Mackenzie Dimitri of Einbinder & Dunn recently represented a national retail-based commercial tenant in a case in the Supreme Court of New York, successfully opposing a motion for summary judgment based on the clear language of the force majeure provision in the lease in that case. Ms. Dimitri, for the tenant, successfully argued that the landlord failed to meet its burden of showing the force majeure period ended when certain restrictions were lifted, as restrictions were based on local infection rates and there were issues of fact as to what infection rates were at various points over the prior year.
Similarly, a new federal district court case out of the Southern District of New York may give commercial tenants some hope that they can obtain relief from their force majeure clauses. In JN Contemporary Art LLC v. Phillips Auctioneers, LLC, No. 1:20-cv-04370-DLC (S.D.N.Y. 2020), the Court ruled that government-mandated restrictions on business operations justified application of the force majeure clause in the operative lease in that case. The Court then went on to characterize the Covid-19 pandemic as a “natural disaster.”
With the current surge of COVID-19 variants, business owners may be looking back to the hardships they went through at the beginning of the pandemic with rising panic. Now may be a critical time for commercial tenants to review the force majeure clauses in their leases and to seek to negotiate them, if possible. In the event of additional government-mandated closures in the coming months, businesses must fully understand their contracts.
We provided a more fulsome discussion of force majeure clauses in our blog post, here.