SWPlaza III, LLC v. TSA Stores, Inc. (C.D. IL - 06-3177)
We previously reported on the short facts surrounding this dispute in an entry regarding the propriety of expert testimony regarding the cost of repair. Not to belabor the point, this dispute arose after two tornadoes damaged a shopping center. TSA was renting space in the center at the time and part of their store was destroyed. The lease had a provision that allowed for the TSA to terminate the lease if within 60 days of the destruction, they estimated that the cost of repair and reconstruction exceeded 35% of the total reconstruction cost.
The parties agreed that the total reconstruction cost of the store was $1,960,067.00 (Slip Op. at 6). 35% of that amount is $686,023.00. The court heard arguments at a bench trial regarding whether TSA properly estimated the amount would exceed the 35% limit within 60 days of the tornado such that their breach of the lease was proper.
After hearing the evidence from all parties, the court found that actions taken by TSA (the full list of facts is recited the opinion) amounted to a determination to breach the lease and then an ad-hoc approach with the estimates and numbers amounting to working out the figure of 35+% after the fact. What this means is that there was no "good faith belief that a reasonable estimate of repair and reconstruction costs would be at least 35% of the then-total reconstruction cost." (Slip Op. at 28-29)
The opinion, and the different information adduced during the hearing should be a reminder to anyone in-house about the proper procedures for negotiating and dealing with the parties you've contracted with.
The opinion can be found here.
