Just What Is It You Want To Restrict? A Business? An Activity?

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Last week Ruminations wrote about the legal niceties involved when a lease says: “Landlord will not lease for the sale of widgets” as contrasted with saying “Widgets can’t be sold at the property.” Today, again writing about use restrictions, we’ll be less “legal,” but not entirely so.

Basically, there is a difference between banning a particular kind of business and banning a particular activity. In simple terms, by way of example, there is a difference between saying that no one can operate an office supply store and saying that no one can sell office supplies (or staplers). We’ll illustrate the issues involved by reference to a May 22, 2015 Florida District Court of Appeal’s decision. It isn’t the best example because of the political and social baggage the case carries, but that may also be why it is a good example. The political and social aspects are not up for discussion in this forum. That’s enough mystery: the case is Planned Parenthood of Greater Florida v. MMB Properties and the decision can be seen by clicking HERE.

Planned Parenthood owned part of a medical park near a hospital. There was testimony that the following recorded use restriction was created to protect the hospital from certain kinds of development. Accept that as “truth.” Here is the text of the use restriction, spelling flaws and all:

The property described herein shall not be used for the following activities without the prior written permission [of the developer in its sole and unfettered discretion], unless ancillary and incidental to a physician’s practice of medicine:

  1.  An Outpatient Surgical Center.

2.   An Emergency Medical Center.

3.   A Diagnostic Imaging Center which includes the following radiographic testing: Fluroscopy [sic], Plane Film Radiography, Computerized Tomography (CT), Ultrasound, Radiation Therapy, Mamography [sic] and Breast Diagnostics, Nuclear Medicine Testing and Magnetic Resonance Imaging (MRI).

We won’t have to say this later, because the court beat us to it when it said: “We conclude that, while the restriction is rather poorly drafted, it is not unclear.” That lack of clarity, however, cost the warring parties a great deal of money and uncertainty as to the final outcome of their dispute. In fact, the court decision we’re quoting from was only a step in the litigation process because it resulted in an injunction prior to an actual trial of the dispute.

What was the dispute? Well, another property owner at the medical park sought to enjoin Planned Parenthood from performing abortions at Planned Parenthood’s facility. Though not said in the court’s opinion, probably because it would have been inconvenient to do so, performing abortions was the only surgical procedure performed there and was only one of many medical and non-medical services available at the facility. To say it in other terms, the clear implication of the court’s decision is that performing abortions was not the primary use at that site. Now, to get an injunction the complaining property owner had to convince the court that it had a good likelihood of success (on the merits) after a full trial. It was successful.

At this point, it is useful to draw a quotation from the appellate court’s decision because it will set up our case for our often-written “Say what you mean and mean what you say” drafting advice. Here goes:

Interestingly, the trial court did not find that performing abortions would transform Planned Parenthood’s facility into an outpatient surgical center. Instead, it found that [the complaining property owner] had a substantial likelihood of success in proving that abortions are outpatient surgical procedures. This distinction highlights a rather poorly worded restrictive covenant that prohibits the property from being “used” for the “following activities” but then lists three “centers” as prohibited activities. In short, it uses names of locations where activities occur rather than naming the activities themselves. It does not define the terms “outpatient surgical center.”

The complaining property owner pointed to the Merriam-Webster Online Dictionary’s definition of “center” as “a facility providing a place for a particular activity or service.” If its choice of definition prevailed, an outpatient surgical center would be a place where outpatient surgical procedures are performed. So, performing abortions in Planned Parenthood’s building would make that building into an “outpatient surgical center.”

Did that make it an “open and shut case”? Well, “No.” Planned Parenthood offered a significantly different understanding of what an outpatient surgical center was intended to be in the restrictive covenant.

Planned Parenthood pointed to Florida’s statutory definition of an “ambulatory surgical center” or a “mobile surgical facility.” Take a look. We’ve underlined the language critical to Planned Parenthood’s defense:

“Ambulatory surgical center” or “mobile surgical facility” means a facility the primary purpose of which is to provide elective surgical care, in which the patient is admitted to and discharged from such facility within the same working day and is not permitted to stay overnight, and which is not part of a hospital. However, a facility existing for the primary purpose of performing terminations of pregnancy, an office maintained by a physician for the practice of medicine, or an office maintained for the practice of dentistry shall not be construed to be an ambulatory surgical center, … .

Essentially, Planned Parenthood argued “that the trial court erred by enjoining it from performing abortions because the restriction at issue [did] not prohibit the activities of performing abortions; rather, it prevent[ed] the operation of outpatient surgical centers.” In making that argument, Planned Parenthood assumed that the terms “ambulatory” and “outpatient” were synonymous.

Pay attention to the underlined “carve-out” for facilities used for the primary purpose of performing abortions. That’s because Planned Parenthood apparently used its property for a lot more than performing abortions.

We need to write this someplace in today’s blog posting, so it might as well be here. Had the restriction banned abortions at the property, the money spent by the litigating parties and by the courts could have been used to feed the world’s hungry. If you want to ban “surgery” at a property, say so. It’s not rocket science.

“Florida adheres to the general rule that a reasonable, unambiguous restriction will be enforced according to the intent of the parties as expressed by the clear and ordinary meaning of its terms.” According to Florida case law, “if it is necessary to construe a somewhat ambiguous term, the intent of the parties as to the evil sought to be avoided expressed by the covenants as a whole will be determinative.” And, it’s not just Florida courts that take this approach; they all do. More particularly, as Ruminations has often written, courts do not “look to an outside source to determine the meaning of [a] word [such as] ‘building’ as used in [an agreement or deed] restriction, rather than first considering the language of the [agreement or] deed restriction as a whole.”

With that in mind, this particular appellate court focused on item “3” of the property’s deed restriction, the one banning diagnostic imaging centers. Unlike items “1” and “2,” it listed a variety of individual imaging “activities” as part of the definition of the kind of “center” that is used for “diagnostic imaging.” To help readers understand this concept (so that they might understand this appellate court’s reasoning), we’ll repeat item “3” of the property’s restrictive covenant:

3.   A Diagnostic Imaging Center which includes the following radiographic testing: Fluroscopy [sic], Plane Film Radiography, Computerized Tomography (CT), Ultrasound, Radiation Therapy, Mamography [sic] and Breast Diagnostics, Nuclear Medicine Testing and Magnetic Resonance Imaging (MRI).

What follows is a quote from the appellate court’s decision. We reproduce it exactly as it reads because Ruminations want to distance itself from its reasoning.

The restriction in question prohibits certain “activities,” namely outpatient surgical centers, emergency medical centers, and diagnostic imaging centers. Although it does not further specify the activities included in the first two categories, it does in the third category, stating that such activities included “the following radiographic testing,” with a list of specific imaging procedures. Thus, the focus of this restriction is on prohibited activities. In this light, the use of the word “center” does not necessarily suggest a quantitative requirement that such activities be the “primary purpose” of the location. Rather, it is merely a location where such activities occur.

We would have thought that to find that someone was violating this particular restriction, you would FIRST have to determine whether the business was a “diagnostic imaging center,” and then see if it was the kind that used one or more of the specifically listed types of testing. Perhaps that’s because when we looked at this “item 3,” we hadn’t yet reached a conclusion as to whether Planned Parenthood was violating the restrictive covenant.

Now, what about the “carve-out” reading: “unless ancillary and incidental to a physician’s practice of medicine:”? How did that figure into the court’s ruling? Well, Planned Parenthood argued that to be an “outpatient surgical center,” surgery would have to be its “primary” purpose. Here, we agree with the court when it noted that a “primary” purpose could never be “ancillary and incidental” if it was actually “primary.”

So, where did the appellate court come out? Again, we’ll just “replay” its words:

Having construed, de novo, the restrictive covenant, we readily find that the trial court’s factual findings as to this issue are supported by competent, substantial evidence. The trial court’s findings were that abortions are outpatient surgical procedures; that Planned Parenthood’s facility is not a physician’s practice of medicine; and, that even if the facility is operated as a physician’s practice of medicine, its performance of abortions was not ancillary or incidental to that practice.

Why would Ruminations write about this kind of restriction? It isn’t because of the passions that abortions and Planned Parenthood evoke. It is because we believe it very likely that when this restriction was recorded, no one had any thought about whether conducting abortions at the property would be an issue. The testimony was that the neighboring hospital didn’t want nearby competition. It wanted the surgery business, the emergency medicine business, and the imaging business. It is unlikely that it wanted the abortion business. The complaining property owner obviously wasn’t performing abortions. After all, it was seeking an injunction against doing so. Nonetheless, the restriction left a lot of room for people to argue “what it meant.” That’s not good drafting. One of the two “combatants” will be unhappy when the trial court holds full proceedings and then again after all of the appeals are exhausted.

Case after case, we see the same thing. Too little thought is given to the words we use. If we want to prohibit “activities,” we should say so. So, in that way, this is the same old story that we have seen in the notorious Winn-Dixie case where the prohibition was against selling “groceries.” [To review that issue (being what a “grocery” item is), click HERE.] Speaking of “groceries,” how would the court in the Planned Parenthood decision have applied its “it doesn’t have to be a primary purpose to be a ‘center’” to a grocery? Would selling any single grocery item make a business into a “grocery”?

To finish today’s posting, we’re going to illustrate a point we tried to make last week about the kind of remedies one can get when a “real covenant” is violated. Here, Planned Parenthood argued that the complaining property owner suffered no harm (i.e., it had no damages) and therefore wasn’t entitled to a remedy. To that, the court correctly ruled that there is no need to show damages when a real covenant is violated in order to get an injunction against the violation.

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