Appeals Court Upholds Verdict in Favor of Lord & Taylor in White Flint Mall Case

Mall owners have few legal options; future of proposed redevelopment unknown


Published:

The Lord & Taylor store at the White Flint Mall site

Andrew Metcalf

The owners of White Flint Mall have lost their appeal in a long-running court case against Lord & Taylor.

In an opinion published Tuesday, three judges of the Fourth Circuit Court of Appeals unanimously upheld a federal district court jury’s $31 million August 2015 verdict in favor of Lord & Taylor.

The opinion, written by Judge Pamela Harris, states the jury in the federal district court case properly accounted for lost profits and future construction costs to reconfigure the store after the owners of the mall—Lerner Enterprises and The Tower Cos.—breached a 1975 easement agreement with Lord & Taylor.

That agreement stated the mall’s owners would maintain the Rockville Pike property as a “first-class” mall until at least 2042. Instead, the owners ended leases with shops inside the mall and later demolished it over the past two years as part of a plan to redevelop the property into a massive mixed-use town center. The Lord & Taylor store sat next to the main mall building and was connected with a shared wall—the store is all that remains on the site now.

It’s not yet clear what legal options the mall’s owners have left to pursue—other than trying to appeal the case to the Supreme Court. Scott Morrison, the trial attorney who represented the mall’s owners in the case, said last year the redevelopment of the mall site wouldn’t happen unless the appeal was successful.

White Flint Mall has been demolished at the site along Rockville Pike. Credit: Andrew Metcalf

However, the estimated $800 million White Flint mall redevelopment is one of the largest proposed in the county—with about 5.22 million square feet of residential, retail, office and hotel development—and is a key component of the county’s White Flint Sector Plan. That plan aims to make the Rockville Pike retail area around the White Flint Metro station into a walkable, urban community.

In the federal district court case, attorneys for the mall’s owners made few attempts to fight the breach of contract, but did attempt to argue that Lord & Taylor would reap greater profits if the mall site was redeveloped into a new town center. However, the district court judge refused to allow the jury to consider testimony during the jury trial about future profits, noting such arguments would be speculation. White Flint’s attorneys had attempted to refute that decision in the appeals case.

Ultimately, the appeals judges sided with the district court’s decision, with Harris writing, “under Maryland law, it is clear that damages related to lost profits may not be recovered unless they can be proved with ‘reasonable certainty.’ “

The judges found that the mall’s owners “could not establish to a ‘reasonable certainty’ whether and to what extent Lord & Taylor would benefit from the redevelopment.”

The opinion also noted the mall’s owners failed to provide the jury with a clear picture of when the new town center would be built, how many buildings it would include and what types of businesses would be expected to lease space in it.

However, the appeals judges found that the lack of information was not the fault of witnesses presented by the developers and noted that “a real estate development of the scale contemplated here is an inherently risky endeavor, extending years into the future and marked by significant uncertainty.”

Lord & Taylor had also attempted to make counterclaims during the appeals case for additional funds related to its property rights under the easement agreement. The judges rejected the retailers’ argument by noting that potential lost profits are the governing factor in breach of contract cases such as this one under Maryland law.

The Fourth Circuit Court of Appeals in Richmond held oral arguments in the case Dec. 6. The latest ruling brings an end to the case that has been contested in federal courts since 2013.

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