Winn-Dixie parent Southeastern Grocers allegedly misled an Aventura-based developer into starting construction of a new store the company had no intention of occupying, court records show.
On Monday, Miami-Dade Circuit Court Judge Abby Cinnamon ruled that an affiliate of TCII Capital Group can amend its 2023 lawsuit against Southeastern Grocers to seek punitive damages against the Jacksonville-based chain.
Previously, the TCII affiliate was seeking at least $21 million in damages representing the amount the developer spent acquiring a site in Poinciana, Florida, and commencing construction of a new shopping center that was supposed to be anchored by a Winn-Dixie store, court records show. TCII is led by CEO Spencer Enslein.
Southeastern Grocers ultimately did not sign a formal lease because at the time the chain was in talks to merge with international grocery chain Aldi, said Sean Burstyn, founder of Miami-based real estate law firm Burstyn Law, who represented TCII”s affiliate. Last year, Aldi acquired Southeastern Grocers and all of its roughly 400 Winn-Dixie and Harveys Supermarket stores.
Arguments rejected
Judge Cinnamon rejected Southeastern Grocer’s defense that the company executed a letter of intent with TCII’s affiliate in which the developer expressly waived any claims, losses or damages arising from the construction of the store, per the judge’s order. TCII executives also relied on a handshake agreement with Southeastern Grocers when construction of the grocery store-anchored shopping center began in 2022, the order states.
“Southeastern Grocers tried to get out of punitive damages and to win the case on summary judgment by relying heavily on a letter of intent,” Burstyn told The Real Deal. “Our position is simple: An LOI is not a license to lie.”
Southeastern Grocers and its attorney, M. Scott Thomas, declined comment while the lawsuit is pending.
TCII relied on “a yearslong mutually beneficial relationship” with Southeastern Grocers to find and buy real estate that could be developed into Winn-Dixie-anchored shopping centers, Cinnamon’s order states. The developer has invested more than $30 million in developing retail sites with Southeastern Grocers, and the two firms “have generated millions of dollars of business, according to the ruling.
In 2021, Southeastern Grocers requested that TCII search for a suitable site for a new supermarket in Poinciana. A year later, TCII paid $6.5 million for a 33.8-acre parcel at 4730 Marigold Avenue and spent roughly $15 million building the shopping center, which is still under development.
During a two-year period, Southeastern Grocers executives did not disclose its plan to sell Winn-Dixie to Aldi while TCII was acquiring permits, hiring architecture and construction firms, signing other tenants and incurring substantial expenses, Cinnamon’s order states.
“Defendant made representations directly to plaintiff and encouraged plaintiff to commence the work without a formal lease,” Cinnamon wrote. “After allowing plaintiff to incur these substantial expenses pursuant to Defendant’s specific instructions, defendant backed out of the Poinciana project.”
Concealment
Southeastern Grocers engaged in “a months-long systematic internal scheme to conceal the sale of Winn-Dixie to Aldi in order to deceive” TCII that was “expressly condoned at the top levels of the defendant’s organization,” the order states.
The grocery giant’s executives used a codename, “Project Arrows,” to reference the secret talks with Aldi. In a deposition, Southeastern Grocers’ head of real estate admitted that corporate directives required employees to lie about Project Arrows, per Cinnamon’s order. Another c-suite executive instructed his subordinates to shut down the Poinciana project in 2022. The same year, a Southeastern Grocers representative assured TCII that the firm still planned to lease the new store.
At the beginning of 2023, Southeastern Grocers construction project managers instructed TCII to continue the project, including signing off on orders for $600,000 worth of steel and pouring the concrete foundation for $1 million, the order states.
“The Court finds that the record evidence provides a reasonable basis for punitive damages,” Cinnamon wrote. “There is evidence that the defendant’s employees engaged in intentional misconduct.”
