Violation of Tenant’s Non-Compete Is Material Breach Justifying Eviction

What Happened: A landlord bound by a no-compete clause with Verizon Wireless leased retail property to a vape shop for the “sole purpose of a vape, tobacco, clothing, computer repair” operation. The lease also required the tenant to refrain from competing with Verizon “or any other phone-related services.”

A few months into the lease, the landlord began receiving complaints about the tenant’s selling phones and phone services out of the premises. The landlord warned the tenant to comply or face eviction. Having lined up another vape shop to lease the space for higher rent, the landlord declined the tenant’s attempt to exercise the renewal option and ordered it to clear out at the end of the term, citing its improper sale of phones and phone services.

The tenant admitted that phones were sold from the store but blamed the action on a rogue employee. Any violation that might have occurred was immaterial, it claimed, while also charging the landlord with entering into an illegal conspiracy with Verizon under state antitrust law.

The court granted the landlord possession of the property and dismissed the tenant’s conspiracy counterclaims.

Ruling: The Ohio appeals court upheld the lower court’s ruling.

Reasoning: The non-compete clearly was material to the landlord, the court noted, given its efforts to emphasize and enforce it. The language was boldfaced in the lease, and the landlord sent the tenant two letters warning the tenant not to violate it, both of which the tenant ignored. It’s understandable why the landlord would feel so strongly, the court reasoned, given how phone sales by other tenants would expose it to the risk of liability to and loss of Verizon as a tenant. Even if the phone sales were just a “side operation” by a rogue employee, that employee was the tenant’s responsibility. Whether the landlord’s non-compete with Verizon was an illegal conspiracy was irrelevant and “does not change the fact that [the tenant] was independently engaging in behavior that constituted a material breach of its lease,” the court concluded.

• Suburban Realty L.P. v. MD Vape & Tobacco, LLC, 2023-Ohio-3198, 2023 Ohio App. LEXIS 3147, 2023 WL 5842012