Ruling barring Abercrombie & Fitch from closing Simon stores upheld

The Indiana Court of Appeals has affirmed a preliminary injunction for Indianapolis-based Simon Property Group that prevented retail clothing store Abercrombie & Fitch from permanently closing stores in dozens of Simon malls.

In February 2019, Abercrombie & Fitch Stores, Inc. began negotiating 54 lease agreements with Simon Property Group, L.P. that involved various lease terms and store relocations. 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.

An agreement between the parties 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 Jan. 31, 2020.

The parties continued negotiating amendments to the agreement into early March 2020, and Abercrombie that month sent Simon the executed lease amendments. Although Abercrombie had sent the executed documents to Simon, Abercrombie decided to close all stores effective March 16 because of the COVID-19 pandemic.

When Simon announced that it was temporarily closing its malls across the country due to COVID-19, Abercrombie sent a letter to Simon formally retracting the signatures on 42 leases and amendments. Its only stated reason for the retraction was “the current uncertainty regarding the impact of COVID-19.”

Eventually, Abercrombie made clear its intention to permanently close and abandon the stores that were included in the agreement, prompting Simon to seek a temporary restraining order and a preliminary injunction. Simon sought to prohibit Abercrombie from permanently closing its stores, and the Marion Superior Court granted an emergency temporary restraining order in Simon’s favor.

The trial court granted Simon a preliminary injunction and ordered Abercrombie not to permanently close its stores, setting bond at $15 million. The court concluded that Simon established a prima facie case that there was an enforceable agreement; that Abercrombie’s sudden closures would cause Simon irreparable harm; the threatened irreparable harm to Simon outweighed any potential pecuniary harm to Abercrombie resulting from an injunction; and the public interest would not be disserved by the granting of an injunction.

Appealing in Abercrombie and Fitch Stores, Inc. v. Simon Property Group, L.P., 20A-CT-1092, Abercrombie claimed that the trial court’s order must be set aside because it erred in issuing an “improper mandatory injunction.”

Noting that 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 appellate court found that the circumstances at hand had 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,” Judge Robert Altice wrote for the appellate court.

Additionally, the appellate court found 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 court’s grant of injunctive relief until a final judgment on the merits may be rendered,” the appellate panel concluded.