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Mallsuits: 25 years of litigation at the Mall of America

By

“We used to build civilizations,

Now we build shopping malls”

Author Bill Bryson (posted Nov. 22, 2002)

The Mall of America in Bloomington commemorated its 25th anniversary this month. When the 4.2 million-square-foot facility opened on Tuesday, Aug. 11, 1992, it was the nation’s largest indoor shopping site, vying for the title of the world’s biggest.

But the mall today falls short of being the biggest in the world, or even in this county for that matter. The mammoth South China Mall in Dongguan, China has nearly 10 million square feet. Nevertheless, with more than 500 stores, 12,500 parking spaces, and about 40 million visitors annually, Minnesota’s “megamall” has earned its self-description as “one of the most visited tourist destinations in the world” and reportedly the largest in the United States.

The silver anniversary of the MOA presents an opportune occasion to review some Mallsuits, litigation arising at one of America’s favorite shopping centers.

Public Protests

Some notable cases have involved public protests. The most recent litigation, with civil and criminal features, centered around organized efforts by the Black Lives Matter (BLM) organization to call attention to its cause and objection to the shooting of Jamar Clark by police officers in north Minneapolis by staging a demonstration at the facility during the end-of-year holiday shopping season late in 2015. In MVAC Holdings v. Black Lives Matter for Minnesotans, 27-CV-1521667 (Dec. 22, 2015), Hennepin County District Court Judge Karen Janisch, balancing “important issues regarding the rights of a private property owner” and the desire of individuals to protest, refused an attempt by the mall to enjoin the planned protest. But she did bar three of the protesters from the demonstration, which was later diverted by the group from the mall to the nearby international airport.

Another Hennepin County District Court jurist, Chief Judge Peter Cahill, previously dismissed criminal charges against 11 organizers of a 2014 BLM protest, while trespass charges remained against 17 in State v. Montgomery, et al., 27-CR-15 1304 (Nov. 9, 2015). Noting a prior ruling of the Minnesota Supreme Court deeming the mall private property and off limits to protesters not authorized by the facility, he felt the protesters had not engaged in impermissibly “subversive” behavior and that the bulk of the charges did not pass constitutional muster.

The undercurrent of “private property” that ran through the BLM rulings stemmed from the landmark case of State v. Wicklund, 589 N.W.2d 793 (Minn. 1996), at the end of the millennium, in which the state Supreme Court refused to apply the freedom of speech provision of the Minnesota Constitution to protesters of a different vintage who were charged with criminal trespass for peacefully picketing and distributing leaflets at the mall in an attempt to dissuade customers from patronizing one of the facilities that sold fur products.

Citing rulings of the U.S. Supreme Court, the court held that the conduct was not protected under the First Amendment to the U.S. Constitution, which does not extend to private property, nor was it covered by the parallel provision of Article I, § 3 of the Minnesota Constitution, which does not invoke “more expansive protection for free speech” than under the federal constitution. The sizeable public finance that went into the mall project coupled with the “invitation to the public” to frequent the property, did not transform the privately-owned property into public property for purposes of state action.

Contract cases

Both federal and state appellate courts have dealt with contract cases at the mall.

In Maurice Sunderland Architecture Inc. v. Simon5F.3d 334 (8th Cir. 1993), the 8th U.S. Circuit Court of Appeals reviewed “lengthy and acrimonious” litigation concerning the construction of the facility. One of the architects brought a breach of contract action on grounds that the mall failed to perform a prior settlement agreement to give public attribution to the architect firm for its role in the design of the facility. After U.S. District Court Judge Richard Kyle dismissed the claim, the appellate court held that the terms of the settlement agreement were too ambiguous and unclear and remanded to determine whether the mall satisfied its architectural acknowledgment obligations under the prior agreement.

A construction company unsuccessfully sued the mall for a mechanic’s lien for improvements made on behalf of a tenant who later abandoned the premises in Marksman Construction Co., Inc. v. Mall of America Co., 1997 WL757392 (Minn. App 1997) (unpublished) rev. denied (Minn. Feb 19, 1997). The suit for failing to pay for improvements was dismissed by the Hennepin County District Court on grounds that the lawsuit was untimely because it was not brought until after the expiration of the time period for filing a mechanic’s lien claim. The Court of Appeals affirmed, applying the general rule that the lien only attached to the tenant’s interest in the property and once the lessee’s interest terminated upon abandonment, the lien ceased to exist.

In Cedar Fair v. Minntertainment Co., 2007 WL 1674830 (Minn. Ct. App. June 12, 2007) (unpublished), the appellate court upheld an arbitration award of nearly $4 million against the operator of the Camp Snoopy amusement park for terminating a management agreement for the facility. Under an “extremely narrow” standard of review, the arbitral decision was upheld because no “fraud … procured the arbitration award.”

Taxing topics

Camp Snoopy was at the heart of one of a number of tax-related cases.

In Minntertainment Co. v. Commissioner of Revenue, 1997 WL 45346 (Minn. T.C. 1997) (unpublished), its corporate operator was not required to pay a use tax for the purchase of amusement devices, such as rides and machines, for use by customers. It was entitled to a tax refund on grounds that the original acquisitions of the devices were not taxable because they constituted a purchase for resale, which is exempt from tax under Minn. Stat. § 297A.01 subd. 4.

The topic of public accessibility to data about the mall was raised in two tax cases. One arose when the Hennepin County Assessor tried to gather data from the mall to prepare for a hearing in Tax Court. The Tax Court granted a protective order precluding the information from becoming public in Mall of America Co. v. County of Hennepin, 1995 WL 128523 (Minn. T.C. 1995) (unpublished).

Characterizing the Mall of America as unique, the Tax Court granted the protective order for data sought to be discovered in connection with the assessment of taxes in Mall of America Co. v. County of Hennepin, 1995 WL 461069 (Minn. T.C. 1995) (unpublished). It gave “additional protection” to the data sought beyond that already required under the Government Data Practices Act because the requested information “has been treated in a highly confidential manner” by the mall and was never disclosed outside of the organization.

Triple trouble

The most prolific, ponderous and troublesome litigation involving the mall was a dispute between business partners with ownership interests in the facility. Known as the “Triple Five” litigation, the series of cases centered on a violation of fiduciary obligations and usurping of a business opportunity, resulting in a ruling by U.S. District Court Judge Paul Magnuson granting equitable relief, imposition of a constructive trust and disgorgement of profits by one of the entities that had acquired an additional interest in the facility, unbeknownst to its partners. The judge also removed it and replaced it with a different entity.

The 8th Circuit affirmed most of the key rulings, while reversing others in Triple Five of Minnesota Inc. v Simon404 F.3rd 1088 (2005). Addressing a “complicated series of transactions,” the appellate court affirmed a finding of breach of fiduciary duty by one of the partners for failing to disclose negotiations to sell its interest to a bigger party and usurping a partnership opportunity by not disclosing those transactions.

But the court diverged from Magnuson’s approach for equitable relief, imposing a constructive trust in favor of one of the parties, while giving it the opportunity to purchase the interest of the other. It also said that the District Court abused its discretion by changing the partnership distribution from 50/50 to 80/20. However, the removal of one party as a managing partner in place of another was proper because the ousted managing partner “did not conduct itself in a manner befitting a managing partner who had a heightened duty to protect the interest of its partner.”

Meanwhile, the litigation continued before Magnuson, who in one of his remedial rulings referred to the “pivotal role” of the public interest in framing injunctive relief because the mall is “such a significant landmark in the state of Minnesota.” Therefore, he suspended a 20-day buy-sell evaluation, pending further legal rulings, to determine which entity should be entitled to buy out the other to own the Mall. Teachers Insurance & Annuity Assoc. of America v. Mall of America, 2006 WL 1888491 (D. Minn. 2006) (unpublished).

Security suits

The mall has encountered legal strife in dealing with issues concerns security at the facility.

Some security practices were made accessible to the public under the Data Practices Act in Northwest Publications, Inc. v. City of Bloomington499 NW Sect. 509 (Minn. App 1993), which was brought by a newspaper seeking emergency response plans maintained at the mall and a written protocol governing interaction between the mall security personnel and Bloomington police.

Reversing the Hennepin County District Court, the Court of Appeals held that some portions of the plan may be non-public data under Minn. Stat. § 13.37, which classifies security information as non-public, but the other portions contain public information that was not “so intricately intertwined” and was subject to “relatively simple separation.”

In Goldstar Taxi and Transportation Service v. Mall of America Co., 987 F. Supp. 741 (D. Minn. 1997), minority-owned taxi cab companies and minority taxi drivers lost their claims of discrimination and harassment because security guards made racial slurs to them, treated white drivers more favorably, and enforced rules imposed of discipline unfairly upon minority taxi owners.

Magnuson held that the racial slurs, while “repugnant and inappropriate,” were too infrequent and sporadic to support a claim of discrimination and did not impede the ability of the drivers to solicit fares at the facility. The mall also had legitimate business reasons to contract with a white-owned companies for purpose of maintaining safety and order of mall property where these companies were larger, had better fleets, and demonstrated greater ability to reliably control and dispatch the drivers than the minority-owned ones that were denied access.

A claim that a security officer improperly detained and mistreated an Asian-American youth who was involved in an altercation with another mall patron was rejected in Kor v. Mall of America Companies Inc., 2000 WL 558067 (Minn. App. 2000) (unpublished). Affirming dismissal by the Hennepin County District Court, the Court of Appeals held that there was no evidence showing that the girl suffered any harm due to the reactions of the security personnel because the evidence did not show that the girl’s condition would have been alleviated had the officers done anything different. Because the girl’s conduct caused a threat to the health and safety of other mall patrons, she was properly detained by security personnel.

Restaurant rulings

Some legal fights at MOA have revolved around the many restaurants housed there.

The Rainforest Café and a rival theme-based restaurant chain, Amazon Bar and Grill, settled their scuffle over who was king of the jungle. In the dispute in Rainforest Café Inc. v. Amazon Inc., 866 F. Supp. 886 (D. Minn. 1999), over the design, décor and menus of the two rainforest café restaurants, each claimed the other was infringing on the right to market the rainforest concept.

U.S. District Court Judge Michael J. Davis, who denied Rainforest’s motion for summary judgment, determined that there was a genuine issue of fact as to the likelihood of confusion between the two restaurants and also on other claims.

In Johns v. Harborage I, a/k/a America Live, 585 N.W.2d 853 (Minn. App. 1998), the Minnesota Court of Appeals upheld an award of $25,000 in compensatory fees on behalf of a server and hostess at Gators Bar and Grill in the Mall, who were sexually harassed by a co-worker, while a punitive damage award did not succeed.

But subsequent transactions led to renewed litigation over which entity was liable for the awards after the original defendant turned out to be judgment proof. One company that acquired its assets was deemed by the Court of Appeals “not a successor” and hence not liable, Johns v. Harborage I645 N.W.2d 761 (Minn. App. 2002). However, the Supreme Court reversed and reinstated the judgment against the acquiring entity, 664 N.W.2d 291 (2003), because of the substantial continuity of the business operations under the new ownership.

Injury issues

Injuries to patrons form a recurrent theme of Mall litigation.

In Mitchell v. Mall of America2005 WL 1020870 (Minn. App. 2005) (unpublished), a visitor who slipped and fell on a staircase at the mall, possibly due to a spilled liquid substance, had his case dismissed by the Hennepin County District Court and the appellate court affirmed, because of insufficient evidence of “constructive knowledge or foreseeability” by the mall.

In Nickelson v. Mall of America, Co., Inc., 593 N.W.2nd 527 (Minn. 1998), a store employee injured in a store fracas with people who were apparently shoplifting was entitled to sue the mall. While the mall does not have a duty to protect its tenant’s employees merely due to its status as a landlord, the hiring by the mall of a security force, coupled with instructions in the security manual that guards should break up any physical altercations, created a duty to intervene on behalf of the besieged employee.

A woman who broke her arm when she fell backwards over a decorative brick railing on a crowded walkway in the Camp Snoopy Amusement Park prevailed in her personal injury suit in Nagel v Minntertainment2000 WL 782013 (Minn. App 2009) (unpublished). The Appellate Court upheld a negligence verdict by a Hennepin County jury of $114,570. The trial court properly admitted expert testimony from an industrial engineer that a hazardous condition existed on the walkway because the low barricade was not protected by safety fencing.

This litany of litigation at the mall shows how the facility has been a place for legal claims as well as commerce in its 25 years as one of the largest and most prominent sites of its kind in the country and the world as well.

PERSPECTIVES POINTERS

Largest size shopping mall in the United States

  • Mall of America, Twin Cities (520 stores)
  • King of Prussia Mall, Philadelphia, PA (450 stores)
  • Avenura Mall, Miami, FL (200 stores)
  • South Coast Plaza, Orange County, CA (280 stores)
  • Del Arno Fashion Center, Los Angeles, CA (200 stores)

 

This article was originally published in Minnesota Lawyer