Hamilton Mill Theatre Development, LLC v. Regal Cinemas, Inc.

Citation: Not availableDocket: A22A0715

Court: Court of Appeals of Georgia; August 26, 2022; Georgia; State Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Motions for reconsideration must be physically received in the clerk’s office within ten days of the decision date to be considered timely. In the case of Hamilton Mill Theatre Development, LLC v. Regal Cinemas, Inc., a lease dispute arose between the landlord, Hamilton Mill Theatre Development, LLC, and its tenant, Regal Cinemas, Inc., due to disruptions from the COVID-19 pandemic. The landlord claimed Regal underpaid rent both before and during the pandemic, leading to cross-motions for summary judgment. The trial court ruled in favor of Regal, concluding no rent underpayment occurred. 

Summary judgment is appropriate when there are no genuine issues of material fact, allowing the moving party to obtain judgment as a matter of law. A defendant can meet this burden by negating essential elements of the plaintiff's claims or demonstrating a lack of evidence to support those claims. The burden shifts to the nonmoving party to present specific evidence of a triable issue if the defendant meets their burden. 

On appeal, summary judgments are not granted a presumption of correctness, and the appellate court conducts a de novo review, viewing evidence favorably towards the nonmovant. In this case, the lease agreement from 2007 stipulated that Regal would pay rent based on 15% of its Gross Box Office Receipts and Concession Receipts, with Regal required to furnish a monthly statement detailing these receipts. "Gross Box Office Receipts" are defined as the total gross receipts from ticket sales for theatrical viewings.

Concession Receipts are defined as the total income from various food and merchandise sales within the Theatre Building or the Demised Premises, including items like candies, drinks, toys, and video games. The lease restricts Regal's operations to a fourteen-screen motion picture theatre focused on presenting first-run movies, explicitly prohibiting the operation of a discount theatre. Regal commits to using the Demised Premises solely for this purpose throughout the Lease Term, ensuring high-quality operations to maximize Gross Box Office and Concession Receipts.

Regal is required to operate continuously for the Permitted Use but may cease operations or alter the use after ten full years if there are material adverse changes in financial performance, supported by evidence. A written notice must be given to the Landlord to "go dark" or change the Permitted Use, which can only occur after establishing the Market Base Rent Rate and notifying the Landlord about the commencement of Fixed Base Rent payments.

If Regal seeks to establish the Market Base Rent Rate to "go dark," the Landlord can terminate the lease with a 30-day notice. If the Landlord does not act within this timeframe, Regal may proceed with its plans. The term "go dark" is not defined, but the "Market Base Rent Rate" is described as the Landlord's reasonable calculation of the base rent for comparable first-class retail space within a ten-mile radius, excluding the Mall of Georgia.

Landlord must provide Regal with written notice of the Market Base Rent Rate within twenty days after Regal indicates a desire to "go dark." The established Market Base Rent is then multiplied by the property's square footage to determine the Fixed Base Rent. The lease includes a force majeure clause that excuses performance failures due to uncontrollable events, such as strikes, natural disasters, and governmental actions, provided they are not related to the timely payment of lease amounts. Disputes arose during the COVID-19 pandemic when Regal notified all landlords in March 2020 of its temporary cessation of operations and requested discussions to address challenges. In May 2020, after Georgia lifted restrictions, Landlord claimed Regal breached the lease by not resuming operations, interpreting this as an election to "go dark," and sought Fixed Base Rent starting May 1, 2020. Regal did not reopen due to safety concerns and lack of new films until August 2020, but closed again in October 2020. Regal continued to pay based on Gross Box Office and Concession Receipts rather than Fixed Base Rent, leading Landlord to sue. Initially seeking Fixed Base Rent, Landlord later amended the complaint to allege Regal had underpaid Concession Receipts prior to the pandemic. The trial court granted Regal's summary judgment motion and denied Landlord's, prompting Landlord to appeal. Landlord argues the trial court erred by concluding Regal's failure to operate was not a material breach triggering Fixed Base Rent, asserting the force majeure clause does not apply. Georgia law dictates that contract interpretation begins with determining if the language is clear and unambiguous, allowing enforcement according to its terms if so.

In the event of contractual ambiguity, courts must apply contract construction rules to clarify the terms. If ambiguity persists, a jury must interpret the language and intent of the parties involved. Generally, lease provisions are interpreted against the lessor. The current dispute involves whether the Landlord can collect Fixed Base Rent instead of rent based on a percentage of Gross Box Office Receipts and Concession Receipts, particularly during periods when the theatre was closed and not showing films. The lease mandates that Regal operate a fourteen-screen motion picture theatre, showcasing first-run films, which are newly released and not available elsewhere. The Landlord acknowledges that Regal only generated Concession Receipts averaging $400 per month when no films were shown, compared to previous rent payments averaging $50,000 per month. This lack of movie showings typically constitutes a lease default; however, a force majeure clause in the lease excuses Regal from performance obligations due to circumstances like the unavailability of new movies from studios. Both parties agree that Regal could not fulfill its lease obligations during periods when no new films were released, and even after reopening, Regal's operations were contingent on the release of new films. The Landlord contends Regal's inability to operate equates to a voluntary decision to "go dark," thereby triggering Fixed Base Rent, though the lease does not define "go dark." Ultimately, the conditions for imposing Fixed Base Rent have not been met, as the lease outlines specific criteria for establishing Market Based Rent first.

Regal is permitted to cease operations at the Demised Premises and "go dark" if it demonstrates material adverse changes in the financial performance of its first-run movie theatre. Regal must provide satisfactory evidence to the Landlord and give written notice to exercise this right. However, the Landlord has not recognized Regal's temporary closure during the government-mandated shutdown as a "go dark" election, indicating that such closures due to force majeure are not equivalent to a voluntary decision to cease operations. Regal did not formally notify the Landlord of a desire to "go dark," and evidence shows that Regal intended to continue operations whenever possible, with the failure to show movies attributed to the force majeure clause rather than a written election to "go dark." The lease places the financial burden of the pandemic on the Landlord, who will receive reduced rental income, although prior provisions for minimum rent payments that could have mitigated this burden had lapsed before the pandemic. Consequently, the Landlord could not unilaterally impose Fixed Base Rent on Regal. The trial court correctly granted summary judgment to Regal.

Additionally, the Landlord argued that the trial court erred in granting Regal summary judgment regarding underpayment of rent, claiming that certain payments from Regal's beverage supplier under a marketing agreement should be counted as Concession Receipts for rent calculation. The lease stipulates that if Regal's rent falls below $62,000 per month, Regal must pay the difference starting from the third full month of the lease term. Regal's marketing agreement with its beverage supplier established exclusive rights for the supplier in Regal's theatres and included terms for advertising and promotional rights, but the trial court disagreed with the Landlord's position on including the marketing payments in the rent calculations.

In exchange for exclusivity and marketing opportunities from Regal, the supplier agreed to pay "Media Support Funding" based on Regal's fountain syrup purchases for its theatres, defined as venues primarily showing feature films owned or controlled by Regal in the U.S. and D.C. The landlord claims these payments qualify as "Concession Receipts" under the lease, seeking 15% of the funding related to syrup purchased by a specific theatre. However, the payments do not align with the lease's definition of Concession Receipts, which includes proceeds from sales of various food and merchandise items. The Media Support Funding is payment for exclusivity in beverage provision and marketing, not for the sale of items listed as Concession Receipts. Section 4.3 of the lease, which requires Regal to maintain records of all receipts, does not alter this interpretation, as it does not broaden the definition of Concession Receipts to include the funding from the beverage supplier. The contract must be interpreted as written, with the language favoring Regal. The trial court correctly granted summary judgment to Regal, affirming that the landlord's claim for underpayment based on the Marketing Agreement was unfounded.