines when service is permit-
ted upon a non-resident of this state. A non-resident is subject to
service of process when the event out of which the claim which is
the subject of the complaint arose from the non-resident’s:
“1.Transacting any business in this state,
2.Contracting supply services or goods in this state...
4.Causing tortious injury in this state by an act or
omission outside this state if he regularly does or
solicits business, or engages in any other persistent
course or conduct or derived substantial revenue
from goods used orconsumed or services rendered
in this state;” Ohio Civ. R. 4.3(A) 1, 2 and 4
Mitchell’s meets none of the above bases for out of state service.
The lease agreement was entered into to effect the business of
providing a tuxedo rental service in the state of Kentucky, and not
in the State of Ohio. Mitchell’s does not have any of the minimum
contacts set out by Rule 4.3 of the Ohio Rules of Civil Procedure to
vest this Court with in personam jurisdiction.
For the foregoing reasons, and upon the authorities cited,
Defendant, Mitcheil’s Formal Wear, Inc., respectfully requests
that this Court grant its Motion to Dismiss on the grounds that this
action is improperly venued and, further, that this Court lacks in
personam jurisdiction over Defendant. Defendant further prays
for its costs, including reasonable attorney fees incurred in pre-
senting this Motion, and any other such relief as the Court may
find equitable and just.
20a
7
7
3
ef
%
Respectfully submitted,
/s/
JEFFREY B. FLECK, ESQ.
MARY DeGENARO, ESQ.
FLECK, MOSTOV & SCHWARTZ
1100 Wick Building
Youngstown, Ohio 44503
216/743-3344
Attorneys for Defendant
CERTIFICATE Or SERVICE
I hereby certify that acopy of the foregoing Motion to Dismiss
has been delivered by regular U. S. Mail to: Daniel Daniluk,
Attorney for Plaintiff, 2445 Belmont Avenue, Youngstown, Ohio
44505 this 21st day of April, 1988.
j
/s/
JEFFREY B. FLECK, Esq.
MARY DeGENARO, ESQ.
Attorneys for Defendant
As they do not pertain to this Petition for Writ of Certioran,
Exhibits A and B to the Motion to Dismiss are not reproduced.
[FILED ON JUNE 8, 1988]
IN THE COURT OF COMMON PLEAS
MAHONING COUNTY, OHIO
KENTUCKY OAKS MALL CO. :
PLAINTIFF, : CIVIL ACTION
vs. ; FILE NO. 88-CV-57
MITCHELL’S FORMAL
WEAR, INC., : JUDGE WILLIAM
HOUSER
DEFENDANT.
DEFENDANT'S SUPPLEMENTAL BRIEF OF
AUTHORITY IN SUPPORT OF ITS MOTION TO DISMISS
FACTS
In March of 1985, Plaintiff, an Ohio limited partnership,
(hereinafter referred to as “Ky. Oaks”) and Defendant, a Georgia
corporation, (hereinafter referred to as “ Mitchell’s”) entered intoa
lease agreement concerning property located in Paducah, Ken-
tucky. Mitchell’s is a Georgia corporation engaged in tuxedo sales
and rentals in the southeastern United States only. Neither of these
activities is conducted in Ohio. No officer of or counsel for
Mitchell’s went to Ohio to conduct negotiations. Mitchell’s has no
officers, agents or stores in Ohio.
The leased premises was built in Kentucky by a Kentucky
contractor. The lease stated that rental payments would be paid to
Cafaro in Youngstown, Ohio.
On January 22, 1988, Cafaro sued Mitchell’s in Mahoning
County, Ohio. The court can take judicial notice of the fact that the
Ohio line is approximately 270 miles from the instant shopping
center in Paducah, Kentucky. The lease recites that the governing
law is the law of the state where the shopping center is located,
22a
4
3
namely Kentucky. Mitchell’s moved to dismiss the action because
Ohio lacks personal jurisdiction over Mitchell’s.
Ae O NOTIONS OF FAIR PLAY AND
SUBSTANTIAL JUSTICE” REQUIRE THAT THIS
CASE BE DISMISSED.
The Due Process Clause “requires .. . that in order to
subject a defendant to ajudgmentin personam, if he be not present
within the territory of the forum, he have certain minimum
contacts with it such that the maintenance of the suit does not
offend ‘traditional notions of fair play and substantial justice.”
International Shoe co. v. Washington, 326 U.S. 310, 316. (1945)
(quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). In Wainscott
v. St. Louis-San Francisco Ry. Co., 47 Ohio St.2d 133 (1976), the
Ohio Supreme Court applied the guidelines set out in Interna-
tional Shoe and determined that the contacts which existed be-
tween the out-of-state defendant and the State of Ohio were
insufficient for the State of Ohio to fairly claim jurisdiction. In
Wainscott, the Missouri defendant solicited business in Ohio, paid
personal and property taxes in Ohio, and maintained two offices
in Ohio. The court stated that “[t]he opinion in International Shoe
makes it clear that the quality and nature of the activity conducted
within a state in a given case must be viewed in relation to the fair
and orderly administration of the laws.” Id. at 143. In spite of the
defendant's substantial activity in Ohio, the court concluded that
the existing contacts were not “such as to make it fair and reason-
able for the [out-of-state] corporation to defend a suit in this
jurisdiction.” Id. at 144.
Unquestionably, the Missouri corporation in Wainscott
had substantially more contacts with Ohio than does Mitchell’s in
the present case. The only contacts Mitchell’s has with Ohio are the
payment of rent to an Ohio location and the fact that the contract
was accepted in Ohio. Additionally, the Missouri corporation
actively pursued its Ohio contacts by soliciting business there.
Mitcheil’s never solicited business in Ohio; any activities con-
ducted in Ohio were incidental to the leasing of Kentucky prop-
erty. Consequently, it would not comport with “traditional no-
tions of fair play and substantial justice” for Mitchell’s to be forced
to defend a suit in Ohio.
The court in Garrett v. Ruth Originals Corp., 456 F.Supp
376 (S.D. Ohio 1978), also applied the guidelines set out in Interna-
tional Shoe to a case construing the Ohio long-arm statute. Their
application of the guidelines focused on several factors that the
Sixth Circuit had identified as important in the analysis. Ia. at 381.
23a
When applying these factors to the present case, the conclusion is
no different than that compelled by the Wainscott analysis -- it is
unreasonable to require Mitchell’s to defend a suit in OHio.
One of the factors important to a fairness analysis is
“presence” in the forum. Presence in the forum is important
“because physical contacts ‘provide a clue to the significance
attached by the defendant to the activities occurring within the
forum state -- and thus aclue as to his expectations.’” Garrett at 382
(quoting In-Flight Devices Corp. v. Van Dusen. Air, Inc., 466 F.2d
220 (6th Cir. 1972)). In the case at hand, no agent of Mitchell’s was
physically present in Ohio for purposes involving the lease.
According to the Garrett court, the lack of presence, although not
dispositive is “significant.” Id.
A second factor which must be considered is “the reason-
able expectations of the defendants in light of the actual impact
upon the forum.” Id. The only impact on Ohio resulting from the
lease negotiations is “the creation of a duty owed to one of its
residents.” Id. at 380. The court in Garrett recognized such an
obligation as an “extreme case,” and a “simple case,” Id., unlike
the unavoidable impact present in Garrett where the defendant
“required that the plaintiff leave his established position of em-
ployment and place of residence in Ohio,” thereby “withdrawing
his human capital from the state.” Id.
A third factor to be considered is the “expectations the
defendant reasonably should have had with regard to the possibil-
ity of defending a suit in a distant forum.” Id. at 382. Mitchell’s
maintains no office in Ohio, none of its representatives spend time
there, and it receives no income from Ohio. All contacts Mitchell's
has with Ohio are incidental to its leasing of Kentucky real estate
from Plaintiffin Kentucky, approximately 270 miles from the Ohio
lines. It is unreasonable to contend that Mitchell’s should have
expected to defend a suit in Ohio.
Il. OHIO LACKS IN PERSONAM JURISDICTION
I : U IT LL’S
N SINESS IN OHIO.
Ohio Rev.Code §2307.382 provides in pertinent part, that:
(A) A court may exercise personal jurisdiction over a
person who acts directly or by an agent, as to a cause of action
arising from the person’s: (1) transacting any business in this
state; (2) contracting to supply services or goods in this state; and
(3) causing tortious injury by an act or omission in this state.
However, according to the Ohio Court of Appeals, “Ohio
has not extended long-arm jurisdiction to the limits of due process
24a
OE eT TO ee aT
a al ps as ae
but, instead, actual transaction of business in Ohio is a prerequisite
to rN exercise of long-arm jurisdiction under the circumstances,”
i Vv. ber, 8 Ohio App.3d 236, 238
(1982), Therefore, in addition to the traditional due process
minimum contact requirements, see, International Shoe Co. v.
Washington, 326 U.S. 310 (1945), Wainscott v. St. Louis - San
Francisco Ry. Co., 47 Ohio St. 2d 133 (1976), there is a requirement
that an out-of-state resident transact business in Ohio for Ohio to
exercise jurisdiction over him. The court in Ohio State Tie &
Timber relied on Ohio Civ. R. 4.3(a) to reach this conclusion. Ohio
State Tie & Timber, Inc. v. Paris Lumber, 8 Ohio App 3rd 236, 238.
Ohio Civ. R. 4.3(A) defines when out-of-state service of process is
permitted. The language of the rule parallels the language of the
long-arm statute. Civ.R.4.3(A) permits the service of process
outside of Ohio upon a non-resident only under certain specified
circumstances, including when the non-resident is “transacting
any business in this state.” Ohio Civ.R. 4.3(A)(1). This subsection
of the rule is the only possible basis for Ohio to exercise long-arm
jurisdiction over Mitchell's in this case. Therefore, the issue in this
case is whether Mitchell’s ever transacted any business in the State
of Ohio. The answeris no. Mitcheil’s has insufficient contacts with
Ohio to charge it with transacting business in Ohio and thereby
subject it to Ohio jurisdiction in that its only contacts with Ohio
were the payment of rent to an Ohio location and the fact that the
contacts with Ohio were the payment of rent to an Ohio location
and the fact that the contract was accepted in Ohio.
Further, the fact that the contract was accepted in Ohio is
not a “contact” with Ohio for jurisdictional purposes. Rather, the
location of a contract’s acceptance usually determines which law
will govern the terms ofa contract. However, this lease specifically
states in paragraph 44 that “[t]he lease shall be governed by and
construed in accordance with the applicable laws of the state
where the demised premises are located.” Because the demised
premises are located in Paducah, Kentucky, Kentucky law con-
trols.
Kentucky may assert jurisdiction over both parties while
complying with constitutional due process requirements. In Info-
Med, Inc. v. National Healthcare, Inc., 669 F.Supp. 793 (W.D.Ky.
1987), the court states, “[i]t is a well established that the Kentucky
long-arm statute allows state courts to reach to the full constitu-
tional limits of due process in the extension of jurisdiction over
non-resident defendants.” Id. at 795. Kentucky’s long-arm stat-
ute, KRS 454.210(2)(a)(1), states in part:
25a
A court may exercise personal jurisdiction over a
person who acts directly or by an agent, as to a
claim arising from the person’s: 1. Transacting any
business in this Commonwealth. . .
Therefore, again the issue is whether both parties were transacting
business in Kentucky. The answer is yes.
Ky. Oaks operates the Kentucky Oaks Mall in Paducah,
Kentucky. Mitchell’s leased a store from Ky. Oaks in that Mall.
Certainly, these operations constitute transacting business in
Kentucky. Therefore, Kentucky may properly assert jurisdiction
over both parties.
Frequently, where the Ohio courts have dismissed cases
because of a lack of jurisdiction over an out-of-state defendant, the
defendant has had many more contacts with Ohio than does
Mitchell’s. In Ohio State Tie & Timber, the court granted the de-
fendant’s motion to dismiss for lack of personal jurisdiction. The
court held that “[t]he ordering of goods from an Ohio resident by
telephone from Kentucky bya Kentucky resident, which goods are
to be shipped to Kentucky by the Ohio resident does not constitute
the transaction of business in Ohio by the Kentucky resident who
ordered the goods, even though the goods had to be specially
prepared to meet the needs of the Kentucky resident.” Id. at 238.
In the case at hand, the defendant's contacts with Ohio are
less substantial than the out-of-state defendant's in Ohio State Tie
& Timber. In this case, the only contacts between the Ohio
resident, Ky. Oaks, and the out-of-state defendant, Mitchell's,
were telephone calls and letters through the mail. Never was
Cafaro required to specially prepare and ship goods from Ohio to
Mitchell’s in another state. Moreover, the property covered by the
lease agreement between the parties is in Kentucky, not Ohio.
Another case, factually similar to the one at hand, where
the Court of Appeals for Ohio found that Ohio had no jurisdiction
over a non-resident corporation is NRM Corp. v. Pacific Co., 36
Ohio App.2d 179 (1973). In NRM, an Ohio corporation NRM, filed
an action in Ohio court on an account with an Oregon corporation,
Pacific. Pacific had signed and mailed to NRM an order for the
purchase of machinery. The machinery was manufactured in
Ohio and shipped to Oregon. Thirty-three payments were mailed
from Oregon to NRM in Ohio over the course of 3 years. Business
transactions were conducted by mail and by telephone for the
most part. One time, however, Pacific’s purchasing agent trav-
elled to Ohio to negotiate differences that had arisen between the
parties. Nevertheless, the court held that “the signing, and
26a
mailing, in Oregon, of an order for the purchase of machinery by
an Oregon corporation from an Ohio corporation, which machin-
ery is to be shipped to and used in Oregon, is not such a’minimum
contact’ in Ohio as to charge the Oregon firm with ‘transacting any
business’ in Ohio, and thereby subject it to the jurisdiction of the
Ohio courts. The fact that an agent of NRM visited Akron to
compromise the controversy is immaterial.” Id. at 182.
The contacts involved ix the case at hand are substantially
fewer than those involved in NRM. Never did an agent or officer
of Mitchell’s travei to Ohio. Never was Ky. Oaks required to ship
any product to Mitchell’s in another state. The only contacts
Mitchell’s had with Ohio were the negotiations conducted by tele-
phone and mail and the payment of rent to Ky. Oaks in Ohio.
Accordingly, Mitchell’s has insufficient contacts in Ohio to charge
it with transacting any business in Ohio, and to subject it to the
jurisdiction of the Ohio courts.
Consistently, when Ohio has asserted jurisdiction over an
out-of-state defendant, the contacts the defendant has had withthe
state are substantially greater that the contacts Mitchell’s has with
Ohio. For example, in a case with facts similar to the facts of this
case, Meadowbrook Mall Co. v. State Side Imports of West Vir-
ginia, Inc., Mahoning Common Pleas no. 84-CV-1250 (unreported),
the defendant’s motion to dismiss for lack of personal jurisdiction
was denied because it was found that the defendant had trans-
acted business in the State of Ohio. However, in that case, the
defendant had not only negotiated a lease with the plaintiff, an
Ohio company, for out-of-state property, but additionally it had
negotiated a contract with the plaintiff's contractor, also an Ohio
resident. The fact of additional negotiations distinguishes Mead-
owbrook Mall from the present case.
Ill. THIS ACTION IS IMPROPERLY VENUED.
By attempting to bring this a-tion in Mahoning County,
Ohio, Ky. Oaks has attempted to avaii itself of the doctrine of
forum non conveniens, which was explicitly rejected by the Ohio
Supreme Cort in State, ex. rel. Starnerv. Deltoff, 18 Ohio St. 3d 163
(1985).
Pursuant to Civ. R. 3, an Action is to be tried where venue
is proper, not convenient forthe Plaintiff. The Court of Appeals for
Trumbull County has held in Beraducce v. Teachers Retirement
System, 21 Ohio App. 3d 195 (1984) that the controlling authority
interpreting Civ. R. 3, governing venues, is Varketta v.Gen Motors
Corp., 34 Ohio App. 2d 1 (1973).
27a
In resolving whether the bases for venue set out in the rule are
each alternatives to the other, the Court held:
“The answer to this question is obvious by a clear
reading of the language of this rule. Civil Rule 3(B)
establishes a system of priorities. The first nine pro-
visions of 3(B) are alternatives, and each may be a
proper basis for venue, but they do not have to be
followed in any order. Plaintiff has a choice where
the action will be brought if any of the counties
specified in C. R. 3(B)(1) through (9) are a proper
forum under the facts of the case. The tenth provi-
sion under civil Rule 3(B)(10) is available only if
none of the first nine is available, and the eleventh
provision is only available if none of the first ten is
available.” Id. at 6.
The decision in Varketta that if a forum pursuant to Civ. R.
3(B)(1) through (9) is availabie, then action must be venued there
(see syllabus).
This is buttressed by the Ohio Supreme Court’s
decision in Morrison v. Sterner, 32 Ohio St. 2nd 86
(1972) were the court held:
“The first nine provisions of Civ. R. 3(B) are on an
equal status, and any court therein maybe a proper
and initial peace of venue.” Id. at 89.
See also, staff notes to Civ. R. 3(B). There is an available
forum under Civ. R. 3(B)(2), (3), (5), and (6) in McCracken County,
Kentucky, where this action wculd be properly venued, and must
be brought. Therefore, pursuant to Civ. R. 3(B) and the holding in
Varketta and Morrison, Ky. Oaks cannot use Civ. R. 3(B)(1) as a
basis for vesting this Court with venue in this action, as the proper
venue for this action is McCracken County, Kentucky, which is a
forum available to Ky. Oaks. This action must be dismissed for
improper venue.
The Mahoning County Common Pleas Court has spoken
on these issues. Judge Jenkins in Case No. 84 CV 1206 dismissed
the same plaintiffin that case for want of jurisdiction. The facts are
basically the same. The law is the same.
CONCLUSION
The defendant's motion to dismiss should be granted. The
28a
Ohio court lacks personal jurisdiction over the defendants because
the defendants have insufficient minimum contacts with Ohio to
constitute “the transacting of any business” as required for juris-
diction by Ohio Civ. R. 4.3(A)(1). Additionally, the Ohio court’s
assertion of personal jurisdiction over the defendants does not
comport with “traditional notions of fair play and substantial
justice,” as required by International Shoe and its progeny.
In addition to the foregoing, plaintiff requests that the
Motion to Dismiss be granted on the grounds inat this action is
improperly venued for the foregoing reasons and upon the au-
thorities cited.
HARMON, SMITH & BRIDGES Respectfully submitted,
/s/ /s/
ARCHER D. SMITH, III JEFFREY B. FLECK, ESQ.
1759 Peachtree Road, N.E. MARY DeGENARO, ESQ.
Atlanta, GA 30309-2303 Fleck, Mostov & Schwartz
404/881-1200 1100 Wick Building
Youngstown, Ohio 44503
OF COUNSEL 216/743-3344
Attorneys for Defendant
29a
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing Supplemental
Brief of Defendant has been hand delivered this 8th day of June,
1988, to: Daniel Daniluk, Esq. and Jay Blackstone, Esq., Counsel
for Plaintiff, at the Mahoning County Courthouse, Youngstown,
Ohio 44503.
/s/
JEFFREY B. FLECK, ESQ.
MARY DeGENARO, ESQ.
Attorneys for Defendant
LEASE
THIS LEASE, made on the 28th_ day of March, 1985, by
and between KENTUCKY OAKS MALL COMPANY, an Ohio
Limited Partnership _, having an office at 2445 Belmont Avenue,
P. O. Box 2186, Youngstown, Ohio 44504 (hereinafter referred to as
“Landlord”), and MITCHELL'S FORMAL WEAR, INC, a Geor-
ia Corporation, having an office at 4030C Pleasantdale Road, At-
lanta, GA_30340 (hereinafter referred to as “Tenant”).
WITNESSETH:
1. Demised Premises
The Landlord hereby demises and leases to the
Tenant, and the Tenant hereby rents from the Landlord, the
following described premises situated in the__City _ of Paducah
, County of __ McCracken _ and State of _ Kentucky
A one-story room, without basement, having approximate
measurements of _Thirty and 00/100 - (30.00) feet
in width, (Center to center of side walls), and Twenty-five
7 .67) feet in depth, (Outside of front
wall tocenter of rear wall), located as shown outlined in red
on Exhibit C, attached hereto and made a part hereof, to be
constructed by Landlord as part of a shopping center
known as KENTUCKY OAKS MALL (hereinafter referred
to as “Shopping Center”). The Demised Premises are
identified as:
UNIT NO. 640 KENTUCKY OAKS MALL __ Paducah,
Kentucky
“Demised Premises”, as used in this lease, shall refer to the
storeroom described above (but shall not include the roof of the
Demised Premises and the area beneath the Demised Premises).
Gross area of the Demised Premises shall be the number of square
feet of total floor space (including the mezzanine and double-
decked storage platforms, if any).
The size, type and shape of the building in which the
Demised Premises are located and/or the Shopping Center shall
be subject to such changes, enlargements and/or reductions as
Landlord at any time deems desirable for the benefit of the
3la
Shopping Center, so long as the location and size of the Demised
Premises shall not be substantially changed except as otherwise
specifically provided for in this lease.
Landlord shall have the exclusive right to use all or any
partof the roof overthe Demised Premises and exterior walls of the
Demised Premises for any purpose; to erect in connection with the
construction there of temporary scaffolds and other aids to con-
struction on the exterior of the Demised Premises, provided that
access to the Demised Premises shall not be denied; and to install
and use pipes, ducts, conduits and wires leading through the
Demised Premises and serving other parts of the Shopping Center
in locations which will not materially interfere with Tenant’s use
thereof. In addition to the foregoing, Landlord may make any use
- it desires of the side and rear walls of the Demised Premises,
provided that there shall be no encroachment upon the interior of
the Demised Premises and provided further that the Tenant’s
access to the Demised Premises shall not be impaired. Landlord
hereby reserves the right at any time to make alterations or
additions to, and to build additional stories on, the building in
which the Demised Premises are contained and to build adjoining
the same. Landlord also reserves the right to construct other
buildings or improvements in the Shopping Center from time to
time and to make alterations thereof or additions thereto and to
build additional stories on such building or buildings and to
incorporate additional land into the Shopping Center and build
thereon and to construct deck or elevated parking facilities.
2. Construction
Landlord and Tenant agree that the construction and
improvements of the Demised Premises shall be done as described
in Exhibit A entitled “Specifications”, attached hereto and made a
part hereof. Any work in addition to any of the items specifically
enumerated in said Exhibit A shall be performed by the Tenant at
its owncost and expense. Any work thatis an obligation of Tenant
but is done by Landlord on behalf of Tenant, whether or not
pursuant to Exhibit A orto this clause, shall be at Tenant's sole cost
and expense and will be paid for by Tenant to Landlord based on
the cost to Landlord of such work, together with the sum equal to
fifteen percent (15%) of said cost for overhead and an additional
sum equal to ten percent (10%) of said amount for profit, all due
and payable within ten (10) days after billing from Landlord to
Tenant.
If Tenant does not submit to Landlord the drawings and
32a
specifications (whether original or revised) required in Exhibit A
within the time limits therein set forth, or if Tenant fails to proceed
with the work required to be done by Tenant as set forth herein or
in Exhibit A, then for purposes of determination of commence-
ment of the term as set forth in Clause 3 hereof, the Demised
Premises shall be deemed to be substantially completed by Land-
lord when so much of such work shall have been substantially
completed by Landlord as could then be performed without such
drawings and specifications or without such work of Tenant. In
any event, Landlord’s work shall have been substantially com-
pleted when so much as been accomplished as to permit Tenant to
enter the Demised Premises to begin any work required to be done
by Tenant or to begin fixturing.
Opening for business in the Demised Premises by Tenant
shall constitute an acceptance of the Demised Premises and an
acknowledgement by Tenant, that the Demised Premises are inthe
condition required under this lease, except as to deficiencies of
which Tenant notifies Landlord in writing prior to opening.
3. Term
TO HAVE AND TO HOLD the Demised Premises for a
term of ten (10) lease years, to commence seventy-five (75) days
after substantial completion of all of Landlord’s work in the
Demised Premises in accordance with Clause 2 of this lease, or on
the date Tenant opens for business (whichever is sooner).
The first lease year shall be for a period of twelve (12)
consecutive calendar months from the commencement date of the
lease term, except that if such commencement date shall be other
than the first day of a calendar month, the first lease year shall be
the period from such commencement date to the end of the calen-
dar month in which it shall occur, plus the following twelve (12)
calendar months. Each lease year after the first lease year shall be
a successive period of twelve (12) calendar months.
The parties agree that once the commencement date of the
term has been established and upon the request of either party, a
short form or memorandum of this lease will be executed for
recording purposes, which short form or memorandum of lease
wiill set forth the actual commencement and termination dates of
the term. Tenant agrees that it shall not record this lease without
the written consent of the Landlord. Any fees or cther charges
levied by any governmental authority, including the cost of re-
‘cording said short form or memorandum of lease, will be at the
expense of the party requesting that said lease be recorded.
33a
If the term of this lease shall not have commenced within
five (5) years of the date hereof, then this lease shall automatically
become null and void and both parties relieved of all obligations
hereunder.
Tenant covenants and agrees that promptly after Landlord
delivers possession of the Demised Premises to Tenant, Tenant
shall commence and shall proceed with due diligence to make all
. improvements to and install in the Demised Premises all fixtures
and other equipment which may be necessary or proper in the
operation of Tenant’s business and thereafter to open its store for
business.
4._ Mini nt
Tenant hereby covenants and agrees to pay to the Landlord
as minimum annual rental for the Demised Premises, the follow-
ing:
(a) Commencing with the first (1ST) lease year and
continuing to the end of the _ FIFTH (STH) lease
year of the term of this lease, the sum of _ FOUR-
and_ 04 D ARS
($14,000.04) per year, payable in equal monthly in-
stallments of ONE THOUSAND ONE HUNDRED
IXTY- and 67/100 DOLLARS ($1,167.6
each, all in advance on the first day of every calen-
dar month during said period. Landlord shall
grant a credit of One Thousand Five Hundred
Dollars ($1,500.00) to Tenant’s rent obligation above,
and apply such to Tenant’s rent forthe first and sec-
ond months of the term hereof.
If the term of this lease shall commence on a day
other than the first day of the month, Tenant shall
pay in advance on said commencement day Mini-
mum Rent equal to one-thirtieth (1/30) of the monthly
Menimum Rent multiplied by the number of days
in the fractional month for which Tenant is obli-
gated to pay rent.
(b) Commencing with the _ SIXTH (6TH) lease year
and continuing to the end of the TENTH (10TH)
lease year of the term of this lease, the sum of
SI OUSA nd_08/100 DOLLARS
.08) per year, payable in equal monthly in-
stallments of
RTY-THREE a 00 -
LARS _ ($1,333.34) each, all in advance on the first
day of every calendar month during said period.
5._ Percentage t
In addition to the payment of Minimum Rent as hereina-
bove provided, Tenant shall pay to Landlord during each year of
the term hereof as Percentage Rent, the following:
(a) Commencing with the first (1ST) lease year and
continuing to the end of the _FIFTH (5TH) lease
year, a sum equal to _SIX (6%) percent of ail gross
sales made in, on or from the Demised Premises
during each lease year during said period in excess
of $200,000.00, prorated for any period more than
a twelve (12) month lease year or less than a twelve
(12) month lease year, (hereinafter referred to as
“Breakpoint”).
(b) Commencing with the _SIXTH (6TH) lease year
and continuing to the end of the TENTH (10TH)
lease year, a sum equal to _SIX (6%) percent of all
gross sales made in, on or from the Demised Prem-
ises during each lease year during said period in
excess of $225,000.00, prorated for any period more
than a twelve (12) month lease year or less than a
twelve (12) month lease year.
In the event the fixed Minimum Rent for any lease year (or
partial lease year) shall be reduced or abated for any reason
whatsoever, the Breakpoint of gross sales for determining the
Percentage Rent shall likewise be reduced proportionately. In the
event Tenant ceases to operate its business in the Demised Prem-
ises for any reason whatsoever, then the gross sales made in, on,
or from the Demised Premises during the lease year in which
Tenant ceased to operate its business in the Demised Premises
shall equal the amount of gross sales actually made in, on or from
the Demised Premises during that lease year multiplied by the
fraction having as its numerator 365 and having as its denominator
the number of days during that lease year Tenant was actually
open for business in the Demised Premises in compliance with
Clause 6 of this lease.
Tenant shall submit to the Landlord on or before the
fifteenth (15th) day following each monthly period during the
term hereof, a written statement of gross sales for the preceding
calendarmonth, such statement to set forthin reasonable, accurate
detail the amount of gross sales for said monthly period. Com-
ill
mencing with the month in which the aggregate gross sales for any
lease year (or for a partial lease year) shall first exceed the Break-
point set forth in this Clause 5 (or a proportionate part thereof for
a partial lease year) and thereafter, as to all gross sales during the
remainder of such lease year (or partial lease year), Tenant shall
pay to Landlord Per -entage Rent concurrently with the submis-
sion by Tenant of the written statement of gross sales. On or before
the last day of the menth following the close of each lease year (or
partial lease year), Tenant shall furnish to the Landlord astatement
certified either by a certified public accountant employed by
Tenant orby anofficer of Tenant of the gross sales forthe preceding
lease year (or partial lease year) and shall tender therewith the bal-
ance of Percentage Rent due for such lease year (or partial lease
year). If the Percentage Rent installments paid by Tenant during
any lease year (or partial lease year), exceed the Percentage Rent
due for such lease year (or partial lease year), Landlord shall
refund said excess amount to Tenant within thirty (30) days after
receipt of Tenant's certified statement of gross sales.
“Gross sales”, as used herein, shall mean the amount of
sales of all merchandise and/or services sold or rendered in, on,
about or from the Demised Premises by Tenant orany subtenants,
licensees or concessionaires, whether for cash oronacharge, credit
or time basis without reserve or deduction for inability or failure
to collect, including but not limited to such sales and services: (1)
where orders originate at and/or are accepted by Tenant in
demised Premises but delivery or performance thereof is made
from or at any place other than the Demised Premises; (2)
pursuant to mail, telegraph, telephone or other similar orders
received or filled at or in Demised Premises; (3) by means of
mechanical and other vending machines in the Demised Premises
(but this shall not be construed as aconsent of Landlord to Tenant's
use of such machines); (4) which Tenant in the normal and
customary course of business would credit or attribute to its
business upon Demised Premises or any part or parts thereof.
There shall be deductible from gross sales (to the extent that they
are included):
(a) Amounts of refunds, allowances or discounts to
customers provided they have been included in
gross sales and provided further that if such re-
funds, allowances or discounts are in the form of
credits to customers, such credits shall be included
in gross sales when used.
= eh te) NES ba
(b) Exchange of merchandise between stores of Tenant
where such exchanges are made solely for the op-
eration of Tenant’s business and not for the pur-
pose of consummating a sale which has been made
at, in, on or from the Demised Premises and/or for
the purpose of depriving Landlord of the benefit of
such sales which ctherwise would have been .nade
at, in or from the Demised Premises.
(c) Returns to shippers and manufacturers for credit.
(d) Sales of trade fixtures orstore operating equipment
after use thereofin the conduct of Tenant's business
in the Demised Premises.
(e) All sums and credits received in settlement of
claims for loss or damage to merchandise.
(f) Amount of any excise or sales iax levied upon retail
sales and payable over to the appropriate govern-
mental authority, provided that specific record is
made at the time of each sale of the amount of sales
tax and the amount thereof is expressly charged to
the customer.
The Tenant covenants and agrees to keep upon the De-
mised Premises or at its principal office, books and records in ac-
cordance with generally accepted accounting practice, in which
shall be recorded gross sales. The books and records of account
shall also include all federal, state and local tax returns of Tenant
relating to Tenant's sales. Such books and records shall be open to
the inspection of the Landlord and Landlord’s authorized agents
at all reasonable times upon reasonable notice, during business
hours at any time during the term of this lease and fora period of
at least one (1) year after the termination of this lease. If Landlord
shall make an audit of Tenant’s records and any such audit shows
that the amount of gross sales on Tenant’s statement was under-
stated by more than Two Percent (2%) for any calendar year (but
prorated for any shorter period), then Tenant (in addition to
paying the Percentage Rent due for such understatement) shall
pay to Landlord the cost of the audit.
6. Use
Tenant agrees that the Demised Premises shall be occupied
by no other person or entity except upon and with the written
consent of Landlord first had, and shall be used for the sole
purpose of _a retail store forthe sale and rental of formal wearand
related wedding items and apparel. Tenant recognizes that
37a
the specific limited use prescribed herein is a material considera-
tion to Landlord in order that the Shopping Center will maintain
an appropriate tenant mix.
Unless otherwise consented to in writing by Landlord,
Tenant agrees to conduct its business i in the Demised Premises
under the name of
Tenant agrees to keep its Demised Premises adequately
illuminated and continuously and uninterruptedly open for busi-
ness during the same days, nights and hours as any department
store or stores located in the Shopping Center and at least, in any
event, from the hours of 10:00 a.m. to 9:30 p.m. Monday through
Saturday, and shall maintain therein a substantial stock of mer-
chandise and a sufficient number of employees for the purpose of
selling said merchandise, unless prevented from doing so by-
strikes, fire, casualties or other causes beyond Tenant's control. In
no event, however, will Tenant open for business after 10:00 p.m.
or before 9:00 a.m. on any day without Landlord’s consent. Tenant
shall be under no obligation to be open on any Sunday.
Tenant agrees that so long as this lease remains in effect,
Tenant (or any officer, director orshareholder owning capital stock
of Tenant if Tenant be a corporation) will not, either within the
Shopping Center (except under lease from Landlord) or within
five (5) miles of the Shopping Center, measured from the perime-
ter of the Shopping Center, directly or indirectly own, operate or
be financially interested in, either itself or with others, a business
like orsimilarto the business authorized to be conducted under the
terms of this lease. Due to the difficulty in determining the extent
to which Landlord would be damaged by reason of loss of Percent-
age Rent or otherwise in the event that Tenant should breach the
foregoing covenant, Tenant agrees that Landlord shall, in addition
to any other remedies otherwise available to it, be entitled to add
seventy-five percent (75%) of the gross sales (as defined in this
lease) from any such location established in violation of the
foregoing covenant to the gross sales from the Demised Premises
for the determination of Percentage Rent due under Clause 5
thereof. Tenant agrees to furnish to Landlord an annual certified
statement of gross sales from any such location(s) in accordance
with Clause 5 of this lease.
Tenant further agrees that during the entire term hereof, no
part of the Demised Premises shail be abandoned or left vacant
unless the Demised Premises have been destroyed by fire or other
casualty.
2)
(3)
(4)
(5)
(6)
A. Affirmative Obligations
Tenant agrees at its own cost and expense
to:
(1)
t
Keep and maintainina safe, neat and clean condi-
tion all portions of its Demised Premises and ap-
purtenances including adjoining areas, storefront,
vestibules, entrances and returns, doors, fixtures,
windows and plate glass.
Use its best efforts to cause all trucks servicing its
Demised Premises to load and unload priorto the
hours of opening for business to the general
public of the Shopping Center, where reasonably
practicable in light of Tenant’s business opera-
tion.
Cause its employees, officers and agents to park
only in such places as provided and designated
by the Landlord for employee parking, and spe-
cifically, not to permit parking by any of them in
any service court area. (Landlord reserves the
right to impose fines against Tenant for any vio-
lation of these parking restrictions by Tenant or
Tenant's employees; Landlord further reserves
the right to have towed any automobile parked in
violation of this clause.)
Abide by and observe all reasonable rules and
regulations established by Landlord from time to
time with respect to the operation of the Shop-
ping Center and its Common Areas.
Cooperate fully with the Landlord and other ten-
ants of the Shopping Centerin promoting the use
of trade names and slogans as may be adopted for
the Shopping Center and in all promotional and
advertising campaigns.
Advertise with a display-type advertisement a
minimum of two (2) times during each lease year
with a total of at least one-eighth (1/8) tabloid per
lease year in the printed media selected by Land-
lord or the Merchants Association or Marketing
Fund, and pertaining to events sponsored by
Landlord or the Merchants Association or Mar-
keting Fund; in the event Tenant fails or refuses
to comply with these minimum advertising re-
39a
(7)
(8)
(9)
(10)
(11)
quirements, Tenant will pay to Landlord an amount
equal to the cost of such advertisements, upon
demand, said amount to be considered as addi-
tional rental for the purposes of this lease. Addi-
tionally, Tenant agrees to expend three percent
(3%) ofits gross sales on local and regional adver-
tising (electronic and paper) in each year.
Keep its display windows and signs electrically .
lighted during such hours that the Shopping
Centeris open for business and during such other
periods as the Landlord may reasonably pre-
scribe.
Shut off all exhaust fans, if any, servicing the De-
mised Premises at all times when the Demised
Premises are closed; if Tenant’s Demised Prem-
ises front on an enclosed mall, Tenant shall main-
tain positive air pressure so as to prevent the
drawing ofheated orcooled air from the enclosed
mall and sha! keep the Demised Premises heated
or air-conditioned, as the case may be, to at least
the same minimum temperature (in the case of
heat) or at the same maximum temperature (in
the case of air-conditioning) as Landlord shall
attempt to maintain in such mall.
Handle and dispose of all trash, rubbish, refuse,
garbage and waste in accordance with regula-
tions established by Landlord, use and pay for
the services of the designated trash hauler for the
Shopping Center, and not permit the accumula-
tion (unless in sealed metal containers) or burn-
ing of any trash, rubbish, refuse, garbage or waste
materials in, on orabout any part of the Shopping
Center.
Participate in any reasonable exterminating pro-
grams that may be established by Landlord for all
or substantially all other stores and businesses in
the Shopping Center.
Take no action which would violate Landlord’s
union contracts, if any, affecting the Shopping
Center, nor create any work stoppage, picketing,
labor disruption or dispute or any interference
40a
(12)
with the business of the Landlord orany tenant or
occupant inthe Shopping Center orwith the right
and privileges of any customer or other person
lawfully in and upon said Shopping Center, nor
cause any impairment or reduction of the good-
will of the Shopping Center.
Pay when due all personal property taxes as-
sessed against Tenant's fixtures and furnishings,
all taxes arising out of the operation of Tenant’s
business, and pay for all license fees, occupa-
tional taxes and other governmental charges as-
sessed by reason of Tenant's use or occupancy of
the Demised Premises; Tenant will permit no lien
to attach to the Demised Premises as a result of
taxes payable by Tenant.
Negative Obligations
Tenant agrees that it shall not, without first obtaining
Landlord’s consent:
(1)
(2)
(3)
Permit its Demised Premises to be used in any
way which will injure the reputation of the same
(or of the Shopping Center) or may be anuisance,
annoyance, inconvenience or damage to the ten-
ants of the Shopping Center or of the neighbor-
hood including, without limiting the generality
of the foregoing, noise by the playing of any mu-
sical instrument or radio or television, or the use
of a microphone, loudspeaker, electrical equip-
ment, or utilizing flashing lights or search lights
or any other equipment which in the judgment of
the Landlord might cause disturbance, impair-
ment orinterference with the use orenjoyment by
any other tenant in the Shopping Center.
Display any merchandise, solicit business or dis-
tribute advertising or promotional matter out-
side its Demised Premises orin any way obstruct
sidewalks or Common Areas adjacent thereto.
Permit deliveries of any kind through the front
eritrance of its Demised Premises except where
no other entrance to the Demised Premises is
available.
4la
(4)
(5)
(6)
(7)
(8)
(9)
(10)
8. Signs
Permit its Demised Premises to be used for lodg-
ing purposes.
Permit any auction sale, fire sale, bankruptcy sale
and/or going-out-of-business sale, or similar types
of sensational sales promotions to be conducted
in the Demised Premises.
Use, occupy, suffer or permit any use of its
Demised Premises which would (a) violate any
law, ordinance or regulation, (b) constitute a
nuisance, (c) constitute an extra-hazardous use,
or (d) violate, suspend or void any policy or
policies of insurance of either Landlord or any
other tenant in the Shopping Center, or increase
the cost of such insurance over and above its nor-
mal cost.
Subject any fixtures, furnishings or equipment in
or on Tenant’s Demised Premises which are af-
fixed to the realty to any mortgages, liens, condi-
tional sales agreements, security interests or en-
cumbrances.
Operate on the Demised Premises or in any part
of the Shopping Center any coin- or token-oper-
ated vending machines or similar devices (in-
cluding without limitation, pay telephones, pay
lockers, pay toilets, scales, amusement devices
and machines for the sale of merchandise and/or
commodities).
Use any forklift truck, tow truck or any other
powered machine for handling freight in the
Demised Premises unless the same be powered
by electricity.
Place aload onany floorinthe Demised Premises
or within the interior of the Shopping Center
which exceeds the floor load per square foot
which such floorwas designed tocarry, orinstall,
operate or maintain therein any heavy item of
equipment except in such manner as to achieve
proper distribution of the weight.
Tenant agrees that it will not erect any signs without first
obtaining Landlord’s approval as to size, color, type and location
of the permitted signs, and Tenant agrees that no sign will be
erected unless it meets the standards as set forth in Exhibit B
attached hereto and made a part hereof. Tenant agrees not to
display any banners, pennants, search lights, window signs,
balloons, or similar temporary advertising media. Tenant agrees
to maintain its signs in a good state of repair and save the Landlord
harmless from any loss, cost or damage as a result of the erection,
maintenance, existence or removal of the same and shall repair any
damage which may have been caused by the erection, existence,
maintenance or removal of such signs. Upon vacating the De-
mised Premises, the Tenant agrees to remove all signs and repair
all damage caused by such removal.
9. Utilities
From the date the work of the Landlord in the Demised
Premises is substantially completed, or from the date Tenant
begins its work in the Demised Premises, whichever first occurs,
Tenant ag es to pay for all utility services rendered or furnished
to the Demised Premises including heat, water, electricity, sprin-
kler charges, fire line charges, sewer rental, sewage treatment
facilities and the like, together with all taxes levied or other charges
on such utilities and governmental charges based on utility con-
sumption, standby utility capacity or potential utility use. If any
such utilities are not separately metered or assessed or are only
partly separately metered or assessed and are used in common
with other tenants of the Shopping Center, Tenant will pay to
Landlord an apportionment of such charges for utilities used in
common based on the gross area leased to each tenant using such
common facilities, in addition to Tenant’s payments of the sepa-
rately metered charges. If Landlord shall supply any such serv-
ices, Tenant will purchase same from Landlord at charges not in
excess of the charges for the services in question made by any util-
ity corporation or governmental agency supplying such utilities in
the area. Any such charges for services supplied by Landlord, or
charges for utilities which may be rebilled by the Landlord, shall
be due and payable as additional rent within ten (10) days after
billings therefor are rendered to Tenant. In no event shall Land-
lord be liable for the quality, quantity, failure or interruption of
such services to the Demised Premises, except where such is due
to Landlord’s gross negligence or wilful misconduct.
10. xes
A. Commencing with the first day of the term of this
lease or the date tenant cpens for business, whichever first occurs,
43a
Tenant shall thereafter pay Tenant's pro rata share of the Real
Estate, Tax Expense which shall include all real estate taxes and
assessments both general and special imposed by federal, state or
local governmental authority or any other taxing authority having
jurisdiction over the Shopping Cente, against the land, buildings
and all otherimprovements within the Shopping Center owned or
leased by the Landlord, together with any and all expenses in-
curred by Landlord in negotiating, reviewing, appeaiing or con-
testing such taxes and assessments. Real Estate Tax Expense shall
include the gross amount of real estate taxes, but such amount
shail not be increased by any additional charges or penalties
incurred by Landlord due to late payment of real estate taxes nor
be reduced by any discount earned by Landlord due to early
payment of real estate taxes Tenant’s pro rata share shall be
computed by multiplying the total of such Real Estate Tax Expense
by a fraction whose numerator is the gross area of Tenant's
Demised Premises and whose denominator is the number of
square feet of total ground floor leasable space within the Shop-
ping Center owned or leased by the Landlord. Tenant hereby
waives any right it may have, by statute or otherwise, to protest the
real estate taxes and assessments.
Landlord shall estimate Tenant’s annual pro rata share of
such Real Estate Tax Expense and one-twelfth (1/12) of the amount
so estimate shall be paid by Tenant on the first (1st) day of each
calendar month in advance. Within ninety (90) days after the end
of each tax year, Landlord shall furnish Tenant a statement in
reasonable detail of the Real Estate Tax Expense for the prior year
and, thereupon, there shall be an adjustment between Landlord
and Tenant with payment to or repayment by Landlord, as the case
may required, to the end that Landlord shall receive the entire
amount of Tenant’s annual pro rata share for such period. Any
repayment that may be due by Landlord to Tenant may, at
Landlord’s option, take the form of a credit on Tenant’s next
succeeding payment or payments pursuant to this clause. If
Tenant's pro rata share is greater than the amount paid by Tenant
during the prior tax year, Tenant shall pay the Landlord the
difference between the amount paid by Tenant and the amount
actually due within ten (10) days after receipt of Landlord’s
statement.
B. Itis the intention of the parties hereto that Landlord
shall receive the rents and other charges required to be paid to
Landlord by Tenant pursuant to this lease on ar absolutely net
basis and that Tenant shall, except as specifically provided in this
lease to the contrary, pay all costs, expenses and obligations of
every kind ornature whatsoever relating to the Demised Premises
or any improvements thereon or to the tenancy therein created by
this lease, which costs, expenses and obligations may arise or
become due during the term of this lease (including any extensions
thereof). Therefore, Tenant alone shall be responsible for payment
of any type of tax, excise or assessment (regardless of label or
whether in the form of a rental tax, gross receipts tax, sales tax,
business or occupation tax, use assessment, privilege tax, fran-
chise tax, or otherwise, except any tax, excise or assessment which
in substance is a net income or franchise tax that is based solely on
Landlord’s net income) levied, assessed or imposed at any time by
any governmental authority upon or against the Demised Prem-
ises, the use or occupancy of the Demised Premises, the rents and
other charges payable by Tenant to Landlord, or otherwise with
respect to the Landlord-Tenant relationship. Tenant shall pay the
full amount of such tax, excise or assessment directly to the
appropriate governmental authority, unless the applicable law
expressly imposes solely on Landlord the duty to pay or collect
such tax, excise or assessment, in which case Tenant shall pay the
full amount of such tax, excise or assessment as additional rent
under this lease to Landlord, on or before the date when any fine,
penalty or interest would be added thereto for nonpayment.
Notwithstanding that the applicable law may impose on Landlord
the duty to pay or collect such tax, excise or assessment, Landlord
shall in no event be obligated by Tenant to pay such tax, excise or
assessment and Landlord shall be indemnified against and saved
harmless from the same by Tenant. IN the event (i) Tenant fails to
timely pay such tax, excise or assessment and Landlord pays the
same, or (ii) Landlord elects in its sole discretion to pay the same
in advance, Tenant shall promptly reimburse Landlord for the
amount thereof (including the fine, penalty or interest, if any) as
additional rent under this lease, and such additional rent shall be
deemed to be due as of the last date before any fine, penalty or
interest would be added to such tax, excise or assessment for
nonpayment. The provisions of this paragraph shall also apply to
any such tax, excise or assessment which may at any time replace
or supplement any tax, excise or assessment described in Section
A or B of this clause.
45a
A. Landlord shall make available from time to time
within the Shopping Center such Common Areas as and to the
extent Landlord shall alone from time to time appropriate. Common
Areas shall be defined as including but not limited to any parking
areas, driveways, service courts, access and egress roads, side-
walks, opened and enclosed courts and malls, landscaped and
planted areas, fire corridors, meeting areas and public restrooms.
Landlord shall operate, mange, equip, light, repair and maintain
said Common Areas for their intended purposes in such manner
as Landlord shall inits sole discretion from time to time determine,
and may from time to time change the size, location, elevation,
nature and/or use of any Common Areas and may make installa-
tions and/or construct, erect, move or remove permanent or
temporary improvements therein or thereon, including but not
necessarily limited to, buildings, structures, booths and kiosks.
Landlord shall have the right to retain revenue from income-
producing events whether or not conducted for promotional
purposes or by or through the Merchants Association or Market-
ing Fund. .
B. Tenant, its officers, employees, customers and
invitees shall have the non-exclusive right in common with Land-
lord and all others to whom landlord has or may hereafter grant
rights, to use said Common Areas as designated by Landlord
subject to such rules and regulations as Landlord may impose.
Landlord may atany time close any Common Area to make repairs
or changes or prevent the acquisition of public rights in such area
or to discourage non-customer parking.
lve Tenant shall pay to Landlord for Landlord’s oper-
ating, maintaining arg repairing said Common Areas, an annual
amount equal to Three and 50/100 Dollars ($3,50) per square foot
of gross area of Tenant’s Demised Premises per calendar year, on
a prorated basis for any period less than a full calendar year. Said
amount shall be considered as additional rent and subject to all of
the provisions of this lease as to default in the payment of rent and
shall be payable within thirty (30) days after the commencement of
this lease or the date the Tenant opens for business, whichever first
occurs, and within thirty (30) days after the commencement of
each calendar year thereafter. Regardless of the gross area of the
Demised Premises, Tenant’s payment hereunder will not be less
than Three Thousand & 00/100 Dollars ($3,000.00) in any calendar
year.
46a
Landlord covenants and agrees to keep and maintain, atits
own cost and expense (except as hereinafter set forth), the roof and
other exterior portions of the Demised Premises and the plumb-
ing, sewage and utility lines outside the building in which the
Demised Premises are located, and to make any structural repairs
in the interior of the Demised Premises; except, however, that
Landlord shall not be responsible for the following, even if exterior
or structural: storefront, doors, door frames, door checks and
operators and windows; reasonable wear and tear; damage caused
by any act or negligence of Tenant, its employees, agents, invitees,
licensees or contractors; such structural or exterior portions not
originally constructed by the Landlord; and any structural or
exterior portions of the Demised Premises abutting an open or
enclosed mall. Other than as herein provided, Landlord shall not
be responsible to make any other improvements or repairs of any
kind in or upon the Demised Premises.
Tenant covenants and agrees to keep and maintain at its
own cost and expense in good order, condition and repair the
Demised Premises and every part thereof, except as hereinbefore
provided, including, but without limitation, the exterior and
interior portions of all doors, door frames, door checks and opera-
tors, windows, plate glass and showcases surrounding the De-
mised Premises, all plumbing and sewage facilities, and electrical
systems within or beneath the Demised Premises, servicing Prem-
ises, fixtures, heating, air-conditioning and electrical equipment,
and interior walls, floors and ceilings, signs and all interior build-
ing appliances and similar equipment, and any portions of the roof
and other exterior areas of the Demised Premises which have been
altered by the Tenant. Tenant further agrees to replace any of said
equipment servicing Premises when necessary at its own cost and
expense.
Tenant shall promptly comply with all present and future
laws, regulations or rules of any county, state, federal and other
governmental authority and any bureau and department thereof,
and of the National Board of Fire Underwriters or any other body
exercising similar function which may be applicable to the De-
mised Premises, including the making of any required structural
changes thereto, except where Landlord is obligated as to such
under this Lease.
_ IfTenant refuses or neglects to commence or complete said
repairs or changes promptly and adequately, Landlord may, but
shall not be required to do so, make or complete said repairs or
changes and Tenant shall pay the cost thereof to Landiord upon
demand, together with the sum equal to fifteen percent (15%) of
said costs for overhead and an additional sum equal to ten percent
(10%) of said amount for profit, all due and payable within ten (10)
days after billing from landlord io Tenant.
13. § ter of Demised Prem
Tenant covenants and agrees to deliver up and surrender
to the Landlord the possession of the Demised Premises upon the
expiration of this lease or its earlier termination, as herein pro-
vided, in as good condition and repair as the same shall be at the
commencement of said term ormay have been put by the Landlord
during the continuance thereof -- ordinary wear and tear and
damage by fire or the elements, excepted. Nothing herein shall be
construed as relieving the Tenant of any of its obligations under
the provisions of Clause 12 above.
14. Property in the Demised Premise
Except as to Tenant's trade fixtures, all leasehold or build-
ing improvements, including without limitation carpeting and
padding, fluorescent light fixtures and heating and air-condition-
ing equipment, and all construction work done by the Tenant or
prior tenants attach to the freehold when installed or completed
and shall be the property of the Landlord, unless abandoned in
writing by Landlord, in which event Tenant shall assume owner-
ship of and responsibility for same. Tenant shall not remove,
destroy or alter any leasehold or building improvement without
first giving adequate prior written notice to Landlord who shall
have the right to demand that Tenant salvage and deliver to
Landlord, at the expense of Tenant, any existing improvement or
construction work. Al! store fixtures or trade fixtures and signs
shall remain the property of the Tenant subject at all times to a
security interest in favor of Landlord to secure Landlord’s claim for
rent and othersums which may become due to the Landlord under
this lease, subordinate to the interests of inventory finance Lender
of Tenant, i.e., Trust Company Bank, Ailanta, Georgia.
Tenant further agrees that all personal property of every
kind or description which may at any time be in the Demised
Premises shall be at the Tenant's sole risk, or at the risk of those
claiming under the Tenant. Landlord shall not be responsible or
liable to Tenant for any loss or damage that may be occasioned by
the acts or omissions of persons occupying any space adjacent to
or adjoining Tenant’s Demised Premises, or any part thereof.
48a
Except for its gross negligence, Landlord shall not be responsible
or liable to Tenant for any loss or damage resulting to Tenant or its
property from roof leaks, water, gas, steam, fire, or the bursting,
stoppage or leaking of sewer pipes, or from the heating or plumb-
ing fixtures, or from electric wires, or from gas or odors, or caused
in any manner whatsoever.
15. Alterations
Tenant further covenants not to permit structural or exte-
rior alterations of or upon any part of the Demised Premises except
by and with the written consent of the Landlord first had. All
alterations and additions to the Demised Premises shall be made
in accordance with all applicable laws, ordinances and regulations
and shall remain for the benefit of the Landlord and the Tenant
further agrees, in the event of making such alterations as herein
provided, to indemnify and save harmless the Landlord from all
expenses, liens, claims or damages to either persons or property or
the Demised Premises, arising out of or resulting from the under-
taking or making of said alterations or additions.
16. Assignment and Subletting
Tenant covenants and agrees not to assign this lease or to
sublet the whole or any part of the Demised Premises, or to permit
any other persons to occupy same, references elsewhere herein to
assignees notwithstanding. Any assignment or subletting, even
with the consent of Landlord, shall not relieve Tenant from liability
for payment of rent or other sums herein provided or for the
obligation to keep and be bound by the terms, conditions and
covenants of this lease, notwithstanding the fact that this lease
may be amended by agreement between such assignee or subten-
ant and Landlord. In the event any assignment or subletting, even
with the consent of Landlord, results in rental income or other
lease charges in an amount greater than that provided for in this
lease, then such excess shall belong to the Landlord and shall be
payable to Landlord as additional rental herein reserved. The
acceptance of rent from any other person shall not be deemed to be
a waiver of any of the provisions of this lease or to be a consent to
the assignment of this lease or subletting of the Demised Premises.
Notwithstanding anything to the contrary contained in
this Clause 16, Landlord shall not unreasonably withhold its
consent to any assignment of this lease unless Landlord shall have
a reasonable basis for withholding such consent, such as, but not
limited to, the financial responsibility, the merchandising ability
49a
and practices, and the general desirability (character and reputa-
tion) of the proposed assignee, and if the net worth of the proposed
assignee shall be at least equal to or the greater of (i) the net worth
of the Tenant as of the date of this lease, or (ii) the net worth of the
Tenant immediately preceding the date of such assignment. Any
such assignment shall be upon and subject to all of the covenants,
provisions and conditions contained in this lease, all of which shall
be assumed by any such assignee by a written instrument satisfac-
tory to Landlord, and such assignment shall not relieve the Tenant
of or from any of its obligations under this lease.
An assignment for the benefit of creditors or oy operation
of law shall not be effective to transfer any rights to assignee
without the written consent of the Landlord first having been
obtained.
Provided Tenantisa corporation, thenifat any time during
the term of this lease any part or all of the corporate shares of
Tenant shall be transferred by sale, assignment, operation of law
or other disposition so as to result in a change in the present
effective voting control of Tenant by the person or persons owning
a majority of said corporate shares on the date of this lease,
excluding transfers between existing shareholders. Tenant shall
promptly notify Landlord in writing of such change, and Landlord
may terminate this lease at any time after such change in control
by giving Tenant ninety (90) days’ prior written notice of such
termination.
17. Holding Over
If the Tenant shall remain in possession of all or any part of
the Demised Premises after the expiration of the term of this lease
or any renewal thereof, then the Tenant shall be deemed a tenant
of the Demised Premises from month to month at one hundred
fifty percent (150%) of the Minimum Rent, Common Area Main-
tenance and Insurance charges payable during the last year of the
term of this lease or any renewal thereof, and subject to all of the
terms and provisions hereof, except only as to the term of this
lease.
8. Access to Demised Premise
Tenant further agrees to permit the Landlord’s agents to
inspect or examine the Demised Premises at any reasonable time
upon reasonable notice (except in an emergency), and to permit
the Landlord to make such repairs to the building of which the
Demised Premises are a part that the Landlord may deem desir-
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able or necessary forits preservation and which the Tenant has not
covenanted herein to do or has failed so to do.
Tenant further agrees that on and after ninety (90) days
next preceding the expiration of the term of this lease the Landlord
orits agents shall have the right to show the Demised Premises to
potential tenants, and to place notices offering the Demised Prem-
ises “To Let” or“ For Sale” on the front of the Demised Premises or
any part thereof.
19. Trade Fixtures
Tenant may, at the expiration of said term, remove all the
Tenant's trade fixtures which can be removed without costly
injury to, orundue defacement of the Demised Premises; provided
all rents stipulated are paid in full and Tenant is not otherwise in
default hereunder, and that any and all damage to Demised
Premises or to Landlord’s premises (resulting from or caused by
such removal) shall be promptly repaired at Tenant's expense.
20. Quiet Enjoyment
Landlord covenants and agrees that if the Tenant shall
perform all of the covenants and agreements herein stipulated to
be performed on the Tenant's part, the Tenant shall, at all times
during said term, have the peaceable and quiet enjoyment and
possession of the Demised Premises without ary manner of
hindrance from the Landlord or any persons lawfully claiming
through the Landlord.
21. Insurance ;
A. Tenant covenants and agrees to obtain and have in
force upon mutual execution and delivery of this lease, and to keep
in force continuously thereafter until the expiration of the entire
term of this lease: (1) comprehensive general liability insurance
relating to the Demised Premises and its appurtenances on an
occurrence basis with minimum limits of liability in amounts of
Two Hundred Fifty Thousand Dollars ($250,000) for bodily injury,
personal injury or death to any one person, Five Hundred Thou-
sand Dollars ($500,000) for bodily injury, personal injury or death
to more than one person, and Five Hundred Thousand Dollars
($500,):00) with respect to damage-to property by water or other-
wice; (2) fire and extended coverage, vandalism, malicious mis-
chief and special extended coverage insurance in an amount
adéquate to cover the cost of replacement of all leasehold or
building improven:ents in the Demised Premises which were
5la
originally constructed by Tenant, as well as the cost of replacement
of all fixtures, equipment, decorations, contents and personal
property therein; (3) plate glass insurance with respect to all plate
and other glass in the Demised Premises; and (4) if there is a boiler
or air-conditioning equipment in, on, adjoining or beneath the
Demises Premises, broad form, boiler or machine insurance in the
amount of One Hundred Thousand Dollars ($100,000). Tenant
agrees to deliver to Landlord, at least fifteen (15) days prior to the
time such insurance is first required to be carried by Tenant, and
thereafter at least fifteen (15) days prior to the expiration of any
such policy, either a duplicate original oracertificate and true copy
of all policies procured by Tenant in compliance with its obliga-
tions hereunder, together with evidence of payment therefor and
including an endorsement which states that such insurance may
not be cancelled except upon ten (10) days’ written notice to
Landlord and any designee(s) of Landlord.
B. All of the aforesaid insurance shall be written by
one (1) or more responsible insurance companies satisfactory to
Landlord; all suchinsurance may be carried undera blanket policy
covering the Demised Premises and any other of Tenant's stores
and shall contain endorsements that: (1) such insurance may not
be canceled or amended with respect to Landlord (or its designee[s]),
except upon ten (10) days’ written notice by registered mail to
Landlord (and such designee[s]}) by the insurance company; and
(2) Tenant shall be solely responsible for payment of premiums for
suchinsurance. Inthe event Tenant fails to furnish such insurance,
the Landlord may obtain such insurance and the premiums shall
be deemed additional rent to be paid by Tenant to the Landlord
upondemand. Itis further agreed that any statements made inthis
section concerning minimum insurance requirements cannot be
construed by the Tenant as indicating either the adequacy or
sufficiency of insurance required for the Tenant’s purposes, nor
shall such requirements be used to define the responsibility of the
Tenant to repair, restore or replace as otherwise covered in this
lease.
wi The minimum limits of the comprehensive general
liability policy of insurance shall in no way limit or diminish
Tenant’s liability under Section D hereof and shall be subject to
increase at any time, and from time to time, after the commence-
ment of the fifth (5th) year of the term hereof if Landlord in the
exercise of iis reasonable judgment shall deem same necessary for
adequate protection. Within thirty (30) days after demana
thereforby Landlord, Tenant shall furnish Landlord with evidence
52a
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that such demand has been complied with.
D. Tenant will defend, indemnify and save Landlord
harmless from and against any and all claims and demands in
connection with any accident, injury or damage whatsoever caused
to any person or property arising directly or indirectly out of the
business conducted in the Demised Premises or occurring in, onor
about the Demised Premises or any part thereof, or arising directly
orindirectly from any act or omission of Tenant or any concession-
aire or subtenant or their respective licensees, servants, agents,
employees or contractors, and from and against any and all costs,
expenses and liability incurred in connection with any such claim
or proceeding brought thereon. The comprehensive general liabil-
ity coverage maintained by Tenant pursuant to Section A above
shall specifically insure the contractual obligations of Tenant as set
forth herein. -
E. Tenant agrees, at its own cost and expense, to
comply with all of the rules, regulations and recommendations of
the Fire Insurance Rating Organization having jurisdiction and
any similar body. If at any time and from time to time, as a result
of or in connection with any failure by Tenant to comply with the
foregoing sentence or any act of omission or commission by
Tenant, its employees, agents, contractors or licensees, or as a
result of or in connection with the use to which the Demised
Premises are put (notwithstanding that such use may be for the
purposes hereinbefore permitted or that such use may have been
consented to by Landlord), the fire insurance rate(s) applicable to
the Demised Premises, or the building in which same are located,
or to any other premises in said building, or to any adjacent
property owned or controlled by Landlord, or an affiliate of
Landlord, and/or to the contents in any or all of the aforesaid
properties shall be higher than that which would be applicable for
the lease hazardous type of occupancy legally permitted therein,
Tenant agrees that it will pay to Landlord, on demand, as addi-
tional rental, such portion of the premiums for all fire insurance
policies in force with respect to the aforesaid properties and the
contents of any occupant thereof as shall be attributable to such
higher rate(s). If Tenant installs any electrical equipment that
overloads the lines in the Demised Premises or the building which
the Demised Premises are located, Tenant shall, at its own cost and
expense, promptly make whatever changes are necessary to remedy
such condition and to comply with all requirements of the Land-
lord and the Board of Fire Insurance Underwriters and any similar
body and any governmental authority having jurisdiction thereof.
53a
For the purpose of this paragraph, any finding or schedule of the
Fire Insurance Rating Organization having jurisdiction thereof
shall be deemed to be conclusive. In the event that this lease so
permits and Tenant engages in the preparation of food or pack-
aged foods or engages in the use, sale or storage of inflammable or
combustible material, Tenant shall install chemical extinguishing
devices (such as ansul) approved by the Fire Insurance Rating
Organization and shall keep such devices under service as re-
quired by such organization. If gas is used in the Demised
Premises, Tenant shall install gas cutoff devices (manual and
automatic). :
F. Each insurance policy carried by Landlord or Ten-
ant and insuring all or any part of the Shopping Center, the
Demised Premises, including improvements, alterations and changes
in and to the Demised Premises made by eiiher of them and
Tenant's trade fixtures therein, shall be written in a manner to
provide that the insurance company waives all right of recovery by
way Of subrogation against Landlord or Tenant as the case may be,
in connection with any loss or damage to the Demised Premises
property or businesses caused by any of the perils covered by fire
and extended coverage, building and contents, and business
interruption insurance, or for which either party may be reim-
bursed as a result of insurance coverage afiecting any loss suffered
by it; provided, however, that the foregoing waivers shall apply
only to the extent of any recovery made by the parties hereto under
any policy of insurance now or hereafter issued. So long as the
policy or policies involved can be so written and maintained in
effect, neither Landlord nor Tenant shall be liable to the other for
any such loss or damage. In the event of inability on the part of
either party to obtain such provision in its policy or policies with
the carrier with whom such insurance is then carried, or such
carriers requiring payment of additional premium for such provi-
sion, the party so affected shall give the other party written notice
of such inability or the increase in premium as the case may be.
The party to whom such notice is given shall have fifteen (15) days
from the receipt thereof within which: (1) in the case of such
inability on the part of the other carrier, to procure from the
aforesaid party's insurance carrier in writing, at no increase in
premium over that paid theretofore by the party so affected, such
waiver of subrogation; (2) in the case of increased premium, to pay
the party so affected the amount of such increase; (3) to waive, in
writing, within the time limit set forth herein, such requirement to
obtain the aforesaid waiver of subrogation. Should the party to
whom such notice is given fail to comply as aforesaid within the
said fifteen (15) day period, each and every provision in this para-
graph in favor of such defaulting party shall be cancelled and of no
further force and effect. It is further agreed that no right of
recovery shall be waived by a party if that party has elected, within
the scope of this agreement, to self-insure (in whole or in part and
to the extent of such self-insurance) as respects any insurance
required herein, if damages sustained are deemed to be a result of
negligence on the part of Landlord or Tenant.
G. Landlord agrees to maintain: (1) comprehensive
general liability insurance relating to the Shopping Center and its
Common Areas onan occurrence basis in the minimum amount of
One Million Dollars ($1,000,000); (2) fire and extended coverage,
vandalism, malicious mischief and special extended coverage
insurance to the extent of the replacement value of the Shopping
Center buildings and improvements originally constructed by
Landlord. Tenant agrees to pay to Landlord, as its share of
Landlord’s general insurance costs and expenses, an annual amount
equal to twenty cents (20¢) persquare foot of gross area of Tenant's
Demised Premises per calendar year (but not less than One
Hundred Fifty & 00/100 Dollars [$150.00] per calendar year), to be
adjusted annually upward or downward, but never less than the
above amount, in directed proportion to the increase or decrease
of the annual cost and expense to Landlord for such insurance
from the date of this lease to the annual period in question. Said
amount to be paid by Tenant shall be considered as additional rent
and subject to all of the provisions of this lease as to default in the
payment of rent and shall be payable within thirty (30) days after
the commencement of this lease or the date the Tenant opens for
business, whichever first occurs, and within thirty (30) days of the
commencement of each calendar year thereafter.
22. Eminent Domain
A. If the whole of the Demised Premises, or such
portion thereof as to render the remainder unsuitable for the
purposes forwhich the Demised Premises were leased, be taken or
condemned for any public or quasi-public use or purposes by any
competent authority in appropriation proceedings or by any nght
of eminent domain, then this lease shall cease and terminate from
the time possession thereof is required for publicuse. Any dispute
under the provisions of this paragraph shall be submitied to the
American Arbitration Association in accordance with its proce-
dures at such time, which determination shall be binding upon the
55a
parties hereto.
B. If any part of the Demised Premises shall be so
taken and this lease shall not terminate under the provisions of
Section A above, then Landlord at its own expense, shall repair and
restore the portion not affected by the taking and thereafter the
Minimum Rent to be paid by Tenant shall be equitably and
proportionately adjusted. The repair and restoration work of
Landlord shall not, however, exceed the scope of the work re-
quired to be done by Landlord in originally constructing Tenant's
Demised Premises and the cost thereof shall not exceed the net
proceeds of the condemnation award actually received and re-
tained by Landlord.
S All compensation awarded or paid upon such a
total or partial taking shall belong to and be the property of
Landlord without participation by Tenant and without any deduc-
tion therefrom for any present or future estate of Tenant. Tenant
shall, however, be entitled to claim, prove and receive in such
condemnation proceedings, such award as may beallowed forloss
of business and for fixtures and other equipment installed by
Tenant, provided that no such claim of Tenant shall diminish or
otherwise adversely affect Landlord’s award or the award of any
and all ground and underlying lessors and mortgagees.
23. Fire or Other Casualty
A. Should the Demised Premises (or any part thereof)
be damaged or destroyed by fire or other casualty insured under
the standard fire and casualty insurance policy with approved
standard extended coverage endorsement applicable to the Demised
Premises, Landlord shall, except as otherwise provided herein,
and to the extent it recovers proceeds from such insurance, repair
and/or rebuild the same with reasonable diligence. Landlord’s
obligation hereunder shall be limited to the building and improve-
ments originally provided by Landlord when the Demised Prem-
ises were originally constructed. Landiord shall not be obligated
to repair, rebuild or replace any property telonging to Tenant or
any improvements to the Demised Premises furnished by Tenant.
Unless this lease is terminated by Landlord as hereinafter pro-
vided, Tenant shall, atits cost and expense, repair, restore, redeco-
rate and refixture the Demised Premises and restock the contents
thereofina manner and to at least a condition equal to that existing
prior to such damage or destruction, except for the building and
improvements to be reconstructed by landlord as above set forth,
and the proceeds of all insurance carried by Tenant on the prop-
erty, decorations and improvements as well as fixtures and con-
tents in the Demised Premises shall be expended by Tenant for
such purposes. In the event the Demised Premises are completely
or partially destroyed or so damaged by fire or other casualty and
this lease is not terminated as hereinafter provided, there shall be
no abatement of rent; it being understood and agreed that the
~ Tenant shall, at its sole discretion, cost and expense, procure
necessary insurance to protect itself against any interruption of its
business.
B. Notwithstanding anything to the contrary con-
tained in the preceding Section A or elsewhere in this lease,
Landlord at its option may terminate this lease on thirty (30) days’
notice to Tenant, given within ninety (90) days after the occurrence
of any damage or destruction if (1) the Demised Premises be
damaged or destroyed as a result of a risk which is not covered by
Landlord’s insurance, or (2) the Demised Premises be damaged
and the cost to repair the same shall be more than twenty-five
percent (25%) of the cost of replacement thereof, or (3) the Demised
Premises be damaged during the last three (3) years of the term, or
(4) the building of which the Demised Premises are a part shall be
damaged to the extent of twenty-five percent (25%) or more of the
then monetary value thereof (whether the Demised Premises be
damaged or not), or (5) if any or all of the buildings or Common
Areas of the Shopping Center are damaged (whether or not the
Demised Premises are damaged) to such an extent that, in the sole
judgment of Landlord, the Shopping Center cannot be operated as
an integral unit.
wa Except to the extent specifically provided forin this
lease, none of the rentals payable by Tenant, nor any of Tenant’s
other obligations under any provisions of this lease, shall be
affected by any damage to or destruction of the Demised Premises
by any cause whatsoever, and Tenant hereby specifically waives
any and all additional rights it might otherwise have under any
law or statute.
24. Default by Tenant
In the event:
(a) Tenant shall fail to pay ariy rental or other charges
when due hereunder and such default continues for
more than ten (10) days; or
(b) Tenant shall fail to observe or perform any of the other
terms, conditions or covenants of this lease to be ob-
served or performed by Tenant and such default con-
tinues for more than ten (10) days; or
57a
(c) Tenant or an agent of Tenant shall falsify any report
required to be furnished to Landlord pursuant to the
terms of this lease; or
(d) Tenant or anagent of Tenant shall suffer this lease to be
taken under any writ of execution,
then Landlord, besides other rights or remedies it may have, shall
have the immediate right to terminate this lease, in which event
Tenant shall have no further right, title or interest in orto either the
Demised Premises or this lease, or to reenter and attempt to relet
without terminating this lease and, in either event, to remove all
persons and property from the Demised Premises and store such
property in a public warehouse or elsewhere at the cost of and for
the-account of Tenant, all without demand, service of notice cr
resort to legal process and without being deemed guilty of trespass
or becoming liable for any loss or damage which may be occa-
sioned the: eby. Notwithstanding any provision of this lease to the
contrary, Landlord, at its option, may, without terminating this
lease or affecting Tenant’s obligation to pay Percentage Rent and
othercharges equivalent to rent, declare the entire amount of Mini-
mum Rent for the remainder of the term of this lease immediately
due and payable and collect such amount by any lawful proce-
dure.
If at any time after the execution of this lease, Tenant or any
Guarantor of this lease shall commence, in any court pursuant to
any Statute either of the United State or of any State, an insolvency
or bankruptcy proceeding (including, without limitation, a pro-
ceeding for liquidation, reorganization or for adjustment of debts
of an individual with regular income), or if such a proceeding is
commenced against Tenant or any Guarantor of this lease and
either an ordez for relief is entered against such party orsuch party
fails to secure a discharge of the proceeding within thirty (30) days
of the filing thereof, or if Tenant or any Guarantor of this lease
becomes insolvent or is unable or admits in writing its inability to
pay its debts as they become due, or makes an assignment for the
benefit of creditors or petitions for or enters into an arrangement
with its creditors or a custodian is appointed or takes possession
of Tenant’s or any Guarantor’s property, whether or not a judicial
proceedings is instituted in connection with such arrangement or
in connection with the appointment of such custodian (each of the
foregoing events are hereinafter referred to as an “act of bank-
ruptcy”), then Landlord, besides other rights or remedies it may
have, shall have the immediate right to terminate this lease or
reenter and attempt to relet without terminating this lease and
remove ail persons and property from the Demised Premises and
such property may be removed and stored in a public warehouse
or elsewhere at the cost of, and for the account of, Tenant, all
without service of notice or resort to legal process and without
being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby and Landlord may
retain as liquidated damages any rent or money received by
Landlord from Tenant or others on behalf of Tenant. In the event
of a proceeding involving Tenant under the Bankruptcy Code, 11
U.S.C. 101 et seq., if this lease is assumed by Tenant’s trustee in
bankruptcy (after he has cured all existing defaults, compensated
Landlord for any loss resulting therefrom and provided adequate
assurance of future performance), then this lease may not be as-
signed by the trustee toa third party, unless such party (i) executes
and delivers to Landlord an agreement in recordable form whereby
such party assumes and agrees with Landlord to discharge all
obligations of Tenant under this lease, including, without limita-
tion the provisions of Clause 6 relating to the permitted use of the
Demised Premises and the manner of operation thereof; (ii) has a
net worth and operating experience at least comparable to that
possessed by Tenant named herein and any Guarantor of this lease
as of the execution of this lease; and (iii) grants Landlord, to secure
the performance of such party's obligations under this lease, a
security interest in such party's merchandise, inventory, personal
property, fixtures, furnishings, and accounts receivable (and inthe
proceeds ofall of the foregoing) with respect to its operations in the
Demised Premises, and in connection therewith, such party shall
execute such security agreements, financing statements and other
documents (the forms of which are to be designated by Landlord)
as are necessary to perfect such lien.
If Landlord, withou* terminating this lease, either (i) elects
to reenter and attempts to relet, as hereinbefore provided, or (ii)
takes possession pursuant to legal proceeding
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