Although contracts are to be construed in accordance with the parties’ intent, in New York, it is firmly established that the best evidence of what parties intend is what they say in writing. This rule is applied with special force when the agreement is negotiated at arm’s length or by sophisticated business people. Sometimes, parties dispute the meaning of a contract’s terms and litigation over their intent and the alleged ambiguity ensues. This was the case in Gristede’s Operating Corp. v. Scarsdale Shopping Center Associates, LLC, Index No. 53040/2012.
In 1998, the plaintiff, supermarket chain Gristede’s, leased space in the Golden Horseshoe Shopping Center from defendant Scarsdale Shopping Center Associates, LLC (“Scarsdale”), to operate Gristede’s Store No. 90 (“Store No. 90”) through April 2015 with no right of renewal.
In 2006, Gristede’s and drug store chain Walgreens, which were in talks for Walgreens to acquire certain leases held by Gristede’s, including Store No. 90, entered into a “Confidentiality Agreement” prohibiting Walgreens from discussing (by itself or through an agent) any possible lease or other issues with the owner or agent of any premises in which a Gristede’s store was located. In 2007, Gristede’s and Walgreens entered into a contract of sale (“2007 Contract”) for Walgreens to purchase six leases from Gristede’s, including the one for Store No. 90. Gristede’s and Walgreens also agreed to extend the Confidentiality Agreement for five years from the contract’s execution date.
On January 1, 2009, Gristede’s and Walgreens amended the 2007 Contract to limit its applicability to the purchase of only one lease for a property in Manhattan and “to terminate the Contract with [sic] to all other Property which has not been sold, assigned or otherwise transferred by Sellers to Purchaser as of the date hereof” (“2009 Amendment”). The 2009 Amendment also provided that “the Contract is terminated and deemed of no further force with respect to each and every Property (other than Store 561) which, as of the date hereof, has not been sold, assigned or otherwise transferred by Sellers to Purchaser pursuant to the Contract … and that the parties shall have no rights, obligations and liabilities thereto except to the extent that the same expressly survive the termination of the Contract” (emphasis in original).
It was undisputed that Store No. 90 was one of the unsold properties that was excised from the 2007 Contract by the 2009 Amendment.
In 2011, an alleged agent of Walgreens contacted Scarsdale about Store No. 90.
Thereafter, Gristede’s and Walgreens resumed negotiations regarding the potential sale of leases held by Gristede’s. In 2012, Gristede’s and Walgreens entered into an agreement (“2012 Agreement”) providing that they “each hereby confirm that … all of the terms, covenants and conditions of the [Confidentiality Agreement], as amended by [the 2007 Contract] … remain in full force and effect and are incorporated herein by reference thereto” (emphasis added).
Later in 2012, Gristede’s commenced action against Walgreens and Scarsdale. As relevant to the appeal, Gristede’s asserted a cause of action alleging that Walgreens breached the Confidentiality Agreement and Walgreens moved for summary judgment to dismiss it. Westchester Commercial Division Justice Linda S. Jamieson granted Walgreens’ motion and Gristede’s appealed.
The Second Department affirmed, holding that “when parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms’” (citing Riverside S. Planning Corp. v. CRP/Extell Riverside, L.P., 13 N.Y.3d 398, 403 (2009) (quotation omitted)). “Courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing’” (citations omitted). “Ambiguity is determined by looking within the four corners of the document, not to outside sources’” (quoting Riverside S. Planning Corp. v., 13 N.Y.3d at 404 (quotation omitted)). “The entire contract must be reviewed and [p]articular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought’” (quotations omitted). “Where the language chosen by the parties has a definite and precise meaning, there is no ambiguity” (quotations omitted).
The Second Department held that “Walgreens established, prima facie, that the 2009 Amendment unambiguously terminated the Confidentiality Agreement as its pertained to Store No. 90” and that “in narrowing the applicability of the 2007 Contract to one property in Manhattan, Gristede’s and Walgreens ‘clearly and unambiguously’ stated that they ‘shall have no rights, obligations and liabilities’ as to Store No. 90 ‘except to the extent that the same expressly survive the termination of the Contract’” (emphasis added).
In addition, the 2007 Contract and 2009 Amendment contained no express language preserving the Confidentiality Agreement as to Store No. 90. The Second Department held, therefore, that “since an essential element of a breach of contract cause of action is the existence of a valid contract … the alleged contact between an agent of Walgreens and Scarsdale in 2011 could not have constituted a breach of the Confidentiality Agreement, as it was ‘clearly and unambiguously terminated as to Store No. 90 at that time’” (internal citations omitted).
Finally, the Court held that “[a]lthough the subsequent 2012 agreement recited that the Confidentiality Agreement ‘remain[s] in full force and effect,’ there was clearly no contractual prohibition against contact between Walgreens and Scarsdale in existence when the contact between Walgreens and Scarsdale was allegedly made.”
Takeaway: When an agreement between sophisticated parties is memorialized in a clear, complete document, courts will enforce it according to its terms and will not look to outside sources.
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