An affiliate of the Sterling Organization ("Sterling") represented by Pryor Cashman's Real Estate Litigation Group scored a major victory against LA Fitness, the national fitness center company. In addition to the recovery of all unpaid rent and attorneys' fees, the court also awarded Sterling all costs incurred in connection with the appeal.
In the matterSVAP III Poway Crossings, LLC v. Fitness International, LLC ("LA Fitness"), Sterlingcommenced an action against LA Fitness, the owner of 700 fitness centers worldwide, seeking all unpaid rent due under a commercial lease. As a defense to the litigation, LA Fitness claimed the various Executive Orders issued in the State of California in the immediate aftermath of the COVID-19 pandemic amounted to a breach by Sterling for failing to ensure LA Fitness would be able to open and operate its premises as a fitness center on a daily basis, thereby entitling LA Fitness to a rent abatement.
On summary judgment, Sterling prevailed, with the lower court holding:
The obligation of the tenant under the Lease is to pay rent – not operate a profitable fitness center...Landlord's duty to ensure Fitness' intended use was legally permissible ended 19 years ago. Thereafter, Landlord remains obligated to provide possession of the Premises to Fitness, which both parties acknowledge Landlord has done throughout the duration of the Lease and the Pandemic.
LA Fitness appealed, reiterating its argument that its obligation to pay rent was excused during the period that California's Executive Orders precluded it from opening to the public.
After a vigorous representation by Pryor Cashman, the Fourth District wrote in its decision, "We disagree [with the applicability of the equitable doctrines of impossibility, impracticability and frustration of purpose and Section 1511] and therefore reject each of Fitness's arguments."
"We could not be happier with the precedent set by the State of California establishing that when a contract clearly allocates the risk of business interruption to the tenant, none of the stock COVID-related equitable doctrines excuse a tenant's obligations to pay rent" said Pryor Cashman Partner Rachel Shaw, the co-lead counsel for Sterling who has extensive experience in representing prominent owners. Rachel adds, "Commercial landlords across the country will be quite pleased that courts are continuing to enforce commercial leases, as written."
The Pryor Cashman team representing Sterling includes Todd Soloway, Rachel Shaw, Benjamin Akley, and John Kilgard.
Read the full decision using the link below.
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