Covid-19 Provides Basis for Successful Equitable Non-Forfeiture Defense

BRIDGEPORT, CT, Dec. 9, 2020 – A unique legal defense centered around the impact of COVID-19 will allow a Southport, CT restaurant to remain in business.  This is the first successful use of the impact of COVID-19 as part of an equitable nonforfeiture defense in a case involving a commercial lease and centers around the Court’s acknowledgment of the impact of the pandemic on restaurants. The restaurant, Wafu Asian Bistro, was represented by Aaron Romney and John Cesaroni of Zeisler & Zeisler, P.C.

 

In his recent judgement Superior Court judge Walter M. Spader, Jr., found that the defendant had demonstrated that the COVID-19 pandemic had excused the tenant’s failure to pay rent and allowed the tenant an opportunity to reinstate its lease. The decision in the case, Dawid Investments, LLC v. Jing Fu, Inc. d/b/a Wafu Asian Bistro, No. BPH-CV20-6008921-S (J.D. of Fairfield, Housing Session), appears to be one of first impression.

 

Wafu Bistro has been in business for nine years, paying rent as their lease required.  When the defendant was unable to pay rent at the beginning of the COVID-19 pandemic, the landlord brought a summary process action against it. As part of the defense of equitable nonforfeiture, Attys. Romney and Cesaroni argued that when the COVID-19 pandemic hit in March of this year, the restaurant saw a significant decrease in revenue.  As a result, the restaurant was unable to pay its rent to the landlord.

 

Under Connecticut’s rather draconian eviction law, in order to make out a defense of equitable nonforfeiture, a defendant has to demonstrate that its failure to pay was not “willful or grossly negligent” meaning that the failure to pay must be accompanied by a good faith intent to comply with the lease or there must be a good faith dispute over the meaning of the lease. Economic hardship, alone, will not satisfy this requirement. The Court found that the defendant’s failure to pay rent was not “willful or grossly negligent” because, despite the fact that the defendant had defaulted, it “…did so in the context of operating a restaurant during a global pandemic” in which it lost hundreds of thousands of dollars in revenue. The Court also stressed that over 600 Connecticut restaurants have closed since March because of COVID-19, and wrote, “If the Court can attempt to limit this crisis by one business, it is going to try.” Atty. Cesaroni, who was trial counsel for the defendant noted, “The Court’s decision recognizes the availability of an important defense for tenants in these extraordinary times, which have seen countless small businesses fail, especially where that tenant, like the defendant here, sought to make the landlord whole.”

 

In its decision, the Court also found that the other factors of equitable nonforfeiture weighed in favor of the defendant. First, it found that the loss to the defendant upon eviction would be disproportionate to the loss of the plaintiff because the defendant, who performed “faithfully” under the lease for over nine years, would lose the benefit of the remainder of the twenty-year lease. Second, the Court concluded the plaintiff’s harm was reparable because the defendant had offered to make full payment of all arrears due under the lease. In fact, as demonstrated at trial, the plaintiff had refused previous offers by the defendant to pay the arrearage in full in exchange for reinstating the lease. The Court ordered the defendant to pay the arrearage, nearly $100,000.00, into court and also to pay into court attorneys’ fees and costs to be determined at a later date. If the defendant complies, the lease will be reinstated, and the defendant can continue to operate its restaurant. Romney said of the decision, “The Court’s decision establishes that even Connecticut law, which extends very few lifelines to commercial tenants who fall behind on rent, recognizes the extraordinary environment that COVID-19 has created.”

 

About Zeisler & Zeisler

For over 50 years, Zeisler & Zeisler has provided representation that empowers clients to overcome obstacles and seize opportunities. The firm offers a broad range of legal services to local, regional and national clients in the areas of insolvency, litigation, business law, commercial and real estate transactions, and personal injury. Zeisler & Zeisler’s insolvency group has a national reputation in the areas of bankruptcy, corporate restructuring, creditors’ rights and other insolvency matters, leveraging its vast experience, passion and creativity to resolve its clients’ most daunting financial challenges. The firm’s litigation team blends tenacious representation and practical counsel to win high-stakes disputes in a diverse range of legal matters. For more information go to zeislaw.com.

 

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