Shop ‘n Bag Prevails Over Dollar Tree In Lease Dispute

Print Friendly

The key testimony in this regard came from a video deposition taken of Ed Heller, the attorney who represented the original lessee Fleming Foods (Holiday was a sublesee of Fleming, the now defunct wholesaler). Heller testified that he had represented Fleming for over 30 years in its lease negotiations with landlords and that all the company’s leases contained broad language to provide the supermarket anchor tenants with protection against competition from other businesses, not just supermarkets. Heller testified that both parties understood that this was the intent of the language “retail supermarket of any nature.”

After deciding the issue of original intent, the jury found that Dollar Tree was operating a retail supermarket of some nature by selling the same types of food and grocery items asHoliday. The evidence at trial showed that the Mayfair Dollar Tree’s food and grocery sales had increased year after year since 2006, comprising well over 50 percent of its total sales in 2012. This increase is consistent with Dollar Tree’s corporate policy of increasing the sale of food as a means of driving customer traffic into their stores. According to Proper, the former store manager at the Mayfair Dollar Tree testified that he knew his store was taking customers away from the Mayfair Shop ‘n Bag and he suspected corporate knew this as well.

The case was bifurcated (the jury was only asked to decide whether the landlord breached its lease withHoliday) and a separate trial will be scheduled to decide the issue of damages.

While Holiday did not pursue any direct claims against Dollar Tree, Dollar Tree brought a declaratory judgment action in which it sought a declaration or ruling from the trial judge concerning the parties’ respective lease rights and obligations. Judge McInerney agreed with the jury, finding that Dollar Tree has been operating a retail supermarket of some or any nature since the inception of its lease in 2003. This court’s ruling is a final order which is appealable and Dollar Tree is expected to appeal.

An interesting twist in the case is that the shopping center was sold in 2010, so if the appeal is not heard (or the Gilberts prevail on appeal) the new landlord (WP Realty) would be assigned the task of potentially evicting Dollar Tree. Those trials and rulings probably won’t take place until later this year or early 2014.

Asked about how this verdict may affect other supermarkets that are facing similar encroachments by non-traditional retailers selling many similar items, Proper stated: “While the language of every lease is unique, this case has potential broad implications for all supermarket operators whose exclusivity rights have been violated. In my opinion, the nature of Dollar Tree and other dollar stores’ business would allow a jury to find violations of many different types of lease restrictions, including leases that restrict competition from other supermarkets, food stores, grocery stores, and the like.”

Proper commented, “Dollar stores like Dollar Tree have made a conscious decision to operate as non-traditional supermarkets which they have every right to do provided, of course, they do not violate the exclusive lease rights of the anchor supermarket.”

As for Harry Gilbert, one of the true veterans of the grocery industry (who started in the business as a 13 year-old with Frankford Unity and formed Holiday Supermarkets in 1970), was filled with so much emotion that he rejoiced in a loud and cheerful that “Today justice has been served!”

“It’s been going on for so long; there were many times that I just wanted it to end, but I knew we had to persevere because we were doing the right thing. The jury saw through the smoke screen from Dollar Tree’s high powered attorneys and accepted Mr. Justin Proper’s clear and concise presentation of the true facts. I think this sends a message to independent retailers that you can’t be bullied by big corporations who try tosteamroll small business owners by forcing them to pursue expensive litigation. Our business was unfairly damaged by the actions of the landlord and Dollar Tree and the jury’s verdict clearly reflects this fact.”