A battle over liquor store placement in the Rochester CityGate development project will proceed in federal court, the U.S. Court of Appeals for the Second Circuit ordered in a summary judgment Thursday.

The case arrived at the appellate court after U.S. District Judge David Larimer of the Western District of New York allowed and granted cross-motion for judgment on the pleadings in favor of the defendants, Anthony J. Costello & Son (Spencer) Development and GAP Partners IV.

Plaintiff Costco had sued over breach of contract claims after the defendants allegedly allowed CityGate Wine & Spirits to occupy a building that wasn't part of the agreement between Costello and Costco. The agreement identified specific properties each entity would use for liquor stores. In choosing a different location, Costco claimed its tenant, CHM Liquors, was denied a license by state authorities because CityGate Wine & Spirits was now too close to Costco.

In its cross-motion for judgment, Costello and the liquor store argued the liquor store provision of the agreement was unenforceable under New York State Real Property Actions and Proceedings Law. Larimer agreed, finding that claims of harm done by the denial were misplaced, as Costco's lawyer failed to appropriately contest CityGate Wine & Spirits licensing with the board, but that the board appeared as if it would have denied CHM's license even if CityGate Wine & Spirits had gone in the agreed-upon building.

The panel of Circuit Judges Jose Cabranes, John Walker Jr. and Reena Raggi ruled that Costello and the liquor store failed to meet their burden in the cross-motions. The facts of the case suggest the defendants were aware there was a restriction from the outset, and may have attempted to evade them by referencing the agreed-upon spot for development of the liquor store in amendments to the leasing agreement, the panel found.

The sequence of events suggests that Costco may have very well been able to have its liquor store in place before Costello had the agreement been followed, according to the panel.

“The pleadings here give rise to a plausible inference that Costello's breach injured Costco by depriving it of a similar competitive advantage,” the panel found.

The panel vacated and remanded the case back to the Western District for further proceedings.

Costco was represented by Joseph Hage Aaronson name attorney Gregory Joseph. He declined to comment.

CityGate Wine & Spirits was represented by Nixon Peabody partner Christopher Thomas. Anthony J. Costello & Son (Spencer) Development was represented by Culley, Marks, Tanenbaum & Pezzulo name attorney Glenn Pezzulo. Neither could be reached for comment.

A battle over liquor store placement in the Rochester CityGate development project will proceed in federal court, the U.S. Court of Appeals for the Second Circuit ordered in a summary judgment Thursday.

The case arrived at the appellate court after U.S. District Judge David Larimer of the Western District of New York allowed and granted cross-motion for judgment on the pleadings in favor of the defendants, Anthony J. Costello & Son (Spencer) Development and GAP Partners IV.

Plaintiff Costco had sued over breach of contract claims after the defendants allegedly allowed CityGate Wine & Spirits to occupy a building that wasn't part of the agreement between Costello and Costco. The agreement identified specific properties each entity would use for liquor stores. In choosing a different location, Costco claimed its tenant, CHM Liquors, was denied a license by state authorities because CityGate Wine & Spirits was now too close to Costco.

In its cross-motion for judgment, Costello and the liquor store argued the liquor store provision of the agreement was unenforceable under New York State Real Property Actions and Proceedings Law. Larimer agreed, finding that claims of harm done by the denial were misplaced, as Costco's lawyer failed to appropriately contest CityGate Wine & Spirits licensing with the board, but that the board appeared as if it would have denied CHM's license even if CityGate Wine & Spirits had gone in the agreed-upon building.

The panel of Circuit Judges Jose Cabranes, John Walker Jr. and Reena Raggi ruled that Costello and the liquor store failed to meet their burden in the cross-motions. The facts of the case suggest the defendants were aware there was a restriction from the outset, and may have attempted to evade them by referencing the agreed-upon spot for development of the liquor store in amendments to the leasing agreement, the panel found.

The sequence of events suggests that Costco may have very well been able to have its liquor store in place before Costello had the agreement been followed, according to the panel.

“The pleadings here give rise to a plausible inference that Costello's breach injured Costco by depriving it of a similar competitive advantage,” the panel found.

The panel vacated and remanded the case back to the Western District for further proceedings.

Costco was represented by Joseph Hage Aaronson name attorney Gregory Joseph. He declined to comment.

CityGate Wine & Spirits was represented by Nixon Peabody partner Christopher Thomas. Anthony J. Costello & Son (Spencer) Development was represented by Culley, Marks, Tanenbaum & Pezzulo name attorney Glenn Pezzulo. Neither could be reached for comment.