## Facts

- Tenet operated an outpatient surgery center under a long-term commercial lease for space in a Louisiana shopping center.
- The lease allowed assignment with the landlord’s consent, and required that consent “shall not be unreasonably withheld.”
- West Jefferson, a public hospital service district, purchased the shopping center and became Tenet’s landlord, taking the property subject to existing leases.
- Tenet stopped operating the surgery center and sought to assign the lease to Pelican, which proposed to operate an occupational medicine clinic providing general medical services, largely for workers’ compensation patients and some walk-in patients.
- West Jefferson refused to consent, asserting (1) the proposed use was outside the lease’s permitted uses and (2) the clinic would compete with West Jefferson’s services and conflict with West Jefferson’s plans for future expansion of its hospital campus.

## Issues

1. Whether West Jefferson unreasonably withheld consent to Tenet’s proposed lease assignment in violation of the lease clause requiring consent not be unreasonably withheld.
2. Whether a landlord may withhold consent based on competitive concerns and the landlord’s future business plans rather than objective, lease-related reasons.

## Decision

- The Fifth Circuit reversed the district court’s summary judgment for West Jefferson.
- The court held that West Jefferson unreasonably withheld consent as a matter of law.
- The court determined Pelican’s proposed occupational medicine clinic fell within the lease’s permitted use for “general medical and physicians offices.”
- The court held that competitive motives and the landlord’s expansion plans were improper bases to deny consent absent express contractual authorization.

## Legal Principles

- A “consent not unreasonably withheld” clause imposes an objective standard; refusal must be supported by legitimate concerns tied to the lease and the premises.
- Reasonable grounds to deny consent may include factors such as the assignee’s financial responsibility, legality of the proposed use, compliance with lease restrictions, or material impacts on the property.
- A landlord generally may not withhold consent based on reasons personal to the landlord’s economic interests as a competitor, such as suppressing competition.
- A purchaser of leased property succeeds to the lease’s benefits and burdens and cannot use post-purchase business strategies to avoid contractual limits on discretion.

## Conclusion

The court held that the landlord breached the lease by withholding consent for reasons unrelated to objective lease or property concerns, rejecting competition-based and expansion-based justifications where the proposed assignee’s use fit within the lease’s permitted medical uses.


Tenet Healthsystem Surgical, L.L.C. v. Jefferson Par. Hosp. Serv. Dist. No. 1, 426 F.3d 738 (5th Cir. 2005)