Lord & Taylor has appealed a federal court’s rejection of its request to halt redevelopment construction at the White Flint Mall.
The New York-based retailer filed a lawsuit against the Rockville mall for violating its original construction agreement with a plan to massively redevelop the enclosed mall into a mixed-use retail space.
White Flint Mall LLP then filed counterclaims against Lord & Taylor alleging the retailer purposely waited until the mall had already spent millions on the project and was about to begin construction before taking issue with the changes.
U.S. District Court Judge Roger W. Titus issued an order last month dismissing Lord & Taylor’s request for a permanent injunction to stop the mall from carrying out its redevelopment plan. Titus also dismissed White Flint’s counterclaims asking for compensatory damages for delays the lawsuit would cause.
Lord & Taylor LLC filed to appeal the order on injunctive relief with the 4th U.S. Circuit Court of Appeals Dec. 24. The retailer then filed a motion Dec. 31 to stay litigation in the federal case pending a decision from the appellate court.
White Flint will oppose the federal court motion and file briefs in the appellate court, said its attorney, S. Scott Morrison of Katten Muchin Rosenman LLP in Washington, D.C.
“What they are doing with the injunctive relief claim is extracting a very large upfront payment from my client to which they are not entitled,” Morrison said. “That is really what Lord & Taylor’s strategy is all about.”
Lord & Taylor’s attorney, David G. Barger of Greenberg Traurig LLP in McLean, Va., declined to comment on the ongoing litigation.
White Flint plans to redevelop its enclosed mall off Rockville Pike into an open-air site with apartments, office space and retail. Plans for the White Flint Sector Plan were approved by the Montgomery County Council in March 2010, and construction is slated to begin early this year.
Lord & Taylor filed its lawsuit July 1, 2013, claiming White Flint could not go forward with its redevelopment plan without the retailer’s consent.
The lawsuit claimed one count of declaratory judgment asking the court to declare that White Flint cannot redevelop the site while the agreement is in effect and that the mall is required to comply with the agreement.
Lord & Taylor also requested a preliminary injunction that would bar the mall from going forward with redevelopment.
Lord & Taylor signed a construction operation and reciprocal easement agreement with White Flint in 1975 and the store opened in 1976.
Per the terms of terms of the agreement, White Flint cannot alter the architectural design, appearance, the number of floors, size of the mall, location of buildings or parking areas without the consent of Lord & Taylor.
The contract also contains terms barring the mall from making changes that would restrict pedestrian or vehicle traffic or increase office space to more than 100,000 square feet, and specified that it must operate a “first class high fashion regional shopping center,” according to the complaint.
Lord & Taylor claims the redevelopment plan alters the entire enclosed mall and its architectural look, and changes vehicle and pedestrian flow around the store and mall to the detriment of Lord & Taylor. With its new focus on mixed use, Lord & Taylor claims the plan exceeds the 100,000-square-foot limit on office space.
The mall is now 40 percent empty in order to prepare for demolition, which, according to Lord & Taylor, has led to fewer customers in its store.
White Flint was surprised when the retailer filed its lawsuit, Morrison said.
“There’s no question Lord & Taylor wants the redevelopment to go forward,” Morrison said. “That is why the whole case is very disingenuous.”
White Flint claims Lord & Taylor has known about the redevelopment plan since at least early 2009, never made objections throughout the approval process at hearings before the Montgomery County Planning Board and County Council, and has previously worked with the mall to plan for changes, according to its counterclaim.
“In this case, Lord & Taylor not only sat on its rights to challenge the redevelopment for years, they worked closely with White Flint to redesign their store so that it was going to be part of the redevelopment itself,” Morrison said.
Lord & Taylor purposely timed the filing of its lawsuit hoping to collect a larger payment from White Flint, which would not want to delay the project, Morrison said.
“That was the idea behind the litigation effort by Lord & Taylor, which was simply to paralyze the project and thereby get White Flint to pay the money to let them proceed,” Morrison said.
Sales have declined at the mall, including Lord & Taylor, over the past decade, according to White Flint’s counterclaim. The mall believes the retail location will be revitalized with a new mixed-use design.
The mall has already invested $7 million in pre-development work and has signed contracts amounting to $24 million with architects and contractors. Before the design was even approved, the mall had already invested $6 million.
White Flint claimed Lord & Taylor is acting in violation of the original agreement and an implied covenant of good faith and fair dealing.
The mall claimed the lawsuit would delay the redevelopment procession and jeopardize its negotiations with potential tenants and therefore filed claims for breach of contract and tortious interference with prospective economic advantage. White Flint asked for at least $1 billion in compensatory damages for each count.