Johnson & Bell attorneys Carlos Vera and Adam Sedia recently defended a client in Cook County Circuit Court litigation in which the plaintiff sought to enforce a $3.6 million penalty provision in a co-tenant agreement based on an alleged default. The client is a multi-location operator of specialty bakery cafes.
The trial court dismissed the claim with prejudice and the Appellate Court of Illinois, First Judicial District affirmed. The opinion of the court, written by Justice Raymond Mitchell with Justice David Navarro concurring, upheld an earlier ruling by Judge Thomas Donnelly of Cook County. Shareholder Vera handled the litigation in the trial court and associate Sedia prepared and argued the appeal.
The case turned on a dispute between the defendant and the plaintiff, which operated a chain of gift and stationery boutiques, over a co-tenant agreement on a commercial property in Chicago. The plaintiff and the defendant occupied the space together as co-tenants and joint leaseholders but in 2021 the plaintiff filed for bankruptcy. Its joint lease with the defendant was assigned to the plaintiff as part of the asset purchase agreement approved by the bankruptcy court, but the asset purchase agreement did not mention the co-tenant agreement.
The property landlord sent notice of default, and the plaintiff settled, then sued the defendant under the default provisions of the co-tenant agreement. The circuit court dismissed the complaint, finding that the co-tenant agreement was never assigned to the plaintiff's new post-bankruptcy business. The appellate court agreed and held that the co-tenant agreement and the lease were not “inseparable,” and therefore not assigned as one unit. The appellate court also rejected plaintiff’s alternative argument that an implied contract was formed to adopt the terms of the co-tenant agreement.
Sedia commented, “This case illustrates the importance of ensuring that all contractual and business arrangements are in order and highlights the Illinois courts’ pragmatic approach to holding parties to the plain language of their agreements.”
