THE GAP, INC. FILES SUIT IN DELAWARE CHANCERY COURT TO CANCEL STORE LEASES

On July 23, 2020, The Gap Inc. (“The Gap”) and its leading subsidiaries including Athleta LLC, Banana Republic, LLC, and Old Navy, LLC sued shopping mall operator Simon Property Group LP (“Simon”) in the Delaware Chancery Court seeking an order canceling hundreds of store leases or, in the alternative, letting the retailer avoid rent, retroactive to the date of the first Covid-19 related store closures in March.  

The complaint, brought pursuant to Section 341 of the Delaware Code, 10 Del. C. § 341, asserts claims for rescission, cancellation, and termination (Count I), as well as reformation (Count II).  The action targets leases for company stores at hundreds of malls across the country.  According to The Gap, “the COVID-19 pandemic has presented unique and unprecedented circumstances that were unforeseeable—indeed, unimaginable—at the time the leases between Tenants and Landlords were executed.”  It further alleges that “[t]o protect the health and safety of their employees, customers, and the surrounding communities, and comply with applicable law, Tenants have been required to close their stores and keep them closed for extended periods of time.”  At the same time, the company’s revenue from those stores “dropped to zero overnight.”  

The Gap asserts that the relief sought under Delaware law is appropriate because the pandemic has “frustrated the express purpose of these leases and made their principal object illegal, impossible, and impracticable, all for a period of time that remains unknown and unknowable.”  Notably, that hasn’t stopped Simon from demanding rent.

The case is The Gap Inc. v. Simon Property Grp. LP, Del. Ch., No. 2020-0611, complaint filed 7/23/20.