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Law360 (May 26, 2020, 7:58 PM EDT) -- A restaurant slated for a historic downtown Pittsburgh building is using delays caused by the COVID-19 pandemic to break its lease, according to a complaint the landlord filed Tuesday in Pennsylvania state court.
After the renovations at the former Frank & Seder department store were delayed six weeks by a statewide shutdown of nearly all construction activities, Davio's restaurant, which was expected to take space in the building, demanded to renegotiate its lease and refused the landlord's extension of the space's delivery date, according to the complaint that landlord 441 Smithfield Street LLC filed in the Allegheny County Court of Common Pleas.
"On May 21, 2020, plaintiff had a phone conversation with Steve DiFillippo, the principal of the defendant, who again asserted that the defendant had no intention of honoring its lease obligations and that he would not discuss proceeding with the lease in accordance with its terms," the complaint said. "Despite numerous demands by plaintiff to defendant to comply with the terms and conditions of the lease agreement between the parties, defendant has repeatedly failed and refused to communicate or affirm its intention not to breach the terms of the lease."
The landlord sought a declaratory judgment from the court that its lease terms and the statewide closures allowed it to extend its construction completion date by 42 days, that the landlord and tenant could keep working on construction concurrently, and that the tenant had breached its contract by repudiating the lease terms.
441 Smithfield Street LLC had signed a lease with Davio's, operating under 441 Smithfield Pittsburgh LLC, starting in April 2018, the suit said.
The landlord was renovating the former department store and office building at the intersection of Fifth and Smithfield streets in downtown Pittsburgh, converting it into apartments and ground-floor restaurants and retail space. Davio's, which Steve DiFillippo bought in Boston and expanded to 11 other locations, including Philadelphia and New York, was slated to take one of the ground-floor restaurant spaces.
The parties signed a lease extension in October 2018, the suit said.
In response to the pandemic, Pennsylvania Gov. Tom Wolf signed an emergency order March 19 forcing the temporary suspension of almost all construction activity, including the 441 Smithfield project, until May 1. The lawsuit said the landlord notified Davio's of the shutdown the next day.
The suit said the lease contained a provision that allowed the landlord to extend its deadlines due to material shortages, labor disputes or governmental restrictions, for as long as the delays had postponed construction activities. After getting no response to its March 20 letter, the landlord said it sent another letter to Davio's on March 30 warning that its completion date would be delayed and the tenant's lack of response was taken as an acceptance of the extension.
But on May 7, a broker and representative of the restaurant called and said the tenant would not accept the revised delivery dates and wanted to unilaterally renegotiate the terms of the lease, the suit said. When construction was allowed to resume in early May, the landlord gave a revised delivery date in February 2021, which would allow the restaurant to open in April 2021, the complaint said, but the landlord also sent Davio's a notice of default for its stated intent not to honor the lease. The phone call with DiFillippo, reiterating that the lease needed to be renegotiated rather than extended, followed.
"To date defendant has not taken any action to disavow the actions of its authorized representative or of its principal of its express intention to breach the terms of the lease," the complaint said.
Another part of the lease dealt with when the landlord would turn over the space for the restaurant to do its own construction work, and the landlord also sought a court declaration that the lease allowed both landlord and tenant to be working on the space at the same time.
"Because of the pandemic's effect on timing of construction work and the supply chain of construction materials, plaintiff seeks declaratory judgment from this court that the terms of the lease do not require exclusive possession of the leased premises at the time of the landlord's delivery of the premises to the tenant under the terms of the lease … but rather only delivery when the tenant can commence tenant's work, not to the exclusion of the landlord also completing its work," the complaint said.
The landlord said it had been damaged by Davio's repudiation of its contract, and it sought damages for the lost rent, construction costs and punitive damages for the alleged breach of contract.
Counsel for the landlord and representatives of Davio's did not immediately respond to requests for comment Tuesday.
Landlord 441 Smithfield Street LLC is represented by Richard J. Parks of Pietragallo Gordon Alfano Bosick & Raspanti LLP.
Counsel information for Davio's was not immediately available Tuesday.
The case is 441 Smithfield Street LLC v. 441 Smithfield Pittsburgh LLC, case number GD-20-006100, in the Court of Common Pleas for Allegheny County, Pennsylvania.
--Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.
