Lawyers for Lord & Taylor began their courtroom efforts Tuesday to cast the nationally known retailer as the unwitting victim of a money-grubbing developer who wasn’t satisfied with just making millions of dollars a year and was determined to make billions instead.
Counsel for the owners of the former White Flint Mall in Rockville will assert it was their client that was victimized, by market forces beyond their control and a tenant that stood in the way of an essential redevelopment of the Montgomery County shopping mall into a vibrant town center that is their only path toward economic viability.
That was the context of the opening arguments as a jury of eight began to hear the first details of a 2-year-old drama that came to a head at the U.S. District Court in Greenbelt Tuesday. It was in courtroom 2C before Judge Roger Titus where the trial kicked off in Lord & Taylor’s very public lawsuit against the principals of Lerner Enterprises and The Tower Cos. who want to redevelop the 45-acre site along Rockville Pike.
“This is just good, old-fashioned business. This is just good, old-fashioned greed,” Greenberg Traurig LLP attorney David Barger, representing Lord & Taylor, told the jury during his opening statement Tuesday. “The only problem is they had a contract.”
Testimony from prominent figures including Ted Lerner of Lerner Enterprises and Washington Nationals fame and Richard Baker, head of Hudson’s Bay Co. that owns Lord & Taylor among other national retail brands, is expected to factor heavily in the acrimonious battle between landlord and legacy department store anchor. As I noted in my May 9 cover story, both sides say the case comes down to pure and simple greed, but to whom to assign that greed is something for the jury to determine.
Lawyers for Lord & Taylor assert White Flint’s owners violated the terms of a 1975 agreement requiring them to operate White Flint as a first-class shopping center until their lease expires around 2042 and to seek Lord & Taylor’s written consent before departing from that plan. They violated that agreement by deliberately letting other tenants’ leases expire and buying out others in order to redevelop the 1 million-square-foot center into a roughly 5 million-square-foot mixed-use center, the lawyers argued.
Lord & Taylor upheld its end of the bargain by continuing to operate as one of White Flint’s legacy retailers, Barger told the jury, while the mall’s owners secretly conspired to empty out the rest of the mall and set the stage for the site’s redevelopment. The retailer is seeking $50 million in damages, tied to both the loss of revenue it has sustained since the rest of the mall’s stores have closed and more lost revenue as the store is surrounded by a decade or so of active construction, as well as the expense of building out a new store in a redeveloped White Flint town center.
Lawyers for White Flint counter that the mall’s profitability began a steep decline after 2006, exacerbated when co-anchor Bloomingdale’s decided not to renew its lease, and that their only choice was to redevelop. Lord & Taylor was on board up to a point, working for more than a year with a consultant White Flint had hired to design plans for Lord & Taylor as part of the mall’s remake. It decided to sue instead after White Flint refused to pay $100 million in damages for their consent to allow the project to proceed.
“You would think this is a personal vendetta,” Scott Morrison, an attorney with Katten Muchin Rosenman LLP who represents White Flint, told the jury. “This had nothing to do with greed. You don’t drive a successful mall into the ground.”
Morrison said White Flint did everything it could to operate the mall as a viable, ongoing concern amid the 2008 recession, a dramatic shift of shoppers from brick-and-mortar stores to online sites, intensified competition from larger, more profitable super-regional malls, and in 2012, the loss of Bloomingdale’s as Lord & Taylor’s co-anchor. There was just no way it could continue to operate as a first-class shopping center, as the agreement required, and that redeveloping the site was the only viable option, said Morrison.
While White Flint was courting anchor tenants and equity partners behind the scenes, including joint venture talks with Macerich and the Related Cos., Morrison said those discussions were private by nature to arrange complicated, multimillion-dollar financing deals. He said Lord & Taylor’s attempts to cast them as covert or underhanded are slanted, misleading and mostly untrue.
Lord & Taylor dug in instead, he said, requiring that White Flint pay it $100 million for its consent to proceed. And while Lord & Taylor is claiming damages of $50 million or more, Morrison said that’s just for the period between when tenancy at the mall began to drop off to when the redevelopment is completed. At that point, Lord & Taylor stands to see its own sales increase to $36 million, well over the $23.6 million in sales it posted in its most profitable year in the recent past, it was argued. That increase spread out over the next several decades should more than make up for any temporary decrease in sales in the lead-up to the redevelopment, Morrison said.