Tobacco Shop Faces Eviction Over the Lottery

A Huntington Beach tobacconist has been threatened with eviction from the Laguna Hills Mall for an unusual offense: selling lottery tickets.

To officials from Ernest Hahn Inc., a San Diego-based developer and owner of the mall, the issue is a simple dispute over the lease.

“We have very explicit usage clauses, and they do not include lottery tickets,” Hahn leasing specialist Sandy Hanna said.

“Tenants have never been allowed to sell something just because it’s new. If it’s a shoe store, it can’t begin selling ice cream.” Nor may a tobacco store--or any retail store--suddenly start selling lottery tickets, she said.

Craig Hepner, general manager of Hiland’s Tobacco Locker, a chain of Southern California tobacco shops that holds a state license to sell lottery tickets, called that a specious argument.

Lottery tickets “wouldn’t be within anyone’s usage clause because until Oct. 3 (the day the California Lottery began) they didn’t exist,” Hepner said Wednesday.

Hepner said Hahn officials first told him that tickets were banned because they did not want gambling at their mall. But recently, Hepner said, he learned that Hahn was considering setting up a booth that would be the mall’s only sales outlet for lottery tickets.

Sold 10,000 Tickets

Hepner said he believed that Hahn officials decided they liked the looks of the lottery business--Hepner’s Laguna Hills store has sold 10,000 of the $1 tickets since the lottery began--and decided to keep the ticket concession to themselves.

Hahn officials deny that they want to sell lottery tickets themselves. If the mall decides to open such a booth, it would be operated by a Hahn tenant who also would sell bus passes and mall gift certificates, Hanna said.

Hahn’s concern, in the case of the tobacco store and several merchants at other Hahn malls who wanted to sell lottery tickets, has been preserving the vitality of its shopping malls, Hanna said.

“There’s a feeling, not so much now but as more (lottery) games are offered, that tenants might be taking more time selling lottery tickets than running their business,” she said.

The dispute with Hiland’s began on the lottery’s opening day, when the tobacco stores began selling lottery tickets from nine of their outlets in Southern California.

Though three Tobacco Lockers are in Hahn-owned malls (in Palos Verdes, Hawthorne and Laguna Hills), only the most successful location, in Laguna Hills, was given an ultimatum. Hahn officials served “perform covenant or quit” papers on that outlet, giving it 30 days to stop selling tickets or lose its lease.

As the Nov. 3 deadline approaches, Hepner and his staff have continued to sell lottery tickets from their narrow store. A large lottery poster, showing a golden L, hangs in the window and a triangular lottery display twirls gently above the boxes of pipes, imported tobacco and cigars that crowd the shop.

The store sells about 400 lottery tickets a day, Hepner said. While the Tobacco Locker’s sales commissions have been negligible, the lottery tickets have increased foot traffic in the small store, Hepner said, and forbidding their sale “is not in the best interest of the mall, let alone the community.” He noted that 34% of lottery revenues are to be spent on public education.

Hepner said he is angry because “it’s the principle involved”: a merchant’s right to sell lottery tickets.

Will Probably Concede Defeat

Principle or no, when Nov. 3 arrives, Hepner admitted that he will probably concede defeat. The Laguna Hills outlet is too valuable to lose, so “we’re probably going to quit selling tickets,” he said.

Still, if the mall ultimately tries to establish a lottery ticket outlet--one of its own or one operated by someone else--both Hepner and state lottery officials said they will be watching closely.

“If they tell this place (Hiland’s) they cannot sell lottery tickets and then open up their own lottery, we’ll be waiting to take a look at that,” said Ulysses Carter, the lottery’s Orange County director.

Lottery tickets cannot be sold without some connection to another business, he said. So if the mall wants to set up a stand-alone booth for lottery tickets, “we’ll be looking to see if it’s something we want,” Carter said.