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American Multi-Cinema, Inc. v. MCL REC

April 11, 2008


The opinion of the court was delivered by: Blanche M. Manning United States District Judge

Judge Blanche M. Manning


Cross-claim defendant MCL REC, L.L.C. ("MCL") moves for summary judgment against cross-claim plaintiff Intercontinental River East, L.L.C. ("Intercontinental"). In addition, Intercontinental seeks to strike portions of MCL's Local Rule 56.1 statement. For the reasons stated below, the motion for summary judgment is granted in part and denied in part and Intercontinental's motion to strike is denied.

I. Facts*fn1

General Background

American Multi-Cinema, Inc. ("AMC") is a Missouri corporation in the business of theatrical film exhibition. In July 1999, AMC leased retail space at the River East Center in Chicago. From April 2004 to January 8, 2006, AMC's landlord at River East was MCL REC, L.L.C. ("MCL"). On January 9, 2006, MCL sold the River East property to cross-claimant Intercontinental, which then became AMC's landlord.

The instant dispute surrounds who must pay for the hot and cold water used by AMC. The hot and cold water provided to the retail tenants in the River East Center, including AMC, is produced by a central system that is owned by Embassy Suites Hotel ("Hotel"). The retail tenant's landlord pays a monthly charge to the Hotel for the hot and cold water that is produced by the central system and delivered to the retail tenants, including AMC. The landlord then sends monthly invoices to the retail tenants for their respective hot and cold water usage.

AMC disputes its obligation to pay its hot and cold water charges, and made payments to MCL under protest. The dispute about the payment of hot and cold water charges has spawned at least two separate lawsuits and several claims, counterclaims and cross-claims as described below.

Litigation Regarding the Water Charges

AMC initiated this diversity action on January 6, 2006, by filing a one-count complaint for declaratory judgment against MCL regarding interpretation of the AMC lease.*fn2 Specifically, AMC's lawsuit seeks a judicial determination that Section 12(A) of its lease does not require it to separately pay for its hot and cold water charges. MCL filed a counterclaim against AMC alleging that while it was AMC's landlord, it regularly paid for hot and cold water. The counterclaim alleges that despite repeated demands by MCL, AMC failed to pay the invoices for such charges as issued by MCL, requiring MCL to declare AMC in default before it would tender payment. AMC ultimately paid MCL over $340,000 as "payments under protest" for the hot and cold water invoices from MCL.

On January 9, 2006, MCL sold certain property at Chicago's River East Center to Intercontinental ("Sale"); so, on that date, Intercontinental became AMC's landlord at the River East Center. The Sale was accomplished pursuant to a written Agreement of Purchase and Sale ("Sale Agreement"). Intercontinental did not become a party to the lease with AMC until the closing occurred on January 9, 2006. Since being assigned the lease on that date, Intercontinental has taken the position, like MCL, that AMC is obligated to pay a separate charge for hot and cold water pursuant to the lease with AMC. In that vein, Intercontinental has issued invoices to AMC pursuant to the lease for AMC's monthly utility charges, but AMC has refused to pay. While Intercontinental inherited the lease with AMC from MCL when it purchased the River East Center, MCL did not tell Intercontinental how to interpret the lease and, in fact, Intercontinental reviewed the lease and made its own interpretations as to what the lease means.

On February 1, 2006, more than three weeks after the closing date of the sale, AMC filed its First Amended Complaint, reasserting its prior claims against MCL and adding a claim for declaratory judgment on the same basis against Intercontinental. On March 30, 2006, Intercontinental filed its answer, affirmative defenses and cross-claim against MCL. The cross-claim seeks indemnification and to be held harmless as well as an award of attorneys' fees, expenses, and costs it incurs in defending against AMC's First Amended Complaint pursuant to an indemnification provision in the Assignment of Leases and Section 9.5 of the Sale Agreement.

On August 28, 2006, Intercontinental filed a counterclaim against AMC seeking damages that include unpaid hot and cold water charges.

Relevant Contract Provisions

The interpretation of several contractual provisions are at issue in this case. These provisions are set forth below. First, as already noted, MCL assigned the AMC Lease to Intercontinental pursuant to a written Assignment of Leases, which was an exhibit to the Sale Agreement. The Assignment of Leases included the following language, pursuant to which MCL was the Assignor and Intercontinental was the Assignee:

Assignor hereby agrees to indemnify, defend and hold Assignee harmless from and against any and all claims, demands, liabilities and/or obligations to the extent arising out of or accruing pursuant to the Leases and Service Contracts prior to the Closing Date . .

Furthermore, Section 9.5 of the Sale Agreement states:

If either party hereto fails to perform any of its obligations under this Agreement or if any dispute arises between the parties hereto concerning the meaning or interpretation of any provision of this Agreement, whether prior to or after Closing, or if any party defaults in payment of its post-Closing financial obligations under this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expense incurred by the other party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees and disbursements.

Section 3.2 of the Sale Agreement describes "Exception Matter." Specifically, it states in relevant part:

the term "Exception Matter" shall refer to a matter, (i) which makes a representation or warranty of Seller contained in this Agreement untrue or incorrect and (ii) which is disclosed to Buyer by written notice from Seller or is otherwise discovered by Buyer before the Closing. If Buyer first obtains actual knowledge of any material Exception Matter prior to Closing, Buyer's sole remedy shall be to terminate this Agreement and obtain a return of the Deposit .... Seller shall have no obligation to cure or remedy any Exception Matter, even if Seller has notified Buyer of Seller's election to attempt to cure or remedy any Exception Matter, and, subject to Buyer's right to terminate this Agreement as set forth above and obtain a return of the Deposit, Seller shall have no liability whatsoever to Buyer with respect to any Exception Matters....If Buyer obtains actual knowledge of any Exception Matter before the Closing, but nonetheless elects to ...

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