In a landmark case highlighting the ongoing financial disputes stemming from the COVID-19 pandemic, a commercial tenant has sought to reclaim rent paid during government-mandated closures. Fitness International, LLC filed a complaint in the Superior Court of Los Angeles County on December 2020 against Wedge Office, LLC. The case revolves around whether Fitness International should be reimbursed for rent paid while its fitness center was closed due to state and local COVID-19 restrictions.
Fitness International leased space from Wedge Office in an office complex in Los Angeles to operate an LA Fitness center. Following state and local orders issued in March 2020 that mandated the closure of gyms and fitness centers, Fitness International ceased operations but continued paying rent under protest to avoid eviction. They later filed a lawsuit seeking reimbursement for these payments, arguing that their lease included provisions excusing them from rent obligations under such circumstances.
The crux of Fitness International's argument lies in a rent abatement provision within their lease agreement. According to this provision, they were not obligated to pay rent if the premises became "untenantable" due to lack of reasonable access within the office complex. However, both the trial court and appellate court found that this provision did not apply because the government restrictions were external factors unrelated to physical access issues within the complex itself.
Additionally, Fitness International invoked doctrines of frustration of purpose and impracticability, claiming these legal principles excused their obligation to pay rent since they could not use the premises for its intended purpose as a fitness center. However, both courts rejected these arguments. The courts concluded that temporary government restrictions did not destroy the entire value of a long-term lease and noted that California law does not recognize "temporary" frustration of purpose as grounds for terminating contractual obligations.
Fitness International sought judicial declarations affirming they had no obligation to make rent payments during the closure period and claimed breach of contract by Wedge Office for demanding rent under those conditions. They also pursued recovery of all rent payments made under protest through causes of action for declaratory relief, breach of contract, and money had and received.
Ultimately, Wedge Office's motion for summary judgment was granted by Judge Robert B. Broadbelt III. The court ruled that Fitness International's interpretation of "reasonable access" was too broad and did not align with the lease terms or applicable legal doctrines. The appellate court affirmed this decision on June 18, 2024.
Representing Fitness International were attorneys A. Grant Phelan from Klehr Harrison Harvey Branzburg and Dawn B. Eyerly from Saul Ewing LLP. Wedge Office was represented by Fred L. Wilks and Matthew A. Hodel from Hodel Wilks LLP.