Schulte Roth Sues NY Landlord In Latest BigLaw Rent Dispute

By Justin Wise
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Law360 (October 28, 2020, 10:36 PM EDT) -- Schulte Roth & Zabel LLP has become the latest BigLaw firm to take on its landlord over rent, claiming its been forced to continue paying monthly fees despite a leasing agreement provision allowing rent abatement when the use of its Manhattan office is affected by a public health emergency.

In a lawsuit filed on Friday in New York state court, the firm alleges that its longtime landlord, Metropolitan 919 3rd Avenue LLC, breached the firm's lease and that it's entitled to monetary damages of at least $10 million.

The complaint comes as multiple BigLaw practices, including Jenner & Block LLP and Simpson Thacher & Bartlett LLP, battle with landlords over rent during the coronavirus pandemic. Simpson Thacher in July sued its New York landlord for $8 million, alleging it ignored a rent abatement provision triggered by the health crisis.

Schulte Roth's complaint zeros in on a rent abatement provision that it says was designed for circumstances like the one the coronavirus caused. As the virus rapidly spread throughout the U.S. in the spring, several states, including New York, issued orders calling for non-essential businesses to reduce their in-person workforce.

Schulte Roth vacated its Manhattan offices on March 13 in accordance with government mandates and has been unable to use the space for "ordinary conduct of its business" since then, the lawsuit says. In recent months, small, rotating crews have come into the office, though only to complete simple functions, the firm says.

Schulte said that under its agreement, it is entitled to rent abatement when it cannot use the office for typical business conduct for more than 15 consecutive days because of "unavoidable delays," which include government orders linked to emergencies.

But the landlord has refused to agree and in early April rejected an "abatement notice" from the firm, according to the complaint. Metropolitan 919 3rd Avenue allegedly said rent abatement was only allowed in the event of a breach by the landlord, an interpretation the firm says is erroneous.

Schulte Roth says it has continued paying unchanged rent fees "in protest" since the dispute began. It is asking for a declaratory judgment stating the firm is entitled to abatement for all past and future rent payments during the health crisis.

"While we generally do not comment on litigation, we can confirm that we have filed a claim for a rent abatement against our New York landlord pursuant to a clear and explicit rent abatement provision in our lease agreement and have continued to pay rent while preserving our rights," Schulte Roth & Zabel LLP said in a statement to Law360.

SL Green Realty Corp. is the owner of the 919 3rd Avenue property in New York, according to its website.

Janice Mac Avoy of Fried Frank Harris Shriver & Jacobson LLP, who represents the landlord, told Law360 that the lawsuit is "legally without merit" and said the landlord has worked "tirelessly" to keep the offices safely accessible throughout the pandemic.

"The attempt by Schulte Roth & Zabel and other well-heeled, white-shoe firms to take advantage of the pandemic and not live up to their financial commitments at a time when the vast majority of New Yorkers continue to meet their obligations poses a very serious threat to New York City and its economy," she said.

Schulte Roth is represented by Peter N. Wang, Douglas S. Heffer and Christopher A. DeGennaro of Foley & Lardner LLP.

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 vs. Metropolitan 919 3rd Avenue LLC, case number 655632-2020, in the Supreme Court of the State of New York, County of New York.

--Editing by Emily Kokoll.

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