Lawsuit Against Ukrop's Over Mooretown Location Moves Forward

By Amber Lester Kennedy Monday, November 29, 2010

A Ukrop's employee helps load groceries in this file photo of the Mooretown Road location.

York-Poquoson Circuit Court substitute Judge William Andrews on Monday settled a dispute between Ukrop’s and Texas-based American General Life Insurance Company (AGL) over whether AGL had notified the grocer of its intent to purchase the location in a timely manner. He ruled in AGL’s favor, which will allow the company’s $2 million lawsuit against Ukrop’s to move forward.

AGL filed the lawsuit on Aug. 13, claiming it should be allowed to purchase the former Ukrop’s location, which has been vacant since Jan. 31, 2009. AGL purchased the Williamsburg Market Shopping Center through foreclosure for $7 million in June 2010.

Although the former Ukrop’s location is attached to the shopping center, the building and parking lot belong to Ukrop’s, which sold all of its locations earlier this year. Ukrop’s had entered into an operation and easement agreement with the center’s previous owner, WaitzerWMC, that gave the shopping center’s owner six months to buy the property if it stopped functioning as a grocery store for 12 consecutive months.

AGL had until July 31 of this year to exercise its repurchase rights, and notified Ukrop’s of its intent to purchase by certified letter dated July 23. On July 20, Ukrop’s had signed a contract with Supermarket Equipment Sales to sell its fixtures, such as refrigerators, grills, cash registers and more, for $750,000. In September, substitute Judge Walter Ford decided Ukrop’s could not move forward with the sale; he also granted an amendment to add Supermarket Equipment Sales, LLC as a third party to the civil case.

The timeliness of the repurchase rights notification was the subject of Monday’s hearing. Ukrop’s lawyer Courtney Paulk argued the repurchase rights in the operation and easement agreement with WaitzerWMC would have required notice within six months of the store’s closing. AGL’s lawyer Sheldon Franck successfully argued that AGL had 18 months – 12 consecutive months since the store’s closure, plus an additional six months following that period.

On Wednesday, Paulk said Ukrop’s will have 21 days from the entry of the order to file pleadings in response. She said the lawyers were still debating the language of the order, so the 21-day period did not begin immediately. She did not indicate how Ukrop’s wanted to proceed.

Franck said his clients are trying to fulfill their contract. “From our perspective, we’re contractually obligated to purchase the store and Ukrop’s is contractually obligated to sell it,” he said.

In the September hearing, AGL wanted to prevent the sale of the grocery store’s fixtures because it hoped to be able to lease the space to another grocer in the future. AGL and commercial leasing agency Divaris Real Estate are facing a tight deadline to try to turn around the shopping center, which has struggled since Ukrop’s left its space.

Gerald Divaris, chairman of Divaris Real Estate, testified that several tenants of the shopping center have a co-tenancy provision in their leasing agreements that allow them to go to a reduced rent rate if the anchor store leaves. For example, the ROSS clothing store originally paid $11 per square foot for rent, but now pays $3 per square foot, due to the departure of Ukrop’s.

Furthermore, several tenants, including ROSS, reserved the right to terminate their contracts on Jan. 31, 2011 if the anchor store remained empty. In September, Divaris said his primary objective was to fill the space, but said his company had not identified a prospect. In the meantime, litigation will continue until at least the end of the year.