55 Oak Street LLC v. Rdr Enterprises, Inc.

275 A.3d 316 (2022)

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Nature of the Case

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Facts

P and D entered into a five-year lease agreement, with D's option to extend, for D's bed-and-breakfast establishment, the Thistle Inn. The Thistle Inn contains a restaurant space that can seat up to ninety-nine people. D is required to pay a 'base rent' of $2,500 per month and an 'additional rent' covering all property taxes, insurance, and utilities. The lease includes a force majeure clause, which states: “FORCE MAJEURE. Neither party hereto will be liable for any failure to comply or delay in complying with its obligations hereunder if such failure or delay is, including but not limited to, due to acts of God, inability to obtain labor, strikes, lockouts, lack of materials, governmental restrictions, enemy actions, civil commotion, fire, unavoidable casualty or other similar causes beyond such party's reasonable control (all of which events are herein referred to as 'Force Majeure Events'). It is expressly agreed that neither party will be obliged to settle any strike to avoid a Force Majeure Event from continuing.” On March 18, 2020, Governor Mills issued an executive order to reduce the spread of COVID-19: 'all restaurants and bars shall close their dine-in facilities' until March 31, 2020, and that 'eating and drinking inside restaurants and bars is temporarily prohibited.' The order was later extended to preclude indoor dining through May 31, 2020. D closed the Thistle Inn's indoor restaurant on March 18, 2020. The Thistle Inn had never offered carry-out, delivery, or drive-through services, and it did not begin offering those services during the pandemic. After the executive order went into effect D largely stopped paying rent to P for the restaurant portion of the Thistle Inn. On April 28, 2020, the Governor published a pandemic management plan permitting indoor dining on a restricted basis starting on June 1, 2020, as long as capacity and social-distancing guidelines were followed. Approximately thirty-five guests could be seated at the Thistle Inn. D decided not to open the Thistle Inn for indoor dining because it believed that such a partial reopening would be a poor financial decision. On August 20, 2020, P sent D notice of default and termination and for D to vacate the premises immediately. P filed this FED action on October 14, 2020. D deposited the disputed unpaid rent with the District Court. The disputed rent totaled to $19,685.03. The District Court held that D was excused from its contractual obligation to pay any rent between March 18, 2020, and May 31, 2020, because the Governor's executive orders completely prohibiting indoor dining constituted a 'governmental restriction[]' force majeure event within the meaning of the lease's force majeure clause. The District Court concluded that for the period after May 31, 2020, the 'pandemic itself constitutes a force majeure event and, therefore, would excuse D's performance under the lease agreement, at least in part. The District Court discounted the rent owed by 40 percent of the lease amount. It denied P possession, concluding that D's obligation was entirely excused or partially excused. P appealed and the Superior Court affirmed. P appealed.