Goldberg Kohn Secures Win on Behalf of Landlord, Rejecting Tenant Banana Republic’s COVID-19 Defenses to Rent Payments
On March 24, 2021, Judge Michael F. Otto of the Circuit Court of Cook County, Illinois rejected Banana Republic’s attempt to avoid paying rent on its North Michigan Avenue store based on circumstances created by the COVID-19 pandemic. Judge Otto’s Memorandum Opinion and Order can be accessed below. The landlord, Ponte Gadea Chicago, LLC, was represented by Frederic R. Klein, Steven A. Levy, and Juan C. Arguello of Goldberg Kohn Ltd., Robert Higgins and Michael Brancheau of Higgins & Brancheau LLC, and Manuel A. Fernandez of Alvarez & Diaz-Silveira LLP.
Banana Republic ceased paying rent to Ponte Gadea for its North Michigan Avenue store in April 2020, and later began paying only partial rent, claiming the legal right to do so in light of COVID-19 and the impact on Banana Republic's business. In response to Ponte Gadea’s complaint seeking payment of the past due rent under the long-term lease for the property, Banana Republic asserted numerous defenses and counterclaims, all essentially asserting that the allegedly unforeseeable COVID-19 pandemic, and Governor Pritzker’s executive orders restricting non-essential business, were a basis for Banana Republic to cease paying rent. Included among the defenses and claims asserted by Banana Republic were theories of commercial impracticability, frustration, impossibility, breach of contract, failure of consideration, illegality, mistake, contract reformation, rescission, estoppel, unclean hands, and unjust enrichment. In a detailed 15-page opinion, Judge Otto rejected every one of Banana Republic's COVID-19 defenses and claims, and dismissed them with prejudice.
Judge Otto held that the parties were bound by the terms of their lease, which expressly contemplated the possibility of a government mandated closure of the store, but did not provide for rent abatement in that event. Judge Otto further stated that the court would not use common law theories to re-write the lease to include a rent abatement provision for COVID-19. Judge Otto also rejected Banana Republic's contention that a pandemic was unforeseeable when the lease was signed in 1996, and was therefore a basis for nonperformance under the lease, ruling that “numerous pandemics have occurred in recent history …. [I]t has remained regrettably clear … that medical science has not, as yet, eliminated pandemics.”
The case is Ponte Gadea Chicago, LLC v. Banana Republic LLC, No. 20 L 6235 (Circuit Court of Cook County, Illinois, Law Division).
If you would like to discuss this case or this area of law further, please call Fred Klein at 312.201.3908 or Steve Levy at 312.201.3965.
