Jury rules in Caruso’s favor

LOS ANGELES — A jury on Thursday found that owners of the Glendale Galleria tried to block leading restaurant chain the Cheesecake Factory from signing a lease at the Americana at Brand, and awarded Americana developer Caruso Affiliated Holdings $74 million in damages.

The jury also determined that Galleria owner General Growth Properties acted with malice, oppression or fraud, a legal standard that triggers additional punitive damages. The trial will resume Tuesday to assess the amount of the penalty.

After signing a July 2003 letter of intent to negotiate a lease at the Americana, the Cheesecake Factory didn’t ink a deal until February 2007. The restaurant hesitated, Caruso attorneys argued, because General Growth — a Chicago-based real estate investment trust that owns and manages more than 200 malls nationwide and is the restaurant’s biggest landlord — threatened to block Cheesecake Factory deals at other General Growth malls.

The 43-month delay in signing a lease stalled design plans at the Americana, marred lease negotiations with other prospective tenants that tend to follow the Cheesecake Factory and disrupted the developer’s attempt to secure a crucial loan, Caruso attorneys said.

The $74 million in damages awarded by the jury — the full amount requested by Caruso — accounts for lost income and increased construction costs accrued during the Cheesecake Factory lease lapse, Caruso attorney John Gordon said.

The smoking gun, Caruso attorney Kenneth Chiate said Monday, was a 2003 voice mail left by Cheesecake Factory real estate brokers Robert Schnur and Marc Guth for the Americana’s former lease manager, James Ashton. The message was in response to Ashton’s repeated requests in the months following the July letter of intent to begin lease negotiations.

Schnur and Guth warned in the message that General Growth, which was allegedly courting the restaurant for the Galleria, was slowing deals at other locations and reminded Ashton that their communication should remain secret.

General Growth attorneys argued that the company never knew of the letter of intent and that Schnur and Guth were crafting a semblance competition between the Galleria and the Americana to get a better deal for the Cheesecake Factory.

The restaurant’s delay in negotiating a lease was not caused by General Growth, but by a host of other construction-related and legal hurdles, General Growth attorney David Battaglia said.

The September 2004 city referendum to approve the Americana, for one, plus the 2005 California Environmental Quality Act injunction initiated by General Growth and a series of city eminent domain proceedings for 12 properties within the Americana site that concluded in mid-2006, were legitimate reasons for any tenant to delay inking an Americana lease, Battaglia said.

But the jury not only pinned the delay to General Growth interference, meriting the full amount of compensatory damages; it will also look to make an example out of General Growth by tacking on further punitive damages.

“With punitive damages, the theory is that the defendant has done something that not only harmed the plaintiff, but it’s behavior that’s bad, and you want this defendant and other defendants from . . . doing bad things,” said Stephen Yeazell, a UCLA law professor and expert on civil procedure.

Punitive damages tend to equal compensatory damages, but juries, Yeazell says, are more willing to dig deeper into the wallets of wealthier defendants — a precedent that could mean a steep penalty for General Growth, a public company that posted a net operating income of $2.4 billion last year.

“The idea is that the amount should fit the defendant as well as the act,” Yeazell said.

Attorneys for Caruso Affiliated and General Growth declined to comment.

 RYAN VAILLANCOURT covers business, politics and the foothills. He may be reached at (818) 637-3215 or by e-mail at ryan.vaillancourt@latimes.com.