Case 2:18-cv-02882-NJB-MBN Document 1 Filed 03/19/18 Page 1 of 8

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

2801 MAGAZINE STREET, LLC CIVIL ACTION NO.

VERSUS MAGISTRATE JUDGE

CHIPOTLE MEXICAN GRILL OF

COLORADO, LLC AND CHIPOTLE
MEXICAN GRILL, INC.

COMPLAINT

NOW INTO COURT, through undersigned counsel, comes Plaintiff 2801 Magazine

Street, LLC (“Plaintiff,”) which files this complaint against Defendants Chipotle Mexican Grill

of Colorado, LLC and Chipotle Mexican Grill, Inc. (collectively, “Defendants”). Based on

information and belief, Plaintiff respectfully avers as follows:

PARTIES

1. Plaintiff 2801 Magazine Street, LLC is a limited-liability company organized under the

laws of Delaware with its principal place of business in New Orleans, Louisiana.

Plaintiff is owned entirely by Danusha, LLC, a Louisiana limited-liability company.

Danusha, LLC’s managers are Danielle Haynes Kavanagh, an individual above the age of

majority who resides in New Orleans, Louisiana, and Mark A. Fullmer, an individual

above the age of majority who resides in Metairie, Louisiana.

2. Defendant Chipotle Mexican Grill of Colorado, LLC (“Chipotle LLC”) is a limited-

liability company organized under the laws of Colorado, with its principal place of

business in Denver, Colorado. Chipotle LLC’s members/managers are M. Steven Ells, an

individual above the age of majority who resides in Denver, Colorado, John Hartung, an

individual above the age of majority who resides in Denver, Colorado, and Chipotle

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Mexican Grill, Inc., a corporation organized under the laws of Delaware, with its

principal place of business in Denver, Colorado. Chipotle LLC is registered to do

business in Louisiana, and may be served through its registered agent Cogency Global,

Inc., 3867 Plaza Tower Dr., 1st Floor, Baton Rouge, Louisiana 70816.

3. Defendant Chipotle Mexican Grill, Inc. (“Chipotle”) is a corporation organized under the

laws of Delaware with its principal place of business in Denver, Colorado. Chipotle is

registered to do business in Louisiana, and may be served through its registered agent

Cogency Global, Inc., 3867 Plaza Tower Dr., 1st Floor, Baton Rouge, Louisiana 70816.

JURISDICTION

1. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §

1332. There is complete diversity of citizenship between Plaintiff and Defendants, and

the amount in controversy exceeds $75,000, exclusive of interest and costs.

2. Defendant Chipotle LLC is subject to the Court’s personal jurisdiction because Chipotle

LLC specifically solicited and conducted business in the City of New Orleans, Louisiana,

which is within this judicial district.

3. Defendant Chipotle is subject to the Court’s personal jurisdiction because Chipotle

specifically solicited and conducted business in the City of New Orleans, Louisiana,

which is within this judicial district, and because Chipotle entered a guaranty agreement

with Plaintiff wherein Chipotle agreed to exclusive jurisdiction in the U.S. District Court

for the Eastern District of Louisiana and/or Orleans Parish Civil District Court.

VENUE

4. Venue is proper and lies in this Court pursuant to 28 U.S.C. 1391(b) because Defendants

engage in business activity in this District as set forth above, and a substantial part of the

events or omissions giving rise to Plaintiff’s claims occurred in this judicial district.

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Specifically, as a result of Defendants’ acts and omissions, which occurred in this district,

Plaintiff has suffered damages in this judicial district.

FACTUAL ALLEGATIONS

1. Plaintiff owns the 7-unit shopping center located at 2801 Magazine Street, New Orleans,

Louisiana, 70115 (the “Center”). On or around July 14, 2017, Plaintiff entered into a

commercial lease with Defendant Chipotle LLC (the “Lease”). Pursuant to the Lease,

Chipotle LLC leases Unit 2 at the Center (the “Property”) for an initial term of ten years.

A copy of the Lease is attached hereto as Exhibit “A.”

2. Pursuant to the Lease, Chipotle LLC is permitted to use the Property to operate a

“Chipotle” restaurant serving specialty burritos, Mexican wraps, fajitas, tacos, and other

items generally served in a “Chipotle” restaurant, and for the retail sale of any other

goods or services that do not violate an exclusive use or a prohibited use restriction in

effect from time to time in leases in the Center. See Ex. A § 1.1

3. Pursuant to the Lease, Chipotle LLC agrees to pay Plaintiff base rent in the amount of

$9,137.50 per month for lease years 1-5 and base rent in the amount of $10,051.25 in

lease years 6-10. See id. Chipotle LLC is also obligated to pay as rent taxes, insurance

and common maintenance expenses in each lease year under the Lease (the “Triple Net

Expenses”). See id. §§ 9.2, 10.3, 10.5, and 12.1.

4. Moreover, pursuant to the Lease, Plaintiff is entitled to “all costs, damages and expenses,

including reasonable attorney’s fees,” in the event that Plaintiff must seek judicial relief

against Chipotle LLC. See id. § 38.12.

5. Defendant Chipotle guarantees all obligations of Chipotle LLC under the Lease, as set

forth in the Guaranty of Lease. A copy of the Guaranty of Lease is attached hereto as

Exhibit “B”; see also Ex. A § 40.1 (stating that “[c]ontemporaneously with the execution

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of this Lease, Chipotle Mexican Grill, Inc., a Delaware corporation, shall execute a

Guaranty . . . .”).

6. Specifically, Chipotle, inter alia, “absolutely and unconditionally guarantees to [Plaintiff]

and [Plaintiff’s] successors and assigns the prompt payment of rent and other sums of

money and the full and timely performance of the covenants and agreements to be made

and performed by [Chipotle LLC] under the Lease (collectively, the “Obligations”). If

[Chipotle LLC] shall at any time and in any manner default in the payment or

performance of any of the Obligations, then [Chipotle] shall immediately: (i) pay to

[Plaintiff] the full amount of any defaulted Obligations and other sums then or thereafter

due under the Lease; (ii) fully satisfy and perform any defaulted Obligation; and (iii) pay

to [Plaintiff] the amount of damages, costs, and expenses incurred by [Plaintiff] by reason

of such default and any subsequent default by [Chipotle LLC]. [Chipotle’s] liability

under this Guaranty of Lease is solidary (joint and several) with [Chipotle LLC].” See

Ex. B, p. ¶ 1.

7. After staunch opposition from neighbors about Chipotle LLC’s occupancy of the

Property, and through great effort and expense by Plaintiff, Plaintiff and Chipotle LLC

also entered into a “Good Neighbor Agreement and Restrictive Covenants” with the

Garden District Association, a Louisiana non-profit corporation (the “GDA”), and

Neighborhood Improvement Association of the Irish Channel, Inc., a Louisiana non-

profit corporation (the “ICA”), on or around December 11, 2017 (the “GNARC”). A

copy of the GNARC is attached hereto as Exhibit “C.”

8. In the GNARC, Plaintiff agreed to forever burden the Center with a restrictive covenant,

which provides that upon termination of the Lease, “no portion of the [Center] shall be

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used as a restaurant, fast food, as defined in the [New Orleans Comprehensive Zoning

Ordinance]” (the “Restrictive Covenant”). See Ex. C § 3(k).

9. Plaintiff granted the Restrictive Covenant for the sole benefit of Chipotle LLC, in order

for Chipotle LLC to obtain the required City of New Orleans permit.

10. The Restrictive Covenant substantially and negatively affects Plaintiff’s ability to relet

any portion of the Center to a tenant similar to Chipotle LLC, and decreases both the

Property’s future rental value and by extension the fair market value of the Center.

11. Additionally, pursuant to the GNARC, Plaintiff agreed to use a more expensive dumpster

service at the Center in an effort to reach a compromise with the GDA and ICA. See id.

§3 (b).

12. On March 8, 2018, Chipotle LLC abandoned the Property without cause by informing

Plaintiff in writing that: (i) it will not proceed with constructing tenant improvements on

the Property, (ii) it will not open or operate its restaurant, and (iii) Plaintiff should “relet

the premises and otherwise mitigate its damages.” A copy of Chipotle LLC’s March 8,

2018 Letter is attached hereto as Exhibit “D.”

13. Plaintiff intends to enforce the parties’ obligations under the Lease and the Guaranty of

Lease.

14. By demand letter dated March 13, 2018, Plaintiff made demand on Defendants for

accelerated rent in the amount of $1,151,325, accelerated over the course of the Lease’s

ten-year rental period, accelerated Triple Net Expenses which are rent under the Lease of

not less than $180,030, all damages that Plaintiff has sustained as a result of Chipotle

LLC’s abandonment of its lease obligations, including, without limitation, damages

sustained as a result of the Restrictive Covenant and its other covenants in the GNARC,

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and attorneys’ fees, all of which Plaintiff is entitled to either under Louisiana law or the

terms of the Lease.

15. To date, Defendants have not advised Plaintiff of a change in their position with regard to

Chipotle LLC’s abandonment of the Lease; Defendants failed to respond to the March 13,

2018 demand letter sent by Plaintiff.

16. To date, neither Chipotle LLC nor Chipotle have paid Plaintiff any portion of the

accelerated rent, Triple Net Expenses, damages, costs, expenses, and/or attorneys’ fees,

as described above.

17. Plaintiff has been harmed by Chipotle LLC’s abandonment of the Property.

18. Plaintiff has been harmed by Chipotle’s failure to satisfy any of Chipotle LLC’s defaulted

obligations, as Chipotle is required to do under the Guaranty of Lease. See Ex. B, pp. 1-

2.

COUNT I – DEFAULT UNDER THE LEASE

19. Chipotle LLC has abandoned the Lease and refused to perform its obligations under the

Lease. Chipotle has defaulted in the performance of its obligations to Plaintiff under the

Guaranty of Lease, including but not limited to Defendants’ failure to make the required

payments recited above.

20. Acting as Chipotle LLC’s mandatary solely to the extent permitted by Louisiana law due

to Chipotle LLC’s abandonment of the Lease, and intending to enforce the Lease,

Plaintiff has begun to search for a replacement tenant for Chipotle LLC at the Property,

but as yet, has been unable to find such a tenant. Accordingly, Plaintiff has suffered and

continues to suffer substantial damages.

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21. Plaintiff is entitled to a judgment declaring that Chipotle LLC has abandoned the Lease,

that Defendants are solidarily (jointly and severally) liable to Plaintiff for the accelerated

base rentals in the amount of $1,151,325, accelerated over the course of the Lease’s ten-

year rental period, accelerated Triple Net Expenses which are rent under the Lease of not

less than $180,030, all damages that Plaintiff has sustained as a result of Chipotle LLC’s

abandonment of its Lease obligations and Chipotle’s breach of its Guaranty of Lease

obligations, including, without limitation, damages sustained as a result of the Restrictive

Covenant, its other covenants in the GNARC, and costs, expenses, and attorneys’ fees

incurred in enforcing its rights.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff 2801 Magazine Street, LLC respectfully requests that the

Court:

1. Find and declare that Defendant Chipotle Mexican Grill of Colorado, LLC has

abandoned the Lease;

2. Find and declare that Defendant Chipotle Mexican Grill, Inc. has defaulted on its

obligations under the Guaranty of Lease by failing to fulfill Chipotle LLC’s obligations

under the Lease, after Chipotle LLC abandoned those obligations;

3. Find and declare that Defendants are solidarily (jointly and severally) liable to Plaintiff

for the accelerated base rentals in the amount of $1,151,325, and grant to Plaintiff the

same;

4. Find and declare that Defendants are solidarily (jointly and severally) liable to Plaintiff

for the accelerated Triple Net Expenses of not less than $180,030, and grant to Plaintiff

the same;

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5. Find and declare that Defendants are solidarily (jointly and severally) liable to Plaintiff

for all damages that Plaintiff has sustained as a result of Chipotle LLC’s abandonment of

the Lease and its obligations thereunder and Chipotle’s breach of its Guaranty of Lease

obligations, including, without limitation, damages sustained as a result of the Restrictive

Covenant and its other covenants in the GNARC, and grant to Plaintiff the same;

6. Find and declare that Defendants are solidarily (jointly and severally) liable to Plaintiff

for Plaintiff’s costs, expenses, and reasonable attorney’s fees in bringing this matter, as

set forth in § 38.12 of the Lease, and grant to Plaintiff the same; and

7. Grant Plaintiff all other relief as this Court determines to be just and equitable.

Respectfully submitted,

PHELPS DUNBAR LLP

BY: /s/ Christopher K. Ralston

Christopher K. Ralston, (Bar #26706)
Lindsay Calhoun, (Bar #35070)
Canal Place | 365 Canal Street, Suite 2000
New Orleans, Louisiana 70130-6534
Telephone: 504-566-1311
Telecopier: 504-568-9130
Email: ralstonc@phelps.com
lindsay.calhoun@phelps.com

ATTORNEYS FOR PLAINTIFF 2801

MAGAZINE STREET, LLC

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