Great Atlantic & Pacific Tea Co. v. Gillis

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS October 15, 2003
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
_____________________ Clerk
No. 03-60217
Summary Calendar
_____________________
Great Atlantic and Pacific Tea Company Inc.,
Plaintiff - Counter Defendant - Appellee,
versus
Norman B. Gillis, Jr.; Norman Gillis Jr. & Associates,
Defendants - Counter Claimants - Appellants.
_________________________________________________________________
Appeals from the United States District Court
for the Southern District of Mississippi, Jackson
District Court No. 3:00-CV-740-WS
_________________________________________________________________
Before HIGGINBOTHAM, DAVIS and PRADO, Circuit Judges.1
PER CURIAM.
Norman B. Gillis and Norman Gillis Jr. and Associates, Inc.
(Gillis) appeal from a judgment of the district court in favor of
Great Atlantic and Pacific Tea Company (A&P). The parties are
involved in two lawsuits regarding a commercial property in
McComb, Mississippi that was leased by A&P from Gillis. The
1
Pursuant to 5th Cir. R. 47.5, this Court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5th Cir. R.
47.5.4.
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first suit was filed in Mississippi state court by Gillis against
A&P and its sub-lessee, R&M Foods, Inc. (R&M). In that suit
Gillis sought a declaratory judgment that he had lawfully
cancelled his lease with A&P and was therefore entitled to
possession of the property and monetary damages. R&M is a
Mississippi corporation.
The second suit, which gave rise to this appeal, was filed
in federal district court by A&P against Gillis. In that suit,
A&P sought a declaratory judgment under The Declaratory Judgment
Act that its lease with Gillis remained in effect and that Gillis
was barred from cancelling its lease. See 28 U.S.C. § 2201 (West
1994). A&P also requested damages it alleged resulted when
Gillis attempted to cancel its lease. Gillis unsuccessfully
moved to join R&M as an involuntary plaintiff in the suit.
Gillis then filed a motion for “Administrative Dismissal or in
the Alternative Abstention,” arguing the district court should
abstain from hearing A&P’s lawsuit because Gillis’ lawsuit was
pending in state court.
The district court instead held a bench trial. At the end
of the trial, the district court determined Gillis was not
authorized to cancel his lease with A&P and that A&P had timely
cured its initial default by paying to Gillis the required annual
percentage rent. Gillis challenges that judgment in this appeal.
In particular, Gillis maintains the district court lacked subject
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matter jurisdiction and erred in its findings of fact.
The District Court’s Jurisdiction
This Court reviews the district court’s decision to issue a
declaratory judgment for an abuse of discretion. See Agora
Syndicate v. Robinson Janitorial Specialists, 149 F.3d 371, 372
(5th Cir. 1998); Wilton v. Seven Falls Co., 515 U.S. 277, 289-290
(1995) (holding that “district courts’ decisions about the
propriety of hearing declaratory judgment actions . . . should be
reviewed for abuse of discretion.”). A reviewing court finds an
abuse of discretion, if after examining the evidence, it is left
with “[a] ‘definite and firm’ conviction that the court below
committed [a] clear error of judgment in the conclusion it
reached upon a weighing of the relevant factors." See Conkling v.
Turner, 18 F.3d 1285, 1293 (5th Cir.1994) (quoting Hoffman v.
Merrell Dow Pharmaceuticals, Inc. (In re Benedictin Litig.), 857
F.2d 290, 370 (6th Cir. 1988)).
Gillis argues the district court should not have exercised
jurisdiction over the instant case because R&M was a necessary
party and because his state lawsuit against A&P and R&M was still
pending. In the instant case, the district court had discretion,
based on general principles of practicality and wise judicial
administration, to decide whether to exercise its jurisdiction.
See Wilton, 515 U.S. at 288 (holding “[i]n the declaratory
judgment context, the normal principle that federal courts should
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adjudicate claims within their jurisdiction yields to
considerations of practicality and wise judicial
administration.”). The district court also considered the
following factors set forth by this Court in Travelers Insurance
Co. v. Louisiana Farm Bureau Federation, Inc., 996 F.2d 774, 778
(5th Cir. 1993)2: 1) whether there is a pending state action in
which all of the matters in controversy may be fully litigated,
2) whether the plaintiff filed suit in anticipation of a lawsuit
filed by the defendant, 3) whether the plaintiff engaged in forum
shopping in bringing the suit, 4) whether possible inequities in
allowing the declaratory plaintiff to gain precedence in time or
to change forums exist, 5) whether the federal court is a
convenient forum for the parties and witnesses, and 6) whether
retaining the lawsuit in federal court would serve the purposes
of judicial economy.
The district court concluded that practicality, wise
2
The Travelers standard is intended for pure declaratory
judgment cases and therefore may not have been appropriate in the
instant case, which included a counterclaim for monetary damages.
See Diamond Offshore Co. v. A&B Builders, Inc., 302 F.3d 531, 539
(5th Cir. 2002) (holding that inclusion of timely and non-
frivolous monetary damages removed a suit “from the realm of a
declaratory judgment action” for purposes of determining exercise
of jurisdiction). Yet even if the Travelers standard was
inappropriate, federal jurisdiction was proper because the
alternative standard applied to the facts of this case leads to
the same result. See Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800, 817 (1976) (holding that federal
courts have a “virtually unflagging obligation” to exercise their
subject matter jurisdiction, despite the pendency of state court
proceedings).
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judicial administration, convenience to the parties and judicial
economy weighed in favor of federal jurisdiction. After
reviewing the record, this Court finds ample support for that
conclusion: the alternative state forum was less than ninety
miles from the district court, the state court proceedings were
not yet near resolution, and the instant case was ready for
adjudication. Based on these facts, and considering the district
court’s opportunity to examine the testimony of the witnesses, we
find no abuse of discretion in the district court’s exercise of
jurisdiction.
Part of Gillis’ argument against the district court’s
jurisdiction is that R&M, whose presence would have destroyed
diversity jurisdiction, was a necessary party to the instant
case. Gillis argues that because R&M was properly joined as a
defendant with an interest in the property in the state court
suit, it should have been joined as an involuntary plaintiff in
the instant suit. The joinder of an involuntary plaintiff,
however, is reserved for certain narrowly defined situations.
These situations are not implicated in the present case.3 This
3
A party may be joined as an involuntary plaintiff if the
party is an exclusive licensee or the equitable owner of a
copyright. See Caprio v. Wilson, 513 F.2d 837, 839 (9th Cir.
1975). Additionally, a party may be joined as an involuntary
plaintiff if the party has a duty to allow the use of his name in
the action or an obligation to join in the action. See
Independent Wireless Telegraph Co. v. Radio Corporation of
America, 269 U.S. 459 (1926).
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Court finds no error in the district court’s refusal to join R&M
as an involuntary plaintiff.
To the extent that Gillis alleges the district court erred
by failing to consider his motion for administrative dismissal,
this Court finds no error. In his motion, Gillis maintained the
district court should abstain from exercising its jurisdiction
based on convenience to the parties and avoidance of “useless
piecemeal litigation.” He argued if he were to succeed in the
instant case he would have to bring a second suit to obtain
possession of the property from the current tenant, R&M. This is
presumably the piecemeal litigation to which Gillis refers. This
Court has held that abstaining from the exercise of jurisdiction
is proper to avoid multiple lawsuits on the same issue with
conflicting results, but not to avoid following the normal legal
procedures Gillis describes. See Travelers, 996 F.2d at 779.
Regarding Gillis’ motion, the district court explained that
unless a hearing was necessary the suit would proceed to trial.
The district court ultimately considered Gillis’ motion, and
clearly determined not to stay the case when it proceeded to
trial. Moreover, the district court delineated its rationale for
exercising jurisdiction over the parties in its March 12, 2003
order. By addressing the question of jurisdiction in its order
and having previously explained why R&M would not be joined as an
involuntary plaintiff, the district court addressed each of
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Gillis’ arguments. This Court finds no error in the district
court’s handling of Gillis’ motion.
Interpreting the Contract
The sole dispute between the parties is whether A&P’s
manner of curing its acknowledged rent default entitled Gillis to
cancel A&P’s lease. Both parties agree that the governing lease
provision required that defaults be cured “as soon as may be
reasonably possible.” Gillis alleges the district court erred in
finding that A&P complied with this provision.
This Court reviews the district court’s findings of fact
using a clearly erroneous standard. See FED. R. CIV. P. 52 (a);
Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573
(1985); and N.A.A.C.P. v. Fordice, 252 F.3d 361, 365 (5th Cir.
2001). A finding is clearly erroneous if, after examining the
entire record, the reviewing court “is left with the definite and
firm conviction that a mistake has been committed.” Anderson, 470
U.S. at 573. Under this standard an appellate court must defer
to a trial court’s plausible account of the evidence considered
against the entirety of the record, and may not merely substitute
its opinion for that of the trial court. N.A.A.C.P., 252 F.3d at
364.
In the instant case, the district court properly applied
Mississippi law to the contract in question. See Amica Mut. Ins.
Co. v. Moak, 55 F.3d 1093, 1095 (5th Cir. 1995). Under
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Mississippi law, contracts are read in their entirety so as to
give effect to all clauses. Brown v. Hartford Ins. Co., 606
So. 2d 122, 126 (Miss. 1992). Contract provisions are also
reasonably construed, and read so as to avoid giving one party an
unfair or unreasonable advantage over the other. Robinson v.
Martel Enterprises, Inc., 337 So. 2d 698, 701 (Miss. 1976).
Additionally under Mississippi law, an implied covenant of good
faith and fair dealing is read into every contract. Cenac v.
Murry, 609 So. 2d 1257, 1272 (Miss. 1992).
Under the terms of the lease between the parties, A&P is
required to pay Gillis the lesser of $12,000 or 1% of its gross
sales. Because R&M subleases the property from A&P, A&P used
R&M’s sales figures to calculate the percentage rent due. A&P is
required to pay the percentage rent to Gillis by May 31 of each
year. In 1999 and 2000, A&P neglected to make this payment. On
August 31, 2000, Gillis sent A&P a default notice informing A&P
that he would cancel the lease unless it cured the default within
ten days. A&P received this notice on September 5, 2000. On
September 6, 2000, A&P’s Director of Real Estate Law, Robert E.
David, called Gillis to ask for an extension and to explain that
he needed to obtain the annual sales reports from R&M before A&P
could pay Gillis.
At trial, David testified he thought Gillis understood that
R&M was entitled to ten days to provide the reports and that
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David would forward the funds as soon as A&P received them from
R&M and the funds had cleared A&P’s account. Gillis, however,
testified he understood David would send the funds as soon as A&P
received the reports from R&M. By the time A&P paid Gillis,
after waiting for the funds from R&M to clear, Gillis had
cancelled the lease with A&P. As a result, the district court
had to determine whether A&P’s decision to wait for the funds to
clear was reasonable and whether Gillis’ cancellation of the
lease was made in good faith.
The district court had strong evidence to support its
finding that A&P’s actions were reasonable after considering the
contract as a whole, construing the lease provisions reasonably
and fairly to each party, and evaluating the good faith each
party owed the other. After David and Gillis spoke on September
6, 2000, David sent Gillis a letter confirming his understanding
of their conversation, explaining R&M was entitled to ten days to
pay A&P under its sub-lease, and citing the over-lease provision
that required cure “as soon as may be reasonably possible.”
Receiving no response, David left a phone message and sent a
letter on September 8, 2000. In that letter, David wrote “I will
be forwarding payment to you as soon as I receive [R&M’s] check
and it clears our account.” A&P tendered a check for $24,000.00
on Friday September 15, 2000, payable the following Monday,
September 18, 2000. The check was made conditional on Gillis’
reinstatement of the lease and acceptance of it as a complete
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cure. David’s actions, including his explanations to Gillis,
indicate A&P was acting in good faith and working quickly to cure
its default. In addition, A&P’s conditions on the check were
reasonable safeguards to protects A&P’s interests in the
property.
In examining Gillis’ conduct, the district court had
evidence that Gillis violated his duty of good faith to A&P. The
district court also properly determined Gillis’ conduct could not
be sanctioned under a fair reading of the lease provisions.
Throughout the proceedings, Gillis has argued that the arbitrary
period of ten days set out in the default notice was to begin the
date he mailed the letter (August 31, 2000) and not on the date
A&P received the letter (September 5, 2000). This position
means, however, that Gillis only allowed A&P six days from
receiving notice to cure its default before he cancelled the
lease. Although Gillis contends A&P’s manner of curing was
unreasonably protracted, he failed to respond to David’s letters
that spelled out exactly how A&P planned to cure.
As a result, this Court is not left with a definite or firm
conviction that a mistake has been committed. Consequently, the
district court did not err. Because this Court finds neither
clear error in the district court’s findings of fact nor abuse of
discretion in the its exercise of jurisdiction, this Court
affirms the district court’s judgment.
AFFIRMED.
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