50-year-old family market may be forced out of business

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January 19, 2004 // UPDATED 2:38 pm - April 24, 2007
By: Sarah McKenzie
Sarah McKenzie

In a Downtown with few produce aisles, City Market sues its Laurel Village property manager to keep serving rich and poor

Downtown's sole, full-line grocery store, City Market, has slapped its landlord with a lawsuit that claims the grocer is being illegally forced out of business.

City Market, 1240 Hennepin Ave., filed a 52-page complaint Dec. 8 against Golden Valley-based Great Lakes Management Company, which manages Laurel Village, the grocery's current home. The complaint includes nine counts with allegations ranging from breach of contract to defamation. The heart of the complaint, however, centers on a dispute about whether the grocer gave proper notice when it attempted to renew its lease.

Brad Hanson and Brian Hanson, brothers who co-own City Market, claim they filed the necessary paperwork in September to comply with the lease's renewal terms.

Under Great Lakes Management's contract interpretation, the lease expired Dec. 31 and the Hanson brothers failed to give proper notice.

The grocery store has been in the neighborhood for 50 years. The brothers' uncle, Del Bauers, started the business on the corner of 13th Street South and Hennepin Avenue (now home to Espresso Royale Caff). The market then fell into the hands of Brad and Brian's father, Don Hanson, who owned the place until 1996 when they took over ownership.

"We hope to be here tomorrow," said Brad Hanson. "We can't just pick up and move in a month or two."

City Market remains open despite the legal wrangling. The grocer is in a holding pattern until February when the two sides are expected to appear in court for a hearing on the suit. The judge assigned to the case ordered the parties to try to workout a compromise before the court date.

At the February hearing, the judge is expected to determine whether City Market can continue operating in Laurel Village as litigation proceeds. If the grocer's request is denied, City Market would be forced to close its doors and wait for the outcome of the trial to determine whether it could reopen.

Michael Pagh, president of Great Lakes Management, kept his comments on the suit brief.

"I think that the issue is as simple as this -- we have a disagreement concerning the rights and obligations that both parties have under the terms of an existing lease," he said. "As a result of that, we are going to go before a judge and let that judge sort this thing out for us."

Great Lakes Management oversees Laurel Village, an upscale housing development spanning three city blocks on Hennepin Avenue from 12th Street to 15th Street. It is owned by the St. Paul Companies, an insurance giant.

Advertised as the "pulse of Downtown," Laurel Village has 727 apartments. Currently, the complex is 93-percent occupied, Pagh said. The complex has eight other retail tenants besides City Market, though some spaces, such as the former City Liquors space next to City Market, and the Dish restaurant space at 13th and LaSalle, have been vacant for months.

Pagh would not comment on whether another potential grocery tenant has been lined up for Laurel Village. He said the company is in negotiations with another restaurant tenant, however, to fill the space left vacant by Dish.

James Baumgartner, Laurel Village property manager, said, "We are committed to having a grocer there to serve the needs of our residents as well as the area neighbors."

Besides asserting Great Lakes breached the lease, City Market's complaint alleges a history of failed promises and threats from the management company.

Among them: that Laurel Village made overtures about increasing City Market's customer base and providing 32 ground-level parking spaces, which would be monitored by security guards. The grocer claims the promises were made before City Market became a Laurel

Village tenant in 1990. The Hanson brothers also allege that they were induced to sign the lease and told a competing grocery store would go in the space if they didn't agree to move from their previous location on the corner of the 13th Street South and Hennepin Avenue.

Instead of more customers, new parking spots and better security, the grocer paints a bleak picture of its relationship with Laurel Village in recent months. The complaint alleges the company stuck City Market with excessive maintenance charges, reneged on its parking agreement by giving 15 of its parking spots to other retailers and later opened the rest of the spaces to the public.

The grocer also raised complaints about concrete planters that obstructed delivery trucks and trucks parked near the store's front entrance that deterred customers from entering the store.

Additionally, Brad Hanson claims Laurel Village violated a noncompete clause in the lease by promoting SimonDelivers.com, an online grocery delivery business that began serving Downtown apartment buildings in April.

City Market is larger than a convenience store with a couple of aisles of frozen food, a deli and small produce section. The grocery store has 11 employees. The grocer pulled in about $1.8 million in sales in 2003, Hanson said. About 1,000 customers stop in on the weekdays.

Dick Saliterman, an attorney representing City Market, considers the grocer a neighborhood fixture and has sought support from other community leaders in keeping the grocer in business.

"It is one of most important components of what community is all about. It has been family-owned for 50 years. They treat their employees and especially their customers with that same sense of community that is often lost in our city. It's like a beacon of community," he said.

City Councilmember Lisa Goodman (7th Ward), who lives near City Market, said she would be sad to see a business that has been in the neighborhood for 50 years close up shop -- particularly a grocery store.

"There is definitely a need for a full-service grocery store Downtown," she said, adding she would like to see Laurel Village expand its grocery store by using its vacant commercial space for extra square footage.

The market has developed a niche in catering to low-income shoppers. About 40 percent of the sales come from Food Stamps, Hanson said. City Market has also partnered with the Basilica of Saint Mary on a food voucher program, which provides people in need with $50 for groceries.

The Basilica's Rev. Michael O'Connell filed an affidavit in support of City Market.

"City Market has been our neighbor and one we cannot afford to lose for any reason," O'Connell wrote. "In some respects, the market perhaps even provides some services not entirely different than those of the church itself as a sort of community center or meeting ground and a place for a sense of decency and civilization off of the sometimes very hard and cold cruel streets of Hennepin Avenue and nearby neighborhoods."