Ruling: Simon must face anti-trust suit from competitor

Indianapolis-based Simon Property Group must face an anti-trust lawsuit from a competitor that developed a northern Indiana shopping center near a Simon mall, a federal judge has ruled.

The developer of Heritage Square in Granger claims Simon employed unlawful means in violation of the Sherman Anti-Trust Act to pressure a tenant into signing a lease at its University Park Mall a mile away in Mishawaka instead of opening in the new plaza. Internal Simon emails discovered in the lawsuit show executives discussed terminating leases for Ann Taylor stores at more lucrative malls if the chain didn’t sign a lease at University Park.

As Heritage was in development in 2006, internal Simon documents read, “We need a positive decision on University Park before we will move forward with any key renewals,” and that the Ann Taylor stores in other key malls “would be prime centers to kill if negotiations go south.

“If they go ahead with Heritage we’re going to cancel Woodbury and Dadeland,” an internal Simon email says, referring to Simon malls in New York and Miami, respectively.  “Lose a pinky — take an arm!”

Ann Taylor signed a lease and began working on opening a store at Heritage Square before it opened in 2006, but the clothing retailer backed out of its lease. The chain struggled during the recession, closing more than 100 stores beginning in 2008, but it ultimately opened a Loft store at University Park in March 2009.

Heritage Square’s developer sued Simon in 2011, claiming not only the rent it would have received from its Ann Taylor lease, but also arguing the retailer’s departure created a snowball effect causing it to lose other high-end retailers and earn less in lease revenue from other tenants. Heritage Square’s developers ultimately surrendered debt of $33 million to its lender in exchange for a deed in lieu of foreclosure valued at $12.5 million.

Simon argues the evidence isn’t sufficient to prove it attempted to impose a “tying” arrangement on Ann Taylor, and that Heritage’s developer cannot prove harm to competition.  

Both sides moved for summary judgment, but Judge Jon E. DeGuilio of the District Court for the Northern District of Indiana in South Bend denied both motions Friday, setting the stage for a trial.
DeGuilio wrote there are too many facts in dispute in the litigation to award judgment to either party at this stage.

While DeGuilio noted in his order that both Simon and Ann Taylor dispute Simon threatened to tie other leases to University Park, the judge wrote the internal Simon emails could not be ignored.

“While these emails may fall short of a smoking gun, they at least permit an inference that Simon threatened to withhold leases in other properties if Ann Taylor proceeded with its store at Heritage Square or did not sign a lease at University Park,” DeGuilio wrote. “There is also evidence that these threats affected Ann Taylor’s actions,” including halting construction of the Heritage Square store after spending more than $100,000 prior to an expected opening before the 2006 Christmas season.

The case is Gumwood HP Shopping Partners, L.P. v. Simon Property Group, Inc., 3:11-CV-268.

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