A/R Retail LLC v. Hugo Boss Retail, Inc.

Facts

P is the landlord of the luxury indoor shopping center known as The Shops at Columbus Circle. D is a fashion brand that sells men's and women's high-end apparel, shoes, and accessories. Since 2012, D has leased a two-floor retail store from P. D was paying $692,026.07 per month for rent. On March 7, 2020, Governor Cuomo signed an Executive Order 'declaring a State disaster emergency for the entire State of New York' that remained 'in effect until September 7, 2020.' Further Executive Orders mandated commercial and retail closures. Issued on March 18, they ordered that 'all indoor common portions of retail shopping malls . . . shall close and cease access to the public.' P closed the Shops including the Store. D's employees were barred from accessing the Premises. P also restricted deliveries to the Premises during this time. D paid the rent for the month but expressly 'reserved all rights' relating to the rent in a letter written to P on March 18, 2020, the day after the Shops closed. D stated it 'may deem such cessation or diminution of operation as an event of casualty or force majeure which may excuse D from performance under the Lease due to impossibility of performance, commercial impracticability or frustration of the purpose of the Lease.' D claimed that section 15.2 of the Lease 'affords [it] the right to terminate the Lease,' so that 'if d proceeds with exercising this right it could close its store without penalty.' On September 9, 2020, the Shops reopened to the general public. Business has not been the same. State guidelines limited occupancy in the Store to 50% of the maximum allowable amount, including customers and employees. P decreased the Operating Hours of the Shopping Center by 20%, from 50 hours of weekly operation to 40 hours per week. Traffic has declined by 83% with a decrease in year-over-year sales by76%. D has not paid monthly rent in full since May 2020. The contract has a force majeure clause that reads: “'Force majeure' shall mean causes beyond the claiming party's reasonable control (other than causes delaying the payment of money due and payable hereunder) and occurring without its fault or negligence, including, without limitation, acts of God (including, without limitation, earthquake, flood and/or extreme or extended inclement weather), strikes, lockouts, breakdowns, accidents, order or regulations of or by any governmental authority, building department delays, war, acts of terrorism (whether local, national or global in nature), failure of suppliers, subcontractors, and carriers, or party to substantially meet its performance obligations under this Lease, provided that, as a condition to the claim of a Force Majeure delay, the party experiencing the difficulty shall give the other prompt written notice, with full details following the occurrence of the cause relied upon. Dates by which performance obligations are scheduled to be met will be extended for a period of time equal to the time lost due to any delay so caused.” 'Landlord and/or Tenant shall be excused for the period of delay in the performance of any of their obligations hereunder, except Tenant's obligations to pay any sums of money due under the terms of this Agreement, and shall not be considered in default, when prevented from so performing because of Force Majeure; provided, however, the claiming party must notify the other party of any such delay within five (5) Business Days following the initial occurrence of such Force Majeure event in order to delay the performance of any obligation hereunder. Notwithstanding anything to the contrary contained in this Section 26S, if any work performed by Tenant, Tenant's contractors and/or subcontractors results in a strike, lockout and/or labor dispute, such strike, lockout and/or labor dispute shall not be deemed Force Majeure for purposes of this Lease.' P sued D and D sued P. P wanted back rent and D wanted rescission or reformation of the Lease due to 'frustration of purpose' or 'impossibility of performance;' termination of the Lease because the pandemic constitutes a 'casualty' that has 'rendered [the Premises] wholly or substantially untenantable;' abatement of rent because the pandemic constitutes a 'hazard;' and recovery of 'overpaid' rent 'for the period of time that D was unable to operate a retail store at the Premises as originally contemplated by the Lease.' Both parties moved for summary judgment. 

Issues

Rule of Law

Holding and Decision

Legal Analysis

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