STATE OF MINNESOTA
IN SUPREME COURT
A22-1057
Court of Appeals Moore, III, J. Took no part, Procaccini, Hennesy, J.J.
Fitness International, LLC,
Appellant,
vs. Filed: July 24, 2024 Office of Appellate Courts City Center Ventures, LLC,
Respondent.
______________________
John C. Holper, Winthrop & Weinstine, P.A., Minneapolis, Minnesota; and
A. Grant Phelan, Klehr Harrison Harvey Branzburg LLP, Philadelphia, Pennsylvania, for appellant.
John J. Steffenhagen, Brian N. Niemczyk, Hellmuth & Johnson, PLLC, Edina, Minnesota, for respondent. ________________________
SYLLABUS
1. The doctrine of temporary frustration of purpose delineated in the
Restatement (Second) of Contracts § 269 is a justification for nonperformance of a contract
that is recognized under Minnesota law in certain circumstances.
2. Summary judgment in favor of the landlord was appropriately granted
because, even assuming that the doctrine of temporary frustration of purpose may be used
1 as the basis for a breach-of-contract claim and not only as an affirmative defense, the
commercial lease tenant’s obligation to perform under the lease agreement was merely
suspended during the period of temporary frustration, not discharged.
Affirmed.
OPINION
MOORE, III, Justice.
This appeal poses the question of whether, under Minnesota law, a commercial lease
tenant whose purpose in entering the lease agreement is temporarily frustrated has a cause
of action for breach of contract to recover rent paid for the period of temporary frustration.
Appellant Fitness International, LLC (“Fitness”) entered into a lease agreement with
respondent City Center Ventures, LLC (“City Center”) for a property owned by City
Center. Since the lease began, Fitness has operated a health club and fitness center in a
building Fitness constructed on the property. For a period of approximately 3.5 months in
2020, however, Fitness was not legally allowed to operate its health club and fitness center
due to executive orders mandating closure of certain non-essential businesses to slow the
spread of COVID-19. Fitness sued City Center, seeking recovery of rent paid during the
mandatory closure period. Fitness argued that the doctrine of frustration of purpose
excused its obligation to pay rent for that time, that City Center’s failure to excuse the rent
during the closure period was a breach of the lease agreement, and that Fitness was entitled
to a refund of the amounts paid to City Center for the closure period. The district court
granted City Center’s motion for summary judgment, and the court of appeals affirmed.
2 For the reasons stated below, we conclude that summary judgment was
appropriately granted in favor of City Center. We recognize that the approaches outlined
in the Restatement (Second) of Contracts §§ 265, 269 (Am. L. Inst. 1981), are appropriate
frameworks to analyze a claim of permanent or temporary frustration of purpose. We have
no need to decide, however, whether this permits temporary frustration of purpose to be
used as the basis for a breach-of-contract claim and not only as an affirmative defense.
Here, even assuming, without deciding, that Fitness was entitled to pursue a claim of
temporary frustration of purpose that, if properly supported, would allow it to recover rent
paid during the mandatory COVID-19 closure periods, Fitness has not established that its
obligation to pay rent owed for the closure periods was discharged, rather than merely
suspended. Accordingly, we affirm the decision of the court of appeals, but on different
grounds.
FACTS
The facts in this case are undisputed. Fitness is a California limited liability
company that owns and operates fitness centers throughout the United States and Canada.
City Center is a Minnesota limited liability company that owns and leases commercial real
estate. In 2007, Fitness and City Center executed a commercial lease agreement for a
property owned by City Center in Hopkins. Provisions of the lease agreement relevant to
our analysis are as follows.
Article I of the lease agreement provides that Fitness “shall have the right
throughout the Term to operate the [property], or any portion thereof, for uses permitted
under this Lease.” The lease further describes the initially permitted use of the property as
3 “the operation of a health club and fitness facility,” which includes ancillary uses such as
offering spa or tanning services, selling vitamins or other supplements, and selling apparel
and fitness-related accessories. Fitness was required to operate under this initial use for
one day. Following the one-day required operating period for the property’s initial use,
Article VIII of the lease agreement allows Fitness to modify its use of the property “to any
alternate legal use.” Lastly, Article XXII of the lease agreement contains a force majeure
clause. 1 The provision states, in relevant part:
If either party is delayed or hindered in or prevented from the performance of any act required hereunder because of . . . restrictive laws . . . performance of such act shall be excused for the period of the delay caused by the Force Majeure Event and the period for the performance of such act shall be extended for an equivalent period . . . . Delays or failures to perform resulting from lack of funds or which can be cured by the payment of money shall not be Force Majeure Events.
Fitness paid timely rent and enjoyed full use of the property, pursuant to the lease
agreement, from July 2007 until March 2020. Beginning in March 2020, in response to
the emergence of the COVID-19 pandemic, Governor Walz used executive orders to close
many public spaces to control the spread of the virus. On March 16, 2020, Governor Walz
issued Executive Order No. 20-04, mandating closure of non-essential businesses,
including gyms and fitness centers. Emerg. Exec. Order No. 20-04, Providing for
Temporary Closure of Bars, Restaurants, and Other Places of Public Accommodation
1 A “force-majeure clause” is generally defined as “[a] contractual provision allocating the risk of loss if performance becomes impossible or impracticable, esp[ecially] as a result of an event or effect that the parties could not have anticipated or controlled.” Force-Majeure Clause, Black’s Law Dictionary (12th ed. 2024).
4 (Mar. 16, 2020). Following this order, Fitness stopped operating its fitness center and
ceased collecting membership fees.
Three months later, Governor Walz issued Executive Order No. 20-74, permitting
gyms and fitness centers to re-open to the public if following the State’s industry
guidelines. Emerg. Exec. Order No. 20-74, Continuing to Safely Reopen Minnesota’s
Economy and Ensure Safe Non-Work Activities during the COVID-19 Peacetime
Emergency (June 5, 2020). Fitness then began operating its fitness center again. But
following an uptick in COVID-19 cases, Governor Walz issued Executive Order No. 20-
99, again mandating closure of gyms and fitness centers from November 20, 2020 to
December 18, 2020. Emerg. Exec. Order No. 20-99, Implementing a Four Week Dial Back
on Certain Activities to Slow the Spread of COVID-19 (Nov. 18, 2020). Accordingly,
Fitness stopped operating its fitness center during this time.
Fitness’s closures of its fitness center in 2020 prompted it to suspend its rent
payments. On March 17, 2020, the day after the first emergency executive order affecting
it issued, Fitness sent a letter to City Center stating that it believed its obligation to pay rent
during the mandatory closure period was excused because the closure, among other things,
frustrated the purpose of the lease. Fitness proposed that “[a]ll regularly scheduled rent
and other charges due and payable under the Lease . . . will abate from the date of this letter
until the earlier of (a) the 30th day after we reopen the club or (b) June 30, 2020.” Fitness
failed to pay timely rent for April, May, and June of 2020.
In June 2020, City Center provided written notice of default to Fitness, demanded
rental payments, and informed Fitness that failure to make payments would result in an
5 eviction action. Four months later, Fitness paid the overdue rent plus late fees but wrote
to City Center that such payments were “paid under protest.” Fitness again failed to pay
rent in December 2020. Three months later, City Center filed an eviction action in
Hennepin County District Court, alleging that Fitness had failed to pay all rent due for the
month of December. After Fitness paid the overdue December 2020 rent, City Center
dismissed the eviction action.
In April 2021, Fitness filed a complaint in Hennepin County District Court against
City Center, seeking to recover the rent and associated late fees it paid under protest during
the mandatory closure periods when it could not legally operate its fitness center, totaling
$334,922.71. Fitness’s breach-of-contract claim alleged, in part, that payment was excused
under the doctrine of frustration of purpose. 2 According to Fitness, its principal purpose
in entering the lease agreement—the operation of a health club and fitness center—was
frustrated when executive orders mandated the closure of its business and, therefore, it was
not obligated to perform its duties under the lease during the closure periods. Fitness
alleged further that City Center’s refusal to abate rent during the closure periods was a
breach of contract and sought a declaratory judgment that it was excused from paying rent
during the closure periods. City Center filed an answer and counterclaim, seeking a
declaratory judgment that Fitness was not excused from paying rent during the closure
periods.
2 Fitness’s complaint did not specifically reference temporary frustration of purpose.
6 The district court granted summary judgment in favor of City Center, and the court
of appeals affirmed. Fitness Int’l, LLC v. City Center Ventures, LLC, No. A22-1057, 2023
WL 2230321, at *1 (Minn. App. Feb. 27, 2023). The court of appeals noted that Fitness
cited to no binding authority allowing it to apply the doctrine of frustration of purpose to
establish a breach-of-contract claim. 3 Id. at *2, 5. The court of appeals declined to extend
this legal theory—which is generally used as an affirmative defense—to Fitness’s claim.
Id. at *5. Furthermore, the court of appeals determined that Fitness could not meet the
requirements for frustration of purpose because the mandatory COVID-19 closures did not
prohibit all the permitted uses of the property stated in the lease and thus, did not
substantially frustrate the purpose of the lease. Id. For these reasons, the court of appeals
determined that summary judgment was appropriately granted in favor of City Center. 4 Id.
at *2.
We granted review to consider the doctrine of frustration of purpose in this context.
3 Because Fitness’s complaint asserted frustration of purpose generally, the court of appeals did not distinguish between “permanent” frustration of purpose and temporary frustration of purpose. 4 The court of appeals made additional determinations relating to (1) whether City Center breached its duties under the lease agreement; (2) whether the doctrines of impossibility or impracticability supported Fitness’s claim; and (3) whether City Center owed interest on late renovation contribution payments to Fitness under section 19.7 of the lease agreement. Fitness Int’l, 2023 WL 2230321, at *2–3. Because we granted review solely on Fitness’s claims relating to the doctrine of frustration of purpose, we do not address these portions of the court of appeals’ decision.
7 ANALYSIS
The question posed here is whether the court of appeals erred in determining that
Fitness could not use the doctrine of frustration of purpose to seek recovery of rent it paid
to City Center during the mandatory COVID-19 closure periods. This case comes before
us on appeal from the district court’s grant of summary judgment in favor of City Center.
Summary judgment is appropriate “if the movant shows that there is no genuine issue as to
any material fact and the movant is entitled to judgment as a matter of law.” Minn. R. Civ.
P. 56.01. On appeal, we review de novo a grant of summary judgment by determining
whether there are any genuine issues of material fact and whether the district court erred in
applying the law to the facts. Day Masonry v. Indep. Sch. Dist. 347, 781 N.W.2d 321, 325–
26 (Minn. 2010). We view the evidence in the light most favorable to the non-moving
party. Id. at 325.
We first address general principles of Minnesota law and the Restatement governing
the frustration-of-purpose doctrine, including the doctrine of temporary frustration of
purpose. Then we address whether Fitness’s obligation to pay rent for the mandatory
closure period was excused, such that City Center is required to return the rent payments.
I.
We turn first to the governing law of the frustration-of-purpose doctrine. Fitness
argues the Restatement (Second) of Contracts (“the Restatement”) governs this question,
and City Center does not argue otherwise. For the reasons stated below, we agree.
As set forth in the Restatement, the doctrine of frustration of purpose excuses
performance under a contract in certain situations:
8 Where, after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.
Restatement (Second) of Contracts § 265 (Am. L. Inst. 1981). The Restatement approach
essentially requires the asserting party to prove three elements: (1) the party’s principal
purpose in entering the contract is substantially frustrated; (2) without their fault; (3) by
the occurrence of an event, the nonoccurrence of which was a basic assumption on which
the contract was made. Id. A “principal purpose” is one that is “so completely the basis
of the contract that, as both parties understand, without it the transaction would make little
sense.” Id. at cmt. a. And for a frustration to be “substantial,” it must “be so severe that it
is not fairly to be regarded as within the risks that [the asserting party] assumed under the
contract.” Id.
The Restatement approach to frustration of purpose has a corollary that governs
circumstances where the frustration is only temporary. Specifically:
Impracticability of performance or frustration of purpose that is only temporary suspends the obligor’s duty to perform while the impracticability or frustration exists but does not discharge his duty or prevent it from arising unless his performance after the cessation of the impracticability or frustration would be materially more burdensome than had there been no impracticability or frustration.
Restatement (Second) of Contracts § 269 (Am. L. Inst. 1981). Notably, temporary
frustration of purpose only suspends the asserting party’s duty, rather than discharging all
remaining duties to perform. Compare id., with Restatement (Second) of Contracts § 265.
9 Once the frustration has ended, full performance is required unless the “materially more
burdensome” standard is met. Restatement (Second) of Contracts § 269 cmt. a.
We have previously applied the Restatement approach to the doctrine of
“permanent” frustration of purpose. See J.J. Brooksbank Co. v. Budget Rent-A-Car Corp.,
337 N.W.2d 372, 377 (Minn. 1983). 5 In Brooksbank, the plaintiff and defendant entered
into a licensing agreement for a rental car franchise, which included provisions relating to
the defendant’s system for allocating car reservations. Id. at 373. After the reservation
system changed, the plaintiff brought an action to determine the extent of the defendant’s
obligations under the agreement. Id. The defendant argued, in part, that it was excused
from performing under the agreement under the doctrine of frustration of purpose. Id. at
377. We acknowledged the requirements for frustration of purpose to discharge contractual
obligations under the Restatement, but found that the requirements were not met. Id.
Before our Brooksbank decision, we recognized temporary impossibility of
performance as a defense to a breach-of-contract claim in the context of a commercial
contract in Village of Minneota v. Fairbanks, Morse & Co., 31 N.W.2d 920, 925 (Minn.
1948). 6 In that case, the defendant argued that its obligations under the contract were
5 Relying on Brooksbank, the court of appeals has adopted the Restatement approach as a statement of Minnesota law. See Little Canada Charity Bingo Hall Ass’n v. Movers Warehouse, Inc., 498 N.W.2d 22, 24–25 (Minn. App. 1993) (citing Brooksbank, 373 N.W.2d at 377), rev. denied (Minn. May 18, 1993). 6 The Restatement combines the analysis for temporary impossibility, temporary impracticability, and temporary frustration of purpose and proposes the same remedy for all three doctrines. See Restatement (Second) of Contracts § 269. Although we have only addressed Restatement § 269 in the context of temporary impossibility, we conclude that the same principles apply to temporary frustration of purpose.
10 excused because wartime restrictions during World War II made performance temporarily
impossible. Id. at 921. Under the doctrine of impossibility, the unforeseen exercise of
governmental authority rendering performance of a contract impossible will excuse the
promisor’s obligation in connection with that obligation. Id. at 925–26. We recognized
that impossibility may be only temporary, and in those cases, performance of a contract
will only be excused in unique situations when the asserting party “would have been
compelled to render performance substantially different from what it contracted for.” Id.
at 926. We held that the unprecedented wartime restrictions created temporary
impossibility of performance, and excused the defendant’s performance under the contract.
Id.
Expanding on that principle, we hold today that the doctrine of temporary frustration
of purpose delineated in the Restatement (Second) of Contracts § 269 is a justification for
nonperformance of a contract that is recognized under Minnesota law in certain
circumstances. The approaches outlined in Restatement (Second) of Contracts §§ 265, 269
are appropriate frameworks to analyze a claim of permanent or temporary frustration of
purpose, respectively. Neither of these Restatement sections, however, directly address
whether the doctrine of frustration of purpose can be used affirmatively by a plaintiff in a
claim for breach of contract or whether, consistent with how the doctrine was invoked in
Brooksbank and Village of Minneota, it may only be raised as an affirmative defense. We
turn to this next.
11 II.
With these two frameworks in mind, we turn to the question of whether Minnesota
law authorizes Fitness to bring an affirmative claim for breach of contract based on
frustration of purpose. If so, and if Fitness is successful on its claim, Fitness could recover
the rent it paid to City Center for the mandatory COVID-19 closure periods. City Center
argues that the doctrine of frustration of purpose is an affirmative defense and does not
itself support a cause of action.
A.
The doctrine of frustration of purpose is generally raised as an affirmative defense,
although our court has never had occasion to limit the use of the doctrine to that
circumstance. See City of Savage v. Formanek, 459 N.W.2d 173, 176 (Minn. App. 1990)
(discussing elements for the “defense of frustration of purpose to apply” (emphasis added)),
rev. denied (Minn. Oct. 25, 1990); 4 Minn. Dist. Judges Ass’n, Minnesota Practice—Jury
Instruction Guides, Civil, CIVJIG 20.79 (6th ed. 2023) (“Defenses—Frustration.”). The
court of appeals, relying on its own decision in Little Canada Charity Bingo Hall
Association v. Movers Warehouse, Inc., 498 N.W.2d 22, 24–25 (Minn. App. 1993), rev.
denied (Minn. May 18, 1993), determined that Fitness could not use frustration of purpose
to establish its claim because the doctrine is only available as an affirmative defense.
Fitness, 2023 WL 2230321, at *5. We need not decide whether Minnesota law authorizes
Fitness to bring a breach-of-contract claim based on temporary frustration of purpose
because, for the reasons stated below, the undisputed facts in the record do not establish
such a claim.
12 B.
Assuming without deciding that a party may bring an affirmative claim for breach
of contract based on temporary frustration of purpose, we next address whether Fitness has
created a genuine issue of material fact, sufficient to withstand summary judgment, on such
a claim. Specifically, we address whether Fitness has presented facts that would allow it
to prevail on a temporary-frustration-of-purpose claim for recovery of the rent Fitness paid
to City Center for the mandatory COVID-19 closure period. We conclude that it has not.
As an initial matter, we recognize that Fitness does not ask to be excused from all
further performance under the lease. Rather, Fitness argues that its obligation to pay rent
only for the mandatory closure periods is excused and asks the court to order City Center
to return the previously paid rent for those periods. Fitness has continued to operate its
business at the leased property since the mandatory closures ended in December 2020 and
does not argue for full discharge of the lease agreement. Because Fitness alleges that its
principal purpose in entering into the lease agreement was only temporarily frustrated
during the mandatory closure periods, the doctrine of temporary frustration of purpose is
the applicable analytical framework for Fitness’s claim. See Restatement (Second) of
Contracts § 269.
Even if we were to assume that Fitness satisfied the other requirements of temporary
frustration of purpose, it cannot obtain the requested relief—the return of rent payments
made for the mandatory closure periods. As discussed previously, under the Restatement
approach, the usual remedy for temporary frustration of purpose is temporary suspension
of contractual obligations, not discharge of obligations required during the period of
13 frustration. Id. In this context, if a commercial tenant’s principal purpose for entering a
lease agreement is temporarily frustrated, then its obligation to pay rent is delayed until the
frustration ceases. But once the frustrating event ends, the tenant is still required to make
any overdue or unpaid rent payments for the period of frustration. Contractual obligations
are only discharged if performance would be “materially more burdensome” after the
temporary frustration ceases. Id.
“Materially more burdensome” performance requires more than inconvenience or
increased costs. Vill. of Minneota, 31 N.W.2d at 926 (noting that discharge of performance
has been allowed “where very greatly increased difficulty had been caused by facts not
only unanticipated but inconsistent with the facts that the parties obviously assumed to
exist”). For example, in Village of Minneota, the defendant in a construction contract was
temporarily unable to perform due, in part, to wartime supply restrictions during World
War II. Id. Wartime restrictions were not lifted until more than five years after the contract
was originally signed. Id. We held that the unique and severe conditions caused by the
war, including unprecedented costs from supply restrictions, allowed for discharge, rather
than suspension, of the defendant’s obligations under the doctrine of temporary
impossibility. Id. at 926–27; see also Restatement (Second) of Contracts § 269 cmt. a,
illus. 1.
Here, Fitness has put forth no specific evidence, and has made no argument, that
paying the rent after the closure period would be “materially more burdensome,” such that
14 its obligation to pay would be discharged completely. 7 Restatement (Second) of Contracts
§ 269. Fitness’s declarations filed with the district court provide no evidence that, for
example, Fitness would suffer financial distress if required to make the disputed rent
payments, nor any evidence that Fitness suffered a financial loss that harmed the business’s
viability. Fitness did not generate revenues from its use of the property during the
mandatory closures, but this fact alone is not enough to discharge Fitness’s obligation to
pay rent. And Fitness has, in fact, already paid rent for the closure periods, showing that
it is entirely able to fulfill its contractual obligations. 8 Fitness’s obligation to pay rent for
the closure period was merely delayed by the temporary frustration. 9 Once the temporary
7 Additionally, Restatement (Second) of Contracts § 269 cmt. a, states that “[i]n applying the standard of materiality, a court will consider whether the delay has seriously upset the allocation of risks under the agreement of the parties.” Here, Article XXII of the lease agreement negotiated by Fitness and City Center contains a force majeure clause that specifically contemplates the risk of “restrictive laws” affecting the contract and allocates that risk to the parties accordingly. 8 By Fitness’s own admission, in a declaration filed in support of Fitness’s motion for summary judgment by its Director of Lease Administration, it “is not claiming ‘financial inability’ to pay [r]ent.” 9 Other jurisdictions have reached the same conclusion under similar facts. For example, in Inland Commercial Real Estate Services, LLC v. ASA EWC, LLC, 213 N.E.3d 604, 607–09 (Mass. Ct. App. 2023), the Massachusetts Court of Appeals considered an argument by a commercial tenant that its purpose in entering a lease agreement was temporarily frustrated by COVID-related mandatory business closures. After noting that the asserting party did not “seek to be excused from further performance” and “continued to operate its business at the [leased] premises once the COVID-19 restrictions were lifted,” the court found that temporary frustration of purpose was inapplicable to the disputed commercial lease because the remedy provided for by the Restatement would not authorize the tenant to have their obligation to pay rent during the mandatory closure period fully discharged. Id. at 609; cf. Vereit Real Est., LP v. Fitness Int’l, LLC, 529 P.3d 83, 90 (Ariz. Ct. App. 2023) (finding tenant’s temporary-frustration-of-purpose argument waived by
15 frustration caused by the mandatory closures ended and Fitness was allowed to legally
operate its health club and fitness center on the property, all rent payments became due.
On these facts, Fitness’s obligation to pay rent for the alleged period of temporary
frustration—approximately March to June 2020 and November to December 2020—is not
discharged. As a result, Fitness is not entitled to return of the rent payments made to City
Center for the mandatory closure periods. Because the undisputed facts conclusively show
that Fitness is not entitled to the requested relief, the district court did not err in granting
summary judgment in favor of City Center.
CONCLUSION
For the foregoing reasons, we affirm the decision of the court of appeals, but on
different grounds.
PROCACCINI, J., took no part in the consideration or decision of this case.
HENNESY, J., not having been a member of this court at the time of submission,
took no part in the consideration or decision of this case.
noting unobjected-to conclusion from the district court that tenant’s obligation to pay rent during temporary frustration would be suspended, not discharged).