Northglenn Gunther Toody's, LLC v. HQ8-10410-10450 Melody Lane LLC

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 24, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
NORTHGLENN GUNTHER TOODY’S,
LLC, a Colorado Limited Liability
Company,
Plaintiff - Appellant,
No. 16-1468
v. (D.C. No. 1:16-CV-02427-WJM-KLM)
(D. Colo.)
HQ8-10410-10450 MELODY LANE LLC,
a Delaware limited liability company
registered to do business in Colorado,
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before MATHESON, PHILLIPS, and McHUGH, Circuit Judges.
_________________________________
Northglenn Gunther Toody’s, LLC (NGT) appeals from the district court’s
denial of its motion for a preliminary injunction. NGT sought to prevent its landlord,
HQ8-10410-10450 Melody Lane LLC (Melody Lane), from leasing the building next
to NGT’s diner-style restaurant to an International House of Pancakes (IHOP)
franchisee. Exercising jurisdiction under 28 U.S.C. § 1292(a)(1), we affirm.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
BACKGROUND
Melody Lane operates the Northglenn Marketplace shopping center in
Northglenn, Colorado. One of its tenants is NGT, the owner of Gunther Toody’s, a
diner-style restaurant themed to evoke the 1950s. NGT has possession of the
premises under a lease dated August 19, 1998, as amended and modified (the Lease).
The Lease includes a limited exclusivity clause, stating that so long as NGT is not in
default, Melody Lane “shall not permit any other portions of the Shopping Center to
be leased or sold for usage as a diner similar in concept to the operation conducted
from the Leased Premises by [NGT]”—that is, “a diner similar in concept to”
Gunther Toody’s. Aplt. App., Vol. I at 161.
In 2016, a Marketplace restaurant space next to Gunther Toody’s became
vacant. In June 2016, Melody Lane leased that space to an IHOP franchisee for use
as an IHOP restaurant. For purposes of this appeal, IHOP qualifies as a “diner.”
IHOP serves breakfast foods 24 hours a day, but it also offers hamburgers, fries, and
similar American foods.
Soon after executing the IHOP lease, Melody Lane executed an estoppel
certificate and agreement (the Estoppel Agreement) for NGT. The Estoppel
Agreement warranted that to Melody Lane’s knowledge, neither Melody Lane nor
NGT was in default under the Lease, “nor has there occurred any event or
circumstance which, with notice or the passage of time, or both, would constitute a
default under the Lease[.]” Id. at 172.
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When NGT became aware of the planned IHOP restaurant, it notified Melody
Lane that allowing an IHOP breached the Lease’s exclusivity clause. Melody Lane
denied that the IHOP was a “diner similar in concept to” Gunther Toody’s and
refused to rescind the IHOP lease. NGT then brought this diversity-jurisdiction suit
for breach of contract, breach of the implied duty of good faith and fair dealing, and
breach of warranty.
Concurrently with filing its complaint, NGT moved for a temporary restraining
order (TRO) and a preliminary injunction. The district court denied a TRO and
ordered Melody Lane to respond regarding a preliminary injunction. Both parties
submitted extrinsic evidence, including opinions by expert witnesses. The
overarching issue was whether IHOP is “similar in concept” to Gunther Toody’s.
After receiving NGT’s reply, the district court decided the motion on the written
materials, without holding an evidentiary hearing or allowing oral argument.
NGT argued that both restaurants “offer[] relatively inexpensive food with an
emphasis on breakfast items such as pancakes, omelets, waffles, and French toast,
which are served throughout the day. . . . Both serve traditional American dishes
such as cheeseburgers, fries, salads, steak and mashed potatoes, club sandwiches,
BLTs, ice cream sundaes and other simple fare.” Aplt. App., Vol. I at 119-20.1 The
district court concluded, however, that “Gunther Toody’s arguments make clear . . .
that it interprets ‘diner similar in concept to the operation conducted from the Leased
1
Contrary to NGT’s assertion that Gunther Toody’s serves breakfast
throughout the day, Gunther Toody’s menu indicates that it serves breakfast only
during morning hours.
3
Premises by [NGT]’ as a long-form name simply for ‘diner.’” Id., Vol. III at 602.
Because “Colorado courts strive to avoid any interpretation that would render
contractual language meaningless or redundant,” the district court “[could not] agree
that the ‘similar in concept’ clause has no independent force—that it does not modify
‘diner’ in some meaningful way.” Id. at 603. Instead, the district court found “more
persuasive the conclusions of Melody Lane’s expert . . . that the ‘concept’ at issue in
the Restrictive Covenant is specifically the concept of a 1950s-style diner, not the
general concept of a table service restaurant with a broad array of American
breakfast, lunch, and dinner offerings.” Id. at 605. Accordingly, the district court
denied a preliminary injunction for failure to show a likelihood of success on the
merits. NGT now appeals.
ANALYSIS
NGT argues that the district court erred both in denying a preliminary
injunction and in deciding the issue without holding an evidentiary hearing and
allowing oral argument.
I. Decision Without a Hearing and Oral Argument
We first address the district court’s election to resolve the matter on the
written materials. We review this decision for abuse of discretion. See Davoll v.
Webb, 194 F.3d 1116, 1139-40 (10th Cir. 1999).
As NGT acknowledges, neither Fed. R. Civ. P. 65(a) nor this circuit’s
precedent require the district court to hold an evidentiary hearing or oral argument
before deciding a motion for a preliminary injunction. And while NGT submits that
4
“[i]t is an abuse of discretion to decide a preliminary order without giving the parties
a fair opportunity to present their case,” Aplt. Br. at 15, the record does not indicate
that NGT was deprived of any such “fair opportunity.” NGT had ample opportunity
to present its arguments and evidence in written form. Not only did it file an opening
memorandum and a reply (both supported by the opinions of its expert witness and
other exhibits), but also the district court granted its motion to supplement the record
with additional evidence.
NGT submits that it acted “with the understanding and assumption if the court
found ambiguity in the Ground Lease’s terms then the parties would be afforded an
opportunity to present more detailed evidence at an evidentiary hearing[.]” Id. at 16.
The district court, however, explicitly informed the parties three times during the
briefing (including before NGT filed its reply) that it had not yet decided whether to
hold a hearing. NGT’s unfounded assumption did not make the district court’s
decision an abuse of discretion.
NGT also argues that in the absence of a hearing, the district court could not
weigh the affidavits of one party over the affidavits of the other. NGT did not make
this argument in the district court, however, and it does not argue for the application
of plain error on appeal. This assertion therefore is waived. See McKissick v. Yuen,
618 F.3d 1177, 1189 (10th Cir. 2010) (“[E]ven if [the appellant’s] arguments were
merely forfeited before the district court, [its] failure to explain in [its] opening
appellate brief . . . how they survive the plain error standard waives the arguments in
this court.”).
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II. Denial of Preliminary Injunction
We now turn to NGT’s merits arguments. “We review a district court’s
decision to deny a preliminary injunction under a deferential abuse of discretion
standard” that requires us to “examine the district court’s legal determinations
de novo, and its underlying factual findings for clear error.” Warner v. Gross,
776 F.3d 721, 727-28 (10th Cir.) (internal quotation marks omitted), aff’d sub nom.
Glossip v. Gross, 135 S. Ct. 2726 (2015). “An abuse of discretion occurs only when
the trial court bases its decision on an erroneous conclusion of law or where there is
no rational basis in the evidence for the ruling.” Diné Citizens Against Ruining Our
Env’t v. Jewell, 839 F.3d 1276, 1281 (10th Cir. 2016) (internal quotation marks
omitted).
A preliminary injunction is “an extraordinary remedy that may only be
awarded upon a clear showing that the [movant] is entitled to such relief.” Winter v.
Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). “A plaintiff seeking a
preliminary injunction must establish that he is likely to succeed on the merits, that
he is likely to suffer irreparable harm in the absence of preliminary relief, that the
balance of equities tips in his favor, and that an injunction is in the public interest.”
Id. at 20. The district court considered only the first requirement, the likelihood of
success on the merits.
NGT argues that the district court used the wrong standard to evaluate the
success factor. As stated, generally a movant must show that it “is likely to succeed
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on the merits.” Id.2 But with certain disfavored types of preliminary injunctions, the
movant must make a “strong showing” of likelihood of success. N.M. Dep’t of Game
& Fish v. U.S. Dep’t of Interior, 854 F.3d 1236, 1246 n.15 (10th Cir. 2017).
Classifying NGT’s motion as seeking a mandatory injunction and an injunction that
would provide complete relief, which are two of those disfavored injunctions, the
district court applied the heightened standard. NGT asserts that this was error
because it sought a prohibitory injunction, not a mandatory injunction. We need not
consider this argument, however, because we conclude that NGT has not shown that
it is entitled to relief under even the ordinary standard.
In a diversity case, the federal court applies the substantive law of the forum
state, Edens v. The Netherlands Ins. Co., 834 F.3d 1116, 1120 (10th Cir. 2016),
cert. denied, 137 S. Ct. 1375 (2017), in this case Colorado. “Under Colorado law,
contracts should be interpreted consistently with the well-established principles of
contractual interpretation. Courts must examine contractual terms and attempt to
determine the intent of the parties.” Level 3 Commc’ns, LLC v. Liebert Corp.,
2
NGT asserts that “it will ordinarily be enough that the movant has raised
questions ‘so serious, substantial, difficult and doubtful as to make them a fair
ground for litigation and thus for more deliberate investigation.’” Aplt. Br. at 18
(quoting Lundgrin v. Claytor, 619 F.2d 61, 63 (10th Cir. 1980)). That describes the
modified test this court has applied upon a strong showing that the harm factors favor
the movant. See Diné Citizens Against Ruining Our Env’t v. Jewell, 839 F.3d 1276,
1281-82 (10th Cir. 2016). But the district court did not determine that the harm
factors favored NGT, and even if it had, we recently recognized that the modified test
is no longer good law in light of Winter v. Natural Resources Defense Council, Inc.,
555 U.S. 7, 22 (2008), see Diné Citizens, 839 F.3d at 1282. “Accordingly, we reject
the use of a modified test to review whether the district court abused its discretion in
issuing the preliminary injunction.” N.M. Dep’t of Game & Fish v. U.S. Dep’t of
Interior, 854 F.3d 1236, 1246-47 (10th Cir. 2017).
7
535 F.3d 1146, 1154 (10th Cir. 2008) (brackets, citation, and internal quotation
marks omitted). “To determine the meaning of a contract, court must examine the
entire instrument, and not view clauses or phrases in isolation.” Id. (alterations and
internal quotation marks omitted). “[E]very relevant provision must be considered
and given effect[.]” Id.NGT argues that the district court erred in evaluating extrinsic evidence
because it never clearly found that the restrictive clause was ambiguous. “It is
axiomatic that in the absence of an ambiguity a written contract cannot be varied by
extrinsic evidence.” Id. (internal quotation marks omitted). We decline, however, to
reverse solely due to the district court’s references to extrinsic materials. The district
court permissibly consulted such materials to the extent that the term “concept” is
ambiguous, and remanding for a specific finding of ambiguity would be focusing on
merely technical error, if there were any error.
Moreover, NGT itself conflates a “plain language” inquiry with reference to
extrinsic evidence. Its principal merits argument is that “[t]he two diners are ‘similar
in concept’ within the plain meaning of the Ground Lease because their menus and
pricing are comparable. . . . When analyzing the ‘concept’ of these two diners, the
[district] court should have compared the menus and pricing.” Aplt. Br. at 12.3 Such
3
In this section of its brief, NGT also states that “[t]he denial of a hearing
prevented Gunther Toody’s from presenting these factors to the court and prevented
the court from properly weighing the evidence in context.” Aplt. Br. at 13. To the
extent that NGT is relying on arguments not made before the district court, they are
waived. See McKissick v. Yuen, 618 F.3d 1177, 1189 (10th Cir. 2010). To the extent
that NGT is attempting to bolster its argument that it was prejudiced by the lack of a
8
an exercise, however, requires exactly what NGT claims is error – reference to the
parties’ exhibits. In any event, we agree with the district court that adopting NGT’s
argument essentially would broaden the restrictive covenant to preclude operating
any “diner” in the Marketplace, not just a “diner similar in concept to” Gunther
Toody’s. As the district court stated, Colorado law directs that “every relevant
provision must be considered and given effect,” Level 3 Commc’ns, LLC, 535 F.3d at
1154, so that a court should not lightly read out a limiting phrase. We therefore are
not persuaded that the district court erred by concluding that NGT is unlikely to
succeed on the merits.
Finally, NGT asserts that the district court failed to consider its likelihood of
success on its claim that Melody Lane breached the Estoppel Agreement. Even
assuming that injunctive relief would be a proper remedy for this claim, in the district
court NGT did not specifically argue its likelihood of success on any claim related to
the Estoppel Agreement,4 and it does not argue for plain error review now. Thus, the
contention is waived. See McKissick, 618 F.3d at 1189.
hearing, nothing prohibited NGT from making whatever arguments it chose in its
filings.
4
NGT’s preliminary-injunction motion focused on the Lease and only briefly
noted its breach of warranty claim. Further, NGT effectively admits that it did not
adequately brief this claim by stating “[h]ad the matter been scheduled for an
evidentiary hearing and argument, the district court would have been presented more
about the parties’ Estoppel Agreement and Gunther Toody’s breach of warranty
claims.” Aplt. Br. at 17.
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CONCLUSION
The district court’s denial of a preliminary injunction is affirmed.
Entered for the Court
Gregory A. Phillips
Circuit Judge
10