Groceries And Other Definitions Revisited

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Groceries, sandwiches, ice cream, supermarkets, restaurants, department stores, variety stores – oh, the words we use, what do they mean? Today, we revisit one of our most-read blog postings because a federal appeals court revisited the underlying case (again). We’re “talking” about the Winn-Dixie case. Our “take” on that underlying case can be read by clicking: HERE. Ruminations urges readers to refresh their memories now by re-reading our earlier blog posting

Winn-Dixie, a supermarket chain, won a court decision in Florida where the lower court ruled that “groceries” included soup, aluminum foil, and similar items. As a result, it ruled that dozens of “dollar” type stores run by three retailers were in violation of a provision in the supermarket’s lease prohibiting others from selling groceries. Basically, the federal court that first heard the lawsuit looked at an earlier state court ruling, and (kind of properly) treated it as binding on itself, the federal court.

The earlier state court was asked to resolve a dispute between the same supermarket store chain and a single “dollar” type store arguing about the very same (or nearly the same) exclusive use provision in the supermarket’s lease. We’re not sure how vigorously that lone “dollar” type store argued its position. We suspect: “not well,” but can’t be sure. Anyway, the state court chose a particular dictionary and ruled that groceries meant more than just food products. “Groceries” could have meant just food products or it could have meant the other “stuff” grocery stores sell in addition to food products. Basically, in our view, that state court relied on a dictionary that defined “groceries” as the merchandise sold by grocery stores. To us, that’s a circular definition and use of the same technique would lead to absurd definitions such as “appliances” meaning all items sold at appliance stores, including “books” because appliance stores sell books (about designing kitchens)

Our other discomfort with the state court’s precedential definition of “groceries” was that it could have chosen a different dictionary and found a definition restricting the word’s meaning to food products. [Our earlier blog posting gives examples.] Lastly, as we will again point out at the end of today’s posting, our main discomfort is that, over and over, the landlords on the other side of the supermarket’s leases allowed the word “groceries” to be used without definition. That was a mistake on two levels. First, they acted as if the word was unambiguous. Second, at least for the locations in Florida where “groceries” had been defined to include non-food products, they seemingly had no idea that the word had been judicially defined. We might excuse those landlords whose leases predated the state court’s earlier decision, but more about that later.

Well, the first court to hear the supermarkets suit against that whole bunch of “dollar” type stores in three states, the United States District Court, was “stuck” with the precedential “definition.” When we saw the original decision, we understand that federal “law” binds federal courts to accept a state’s substantive law, but we didn’t understand the basis upon which the first federal court applied a definition “locked-down” by one state to the other two states covered by the law suit.

Well, neither did the United States Court of Appeals that heard the first appeal. It also was troubled by how the District Court could use that definition when it ruled on leases for locations in those other two states. So, while the appellate court endorsed the lower court’s reliance on the definition decided-upon by a state court, it didn’t think the District Court had looked closely enough at how that state court actually had arrived at the definition. Specifically, the state court wrote that “groceries” included “food and ‘many household supplies.’” The District Court skipped right over the word, “many,” and the Court of Appeals sent the matter back so that the lower federal court could figure out what “many” included and what it did not.

At the same time, the Court of Appeals rejected the lower court’s use of the definition of “groceries” in the jurisprudence of one state as binding on the other two states. So, as to the other two states, it sent the matter back, instructing the lower court to look again at the leases in those states. Basically, each lease needed to be interpreted using the state law for the state where each supermarket was located and not by using the law in the state where the law suit was brought.

The District Court, on the remand, determined that “many” (but not all) could be understood by looking at examples of household products found in the earlier state court decision — “soap, matches, [and] paper napkins” —the household items “that are to be considered groceries are the types associated with the preparation and service of food, as well as the maintenance of a clean kitchen (as the primary place where food is prepared).”

Narrowing the definition of groceries did not have a major effect on the “dollar” type stores within the states where the definition had previously been judicially determined. Those stores were still floor areas restricted (500 square feet of “sales” areas, another disputed undefined term) when it came to the restricted grouping of food and  “household” products, but (at least) they had a “rule” to follow.

By the time the District Court looked a second time at the second issue – the extraterritorial use of one state’s binding ruling on leases in the other two states, a settlement was reached as to the stores in one of those two states. As to the other, now not bound to the definition it had used when it first heard the case (before the appeal), the District Court ruled that the word “groceries” had to be construed narrowly and thus meant only food items. The general rule when it comes to enforcing restrictive covenants is to do so narrowly. The state in question had no “definition” for “groceries,” so when choosing between the “expanded” definition (i.e., the one that includes “many” household products) and the narrower food-only definition, the narrower one prevailed.

So, the word “groceries” within the same lease language had two different meaning depending on the state where the supermarket was located.

Here’s where it gets interesting. [Yes, it is about time!] When the case got back to the lower court, the attorney for the “dollar” type stores raised an intriguing issue. He asked the District Court to bifurcate its ruling, separating those leases executed before the state court issued its definition of “groceries” from those executed after the state court’s definition. The argument made was that landlords should not be bound by a definition decided-upon after a lease was executed because they didn’t have notice as to what a later court would decide “groceries” meant. The lower court accepted this argument and reduced the number of affected locations in Florida from 41 to 14.

Well: surprise, surprise  ̶  the supermarket appealed this second ruling by the lower federal court and the federal Court of Appeals seemed “stung.” The very first words in its ruling on this appeal were:

After we have remanded a case with specific instructions, attorneys rarely attempt to have the district court defy our mandate. And even if they try it, a district court is seldom misled into that kind of error by them. This is one of those rare cases where the attorneys representing one side successfully urged the district court to act contrary to our mandate. Of course, we reverse that part of its judgment.

Right or wrong on the substance of the appeal, the use of “Of course” gives the impression that the appellate court was feeling some disrespect. Ruminations, will not comment on the propriety or impropriety of the attorney’s argument even though the decision goes on to amplify the basis for the appellate court’s ire, using a lot more words.

More importantly, the Court of Appeals teaches us a new and important lesson. The chastised attorney argued that using the state court’s definition to interpret earlier leases violated “fundamental notions of fairness and due process.” To support that argument, it cited the treatment of statutes affecting contracts as well as decisions in criminal cases, arguing that the legal doctrine was that there is a “‘strong presumption against retroactive application’ of state and federal statutes affecting contractual rights, property rights, or liberty interests.”

The appellate court took this argument by the “dollar” type stores’ attorney to mean that the earlier state court decision had the same effect as a statutory codification of definitions for ‘groceries’ … in this case.” In response, the appellate court wrote: “But so do a lot of judicial decisions, including most or all of the decisions defining statutory terms.” Here is what the court said, using an awful lot of words.

Even if we turned the system upside down and allowed our decisions to be second-guessed in the district courts, the defendants’ belated arguments against applying the [earlier state court’s] decision are meritless anyway. The argument they stress is that our application of the [earlier state court’s] decision to leases executed before that decision was issued violates “fundamental notions of fairness and due process.” They rely on several decisions, including a criminal one, for the proposition that there is a “strong presumption against retroactive application” of state and federal statutes affecting contractual rights, property rights, or liberty interests. Of course, we are talking about a judicial decision, not a statute. That major difference makes no difference, they say, because “the [earlier state court’s] decision had the same effect as a statutory codification of definitions for ‘groceries’ and ‘sales area’ in this case.” But so do a lot of judicial decisions, including most or all of the decisions defining statutory terms.

A judicial decision is not, however, a statute. And as Justice Holmes once put it, “[j]udicial decisions have had retrospective operation for near a thousand years.” … Judicial decisions operate the same way in [the state in question here], as well, having retroactive effect. … (“In saying what the common law is in 1981, the highest court in the state was stating by necessary implication what the law had always been. The role of judges is only to find the law, not to make it or state what it will be or might have been. . . . [W]hen a state’s highest court states what appears to be partially prospective law, its decision should not be interpreted to be any less retroactive than the court has itself expressly stated. There should be the strongest presumption against implied prospectivity.”).

“As Justice Scalia explained in his concurring opinion in Harper, ‘[T]he true traditional view is that prospective decision-making is quite incompatible with the judicial power, and that the courts have no authority to engage in the practice.’” … “[A]ny decision of this Court announcing a new rule of law, or merely applying an established rule of law to a new or different factual situation, must be given retrospective application by the courts of this state in every case pending on direct review or not yet final.”

To simplify all of that, the Court of Appeals simply said that the earlier state court, in arriving at its definition of “groceries,” had not created “law,” but simply stated what “groceries … had always meant.”

OK, now for the take-away. Though we only have written about the Winn-Dixie case, we began today’s posting with a list: Groceries, sandwiches, ice cream, supermarkets, restaurants, department stores, variety stores. Why? That’s because all of these commonly used words suffer from the same deficiencies as the first one in the list. They don’t have a single, accepted meaning. That means, when disputed, courts are commanded to search for the intention of the parties. That’s a hornet’s nest and courts like to look at dictionaries. But, dictionaries don’t always agree among themselves and courts then choose one or more without ever explaining why the others were rejected.

So, what to do? How about defining these words within our leases? At the end of the day, these are “technical” words in our industry. Their definitions may not exactly match what the consuming public thinks they mean, and that includes what judges think they mean. Yes, we are bound by language, but we aren’t limited in the words we choose to use. We can, and should, use “language” to define important words, especially ones that have different meanings in different communities and under different contexts.

To read the second decision by the United States Court of Appeals (the January 31, 2018 one), click: HERE.

[To read an old decision defining a chicken, click: HERE.]

[To read an old blog posting about: “Ice Cream,” click: HERE.]

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Comments

  1. Jeremy J. Deeken says:

    This reminds me of a case I reported on for the Friedman on Leases treatise, specifically at issue was the related problem caused by the use of dynamic incorporation to define exclusive use clauses. Such was the subject of dispute in Interstate Realty Co. v. Sears, Roebuck & Co. (D. N.J. April 27, 2009). In that dispute, the tenant was allowed the exclusive right to sell items typically sold in “Sears Hardware Stores”. Tenant later changed the name of the store to “Sears Appliance and Hardware Store” and attempted to enforce an exclusive right to sell appliances. While the court rejected this expanded interpretation based upon a change of name, it did allow that the time for determining what are “items typically sold in Sears Hardware Stores” was not when the lease was entered into, but rather when litigation was initiated. As a dynamic term, the definition was subject to undergo significant evolution through the years. The takeaway is that Sears could perhaps successfully argued that appliances were covered by the exclusive use if it had gradually incorporated appliances into its product line at its hardware stores and establish a waiver/course of performance defense against an action to exclude appliances from the protection of the exclusive use.

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