Bon-Ton Stores, Inc. v. May Dept. Stores Co., 94-CV-6454L
| Decision Date | 30 November 1994 |
| Docket Number | 94-CV-6479L.,No. 94-CV-6454L,94-CV-6454L |
| Parties | The BON-TON STORES, INC., Plaintiff, v. The MAY DEPARTMENT STORES COMPANY, McCurdy & Company, Inc., and Wilmorite, Inc., Defendants. STATE OF NEW YORK By G. Oliver KOPPELL, Attorney General, Plaintiff, v. The MAY DEPARTMENT STORES COMPANY, McCurdy & Company, Inc., and Wilmorite, Inc., Defendants. |
| Court | U.S. District Court — Western District of New York |
COPYRIGHT MATERIAL OMITTED
James Metzler, Boylan, Brown, Code, Fowler, Randall & Wilson, Rochester, NY, Ray S. Bolze, Marc G. Schildkraut, Yvette Benguerel, Eberhard W. Pfaller, Jr., Howrey and Simon, Washington, DC, for The Bon-Ton Stores, Inc.
Joseph Opper, Robert Hubbard, Pamela Jones Harbour, New York State Dept. of Law, Antitrust Bureau, New York City, for State of NY, by G. Oliver Koppell.
Anthony R. Palermo, Hodgson, Russ, Andrews, Woods & Goodyear, Rochester, NY, Ronald J. Dolan, Gary P. Chura, St. Louis, MO, for The May Dept. Stores Co.
Fred G. Aten, Jr., Harter, Secrest & Emery, Rochester, NY, for McCurdy & Co., Inc.
Paul R. Braunsdorf, Harris, Beach & Wilcox, Rochester, NY, for Wilmorite, Inc.
DECISION AND ORDER
In our economic system, mercantile enterprises are generally left to their own devices to determine how best to make a profit. Certain actions, or inactions, purportedly designed to enhance profits may instead have a potential to harm the public. In such a case, swift action by a governmental agency or a court is necessary to avoid harm both to individuals and to the general public.
This is such a case. The attempt by a large retail company to purchase all of the assets of its principal competitor, effectively blocking other like competitors from entering the market, will have serious adverse economic effects in the greater Rochester metropolitan area. Whenever competition is substantially reduced, consumers suffer. Lack of choices and higher prices are almost inevitable. In such a circumstance the public interest controls and the acquisition must be vacated and annulled.
Plaintiffs The Bon-Ton Stores, Inc. ("Bon-Ton") and the State of New York ("the State") commenced these consolidated actions against defendants, May Department Stores Company ("May"), McCurdy & Company, Inc. ("McCurdy's"), and Wilmorite, Inc. ("Wilmorite"), to enjoin the sale of eight McCurdy-owned department stores in the greater Rochester, New York area to May. May presently owns four stores in the area doing business as Kaufmann's.
Plaintiffs allege that the sale violates both federal and state antitrust laws, specifically Section 7 of the Clayton Act, 15 U.S.C. § 18, Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and § 340 of the New York General Business Law. Bon-Ton seeks an injunction enjoining defendants from concluding and closing on an agreement between McCurdy's and May by which May would acquire the McCurdy's stores in the Rochester area. Bon-Ton also seeks damages as well as costs and attorneys' fees. The State also seeks to block the sale and also seeks civil penalties, costs and attorneys' fees.
There are several motions pending before the Court. Bon-Ton and the State have moved for a preliminary injunction and all defendants have moved to dismiss the complaints.
Bon-Ton had sought a temporary restraining order at the time the complaint was filed because closing on the purchase agreement between May and McCurdy's was imminent. In lieu of a hearing on the temporary restraining order application, the parties stipulated that May would maintain three of the acquired stores in the major regional malls, as is, at least until November 1, 1994. Wilmorite likewise agreed to maintain the McCurdy's store site at Eastview Mall, as is, until that date. Under the terms of the challenged acquisition, Wilmorite was to obtain that store.
The rationale for the stipulation was to maintain the transferred assets, as is, at least pending a determination of the preliminary injunction motion, so that if plaintiff prevailed, a remedy would be readily available and the Court could annul the sale and divest May and Wilmorite of the assets transferred pursuant to the challenged acquisition.
By order entered October 31, 1994, the Court directed that an evidentiary hearing be held, primarily concerning the relevant product market appropriate in the case. The need for such a hearing was discussed at length in that order, familiarity with which is assumed. In an antitrust case such as this, it is essential that both the geographic and relevant product markets be determined, in the first instance, so that the Court can properly determine the likely effect on the geographic and product markets caused by the proposed merger, acquisition or other challenged business activity.
In that same order, the Court extended the stipulated temporary restraining order until further order of the Court.
The Court conducted a hearing over three days. Ten witnesses testified at the hearing. All of these witnesses had previously submitted affidavits or declarations to the Court either in support of or in opposition to the pending motions.
As noted in my October 31 Decision, the record on the motions is quite extensive. Prior to the hearing, the Court had been "carpet bombed"1 with hundreds of pages of documents and exhibits, 42 separate affidavits or declarations, and lengthy legal memoranda on several issues. The Court has heard extensive oral arguments on the motions and also received post-hearing briefs from all of the parties.
Bon-Ton is an independent regional department store company based in York, Pennsylvania with the majority of its stores in Pennsylvania. In July 1994 Bon-Ton acquired ten stores in the greater Buffalo, New York metropolitan area, giving them 14 stores in upstate New York. In 1993 Bon-Ton had net sales of approximately $337 million. Bon-Ton currently has no stores in the Rochester metropolitan area.
McCurdy's, an independent closely-held department store company based in Rochester, New York, owned and operated 12 stores in New York, nine of which were in the Rochester metropolitan area. McCurdy's, founded in 1901, had been one of Rochester's premier department stores for many years. Eight of the 12 stores were operated under the "McCurdy" name, and four were operated under the name "B. Forman." McCurdy's 1993 net sales amounted to some $83 million.
The May Department Stores Company is a holding company based in St. Louis, Missouri that owns and operates over three hundred department stores throughout the country.2 It is one of the largest department store companies in the United States. Its stock is traded on the New York Stock Exchange and in 1993 it had net sales of approximately 11 billion dollars. One of the department stores owned by May is Kaufmann's, which operates forty stores in Pennsylvania, West Virginia, Ohio and New York. Kaufmann's presently operates four department stores in the Rochester, New York metropolitan area. All of these stores are located in major shopping malls: The Mall at Greece Ridge ("Greece Ridge"), Marketplace, Irondequoit and Eastview Malls.
Wilmorite, Inc., founded in 1950 with headquarters in Rochester, New York, is involved in large-scale real estate development, generally in the northeast United States. It has developed twenty-three large retail centers in New York, Connecticut, New Jersey and Illinois, including regional shopping malls and community shopping centers.
In the greater Rochester area, Wilmorite has developed the five largest shopping malls, including Greece Ridge, Eastview, Marketplace, and Irondequoit Malls and Pittsford Plaza.
In addition to the development of shopping malls, Wilmorite has developed other types of property, including apartments, office buildings and urban redevelopment projects.
An affiliated company of Wilmorite, Genesee Management, manages Wilmorite's properties, including twenty-two shopping centers, totalling approximately seventeen million square feet of gross leasable space, as well as apartment projects, office projects and a hotel. Wilmorite is not in the department store business, and it does not compete with either Bon-Ton or May.
In the spring of 1994, after a series of financial misfortunes, McCurdy's determined to close its retail operation and sell its assets, including all of its twelve stores.
McCurdy's retained TM Capital Corp. ("TM"), an investment banking firm in New York City, to arrange the sale of its department store assets. TM recommended a "controlled auction" sale where numerous potential purchasers are courted simultaneously. Affidavit of Michael S. Goldman, sworn to October 5, 1994, ¶¶ 7-8. Thirty-six potential purchasers throughout the United States and Canada were notified and sixteen were sufficiently interested to obtain a Confidential Descriptive Memorandum, prepared by TM, which described the operations of the McCurdy's and B. Forman stores and contained detailed historical and financial information about the stores.
Both Bon-Ton and May obtained this information and these two firms were the only two engaged in serious negotiations with TM for the purchase of McCurdy's. There were extensive discussions among TM and representatives of Bon-Ton, McCurdy's and May. Apparently neither May nor Bon-Ton were informed by TM as to each other's interest as a potential bidder.
On June 1, 1994, McCurdy's accepted May's offer to buy eight of the 12 McCurdy's department stores, six of which are in the Rochester area, for $17.75 million. On June 3, 1994, this agreement was memorialized in a letter of intent between McCurdy's and May. An Asset Purchase Agreement dated July 1, 1994, specifying the terms of the sale was executed on September 19, 1994.
May agreed to purchase a total of eight McCurdy's stores, six in the Rochester area, one in Elmira, New York, and one in Syracuse, New York....
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