Williams v. La Perla North America, Inc.

Background

Gregg Williams alleged that La Perla North America, Inc. breached a lease between La Perla and Williams’s predecessor in interest. Williams brought the action solely as a state court-appointed receiver. He alleged that La Perla stopped paying rent in May 2021 and abandoned the leased commercial property around April 2021.

La Perla filed an answer and counterclaim. After the court previously dismissed La Perla’s counterclaims with 20 days to amend, La Perla filed a first amended counterclaim asserting claims for restitution and breach of contract.

The restitution claim alleged that the lease was unenforceable or void because its purpose was frustrated. La Perla relied in part on reduced walk-in customers during the COVID-19 pandemic and increased crime, homelessness, and waste outside the property and in surrounding neighborhoods. The breach-of-contract claim alleged that Williams had a duty under the lease to mitigate damages after La Perla vacated the property and that he failed to do so.

Legal Standard

The court applied Rule 12(b)(6), which permits dismissal when a pleading does not contain enough facts to state a legally plausible claim for relief. At this stage, the court accepts the complaint’s factual allegations as true and interprets them in favor of the party opposing dismissal.

Restitution Claim

The court held that La Perla again failed to allege facts showing that the lease’s purpose was totally or nearly totally destroyed, as required for frustration of purpose in the lease context under California law. La Perla did not add new material facts or arguments that changed the court’s prior analysis, and the court found no cited case suggesting that La Perla’s allegations were sufficient under California real-estate law. The court therefore dismissed the restitution claim.

Breach-of-Contract Claim

The lease stated that “[n]o act by Landlord other than giving written notice to Tenant shall terminate this Lease.” The court found no allegation that Williams gave written notice terminating the lease. It therefore held that La Perla had not plausibly alleged that the landlord terminated the lease.

Under the lease and California Civil Code section 1951.4, if La Perla defaulted and abandoned the property, the landlord could choose whether to continue collecting rent or attempt to reduce damages by renting to a new tenant, unless the landlord terminated the lease. The court rejected La Perla’s argument that the landlord’s conduct—including not returning the keys, sending a notice of belief of abandonment, and filing an unlawful-detainer proceeding—plausibly showed termination. Those allegations did not show that the landlord gave the written notice required by the lease.

The court also distinguished a case involving a notice of belief of abandonment because that case did not involve a lease provision requiring written notice to terminate. The court concluded that La Perla had not plausibly alleged a breach based on failure to mitigate because the landlord had not terminated the lease.

Disposition

The court granted Williams’s motion to dismiss La Perla’s first amended counterclaim causes of action with prejudice and without leave to amend. It concluded that amendment would be futile because La Perla had already received an opportunity to amend, had not corrected the legal deficiencies, and had added no new material allegations supporting frustration of purpose. The order disposed of Docket Number 36.