Shop ‘n Bag Prevails Over Dollar Tree In Lease Dispute

Print Friendly

In what is believed to be a landmark decision involving supermarkets successfully litigating against encroachment from other retailers selling similar products, Philadelphia-based Holiday Supermarkets, Inc. has prevailed in its effort to thwart Dollar Tree Stores from continuing to sell grocery and food products, including refrigerated and frozen food, at its store in the Mayfair Shopping Center in Northeast Philadelphia.

On January 29 in Philadelphia Commerce Court, a jury unanimously agreed with the Gilbert family (Harry, Catherine, Gary, Mark and Kathy Gilbert Irwin), which operates four independent supermarkets (three Shop ‘n Bags and one Thriftway), all in the city, that the landlord violated the exclusive use provision in Holiday’s lease by allowing Dollar Tree to directly compete in the same shopping center with the Gilberts’ Shop ‘n Bag store by selling the same types of food and grocery items.

Holiday Supermarket has anchored the center since it was built in 1992. This case actually dates back to 2003 when Dollar Tree became a tenant in the shopping center. While Dollar Tree sold food and grocery products from the inception of its lease, Holiday’s owner, Harry Gilbert, had no idea. “Honestly, I thought they were only selling candy and gum,” Gilbert noted. Gilbert did not suspect that Dollar Tree may have been directly competing against his store in violation of his lease until sometime in 2006 or 2007 when he heard that Dollar Tree had installed refrigerated and frozen cases. Harry Gilbert immediately complained to the landlord at the time (Regency Realty and USRP I), which responded by sending a letter to Dollar Tree in August of 2007 to cease and desist from selling food and grocery items in violation of Holiday’s exclusive rights. This request was ignored.

In 2009, Gilbert again complained about Dollar Tree’s continued food and grocery sales, this time through his attorneys. The landlord’s legal department sent a second cease and desist letter which also was ignored. Despite acknowledging that Dollar Tree was violatingHoliday’s lease rights, the landlord was unwilling to take legal action against Dollar Tree. This forced the Gilberts (Holiday) to commence a lawsuit in 2009.

In 2010, a Philadelphia judge, Albert W. Sheppard Jr. (who has since died), dismissed Holiday’s lawsuit, finding that Holiday’s lease was limited to competition from other supermarkets and Dollar Tree was not a supermarket. At that time, Holiday retained new counsel, White and Williams LLP, who was successful in getting the decision reversed on appeal. This time the case was heard by Judge Patricia McInerney. The case was remanded for a jury to determine what the original parties to the lease intended by the restriction which gave the lessee the exclusive right to operate a “retail supermarket of any nature.”

After a five day trial, the jury found that the Mayfair Dollar Tree store was a retail supermarket of some nature and that the landlord (Regency Realty and USRP I) violated the exclusive use provision in the Gilberts’ lease by allowing Dollar Tree to sell food and grocery products in competition with the Gilberts’ Mayfair Shop ‘n Bag.

Dollar Tree argued that there was no lease violation because it was not a retail supermarket. But Holiday’s attorney, Justin Proper of White and Williams, effectively proved to the jury that the original parties to the lease did not intend for the language “retail supermarket of any nature” to simply limit competition from other traditional supermarkets. Instead, Proper was able to prove that the parties intended the lease to prohibit competition from any business selling food and grocery items in competition with Mayfair’s Shop ‘n Bag’s business.