United States District Court, W.D. Texas, Austin Division
SPARKS, SENIOR UNITED STATES DISTRICT JUDGE.
REMEMBERED on this day the Court reviewed the file in the
above-styled cause, and specifically WC 1899 McKinney Avenue,
LLC, World Class Capital Group, LLC, and Natin and Sheena
Paul (collectively, World Class)'s Motion for Summary
Judgment [#79], STK Dallas, LLC and The One Group
Hospitality, Inc. (collectively, STK)'s Response [#82] in
opposition, and World Class's Reply [#92] in
support. Having reviewed the documents, the
governing law, the arguments of counsel, and the file as a
whole, the Court now enters the following opinion and orders.
dispute concerns a lease agreement between World Class and
STK. STK is a restaurant group that sought to open a
restaurant in Dallas, Texas. Resp. [#82-1] Segal Decl. at
Towards that end, STK entered into discussions with World
Class in 2014 regarding a potential lease of retail space at
1899 McKinney Avenue (the Premises). Id.
the lease negotiations, STK discovered the Premises lacked on
site parking and expressed concern about its ability to
secure nearby off site parking for its planned restaurant.
Mot. Summ. J. [#79] at 106. In an attempt to allay these
concerns, World Class undertook a search for off site parking
in early 2015. Internal emails exchanged within World Class
around that time suggest World Class had considered eight
possible parking lots in the vicinity, of which four were
unavailable. Mot. Seal [#83-1] Ex. A at 2-6. World Class
concluded the other four lots were likely only available on a
month-to-month basis "if they are available at
2015, neither party had identified a parking solution, and on
May 17, 2015, STK proposed "add[ing] a contingency [to
the proposed lease agreement] for finding acceptable offsite
parking for intended use" because "[o]perations has
not had a chance to secure a lot." Segal Decl. at 8-9.
World Class responded that there was "plenty of parking
nearby in garages and surface lots" and assured STK that
it would "help in any way as needed." Id.
But World Class resisted adding a parking contingency to the
Lease Agreement on the ground that the addition of another
contingency would "throw a monkey wrench in
execution." Id. STK ultimately conceded and
informed World Class that it was "okay forgoing a
parking contingency" but asked World Class to provide
information on "the company that provided parking
services for the previous tenant." Segal Decl. at 12.
The Lease Agreement
Lease Agreement and a corresponding Guaranty Agreement were
executed by the parties on June 5, 2015, and several of their
provisions are relevant here. Mot. Summ. J. [#79] Ex. 2-A
(Lease Agreement) at 62; Am. Compl. [#14] at 52-53 (Guaranty
the Lease Agreement contains an "as-is" clause
specifying that the Premises were to be leased
"as-is" and without reliance upon any warranty as
to the fitness of the Premises for any particular purpose.
Lease Agreement § 3.1. The "as-is" clause
does, however, require World Class to deliver the Premises to
STK "in compliance with" all local codes and
the Lease Agreement contains a parking disclaimer clause.
Lease Agreement § 3.2. Under the terms of that clause,
STK acknowledged and agreed that the Premises "may not
contain sufficient parking" for the Premises's
intended use. Id. In turn, World Class agreed
"at the request of [STK] but at no cost to [World
Class], to assist [STK] in identifying and locating offsite
the Lease Agreement contains a provision establishing a
contingency period. Under the terms of that provision, if the
Premises were unable to be operated for their intended use
because STK cannot "obtain the necessary permits"
despite using "commercially reasonable best
efforts," STK could terminate the Lease Agreement so
long as STK provided written notice on or before August 3,
2015. Lease Agreement § 2.2(ii).
and finally, the Lease Agreement contains provisions
affecting the timing of STK's rent obligations. Under
Lease Agreement § 1.1 (i), the Rent Commencement Date
falls on the earlier of (i) the date on which STK opened its
restaurant to the public, or (ii) February 1, 2016,
"subject to extension as provided for in Section
28.18." In turn, Lease Agreement § 28.18 provides
the Rent Commencement Date "shall be extended by one day
for each such day of delay" caused by a "Force
Majeure Event." The Lease Agreement defines a
"Force Majeure Event" as "any delay due to
strikes, riots, acts of God, shortages of labor or materials,
war, governmental laws, regulations or restrictions or any
other causes of any kind whatsoever which are beyond the
reasonable control of such party." Id. §
the parties signed the Lease Agreement, subsequent attempts
to locate offsite parking failed. See Segal Decl. at
2 ("In July 2015, One Group retained Lone Star, a
parking consulting company, to assist in securing the deeded
parking spaces needed for operation of a restaurant. . .
[but] [n] either One Group nor its consultants were ever able
to secure the required number of deeded parking spaces under
Dallas' local codes and regulations .. .."). Yet, in
spite of the obvious obstacle the parking situation posed to
opening a restaurant, STK failed to provide written notice
within the contingency period of intent to terminate the
Lease Agreement. See Segal Decl. at 3. STK also
failed to pay its rent, and in March 2016, STK received a
letter from World Class demanding that STK begin paying rent
due under the terms of the Lease Agreement. Id. STK
Group then made two rent payments to World Class "in the
hopes that the needed parking would be found."
needed parking was not found. In April 2016, STK informed
World Class it was "unable to get car parking,"
that it had not received any substantial assistance from
World Class, and that the City of Dallas (the City) was
unwilling to grant STK a parking variance. Segal Decl. at 3.
As a result of these obstacles, STK concluded it could not
proceed with the restaurant and ceased making rent payments
to World Class. Id.
the same time, STK learned a prior lessee had encountered
similar parking problems and had applied for a parking
variance from the City. Id. at 3-4. In
conjunction with the parking variance application, the prior
owner of 1899 McKinney Avenue had written a letter to the
City asserting the owner had "tried in vain" to
secure an offsite parking agreement but had been unable to do
so. Segal Decl. at 4. Despite this entreaty, the City had
denied the variance application in January 2014. Id.
October 2016, World Class and STK arranged an in-person
meeting to discuss how to proceed. Segal Decl. at 4. STK
alleges the parties agreed at this meeting that if they were
unable to secure parking or a variance for operation of the
restaurant, the parties would cancel the Lease Agreement and
"walk away with no claim on the other."
the parties' alleged agreement to cancel the Lease
Agreement if parking could not be found, World Class filed
suit in May 2017 alleging breach of contract. Notice Removal
[#1-1] Ex. A (Pet.) at 13-14. STK then removed the action to
this Court on the basis of diversity jurisdiction and filed
counterclaims alleging fraud in the inducement, fraudulent
concealment, negligent misrepresentation, and breach of
contract. Not. Removal [#1] at 2-3; Countercls. [#21] at
10-15. World Class responded by asserting a fraud claim
against STK alleging STK had misrepresented its
"attention to detail" and financial condition when,
in reality, it "could not meet the obligations under the
Lease . . . [and] Guaranty." [#48] at 14-15. World Class
now moves for summary judgment on its breach of contract
claims as well as on STK's affirmative defenses and
counterclaims. Mot. Summ. J. [#79]. This pending motion is
ripe for review.
judgment shall be rendered when the pleadings, the discovery
and disclosure materials on file, and any affidavits show
that there is no genuine dispute as to any material fact and
that the moving party is entitled to judgment as a matter of
law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett,
477 U.S. 317, 323-25 (1986); Washburn v. Harvey, 504
F.3d 505, 508 (5th Cir. 2007). A dispute regarding a material
fact is "genuine" if the evidence is such that a
reasonable jury could return a verdict in favor of the
nonmoving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). When ruling on a motion for summary
judgment, the court is required to view all inferences drawn
from the factual record in the light most favorable to the
nonmoving party. Matsushita Elec. Indus. Co. v. Zenith
Radio, 475 U.S. 574, 587 (1986); Washburn, 504
F.3d at 508. Further, a court "may not make credibility
determinations or weigh the evidence" in ruling on a
motion for summary judgment. Reeves v. Sanderson Plumbing
Prods., Inc., 530 U.S. 133, 150 (2000); Anderson,
Ml U.S. at 254-55.
the moving party has made an initial showing that there is no
evidence to support the nonmoving party's case, the party
opposing the motion must come forward with competent summary
judgment evidence of the existence of a genuine fact issue.
Matsushita, MS U.S. at 586. Mere conclusory
allegations are not competent summary judgment evidence, and
thus are insufficient to defeat a motion for summary
judgment. Turner v. Baylor Richardson Med. Ctr., 476
F.3d 337, 343 (5th Cir. 2007). Unsubstantiated assertions,
improbable inferences, and unsupported speculation are not
competent summary judgment evidence. Id. The party
opposing summary judgment is required to identify specific
evidence in the record and to articulate the precise manner
in which that evidence supports his claim. Adams v.
Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th
Cir. 2006). Rule 56 does not impose a duty on the court to
"sift through the record in search of evidence" to
support the nonmovant's opposition to the motion for
summary judgment. Id.
disputes over facts that might affect the outcome of the suit
under the governing laws will properly preclude the entry of
summary judgment." Anderson, 477 U.S. at 248.
Disputed fact issues that are "irrelevant and
unnecessary" will not be considered by a court in ruling
on a summary judgment motion. Id. If the nonmoving
party fails to make a showing sufficient to establish the
existence of an element essential to its case and on which ...