Submitted October 23, 2013.
Appeal from United States District Court for the District of North Dakota - Fargo.
For Commercial Resource Group, LLC, Plaintiff - Appellant: Serkland & Lundberg, Fargo, ND.
For The J.M. Smucker Company, Defendant - Appellee: Dorsey & Whitney, Minneapolis, MN; Dorsey & Whitney, Fargo, ND.
Before RILEY, Chief Judge, COLLOTON, and KELLY, Circuit Judges. COLLOTON, Circuit Judge, dissenting.
KELLY, Circuit Judge.
J.M. Smucker Co. (" Smucker" ) leased a commercial building from Commercial Resource Group (" CRG" ). The lease provided that, after its initial term, it would automatically renew unless Smucker provided written notice of its intent to terminate the lease 180 days prior to the end of the current term. Smucker sent a termination notice to CRG that arrived after the deadline. CRG refused to accept the notice and filed suit in federal court based on diversity jurisdiction to recover rent for the additional term. The district court found that because Smucker had substantially performed its lease obligations, it would be unconscionable to hold Smucker to the renewal. CRG appeals. With jurisdiction under 28 U.S.C. § 1291, we reverse.
In March 2001, Smucker leased a commercial building in West Fargo, North Dakota, from CRG. The parties negotiated an amendment to the lease in 2005. The amendment provided that the lease would continue for an initial two-year term, and it gave Smucker an option to renew the lease for up to four additional one-year terms. After the initial term, the lease was set to renew automatically on July 1st of each year unless Smucker provided CRG written notice of its intent to terminate 180 days prior, i.e., by January 1st. The original lease specified the address to which the written notice should be sent (" original address" ). On September 15, 2006, CRG informed Smucker of a change of address and notified Smucker that " all future rent payments and lease correspondence" should be sent to its new address (" 2006 address" ). Smucker received this notice and began sending rent payments to the new address. The lease was not modified to reflect the change of address.
In late 2009, Smucker decided to close down its West Fargo facility. On December 22, 2009, Smucker sent a notice of termination to CRG by way of Federal Express (" FedEx" ); however, Smucker sent the notice to the original address instead of the 2006 address. On December 23, 2009, Smucker received an email from FedEx stating " FedEx attempted, but was unable to complete delivery [of the December 22, 2009, notice]." FedEx " [r]ecommended" that Smucker " [c]ontact [FedEx] to provide correct delivery address and/or additional delivery information." Smucker took no action. FedEx sent a second email a week later, on December 30, 2009. The second email stated, " FedEx attempted, but was unable to complete delivery." This email instructed that " [n]o action is required" because " [t]he
package is being returned to the shipper." Smucker took no additional action prior to the January 1st deadline for terminating the lease.
After the deadline passed, Smucker sent a second termination notice to CRG, this time to the 2006 address. The notice was dated January 4, 2010, and it arrived on January 5, 2010. This second notice stated Smucker wanted to terminate the lease. It also explained that Smucker had sent a timely termination notice to the original address, but that notice had been returned " as undeliverable." The parties disagree as to whether this second notice effectively terminated the lease.
The district court found that Smucker had substantially performed the contract and should not be held responsible for a " minor delay" that was the result of " an honest mistake in mailing." The court emphasized that Smucker " made a good faith attempt" and " acted promptly to correct [its mistake]." As such, the district court held that " [t]o punish Smucker in the form of hundreds of thousands of dollars . . . would be an unconscionable result . . . especially where time was not of the essence to the contract and where the untimely notice did not result in any demonstrable injury to CRG." ...