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by Ron Davis
A bakery tenant of a New York State shopping center has forced his landlord to recognize a noncompete clause in their lease–and apply its meaning to the merchandise sold by another of the center’s tenants.
The shopping center is located in Wesley Hills and leases space to the bakery tenant to operate a business known as Bubba’s Bagels of Wesley Hills. In the lease, the two parties agreed to a somewhat vague provision stating that the owner of the shopping center would not lease space at the facility to “any other bakery.”
That restriction was soon tested, however, when the shopping center owner leased space to a supermarket tenant. As part of the supermarket’s wide variety of food departments was one that sold fresh-baked breads and other bakery products.
The bakery tenant, upon learning of the bakery products that the supermarket was selling, contacted the shopping center owner and pointed out that the operation of the supermarket bakery violated the noncompete agreement of their lease. The shopping center owner denied any lease violation, however, arguing that the supermarket tenant was not “any other bakery.”
The tenant responded that the supermarket itself was not a bakery, but that it contained one. And when the shopping center owner still failed to enforce the noncompete clause, the tenant sued.
A New York court sided with the shopping center owner, ruling that the supermarket’s operation of a bakery department did not violate the tenant’s noncompete clause contained in the lease.
The tenant appealed that ruling.
A New York State appellate court reversed the lower court decision, explaining, “Based on our review of the record, we find that the conclusion could not have been reached on any fair interpretation of the evidence. The evidence clearly demonstrates that a covenant in the commercial lease of Bubba’s Bagels of Wesley Hills, which prohibited the operation of ‘any other bakery’ in the shopping center where Bubba’s leased its space, was violated. We reject the contentions that the phrase ‘any other bakery’ in Bubba’s lease is ambiguous and that there was no meeting of the minds regarding its meaning.”
The appellate court also ordered a hearing into the issue of damages sustained by the Bubba’s Bagels tenant as a result of the supermarket’s bakery operations. (Bubba’s Bagels of Wesley Hills, Inc. v. Bergstol, 2005 N.Y. Slip Op. 03623)
Decision: May 2005
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