Deauville Corp. v. Federated Dept. Stores, Inc.

• Decision Date: 08 April 1985
• Docket Number: No. 83-2496,83-2496
• Citation: Deauville Corp. v. Federated Dept. Stores, Inc., 756 F.2d 1183 (5th Cir. 1985)
• Parties: 1985-1 Trade Cases 66,537 The DEAUVILLE CORPORATION, et al., Plaintiffs-Appellants, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1183

756 F.2d 1183

1985-1 Trade Cases 66,537

The DEAUVILLE CORPORATION, et al., Plaintiffs-Appellants, v. FEDERATED DEPARTMENT STORES, INC., et al., Defendants-Appellees.

No. 83-2496.

United States Court of Appeals Fifth Circuit.

April 8, 1985.

Andrews, Kurth, Campbell & Jones, Paul E. Harris, Bradley Westmoreland, Houston, Tex., for plaintiffs-appellants.

Baker & Botts, David P. Cotellesse, N.K. Alexander, Jr., Reagan Burch, Houston, Tex., for Federated Dept. Stores, et al.

Vinson & Elkins, David M. Bond, Travis C. Broesche, Ann Lents, Houston, Tex., for Montgomery Ward and Co., et al.

Appeal from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, JOLLY and DAVIS, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

The Deauville Corporations and their principals, Thomas J. Gordon and Harry R. Jones, (collectively "Deauville") brought suit for damages and injunctive relief against Montgomery Ward & Company and its real estate subsidiary, Montgomery Ward Properties Corporation (collectively "Ward" unless otherwise indicated) and against Federated Department Stores, Inc., and Federated Stores Realty, Inc. (collectively "Federated" unless otherwise indicated). Deauville alleges violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1, 2, and of Texas contract and business tort law, because of its loss of Ward, a prospective anchor tenant for Deauville's proposed shopping mall, to Federated, a developer of a nearby shopping mall.

The case was tried to a jury, but, after a lengthy and complicated trial, the court took the case from the jury at the last moment and directed verdicts in favor of the defendants on all issues. Deauville appeals. We affirm in part and reverse in part, and require a second trial that might well have been avoided had the court allowed the case to go to the jury.

I.

Successful regional shopping malls require "anchor tenants." An anchor tenant usually owns its own building, the land beneath, and part of the adjacent parking area. Developers usually prefer one anchor tenant to be a mass merchandiser, such as Ward, and another to be a department store that sells fashion merchandise and similar goods. With anchor tenants at the ends of the mall, a flow of pedestrian traffic between the anchor stores attractive to small retail tenants along the mall interior is created. Developers acknowledge that without suitable anchor tenants, a mall will not have the ability to draw retail customers necessary to make the mall a good location for retailers.

In 1969 Federated, which owns several chains of department stores, bought a tract of land in north Harris County, Texas, near Houston. In 1973 it decided to develop a shopping mall, eventually named Greenspoint, on that tract. It anticipated building the mall in more than one phase, and hoped eventually to have six anchor tenants. By 1974 Federated had commitments from two anchor tenants, one mass merchandiser and one department store. Another mass merchandiser seemed ready to commit to Greenspoint, and Federated was soliciting a second department store to balance against it.

Also during the early 1970's, Ward was seeking a retail store site in north Harris County and approached Federated regarding the possibility of locating at Greenspoint. Federated was not interested in adding another mass merchandiser to Greenspoint at that time, however, because it already had an imbalance between department-store and mass-merchandiser anchor tenants.

In 1973 Deauville decided to develop a mall on a site several miles from Greenspoint, near "farm-to-market" road 1960 (FM 1960). Learning that Ward was interested in locating in north Harris County, in March 1975 Deauville requested that Ward become a joint venturer in the 1960 project. Ward agreed, and on May 5, 1975, Ward Properties and Deauville entered into a joint venture agreement. The agreement provided for Deauville to secure an option to purchase the 1960 site, and for the parties to work together toward developing a mall on that site.

In June 1975 Deauville obtained a 120-day purchase option on the 1960 site. The option could be extended for up to one year. To extend the option beyond March 1976, however, the joint venture agreement required that Deauville have a written commitment from at least one anchor tenant to locate on the site. After acquiring the option, Deauville attempted to attract several department store anchor tenants to the project. Experiencing less success than it had hoped, Deauville then decided to bring a national mall developer, Melvin Simon, into the effort.

After negotiating with Ward and Deauville, on November 26, Simon sent a letter to both of them memorializing their agreement and modifying the May 5 agreement between Deauville and Ward. The letter specified the share of the project to be owned by each of the three parties, and the capital contribution each was to make. One paragraph of the letter provided that any of the parties could cease making option payments from January through June if it so desired, and the two remaining parties would be allowed to purchase the interest of the withdrawing party. ¹

Meanwhile, by 1975 Greenspoint, which was to open in less than a year, had a commitment from its second mass merchandiser, and a second national department store had contacted Federated expressing an interest in Greenspoint. Also by 1975 Federated knew of the Deauville and Ward joint venture to develop the 1960 site, and was concerned not only about losing its prospective anchor tenant, Ward, to the 1960 project, but also about competition from the 1960 regional mall located only a few miles from Greenspoint. Federated decided to offer Ward an anchor tenant site at Greenspoint.

Because the 1960 project had no commitment from a department store, Ward negotiated with Federated about locating at Greenspoint while still involved in the Deauville joint venture. In March 1976, by paying Deauville's and Simon's share of the option payments, Ward obtained an extension of the 1960 site purchase option for the rest of the year--through June--without committing itself as an anchor tenant to the 1960 project. Then, in April, Ward and Federated reached an agreement. Ward decided to locate at Greenspoint, and withdrew from the Deauville joint venture. Deauville and Simon extended the site purchase option one month beyond its June expiration date, but shortly thereafter the project collapsed. Deauville brought suit against Federated and Ward.

Deauville alleged that Ward breached their joint venture agreement, or, in the alternative, breached the fiduciary obligation existing between joint venturers. It alleged that Federated and Ward tortiously interfered with its joint venture agreement with Ward Properties, and that Ward Properties tortiously interfered with its prospective business relations with Ward Stores. It further alleged that Federated and Ward combined to restrain trade, in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1, and finally, that Federated monopolized or attempted to monopolize rental mall tenant space in violation of section 2 of the Sherman Act, 15 U.S.C. Sec. 2. Deauville appeals the district court's granting of directed verdicts in favor of the defendants on all claims.

II.

The standard under which this court reviews appeals from directed verdicts is well established:

[T]he court should consider all of the evidence--not just that evidence which supports the nonmover's case--but in the light and with all reasonable inferences most favorable to the party opposed to the motion. If the facts and inferences point so strongly and overwhelmingly in favor of one party that the court believes that reasonable men could not arrive at a contrary verdict, granting of the motions is proper. On the other hand, if there is substantial evidence opposed to the motions, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motions should be denied, and the case submitted to the jury.

Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir.1969) (en banc).

III.

A.

Deauville alleges that Federated monopolized and attempted to monopolize the market of leased regional mall space in north Harris County in violation of section 2 of the Sherman Act. To prevail on a monopolization claim, the plaintiff must prove by a preponderance of the evidence that the defendant has obtained "monopoly power" in the relevant market, and that the defendant improperly acquired or maintained that power "as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966). Thus, a monopolization claim consists of two elements: first, that the defendant obtained actual possession of "monopoly power" and, second, that the defendant's methods in acquiring or maintaining this power were improper. The attempt offense also has two elements: first, specific intent to monopolize; and, second, a dangerous probability that the attempt will be successful. Dimmitt Agri Industries, Inc. v. CPC Intern. Inc., 679 F.2d 516, 525 (5th Cir.1982).

We hold that Deauville failed to adduce sufficient evidence to support a finding that Federated either obtained monopoly power or that there was a dangerous probability that Federated might have obtained monopoly power by offering Ward a position in Greenspoint.

The "monopoly power" which is a component of the "monopolization" offense must include the power to exclude competition effectively: "Price and competition are so intimately entwined that any discussion of theory must treat them as one. It is inconceivable that price could be controlled without power over competition...." United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377, 391, ...