Cozen O'Connor's Landlord Disputes Firm's Complaints

Cozen O'Connor's landlord says its building is completely up to par, despite complaints from the law firm that the elevators are dangerous and do not work; the roof leaks; and the plants look shabby.

Background

Landlord 1900 Market GP and its general partner OSEB Associates filed a response to a lawsuit filed by Cozen O'Connor in July of this year. The company said it has maintained the building in accordance with the lease, has modernized elevators, despite having no contractual obligation to do so, and has no obligation to arbitrate disputes over elevator repairs as the firm suggests, according to the filing.

The landlord, represented by attorneys at Klehr Harrison Harvey Branzburg, also contended that the law firm should not be able to argue now that the building at 1900 Market St. in Center City Philadelphia is a Class A building when the firm referred to it as Class B during recent arbitration with OSEB over rent per square foot.

The Suit

Cozen O'Connor sued the landlord in Philadelphia Common Pleas Court in an effort either to be released from the five-year lease obligation it began this year, or force the landlord into arbitration. The firm said the landlord has failed to maintain the Class A building properly and refused to arbitrate Cozen O'Connor's complaints, according to the court filing.

The firm extended its lease in July 2010 for the more than 200,000 square feet of space at 1900 Market St. to run between Jan. 1, 2011 and Dec. 31, 2015. Cozen O'Connor's complaints include problems with the elevators and a leaking atrium in the lobby during heavy rains, for which management places buckets and trash cans to catch the water instead of repairing the leaks.

It also argued the HVAC system regularly malfunctions; the cleaning services are inadequate; the plants in the atrium lobby are not properly cared for; there are odors from the loading dock; and a food service tenant has been allowed to create an outdoor eating space at the main entrance that is surrounded by a plastic fence, often in disrepair.

Elevators

Above all the other complaints briefly mentioned, the firm spent several pages outlining the problems with the nine elevators in the building, which also houses the Philadelphia Stock Exchange. In its response, OSEB said the elevators are subject to preventative maintenance and operate as they were designed and in accordance with how they were represented in the lease.

On April 22, 2010, the landlord gave Cozen O'Connor an elevator modernization project proposal to repair the elevators. The project was to have been completed by July 29, 2011, but the firm said only two have been repaired and a third is in the works. The firm said the landlord told Cozen O'Connor there would be no more repairs under the plan because the rental arbitration initiated between the two parties in summer 2010 was not resolved in the landlord's favor, according to the complaint.

In its response, however, OSEB said it simply made the law firm aware of its existing elevator repair plans after the firm raised concerns. It said it owed Cozen O'Connor no duty to modernize them. It also denied the inadequate repairs to the atrium leaks and said the elevator modernization plan will continue over time, but could be stopped at OSEB's discretion.

The landlord also said the outside eatery has been removed, but pointed out that a restaurant provides a benefit to tenants and is not inconsistent with a first-class building. As for the plants, OSEB said it conducted an “atrium plant rejuvenation project in March 2010.”

History

Cozen O'Connor has been in the building since 1996 and gone through several lease extensions and agreement amendments. Between the years 2008 and 2010, the firm was paying $25.50 per square foot for the 203,667 square feet of rentable space, according to exhibits attached to the complaint.

When Cozen O'Connor wanted to execute its option for a five-year lease extension, the two parties could not come to terms as to the fair market rental rate. So, pursuant to the lease, they entered arbitration and ultimately signed a lease extension agreement on July 27, 2010. According to the lease extension agreement attached to the complaint as an exhibit, the firm is to pay $15.68 per square foot in 2011, or nearly $3.2 million a year. That price escalates incrementally each year, ultimately reaching $17.68 per square foot in 2015, or $3.6 million a year, according to the lease.

Cozen O'Connor said in the complaint that it attempted to initiate an arbitration, as outlined by the lease, to resolve the dispute over the maintenance of the building. Even after the landlord told the firm in January 2011 that it would not submit the dispute to arbitration, Cozen O'Connor selected its arbitrator and asked who the landlord would select. The lease requires three arbitrators to hear the dispute, with the third being selected by the first two.

The landlord again refused arbitration in March and the suit followed. The firm is seeking a declaratory judgment that the landlord has failed to execute the lease by failing to maintain the building properly and that the firm should be released from its obligations under the lease. In the alternative, the firm is seeking declaratory relief in the form of a court order mandating that the landlord submit these complaints to arbitration. If neither of those two requests are granted, the firm has raised a breach of contract claim against the defendants.

OSEB's attorneys said in letters to Cozen O'Connor, which were attached to the response as exhibits, that the firm was misreading the arbitration requirements in the lease. OSEB said in the response that arbitration as to elevator issues is not “unilaterally available to Cozen as a matter of right.” The company also reiterated that the elevators are “safe, reliable and fully functional.”

Cozen O'Connor member Sarah E. Davies is representing the firm in the case. A. Grant Phelan and Sean P. Whalen of Klehr Harrison represent OSEB and 1900 Market GP.

Gina Passarella is a reporter for The Legal Intelligencer, an ALM sister publication of this newsletter in which this article also appeared. She can be reached at [email protected].

Cozen O'Connor's landlord says its building is completely up to par, despite complaints from the law firm that the elevators are dangerous and do not work; the roof leaks; and the plants look shabby.

Background

Landlord 1900 Market GP and its general partner OSEB Associates filed a response to a lawsuit filed by Cozen O'Connor in July of this year. The company said it has maintained the building in accordance with the lease, has modernized elevators, despite having no contractual obligation to do so, and has no obligation to arbitrate disputes over elevator repairs as the firm suggests, according to the filing.

The landlord, represented by attorneys at Klehr Harrison Harvey Branzburg, also contended that the law firm should not be able to argue now that the building at 1900 Market St. in Center City Philadelphia is a Class A building when the firm referred to it as Class B during recent arbitration with OSEB over rent per square foot.

The Suit

Cozen O'Connor sued the landlord in Philadelphia Common Pleas Court in an effort either to be released from the five-year lease obligation it began this year, or force the landlord into arbitration. The firm said the landlord has failed to maintain the Class A building properly and refused to arbitrate Cozen O'Connor's complaints, according to the court filing.

The firm extended its lease in July 2010 for the more than 200,000 square feet of space at 1900 Market St. to run between Jan. 1, 2011 and Dec. 31, 2015. Cozen O'Connor's complaints include problems with the elevators and a leaking atrium in the lobby during heavy rains, for which management places buckets and trash cans to catch the water instead of repairing the leaks.

It also argued the HVAC system regularly malfunctions; the cleaning services are inadequate; the plants in the atrium lobby are not properly cared for; there are odors from the loading dock; and a food service tenant has been allowed to create an outdoor eating space at the main entrance that is surrounded by a plastic fence, often in disrepair.

Elevators

Above all the other complaints briefly mentioned, the firm spent several pages outlining the problems with the nine elevators in the building, which also houses the Philadelphia Stock Exchange. In its response, OSEB said the elevators are subject to preventative maintenance and operate as they were designed and in accordance with how they were represented in the lease.

On April 22, 2010, the landlord gave Cozen O'Connor an elevator modernization project proposal to repair the elevators. The project was to have been completed by July 29, 2011, but the firm said only two have been repaired and a third is in the works. The firm said the landlord told Cozen O'Connor there would be no more repairs under the plan because the rental arbitration initiated between the two parties in summer 2010 was not resolved in the landlord's favor, according to the complaint.

In its response, however, OSEB said it simply made the law firm aware of its existing elevator repair plans after the firm raised concerns. It said it owed Cozen O'Connor no duty to modernize them. It also denied the inadequate repairs to the atrium leaks and said the elevator modernization plan will continue over time, but could be stopped at OSEB's discretion.

The landlord also said the outside eatery has been removed, but pointed out that a restaurant provides a benefit to tenants and is not inconsistent with a first-class building. As for the plants, OSEB said it conducted an “atrium plant rejuvenation project in March 2010.”

History

Cozen O'Connor has been in the building since 1996 and gone through several lease extensions and agreement amendments. Between the years 2008 and 2010, the firm was paying $25.50 per square foot for the 203,667 square feet of rentable space, according to exhibits attached to the complaint.

When Cozen O'Connor wanted to execute its option for a five-year lease extension, the two parties could not come to terms as to the fair market rental rate. So, pursuant to the lease, they entered arbitration and ultimately signed a lease extension agreement on July 27, 2010. According to the lease extension agreement attached to the complaint as an exhibit, the firm is to pay $15.68 per square foot in 2011, or nearly $3.2 million a year. That price escalates incrementally each year, ultimately reaching $17.68 per square foot in 2015, or $3.6 million a year, according to the lease.

Cozen O'Connor said in the complaint that it attempted to initiate an arbitration, as outlined by the lease, to resolve the dispute over the maintenance of the building. Even after the landlord told the firm in January 2011 that it would not submit the dispute to arbitration, Cozen O'Connor selected its arbitrator and asked who the landlord would select. The lease requires three arbitrators to hear the dispute, with the third being selected by the first two.

The landlord again refused arbitration in March and the suit followed. The firm is seeking a declaratory judgment that the landlord has failed to execute the lease by failing to maintain the building properly and that the firm should be released from its obligations under the lease. In the alternative, the firm is seeking declaratory relief in the form of a court order mandating that the landlord submit these complaints to arbitration. If neither of those two requests are granted, the firm has raised a breach of contract claim against the defendants.

OSEB's attorneys said in letters to Cozen O'Connor, which were attached to the response as exhibits, that the firm was misreading the arbitration requirements in the lease. OSEB said in the response that arbitration as to elevator issues is not “unilaterally available to Cozen as a matter of right.” The company also reiterated that the elevators are “safe, reliable and fully functional.”

Cozen O'Connor member Sarah E. Davies is representing the firm in the case. A. Grant Phelan and Sean P. Whalen of Klehr Harrison represent OSEB and 1900 Market GP.

Gina Passarella is a reporter for The Legal Intelligencer, an ALM sister publication of this newsletter in which this article also appeared. She can be reached at [email protected].