Simon Prop. Grp. v. Regal Entm't Grp.

• Decision Date: 27 June 2022
• Docket Number: C. A. N21C-01-204 MMJ CCLD
• Parties: SIMON PROPERTY GROUP, L.P., on behalf of itself and affiliated landlord entities, Plaintiff, v. REGAL ENTERTAINMENT GROUP, HOYTS CINEMAS CORPORATION, and WALLACE THEATER HOLDINGS, INC., Defendants.
• Court: Superior Court of Delaware

SIMON PROPERTY GROUP, L.P., on behalf of itself and affiliated landlord entities, Plaintiff,
v.
REGAL ENTERTAINMENT GROUP, HOYTS CINEMAS CORPORATION, and WALLACE THEATER HOLDINGS, INC., Defendants.

C. A. No. N21C-01-204 MMJ CCLD

Superior Court of Delaware

June 27, 2022

Submitted: May 16, 2022

On Plaintiff's Motion for Partial Summary Judgment as to Liability GRANTED

Timothy R. Dudderar, Esq., Jesse L. Noa, Esq., Carla M. Jones, Esq., Potter Anderson & Corroon, LLP, Wilmington, DE, David M. Fedder, Esq., Dentons U.S. LLP, St. Louis, MO, Shannon Shin, Esq. (Argued), Dentons U.S. LLP, Chicago, IL, Attorneys for Plaintiff Simon Property Group, L.P.

Kashif I. Chowdhry, Esq., Parkowski, Guerke & Swayze, P.A., Dover, DE, Curtis Romig, Esq. (Argued), Kevin Arocha, Esq., Bryan Cave Leighton Paisner LLP, Atlanta, GA, Erin A. Kelly, Esq., Bryan Cave Leighton Paisner LLP, Denver, CO, Attorneys for Defendant Regal Entertainment Group, et al.

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OPINION

JOHNSTON, J.

FACTUAL AND PROCEDURAL CONTEXT

This case stems from leasing arrangements disrupted by the Covid-19 Pandemic.

The landlord is Simon Property Group L.P. ("Simon"), a Delaware limited partnership. Simon is the principal operating partnership for Simon Property Group Inc., a publicly-held Delaware corporation. Simon brings this action on behalf of itself and as an assignee of its affiliated landlord entities ("Simon Landlords").

Regal Entertainment Group is the parent company of several entities ("Tenants") that are tenants at various Simon properties. Hoyt Cinemas Corporation and Wallace Theater Holdings are subsidiaries of Regal Entertainment Group. Defendants, Regal Entertainment Group, Hoyt Cinemas Corporation, and Wallace Theater Holdings (collectively "Regal") are Delaware corporations.

This action involves four commercial lease agreements ("Leases") between Simon and Regal-Cape Cod Mall in Massachusetts, Coconut Point in Florida, McCain Mall in Arkansas, and Shops at Nanuet in New York. The Leases were

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entered into between March 1999^[1] and July 2012. Each Lease is subject to a choice-of-law provision.

Each Lease requires Tenants to timely pay their obligations as outlined within the rental agreements. Regal guaranteed performance by Tenants of all agreements, covenants, and obligations contained within the Leases. Each Lease contains either the same or a close variation of the following Guarantee Provision:

Guarantor hereby absolutely unconditionally and irrevocably guarantees (i) the full and prompt payment of rent and other charges payable under the Lease, (ii) the full, complete and punctual performance, observance and satisfaction of each obligation, duty, covenant and agreement of Tenant under the Lease, and (iii) the full and prompt payment of any costs of enforcing this Guaranty . . . . If Tenant defaults under the Lease, Guarantor will immediately cure the default, including payment to Landlord of any amounts in default, and including all damages and expenses arising in connection with Tenant's default, to the extent such are required to be paid by Tenant pursuant to the Lease

The Leases also contain a force majeure provision, obligating Tenants to pay rent in full and on time despite the occurrence of a force majeure event. Each force majeure clause provides either the same or a similar variation of the following:

Section 21.5. Force Majeure. If either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts labor troubles, inability to procure material, failure of power, restrictive governmental laws or regulations, riots, insurrection, war, environmental remediation work

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whether ordered by any governmental body or voluntarily initiated, or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under this Lease, the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. Notwithstanding the foregoing, the provisions of this Section 21. 5 shall at no time operate to excuse Landlord or Tenant from the payment of Minimum Annual Rent, additional rent or any other payments required by the terms of this Lease when the same are due, and all such amounts shall be paid when due.^[2]

In March 2020, state and local governments began to implement numerous orders and guidelines in response to the outbreak of COVID-19 in the United States. As a result, multiple states, including the states where the Simon properties are located-Massachusetts, Florida, Arkansas, and New York-mandated the closure of shopping malls and movie theatres. ^[3] Tenants at Simon properties adhered to the relevant COVID-19 restrictions in their respective states. In April 2020, Tenants began to default on their rent obligations under the Leases.

Upon reopening, capacity was restricted to 50% or less while adhering to social distancing guidelines. Additionally, movie studios had limited access to first-run films. Regal asserts there were no new releases from mid-March 2020 until at least August 2020. Regal began attempting to reopen theaters in August

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2020 with limited access to first-run films. As a result, Regal asserts that it was struggling to avoid bankruptcy due to non-existent revenue and high operating costs.

Tenants currently are in default under their Leases for failure to pay rent and other charges for the period between March 2020 and April 2021. Simon asserts that Regal, as guarantor, owes Simon Landlords an excess of $5.5 million in unpaid rent and other charges.

Simon has moved for partial summary judgment on Count II (Breach of Cape Cod Regal Guaranty), Count III (Breach of Coconut Point Guaranty), Count IV (Breach of McCain Mall Guaranty), and Count V (Breach of Shops at...