Facts

Plaintiff Palm Plaza Investors LP leased certain shopping center premises on Santa Monica Blvd. in West Los Angeles to defendant California Healing Art College LLC to conduct a trade school business for health and related educational programs.

Plaintiff pursued binding arbitration with defendant, pursuant to the written lease, claiming it was owed unpaid rent. Defendant filed a counterclaim, alleging plaintiff breached the contract.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended that because of financial difficulties, defendant defaulted on the payment of its monthly rent of about $23,000, for a collective total of $109,700 as unpaid rent through September 2013. More than seven years remained on the lease term.

Plaintiff contended that it used reasonable efforts to repair the roof, that the leaks were minor, and that they did not significantly interfere with defendant's business. Plaintiff contended it attempted to repair the roof, but some leaks persisted. Plaintiff argued that defendant desired to relocate its business to an entirely different area of Los Angeles in hopes that it would be able to attract more students to a new location. Plaintiff claimed that defendant used the claim of roof leaks as a pretext to move its operation, and be excused from staying at the premises for the seven-year remainder of the lease term.

Plaintiff also contended that it used reasonable efforts to mitigate its damages of lost future rent by re-leasing the premises to new tenants. Plaintiff re-leased various portions of the premises to new businesses in an effort to mitigate its damages of lost rent for the balance of the term of its lease with defendant. Plaintiff also maintained that it was entitled to recover the worth at the time of the award, discounted to present value, for the remainder of defendant's lease, less the amounts of rent plaintiff would likely receive from the new tenants.

Plaintiff pursued binding arbitration to recover its unpaid past and forecasted future rent. Plaintiff contended that the burden of proof was on defendant to prove that plaintiff did not reasonably mitigate its damages, but that defendant failed to satisfy that proof.

DEFENDANT'S CONTENTIONS:
Defendant contended that the roof leak interfered with its business enough to constitute a breach of the lease by plaintiff and constructively evicted defendant. Defendant vacated at the end of December 2013 claiming that it was constructively evicted due to plaintiff's failure to abate the roof leakage and defendant's consequent inability to conduct its health and education programs at the property. Defendant then relocated its business to Carson.

Defendant argued that plaintiff was not entitled to future damages of unpaid rent following the time of the arbitration award. Defendant maintained that plaintiff did not prove that plaintiff reasonably sought to mitigate its damages by re-rental.

Defendant filed a counterclaim for $2,877,000 as lost profits because of plaintiff's alleged breach of its contractual obligation under the lease to maintain the integrity of the roof.

Settlement Discussions

Defendant offered plaintiff a percentage ownership of the business, which plaintiff rejected.

Result

An arbitration award for $845,550 in favor of plaintiff was confirmed by the Los Angeles Superior Court. The total judgment in favor of plaintiff and against defendant was for $854,483, which included attorney fees and costs.

Other Information

FILING DATE: Jan. 7, 2014.