Court Opinion

ID: 4637283
Source: CourtListenerOpinion
Date Created: 2020-11-25 16:03:31.54515+00
Date Added: 2024-06-11T07:58:40.231586
License: Public Domain

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

      Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020    Page 2 of 16
      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.

      Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020     Page 3 of 16
[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.

      Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020      Page 4 of 16
[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.

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020                         Page 5 of 16
       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.

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020   Page 6 of 16
[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

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020            Page 7 of 16
                 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

Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020         Page 8 of 16
       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
       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020       Page 9 of 16
       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.

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020    Page 10 of 16
[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.

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020    Page 11 of 16
[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

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020    Page 12 of 16
       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

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020   Page 13 of 16
       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.

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020                                   Page 14 of 16
       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

       Court of Appeals of Indiana | Opinion 20A-CT-1092 | November 25, 2020   Page 15 of 16
       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.

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