By Craig Clough

Law360 (February 19, 2021, 8:20 PM EST) -- Italian fashion brand Valentino and its American branch were sued Friday in New York state court for over $207 million by the landlord of its former store on Fifth Avenue in Manhattan, claiming the company illegally broke its lease while trying to "capitalize upon and pervert" the COVID-19 pandemic.

According to the landlord, 693 Fifth Owner LLC, Valentino's abandonment of the property does not relieve it of its duty to pay rent through the expiration of its lease, especially after the dismissal of Valentino's own lawsuit arguing the lease has been rendered void by the pandemic.

Between rent owed since September, future rent still owed through 2029 and damage done to the property totaling over $15 million, 693 Fifth Owner said Valentino is on the hook for up to $207 million, according to the suit. The landlord said Valentino tried to argue in court that the pandemic caused the problems at its flagship American store when in reality competition from online retailers has been eating away at the store's profits for years.

"In fact, it is in response to these declining business prospects that defendants have opportunistically attempted to capitalize upon and pervert the international COVID-19 pandemic in order to evade their lawful obligations under the Lease and Guaranty, respectively," the landlord said.

In June, Valentino USA Inc. sued 693 Fifth Owner, claiming that the pandemic and its resulting government orders and mandatory closures "massively disrupted" its sales and invalidated the very purpose of its Fifth Avenue lease.

Per the lease, Valentino is required to "continuously operate" at its space, Valentino said. But in the midst of the pandemic, Valentino is unable to offer in-store sales or associated services like fittings, which are vital to its business and central to the lease's purpose, according to the suit.

Valentino said it notified 693 Fifth Owner that it would be packing up and leaving by the end of the year. But the building's owner refused to accept such a move, arguing that the pandemic notwithstanding, Valentino's obligations haven't been excused, per the Valentino suit.

Valentino occupies the entire retail space in the building, which was recently redeveloped by architect David Chipperfield, according to the building's website. The rest of the 20-story, 100,000-square-foot building is used for office space.

Justice Andrew Borrok of the New York Supreme Court for New York County dismissed the suit last month and said in the order that no "wrongful act of the landlord is alleged to have caused the necessity" of the decision by Valentino to move out of the building.

Armed with the dismissal, 693 Fifth said in its suit it is seeking for the court to ensure that the terms of the lease will be executed, which includes Valentino paying back rent of $6,638,390, making a commitment to make future rent payments of over $184 million and fixing $15 million in damages to the property.

If Valentino can deliver the property in the "condition required" by the lease — which includes reimbursing the 693 Fifth Owner for the $15 million in damages — its obligation in future rent owed could be reduced to a total of three years, which would still total over $58 million, the landlord said.

The lawsuit is the latest legal spat between a commercial landlord and tenant over rent in the era of COVID-19.

In July, WeWork's landlord at a Los Angeles office building said the coworking company owed at least $54 million in damages after it backed out of a 10-year lease agreement.

Jenner & Block LLP said its Chicago landlord actually owes the firm $840,000 thanks to a rent abatement provision triggered by the pandemic.

Victoria's Secret also sued the landlord of its midtown Manhattan store, claiming the building's owners attempted to collect more than $1 million per month in rent after the shutdown despite the terms of the lease being unenforceable.

In May, the NBA was accused of failing to pay rent for its store on Fifth Avenue for two months and purportedly owes its landlord more than $1.2 million. Similarly, The Gap Inc. and Ross Stores Inc. have also been sued over unpaid rent, according to complaints in New York and Florida federal courts, respectively.

Valentino and counsel for 693 Fifth Owner did not immediately respond to requests for comment.

693 Fifth Owner is represented by Robert J. Cyruli of Cyruli Shanks & Zizmor LLP.

Counsel information for Valentino was not immediately available.

The case is 693 Fifth Owner LLC v. Valentino USA Inc., case number unavailable, in the Supreme Court of the State of New York, County of New York.

--Additional reporting by Lauren Berg and Hailey Konnath. Editing by Ellen Johnson.

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