Polk Bros. v. Forest City Enterprises

776 F.2d 185 (7th Cir. 1985)


P owned some land and discussed with D the possibility of building a store large enough for both firms. P sells appliances and home furnishings; D sells building materials, lumber, tools, and related products. Both have substantial chains of stores. They reached an agreement. P built a single building on a large parcel of land. The building is partitioned internally. P's store contains 64,000 square feet, D's 68,000 square feet. One parking lot serves both businesses. D became P's lessee in 1973. The stores opened in 1975. In 1978 D exercised its option to buy, and P took back a mortgage for some $1.4 million. As part of the deal, they negotiated a covenant restricting the products each could sell. D promised not to sell 'major appliances and furniture,' although it reserved the right to sell 'built-in appliances in connection with Kitchen-Build-In business.' P promised not to 'stock or sell Toro and Lawnboy products including lawn mowers, building materials, lumber, and related products, tools, paints and sundries, hardware, garden supplies, automotive supplies or plumbing supplies.' They agreed on a long list of things that both could sell, including 'Gas & Electric Heaters, Built-In-Ranges, . . . Snow Blowers, Lawn Mowers, and Hardware/Garden Mdse'. The parties agreed that the restrictions in the lease would become covenants running with the land for 50 years. In 1982, D changed management. In January 1983, D informed P that it considered the covenant invalid. P sued D in state court. D removed the action to the district court. P asked for an injunction. The district court concluded both that the covenant is a per se violation of state antitrust law and that P not obtain equitable relief for being in pari delicto. P appealed.