Business 8th Edition by Marianne Jennings

تمرين 33

Child World , Inc. v South Towne Centre , Ltd.
634 F.Supp. 1121 (S.D. Ohio 1986)
Toys "R" Us Only
Facts
Child World, Inc. (plaintiff) operates large retail toy stores throughout Ohio and other states called Children's Palace. South Towne Centre, Ltd. (defendant) is a limited partnership in Ohio that leases space in its South Towne Centre shopping complex to a Children's Palace store. Section 43(A) of the lease, executed in February 1976, provided as follows:
Except insofar as the following shall be unlawful , the parties mutually agree as follows:
A. Landlord shall not use or permit or suffer any other person , firm , corporation or other entity to use any portion of the Shopping Center or any other property located within six (6) miles from the Shopping Center and owned , leased , or otherwise controlled by the landlord (meaning thereby the real property or parties in interest and not a "straw" person or entity) or any person or entity having a substantial identity of interest , for the operation of a toys and games store principally for the sale at retail of toys and games , juvenile furniture and sporting goods such as is exemplified by the Child World and Children's Palace stores operated by Tenant's parent company , Child World , Inc. at the demised premises and elsewhere.
The lease was for 20 years and was signed by Barbara Beerman Weprin, the sole general partner of South Towne. Mad River, Ltd. is another limited partnership in which Ms. Weprin is the sole general partner. Mad River owns another parcel of land approximately one-half mile from the South Towne Centre. On December 24, 1985, Mad River entered into an agreement to sell the parcel of land to Toys "R" Us, Inc. Toys "R" Us intends to construct a retail facility similar to the description in the above-noted lease clause. When Children's Palace was informed of the sale, they brought suit, seeking to enforce the covenant not to lease or sell to a competitor of Children's Palace.
Judicial Opinion
RICE, Circuit Judge
The consensus of the federal courts which have considered covenants in shopping center leases is one with which this Court can agree; namely, that the varying terms, conditions, and economic justifications for such restrictions render them inappropriate subjects for application of the per se rule. Defendants have not alleged nor proven anything about Section 43(A) of the lease which would indicate that it has only anticompetitive consequences. Indeed, in Finding of Fact #9, Defendants agree that Section 43(A) was negotiated as an inducement for Plaintiff to erect a Children's Palace store on Defendants' premises and to enter into a 20-year lease. This economic justification for exclusivity clauses is among the primary reasons that clauses such as Section 43(A) have not been found to be per se illegal, but rather have been found consistent with the public interest in economic development. Such laws can induce tenants to establish stores and to enter into a particular marketplace, often then encouraging the entry of other, often smaller, merchants.
A number of factors have been considered by the courts which have excluded restrictive covenants in shopping center leases: (1) the relevant product and geographic markets, together with the showing of unreasonable impact upon competition in these markets, due to the restrictive covenant; (2) the availability of alternate sites for the entity excluded by the operation of such a covenant; (3) the significance of the competition eliminated by the exclusivity clause, and whether present or future competitors were the parties excluded;
(4) the scope of the restrictive covenant and whether it varied depending on particular circumstances; and
(5) the economic justifications for the inclusion of the restrictive covenant in the lease.
Due to the particular facts of this case, however, the Court needs not, and specifically does not, reach the validity of the six-mile limitation contained in Section 43(A). Regardless of possible over breadth, a restrictive covenant challenged as unreasonable... will be upheld to the extent that a breach of the covenant has occurred or is threatened to occur within a reasonable geographic area and time period. The parties have agreed, in Finding of Fact #12, that the parcel which Defendants seek to convey to Toys "R" Us is approximately one-half mile from the Children's Palace store covered by the Lease. The Court finds that Section 43(A) is lawful and enforceable to the extent of one-half mile, as required by the facts of this case.
Turning to the impact which enforcement of Section 43(A), as applied in this case, would have upon the Defendants, the burdens of enforcement are not unduly great. As noted supra , Section 43(A) does not appear to preclude rental or sale, even within a one-half mile radius, to any number of stores which can compete with a Children's Palace toy and game store but which are not "copycat" stores. On the financial level, there is testimony from a representative of Defendants in the record to the effect that the value of the parcel in question increases almost daily. Moreover, Defendants believe that they will have no difficulty in finding another purchaser, should Section 43(A) preclude their sale of the parcel to Toys "R" Us.
Enforcement of Section 43(A) to the extent of one-half mile would also not appear to foreclose the entry of Toys "R" Us into competition with Plaintiff's store in the environs of the South Towne Centre shopping center. In his deposition, J. Tim Logan indicated that, even were Section 43(A) upheld, presumably in its entirety, Toys "R" Us would still establish a store in the vicinity of Plaintiff's store.
Other courts have believed that restrictive covenants of a scope of one-half mile or more, albeit less than six miles, are legitimate lures by landlords in order for shopping center tenants to enter particular marketplaces and to thereby enhance the economic development of the community. The public has surely benefited from the development of South Towne Centre. As a restriction of six miles appeared reasonable to Defendants' predecessors at the time of bargaining, enforcement of Section 43(A) of the Lease to the extent of one-half mile is consistent with that original calculation of value, and certainly reasonable.
What restrictions were placed in the lease agreement?