Background
ApplianceSmart operated a store in a large retail space owned by Trustees Main/270, with its former parent JanOne guaranteeing the lease. After defaults in 2019 and 2021 were resolved through agreements, ApplianceSmart defaulted again in February 2022. Trustees Main repossessed the premises without terminating the lease, sought unpaid rent and other damages from ApplianceSmart and JanOne, and began searching for a replacement tenant.
JanOne proposed ARCA Recycling, a JanOne affiliate that intended to assume the existing lease and continue operating under the ApplianceSmart name. Trustees Main required safeguards including payment of arrears and a nonrefundable deposit equal to six months’ rent, but JanOne balked at the deposit. Live Ventures, ApplianceSmart’s later parent, proposed Flooring Liquidators, but declined to provide written answers to Trustees Main’s standard business questionnaire. Trustees Main instead pursued other prospects and signed a lease with AutoZone in September 2024, although AutoZone did not begin paying rent before ApplianceSmart’s lease term expired. After a bench trial, the district court found that Trustees Main had reasonably mitigated its damages.
The Court’s Holding
The Sixth Circuit affirmed. Applying Ohio law, the court held that a commercial landlord must make reasonable efforts to rerent property after a breach but need not accept any available tenant or expose itself to undue risk. Trustees Main reasonably declined to proceed without protective conditions because both proposed replacements were affiliated with companies connected to ApplianceSmart’s repeated defaults, and Flooring Liquidators’s sponsor also withheld requested business information.
The court also concluded that Trustees Main’s broader, multi-year effort to secure a reliable replacement was commercially reasonable despite the delay before AutoZone began paying rent. It rejected ApplianceSmart’s analogy to federal employment-discrimination mitigation law and concluded that a landlord need not sell its property to mitigate lease damages. The court separately accepted amended jurisdictional allegations showing complete diversity: Trustees Main was a citizen of Ohio and Florida, ApplianceSmart was a citizen of Minnesota and Nevada, and JanOne was a citizen of Nevada.
Key Takeaways
- Ohio’s mitigation rule requires reasonable reletting efforts, not acceptance of every proposed replacement tenant.
- A landlord may demand reasonable protections before leasing to an affiliate of parties associated with repeated defaults.
- A lengthy search does not establish a failure to mitigate when the landlord actively pursues prospects and market conditions delay reletting.
Why It Matters
The decision confirms that a commercial landlord’s duty to mitigate does not require it to trade speed for substantial credit or default risk. Courts may consider a proposed tenant’s affiliations, the parties’ prior performance, and the prospective tenant’s willingness to provide financial information when evaluating whether the landlord acted reasonably.
The opinion also illustrates that defective diversity allegations may be corrected on appeal when the supplemental allegations establish jurisdiction that existed when the action began, rather than attempting to create jurisdiction retroactively.