Because of Winn-Dixie: The Common Law of Exclusive Use Covenants

BY TANYA D. MARSH, 69 U. Miami L. Rev. 935 (2015).

Introduction: As a condition of entering into a lease for space in a shopping center, tenants with significant bargaining power often require landlords to promise that no other occupant of the shopping center will sell certain goods or services. This promise, contained in the lease, is known as an “exclusive use covenant” because it establishes the beneficiary’s right to be the exclusive provider of particular goods or services in a defined area. Grocery store tenants, like Winn-Dixie, typically require the landlord to promise that no other tenant will sell more than a de minimus amount of food items intended for off-premises consumption. Over the past decade, so-called “dollar stores” retailers, like Dollar Tree, Dollar General, and Family Dollar, selling discount, convenience products, including food items, have aggressively expanded. Grocery store chains, fearing increasing competition from the dollar stores, have relied upon exclusive use covenants to protect themselves from the dollar stores.

In particular, Winn-Dixie has been involved in litigation against several dollar store chains for more than a decade. Winn-Dixie filed a string of lawsuits, each addressing a violation of an exclusive use covenant in a single shopping center, until 2011, when it filed lawsuits in federal court against the owners of three national dollar store chains, alleging breaches of its exclusive use covenant at 136 shopping centers in Alabama, Florida, Georgia, Louisiana, and Mississippi. The three lawsuits were consolidated into a single case, Winn-Dixie Stores, Inc. v. Dolgencorp, L.L.C. The district court reached a split decision, and the parties cross-appealed.

On March 5, 2014, the Eleventh Circuit Court of Appeals issued its decision in Dolgencorp. The court considered the interpretation of key terms in the exclusive use covenants, the enforceability of the covenants directly against the dollar store defendants, and the remedies available to Winn-Dixie. The opinion concluded years of litigation between the parties, but it also left important questions regarding exclusive use covenants unsettled. This article outlines the history of the dispute between Winn-Dixie and the dollar stores, the doctrinal issues addressed by the Eleventh Circuit, the broader implications of the decision, and the lingering uncertainties that face retail landlords and tenants with respect to exclusive use covenants, particularly in Florida.

Part II begins by introducing the law and usage of exclusive use covenants in the retail real estate industry. It examines how exclusive use covenants are used by retail tenants and landlords and how they are interpreted and enforced at common law. Part III unpacks the Eleventh Circuit’s decision in Dolgencorp and related cases previously decided by Florida state and federal courts. Finally, Part IV argues that Dolgencorp reveals fundamental confusion regarding the interpretation, enforceability, and remediation of exclusive use covenants at common law. . . . Full Article.

Recommended Citation: Tanya D. Marsh, Because of Winn-Dixie: The Common Law of Exclusive Use Covenants, 69 U. Miami L. Rev. 935 (2015).

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