The attempt by Schulte Roth “and other well-heeled, white-shoe firms to take advantage of the pandemic and not live up to their financial commitments” poses a very serious threat to New York City and its economy, said the landlord’s attorney at Fried Frank.
Schulte Roth & Zabel has filed suit against its New York landlord, seeking at least $10 million, becoming the latest Am Law 200 firm to dispute its office rent obligations during the pandemic.
Schulte is seeking rent abatement from its landlord at 919 Third Ave., an SL Green property in Midtown. The case is similar to Simpson Thacher & Bartlett and Jenner & Block’s litigation this year against their landlords. The law firm disputes have continued to percolate in the legal industry, as the pandemic and shutdown orders have forced firms to operate remotely.
But the landlord’s attorney at Fried, Frank, Harris, Shriver & Jacobson strongly disputes Schulte’s argument—along with the broader argument made by other firms.
“While this lawsuit is legally without merit, the attempt by Schulte Roth & Zabel and other well-heeled, white-shoe firms to take advantage of the pandemic and not live up to their financial commitments at a time when the vast majority of New Yorkers continue to meet their obligations poses a very serious threat to New York City and its economy,” said Janice Mac Avoy, a Fried Frank partner.
“Law firms are continuing to work at full capacity” in New York, she said. “The reason they can do that is because their landlords are keeping their business open,” she said, referring to offices still maintaining mail service and IT equipment.
Schulte, represented by Foley & Lardner, is suing Metropolitan 919 3rd Avenue LLC, as the successor to 919 Third Ave. Associates in Manhattan Supreme Court. Schulte said it has had an office at 919 Third Ave. since 2000.
Schulte’s suit cites sections of the lease that point to “unavoidable delays” in occupying the space. Schulte argues the “lease is clear” that where the firm has been forced to vacate its offices “by laws or government mandates” in response to a national emergency for more than 15 business days, the firm is entitled to rent abatement while Schulte cannot occupy its offices “for the ordinary conduct of its business.”
Schulte said the lease is also clear that the firm is entitled to rent abatement while Schulte is unable to use its office due to “any cause whatsoever reasonably beyond the [landlord or tenant’s] control.”
Schulte said it complied with New York’s order for in-person workforce reductions. When New York allowed professional services firms, including law firms, to reopen this summer, it faced a 50% occupancy limit. With a second wave of infections predicted this winter, Schulte said, it is still operating under restrictions imposed by state and local orders.
Schulte said it provided the landlord an “abatement notice” at the end of March. In early April, the landlord rejected the notice, “advancing a contorted interpretation” of the lease provision.
Schulte advised the landlord it paid April rent “under protest” and it has continued to pay rent due and owing “under protest,” which the landlord has refused to refund, Schulte’s suit said. The firm, seeking $10 million, said the landlord has refused to acknowledge its right to rent abatement under the lease and has refused to reimburse its rent payments.
In a statement, a Schulte representative confirmed the firm filed a claim for rent abatement under “a clear and explicit rent abatement provision in our lease agreement and have continued to pay rent while preserving our rights.”
Mac Avoy, the landlord’s attorney, said while she’s aware of two other law firms in out-of-court negotiations with their landlords over rent abatement issues, those disputes are “few and far between” in the legal industry.
“SL Green has worked tirelessly to ensure that this building and their entire portfolio have remained open and safely accessible to tenants this entire year to meet their obligations and support this city,” she added in a statement.
Meanwhile, Simpson Thacher in New York and Jenner in Chicago remain in litigation with their landlords. In Jenner’s case, in which the landlord claims it owes nearly $3.8 million in unpaid rent, a judge on Oct. 16 allowed a key affidavit to remain in Jenner’s arguments, according to a court ruling obtained by Law.com.
Law.com
