Court Reverses Kmart, MacDade Mall Ruling

Facts: In 2004, Kmart asked MacDade Mall for permission to close its store for 90 days for renovations and remodeling. According to Kmart’s attorney, the lease stated that if Kmart elected to stop operating the store, the landlord had the option to terminate the lease.

Later that year, MacDade informed Kmart that it would be exercising its option to terminate the lease and start eviction proceedings based on Kmart’s notice of intent to discontinue store operations. Kmart argued that that it only asked for permission to close only temporarily and would have kept operating if permission was not granted. The court ruled in favor of MacDade Mall, finding that it properly terminated the lease. Kmart appealed. Decision: A Pennsylvania appeals court reversed the lower court’s decision and ruled in favor of Kmart.

Reasoning: The court ruled that because Kmart notified mall management that if permission to close temporarily was not granted, it would continue operations, it did not “elect to discontinue the operation of its store.” Therefore, the mall’s right to terminate was never triggered.

Source: Kmart of Pennsylvania L.P. v. MD Mall Associates, LLC, September 2008