Lord & Taylor, LLC v. White Flint, L.P.

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-2548
LORD & TAYLOR, LLC,
Plaintiff - Appellant,
v.
WHITE FLINT, L.P., f/k/a White Flint Mall, LLLP,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, Senior District Judge.
(8:13-cv-01912-RWT)
Argued: January 28, 2015 Decided: March 4, 2015
Before WILKINSON, AGEE, and HARRIS, Circuit Judges.
Affirmed by published opinion. Judge Harris wrote the opinion,
in which Judge Wilkinson and Judge Agee joined.
ARGUED: Michelle DeFinnis Gambino, GREENBERG TRAURIG LLP,
McLean, Virginia, for Appellant. Stuart Scott Morrison, KATTEN
MUCHIN ROSENMAN LLP, Washington, D.C., for Appellee. ON BRIEF:
Kevin B. Bedell, David G. Barger, GREENBERG TRAURIG LLP, McLean,
Virginia, for Appellant.
PAMELA HARRIS, Circuit Judge:
Plaintiff-Appellant Lord & Taylor, LLC (“Lord & Taylor”)
has for many years operated a retail store connected to the
White Flint Shopping Center (the “Mall”), an enclosed shopping
mall along Rockville Pike in Montgomery County, Maryland. In
October 2012, the Montgomery County Council approved plans to
tear down the Mall and redevelop the site into a mixed-use,
town-center-style development as part of the county’s broader
plan to revitalize the surrounding area. Lord & Taylor filed
this action to stop the Mall’s owner, Defendant-Appellee White
Flint, L.P. (“White Flint”), from going forward with the
redevelopment. In addition to declaratory relief, Lord & Taylor
seeks a permanent injunction that would prohibit White Flint
from replacing the Mall with the proposed town center.
The district court denied Lord & Taylor’s request,
concluding that an injunction would be unworkable in light of
the already advanced stage of the project: Either the court
would be required to supervise the repopulation and restoration
of the largely vacant Mall, or the effect of its order would be
to suspend the site in its current unusable state. We see no
grounds for disturbing the district court’s reasoned exercise of
its equitable discretion, and therefore affirm.
2
I.
A.
In 1975, White Flint opened discussions with Lord & Taylor
and Bloomingdale’s, a nonparty to this case, about development
of what would become the Mall. Ultimately, Lord & Taylor and
Bloomingdale’s agreed to lease land immediately adjacent to the
Mall and serve as retail “anchor” tenants. In exchange, White
Flint agreed that it would construct and then maintain a “first
class high fashion regional [s]hopping [c]enter,” on the Mall
property.
The parties memorialized their understanding in a
reciprocal easement agreement (“REA”), committing White Flint to
continued operation of a three-story, enclosed mall on the site,
and detailing the layout of the Mall and its surrounding
internal roadways and parking areas. Under the REA, most of the
site may be used only for retail purposes, and White Flint may
build additional structures only with Lord & Taylor’s consent.
Any changes to the Mall, including alterations to its
“architectural design or appearance,” also must be approved by
Lord & Taylor. All of these conditions are treated by the REA
as restrictive covenants that “run with the Land,” creating
rights in real property. They remain operative at least through
2042, and Lord & Taylor may extend them until 2057 by exercising
its final lease-renewal option.
3
The Mall opened in 1977 and operated smoothly for many
years. More recently, however, the Mall began to experience a
decline in business. Where to place the blame for that decline
is disputed by the parties. But whatever the cause, in 2012,
Bloomingdale’s opted not to renew its lease at the Mall site.
By 2013, 75 percent of Mall tenants, accounting for at least a
third of the Mall’s space, had left. Since then, the
Bloomingdale’s building has been demolished and the remaining
businesses have closed. The Mall was shuttered permanently on
January 4, 2015, and Lord & Taylor alone remains open for
business.
In November 2011, White Flint released a preliminary plan
to redevelop the site (the “Sketch Plan”), as part of Montgomery
County’s broader initiative to redevelop the surrounding area
(the “Sector Plan”). The Sector Plan is a massive public-
private undertaking. Once complete, it will transform the area,
anchored by a station of the Washington metropolitan area
subway, into a 430-acre urban center, with 14,000 new
residential units and 7.5 million square feet of new mixed-use
space. Execution of the Sector Plan is expected to involve $1
billion in new public works and eventually to generate $40
billion in additional tax revenue.
White Flint’s Sketch Plan also is ambitious. The Sketch
Plan would transform the Mall site into the sort of mixed-use
4
development increasingly popular across the country, with a 45-
acre town center including 2,400 apartment units, parks and
schools, a hotel, and at least three high-rise office buildings.
The Lord & Taylor store would remain, but the enclosed Mall
would be demolished, along with portions of the parking lots and
internal roadways surrounding Lord & Taylor. Montgomery County
approved the plan in October 2012, and considers it “an
essential component of the Sector Plan.”
B.
Lord & Taylor objects to implementation of the Sketch Plan
and the contemplated redevelopment of the Mall site. According
to Lord & Taylor, what it was promised by White Flint was a
“first class . . . [s]hopping [c]enter,” devoted to retail uses
and consistent with the design specifications memorialized in
the REA. The town center that White Flint proposes to build
around its store instead, Lord & Taylor argues, violates the
plain terms of the REA and will negatively affect the store’s
business, disrupting customer access by destroying internal
roads and parking areas and denying the store the benefit of
foot traffic from Mall customers.
Negotiations between Lord & Taylor and White Flint reached
an impasse in the spring of 2013, and in July 2013, Lord &
Taylor filed the two-count complaint that is the basis for this
lawsuit. Count I, for declaratory relief, seeks a declaration
5
that the REA precludes White Flint from redeveloping the Mall
site as contemplated by the Sketch Plan and instead requires
White Flint to continue operation of a “first class high fashion
retail [s]hopping [c]enter.” Count II – the count at issue here
– seeks a permanent injunction compelling White Flint to honor
the terms of the REA. Specifically, Lord & Taylor asks the
court to enjoin White Flint “from taking any steps to carry out
or construct [the] redevelopment” in a manner inconsistent with
the REA and to “require [White Flint] to abide by its
obligations under the [REA] to operate a first class high
fashion regional retail [s]hopping [c]enter.”
White Flint moved for partial summary judgment with respect
to Count II of the complaint. It argued, in part, that it would
be infeasible for the district court to enforce an injunction
requiring what was at the time a mostly empty Mall to resume
operations, and then to maintain its status as a “first class
high fashion shopping center” until as late as 2057. Lord &
Taylor, LLC v. White Flint, L.P., Case No. 8:13-cv-01912-RWT (D.
Md. Sept. 5, 2013), ECF No. 15. White Flint also argued that
the equities of the case did not favor specific performance of
the terms of the REA and a halt to the redevelopment because of
the significant public interest in seeing the project go forward
and the time and expense already devoted to the project.
6
The district court agreed and dismissed Count II of the
complaint. It assumed for purposes of its decision that Lord &
Taylor could show under Count I that the proposed redevelopment
would breach the REA, and that Lord & Taylor would be entitled
to damages for any harm that resulted. It concluded, however,
that injunctive relief would be infeasible under the
circumstances. Because of physical changes to the site (most
notably the demolition of the Bloomingdale’s store) and what was
then a 75-percent vacancy rate, the court reasoned, an
injunction requiring White Flint to operate the “first class”
shopping center contemplated by the REA would require the court
to supervise “rebuilding [and] bringing tenants back in” to the
Mall – a task the court deemed outside its competence. “[F]or
me to enter into this case and try to enjoin an ongoing
development project like this is just not feasible.”
The district court subsequently denied Lord & Taylor’s
motion for a stay pending appeal and preliminary injunction.
Lord & Taylor, LLC v. White Flint, L.P., Case No. 8:13-cv-01912-
RWT (D. Md. Feb. 7, 2014), ECF No. 64. The court reiterated its
practical concerns, explaining that even maintaining the status
quo was no longer feasible given the “advanced stage[]” of the
project and the “reality that the [M]all is almost completely
vacant and partially demolished.”
7
Lord & Taylor timely noted its appeal to this court. It
also moved for a stay of the district court’s decision, which we
denied. Lord & Taylor, LLC v. White Flint, L.P., No. 13-2548
(4th Cir. Mar. 14, 2014).
II.
A.
Lord & Taylor’s first contention on appeal is that the
district court erred by failing to apply the correct Maryland
law to its request for injunctive relief. We review this claim
de novo, see Woollard v. Gallagher, 712 F.3d 865, 873 (4th Cir.
2013) (de novo review governs district court decision on
injunctive relief when “contested issue is a question of law”),
and find it unpersuasive.
The parties agree, as do we, that Maryland substantive law
applies in this diversity action, and governs Lord & Taylor’s
Count II claim for a permanent injunction. See Capital Tool and
Mfg. Co., Inc. v. Maschinenfabrik Herkules, 837 F.2d 171, 172
(4th Cir. 1988) (Erie doctrine requires courts to apply state
substantive law to a request for permanent injunctive relief in
diversity cases); see also 11A Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 2943 (3d ed. 2014)
(Erie rationale extends to requests for injunctive relief).
According to Lord & Taylor, however, the district court took a
8
different approach, and relied instead on the federal-law
standard for injunctions in denying relief.
We do not read the record that way. The parties’ briefing
on summary judgment may have generated some confusion as to the
appropriate choice of law. But the district court directly
addressed the choice-of-law question at the summary judgment
hearing and expressly clarified in its decision that it was
applying Maryland law. We take the district court at its word
and have no reason to doubt that it properly identified Maryland
substantive law as controlling.
Lord & Taylor argues in the alternative that if the
district court applied Maryland law, then it misapplied it
badly, relying on factors that have no place in the analysis
under Maryland precedent. Maryland law, Lord & Taylor contends,
strongly favors injunctive relief for breaches of restrictive
covenants – so strongly that injunctions are granted almost as a
matter of course and regardless of factors like the public
interest or the availability of monetary damages to compensate
for a breach. If White Flint’s proposed redevelopment would
violate the REA – and the district court assumed as much for
purposes of summary judgment – then according to Lord & Taylor,
there was virtually nothing left for the court to do but enjoin
the breach.
9
We disagree. It is true that an injunction typically is an
appropriate remedy for breach of a restrictive covenant under
Maryland law. See Dumbarton Improvement Ass’n., Inc. v. Druid
Ridge Cemetery Co., 73 A.3d 224, 233 (Md. 2013). But injunctive
relief is not automatic, and the presumption in its favor does
not displace a trial court’s traditional discretion when it sits
in equity, see Roper v. Camuso, 829 A.2d 589, 601 (Md. 2003)
(“Trial courts are granted broad discretionary authority to
issue equitable relief.”). Indeed, the very cases cited by Lord
& Taylor recognize that injunctive relief remains subject to
“sound judicial discretion” even where restrictive covenants and
real property rights are concerned. Chestnut Real Estate P’Ship
v. Huber, 811 A.2d 389, 401 (Md. Ct. Spec. App. 2002); see also
Redner’s Mkts., Inc. v. Joppatowne G.P. L.P., Civ. A. No. 11-
1864-RDB, 2013 WL 2903285, at *5 (D. Md. June 13, 2013).
The parties dispute the precise scope of this equitable
discretion and the particular factors that should guide its
exercise. We need not resolve any difficult questions of state
law to decide this case, however, because one thing that
Maryland law makes perfectly clear is that trial courts may take
account of feasibility concerns – like those relied on by the
district court here – in considering injunctive relief for
breach of a restrictive covenant.
10
In this context, as in others, trial courts retain
discretion to deny specific performance or injunctive relief
(Maryland case law does not distinguish between the two for
these purposes) where enforcement would be “unreasonably
difficult” or require “long-continued supervision” by the court.
See Edison Realty Co. v. Bauernschub, 62 A.2d 354, 358 (Md.
1948). So, for instance, an injunction may be denied as
infeasible if it would compel the parties to continue a
commercial relationship, or require the court to closely monitor
the caliber of their performance. See, e.g., M. Leo Storch L.P.
v. Erol’s, Inc., 620 A.2d 408, 412-14 (Md. Ct. Spec. App. 1993)
(denying injunction to enforce continuous-operation lease clause
on feasibility grounds); Edison Realty Co., 62 A.2d at 358
(specific performance may be denied where court would be
required to issue “a multiplicity of orders . . . in its
endeavor to superintend [the parties’] work”). Indeed, because
such affirmative injunctions are difficult to draft clearly and
even harder to enforce, Maryland courts typically will issue
them only where no other relief is possible. See Md. Trust Co.
v. Tulip Realty Co. of Md., Inc., 153 A.2d 275, 284 (Md. 1959).
And the inquiry into feasibility is itself wide ranging and
equitable in nature, with courts instructed to consider broadly
the “advantages to be gained” from injunctive relief as well as
“the harm to be suffered” if an injunction is denied as
11
infeasible. M. Leo Storch L.P., 620 A.2d at 412 (quoting Edison
Realty Co., 62 A.2d at 358).
Whether the district court properly exercised its
discretion in determining that injunctive relief would be
infeasible in this case is a separate question, which we address
in turn. The point here is simply that Maryland law did not
require the district court to turn a blind eye to feasibility
and related equitable concerns. On the contrary: Maryland law
clearly authorized the district court to go beyond the state-law
presumption in favor of injunctive relief to consider the
feasibility of what it was being asked to do.
B.
Even on this account of the law, Lord & Taylor argues, the
district court erred, because the injunctive relief it seeks
would in fact be entirely feasible. On this claim, our review
of the district court’s determination is highly deferential.
When a district court’s decision rests on evaluation of
equitable considerations or other traditionally discretionary
factors, we generally apply an abuse of discretion standard.
See Ray Commc’ns., Inc. v. Clear Channel Commc’ns., Inc., 673
F.3d 294, 299 (4th Cir. 2012) (reviewing application of the
doctrine of laches for abuse of discretion); Baldwin v. City of
Greensboro, 714 F.3d 828, 833 (4th Cir. 2013) (reviewing
application of equitable tolling doctrine for abuse of
12
discretion). That deferential approach makes perfect sense when
it comes to the feasibility of equitable relief: The district
court is better positioned than we are to weigh the costs and
benefits of injunctive relief and, in particular, to assess the
practical difficulties of enforcement of an injunction –
difficulties that will fall in the first instance on the
district court itself. Accordingly, we will review the district
court’s feasibility determination for abuse of discretion, and
disturb it only if we find that the court “committed a clear
error of judgment.” Brown v. Nucor Corp., 576 F.3d 149, 161
(4th Cir. 2009) (applying abuse of discretion standard to
district court class-certification determination (quoting
Westberry v. Gislaved Gummi AB, 178 F.3d 257, 261 (4th Cir.
1999))).
Like the district court, we must take account of the
practical realities of the situation. At the time of the
district court’s decision in December 2013, Bloomingdale’s had
declined to renew its lease, and the building it occupied had
been demolished. Much of the Mall itself was vacant, and
according to Lord & Taylor, many of the remaining tenants were
on short-term leases due to expire in 2014. Restoring the Mall
to its former glory, as Lord & Taylor requested in Count II of
its complaint, would have required more than a negative
prohibition on the site’s redevelopment. It would have
13
necessitated an affirmative injunction ordering White Flint to
transform the now-fading Mall back into a “first class high
fashion regional retail [s]hopping [c]enter” – the kind of order
that is so hard to draft with specificity and then to enforce
that Maryland courts generally will grant it only as a last
resort. See Md. Trust Co., 153 A.2d at 284.
In this case, affirmative injunctive relief would have been
even more impractical than usual, thanks to the highly detailed
provisions of the REA. An order that White Flint “abide by its
obligations under the REA,” as sought by Lord & Taylor, also
would require judicial oversight of compliance with the myriad
of REA conditions that control every facet of the Mall’s
operations, from the distribution of parking and interior access
roads to the placement of entrances to the design of the various
retail stores and restaurants that populate the Mall. And once
it had ascertained that the Mall’s operations were again
compliant with every provision of the REA, the district court’s
job still would not be done: It would have to ensure that the
Mall remained in compliance for the duration of the REA, at
least until 2042 and potentially for over forty years. See M.
Leo Storch L.P., 620 A.2d at 414 (declining to enforce
continuous-operation clause because court would be required to
monitor ongoing performance). Such long-term, ongoing
supervision eventually would entangle the district court in
14
every aspect of the Mall’s daily operations, with any potential
violation of the REA’s specifications becoming fair game in a
subsequent contempt proceeding.
The cases Lord & Taylor cites to argue that all of this
would be perfectly feasible suggest to us just the opposite.
The scale and complexity of the Mall’s operations – spread over
45 acres, and potentially involving dozens of new counter-
parties as the Mall repopulates – and the duration of the
proposed injunction have no parallel in the Maryland case law.
The injunction sought here would be nothing like one that
prohibits operation of a single nearby competitor, see Redner’s
Mkts., Inc., 2013 WL 2903285, at *2 (enjoining operation of a
rival grocery store in the same strip mall), or resolves a
single dispute over misused office space, see City of Bowie v.
MIE, Props., Inc., 922 A.2d 509, 518, 538 (Md. 2007) (enjoining
operation of a dance studio). By comparison, Maryland courts
have found injunctive relief infeasible under circumstances far
more streamlined and straightforward than these, involving
purely bilateral commercial relations. See M. Leo Storch L.P.,
620 A.2d at 414 (refusing to order a tenant to reoccupy leased
retail space on feasibility grounds). We can find no Maryland
precedent, and Lord & Taylor provides none, even suggesting that
it would be feasible for the court to craft and enforce an order
directing White Flint to reboot and then maintain a “first class
15
high fashion regional retail [s]hopping [c]enter,” consistent
with the REA’s detailed specifications, through the year 2057.
At oral argument, Lord & Taylor refined its position,
suggesting that it would be satisfied with a more limited,
negative injunction that simply prohibited White Flint from
moving ahead with the destruction of the Mall and its adjacent
parking areas. That is essentially the same proposal Lord &
Taylor offered to the district court when it moved there for a
stay pending appeal. The district court rejected this version
of the proposed relief as well, deeming it “unrealistic” to
require White Flint to maintain the status quo of a mostly empty
Mall with a demolished “anchor” store on one side. In effect,
the district court held, the redevelopment had passed the point
of no return.
Again, we must attend to the realities of the situation
facing the district court. A negative injunction, as the court
understood, would freeze in place a vacant and partially
demolished Mall, tantamount to a judicially mandated blight on
the area. That outcome would serve neither party to the
dispute, let alone the interests of the general public. Indeed,
it is so patently unworkable that Lord & Taylor defends it not
on its own terms, but as a form of leverage that might encourage
White Flint to resume Mall operations, consistent with the REA.
But the district court cannot simply assume that best-case
16
scenario, and must instead contend with the very real
possibility that a negative injunction would produce nothing but
an empty and unusable 45-acre Mall site in the heart of
Montgomery County’s redevelopment project.
Moreover, even if a negative injunction did send White
Flint back to the drawing board and eventually to the
negotiating table, feasibility concerns would remain. Should
the parties dispute whether any White Flint proposal to
repopulate and restore the Mall lived up to the detailed
specifications of the REA or produced a sufficiently “first
class” and “high fashion” shopping experience, the district
court would find itself inserted once again into the thick of
ongoing and complex commercial relationships. And any effort to
resolve that dispute by way of injunctive relief would raise
precisely the feasibility issues already described.
Taken together, these concerns are more than enough to
persuade us that the district court did not commit a “clear
error of judgment,” Brown, 576 F.3d at 161, in finding that
injunctive relief would be infeasible. * Continuous judicial
*
Lord & Taylor contends that additional discovery was
necessary before the district court could grant White Flint’s
motion for summary judgment on Count II of the complaint. But
the discovery sought by Lord & Taylor had no connection to
feasibility, and so could not have affected the district court’s
feasibility determination or our disposition of this appeal. As
we have explained, the district court’s feasibility analysis
17
supervision of commercial relationships on this scale may place
a particular strain on a district court, and the decision to
refuse such intervention goes to the heartland of that court’s
discretion to manage its own affairs. Where, as here, the
district court follows applicable state law and reasonably
exercises its discretion in denying injunctive relief as
infeasible, we have no grounds to second guess its decision.
III.
For the reasons stated above, we affirm the district
court’s dismissal of Count II of the complaint.
AFFIRMED
turned on the current realities of the situation and the terms
of the REA, neither of which implicates any material factual
dispute between the parties.
18