Dollar Tree threatens lawsuit over Downey’s discount store moratorium

Photo by Eric Pierce

DOWNEY — Dollar Tree is threatening to sue the City of Downey over its recent moratorium on new discount stores, alleging the move was aimed at blocking the retailer from opening at Downey Landing.

The dispute centers on Dollar Tree’s plan to take over the former Party City space at the shopping center. In a 15-page letter dated June 24 and addressed to City Attorney John Funk, attorneys for Dollar Tree accused the city and the property owner, Downey Landing SPE, LLC, of working together to stop the store from opening despite a federal bankruptcy court order approving the lease assignment to Dollar Tree.

The letter, written by Westlake Village attorney Matthew Jacobs, was attached to the agenda for Tuesday’s City Council meeting. Council members are expected to discuss the matter in closed session.

Dollar Tree claims the city’s arguments that the store would violate the property’s “First Quality Use” standards are “unsubstantiated and unsupportable.” The retailer also alleges the City Council’s May 28 vote to impose a 45-day moratorium on single-price overstock/discount stores — a category it says includes only eight businesses citywide — was really intended to block a single tenant at a specific location.

“Defendants’ actions not only deprive Downey residents of convenient access to high-quality and affordable products (and threaten dozens of jobs), but they also violate a binding federal court order,” Jacobs wrote.

The moratorium temporarily halts the approval, relocation or expansion of so-called SPODS, defined in the ordinance as retailers that sell most items at a single discount price or in the “low and very low price ranges.” City staff said the pause was needed to study potential impacts on neighborhood quality of life and economic development.

Dollar Tree’s letter warns that if the city and property owner do not engage in settlement discussions, the company is prepared to file suit in federal court. Potential claims outlined in the letter include violation of the bankruptcy court’s order, breach of contract, tortious interference, and equal protection violations under the U.S. and California constitutions.

“Dollar Tree is hopeful that the parties will be able to resolve this matter without the need for litigation, and it looks forward to productive discussions toward that end,” the letter states. “But if Defendants reject Dollar Tree’s invitation to engage in good faith and persist in their misconduct, Dollar Tree will not hesitate to vigorously pursue its claims in court.”

The Chesapeake, Virginia-based retailer already operates three Dollar Tree stores in Downey and more than 9,000 across the U.S. and Canada. It says it is currently paying rent for the Downey Landing space but has been blocked from opening.

The City Council meeting is scheduled for Aug. 12 at 6:30 p.m. at City Hall.