Regal Cinemas sues the Town of Culpeper over lease termination

Regal Cinemas is suing the town over what the lawsuit says is an illegitimate lease termination. The town has filed a response disagreeing with this claim. (Courtesy InsideNoVa/Josh Gully)

This article was written by WTOP’s news partner InsideNoVa.com and republished with permission. Sign up for InsideNoVa.com’s free email subscription today.

Regal Cinemas, Inc. has filed a lawsuit claiming that the Town of Culpeper illegitimately attempted to prematurely terminate the theater’s lease for the building at 210 S. Main St. The town disagrees with this notion and has filed a motion for the lawsuit’s dismissal.

On Feb. 9, the Culpeper Town Council voted to terminate the lease because Regal had not operated a movie theater business for at least 120 days. The town also directed staff to pursue the collection of past due rent totaling $56,428. The lease was officially terminated on Feb. 13. The lease was terminated because the theater had not operated for 120 days, not because of the delinquent payments.

Filed in the federal U.S. District Court in Charlottesville, Regal’s lawsuit says the town’s attempt “to seize this valuable property” was conducted “in an underhanded and rushed effort.”

“That is, the Town sought to take advantage of the unfortunate circumstances of the COVID-19 pandemic to terminate and breach the Lease so that the Town could take the theater and thereafter rent the Property to the highest bidder,” Regal says in its complaint.
Town Manager Chris Hively told the Culpeper Times that the town “believes there is no merit in Regal’s lawsuit.”

“No date has been set yet for the court to rule on the Town’s motion to dismiss the lawsuit,” he wrote in an email. “The Town looks forward to resolving the lawsuit and ensuring that the Town’s property is once again available for the benefit of the public as soon as possible.”

The theater, which opened in 2000, closed at the onset of the coronavirus pandemic due to state-imposed restrictions. Those restrictions were later lifted and the theater reopened on Aug. 28. Due to low attendance, a lack of new movies and safety concerns, the theater closed again on Oct. 9. It has remained closed since.

An issue at the crux of the lawsuit is whether the town provided proper notice in terminating the lease.

The lease states that “In the event that Tenant vacates, abandons or deserts the Property, or ceases operating its movie theatre business at the Property for a period of one hundred twenty days (120) or more, without opening or reopening as the case may be, and except for the making of necessary renovations or repairs following a fire or other casualty, Landlord may, at its sole option, declare the Tenant in default and terminate this Lease by giving written notice of such termination and of the effective date thereof to Tenant. Upon giving this such notice, this Lease shall cease and come to an end as of the date set forth in said notice.”

The lawsuit notes that “Regal’s theatre remains temporarily closed to the public as of the date of this filing, but Regal intends to re-open the theatre shortly” and claims “at no point has Regal ever abandoned or vacated the Property, nor has Regal fully or permanently ceased operations on the Property.” It adds that the theater “has only temporarily closed its doors to the public in an effort to protect public safety in the midst of a global pandemic.”

The lawsuit claims the town failed to comply with a contractual provision requiring 30 days’ notice of the termination “and the opportunity to cure before any such termination.” The lawsuit says the town acknowledged that the theater had 30 days to pay its delinquent rent, and the theater did so on Feb. 12. Shortly after that payment was received, Hively said Regal “filed suit in Federal court…to attack the Town’s termination of the lease rather than return possession of the Town owned property.”

Regarding the alleged improper notice of termination, the town filed a motion saying a 30 day notice was not necessary since the theater’s operations ceased for 120 days. The town’s reply adds that “plain reading of the Lease and basic rules of contractual construction permitted the Town to terminate the lease upon written notice at an effective date selected by the Town.” The filing adds that Regal does not need 30 days’ notice to “cure” its failure to operate a theater.

“As required by the lease, the Town provided Regal Cinemas thirty days to pay the back rent, but was not required to give Regal Cinemas an additional thirty days to reopen,” Hively said.

During the closure, the lawsuit says “Regal has performed necessary maintenance and repairs to protect the building from water intrusion, service the HVAC system, and otherwise engaged in activity to prevent the deterioration of the premise.” Hively noted that “the lease requires Regal Cinemas to maintain operations of the Culpeper movie theater and not close for 120 days or more, except if repairing damage from fire or similar cause.”

Amongst Regal’s request in the lawsuit is a judicial ruling that the theater’s “temporary suspension of its full operations to protect public safety during the COVID-19 pandemic does not constitute a cessation” as defined in the lease. The town’s response states that “Regal attempts to sidestep” a “clear breach of contract by asking the Court to add additional terms not found in the Lease.”
Regal also asks for a ruling that any period during which the theater was “conducting necessary modifications or repairs at the theater” to not count towards the 120-day period outlined in the lease.

The town replies that Regal’s “contractual maintenance obligation of the Property” does not qualify as “movie theater operations.”

If those requests are denied, Regal asks for a judicial declaration “that such cessation is excused and the Town cannot terminate the Lease…because the cessation was the direct result of unexpected and/or unforeseeable circumstance not contemplated at the time the parties entered the Lease.”

Regal also seeks damages of at least $75,000 because the town allegedly breached the lease.

Regal Cinemas’ attorney did not respond to a phone message by publication. The story will be updated if she responds.

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