Simon Property Group was sued recently for using anticompetitive tactics to prevent key retailers from following through with lease agreements. Gumwood HP Shopping Partners LP alleges that Simon has a pattern of abusing its power to bully its tenants into complying with its wishes. The suit asserts Simon engaged in monopolization, attempted monopolization and restraint of trade in violation of the Sherman Act.

In an antitrust lawsuit filed in Indiana on June 29, 2011, Gumwood claims that Simon improperly used its power as the largest public U.S. real estate firm to prevent retailers from opening stores at Gumwood’s Heritage Square mall in Mishawaka, Ind., because it would be in competition with Simon’s mall in the area.

In its lawsuit, Gumwood alleges the Simon commonly employs various threats to induce its retail tenants into complying with Simon’s wishes. One tactic is to refuse to renew existing leases or make renewals if a tenant opens stores in a competing development in another market. Another tactic employed by Simon is requiring a tenant to relocate a store without giving it an opportunity to renew an existing lease in order to prevent the tenant from opening a store in a competing center. In addition, Simon allegedly increases rates or makes renewal terms less favorable in retaliation if a tenant opens a store in a competing center. Simon allegedly used these anti-competitive tactics to the detriment of Gumwood.

The lawsuit stems from Gumwood’s attempts to sign leases with key retailers at its Heritage Square mall and Simon’s alleged attempts to prevent key retailers from opening locations at Heritage Square. According to the lawsuit, Gumwood entered into lease negotiations with a core group of key tenants, including Ann Taylor Loft. In its complaint, Gumwood noted that securing a tenant like Anne Taylor Loft would be important because other desirable tenants would be more willing to lease space if Loft opened a store at the mall. However, after Ann Taylor signed a lease with Gumwood, Simon allegedly began applying pressure on Anne Taylor, which already had several affiliated stores in various Simon properties, to not open a Loft store at Heritage Square. Ann Taylor terminated its lease agreement with Gumwood and later signed a lease for a Loft store at Simon’s mall in the area.

Gumwood claims Ann Taylor changed its mind as a direct and proximate result of Simon’s improper influence. Ann Taylor had many existing leases with Simon and had other deals it was negotiating with Simon and Simon allegedly used those deals as additional leverage to force Ann Taylor not to proceed with opening a store at Gumwood’s mall. As support for its claims, Gumwood alleges that a former Simon employee reported that Simon executives, including its president and chief operating officer, discussed at a meeting their intent to kill the Heritage Square deal with Ann Taylor.

Gumwood alleges that the loss of Ann Taylor as a tenant impacted the amount of rent it could charge other retailers as well as the types of retailers who were willing to open locations at Heritage Square. For example, while Eddie Bauer signed a lease with Gumwood, the loss of the Loft store and other tenants hurt the retailer’s profitability and as a result, Eddie Bauer required Gumwood to agree to a reduced rent structure as a result of the lack of required co-tenants.

Gumwood is seeking compensatory damages, treble damages, attorneys’ fees, prejudgment interest and costs.