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Hand Cut Steaks Acquisitions, Inc. v. Lone Star Steakhouse & Saloon of Nebraska, Inc.

Supreme Court of Nebraska

January 19, 2018

Hand Cut Steaks Acquisitions, Inc., an Arkansas corporation, appellant and cross-appellee,
v.
Lone Star Steakhouse & Saloon of Nebraska, Inc., a Nebraska corporation, appellee and cross-appellant, and LSF5 Cactus, L.L.C., a Delaware LIMITED LIABILITY COMPANY, APPELLEE.

          1. Evidence: Stipulations: Appeal and Error. In a case in which the facts are stipulated, an appellate court reviews the case as if trying it originally in order to determine whether the facts warranted the judgment.

         2. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional question does not involve a factual dispute, determination of a jurisdictional issue is a matter of law which requires an appellate court to reach a conclusion independent from the trial court's.

         3. Landlord and Tenant: Abandonment. An abandonment of leased premises by the tenant constitutes an offer to terminate the lease.

         4. Landlord and Tenant: Abandonment: Intent. Whether there has been an acceptance by the landlord of the tenant's abandonment of the premises is largely a matter of intention, and such an acceptance may be inferred from acts of the landlord inconsistent with the continuance of the lease.

         5. Landlord and Tenant. Whether a surrender and acceptance of leased premises occurred is a question of fact.

         6. Landlord and Tenant: Abandonment: Damages. After a tenant abandons leased property, a landlord may mitigate its damages not only by reletting the property to another tenant, but also by selling the property.

         7. Landlord and Tenant: Abandonment: Intent. Like retaking and reletting leased property, the act of attempting to sell and selling the property by a landlord after a tenant abandons it is equivocal and can evince an [298 Neb. 706] intent to mitigate the landlord's damages just as easily as it can evince an intent to accept the tenant's surrender.

         8. Landlord and Tenant: Abandonment: Damages: Intent: Presumptions. Where a landlord's actions are not inconsistent with an intent to mitigate its damages, a court will not presume that the landlord intended to accept the tenant's surrender of the leased premises and terminate the lease.

         9. Landlord and Tenant: Abandonment: Damages. A landlord may not unreasonably refuse to accept a qualified and suitable substitute tenant for the purpose of mitigating the damages recoverable from a tenant who has abandoned the leased premises prior to the expiration of the term.

         10. __: __:__.A landlord has a duty to relet the premises in order to mitigate damages when a tenant abandons the premises prior to the expiration of a lease. This duty to mitigate requires that the landlord take all reasonable steps to reduce his damages.

         11. Landlord and Tenant: Abandonment: Damages: Proof. In a landlord's action to recover unpaid rent upon a tenant's abandonment of the premises prior to the end of the lease term, the tenant has the burden to show that the landlord unreasonably failed to relet the premises and mitigate damages.

         12. Landlord and Tenant: Abandonment: Damages. After a tenant has abandoned leased premises, a landlord may satisfy its duty to mitigate damages by retaking the premises and making reasonable efforts to relet the premises on the tenant's account, to sell the property, or both.

         13. Landlord and Tenant: Leases: Breach of Contract: Damages: Sales: Time. A landlord may generally recover unpaid rent and expenses due under a lease from the time of the tenant's breach through the time a sale of the property is completed, plus any commercially reasonable expenses incurred in order to procure a new tenant or buyer.

         14. Landlord and Tenant: Abandonment: Damages. A landlord's efforts to mitigate its damages after a tenant abandons the leased property must be commercially reasonable under the circumstances.

         15. Landlord and Tenant: Abandonment: Damages: Time. A landlord's duty to mitigate its damages arises when the tenant abandons or surrenders the property.

         16. Landlord and Tenant: Abandonment: Damages. Until there is an abandonment or tender of property by a tenant, a landlord has no duty to mitigate its damages by reletting or selling the property.

         17. Landlord and Tenant: Abandonment: Damages: Sales: Time. If a landlord's efforts to mitigate its damages by selling abandoned property are reasonable under all the circumstances-including reasonable in time-damages will ordinarily run until the date of sale.

          [298 Neb. 707] 18. Jurisdiction: Words and Phrases. Personal jurisdiction is the power of a tribunal to subject and bind a particular person or entity to its decisions.

         19. Constitutional Law: Jurisdiction: Due Process: Service of Process: States. Courts' ability to validly exercise personal jurisdiction is not without limit. The Due Process Clause of the 14th Amendment to the U.S. Constitution bars a court from exercising personal jurisdiction over an out-of-state defendant, served with process outside the state, unless that defendant has sufficient ties to the forum state.

         20. Constitutional Law: Jurisdiction: Statutes: Due Process: States. A two-step analysis is used to determine whether a Nebraska court may validly exercise personal jurisdiction over an out-of-state defendant. First, a court must consider whether Nebraska's long-arm statute-Neb. Rev. Stat. § 25-536 (Reissue 2016)-authorizes the exercise of personal jurisdiction over the defendant. Second, a court must consider whether the exercise of personal jurisdiction over the defendant comports with the Due Process Clause.

         21. Constitutional Law: Jurisdiction: Statutes: Due Process. If a Nebraska court's exercise of personal jurisdiction would comport with the Due Process Clause of the 14th Amendment, it is authorized by the long-arm statute-Neb. Rev. Stat. § 25-536(2) (Reissue 2016).

         22. Constitutional Law: Jurisdiction: Due Process: States: Words and Phrases. To satisfy the Due Process Clause, a court may only exercise personal jurisdiction over a defendant that is not present in the forum state if that defendant has "minimum contacts" with the forum such that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. To constitute sufficient minimum contacts with the forum, a defendant's conduct and connection with the forum state must be such that he or she should reasonably anticipate being haled into court there.

         23. Jurisdiction: States. Whether a defendant's contacts with the forum state are sufficient to support the exercise of personal jurisdiction will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws.

         24. __:__. Personal jurisdiction is proper where the defendant's contacts proximately result from actions by the defendant himself or herself that create a substantial connection with the forum state.

         25. __:__. In the minimum contacts analysis, courts will consider the burden on a defendant in light of considerations such as (1) the forum state's interest in adjudicating the dispute, (2) the plaintiff's interest [298 Neb. 708] in obtaining convenient and effective relief, (3) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (4) the shared interest of the several states in furthering fundamental substantive social policies. Consideration of these factors may sometimes serve to establish the reasonableness of jurisdiction upon a lesser showing of minimum contacts than would otherwise be required.

         26. __: __ . The nature and quality of a defendant's contacts with the forum state necessary to support the exercise of personal jurisdiction depend on the connection between the contacts and the claim being asserted.

         27. Jurisdiction: States: Words and Phrases. General, or all-purpose, jurisdiction is jurisdiction arising where a defendant's affiliations with a state are so continuous and systematic as to render the defendant essentially at home in the forum state.

         28. Jurisdiction. Where a court has general personal jurisdiction over a defendant, it can adjudicate any claim against the defendant-even a claim that arises outside the forum state and bears no connection to the defendant's contacts with the forum.

         29. Jurisdiction: Words and Phrases. Specific, or case-linked, jurisdiction requires that a claim arise out of or relate to the defendant's contacts with the forum.

         30. Jurisdiction. A defendant need not be at home in the forum to be subject to specific personal jurisdiction, but, rather, there must be an affiliation between the forum and the underlying controversy.

         31. Jurisdiction: Words and Phrases. Specific personal jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction. There must be a substantial connection between the defendant's contacts and the operative facts of the litigation.

         32. Jurisdiction: Due Process: Contracts. For purposes of personal jurisdiction, it is sufficient for purposes of due process that a suit be based on a contract which has substantial connection with that state.

         33. Jurisdiction: States. Personal jurisdiction may not be avoided merely because a defendant did not physically enter the forum state.

         34. Jurisdiction: States: Contracts. To determine whether a defendant's contract supplies the contacts necessary for personal jurisdiction in a forum state, a court is to consider the parties' prior negotiations and future contemplated consequences, along with the terms of the contract and the parties' actual course of dealing.

         35. States: Real Estate. Generally, a state has a unique interest in adjudicating transactions affecting its land.

         [298 Neb. 709] 36. Landlord and Tenant: Guaranty: States. While a guaranty of a personal debt generally bears no intrinsic connection to any particular location, a guaranty to pay and perform a tenant's obligations under a lease of real property uniquely affects the state in which the premises are located.

         37. Jurisdiction: Due Process: States: Real Estate. While the Due Process Clause's personal jurisdiction analysis no longer bears a rigidly territorial focus, states nevertheless, as coequal sovereigns in a federal system, have a special interest in adjudicating disputes relating to the real property with their borders.

         38. Jurisdiction: Guaranty: States. Where a guarantor takes on obligations that are uniquely tied to and uniquely affect a particular location, it is not unreasonable for courts of that state to exercise personal jurisdiction over the guarantor in connection with claims arising from or related to those obligations.

         39. Jurisdiction: States: Contracts. While the minimum contacts personal jurisdiction analysis is distinct from a choice-of-law analysis, a choice-of-law contractual provision in favor of the forum state's law is a relevant contact with the forum.

         40. Contracts: Attorney Fees: Public Policy. In the absence of a uniform course of procedure or authorization by statute, contractual agreements for attorney fees are against public policy and will not be judicially enforced.

         Appeal from the District Court for Douglas County: Leigh Ann Retelsdorf, Judge. Affirmed in part, and in part reversed and remanded for further proceedings.

          David L. Welch and Jeffrey A. Nix, of Pansing, Hogan, Ernst & Bachman, L.L.P., for appellant.

          Michael S. Degan, of Kutak Rock, L.L.P., for appellees.

          Heavican, C.J., Cassel, Stacy, Kelch, and Funke, JJ.

          Cassel, J.

         I. INTRODUCTION

         When a tenant abandons leased property, a landlord may either accept the abandonment, thereby terminating the lease, or attempt to relet or sell the property. Here, after the tenant stopped paying rent and the landlord sued, the tenant [298 Neb. 710] surrendered the property. The landlord rejected offers by prospective tenants and instead, after lengthy negotiations, sold the property.

         Following a bench trial on stipulated facts, the district court awarded damages to the date the landlord reached a tentative agreement to sell rather than to an actual sale date. And the court dismissed the tenant's out-of-state guarantor for lack of jurisdiction.

         On appeal, we affirm the district court's damages award because, although the landlord did not terminate the lease, the duration of finalizing the sale was not reasonable. But because the guaranty established sufficient connections to Nebraska, we reverse the dismissal of the guarantor.

         II. BACKGROUND

         1. Parties

         The tenant, Lone Star Steakhouse & Saloon of Nebraska, Inc. (Lone Star), is a Nebraska corporation. Lone Star leased property in west Omaha, Nebraska, to use for the operation of a steakhouse restaurant from the landlord, Hand Cut Steaks Acquisitions, Inc. (HCS), an Arkansas corporation. LSF5 Cactus L.L.C. (Cactus), a Delaware limited liability company doing business in Texas, is a subsidiary of Lone Star's parent company. Cactus guaranteed the performance of Lone Star's obligations under the lease.

         2. Property and Lease to Lone Star

         In 2010, HCS hired an agent to list and market the property. He did so, eventually securing Lone Star as a tenant. Lone Star leased the property for a 66-month term, to run from 2010 through 2016. The lease began with 6 months of free rent, followed by rent increasing incrementally. Lone Star was also responsible for paying property taxes, property insurance, and common area maintenance costs.

         The lease contained an attorney fee provision: "In the event of litigation between the parties to enforce this Lease, the [298 Neb. 711] prevailing party in any such action shall be entitled to recover reasonable costs and expenses of suit, including, without limitation, court costs, attorneys' fees, and discovery costs.''

         The lease also contained a choice-of-law provision: "This Lease shall be construed, interpreted, and enforced pursuant to the applicable laws of the state in which the Premises are located."

         Cactus executed a guaranty of the lease which provided that

[Cactus], in consideration of the direct and material benefits that will accrue to [it], and for the purpose of inducing [HCS] to enter into [the lease] with Lone Star . . ., a subsidiary of [Cactus], absolutely and unconditionally guarantees the payment and performance of, and agrees to pay and perform as primary obligor, all liabilities, obligations, and duties (including but not limited to payment of rent) imposed upon [Lone Star] under the terms of the . . . Lease.

         And the lease acknowledged the guaranty signed by Cactus: "As an inducement to [HCS] to enter into this Lease, [Lone Star] agrees and acknowledges that its obligations under this Lease shall be guaranteed ... by its parent corporation, [Cactus], a Delaware limited liability company . . . ." Cactus was also an insured under a general liability and workers' compensation and employers' liability insurance policy covering Lone Star's restaurant in Omaha.

         3. Restaurant Closes and HCS Sues

          In October 2012, Lone Star notified HCS that it planned to shut down its restaurant in 3 weeks. Lone Star continued paying rent through February 2013, but then stopped. In March 2013, HCS served a notice of default on Lone Star. In April, HCS filed suit against Lone Star and Cactus. Later in April, HCS demanded that Lone Star surrender the premises. Its demand letter stated, "This Notice shall in no way be construed as a termination of [the] Lease or as a relinquishment [298 Neb. 712] or waiver by [HCS] as to any rental amounts or other amounts due under [the] Lease . . . ." Lone Star surrendered the premises in early May, and the parties executed an acknowledgment of tender and receipt of premises agreement.

         4. Interest From Prospective Tenants

         Shortly after Lone Star notified HCS that it planned to close the restaurant, HCS began receiving inquiries about the availability of the property.

         According to the parties' trial stipulation, "[HCS] relied upon [the agent] to relay communications for purposes of selling or reletting the Premises." But the parties also stipulated that HCS did not hire the agent or anyone else as a broker for the purpose of reletting the premises, before or after HCS regained control of the premises in May 2013. The agent did not do any marketing or list the property for HCS as was done in 2010, when he secured Lone Star's tenancy.

         From October 2012 through February 2013, the agent and HCS' owner, Pat Boyd, corresponded with a broker representing a pizza firm about leasing or purchasing the property. The broker told HCS that the pizza firm "[w]ants the [p]roperty" and made multiple offers for a sale or lease. Boyd said in his deposition that he was not interested in the pizza firm because he did not find any of its offers acceptable and because he "was not interested in their concept." Boyd also said that he made up his mind that he was not interested in the pizza firm as a tenant as early as November 2012.

         HCS also received two offers in May 2013 from a broker on behalf of a restaurant proprietor interested in starting a crab restaurant. Regarding the crab restaurant, Boyd testified, "This particular concept, we - we weren't interested in putting in our building." Boyd also said that he was not interested because he learned that the proprietor previously had several other restaurant concepts that failed.

         [298 Neb. 713] 5. Negotiations With Ultimate Buyer

          Discussions with the ultimate buyer began in December 2012. In January 2013, the buyer sent HCS an offer to purchase the property. HCS rejected the offer and expressed its interest in negotiating a lease rather than a sale. They continued to negotiate, and in May, the buyer made another offer to purchase the property. Boyd told the buyer he was more interested in a lease than a sale of the property. The buyer told Boyd, "'We are too far apart to make a ground lease work here[, but w]e can be much more aggressive . . .'"in negotiating a purchase. The buyer asked HCS to make a counteroffer for the sale of the property. After further negotiations, a letter of intent (LOI) outlining the terms of the sale of the property for $1, 715 million was executed in June 2013. However, it took until September 2013 for the parties to finalize the purchase agreement for the property and, due to some issues with title insurance, until April 2014 to close on the sale.

         6. Pretrial Motions and Orders

         Before trial, the district court granted a motion of Cactus, the guarantor of Lone Star's lease, to dismiss it for lack of personal jurisdiction. But the court later granted HCS' motion to reconsider its order and allowed limited discovery with regard to Cactus' contacts with Nebraska. After discovery was conducted, the court denied Cactus' renewed motion to dismiss and reserved ruling on the issue until trial. The district court also granted in part and denied in part HCS' pretrial motion for summary judgment, granting summary judgment on the issue of Lone Star's breach of the lease.

         A bench trial was held on stipulated facts on the issue of damages, after which the district court issued a "Bench Trial Order." The court concluded that HCS had not accepted Lone Star's surrender of the lease, because HCS' "actions were consistent with a landlord attempting to mitigate its damages." The court also concluded that "[HCS] took reasonable [298 Neb. 714] steps to mitigate its damages after Lone Star's breach of the Lease."

         The district court also addressed the issue of whether a landlord may mitigate its damages by selling, rather than reletting, the property:

The Court does not find it reasonable to fault Lone Star for the lengthy closing process in the negotiations between [HCS] and [the buyer]. Under the theory of contracts, the breaching party is not to be punished for [its] breach, but rather, the non-breaching party is to be made whole. It would indeed be a punishment for Lone Star to pay nearly a year's worth of damages because the closing period between [HCS] and [the buyer] was such a drawn-out negotiation. Therefore, for purposes of mitigation and damages, the ...

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