## Facts

- J.C. Penney Company, Inc. was an anchor tenant in the Quaker Village Shopping Center in Pennsylvania under a long-term lease.
- Penney’s lease permitted operation of a department store “including a prescription pharmacy.”
- Penney claimed the lease also functioned as an exclusive-use provision that barred the landlord (and other tenants) from allowing a competing pharmacy in the center.
- Giant Eagle, Inc. became a tenant and planned to operate a supermarket with an in-store, full-service pharmacy.
- Giant Eagle opened its pharmacy on August 13, 1992; Penney filed suit the same day seeking to enjoin the pharmacy’s operation.
- Penney alleged a competing in-center pharmacy would cause loss of business and irreparable harm not adequately compensable by money damages.

## Issues

1. Whether, under Pennsylvania contract law, Penney’s lease created a clear and enforceable exclusive-use right or restrictive covenant prohibiting another tenant from operating a prescription pharmacy in the shopping center.
2. Whether Penney satisfied the federal requirements for a preliminary injunction, particularly likelihood of success on the merits and irreparable harm.

## Decision

- The Third Circuit reversed the district court’s order granting a preliminary injunction against Giant Eagle.
- The court held Penney failed to show a sufficient likelihood of success because the lease did not unambiguously create an exclusive pharmacy right.
- The court reasoned that language permitting Penney to operate a pharmacy described Penney’s allowed use, not a center-wide restriction on competitors.
- Applying strict construction principles for restrictive covenants, the court declined to infer exclusivity by implication and resolved any ambiguity against the restraint on use.
- The court also noted Penney’s alleged harm was primarily economic and generally compensable by damages, while an injunction would substantially harm Giant Eagle’s supermarket operations.

## Legal Principles

- Commercial leases are interpreted as contracts; when terms are clear, intent is determined from the document’s text under Pennsylvania law.
- Restrictive covenants limiting use of property or restraining competition must be clearly expressed and are strictly construed; ambiguous provisions are construed against the party asserting the restriction and in favor of free use.
- A preliminary injunction is an extraordinary remedy; the movant bears a heavy burden to show (1) likelihood of success, (2) irreparable harm, (3) favorable balance of harms, and (4) consistency with the public interest.
- Economic injury alone is ordinarily not irreparable where money damages can provide adequate relief.

## Conclusion

The Third Circuit vacated the preliminary injunction because the lease’s permissive “including a prescription pharmacy” language did not clearly create a center-wide exclusive right, and Penney’s showing on likelihood of success and irreparable harm was insufficient to justify extraordinary injunctive relief.


J.C. Penney Co. v. Giant Eagle, Inc., 85 F.3d 120 (3d Cir. 1996)