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Law360 (September 25, 2020, 9:38 PM EDT) -- A New York City landlord's efforts to terminate the lease of Club Monaco on Broadway during the pandemic "is not only cruel considering the current environment, but illegal," the Ralph Lauren-owned retailer said in a lawsuit filed in New York state court on Thursday.
The breach of contract suit seeks to enjoin the landlord, BSD Broadway Propco LLC, from its efforts to "terminate" the lease, which could leave the retailer on the hook for millions in rent while depriving it of its possessions. It also asks the court for a "rescission" of the lease and a declaration that the lease is unenforceable as a result of the COVID-19 pandemic and the subsequent government-mandated shutdowns.
"Those shutdowns brought New York City to a complete halt," the retailer said Monday. "Since March 2020, virtually all business and commercial activity has been at a standstill. The formerly burgeoning business of selling apparel from physical store locations has been non-existent. None of this was even remotely foreseeable."
BSD told Club Monaco earlier this month that it was in default after failing to pay $166,547.79 in late fees associated with its rent payment for the months of May, June, July and August, the suit alleges. Club Monaco said it paid the rent in full for those months on about Sept. 1, after months of negotiations over a rent abatement and lease modification agreement fell through.
Club Monaco says it is not in default because BSD is prohibited from charging late fees during the pandemic per Gov. Andrew Cuomo's executive order. Additionally, it says, Club Monaco paid in pull after negotiations broke down.
Finally, the retailer "does not owe rent as of March 19, 2020, as the purpose for which it leased the premises has been entirely frustrated as a result of the COVID-19 pandemic," the suit claims.
A number of disputes over New York City leases, and related laws, have cropped up since the start of the pandemic.
In July, two landlords asked a Manhattan federal court to enter an injunction against a set of laws passed to help protect tenants from the economic fallout of the deadly COVID-19 pandemic, saying the measures unconstitutionally interfere with their free speech and leases.
Marcia Melendez, Ling Yang and their associated companies asked U.S. District Judge Ronnie Abrams to enjoin the three laws passed in May. Among other things, the property owners argue the city is infringing on their free speech ability to seek rent payments and wrongly changes the terms of their contracts with their tenants, both in violation of the U.S. Constitution.
In June, Italian fashion brand Valentino sued its Fifth Avenue landlord, telling a New York state court that it has been blocked from moving out of the Manhattan space even though the lease has been rendered void by the COVID-19-spurred shutdown.
The luxury brand's American branch says in its complaint that the pandemic and its resulting government orders and mandatory closures have "massively disrupted" its sales. In fact, the closures have frustrated the very purpose of its Fifth Avenue lease with building owner 693 Fifth Owner LLC, Valentino says.
Also in June, Victoria's Secret sued the landlord of its store in Midtown Manhattan, saying the building's owners attempted to collect more than $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.
Club Monaco is represented by Jesse B. Schneider, Joshua H. Epstein and Allyson B. Hopper of Davis & Gilbert LLP.
Counsel for the landlord was not immediately known.
The case is Club Monaco US LLC v. BSD Broadway Propco LLC, case number unknown, in the Supreme Court of the State of New York, County of New York.
--Editing by Jay Jackson Jr.
For a reprint of this article, please contact reprints@law360.com.
