On November 25, 2020, Indiana's Court of Appeals upheld a trial court's decision granting a preliminary injunction preventing Abercrombie & Fitch Stores, Inc. (Abercrombie) from closing retail stores located in Simon Property Group, L.P. (Simon) shopping malls (Abercrombie & Fitch Stores, Inc. v. Simon Property Group, L.P., (Ind. Ct. App. 2020).

In February 2019, Abercrombie and Simon began negotiating lease agreements for 54 retail stores. Most of the lease agreements expired or were set to expire by January 31, 2020. On January 14, 2020, Abercrombie sent Simon an email finalizing the terms of the leases, which both agreed included all major points of the parties. Abercrombie, , at *5. Thereafter, counsel for Abercrombie and Simon began drafting conforming amendments to the applicable lease agreements. Starting February 2020, Abercrombie paid rent in accordance with the negotiated terms of the lease amendments and continued to occupy the retail stores, including those with expired leases.

In early March 2020, the COVID-19 pandemic began affecting commerce, and many commercial landlords and tenants were forced to close their retail properties under various by state and local government orders requiring non-essential businesses to close. For more information on state and local business closures, see COVID-19: Select State and Local Business Closures and Reopenings Tracker (US).

On Friday, March 13, 2020, Abercrombie sent 42 executed lease amendments for 42 of the 54 retail stores. Three days later, on March 16, 2020, Abercrombie decided to close all retail stores due to the COVID-19 pandemic. On March 17, 2020, Simon began sending electronically signed copies of the lease amendments back to Abercrombie. On March 18, 2020, Simon announced that it was temporarily closing its retail properties throughout the nation after discussions with government officials. That same day, Abercrombie formally retracted its signatures from the 42 lease amendments, blaming the uncertainty caused by the COVID-19 pandemic.

Simon filed a complaint for a declaratory judgment that the lease amendments were valid and enforceable. When Abercrombie made its intention clear to permanently close its retail stores, Simon requested a temporary restraining order (TRO) and a preliminary injunction to prohibit Abercrombie from closing its retail stores. The trial court granted the emergency TRO order in favor of Simon, and a week later granted Simon's request for a preliminary injunction prohibiting Abercrombie from permanently closing its retail stores.

To obtain a preliminary injunction, the moving party must show:

Coates v. Heat Wagons, Inc., 942 N.E.2d 905, 911-12 (Ind. Ct. App. 2011).

The trial court reasoned:

Abercrombie, , at *17.

Abercrombie appealed the case to the Indiana Court of Appeals claiming that:

Abercrombie, , at *24.

The purpose of a preliminary injunction is to maintain the status quo, which is the last, actual, peaceful, uncontested status between parties. Since Abercrombie and Simon were performing under the lease amendments for two months before the COVID-19 pandemic caused Simon to close its shopping malls, the Court of Appeals affirmed the trial court's finding that the status quo was the time period before the COVID-19 pandemic. During that time, Abercrombie's retail stores were open and operational under the lease amendments. The preliminary injunction only prohibited Abercrombie from permanently closing and abandoning those retail stores that were open and operational before the COVID-19 pandemic and did not require Abercrombie to reopen its retail stores in defiance of any state or local government orders.

At the injunction hearing, Simon had the burden of proof to present substantial evidence of its reasonable likelihood of success at trial by showing that the lease amendments were enforceable.

Despite Simon's repeated email correspondence bearing a disclaimer statement that "to be enforceable by or against a party, a final agreement between the parties must also be written and signed by both parties", the Court of Appeals found that:

Abercrombie, , at *25.

The Court of Appeals found that under the facts, there was prima facie evidence of an enforceable contract, despite Simon's email disclaimer.

In recent years, commercial landlords have started to challenge tenants who attempt to close their retail stores. While these holdings are usually based on narrowly tailored fact patterns, counsel for landlords and tenants should be aware that some courts remain open to granting injunctions preventing tenants from closing. For another Indiana case granting Simon a similar preliminary injunction, see Legal Update, Injunction Prevents Starbucks from Closing Teavana Stores in Simon Malls.

In Abercrombie, the Court of Appeals looked at the parties' email correspondence and conduct to establish the existence of an enforceable contract. Counsel for landlords and tenants need to advise clients to be careful with their words and actions when engaging into contract negotiations to avoid being bound before a formal lease agreement or amendment is signed.

For more information on retail leasing, including a commercial landlord's potential duty to mitigate, see: