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Litigation in the Pandemic


COVID-19 related litigation continues in South Florida federal courts between commercial landlords and tenants, and a recent order from the Southern District Court of Florida gives us a glimpse of the analysis judges are undertaking as commercial tenants assert force majeure defenses in response to breach of contract claims from their corresponding landlords for failure to pay rent.  In Palm Springs Mile v, Kirkland’s Stores Inc, Kirkland’s Stores was recently sued by its landlord for failure to pay rent in excess of $466,000, commencing in April and for the following months.   Kirkland’s Stores filed a motion to dismiss and argued that the force majeure clause in the Lease excused its required payments under the Lease.  A force majeure clause is a “contractual clause that excuses performance of contractual obligations, either wholly or for the duration of the force majeure, upon the occurrence of a covered event which beyond the control of either party to the contract.”  In the past Courts have found that force majeure clauses are: limited in scope, should be narrowly construed, and will generally only excuse a party’s nonperformance if the event that caused the party’s nonperformance is specifically identified. 

Although Kirkland Stores argued that the Miami Dade County regulations governing the shut-down of non-essential activities and business operations suspended its obligation to pay rent, the Court made an important finding that Kirkland Stores failed to link or explain how the governmental regulations shutting down non-essential businesses resulted in its inability to pay its rent.  Precedent in Florida is scarce with respect to analyzing force majeure clauses with respect to acts of the government; however, in the case of ARHC NV WELF01, LLC v. Chatsworth at Wellington Green LLC, the Middle District of Florida found that when asserting a force majeure provision as an affirmative defense to a breach of contract claim for failure to pay rent, a commercial tenant cannot only allege that it has been deprived of revenue which led to the failure to pay rent.  A commercial tenant must go beyond that allegation and be able to show a clear nexus that the failure to pay rent “resulted from” government regulations as contemplated by force majeure clauses in leases.  Ultimately force majeure clauses are not intended to buffer any party against the normal risks of a contract. 

We suspect that there will continue to be litigation related to the contractual obligations between commercial landlords and tenants which may lead to different views on the applicability of force majeure clauses related to government regulations.