1600 Walnut Corporation, General Partner of L-A 1600 Walnut LP v. Cole Haan Company Store n/k/a Cole Haan Company Store, LLC
530 F.Supp.3d 555
E.D. Pa.2021Background
- 1600 Walnut (landlord) and Cole Haan (tenant) entered a long-term commercial lease (extended to March 31, 2025) that contains a force majeure clause and an automatic termination-on-eminent-domain clause; the force majeure clause expressly states Tenant remains obligated to pay rent during force majeure events and excludes inability to obtain funds as an excuse.
- Pennsylvania COVID-19 executive orders (March 2020) closed or restricted retail; Philadelphia allowed limited reopening after June 5, 2020; Cole Haan vacated the store in March 2020 and stopped paying rent and did not reopen.
- 1600 Walnut sued Cole Haan for unpaid rent, additional rent, late fees, interest, attorneys’ fees and costs.
- Cole Haan filed amended counterclaims seeking declaratory relief: discharge or abatement of rent based on frustration of purpose, impossibility/impracticability, failure of consideration, and contractual termination alleging a regulatory taking.
- 1600 Walnut moved to dismiss all counterclaims under Fed. R. Civ. P. 12(b)(6); the court applied Pennsylvania law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the lease's force majeure clause bars common-law defenses (frustration, impossibility, failure of consideration) | The lease allocates the risk: force majeure does not relieve Tenant of rent and excludes lack of funds, so common-law defenses are precluded | The pandemic is not covered by the clause (it is a natural, long-duration event) and the pandemic itself (not just government orders) caused nonperformance | Clause is unambiguous and covers the pandemic (catchall "another reason" and "restrictive governmental laws"); common-law defenses inapplicable; counterclaims dismissed |
| Whether COVID-19 executive orders constitute a taking (contractual termination/inverse condemnation) | Governor’s orders are a valid exercise of police power and not a taking; no contractual termination | Restrictions effectively took the use of the premises and justify termination/inverse condemnation relief | Dismissed: Pennsylvania Supreme Court precedent treats the executive orders as police-power regulations, not a taking |
| Whether Tenant is excused from paying rent during COVID-related closures | Tenant: impossibility/impracticability or frustration entitles rent abatement or discharge | Landlord: lease explicitly requires rent payments during force majeure and bars inability-to-pay defense | Dismissed: rent obligation remains under the lease; Tenant not excused |
Key Cases Cited
- Albert M. Greenfield & Co. v. Kolea, 380 A.2d 758 (Pa. 1977) (parties may allocate contractual risks; courts apply common-law doctrines only if contract is silent)
- Ram Const. Co. v. Am. States Ins. Co., 749 F.2d 1049 (3d Cir. 1984) (unambiguous contract language is construed as a matter of law)
- Hong Kong Islands Line Am. S.A. v. Distribution Servs. Ltd., 795 F. Supp. 983 (C.D. Cal. 1991) (force majeure requires proximate causation of nonperformance)
- Wheeling Valley Coal Corp. v. Mead, 186 F.2d 219 (4th Cir. 1950) (proximate-cause principle for force majeure)
- Friends of Danny DeVito v. Wolf, 227 A.3d 872 (Pa. 2020) (Pennsylvania Supreme Court: Governor’s COVID-19 orders are valid police-power actions, not a taking)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard under Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim for relief)
- Ballentine v. United States, 486 F.3d 806 (3d Cir. 2007) (standard for accepting well-pleaded allegations on a motion to dismiss)