Landlords & Online Retailers: May Be Liable for Tenant’s Illicit Goods

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Handbags hanging from a cart

Landlord GraphicBy:  Maren Calvert

In March 2019, a jury in New York awarded Omega $1.1 million in its lawsuit against a landlord because of the landlord’s “willful blindness” to its tenant’s penchant for selling fake watches.

This wasn’t a surprise to the landlord.

New York City police had raided the property multiple times for counterfeit activity and the landlord had been sued by the City and Louis Vuitton for fake handbags being there before.

To settle that lawsuit, the landlord agreed to hire a private investigator to monitor the property but then stopped investigating when the term of that agreement ended.

In short, there was no doubt the landlord in the Omega case had notice that something hinky was going on. The landlord appealed in September 2019, and we are currently awaiting the outcome of that appeal. We will post a blog update once the appellate opinion is issued.

In the meantime, the Omega case does not mean landlords are liable for all illegal activity in their buildings. Instead, it means that where landlords control the building (or other property/assets) the tenant uses to sell counterfeit materials and the landlord knows or reasonably suspects illegal activities are going on, the landlord can’t just look the other way.

The landlord should send a cease-and-desist letter to the tenant or take other action to try to stop the counterfeiting.

The same concept applies to online retail platforms. The platform host must act if it knows or suspects sellers are trafficking counterfeit goods on their website or application.

Please contact Maren at HLG if you’d like us to review your commercial leases to ensure they adequately address these types of risks and/or if you’d like advice about the types of action you can take as a landlord or retail platform to minimize your risk.

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