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Arent Fox Wins First Case For Retailer in COVID-19 Landlord-Tenant Dispute

Arent Fox has secured an important win for a major retail tenant in one of the many commercial lease disputes being litigated in courts nationwide in the wake of the retail apocalypse brought on by the COVID-19 pandemic.

On December 14, New York State Supreme Court, New York County, denied a motion by landlord International Plaza Associates for summary judgment in a rent case where the tenant, Innisfree – a South Korea-based cosmetics company – is seeking relief from its obligations under a commercial lease on grounds of frustration of purpose and impossibility of performance.

The decision is one of the first to rule in favor of a commercial tenant’s COVID-based frustration/impossibility defenses at the summary judgment stage, and sets a precedent for other tenants to follow when disputing commercial lease agreements on COVID grounds.

Key Details

  • Amid the COVID-19 pandemic, landlord International Plaza Associates sued its tenant Innisfree for unpaid rent at their retail location in a luxury Midtown Manhattan shopping corridor.
  • The Arent Fox team brought several defenses on behalf of Innisfree to justify denying a summary judgment, including that COVID-19 was an unforeseeable cataclysmic event that completely frustrated the purpose of the lease, and that rendered it impossible to perform certain requirements in the contract.
  • The landlord moved for summary judgment early in the case, arguing that the common law defenses of frustration of purpose and impossibility of performance should be disregarded as a matter of law. The New York Supreme Court disagreed.

Background

  • A hearing was held virtually on December 1.
  • Tenant’s arguments underscored the unforeseeable nature of the cataclysmic effect that the pandemic has had on non-essential businesses in Manhattan that require close personal contact with customers in order to continue to operate.
  • The court denied the landlord’s motion for summary judgment, agreeing with the tenant that material factual disputes existed.

AF Team

The Arent Fox team representing Innisfree was led by Fashion & Retail Leader Anthony V. Lupo and Counsel Eric Roman.

About Arent Fox
Founded in 1942, Arent Fox is internationally recognized in core practice areas where business and the law intersect. With more than 450 lawyers and professionals, the firm provides strategic legal counsel and multidisciplinary solutions to a global roster of corporations, governments, and trade associations.

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