Tiffany suit could become landmark

Elise Gee

COSTA MESA -- A victory for Tiffany & Co. in a suit against South

Coast Plaza could mean a legal landmark for the retail industry, experts

said.

Tiffany, which is looking to open a store in Mission Viejo, filed a

lawsuit Wednesday against South Coast Plaza claiming a clause in its

lease is illegal and unenforceable because it violates the California

Business and Professions Code.

But experts said such noncompetition or radius-restriction clauses, which

keep a company from opening more stores in an area, are used often in the

retail industry.

“They’re very, very common,” said Wally Limberg, of Strategic Retail

Advisors in Newport Beach. “Every major developer uses them, the Irvine

Co., the Segerstroms, even the power centers do.”

Such clauses help ensure that South Coast Plaza retains its unique mix of

retailers. A victory for Tiffany & Co. could open the door for other

retailers to make similar requests, said Gary Mickelson, partner in

charge of retail development at Koll in Newport Beach.

“If their fundamental challenge is to try to say those restrictions in

our lease are not enforceable, they’re against the law or against the

California business code, that would be a landmark legal decision,”

Mickelson said.

Tiffany & Co. initiated the suit after South Coast Plaza denied its

request to open a store at the Shops in Mission Viejo, a mall that some

have speculated will dent South Coast Plaza’s customer base. The Shops

and South Coast Plaza are undergoing $100-million-plus renovations.

“I don’t think it’s going to be the huge rivalry that people make it out

to be,” Limburg said. “South Coast Plaza is at the head of its class, top

in the country. I think everybody else would like to be who they are.”

Debra Gunn Downing, spokeswoman for South Coast Plaza, declined to

comment on the lawsuit, other than to say its lawyers are reviewing it.

Even if the Mission Viejo mall never matches South Coast Plaza’s

world-class status, it will affect its sales, Mickelson said. A major

score for the Shops was securing a lease with Nordstrom, which will act

as a magnet for other high-end tenants in the affluent South County

community, he said.

Saks Fifth Avenue will also be at the new mall. Both of those department

stores also have locations at South Coast Plaza. But radius-restriction

clauses do not usually apply to department stores.

“Department stores are given the land to come there,” Limburg said. “They

don’t tell the department stores what to do. The department stores tell

the landlords what to do.”