Marina's Blog

Highland Mall strikes back against Dillard's

Highland Mall’s owners have filed a response and countersuit to a lawsuit filed by one of its anchor tenants, Dillard’s, in March alleging that the mall’s owner— Highland Mall Limited Partnership, made up of Simon Property Group Inc. (NYSE: SPG) and General Growth Properties Inc. (NYSE: GGP)— let the mall deteriorate into a “ghost town,” forcing Dillard’s to break its lease.

In a lawsuit filed March 27 in U.S. District Court, Dillard Texas LLC and The Higbee Co. — both wholly owned subsidiaries of national department store chain Dillard’s Inc. — asked the court to void its contractual obligations to Highland, including paying rent on the remainder of its lease.

Before the lawsuit was filed, Dillard’s announced that it plans to close both its two-level stores within the mall, one focused on men’s clothing and the other on women’s fashion and home decor. Dillard’s lease for the men’s store expires in 2017, while it owns its women’s store but pays Highland Mall for common area maintenance and other charges.

In their countersuit, Highland’s owners deny Dillard’s allegations in its lawsuit and claim Dillard’s is in breach of its lease for chronically failing to pay common area and other charges starting in October 2006.

The countersuit also claims Dillard’s, in order to get out of its lease, began letter-writing and public media campaigns in late summer 2008 to “discredit Highland Mall in the eyes of consumers and potential tenants.”

Dillard’s sought to “convince the public and prospective tenants that Highland Mall is deteriorating and an undesirable place to shop or open a business...and [misinform] the public about the quality of Highland Mall,” its safety and its tenant mix, the countersuit alleges. The suit claims that the mall lost prospective tenants as a result of Dillard’s campaigns.

The mall’s owners ask for a declaratory judgment, attorneys’ fees and damages related to Dillard’s alleged breach of contract, “business disparagement” and “interference with business relations.”

Dillard’s attorney, Brock Akers at Phillips & Akers PC, could not immediately be reached for comment.