966 F.2d 273
Walgreen Co. has operated a pharmacy in the Southgate Mall in Milwaukee since the mall opened in 1951.1 Its current lease, signed in 1971 and carrying a thirty-year six-month term, contains an exclusivity clause in which the landlord Sara Creek Property Co. promises not to lease space in the mall to anyone else who wants to operate a pharmacy or a store containing a pharmacy.2
In 1990 Sara Creek informed Walgreen that it intended to buy out its largest tenant, the anchor tenant that had gone broke.3 It planned to install in its place a discount store operated by Phar-Mor Corporation.4 Phar-Mor's store would occupy 100,000 square feet, of which 12,000 would be occupied by a pharmacy the same size as Walgreen's.5 The entrances to the two stores would be within a couple of hundred feet of each other.6
Walgreen filed a diversity suit for breach of contract against Sara Creek and Phar-Mor in the Eastern District of Wisconsin.7 It asked for an injunction against Sara Creek's letting the anchor premises to Phar-Mor.8 After an evidentiary hearing the district judge found a breach of Walgreen's lease.9 The judge entered a permanent injunction against Sara Creek's letting the anchor tenant premises to Phar-Mor until the expiration of Walgreen's lease.10
Sara Creek presented an expert witness who testified that Walgreen's damages could be readily estimated.11 Walgreen countered with evidence from its employees that its damages would be very difficult to compute.12 The damages included intangibles such as loss of goodwill.13 The district court granted the injunction over the defendants' objection that Walgreen had failed to show its remedy at law was inadequate.14
Sara Creek appealed the grant of the permanent injunction to the Seventh Circuit.15
Whether the district court properly granted a permanent injunction against Sara Creek leasing the anchor tenant premises to Phar-Mor rather than awarding damages for breach of the exclusivity clause?16
The choice between granting a permanent injunction or awarding damages for breach of contract requires balancing the costs and benefits of each remedy. The court grants the injunction only when the damages remedy is inadequate because calculating damages would be costly and inaccurate.17
Yes. Walgreen has operated a pharmacy in the Southgate Mall in Milwaukee since its opening in 1951.18 Its current lease, signed in 1971 and carrying a thirty-year six-month term, contains an exclusivity clause in which the landlord Sara Creek promises not to lease space in the mall to anyone else who wants to operate a pharmacy or a store containing a pharmacy.19
In 1990 Sara Creek informed Walgreen that it intended to buy out its largest tenant, the anchor tenant that had gone broke, and install in its place a discount store operated by Phar-Mor Corporation.20 Phar-Mor's store would occupy one hundred thousand square feet, of which twelve thousand would be occupied by a pharmacy the same size as Walgreen's, with the entrances to the two stores within a couple of hundred feet of each other.21
Walgreen filed a diversity suit for breach of contract against Sara Creek and Phar-Mor in the Eastern District of Wisconsin and asked for an injunction against Sara Creek's letting the anchor premises to Phar-Mor.22 After an evidentiary hearing the district judge found a breach of Walgreen's lease and entered a permanent injunction against Sara Creek's letting the anchor tenant premises to Phar-Mor until the expiration of Walgreen's lease.
Sara Creek presented an expert witness who testified that Walgreen's damages could be readily estimated. Walgreen countered with evidence from its employees that its damages would be very difficult to compute because they included intangibles such as loss of goodwill.23 The district court granted the injunction over the defendants' objection that Walgreen had failed to show its remedy at law was inadequate.
The determination of Walgreen's damages would have been costly in forensic resources and inescapably inaccurate.24 The lease had ten years to run, so Walgreen would have had to project its sales revenues and costs over the next ten years, and then project the impact on those figures of Phar-Mor's competition, and then discount that impact to present value.25 All but the last step would have been fraught with uncertainty.26
On the other side of the balance, the injunction is a simple negative injunction that Sara Creek is not to lease space in the Southgate Mall to Phar-Mor during the term of Walgreen's lease, and the costs of judicial supervision and enforcement should be negligible.27 There is no contention that the injunction will harm an unrepresented third party.28
The district court did not exceed the bounds of reasonable judgment in concluding that the costs of the damages remedy would exceed the costs of an injunction.29