When Starbucks announced last month that it would be shutting down all of its Teavana stores, a lot of people were unhappy. Tea lovers were sad, of course, but another group that did not appreciate the news was Simon Property Group, the largest shopping mall operator in America. Now Simon has filed a lawsuit against Starbucks for breaking its lease contracts by closing its Teavana stores and “shirking its contractual obligations.”
Starbucks’ 379 Teavana stores were primarily located in shopping malls. 78 of those Teavana stores are in malls operated by Simon. In July, Starbucks announced that all the Teavana stores would be closing by the end of 2018, but a representative from Simon told the Indianapolis Business Journal that Starbucks actually plans to close its Teavana stores by December 31, 2017.
Simon says two of the leases for the 78 Teavana stores in its various malls expire in 2017. The other 76 are in place for longer than that. Some of the leases reportedly extend until 2027.
“In order to successfully operate its shopping centers, Simon depends upon each tenant fulfilling the covenants in their respective leases,” the company said in its suit. “Crucially, each of Simon’s tenants promises that it will open and operate continuously for the entire term of its lease.”
Simon’s lawsuit points out that other companies have been closing their mall stores recently, but those companies said closures were necessary to prevent bankruptcy. Simon says Starbucks is obviously in no danger of bankruptcy.
The suit alleges that Teavana is not actually losing money, but "Starbucks simply believes it can make more money if it violates the leases than if it honored its contractual promises and obligations."
Simon says a mall is a “co-dependent ecosystem” that relies on a mix of stores to create traffic and benefit all mall tenants. That requires all lessees to maintain and operate in their locations for the the duration of their leases.
Simon is seeking a permanent injunction to stop Starbucks from closing its Teavana stores before the end of their lease agreements.
Starbucks told the Indianapolis Star that it is “working to resolve this dispute.”