Judge tosses law firm Schulte's $38 million COVID-19 rent refund lawsuit

By Sara Merken

July 10 (Reuters) - A New York state judge on Wednesday dismissed U.S. law firm Schulte Roth & Zabel's lawsuit against its Manhattan landlord that sought a rent abatement of more than $38 million due to COVID-19 restrictions.

Justice Andrea Masley in her order said Schulte failed to prove that the firm and its landlord, Metropolitan 919 3rd Avenue LLC, intended a rent abatement provision in their 1998 lease in a manner that Schulte argued would cover disruption to the building's use during the pandemic.

The judge held a bench trial in 2023 that she said hinged in part on Schulte and the landlord's intent when originally entering into the lease, and whether an "unavoidable delay" in accessibility alone would trigger the abatement provision or if it would also require a failure by the landlord to provide certain services.

A Schulte spokesperson in a Thursday statement said the firm is disappointed by the decision.

Lawyers for the landlord did not immediately comment.

Other large law firms brought legal actions against their landlords over rent during the pandemic.

Crowell & Moring has turned to former U.S. Solicitor General Donald Verrilli Jr., who is now at Munger, Tolles & Olson, to lead its appeal of a judge's decision last year that said the law firm cannot force its Washington, D.C., landlord to refund $30 million in rent that the firm paid when most of its lawyers worked from home during the pandemic.

Schulte plans to merge with larger firm McDermott Will & Emery next month. The firms have said the combined firm, which will be called McDermott Will & Schulte, will be the ninth largest law firm in New York.

The case is Schulte Roth & Zabel LLP v. Metropolitan 919 3rd Avenue LLC, In Its Individual Capacity And As Successor In Interest To 919 Third Avenue Associates L.P., New York County Supreme Court, No. 655632/2020.

For the plaintiff: Peter Wang of Foley & Lardner

For the defendant: Janice Mac Avoy of Fried Frank