Law360 (January 3, 2021, 12:02 PM EST) -- Real estate lawyers this year will be keeping close tabs on a variety of disputes between landlords and tenants, and in doing so will look for clues to the broader question of how courts will rule on lease disputes centered around COVID-19.
Experts are looking at disputes between The Gap Inc. and two major mall owners to get a sense of how retail disputes may play out in the courts. There's also the question of what sorts of rent abatement that law firms are entitled to in the wake of forced closures.
Here, Law360 looks at various real estate disputes that lawyers will be watching in 2021:
Gap in July sued landlord Brookfield Properties Retail Inc. in Illinois, seeking to get out of leases or close stores. The retailer that same month also sued Simon Property Group LP in Delaware, seeking to get out of hundreds of leases.
Both cases are significant because of the broad reach of Gap as well as Simon and Brookfield, two of the biggest mall owners in the country. Simon and Brookfield, for their part, have sued Gap over missed rent payments.
"If there's a decision in Delaware … that will ripple throughout the whole marketplace," said Martin Fantozzi, a director at Goulston & Storrs PC, noting the nationwide reach of Simon.
Gap is represented in the Illinois suit by Charles Valente and Isaiah Fishman of Kaplan Saunders Valente & Beninati LLP. Brookfield is represented by Daniel Weiss of Jenner & Block LLP. The case is The Gap Inc. et al. v. Brookfield Properties Retail Inc. et al., case number 2020-CH-04984, in the Circuit Court of Cook County, Illinois.
Gap is represented in the Delaware suit by Patricia Winston and Kuhu Parasrampuria of Morris James LLP and Michael Geibelson and Daniel Allender of Robins Kaplan LLP. Simon Properties is represented by Matthew Fischer, Timothy Dudderar, J. Matthew Belger, Jacqueline Rogers and Jesse Noa of Potter Anderson & Corroon LLP and Richard Fenton and Kristen Rodriguez of Dentons US LLP. The case is The Gap Inc. et al. v. Simon Property Group LP et at., case number 2020-0611, in the Court of Chancery of the State of Delaware.
Law Firm Suits
Multiple law firms are in the midst of suits with their landlords, and lawyers say those cases are shining light more narrowly on specific provisions of contracts as opposed to the broader retail-sector disputes at question in the Gap suits.
Among the cases lawyers will be watching in 2021 are a suit Schulte Roth & Zabel LLP has filed against its landlord and suit brought against Jenner & Block by its landlord.
Schulte Roth claimed its lease agreement entitles it to rent abatement given that the pandemic forced closure of their offices, while Jenner Block and landlord Heitman LLC have both alleged that one side owes the other money in a rent abatement dispute.
Experts say these closely watched suits point to more granular lease disputes, and law firms may have the upper hand since they are generally a key and stable source of revenue for building owners.
Emilie Cooper, a partner at Haynes and Boone LLP, said law firm tenants often have an advantage when it comes to negotiating leases, and are careful to include language on the question of access that is often favorable to a law firm.
"Needless to say, law firms pay very close attention to their own leases. There's a lot of oversight," said Larry Mittman, a partner at Haynes and Boone. "Having a law firm tenant that occupies a substantial amount of space, in spite of some of the law firms that have crashed and burned, for the most part, they are good tenants. Therefore, having a law firm in a building is a really good anchor."
Schulte Roth is represented by Peter Wang, Douglas Heffer and Christopher DeGennaro of Foley & Lardner LLP. Landlord Metropolitan 919 Third Avenue LLC is represented by Janice Mac Avoy of Fried Frank Harris Shriver & Jacobson LLP. The case is Schulte Roth & Zabel LLP v. Metropolitan 919 3rd Avenue LLC, case number 655632-2020, in the Supreme Court of the State of New York, County of New York.
In the Jenner & Block case, Chicago landlord Hart 353 North Clark LLC is represented by John Riccione, William Serritella Jr. and Brianna Skelly of Taft Stettinius & Hollister LLP. Jenner & Block is represented in-house by David Bradford, Andrew Vail and Abraham Salander. That case is Hart 353 North Clark LLC v. Jenner & Block LLP, case number 2020L005476, in the Circuit Court of Cook County.
Challenge to the CDC's Eviction Moratorium
While many lawsuits deal with the impact of closures at the local and state levels, the Centers for Disease Control and Prevention's moratorium on residential evictions, which was scheduled to run through the end of December, is also the subject of litigation.
Lawyers say a recent suit in Texas will be telling in terms of how courts across the country view the CDC moratorium.
A group of landlords led by Lauren Terkel filed that suit in late October, claiming the CDC moratorium went beyond the federal government's powers and
"Terkel is arguing that the CDC is unconstitutionally playing out an eviction moratorium on a national level," said Jason Vanslette, a partner at Kelley Kronenberg. "The constitutional argument is that this is not within their powers. … It's a federal issue that will affect states."
Lawyers say the Texas challenge to the federal moratorium is particularly significant given that various states, including New York and California, have similar moratoriums in place and lawmakers are trying to figure out how to address the issue on a state level.
To be protected by the CDC ban, tenants need to either have received a Coronavirus Aid, Relief, and Economic Security Act stimulus check or make under $99,000, or less than $198,000 jointly.
The landlords are represented by Robert Henneke, Chance Weldon and Ryan Walters of the Texas Policy Foundation and Kimberly Hermann and Celia Howard O'Leary of the Southeastern Legal Foundation. The CDC is represented by Steven Myers of the United States Department of Justice. The case is Terkel et al. v. Centers for Disease Control and Prevention et al., case number 6:20-cv-00564, in the U.S. District Court for the Eastern District of Texas.
--Additional reporting by Lauraann Wood, Justin Wise, Emma Cueto, Dave Simpson, Jack Queen and Emma Whitford. Editing by Bruce Goldman.
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