Evans, Inc. v. Tiffany & Co.
| Decision Date | 14 April 1976 |
| Docket Number | No. 73 C 2555.,73 C 2555. |
| Citation | 416 F. Supp. 224 |
| Parties | EVANS, INC., Plaintiff, v. TIFFANY & CO., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Lee N. Abrams of Mayer, Brown & Platt, Chicago, Ill., for plaintiff.
Rodney D. Joslin, Thomas P. Sullivan, William D. Heinz of Jenner & Block, Chicago, Ill., for defendant.
This matter arose as an action by Evans, Inc. (Evans) against Tiffany & Company (Tiffany) for breach of contract.1 The case was tried to the Court without a jury. The Court has examined all of the testimony and exhibits presented, and being fully advised of the premises, finds that a binding contract existed between Evans and Tiffany and that Tiffany breached the contract. Evans shall be entitled to damages in the amount of $598,924.00. The following shall constitute the Court's findings of fact and conclusions of law pursuant to F.R.Civ.P. 52(a).
Since 1966 Tiffany has maintained a retail branch jewelry store at 715 North Michigan Avenue. In mid-1972 Tiffany determined that the 715 North Michigan space (5,000 square feet) was beginning to be inadequate for its increased volume. It was also concerned that in 1976 when its lease expired it might not be able to renew its lease on the 715 North Michigan premises. Tiffany thus began a search for a new retail store location. It was quickly determined by Tiffany officials to remain on North Michigan Avenue, hopefully in a store in the approximately three-quarter mile strip between the Saks Fifth Avenue store on the south and the Drake Hotel on the north, the prime luxury shopping area along North Michigan Avenue. Tiffany desired a store of approximately 8,500 square feet, with substantial ground floor exposure, at a $100,000 annual rental.
During late 1972 Anthony Ostrom, Divisional Vice President for Tiffany in Chicago, considered various Michigan Avenue locations as possible new sites for Tiffany's Chicago retail branch. The only Michigan Avenue locations in which Ostrom was at all interested during that period (other than the 715 North Michigan Avenue location) were: (1) the Farwell Building at the northwest corner of Superior and Michigan (diagonally across Michigan Avenue from Tiffany's present location); (2) the proposed Water Tower Place Development; (3) the building at 549 North Michigan Avenue which previously was occupied by the Berman Fur Company; and (4) the building at 920 North Michigan Avenue.
Tiffany's interest in the Farwell Building was never thoroughly explored because Tiffany's executives did not think that the building was suited for a Tiffany store location. The 549 North Michigan Avenue building was rejected as being too far south in the trade area (this building being south of the Saks store).
By October 1972, the Tiffany executives were conducting their site search through Howard Storch of Brown & Storch. Storch is a well known Michigan Avenue real estate broker. Storch showed Ostrom the 920 North Michigan site. Evans, as successor in interest to Blum's-Vogue, Inc., is the lessee of the entire building at 920 North Michigan Avenue, under a lease which is to expire on May 31, 1989. The lessor of the building is a LaSalle National Bank land trust, the principal beneficiary of which is Jerrold Wexler.
In late October 1972, Tiffany's senior management became involved in the search for a new store location. Farnham Lefferts, President of Tiffany, visited Chicago to examine various buildings. Without informing Evans, Lefferts examined the first and second floors and the mezzanine of the building at 920 North Michigan Avenue with Storch and Wexler. Those three then had a luncheon meeting with Ostrom. Wexler stated that he thought that he could reacquire Evans' leasehold interest in the 920 North Michigan Avenue building. He said that he would then lease the first two floors and the mezzanine to Tiffany. He stated, however, that he would do so only if Tiffany agreed to a "demolition clause" which would permit Wexler to terminate Tiffany's lease on one year's notice if he decided to demolish the building in order to develop a larger structure on the same site.3 Wexler later communicated to Tiffany a $165,000 annual rental figure for the first two floors and the mezzanine of the 920 North Michigan Avenue building.
After his trip to Chicago, Lefferts indicated a preference for the 920 North Michigan Avenue location. Lefferts and Ostrom agreed, however, that Tiffany would not enter into a lease which could be cancelled on one year's notice under a demolition clause. Walter Hoving, Chairman of the Board of Tiffany, when informed, likewise agreed. The rental price Wexler proposed was also unsatisfactory.
In November 1972, Storch arranged a luncheon meeting with Ostrom and David Meltzer, President of Evans. Meltzer indicated that the recently-acquired Blum's-Vogue business (a women's dress and fur shop at 920 North Michigan) had not been financially successful for Evans, and that Evans was seriously considering closing the Blum's-Vogue apparel operation, retaining only its fur salon, which was successful. Meltzer said that he was anxious to dispose of the financial burden imposed on Evans by its lease of the building at 920 North Michigan Avenue. He said that he would let Tiffany have either an assignment of Evans' lease of the entire building, or merely a sixteen year sublease of the first two floors and mezzanine — which Tiffany preferred.
Ostrom informed Meltzer at this meeting that it was very important for Tiffany to occupy the premises for the full term of any lease because of the amount that it would expend for leasehold improvements. Meltzer responded that he did not think that this would present a problem. No specific economic terms were discussed at the meeting.
Ostrom communicated the results of that meeting to Lefferts. On December 14, 1972, Charles Anderson (Tiffany's chief architect) carefully inspected the building at 920 North Michigan Avenue. Anderson concluded that the space could be remodeled for use as a Tiffany retail branch, and so advised Tiffany executives.
During early January 1973, Evans sent to Tiffany operating statements for the 920 building and a copy of Evans' lease of that building. Some time in January, Storch advised Ostrom that Evans would sublease the required space for an annual rental of $115,000. Tiffany executives, however, decided that it should only pay $100,000 per year for the space and then only on a sublease basis.
During the same time period, Evans and Uptown Federal Savings & Loan Association (Uptown) were discussing the possibility of Uptown's leasing some space in the subject premises. Uptown was under considerable time pressure, believing that it needed a firm commitment for space before the Federal Home Loan Bank Board would process its branching application on a priority basis. This application was due February 1, 1973. Uptown's interest in the 920 North Michigan building was genuine; the Court believes that had the Tiffany-Evans arrangement not been consummated, Uptown would have rented space in the subject premises at an annual rental possibly as high as in the $115,000-$125,000 range.
During the pre-January 29th period, Tiffany also rejected its only other site under consideration, the Water Tower Place.
On the morning of Monday, January 29, 1973, Lefferts and Anderson flew to Chicago. Ostrom picked them up at the airport, and the three of them went first to the building at 920 North Michigan Avenue, which they examined briefly. After lunch, Lefferts, Anderson and Ostrom met with the developers of Water Tower Place, who offered Tiffany space in that proposed building.4
The cost of space in Water Tower Place was approximately double the price Tiffany wished to pay ($20.00 per square foot). Tiffany also was opposed to the 6% sales override (as against a flat rental). Moreover, Water Tower Place could not give Tiffany ground floor exposure. Thus, at the time of the January 29, 1973 meeting, the only site Tiffany had under active consideration was the 920 North Michigan Building.
After leaving the meeting with the Water Tower developers, Lefferts and Ostrom went to Storch's office and Anderson went to make another inspection of the building at 920 North Michigan Avenue. Lefferts and Ostrom met at Storch's office with Storch, Meltzer, Ralph Romberg (Vice President of Evans), Irving Karm (Meltzer's assistant), and Ernest Wish of Coopers & Lybrand (Evans' public accounting firm). Meltzer stated that he had another prospective subtenant, a savings and loan association, which was prepared to pay $125,000 in annual rent for the first, second and mezzanine floors. Meltzer explained that the savings and loan association had to obtain a commitment for a suitable location near Walton and North Michigan Avenue within a few days in order to fulfill requirements incident to its application to open a branch in that area. This fairly summarized the actual status of the Uptown negotiations on January 28th. Meltzer stated, however, that he would prefer to lease the space to Tiffany. The evidence also shows that Meltzer explained clearly that he wished to wrap up a firm commitment for the subject premise before he left on an extended foreign business trip two days later.
Tiffany, through Lefferts, responded that it only would participate in a sublease arrangement, and would be willing to pay only $100,000 per year rental. Tiffany never objected to Meltzer's pressure to enter a firm commitment that evening. Meltzer made a counteroffer of $107,500 per year, which Lefferts also rejected. The Evans representatives then left the room to confer privately. Upon their return, Meltzer stated that Evans would...
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