2015 | Real Estate

Attorney for White Flint Says Mall Redevelopment ‘Very Unlikely’ Unless Verdict Reversed

Lord & Taylor's attorney believes jury's verdict will hold up on appeal

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A conceptual image shown as an exhibit during the White Flint trial shows how a Lord & Taylor store (marked with a K) could fit into a redeveloped site

The trial attorney who represents White Flint Mall’s owners said Tuesday the $31 million court judgment last week in favor of Lord & Taylor could halt the mall’s redevelopment.

“Unless the judgment is reversed, the redevelopment of the White Flint site is very unlikely to occur,” Scott Morrison, who works in the Washington, D.C. office of the firm Katten Muchin Rosenman LLP, said in a phone interview with Bethesda Beat. “The judgment imposes a very onerous financial burden on White Flint. Unless that burden is removed, I don’t see any feasible way to proceed with the cost of redevelopment.”

Morrison said the mall’s owners—Lerner Enterprises and The Tower Cos.—will appeal the verdict within the 30 days allotted by law. He said he believes U.S. District Court Judge Roger W. Titus erred by not permitting the jury to hear evidence during the trial about future profits the store could make at a redeveloped site.

 “We think the trial court was simply wrong in the application of Maryland law,” Morrison said. “It effectively left the jury without any recourse to in any way balance the short-term harm from demolition and construction with the huge amount of potential profits in the new development… The sad truth is Lord & Taylor doesn’t deserve that [money]. Lord & Taylor is going to make millions and millions of dollars going forward, if redevelopment can proceed.”

The appeal would be heard in the U.S. Court of Appeals for the Fourth Circuit Court in Richmond, Virginia. White Flint’s owners previously won an appeal against Lord & Taylor in April, when the appeals court upheld a U.S. District Court ruling that the retailer didn’t have a right to an injunction to halt redevelopment at the site.

“I think the Fourth Circuit will agree with us. We’re optimistic about the appeal,” Morrison said.

Filing for bankruptcy of the mall is also an option and is currently being evaluated, according to Morrison.

A jury awarded Lord & Taylor $31 million in a verdict Friday in the 2½-week trial at U.S. District Court in Greenbelt. The amount is what Lord & Taylor’s attorneys had claimed were the store’s lost profits in closing arguments. The case stemmed from a 1975 easement agreement in which the mall’s owners had agreed to maintain the mall as a “first-class” shopping destination. Lord & Taylor’s attorneys argued during the trial that the mall’s owners breached the contract first by failing to save the struggling mall, then by closing it in January and beginning demolition in July.

Michelle Gambino, an attorney who represents Lord & Taylor, wrote in an email that the court’s decision to bar future profits from the jury’s consideration is backed up by “ample case law.”

“The testimony was entirely too speculative and we strongly agree with the court’s ruling precluding consideration of the issue,” Gambino wrote.

Gambino said she doesn’t see any reason why the verdict would stop the mall’s owners from redeveloping the site.

“[White Flint] represented less than a week ago while under oath that it was going to build a newly revised plan that kept many of the site characteristics [that] Lord & Taylor bargained for intact (including its parking lots and surface lot) and stated in its closing argument that it was fully prepared to invest over $800 million in the redevelopment,” Gambino wrote. “We do not see how the jury’s verdict would in any way impact that and now preclude White Flint from carrying out its representations.”

The redevelopment would dramatically change the mall site. In a sketch plan approved by Montgomery County in 2012, the mall’s owners proposed construction of several buildings that would include 1 million square feet of office space, 2,400 residential units, 1 million square feet of retail space and a 280,000-square-foot hotel. Community members in the area that surrounds the Rockville Pike site were hopeful Monday that the verdict meant redevelopment can begin in earnest.