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Valuerock TN Properties, LLC v. PK II Larwin Square S.C. LP

California Court of Appeals, Fourth District, Third Division

June 28, 2019

VALUEROCK TN PROPERTIES, LLC, et al., Plaintiffs and Respondents,
PK II LARWIN SQUARE S.C. LP, et al., Defendants and Appellants.

          Appeal from an order of the Superior Court of Orange County, No. 30-2016-00878748Craig L. Griffin, Judge.

          Blackmar, Principe & Schmelter, Gerry C. Schmelter, Peter J. Attarian, Jr., and Timothy D. Principe for Defendants and Appellants.

          O'Melveny & Myers, Marc F. Feinstein and Andrew J. Weisberg for Plaintiffs and Respondents.


          ARONSON, J.

         This is an appeal from an order denying a special motion to strike under the anti-SLAPP (strategic lawsuit against public participation) statute. (See Code Civ. Proc., § 425.16 (§ 425.16).) The case arises from a landlord's repeated refusal to consent to the proposed assignment of a ground lease for the anchor space in a shopping center. The plaintiffs are the entities that wish to assign the leasehold interest and the entities that agreed to take the assignment; the defendants are the landlord and its parent company.

         In their original and first amended complaints, the plaintiffs alleged the landlord unreasonably withheld consent to the plaintiffs' lease assignment request. While the litigation was pending, the plaintiffs made an amended lease assignment request, which the landlord similarly rejected. In their second amended complaint, the plaintiffs asserted the same five causes of action as before, but added allegations about the landlord's refusal to consent to their amended assignment request.

         The landlord filed an anti-SLAPP motion to strike the second amended complaint, contending the plaintiffs' amended assignment request and the landlord's response to that request were settlement communications and statements made in litigation, and therefore constituted protected activity. The trial court denied the motion, finding the landlord's rejection of the amended assignment request was not a settlement communication or litigation-related conduct, but rather an ordinary business decision. We agree and affirm the order denying the anti-SLAPP motion.



         The following facts are taken from the pleadings, the declarations, and other evidence submitted on the special motion to strike.

         A. The Lease

         Defendant PK II Larwin Square S.C. LP (Larwin) is the owner and landlord of Larwin Square, a community shopping center located in Tustin. Defendant Kimco Realty Corporation (Kimco) is a real estate investment trust that holds an indirect minority interest in Larwin.

         From 1978 until 2015, the anchor tenant for the Larwin Square shopping center was a Vons supermarket. Vons entered into a 30-year ground lease for the space in 1977 and later extended the lease term to 2021. The lease prohibited Vons from transferring or assigning the lease without the landlord's prior written consent, but further provided the landlord's “consent shall not be unreasonably withheld.”

         B. The Assignment of the Lease to Haggen

         In 2015, as part of the planned merger between Albertsons and Vons' parent company, and per the divestiture terms imposed by the Federal Trade Commission, many Vons stores - including the Larwin Square store - were sold to Haggen, a small grocery chain in the Northwest.

         In anticipation of the merger, Larwin approved the assignment of Vons's Larwin Square lease to Haggen Opco South. In May 2015, Haggen notified Larwin that Vons was instead assigning the lease to a different Haggen entity, plaintiff Haggen Property Holdings III, LLC (HPH III). Larwin did not object to the change. A few months later, without Larwin's knowledge or consent, HPH III “secretly” assigned the lease to plaintiff Haggen Property South, LLC (Propco).

         Haggen operated a supermarket in Larwin Square for just a few months, from June to October 2015. The space has been vacant ever since, but Propco has continued to pay rent and other expenses for the premises.

         C. The First Request for Larwin's Consent to an Assignment to ValueRock

         In February 2016, Propco sold its interest in the ground lease to plaintiff ValueRock Investment Partners, LLC (ValueRock IP), a commercial real estate investment firm. ValueRock IP in turn assigned its rights in the lease to its affiliate, plaintiff ValueRock TN Properties, LLC (ValueRock TN), a special purpose entity created to acquire the lease.

         In May 2016, Propco asked for Larwin's approval of the assignment to ValueRock. During a preliminary telephone conversation between representatives for Larwin and Propco, Larwin expressed concern that according to its records, HPH III was actually the tenant, Larwin had no record of any transfer to Propco, and the lease required the tenant to request landlord consent before making any assignment. Larwin then sent Propco the May 2015 lease assignment from Vons to HPH III, noted that was “inconsistent” with Propco's claim to be assignee of the lease, and explained the inconsistency was “causing our legal team [to] question if we are dealing with the Tenant here.” Despite those concerns, Larwin requested additional information to evaluate the request for consent, such as ValueRock TN's financials, experience, and plans for the premises.

         Propco complied in part. It provided general information about ValueRock and its leadership team, but it refused to provide detailed financial information on ValueRock TN because Kimco (Larwin's parent), like ValueRock TN, was also a real estate investor and developer. As for ValueRock's plans for the premises, Propco replied that while nothing in the ground lease required the space to be used as a ...

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