Abercrombie and Fitch Stores, Inc. v. Simon Property Group, L.P. ( 2020 )

FILED
Nov 25 2020, 8:08 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
F. Paganelli Wayne C. Turner
Caroline E. Richardson Michael R. Limrick
Stephanie L. Grass Kenneth J. Munson
Indianapolis, Indiana Che’lee A. John
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Abercrombie and Fitch Stores, November 25, 2020
Inc. Court of Appeals Case No.
Appellant-Defendant, 20A-CT-1092
Appeal from the Marion Superior
v. Court
The Honorable Heather A. Welch,
Simon Property Group, L.P., Judge
Appellee-Plaintiff. Trial Court Cause No.
49D01-2004-PL-13294
Altice, Judge.
Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020 Page 1 of 16
Case Summary
[1] Abercrombie & Fitch Stores, Inc. (Abercrombie) appeals the trial court’s grant
of a preliminary injunction in favor of Simon Property Group, L.P. (Simon)
that prohibited Abercrombie from permanently closing its retail stores in Simon
malls. Abercrombie claims that the trial court improperly entered a mandatory
injunction rather than granting prohibitory injunctive relief because
Abercrombie was ordered to take more action than was necessary to preserve
the status quo. Abercrombie also contends that the trial court abused its
discretion because the evidence did not show that Simon was likely to prevail
on the merits of its breach of contract claims at trial, and there was no showing
that Simon would suffer irreparable harm if injunctive relief was not granted.
[2] We affirm.
Facts and Procedural History
[3] Abercrombie operates retail clothing stores throughout the United States in
Simon malls. Over the past several years, the parties have negotiated groups of
new and renewal leases in “packages” that establish terms for multiple stores.
Appellant’s Brief at 6.
[4] The parties began negotiating fifty-four lease agreements in early February
2019, that involved various lease terms and store relocations (Agreement).
Johnny Ciotola, Abercrombie’s store director, negotiated the terms for
Abercrombie and its in-house legal counsel, Jennifer Mason, was responsible
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for finalizing the documentation. Pervis Bearden and Daniel Seabaugh
negotiated the terms for Simon, and attorney Elizabeth Young would confirm
the final terms. During the course of the year, the parties discussed the leases
and the terms of a settlement agreement regarding the resolution of a rent
dispute. Most of the leases had either expired or were due to expire by the end
of January 2020.
[5] On January 14, 2020, Ciotola sent an email to Bearden stating that “per our
most recent communication(s), we can agree to the [attached] package terms
that is understood by both parties to be the final position.” Appellant’s Appendix
Vol. II at 11, 189-94. That email set forth the length of each lease,
Abercrombie’s rent obligation, the terms upon which Abercrombie would open
new stores, and the location of the stores that would be closing. Ciotola and
Mason each confirmed that this email contained all “major points” of the
parties’ dealings. Appellant’s Appendix Vol. V at 11.
[6] On January 15, Young and Mason confirmed that a “bunch of deals [had been]
approved” following “very thorough negotiations,” and that they would begin
drafting the conforming documents. Appellant’s Appendix Vol. III at 41.
Abercrombie and Simon representatives continued to exchange emails about
some of the non-substantive lease provisions. All of Simon’s email responses
included language stating that “to be enforceable by or against a party, a final
agreement between the parties must also be written and signed by both parties.”
Exhibit A-2.
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[7] On January 23, 2020, Mason acknowledged that she had received a draft of the
lease documentation from Young. It was her understanding that an
“agreement [was] reached between [the parties and] documented in [the
January 14] email” from Ciotola to Bearden. Exhibit 2.
[8] The Agreement provided, among other things, that Abercrombie would pay
Simon nearly $450,000 less per month in combined rent for its stores than it had
in the prior year. Although Simon did not sign a document entitled, “Renewal
Rents Letter,” Abercrombie paid—and Simon accepted—the rent amounts
contemplated in the Agreement, starting in February 2020. Abercrombie was
also permitted to continue occupying all the stores that were subject to the
Agreement, rather than having to close the stores whose leases would have
expired on January 31, 2020.
[9] Although Abercrombie closed five of its stores as contemplated in the
Agreement, the parties continued negotiating amendments to the Agreement
into early March 2020, and they revised some non-substantive terms in several
leases. Each time one of Simon’s attorneys forwarded a proposed amendment
to Abercrombie, the attached documents were prefaced with the following
language: “If the amendment is in acceptable form, please have two (2) clean,
legal sized copies of the amendment executed and return both copies to my
attention at your earliest convenience, and I will thereafter return a fully-
executed original for your files.” Appellant’s Appendix Vol. V at 60.
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[10] By March 10, Abercrombie had completed edits on the remaining lease
documents, and Mason encouraged Young to have the documents executed “as
quickly as possible.” Appellant’s Appendix Vol. III at 39, 51. On March 13,
Simon accepted Abercrombie’s final proposed language to the Agreement.
Thereafter, Mason was provided with an “execution-ready” version of the
Agreement that contained no material deviations from the original and essential
terms that were included in Ciotola’s January 14, 2020 email. Id. at 16.
[11] Also on March 13, Abercrombie sent Simon the executed lease amendments
with Abercrombie representatives’ original handwritten signatures in three
separate packages. These documents represented forty-two of the fifty-four
stores that had been the subject of the original negotiations. As with past
correspondence, the cover letters in each package provided that “the documents
have been originally signed by Tenant. Upon counter-execution by landlord,
please return one fully executed original copy. . . .” Appellant’s Appendix Vol. 5
at 57-59. Although Abercrombie had sent these executed documents to Simon,
Abercrombie decided to close all stores effective March 16, 2020, because of the
COVID-19 pandemic. 1
[12] Beginning at 4:20 p.m. on March 17, 2020, Simon began sending electronically
signed copies of the lease amendments to Abercrombie by email. On March
18, Simon announced that it was temporarily closing its malls across the
1
The evidence does not reflect whether Abercrombie communicated its decision to close the stores to Simon
at this point.
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country after discussing the spread of COVID-19 with federal state and local
officials. That same day, Abercrombie sent a letter to Simon formally retracting
the signatures on forty-two leases and amendments. Abercrombie’s only stated
reason for the retraction was “the current uncertainty regarding the impact of
COVID-19.” Id. at 203. Abercrombie also stated that the Agreement “shall be
of no further force or effect.” Id. (Emphasis added).
[13] Abercrombie did not provide Simon with executed copies of the remaining
lease documents or the settlement document contemplated under the
Agreement. Simon rejected Abercrombie’s retraction on the grounds that
Abercrombie had repeatedly confirmed the Agreement, and that the parties had
been fully performing under the Agreement for nearly two months.
[14] Notwithstanding Abercrombie’s retraction letter, Simon continued forwarding
executed documents to Abercrombie for signature. By March 20, 2020,
Abercrombie had paid its second month of rent at the lower rate under the
Agreement. On March 27, Abercrombie sent notices of termination to
landlords at the locations where the leases had expired on or before January 31,
2020. Abercrombie instructed the landlords to consider the leases as month-to-
month tenancies from that day forward.
[15] On April 7, 2020, Simon filed a complaint against Abercrombie, seeking a
declaratory judgment that the Agreement was valid and enforceable. Simon
also sought damages and specific performance for Abercrombie’s breach of the
Agreement.
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[16] Three weeks later, Abercrombie made clear its intention to permanently close
and abandon the stores that were included in the Agreement. In response,
Simon sought a temporary restraining order and a preliminary injunction on
April 27, 2020, seeking to prohibit Abercrombie from permanently closing its
stores. The trial court granted an emergency temporary restraining order in
Simon’s favor on May 1, 2020.
[17] Following a hearing on the motion for preliminary injunction on May 8, 2020,
the trial court granted Simon’s motion and ordered Abercrombie not to
permanently close its stores. The trial court set a bond at $15 million and
determined that (a) Simon established a prima facie case that there was an
enforceable Agreement; (b) Abercrombie’s sudden closures would cause Simon
irreparable harm; (c) the threatened irreparable harm to Simon outweighed any
potential pecuniary harm to Abercrombie resulting from an injunction; and (d)
the public interest would not be disserved by the granting of an injunction.
[18] The trial court’s order provided that
A. Abercrombie & Fitch Stores, Inc., its agents, successors,
parent, subsidiary or affiliate companies, and all those persons
and entities in active concert or participation with them are
ENJOINED, in any manner, either directly or indirectly from:
i. removing all inventory, all fixtures, or all equipment
from the 53 stores at issue in this action for the purpose of
closing those stores; however, [Abercrombie] stores can
reallocate its inventory to other stores or to reserve for
online sales but must maintain sufficient amounts of
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inventory in each store to operate per the terms of its lease;
and
ii. otherwise abandoning the 53 stores at issue in this
action pursuant to A&F Stores’ unilateral declaration that
the leases for those stores have terminated. [Abercrombie]
stores should operate per the terms of the lease documents
drafted pursuant to the [Agreement], thereby maintaining
the status quo.
Appellant’s Appendix Vol. 2 at 45-46. Abercrombie now appeals.
DISCUSSION AND DECISION
I. Standard of Review
The grant or denial of a preliminary injunction rests within the sound discretion
of the trial court, and appellate review is limited to whether there was a clear
abuse of that discretion. Indiana Family & Social Servs. Admin. v. Walgreen Co.,
769 N.E.2d 158, 161 (Ind. 2002). When considering whether a trial court’s
grant of a party’s motion for a preliminary injunction constitutes an abuse of
discretion, this court determines whether the evidence supports the trial court’s
special findings of fact and whether the findings support the judgment. Hannum
Wagle & Cline Engineering, Inc. v. American Consulting, Inc., 864 N.E.3d 863, 874
(Ind. Ct. App. 2016). Findings of fact are clearly erroneous when the record
lacks evidence or reasonable inferences from the evidence to support them. Id.A judgment is clearly erroneous when a review of the record leaves the
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reviewing court with a firm conviction that a mistake has been made. Robert’s
Hair Designers, Inc. v. Pearson, 780 N.E.2d 858, 863 (Ind. Ct. App. 2002).
[19] This court has determined that
An injunction is an extraordinary remedy that should be granted
only with caution. Injunctions must be narrowly tailored and
never more extensive in scope than is reasonably necessary to
protect the interests of aggrieved parties. Moreover, the
injunction should not be so broad as to prevent the enjoined
party from exercising his rights. If an injunction is more
extensive than is reasonably necessary to protect a party’s
interests or unduly prevents a party from exercising his rights, we
may remand to the trial court for revision.
William J. Huff, II Revocable Trust Declaration, Dated June 28, 2011 v. Cain, 120
N.E.3d 1029, 1086 (Ind. Ct. App. 2019) (internal citations omitted).
[20] We note that the purpose of a preliminary injunction is to maintain the status
quo. AGS Capital Corp. v. Product Action Int’l, LLC, 884 N.E.2d 294, 314 (Ind.
Ct. App. 2008), trans. denied. To obtain a preliminary injunction, the moving
party must show by a preponderance of the evidence that: (1) its remedies at
law are inadequate and that irreparable harm will occur during the pendency of
the action as a result; (2) it has at least a reasonable likelihood of success on the
merits by establishing a prima facie case; (3) the threatened harm it faces
outweighs the potential harm the injunction would pose to the non-moving
party; and (4) the public interest would not be disserved by granting the
injunction. Coates v. Heat Wagons, Inc., 942 N.E.2d 905, 911-12 (Ind. Ct. App.
2011). Reversal of an injunction on the “likelihood of success” factor is
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warranted only if “the likelihood of success is so improbable as to render the
trial court’s determination erroneous as a matter of law.” Norlund v. Faust, 675
N.E.2d 1142, 1149 (Ind. Ct. App. 1997), trans. denied.
II. Abercrombie’s Claims
A. Prohibitory vs. Mandatory Injunction
[21] Abercrombie claims that the trial court’s order must be set aside because it erred
in issuing an “improper mandatory injunction.” Appellant’s Brief at 31. More
particularly, Abercrombie asserts that the trial court erroneously construed the
status quo position of the parties as being the period prior to Abercrombie’s
March 16 decision to close all stores. Abercrombie contends that March 17,
2020, was the appropriate date that the trial court should have considered,
which was just prior to Simon’s filing of the action and when its stores were
already temporarily closed due to pandemic concerns. Hence, Abercrombie
asserts that the trial court’s order improperly compelled it to take an action and
engage in an activity that it had not otherwise been doing, i.e., reopen nearly
fifty stores that it had already closed.
[22] The status quo of the parties is determined as of the “last, actual, peaceful, and
non-contested status which preceded the pending controversy.” Hannum, 64
N.E.3d at 883. Under this test, Abercrombie’s argument that the final pre-
dispute status occurred when Abercrombie’s stores were temporarily closed
because of COVID-19 mischaracterizes the issue before the trial court and
ignores the trial court’s findings based on the evidence.
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[23] The parties had been performing under the Agreement for nearly two months
before the COVID-19 pandemic prompted a temporary closure of Simon malls.
The circumstances here have nothing to do with the temporary, government-
ordered closures. Rather, it was Abercrombie’s threat to permanently close and
abandon its stores on the theory that there was no binding contract between the
parties that prompted Simon’s request for an injunction. Simon requested
injunctive relief prohibiting the permanent closures. Hence, contrary to
Abercrombie’s claim, the trial court’s order was not an improper mandatory
directive. In other words, the injunctive relief granted for Simon did not order
Abercrombie to reopen its stores in defiance of the temporary closures that the
government had ordered because of the COVID-19 crisis. The temporary
injunction merely prohibited Abercrombie from permanently closing its stores
and abandoning those locations. Thus, Abercrombie’s mandatory injunction
argument fails.
B. Appropriateness of Relief
[24] Abercrombie contends that the trial court abused its discretion in granting
injunctive relief for Simon because the evidence failed to show that Simon will
prevail on the merits at trial. Notwithstanding Abercrombie’s claim, Simon’s
burden was to present substantial evidence at the injunction hearing
establishing that it had a reasonable likelihood of success at trial. IHSAA v.
Martin, 731 N.E.2d 1, 7 (Ind. Ct. App. 2000), trans. denied. Put another way,
Simon was not required at the preliminary injunction stage to show that it was
“entitled to relief as a matter of law.” Norlund, 675 N.E.2d at 1149.
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[25] We note that absolute certainty of all contract terms is not required for a
contract to be enforceable. Rather, the parties must only agree to the essential
terms to render an agreement enforceable. Conwell v. Gray Loon Outdoor Mktg.
Grp., Inc, 906 N.E.2d 805, 813 (Ind. 2009). Additionally, the parties’
performance under an agreement will amount to an unambiguous and overt
admission by both parties that a contract existed. Int’l Creative Mgmt, Inc. v. D &
R Entm’t Co., 670 N.E.2d 1305, 1313 (Ind. Ct. App. 1996), trans. denied.
[26] In this case, the evidence established that Ciotola’s email of January 14, 2020 to
Bearden stated the essential terms for each lease at issue. Abercrombie
acknowledged that the email included the “major points of the parties’ ongoing
discussions to which Abercrombie could agree,” including the new rent rate
and lease extensions. Appellant’s Brief at 8. The parties intended to be bound by
the Agreement as shown by Abercrombie’s repeated statements that it had
reached an agreement with Simon and that negotiations were complete.
Notwithstanding the disclaimer language set forth in the parties’ email
exchanges, Abercrombie kept its stores open after January 31, 2020, and it paid
the decreased rent amount for two months under the Agreement. Simon
accepted the lower rent payments, and Abercrombie proceeded with its store
relocation plans and closures contemplated by the Agreement.
[27] The parties went on to prepare and finalize all lease documentation, Simon
approved the final draft of the rent-dispute settlement agreement that
Abercrombie had distributed, and Abercrombie executed forty-three lease
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agreements that the parties had negotiated before this dispute began.
[28] In light of this evidence, we conclude that Simon has presented prima facie
evidence of an enforceable Agreement. The evidence supports the trial court’s
findings, and the trial court’s judgment is supported by the findings. Thus, the
trial court did not abuse its discretion in concluding that Simon established a
likely chance of success at trial proving that Abercrombie’s intention to close
their stores before the lease extensions expired —along with its failure to make
the agreed-upon rent payments—would constitute a breach of the Agreement.
See Wolvos v. Meyer, 668 N.E.2d 671, 678 (Ind. 1996) (finding that the parties
agreed to certain enforceable terms of an agreement with the expectation that
they would execute a complete agreement in the future, and “a mere reference
to a more formalized contract does not void the presently existing agreement”).
[29] Abercrombie also argues that the preliminary injunction must be set aside
because Simon failed to show that it would be subject to irreparable harm in the
absence of an injunction. Simon’s initial burden was to demonstrate that
“remedies at law were inadequate, thus causing irreparable harm pending
resolution of the substantive action.” Ind. Family & Soc. Svcs. Admin. v.
Walgreen, Inc., 769 N.E.2d 158, 162 (Ind. 2002). Irreparable harm is that harm
which cannot be compensated for through damages upon resolution of the
underlying action. Coates, 942 N.E.2d at 912. The test is whether later money
damages would be “as full and adequate as the equitable remedy.” Barlow v.
Sipes, 744 N.E.2d 1, 6 (Ind. Ct. App. 2001), trans. denied. Injunctive relief may
be granted if it is more practicable, efficient, or adequate than the remedy
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afforded by law. Crossman Communities, Inc. v. Dean, 767 N.E.2d 1035, 1041-42
(Ind. Ct. App. 2002). One purpose of a preliminary injunction is to prevent
harm to the moving party that could not be corrected by a final judgment. Id.[30] In support of its claim, Abercrombie notes that even though some of its stores
vacated Simon malls from 2016 – 2018, Simon was able to generate significant
profits during that time. But in that instance, the trial court observed that those
circumstances arose when the closures had been negotiated and there was time
to locate replacement tenants. More specifically, thirty-three stores closed over
the course of two years as part of ongoing negotiations, whereas here,
Abercrombie threatened to permanently close more than fifty stores without
notice.
[31] Additionally, the trial court’s finding that Abercrombie could pay the remaining
amounts under the leases does not mean that the payment of those amounts
would constitute a complete remedy. The trial court considered evidence
presented by Simon’s expert, John Talbott, a professor at Indiana University’s
Kelley School of Business.2 Talbott averred that shopping centers derive their
success from a mix of tenants, and the stores agree to be open when the malls
are. Talbott explained that the sudden closure of Abercrombie stores would
2
[1] Although Abercrombie alleges that the trial court erroneously relied on Talbott’s affidavit, it offers no cogent
argument in support of that conclusion, and it did not object to the admissibility of his testimony. In any event,
Talbott’s affidavit establishes that he was qualified to testify about the harm that Simon would suffer following a
mass shutdown of Abercrombie’s stores.
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suggest to many that the shopping center is in trouble. And even in ordinary
times, such closures would have a harmful effect on Simon and other mall
tenants.
[32] Talbott noted that sudden closures by known retailers would impose significant
stress on Simon to retain and attract other tenants. He also opined that
customers who consider returning to temporarily closed Simon malls because of
COVID-19 will respond negatively if nationally recognized stores are not
included in the mall shopping experience when the pandemic ends. If other
companies were permitted to vacate their premises only because of the
pandemic, Talbott reasoned that other tenants might very well be tempted to
suddenly depart when considering whether to renew their leases.
[33] Talbott explained that Simon will experience a multi-year battle in adjusting the
manner that its malls operate because of COVID-19 concerns. Talbott believed
that Abercrombie’s decision to abandon and close its stores cannot be
accurately determined and calculated; however, he indicated that the damages
Simon would suffer without an injunction were substantial and beyond what
could be remedied merely by Abercrombie’s payment of a judgment for unpaid
rent.
[34] Given this evidence, it was reasonable for the trial court to conclude that
Abercrombie’s sudden decision to vacate and permanently close its stores
would present irreparable harm to Simon. Thus, the indirect effects of a mass
store closing, along with the consequences of the pandemic, supports the trial
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court’s grant of injunctive relief until a final judgment on the merits may be
rendered.
[35] Judgment affirmed.
Riley, J. and May, J., concur.
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