Because of Winn-Dixie: The Common Law of Exclusive Use Covenants

Abstract

As a condition of entering into a lease for space in a shopping center, tenants with significant bargaining power often require landlords to promise that no other occupant of the shopping center will sell certain goods or services. This promise, contained in the lease, is known as an “exclusive use covenant” because it establishes the beneficiary’s right to be the exclusive provider of particular goods or services in a defined area. Grocery store tenants, like Winn-Dixie, typically require the landlord to promise that no other tenant will sell more than a de minimus amount of food items intended for off-premises consumption. Over the past decade, so-called “dollar stores” retailers, like Dollar Tree, Dollar General, and Family Dollar, selling discount, convenience products, including food items, have aggressively expanded. Grocery store chains, fearing increasing competition from the dollar stores, have sought to enforce their exclusive use covenants against landlords and the dollar stores.

In particular, Winn-Dixie has been involved in litigation against various dollar stores for more than a decade. Winn-Dixie filed a string of lawsuits, each addressing a single violation, until 2011, when it filed lawsuits in federal court against the owners of three national dollar store chains, alleging breaches of its exclusive use covenant at 136 shopping centers in Alabama, Florida, Georgia, Louisiana, and Mississippi. The three lawsuits were consolidated into a single case, Winn-Dixie Stores, Inc. v. Dolgencorp, L.L.C.

On March 5, 2014, the Eleventh Circuit Court of Appeals issued its decision in Dolgencorp. The court considered the interpretation of key terms in the exclusive use covenants, the enforceability of the covenants against third-party tenants, and the remedies available to Winn-Dixie following a breach of the covenants. The opinion concluded years of litigation between the parties, but it also left important questions regarding exclusive use covenants unsettled. This article outlines the history of the dispute between Winn-Dixie and the dollar stores, the doctrinal issues addressed by the Eleventh Circuit, and the lingering uncertainties that face retail landlords and tenants with respect to exclusive use covenants, particularly in Florida.

Keywords: retail, real estate, property, Winn Dixie, servitude, covenant, exclusive use

JEL Classification: K11