Failure to File Post-Trial Motions Means $18.5 Mil. Verdict Stands

The Pennsylvania Superior Court has upheld an $18.5 million verdict against grocery chains Safeway and Genuardi's because the chains did not file post-trial motions before appealing to the Superior Court.

The two chains were sued when Safeway, as the successor to Genuardi's, backed out of a lease deal with developer Newman Development Group of Pottstown, PA. The verdict was said to be the largest out of Chester County, PA, in at least 10 years. Although the grocers filed post-trial motions of a Chester County judge's initial findings in a bench-trial in Newman Development Group v. Genuardi's Family Market Inc., No. 744 EDA 2010, March 18, 2011, they did not do so after the judge made additional findings on remand from the Superior Court, and instead went right back to that court for a second appeal.

Issues Waived

The Superior Court has now found that their issues on the latest appeal were waived, having not been raised before the trial court on post-trial motions. In an opinion written by Superior Court President Judge Correale F. Stevens, a three-judge panel said post-trial motions are used to give a trial judge a chance to correct any alleged errors in his ruling and possibly avoid the need for appellate review.

Newman had been up on appeal to the Superior Court once before and was remanded to the trial court to recalculate damages. The initial damage award was just under $317,000 and it was recalculated on remand to nearly $18.5 million, which included attorney fees costs and interest. It was that recalculation that Safeway then appealed straight to the Superior Court.

Safeway argued it was not allowed nor required to appeal a proceeding on remand. The company cited Rule of Civil Procedure 227.1(c), which states that a motion for post-trial relief may be filed after a jury or bench trial and may not be filed over certain orders such as motions for summary judgment or other orders on motions “which do not constitute a trial.”

Safeway's Argument

While Safeway admitted the entire case included a trial at one point, it argued the proceedings on remand from the Superior Court did not constitute a trial under Rule 227.1. The company argued that no new evidence was introduced on remand aside from a calculation of attorneys' cost and fees and interest. Safeway argued that the trial judge's decision was, therefore, based on legal arguments and the factual record developed prior to the first appeal to the Superior Court.

“Although there are instances where post-trial motions are prohibited, we have found no precedent to suggest that where a matter has been tried before the lower court but remanded on the issue of damages, post-trial motions are prohibited to the resulting damage award,” Stevens said.

The Panel

The panel instead likened Newman to the facts of the 2004 case Cerniga v. Mon Valley Speed Boat Club, 862 A.2d 1272 (2004), where the Superior Court vacated a trial court's order and remanded the case, at which point the trial court made additional findings of fact and conclusions of law and issued another order, according to the opinion. The boat club in that case then appealed directly to the Superior Court without filing post-trial motions. The Superior Court granted a motion to quash the boat club's appeal, ruling the boat club frustrated the purpose of Rule 227.1 and deprived the trial court of an opportunity to correct any errors in its latest ruling, Stevens said.

Similarly, Chester County Common Pleas Judge William P. Mahon was not given an opportunity to correct alleged errors in his latest damage award, Stevens said. Stevens pointed out that Safeway filed post-trial motions when Mahon entered his initial damages assessment in Newman's favor, but failed to do so when Mahon increased that assessment based on instructions from the Superior Court.

“Appellants have failed to convince us that there is a single viable procedural reason for excusing the filing of post-trial motions raising their challenges,” Stevens said. Nancy Winkelman of Schnader Harrison Segal & Lewis, and Neil Schur of Stevens & Lee represented Safeway. Schur referred requests for comment to Winkelman, who declined to comment. Thomas A. “Buck” Riley Jr. of Riley Riper Hollin & Colagreco in Exton, PA, represented Newman. Riley said the verdict, with interest and attorneys' fees continuing to add up, is now approaching $20 million.

Shopping Center Showdown

Newman identified a site for a shopping center in North Coventry Township, PA, in 1996. By 1998, Newman had not gained approval to construct the shopping center, but the development company signed a lease with Genuardi's to have them co-anchor the shopping center, along with a Target department store or a Lowe's Home Center. The lease allowed Genuardi's to terminate the agreement if Newman failed to begin construction by May 1, 2001, or if it failed to recruit one of the agreed-upon co-anchors successfully.

The lease also included a remedies provision that measured Newman's expectation interest as the total rent owed over the term of the lease, the loss caused by the lower rent paid by the replacement tenants and the costs of securing replacement tenants, according to the Superior Court's initial opinion in the case. Genuardi's then suggested the parties draft a long-term lease and place it in escrow. A lease in escrow becomes a contractual agreement after certain conditions are met. In this case, Genuardi's would be able to terminate the lease if Newman failed to begin construction on a co-anchor store.

Newman and Genuardi's signed the lease in escrow in April 2000, after they defined the terms through amending letters that gave Newman more time to build the shopping center, according to Newman's brief on appeal.

However, in 2001, Safeway purchased Genuardi's and terminated the lease a year later on the grounds that Newman had not begun construction of the shopping center or agreed to terms with a co-anchor within the time allotted by the lease. Newman wrote in its appellate brief that Safeway was unaware of the lease in escrow, but that, even after being informed of it, Safeway sent Newman a letter stating that it had no intention of honoring the contract.

Newman eventually found replacement tenants for Genuardi's in PetSmart and Michael's Arts and Crafts, and also agreed to a lease with Lowe's in March 2004. Newman, though, sold the shopping center in June 2005 for a lower-than-expected price as a result of the contractual breach, it alleged.

Gina Passarella is a reporter for The Legal Intelligencer, an ALM sister publication of this newsletter in which this article also appeared.

The Pennsylvania Superior Court has upheld an $18.5 million verdict against grocery chains Safeway and Genuardi's because the chains did not file post-trial motions before appealing to the Superior Court.

The two chains were sued when Safeway, as the successor to Genuardi's, backed out of a lease deal with developer Newman Development Group of Pottstown, PA. The verdict was said to be the largest out of Chester County, PA, in at least 10 years. Although the grocers filed post-trial motions of a Chester County judge's initial findings in a bench-trial in Newman Development Group v. Genuardi's Family Market Inc. , No. 744 EDA 2010, March 18, 2011, they did not do so after the judge made additional findings on remand from the Superior Court, and instead went right back to that court for a second appeal.

Issues Waived

The Superior Court has now found that their issues on the latest appeal were waived, having not been raised before the trial court on post-trial motions. In an opinion written by Superior Court President Judge Correale F. Stevens, a three-judge panel said post-trial motions are used to give a trial judge a chance to correct any alleged errors in his ruling and possibly avoid the need for appellate review.

Newman had been up on appeal to the Superior Court once before and was remanded to the trial court to recalculate damages. The initial damage award was just under $317,000 and it was recalculated on remand to nearly $18.5 million, which included attorney fees costs and interest. It was that recalculation that Safeway then appealed straight to the Superior Court.

Safeway argued it was not allowed nor required to appeal a proceeding on remand. The company cited Rule of Civil Procedure 227.1(c), which states that a motion for post-trial relief may be filed after a jury or bench trial and may not be filed over certain orders such as motions for summary judgment or other orders on motions “which do not constitute a trial.”

Safeway's Argument

While Safeway admitted the entire case included a trial at one point, it argued the proceedings on remand from the Superior Court did not constitute a trial under Rule 227.1. The company argued that no new evidence was introduced on remand aside from a calculation of attorneys' cost and fees and interest. Safeway argued that the trial judge's decision was, therefore, based on legal arguments and the factual record developed prior to the first appeal to the Superior Court.

“Although there are instances where post-trial motions are prohibited, we have found no precedent to suggest that where a matter has been tried before the lower court but remanded on the issue of damages, post-trial motions are prohibited to the resulting damage award,” Stevens said.

The Panel

The panel instead likened Newman to the facts of the 2004 case Cerniga v. Mon Valley Speed Boat Club , 862 A.2d 1272 (2004), where the Superior Court vacated a trial court's order and remanded the case, at which point the trial court made additional findings of fact and conclusions of law and issued another order, according to the opinion. The boat club in that case then appealed directly to the Superior Court without filing post-trial motions. The Superior Court granted a motion to quash the boat club's appeal, ruling the boat club frustrated the purpose of Rule 227.1 and deprived the trial court of an opportunity to correct any errors in its latest ruling, Stevens said.

Similarly, Chester County Common Pleas Judge William P. Mahon was not given an opportunity to correct alleged errors in his latest damage award, Stevens said. Stevens pointed out that Safeway filed post-trial motions when Mahon entered his initial damages assessment in Newman's favor, but failed to do so when Mahon increased that assessment based on instructions from the Superior Court.

“Appellants have failed to convince us that there is a single viable procedural reason for excusing the filing of post-trial motions raising their challenges,” Stevens said. Nancy Winkelman of Schnader Harrison Segal & Lewis, and Neil Schur of Stevens & Lee represented Safeway. Schur referred requests for comment to Winkelman, who declined to comment. Thomas A. “Buck” Riley Jr. of Riley Riper Hollin & Colagreco in Exton, PA, represented Newman. Riley said the verdict, with interest and attorneys' fees continuing to add up, is now approaching $20 million.

Shopping Center Showdown

Newman identified a site for a shopping center in North Coventry Township, PA, in 1996. By 1998, Newman had not gained approval to construct the shopping center, but the development company signed a lease with Genuardi's to have them co-anchor the shopping center, along with a Target department store or a Lowe's Home Center. The lease allowed Genuardi's to terminate the agreement if Newman failed to begin construction by May 1, 2001, or if it failed to recruit one of the agreed-upon co-anchors successfully.

The lease also included a remedies provision that measured Newman's expectation interest as the total rent owed over the term of the lease, the loss caused by the lower rent paid by the replacement tenants and the costs of securing replacement tenants, according to the Superior Court's initial opinion in the case. Genuardi's then suggested the parties draft a long-term lease and place it in escrow. A lease in escrow becomes a contractual agreement after certain conditions are met. In this case, Genuardi's would be able to terminate the lease if Newman failed to begin construction on a co-anchor store.

Newman and Genuardi's signed the lease in escrow in April 2000, after they defined the terms through amending letters that gave Newman more time to build the shopping center, according to Newman's brief on appeal.

However, in 2001, Safeway purchased Genuardi's and terminated the lease a year later on the grounds that Newman had not begun construction of the shopping center or agreed to terms with a co-anchor within the time allotted by the lease. Newman wrote in its appellate brief that Safeway was unaware of the lease in escrow, but that, even after being informed of it, Safeway sent Newman a letter stating that it had no intention of honoring the contract.

Newman eventually found replacement tenants for Genuardi's in PetSmart and Michael's Arts and Crafts, and also agreed to a lease with Lowe's in March 2004. Newman, though, sold the shopping center in June 2005 for a lower-than-expected price as a result of the contractual breach, it alleged.

Gina Passarella is a reporter for The Legal Intelligencer, an ALM sister publication of this newsletter in which this article also appeared.