MEMORANDUM AND ORDER RE: MOTION TO EXCLUDE PLAINTIFF'S EXPERTS AND MOTION FOR SUMMARY JUDGMENT
Plaintiff Best Buy Stores, L.P. ("Best Buy") brought this action against defendant Manteca Lifestyle Center, LLC ("Manteca") alleging various claims arising out of plaintiff's lease with defendant. Presently before the court are defendant's motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 and motion to exclude plaintiff's experts.
In 2004, Poag & McEwen Lifestyle Centers, LLC ("Poag") began work on a shopping center to be located in Manteca, California. (Best Buy App. Ex. 7 ("Poag Dep. II") at 188:18-21.) Like most of the shopping centers developed by Poag, this center was originally intended to be a "lifestyle" center, meaning that it would "cater to the retail needs and lifestyle pursuits of higher-income consumers." (Moseley Decl. ¶¶ 7-10, 12; Best Buy App. Ex. 42.) While Poag initially envisioned the Manteca center as a two-phase project with an initial phase of 650,000 to 715,000 square feet and a second phase of approximately 389,000 square feet, (Best Buy App. Ex. 10 ("Grambergs Dep. II") at 190:12-191:19; Best Buy App. Ex. 39 at MAN0008686), it ultimately sought approval from the city of Manteca for a lifestyle center of 650,000 to 746,000 square feet. (Grambergs Dep. II at 191:8-20; Best Buy App. Ex. 8 at MAN00006553.) Promenade Shops at Orchard Valley ("the Promenade"), the shopping center eventually developed in Manteca, is owned by Manteca, a limited liability company related to Poag. (Best Buy App. Ex. 42; id. Ex. 43; Manteca App. Ex. 7 ("Poag Dep. I") at 11:3-15.)
In 2007, Poag provided Best Buy with a site plan for the proposed Manteca shopping center and negotiation of a lease agreement began. (Moseley Decl. ¶¶ 17-19; Manteca App. Ex. 13 ("Moll Dep. I") at 116:6-117:1.) As Best Buy's Director of Real Estate during the relevant time period, Melissa Moseley was the primary person involved in negotiations on behalf of Best Buy. (Moseley Decl. ¶¶ 1, 6.) Her counterpart at Poag was Bud Moll. (Id. ¶¶ 17-21, 24.) A lease was executed by Manteca and Best Buy in July of 2007. (Manteca App. Ex. 1 at MAN0000451-52.)
Before entering into the lease at issue here, Best Buy had previously entered into a lease related to a Poag-developed shopping center in Colorado known as Centerra. (Moseley Decl. ¶¶ 13-16.) In negotiating the Promenade lease, the parties used the Centerra lease as a starting point. (Id. ¶ 21; Manteca App. Ex. 17 ("Schram Dep. I") at 114:21-115:2.)
The co-tenancy provision in the Centerra lease provided that co-tenancy would be established if two of the following five establishments were open and operating: a department store, a sporting goods store, a bookstore, a cinema, or no less than 150,000 square feet of smaller retail tenants. (Manteca App. Ex. 3 Art. 8.) In adapting this provision to the Manteca lease, Best Buy rejected Moll's proposal that a 20,000 square foot retail store and 50,000 square feet of small retail stores be included as co-tenancy factors, instead requiring that between J.C. Penney, Bass Pro, and a cinema, two of these businesses be open for the co-tenancy condition to be met. (Manteca App. Ex. 13 ("Moll Dep. I") at 133:6-135:5; id. Ex. 44 at MAN000534; id. Ex. 45 at MAN000557.) Best Buy also added a requirement that at least 60% of the "gross leasable area of the Shopping Center" be open before co-tenancy would be established. (Moll Dep. I at 133:11-35; Manteca App. Ex. 15 at MAN0000826; id. Ex. 1 Art. 8.)
The Co-Tenancy Condition the parties ultimately agreed to provides that:
As used herein, the "Opening Co-Tenancy Condition" shall mean that, as of the Commencement Date, Tenant shall not be required to open for business unless sixty percent (60%) (not including Best Buy) of the gross leasable area of the Shopping Center are open and operating at the Shopping Center, or are to open concurrently with Tenant, including at least two (2) or more of the following tenants: (I) J.C. Penney; (ii) Bass Pro; (iii) a cinema.
Should the Opening Co-Tenancy Condition not be satisfied, Tenant may either (I) delay opening for business until the Opening Co-Tenancy Condition is satisfied . . . or (ii) open for business and pay fifty percent (50%) of the monthly Rent (and any additional other costs without reduction) payable pursuant to the terms of this Lease until such time as the Opening CoTenancy Condition has been satisfied. (Manteca App. Ex. 1 Art. 8.)
While the initial lease signed by the parties provided for an April 2009 opening, the parties later discussed the possibility of an October 2008 opening. (Manteca App. Ex. 4 ("Moseley Dep. I") at 316:4-13, 334:11-16; Moseley Decl. Ex. 4.) There was a concern on the part of Best Buy, however, about opening a store "without the appropriate cotenancy," (Manteca App. Ex. 51; id. Ex. 11 ("Matre Dep. I") at 98:25-99:13), or opening "while everyone [was] in the middle of construction and the site [was] a mess." (Best Buy App. Ex. 48.)
In early January 2008, Moll assured Moseley that, other than Dick's Sporting Goods, he was "not aware of anyone who won't be opening on time this October (except In Shape Health Club)." (Id.) In February, he notified her that J.C. Penney was delaying its opening until March 2009 and that some of the small retail shops, referred to as in-line shops, would also not open until 2009. (Moseley Decl. ¶ 41, Ex. 5.) In April 2008, Moll indicated to a construction project manager at Best Buy that Bass Pro, the theater, J.C. Penney, and "the balance of the center" would be open by March 2009. (Best Buy App. Ex. 50.)
Best Buy was concerned that if it opened before other parts of the Promenade, it would not be able to generate a profitable level of sales. (Moseley Decl ¶ 40, Ex. 4; see also Matre Dep. I at 99:25-102:8.) Although it noted that under the Co-Tenancy Condition its operating costs would be lower if it opened in October because it would be on reduced rent "until the balance of the retail," (Moseley Decl. Ex. 5; Moseley Dep. I at 330:12-331:24; see also Manteca App. Ex. 51), Best Buy ultimately opted not to open its store in 2008.
As a result of the economic downturn that occurred in 2008, Manteca had a harder than expected time finding tenants interested in leasing space at the Promenade. (Best Buy App. Ex. 9 ("W. Moseley Dep. II") at 247:24-248:15; id. Ex. 14 No. 8.) Rather than constructing all of the buildings indicated on the Site Plan at once only to have many of them sit empty, Manteca decided to stagger construction. (Id. Ex. 14 No. 8 at 3; id. Ex. 15.)
In September 2008, Moll informed Moseley that (1) only Bass Pro and the cinema were opening in October 2008, (2) J.C. Penney was the only store opening in March 2009, (3) In Shape Health Club and Dick's Sporting Goods were not opening until July 2009, (4) only half of the "small lifestyle" space was leased, and (5) Hampton Inn would not open until July or August 2009. (Manteca App. Ex. 53.) A month later, Moseley contacted Moll and indicated that Best Buy was no longer interested in opening its store at the Promenade. (Moll Dep. I at 238:16-22.) Moll responded by reminding her that their lease agreement required Best Buy to open for at least one day. (Id. at 238:23-239:1.) According to Moll, Moseley then expressed interest in opening at a lower rent. (Id. at 239:2-4.) Moll responded that he did not have Best Buy's lease in front of him, and did not know exactly what Best Buy was permitted or not permitted to do. (Id. at 239:4-6.)
Moseley sent Moll an email the following month requesting an update on "signed leases and co-tenancy for Manteca." (Manteca App. Ex. 27.) Moll informed her that "upon your scheduled opening next Spring we will have met your cotenancy requirems [sic]." (Id.) He elaborated in a later email to Moseley that, according to his property administration department, Manteca would "meet the opening co-tenancy requirement per your lease once JC Penney opens at the center," and that the square footage of J.C. Penney, Bass Pro, and the movie theater together "surpasses the 60% GLA requirement per your lease." (Manteca App. Ex. 28.)
In December 2008, Moseley negotiated for forty-five days of free rent in exchange for Best Buy agreeing to open three weeks ahead of schedule. (Moseley Decl. ¶ 47; Manteca App. Ex. 29.) During these negotiations, Moseley clarified that Best Buy would receive one and a half months of free rent, and then "go to co-tenancy rent under the existing lease until such time as the co-tenancy is met (which would be our old opening date based upon your information on co-tenancy, or earlier if you meet it)." (Manteca App. Ex. 29.) The parties executed the amendment to the lease on January 19, 2009. (Manteca App. Ex. 2.)
Moseley and Kris Thorn, another Best Buy employee, exchanged emails discussing co-tenancy at the Promenade in early January 2009. (Id. Ex. 58; id. Ex. 59.) Thorn began the email exchange by asking Moseley "How did you/ can we verify your cotenancy?" (Id. Ex. 59.) Moseley responded that she had spoken to other retailers and to defendant, and noted that both Bass Pro and the theater were open. (Id. Ex. 58; id. Ex. 59.) When asked specifically who she talked to that "makes up the sixty percent," Moseley was unable to give an immediate answer. (Id. Ex. 59.) Instead she noted the square footage of Bass Pro and the theater and stated that she would "dig out [her] notes from the file in the morning." (Id.; Moseley Dep. I at 427:1-430:9.) Neither Moseley nor Thorn recall the circumstances that led to the email exchange or any follow-up in which the question of co-tenancy was definitively answered. (Moseley Dep. I at 427:1-430:9; Manteca App. Ex. 32 ("Thorn Dep. I") at 133:5-137:20.)
Moll updated Moseley on the status of the Promenade in January 2009, informing her that (1) the health club would not begin construction until March, (2) the hotel and Red Robin restaurant would not open until the fall, (3) Dick's Sporting Goods, which had been in talks to lease the building next to Best Buy's, was no longer interested in the property and the building next to Best Buy was not built yet, and (4) Manteca had partnered with Craig Realty, an outlet developer who was now pursuing outlet-type tenants for the Promenade. (Moseley Dep. I at 422:10-424:1; Manteca App. Ex. 57.) At this point, Craig Realty had assumed responsibility for securing tenants for the larger retail spaces, referred to as "pads." (Best Buy App. Ex. 23 ("Kern Dep. II") at 40:20-25; Best Buy App. Ex. 18.) Manteca elected not to pursue the deal with Dick's in order to allow more square footage for the outlet center Manteca was now pursuing in partnership with Craig Realty. (Best Buy App. Ex. 17; Poag Dep. II at 326:2-15.)
This was the first time that Manteca indicated that a significant portion of the Promenade would not be open when the Best Buy store opened for business. (Moseley Decl. ¶¶ 42-49.) By this point, plans for Best Buy's opening had progressed too far for it to be feasible for Best Buy to change its opening date. (Moseley Dep. II at 422:10-24.)
When the Best Buy store at the Promenade opened at the end of February 2009, the cinema and Bass Pro were open. (Manteca App. Ex. 35.) By the time plaintiff was required to begin paying rent, J.C. Penney was also open. (Best Buy App. Ex. 46 No. 3.) Together, these three tenants represented approximately 290,000 square feet open and operating at the Promenade. (Manteca App. Ex. 35.) The total square footage constructed at that point was approximately 373,000, (id.), and the total square footage listed on the Site Plan attached to the lease was 743,908, (id. Ex. 1 Ex. B). The businesses open other than Best Buy's therefore represented approximately seventy-eight percent of the buildings built so far and approximately thirty-eight percent of the buildings shown on the Site Plan.
Shortly after Best Buy's store opened for business, Manteca emailed a co-tenancy calculation to Tricia Remus, an operating expense analyst at Best Buy responsible for processing real estate invoices. (Id. Ex. 35; Best Buy App. Ex. 79 ("Remus Dep. II") at 14:8-15:1, 17:6-18:15; Moseley Decl. ¶ 53.) Using the total constructed square footage as the gross leasable area of the shopping center, this calculation showed that seventy-eight percent of the gross leasable area was open and operating as of March 6, 2009. (Manteca App. Ex. 35.) Remus reviewed both the email and the parties' lease and entered information into Best Buy's database indicating that the Co-Tenancy Condition had been met. (Remus Dep. II at 14:8-15:1; 38:5-39:23.) This was Remus' first time doing any work related to a co-tenancy condition on a Best Buy lease. (Id. at 77:18-78:10.)
In May 2009, Remus emailed Moseley and the Best Buy construction project manager assigned to the Promenade store seeking approval to submit a request to her managers that Best Buy begin making rent payments to Manteca. (Manteca App. Ex. 61.) In that email, Remus stated that "[c]o-tenancy was met on 3/6/09 when J.C. Penney opened and 78% percent of the shopping center was open." (Id.) After both Moseley and the construction project manager indicated that they approved, Remus submitted her rent payment request to a manager who would ultimately be responsible for determining the rent due under the Co-Tenancy Condition. (Remus Dep. II at 63:5-14; Best Buy App. Ex. 80 ("Beine Dep. II") at 7:9-8:11.)
By July, Best Buy had not made any rent payments to Manteca and Manteca entered a Notice of Default. (Manteca App. Ex. 38.) Remus responded to Manteca on July 30, 2008, protesting that the amount of rent demanded was too high. (Best Buy App.
Ex. 56.) She explained that the Co-Tenancy Condition had not been met because the open businesses did not represent sixty percent of "the gross leasable area of the ...