On September 7, 2022, Justice Ostrager of the New York County Commercial Division issued a decision in Series PC of HCI-Cerberus PCNY Owner LP v. Diamond Resorts Intl. Mktg., Inc., 2022 NY Slip Op. 32998(U), dismissing a litany of defenses to contract performance based on the pandemic, explaining:
A motion to dismiss affirmative defenses pursuant to CPLR 3211(b) is granted if the plaintiff can demonstrate that the defenses do not apply under the factual circumstances of the case or that defendant failed to state a defense. The Court should apply the same standard to motions under CPLR 3211(b) as it does under CPLR 3211(a)(7): the pleading is afforded a liberal construction, the facts alleged are accepted as true, and the pleading’s proponent is accorded the benefit of every
favorable inference.Plaintiffs’ motion to dismiss defendant’s second affirmative defense for frustration of purpose is granted and the motion is dismissed as a matter of law. The parties’ underlying purpose in entering into the Agreements was for the lease and licensing of commercial spaces at plaintiffs’ Hotels. Defendant makes no argument it was entirely deprived of its access to the commercial spaces and merely argues that the COVID-19 pandemic deprived defendant of access to anticipated numbers of Hotel guests. In the context of the COVID-19 pandemic, New York courts have found that frustration of purpose is not a basis to avoid commercial real estate rent payments due to reduced revenues.
Plaintiffs’ motion to dismiss defendant’s third affirmative defense for impossibility, impracticability, and illegality is granted as a matter of law. These defenses are limited to the destruction of the means of performance. Where impossibility or difficulty is occasioned only by financial difficulty or economic hardship, performance of a contract is not excused. Defendant does not
submit any evidence or explanation of how performance was impossible, rather than being difficult due to the pandemic. The illegality defense is also without merit and must also be dismissed because defendant makes no allegation which goes to the legality of the actual obligations under the Agreements. Defendant contends that the government orders entered into in response to the COVID-19 pandemic rendered it inadvisable or illegal for defendant to meet and connect with guests in furtherance of defendant’s marketing activities, but this does not address the legality of defendant’s obligation under the Agreements, which is to pay rent, room fees, and concierge fees in exchange for plaintiffs’ leasing and licensing of the spaces.. . .
Plaintiffs’ motion to dismiss defendant’s fifth affirmative defense for Force Majeure is granted. The Force Majeure provisions at issue contains narrow language which does not encompass the COVID-19 pandemic. Defendant also does not claim that the pandemic affected defendant’s ability to pay rent, as acknowledged by defendant on the transcript of proceedings of September 6, 2022. No party has cited any case where a Court has applied a narrowly drafted Force Majeure clause identical to the one at issue here to excuse performance of the obligation to pay rent because of Covid-19 business interruptions.
(Internal quotations and citations omitted).