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Law360 (May 5, 2020, 6:39 PM EDT) -- Chuck E. Cheese sued Tuesday to stop a Dallas landlord from using the restaurant's rent forgiveness request and the economic downturn related to the coronavirus pandemic to terminate a lease that's valid through the end of 2021.
CEC Entertainment Inc., doing business as Chuck E. Cheese, petitioned a Dallas County district court to prevent landlord TX Dallas Midtown LP from ending its lease and evicting the entertainment restaurant from a location in the mixed-use Midtown development. CEC said that while it had originally asked for a rent abatement in mid-March, the restaurant has since paid its April rent in full.
According to the petition, Dallas Midtown countered the abatement request with a proposed lease amendment that gave it authority to terminate the lease "for any reason or no reason whatsoever." Even though CEC rejected that offer and paid the rent due, Dallas Midtown is still attempting to evict the business, CEC claimed.
"The proposed amendment is a clear attempt to leverage the financial hardship imposed by the COVID-19 pandemic on CEC into a unilateral and costless lease termination provision — a free option — to allow Midtown to escape its lease obligations," CEC said.
CEC entered into its current lease with Dallas Midtown's predecessor, Macerich Valley View Adjacent LP, in August 2010. The initial lease term ends Dec. 31, 2021, but CEC can extend the lease twice beyond that, according to the petition. One of the lease's provisions requires the landlord to give CEC notice when there is a rent default and allow CEC 10 days to pay the rent before beginning the eviction process.
On March 16, CEC requested rent abatement from Dallas Midtown, saying the pandemic had an "outsized effect on CEC's restaurants due to their reliance on in-person, interactive experiences." A week later, Dallas Midtown countered with the proposed lease amendment, which would allow it to terminate the lease at any time, according to the petition.
After CEC rejected that amendment, Dallas Midtown allegedly sent a letter April 6 with a notice of default and the proposed amendment attached. CEC argues this notice of default wasn't valid under the lease agreement because it wasn't sent to the company's real estate department, according to the petition.
Dallas Midtown sent a follow-up letter April 17 rescinding its proposed amendment and telling CEC it had until April 30 to leave the premises. That letter was received by the real estate department on April 20, but CEC claims it was invalid because it didn't mention the 10-day period called for in the lease to pay the default rent, according to the petition.
Nevertheless, CEC claims it paid the rent in full on April 22 and sent proof of payment to Midtown Dallas, which was answered with a May 1 three-day notice to vacate. After calling Midtown Dallas to work out the confusion, CEC filed its petition in state court.
"Importantly, there has been no default," CEC said. "When CEC actually received a proper notice from Midtown on April 20, it promptly cured the issue. That should have been the end of the situation. Instead, Midtown has threatened to evict CEC notwithstanding April rent has been paid in full including all fees and charges and there is no default."
CEC is seeking a declaratory judgment finding that it has satisfied the default payment, that Dallas Midtown's two notice letters were invalid under the lease, and that Dallas Midtown's attempt to evict CEC is in violation of the lease and a breach of contract claim. The restaurant is seeking an unspecified amount of damages along with attorney fees, according to the petition.
Counsel for CEC didn't immediately respond to requests for comment, and representatives of Dallas Midtown couldn't be reached Tuesday.
CEC is represented by Paul R. Genender of Weil Gotshal & Manges LLP.
Counsel information for Dallas Midtown wasn't immediately available Tuesday.
The case is CEC Entertainment Inc. doing business as Chuck E. Cheese v. TX Dallas Midtown LP, case number DC-20-06408, in the 160th District Court of Dallas County, Texas.
--Editing by Adam LoBelia.
For a reprint of this article, please contact reprints@law360.com.
