Complex Commercial Litigation Section Review
Earlier this year, the Business Litigation Session granted a commercial landlord a preliminary injunction requiring its tenant to pay rent. The decision came in Waltham Centerpoint I Investment Group, LLC v. Generation Bio Co., 2484-cv-00462-BLS2. The tenant, Generation Bio, leased commercial lab space in Waltham from Centerpoint. Generation Bio gave Centerpoint notice that it was terminating the lease, vacated the premises, and stopped paying rent after it alleged that Centerpoint had committed a material breach of the lease by rejecting several proposed improvement plans. Centerpoint filed suit requesting damages for breach of contract and a declaratory judgment that Generation Bio had no right to terminate the lease or withhold rent. Generation Bio asserted counterclaims for breach of contract and violation of Chapter 93A.
Centerpoint prevailed on a motion for partial summary judgment, with Judge Debra Squires-Lee holding that Generation Bio's obligation to pay rent was independent of the landlord's covenants in the lease. Generation Bio therefore had no right to withhold rent or terminate the lease, even if it could establish that Centerpoint had breached the lease by withholding approval of the tenant improvement plans.
When Generation Bio declined to pay rent to Centerpoint, Centerpoint filed a motion for a preliminary injunction to compel Generation Bio to pay up. In granting Centerpoint's motion, Judge Kenneth Salinger found that Judge Squires-Lee's decision established that Centerpoint was likely to prevail on its claim for breach of contract. Judge Salinger pointed to the language in the lease that stated, in part, "[w]ithout limiting the generality of the foregoing, Tenant's covenant to pay rent is independent of every other covenant in this Lease." Judge Salinger noted that the "effect of this provision is to negate the common law rule of mutually dependent covenants, under which a landlord's material breach of a commercial lease may be an affirmative defense to a claim for non-payment of rent or damages equivalent to rent."
The enforcement of this language is notable, but its presence in a commercial lease is not surprising. More than 20 years ago in Wesson v. Leone Enterprises, 437 Mass. 708, 709 (2002), the Supreme Judicial Court abandoned the rule of independent covenants in commercial leases in favor of the "modern rule" of mutually dependent covenants. Undergirding the modern rule is the conception of "leases as contracts for the possession of property." Id. at 717. But just as leases are contracts, parties to the lease can contract around the rule of mutually dependent covenants. Here, the parties did so. Judge Salinger's decision finding Generation Bio liable to Centerpoint simply acknowledged the caveat in Wesson that parties to a lease can "validly agree otherwise" and jettison the rule of mutually dependent covenants. This caveat has been lurking in Massachusetts law for over 20 years. As Generation Bio discovered, tenants should tread very cautiously when their leases have reclaimed the rule of independent covenants.
While the substantive discussion about dependent versus independent covenants is notable, what is eye-catching about Judge Salinger's decision is the award of injunctive relief in the form of the payment of money — specifically, the payment of back rent and future rent and related charges as they come due under the lease. It is blackletter law that "economic harm alone" does not establish "irreparable harm," and one might have thought that this oft-cited maxim would have stopped Centerpoint's request in its tracks. Judge Salinger, however, credited Centerpoint's testimony that without rent payments from Generation Bio, it would not have the resources necessary to fund significant tenant improvements required to lease out additional commercial lab space on the Waltham campus. The irreparable harm was not the nonpayment of rent per se but the potential "loss of significant business opportunities whose value cannot be readily quantified." This is the second flare sent up in the night sky for tenants. Be mindful of language in your commercial leases creating independent covenants; but beware of the prospect of being compelled to pay significant rent damages to your landlords during the pendency of litigation.
Originally published by Massachusetts Bar Association
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