Abercrombie and Fitch Stores, Inc. v. Simon Property Group, L.P.

FILED

Nov 25 2020, 8:08 am

CLERK

Indiana Supreme Court

Court of Appeals

and Tax Court

ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE

F. Paganelli Wayne C. Turner

Caroline E. Richardson Michael R. Limrick

Stephanie L. Grass Kenneth J. Munson

Indianapolis, Indiana Che’lee A. John

Indianapolis, Indiana

IN THE

COURT OF APPEALS OF INDIANA

Abercrombie and Fitch Stores, November 25, 2020

Inc. Court of Appeals Case No.

Appellant-Defendant, 20A-CT-1092

Appeal from the Marion Superior

v. Court

The Honorable Heather A. Welch,

Simon Property Group, L.P., Judge

Appellee-Plaintiff. Trial Court Cause No.

49D01-2004-PL-13294

Altice, Judge.

Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020 Page 1 of 16

Case Summary

[1] Abercrombie & Fitch Stores, Inc. (Abercrombie) appeals the trial court’s grant

of a preliminary injunction in favor of Simon Property Group, L.P. (Simon)

that prohibited Abercrombie from permanently closing its retail stores in Simon

malls. Abercrombie claims that the trial court improperly entered a mandatory

injunction rather than granting prohibitory injunctive relief because

Abercrombie was ordered to take more action than was necessary to preserve

the status quo. Abercrombie also contends that the trial court abused its

discretion because the evidence did not show that Simon was likely to prevail

on the merits of its breach of contract claims at trial, and there was no showing

that Simon would suffer irreparable harm if injunctive relief was not granted.

[2] We affirm.

Facts and Procedural History

[3] Abercrombie operates retail clothing stores throughout the United States in

Simon malls. Over the past several years, the parties have negotiated groups of

new and renewal leases in “packages” that establish terms for multiple stores.

Appellant’s Brief at 6.

[4] The parties began negotiating fifty-four lease agreements in early February

2019, that involved various lease terms and store relocations (Agreement).

Johnny Ciotola, Abercrombie’s store director, negotiated the terms for

Abercrombie and its in-house legal counsel, Jennifer Mason, was responsible

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for finalizing the documentation. Pervis Bearden and Daniel Seabaugh

negotiated the terms for Simon, and attorney Elizabeth Young would confirm

the final terms. 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.

[5] On January 14, 2020, Ciotola sent an email to Bearden stating that “per our

most recent communication(s), we can agree to the [attached] package terms

that is understood by both parties to be the final position.” Appellant’s Appendix

Vol. II at 11, 189-94. That email set forth the length of each lease,

Abercrombie’s rent obligation, the terms upon which Abercrombie would open

new stores, and the location of the stores that would be closing. Ciotola and

Mason each confirmed that this email contained all “major points” of the

parties’ dealings. Appellant’s Appendix Vol. V at 11.

[6] On January 15, Young and Mason confirmed that a “bunch of deals [had been]

approved” following “very thorough negotiations,” and that they would begin

drafting the conforming documents. Appellant’s Appendix Vol. III at 41.

Abercrombie and Simon representatives continued to exchange emails about

some of the non-substantive lease provisions. All of Simon’s email responses

included language stating that “to be enforceable by or against a party, a final

agreement between the parties must also be written and signed by both parties.”

Exhibit A-2.

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[7] On January 23, 2020, Mason acknowledged that she had received a draft of the

lease documentation from Young. It was her understanding that an

“agreement [was] reached between [the parties and] documented in [the

January 14] email” from Ciotola to Bearden. Exhibit 2.

[8] The Agreement 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 January 31, 2020.

[9] Although Abercrombie closed five of its stores as contemplated in the

Agreement, the parties continued negotiating amendments to the Agreement

into early March 2020, and they revised some non-substantive terms in several

leases. Each time one of Simon’s attorneys forwarded a proposed amendment

to Abercrombie, the attached documents were prefaced with the following

language: “If the amendment is in acceptable form, please have two (2) clean,

legal sized copies of the amendment executed and return both copies to my

attention at your earliest convenience, and I will thereafter return a fully-

executed original for your files.” Appellant’s Appendix Vol. V at 60.

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[10] By March 10, Abercrombie had completed edits on the remaining lease

documents, and Mason encouraged Young to have the documents executed “as

quickly as possible.” Appellant’s Appendix Vol. III at 39, 51. On March 13,

Simon accepted Abercrombie’s final proposed language to the Agreement.

Thereafter, Mason was provided with an “execution-ready” version of the

Agreement that contained no material deviations from the original and essential

terms that were included in Ciotola’s January 14, 2020 email. Id. at 16.

[11] Also on March 13, Abercrombie sent Simon the executed lease amendments

with Abercrombie representatives’ original handwritten signatures in three

separate packages. These documents represented forty-two of the fifty-four

stores that had been the subject of the original negotiations. As with past

correspondence, the cover letters in each package provided that “the documents

have been originally signed by Tenant. Upon counter-execution by landlord,

please return one fully executed original copy. . . .” Appellant’s Appendix Vol. 5

at 57-59. Although Abercrombie had sent these executed documents to Simon,

Abercrombie decided to close all stores effective March 16, 2020, because of the

COVID-19 pandemic. 1

[12] Beginning at 4:20 p.m. on March 17, 2020, Simon began sending electronically

signed copies of the lease amendments to Abercrombie by email. On March

18, Simon announced that it was temporarily closing its malls across the

1

The evidence does not reflect whether Abercrombie communicated its decision to close the stores to Simon

at this point.

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country after discussing the spread of COVID-19 with federal state and local

officials. That same day, Abercrombie sent a letter to Simon formally retracting

the signatures on forty-two leases and amendments. Abercrombie’s only stated

reason for the retraction was “the current uncertainty regarding the impact of

COVID-19.” Id. at 203. Abercrombie also stated that the Agreement “shall be

of no further force or effect.” Id. (Emphasis added).

[13] Abercrombie did not provide Simon with executed copies of the remaining

lease documents or the settlement document contemplated under the

Agreement. Simon rejected Abercrombie’s retraction on the grounds that

Abercrombie had repeatedly confirmed the Agreement, and that the parties had

been fully performing under the Agreement for nearly two months.

[14] Notwithstanding Abercrombie’s retraction letter, Simon continued forwarding

executed documents to Abercrombie for signature. By March 20, 2020,

Abercrombie had paid its second month of rent at the lower rate under the

Agreement. On March 27, Abercrombie sent notices of termination to

landlords at the locations where the leases had expired on or before January 31,

2020. Abercrombie instructed the landlords to consider the leases as month-to-

month tenancies from that day forward.

[15] On April 7, 2020, Simon filed a complaint against Abercrombie, seeking a

declaratory judgment that the Agreement was valid and enforceable. Simon

also sought damages and specific performance for Abercrombie’s breach of the

Agreement.

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[16] Three weeks later, Abercrombie made clear its intention to permanently close

and abandon the stores that were included in the Agreement. In response,

Simon sought a temporary restraining order and a preliminary injunction on

April 27, 2020, seeking to prohibit Abercrombie from permanently closing its

stores. The trial court granted an emergency temporary restraining order in

Simon’s favor on May 1, 2020.

[17] Following a hearing on the motion for preliminary injunction on May 8, 2020,

the trial court granted Simon’s motion and ordered Abercrombie not to

permanently close its stores. The trial court set a bond at $15 million and

determined that (a) Simon established a prima facie case that there was an

enforceable Agreement; (b) Abercrombie’s sudden closures would cause Simon

irreparable harm; (c) the threatened irreparable harm to Simon outweighed any

potential pecuniary harm to Abercrombie resulting from an injunction; and (d)

the public interest would not be disserved by the granting of an injunction.

[18] The trial court’s order provided that

A. Abercrombie & Fitch Stores, Inc., its agents, successors,

parent, subsidiary or affiliate companies, and all those persons

and entities in active concert or participation with them are

ENJOINED, in any manner, either directly or indirectly from:

i. removing all inventory, all fixtures, or all equipment

from the 53 stores at issue in this action for the purpose of

closing those stores; however, [Abercrombie] stores can

reallocate its inventory to other stores or to reserve for

online sales but must maintain sufficient amounts of

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inventory in each store to operate per the terms of its lease;

and

ii. otherwise abandoning the 53 stores at issue in this

action pursuant to A&F Stores’ unilateral declaration that

the leases for those stores have terminated. [Abercrombie]

stores should operate per the terms of the lease documents

drafted pursuant to the [Agreement], thereby maintaining

the status quo.

Appellant’s Appendix Vol. 2 at 45-46. Abercrombie now appeals.

DISCUSSION AND DECISION

I. Standard of Review

The grant or denial of a preliminary injunction rests within the sound discretion

of the trial court, and appellate review is limited to whether there was a clear

abuse of that discretion. Indiana Family & Social Servs. Admin. v. Walgreen Co.,

769 N.E.2d 158, 161 (Ind. 2002). When considering whether a trial court’s

grant of a party’s motion for a preliminary injunction constitutes an abuse of

discretion, this court determines whether the evidence supports the trial court’s

special findings of fact and whether the findings support the judgment. Hannum

Wagle & Cline Engineering, Inc. v. American Consulting, Inc., 864 N.E.3d 863, 874

(Ind. Ct. App. 2016). Findings of fact are clearly erroneous when the record

lacks evidence or reasonable inferences from the evidence to support them. Id.

A judgment is clearly erroneous when a review of the record leaves the

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reviewing court with a firm conviction that a mistake has been made. Robert’s

Hair Designers, Inc. v. Pearson, 780 N.E.2d 858, 863 (Ind. Ct. App. 2002).

[19] This court has determined that

An injunction is an extraordinary remedy that should be granted

only with caution. Injunctions must be narrowly tailored and

never more extensive in scope than is reasonably necessary to

protect the interests of aggrieved parties. Moreover, the

injunction should not be so broad as to prevent the enjoined

party from exercising his rights. If an injunction is more

extensive than is reasonably necessary to protect a party’s

interests or unduly prevents a party from exercising his rights, we

may remand to the trial court for revision.

William J. Huff, II Revocable Trust Declaration, Dated June 28, 2011 v. Cain, 120

N.E.3d 1029, 1086 (Ind. Ct. App. 2019) (internal citations omitted).

[20] We note that the purpose of a preliminary injunction is to maintain the status

quo. AGS Capital Corp. v. Product Action Int’l, LLC, 884 N.E.2d 294, 314 (Ind.

Ct. App. 2008), trans. denied. To obtain a preliminary injunction, the moving

party must show by a preponderance of the evidence that: (1) its remedies at

law are inadequate and that irreparable harm will occur during the pendency of

the action as a result; (2) it has at least a reasonable likelihood of success on the

merits by establishing a prima facie case; (3) the threatened harm it faces

outweighs the potential harm the injunction would pose to the non-moving

party; and (4) the public interest would not be disserved by granting the

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

2011). Reversal of an injunction on the “likelihood of success” factor is

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warranted only if “the likelihood of success is so improbable as to render the

trial court’s determination erroneous as a matter of law.” Norlund v. Faust, 675

N.E.2d 1142, 1149 (Ind. Ct. App. 1997), trans. denied.

II. Abercrombie’s Claims

A. Prohibitory vs. Mandatory Injunction

[21] Abercrombie claims that the trial court’s order must be set aside because it erred

in issuing an “improper mandatory injunction.” Appellant’s Brief at 31. More

particularly, Abercrombie asserts that the trial court erroneously construed the

status quo position of the parties as being the period prior to Abercrombie’s

March 16 decision to close all stores. Abercrombie contends that March 17,

2020, was the appropriate date that the trial court should have considered,

which was just prior to Simon’s filing of the action and when its stores were

already temporarily closed due to pandemic concerns. Hence, Abercrombie

asserts that the trial court’s order improperly compelled it to take an action and

engage in an activity that it had not otherwise been doing, i.e., reopen nearly

fifty stores that it had already closed.

[22] The status quo of the parties is determined as of the “last, actual, peaceful, and

non-contested status which preceded the pending controversy.” Hannum, 64

N.E.3d at 883. Under this test, Abercrombie’s argument that the final pre-

dispute status occurred when Abercrombie’s stores were temporarily closed

because of COVID-19 mischaracterizes the issue before the trial court and

ignores the trial court’s findings based on the evidence.

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[23] 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 circumstances here have 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.

B. Appropriateness of Relief

[24] Abercrombie contends that the trial court abused its discretion in granting

injunctive relief for Simon because the evidence failed to show that Simon will

prevail on the merits at trial. Notwithstanding Abercrombie’s claim, Simon’s

burden was to present substantial evidence at the injunction hearing

establishing that it had a reasonable likelihood of success at trial. IHSAA v.

Martin, 731 N.E.2d 1, 7 (Ind. Ct. App. 2000), trans. denied. Put another way,

Simon was not required at the preliminary injunction stage to show that it was

“entitled to relief as a matter of law.” Norlund, 675 N.E.2d at 1149.

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[25] We note that absolute certainty of all contract terms is not required for a

contract to be enforceable. Rather, the parties must only agree to the essential

terms to render an agreement enforceable. Conwell v. Gray Loon Outdoor Mktg.

Grp., Inc, 906 N.E.2d 805, 813 (Ind. 2009). Additionally, the parties’

performance under an agreement will amount to an unambiguous and overt

admission by both parties that a contract existed. Int’l Creative Mgmt, Inc. v. D &

R Entm’t Co., 670 N.E.2d 1305, 1313 (Ind. Ct. App. 1996), trans. denied.

[26] In this case, the evidence established that Ciotola’s email of January 14, 2020 to

Bearden stated the essential terms for each lease at issue. Abercrombie

acknowledged that the email included the “major points of the parties’ ongoing

discussions to which Abercrombie could agree,” including the new rent rate

and lease extensions. Appellant’s Brief at 8. The parties intended to be bound by

the Agreement as shown by Abercrombie’s repeated statements that it had

reached an agreement with Simon and that negotiations were complete.

Notwithstanding the disclaimer language set forth in the parties’ email

exchanges, Abercrombie kept its stores open after January 31, 2020, and it paid

the decreased rent amount for two months under the Agreement. Simon

accepted the lower rent payments, and Abercrombie proceeded with its store

relocation plans and closures contemplated by the Agreement.

[27] The parties went on to prepare and finalize all lease documentation, Simon

approved the final draft of the rent-dispute settlement agreement that

Abercrombie had distributed, and Abercrombie executed forty-three lease

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agreements that the parties had negotiated before this dispute began.

[28] In light of this evidence, we conclude that Simon has presented prima facie

evidence of an enforceable Agreement. The evidence supports the trial court’s

findings, and the trial court’s judgment is supported by the findings. Thus, the

trial court did not abuse its discretion in concluding that Simon established a

likely chance of success at trial proving that Abercrombie’s intention to close

their stores before the lease extensions expired —along with its failure to make

the agreed-upon rent payments—would constitute a breach of the Agreement.

See Wolvos v. Meyer, 668 N.E.2d 671, 678 (Ind. 1996) (finding that the parties

agreed to certain enforceable terms of an agreement with the expectation that

they would execute a complete agreement in the future, and “a mere reference

to a more formalized contract does not void the presently existing agreement”).

[29] Abercrombie also argues that the preliminary injunction must be set aside

because Simon failed to show that it would be subject to irreparable harm in the

absence of an injunction. Simon’s initial burden was to demonstrate that

“remedies at law were inadequate, thus causing irreparable harm pending

resolution of the substantive action.” Ind. Family & Soc. Svcs. Admin. v.

Walgreen, Inc., 769 N.E.2d 158, 162 (Ind. 2002). Irreparable harm is that harm

which cannot be compensated for through damages upon resolution of the

underlying action. Coates, 942 N.E.2d at 912. The test is whether later money

damages would be “as full and adequate as the equitable remedy.” Barlow v.

Sipes, 744 N.E.2d 1, 6 (Ind. Ct. App. 2001), trans. denied. Injunctive relief may

be granted if it is more practicable, efficient, or adequate than the remedy

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afforded by law. Crossman Communities, Inc. v. Dean, 767 N.E.2d 1035, 1041-42

(Ind. Ct. App. 2002). One purpose of a preliminary injunction is to prevent

harm to the moving party that could not be corrected by a final judgment. Id.

[30] In support of its claim, Abercrombie notes that even though some of its stores

vacated Simon malls from 2016 – 2018, Simon was able to generate significant

profits during that time. But in that instance, the trial court observed that those

circumstances arose when the closures had been negotiated and there was time

to locate replacement tenants. More specifically, thirty-three stores closed over

the course of two years as part of ongoing negotiations, whereas here,

Abercrombie threatened to permanently close more than fifty stores without

notice.

[31] Additionally, the trial court’s finding that Abercrombie could pay the remaining

amounts under the leases does not mean that the payment of those amounts

would constitute a complete remedy. The trial court considered evidence

presented by Simon’s expert, John Talbott, a professor at Indiana University’s

Kelley School of Business.2 Talbott averred that shopping centers derive their

success from a mix of tenants, and the stores agree to be open when the malls

are. Talbott explained that the sudden closure of Abercrombie stores would

2

[1] Although Abercrombie alleges that the trial court erroneously relied on Talbott’s affidavit, it offers no cogent

argument in support of that conclusion, and it did not object to the admissibility of his testimony. In any event,

Talbott’s affidavit establishes that he was qualified to testify about the harm that Simon would suffer following a

mass shutdown of Abercrombie’s stores.

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suggest to many that the shopping center is in trouble. And even in ordinary

times, such closures would have a harmful effect on Simon and other mall

tenants.

[32] Talbott noted that sudden closures by known retailers would impose significant

stress on Simon to retain and attract other tenants. He also opined that

customers who consider returning to temporarily closed Simon malls because of

COVID-19 will respond negatively if nationally recognized stores are not

included in the mall shopping experience when the pandemic ends. If other

companies were permitted to vacate their premises only because of the

pandemic, Talbott reasoned that other tenants might very well be tempted to

suddenly depart when considering whether to renew their leases.

[33] Talbott explained that Simon will experience a multi-year battle in adjusting the

manner that its malls operate because of COVID-19 concerns. Talbott believed

that Abercrombie’s decision to abandon and close its stores cannot be

accurately determined and calculated; however, he indicated that the damages

Simon would suffer without an injunction were substantial and beyond what

could be remedied merely by Abercrombie’s payment of a judgment for unpaid

rent.

[34] Given this evidence, 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

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court’s grant of injunctive relief until a final judgment on the merits may be

rendered.

[35] Judgment affirmed.

Riley, J. and May, J., concur.

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