PROSPECT HILL ACQUISITION LLC v. TYCO ELECTRONICS CORPORATION

328 F.Supp.2d 179 (2004) | Cited 1 time | D. Massachusetts | August 10, 2004

MEMORANDUM

Plaintiff Prospect Hill Acquisition ("Prospect Hill")instituted this action against Defendant Tyco ElectronicsCorporation ("Tyco") to recover $423,568.79 in occupancy charges,plus additional charges for rent, taxes, and operating costs,pursuant to a fixed-term lease between the two Parties for afacility located in Waltham, Massachusetts. The charges representthe amount that Prospect Hill insists is owed to it under thelease's Holdover Clause.

According to the lease, Tyco was required to surrender thefacility on June 21, 2002. And, the lease provides that, by thesurrender date, Tyco must "remove . . . any and all equipment,ducts, fixtures, materials or other property that are or might becontaminated, hazardous and/or subject to regulation by anyEnvironmental Laws."1 Prospect Hill maintains that Tyco breached the lease and became a holdover tenant when itfailed to remove the facility's cyanide-contaminated concretefloor by the surrender date. Tyco, however, insists that it didnot breach the lease and, thus, did not become a holdover tenantbecause the lease did not require that it remove the concretefloor.

Presently before this court are the Parties' cross-motions forsummary judgment.

Background

From 1975 to 1999, several companies owned the facility inissue.2 During that period, the companies conducted metalplating operations in a portion of the facility. Hazardousmaterials, including cyanide compound solutions, were used in themetal plating operations.3 The portion of the facilitywhere metal plating operations were conducted had a concretefloor that was regularly exposed to the hazardousmaterials.4

In 1999, Tyco purchased the facility.5 Tyco, like thecompanies that owned the facility before it, conducted metalplating operations in the facility and exposed the facility'sconcrete floor to hazardous materials.6

In November of 2001, Tyco entered into a purchase and saleagreement ("P&S") with Prospect Hill Executive Office Park ("PHEOP").7 Pursuantto the P&S, Tyco agreed to sell the facility to PHEOP.8

On November 30, 2001, PHEOP and Prospect Hill entered into anassignment.9 Under the assignment, PHEOP assigned itsrights and obligations with regard to the P&S to ProspectHill.10

The closing for the sale of the facility occurred subsequent tothe assignment but also on November 30, 2001.11 At theclosing, Prospect Hill and Tyco entered into a written leasethrough which Prospect Hill leased the facility to Tyco for afixed term beginning on November 30, 2001 and ending on June 21,2002.12

The lease contains the following provisions in its SurrenderClause: Section 1. At the expiration or prior termination of the Term of this Lease, except as hereinafter specifically provided, [Tyco] shall surrender the Demised Premises in the same condition as existed on the Commencement Date, reasonable wear and tear and damage by fire or other casualty excepted. Notwithstanding the foregoing, at the expiration or prior termination of the Term of this Lease, [Tyco] shall (i) remove its furniture and office equipment from the Demised Premises and its manufacturing equipment from that portion of the Demised Premises in which [Tyco's] manufacturing operations are currently located; (ii) steam clean floors, walls and other exposed surfaces and dispose of residues in accordance with applicable law in the portion of the Demised Premises in which [Tyco's] wastewater treatment equipment and manufacturing operations are currently located; (iii) leave all remaining wiring in compliance with the National Electrical Code; and (iv) remove from the Demised Premises any and all equipment, ducts, fixtures, materials or other property that are or might be contaminated, hazardous and/or subject to regulation by any Environmental Laws. . . . Section 2. All personal property and trade fixtures owned by [Tyco] shall remain the property of [Tyco] and may be removed by [Tyco] no later than the expiration of the Term hereof.13The lease also contains the following Holdover Clause: If [Tyco] remains in the Demised Premises beyond the expiration of this Lease, such holding over shall be without right and shall not be deemed to create any tenancy, but [Tyco] shall be a tenant at sufferance only and shall pay during such period of holdover, when and as billed therefor by Landlord, as an occupancy charge (but not as rent), an amount pro rated on a daily basis equal to three (3) times the Annual Base Rent due from [Tyco] as of the expiration of the Term, plus any charges for additional rent hereunder, and Taxes and operating costs, if any, due for such period of holdover.14And, the lease states that it "constitutes the entire and onlyagreement between the parties relating specifically to thismatter and no oral statements or representations or prior writtenmatters not contained in this Lease shall have any force andeffect."15

On March 29, 2002, approximately three months prior to theexpiration of the term of the lease, Prospect Hill's propertymanager for the facility, Spaulding & Slye Colliers("Spaulding"), sent Tyco a letter that outlined Tyco's responsibilities underthe lease's Surrender Clause.16 The letter, in fact,cited the Surrender Clause.17

On May 20, 2002, Prospect Hill's environmental consultant,Haley & Aldrich ("Haley"), contacted Tyco and requested that Tycodetermine whether there was cyanide present in the facility'sconcrete floor.18 Although Tyco did not feel that it wasobligated to test the concrete floor for cyanide, it agreed to doso.19

On June 18, 2002, three days before the expiration of the termof the lease, Spaulding representatives met with Tycorepresentatives at the facility and conducted an exitwalkthrough.20 At the walkthrough, Tyco attempted to givethe keys to the facility to Spaulding.21 Spaulding,however, refused to accept them.22 Spaulding informedTyco that it had been instructed not to accept the keys untilTyco resolved the issue of the cyanide in the concretefloor.23

On July 8, 2002, Spaulding forwarded to Tyco an invoice for$156,000.00 "for [occupancy charges] through July 31, 2002 . . .at [the] 300% holdover level."24 In a letter dated July 15, 2002 to the Realty Associates Fund III, L.P., ProspectHill's agent, Tyco made it clear that it did not believe that itwas in holdover status.25

In the July 15, 2002 letter, Tyco also stated that tests it hadconducted revealed that the concrete floor contained traceamounts of cyanide.26 After it received the letter,Prospect Hill requested that Tyco remove the concretefloor.27 Prospect Hill insisted that, under the followingprovision in the lease's Surrender Clause, Tyco was required toremove the concrete floor: "at the expiration . . . of the Termof this Lease, [Tyco] shall . . . remove from the DemisedPremises any and all equipment, ducts, fixtures, materials orother property that are or might be contaminated, hazardousand/or subject to regulation by any EnvironmentalLaws. . . ."28

Although Tyco insisted that it was not required to remove theconcrete floor, it agreed to do so.29 The removal of theconcrete floor began on September 16, 2002 and was completed onSeptember 27, 2002.30

On February 26, 2003, Prospect Hill instituted this action torecover $423,568.79 in occupancy charges, plus additional charges for rent, taxes, andoperating costs, under the lease's Holdover Clause. Prospect Hillclaims that, from June 22, 2002 until the cyanide clean-up wascomplete and Tyco surrendered the facility in accordance with thelease's Surrender Clause, Tyco was a holdover tenant.

Discussion

Under Federal Rule of Civil Procedure 56, summary judgment isappropriate only if the record reveals that there is "no genuineissue as to any material fact and . . . the moving party [hasdemonstrated an] entitle[ment] to a judgment as a matter oflaw."31 Pursuant to this standard, the "party seekingsummary judgment [must] make a preliminary showing that nogenuine issue of material fact exists. Once the movant has madethis showing, the nonmovant must contradict the showing bypointing to specific facts demonstrating that there is, indeed, atrialworthy issue."32

Of course, "[t]he happenstance that all parties seek summaryjudgment neither alters the yardstick nor empowers the trialcourt to resolve authentic disputes anent materialfacts."33 A court considering cross-motions for summaryjudgment "must evaluate each motion separately, being careful todraw inferences against each movant in turn."34 Prospect Hill contends that, because Tyco did not remove thecyanide-contaminated floor from the facility until more thanthree months after the lease's surrender date, Tyco breached theunambiguous language of the lease and became a holdover tenant.Prospect Hill further reasons that, as a result of its holdoverstatus, Tyco became obligated under the lease to pay ProspectHill occupancy charges totaling $423,568.79, plus additionalcharges for rent, taxes, and operating costs. Tyco, however,maintains that, because the lease, by its unambiguous terms, didnot require that Tyco remove the concrete floor, it neitherbreached the lease nor achieved the status of a holdover tenant.It, thus, takes the position that it does not owe Prospect Hillany charges under the lease's Holdover Clause.

The first question that this court must answer in resolving theParties' dispute is whether the relevant portions of the leasecontain any ambiguity. The determination of whether a contract isambiguous is a question of law for the court that has significantimplications.35 If a court decides "that a contract isunambiguously worded, it typically will construe the documentbased upon the plain and natural meaning of the languagecontained therein."36 But, "[i]f . . . the contractlanguage is ambiguous, on its face or as applied, contractmeaning normally becomes a matter for the factfinder."37Of course, "[a]n ambiguity is not created simply because a controversy exists between the parties, each favoring aninterpretation contrary to the other's."38 Rather,"[c]ontract language ordinarily is considered ambiguous [only]where an agreement's terms are inconsistent on their face orwhere the phraseology can support reasonable differences ofopinion as to the meaning of the words employed and obligationsundertaken."39

This court believes that the relevant portions of the lease areunambiguous. It is, therefore, appropriate to resolve theParties' dispute at the summary judgment stage.

Prospect Hill contends that Tyco, because it failed to removethe facility's cyanidecontaminated concrete floor by thesurrender date, breached the unambiguous language of the lease'sSurrender Clause, became a holdover tenant, and consequently, isobligated to pay charges under the lease's Holdover Clause. Thiscourt disagrees.

Section One of the lease's Surrender Clause provides that, "atthe expiration . . . of . . . this Lease, [Tyco] shall . . .remove from the Demised Premises any and all equipment, ducts,fixtures, materials or other property that are or might becontaminated, hazardous and/or subject to regulation by anyEnvironmental Laws. . . ."40 Prospect Hill insists thatthe facility's cyanidecontaminated concrete floor constituted"materials or other property that are or might be contaminated,hazardous and/or subject to regulation."41

Although the language of the above-quoted provision does notexpressly define or limit the types of "materials or other property" that Tyco had toremove from the facility if "contaminated, hazardous and/orsubject to regulation," this court believes that thecyanide-contaminated floor did not constitute "materials or otherproperty." The lease uses the phrase "materials or otherproperty" in a context ("equipment, ducts, fixtures, materials orother property"42) that makes it clear that the phraserefers only to moveable materials and moveable property. Hence,real property, such as the facility's concrete floor, cannotconstitute "materials or other property."43

To support its argument, Prospect Hill points out that SectionTwo of the Surrender Clause makes specific reference to personalproperty ("[a]ll personal property . . . owned by [Tyco] shallremain the property of [Tyco] and may be removed by [Tyco] nolater than the expiration of the Term hereof"44) andSection One does not.45 Prospect Hill, therefore,concludes that the term "property," as it appears in Section One,cannot refer to personal property.46 But, as this court has already pointed out, the phrase "materials orother property" appears in a context that establishes that itrefers to moveable materials and moveable property. ProspectHill's observation is, thus, unpersuasive.

Prospect Hill also notes that, because Section Two of theSurrender Clause requires that Tyco remove all of its personalproperty, there would have been no need to include in the leasethe "contaminated, hazardous and/or subject to regulation"language in Section One if, in fact, the term property in SectionOne referred only to personal property.47 But, SectionTwo does not require that Tyco remove all of its personalproperty. Rather, it provides that "[a]ll personal property andtrade fixtures . . . may be removed by [Tyco]. . . ."48Section Two identifies the property that Tyco may remove whileSection One identifies the property that Tyco must remove. And,more importantly, it has already been established that the phrase"materials or other property" in Section One refers not only topersonal property but to all moveable materials and moveableproperty. Prospect Hill's observation is, once again,unpersuasive.

Because Tyco had no obligation to remove thecyanide-contaminated concrete floor under the lease's SurrenderClause, it did not breach the lease and become a holdover tenantwhen it failed to remove the floor by the lease's surrender date.Similarly, Tyco did not breach the lease and become a holdovertenant when, after the surrender date and at the insistence ofProspect Hill, it retained the keys to the facility and removedthe contaminated floor.49 Conclusion

For the foregoing reasons, Tyco's motion for summary judgmentis ALLOWED, and Prospect Hill's motion for summary judgment isDENIED.50

1. Aff. of Glen L. Foster, submitted in supp. of Tyco Elecs.Corp.'s Mot. for Summ. J. ("Tyco's Mot. for Summ. J."), Ex. 3 at9.

2. Tyco Elecs. Corp.'s Statement of Material Facts in Supp. ofSumm. J. ("Tyco's Statement of Material Facts") ¶ 1.

3. Id.

4. Id.

5. Id. ¶ 2.

6. Id.

7. Id. ¶ 3.

8. Id. The P&S contains the following language: Buyer is acquiring the Premises strictly on an "as is[,]"[] "where is" and "with all defects" basis and without representation or warranty, express, implied or statutory, of any kind, including, without limitation, representation or warranty as to title, condition (structural, mechanical, environmental or otherwise), construction, development, income, compliance with law, habitability, tenancies, merchantability or fitness for any purpose, all of which are hereby disclaimed and which Buyer hereby waives. . . .Aff. of Glen L. Foster, submitted in supp. of Tyco's Mot. forSumm. J., Ex. 1 at 5.

9. Tyco's Statement of Material Facts ¶ 6.

10. Id.

11. Id. ¶ 7.

12. Prospect Hill Acquisition LLC's Statement of UndisputedFacts and Legal Elements ("Prospect Hill's Statement ofUndisputed Facts") ¶¶ 13, 32.

13. Aff. of Glen L. Foster, submitted in supp. of Tyco's Mot.for Summ. J., Ex. 3 at 9.

14. Id. at 17.

15. Id. at 18.

16. Tyco's Statement of Material Facts ¶ 17.

17. See Aff. of Glen L. Foster, submitted in supp. of Tyco'sMot. for Summ. J., Ex. 4.

18. Tyco's Statement of Material Facts ¶ 23.

19. Id. ¶ 24.

20. Id. ¶ 21.

21. Id. ¶ 25.

22. Id.

23. Id.

24. Aff. of Glen L. Foster, submitted in supp. of Tyco's Mot.for Summ. J., Ex. 7.

25. See id.

26. See id.

27. Tyco's Statement of Material Facts ¶ 31.

28. Aff. of Glen L. Foster, submitted in supp. of Tyco's Mot.for Summ. J., Ex. 3 at 9.

29. Tyco's Statement of Material Facts ¶ 33.

30. Id. ¶ 44. Although "Prospect Hill admits that thephysical removal of the concrete occurred [between September 16,2002 and September 27, 2002]," it maintains that "[i]t was notuntil October 1, 2002[] that Tyco completed the approved scope ofwork for the removal of the cyanide[-]contaminated concrete."Prospect Hill Acquisition LLC's Resp. to Tyco Elecs. Corp.'sStatement of Material Facts in Supp. of Summ. J. ¶ 44; ProspectHill's Statement of Undisputed Facts ¶ 23.

31. Fed.R. Civ. P. 56(c). It is established that, [i]n the lexicon of Rule 56, "genuine" connotes that the evidence on the point is such that a reasonable jury, drawing favorable inferences, could resolve the fact in the manner urged by the nonmoving party, and "material" connotes that a contested fact has the potential to alter the outcome of the suit under the governing law if the controversy over it is resolved satisfactorily to the nonmovant.Blackie v. Maine, 75 F.3d 716, 721 (1st Cir. 1996).

32. Id. (internal quotations omitted) (alteration inoriginal).

33. Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990).

34. Id.

35. See Lohnes v. Level 3 Communications, Inc.,272 F.3d 49, 53 (1st Cir. 2001).

36. Id.

37. Den Norske Bank v. First Nat'l Bank of Boston,75 F.3d 49, 52 (1st Cir. 1996); see Lohnes, 272 F.3d at 53-54 (notingthat "if the plain meaning of a contract phrase does not springunambiguously from the page or from the context[,] then theinterpretive function involves a question of fact") (internalquotations omitted).

38. Bank v. Int'l Bus. Machs. Corp., 145 F.3d 420, 424 (1stCir. 1998) (internal quotations omitted).

39. Lohnes, 272 F.3d at 53 (internal quotations omitted).

40. Aff. of Glen L. Foster, submitted in supp. of Tyco's Mot.for Summ. J., Ex. 3 at 9.

41. Id. (emphasis added). The Parties do not dispute thatthe cyanide embedded in the concrete floor was a contaminant or ahazard within the meaning of the lease.

42. Aff. of Glen L. Foster, submitted in supp. of Tyco's Mot.for Summ. J., Ex. 3 at 9.

43. Tyco also argues that, because the Surrender Clauserequired it to "steam clean [the facility's] floors," id., itcould not have been obligated under the lease to remove thecyanidecontaminated concrete floor. See Tyco Elecs. Corp.'sMem. in Opp'n to Prospect Hill's Mot. for Summ. J. & in FurtherSupp. of Tyco Elecs. Corp.'s Mot. for Summ. J. at 6 ("[T]he factthat the Surrender [C]lause provided for the floor to besteam-cleaned (rather than removed) indisputably demonstratesthat it could not have been intended to require Tyco [] to removethe concrete floor simply because the concrete contained tracesof cyanide. . . ."). Tyco's argument, however, lacks merit.According to the Surrender Clause, Tyco had an obligation tosteam clean the floors under subsection (ii), and undersubsection (iv), it had a separate obligation to removecontaminants. See Aff. of Glen L. Foster, submitted in supp. ofTyco's Mot. for Summ. J., Ex. 3 at 9.

44. Id.

45. See Prospect Hill Acquisition LLC's Opp'n to Tyco Elecs.Corp.'s Mot. for Summ. J. at 15.

46. See id.

47. See Prospect Hill Acquisition LLC's Mem. in Supp. of itsMot. for Summ. J. at 16.

48. Aff. of Glen L. Foster, submitted in supp. of Tyco's Mot.for Summ. J., Ex. 3 at 9. (emphasis added).

49. The fact that Tyco ultimately removed thecyanide-contaminated concrete floor at its own expense isirrelevant to this court's legal analysis.

50. In view of the way in which the Parties' dispute has beenresolved, it is unnecessary for this court to address thefollowing arguments that Tyco articulated in supports of itsmotion for summary judgment: (1) even if Tyco was required toremove the concrete floor, the fact that it removed the floorafter the surrender date did not render it a holdover tenant, (2)the charges set forth in the lease's Holdover Clause represent anunenforceable penalty, and (3) the Surrender Clause must beinterpreted in conjunction with the P&S, and according to theP&S, the facility was purchased from Tyco "as is" and with noenvironmental warranties.

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