Tuesday, November 30, 2021


             California Union Square owns a 131,000 square foot building in San Francisco. Saks operated a department store there since 1991. The lease is over 100 pages long and consists of 24 articles, most of which contain both sections and subsections.

            The contract provides Saks an initial 25-year lease term, followed by five successive options to renew for 10 years each. Section 3.1 describes the initial rent, while Section 3(b) provides the process for determining rental in each renewal period.

            Renewal rents are intended to be reset to “Fair Market Rents,” which means “the open market rental value of the [property] for first-class retail use.” If the parties cannot agree on renewal rent, then Section 3.1(c) requires arbitration.

            As well, this lease form provides for “baseball arbitration,” in which each party proposes its own rent determination, and the arbitrator selects one of the two proposals. Section 3.1(c)(iv) states that both LL and T are obligated to equally share the fees and expenses of the arbitrator; each party pays its own attorney’s fees.

            However, Section 23.10 provides that the prevailing party in any action regarding the lease is entitled to receive from the other party all costs and expenses, including reasonable attorney’s fees.

            In January 2016 Saks exercised a 10-year renewal option. LL and T could not agree upon Fair Market Rent. The issue was dispatched to arbitration.

            A three-day arbitration hearing was convened one year later. The arbitrator issued an Award for the LL, estimating Fair Market Rent to be approximately $11 million per year. That number was closer to LL’s proposal then that offered by Saks, as LL had proposed $13.9 million while Saks had suggested $6.25 million.

            As a consequence, under the terms of “baseball arbitration” the annual rental for the new lease term would be $13.9 million.

            LL filed a lawsuit to confirm the award; Saks attempted to vacate it. The trial court granted Saks’ motion, finding that the arbitrator had exceeded his powers, and ordered a new arbitrator be appointed and the matter re-arbitrated.

            In October and November 2018, a four-day re-arbitration was held. The replacement arbitrator found in favor of Saks and ruled that the $6.25 million rent number proposed by Saks would serve as the Fair Market Rent.

            LL filed a lawsuit to vacate the Award. Saks defended and attempted to confirm it. Judgment was entered for Saks in June 2019.

            LL appealed.

            The Appellate Court affirmed the trial court’s decision confirming the arbitrator’s second award, in favor of Saks.

            LL appealed to the Supreme Court. But the Supremes refused to review it.

            Saks then moved to recover $1 million in attorneys’ fees for litigation expenses caused by the court proceedings. The trial court denied the request.

            Saks appealed.

            Ok so at this juncture I am supposed to write about what happened thereafter. But don’t you see – it doesn’t matter. Saks exercised its renewal option in 2016 and this issue has bounced up, down, and through arbitration and courts for five years now.

            It doesn’t appear poised to end.

            Still and yet, there will be some that need to know. To those I say: the trial court’s order denying Sak’s recovery of attorney’s fees is affirmed.  

            Saks won. Saks lost. Union Square won. Union Square lost. See California Union Square LP v. Saks & Company; California Court of Appeals, 1st Appellate District, Division Three, October 29, 2021: https://law.justia.com/cases/california/court-of-appeal/2021/a162043.html.  

            Lessons / Questions / Observations:

1.      Observation. Non-lawyers do not understand that in arbitration an Award is issued at the conclusion. An Award is not a Judgment. A secondary procedure is required whereby lawyers seek to convert the Award to a Judgment, which can then be enforced by sheriffs, constables, marshals, and other law officers, through the issuance of writs, turnover orders, post-Judgment discovery, and legal collection mechanisms as offered by state law.

2.      Lesson. In that secondary step requesting conversion to Judgment, the Award can be contested. Even though it is supposed to be final and uncontroverted. If the dollars are large enough, a courthouse fight is coming. Again, this is after a “final” Award has been issued.

3.      Question. Then what benefit is arbitration? First, if the dispute is about something obtuse then presumably an arbitrator can be found who understands nuclear reactors. Second, there are no juries in arbitration, just one or more dispassionate subject-matter experts, so it is difficult to extract a punitive amount from the loser. Third, arbitration is supposed to be confidential. No one knows the outcome, or even that parties are engaged in a dispute. That is until the Award is converted to a Judgment. See above.

                                                                                    Stuart A. Lautin, Esq.*



* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization

Licensed in the States of Texas and New York


Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.

Monday, November 1, 2021


             Advised in 1780 that British troops stationed in New York were “making an embarkation with which they menace the French fleet and army” stationed in Rhode Island, Alexander Hamilton wrote a letter to the Marquis de Lafayette. When Lafayette received the letter, he met with the Massachusetts General William Heath who, in turn, sent it to the Massachusetts Council.

            The Council, serving as the executive body during the Revolutionary War, authorized sending troops to Rhode Island to help the French forces.

            That letter, along with other records of the period, were ultimately transferred to the custody of the Massachusetts Archives. The Archives kept the letter in an indexed volume at least until 1920.

            At some point between 1920 and 1950, the letter disappeared. Only a copy was maintained.

            The Commonwealth of Massachusetts and USA assert that the letter was taken by Harold Perry sometime at or shortly before WWII. The Estate of Stewart Crane instead suggested that the letter was missing due to the negligence of the Archives, or perhaps because the Archives no longer wanted to maintain it.

            The letter ultimately came into the possession of Stewart Crane, who claimed that his father purchased it in 1945 from a rare documents dealer in Syracuse, NY. In November 2018, Stewart consigned it to a Virginia auctioneer who discovered that the letter was “missing” and contacted the Archives.

            The auctioneer notified the FBI. The FBI seized it pursuant to a judicial warrant on December 19, 2018.

            Five months later USA filed a verified complaint for forfeiture, alleging a violation of federal statutes that criminalize interstate transport of and trade in stolen goods valued over $5,000.

            Only the Commonwealth of Massachusetts and Stewart Crane’s Estate filed claims to the letter. The federal district court granted USA’s motion to strike the Estate’s claim, and concluded that under Massachusetts law a public record the letter could only be owned by the Commonwealth.

            The court awarded the letter to Massachusetts. The Estate of Stewart Crane appealed.

            The Court of Appeals reviewed Massachusetts laws regarding public records, and determined based on laws starting in 1897 that the letter qualifies as a historic public “original paper.” As such, the letter was part of the files of the Commonwealth, was retained by the Commonwealth, and was stored in the Commonwealth’s Archives.

            The Court of Appeals delighted in using words and terms such as contretemps, kleptomaniacal, alternate reality, asseverational array, chary, pellucid, whistling past the graveyard, the legislature said what it meant and meant what it said, force a square peg into a round hole, perfidy, short shrift, and elucidated.

            Thank you, Google.

            The Commonwealth of Massachusetts will keep this letter. See USA v. Letter from Alexander Hamilton to the Marquis de Lafayette Dated July 21, 1780; US Court of Appeals, 1st Circuit, No. 20-2061, October 6, 2021: https://wbznewsradio.iheart.com/content/massachusetts-gets-stolen-hamilton-letters-back-federal-court-rules/.

            Lessons / Questions / Observations:

            I have no lessons, questions, or observations. I write this Article only because Al Hamilton penned almost all of the Federalist Papers, was our nation’s first Secretary of the Treasury, and pretty much created our Republic.

            Well, that and I’m a huge Broadway musical fan. Hey Lin-Manuel: call me, I found the subject for your new production!

                                                                                    Stuart A. Lautin, Esq.*


* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law, Texas Board of Legal Specialization

Licensed in the States of Texas and New York


Reprinted with the permission of North Texas Commercial Association of REALTORS®, Inc.