Crown Books, which has created a small sensation among area book-buyers and merchants by offering best sellers at substantial discounts, may have to vacate its store at 1700 G St. NW -- or negotiate a new lease -- in the wake of a federal court ruling issued Friday.
The Federal Home Loan Bank Board, whose building at 17th and G Streets has won architectural praise and awards, was told by United States District Court Judge Louis F. Oberdorfer that the lease it signed with Crown was illegal. In an opinion being studied yesterday by the board's lawyers, Oberdorfer said the General Services Administration and not the board had exclusive authority to negotiate long-term leases.
Oberdorfer's ruling grew out of a suit filed by Globe Books, which has a store at 1700 Pennsylvania Ave. NW, just around the corner from Crown's store.
Globe claimed in its suit that it had first been offered a lease by the board at $18 to $20 a square foot, a price higher than the rent at its present location.
Later, Globe said, it was discovered that Crown had negotiated a lease for $8 a square foot with 4 percent of sales over $1 million to be paid to the board for the first five years, with increases of $2 a square foot for the second five years and again after the 10th year of the lease. Crown's lease was to run for 20 years.
Globe, which has been located at 1700 Pennsylvania since 1967, was forced by Crown's proximity to begin discounting first-line books in order to compete. Globe's suit claimed that the price offered to Crown was lower than that originally quoted to Globe and that, in effect, the board is subsidizing Crown. Crown, a subsidiary of Dart Drug, first opened in Rockville with one store and now has 11.
Globe's owner, Alexander S. Roesell, said yesterday that Globe's business in the Pennsylvania Avenue store was off about 22 percent last year over the previous year and even more if one figured in what would have been the normal expected increase in business.
In his opinion, Oberdorfer left open the question of what would happen to Crown's lease. Crown, according to its lawyer, Charles R. Donnenfeld, already has spent $100,000 to outfit the store for business. Oberdorfer said in his opinion that the lease is invalid, "unless and until it should be ratified by GSA or Congress."
In addition to the problems with the Crown lease, the board has been criticized by GSA, the General Accounting Office and Sen. William Proxmire (D-Wis.). Criticism has been aimed at the cost of constructing the $51 million building, the manner in which it was furnished and some of the other leases -- including a restaurant, a disco, a cafeteria, two clothing stores and a card shop -- into which the board entered. Those leases may also be invalid under Oberdorfer's ruling.
A hearing has been scheduled for Friday to determine how to go about dealing with remaining questions in the suit, including whether Globe has any money damages coming to it as a result of the lease, and who would pay such damages.
Lawyers for both Crown and the board may try to appeal Oberdorfer's ruling to the U.S. Court of Appeals. "The case is not over yet by any means," said Matthew Ash, the board's lawyer.