Connecticut Supreme Court’s landmark landlord-tenant decision addressing the implications of the COVID-19 pandemic and resolving the question of who bears the burden of proof regarding the duty to mitigate damages | Murtha Cullina

On May 10, 2022, the Connecticut Supreme Court issued an extremely important decision in AGW Sono Partners, LLC v. Downtown Soho, LLC, et al. (SC 20625), addressing several COVID-19-related defenses asserted by commercial tenants in the wake of government executive order closures and the pandemic as a whole. The Court also resolved the issue of who bears the burden of proof regarding the duty to mitigate damages.

In AGW Sono Partners, the tenant, a restaurant and bar operator, stopped paying rent due to the effects of governor’s executive orders forcing his business to close, as well as the effects of the pandemic. The landlord exercised his rights under the law and the lease and terminated the lease. The tenant eventually moved out. The lessor brought an action to recover unpaid rent and damages resulting from the breach of the commercial lease. The tenant asserted several defenses, including in particular the defenses based on the doctrine of impossibility and the destruction of purpose. Following a trial, the trial court entered judgment in favor of the landlord, finding that the tenant was not exempt from his rental obligations based on the doctrines of impossibility and frustration of the goal. The trial court granted a monetary judgment, but did not award all damages to the owner, saying there was not enough information regarding the mitigation of damages.

The Supreme Court upheld the trial court’s decision regarding the defense of impossibility, finding that the effects of the executive order and the pandemic did not make it impossible to perform the obligations of the lease. The Supreme Court agreed with the trial court that even under the most restrictive executive orders, enforcement was not rendered entirely impossible since the restaurant could still have provided curbside or take-out service, and notably the lease did not prohibit this from happening. Further, the Supreme Court noted that although the lease did not contain a force majeure clause, the lease had other wording that made it clear that the defendant/tenant had an obligation to comply with all laws, ordinances and regulations, and to the extent that there was forgiveness in a crisis situation, the lease only relieves the obligations of the plaintiff/landlord.

Similarly, the Supreme Court upheld the trial court’s decision regarding the goal annihilation defence. The Supreme Court, acknowledging that the doctrine is interpreted narrowly, concluded that the purpose of the lease was not frustrated by executive orders or the pandemic. Again, the Supreme Court pointed out that the language of the lease did not limit certain types of meals and did not preclude take-out or subsequent outdoor dining.

Finally, the Supreme Court considered the question of who bears the burden of proof with respect to the mitigation of damages. The Court first repeated a well-established law in Connecticut that when a landlord chooses to terminate a lease and pursue a claim for breach of contract, the landlord is obligated to mitigate its damages. Although it was the tenant who raised the defense of non-mitigation of damages, the trial court placed the onus on the landlord to prove its mitigation efforts and found that the landlord failed to present sufficient evidence. information, thereby reducing damage. The Supreme Court, if not, recognize that it was an unresolved law in Connecticut, held that where a tenant has breached a lease, the onus is on the tenant to prove that the landlord failed to undertake commercially reasonable efforts to mitigate its damages. Therefore, the Supreme Court quashed and returned this case to the trial court only with respect to a new action for damages.