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Supreme Court upholds $18.5 million breach-of-lease judgment

Many real estate disputes go to court, but very few are tried and most are settled. Only rarely do such cases result in the entry of a final judgment for a significant amount of money. A very large exception to this "rule" was recently provided by a decision of the Pennsylvania Supreme Court. The court refused to hear an appeal by Safeway, Inc. from a decision of the state superior court that affirmed a judgment of $18.5 million against Safeway, Inc. for breaching its lease with Newman Development Group.

The dispute has lasted almost twenty years. In 1996, Newman announced plans to construct a shopping center in North Coventry. In 1998, Genuardi's Family Markets signed a letter of intent to become an anchor tenant in the center; a few months later, it signed a lease for the space. Safeway bought Genuardi's in February 2001. One year later, after facing intense customer opposition to changes it wished to make in the Genuardi's stores, Safeway sent a notice of termination to Newman, asserting that Newman had failed to complete construction of the store in a timely manner.

For a variety of reasons, Newman was unable to find a replacement tenant, and it sued Safeway for rent owed for the 20-year term of the lease, interest and attorney's fees. After a trial in 2006 and an initial appeal, the trial court in 2010 calculated that Safeway owed Newman $10 million in rent, $8 million in rent and related costs for a total of more than $18 million. The Superior Court affirmed this result, and the Supreme Court's recent decision means that Safeway must now pay to Newman the amount ordered by the trial court.

This case demonstrates the perils of real estate litigation. Anyone who is contemplating abandoning an otherwise valid lease, or a landlord who is contemplating bringing a claim for such a breach, will wish to consult an attorney who is knowledgeable about commercial leases. Such a consultation can provide a useful evaluation of the facts of the case and an analysis of the probability of recovering damages or successfully defending against the claim.

Source: Pottstown Mercury, "Court decision upholds $18 million verdict," Michael P. Rellahan, June 30, 2015

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