Two Florida COVID Cases Decided in Landlords’ Favor

Both cases involved LA Fitness and attempts to invoke force majeure clauses in connection with COVID restrictions in order to be excused from responsibilities under a lease agreement.  In both cases, Florida intermediate appellate courts decided in favor of the landlords.

In Fitness International, LLC v. 93 FLRPT, LLC, LA Fitness sought a refund from its landlord for fifteen weeks during which it had to either close of limit access to its facilities pursuant to government ordered restrictions related to the COVID-19 pandemic.   The trial court granted summary judgment for the landlord and the Court of Appeals for the Second District affirmed.  

LA Fitness argued that its performance was excused under the lease’s force majeure clause, but just for good measure, it also invoked common-law doctrines of impossibility, impracticability, and frustration of purpose.  The landlord, not surprisingly, argued that neither the clause nor the common-law doctrines excused LA Fitness from its obligation to pay rent.  Moreover, paying rent was neither impractical nor impossible.  In fact, LA Fitness did pay rent.  Frustration of purpose is a better fit here, but the lease did not provide that LA Fitness would operate as a fitness center throughout the lease term.  

The trial court held that the force majeure clause applied where a party has been delayed, hindered, or prevented “from the performance of any act required” by the lease.  Both parties were able to perform, notwithstanding the COVID restrictions.  The force majeure clause covered “restrictive laws,” and the trial court treated that as precluding any common-law defense to LA Fitness’s obligation to pay.  

On appeal, LA Fitness’s arguments hinged on its claim that the landlord had warranted that it would have the right to operate a health club on the premises continuously throughout the term of the lease.  The appellate court found no such warranty.  The key language was provided in § 1.9 of the lease:

1.9 PRIMARY USES. The “Primary Uses” of the Building shall be for the operation of a full service health club and fitness facility which may include, without limitation, weight and aerobic training, exercise dancing, yoga, Pilates, Zumba, racquetball, personal training, health and fitness related programs, free weights, spinning/cycling, boxing, basketball, swimming pool, swim lessons, racquetball lessons, sauna and whirlpool facilities. . . . Landlord hereby represents, warrants and covenants to Tenant that Tenant’s operation of business from the Building in accordance with this Lease for a health club and fitness facility . . . does not and will not violate any agreements respecting exclusive use rights or restrictions on use within the Project or any portion thereof. . . . Tenant shall have the right throughout the Term to operate the Building, or any portion thereof, for uses permitted under this Lease.

Although the court found that the meaning of the term was ambiguous, it also found that it could not constitute a warranty.  It guaranteed that use of the premises as a fitness center would not violate “any agreements respecting exclusive rights,” but landlord had made no warranties with respect to government actions. Tenant was not required to operate the premises as a health club, and so there was no warranty from the landlord with respect to such operations. 

Landlord’s obligation was to provide possession of the premises and Tenant’s obligation was to pay rent and use the premises in the manners permitted by the lease. Landlord was not obligated to ensure Tenant’s particular use of the premises, and the government-mandated restrictions did not prevent Tenant from paying rent.

The court further reasoned that the lease’s force majeure clause was not triggered because both parties could fulfill their obligations notwithstanding government restrictions.  The landlord did not warrant that LA Fitness would be able to use the premises as a health club, and so it was not hindered in any obligation it had under the lease.  LA Fitness could pay, and thus its obligations also were not excused.  It had assumed the risk that Tenant’s “primary use” of the premises as a health club could become difficult or impossible to achieve.

LA Fitness’s performance was not rendered impossible or impractical due to the government restrictions. Because the force majeure clause specifically contemplated “restrictive laws” that might hinder or delay performance, the COVID restrictions were not unforeseeable, thus precluding any frustration of purpose argument.  

One week after losing in the Second District, LA Fitness lost again in the Third District in Vereit Real Estate, LP v. Fitness International, LLC.  In this case, LA Fitness had won in the trial court, but the appellate court reversed and remanded with instructions to grant summary judgment in favor of the landlord.  Here again, the language turned on the language of the force majeure clause (with pertinent language in bold):

22.3 FORCE MAJEURE. If either party is delayed or hindered in or prevented from the performance of any act required hereunder because ofstrikes, lockouts, inability to procure labor or materials, failure of power, restrictive laws, riots, insurrection, war, acts of terrorism, fire, severe inclement weather such as snow or ice or other casualty or other reason of a similar or dissimilar nature beyond the reasonable control of the party delayed, financial inability excepted (any “Force Majeure Event”), performance of such act shall be excused for the delay caused by the Force Majeure Event. Delays or failure to perform resulting from lack of funds or which can be cured by the payment of money shall not be Force Majeure Events.

The reasoning is very similar to that of the Second District.  Although the parties anticipated that LA Fitness would operate a health club, that was not a requirement of the lease.  Its obligation was to pay rent, and the restrictive laws did not hinder it from doing so.  In any case, even if LA Fitness could not pay, the force majeure clause’s second sentence excludes inability to pay from coverage.  The possibility of a restrictive law was expressly contemplated in the force majeure clause and thus could not be the basis of a common-law excuse, as excuses are triggered by unforeseen occurrences.  

I find this reasoning annoyingly formalistic but I’m not sure it is wrong.  Tenants will have to review these cases and come up with better language if they want to gain any protection under force majeure clauses.  Under Florida law, force majeure clauses are not to be treated as “opt-out” provisions and are narrowly construed.  Still, I think it takes some mental gymnastics to conclude that LA Fitness’s purpose was not frustrated by the restrictive laws in question.  Yes, operating a health club was the “primary” but not the exclusive purpose of the lease.  But has any LA Fitness franchise ever operated anything else under a lease for one of its health clubs?  Sometimes it makes sense to give limited effect to boilerplate language that bears no relation to actual conduct or expectations.  The courts also could just as easily have concluded that the unprecedented COVID restrictions of March 2020 were not what the parties contemplated when they agreed to the “restrictive laws” language in the force majeure clause.