United States District Court, S.D. California
September 8, 2005.
DDR OCEANSIDE LLC, Plaintiff,
REGAL CINEMAS, INC., a Corporation; and DOES 1 through 10, inclusive, Defendant.
The opinion of the court was delivered by: IRMA GONZALEZ, District Judge
ORDER (1) GRANTING IN PART AND DENYING IN PART DEFENDANT'S
CROSS-MOTION FOR SUMMARY JUDGMENT; and (2) DENYING PLAINTIFF'S
CROSS-MOTION FOR SUMMARY JUDGMENT
Presently before the Court is plaintiff DDR Oceanside, L.L.C.'s
("DDR") and defendant Regal Cinemas, Inc.'s ("Regal")
cross-motions for summary judgment. For the reasons stated below,
the Court denies DDR's cross-motion for summary judgment, and
grants in part and denies in part Regal's cross-motion for
A. Factual Background
DDR's suit arises out of an agreement whereby DDR's
predecessor-in-interest agreed to build out and lease (the
"Lease") commercial property, located at Oceanside Entertainment
Center, Oceanside, California, to Regal for the operation of a 16-plex
movie house (the "premises" or "theater").*fn1 (Pretrial
Order at 1:27-2:2:6.) DDR is the current owner and landlord of
the theater. Regal is the current lessee of the theater. Id.
On December 12, 1997, DDR's predecessor-in-interest (sometimes
"DDR's predecessor") and Regal entered into a written fifteen
year lease agreement. Regal and DDR's predecessor agreed the base
rent would be determined by multiplying the gross leasable area
("GLA") by a predetermined dollar amount. (Pretrial Order at
15-24.) The GLA is "the number of square feet of area on all
floors available for the exclusive use by the tenants" and "is
measured from the exterior face of the exterior walls and the
exterior face of service corridor walls." (Regal's Notice of
Lodgement ("NOL") ISO Motion Ex. A p. 7.) The Lease estimated the
GLA at 60,000 square feet. However, section 1.05 of the Lease
provides, "[o]n or before the Rent Commencement Date, Landlord
and Tenant shall determine the actual GLA of the floor area of
the Theatre in the manner described in Section 1.03(e). Tenant
and Landlord shall include the actual GLA of the Premises in the
Completion Certificate . . . and the parties agree that the
Minimum Rent . . . shall be determined based upon the actual GLA
of the Premises as measured." Id. at 8 (sic). The "Rent
Commencement Date" is defined as, "[t]he earlier of the Actual
Opening Date or the date which is the 91st day from and after the
Contingencies Date." Id. at 6.
Regal opened for business on December 10, 1999. On December 22,
1999, Oliver McMillan, DDR's predecessor's property management
company, sent a letter congratulating Regal on its December 10,
1999 opening, and notifying Regal that a monthly minimum rent of
$841,078.00 was then due. Oliver McMillan calculated the base
rent after concluding that the GLA of the theater was 60,077
square feet. (Regal's NOL Ex. C.) The parties did not complete a
"Completion Certificate," as required by section 1.05 of the
On May 25, 2000, DDR, now the owner of the theater, notified
Regal that its base rent and common area maintenance ("CAM") fees
were to be based on 60,856 square feet of GLA, and not 60,077 square feet, as indicated by DDR's predecessor.*fn2
(Regal's NOL Ex. D.) DDR stated that its predecessor's December
12, 1999 statement of GLA was merely an estimate, and was not
intended to be used as "the actual gross leasable area of the
premises as calculated in accordance with" the Lease. (Regal's
NOL Ex. H.)
On October 2001, Regal filed for bankruptcy in the Middle
District of Tennessee. During the course of Regal's bankruptcy
proceedings, DDR submitted Claim Numbers 1097 and 1100 in
anticipation that Regal would reject the Lease, and for rent and
CAM fees based on the larger GLA calculation. (Regal's NOL Ex.
E.) Regal objected to DDR's claim on the grounds that it had not
rejected the lease and that it had met its rent obligations to
DDR. In response, DDR withdrew its claims, but "with the specific
reservation of all rights with regard to any outstanding cure
amounts." (Regal's NOL Exs. L and M.) Accordingly, on May 7,
2002, the bankruptcy court ordered DDR's claim expunged. (Regal's
NOL Ex. N.) The bankruptcy court approved Regal's reorganization
plan on December 7, 2001, effective January 29, 2002. (Regal's
NOL Ex. K.)
Since December 1999, Regal has paid rent and CAM fees based on
60,077 square feet of GLA. (Regal's NOL. Ex. I.) DDR now seeks
more than $86,081.76, plus nine percent interest, for DDR's
alleged short payment of rents from February 1, 2002 through the
date of the filing of this civil action.*fn3
B. Procedural Background
DDR filed suit against Regal in San Diego Superior Court on May
7, 2004. Regal answered and removed to the United States District
Court for the Southern District of California pursuant to
diversity jurisdiction under 28 U.S.C. § 1441(a) and bankruptcy
jurisdiction pursuant to 28 U.S.C. § 1452(a). On October 29,
2004, Regal moved this Court for an order transferring this
action to the United States District Court for the Middle
District of Tennessee. (Doc. No. 9.) This Court denied Regal's
motion to transfer on December 20, 2004. (Doc. No. 20.)
The Court held a pre-trial conference on July 11, 2005. (Doc.
No. 30.) The parties indicated that the issues involved had been winnowed down, and that those
that were left could be disposed of on summary judgment. While
the parties' motion cut-off date was May 6, 2005, the Court
granted the parties leave to file cross-motions for summary
judgment. (Doc. No. 32.) On August 1, 2005, the parties filed
their respective cross-motions for summary judgment. (Doc. Nos.
33 and 41.) The parties have fully briefed the issues, and,
pursuant to Civil Local Rule 7.1(d)(1), the Court finds their
cross-motions for summary judgment appropriate for disposition
without oral argument.
A. Legal Standards
1. Res Judicata
The doctrine of res judicata bars relitigation of claims that
were or could have been asserted in an earlier proceeding.
Levinson v. United States, 969 F.2d 260, 262 (7th Cir. 1992). A
defendant relying on res judicata as a defense must plead it as
an affirmative defense in his or her answer to the complaint.
Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found.,
402 U.S. 212, 350 (1971).
A federal action may be barred by res judicata where an earlier
lawsuit (1) involved the same claim sued upon in the instant
civil action; (2) involved the same parties or persons in privity
of interest with them; and (3) resulted in a final judgment on
the merits. Nordhorn v. Ladish, 9 F.3d 1402, 1404 (9th Cir.
1993). However, res judicata does not apply when a cause of
action has been expressly reserved for later adjudication. "Under
a generally accepted exception to the res judicata doctrine, a
litigant's claims are not precluded if the court in an earlier
action expressly reserves the litigant's right to bring those
claims in a later action." Apparel Art Intern. v. Amertex
Enters., 48 F.3d 576, 586 (1st Cir. 1995); see also In re
Matter of Energy Co-op., Inc., 814 F.2d 1226 at 1233 (7th Cir.
1987) ("If a court reserves for later resolution an issue that
might otherwise have been adjudicated in the initial proceeding,
res judicata will not operate to bar the subsequent suit.").
Bankruptcy judgments may have a res judicata effect. Donegal
Steel Foundry Co. v. Accurate Prod. Co., 516 F.2d 583, 588 n 12
(citing Stoll v. Gottlieb, 305 U.S. 165 (1938)); In re Justice
Oaks II. Ltd., 898 F.2d 1544, 1550 (11th Cir. 1990) ("This issue
has been settled for some time: a bankruptcy court's order
confirming a plan of reorganization is given the same effect as
any district court's final judgment on the merits."). 2. Contract Interpretation and Modification
Contracts are to be interpreted so as to give effect to the
mutual intention of the parties at the time of contracting, to
the extent the mutual intent is ascertainable and lawful. Cal.
Civ. Code § 1636. The mutual intent of the parties is to be
ascertained solely from the contract that is reduced to writing,
if possible. Cal. Civ. Code § 1639. The contract language
controls if clear and explicit. Cal. Civ. Code § 1638. Words are
to be given their ordinary and popular meaning, unless used in a
special or technical way by the parties. Cal. Civ. Code § 1644.
Technical words are interpreted as used by persons in the
profession or business to which they relate, unless clearly used
differently. Cal. Civ. Code § 1644. The contract is to be
interpreted as a whole so as to give effect to every part, if
practicable. Cal. Civ. Code 1641. A contract may be interpreted
by reference to the circumstances under which it was made, and
the matter to which it relates. Cal. Civ. Code § 1647.
In California, modification of written contracts is also
controlled by statute. Pursuant to California Civil Code § 1698:
(a) A contract in writing may be modified by a
contract in writing.
(b) A contract in writing may be modified by an oral
agreement to the extent that the oral agreement is
executed by the parties.
(c) Unless the contract otherwise expressly provides,
a contract in writing may be modified by an oral
agreement supported by new consideration. The statute
of frauds (Section 1624) is required to be satisfied
if the contract as modified is within its provisions.
Section 1698(b) allows modification of a written contract by an
oral agreement to the extent the oral agreement is executed.
"Executed" in section 1698(b) has the normal meaning of that term
in contract law. That is, the agreement must have been fully
performed. Lockheed Missiles & Space Co. v. Gilmore Indus.,
135 Cal. App. 3d 556, 559 (Ct. App. 1982) (relying on Black's Law
Dictionary to define "executed" as "completed; carried into full
effect.") (internal quotations omitted).
Section 1698(c) allows oral modification of a written contract
only if the written contract does not provide otherwise. See
also Marani v. Jackson, 183 Cal. App. 3d 695, 704 (Ct. App.
1986) (noting that oral modification of a written contract is
allowed only if "the written contract does not contain an express
provision requiring that modification be in writing."). "An agreement to modify a written contract will be implied if
the conduct of the parties is inconsistent with the written
contract so as to warrant the conclusion that the parties
intended to modify it." Daugherty Co. v. Kimberly-Clark Corp.,
14 Cal. App. 3d 151, 158 (Cal. Ct. Appl. 1971); Garrison v.
Edward Brown & Sons, 25 Cal. 2d 473, 479 (Cal. Ct. Appl. 1944)
("Before a contract modifying a written contract can be implied,
the conduct of the parties according to the findings of the trial
court must be inconsistent with the written contract so as to
warrant the conclusion that the parties intended to modify the
3. Summary Judgment
Summary judgment is proper where "there is no genuine issue as
to any material fact and . . . the moving party is entitled to
judgment as a matter of law." Fed.R.Civ.P. 56(c). A material
issue of fact is a question that a jury must answer to determine
the rights of the parties under the applicable substantive law.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Act
Up!/Portland v. Bagley, 988 F.2d 868, 873 (9th Cir. 1993). A
dispute is "genuine" only if "a jury applying [the substantive
law's] evidentiary standard could reasonably find for either the
plaintiff or the defendant." Anderson, 477 U.S. at 255.
In considering a motion for summary judgment, the Court must
examine all the evidence in the light most favorable to the
non-moving party. United States v. Diebold, Inc., 369 U.S. 654,
655 (1962). The moving party bears "the initial responsibility of
informing the district court of the basis for its motion."
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To satisfy
this burden, the moving party must demonstrate that no genuine
issue of material fact exists for trial. Id. at 322. However,
the moving party is not required to negate those portions of the
non-moving party's claim on which the non-moving party bears the
burden of proof. Id. at 323.
On cross motions for summary judgment, the burdens faced by the
opposing parties vary with the burden of proof they will face at
trial. When the moving party will have the burden of proof at
trial, "his showing must be sufficient for the court to hold that
no reasonable trier of fact could find other than for the moving
party." William W. Schwarzer, Summary Judgment Under the Federal
Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465,
In contrast, a moving party who will not have the burden of
proof at trial need only point to the insufficiency of the other side's evidence, thereby shifting
to the nonmoving party the burden of raising genuine issues of
fact by substantial evidence. T.W. Elect. Serv., Inc. v. Pacific
Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987)
(citing Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986);
Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d 1100,
1103-04 (9th Cir. 1986).
Courts may grant summary judgment motions touching upon
contract interpretation when the agreement is unambiguous. See
San Diego Gas & Elec. Co. v. Canadian Hunter Mktg. Ltd.,
132 F.3d 1303, 1307 (9th Cir. 1997). Ambiguity is a question of law
for the court. Maffei v. N. Ins. Co. of N.Y., 12 F.3d 892, 898
(9th Cir. 1993). While courts ordinarily hesitate to grant
summary judgment when a contract is ambiguous, there is no "rigid
rule prohibiting reference to extrinsic evidence in resolving a
contractual ambiguity on a summary judgment motion." San Diego
Gas & Elec. Co., 132 F.3d at 1307. Courts may still consider
whether, construing the evidence in the nonmovant's favor, the
ambiguity can be resolved consistent with the nonmovant's
1. Res Judicata
Regal argues that DDR's claim for increased rent and CAM fees
is barred by res judicata. (Memo. ISO Motion at 11:4.) In Regal's
bankruptcy proceedings before the United States Bankruptcy Court
for the Middle District of Tennessee, DDR submitted claims for
the underpayment of monthly rent and CAM fees and for lease
rejection damages. (Regal's NOL Exs. E and F.) Regal objected to
DDR's claim on the bases that "[t]he lease was not rejected and
rent was paid." (Regal's NOL Ex. L pg. 24.) In response, DDR
agreed that the lease had not been rejected, however, asserted
that there were "still various cure items. Accordingly, while
[DDR] consent[ed] to the expungement of [its] claims [it did] so
with the specific reservation of all rights with regard to any
outstanding cure amounts." (Regal's NOL Ex. M pg. 2.) On May 7,
2002, the Honorable Marian Harrison, United States Bankruptcy
Judge, ordered that DDR's claims be disallowed because: (1) DDR
agreed to the expungement of its claims; and (2) the Court was
satisfied that, under the circumstances, that such relief was
appropriate. (Regal's NOL Ex. N pg. 1.)
Regal asserted the doctrine of res judicata as an affirmative
defense in its answer, and therefore, it can assert it on summary judgment. (Answer at
2:16-17.) The first two elements of the doctrine of res judicata
are also satisfied. First, DDR makes the same claim in the
instant civil action as it did in Regal's bankruptcy proceeding.
There, as here, DDR sought increased rent and CAM fees based upon
a GLA greater than 60,077 square feet. Second, there is an
identity of parties. DDR and Regal were both parties to Regal's
However, Regal's argument ultimately fails because the
bankruptcy court did not adjudicate DDR's claims on the merits,
and even if it did, DDR reserved its rights "with regard to any
outstanding cure amounts." (Regal's NOL Ex. M pg. 2.) DDR
"consented to the expungement of its claims." Id. A party's
consent to the expungement of its claims before the bankruptcy
court is the equivalent of a voluntary dismissal without
prejudice before a district court. A dismissal without prejudice
indicates that judgment is not on the merits and will have no
preclusive effect. See Cooter & Gell v. Hartmarx Corp.,
496 U.S. 384, 396 (1990). Accordingly, the bankruptcy court's
disallowance of DDR's claims, pursuant to DDR's consent to the
expungement of its claims, was not on the merits and has no
Even if the bankruptcy court's disallowance of DDR's claims
could be construed as on the merits, DDR expressly reserved its
right to bring its claims in a later action. DDR consented to the
expungement of its claims with the "specific reservation of all
rights as to any outstanding cure amount." (Regal's NOL Ex. M.)
When the bankruptcy court disallowed DDR's claims, it did so in
part because DDR consented to their expungement. (Regal's NOL Ex.
N.) Since the bankruptcy court relied on DDR's consent to the
expungement of its claims, it incorporated by implication DDR's
express reservation of its rights to litigate these claims in a
later action. Thus, DDR's claims are not barred by the principle
of res judicata because the bankruptcy court expressly reserved
DDR's right to bring these claims in a later action. See
Apparel Art Intern. v. Amertex Enters., 48 F.3d at 586.
2. Lease Modification
Regal argues that Oliver McMillan modified the Lease, and
therefore, DDR is estopped from seeking increased rent based on a
greater GLA. Specifically, Regal contends that Oliver McMillan
agreed to a GLA of 60,077 square feet and that DDR is bound by
that determination. (Memo. ISO Motion at 6:4-6.)
As stated above, under California law, written contracts can
only be modified in writing or by oral agreement where the
agreement is executed. However, a contract's term can limit the
ability of the parties to orally modify its terms. Cal. Civ. Code
§ 1698. Thus, where a written agreement requires written
modifications, oral amendments are precluded. Conley v.
Matthes, 56 Cal. App. 4th 1453, 1465 (Cal.Ct.App. 1997).
Here, section 23.13(b) of the Lease states, "[n]o alteration,
amendment, change or addition to this Lease shall be binding upon
LANDLORD or TENANT unless reduced to writing, signed by them and
mutually delivered between them." (Regal's NOL Ex. A p. 54.)
Further, "[n]o covenant, term, agreement or condition of this
Lease shall be deemed to have been waived by LANDLORD or TENANT,
unless such waiver be in writing." Id. at 51. Accordingly, the
Lease cannot be orally modified, and any written modification
must conform with the Lease's terms in order to be valid.
Regal argues that Oliver McMillan's December 22, 1999 letter,
in which it stated that the minimum rent was based on a GLA of
60,077 square feet, was a valid and binding Lease amendment.
Accordingly, it argues, the parties were not required to (1)
jointly determine the actual GLA of the premises in a manner set
forth by the lease; or (2) to complete out the "Completion
Certificate." (See Regal's NOL Ex. A p. 8.)
Oliver McMillan's December 22, 1999 letter (the "letter") did
not modify the Lease or waive any of its conditions. First, while
subscribed by Oliver McMillan, the letter was never signed by
Second, and more importantly, the letter in no way indicates
that Oliver McMillan intended it to take the place of the Lease
mandated "Completion Certificate." (See Regal's NOL Ex. A)
("LANDLORD and TENANT shall determine the actual GLA . . . [and]
shall include the actual GLA . . . in the "Completion
Certificate."). The letter states, "I am sending you this
information so that we may start the billing process and other
related billing items on the right foot." (Regal's NOL Ex. A.)
Regal argues that the "Completion Certificate" can be dispensed
with because it is a "ministerial act." (Regals' Memo. ISO Motion
at 8:3-5.) The lease's terms do not support Regal's
characterization. Rather than a ministerial act, the "Completion
Certificate" requires the parties come together and agree on the theater's actual GLA, and
accordingly, Regal's minimum base rent. Thus, it is an integral
and final part of the Lease agreement. In order to waive a
contract provision, especially when it is vital to the contract
terms, the intent to do so must be clear as evidenced by
objective evidence. See Biren v. Equality Emergency Med.
Group, Inc., 102 Cal. App.4th 125, 141 (Cal. Ct. Appl. 2002)
(quoting Frank T. Hickey, Inc. v. Los Angeles Jewish Cmty.
Council, 128 Cal. App. 2d 676, 682-683 (Cal. Ct. Appl. 1954)
("`The parties may, by their conduct, waive . . . a provision'
where evidence shows that was their intent."). Here, the letter
does not indicate that Oliver McMillan intended to amend the
Lease to obviate the need for the "Completion Certificate."
Therefore, the December 22, 1999 letter did not modify the Lease.
Since the Lease's terms survive in their original form, Regal
and Oliver McMillan were required to collectively determine the
theater's actual GLA and record the actual in the "Completion
Certificate." This did not occur. Therefore, DDR is not bound by
Oliver McMillan's preliminary determination that Regal owed rent
based on a GLA of 60,077 square feet.
3. The Theater's Actual GLA
The heart of the dispute between Regal and DDR is the question
of the theater's actual GLA. DDR asserts that the theater's
actual GLA is 63,721 square feet. DDR arrives at this figure by
totaling the square footage of the following distinct areas: (1)
the theater's primary building, 60,332 square feet; (2) the
ticket booth canopy, 2,170 square feet; (3) two recessed exits,
285 square feet; and (4) two enclosed exits, 934 square
feet.*fn4 (See Exhibit A attached to this Order for a
diagram of the theater.)*fn5 Regal claims that theater's
actual GLA is only 59,983 square feet. Regal contends that only
the theater's primary building should be included in the GLA, and
thus, excludes the three other distinct areas.
a. The Theater's Primary Building
The sole dispute with regard to the theater's primary building
is its actual GLA. DDR claims that the theater's actual GLA is
60,332 square feet. (Declaration of Mark Swenson ISO DDR's Motion ¶ 3.) Regal claims that the theater's actual GLA is
59,983.17 square feet. (Declaration of Robert Perry ISO Regal's
Motion ¶ 4.) Thus, there is a genuine issue of material fact as
to the theater's primary building's actual GLA. Accordingly,
DDR's motion for summary judgment on this issue is denied.
b. The Three Disputed Areas
There is no genuine issue of material fact as to the location
and square footage of the ticket booth canopy, the recessed
exits, and the enclosed exits. The only dispute as to these three
areas is whether the Lease's language permits each to be included
in the theater's actual GLA; Regal argues that it does not, while
DDR argues that it does.
The Lease states, "TENANT and LANDLORD shall determine the
actual GLA of the premises by measurement of the floor area of
the Theatre in the manner described in Section 1.03(e)." (Regal's
NOL Ex. A p. 8.) Section 1.03(e) of the Lease states, "GLA . . .
shall be measured for purposes of this Lease from the exterior
face of exterior walls and the exterior face of service corridor
walls (or fences in the case of leasable areas enclosed by fence
or similar barricade)." Id. at 7. The lease defines GLA as:
the number of square feet of an area on all floors
available for the exclusive use by the tenants or
other occupants thereof and their customers, clients
or other invitees, but not including mezzanines and
balconies so long as such areas are used to display
stock for sale and not otherwise open to clients and
customers, and not including other areas and space
defined herein as part of Common Areas.
Id. (emphasis added). Section 1.03(d) of the Lease defines
"common areas" as:
all areas, facilities and improvements operated or
provided at or in connection with the Center from
time to time for the non-exclusive common use of
LANDLORD and the lessees or occupants of the Center
(including TENANT), and shall include, but not be
limited to, the Parking Retention Areas, delivery
areas, sidewalks, stairways, service corridors, exit
corridors, seating areas, buffer areas, screening
facilities, retaining walls, landscaped areas, open
space areas, utility systems, sanitary and other
waste handling systems, holding tanks, force mains,
fire detection and/or suppression systems, lifesafety
systems, security systems, drainage systems and
Id. Accordingly, an area is considered common, and not included
in Regal's GLA, if (1) it is an area not exclusive to Regal, or
(2) it is specifically denoted as a "common area" in the Lease. i. Recessed Exits
The recessed exits sit on the east and west sides of the
theater. Both exit doors sit at the end of a small alcove. Thus,
the disputed areas are outside the theater's walls, but are
covered by an overhang. (See Swenson Decla. at Ex. H;
Declaration of Edwin Schwing ISO Regal's Motion ¶ 6; Regal's NOL
Ex. P.) The disputed areas total 285 square feet; 212 feet at the
theater's west exit and seventy-three feet at the theater's east
The recessed exits are "common areas" for the purposes of
calculating the theater's actual GLA. Section 1.03(d) of the
Lease states that "exit corridors" are "common areas." (Regal's
NOL Ex. A p. 7.) Webster's International Dictionary defines a
corridor as, "a usually covered passageway." Webster's Third New
International Dictionary, Unabridged, Merriam Webster, Inc. The
spaces between the exit doors and the theater's exterior wall are
just that, covered passageways which lead from the exit doors to
the outside. Since the recessed exits are "exit corridors," and
the Lease defines "exit corridors" as common areas, the recessed
exits are common areas under the terms of the Lease. Thus, the
recessed exits' 285 square feet are properly excluded from the
theater's actual GLA.
ii. Enclosed Exits
At the east side and the southeast corner of the theater there
are two separate exits from the theater. (Schwing Decla. ¶¶ 4, 5;
Regal's NOL Ex. P.) The exits open into two areas that are
enclosed by a fence; a locked gate prevents access to each. Id.
The fenced in area off the east exit totals 600 square feet, and
the fenced in area off the southeast exit totals 334 square feet.
(Swenson Decla. ¶ 4.)
DDR argues that both areas are for Regal's exclusive use, and
therefore, should be included in the GLA. (DDR's Memo. ISO Motion
at 10.) Regal claims that neither area is exclusive to it, and
accordingly, must be excluded from the GLA. (Regal's Memo. ISO
Motion at 14-15.)
a. East Exit
As stated above, outside the east exit is a fenced in area
totaling 600 square feet. The gated area encompasses a small
stairwell and a small concrete landing. Also within the gated
area outside the east exit are four to six pipes which flow to
the building adjacent to the theater. (Schwing Decla. ¶ 5; Regal's NOL Ex. T.)
The Lease specifically identifies "utility systems" as common
areas. (Regal's NOL Ex. A p. 7.) Regal argues that the east exit
enclosure is a "common area' because it contains a "utility
system." Regal also asserts that the east exit is not under its
exclusive control because DDR maintains a key to the locked gate.
DDR claims that it does not have a key to the area, and
therefore, it is under Regal's exclusive control.
There is a genuine issue of material fact as to whether or not
the area outside the east exit is a "common area.". Regal is not
entitled to summary judgment on its claim that the east exit is a
"common area" because it encloses a "utility system." While the
Lease states that "utility systems" are common areas, the Lease
is ambiguous as to the definition of a utility system. Here, what
Regal characterizes as a "utility system" is a fire system
composed of a few pipes which sit flush against the theater's
exterior wall and rise from the ground up. (Regal's NOL Ex. T.)
When a contract is ambiguous, and a court cannot resolve the
ambiguity, court's should refrain from granting summary judgment.
See San Diego Gas & Elec. Co., 132 F.3d at 1307. Because of
the ambiguity in the lease regarding the "utility system,"
Regal's motion for summary judgment on this ground is denied.
Second, DDR is not entitled to summary judgment on its claim
that the east exit should be included in the GLA. DDR argues that
the area must be included in the GLA because it is exclusive to
Regal. The parties have presented conflicting evidence on whether
or not DDR has a key to the area; DDR presents evidence that it
does not, while Regal presents evidence that DDR does. (Ballard
Decla. ¶ 3; Schwing Decla. ¶ 8.) If DDR has a key to the area
then it is not exclusive to Regal because an access key would
permit DDR to enter the area at any time, even in nonemergencies,
without seeking Regal's approval. Thus, there is a genuine issue
of material fact regarding whether or not the east exit area is
exclusive to Regal. Accordingly, the parties' respective
cross-motions for summary judgment on this issue are denied.
b. Southeast Exit
The southeast exit area totals 334 square feet. The fenced area
encloses a locked ladder that provides roof access to the
adjacent tenant space. (Schwing Decla. ¶ 4.) DDR has a key to
this area and to the locked ladder. Id. The area also houses a
utility shed which Regal maintains for its exclusive use. (Ballard Decla. ¶ 4.) Thus, the fenced-in area
encloses one element that is clearly common, the ladder, and one
that is clearly exclusive to Regal, the utility shed.
Regal relies heavily on the deposition testimony of Mark
Swenson. DDR retained Mark Swenson, a certified architect, to
measure the theater's GLA. (Swenson Decla. ¶¶ 1-2.) At Swenson's
deposition he testified that if the ladder provided access to
other tenants then the southeast exit area would not be exclusive
to Regal. (Regal's NOL Ex. V p. 62.) However, DDR objects to
Swenson's testimony on the grounds that it is irrelevant and
inadmissible because Swenson is not an expert on contract law or
interpretation of written leases. (DDR's Reply at 5:16-21.) The
Court grants DDR's objection as to Swenson's legal conclusions,
and does not consider them in ruling on the parties'
cross-motions for summary judgment.
Not withstanding the Court's evidentiary ruling, the area
outside the southeast exit is a "common area" under the terms of
the Lease. While Regal maintains a utility shed in it, DDR
maintains a key to the area "for the purposes of maintaining
access to the roof ladder" which provides access to other
tenants' buildings. (Ballard Decla. ¶ 4.) DDR does not need or
seek Regal's permission to enter this area. (Schwing Decla. ¶ 4.)
Thus, the area is not exclusive to Regal because DDR's access is
not restricted Accordingly, the southeast exit area is properly
excluded from the theater's actual GLA calculation.
iii. Ticket Booth Canopy
The ticket booth canopy is a 2,170 square foot semi-circular
area that extends off the front of the theater's facade. (See
Regal's NOL Exs. P and Q.) The canopy covers the theater's ticket
booth windows. There are three large arches in the canopy for
ingress and egress. Id. Regal's name is on the front of the
canopy, and Regal decorates the inside of it with movie posters
The theater sits in the center of the Oceanside Entertainment
Center, and the Center's patrons routinely walk through the
ticket booth area to get from one side of the Center to the
other. (Schwing Decla. ¶ 3.) Up until Regal filed its
cross-motion for summary judgment, DDR maintained garbage cans
and cigarette receptacles underneath the canopy.*fn6 Id.
Lastly, Regal claims that DDR cleans the area, while DDR claims that Regal employs its own
agents to clean it. (Id; Lyle Ballard's Decla. ISO Regal's Opp.
The ticket booth canopy area is a "common area," and therefore,
is not included in the theater's GLA. The terms of the Lease
define sidewalks and open space areas as "common areas." (Regal's
NOL Ex. A.) The ticket canopy is both a sidewalk and an open
space area. First, it serves as a walkway from one side of the
Oceanside Entertainment Center to the other. While it may not be
the exclusive passage or walkway, DDR admits that it is one.
(Ballard Decla. ISO DDR's Opp. ¶ 3.) ("Although one can get from
one tenant to another by walking through Regal's ticketbooth
canopy area, this is by no means the exclusive nor common means
of ingress or egress.") (sic) It is also an open space area
because Regal allows non-paying customers to congregate, stand,
or walk in the ticket booth canopy. (Schwing Decla. ¶ 3.) Since
the ticket booth canopy is a "common area," it is excluded from
For the foregoing reasons, the Court finds the following:
1. DDR's instant civil action is not barred by the
doctrine of res judicata.
2. DDR's predecessor-in-interest's actions did not
amend the lease, and therefore, DDR is not estopped
from seeking an increase in Regal's base rent.
3. There is a genuine issue of material fact as to
the theater's primary building's GLA.
4. The recessed exits are "common areas," and
therefore, excluded from the GLA.
5. There is a genuine issue of material fact as to
whether or not the east exit enclosure is a "common
area" or should be included in the GLA.
6. The southeast exit enclosure is a "common area,"
and therefore, excluded from the GLA.
7. The ticket booth canopy is a "common area," and
therefore, excluded from the GLA.
Accordingly, Regal's cross-motion for summary judgment is hereby
DENIED in part and GRANTED in part. DDR's cross-motion for
summary judgment is hereby DENIED. The parties shall contact the Court forthwith in order to
schedule a pretrial conference, or otherwise advise the Court of
their respective intended courses of action.
IT IS SO ORDERED.
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