Caruso Mgmt. Co. v. Int'l Council of Shopping Ctrs.

• Decision Date: 23 August 2019
• Docket Number: 18 Civ. 11932 (VM)
• Citation: 403 F.Supp.3d 191
• Parties: CARUSO MANAGEMENT COMPANY LTD., Plaintiff, v. INTERNATIONAL COUNCIL OF SHOPPING CENTERS, Defendant.
• Court: U.S. District Court — Southern District of New York

403 F.Supp.3d 191

CARUSO MANAGEMENT COMPANY LTD., Plaintiff,

v.INTERNATIONAL COUNCIL OF SHOPPING CENTERS, Defendant.

18 Civ. 11932 (VM)

United States District Court, S.D. New York.

Signed August 23, 2019

Julia Marie Beskin, Renita Sharma, Steven M. Edwards, Quinn Emanuel Urquhart & Sullivan LLP, New York, NY, for Plaintiff.

Alan Schoenfeld, Wilmer Cutler Pickering Hale & Dorr LLP, New York, NY, Steven Franklin Cherry, Wilmer Cutler Pickering Hale & Dorr, L.L.P., Washington, DC, for Defendant.

DECISION AND ORDER

VICTOR MARRERO, United States District Judge

Plaintiff Caruso Management Company Ltd. ("Caruso") brought this action against defendant International Council of Shopping Centers ("ICSC"), alleging multiple antitrust violations as well as claims of tortious interference with contract and prospective business. (See "Amended Complaint," Dkt. No. 20.) The crux of the Amended Complaint is that Caruso desires to meet with potential clients at nearby hotel venues during ICSC's annual "RECon" event, a large real estate conference held at the Las Vegas Convention Center ("Convention Center"). ICSC, however, has contracts with nearby hotels containing exclusivity clauses preventing such offsite meetings.

Caruso moved for a preliminary injunction to prevent the enforcement of the exclusivity clauses before this year's RECon, which took place in May 2019. The Court held a show cause hearing on Caruso's preliminary injunction motion on April 12, 2019 (the "Preliminary Injunction Hearing"). (See Dkt. Minute Entry for 4/12/2019.) The Court found that Caruso did not sufficiently demonstrate irreparable harm and denied Caruso's motion for a preliminary injunction. See Caruso Mgmt. Co. v. Int'l Council of Shopping Centers, No. 18 Civ. 11932, 2019 WL 1949801 (S.D.N.Y. Apr. 18, 2019) (the "April 18 Order," Dkt. No. 52.)

Now before the Court are the pre-motion letters submitted by ICSC seeking a conference to discuss a motion for summary judgment on all of Caruso's claims. The Court construes such letters as a motion by ICSC for summary judgment pursuant to Rule 56(a) of the Federal Rules of Civil Procedure (" Rule 56(a)") (the "ICSC Motion"). For the reasons set forth below, the ICSC Motion is GRANTED in part and DENIED in part.

I. BACKGROUND

A. FACTUAL BACKGROUND

Caruso is a successful real estate company founded by Rick Caruso. It owns, develops, manages, rents, buys, and sells profitable shopping center real estate. Its targeted clients include high-profile and profitable retailers. Caruso's properties are located exclusively in Southern California and rank among some of the most desirable retail locations in the United States.

For sixteen of the last eighteen years, Caruso has attended RECon, which is a large convention that ICSC hosts annually and draws over 35,000 attendees. Among its educational and other programming, RECon provides attending retailers and developers ample opportunity to engage in "deal-making." (See Belli Tr. 18:9-17.)

RECon also provides a significant source of income to its host, ICSC, which is a membership organization of retail real estate industry professionals with over 70,000 members such as Caruso and its employees. Certain ICSC members make up its board of trustees, which in turn selects a smaller group of about a dozen trustees to comprise the "Executive Board." The Executive Board is responsible for ICSC's governance, long-term strategy, and budget. The Executive Board, in carrying out those responsibilities, oversees the performance of ICSC's CEO, Tom McGee ("McGee"), and senior management. (See McGee Tr. 12:9-19.)

Recently, ICSC's marquee event at the Convention Center has faced competition for attendees. Since 2009, certain ICSC members (the "Real Estate Investment Trusts" or "REITs"), have taken to hosting their own large event at the nearby Caesars Palace ("Caesars"), during the weekend of RECon, for members to convene there, rather than attend RECon itself (the "REIT Convention"). The Simon Property Group, the largest mall owner in the country, and one of Caruso's competitors, rents space from Caesars every year to organize this gathering.

Both parties, as well as other RECon attendees, have complained about the negative impact that the REIT Convention has had on attendance at RECon. In response to such concerns, ICSC has taken some measures to preserve the effectiveness of RECon as a deal-making, networking, and social event. For example, ICSC requires exhibitors to staff their booths at the Convention Center during business hours. Further, ICSC now includes exclusivity clauses in its contracts with the hotels near the Convention Center at which it reserves discounted rooms for attendees (the "Covered Hotels"). These exclusivity clauses prevent the hotels from renting venue space for any events that would be similar or connected to RECon. However, the Simon Property Group's contract with Caesars predates such exclusivity clauses, thus those restrictions have no impact on the REIT Convention.

The negative effects of the REIT Convention on RECon motivated Caruso to start hosting its own away from the Convention Center event. In 2018, Caruso agreed to rent such offsite venue space on the casino floor at the nearby Wynn Hotel (the "Wynn") to host an event. The Wynn is not only one of the Covered Hotels, but also an informal "headquarters" hotel where ICSC hosts social and networking events of its own during RECon. ICSC's contract with the Wynn in 2018 contained an exclusivity clause, which required the Wynn to "use commercially reasonable efforts to not book function space in the Conference Center for any group or individual with the purpose to display exhibits directly related in any way to the related products relating to the show." (Pl. Ex. 34 ¶ 25.) "Conference Center" is not defined in that contract.

When ICSC learned of Caruso's agreement to exhibit at the Wynn in 2018, ICSC notified the Wynn that, in ICSC's view, Caruso's agreement violated the exclusivity clause in ICSC's agreement with the Wynn Specifically, Malachy Kavanagh ("Kavanagh"), a senior vice president of ICSC, emailed McGee about Caruso's agreement and organized a conversation between McGee and the Wynn's CEO. McGee, in turn, notified certain members of the Executive Board about Caruso's agreement with the Wynn and his plan to speak with the Wynn's CEO. (See Pl. Ex. 4 at 1-2; McGee Tr. 118:10-120:7.) When considering what approach to take with the Wynn, McGee and Kavanagh noted that the Wynn wanted to renew its contract with ICSC for RECon 2020 and 2021. (See Pl. Ex. 35 at 1.)

After several discussions among the Wynn, ICSC, and Caruso, the Wynn permitted Caruso to hold its event in a restaurant on Wynn hotel grounds, where Caruso met with twenty-one retailers. During this time, Caruso's counsel wrote to McGee about the situation, prompting McGee to seek the advice of certain Executive Board members about how to resolve the conflict. (See McGee Tr. 139:16-144:25.)

Shortly after RECon 2018, Caruso began to arrange a similar event with the Wynn for RECon 2019. In the meantime, McGee directed ICSC employees "to have conversations" with the Covered Hotels, such as the Wynn, to "ensure" clarity about the "understanding of the exclusivity clause." (Id. 24:11-20.) ICSC maintains an unwritten policy, which predates McGee's tenure as CEO, animating the inclusion of the exclusivity clause in the contracts with the Covered Hotels. (See id. 82:17-84:21.)

Ultimately, Caruso was unable to exhibit at the Wynn in 2019. On January 11, 2019, ICSC and the Wynn amended their contract, clarifying and expanding the exclusivity clause to prevent exhibition of products related to RECon at "any other function space or hospitality space or other publicly available space" at the Wynn. (Pl. Ex. 37 at 64.) ICSC understands that this clause prevents Caruso from hosting any and all formal meetings on the premises of the Wynn and other Covered Hotels, even in a private suite, during RECon. McGee met with the Executive Board in the days leading up to this renegotiated contract and after Caruso filed suit, but does not recall discussing the substance of Caruso's lawsuit with the Executive Board. (See McGee Tr. 154:12-25, 157:2-3.)

B. PROCEDURAL BACKGROUND

On December 18, 2018, Caruso sued ICSC in this Court, requesting a preliminary injunction and expedited discovery. (See Amended Complaint; Dkt. No. 6.) Counts I, II, and III assert violations of the antitrust laws under Sections One and Two of the Sherman Act, 15 U.S.C. §§ 1, 2. (See Amended Complaint ¶¶ 62-82.) Count IV asserts state law claims of tortious interference with contract and prospective business. (Id. ¶¶ 83-88.)

On January 11, 2019, the Court held a hearing to address Caruso's motion for a preliminary injunction and expedited discovery. (See Dkt. Minute Entry for 1/11/2019.) The Court granted the application for expedited discovery and set a hearing date for April 12, 2019 regarding the preliminary injunction request. (See id. )

After the Preliminary Injunction Hearing, the Court denied Caruso's motion for a preliminary junction and ordered the parties to confer on a trial date, due to the Court's preliminary finding of genuine disputes of material fact that would make motions for summary judgment a waste of the parties' and the Court's resources. (See April 18 Order at 22.)

Undeterred by the Court's Order to confer on a trial date, ICSC addressed the Court by letter dated April 22, 2019, setting forth its basis for ICSC's anticipated motion for summary judgment. (See "April 22 Letter," Dkt. No. 55.) ICSC presents three arguments. First, contends that summary judgment on Count I is warranted on the grounds that Caruso cannot show evidence of a horizontal agreement. (Id. at 1-2.) Second, ICSC seeks summary judgment on Counts II and III by contesting Caruso's proposed market definitions and methodologies for calculating market power. (See id. at 2-3.) Third, ICSC argues that it is entitled to summary...