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Law360 (June 10, 2020, 10:06 PM EDT) -- Victoria's Secret is suing the landlord of its store in Midtown Manhattan, saying the building's owners attempted to collect over $1 million per month in rent after the COVID-19 shutdown despite the terms of the lease being unenforceable due to the government-mandated closing of the store.
According to the lawsuit brought by the lingerie giant and its parent company L Brands Inc. on Monday, the landlord at its Herald Square location in Midtown Manhattan should excuse the lease because it is no longer enforceable under the frustration of purpose doctrine.
The landlord, Herald Square Landlord LLC, is a subsidiary of New York's largest office landlord, SL Green Realty Corp., Victoria's Secret said.
"In sum, the total standstill of business, commerce and everyday life in New York City has completely and unforeseeably frustrated the purpose of the lease and has rendered performance impossible," Victoria's Secret said.
Victoria's secret said that it first signed a lease for the location in 2001 and that Herald Square gets roughly 2 million visitors per year. The most recent version of the lease called for Victoria's Secret to pay a total of around $1.08 million monthly rent for retail and office space at the location, according to the lawsuit.
As the result of an order by New York Gov. Andrew Cuomo to fight the coronavirus, the Herald Square Victoria's Secret closed on March 17 and had already paid rent through April 1 but has refused to pay any rent since that date, according to the lawsuit.
Victoria's Secret argued that the lease requires it to operate a retail business and clearly outlines that if it were unable to do so it would "frustrate" the lease's purpose. If Victoria's Secret remained closed for at least six consecutive days, then Victoria's Secret "shall be entitled to an abatement of minimum rent and additional rent," Victoria's Secret said.
"To put this in perspective, today marks the 83rd consecutive day of closure at the premises," Victoria's Secret said, adding, "it is clear from the lease that both parties understood that the operation of a retail business at the retail premises — amid the hustle-bustle of Midtown Manhattan — was the primary purpose of the lease, and the inability to operate as a retail business in that setting would entitle (Victoria's Secret) to an abatement of rent and a rescission of the lease."
Victoria's Secret and L Brands said they received communications from SL Green Realty Corp. including a notice of default for its April and May rent and a notice of termination purporting to cancel the lease as of Tuesday while demanding Victoria's Secret vacate the premises.
Victoria's Secret argued that it should have been refunded a pro-rated amount for its March rent following Cuomo's shutdown order on March 17.
Causes of action brought by Victoria's Secret include unjust enrichment, breach of contract and rescission based on impossibility of performance or frustration of purpose.
Victoria's Secret is seeking among other things for the lease to be rescinded and reimbursement for the rents, pre-paid real estate taxes and other expenses paid for the period of time that Victoria's Secret was "deprived of its use of the premises as originally contemplated in the lease."
The lawsuit comes as other retailers and landlords are locking horns over leases amid COVID-19.
The NBA's landlord at its store on Fifth Avenue in New York filed suit
against the league in May, claiming it owes more than $1.2 million in rent for the past two month. A Virginia bankruptcy judge in May also allowed bankrupt clothing retailer J.Crew to delay payments on its rent obligations for 60 days, overruling objections from some of the debtor's landlords, as the clothing line struggles amid COVID-19.The parties did not immediately respond to requests for comment.
Victoria's Secret and L Brands are represented by William H. Mack, Larry Hutcher and Benjamin S. Noren of Davidoff Hutcher & Citron LLP.
Counsel for the defendants could not immediately be identified.
The case is Victoria's Secret Stores LLC et al. v Herald Square Owner LLC et al., case number 651833/2020, in the Supreme Court of the State of New York, County of New York.
--Editing by Gemma Horowitz.
For a reprint of this article, please contact reprints@law360.com.
