The supreme courts of Arizona and Minnesota have adopted provisions of the Restatement of the Law Second, Contracts, dealing with the doctrine of frustration of purpose in considering the enforceability of a plea deal in a criminal case and deciding a conflict over a commercial lease arising out of the COVID-19 pandemic.
In State v. Williams, 553 P.3d 161 (Ariz. 2024), a criminal defendant with seven prior felony convictions, including a 2004 Arizona conviction for use or possession of marijuana, was charged with 14 additional felonies, including two counts of sex trafficking. The defendant agreed to plead guilty to the two counts of sex trafficking in exchange for a “slightly aggravated” term of 12 years of incarceration based on his repeat-offender status; in addition, the state agreed to dismiss the remaining 12 counts, as well as any allegations of prior felonies, other than the marijuana conviction.
After the trial court accepted the plea agreement and sentenced the defendant according to its terms, Arizona voters adopted Proposition 207, which authorized the expungement of adult convictions for the possession or use of small amounts of marijuana. The defendant obtained an order vacating and expunging his marijuana conviction and subsequently filed a petition for post-conviction relief, claiming that his sex-trafficking conviction and sentence were invalid because the marijuana conviction was no longer a valid prior offense for purposes of enhancing his sentence under the plea agreement. After the trial court dismissed the defendant’s petition, the court of appeals reversed, vacated the plea agreement, reinstated the original charges against the defendant, and remanded, finding that the plea agreement was void under the doctrine of frustration of purpose.
On appeal, the Supreme Court of Arizona vacated in part, holding that, while the court of appeals properly concluded that the defendant was entitled to post-conviction relief, it erred in vacating the plea agreement. The court adopted the frustration-of-purpose test set forth in the Restatement of the Law Second, Contracts § 265, Comments a and b, in concluding that, while the defendant’s guilty plea as a repeat offender was void, the plea agreement was not necessarily invalidated as a result; rather, the plea agreement was potentially voidable. Reasoning that the stipulated 12-year sentence was a principal purpose of the plea agreement for both parties, the court explained that, if the trial court resentenced the defendant to more or less than the originally agreed-upon 12 years of imprisonment, the plea agreement could be invalidated at the election of the frustrated party.
The Supreme Court of Minnesota also considered issues related to the doctrine of frustration of purpose in Fitness International, LLC v. City Center Ventures, LLC, 9 N.W.3d 526 (Minn. 2024). The commercial tenant in that case, which operated a health club and fitness center on leased property, sued its landlord, seeking to recover rent for a three-and-a-half-month period during which the health club and fitness center was not legally allowed to operate due to state-government orders issued in response to the COVID-19 pandemic. The tenant alleged that its payment of rent was excused under the doctrine of frustration of purpose, and that the landlord breached the lease by refusing to abate its rent during the mandatory-closure period. The trial court granted summary judgment for the landlord and the court of appeals affirmed, observing that the doctrine of frustration of purpose was generally used by a defendant as an affirmative defense, rather than by a plaintiff to establish a claim for breach of contract. In any event, the court found that the purpose of the lease had not been substantially frustrated, because the mandatory closures did not prohibit all permitted uses of the leased property.
On appeal, the Supreme Court of Minnesota affirmed on different grounds. The court began by clarifying that the applicable analytical framework for the tenant’s claim under Minnesota law was the doctrine of temporary frustration of purpose, because the tenant was only seeking to be excused from a portion of its performance, rather than for all of its remaining lease obligations. The court noted that, “the approaches outlined in the Restatement Second of Contracts §§ 265, 269 are appropriate frameworks to analyze a claim of permanent or temporary frustration of purpose, respectively.”
The court explained that, according to § 269, temporary frustration of purpose only suspended the asserting party’s duty, rather than discharging all remaining duties to perform; once the temporary frustration ended, full performance was required unless performance would be “materially more burdensome than had there been no . . . frustration.” Because the tenant failed to show that paying rent after the closure period would have been materially more burdensome than paying during the closure period—in fact, the tenant had already paid the rent for the closure period when it was due—the tenant’s obligation to pay rent was not discharged.