Extreme Reach, Inc. v. PGREF I 1633 Broadway Land, L.P.

Background

Extreme Reach, the tenant, leased the fifth and sixth floors of 1633 Broadway under a lease with a term of 15 years and 10 months. The lease ordinarily would expire on April 14, 2028, but Article 34 gave Extreme Reach a one-time option to end the lease on October 14, 2023, if it gave written notice and made a termination payment by July 14, 2022.

Article 11 required lease notices to be in writing and sent by certified or registered mail with a return receipt, or by recognized overnight courier with a signed receipt. The notice also had to be addressed to specified leasing and building-management recipients. Article 34 did not specify a payment method but required the termination payment to be made concurrently with the termination notice.

On July 12, 2022, Extreme Reach’s chief financial officer emailed the termination notice to representatives of the landlord’s affiliate, hand-delivered a copy to a landlord representative, and sent the notice by certified mail with a return receipt requested. On July 13, Extreme Reach sent the termination payment in two automated-clearing-house installments. The defendants received those payments on July 14, totaling $7,532,543.93. On July 20, the defendants rejected the notice and returned the payment.

Parties’ Motions and Arguments

Both sides moved for summary judgment, asking the Court to resolve the lease-interpretation dispute without a trial. Extreme Reach sought a declaration that it complied with Article 34 and that the lease would terminate on October 14, 2023. It also sought attorneys’ fees based on the defendants’ alleged bad faith and conduct before and during the litigation.

The defendants sought a declaration that Extreme Reach did not terminate the lease, that Article 34 became void and was deleted from the lease under Section 34.01(c), and that the lease remained in effect through April 14, 2028. They also sought attorneys’ fees under a lease provision concerning a tenant default.

Court’s Analysis

The Court held that Extreme Reach timely gave the termination notice. Article 34 required the tenant to send the notice by July 14, 2022; it did not require the defendants to receive it by that date. Extreme Reach sent the notice by certified mail on July 12. The Court also noted that the defendants had actual notice through email and hand delivery before the deadline, and that they did not identify a proper recipient who differed from the leasing representatives to whom the notice was addressed.

The Court further held that Extreme Reach substantially complied with the concurrent-payment requirement. Although the defendants received the payment two days after receiving actual notice, they received the full payment on the July 14 deadline. The defendants presented no evidence that this timing caused them prejudice. The Court also concluded that the lease’s clause making time essential applied to giving the notice, not to the timing of the payment.

Attorneys’ Fees

The Court denied Extreme Reach’s request for attorneys’ fees and costs. Although the Court found that the defendants breached the lease by rejecting the properly made termination notice and criticized the defendants’ arguments and conduct, it concluded that their conduct was not sufficiently wanton or frivolous to justify shifting fees under an exception to the usual rule that each side pays its own attorneys’ fees.

Disposition

The Court granted in part and denied in part Extreme Reach’s motion for summary judgment. The granted portion established that Extreme Reach validly exercised the lease’s early-termination option and that the lease would terminate on October 14, 2023. The Court denied Extreme Reach’s request for attorneys’ fees. The Court denied the defendants’ motion for summary judgment. The Clerk was directed to close the pending motions and close the case.