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Aeroground, Inc. v. CenterPoint Properties Trust

United States Court of Appeals, Seventh Circuit

December 23, 2013

AEROGROUND, INC., d/b/a Menzies Aviation, Plaintiff-Appellant,

Argued Dec. 4, 2013.

Page 811

William J. Dorsey, Attorney, Katten Muchin Rosenman LLP, Chicago, IL, for Plaintiff-Appellant.

David A. Eide, Attorney, Lawrence M. Karlin, Attorney, Karlin Eide, Chicago, IL, for Defendant-Appellee.

Before FLAUM, EASTERBROOK, and TINDER, Circuit Judges.

FLAUM, Circuit Judge.

In 2007, two companies— Menzies and CenterPoint— entered into a ten-year lease for a warehouse near O'Hare Airport. CenterPoint, the lessor, owns the warehouse; Menzies, the lessee, operates an air cargo handling business, which includes the use of 15,000- and 30,000-pound forklifts.

Page 812

It did not take long for these heavy forklifts to severely damage the concrete slab on which the machines operated. The parties dispute who is responsible for fixing the damage, at a cost of about $1 million. Under the lease, Menzies is responsible for repairing the warehouse's " floor," while CenterPoint is responsible for repairing its " foundation." Menzies sued. After a bench trial, the district court concluded that the damage affected only the surface of the concrete slab— i.e., it affected the slab's function as a floor, not its function as a foundation. Therefore, Menzies was not entitled to recover. We affirm.

I. Background

Aeroground Inc., which does business as Menzies Aviation (" Menzies" ), operates an air cargo handling business. CenterPoint Properties Trust (" CenterPoint" ) is a real estate investment trust that owns a warehouse near O'Hare Airport. The facility is a single-story structure— a 185,280 square-foot warehouse built in 1998 or 1999, plus a large addition built in 2007. Another company used the building to store airplane parts from 1999 until 2006.

In February 2007, Menzies and CenterPoint entered into a lease for the building. After a dispute, the parties mutually terminated that lease and signed a new, ten-year lease in November 2007. Between February and November, CenterPoint constructed various improvements to the building, at Menzies' request, including increasing the number of dock doors from two to thirty-eight and installing 45,000-pound dock levelers. These improvements cost CenterPoint about $1.4 million.

When Menzies began moving its air cargo handling operations into the building in November 2007, the six-inch concrete slab did not exhibit any visible damage. By January 2009, the concrete slab had begun to deteriorate. The damage— " cracking, scaling of the concrete surface, and raveling along contraction joints" — was not consistent with typical wear and tear. The slab could not support Menzies' heavy forklifts, which were typical of its field. Menzies told CenterPoint about these problems in January 2009. CenterPoint paid for some repairs (at a cost of about $92,000), but then stopped doing so. CenterPoint did not submit an insurance claim. The parties agree that the concrete slab is so damaged that it must be replaced, at an estimated cost of between $966,000 (the cost of a new, identical floor) and $1.23 million (the cost of a new floor that would permit heavy forklift operation).

As relevant here, Menzies sued CenterPoint for breach, and CenterPoint counterclaimed. Both parties contended that the other was responsible for replacing the concrete slab and had breached the lease by failing to replace the slab. After a bench trial, the federal district court held that neither party was entitled to recover. The court found that the concrete slab had a " dual nature as both floor and foundation," but " the damage at issue was related to the slab's function as a floor." The damage was therefore Menzies' responsibility since Menzies is responsible for the " floor" — not CenterPoint's responsibility, which includes the " foundation." However, CenterPoint lost on its counterclaim, because the lease required that it give timely notice to Menzies if Menzies allegedly breached, and CenterPoint did not do so. Only Menzies appeals.

II. Discussion

In an appeal from a bench trial, we review for clear error the district court's findings of fact and its applications of law to those findings of fact. Egan Marine Corp. v. Great Am. Ins. Co. of New York,665 F.3d ...

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