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Fourth Circuit Sustains District Court’s Jury Instructions and Evidentiary Rulings in Contract Dispute Between Lord & Taylor and White Flint Mall

Lord & Taylor, LLC v. White Flint, L.P.
No. 15-1995 (4th Cir. Feb. 28, 2017) United States Court of Appeals for the Fourth Circuit
by Matthew S. Sarna, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ca4.uscourts.gov/Opinions/Published/151995.P.pdf

In Lord & Taylor, LLC v. White Flint, L.P., No. 15-1995 (4th Cir. Feb. 28, 2017), the United States Court of Appeals for the Fourth Circuit found no error in the district court’s limiting of jury instructions, evidentiary rulings, and overall capable management of the parties’ lengthy trial, and accordingly affirmed in full the court’s judgment.

Over 30 years ago in 1975, White Flint reached an agreement with Lord & Taylor, in which Lord & Taylor would lease land on the forthcoming White Flint Mall site (the “Mall”) and serve as an “anchor” tenant. In consideration, White Flint would construct a high quality mall and maintain it until 2042. The agreement additionally required Lord & Taylor’s consent prior to White Flint building any additional structures or making alterations to the Mall’s appearance.

After a decline in business, the Mall officially closed in January 2015, leaving Lord & Taylor the sole business operating on the premises. At that point, White Flint had begun planning the Mall’s redevelopment into a mixed-use space. Lord & Taylor objected, eventually bringing a breach of contract claim and seeking an injunction from White Flint carrying out its proposed plan. The district court quickly concluded that an injunction was infeasible and so Lord & Taylor amended its complaint, claiming damages of between $70 and $100 million.

At the motions in limine hearing, the district court rejected Lord & Taylor’s claim to recover damages for lost property rights, but allowed its claim for lost profits to survive. The trial focused heavily on damages. Specifically, Lord & Taylor presented two theories under which it sought recovery. First, Lord & Taylor claimed lost profits. Lord & Taylor’s expert calculated lost profits of up to $31 million during the time of the demolition and reconstruction phase of the redevelopment. Attempting to offset this calculation, White Flint offered expert testimony opining a lower construction time frame and purporting that Lord & Taylor would eventually see greater profits in the subsequent years after redevelopment. However, while the district court allowed this matter to be argued, the court instructed the jury to disregard any such future benefit on the bases that it was too speculative.

The second damages theory revolved around the costs of reconfiguring the store to conform to the redevelopment plan. Lord & Taylor offered a long-time store executive to present testimony as to the construction costs, which totaled between $30 and $36 million. White Flint objected to this testimony, arguing that it constituted to expert testimony and that the executive was not qualified under FRE 702. The district court disagreed and allowed the testimony under FRE 701.

After deliberation, the jury returned a verdict in favor of Lord & Taylor to the tune of $31 million.

The Fourth Circuit reviews a district court’s jury instructions, evidentiary rulings, and discovery rulings for abuse of discretion only. See Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141 (1997). Accordingly, on appeal, the Court looked to whether the jury instruction to disregard the future earnings offset argument, the allowance of Lord & Taylor’s executive’s testimony, and the rejection of the lost property rights claim, was an abuse of the district court’s discretion.

As to the first point, the Court explained that under Maryland law, damages must be proved with “reasonable certainty” and cannot be overtly speculative. Quoting the district court, the Court stated, “We don’t know whether this [Mall] will be the rage of Montgomery County or the beached whale of Montgomery County.” J.A. 5333. The Court found no reason to disturb the lower court’s ruling on this matter, citing several cases in support of its opinion. See, e.g., John D. Copanos & Sons Inc. v. McDade Rigging & Steel Erection Co., 403 A.2d 402, 405 (Md. Ct. Spec. App. 1979) (“Anticipated profits” must be shown “with reasonable certainty so that evidence rises above speculation or conjecture.”). As a real estate development of this magnitude is inherently risky, extending years into the future and potentially triggering a long list of contingencies, speculation about future profits could not be established as “reasonably certain.”

Moving on the second point on appeal, the Fourth Circuit performed an analysis of what types of testimony fall under FRE 701 and under FRE 702. The Court explained that while there is a “fine line” between 701 and 702, Lord & Taylor’s executive’s testimony qualified as “lay testimony” under FRE 701. The Court relied on case law to further its decision. See MCI Telecommunications Corp. v. Wanzer, 897 F.2d 703, 706 (4th Cir. 1990) (allowing lay opinion testimony under Rule 701 where it is “well founded on personal knowledge as distinguished from hypothetical facts” and based on “relevant historical or narrative facts that the witness perceived.”); Lake Ridge Apartments, LLC v. Bir Lakeridge, LLC, 335 F. App’x 278 (4th Cir. 2009) (unpublished) (allowing lay testimony as to projected construction costs when it is based on the witness’s personal experience with similar projects).

Further, the Court examined the Advisory Committee’s Note to FRE 701. “Most courts have permitted the owner or officer of a business to testify as to the value or projected profits of the business, without the necessity of qualifying the witness as an accountant, appraiser, or similar expert.” Fed. R. Evid. 701 advisory committee’s note to 2000 amendment. Because the executive’s testimony revolved around his experience in the day-to-day operations of Lord & Taylor store reconstruction, the Court found that the district court did not abuse its discretion by allowing its inclusion.

Finally, the Court agreed with the district court’s decision to reject Lord & Taylor’s lost property rights damages theory. The Court explained that Maryland law does not permit recovery for abridged property rights as distinct from and in addition to lost profits. Under Maryland law, “loss of profits is the governing factor” in calculating damages from a violation of a restrictive use covenant. Freedman v. Seidler, 194 A.2d 778, 782 (Md. 1963). Accordingly, the Court would not allow Lord & Taylor to “get[] six or more pieces of pie out of a four-piece pie.” J.A. 2287.

Finding no abuse of discretion, the Fourth Circuit affirmed in full the judgment of the district court.