Thread by @jentaub

⚖️ Court is in session. Or will be at 12:30 pm today.

Judge Mastroianni of the federal district of Massachusetts is holding hearings in two cases at @WNEULaw.

I won't be allowed to tweet (or have any electronic devices in the courtroom), thought I'd pre-tweet it

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The first case is Eastfield Associates, LLC v. Cinemark USA Inc.

When: Eastfield filed the lawsuit on August 20, 2020

Where: Federal district court of Massachusetts

Who: Plaintiff is Eastfield (landlord) and Defendant is Cinemark (commercial tenant)

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What: Breach of contract and property damage. Eastfield and Cinemark are parties to a lease under which Cinemark first occupied the Eastfield Mall movie theater space in 2013.

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Under the lease, Cinemark was required to pay rent and additional payments (such as a share of common areas) through July 31, 2022. On March 23, 2020, MA governor ordered businesses to shut down due to Covid-19 pandemic. Partial reopening was permitted in early July 2020

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Cinemark stopped payments beginning April 2020 and later vacated premises. In June 2020, Cinemark announced restructuring plan that included closure of many domestic theaters, including this one, but reopened the theaters in Hadley and West Springfield, MA in October 2020.

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Why does fed court have subject matter jurisdiction? 28 USC 1332 (diversity of citizenship). Amount in controversy exceeds $75,000 and parties domicled in different states. Eastfield says it is owed more than $330,000.

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How: Parties made motions for partial summary judgment. Under FRCP 56, "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."

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What is a Partial Summary Judgment: If Eastfield "wins" its partial summary judgment motion, then the case would go forward to trial on damages (meaning how much money the tenant owes) and other matters. For example, they also claim property damage to the theater space.

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Conversely, If the court grants Cinemark's motion, then all that would be left for trial would be claims about damage to the premises.

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The issues issues according to Eastfield are whether as a matter of law (1) Cinemark is liable for breach of the lease because it failed to pay rent and related sums due; and (2) Cinemark's affirmative defenses (which it claims justify the breaches) are legally viable?

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The issue according to Cinemark is whether it is not liable for non-payment because it has the affirmative defense under the "frustration of purpose" doctrine.

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Rules: In addition to the standards under FRCP 56, we are considering the application of the "frustration of purpose" common law doctrine in MA in the context of a pandemic order-related business shutdown.

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Caselaw: An interesting MA decision is the recent UMNV v. Caffe Nero in which a commercial tenant was excused from paying rent under the frustration of purpose doctrine.

See decision here.

demourasmith.com/documents/Caff…

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Tenant's argument: Cinemark argues that it does not have to pay rent or other sums because pandemic was "an event neither anticipated nor caused by either party," that the lease with Eastfield did not allocate the risk of the pandemic and. . .

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"that as a result, the object or purpose of the movie theater lease was destroyed and the value of performance destroyed."

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In addition, Cinemark argues that the force majeure clause of the lease which still requires rental payments even when there are "government restrictions," etc. does not decide the case.

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In contrast, Eastfield argues that the frustration of purpose defense should not be available to Cinemark as they believe that the event was anticipated and the risk of loss was negotiated through the force majeure clause of the agreement.

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This provision permits performance delays due to "acts of God, governmental restrictions, regulations or controls." However, it also explicitly excludes tenant's non-payment. This shows, according to Eastfield that risk-of-loss was allocated, says Eastfield.

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Further, Eastfield argues that the value of performance was not destroyed because Cinemark could reopen the theater at partial capacity.

However . . .

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In Caffe Nero, the court said "force majeure provision does not address possible frustration of purpose."

Yet . . . .

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In Nero, court found that tenant's obligation to pay was discharged from March 24 to June 22, the time during which the lease was completely frustrated as Governor Baker's order barred restaurants from serving customers indoors.

The rest was sent to trial. . . .

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The court is also hearing an interesting motion to dismiss under FRCP 12b-6 for lack of personal jurisdiction.

It involves a lawsuit brought by Kevin Rankin's insurance company after Rankin's home was damaged when the bathroom exhaust fan caught fire.

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The insurance company sued a fan manufacturer and A.O. Smith Corporation, the maker of a motor that was in the fan. The cause of action negligence and breach of warranty in the design and manufacture of the fan and the motor.

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Defendant A.O. Smith made a motion to dismiss under Rule 12b-6 for lack of personal jurisdiction. Defendant argues that it is not "at home" in Massachusetts and cannot be sued here due to the absence of contacts with MA that are "sufficiently continuous and systematic."

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Plaintiff, Commerce Insurance Company, argues that because defendant is registered as a foreign corporation in MA and has other contacts here, the motion to dismiss for lack of personal jurisdiction should be denied.

Okay, catch you on the other side!

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