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kelley I donion

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gill I huck I goldfarb

701 Fifth Avenue, Suite 6800 Seattle, Washington 98110 Michael A. Goldfarb (206) 452 0260 [phone] (206) 397-3062 [fax]

August 5, 2011
Via Electronic and certjfied Mail
K&L Gates

AUG -8 2011

Charles H. Royce


925 FourthAvenue Suite 2900

Seattle, WA 98104-1158


Lease dated May 17, 2002 between Fryelands Sixth Avenue, LLC and the Monroe Public School District

Dear Mr. Royce, This is in response to your letter of July 29, 2011, which incorrectly asserted that the Monroe Public School District ("District") is not in violation of the Lease. As set forth below, we again request that the District comply with the Lease terms, and this is further notice of breach. As a preliminary matter we note that, while the District continues to make broad statements about decreases in funding, it has not provided any documentation supporting this claim despite the landlord's pending public records requests and other written requests for this information. The District long ago could have provided not only the financial data supporting its alleged claim but also all internal and Board documents, including email, memoranda or other documents addressing the decision to seek termination of the Lease. Much more importantly, however, even if the District provided such supporting documentation, its purported termination, contrary to the claims in your letter, is not within the scope of Section 2.3 of the Lease, and the District lacks the authority to terminate the Lease on that basis. Termination under Section 2.3 requires "a change in state law, rule, regulation and/or
state flmding that is beyond the Tenant's control." It appears that the District does not lack the

funds necessary to meet the Lease obligations or to operate the programs currently operated in the Leased space, but rather desires to spend those funds in other ways. For example, your letter notes that it is "more cost-effective for the District to operate its remaining programs in owned, rather than leased facilities." This is an internal budgetary decision clearly within the District's control, and is not a basis for termination under Section 2.3. The Lease does not entitle the

District to terminate simply because, under current economic conditions, the Lease is no longer the most "cost-effective" means of meeting the District's needs. Termination under Section 2.3 also requires that the current use is no longer "acceptable." This clause was included in the Lease to reflect the fact that, when the Lease was entered, the Sky Valley alternative secondary education program was "experimental." The parties acknowledged the risk that, after an initial "trial" period, the State might deem the experiment to have failed and eliminate funding for that specific program, thereby making the use no longer "acceptable." The District's letters, however, indicate that this has not occurred: the program is continuing and is funded, but the District simply wants to move it to another location. The fact that the District wishes to terminate the Lease, by itself, is not enough to render the use "unacceptable." If it were, this clause would be rendered superfluous, contrary to well-established principles of contract interpretation. See Wagner v. Wagner, 95 Wn.2d 94, 101 (1980) ("An interpretation of a writing which gives effect to all of its provisions is favored over one which renders some of the language meaningless or ineffective."). Finally, your suggestion that the District's prior attempts to terminate the Lease are sufficient is contrary to Washington law. None of the District's previous letters provided the required notice to Fryelands that the District intended to terminate, the Lease in its entirety. "Powers of termination must be exercised strictly in the manner provided in the termination clause." Tacoma Rescue Mission v. Stewart, 155 Wn. App. 250, 255 (2010). Furthermore, a "notice to terminate a lease generally to be effective must be unequivocal and unconditional and must be such as to be fully understood by the recipient" Bright v. Coastal Lumber Co;, CIV. A. 2:89-0258 5 1991 WL 337362 (S.D.W. Va. Jan. 31, 1991) affd, 962F.2d 365 (4th Cir. 1992) (quoting Hix v. Roy, 139 Cob. 457, 459-60, 340 P.2d 438, 439-40 (1959)). None of the previous letters gave an "unequivocal and unconditional" notice of termination pursuant to the terms of the Lease. Rather, the District's previous correspondence uniformly indicated that the District intended to terminate the Lease only with respect to certain portions of the leased properties, but to continue renting other portions of the property under the terms of the existing Lease. Despite the recent suggestion in your letter, nowhere did the District indicate that it intended to terminate the Lease in its entirety and negotiate an entirely new lease for the remaining portions: On February 23, Mr. Mannix wrote: "As of the date of this, communiqu we are not
contemplating terminating the portion of the lease that involves 'Space D' of 'Building

A', otherwise known as the Summit Program." On February 28, when the District officially announced its attempt to partially terminate the lease, Mr. Mannix wrote: "we hereby notify you that the district intends to terminate the lease it currently has for portions of the property held by Fryelands Sixth Avenue LLC." Mr. Mannix went on: "To clarify, we believe that the portions of the lease concerning 'Space A', 'Space B', and 'Space C' in 'Building B', as well as 'Space E' in
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'Building C' - according to the sixth amendment to the original lease agreement - would be impacted. As of this date we are not contemplating terminating the portion of the lease that involves 'Space 1)' of 'Building A', otherwise known as the Summit Program." On March 30, the District attempted to terminate another portion of the lease on a piecemeal basis: "we are hereby formally providing you with six months notice of termination of that portion of the Summit Program lease informally known as the 'gym." Again, Mr. Mannix reiterated that the District did not intend to tenninate the remainder of the lease: "We desire to continue to lease the classroom, office and support spaces utilized by the Summit Program at that same location, and would like to meet to discuss the prorated amount of the lease payment for the area we desire to continue operating." Nor can a defective notice be retroactively cured by a later "clarification." Chinatown Apartments, Inc. v. Chu Cho Lam, 51 N.Y.2d 786, 787, 412 N.E.2d 1312, 1313 (1980) ("since the right to terminate the tenancy pursuant to the terms of the lease was dependent upon service of an adequate notice, the subsequent amendment of the petition []could not operate retroactively to cure a defect in the notice"); Paradise v. Augustana Hosp. & Health Care Ctr., 222 Ill. App. 3d 672, 673, 584 N.E.2d 326, 327 (Ill. App. Ct. 1991) (rejecting party's claim that later notice "clarified" a previous, defective notice for purposes of fixing the termination date of a contract). To make clear, as your letter and the District's July 28 letter appear to concede, the District has no right under the Lease to effect a partial termination. See, e.g. Scenic Galveston Inc. v. Infinity Outdoor, Inc., 151 F.Supp.2d 812, 816 (S.D. Tex. 2001) ("From a plain reading of the contractual provision.. . it is clear that Defendant did not have the right to partially terminate the contract."); In re Penn Central Transp. Co., 354 F.Supp. 776, 777 (E.D. Penn. 1972) ("It suffices to point out that there is no provision in the lease which would authorize a partial termination. The present petition represents a unilateral attempt to reform the lease documents. The petition will be denied."); Curtis v. Am. Energy Dev., Inc., No. 2000-L-133, 2002 WL 1357726, at *4 (Ohio Ct. App 2002) ("The affidavit could not partially terminate the lease, because a partial change would unilaterally alter the lease, which is prohibited by the statute of frauds."). The District's July 28, 2011 Notice of Termination of Lease was the first communication in which the District indicated intent to terminate the Lease in its entirety. Therefore, even if the District had a right to terminate the Lease under Section 2.3, which it does not, the six-month termination period would begin on July 28, 2011. The District is obligated to continue to perform under the Lease, including but not limited to the payment of rent. Any failure of the District to meet the Lease terms will result in litigation to enforce the Lease. The landlord sincerely hopes that will not be necessary.

If you have any questions regarding the landlord's position or wish to discuss this matter further, please do not hesitate to contact me.

Very Truly Yours,