Ambiguous in Alabama, but not in Florida: How not defining “groceries” ended up hurting Winn-Dixie

Contract drafters should keep an unpleasant possibility in the back of their minds:  Courts in different jurisdictions might define a particular term in dif­fer­ent ways, leading to different results.  That happened in an Eleventh Circuit case, Winn-Dixie Stores, Inc. v. DolGenCorp, LLC, No. 15-12990 (11th Cir. Jan. 31, 2018), after remand from 746 F.3d 1008 (11th Cir. 2014).

Grocery-store chain Winn-Dixie leases store space in shopping centers; as an anchor tenant, it has a certain amount of bargaining power to get the lease terms it wants. The Winn-Dixie lease form in suit contains a restrictive cov­en­ant that forbids the landlord from letting other tenants sell more than a spe­ci­fied amount of “groceries” within a certain distance of the Winn-Dixie store. Under local law, that cov­en­ant apparently ran with the land and thus was binding even on subsequent tenants. Winn-Dixie sued Dollar General and others for violating the restrictive covenant. See 746 F.3d at 1016-17, part I.

Dollar General defended (in part) with the assertion that the term groceries, as used in the restrictive covenant, was ambiguous, and therefore by law the restrictive covenant was unenforceable.  In an earlier appeal in the case, the Eleventh Circuit rejected Dollar General’s ambiguity defense for stores in Florida:  The court held that the term groceries was not ambiguous for Florida stores because, in a still-earlier Winn-Dixie case, a Florida court had adopted a definition of groceries; thus, said the Eleventh Circuit, the term was not ambiguous — at least not within Florida. See 746 F.3d at 1022-24.

The Eleventh Circuit’s prior ruling applied only to stores in Florida; the appeals court remanded the case to the district court with instructions to make ad­ditional findings as to whether Alabama courts would consider groceries to be ambiguous — and on remand, the district court held that the term was indeed ambiguous in Alabama; the Eleventh Circuit affirmed. See slip op. at part IV.

Thus, in the context of the Winn-Dixie lease form:

• In Florida, the term groceries is unambiguous, and so Winn-Dixie can stop competitors from selling groceries too close to Winn-Dixie stores in that state.
• But just across the state line in Alabama, the term groceries is am­big­uous; consequently, a Winn-Dixie competitor can lease space in the same Ala­bama shopping center as a Winn-Dixie store and is free to sell how­ever much it pleases in the way of “groceries.”

Drafting lesson: If an important term in your contract might be interpreted differently in different jurisdictions, consider including a definition for that term.