Judge: Helen Zukin, Case: 21SMCV00143, Date: 2023-02-15 Tentative Ruling

Case Number: 21SMCV00143    Hearing Date: February 15, 2023    Dept: 207

Background

This is breach of written contract case arising out of the premises located 10921 Wilshire Boulevard, Los Angeles, California, 90024 (the “Premises”), which was leased by Defendant and Cross-Complainant WW Westwood, L.P. (“Cross-Complainant”) as landlord to Plaintiff and Cross-Defendant Fitness International, LLC (“Cross-Defendant”) as tenant. Cross-Defendant alleges it operated a health club and fitness center in the Premises, but it was materially and negatively impacted by the government-mandated closures due to Covid-19, affecting its ability to pay rent. Cross-Defendant alleges it was excused from performing under the lease, i.e., making rent payments, because of government-mandated closures.

On March 10, 2022, the Court granted summary judgment in Cross-Complainant’s favor on the claims raised by Cross-Defendant’s original Complaint. Thus, Cross-Complainant’s claims against Cross-Defendants are the only claims remaining in the case.

Cross-Complainant’s operative pleading is the First Amended Cross-Complaint (“FACC”) filed against Cross-Defendant on March 23, 2021, and asserting causes of action for: (1) breach of lease; (2) breach of the implied covenant of good faith and fair dealing; (3) fraudulent inducement; and (4) declaratory relief under Code Civ. Proc. § 1060. The Court sustained Cross-Defendant’s demurrer to the second and third causes of action in FACC with leave to amend. Cross-Complainant elected not to amend its Cross-Complaint. Cross-Complainant now moves for summary judgment, or, alternatively, summary adjudication of its causes of action for breach of contract and declaratory relief. Cross-Defendant opposes the motion.

Request for Judicial Notice

Cross-Defendant requests the Court take judicial notice of various orders and protocols issued by governmental agencies, as well as rulings and orders entered by other Courts in litigation in which Plaintiff is a party. Courts can take judicial notice of the existence of Court records, including Court dockets. (Arce ex rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471, 483; Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 790 n.10.) The Court may take judicial notice of the records of any Court of record in the United States. (Salazar v. Upland Police Dept.¿(2004) 116 Cal.App.4th 934, 946.) Courts may take judicial notice of official acts and public records but cannot take judicial notice of the truth of the matters stated therein. (In re Joseph H.¿(2015) 237 Cal.App.4th 517, 541.) Cross-Complainant objects to the Court taking judicial notice of these documents on the basis that these records are irrelevant to the instant motion. Cross-Complainant’s objections are OVERRULED and Cross-Defendant’s request for judicial notice is GRANTED.

Objections to Evidence

Cross-Defendant’s objections to the Declaration of Jennifer Blanchart are OVERRULED.

Cross-Defendant’s objections to the Declaration of Amy Martin are OVERRULED.

Cross-Complainant’s objections to the Declaration of Diann Alexander are OVERRULED.

Cross-Complainant’s objections to the Declaration of Bryan McGarry are OVERRULED.

Legal Standard

Motions for summary judgment are governed by Code Civ. Proc. § 437c, which allows a party to “move for summary judgment in an action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (C.C.P. § 437c(a)(1).) The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code Civ. Proc. § 437c(c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

As to each claim as framed by the complaint, the cross-complainant moving for summary judgment must satisfy the initial burden of proof by presenting facts to prove each element of the cause of action entitling the party to judgment on the cause of action. (C.C.P. § 437c(p)(1). On a cross-complainant’s motion for summary judgment, the cross-complainant bears the burden of persuasion that each element of the cause of action in question has been proved, and that there is no defense thereto. (C.C.P. § 437c(o)(1); Aguilar v. Atlantic Richfield Company, et al. (2001) 25 Cal. 4th 826, 850.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if that party contends that the cause of action has no merit or that there is no affirmative defense thereto . . . . A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (C.C.P. § 437c(f)(1).)

When moving for summary judgment or adjudication, “A plaintiff or cross-complainant has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on the cause of action. Once the plaintiff or cross-complainant has met that burden, the burden shifts to the defendant or cross-defendant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The defendant or cross-defendant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (C.C.P. § 437c(p)(1).)

Analysis

Cross-Complainant moves for summary judgment or adjudication as to its causes of action for breach of contract and declaratory relief asserted in the FACC. Each of these causes of action stem from allegations that Cross-Defendant breached its lease agreement with Cross-Complainant for failing to make rent payments during the time Plaintiff’s business was closed by governmental ordinances issued in response to the Covid-19 pandemic.

Cross-Defendant argues its obligation to pay rent was excused during the period its business was closed in response to government ordinances, citing paragraph 10 of the Fourth Amendment to the lease. Paragraph 10 provides:

10. Force Majeure. If either party is delayed or hindered in or prevented from the performance of any act required hereunder because of strikes, lockouts, inability to procure labor or materials, failure of power, restrictive laws, riots, insurrection, war, fire, inclement weather or other casualty or other reason of a similar nature beyond the reasonable control of the party delayed, financial inability excepted (each, a “Force Majeure Event”), subject to any limitations expressly set forth elsewhere in the Lease (as hereby amended), performance of such act shall be excused for the period of delay caused by the Force Majeure Event and the period for the performance of such act shall be extended for an equivalent period (including delays caused by damage and destruction caused by such Force Majeure Event). Delays or failures to perform resulting from inability to obtain governmental permits or approvals in a timely fashion, lack of funds or which can be cured by the payment of money shall not be Force Majeure Events.

(Ex. E to Alexander Decl. at ¶10.) Cross-Defendant argues paragraph 10 expressly defines force majeure event to include “restrictive laws” which delay, hinder, or prevent a party from performing under the lease. Cross-Defendant claims the government ordinances hindered Plaintiff’s ability to perform under the lease, and thus excused Cross-Defendant’s obligation to perform under the contract during that period. Cross-Defendant contends the language in paragraph 10 stating “the performance of such act shall be extended for an equivalent period” means the terms of the lease will be extended for the time period its business was shuttered in response to government orders, during which time it will be obligated to pay rent.

Cross-Complainant does not dispute the validity of paragraph 10 in the Fourth Amendment, nor does Cross-Complainant argue this provision is superseded or otherwise rendered inoperative. Rather, Cross-Complainant disputes Cross-Defendant’s interpretation of paragraph 10. Cross-Complainant argues the “financial inability” of a party to pay is expressly exempted from the definition of a force majeure event. Cross-Complainant further argues Cross-Defendant’s failure to pay rent “can be cured by the payment of money” and thus cannot qualify as a force majeure event under the last sentence of paragraph 10. Cross-Complainant also contends the clause stating “the performance of such act shall be extended for an equivalent period” simply extended the time for Cross-Defendant to pay the back rent owed without extending the lease term, and thus the full amount of rent would be due and owing to Cross-Complainant even if paragraph 10 was triggered by the governmental closures.

In a recent opinion which has been certified for publication, the Court of Appeal endorsed Cross-Complainant’s interpretation of paragraph 10. (SVAP III Poway Crossings, LLC v. Fitness Internat., LLC (Jan. 20, 2023, No. D079903) ___Cal.App.5th___ [2023 Cal. App. LEXIS 38; 2023 WL 333705.) The Court in SVAP III was faced with a force majeure clause stating:

If either party is delayed or hindered in or prevented from the performance of any act required hereunder because of … restrictive Laws … 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 period of the Force Majeure Event[.] … Delays or failures to perform resulting from lack of funds or which can be cured by the payment of money shall not be Force Majeure Events.

(Id. at 2023 Cal. App. LEXIS 38, at *15-16; 2023 WL 333705, at *5.) The force majeure clause in SVAP III was thus in all material aspects identical to paragraph 10 of the Fourth Amendment at issue here. In interpreting the force majeure clause, the Court of Appeal adopted the interpretation advanced by Cross-Complainant here:

Fitness next contends that its performance is excused because the government closure orders resulting from the COVID-19 pandemic constitute a force majeure event under the lease. SVAP argues that because the performance required of Fitness under the lease was the payment of rent, and the closure orders did not prevent Fitness from paying rent, the force majeure provision does not apply. SVAP has the better argument.

(Id. at 2023 Cal. App. LEXIS at *15; 2023 WL at *5.) The Court held the governmental closure orders were “restrictive laws” for purposes of its analysis, but held those orders did not delay, hinder, or prevent the tenant from performing under the contract because the lease in question did not grant the tenant the unlimited right to use the premises as a health club and fitness facility even when prohibited by law. (Id. at 2023 Cal. App. LEXIS at *16-17; 2023 WL at *6.)

The Court here made similar findings in granting Cross-Complainant’s prior motion for summary judgment on Cross-Defendant’s claims, finding the lease agreement did not grant the tenant the unlimited right to use the premises as a health club and fitness facility, but rather contemplated alternative uses under paragraph 1.3.24 of the original lease which allowed Cross-Defendant to use the property for “(i) massage therapy, (ii) sports medicine, (iii) chiropractic care, (iv) retail sales of sports equipment, clothing, nutritional foods and vitamins, (v) juice bar, (vi) tanning salon), and (vii) personal training.” (Ex. 2 to Blanchart Decl.) Cross-Defendant has not shown any provision of the original lease or subsequent amendments thereto imposed a requirement on Cross-Complainant to guarantee Cross-Defendant would be legally permitted to operate a health club and/or fitness facility for the duration of the lease term.

The Court notes paragraph 7.2 of the original lease provides Cross-Complainant had the obligation to ensure the premises was in compliance with all governmental regulations and laws and this obligation then shifted to Cross-Defendant for the duration of the lease term:

Landlord warrants to Tenant that as of the Commencement Date, the Premises and all operating systems therein are or will be in good operating condition and in compliance with all current governmental regulations, ordinances, and laws including zoning and building codes, regulations and ordinances and Title III of the American with Disabilities Act of 1990….Tenant shall, at its sole cost and expense, promptly comply with all federal, state and local laws, statutes, ordinances and governmental and quasi-governmental regulations or requirements now in force … or which may hereafter be in force affecting the Premises.

(Ex. 2 to Blanchart Decl.)

As Cross-Defendant was not guaranteed the right to operate a health club at the premises for the duration of the lease and had alternate permitted uses available to it, the Court adopts the reasoning of SVP III and finds the governmental closure orders did not delay, hinder, or prevent Cross-Defendant from complying with its rent obligations under the lease such as to trigger the application of the force majeure provision contained in paragraph 10 of the Fourth Amendment.

Cross-Defendant argues SVP III is distinguishable because it concerns governmental orders in San Diego rather than Los Angeles. However, Cross-Defendant fails to show any substantive difference between the relevant closure orders which compels a different analysis of the lease provisions discussed above. Cross-Defendant argues it was prohibited from occupying the premises as a health club in Los Angeles, but as set forth above, Cross-Defendant was free to use the premises for other purposes which were not prohibited by governmental stay at home orders. Cross-Defendant also claims the Court may disregard SVP III because there are other actions pending decision in the Court of Appeal on similar facts, and thus there may soon be a split of authority concerning the interpretation of the lease provisions at issue here. The Court is not free to ignore binding precedent simply because it may be overturned or contradicted in the future.

Cross-Defendant also argues it was excused from its rent obligations under theories of temporary frustration of purpose, impracticability, impossibility, and Civil Code § 1511. The Court already considered and rejected these arguments in ruling on Cross-Complainants’ prior motion for summary judgment on Cross-Defendant’s claims. (March 10, 2022, Order at 6-9.) Cross-Defendant’s opposition does not present any new evidence or argument which alters the Court’s previous lengthy analysis of these theories. The Court thus adopts the reasoning set forth in its March 10, 2022, order and finds Cross-Defendant has failed to carry its burden of establishing the existence of a triable issue of material fact regarding its obligation to pay rent to Cross-Complainant during the time the governmental closure orders were in effect.

As Cross-Complainant’s causes of action for breach of contract and declaratory relief both concern Cross-Defendant’s obligation to pay rent during these time periods, the Court finds Cross-Complainant is entitled to summary judgment in its favor on both causes of action.

Conclusion

Cross-Complainant’s motion for summary judgment on its claims against Cross-Defendant is GRANTED.