Whole Foods Mkt. Grp., Inc. v. Cbl-Friendly Ctr. Cmbs, LLC

Whole Foods Mkt. Grp., Inc. v. CBL-Friendly Ctr. CMBS, LLC, 2025 NCBC 72.

STATE OF NORTH CAROLINA I THE GENERAL COURT OF JUSTICE
SUPERIOR COURT DIVISION
COUNTY OF GUILFORD 25CV005101-400
WHOLE FOODS MARKET
GROUP, INC.,

Plaintiff,

v. ORDER AND OPINION ON
DEFENDANTS’ MOTIONS TO
CBL-FRIENDLY CENTER DISMISS
CMBS, LLC, and TRANSFORM
LEASE OPCO LLC,

Defendants.

1. THIS MATTER is before the Court on Motions to Dismiss filed by both

Defendant Transform Lease Opco LLC (Transformco), (ECF No. 15), and Defendant

CBL-Friendly Center CMBS, LLC (CBL-Friendly), (ECF No. 16), (collectively, the

Motions).

2. The action arises from a controversy resulting from redevelopment work

performed by CBL-Friendly on a building adjacent to a Whole Foods store. Whole

Foods Market Group, Inc. (Whole Foods) alleges that during the redevelopment work,

asbestos both migrated to its store from the adjacent building and was released

within its store, forcing Whole Foods to close the premises for a period of two weeks,

remediate the problem, and discard some of its inventory.

3. The Court, having considered the Motions, the exhibits submitted in

support of and in opposition to the Motions, the related briefing, other relevant

matters of record, and the arguments of counsel at a hearing on the Motions held 13

August 2025, concludes for the reasons stated below that the Motions should be

DENIED.
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., by Thomas G.
Hooper, Brian M. Ballay, M. David Kurtz, and Alexandra B. Rychlak,
for Plaintiff Whole Foods Market Group, Inc.

Womble Bond Dickinson (US), LLP, by Michael Montecalvo and Zachary
Bernstein, for Defendant Transform Lease Opco LLC.

Ellis & Winters LLP, by Curtis Shipley and Andrew S. Chamberlin, for
Defendant CBL-Friendly Center CMBS, LLC.

Earp, Judge.

I. FACTUAL BACKGROUND

4. The Court does not make findings of fact when deciding a motion to dismiss

pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure. It recites

below factual allegations from the complaint that are relevant to a determination of

the Motions. See, e.g., White v. White, 296 N.C. 661, 667 (1979) (stating that the

purpose of “a motion to dismiss is to test the law of a claim, not the facts which

support it” (citations omitted)).

5. Whole Foods is a Delaware corporation that maintains a registered office

in North Carolina, is duly authorized to transact business in North Carolina, and

maintains a place of business in Guilford County, North Carolina. (Compl. ¶ 4, ECF

No. 3.)

6. CBL-Friendly is a Delaware limited liability company with a registered

office in North Carolina. (Compl. ¶ 5.)

7. Transformco is a Delaware limited liability company with a registered office

in North Carolina. (Compl. ¶ 6.)
8. On 23 September 1971, Friendly Center, Inc. executed an agreement to

lease a portion of the Friendly Shopping Center, a commercial complex located in

Greensboro, North Carolina, to Sears Roebuck & Co. (Sears). (Compl. ¶ 7.) One of

the buildings leased was a two-story structure occupied by a Sears department store

(Sears Building). (Compl. ¶ 8.)

9. On 27 September 2010, Sears subleased a portion of the first floor of the

Sears Building to Whole Foods (Whole Foods Premises) to operate a grocery store.

(Compl. ¶¶ 8–10; Decl. of Michael Montecalvo [Montecalvo Decl.], Exhibit A Sublease

[Sublease] § 7.1(a)(i), ECF No. 19.1.)

10. The Sublease states in pertinent part:

(iii) The [Whole Foods] Premises shall be water-tight, free of Hazardous
Materials, free and clear of all prior tenancies, tenants and occupants,
and in a good, structurally sound condition . . . which completion shall
be evidenced by a written certification by Landlord’s architect to [Whole
Foods].

(iv) Landlord shall have removed all asbestos from the [Whole Foods]
Premises and shall have provided [Whole Foods] with evidence of the
completion of the same in form and substance acceptable to all
applicable governing authorities as a condition to issuance to [Whole
Foods] of a building permit for [Whole Foods’] Work.

(Sublease § 5.2(a)(iii)–(iv).)

11. The Sublease also provides:

If Landlord learns of the existence of Hazardous Material on the
Development and same was not caused by [Whole Foods], Landlord shall
immediately disclose the nature of such material to [Whole Foods].
Landlord shall make reasonable effort, at its sole cost, to remove or
cause to be removed said Hazardous Material if, in [Whole Foods’]
judgment, it detrimentally affects [Whole Foods’] business or its
employees[,] is disclosed, and Landlord fails to remove such-material
with reasonable promptness, [Whole Foods] shall have the right, at its
sole option, to abate rent proportionately to the detrimental effect on
[Whole Foods’] business[.]

(Sublease § 17.17(c)(iii).)

12. Section 17.17(a)(ii) of the Sublease defines “Hazardous Material” to include

asbestos.

13. In addition to Section 17.17(c)(iii), Section 4.3 of the Sublease provides for

rent abatement:

(b) Interfering Conditions Caused by Landlord. If the Interfering
Condition was caused by Landlord or persons subject to Landlord’s
control and such Interfering Condition persists for more than forty-eight
(48) hours after Tenant gives Landlord notice (notice by telephone shall
be sufficient for this purpose) of such Interfering Condition, then in
addition to Tenant’s other rights under this Lease (including, without
limitation, Tenant’s right to damages and to exercise its self help
remedies under Section 10.4 below), Tenant shall have the right, upon
written notice to Landlord, to abate Base Rent in the manner
hereinafter provided:

...

(B) If Tenant does not continue operating in the [Whole Foods]
Premises while such Interfering Condition persists, Tenant shall have
the right to abate Base Rent entirely during the period such Interfering
Condition persists.

(Sublease § 4.3(b)(B).)1

14. During occupation, the Sublease allows for “lawful, quiet and peaceful

possession and occupation” of the premises. (Sublease § 13.1(f).)

1 During the period in which Whole Foods’ relationship was with Sears, the Sublease was

amended multiple times. However, none of the provisions at issue changed. (Compl. ¶ 22;
Montecalvo Decl., Exhibit C First Amendment to Lease, ECF No. 19.3; Exhibit D Second
Amendment to Lease, ECF No. 19.4; Exhibit E Third Amendment to Lease, ECF No. 19.5.)
15. Section 17.10 provides that the Sublease “shall run with the land and bind

and inure to the benefit of Landlord and Tenant and their respective successors and

assigns.” (Sublease § 17.10.)

16. On 15 October 2018, Sears filed a petition for Chapter 11 bankruptcy in the

United States Bankruptcy Court for the Southern District of New York (the

Bankruptcy Court). (Compl. ¶ 20.) The Bankruptcy Court entered an Order on 8

February 2019 approving an asset purchase agreement in which Transform Holdco

LLC2 purchased various assets of Sears, including its interest in the Sublease.

(Compl. ¶ 21; Montecalvo Decl., Exhibit B In re Sears Holdings Corporation, et al.,

Case No. 18-23538 (RDD) (Bankr. S.D.N.Y. 2019) [Bankruptcy Order], ECF No. 19.2.)

17. On 9 September 2019, Whole Foods and Transform Operating Stores

entered into a fourth amendment to the Sublease in which they ratified and

confirmed the unamended portions of the Sublease in its entirety. (Compl. ¶ 24;

Montecalvo Decl., Exhibit F Fourth Amendment to Lease [Fourth Amendment] § 6(d),

ECF No. 19.6.) None of the relevant provisions changed. The parties also agreed

that “as of the date of this Amendment, no default by the other exists under the Lease

and no notice of default has been given or received by such party.” (Fourth

Amendment § 6(a).)

18. The Sears department store closed in spring 2023. Prior to its closing, CBL-

Friendly and Transformco began discussions regarding redevelopment of the vacant

2 Whole Foods alleges that Transform Operating Stores, LLC (Transform Operating Stores)

acquired the interest to the Sublease from Transform Holdco, LLC, and that, subsequently,
the named Defendant, Transformco, acquired the interest. (Compl. ¶¶ 23, 25.)
portion of the Sears Building that was not occupied by Whole Foods (the CBL-

Friendly Premises). (Compl. ¶¶ 26–27.) In preparation for the redevelopment, CBL-

Friendly recaptured the vacant parcel from Transformco and hired D.H. Griffin

Construction Co., LLC (D.H. Griffin) as its contractor. (Compl. ¶¶ 28–29.) D.H.

Griffin hired Demolition & Asbestos Removal, Inc. (DARI) to remove the asbestos.

(Compl. ¶ 39.)

19. D.H. Griffin and CBL-Friendly agreed to a Scope of Work (SOW) that

detailed plans for the demolition and reconstruction of the CBL-Friendly Premises.

(Compl. ¶¶ 29–30; Montecalvo Decl., Exhibit H, Operating Agreement, Scope of Work

[Scope of Work], ECF No. 19.8.)

20. On 5 April 2023, Whole Foods, CBL-Friendly, and Transformco entered into

an Operating Agreement outlining the terms by which CBL-Friendly would redevelop

the CBL-Friendly Premises. (Compl. ¶ 31; Montecalvo Decl., Exhibit H Operating

Agreement [Operating Agreement], ECF No. 19.8.)

21. Whole Foods alleges that CBL-Friendly and Transformco were aware that

Whole Foods was to remain open throughout the redevelopment project. (Compl.

¶ 33.) For this reason, the Operating Agreement imposed restrictions on the

redevelopment work, including:

a. [CBL-Friendly] will at all times act reasonably and with due
consideration for the interests of Whole Foods and will cause as
little disturbance to the operations of Whole Foods, Whole Foods’
customers, and Whole Foods’ employees as is reasonably practical
including taking all reasonable mitigation measures to reduce
noise, dust, debris and vibrations to the Whole Foods Premises[.]
(Operating Agreement § 3; Compl. ¶ 34a.)
b. No modifications are to be done to any area of the current
Whole Foods tenant space, and all precautions taken to limit any
interference with their business operations. (Scope of Work ¶ 1;
Compl. ¶ 34b.)

c. All work shall be completed with due diligence and in a manger
[sic] consistent with a first-class shopping center or first-class
commercial [or] residential property. (Operating Agreement § 14;
Compl. ¶ 34c.)

22. In addition, CBL-Friendly committed to perform the following work at its

sole cost and expense: “(i) construct a rear exterior wall to ensure that the Whole

Foods Premises remains intact, watertight and structurally sound, [and] (ii) separate

(including separately metering) all utilities and building systems from the Whole

Foods Premises[.]” (Operating Agreement § 3; Compl. ¶ 35a.)

23. Whole Foods alleges that all parties were aware of asbestos-containing

material (ACM) in the CBL-Friendly Premises. Accordingly, paragraph 3 of the Scope

of Work provides, “[a]batement of ACM in fully demolished structures will be

completed prior to demolition.” (Compl. ¶ 35b; Scope of Work ¶ 3.)

24. In light of the Operating Agreement, Transformco, as successor in interest

to Sears, executed a Fifth Amended Lease Agreement in which Transformco and

Whole Foods again ratified and confirmed the relevant provisions of the Sublease.

(Compl. ¶¶ 36–37; Montecalvo Decl., Exhibit G Fifth Amendment to Lease [Fifth

Amendment] § 25, ECF No. 19.7.)

25. The Fifth Amendment provides that “[t]o Tenant’s actual knowledge: (a) no

event of default has occurred, and (b) no event has occurred that, with the giving of
notice, the passage of time, or both, could constitute an event of default by Tenant or

Landlord[.]” (Fifth Amendment, Exhibit B at 2.)

26. Whole Foods alleges that CBL-Friendly was aware of the risk that asbestos

could migrate into the Whole Foods Premises during the abatement process, so CBL-

Friendly hired an industrial hygienist to place monitors near the demising wall that

separated the Whole Foods Premises from the CBL-Friendly Premises. (Compl.

¶ 40.) Monitoring began on 25 July 2023. (Compl. ¶ 41.)

27. In late August 2023, DARI pressure-washed the construction area near the

demising wall. (Compl. ¶ 42.) In early September 2023, DARI again pressure-washed

the area. (Compl. ¶ 43.) On both occasions, water leaked into the Whole Foods

Premises. (Compl. ¶¶ 42–43.)

28. On 11 September 2023, the asbestos monitors detected asbestos in the

Whole Foods Premises for the first time. (Compl. ¶ 49.) Whole Foods alleges that

asbestos migrated into the store as a result of the water leaks. (Compl. ¶ 44.)

29. Whole Foods also alleges that the redevelopment work caused vibrations in

its store, jarring loose asbestos that still existed on or near the ceiling at the back of

the store close to the demising wall. (Compl. ¶¶ 45–48.)

30. Whole Foods alleges that it did not cause asbestos to be in its store, and

until these events, it was unaware that Sears had failed to remove all asbestos from

the Whole Foods Premises before tendering possession in 2010. (Compl. ¶¶ 46–47.)
31. Whole Foods further alleges that CBL-Friendly became aware of the

asbestos on 12 September 2023, but that it failed to notify Whole Foods of the problem

for another three days. (Compl. ¶¶ 50–51.)

32. On 20 September 2023, CBL-Friendly’s industrial hygienist recommended

that the Whole Foods Premises be closed to remediate the asbestos as soon as

possible. Whole Foods closed its store on 21 September 2023, and it remained closed

until 4 October 2023. (Compl. ¶¶ 52–53.)

33. Whole Foods alleges that it reported the presence of asbestos to its landlord,

Transformco, but Transformco refused to remove it. (Compl. ¶ 54.) Consequently,

Whole Foods undertook to clean the store itself. (Compl. ¶ 53.)

34. In addition to the expense it incurred to remediate the asbestos, Whole

Foods alleges that it lost profits and was forced to discard a large amount of

perishable inventory. (Compl. ¶ 55.) It seeks damages for these losses.

II. PROCEDURAL BACKGROUND

35. Whole Foods filed suit on 5 March 2025 in Guilford County Superior Court,

asserting claims for (1) breach of contract against CBL-Friendly; (2) breach of

contract against Transformco; and (3) declaratory judgment against Transformco.

(See generally Compl.)

36. On 8 April 2025, the case was designated to the Business Court and

assigned to the undersigned. (ECF Nos. 1–2.)

37. On 28 May 2025, Transformco and CBL-Friendly filed the Motions. (ECF

Nos. 15–16.) After full briefing, the Court held a hearing on the Motions on 13 August
2025, at which all parties were represented by Counsel. (Not. of Hr’g, ECF No. 41.)

The Motions are now ripe for disposition.

III. LEGAL STANDARD

38. Both Defendants move to dismiss Plaintiff’s claims in their entirety

pursuant to Rule 12(b)(6). “A motion to dismiss under Rule 12(b)(6) ‘tests the legal

sufficiency of the complaint.’ ” Design Gaps, Inc. v. Hall, 2024 NCBC LEXIS 64, at

*6 (N.C. Super. Ct. May 1, 2024) (quoting Isenhour v. Hutto, 350 N.C. 601, 604 (1999)).

Dismissal of a claim is proper if “(1) the complaint on its face reveals that no law

supports the plaintiff’s claim; (2) the complaint on its face reveals the absence of facts

sufficient to make a good claim; or (3) the complaint discloses some fact that

necessarily defeats the plaintiff’s claim.” Corwin v. Brit. Am. Tobacco, PLC, 371 N.C.

605, 615 (2018) (citations omitted); see Sutton v. Duke, 277 N.C. 94, 103 (1970) (“[A]

complaint should not be dismissed for insufficiency unless it appears to a certainty

that plaintiff is entitled to no relief under any state of facts which could be proved in

support of the claim.”) (citation and emphasis omitted).

39. When deciding a motion to dismiss, the Court views the allegations in the

“light most favorable to the non-moving party.” Sykes v. Health Network Sols., Inc.,

372 N.C. 326, 332 (2019). Nevertheless, the Court is not required “to accept as true

allegations that are merely conclusory, unwarranted deductions of fact, or

unreasonable inferences.” Good Hope Hosp., Inc. v. N.C. HHS, Div. of Facility Servs.,

174 N.C. App. 266, 274 (2005) (citation and internal quotation marks omitted).
40. The Court “may properly consider documents which are the subject of a

plaintiff’s complaint and to which the complaint specifically refers even though they

are presented by the defendant.” Oberlin Cap., L.P. v. Slavin, 147 N.C. App. 52, 60

(2001).

IV. ANALYSIS

A. Breach of Contract Against CBL-Friendly

41. CBL-Friendly first argues that Whole Foods does not state a breach of

contract claim against it because the complaint does not contain allegations tracing

a legal injury to CBL-Friendly. (CBL-Friendly Center CMBS, LLC’s Br. Supp. Mot.

Dismiss [CBL-Friendly Br.] 11, ECF No. 17.) Specifically, CBL-Friendly contends

that Whole Foods has alleged that Transformco, as the successor to Sears, was

responsible for removing asbestos from the Whole Foods Premises but allegedly failed

to do so. (CBL-Friendly Br. 11.) Thus, CBL-Friendly concludes that Whole Foods’

allegations trace the presence of asbestos to Sears/Transformco, and not to it. (CBL-

Friendly Br. 11.)

42. Whole Foods responds that CBL-Friendly’s argument implicates its

standing to sue, not whether it has stated a viable claim. It maintains that it is

required only to allege a legal injury to have standing. Whole Foods argues that it

has more than met this requirement by alleging that CBL-Friendly committed over

ten breaches of the Operating Agreement, each of which constitutes a legal injury.

Even if that were not the case, Whole Foods argues, it has alleged actual injury in the

form of remediation expenses, lost profits, and lost inventory. (Mem. L. Opp’n CBL-
Friendly Center CMBS, LLC’s Mot. Dismiss [Whole Foods Opp’n Br. CBL-Friendly

Mot.] 9–11, ECF No. 36.)

43. To state a valid breach of contract claim, Plaintiff need only allege “(1)

existence of a valid contract and (2) breach of the terms of that contract.” Poor v. Hill,

138 N.C. App. 19, 26 (2000). “When these elements are alleged, ‘it is error to dismiss

a breach of contract claim under Rule 12(b)(6),’ and our appellate courts routinely

reverse trial court orders that require anything more.” Vanguard Pai Lung, LLC v.

Moody, 2019 NCBC LEXIS 39, at *10 (N.C. Super. Ct. June 19, 2019) (quoting

Woolard v. Davenport, 166 N.C. App. 129, 134 (2004) (collecting cases)).

44. Furthermore, “claims for breach of contract are ‘not subject to heightened

pleading standards.’ ” Id. (quoting AYM Techs., LLC v. Rodgers, 2018 NCBC LEXIS

14, at *52 (N.C. Super. Ct. Feb. 9, 2018)). “Rather, they must meet the usual, liberal

standard of Rule 8, which requires only a ‘short and plain statement of the claim’

sufficient to put the court and parties on notice of the events giving rise to the claim.”

Id. (quoting N.C. R. Civ. P. 8(a)(1)). “[A]ll of this means that stating a claim for breach

of contract is a relatively low bar.” Id. at *11.

45. Whole Foods alleges that “migration, disturbance, and displacement of

asbestos” caused it to close its store. (Compl. ¶ 53.) To the extent that migration,

disturbance, and displacement occurred “as a result of the water leaking from the

[CBL-Friendly Premises] into the store[,]” (Compl. ¶ 44), or as a result of vibrations

caused by construction activity, (Compl. ¶ 48), Whole Foods adequately pleads that it

resulted from CBL-Friendly’s breach of the Operating Agreement. Whole Foods
alleges, among other things, that CBL-Friendly failed to complete all abatement of

asbestos-containing material prior to demolition, failed to act at all times reasonably

and with due consideration to Whole Foods’ interests, and failed to act in a way so as

to cause as little disturbance to the operations of Whole Foods as was reasonably

practical. (Compl. ¶ 62d–f.)

46. As for CBL-Friendly’s argument that Whole Foods has not sufficiently pled

standing, Whole Foods’ allegations that a valid contract existed between the parties

and that it was breached by CBL-Friendly are sufficient. See Soc’y for the Hist. Pres.

of the Twenty-Sixth N.C. Troops, Inc. v. City of Asheville, 385 N.C. 744, 751 (2024)

(“Where a party alleges the existence of a valid contract and that such contract has

been breached, that party has alleged a legal injury that gives rise to standing.”).

Moreover, to the extent Whole Foods is required to allege that its legal injury is

traceable to CBL-Friendly, it has done so. (Compl. ¶¶ 2, 48, 53.)

47. Relatedly, CBL-Friendly argues that only one injury is alleged, and that

Whole Foods’ pleading amounts to an assertion of joint and several liability. Citing

Crescent University City Venture, LLC v. AP Atlantic, Inc., 2019 NCBC LEXIS 46

(N.C. Super. Ct. Aug. 8, 2019), CBL-Friendly contends that, under North Carolina

law, it cannot be jointly and severally liable with Transformco for breaches of

separate contracts. (CBL-Friendly Br. 12–13.)

48. Whole Foods responds that it has not alleged that Defendants are jointly

and severally liable; consequently, it maintains that CBL-Friendly’s argument is

nothing but a straw man. (Whole Foods Opp’n Br. CBL-Friendly Mot. 14.) In
addition, Whole Foods distinguishes Crescent on the basis that it was decided at the

summary judgment stage, not on a Rule 12(b)(6) motion, and contends that it is

premature to address CBL-Friendly’s argument regarding joint and several liability.

(Whole Foods Opp’n Br. CBL-Friendly Mot. 14–15.)

49. The Court agrees that CBL-Friendly’s argument that Whole Foods cannot

assert joint and several liability with respect to its contract claims is premature and

would be more appropriately considered at the summary judgment stage. See

Crescent, 2019 NCBC LEXIS 46, at *71–72 (determining at the summary judgment

stage that the plaintiff “may not hold its subcontractors jointly and severally liable

for merely breaching independent contracts” without evidence of concerted action).3

50. Focusing next on Whole Foods’ allegation that CBL-Friendly breached the

Operating Agreement by failing to construct a water-tight wall between the CBL-

Friendly Premises and the Whole Foods Premises, CBL-Friendly argues that Whole

Foods’ claim “reflects a fundamental misreading of the Operating Agreement”

because it “conflates two different walls[.]” (CBL-Friendly Br. 17.) CBL-Friendly

argues that the demising wall, through which the water leaks occurred, was

constructed by Sears years ago in accordance with Exhibit E to the 2010 Sublease.

(Sublease, Exhibit E § 1.2(b).) According to CBL-Friendly, Exhibit E makes it clear

that waterproofing the demising wall was Whole Foods’ responsibility. (CBL-

Friendly Br. 18.)

3 The Court also observes that, in Crescent, the plaintiff expressly alleged that the defendants

were jointly and severally liable for damages resulting from breaches of contract. Id. at *67.
The same is not true here. In addition, the parties in this case, unlike those in Crescent,
contracted for an indemnity provision.
51. According to CBL-Friendly, the wall referenced in the Operating

Agreement is a new wall, also referenced in its Scope of Work with D.H. Griffin, and

was not required to be built until after the demolition process was completed. (CBL-

Friendly Br. 18–19; Scope of Work ¶¶ 11–14.)

52. Whole Foods responds that there is nothing in the Operating Agreement

specifying that the wall it references is the same wall that is described in the Scope

of Work cited by CBL-Friendly. Whole Foods contends that, at best, references to the

construction of one wall or multiple walls in these documents creates an ambiguity

that cannot be resolved at this stage of the litigation. (Whole Foods Opp’n Br. CBL-

Friendly Mot. 26.) The Court agrees.

53. The Scope of Work at issue requires D.H. Griffin to “[i]nstall a CMU and

brick veneer masonry wall to repair and close the existing remaining building along

column lines 8, J, and 13 where structures are removed.” (Scope of Work ¶¶ 11–14.)

A reasonable fact finder could conclude, as CBL-Friendly argues, that this work could

not be completed until after the demolition was finished.

54. On the other hand, the Operating Agreement provides that “[u]pon the

occurrence of the Recapture,” CBL-Friendly was to “construct a rear exterior wall to

ensure that the Whole Foods Premises remains intact, watertight and structurally

sound[.]” (Operating Agreement § 3 (emphasis added).) A reasonable fact finder

could conclude that the language of this provision contemplates construction of a wall

prior to the demolition process.
55. Given the words used in the relevant agreements, whether the parties

contracted for multiple walls or one and, if one, when that wall was to be built, and

who was responsible for ensuring that it was watertight, are questions that cannot

be decided at this stage of the litigation. See LFF IV Timber Holding LLC v.

Heartwood Forestland Fund IV LLC, 2024 NCBC LEXIS 119, at *23 (N.C. Super. Ct.

Sep. 6, 2024) (“It is well settled that a contract interpretation issue cannot be resolved

at the Rule 12(b)(6) stage where each party has shown that the provision at issue is

reasonably susceptible to materially different interpretations.”).

56. Lastly, CBL-Friendly argues that Whole Foods cannot recover

consequential damages because it has not pled that, at the time they agreed to the

terms of the Operating Agreement, the parties were aware that “legacy asbestos”

remained in the Whole Foods Premises.4 To the contrary, CBL-Friendly argues that

Whole Foods has affirmatively alleged that it was unaware in 2023 that Sears had

failed to remove the asbestos before tendering possession of the premises to Whole

Foods. Thus, CBL-Friendly argues, Whole Foods’ pleading has foreclosed the

possibility that the parties contemplated damage caused by the presence of asbestos

at the time of contracting. (CBL-Friendly Br. 14–16.)

4 CBL-Friendly also contends that Whole Foods’ claim fails because its allegation that CBL-

Friendly failed to take “reasonable mitigation measures to reduce . . . vibrations” is
conclusory and does not sufficiently allege how the measures that CBL-Friendly took were
unreasonable or what additional measures it should have undertaken. (CBL-Friendly Br.
14.) Given that breach of contract claims are not required to be pled with particularity and
because Whole Foods has alleged the existence of a contract and breach of its terms, CBL-
Friendly’s argument is unavailing. See Woolard, 166 N.C. App. at 134 (“[W]here the
complaint alleges [(1) the existence of a valid contract and (2) breach of the terms of that
contract], it is error to dismiss a breach of contract claim under Rule 12(b)(6).”).
57. Whole Foods responds that it has alleged that CBL-Friendly was aware

that (a) demolition would take place in the same building in which Whole Foods was

operating a grocery store, and (b) the store was to remain open during the

redevelopment work. Consequently, the Operating Agreement imposed restrictions

on that work. (Compl. ¶¶ 32–35.) Among other things, those restrictions included

CBL-Friendly’s agreement to “cause as little disturbance to the operations of Whole

Foods . . . as is reasonably practical including taking all reasonable mitigation

measures to reduce . . . vibrations to the Whole Foods Premises[.]” (Compl. ¶ 34a.)

Similarly, the Scope of Work attached to the Operating Agreement provided that “all

precautions [would be] taken to limit any interference with . . . [Whole Foods’]

business operations.” (Compl. ¶ 34b.)

58. As for the presence of asbestos in the store, Whole Foods argues that it has

adequately alleged that, when they agreed to the terms of the Operating Agreement,

the parties contemplated the possibility that asbestos could pose a problem. (Whole

Foods Opp’n Br. CBL-Friendly Mot. 23.) Otherwise, it argues, there would have been

no need for CBL-Friendly to have retained an industrial hygienist to monitor for the

presence of asbestos in the store. (Whole Foods Opp’n Br. CBL-Friendly Mot. 23;

Compl. ¶¶ 40–41.)

59. Thus, Whole Foods concludes, the parties foresaw that if the redevelopment

work was not performed consistent with the terms of the Operating Agreement, the

store might have to be closed, resulting in lost profits, lost inventory, and asbestos

remediation. It points to its allegation that “CBL-Friendly’s breaches . . . directly,
naturally, foreseeably, and proximately caused Whole Foods to sustain damages.

These damages included, but are not limited to, lost profits, costs associated with lost

inventory, and remediation costs.” (Compl. ¶ 63.)

60. As stated above, Whole Foods has alleged the existence of a contract, the

Operating Agreement, between itself and CBL-Friendly. It has also alleged that

CBL-Friendly breached the Operating Agreement by:

a. failing to construct a rear exterior wall to ensure that the Whole Foods
Premises remained watertight;

b. failing to separate all work described in Exhibit C to the Operating
Agreement, which included work described in the Scope of Work, from
the Whole Foods Premises;

c. failing to take all precautions to limit any interference with Whole
Foods’ business operations in the Demised Premises;

d. failing to complete all abatement of asbestos-containing materials
prior to demolition;

e. failing to act at all times reasonably and with due consideration for
Whole Foods’ interests;

f. failing to act in such a way so as to cause as little disturbance to the
operations of Whole Foods, Whole Foods’ customers, and Whole Foods’
employees as was reasonably practical;

g. failing to take all reasonable mitigation measures to reduce noise,
dust, debris, and vibrations to the Whole Foods Premises;

h. failing to perform all construction, renovation, and restoration work
in a good and workmanlike manner;

i. failing to complete all work in a manner consistent with a first-class
commercial or residential property; and

j. breaching the implied covenant of good faith and fair dealing by
otherwise failing to perform contractual obligations in good faith, failing
to make reasonable efforts to perform its obligations under the
Operating Agreement, failing to act upon principles of good faith and
fair dealing to accomplish the Operating Agreement’s purposes, and
injuring Whole Foods’ right to receive the Operating Agreement’s
benefits.

(Compl. ¶ 62.)

61. Allegations that the threat of asbestos, regardless of its source, was

contemplated by the parties, coupled with an allegation that CBL-Friendly’s alleged

breach foreseeably and proximately caused Whole Foods to sustain damages in the

form of lost profits, costs associated with lost inventory, and asbestos remediation

costs, is enough, at this stage, to allow Whole Foods’ claim to proceed. See Brakebush

Bros., Inc. v. Certain Underwriters at Lloyd’s of London, 2021 NCBC LEXIS 98, at

*41 (N.C. Super. Ct. Nov. 1, 2021) (determining that the Rule 12(b)(6) stage of the

litigation was “too early” to determine whether plaintiff would be entitled to recover

consequential damages); see also Poor, 138 N.C. App. at 26 (to plead breach of

contract, a plaintiff need only allege “(1) existence of a valid contract and (2) breach

of the terms of that contract”).

62. Accordingly, CBL-Friendly’s Motion to Dismiss Plaintiff’s Breach of

Contract claim shall be DENIED.

B. Breach of Contract Against Transformco

63. Transformco argues that Whole Foods is statutorily barred from seeking

recourse against it because the Bankruptcy Order specifies that it acquired the

Sublease from Sears in February 2019 free and clear of any liability, including

successor liability. (Mem. Supp. Def. Transform Lease Opco LLC’s Mot. Dismiss

[Transformco Mem.] 13–15, ECF No. 23; Bankruptcy Order § M.)
64. Transformco further contends that Whole Foods is contractually barred

from pursuing it because Whole Foods certified in the Fourth and Fifth Amendments

to the Sublease that Transformco was not in default, including for failure to ensure

that the Whole Foods’ Premises were free from asbestos, thereby expressly waiving

its right to sue. (Transformco Mem. 16–17.)

65. Whole Foods responds that Section 365(f) of the Bankruptcy Code has

specific rules governing the rights and liabilities flowing from assignment of an

unexpired lease. It argues that before such a lease may be assigned to a third-party

during bankruptcy, the debtor must assume the obligations of the lease, along with

its benefits, and that it passes both obligations and benefits to the third party. (Mem.

L. Opp’n Transform Lease Opco LLC’s Mot. Dismiss [Whole Foods Opp’n Br.

Transformco Mot.] 8, ECF No. 37.) Consequently, Whole Foods maintains that

Transformco assumed the obligation to, among other things, remove Hazardous

Materials and provide Whole Foods with quiet and peaceful possession and

occupation pursuant to Sections 17.17(c)(iii) and 13.1(f), respectively. (Whole Foods

Opp’n Br. Transformco Mot. 8.)

66. In addition, Whole Foods contends that Transformco contractually

obligated itself to the relevant terms of the Sublease when, after it acquired the

Sublease through bankruptcy and before the redevelopment project began, it agreed

in both the Fourth and Fifth Amendments to ratify its terms. (Whole Foods Opp’n

Br. Transformco Mot. 8–9.)
67. The Bankruptcy Code provides that “[a] debtor in bankruptcy

may . . . assign its rights and obligations under an executory contract to others[.]”

Anytime Fitness, L.L.C. v. Thornhill Bros. Fitness, L.L.C. (In re Thornhill Bros.

Fitness, L.L.C.), 85 F.4th 321, 325 (5th Cir. 2023) (citing 11 U.S.C. § 365(f)(1)).

However, before doing so, the debtor must first assume the agreement in accordance

with Section 365. See id. And “[w]hen an executory contract or lease is assumed, it

must be assumed cum onere, with all of its benefits and burdens.” In re E-Z Serve

Convenience Stores, Inc., 289 B.R. 45, 49 (Bankr. M.D.N.C. 2003) (citing NLRB v.

Bildisco & Bildisco, 465 U.S. 513, 531 (1984)); see also Three Sisters Partners, L.L.C.

v. Harden (In re Shangra-La, Inc.), 167 F.3d 843, 849 (4th Cir. 1999) (same).

68. Likewise, assignments of such agreements to third parties are “all-or-

nothing.” Anytime Fitness, 85 F.4th at 326 (“So too with assignments under § 365(f).

If the trustee (or debtor) could use the Code to assign a fraction of a contract that

could not be assigned outside of bankruptcy, the trustee (or debtor) would arrogate to

itself property it did not have before the petition.”).

69. The Sublease was an executory contract; consequently, when Transformco

assumed the Sublease from Sears in bankruptcy, Section 365(f) specifies that it did

so subject to all of its obligations.

70. Even were this not true, in both the Fourth and Fifth Amendments to the

Sublease, which followed the Bankruptcy Order, Transformco expressly ratified as

its own the obligations of the Sublease, including those in Sections 5.2(a)(iv) and

17.17(c)(iii).
71. “Ratification is defined as the affirmance by a person of a prior act which

did not bind him but which was done or professedly done on his account, whereby the

act, as to some or all persons, is given effect as if originally authorized by him.” Bell

Atl. Tricon Leasing Corp. v. DRR, Inc., 114 N.C. App. 771, 776 (1994) (citation and

internal quotation marks omitted). By agreeing to ratify and confirm terms of the

Sublease, Transformco contractually accepted responsibility for the obligations at

issue.

72. Transformco argues that even though it ratified these obligations, Whole

Foods waived its right to pursue a breach of contract claim because it agreed in the

Fourth and Fifth Amendments that Transformco was not in default. (Transformco

Mem. 16.) Whole Foods responds that it did not waive its right to sue by

acknowledging in the amendments that it was unaware of any default by

Transformco. According to Whole Foods, the earliest date it discovered a default was

in September 2023, when it was informed that asbestos had been detected, some six

months after the effective date of the Fifth Amendment. Therefore, Whole Foods

contends that waiver does not apply because it could not have voluntarily and

intentionally relinquished its right to sue. (Whole Foods Opp’n Br. Transformco Mot.

12–15.)

73. Waiver requires “(1) the existence, at the time of the alleged waiver, of a

right, advantage or benefit; (2) the knowledge, actual or constructive, of the existence

thereof; and (3) an intention to relinquish such right, advantage or benefit.”

Davenport v. Travelers Indem. Co., 283 N.C. 234, 239 (1973) (citation and internal
quotation marks omitted). “Knowledge of the existence of the right, benefit, or

advantage on the part of the party claimed to have made the waiver is an essential

prerequisite to its relinquishment.” Danville Lumber & Mfg. Co. v. Gallivan Bldg.

Co., 177 N.C. 103, 107 (1919).

74. At the time it agreed to the Fourth and Fifth Amendments to the Sublease,

Whole Foods alleges that it was unaware that Sears had failed to remove the asbestos

prior to tendering possession of the premises. (Compl. ¶ 46.) Without knowledge of

the defect, waiver cannot occur. See Salem Realty Co. v. Batson, 256 N.C. 298, 308

(1962) (“The acceptance of work which has been defectively done, the defects being

unknown and not discoverable by inspection, does not amount to a waiver of the

imperfect performance.”) (citation and internal quotation marks omitted); Tisdale v.

Elliott, 13 N.C. App. 598, 601 (1972) (“[A]cceptance with knowledge of a defective

performance may be deemed a waiver of the defective performance. But acceptance

where the defect is unknown, or latent, does not waive the defective performance.”).

75. Next, Transformco argues that Whole Foods’ pleading is conclusory because

it fails to specify the provisions of the Sublease that were allegedly breached.

(Transformco Mem. 19–24.) Further, citing a provision in the Operating Agreement

by which CBL-Friendly agreed to “indemnify, defend and hold Transformco and

Whole Foods harmless from any and all losses [except as may be caused by

Transformco or Whole Foods],” Transformco argues that Whole Foods contractually

agreed that CBL-Friendly, and not it, would be solely liable for any damage resulting

from the redevelopment. (Transformco Mem. 17–19.) Transformco also points to the
complaint’s allegations that it was CBL-Friendly’s agent that dislodged the ACM

allegedly still existing within the ceiling of the Whole Foods store, not Transformco:

“Thus, to whatever extent Whole Foods asserts a breach of contract claim against

Transformco rooted in CBL’s failure to prevent ACM from leaking into the Whole

Foods store and to prevent its work from dislodging ACM in the Whole Foods store,

that part of Whole Foods’s [claim] must be dismissed.” (Transformco Mem. 19.)

76. Whole Foods responds that it is suing Transformco for breaching the

Sublease, not the Operating Agreement and, even if that were not true, the indemnity

provision binds CBL-Friendly, not Whole Foods. (Whole Foods Opp’n Br.

Transformco Mot. 15–16.) The Court agrees. Whole Foods’ allegations give

Transformco sufficient notice of its alleged breaches of Sections 5.2(a)(iv), 17.17(c)(iii),

13.1(f), and 4.3(b). (Compl. ¶¶ 46, 54–55, 67–69); see also Vanguard Pai Lung, LLC,

2019 NCBC LEXIS 39, at *10 (claims for breach of contract only need to meet the

liberal pleading standard of Rule 8). In addition, Transformco’s argument against

Whole Foods with respect to the indemnity provision binding CBL-Friendly is

unavailing.5

77. Transformco next argues that Whole Foods has failed to allege facts to

support a claim for breach of Section 13.1(f) of the Sublease, which requires it to

provide Whole Foods with “lawful, quiet and peaceful possession and occupation of

the Demised Premises[.]” It further contends that Whole Foods’ allegations that it

5 Transformco has filed a cross-claim against CBL-Friendly for indemnification and for
declaratory relief under the Uniform Declaratory Judgment Act, N.C.G.S. § 1-253 et seq.
requesting a declaratory judgment with respect to this indemnity provision. (Transformco
Answer Complaint and Cross-Claim, ECF No. 51.)
reported the presence of asbestos to Transformco and that Transformco failed to

remove it are conclusory and not sufficient to allege a breach of Section 17.17(c)(iii)

of the Sublease. (Transformco Mem. 23.)

78. Whole Foods responds that not only are its allegations of breach sufficient,

but it has also adequately alleged that Transformco’s refusal to remove the asbestos

with “reasonable promptness” forced Whole Foods to close its store for two weeks,

amounting to its constructive eviction. (Whole Foods Opp’n Br. Transformco Mot.

24.) Whole Foods argues that it has adequately alleged a breach of Section

17.17(c)(iii) because (a) it is not required to plead a breach of contract claim with

particularity, and (b) it has alleged that Transformco was informed of the presence of

asbestos and refused to remove it, requiring Whole Foods to undertake that task.

(Whole Foods Opp’n Br. Transformco Mot. 19–20.)

79. The complaint describes the circumstances that Whole Foods claims led to

the disturbance and migration of ACM into the store. (Compl. ¶¶ 42–49.) Whole

Foods then alleges that Transformco was notified of the existence of asbestos in the

store and, after learning of its existence, failed to make efforts to remove it. (Compl.

¶¶ 54, 69a.) Given these allegations, the Court cannot conclude with certainty that

there are no facts that could be proved to support Whole Foods’ claim. State ex rel.

Cooper v. Ridgeway Brands Mfg., LLC, 362 N.C. 431, 444 (2008) (internal quotation

marks and citation omitted).

80. Similarly, Whole Foods has adequately alleged a claim for constructive

eviction resulting from the need to close the store and undertake asbestos
remediation. See Marina Food Assocs., Inc. v. Marina Restaurant, Inc., 100 N.C. App.

82, 92 (1990) (constructive eviction resulted when “[t]he landlord’s breach of the lease

rendered the premise unfit for plaintiff’s purposes”). Transformco’s arguments to the

contrary are unconvincing.

81. Finally, Transformco argues that Whole Foods has failed to assert a breach

of the implied covenant of good faith and fair dealing. (Transformco Mem. 24.) “In

every contract there is an implied covenant of good faith and fair dealing that neither

party will do anything which injures the right of the other to receive the benefits of

the agreement.” Bicycle Transit Auth., Inc. v. Bell, 314 N.C. 219, 228 (1985) (citation

omitted). When the breach of contract and implied covenant are based on the same

acts, “the fate of an implied covenant claim rises and falls with the fate of the breach

of contract claim[.]” Intersal, Inc. v. Wilson, 2023 NCBC LEXIS 29, at *68 (N.C.

Super. Ct. Feb. 23, 2023).

82. Here, Whole Foods has a viable breach of contract claim, so its breach of the

implied covenant of good faith and fair dealing claim does not fail on that basis. In

addition, Whole Foods alleges that Transformco “breach[ed] the implied covenant of

good faith and fair dealing by otherwise failing to perform its contractual obligations

in good faith, failing to make reasonable efforts to perform its obligations under the

Sublease, as amended, failing to act upon principles of good faith and fair dealing to

accomplish the Sublease’s purposes, and injuring Whole Foods’ right to receive the

Sublease’s benefit.” (Compl. ¶ 69d.)
83. As this Court has observed, “‘[e]vasion of the spirit of the bargain, lack of

diligence and slacking off, willful rendering of imperfect performance, abuse of a

power to specify terms, and interference with or failure to cooperate in the other

party’s performance’ may constitute breach of the implied covenant.” Intersal, Inc.,

2023 NCBC LEXIS 29, at *67 (quoting Restatement (Second) of Contracts § 205 cmt.

d (1981)). Whole Foods’ allegations satisfy the pleading requirements for this claim.

84. Accordingly, Transformco’s Motion with respect to Whole Foods’ claim for

breach of contract shall be DENIED.

C. Declaratory Judgment Against Transformco

85. Whole Foods requests that the Court enter a judgment declaring that (a) it

has the right to withhold rent in an amount equal to the rent due for the period of

time during which its store was closed to remove the asbestos; and (b) it has the right

to withhold rent “proportionately to the detrimental effect on Whole Foods’ business

of the asbestos that Transformco refused and failed to remove from the Whole Foods

Store.” (Compl. ¶ 81.)

86. Transformco argues that the Declaratory Judgment Act has no application

because Whole Foods has not alleged the existence of an actual controversy regarding

the validity or construction of the rent abatement provisions (Sections 4.3(b) and

17.17(c)(iii)) of the Sublease. Instead, according to Transformco, Whole Foods has

alleged a dispute that turns solely on issues of fact. (Transformco Mem. 26.)

87. Whole Foods responds that it has alleged an actual controversy because it

has pled that it is entitled to rent abatement due to Transformco’s failure to remove
the asbestos, while Transformco denies any responsibility for the asbestos under the

Sublease. (Whole Foods Opp'n Br. Transformco Mot. 26–27.)

88. The Declaratory Judgment Act (Act) provides that “[a]ny person interested

under a . . . written contract . . . or whose rights, status or other legal relations are

affected by a . . . contract . . . may have determined any question of construction or

validity arising under the . . . contract . . . and obtain a declaration of rights, status,

or other legal relations thereunder.” N.C.G.S. § 1-254 (emphasis added).

89. The Act “is to be liberally construed and administered.” N.C.G.S. § 1-264.

However, as this Court, quoting the Supreme Court, has observed, “a trial court

[may], in the exercise of its discretion . . . decline a request for declaratory relief when

(1) the requested declaration will serve no useful purpose in clarifying or settling the

legal relations at issue; or (2) the requested declaration will not terminate or afford

relief from the uncertainty, insecurity, or controversy giving rise to the proceeding.”

PHE, Inc. v. Dolinksy, 2022 NCBC LEXIS 123, at *19–20 (N.C. Super. Ct. Oct. 19,

2022) (quoting Augur v. Augur, 356 N.C. 582, 588–89 (2002)).

90. In this case, the complaint alleges that Whole Foods, as tenant, and

Transformco, as landlord, are parties to the Sublease. Whole Foods alleges that the

Sublease provides for rent abatement in the event an “Interfering Condition was

caused by Landlord or persons subject to Landlord’s control and such Interfering

Condition persists for more than forty-eight (48) hours after [Whole Foods] gives

Landlord notice” that it exists. (Compl. ¶ 17 (quoting Sublease § 4.3(b)).)
91. In addition, Whole Foods alleges that the Sublease provides for rent

abatement in the event the landlord fails to remove Hazardous Material (defined to

include asbestos) that detrimentally affects its business with “reasonable

promptness.” (Compl. ¶ 18 (quoting Sublease § 17.17(c)(iii)).)

92. Whole Foods alleges that it reported the presence of asbestos in its store

and requested that Transformco remove it, but Transformco refused. (Compl. ¶ 54.)

Whole Foods further asserts that it was required to close its store and remove the

asbestos itself. (Compl. ¶¶ 53, 56.) It seeks a declaratory judgment that it has the

right to withhold rent pursuant to Sections 4.3 and 17.17(c)(iii) of the Sublease.

(Compl. ¶ 81.)

93. Although Whole Foods does not allege that a dispute exists regarding the

validity or interpretation of the rent abatement provisions themselves, Whole Foods

does allege the existence of a more fundamental dispute regarding Transformco’s

liability under the Sublease. Transformco argues that the dispute turns on factual

issues “as to whether Transformco . . . created an interfering condition” and

maintains that the continued existence of asbestos in the Whole Foods store was the

responsibility of Sears—not Transformco. (Transformco Mem. 26.) Whole Foods

disagrees and alleges otherwise.

94. Accepting the allegations in the complaint as true for purposes of this

Motion, and giving consideration to the purpose of the Act, the Court concludes that

Whole Foods has sufficiently stated a claim for declaratory judgment. Transformco’s

arguments are better saved for another day with a more comprehensive record. See
BIOMILQ, Inc. v. Guiliano, 2023 NCBC LEXIS 24, at *32 (N.C. Super. Ct. Feb. 10,

2023) (“The question is not whether the plaintiff will prevail on their claim, ‘[i]t is

only whether they have identified an actual, genuine controversy.’ ” (quoting Bennett

v. Bennett, 2019 NCBC LEXIS 19, at *32 (N.C. Super. Ct. Mar. 15, 2019))).

95. Accordingly, Transformco’s Motion with respect to Whole Food’s claim for

declaratory judgment shall be DENIED.

V. CONCLUSION

96. WHEREFORE, the Court ORDERS as follows:

a. Defendant CBL-Friendly Center CMBS, LLC’s Motion to Dismiss is

DENIED.

b. Defendant Transform Lease Opco LLC’s Motion to Dismiss is likewise

DENIED.

c. Defendant CBL-Friendly Center CMBS, LLC shall file a response to

Defendant Transform Lease Opco LLC’s Crossclaim, (ECF No. 51), within

thirty (30) days.

SO ORDERED, this the 17th day of November, 2025.

/s/ Julianna T. Earp
Julianna T. Earp
Special Superior Court Judge
for Complex Business Cases