UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

 

 

) F

WHOLE FOODS MARKET GROUP, INC., ) l L E D
§ JAN 2 3 2348

Pl - t'ff Clerk, U.S. District & B
am l ’ § Courts for the District ofa ?3|;'¢:[;)1:;¥3
v. ) Case No: 17-cv-01079-RCL

)

WICAL LIMITED PARTNERSHIP, )
)

Defendant. )
)
MEMORANDUM OPINION

 

I. INTRODUCTION

This breach of contract case was brought by plaintiff Whole Foods Market Group, Inc.
(“Whole Foods”) against its commercial landlord, defendant Wical Limited Partnership (“Wical”).
Whole Foods’s Amended Complaint, ECF No. 21, seeks relief on four separate counts. Before
the Court is Wical’s motion to dismiss all four counts. ECF No. 26. Upon consideration of
Wical’s motion, the opposition thereto, the reply brief, the applicable law, and the entire record
herein, the Court will DENY in part and GRANT in part Wical’s Motion to Dismiss.
II. BACKGROUND

For purposes of this Motion to Dismiss the Court will provide (l) the relevant terms of the
lease between plaintiff Whole Foods and defendant Wical and (2) a statement of Whole Foods’s
well pleaded facts. This is appropriate because this is a motion to dismiss and the Court must view
all well pleaded facts in the complaint (and any incorporated documents) as true and in the light

most favorable to Whole Foods.

 

A. Relevant Provisions from Whole Foods Lease with Wical1
Paragraph 4(F)-Conduct of Business:

“Tenant shall continuously conduct its business at the Demised
Premises in accordance with the same standards of operation and in the
same quality as it presently operates its other similar stores, subject to
the other terms and provisions of this Lease. Tenant shall not cause
injury or waste to the Demised Premises, reasonable wear and tear
excepted Tenant shall keep the Demised Premises and all areas
appurtenant thereto (including Without limitation the parking garage,
loading dock and service areas) clean and free from pests, insects,
rubbish, trash and garbage, and, at its own expense, arrange for removal
of same.”

Paragraph 4(G)-Renovati0n

“The Demised Premises may occasionally require rehabilitation,
modernization or improvement. Tenant may, from time to time, close
the Demised Premises to the public for such periods as may be
reasonably required in order to diligently modernize or improve same,
but in no event shall such closures exceed sixty (60) days in the
aggregate during any three (3) year period elapsing during the Lease
Term.”

Paragraph 5(A)_Non-Structural Repairs and Maintenance

“[T]he tenant shall make all necessary structural and non-structural
repairs and perform all maintenance in a good and workable
manner in accordance with all applicable governmental requirements.”

Paragraph 7(A)_Alterations

“Tenant shall not make any exterior or structural alterations,
installations, changes, replacements, additions, or improvements
without Landlord’s prior written consent. All other alterations,
installations, changes, replacements, additions or improvements in or to
the Demised Premises or any part thereof, which are not structural or
exterior, may be made by Tenant, provided that Tenant has complied
with its obligation (if any) to deliver to Landlord the plans or working
drawings for same as below provided in this Article 7(A). The consent
of Landlord under this paragraph shall not be unreasonably withheld,

 

1 Whole Foods filed the lease under seal. See ECF No. 3. However, this Memorandum
Opinion only includes language from lease provisions already cited by the parties in their
motions, which have not been flled under seal.

“If either party hereto shall be delayed or prevented from the
performance of any act required hereunder (other than the payment of
monies) by reason of acts of God, strikes, lockouts, labor troubles, plan
approval delay, inability to procure materials, restrictive governmental
laws or regulations, adverse weather, unusual delay in transportation,
delay by the other party hereto or other cause without fault and beyond
the control of the party obligated to perform (financial inability
excepted), then upon notice to the other party, the performance of such
act shall be excused for the period of the delay and the period of
performance of such act shall be extended for a period equal to the period
of such delay; provided, however, the party so delayed or prevented from
performing shall exercise good faith efforts to remedy any such cause of
delay or cause preventing performance, and nothing in this paragraph
shall excuse Tenant from the prompt payment of any rental or other
charges required of Tenant except as may be expressly provided
elsewhere in this Lease.”

B. Whole Foods’s Well Pleaded Facts

The lease agreement between Whole Foods and Wical runs through January 31, 2021. The
agreement provides Whole Foods tenancy of the property at 2321 Wisconsin Avenue, NW,
Washington D.C. 20007, at which it operates its Georgetown store. Under the contract, Whole
Foods has the option to renew the lease for three additional terms of five years. Whole Foods has
consistently paid the rent and from 1996 until 2017 it never closed the store.

In 2017, the District of Columbia issued two separate ordinance violations to Whole Foods
related to rodent problems at its store. Both times, Whole Foods was required to close the store.
After the second violation notice_~issued on March 13, 2017_Whole Foods sought a “complete
and lasting resolution” to the problem. Amended Complaint, ECF No. 21 at 1137. Whole Foods
consulted numerous contractors in order to understand the extent of the rodent problem and the
proper corrective action needed to solve it. Whole Foods determined that curing the problem
required that “the Georgetown Store must be closed, emptied of much of its inventory and fixtures,
and gutted, including the removal of drywall and ceiling tiles, and a thorough cleaning of the

premises.” Id. at 1138. Only after demolition was Whole Foods able to understand the extent of

the problem and the necessary remedial measures. The Georgetown store has been closed for
business since demolition began in March 2017.

In late March, representatives from Whole Foods and Wical met to discuss the situation.
Whole Foods followed up with a letter on April 5, 2017, informing Wical that the rodent issue had
been resolved following demolition and that the interior of the store required a substantial rebuild.
Whole Foods further provided Wical notice, pursuant to Paragraph 30(A) of the lease, that the
store would remain closed “well beyond the 60 days anticipated in [the] lease.” ECF No. 21-2.
Whole Foods continued, “We do not yet have a final timetable for the drawing, permitting,
reconstruction and reopening of the store, but will keep you updated as our progress advances. As
you know, permitting alone will take about 4 months.j’ Id.

Since Whole Foods had to rebuild the interior of the store as a result of the rodent problem,
it determined that it made sense to remodel the store in order to bring it up to the same standards
of similar stores in the area. Whole Foods planned the following improvements: “modernizing the
store’s layout; replacing existing food display cases; replacing the salad bar; replacing the
millwork, cabinetry, register stands, walls, and ceilings which were demolished in curing the
ordinance violation; overhauling the elevator and conveyor system; and adding new food
presentations which requires the movement of certain maj or systems such as plumbing and
HVAC.” Amended Complaint, ECF No. 21 at 1150 In order to receive the permit to commence
this project, the District of Columbia requires Whole Foods to obtain the property owner’s
approval. Whole Foods reached out to Wical for such approval on May 23, 2017. On May 26,
2017, Wical reldsed its consent. Construction plans were completed on approximately May 26,

2017. If they receive the necessary approvals, Whole Foods believes that it should take six months

to rebuild the interior of the store. To` date, Whole Foods has spent approximately $1 million on
this project.

In addition to refusing to consent to the rebuild of the stores interior, on May 15 , 2017,
Wical sent Whole Foods a Notice of Default, instructing Whole Foods that they had fifteen days
to reopen for business to avoid default, at which time Wical could terminate the lease, Whole
Foods believes this was a ploy to raise its rent. Whole Foods followed up with its own Notice of
Default sent to Wical on July 14, 2017_eight days after Whole Foods delivered a complete copy
of its rebuild plans to Wical. In its Notice of Default, Whole Foods alleged that Wical’s refusal
to consent to the proposed renovation work constituted a breach of contract. On August 4, 2017,
`Whole Foods filed suit before this Court.
III. LEGAL STANDARD

To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.”’ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twornbly, 550 U.S. 544, 570 (2007)). When considering a motion to dismiss under Rule 12(b)(6),
“the court must assume ‘all the allegations in the complaint are true (even if doubtful in fact),’ and
the court must give the plaintiff ‘the benefit of all reasonable inferences derived from the facts
alleged.”’ Aktieselskabet AF 2]. Nov. 2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008)
(intemal citations omitted).

A claim is facially plausible when “the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal,
556 U.S. at 678 (citing Twombly, 550 U.S. at 556). While the factual allegations in the complaint

need not be “detailed,” the Federal Rules require more than “an unadorned, the-defendant-

unlawfully-harmed-me accusation.”' Ia’. (citing Twombly, 550 U.S. at 555). “In determining
whether a complaint states a claim, the court may consider the facts alleged in the complaint,
documents attached thereto or incorporated therein, and matters of which it may take judicial
notice.” Stewart v. Nat'l Educ. Ass’n, 471 F.3d 169, 173 (D.C. Cir. 2006).
IV. DISCUSSION

A. Count I: Declaratory Judgement

The first count of Whole Foods’s Amended Complaint boils down to a request that the
Court declare (l) that Whole Foods did not breach the lease by remaining closed for more than 60
days and (2) that Wical’s Notice of Default Was invalid. In addressing this count, the Court must
focus on the parties’ lease agreement Couits "‘analyze leases of real property according to
established principles of contract law.” Aba'elrhman v. Ackerman, 76 A.3d 883, 887 (D.C. 2013)

£BL

(citation omitted). Under the Declaratory Judgment Act, [i]n a case of actual controversy within
its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations
of any interested party seeking such declaration, whether or not such further relief is or could be
controversy, between parties having adverse legal interests, of sufficient immediacy and reality to
warrant the issuance of a declaratory judgment.”’ Medlmmune, Inc. v. Genetech, Inc., 549 U.S.
118, 127 (2007) (quoting Maryland Casually Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273
(1941)). To survive a motion to dismiss, a declaratory judgment plaintiff must only show that
there is “an actual or imminent injury caused by the defendant that can be redressed by judicial
relief and that is of ‘sufficient immediacy and reality to warrant the issuance of a declaratory
judgment.”’ Epos Technology Ltd. v. Pegasus Technologies Lla’., 636 F.Supp.2d 57, 61 (D.D.C.

2009) (quoting T eva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1338 (Fed. Cir.

2007)

Wical contends that the plain terms of the lease require dismissal of this count. Paragraph
4(G) of the lease provides that Whole Foods “close the [store] to the public for such periods as
may be reasonably required in order to diligently modernize or improve same, but in no event shall
such closures exceed sixty (60) days in the aggregate during any three (3) year period elapsing
during the Lease Term.” Whole Foods itself admits that it has been closed since March 2017, well
beyond the 60 days allowed u the lease, Thus, according to Wical, Whole Foods breached the
lease.

In response, Whole Foods incorrectly posits that their actions are excused pursuant to
Paragraph 4(F) of the lease. Under Paragraph 4(F), Whole Foods must “continuously conduct its
business at the [store] in accordance with the same standards of operation and in the same quality t
as it presently operates its other similar stores” and the store must be kept “clean and free from
pests. . . .” However, the paragraph also notes that those obligations are “subj ect to the other terms
and provisions of this Lease.” Thus, Paragraph 4(F) does not provide Whole Foods justification
to remain closed longer than 60 days. Whole Foods’s obligation to modernize the store and keep
it “clean and free of pests”_pursuant to Paragraph 4(F)_must be accomplished in accordance
With Paragraph 4(G), which explicitly disallows the store from remaining closed for more than 60
days. Paragraph 18(A) also does not provide Whole Foods cover for the delay in opening. While
the paragraph does speak to an extended cure period, it explicitly defines the period to be “not in
excess of sixty (60) days” and that the period cannot be extended if Whole Foods fails in “its
obligation to continuously operate its business operations.”

However, the lease’s force majeure clause_Paragraph 30(A)_does justify closure
beyond 60 days. The paragraph provides that Whole Foods is excused from the performance of a

required act (“other than the payment of monies”) due to “acts of God, strikes, lockouts, labor

troubles, plan approval delayz inability to procure materials, restrictive governmental laws or
regulations, adverse weather, unusual delay in transportation, delay by the other party hereto or
other cause Without fault and beyond the control of the party obligated to perform.”

As an initial matter, this clause is certainly meant to apply to the obligation re-open the
business within 60 days. The lease specifically calls out that “payment of monies” are not excused.
If the parties intended to preclude excusal of the 60-day requirement, it could have also been
explicitly called out in the lease, The Court must therefore assess whether the well pleaded facts
provide grounds for excuse under this paragraph.

Whole Foods sufficiently pleads that the initial closure of the store was beyond their
control. They had in place a pest control program`dating back to April 2, 2014. Despite that
program, the rodent issue persisted and Whole Foods received two notices of violation from the
District of Columbia, requiring immediate closure of the store. Upon receiving their second notice,
Whole Foods engaged multiple contractors who advised that one of the causes of the problem was
“inferior building construction.” Amended Complaint, ECF No. 21 at 11 50. In order to understand
the extent of the problem and ultimately solve it, the store had to be “be closed, emptied of much
of its inventory and fixtures, and gutted, including the removal of drywall and ceiling tiles, and a
thorough cleaning of the premises.” Id. at 11 38. Whole Foods promptly followed that advice and
began demolition on the interior of the store. The Court finds, based on the well pleaded facts,
that Whole Foods was forced to close and gut the interior of the store due to a cause “beyond
[their] control”~_-a rodent problem.

The Court also finds that ongoing delay in re-opening is excused under the contract.
Paragraph 30(A) explicitly excuses performance due to “plan approval delay.” Rebuilding the

interior of the store required that Whole Foods obtain permits from the District of Columbia, And

as Whole Foods pleaded, “the District of Columbia may not approve the plans and issue permits
for months or more due to a backlog in permitting requests”-a process that is beyond its control
and excused under Paragraph 30(A). Id. at 1[ 53.

Moreover, D.C. requires that the property owner consent to plans before the permitting
process can begin. Whole Foods alleges that Wical’s refusal to consent also constituted excusable
delay. Wical responds that [1] Whole Foods did not ask for their consent until May 23, 2017, [2]
only provided them with the construction plans on July 6, 2017, and [3] failed to provide them
with “the complete set of papers required under Paragraph 7(A), namely the plans along with
required certificates of liability insurance and proposed contractors.” ECF No. 26-1 at 5-6. As to
Wical’s first two contentions, Whole Foods pleaded that it “immediately engaged an architect to
draw up plans incorporating the repairs and improvements and approved expedited services from
all vendors relating to the remodeling proj ect” and that “[o]nce the architect’s plans were
substantially completed, they were submitted to the general contractor to draw up construction
plans necessary to obtain permits.” The well pleaded facts indicate that Whole Foods diligently
pursued plans and that was not the cause of any ongoing delays.

Next the Court turns to Wical’s third contention-that Whole Foods failed to provide them
with the complete set papers required under Paragraph 7(A). Paragraph 7(A) provides that Whole
Foods must obtain Wical’s consent before making any “structural alterations” to the premises. In
seeking consent, Whole Foods must “provide [Wical] with the name of any proposed contractors
of Tenant, certificates of liability insurance maintained by such contractors in reasonable amounts
reasonably acceptable to Landlord and copies of all plans for any improvements to be made by

Tenant at the time request for Landlord’s approval is made by tenant.” But Whole Foods need

10

only provide Wical with the “complete set of papers’.’ to get approval for structural changes. The
complete set of papers is not needed to get Wical’s approval for non-structural changes.

In its Amended Complaint, Whole Foods asserts that it is making the following alterations:
“modernizing the store’s layout; replacing existing food display cases; replacing the salad bar;
replacing the millwork, cabinetry, register stands, walls, and ceilings which were demolished in
curing the ordinance violation; overhauling the elevator and conveyor system; and adding new
food presentations which requires the movement of certain major systems such as plumbing and
HVAC.” Amended Complaint, ECF No. 21 at 1150. While these are not minor alterations, that
does not make them structural. The parties have not pointed to a definition of “structural” in the
lease, nor has the Court found one on its own. So the Court must turn to other sources. Black’s
Law Dictionary defines structural alteration as a “significant change to a building or other
structure, essentially creating a different building or structure.” Structural Alteration, BLACK’S
LAW DICTIONARY (10th ed. 2014) (emphasis added). Other courts have taken a similar approach,
drawing a distinction between maj or alterations and altemations that are structural. See, e. g. , Aetna
Cas. & Sur. C0. v. Ocean Acc. & Guarantee Corp., 386 F.2d 413, 415 (3d Cir. 1967) (“Without
attempting to give an all-inclusive definition of the term, it is our judgment that the replacement
of a cooling system, although perhaps a major undertaking, is not a structural alteration within the
accepted meaning of that term.”). lt is the Court’s judgement that the alterations contemplated by
Whole Foods will not essentially create a different structure. There is no evidence to suggest that
Whole Foods is planning on removing load-bearing walls or repurposing the premises for an
entirely different function. Rather, moving around the HVAC and plumbing system, upgrading
equipment, and replacing drywall and ceiling tiles that were demolished, will result in a structure

that will still look like and function as a grocery store.

ll

Wical argues that the Court must consider that the architectural plans provided to them by
Whole Foods in July, and which were attached to Whole Foods’s Amended Complaint, include a
category of changes that are described by the architectural firm as “structural.” ECF No. 21-3 at
ll. The Court takes this argument seriously. lt is certainly relevant that the architect describes
the alterations as “structura .” However, the Court does not agree with Wical that it is dispositive
of the issue. The Court has no way of knowing whether the architect had seen the contract or
intended to use the word “structural” in the same way the parties construed the term in their lease
agreement lt is entirely plausible that the architect thought about the term in a different way.
Therefore, at this stage of the proceeding, when viewing the facts in the light most favorable to
Whole Foods, the Court finds the proposed changes to be non-structural As such, the fact that
Whole Foods did not provide the complete set of papers to Wical in seeking consent cannot be
seen as a reason for delay in re-opening of the business, since Whole Foods was not required to
provide them under the lease agreement.

In sum, the two major reasons for the store remaining closed_the rodent problem and the
delay in acquiring permits to rebuild-were beyond Whole Foods’s control. Whole Foods is
therefore excused, under Paragraph 30(A), from ensuring that the store does not remain closed
beyond 60 days. Accordingly, Whole Foods’s count seeking declaratory judgment that it did not
breach the lease and that Wical’s Notice of Default was invalid will not be dismissed At this
stage, the Court does not need to weigh in on each specific request that Whole Foods wants this
Court to declare, see Amended Complaint, ECF No. 21 at 22-23, except to say that Whole Foods

has pleaded sufficient facts to survive a motion to dismiss on this count.

B. Count II: Damages for a Breach of the Covenant of Good Faith and Fair
Dealing

12

As to Count II, `Whole Foods seeks damages due to Wical’s breach of the implied covenant
of good faith and fair dealing. Whole Foods alleges that Wical breached its duty by issuing a
notice of default which “is contrary to the spirit of the Lease” and destroys their ability to receive
the fruits of the contract. Amended Complaint, ECF No. 21 at 11127.

Wical first maintains that the Court must dismiss this claim since Whole Foods’s
“allegations in support of its implied covenant claim are based on a breach of express provisions
of the Lease-which is the entire premise of Whole Foods’ declaratory judgment claim.” ECF
No. 26-1 at 14. Wical notes that under D.C. law “a party may not bring a claim for breach of the
implied covenant of good faith and fair dealing when it is identical to other claims for relief under
an established cause of action, such as a breach of contract claim.” Id. at 13-14 (citing Washington
Metro. Area Transit Auth. v. Quik Serve Foods, Inc., 2006 WL 1147933, at *5 (D.D.C. Apr. 28,
2006). However, it is also the case that “[p]laintiffs are not required at the pleadings stage to
choose between alternative remedies.” Jacobson v. Hofgard, 168 F.Supp.3d 187, 208 (D.D.C.
2016) (citing Parr v. Ebrahimian, 774 F. Supp. 2d 234, 240 (D.D.C. 2011). Here, Wical contends
that Count ll mirrors the contract claim in Count I. In Count I, however, Whole Foods seeks a
declaratory judgement. In Count Il, Whole Foods seeks damages. Since the remedies are different,
the Court will not dismiss the claim on the grounds that it mirrors the claim in Count I.

Wical further argues that even if the claim stands alone, it should be dismissed because
Wical acted within its rights under the contract by issuing a notice of default. According to Wical,
Whole Foods breached the express terms of the lease by remaining closed for longer than 60 days.
Therefore, Wical was within its contract rights to issue a notice of default. As Wical puts it, “a
breach of the implied covenant cannot stand when a defendant ... acts in accordance with the terms

of the contract.” ECF No. 31 at 9. “It is axiomatic that ‘[t]he implied covenant of good faith and

13

735

fair dealing cannot 'contradict, modify, negate, or override the express terms of a contract.
Billups v. Lab. Corp. ofAm., 2017 WL 435723, at *5 (D.D.C. Jan. 30, 2017) (quoting l7A C.J.S.
Contracts §437 (2016)).

This argument is belied by the fact that, as the Court just held, Whole Foods did not breach
the contract. Whole Foods’s failure to re-open the store within 60 days was excused under
Paragraph 30(A) of the lease. Therefore, Wical was not within its rights to issue a notice of default.
Under D.C. law, “[t]o state a claim for breach of the implied covenant of good faith and fair
dealing, a plaintiff must allege either bad faith or conduct that is arbitrary and capricious.” Kumar
v. George Washington Univ., 174 F.Supp.3d 172, 189-90 (D.D.C. 2016) (quoting Wright v.
Howara' Univ., 60 A.3d 749, 754`(D.C. 2013)). At this stage of the proceeding, Whole Foods has
pleaded sufficient facts to meet that burden. Despite not having breached the contract, Wical sent
Whole Foods a notice of default, which Whole Foods alleges was done for the purpose of getting
out of the lease and raising the rent. Since Whole Foods met its pleading burden, the Court will

DENY Wical’s motion to dismiss this count.

C. Count III: Specific Performance and Injunctive Relief for a Breach of the
Covenant of Good Faith and Fair Dealing

Next, Whole Foods requests that the Court grant injunctive relief and specific performance
due to Wical’s breach of the implied covenant of good faith and fair dealing. Whole Foods appears
to be seeking two forms of specific performance: (1) that the Court require Wical to extend the
cure period and excuse closure under Paragraph 30(A) of the lease and (2) that the Court require
Wical “to consent to the permit application under Paragraph 27(J) of the Lease.” Amended
Complaint, ECF No. 21 at 11 143. As to injunctive relief, Whole Food requests that the Court enjoin
Wical “from taking any steps to terminate the Lease, repossess the Georgetown Store, evict

Plaintiff, or pursue forfeiture.” ]a'.

14

Wical first argues that this count should be dismissed because “Whole Foods cannot state
a claim for breach of the implied covenant in this case.” ECF No. 26-1 at 15. This argument fails
for the reasons discussed above_Whole Foods met its burden on that claim. Turning to the
appropriateness of the remedy, Wical avers that “specific performance cannot be awarded where
there is no clear right to the relief a plaintiff requests under the Lease-here, among other things,
forcing Wical to sign off on permits which would materially alter the premises and keep the Store
closed for far longer than 60 days.” Id. (citing Clark v. Route, 951 A.2d 757, 761 (D.C. 2008)
(“[T]o sustain the right to specific performance of their contract, the purchasers must show that
they have performed or have offered to perform all of the obligations required of them by the
contract.”). This argument is unavailing as it relates to_Whole Foods’s first request for specific
performance, but it effectively explains why the Court must dismiss Whole Foods’s second request
for specific performance

As the Court has explained, Whole Foods pleaded sufficient facts to prove that it did not
breach the contract for failing to re-open the store within 60 days, given that it was excused under
Paragraph 30(A). Therefore, it has the right to specific performance on this issue_the Court can
require Wical excuse the store closure. See Cily Stores Co. v. Ammerman, 266 F. Supp. 766, 776
(D.D.C. 1967) (finding that specific performance is an appropriate remedy for claims related to
“[c]ontracts involving interests in land. . .”).

Whole Foods also asks the Court to require Wical consent to the permit application
pursuant to Paragraph 27(J) of the lease, arguing that Wical is unreasonably withholding its
consent. But Paragraph 27(J) only applies “[w]henever it is necessary under the terms of this
Lease for either party to obtain the consent or approval of the other party.” The only disputed term

of the lease that contains a requirement “for either party to obtain the consent or approval of the

15

other party” is Paragraph 7(A). Paragraph 7(A) of the lease makes clear that structural changes to
the building require landlord consent; but non-structural changes do not require landlord consent.
(“Tenant may make interior non-structural alterations, installations, changes, replacements,
additions or improvements to the Demised Premises without Landlord’s prior written consent. . .”).
The Court has already explained why Whole Foods’s proposed alterations are non-structural in
nature (at least when viewed in the light most favorable to Whole Foods). 'l`herefore, Wical’s
consent is not required under the lease.2 Since Paragraph 27(J) only applies When consent is
required under the lease, it does not apply to this situation. Accordingly, Whole Foods does not
have a legal right to consent under the terms of Paragraph 27(J).3

Turning to Whole Foods’s request for injunctive relief,` Wical contends that Whole Foods
fails to establish it will suffer irreparable harm absent an injunction. See American Civil Liberties
Union v. Mineta, 319 F. Supp. 2d 69, 87 (D.D.C. 2004) (“In determining whether to enter a
permanent injunction, the Court considers a modified iteration of the factors it utilizes in assessing
preliminary injunctions: (1) success on the merits, (2) whether the plaintiffs will suffer irreparable
injury absent an injunction, (3) whether, balancing the hardships, there is harm to defendants or
other interested parties, and (4) Whether the public interest favors granting the injunction.”).
Whole Foods is correct that economic harm is only irreparable When it “is so severe as to cause

extreme hardship to the business or threaten its very existence.” Hill Dermaceuticals, Inc. v. U.S.

Food & Drug Admin., 826 F. Supp. 2d 252, 261 (D.D.C. 2011). But as Whole Foods points out,

 

2 Wical’s consent may be necessary under D.C. law, but that is very different from being

required under the lease,
3 While Wical’s denial of consent may not be required under Paragraph 27(J) of the lease,
it may constitute a violation of the covenant of quiet enj oyment. But the Court will address that
issue later in this opinion.

16

it alleges more than just economic harm in this case. Whole Foods alleges “haim to its goodwill
and reputation in the community, its employees, and the value of the existing property rights and
future leasehold.” ECF No. 29 at 24. The Court finds that those injuries sufficiently allege
irreparable harm. For instance, if Wical attempts to break the lease based on the notice of default
and Whole Foods is forced to move out of the store, it can suffer harm to its reputation in the
community-_harm that cannot be reversed. Moreover, D.C. courts have held that a tenant’s right
to possession of a property is irreparable, given that property “tends to have unique
characteristics.” See, e.g., Simpson v. Lee, 499 A.2d 889, 896 (D.C. 1985).

The Court also finds that Whole Foods has pleaded sufficient facts to meet the other three
factors of the permanent injunction test. For the reasons already discussed by the Court, Whole
Foods adequately pleaded success on the merits of its breach-of-the-covenant-of-good-faith-and-
fair-dealing claim. Wical does not contest the last two factors_balancing of the hardships and
public policy-and the Court finds that Whole Foods adequately pleaded them. Without an
injunction, Whole Foods stands to lose its ability to lease the property and operate its store, while
Wical will merely be required to abide by the contract. Finally, public interest favors the
enforcement of contracts if a party has not breached. ln this case, Whole Foods pleaded facts
sufficient to support that they have not breached the lease. Thus, it is in the public interest for
Wical to be enjoined from breaking the lease,

ln sum, the Court will DENY Wical’s motion to dismiss Count III, except as it relates to
Whole Foods’s request that Wical be required to consent to the permit application under Paragraph

27(J) of the lease,

D. Count IV: Declaratory Relief & Damages for a Breach of Contract Claim
under Paragraphs 18(A), 21, and 27(J) of the Lease

17

As Wical neatly summarizesz in Count IV “Whole Foods seeks a declaration that Wical
breached the Lease by: (1) withholding consent for the permit applications (Am. Compl. 11147-
48); (2) failing to recognize Whole Foods’ right to excuse any delays for causes outside Whole
Foods’ control (Am. Compl. 11 149); and (3) interrupting Whole Foods’ possession and quiet
enjoyment ofthe Store by refusing to consent to the permits and threatening forfeiture of the Lease.
Am. Compl. 1111 151-52.” ECF No. 26-1 at 16. As a result of Wical’s breach, Whole Foods alleges
it can terminate the lease and seek damages. The Court has already addressed the first two reasons.
Wical did not breach the lease by withholding consent for the permit applications pursuant to
Paragraph 27(J) of the lease, The proposed alterations are non-structural and Wical’s consent is
4 not required under the contract `Wical did breach the lease, however, by failing to recognize that
Whole Foods was excused from its obligation to re-open within 60 days.

Whole Foods’s only new argument here is that Wical breached Paragraph 21 of the Lease
by “interrupt[ing] Whole Foods’ possession and enjoyment of the [Store].” Amended Complaint,
ECF No.26-1 at 11 151. Whole Foods alleges that “[b]y refusing to consent to Whole Foods’ permit
application and threatening forfeiture of the Lease, Defendant has made it impossible for Whole
Foods to exercise its rights of possession and enjoyment of the Georgetown Store. Whole Foods
is unable to obtain permits, begin construction, or re-open.” Id. at 11 152. Wical points out that
quiet enjoyment can only be violated under the contract “if the covenants and agreements on the
part of Tenant shall be kept, performed and observed by Tenant as in this Lease provided ...” And
that Whole Foods violated their obligations under the contract by (1) failing to re-open within 60
days; (2) by failing to operate the store at the same standard and quality of similar stores, and (3)

by delivering the architectural plans late and in an incomplete manner.

18

The Court has already addressed why Whole Foods did not breach the contract based on
reasons one and three. Turning to the second reason, Whole Foods submitted plans to Wical for
consent that were designed to raise the quality of the store. Wical refused to consent to those plans.
Wical says that it did not breach the covenant of quiet enjoyment by refusing to consent to those
plans because Whole Foods did not uphold its end of the bargain_to operate the store at a higher
standard. That argument strikes the Court as disingenuous.

Courts set a high bar for finding a breach of the covenant of quiet enjoyment-there is no
breach of the covenant “unless there is an eviction from, or some actual disturbance in, the
possession by the landlord or by some third person under paramount title.” Hyde v. Brandler, 1 18
A.2d 398, 400 (D.C.1~955). While Wical did not change the locks on the property, its refiisal to b
consent to the architectural plans has disturbed Whole Foods’s possession. Without Wical’s
approval, Whole Foods is unable to apply for a permit to rebuild the interior of the store. Without
a perrnit, Whole Foods is unable to open and operate its store. Yet Whole Foods continues to pay
rent. The Court acknowledges that it cannot be that Wical must provide consent to any plans that
Whole Foods puts in front of them. But there is no evidence in this case that Wical engaged with
the plans and discussed with Whole Foods to What, if any, repairs and renovations Wical Would
consent. Rather, Whole Foods pleaded that Wical “failed to respond to [its] July 5, 2017 letter
[with the attached architectural plans] in any manner.” ECF No. 21 at 1156. Accordingly, the Court
finds that Whole Foods has pleaded sufficient facts to adequately support a breach of the covenant
of quiet enj oyment.

Next, the Court will turn to the issue of whether Whole Foods can terminate the lease and
vacate the premises as a result of Wical’s breach. The lease itself is clear as to when the parties

can terminate the lease: in the event of a bankruptcy (Section 17 of the lease) or in the event that

19

Whole Foods defaults (Section 18 cf the lease). Whole Foods dees not point to, nor has the Court
found a provision of the lease permitting them to terminate the lease upon Wical’s breach of the
contract Rather, Whole Foods relies on a theory of constructive eviction to warrant termination
ofthe leases See ECF No. 29 {“Since Dct`cndant’s breaches threaten Whole Foods’ ability to regain
possession and continue operating Whole Foods requested that this Court declare that Whole
Foods is entitled at its option, to terminate the lease.”) “Censtructive eviction like actual eviction,
is a violation ofthe covenant of quiet enjoyment implied in leases." Bow)z v. Har)zillon, 601 A.Ztl
1074, 1077-78 (D.C. 1992). Since Whole Foods adequately states a claim for quiet enjoyment, it
also states a claim for constructive eviction and survives a motion to dismiss on this issue

in sum, the Court will DENY Wical’s motion to dismiss Count W, except as_it relates to
Whole ands’s request that the Court declare Wical in breach Paragraph 27(3) of the lease,
V. CONCLUS!ON

tier the foregoing reasons, the Court will grant in part and deny in part Wical`s motion to
dismiss ’l“he Court will DENY the motion with respect to: (l) Counts l and ll of Whole Foods`s
Amended Complaint; (2) Count 111 (c.\tcept as it relates to Whole Foods’s request that 'Wical be
required tn consent to tire permit application under Paragraph 27(J) ofthe lease on winch the Ccurt
will GRAN'I` dismissal): and (3) Count lV (cxcept as it relates to Whole Foods’s request that the
Court declare Wical in breach of Paragraph 27(J) of the lease, on which the Court will GRAN'!`

dismissal). A separate Ordcr accompanies this Memorandum Opinion.

Date: lairuary __2__;~:2018 ZYU€ C “ w

Roycé/C. Lamherth
United States i}istriet ledge

