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Smokey Point Commercial, LLC v. Dick's Sporting Goods, Inc.

United States District Court, W.D. Washington, Seattle

October 27, 2017

SMOKEY POINT COMMERCIAL, LLC, Plaintiff,
v.
DICK'S SPORTING GOODS, INC., Defendant.

          ORDER DENYING MOTION TO DISMISS

          JAMES L. ROBART UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Before the court is Defendant Dick's Sporting Goods, Inc.'s ("DSG") motion to dismiss Plaintiff Smokey Point Commercial, LLC's ("Smokey Point") amended complaint. (MTD (Dkt. # 15).) The court has considered the parties' submissions in support of and in opposition to the motion to dismiss, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court DENIES DSG's motion to dismiss.

         II. BACKGROUND

         This case arises from a commercial lease agreement between Smokey Point-the landlord-and DSG-the tenant. (See generally FAC (Dkt. # 11).) On December 19, 2014, the two entities entered into a lease agreement for retail space in the Smokey Point Market Place ("the Shopping Center") located in Marysville, Washington. (Id. ¶ 6; see also Compl. (Dkt. # 1-1), Ex. 1 ("Lease") § 1.1.) The Shopping Center was visually mapped out on a Lease Plan, which was attached to the lease agreement as Exhibit A. (See Thoreson Decl. (Dkt. # 21) ¶ 2, Ex. A. ("Lease Plan"); see also MTD at Ex. A.)[2]There are two areas of the Shopping Center, designated Phase I and Phase II, each of which consists of several buildings that would be occupied by various retail tenants. (See id.)

         Both parties agree that the lease agreement controls their rights and obligations with regard to DSG's tenancy, and this case focuses on whether the parties adhered to the terms of this lease agreement in their subsequent conduct. (FAC ¶ 7; see MTD at 4.) The court first details the relevant provisions of the lease agreement and then summarizes the parties' conduct afterwards.

         A. The Lease Agreement

         The lease agreement between Smokey Point and DSG indicated that DSG would occupy a space of approximately 45, 000 square feet in Building A of Phase I. (See Lease §1.1; Lease Plan.) Party City and Ulta Beauty would occupy Building B adjacent to DSG, with Party City occupying roughly 15, 900 square feet and Ulta Beauty occupying roughly 15, 000 square feet. (Lease Plan.) Fitness Evolution was designated to open in Building C, next to Building B, or in a building in Phase II of the Shopping Center. (Id.; Lease § 1.4(c).)

         At the time of the lease agreement, the Shopping Center had not yet been constructed. Thus, the lease provided certain provisions concerning the construction process and the future tenants of the Shopping Center. Two of these provisions are pertinent here: (1) section 1.3 preserving Smokey Point's right to modify the configuration and location of buildings within the Shopping Center; and (2) section 1.6 guaranteeing that certain co-tenants would be operating at the time DSG opened for business. (See generally MTD; Resp. (Dkt. # 20).)

         1. Section 1.3: Right to Alter Buildings

         Section 1.3 of the lease provides that Smokey Point has the right to make changes to any of the Shopping Center buildings that are identified on the Lease Plan. (Lease § 1.3.) The provision in full reads:

[Smokey Point] reserves the right to alter the Common Areas[3] and to construct any and all improvements including, without limitation, buildings on the Common Areas as it determines and to make changes to any of the Shopping Center Buildings identified on the Lease Plan, including changes in configuration and/or location provided any such changes shall not adversely affect the business operations of [DSG] . . .; notwithstanding the foregoing, the initial construction of the Shopping Center shall be substantially as shown on the Lease Plan . . . attached hereto as Exhibit A.

         (Id.) Thus, § 1.3 allowed Smokey Point to change the configuration or location of the buildings on the Lease Plan as long as the changes do not adversely affect DSG's business or render the Shopping Center substantially different from how it appears in the attached Lease Plan.

         2. Section 1.6: Initial Co-Tenancy Requirement

         The lease also included an Initial Co-Tenancy Requirement, which sought to ensure that the Shopping Center will receive sufficient consumer traffic. (Id. § 1.6.) Specifically, § 1.6 sets forth two requirements that must be fulfilled by the time DSG began its tenancy. First, certain identified inducement tenants[4] must be open and operating in their designated spaces, as shown on the Lease Plan. (Id. § 1.6(a).) Second, 70% of the remaining leasable area within the Shopping Center must be open and functioning as "Required Tenants, "[5] as defined by the lease. (Id.) In full, the provision provides:

[O]n the Rental Commencement Dated: (i) Fitness Evolution; (ii) Party City; and (iii) Ulta or an Acceptable Replacement Tenant for Ulta, shall each be open or will simultaneously open with [DSG], fully staffed, stocked and operated as a retail business in substantially all of their respective premises as shown on the Lease Plan . . . [and] at least seventy percent (70%) of the remaining LFA[6] of Phase 1 of the Shopping Center and any LFA constructed within Phase 2 of the Shopping Center, excluding the LFA of the Demised Premises, the Inducement Tenants, and any out-parcels, shall be open or will simultaneously be open with ...

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