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

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.