Sears, Roebuck & Co. v. Forbes/Cohen Fla. Props., L.P.

• Decision Date: 12 July 2017
• Docket Number: No. 4D16–2314,4D16–2314
• Citation: 223 So.3d 292
• Parties: SEARS, ROEBUCK & CO., Appellant, v. FORBES/COHEN FLORIDA PROPERTIES, L.P., a Michigan Limited Partnership, and City of Palm Beach Gardens, Florida, a Florida Municipal Corporation, Appellees.
• Court: Florida District Court of Appeals

223 So.3d 292

SEARS, ROEBUCK & CO., Appellant,

v.FORBES/COHEN FLORIDA PROPERTIES, L.P., a Michigan Limited Partnership, and City of Palm Beach Gardens, Florida, a Florida Municipal Corporation, Appellees.

No. 4D16–2314

District Court of Appeal of Florida, Fourth District.

[July 12, 2017]

Gerald F. Richman and Leora B. Freire of Richman Greer, P.A., West Palm Beach, and Natalie J. Spears and Steven L. Merouse of Dentons US LLP, Chicago, Illinois, for appellant.

Bruce S. Rogow and Tara A. Campion of Bruce S. Rogow, P.A., Fort Lauderdale, and Robert M. Carson and Jeffrey B. Miller of Carson Fischer, P.L.C., Bloomfield Hills, Michigan, for appellee Forbes/Cohen Florida Properties, L.P.

R. Max Lohman and Abigail F. Jorandby of Lohman Law Group, P.A., Jupiter, Florida, for appellee City of Palm Beach Gardens.

Levine, J.

Sears, Roebuck has a lease with Forbes/Cohen for a store within the Gardens Mall. It attempted to sublease part of its store to Dick's Sporting Goods. However, the landlord disapproved of the sublease and collaborated with the City of Palm Beach Gardens, unbeknownst to Sears, to enact a resolution to now require both the landlord and the City to agree to any subdivision of space within the Gardens Mall.

The issues presented in this case are whether the City's resolution unconstitutionally impairs Sears's contract rights and whether that resolution violates substantive due process because it has no criteria stating when approval to subdivide Sears's leased space may be granted or denied. As a related issue, we consider whether Sears is owed attorney's fees as a result of the City's alleged violation of substantive due process. Finally, we consider whether Sears has a contractual right to sublease.

We conclude the City's resolution is unconstitutional both because it impairs Sears's right to contract—and the contract rights emanating from the lease between Sears and Forbes/Cohen—and deprives Sears of its substantive due process rights. Consequently, we find Sears is a prevailing party under 42 U.S.C. sections 1983 and 1988 and is owed attorney's fees. We further conclude that Sears has the contractual right to sublease without authorization from Forbes. The remaining issues are without merit and we affirm without comment.

FACTS

In 1984, Forbes/Cohen Florida Properties, L.P. ("Forbes") entered into a Land Lease to develop property within Palm Beach Gardens and construct a mall. Forbes then petitioned the City of Palm Beach Gardens (the "City") to approve construction for the mall. The City approved Forbes's petition and enacted the Palm Beach Gardens Planning Unit Development ("P.U.D.") through resolution.

The P.U.D. specifically requires that all anchor stores at the mall undergo architectural review "to achieve architectural design harmony and to maintain integrity throughout the project." Issuance of a building permit requires city council approval of any preliminary designs to ensure the proposed modifications do not "disrupt the architectural design, harmony and integrity" of the mall. Further, the P.U.D. restricts signage by limiting anchor tenants to "[o]ne wall sign for each anchor department store facade representing typical identification by sign logo, style, and illumination indigenous to that anchor department store ...."

In 1987, Forbes entered into a sublease with Sears, Roebuck & Co. ("Sears"). The thirty-year sublease gives Sears the option to extend its lease for four separate periods of ten years each so long as Sears was not in material default and was operating as a retail store. Additionally, the sublease gives Sears the "right" to sublease, stating:

[Sears] shall have the right to assign this Lease and to sublet from time to time the Demised Premises or any part thereof ; subject however, to the terms and provisions of the [Reciprocal Easement Agreement]. No such assignment or subletting shall relieve Tenant of its obligations under this Lease ....

(emphasis added). Lastly, the sublease requires Sears to "comply with all laws and ordinances and the orders, rules, and regulations and requirements of all Federal, State, County and municipal governments ... which may be applicable from time to time to the Demised Premises." However, the sublease also allows Sears the "right to contest the applicability of any laws, ordinances, orders, rules, regulations or governmental requests ...." (emphasis added).

Concurrent with the sublease, Sears entered into a Reciprocal Easement Agreement (the "R.E.A."). The R.E.A. mandates that Sears initially operate as a department store, but after twenty years, Sears could use its space for "retail and service purposes and for no other purposes." As to subleasing, the R.E.A. indicates that "Majors," that being anchor tenants like Sears, could "lease all or any portion(s) of its building and/or license departments therein" so long as the sublease otherwise complied with the R.E.A. The R.E.A also sets forth criteria for signage. The R.E.A. requires signs to comply with aesthetic and safety standards, for example prohibiting blinking lights and rooftop signs and requiring compliance with electrical codes. The R.E.A. also prohibits tenants from creating dangerous hazards within the mall. Finally, the R.E.A. provides that it exists for the "exclusive benefit of the Parties and the Fee Owner" and nothing in the R.E.A. should "be construed to create any rights in or for the benefit of any space lessee of any part of the Shopping Center Parcel."

In 2011, Sears began seeking a subtenant to sublease part of its two-story store and entered into negotiations with Dick's Sporting Goods. Sears informed Sidney Forbes, a partner of Forbes, of its plans.

Without informing Sears, Sidney met with the City, told the City of Sears's plans, and personally requested that the City enact a resolution. 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 (the "Resolution") as part of its consent agenda without taking any testimony.

The Resolution states that its purpose was to clarify the P.U.D. The Resolution requires the following:

Prior to any proposed structural modifications, installation of kiosks, and/or any subdivision of an anchor tenant space into any sub-space which requires separate business tax receipts and/or newly separate licensing of any kind whatsoever for the business enterprise intending to occupy the newly created sub-space, anchor tenants must obtain City Council approval. Prior to seeking City Council approval the subject anchor tenant must obtain approval for the subject modification from mall ownership.

Sears, not knowing of the Resolution, informed Forbes of its plans to sublease to Dick's. Forbes claimed Dick's was inappropriate for the mall. Subsequently, Forbes sent Sears a letter stating that Sears's "contemplated actions ... are beyond [Sears's] authority under the Sublease." The letter further stated that Forbes did "not consent to the marketing by Sears of any portion of its space within the Gardens and will not consent to any proposals that is not fully in compliance with all applicable restrictions and fully satisfies all of [Sears's] obligations." Then, at a subsequent meeting, Sidney told Sears that it was not within its rights to sublease to Dick's. Sidney believed Sears could not sublease to Dick's because Dick's was not a department store, Dick's did not have signage rights, and Dick's did not "belong" at the mall.

Sears filed a complaint seeking declaratory relief. As to Forbes, Sears sought a declaratory judgment stating that it had the right to sublease to Dick's. As to the City, Sears sought a declaratory judgment stating that the Resolution was an unconstitutional impairment of contract under the Florida and United States Constitutions and that the Resolution violated Sears's substantive due process rights. Lastly, Sears sought attorney's fees under 42 U.S.C. sections 1983 and 1988.¹

During the pendency of litigation, Sears entered into a sublease with Dick's for one floor of Sears's two-floor lease. As per the sublease, Dick's was to operate as a sporting goods store. Furthermore, the sublease was contingent on Sears getting necessary government approvals, including approvals for signage as well as obtaining a favorable declaratory judgment.

Following the trial court's denial of the City's and Forbes's motions to dismiss and Sears's motion for summary judgment, the case went to trial. At trial, testimony established that Dick's was a "first-class" retailer. Further, Forbes conceded that Sears had the right to sublease so long as it complied with the sublease and the R.E.A. Nevertheless, Forbes asserted the following reasons against the sublease: the proposed Dick's sublease was not compliant with the sublease and the R.E.A. because Dick's could not put up a sign, Sears could not exercise its option to extend its lease while subleasing to Dick's, Sears had not gotten the requisite architectural approvals for modification of the leased premises, and Dick's potential gun sales violated the R.E.A.'s prohibition on creating dangerous hazards.

Sears conceded that, under the sublease, the current signage plans were not compliant with municipal zoning standards. Sears noted that it would need to get city approvals and waivers, but that other anchor tenants at the mall had multiple signs and that it was a regular industry practice to work with municipalities in getting necessary approvals and waivers. Further, Sears conceded that it had not yet attained the necessary architectural approvals for the mall, but would do so upon favorable disposition of the declaratory judgment action. Finally, Sears had not exercised its option to renew its lease, which was set to expire in 2018.

The City's contention at trial was that the Resolution did not create new rights or obligations, but instead was administrative and merely interpreted, and reiterated,...