Pennsylvania Superior Court Orders Airport To Reinstate Lease With Concession Provider, After Airport Officials Wrongfully Called Police To Escort The Provider’s Employees Off The Premises
May 15, 2023
By: Carl L. Engel
On May 9, 2023, the Pennsylvania Superior Court, in the case Fraport Pittsburgh, Inc. v. Allegheny County Airport Authority, reversed a trial court’s denial of a preliminary injunction to restore a commercial tenant’s lease with an airport. After a tenant’s employees were removed by police from the airport for alleged violations of its lease, the tenant filed an emergency motion for a preliminary injunction, asking the court to order the airport to allow the tenant’s employees back on site. The trial court refused, finding that the tenant could be compensated with money damages for its loss of the space, so there was no “irreparable harm” to the tenant. The Superior Court reversed, however, because (i) leased space is unique as a matter of law, and cannot be compensated by money damages alone, and (ii) the airport cannot be rewarded for using the police to evict its tenant and abandoning proper legal channels. Now, the airport must let the tenant’s employees back on site, so the tenant can operate under the lease.
The Allegheny County Airport Authority (the “ACAA”) owns and operates Pittsburgh International Airport. In 1991, the ACAA and Fraport Pittsburgh Inc. entered into a “Master Lease” agreement, under which Fraport acts as the “Master Concessionaire and Lessee” who is in charge of subletting all of the airport’s commercial spaces to various restaurants, retail stores, and other concessions. Fraport also collects rent from the airport’s commercial tenants, manages logistics of the commercial spaces, and ensures subtenant compliance with airport regulations. Fraport pays ACAA a monthly rent based on the rents received from subtenants in the prior month. The parties had renewed the Master Lease several times, most recently in 2012, and it is scheduled to expire on December 31, 2029.
In the summer of 2021, the ACAA approached Fraport to discuss buying out the Master Lease, rather than letting it run through 2029. The ACAA made an offer of $5,000,000, which was rejected by Fraport. Fraport stated that it was willing to negotiate a sale at a higher price, but the ACAA refused to negotiate further.
Between September of 2021 and June of 2022, the ACAA attempted to identify “events of default” under the Master Lease, which would allow the ACAA to terminate it if Fraport did not cure them within five days. These infractions included alleged failures to conduct sufficient daily inspections and to report supposed security risks in subtenant locations. Whenever Fraport cured an alleged “event of default,” the ACAA would find new ones. This back-and-forth culminated on the morning of June 15, 2022, when the ACAA terminated the Master Lease without prior notice and removed Fraport’s employees from the airport via police escort.
Fraport promptly filed motions for special and preliminary injunctions. On June 16, 2022, the trial court granted the special injunction pending resolution of the preliminary injunction. The special injunction returned Fraport and its employees back to the airport to conduct business as usual. However, it was “clear” to the trial court that an injunction was “untenable long term,” because the ACAA’s personnel constantly supervised Fraport, thereby hampering performance of their jobs and raising tensions.
At the evidentiary hearing on the preliminary injunction, the trial court found that “the ACAA’s grounds for termination were ‘dubious,’ its conduct was tantamount to harassment, and its reasons for termination were essentially manufactured.” Even so, it denied the preliminary injunction based on a finding that Fraport could be compensated for the loss with monetary damages, and therefore had not been “irreparably harmed” by the ACAA’s wrongful termination of the Master Lease. In reaching its conclusion, the trial court reasoned that the Master Lease was a services contract, rather than a conveyance of unique property, because the “predominant characteristics of the contract” concerned the performance of services in connection with managing the commercial spaces.
Fraport appealed. The Superior Court reversed the trial court and ordered it to enter a preliminary injunction restoring Fraport’s rights under the Master Lease. At the outset, the Superior Court disagreed with the trial court’s finding that the Master Lease was predominately a services contract, rather than a conveyance of property. To the contrary, they found that the Master Lease stated plainly that “[n]othing contained in this Agreement is intended to create or establish any relationship other than that of lessor and lessee.” The court also found other typical characteristics of a lease, such as a requirement for Fraport to pay rent in exchange for “quiet enjoyment of the premises.”
The Superior Court next found that the trial court had erred by observing no irreparable harm to Fraport. In Pennsylvania, the loss of an interest in real property constitutes “irreparable harm” as a matter of law, because each parcel of real estate is considered unique. The court explained that if real estate were not considered unique, and if owners could be compensated with money damages, property owners could effectively be forced to sell their land to squatters or other bad actors. Accordingly, Fraport’s loss of the use of the commercial space in the airport was “irreparable harm” that could not be fully compensated by money damages, and the preliminary injunction should have been issued to protect its interest.
The Superior Court found that Fraport was also entitled to a preliminary injunction because of the ACAA’s improper use of the local police to enforce the Master Lease. The court observed that the Pennsylvania Landlord Tenant Act requires a landlord to obtain an eviction in court before a tenant may be removed, and the ACAA did not follow that process with respect to Fraport. Therefore, a preliminary injunction restoring Fraport’s rights under the Master Lease was necessary to “ensur[e] the dignity of the legal process,” and the trial court abused its discretion by not issuing one.
This case serves as an illustration of the limitations on a landlord’s ability to remove its property from an unfavorable lease. As the ACAA discovered, a commercial tenant has the same right to occupy its leased premises as an owner, and storefronts are considered as unique as any piece of land. Accordingly, a court will not allow a commercial landlord to seize its property from a tenant in exchange for money damages, and will instead require the landlord to allow the tenant to occupy the space for the duration of the lease term. This case also shows that if a landlord resorts to self-help measures, such as calling police to remove a tenant, the court may allow the tenant to repossess the space solely to deter such conduct.