Judge sides with mall, Palm Beach Gardens in Sears sublease fight

Do not expect to shop for fishing reels and fitness equipment at The Gardens Mall in Palm Beach Gardens anytime soon.

Sears this month lost a major legal decision that would have made it easier for the department store to sublease its second-floor mall space to Dick’s Sporting Goods.

In a June 9 judgment, Palm Beach County Circuit Court Judge Edward Garrison found in favor of the mall and the city, which have been locked in litigation for years with Sears.

At issue: Whether Sears can sublease its second-floor mall space to Dick’s without interference from mall owner Forbes/Cohen Florida Properties L.P. and the city.

Sears had filed a lawsuit against Forbes in 2014, seeking a judge’s OK on the Dick’s deal and clarification on its rights to sublease its space. Sears had argued that its lease terms meant that Forbes had “no right” to approve the Dick’s sublease.

But Garrison refused to give Sears’ the blanket OK it sought.

The June 9 judgment also found in favor of Palm Beach Gardens, which was dragged into the lawsuit after it passed a 2012 resolution that said Sears can’t sublease its mall space without the approval of both Forbes and the city.

The judgment reaffirmed “a municipality’s right to take certain actions,” said R. Max Lohman, Palm Beach Gardens’ attorney. “(The city) didn’t do anything wrong and got sued for it. They had no choice but to defend themselves.”

Robert Carson, an attorney for Michigan-based Forbes, applauded the judgment. “We’re delighted with the result,” Carson said.

For now, Garrison’s decision puts in doubt the pace of the Sears-Dick’s deal at a time when Dick’s has gained greater prominence in the retailing world with the demise of its chief rival, Sports Authority, now liquidating and closing its stores, including six Palm Beach County locations.

Sears was terse in its response to Garrison’s decision, expressing disappointment that the judge did not clarify matters for Sears.

As for the future of the legal dispute, “We are considering our options,” said Gerald Richman, a West Palm Beach lawyer for Sears.

Sears, the struggling retailer, has been subleasing its stores nationwide as part of a new business strategy. In fact, Sears has subleased space at other mall locations to stores such as Dick’s, Forever 21 and Nordstrom Rack.

Dick’s has two locations in Palm Beach County, in Wellington and Boynton Beach, but the Pennsylvania-based retailer is looking for more. Sears and Dick’s still have a contract for the sublease at The Gardens Mall, and it’s possible Dick’s might one day take space there.

But with this legal ruling, the process is likely to be lengthier because both the mall and the city will have a say.

The litigation raised issues about the future of The Gardens mall, which has transformed itself from a sleepy suburban mall into a mecca of luxury retailers, raising the city’s profile along the way. Court documents show Forbes has been keen to retain the cachet and luxury focus of the 1.4-million-square-foot center, which features stores such as Gucci and Louis Vuitton.

Sears alleged in court documents that Forbes made noises about blocking the Dick’s sublease because it really wants the valuable Sears property back.

Retail sources say the mall would love to bring in another high-end retailer. Neiman Marcus, for instance, has locations in Boca Raton and Palm Beach but not at The Gardens mall.

The litigation raised constitutional issues, too, including allegations by Sears that Palm Beach Gardens violated Sears’ due process and interfered with a contract when it drafted the 2012 resolution.

Illinois-based Sears argued in court documents that the resolution was really an ordinance, requiring public notice that did not take place. Sears also said the resolution was unfairly crafted for the benefit of one private party, the mall, over another party, Sears.

Garrison wasn’t persuaded and ruled in favor of the city.

Garrison also sided with Forbes, which had argued that Sears had to abide by lease restrictions and did not have the unrestricted right to sublease its space. Garrison’s judgment was only one page and gave no explanation for his decisions.

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