In one of the many lease disputes that may percolate up through the appellate courts in the months and years to come, the Texas Supreme Court has denied a request for mandamus relief by a commercial landlord whose restaurant tenants ceased or reduced lease payments resulting from COVID-19 state and local public health orders.
The case, In Re Weingarten Realty Investors (No. 21-0878), arose in Harris County. Weingarten, a national real estate firm that operates 160 commercial properties across the country, owns The Centre at Post Oak Shopping Center and River Oaks Shopping Center in Houston. It leases restaurant space to Morton’s Steak House in Post Oak and La Griglia in River Oaks. Both leases are currently in force and terminate in 2023. In mid-March 2020, Governor Abbott and Harris County Judge Lina Hidalgo issued orders limiting restaurant operations, first to take-out and delivery services only, and then to limited capacity in-person dining. Despite remaining open from April to August 2020, the restaurants did not pay rent for April, May, or June, and paid only 75% of the rent owed for July and August. Weingarten notified them of a default. When the restaurants refused to pay the rent owed, Weingarten considered exercising its rights under the lease, including the contractual right to lock-out the restaurants until payment of the amounts owed. The restaurants sought and received a temporary restraining order and then an action for declaratory relief from the court that “the public’s fear of the coronavirus, the various governmental shut-down orders, the coronavirus itself, or some or all of these factors” temporarily created an impracticability or frustration of performance of purpose such that the restaurants and their guarantors should be relieved of the obligation to pay rent for that period of time.
The dispute at the appellate level arose over the restaurant’s request to compel discovery of information about all of Weingarten’s properties with respect to the number of properties, the number of properties that paid 100% of the rent owed during the relevant period, and the number of properties for which Weingarten modified the terms of the lease as a result of the pandemic. For Weingarten’s leases in the two shopping centers, the restaurants requested the names of the tenants, whether each tenant paid 100% of the rent from April to December, 2020, whether Weingarten entered into any agreement modifying the terms of the lease for that period, and the core terms of any such agreements. Weingarten objected to these requests as overly broad, burdensome, intended to harass, irrelevant, and unlikely to lead to any admissible evidence. It also objected that to the extent the requests involved specific information about other tenants, they sought confidential and proprietary information. The trial court granted the restaurants’ requests for discovery, limiting only the scope of the request pertaining to all of Weingarten’s properties nationwide to those located in Harris, Brazoria, Fort Bend, and Galveston Counties. Weingarten sought mandamus relief, which the Houston [First] Court of Appeals denied. SCOTX likewise denied mandamus relief.
The matter now returns to the Harris County district court for further proceedings. The substantive issue—whether the pandemic and its associated disruptions created a temporary impracticability or frustration of performance of a contract—remains. Whether Weingarten and the restaurants will settle the dispute or litigate to the bitter end remains to be seen. But this cannot be the only case of its kind beginning to work its way through the process.
