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Walgreen Co v. Networks -- Usa V

December 17, 2012

WALGREEN CO., PLAINTIFF/COUNTER-DEFENDANT,
v.
NETWORKS -- USA V, INC., A FLORIDA CORPORATION, NETWORKS -- USA XVII, INC., A FLORIDA CORPORATION, NETWORKS -- XXIII, A FLORIDA CORPORATION, AND NETWORKS USA, INC., A FLORIDA CORPORATION, DEFENDANTS/COUNTER-PLAINTIFFS.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge

MEMORANDUM OPINION AND ORDER

On May 11, 2012, Plaintiff Walgreen Co. ("Walgreens") brought the present First Amended Complaint against Defendants Networks -- USA V, Inc. ("NUSA V"), Networks -- USA XVII, Inc. ("NUSA XVII"), Networks -- USA XXIII, Inc. ("NUSA XXIII"), and Networks USA, Inc. ("NUSA") alleging breach of contract and seeking a declaratory judgment regarding two commercial leases in Memphis, Tennessee and one commercial lease in St. Petersburg, Florida pursuant to the Court's diversity jurisdiction. See 28 U.S.C. § 1332. Before the Court is Defendant NUSA's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) and Defendants NUSA XVII's and NUSA XXIII's motion for misjoinder pursuant to Rule 21. For the following reasons, the Court denies NUSA's motion to dismiss. Further, the Court, in its discretion, grants NUSA XVII's and NUSA XXIII's motion for misjoinder and severs these Defendants and the claims against them, namely, Counts III and IV, from this lawsuit. See Lee v. Cook County, Ill., 635 F.3d 969, 971-72 (7th Cir. 2011) ("When a federal civil action is severed, it is not dismissed. Instead, the clerk of court creates multiple docket numbers for the action already on file, and the severed claims proceed as if suits had been filed separately.").

LEGAL STANDARDS

I. Motion to Dismiss

A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Under Rule 8(a)(2), a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted). Under the federal notice pleading standards, a plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Id. at 555. Put differently, a "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570). "In evaluating the sufficiency of the complaint, [courts] view it in the light most favorable to the plaintiff, taking as true all well-pleaded factual allegations and making all possible inferences from the allegations in the plaintiff's favor." AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011).

II. Motion to Sever/Misjoinder

Rule 20 governs the permissive joinder of parties and provides that multiple defendants may be joined in one action where: (1) "any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences;" and (2) "any question of law or fact common to all defendants will arise in the action." Fed.R.Civ.P. 20(a)(2); see also First Time Videos, LLC v. Does 1-500, 276 F.R.D. 241, 251-52 (N.D. Ill. 2011). "Misjoinder occurs when the parties fail to satisfy either of the requirements for permissive joinder under Rule 20." McDowell v. Morgan Stanley & Co., Inc., 645 F.Supp.2d 690, 694 (N.D. Ill. 2009). Rule 21 governs the misjoinder of parties and allows the Court to add or drop a party or sever any claim against a party. See Fed.R.Civ.P. 21. It is well-settled that a district court has broad discretion under Rule 21. See Chavez v. Illinois State Police, 251 F.3d 612, 632 (7th Cir. 2001) (appellate court "accord[s] wide discretion to a district court's decision concerning the joinder of parties"); Otis Clapp & Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738, 743 (7th Cir. 1985) ("Rule 21 gives the court discretion to sever any claim and proceed with it separately if doing so will increase judicial economy and avoid prejudice to the litigants.") (citation omitted).

BACKGROUND

I. The Memphis Lease I

In its First Amended Complaint, Walgreens alleges that on or about December 30, 1992, it entered into a lease ("Memphis Lease I") with third-party RFS, Inc. for the construction and lease of a building and premises located at 4183 Kirby, Memphis, Tennessee ("Walgreens #3086"). (R. 9, First. Am. Compl. ¶ 8.) Walgreens further alleges that in or around August 2004, RFS assigned The Memphis Lease I to Defendant NUSA V. (Id. ¶ 9.) Section 10(a) of the Memphis Lease I states in relevant part: "Landlord shall maintain and make all repairs to the exterior and structural portions of the Building, roof, pipes, ducts, wires and conduits leading to and from the Leased Premises or the Building." (Id. ¶ 10.) Section 17 of the Memphis Lease also states:

If Landlord shall from time to time fail to perform any act or acts required of Landlord by this Lease and if such failure continues for thirty (30) days after receipt of notice from Tenant, Tenant shall then have the right, at Tenant's option, to perform such act or acts, in such manner as Tenant deems reasonably necessary, and the full amount of the cost and expense so incurred shall immediately be owing by Landlord to Tenant, and Tenant shall have the right and is hereby irrevocably authorized and directed to deduct such amount from fixed and percentage rent and other sums due Landlord, together with interest thereon at the so-called corporate base rate charged from time to time by The First National Bank of Chicago, plus two percent until fully reimbursed. (Id. ¶ 11.) Moreover, Section 23 of the Memphis Lease I provides that the prevailing party is entitled to reasonable attorney's fees and costs incurred in any disputes between the Tenant and Landlord. (Id. ¶ 12.)

On or about December 8, 2010, Walgreens #3086 suffered a break-in whereby a large hole was cut into and through the roof directly over the Walgreens' pharmacy. (Id. ¶ 13.) Walgreens determined that the break-in was a casualty loss under the Memphis Lease I, repaired the hole at its own expense, and did not seek reimbursement for those costs. (Id.) Meanwhile, Walgreens' roof consultant, RRK Associates, Ltd. conducted an inspection of the roof of Walgreens #3086 and issued a report on or about June 15, 2011 stating that the roof is eighteen years old and has a useful life of fifteen to twenty years. (Id. ¶ 14.) The report further indicated that there are a number of serious flaws and structural problems present in the roof and that the roof should be replaced immediately. (Id.) More specifically, the report states that: (1) the two roof repairs to areas where holes were cut into the roofing have been permanently repaired; and (2) the cause of the roof leaks and general condition of the roof is not related to the two roof repairs conducted over the photo department and pharmacy. (Id. ¶ 15.) Walgreens further alleges that NUSA V and NUSA were made aware of this report by no later than September 21, 2011 via a Notice of Default. (Id. ¶ 16.) On August 31, 2011, NUSA V and NUSA sent Walgreens a Notice of Default claiming that Walgreens breached the Memphis Lease I by failing to pay for the repair of the entire roof of Walgreens #3086. (Id. ¶ 19.) NUSA V and NUSA further claimed that the maintenance of the roof is an event of casualty and subject to the self-insurance provision of the Memphis Lease I because the problems with the roof were a result of the December 2010 break-in. (Id.) Walgreens also asserts that it responded to NUSA V and NUSA denying that the replacement of the roof was an event of casualty and the responsibility of Walgreens and stated that the replacement of the roof was the obligation of NUSA V and NUSA under Section 10(a) of the Memphis Lease I. (Id. ¶ 20.) On October 3, 2011, NUSA V and NUSA reiterated their position, and thus Walgreens was forced to resort to the self-help provision of the Memphis Lease I to repair and replace the deteriorated roof on February 16, 2012. (Id. ¶¶ 21, 22.)

Similarly, at least as early as August 18, 2010, Walgreens informed NUSA V and NUSA of clogged down spouts at Walgreens #3086. (Id. ¶ 23.) Walgreens alleges that the Memphis Lease I requires NUSA V and NUSA to maintain and make all repairs to the exterior and structural portions of Walgreens #3086 and to the pipes, ducts, and conduits leading to and from Walgreens #3086. (Id. ¶ 24.) Further, Walgreens contends that both parties' roofing consultants agreed that the roofing maintenance issues have impacted and at least partially caused the clogged down spouts. (Id. ¶ 26.) On September 9, 2010, NUSA V and NUSA responded to an August 18, 2010 Walgreens' letter asserting that the clogged down spouts are not an exterior maintenance matter. (Id. ¶ 27.) On or about September 21, 2011, Walgreens demanded that NUSA V and NUSA repair the clogged down spouts, yet NUSA V and NUSA failed to repair the clogged down spouts within thirty days of Walgreens' demand. (Id. ¶¶ 28, 29.) As such, Walgreens alleges that it was forced to resort to the self-help provision of the Memphis Lease I to repair the clogged down spouts on February 16, 2012. (Id. ¶ 30.)

Likewise, on or near March 25, 2010, Walgreens informed NUSA V and NUSA of the need to paint the exterior of the Building because the Memphis Lease I requires NUSA V and NUSA to "maintain and make all repairs to the exterior and structural portions of the Building, roof, pipes, ducts, wires and conduits leading to and from the Leased Premises or the Building." (Id. ¶¶ 31, 32.) On April 28, 2010, NUSA V and NUSA responded to Walgreens' letter of March 25, 2010 asserting that painting is not an exterior maintenance matter, but only cosmetic. (Id. ¶ 34.) Furthermore, Walgreens alleges that on or about September 16, 2011, NUSA V and NUSA agreed to perform the necessary painting using "one of the colors we have in stock" without due regard to current color of the Building. (Id. ¶ 36.) In response, Walgreens demanded that NUSA V and NUSA paint the exterior of Walgreens #3086 consistent with its current color. (Id. ¶ 37.) Because NUSA V and NUSA failed to ...


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