On September 3, 2013, the U.S. District Court for the Northern District of Illinois dismissed a class action complaint against Barnes & Noble seeking damages based on a data security incident, finding that the plaintiffs lacked standing to bring the claims. This decision reaffirms that retailers may be able to avoid damages for data breaches
Jennifer S. Romano
Allegation of Data Breach Alone Insufficient to Sustain Claims Based on Inadequate Cybersecurity Under California Law
On March 6, 2013, the United States District Court for the Northern District of California held that a putative class of LinkedIn premium users lacked standing to pursue state law unfair competition, breach of contract, and negligence claims resulting from a hacking incident. The court dismissed the complaint, concluding that the plaintiffs failed to establish any legally cognizable injury and any causation between the alleged incident and any alleged economic harm.
A putative class of premium LinkedIn users filed an amended complaint alleging unfair competition, breach of contract, and negligence claims. LinkedIn filed a motion to dismiss for lack of standing, which the court granted.…
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Federal Court Rules Printing Only a Credit Card’s Expiration Month on a Receipt Violates Federal Law
On January 24, 2012, the United States Court of Appeal for the Third Circuit ruled that printing just the month of a credit card’s expiration date on a customer receipt violates the federal Fair And Accurate Credit Transactions Act (FACTA). This is the first federal appeals court to address this issue and confirms that retailers…
Recovery Opportunities for Retailers
On May 5th, Crowell & Moring’s Retail Law partnered with the Association of Corporate Counsel (ACC) to host the first webcast of a 3-part retail law series: “Recovery Opportunities for Retailers: Turning A Retail Law Department Into A Profit Center in Retail Leasing, Global Sourcing and Antitrust Litigation.” The webcast was moderated by…
Retailers May Be Overcharged for Electricity in Violation of Their Leases
Under many retail leases, the tenant is required to pay the landlord for electricity used to operate the retail store. Lease provisions regarding electricity charges are often complex or unclear, and provisions regarding how to allocate electricity use to each tenant and what rates to charge vary substantially. Often, retailers are charged for more electricity…
Supreme Court To Decide Whether Retailers Can Require Individual Arbitration of Customer Claims
This year, the United States Supreme Court is expected to decide whether a retailer can protect itself against class action lawsuits by including a single claim arbitration provision in its contracts with customers.
At issue before the United States Supreme Court is the case of AT&T Mobility v. Concepcion. The question to be decided is whether a retailer can enforce a provision in its contracts with customers that states all disputes will be handled through single-party arbitration, as opposed to class action litigation. This decision is particulary relevant to retailers that commonly use customer agreements to sell products and services, such as banks, fitness clubs, car rental companies, and Internet companies.…
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Co-Tenancy Disputes With Landlords Are Decided Based on the Plain Language of the Lease
As shopping center occupancy rates have decreased, enforcing co-tenancy rights has taken center stage for retailers. The key to enforcing rights under a co-tenancy provision is to rely on the plain language of the lease.
For example, in the past year, courts in Michigan and Georgia have ruled in favor of Rainbow, USA in co-tenancy disputes based on the precise language of co-tenancy provisions in the leases. In both cases, the court relied on the plain language of Rainbow’s leases to hold that Rainbow was entitled to pay reduced rent based on the landlord’s failure to meet co-tenancy requirements under the lease.…
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Taxes May Not Be a Straight Pass-Through Under Retail Leases
Retail leases typically contain provisions allowing the landlord to charge the tenant a pro rata share of taxes paid by the landlord. The particular wording of the lease governs what the landlord can and cannot charge a tenant. Looking for ways to cut costs, more tenants are monitoring the taxes passed through by landlords and challenging certain charges.
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CO-TENANCY RIGHTS CAN SHAVE COSTS
In this troubled economy, co-tenancy provisions are playing a critical role in retail leases. The Wall Street Journal recently reported that retail tenants with co-tenancy rights in their leases are “eking out critical savings” to counter the drop in sales. Vendors are offering services that track store closings at shopping centers for purposes of…
Tenant Entitled to Claim Constructive Eviction Despite No Breach Statement in Estoppel Certificate and “Hell or High Water” Clause
Case: Reliastar Life Insurance Co. of NY v. Home Depot, U.S.A., Inc., 570 F.3d 513 (7th Cir. 2009) (applying New York law)
The One Sentence Summary: A federal court applying New York law holds that a tenant’s execution of an estoppel certificate creates no warranties about present or future conditions not known by the tenant at the time of execution; and court holds that constructive eviction relieves a tenant of the obligation to pay rent even where the tenant signed a “hell or high water” clause.
What They Were Fighting About: Home Depot entered into a lease providing that the landlord was responsible for the “building pad.” When the original landlord assigned the lease to a subsequent landlord, Home Depot signed an estoppel certificate providing: “Tenant has fully inspected the Premises and found the same to be as required by the Lease, in good order and repair, and all conditions under the Lease to be performed by the landlord have been satisfied; including but not limited to payment to Tenant of any landlord contributions for Tenant improvements and completion by landlord of the construction of any leasehold improvements to be constructed by landlord; . . . As of this date, the Mortgagor, as landlord, is not in default under any of the terms, conditions, provisions or agreements of the Lease and Tenant has no offsets, claims or defenses against the Mortgagor, as landlord with respect to the lease.”
At the time of the assignment, Home Depot also signed a Recognition Agreement including the following “hell or high water” clause: “Tenant agrees that notwithstanding anything in the Lease or this Agreement contained to the contrary, until Mortgagee notify [sic] tenant that the Assignment has been released, Tenant shall be unconditionally and absolutely obligated to pay to Mortgagee in accordance with the Assignment all rents, purchases payments and other payments of whatever kind described in the Lease without any reduction, set off, abatement, or diminution whatever.”
Two years after the assignment, Home Depot detected cracks in its store walls resulting from a defective building pad. Home Depot vacated the premises, stopped paying rent and claimed constructive eviction. The landlord/assignee filed suit against Home Depot for all moneys owed under the lease.
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