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Law360 (June 23, 2020, 10:39 PM EDT ) Jenner & Block LLP's Chicago landlord actually owes the firm $840,000, and the landlord's claim that the firm is more than $3.7 million behind on its rent is false thanks to a rent abatement provision triggered by the COVID-19 pandemic, Jenner & Block said Tuesday in response to the landlord's Illinois state court lawsuit.
In an answer to the May contract suit from Hart 353 North Clark LLC, an affiliate of global real estate investment management firm Heitman LLC, the law firm claims that the landlord's complaint failed to attach the actual lease, which "contains clear and explicit, hard-negotiated rent abatement provisions" and proves that Jenner & Block paid Hart 353 everything it is owed.
"Jenner & Block negotiated the abatement provisions in 2005 to cover any unforeseen event, such as a pandemic, that could result in Jenner & Block's inability to use and occupy its space in the normal course of business as reasonably determined by Jenner & Block," the firm said.
The firm made this determination in March, following a "thorough, careful process," it said, noting that it hasn't used at least 89% of its space since March 16, dropping from 579 in-office workers to a skeleton crew of, on average, 12.
The firm's answer attaches both a copy of the lease and a declaration from real estate developer Richard Stein, whom the firm claims was the lead negotiator "across the table" from Jenner & Block when the 15-year, $185 million lease was hammered out in 2005.
"I believe that ... Jenner & Block is not obligated to pay rent for the material amount of space that it has reasonably determined it cannot use as it intended in the normal course of business as a result of the COVID-19 pandemic," he said. "I believe the current pandemic is the very type of disruptive event to which Jenner & Block was referring in lease negotiations and for which Jenner & Block sought and received protection, in the form of rent abatement."
The landlord says in the May 20 lawsuit in Cook County Circuit Court that Jenner & Block didn't pay its rent for April and May and owes $3,726,415.74, plus late fees and interest. Jenner & Block leases approximately 416,297 square feet of office space in the downtown Chicago tower at 353 N. Clark St., the suit says.
The complaint alleges the law firm didn't pay the delinquent rent within five days of receiving written notice of nonpayment, constituting a default of the lease agreement.
The landlord claims the firm also owes roughly $68,000 in "unpaid reconciliations" from 2018 and about $92,000 in unpaid cafe charges.
On Tuesday, however, the firm says it's the landlord that in fact owes it money.
"The total credits due to Jenner & Block for overpaid March rent ($694,898), 2017 reimbursable expenses ($121,557), and 2019 operating expenses and property taxes ($643,641) is over $1.4 million," the firm said. "After using those credits to pay the abated rent which Jenner & Block was required to pay for April, May, and June 2020, it is the landlord who owes Jenner & Block a residual credit of over $840,000."
David J. Bradford, a Jenner & Block partner who's representing the firm in the case, said that the firm has met its obligation under the lease agreement.
"Like many other businesses around the world, we have prioritized the health and safety of our workforce during the COVID-19 pandemic," he said in an email. "Years ago, we negotiated a lease that provides flexibility for circumstances like this one when our workforce works from home because we are unable to use our Chicago office space as intended."
Representatives for the landlord did not immediately respond to requests for comment Tuesday.
Hart 353 North Clark LLC is represented by John M. Riccione, William J. Serritella Jr. and Brianna M. Skelly of Taft Stettinius & Hollister LLP.
Jenner & Block LLP is represented in-house by David J. Bradford, Andrew W. Vail, and Abraham M. Salander.
The case is Hart 353 North Clark LLC v. Jenner & Block LLP, case number 2020L005476, in the Circuit Court of Cook County.
--Additional reporting by Celeste Bott. Editing by Orlando Lorenzo.
Update: This story has been updated with comment from Jenner & Block.
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