Katz Deli of Aventura, Inc. v. Waterways Plaza, LLC
2013 Fla. App. LEXIS 18929, 2013 WL 6212040, 183 So. 3d 374 (2013)
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Rule of Law:
When a landlord's prolonged and continuing breach of contract gradually destroys a tenant's business, prospective lost profits are the proper measure of damages if an award of market value would be insufficient to make the injured party whole.
Facts:
- The Haibi family operated a successful business, Katz Deli, and in October 2001, signed a new lease for a much larger space within the Waterways Plaza, with a term running through April 2007 and three five-year renewal options.
- The lease, which was for a below-market rate, required the landlord to make all necessary repairs to the structure and roof.
- In June 2002, Waterways Plaza, LLC ("Waterways") purchased the property, becoming Katz Deli's landlord, despite knowing from a due diligence report that the deli's roof was 'beyond repair' and needed replacement.
- Waterways failed to replace the roof, and beginning in 2002, the roof began to leak into Katz Deli's premises.
- Despite minor repair attempts by Waterways, the leaks progressively worsened, causing open water flows, mold, and a musty smell throughout the establishment.
- As a direct result of the deteriorating conditions, Katz Deli suffered a substantial decrease in business and damage to its reputation.
- By May 2003, the location was deemed unfit for use as a restaurant, and Katz Deli vacated the premises at the end of July 2003.
- The business was ultimately destroyed, as Katz Deli was unable to reopen at a new location due to depleted capital and a damaged reputation.
Procedural Posture:
- Katz Aventura filed suit against Waterways Plaza, LLC in a Florida trial court on June 5, 2003, for breach of contract and constructive eviction.
- The case was decided in a bench trial, where the trial court found in favor of Katz, ruling that Waterways had breached the lease and constructively evicted Katz.
- In a separate hearing on damages, the trial court awarded Katz prospective lost profits of approximately $800,000 for the remainder of its initial lease term.
- The trial court denied Katz's request for lost profits covering the potential lease renewal periods, finding them to be too speculative.
- Katz, as appellant, appealed the damages award to the Florida District Court of Appeal, Third District, seeking greater damages.
- Waterways, as appellee, filed a cross-appeal, arguing that lost profits was an improper measure of damages and that no damages should be awarded.
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Issue:
Are prospective lost profits the proper measure of damages for a constructive eviction where the landlord's continuing breach of contract gradually destroys the tenant's business, rendering market value an inadequate remedy?
Opinions:
Majority - Rothenberg, J.
Yes. Prospective lost profits are the proper measure of damages under these circumstances. The primary goal of contract damages is to place the injured party in the position it would have occupied had the breach not occurred. While the general rule for a completely destroyed business is to award its market value at the date of loss, applying that rule here would be inequitable. Waterways' long-term, continuing breach of contract slowly depreciated the market value of Katz Deli to nothing. Awarding market value at a 'date of loss' that is difficult to pinpoint and reflects a value already diminished by the defendant's own wrongdoing would not make Katz Deli whole. Therefore, under these unique facts, an award of lost profits proven with reasonable certainty is the only remedy that sufficiently restores the plaintiff.
Analysis:
This decision clarifies the flexibility of damages calculations in breach of contract and constructive eviction cases. It establishes an equitable exception to the general rule that market value is the proper measure of damages for a completely destroyed business. The ruling prevents a defendant from benefiting from its own prolonged wrongdoing by slowly strangling a business and then claiming damages should be limited to the diminished value it caused. This precedent is significant for future cases involving long-term breaches, affirming that the overriding goal of making the plaintiff whole can justify departing from standard damages formulas when they would lead to an unjust result.
