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Court of Appeal:
Pandemic Orders Did Not Require Halting Gym Renovation
Fitness International’s Contention That It Was Excused From Paying Rent Is Rejected
By a MetNews Staff Writer
Fitness International, LLC has lost in its effort to justify non-payment of rent to the lessor of its premises in Chatsworth on the ground that emergency orders occasioned by the COVID-19 pandemic forced it to halt a multimillion-dollar renovation, with the Court of Appeal for this district rejecting its defenses of force majeure, frustration of purpose, impossibility of performance and impracticability.
Justice John L. Segal of Div. Two authored the opinion which affirms a summary judgment by Los Angeles Superior Court Judge Melvin D. Sandvig in favor of the lessor, KB Salt Lake III, LLC.
Construction began in November 2019—requiring temporary closure of the Chatsworth gym and fitness club—and was expected to end sometime between June and August of 2020, with a “state of the art” facility to open in August. About $3 million had been spent by Fitness, with another $5 million earmarked for completion of the work, when city and county closure orders were issued by the city and county in March 2020.
Nationwide, Fitness shuttered nearly 750 clubs and furloughed more than 25,000 employees.
Halted Construction
Locally, Fitness said in its opening brief on appeal, “it complied with the closure orders, ceasing all operations (including construction) in March 2020.”
But, Segal wrote, agreeing with Sandvig, no order precluded cessation of construction.
Fitness’s brief continues:
“While commercial, office, industrial buildings and residential housing construction was briefly permitted to resume June 11, 2020, retail construction was not included on the list of permitted construction.”
Segal responded that Fitness “invents the term ‘retail construction,’ which did not appear in the closure orders,” remarking:
“The plain language of the closure orders does not support Fitness International’s fanciful attempt at excusing its decision to cease construction.”
Explains Distinction
Fitness also argued in its brief:
“The distinction between commercial and retail construction makes sense in the context of the Pandemic. As the closure orders clarify, only individuals and businesses necessary to ‘maintain the continuity of operations of critical infrastructure sectors’ were exempt. While continued construction of key infrastructure—including hospitals, airports, ports, roadways and other commercial and residential development—were necessary to maintain continuity of critical infrastructure, the construction of retail developments such as fitness facilities is not, and therefore was not exempted from mandated closure. This is particularly the case because gyms continued to be shuttered at this time—it was more than reasonable for Fitness to interpret this distinction to mean that Fitness was not permitted to construct a gym.”
Segal countered:
“But the COVID-19 closure orders allowed more than ‘critical’ infrastructure projects to continue. They also allowed ‘Essential Businesses’ to continue, and both the City and County orders defined ‘Essential Businesses’ to include commercial construction. In addition, the Los Angeles County COVID-19 closure orders listed many types of commercial properties and businesses that had to close or shut down, and ‘retail construction’ was not one of them….The omission of any reference to ‘retail construction’ among the lengthy list of businesses that had to close confirms the COVTD-19 closure orders did not require ‘retail construction’ projects to stop.”
Factual Issue
Fitness also maintained that it “indisputably understood the closure orders to require cessation of its Tenant’s Work,” declaring:
“ At the very least, whether Fitness’s understanding was correct, is a triable issue of material fact that should have precluded summary judgment.”
Segal said that an interpretation of ordinances and orders presents a question of law which cannot be submitted to a jury.
Fitness acknowledged that it did possess sufficient funds with which to pay rent. The justice, rejecting its contention that a force majeure provision in the lease excused the non-payment if rent, pointed out that Fitness “cannot show it was delayed, hindered, or prevented from paying rent ‘because of’ the COVID-19 pandemic, as required” by the lease provision.
He went on to say that “[e]ven if temporary frustration of purpose is a viable theory under California law,” Fitness “did not show the doctrine excused its obligation to pay rent” because it “did not submit any evidence the COVID-19 pandemic or the COVID-19 closure orders prevented it from completing the renovations, which were necessary for Fitness International to operate the premises as a gym or for other permitted uses under the lease.”
Impossibility, Impracticability
Segal recited that the lease required Fitness to pay rent during the construction, expected to last at least 10 months, entailing a financial drain because with the facility closed, it couldn’t assess membership dues. The justice observed that Fitness “presented no evidence paying rent for an additional six or seven months (assuming the renovations were completed on schedule) until indoor gyms reopened in March 2021” would have been so onerous a financial burden as “to implicate the doctrines of impossibility and impracticability.”
Fitness also invoked Civil Code §1511 which excuses performance that “is prevented or delayed by...the operation of law” or “by an irresistible, superhuman cause.” The statute does not apply, Segal said, because the pandemic did not prevent Fitness from paying rent.
On Sept. 10, 2021, KB Salt served a notice on Fitness to quit or pay rent, amounting to $239,598.35, within five days; it did neither, an unlawful detainer action was filed.
The case is Fitness International, LLC v. KB Salt Lake III, LLC, 2023 S.O.S. 3585.
Bryan M. McGarry of the Irvine firm of Elenoff, Grossman & Schole was the attorney on appeal for Fitness. Thomas E. Lombardi and Matthew C. Anderson of the Century City office of Loeb and Loeb represented KB Salt Lake.
Copyright 2023, Metropolitan News Company