Friday, June 21, 2013

Breaking the Amish

Economic loss to innocent third-parties is often the collateral damage from contract disputes that land in court. Lapp’s Fresh Meats, an Amish-run stall at Joppatowne Plaza Shopping Center, has been sent packing.  According to a federal judge’s ruling last week, the popular vendor, which moved into the Joppa Market Place over two years ago, must shut down by June 23, 2013. The trusting Amish did nothing wrong. They simply got caught in the cross-fire between their landlord and another tenant. And it can happen to your business, too!

The decision follows a 2010 lawsuit filed by Redner’s Markets, which has a store in the plaza, against the shopping center’s owner, Baltimore-based Cordish Companies.  In 2005, this Pennsylvania grocery chain became an anchor tenant after signing a lease with Joppatowne G.P. Limited Partnership, a division of Cordish.  Redner’s agreed to pay $12 million over a 20-year lease that prohibits Cordish from leasing property within a five-mile radius of the shopping center to competing grocery shops.

Redner’s claims that the presence of a half-dozen Amish stalls inside the sprawling marketplace, including Lapp’s Fresh Meats, breaks this contract and siphons business from the grocer.  According to an accountant hired by Redner’s, the grocery chain has lost around $2.3 million in revenue because of the Amish Market.  

Cordish, however, defends the presence of the Amish stores, insisting that they fall within the term of the lease that makes exceptions for ethnic markets.

On June 13, U.S. District Judge Richard D. Bennett ended this two year debate with his ruling against Cordish, ordering the removal of Lapp’s Fresh Meats.  He determined, however, that the presence of several other food stalls in Joppa Market Place do not violate the contract.  Still, the fate of numerous shops remains uncertain and requires another trial.

Cordish will appeal the order forcing Lapp’s Fresh Meats to close.  Meanwhile, the Amish  butchers can only wait for others to determine their fate. If Judge Bennett stays (or postpones) the effect of his order, the market will continue to operate while the appeal winds through the U.S. Court of Appeals. If the order is not stayed, our Amish neighbors will be sent packing.

Fairness to third-parties is not always a core concern in business disputes. Maryland law goes far to protect the deal made by parties to the contract, and that includes restrictions on competition.  Here, a long-term tenant extracted a specific promise from the landlord that related businesses would not be set up to compete against the tenant's business within a five mile radius. The Amish certainly did not know about this restriction when they signed their own lease but enforcement of the restriction necessarily destroys the Amish butcher's business.

But the Amish are not without recourse- if they hire an "english" lawyer, they just might prevail against Cordish for breach of their own leasing agreement.

That would be fair.