In 1968, J.C. Penney entered a sale-and-leaseback arrangement with General Electric Pension Trust. The lease for a Milwaukee shopping center included paragraph 34: if the lessee requested at least $250,000 to build improvements, the trust had to give the request reasonable consideration and negotiate in good faith. If those negotiations failed, the lessee could repurchase the property under a formula that apparently produced a price well below market value.
Penney assigned the lease to Market Street Associates in 1987. When a drugstore chain wanted a new store at the center, Market Street sought financing. It first pursued outside financing, but lenders required a mortgage that Market Street, as lessee rather than owner, could not give. Its general partner, William Orenstein, then contacted the pension trust about buying the property, but the trust floated a $3 million price that he considered excessive.
Market Street next sent letters requesting $2 million in financing for improvements. The first did not mention the lease; the second referred generally to financing "pursuant to the lease" but did not identify paragraph 34. The trust responded that requests below $7 million did not meet its investment criteria. Market Street then asserted that the refusal triggered its paragraph 34 option to buy the property for roughly $1 million. The trust refused to sell.
The district court granted summary judgment to the pension trust. It concluded that Market Street had prevented the required financing negotiations by failing to alert the trust expressly to paragraph 34 and had acted in bad faith by seeking to exploit the trust's apparent ignorance of the purchase-option consequence. Market Street appealed.
Issue #1
Whether the federal court had diversity jurisdiction after removal despite an inadequate removal petition.
Holding
Yes. Although the removal allegations were deficient, subsequent submissions established complete diversity.
Reasoning
For diversity purposes, a limited partnership has the citizenship of every general and limited partner, not merely that of the partnership or its general partner. Likewise, the citizenship of the individual trustees, rather than the trust as an abstract entity, controlled on the defendants' side.
The removal petition failed to allege the citizenships necessary under those rules. But affidavits submitted after oral argument showed that no limited partner shared a state of citizenship with any trustee, so complete diversity actually existed.
The court nevertheless criticized the parties' failure to investigate jurisdiction carefully. Lawyers bear a nondelegable duty to police federal jurisdiction, particularly where partnerships, trusts, and other unincorporated or unconventional entities are involved.
Issue #2
Whether Market Street waived its right to a trial by filing its own motion for summary judgment.
Holding
No. Cross-motions for summary judgment do not waive trial rights unless the parties stipulate that the court may decide the case finally on the summary-judgment record.
Reasoning
A party seeking summary judgment necessarily argues that no genuine factual dispute requires a trial. If the court disagrees, however, the consequence is simply that summary judgment cannot be granted; the movant does not thereby lose its right to have disputed facts tried.
The same rule applies when both sides move for summary judgment. Each may contend that the undisputed record favors it, while still preserving the right to trial if material factual disputes remain.
A waiver would have occurred if the parties had agreed to submit the case for final judgment on the summary-judgment materials. They made no such stipulation here.
Issue #3
Whether the pension trust could defeat Market Street's paragraph 34 rights by refusing to consider the financing request and then arguing that no negotiations had broken down.
Holding
No. The trust could not rely on the absence of negotiations if its own failure to give reasonable consideration to the request prevented negotiations from occurring.
Reasoning
Paragraph 34 made the purchase option contingent on failed negotiations, but it also required the trust to give reasonable consideration to a qualifying request for improvement financing. A party may not use its own breach to impair the other party's contractual rights.
The court rejected the trust's effective position that Market Street had no remedy at all. Although the precise appropriate remedy for a failure to consider financing was not resolved, the trust could not avoid responsibility merely by preventing the contractual process that would otherwise precede the option.
At the same time, Market Street could not insist that the contract's silence on an express notice requirement conclusively ended the matter. The relevant question was whether good faith or an implied contractual condition barred Market Street from exploiting the trust's mistake.
Issue #4
Whether Market Street's failure to identify paragraph 34 expressly established, as a matter of law, a breach of the implied duty of good faith and justified summary judgment for the trust.
Holding
No. The record permitted competing inferences about Orenstein's state of mind, so whether Market Street acted opportunistically and in bad faith required a trial.
Reasoning
The contractual duty of good faith does not convert an ordinary contractual relationship into a fiduciary one. A contracting party is not generally required to disclose every advantage, correct every error, or sacrifice a bargain merely because it has superior information.
But good faith does prohibit post-contractual opportunism in a cooperative relationship. Deliberately taking costless advantage of a contracting partner's oversight about its rights under an existing contract can be sharp dealing that the parties would likely have forbidden had they anticipated the situation.
The district court's account was plausible: Market Street may have wanted a bargain purchase rather than financing, may have recognized the trust's bureaucratic inattention, and may have withheld reference to paragraph 34 hoping the trust would reject the request without recognizing the consequence. If that account were true, Market Street's conduct could violate good faith.
Yet summary judgment required viewing the evidence in Market Street's favor. A factfinder could conclude that Orenstein reasonably believed the trust knew of, or would review and discover, paragraph 34; that the trust declined financing regardless of the option; and that Market Street made an honest request under the lease rather than attempting to trick anyone.
Orenstein's actual belief was central to the good-faith inquiry, and credibility-dependent questions of state of mind ordinarily cannot be resolved on summary judgment. A bench trial would allow the judge to hear the witnesses, assess their credibility, and determine whether Market Street acted opportunistically or reasonably.