RRC Northeast, LLC v. BAA Maryland, Inc. (Ct. of Appeals)

Filed: May 10, 2010

Opinion by Judge Glenn T. Harrell.

Held: A commercial lease may contain an implied covenant against destructive competition by the lessor, inferred from the duty of good faith and fair dealing, but the lease and the circumstances surrounding formation of the lease must demonstrate the parties intended to limit competition.

Facts: The defendant, party to a Master Lease with the Maryland Aviation Administration, leased, developed and managed the food, service and merchandise concessions at BWI. The plaintiff operated several stores at BWI under subleases with the defendant.

After additional competing gift stores were opened at BWI, the plaintiff alleged the defendant caused it economic damage due to, among other theories, (1) breach of express and implied covenants of good faith and fair dealing and (2) breach of sublease. The Circuit Court granted the defendant's motion to dismiss on grounds that the complaint failed to identify contract terms that the defendant breached. The plaintiff filed an amended complaint, which "essentially reasserted the facts as alleged in the" first complaint. The Circuit Court granted the defendant's motion to dismiss, with prejudice.

The Circuit Court then denied plaintiff's motion to alter or amend the judgment of dismissal. The plaintiff alleged in the motion, for the first time, that the sublease incorporated the Master Lease. The plaintiff also had attached to the motion, for the first time, copies of several documents, including the Master Lease and subleases. The Court of Special Appeals affirmed the Circuit Court's denial.

Analysis: A breach of contract complaint must "allege with certainty and definiteness facts showing a contractual obligation owed by the defendant to the plaintiff and a breach of that obligation by defendant." In considering the sufficiency of a complaint alleging breach of contract, "any ambiguity or uncertainty in the allegations is to be construed against the pleader." The Court of Appeals affirmed the dismissal of the breach of contract claim because the complaint failed to allege the defendant promised the plaintiff it would restrict competing gift stores to four stores.

Analyzing the claim for breach of express and implied covenants, the Court of Appeals stated "an implied covenant to refrain from destructive competition may be inferred from a percentage lease, based on the duty of good faith and fair dealing, where the intentions of the parties, as indicated by the terms of the lease and the circumstances surrounding the formation of the lease, suggest that such an inference is appropriate, namely, by limiting competition to a particular level with, or granting exclusivity to, the plaintiff, either in the contract or an incorporated pre-lease document." As the second complaint failed to alleged that the plaintiff and defendant contracted to limit competition, the Court of Appeals affirmed the dismissal.

The full opinion is available in PDF.