Sears, Roebuck & Co. came out largely on the winning side of a dispute with its landlord and city officials in Palm Beach Gardens over its attempt to sublease part of its store to Dick's Sporting Goods.
The retailer brought suit after landlord Forbes/Cohen Florida Properties LP rejected a sublease. Sears claimed Forbes/Cohen worked with city officials in the affluent suburb without Sears' knowledge to pass a resolution that would require tenants to get approval from both the city and landlord before subdividing space at the Gardens Mall.
A state appellate court ruled Wednesday that the resolution was unconstitutional and awarded attorney fees to Sears.
The case presented multiple issues for the Fourth District Court of Appeal. It required the panel to determine whether Sears' rental contract allowed it to sublease and if the retailer was entitled to attorney fees. Issues in play were whether Palm Beach Gardens' resolution deprived Sears of due process by providing no criteria for granting or denying sublease requests and if the city's actions unconstitutionally impaired the retailer's right to contract.
"We conclude that the city unconstitutionally impaired Sears' right to contract and deprived Sears of its rights to substantive due process," Judge Spencer Levine wrote in a unanimous decision with Judges Martha Warner and Alan Forst concurring. "Because the city's resolution deprived Sears of substantive due process, Sears is also owed attorney's fees."
Forbes/Cohen signed a land lease with the city in 1984 to develop the 1.4 million-square-foot mall that attracted Saks Fifth Avenue, Bloomingdale's, Nordstrom, Sears and other major retailers. The project was within a planned unit development requiring all anchor stores to undergo architectural review and obtain city approval for modifications.
The 1987 contract between Forbes/Cohen and Sears gave the retailer the right to sublease its space.
In 2011, Sears' sales and earnings were suffering, and it began seeking a substitute tenant. Talks began with Dick's Sporting Goods, and Sears informed Forbes/Cohen principal Sidney Forbes about its intentions.
"Without informing Sears, Sidney met with the city, told the city of Sears's plans and personally requested that the city enact a resolution," Levine wrote for the appellate court. "Forbes submitted a development application along with a $1,650 fee and then collaborated with the city in crafting the proposed resolution. The city passed Resolution 20-2012 as part of its consent agenda without taking any testimony."