Starbucks Corporation v. New WTC Retail Owner LLC

Background

Starbucks and New WTC Retail Owner LLC entered into a lease on May 6, 2014, for retail space in the Westfield World Trade Center Shopping Center. The lease contemplated that Westfield would later deliver the space after construction of a performing arts center above it. Starbucks’s rent and ten-year lease term were to begin when Starbucks took possession.

The lease originally included an estimated delivery date of June 1, 2015. A 2015 amendment removed that estimate and stated that the actual date of delivery would be the “Delivery Date.” Starbucks alleged that Westfield repeatedly delayed completion of the work and failed to provide a definite delivery date. Starbucks also alleged that Westfield delayed or withheld approval of Starbucks’s plans, which Starbucks needed before applying to the Port Authority for permission to begin construction.

Starbucks asserted two breach-of-contract claims concerning Westfield’s failure to provide a delivery date and deliver possession within a reasonable time. It also asserted a claim for breach of the implied covenant of good faith and fair dealing, based both on the delivery problems and on the alleged delay in the approval process.

Default-judgment motion

Starbucks asked the court to find Westfield in default and enter a default judgment because Westfield had not filed an answer. The court denied the motion. Under the applicable procedure, Starbucks first had to obtain a certificate of default from the Clerk of Court before seeking a default judgment. The Clerk had rejected Starbucks’s request for that certificate.

The court also noted that Westfield had participated in the case, had moved to dismiss, and had raised potentially meritorious defenses. The court concluded that default was unwarranted and that resolving the dispute on the merits was more appropriate.

Motion to dismiss

The court treated Westfield’s premotion letter as a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). At this stage, the court accepted the complaint’s factual allegations as true, drew reasonable inferences for Starbucks, and considered whether the complaint alleged legally plausible claims—not whether Starbucks had already proved them.

Contract claims. Westfield argued that lease provisions excused it from liability for delays in making the premises available. The court rejected that argument at the pleading stage. It concluded that the lease’s delay provision did not bar Starbucks’s claim that Westfield intentionally and unreasonably delayed delivery. The court also concluded that the construction-related provision applied to disruptions after Westfield had delivered possession, not to the failure to deliver possession in the first place.

The court separately held that providing a delivery date was an obligation distinct from actually delivering the premises. Because the lease did not set a deadline for providing that date, New York law supplied a reasonable-time requirement. The court found that Starbucks’s allegations about nearly seven years of vague timeframes and Westfield’s eventual estimate supported a plausible claim that Westfield failed to provide a delivery date within a reasonable time. The court therefore denied Westfield’s motion as to Counts One and Two.

Implied covenant claim. The court dismissed the part of Count Three based on Westfield’s failure to provide a delivery date or deliver possession. That theory relied on the same conduct as the contract claims and was therefore duplicative.

The court also dismissed the part of Count Three based on alleged delays in the Conditional Approval process. Starbucks alleged that Westfield could stall the process, but the complaint did not explain whether or when Starbucks had submitted plans for approval, how Westfield had withheld approval, or what necessary information Westfield had withheld. The court found those missing facts important to making the claim plausible.

Disposition

The court denied Starbucks’s motion for a default judgment. It denied in part and granted in part Westfield’s motion to dismiss. The motion was denied as to Counts One and Two. The fair-dealing theory based on failure to provide a delivery date was dismissed with prejudice as duplicative of those counts. The fair-dealing theory based on delay of the Conditional Approval process was dismissed without prejudice. Westfield was ordered to file and serve an answer within 15 days of the order.