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Lidl was 'deceptive' in planning NC grocery stores that never opened, lawsuit says

A Dallas-based developer is suing German grocer Lidl over its decision to scrap stores in Cary, Charlotte and Wilmington.
A Dallas-based developer is suing German grocer Lidl over its decision to scrap stores in Cary, Charlotte and Wilmington. Photo provided by Lidl

In suing German grocer Lidl for breach of contract, a commercial real estate developer has harsh words for the supermarket chain.

Dallas-based Leon Capital Group calls Lidl's conduct "fraudulent" and "deceptive." It says the grocer left real estate developers "holding the proverbial bag" in millions in development costs through "lies, misrepresentations and bad faith."

Lidl says it looks forward to defending itself against those accusations. "When we have an opportunity to present our case, it will become apparent that the allegations in the complaint are without merit," William Harwood, Lidl's director of communications, said in a statement via email. "We look forward to the opportunity to respond and will be vigorously contesting the claims made in the lawsuit."

According to the complaint, filed this month in federal court, the supermarket chain hired Leon Capital Group to build Lidl-anchored commercial projects in three North Carolina cities — Cary, Wilmington and Charlotte.

"These developments," the complaint says, "were part of Lidl's larger plan for its entry and rapid expansion into the lucrative United States grocery market — a market sector forecast to be worth $1.7 trillion by 2022."

In early 2016, Lidl announced that it would open hundreds of stores in the United states in 2018 and 2019, the complaint notes. "Such an ambitious market entry and expansion plan was destined for failure," it says.

To date, Lidl "has opened only around 50 stores out of the hundreds it had on the drawing board," the complaint says. "After such a disappointing launch, Lidl has taken a hatchet to its plans and dramatically scaled back its expansion," leaving developers like Leon Capital Group in the lurch.

Lidl should have known it was biting off more than it could chew, the complaint says.

"Lidl first sought to tie up hundreds of strategic and high-demand real estate parcels and then determine whether Lidl stores would be economically viable in those locations," the complaint says. "As such, Lidl either undeniably knew or should have known, in its early planning stages, that it would not close on all of the parcels it would put under contract for purchase."

That leaves two possible conclusions, the complaint says. One, "Lidl knew it was gambling with its overly ambitious expansion plan and designed an emergency exit constructed on deception and bad faith," the complaint says. Or, "Lidl was grossly negligent in the execution of its U.S. expansion plan and committed business malfeasance on an epic scale and then purposely left innocent third parties with significant economic losses."

The complaint says Lidl's own leadership has all but admitted gross negligence. It notes that in a January 2018 interview with the German magazine Manager Magazin, Lidl CEO Klaus Gehrig "described Lidl's U.S. expansion as a 'singular catastrophe,' noting that Lidl did a 'poor job' selecting locations and selected stores that were too big and expensive to be profitable."

The magazine, the complaint adds, called Lidl's U.S. expansion a "botched expansion," a "disaster," a "fiasco" and a "debacle."

Lidl "certainly appears to have planned for the eventuality of terminating related contracts and agreements ... when it could shift, through false representations, financial risk to U.S.-based local developers," the complaint says.

In its complaint, Leon Capital Group says Lidl canceled the Wilmington store last November but said it planned to follow through with the Cary and Charlotte stores. In a letter dated Nov. 15, 2017, the complaint says, Lidl's director of real estate wrote to Leon: "I am sorry that we could not close on the (Wilmington) deal, but we look forward to getting the other deals (Cary and Charlotte) across the finish line."

The complaint says Lidl canceled the Cary store a month later, in December 2017, and abandoned the Charlotte store in January of this year.

Leon's situation is not unusual, the complaint says. "One North Carolina developer who teamed with Lidl to develop a Lidl-anchored center in Burlington, N.C., now faces foreclosure, judgments, liens and a litany of claims and lawsuits," the complaint says.

"Leon is just one of many similarly-situated entities that has fallen victims to Lidl's pattern of fraud and deception," the complaint adds.

Lidl said it had done nothing wrong in North Carolina. "Lidl is a company that takes its business responsibilities seriously, and we have exceeded all of our commitments to the State of North Carolina," said Harwood, the communications director.

Leon estimates its losses in the millions of dollars.

Scott Bolejack: 919-829-4629, @ScottBolejack
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