The city of Palm Beach Gardens is suing Sears’ parent company and the owner of The Gardens Mall to get direction on details for subleasing the Sears space to Dick’s Sporting Goods. Meanwhile, Sears’ parent company, Transform, threatens a new lawsuit against the city and the mall.
Do not expect any major changes to the Sears store at The Gardens Mall in Palm Beach Gardens for a while.
Once again, a legal brouhaha is starting up involving the troubled department store, the upscale mall and the city of Palm Beach Gardens.
Since 2012, Sears has wanted to sublease its second floor space to Dick’s Sporting Goods. But lawsuits and red tape have held up the efforts.
After an appellate court ruled in 2017 that Sears had the right to sublease its space, it seemed the lawsuits would recede and something new would come to the mall.
Nope. Everyone is back in court again, and this time, Sears is threatening all-out war after being hit last month with lawsuits by the mall’s owner and the city of Palm Beach Gardens.
Sears’ parent company, Transform HoldCo LLC, said on Wednesday it was readying its own complaint against the city and the mall’s owner, Forbes/Cohen Florida Properties.
“This eight-year frustration of Sears’ right to sublet … has resulted in substantial financial losses that we will be suing Forbes and the city to recover,” a Transform statement said.
A Transform spokesman would not elaborate on details of the pending lawsuit. But if history is any guide, the fight will be long and could be costly to Palm Beach Gardens taxpayers.
In 2019, the city of Palm Beach Gardens paid $625,000 to Sears in legal fees after an appellate court found the city interfered in a contract between the mall and Sears, the Palm Beach Post has learned.
The money came from Palm Beach Gardens taxpayers and was not covered by the city’s insurance.
It could have been worse. At one point, Sears was seeking $2.1 million from the city, said R. Max Lohman, the city’s attorney.
How did a department store once known for its old-timey catalogue and great selection of tools wind up taking such a hard line against its mall landlord and the city in which it does business? The answer is time and money.
The Gardens Mall features 1.4 million square feet. Department store tenants include Saks 5th Avenue, Macy’s, Nordstrom and Bloomingdales, as well as Sears. The mall is east of Interstate 95 on PGA Boulevard.
When the mall first was built in 1988 by the Forbes Company of Southfield Mich., Palm Beach Gardens was a sleepy place. To lure shoppers, Forbes brought Sears in as a founding tenant and gave it a favorable, long lease.
Over time, the mall attracted a more luxury-oriented customers and tenants, and the population boomed. Today the mall is filled with stores such as Jimmy Choo and Chanel.
Meanwhile, the venerable Sears chain struggled to survive in shifting retail winds, finally seeking Chapter 11 bankruptcy protection in October 2018. Now Sears has a new owner, Transform, created to acquire Sears’ assets and subsidiaries. Transform is led by Eddie Lambert, who formerly was chief executive and chairman of Sears.
In recent years, Sears has tried to survive by subleasing its space at other mall locations. But Sears has said Forbes has blocked The Gardens Mall sublease because it really wants the valuable Sears property back. In fact, Forbes tried to buy Sears out of its lease, but Sears rebuffed the offer, court documents say.
Back in 2011, Sears first told Forbes it was working on plans to sublease its second floor mall space to Dick’s, according to court records. Dick’s has stores in West Palm Beach, Boynton Beach and Boca Raton but none in north Palm Beach County.
In 2012, Forbes sought a resolution from the city of Palm Beach Gardens. The resolution said mall anchor tenants could not subdivide their space without the approval of both Forbes and the city. The resolution did not name Sears, but the mall later used the resolution as the basis to fight off efforts by Sears to sublease to Dick’s.
Sears sued Forbes in 2014 for the right to bring in Dick’s, then Sears added the city of Palm Beach Gardens to the lawsuit the next year.
In June 2017, the 4th District Court of Appeal found that the city resolution was unconstitutional because it impaired Sears’ contract rights.
As part of its decision, the 4th DCA not only granted Sears the right to subdivide its mall space. The court also ruled that Sears was owed attorneys’ fees because the city resolution “deprived Sears of substantive due process.”
However, the appellate court said it would not address other aspects of the Sears-Dick’s sublease, including city regulations.
After Transform took charge of Sears, it tried to move forward with the Dick’s sublease. But in court records, Transform says Forbes once again started throwing up roadblocks.
Transform says Forbes won’t sign documents needed to make exterior changes to the department store. For instance, Transform wants to move an entrance and a Sears sign, and add a sign for Dick’s Sporting Goods.
The city says it needs Forbes to sign the documents before it can consider the changes. The forms indicate the landlord grants consent to the changes sought by a tenant. It’s a standard practice by the city, Lohman said.
In the absence of Forbes’ cooperation, Transform has urged the city to exercise its discretion and approve the application anyway. Last year, Transform even threatened litigation over the issue.
But the mall beat Transform to the courthouse.
On Dec. 3, Forbes asked a Palm Beach Court Circuit Court judge for a ruling that says Transform Operating Stores LLC can’t change 1984 rules about The Gardens Mall’s appearance and design, including the look of anchor stores such as Sears.
Given the history on this topic, the city is wary of making the wrong move to either grant the application by Transform, or side with Forbes on the paperwork issue and refuse the application, Lohman said.
Therefore the city of Palm Beach Gardens recently filed its own lawsuit against both Transform and Forbes. The Dec. 19 lawsuit seeks a judge’s ruling on what to do.
Lohman said the city does not want to be stuck in the middle of two warring companies, again.
“I’ve got two parties declaring the absolute right to X, Y and Z,” Lohman said. “These parties have sophisticated attorneys who can’t agree. So how is it fair to put my client into the middle of this, and put taxpayer money at risk over a fight that’s not ours?”
Transform isn’t buying the city’s middle-of-the-road claim.
“After having to pay attorney’s fees to Sears just last year for collaborating with Forbes to violate Sears’ constitutional rights,” Transform’s statement said, “we had hoped that the city would do what it should have done in the first place and simply approve the development application submission.”
Transform went on to call both the Forbes and the city’s lawsuits “frivolous.”
A mall spokesman did not return a phone call seeking comment.