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Wal-Mart Plan Marked Down

Wal-Mart Stores Inc. has banked on a strategy of opening new outlets in vacant storefronts to better and faster penetrate the huge Los Angeles County market. But the retailer’s stumble this month in Burbank – where a Superior Court judge sided with opponents and halted a planned store – shows the limits of that strategy. It doesn’t work everywhere, nor in every instance. “This is one case of trying to fit a square peg into a round hole,” said Gideon Kracov, an attorney for the residents who filed the lawsuit and who has worked to stop other Wal-Mart projects. The Bentonville, Ark. retailer had sought to open a 143,000-square-foot store and grocery at the site of a former Great Indoors furniture store in the city’s busy Empire Center. But the lawsuit filed by three Burbank residents contended that the store would lead to traffic congestion and required an environmental review. It also contended grocery sales were not automatically allowed at the site. Los Angeles County Superior Court Judge Allan J. Goodman ruled on Sept. 3 that the 1301 N. Victory Place project clearly required at least an “environmental assessment” and that the city had failed to complete traffic improvements it had long promised at the center. And since the store site was originally approved for home furnishing sales, the judge said grocery sales would have to be approved by the city manager and director of community development. Drew Sugars, spokesman for the City of Burbank, said the city will take no action until after the city attorney meets with the city council to discuss options. He expects that to happen in two or three weeks. “The city council will ultimately decide what direction the city will take,” Sugars said. Likewise, Wal-Mart is reviewing its legal options. “We believe the vacant former Great Indoors store is suited for Wal-Mart and the permits were granted properly by the City of Burbank – like the more than 1,300 similar permits granted for this shopping center over the last 13 years,” said Rachel Wall, senior manager of community affairs at Wal-Mart, in a statement. Wal-Mart’s game plan of occupying vacant stores has worked in many Southern California cities. A year ago, the company opened a Neighborhood Market, a small format grocery in the 25,000 to 45,000 square-foot range, in Panorama City at a former Valley Foods Warehouse location. In June, it announced plans to open a Neighborhood Market in Simi Valley at a former Vons supermarket in the Santa Susana Plaza on Tapo Street. The company is also on track to fill a vacancy at Valencia Town Center in the Santa Clarita Valley. The strategy has also worked at a former Kmart store in Torrance, a former party-supply store in Downey and a former Mervyn’s in West Covina. Unrelenting opposition However, Wal-Mart continues to face strong opposition from other retailers, neighborhood groups and labor unions. Earlier this month, 21 people were arrested during union-organized protests in downtown Los Angles over the alleged low wages and poor benefits of Wal-Mart employees. Kracov, the attorney who opposed the Wal-Mart in Burbank, is also counsel for the United Food & Commercial Workers Union Local. Previously, he has filed lawsuits to stop planned Wal-Marts in Torrance and Chinatown near downtown L.A. However, he said the union was a not a party to the Burbank lawsuit. Kracov declined to comment on whether he would begin further legal action if the land-use issues were cleared up and Wal-Mart gains approval. “I’m not going to speculate on what might happen in the future,” he said. Kracov believes the basic question in the case was whether Wal-Mart had to follow the same rules as every other business in Burbank, and the specific facts of the case determined the outcome. “I’m aware of Wal-Mart’s strategy to move into existing space and claim that its activities are ‘by right’ and the city cannot make any decisions, but that doesn’t work in every instance,” he said. “For example, on the grocery issue, if grocery is not allowed, then that strategy could run into trouble.” Future stores Dale Goldsmith, a land use attorney at the firm Armbruster, Goldsmith & Delvac LLP in Los Angeles who was not involved in the Burbank suit, said that while the fill-a-vacancy strategy didn’t work in Burbank, he expects Wal-Mart will continue to use it elsewhere. It is based on the legal doctrine that if a city has pre-approved land for a certain use, it no longer has discretion on the matter. Because the approval is “ministerial,” rather than political, Wal-Mart can avoid showdowns with opposing parties in planning meetings and city councils. “The strategy is a sound one because if the city doesn’t have the ability to say yes or no, nobody can sue the city,” Goldsmith said. Indeed, Burbank city officials throughout Wal-Mart’s application process said they had no discretion to deny the retailer’s intention to open a store at the Great Indoors site. Goldsmith noted that Wal-Mart’s strategy seems to work best for the smaller Neighborhood Market format, rather than larger stores such as the planned Burbank location because it’s hard for opponents to argue that smaller stores will be the death knell for nearby retailers. “Having a store that’s more narrowly tailored, it’s harder to make that argument,” he said. “At 40,000 square-feet, it will compete with supermarkets, but not wipe out the mom-and-pops.”

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.
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