Ralphs Grocery v. Midtown Shopping Center CA2/2

Filed 6/17/15 Ralphs Grocery v. Midtown Shopping Center CA2/2 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

RALPHS GROCERY COMPANY et al., B252292 [Consolidated with B254498]

Plaintiffs, Cross-defendants, and (Los Angeles County Appellants, Super. Ct. Nos. BC493630 & BC494962) v.

MIDTOWN SHOPPING CENTER ASSOCIATES,

Defendant, Cross-complainant, and Respondent.

APPEAL from a judgment of the Superior Court of Los Angeles County. William F. Fahey, Judge. Reversed. Horvitz & Levy, Barry R. Levy, Daniel J. Gonzalez; Crowell & Moring, Steven D. Allison, Van V. Nguyen, for Plaintiffs, Cross-defendants, and Appellants. Levinson Arshonsky & Kurtz, Robert A. Levinson, Jason J. Jarvis, for Defendant, Cross-complainant, and Respondent.

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Ralphs Grocery Company (Ralphs) signed a long-term lease requiring it to share with its landlord a percentage of its “gross sales” if they exceed an agreed-upon threshold. The question presented in this appeal is whether, in calculating “gross sales” under the lease, Ralphs may use the amount that it actually charges its customers who receive discounts as part of Ralphs Rewards program, or whether Ralphs must instead use the higher price that these customers could have paid—but did not pay—if they had not been participating in the Rewards program. The trial court held it was the latter definition. We conclude it is the former, and reverse. FACTUAL AND PROCEDURAL HISTORY I. The Lease In 1993, Ralphs and Midtown Shopping Center Associates (Midtown) signed a lease (Lease or Ralphs-Midtown lease) granting Ralphs the right to rent a 53,000 square foot space from Midtown in a west Los Angeles shopping center for at least 20 years, and up to 40 years. Under the Lease, Ralphs is obligated to pay (1) an annual base rental rate of $981,972, and (2) a “percentage rental” rate calculated as 1.25 percent of any “gross 1 sales” over $31,200,000. The Lease defines “gross sales” as “the amount of the sales price, whether or not for cash or upon credit, of all merchandise, goods and the charges for services sold on or delivered from” the rented property. The Lease specifically “exclude[s] or deduct[s]” 15 matters from its definition of “gross sales.” These exceptions include sales taxes, deposits on returned items, amounts refunded or credited to customers for defective items (as well as credits received from such items’ manufacturers), sales from other stores, interest and credit charges imposed upon customers, sales from lottery tickets and coin- operated devices, sales of trade fixtures and equipment, bulk sales of inventory, and sales of crates and butcher scraps to other commercial users. Also “excluded or deducted” are “money-off coupons and vendor coupons” as well as