Jim Whitney
Economics 495
Case summary brief (2-page maximum)
Recorder name:
Case name:
Citation; Date:
Court:
Imelda Hernandez
Walgreens Company (P) v. Sara Creek Property Company (D)
No. 91-3519, 966 F .2d 273; 1992
United States Court of Appeals for the Seventh-Circuit
Name (if specified) and description of litigants at the original trial court level
Plaintiff:
Walgreen Company
Defendant: Sara Creek Property Company
Facts of the case:
Walgreens is located in a mall, leased by Sara Creek. In Walgreen’s contract it
indicates that Sara Creek cannot lease space for any other pharmacy. When the
opportunity presented itself when the anchor tenant went out of business, Sara Creek
leased the space to Phar-Mor, a discount store. As a result, Walgreens asked for an
injunction. Initially the court granted Walgreens the injunction, which then the case was
sent to the court of appeals. The question on hand was whether to grant a permanent
injunction if the damages remedy seem inadequate. Sara Creek questioned why during
the original trial, the judge did not demand for Walgreens to provide a sense of the
financial damages they would incur. Calculating damages was considered to be difficult
since Walgreen’s lease was of ten years, then the loss of sales would have need to be
predicted for that time. The verdict at the court of appeals affirmed the original verdict.
Procedural history (remedy sought, prior rulings, grounds for appeal, etc., as available):
Appeal from the United States District Court for the Eastern District of Wisconsin.
Originally the plaintiff won the injunction, then the defendant appealed questioning the
lack of damages the plaintiff failed to provide. Case went to the court of appeals.
Court opinion (key issues and arguments):
Difficult to estimate the loss of profits for Walgreen’s 10 years lease with Sara Creek.
Also need to take into consideration the wellbeing of society. If allowing a discount store
in the premises will give society access to affordable products, then dismissing the
injunction should be considered.
Dissenting opinion, if any (key issues and arguments):
n/a
Disposition of case:
Affirmed original verdict.
ANALYSIS OF THE CASE
1. Course topic of the
Contract. Breaking contracts, in terms of breach of
case:
contract of specific performance.
2. How does the case relate to the course topic?
Illustrates specific performance. The advantages are markets determine damages,
avoiding litigation costs and errors. The disadvantages are the risk of inefficiency due to
bilateral monopoly. Requires court monitoring of performance.
3. Which previously assigned cases, if any, are related to this case, and how does
this one differ?
n/a
4. How does the case affect economic incentives and efficiency?
Discourages companies from taking upon leases that might not provide them security
from competition. Businesses might not want to undergo lease contracts that will fail to
abide by the restrictions implemented, since it will take a toll on their profits.