Retail Trade

[REAL ESTATE] International fashion retailer H&M, Hennes & Mauritz L.P (“H&M”), retained MM&H in connection with a lease dispute involving its store at the Collins Avenue/Ocean Drive Shopping District in Miami Beach, Florida. The dispute arose after H&M withheld rent payments for its Collins Avenue location for 3-months during the height of the COVID-19 pandemic in 2020, when local government restrictions precluded it from operating the store or otherwise meaningfully using the leased space. MM&H, on behalf of H&M, filed suit against H&M’s landlord after it declared H&M in default of its lease agreement and ultimately terminated the lease due to the missed rent payments. By virtue of the landlord’s conduct, H&M faced eviction from the subject premises and liability in excess of $6 million for future rent payments for the duration of the lease’s 10-year term. The landlord further attempted to use its defaults and termination to prohibit H&M from excising a contractual early termination option.

MM&H sought declaratory relief in the Circuit Court of Miami-Dade County that (1) H&M’s rent obligations were excused during the relevant time periods – as local government restrictions prohibited any functional use of the leased premises and frustrated the express purpose of the lease, i.e., fashion retail – and (2) that H&M could exercise its early termination option notwithstanding the landlord’s claimed defaults and termination of the lease. H&M additionally sought monetary damages for landlord’s breach of the lease agreement and failure to abide by the lease’s covenant of good faith and fair dealing. H&M’s claims relied on language in the lease that supported its decision to withhold rent during the pandemic, fundamental contract principles, such as frustration of purpose and illegality, and the inequitable outcome of the landlord’s conduct. In turn, the landlord filed a counterclaim against H&M seeking declaratory relief that it acted appropriately in defaulting H&M and terminating the lease and money damages for holdover rent.

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