Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 1 of 10
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MARYLAND
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`WALGREEN CO.
`104 Wilmot Road
`Deerfield, Illinois 60015
`
`Plaintiff
`
`v.
`
`MERITUS MEDICAL CENTER, INC.
`11116 Medical Campus Road, Suite 3918
`Hagerstown, MD 21742
`
`Defendant
`
` Case No.: ____________________
`
`SPEEDY HEARING REQUESTED
`
`COMPLAINT FOR DECLARATORY JUDGMENT, PRELIMINARY AND
`PERMANENT INJUNCTIVE AND OTHER RELIEF
`
`Plaintiff Walgreen Co. (“Walgreens”), by its undersigned counsel, Whiteford Taylor &
`
`Preston LLP, hereby brings this Complaint for Declaratory Judgment and for Preliminary and
`
`Permanent Injunctive and Other Relief against Meritus Medical Center, Inc. (“Defendant” or
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`“Meritus”), and states as follows:
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`INTRODUCTION
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`Walgreens operates a retail pharmacy in the Robinwood medical campus in Hagerstown,
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`Maryland, pursuant to a Lease Amendment with Meritus. As part of the Lease Amendment,
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`Meritus expressly agreed not to allow a second retail pharmacy on the Robinwood medical
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`campus. However, despite that restrictive covenant, Meritus has opened and now operates a retail
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`pharmacy on the Robinwood medical campus in direct competition with Walgreens. Walgreens
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`brings this action due to the egregious violation of this bargained-for restrictive covenant.
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MARYLAND
`
`WALGREEN CO.
`104 Wilmot Road
`Deerfield, Illinois 60015
`
`Plaintiff
`
`v.
`
`MERITUS MEDICAL CENTER, INC.
`11116 Medical Campus Road, Suite 3918
`Hagerstown, MD 21742
`
`Defendant
`
` Case No.: ____________________
`
`SPEEDY HEARING REQUESTED
`
`COMPLAINT FOR DECLARATORY JUDGMENT, PRELIMINARY AND
`PERMANENT INJUNCTIVE AND OTHER RELIEF
`
`Plaintiff Walgreen Co. (“Walgreens”), by its undersigned counsel, Whiteford Taylor &
`
`Preston LLP, hereby brings this Complaint for Declaratory Judgment and for Preliminary and
`
`Permanent Injunctive and Other Relief against Meritus Medical Center, Inc. (“Defendant” or
`
`“Meritus”), and states as follows:
`
`INTRODUCTION
`
`Walgreens operates a retail pharmacy in the Robinwood medical campus in Hagerstown,
`
`Maryland, pursuant to a Lease Amendment with Meritus. As part of the Lease Amendment,
`
`Meritus expressly agreed not to allow a second retail pharmacy on the Robinwood medical
`
`campus. However, despite that restrictive covenant, Meritus has opened and now operates a retail
`
`pharmacy on the Robinwood medical campus in direct competition with Walgreens. Walgreens
`
`brings this action due to the egregious violation of this bargained-for restrictive covenant.
`
`
`
`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 2 of 10
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`Walgreens seeks an expedited hearing on its claim for declaratory relief pursuant to Federal Rule
`
`of Civil Procedure 57.
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`PARTIES
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`1.
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`Plaintiff Walgreens is an Illinois corporation. During all times relevant to this
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`matter, Walgreens has maintained a retail pharmacy establishment at 11110 Medical Campus Rd.,
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`Suite 105, Hagerstown, MD 21742.
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`2.
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`Upon information and belief, Defendant Meritus is a Maryland corporation with its
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`principal place of business in Hagerstown, Maryland.
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`JURISDICTION AND VENUE
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`3.
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`This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)(1), in
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`that this is a civil action between a citizen of Illinois and a citizen of Maryland and the amount in
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`controversy exceeds $75,000, exclusive of interest and costs.
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`4.
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`Venue is proper in this Court pursuant to 28 U.S.C. § 1391(b)(1) in that Defendant
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`resides in this district.
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`FACTUAL ALLEGATIONS
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`5.
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`Walgreens has operated a retail pharmacy (the “Walgreens Pharmacy”) at the
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`Robinwood medical campus since 2013, pursuant to a certain Lease Amendment, Assignment,
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`Consent to Assignment and Estoppel dated December 13, 2013 (the “Lease Amendment”) by and
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`between Meritus as the Owner/Landlord and Walgreens as the tenant. A true and accurate copy
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`of the Lease Amendment is attached hereto as Exhibit 1, and is incorporated herein by reference.
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`6.
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`Walgreens took over the operations of the retail pharmacy from a prior tenant which
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`operated the pharmacy pursuant to a Lease dated September 1, 2008.
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`2
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 3 of 10
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`7.
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`Walgreens operates the Walgreens Pharmacy in Suite 105 of the Robinwood
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`medical campus (the “Premises” or “Suite 105”).
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`8.
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`The Premises is part of the larger medical complex in the Robinwood medical
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`campus in Hagerstown, Maryland.
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`9.
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`10.
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`The Meritus Medical Center is part of the Robinwood medical campus.
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`Section 3.i of the Lease Amendment contains a restrictive covenant (the
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`“Restrictive Covenant”) by which Meritus agreed that no part of the Robinwood medical campus,
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`including the Meritus Medical Center, would be used for the operation of a retail pharmacy.
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`Specifically, the Restrictive Covenant provides:
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`Exclusive. Landlord covenants and agrees that, during the Term and
`any extension or renewals thereof, no portion of the Building which
`is owned, leased or controlled directly or indirectly by Landlord or
`any of its parents, subsidiaries or affiliates nor any other buildings
`on the Robinwood medical campus (including, without limitation,
`Meritus Medical Center) which are owned, leased or controlled
`directly or indirectly by Landlord or any of its parents, subsidiaries,
`or affiliates (“Landlord’s Property”), will be used for the operation
`of an outpatient retail pharmacy (including, without limitation,
`specialty pharmacy) and/or mail order pharmacy.
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`11. Meritus owns and operates the Meritus Medical Center.
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`12.
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`The right to exclusivity in the Restrictive Covenant was intended to protect
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`Walgreens and the Walgreens Pharmacy against competition from other retail pharmacies. The
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`Restrictive Covenant was a material inducement to Walgreens to enter into the Lease Amendment
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`and to invest capital into the continued operation of the Walgreens Pharmacy, because it ensured
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`that Walgreens would not face direct competition by other retail pharmacies in the Robinwood
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`medical campus.
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`3
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 4 of 10
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`13.
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`As a result of the Lease Amendment and the Restrictive Covenant contained
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`therein, Walgreens had an expectation that no other retail pharmacy would operate on the
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`Robinwood medical campus, including within the Meritus Medical Center.
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`14. Walgreens bargained for the right of exclusivity in the Restrictive Covenant to
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`prevent direct competition within the medical complex and to protect the substantial economic
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`investment it made pursuant to the Lease Amendment and the significant capital expenditures it
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`incurred for operating the pharmacy. Walgreens’ substantial economic investment made in
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`reliance of the Lease Amendment and operation of the Walgreens Pharmacy exceeds $75,000.
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`15. Meritus has knowingly and intentionally violated the Restrictive Covenant by
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`deliberately planning, either directly or through its affiliates, for another retail pharmacy to operate
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`at the Meritus Medical Center.
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`16.
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` In the Fall of 2021, Walgreens received information that Meritus might be planning
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`to build out and/or lease additional space at the Meritus Medical Center as a retail pharmacy.
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`17.
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`In response to this information, Walgreens advised Meritus that any such second
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`pharmacy would be in violation of the Restrictive Covenant in the Lease Amendment and
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`requested that Meritus not proceed with any such plans.
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`18. Meritus did not respond to Walgreens’ communication.
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`19. Meanwhile, and unbeknownst to Walgreens, Meritus was plotting to attempt to rid
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`itself of the exclusivity obligation imposed by the Restrictive Covenant by selling Suite 105.
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`20. Meritus kept this contemplated sale secret from Walgreens until it was a fait
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`accompli.
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`4
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 5 of 10
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`21.
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`On or about December 8, 2021, Meritus advised Walgreens that Meritus sold Suite
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`105, the Premises where Walgreens operates its retail pharmacy.
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`22.
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`At the time of that sale, Meritus owned (and still owns) the Medical Center where
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`it was planning to build a new retail pharmacy.
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`23.
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`Suite 105 was sold by Meritus to Water Street Investments, LLC (“WSI”). The
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`managing member of WSI is a physician affiliated with Meritus.
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`24.
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`The sale of Suite 105 by Meritus was a bad faith attempt by Meritus to avoid having
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`to comply with the exclusivity obligation imposed by the Restrictive Covenant.
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`25.
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`On or about April 1, 2022, Meritus opened, and it presently operates, a retail
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`pharmacy (the “Meritus Pharmacy”) within the Meritus Medical Center that is in direct
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`competition with Walgreens.
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`26.
`
`The Meritus Pharmacy is owned, leased or controlled directly or indirectly by
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`Meritus, or its parents, subsidiaries or affiliates.
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`27.
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`The opening and continued operation of the Meritus Pharmacy is in direct
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`contradiction to the plain terms of the Restrictive Covenant found in the Lease Amendment. The
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`operation of the Meritus Pharmacy, in direct competition with the Walgreens Pharmacy, has
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`caused and will continue to cause damages to Walgreens, including, but not limited to lost revenues
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`and loss of its investment in the continued operation of the Walgreens Pharmacy.
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`28.
`
`29.
`
`The Restrictive Covenant attaches to and runs with the land.
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`The Restrictive Covenant binds the land and Meritus, which owns the land and the
`
`building where the Meritus Pharmacy is located.
`
`30.
`
`The Restrictive Covenant burdens and restricts the use of the land and the property
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`within the Robinwood medical campus.
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`5
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 6 of 10
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`31. Meritus has taken the position that, because it sold Suite 105, where Walgreens
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`operates the Walgreens Pharmacy, Meritus is no longer required to abide by the Restrictive
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`Covenant in the Lease Amendment.
`
`32.
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`The sale of Suite 105, however, has no effect on the Restrictive Covenant in the
`
`Lease Amendment, which burdened the subject land and prohibited Meritus from causing another
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`retail pharmacy to operate within the Robinwood medical campus, including within the Meritus
`
`Medical Center.
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`COUNT I
`(Declaratory Judgment)
`
`33.
`
`All of the foregoing paragraphs are adopted and incorporated by reference as if
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`fully repeated herein.
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`34. Walgreens has a direct, substantial and present justiciable interest concerning its
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`rights and certain restrictions under the Lease Amendment.
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`35.
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`There exists an actual controversy between Walgreens and the Defendant and a
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`declaration of rights and responsibilities of the Parties would terminate the uncertainty or
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`controversy giving rise to this proceeding.
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`36.
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`There is imminent and inevitable litigation regarding the subject matter of the
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`instant Complaint.
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`37.
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`All persons or entities that have an actual, present and adverse interest in the subject
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`matter of this action are parties to this action or are identified in this complaint.
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`WHEREFORE, Walgreens respectfully requests, pursuant to 28 U.S.C. 2201(a), that this
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`Court enter judgment in favor of Walgreens and declaring:
`
`a)
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`That the Restrictive Covenant in the Lease Amendment remains binding on
`
`Meritus.
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`6
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`
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 7 of 10
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`b)
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`That the operation of a retail pharmacy other than Walgreens in the Meritus Medical
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`Center property constitutes a material breach of the Lease Amendment because it violates the
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`Restrictive Covenant; and
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`c)
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`That Meritus is enjoined from operating or entering into agreements related to the
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`operation of a retail pharmacy in violation of the Restrictive Covenant.
`
`Walgreens seeks a speedy hearing pursuant to FRCP 57.
`
`COUNT II
`(Breach of Contract – Specific Performance of Restrictive Covenant)
`
`38.
`
`All of the foregoing paragraphs are adopted and incorporated by reference as if
`
`fully repeated herein.
`
`39. Walgreens and Defendant were parties to the Lease Amendment whereby
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`Defendant leased retail pharmacy space to Walgreens.
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`40.
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`At all times relevant, Defendant was bound by the exclusivity obligation imposed
`
`by the Restrictive Covenant, whereby it covenanted, among other things, not to lease space to
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`another retail pharmacy, or allow a retail pharmacy to operate at the Meritus Medical Center.
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`41.
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`Defendant has materially breached the Restrictive Covenant by operating the
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`Meritus Pharmacy on its property.
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`42. Walgreens has demanded that Defendant cease and desist its continuing violation
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`of the Restrictive Covenant, but Defendant has ignored Walgreens’ demand.
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`43.
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`Unless Defendant is temporarily, preliminarily, and permanently enjoined from
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`permitting another retail pharmacy from operating in violation of the exclusivity provision,
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`Walgreens will suffer substantial, immediate, and irreparable harm for which it has no adequate
`
`remedy at law.
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`7
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 8 of 10
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`44.
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`The operation of the Meritus Pharmacy poses a significant and substantial threat to
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`Walgreens’ business because it directly competes with and is substantially similar to the Walgreens
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`Pharmacy.
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`WHEREFORE, Walgreens requests judgment in its favor on this claim and requests that
`
`the Court:
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`a) Order Defendant to specifically perform its obligations under the Restrictive Covenant;
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`b) Issue a preliminary and permanent injunction restraining Defendant from (i) operating
`
`the Meritus Pharmacy and (ii) allowing any pharmacy other than the Walgreens Pharmacy to
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`operate within Defendant’s property in violation of the exclusivity provision of the Lease
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`Amendment; and
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`c) Award such other and further relief as this Court deems just and proper under the
`
`circumstances, including an award of money damages for losses caused to date by the operation
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`of the Meritus Pharmacy, and the costs and attorneys’ fees incurred in prosecuting this action.
`
`COUNT III
`(Breach of Contract – Covenant of Good Faith and Fair Dealing and Covenant to
`Refrain from Destructive Competition)
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`45.
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`All of the foregoing paragraphs are adopted and incorporated by reference as if
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`fully repeated herein.
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`46. Meritus had a duty to act in good faith and deal fairly with Walgreens in regards to
`
`its agreement with Meritus.
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`47. Meritus had a duty not to act in such a manner as to prevent Walgreens from reaping
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`the fruits of its agreement with Meritus.
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`8
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 9 of 10
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`48. Meritus had a duty to perform its obligations under the Lease Amendment,
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`including the Restrictive Covenant, in good faith and to refrain from destructive competition.
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`49.
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`As set forth herein, Meritus breached its duty of good faith and fair dealing by
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`opening and operating the Meritus Pharmacy.
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`50.
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`The operation of the Meritus Pharmacy in direct competition with the Walgreens
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`Pharmacy has caused damage to Walgreens.
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`51. Meritus’s actions in trying to rid itself of its obligations under the Lease
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`Amendment, by selling Suite 105 and in opening and operating the Meritus Pharmacy were
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`undertaken in bad faith and have resulted in destructive competition. These actions by Meritus
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`have frustrated and irreparably injured the right of Walgreens to receive the fruits of its agreement
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`with Meritus.
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`WHEREFORE, Walgreens requests judgment in its favor on this claim and requests that the
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`Court:
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`a)
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`Order Defendant to specifically perform its obligations under the Restrictive
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`Covenant;
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`b)
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`Issue a preliminary and permanent injunction restraining Defendant from (i)
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`operating the Meritus Pharmacy and (ii) allowing any pharmacy other than the Walgreens
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`Pharmacy to operate within Defendant’s property in violation of the exclusivity provision of the
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`Lease Amendment; and
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`c)
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`Award such other and further relief as this Court deems just and proper under the
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`circumstances, including an award of money damages for losses caused to date by the operation
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`of the Meritus Pharmacy, and the costs and attorneys’ fees incurred in prosecuting this action.
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`9
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`Case 1:22-cv-01151-JRR Document 1 Filed 05/13/22 Page 10 of 10
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` Respectfully submitted,
`
`/s/ Howard R. Feldman
`John J. Hathway (Bar No. 03847)
`Howard R. Feldman (Bar No. 05991)
`Michael P. Collins, Jr. (Bar No. 20805)
`WHITEFORD TAYLOR & PRESTON LLP
`7 Saint Paul Street
`Baltimore, MD 21202-1626
`(410) 347-8700
`jhathway@wtplaw.com
`hfeldman@wtplaw.com
`mcollins@wtplaw.com
`Attorneys for Plaintiff Walgreen Co.
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`JURY DEMAND
`Defendant requests a jury trial on all issues so triable.
`
`/s/ Howard R. Feldman
`Howard R. Feldman
`
`12240497
`
`10
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