Brooklyn Journal of Corporate, Financial & Commercial Law
Volume 14 Issue 1 Article 7
12-27-2019
“Fair Enough”? Revising the Yellowstone Injunction to Fit New York’s Commercial Leasing Landscape and Promote Judicial Economy
Gabriel W. Block
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Recommended Citation Gabriel W. Block, “Fair Enough”? Revising the Yellowstone Injunction to Fit New York’s Commercial Leasing Landscape and Promote Judicial Economy, 14 Brook. J. Corp. Fin. & Com. L. (). Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol14/iss1/7
This Note is brought to you for free and open access by the Law Journals at BrooklynWorks. It has been accepted for inclusion in Brooklyn Journal of Corporate, Financial & Commercial Law by an authorized editor of BrooklynWorks. FAIR ENOU RE I IN T E YELLOWSTONE INJUNCTION TO FIT NEW YORK COMMERCIAL LEA IN LAN CAPE AN PROMOTE JU ICIAL ECONOMY
AB TRACT The Yellowstone injunction is an equitable remedy that tolls any applicable cure period and gives tenants a better opportunity to maintain their leasehold when they have defaulted under their lease. The remedy is available to commercial tenants in New York City and to commercial and residential tenants throughout the State. This Note examines the Yellowstone injunction in the context of New York City’s commercial tenants, who employ it most frequently and benefit most from its protections. This Note examines the development and application of the Yellowstone injunction and proposes changing the doctrine to exclude cases of monetary defaults and expired or nonexistent cure periods from the realm of Yellowstone relief.
INTRO UCTION ere i , per ap , no uri iction in t e worl in w ic lan lor tenant relation a e uc a prominent place in t e law a New York City t e City or New York n t e City, a u ine reputation an reco nition can mean t e ifference etween ucce or failure, e pecially in t e realm of commercial lea in One of a u ine mo t alua le a et in t e City may e t e lea e ol it elf 1 E en orter term lea e in t e City ten to la t for a eca e or more, t ou lon term roun lea e can la t up to ninety nine year 2 ome run e en lon er t an t at, an t e alue of uc an intere t i ifficult to calculate O er t e year , a tenant may rely on t eir lea e ol to uil up a e icate clientele wit in t e nei or oo , earn an international reputation for e cellence t at raw cu tomer from aroun t e worl , or in e t time an money to impro e t e lea e premi e to
1. See Empire tate Bl oc rump Empire tate artner , N Y 2 1, pp i 199 i ca e i a clear e ample of t e potential alue of a lea e ol in t e City e arm to Empire from lo in t e lea e coul well e irrepara le, ince it i ifficult to ima ine ow ama e coul a e uately compen ate Empire for t e alue of t e appro imately 9 year remainin un er t e lea e an it potential renewal in a uil in of uc nota le c aracter a t e Empire tate Buil in Id. 2 Bar ara au, In Profit and Loss, for 99 Years, E RE L E L Mar 1, 2010 , ttp t ereal eal com i ue article in profit an lo for 99 year e Empire tate Buil in wa u ect to a 114 year roun lea e See Mark Lewi , Soap Opera Ends as Trump Sells Out, FORBE Mar 19, 2002 , ttp www for e com 2002 0 19 0 19empire tml 1fffe4 e 0 4 BROO J COR F N & COM L Vol 14 create a pace t at i t eir own 4 lon a t e u ine i oin well, or well enou t at t e rent can e pai , an per onal relation are maintaine , neit er tenant nor lan lor i likely to try to lea e or terminate t e tenancy owe er, lan lor tenant relation are not alway o amica le an New York i urpri in ly one of t e lea t profita le citie for lan lor nationwi e Many factor , inclu in rent control, rent ta ili ation, an ot er tatutory an ca e law t at ten to fa or tenant , encum er t e City lan lor u icial reme y uni ue to New York tate i t e Yellowstone in unction or Yellowstone , ori inatin in t e eponymou First National Stores, Inc. v. Yellowstone Shopping Center, Inc 9 e Yellowstone in unction operate y tollin t e cure perio of a tenant, alle e ly in efault, until t e un erlyin u icial action i conclu e t u , it pre ent t e tenant ot erwi e ine ita le forfeiture of t e lea e ol 10 e implie arm in e ery Yellowstone ca e i t e tenant lo of t eir lea e ol 11 an in a city wit powerful lan lor it eem con i tent wit pu lic policy to rea ily pro i e in uncti e relief to tenant , w o are tra itionally een a a in le ar ainin power 12 Lea e ol forfeiture wa t e ri in concern e in t e ori inal con truction of t e Yellowstone in unction an
4. See, e.g., ono ue New York, 10 N Y 10 9 up Ct 190 reco ni in t at tenant lea e ol an ot er in e tment in rente property were i nificant factor , w ic oul e i en wei t in e uity con i eration Unlike many uri iction , t e City a eparate ou in court , w ic may e a pro uct of t e complicate lan lor tenant relation an tenancy law in t e City a muc a it i t e re ult of t e City eer i e an ine ita ly lar e u icial ocket See Li Lent, The New York City Housing Court, E COO ER OR June 2010 , ttp cooperator com article t e new york city ou in court full n ela unt, Least Profitable County for Rentals? New York, Data Shows, E RE L E L pr 1, 2014 , ttp t ereal eal com 2014 04 01 lea t profita le county for rental lan lor new york ata ow owin t at in 2014, Man attan New York County wa t e lea t profita le market for lan lor of all U countie . See, e.g., arren E E ti an Jeffrey urkel, HSTPA-2019: Some Observations, N Y L J July 2, 2019 , ttp www law com newyorklaw ournal 2019 0 02 tpa 2019 ome o er ation e cri in implication of t e ou in ta ility an enant rotection ct of 2019 ou t ey are typically limite to t e City, le t an a o en reporte ir an Fourt epartment ppellate i i ion ca e a re Yellowstone in unction a of Octo er 2019 9 Fir t Nat l tore , nc Yellow tone oppin Ctr , nc , 2 N E 2 N Y 19 10 Lon lan ynecolo ical er , C 110 tewart e oc Lt p, N Y 2 9 9, 9 2 pp i 199 11. Yellowstone ca e enerally in ol e commercial lea e ol , t ou tenant wit lon term roun lea e a e al o ou t Yellowstone relief on occa ion See 0 u on Owner, LCC Rector C urc ar en & Ve trymen of rinity C urc in t e City of N Y , 9 N Y 2 4, 4 up Ct 2009 4 Bri e t LLC R & oc LLC, No 09 CV 1 04 L , 2009 U i t LE 11 1 , at 2 E N Y ec , 2009 E C Elec , nc m lunt orp ol in nc , No 101194 200 , 200 N Y Mi c LE 04 , at 1 up Ct pr 2 , 200 12 e City pro i e tenant , particularly re i ential tenant , a e y of ri t an protection See generally N Y RE L RO C Con ol 201 N Y C M N CO E 2 1 02 201 uaranteein a ic le al a i tance for re i ential tenant facin e iction procee in 2019 Revising the Yellowstone Injunction i t e a i for it continue u e 1 owe er, if court are a umin t e nature of t e arm a e on t e form of relief ein ou t, t en t e Yellowstone octrine oul e mo ifie to en ure t at t e tenant i facin enuine an i nificant pecuniary lo 14 Moreo er, t e merit of t e Yellowstone in unction oul e e amine accor in to it alue an efficacy a a u icial reme y an not wit re pect to t e power ynamic etween lan lor an tenant t eem intuiti e t at a reme y like t e Yellowstone in unction woul alrea y a e een a aila le to tenant in t e City n a way, it wa a aila le un er t e tra itional form of in uncti e relief pro i e for in New York tate i wa reco ni e in First National, w ic wa eci e a e on t e u ual tan ar for in uncti e relief1 in t e New York Ci il ractice Law an Rule C LR 1 e a aila ility of t e e tra itional form of in uncti e relief i a foun ation of t i Note it out t e C LR, t e Yellowstone in unction woul e more in i pen a le Fortunately for a rie e tenant an many ot er plaintiff acro New York tate, t e C LR co ifie t eir a ility to eek in uncti e relief art of t i Note pre ent t e e elopment of t e Yellowstone in unction an riefly outline t e ten ion etween tra itional in uncti e relief an t e Yellowstone in unction art e amine Yellowstone’ application in 1 ca e turnin on monetary er u non monetary efault an wit tenant facin ankruptcy a a u et of monetary efault , an 2 ca e in ol in lea e wit e pire or none i tent cure perio Finally, art analy e t e e ituation a roa er reflection of t e tenuou outcome a ociate wit Yellowstone relief an , more narrowly, a we e i ue w ic t e court can re ol e an t ere y curtail t e ine ita le e pan ion or mi application of t e Yellowstone octrine i Note oe not u e t t at t e New York tate Court of ppeal Court of ppeal
1 . See rau ar Mollen orowit omeran & apiro 00 ir e oc ., 1 N E 2 11 , 120 N Y 1999 e e in unction a e ecome commonplace, wit court rantin t em routinely to a oi forfeiture of t e tenant u tantial intere t in t e lea e ol premi e 14 For e ample, not all lea e ol are t e ame ome are uni ue an in e tremely mall upply ee supra te t accompanyin note 1 Con er ely, we mi t not a cri e t e ame lea e ol alue to a typical commercial pace occupie y a lar e fa t foo c ain, cell er ice pro i er, or ank, an in uc a ca e it i le likely a court will fin t e tenant a emon trate irrepara le arm re uire un er t e C LR But see 112 4t t oc , LLC 112 1400 ra e rop LLC, 944 N Y 2 , pp i 2012 notin t at t e 114 year term of t e lea e oul e con i ere ran Manor ealt Relate Facility, nc amilton E uitie , nc., 92 N Y 2 100, 100 pp i 2011 it out t e in unction, plaintiff, w ic operate a re i ential ealt care facility, woul e at ri k of lo in it alua le lea e ol an incurrin i nificant permanent ama e to more t an 0 year of ar earne oo will 1 Fir t Nat l tore , nc Yellow tone oppin Ctr , nc , 2 N E 2 , 9 N Y 19 See also ono ue New York, 10 N Y 10 9 up Ct 190 reco ni in t at tenant lea e ol an ot er in e tment in rente property were i nificant factor , w ic oul e i en wei t in e uity con i eration 1 . See N Y C L R 01, 11, 1 Con ol 201 BROO J COR F N & COM L Vol 14 a oli t e Yellowstone octrine 1 n tea , t i Note will propo e t at t e Court of ppeal oul 1 limit t e application of Yellowstone relief to non monetary efault an monetary efault in only t e mo t e ceptional circum tance , 2 ar tenant in ankruptcy from eekin Yellowstone relief, an affirm certain ppellate i i ion tan ar re ar in cure perio an timely filin to e elop t e Yellowstone octrine in a manner con i tent wit t e ori inal purpo e an rationale of t e Court of ppeal ol in in First National.
I BACK ROUN
A CREATION OF T E YELLOW TONE INJUNCTION e Yellowstone in unction wa create in First National in 19 1 n First National, t e tenant an lan lor eac alle e t at t e ot er wa re pon i le un er t e lea e for t e in tallation of a prinkler re uire y t e New York City Fire epartment 19 e ppellate i i ion, econ epartment, rule unanimou ly t at t e tenant wa re pon i le for t e in tallation ut coul not a ree on t e reme y 20 e ma ority el t at t e lan lor a properly in oke t e applica le pro i ion for terminatin t e lea e an t e court coul , t erefore, eclare t e lea e at an en , 21 ut refu e to t erminate t e lea e ecau e t e tenant wa actin in oo fait w en it rou t t e eclaratory u ment action ccor in ly, t e court pre er e t e lea e upon performance y t e tenant, wit in twenty ay , of it uty to in tall a ati factory prinkler y tem, or to pay t erefor if it a alrea y een in talle y t e lan lor , an permanently en oine t e lan lor from in titutin ummary procee in to e ict t e tenant 22 e Court of ppeal re er e on t e roun t at t e ppellate i i ion i not a e t e aut ority to i ue in uncti e relief on t e fact wit out ome owin of frau , mutual mi take or ot er accepta le a i of reformation 2 e court were ren ere powerle y t e timin of e ent , a t e lea e a alrea y e pire on it own term an t e tenant a
1 . See a i Frey, Note, The Yellowstone Injunction, or “How to Vex Your Landlord Without Really Trying,” BROO L REV 1 , 1 4 1992 e New York Court of ppeal oul make it clear t at t e te t for a Yellowstone in unction, a e cri e in Finley, i inappropriate, an t at lower court oul a ere to t e tra itional ur en for in uncti e relief 1 Mark C illon, The Extent to Which “Yellow tone Injunctions” Apply In Favor of Residential Tenants: Who Will See Red, Who Can Earn Green, and Who May Feel Blue?, 9 C R O O UB L OL Y & E C J 2 , 12 2011 19. First Nat’l, 2 N E 2 at 9 20. Id. at 9 0 21. Id. at 0 22. Id. 2 . Id. at 1 ronically, in First National, t e ca e t at e ta li e t e Yellowstone in unction, t e Court of ppeal refu e to rant t e plaintiff tenant in uncti e relief 2019 Revising the Yellowstone Injunction faile to eek a eclaratory u ement or tay w ile t e lea e wa till in effect 24 n t e ca e t at create t e Yellowstone in unction, t e e piration of t e lea e wa i po iti e in e plainin w y no in unction wa i ue u , t e e i tence of a ali lea e ecame t e fir t court e elope re uirement for a tenant eekin a Yellowstone in unction ot er re uirement u e uently emer e from t e Court of ppeal an ppellate i i ion eci ion w ic a e calcifie t e Yellowstone octrine 2
B T E FOUR FACTOR TE T LE AL UR LE IN E UITY O er time t e tan ar for a Yellowstone in unction a cry talli e e four factor te t, a opte y t e Court of ppeal in Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Ave. Assocs., re uire t at a tenant ow 1 it ol a commercial lea e 2 it recei e from t e lan lor eit er a notice of efault, a notice to cure, or a t reat of termination of t e lea e it re ue te in uncti e relief prior to t e termination of t e lea e an 4 it i prepare an maintain t e a ility to cure t e alle e efault y any mean ort of acatin t e premi e 2 e fourt factor i alternati ely c aracteri e a , whether a basis exists for believing t at t e tenant e ire to cure an a t e a ility to o o t rou any mean ort of acatin t e premi e 2 e four factor may e t e root of all critici m of t e Yellowstone octrine an unnece ary proce ural formality t at imultaneou ly lower t e t re ol for rantin e uita le relief 2
C TRA ITIONAL INJUNCTI E RELIEF IN NEW YORK n contra t, t e tan ar for tra itional form of e uita le relief are far more trin ent party mo in for in uncti e relief un er t e C LR a a
24. Id. at 0 1 See aul Bati ta, ‘Yellowstone’ Revisited: The Pendulum Has Swung, 190 N Y L J 12 ec 29, 19 i cu in t e e entiality of timin in Yellowstone ca e 2 illon, supra note 1 , at 1 2 rau ar Mollen orowit omeran & apiro 00 ir e oc ., 1 N E 2 11 , 120 N Y 1999 uotin 22 E t t ara e Corp 221 E t Owner Corp., 21 N Y 2 02, 0 pp i 199 2 er fel & tern ronwoo Realty Corp , 4 N Y 2 , pp i 19 4 emp a i a e et er a tenant e ire to o anyt in i truly i po iti e i unclear ut it eem unlikely t at t e court will e er rop t e a ility re uirement One may come acro tenuou lan ua e uc a e law i clear t at a tenant i not required to prove its ability to cure prior to o tainin a Yellowstone in unction, a t e proper in uiry i w et er a a i e i t for elie in t at t e tenant e ire to cure an a t e a ility to o o t rou any mean ort of acatin t e premi e Ray & Cut nc 240 LLC, No 111411 200 , 200 N Y Mi c LE , at up Ct Jan 1 , 200 emp a i a e uotin artner LLC ort mperial Ferry Corp , N Y 2 2 , 2 9 pp i 200 f t ere i a meanin ful ifference etween a tenant owin it a ility to cure an t e court a in rea on to elie e t at t e tenant a t e a ility to cure, t at ifference i lim 2 . See, e.g., Frey, supra note 1 , at 1 2 1 BROO J COR F N & COM L Vol 14 muc i er e i entiary ur en t an one mo in for a Yellowstone in unction owe er, t ey may al o a e a muc i er likeli oo of ucce on t eir claim 29 t i t e relati e ea e of o tainin a Yellowstone in unction t at ren er it pro lematic erefore, t e ifference etween tra itional in unction an t e Yellowstone in unction i foun ationally i nificant to ar ument wit in t i Note 0 Court wiel tra itional in uncti e power un er C LR rticle 1 party eekin a preliminary in unction or temporary re trainin or er RO mu t ow 1 t e likeli oo of ucce on t e merit , 2 irrepara le in ury a ent in uncti e relief, an a alancin of t e e uitie t at fa or rantin t e in unction 2 e two form of relief are ine trica ly relate , a RO i merely t e mec ani m y w ic a court can pro i e e uita le relief efore a earin for a preliminary in unction i wi ely acknowle e , t e Yellowstone te t i a lower e i entiary ur en t an t e owin re uire for a RO or preliminary in unction 4 Fir t, a likeli oo of ucce i upplante in t e Yellowstone te t y t e fourt factor t e a ility, or e ire, to cure en court a e, on rare occa ion, offere a rea on for t i ra tic eparture, t ey enerally u e t t at ecau e of t e nature of t e pro lem , t e tan ar normally applica le to temporary in uncti e relief a e little application to a Yellowstone ituation itionally, w ile a owin of t e potential an irrepara le arm or lo to t e tenant i re uire un er t e C LR, t ere i no imilar re uirement, e en nominally, for a Yellowstone in unction Furt ermore, t e enial or rant of a Yellowstone in unction oe not preclu e a party from u e uently eekin a preliminary in unction
29 ey naturally oul , a likeli oo of ucce mu t e own efore a court will rant a preliminary in unction Compare oe elro , 2 N E 2 12 2, 12 N Y 19 e fir t pron of t e te t for preliminary in uncti e relief i likeli oo of ucce on t e merit , with Herzfeld & Stern, 4 N Y 2 at e tenant nee not, a a prere ui ite to t e rantin of a Yellowstone in unction, emon trate a likeli oo of ucce on t e merit 0. See generally Frey, supra note 1 i cu in t e alancin of t e e uitie in erent to in uncti e relief 1. See N Y C L R 01 Con ol 201 roun for temporary re trainin or er an preliminary in unction 2. See illon, supra note 1 , at 04 . See N Y C L R 11, 1 Con ol 201 4. See illon, supra note 1 , at 2 2 . See rau ar Mollen orowit omeran & apiro 00 ir e oc ., 1 N E 2 11 , 120 N Y 1999 Finley ark en oc , 441 N Y 2 4 , 4 pp i 19 1 See also Meyer Val er e, No 2 40 02, 200 N Y Mi c LE 20 9, at 4 up Ct pr 10, 200 . See, e.g., rump on t e Ocean, LLC , 91 N Y 2 1 , 1 0 1 pp i 2011 Oran e ea, nc m il in en Ctr , nc , No 41 12, 2012 N Y Mi c LE 29 , at 9 10, 12 up Ct Jun 4, 2012 rantin Yellowstone in unction ut enyin relief un er C LR ection 01 a e on a failure to ow irrepara le arm . See In re rti anal 201 , LLC, No 1 12 19 JL , 201 Bankr LE 1 , at 4 Bankr N Y No , 201 2019 Revising the Yellowstone Injunction 9
Compari on etween t e C LR an Yellowstone te t oul e rawn in li t of t e fact t at t e C LR i a creature of tatute f t e court want to create a new form of e uita le relief t ey oul o o wit t e power , remainin trictly wit in t e confine t ereof, rante to t em y t e tate le i lature 9 ile t e C LR ar ua ly re trict t e court from ot erwi e makin unc ecke e uita le ecree , t e Yellowstone in unction function a an alternati e t at let t e court work aroun t e re uirement of t e C LR e uni er al a aila ility of t e RO an preliminary in unction oul alway e kept in min w en e aluatin t e merit of t e Yellowstone octrine ecau e t e e tra itional reme ie are alway pre ent, in epen ent of Yellowstone 40
JU ICIAL TREN Court an practitioner a e criti ue t e Yellowstone octrine ince it inception e eca e followin First National aw a tren of rea e ment an retrenc ment of t e Yellowstone in unction y t e lower an appellate court , a a re ult of increa in concern wit t e automatic nature of t e in unction 41 Court tarte to limit t e e tent to w ic t ey woul en oin t e lan lor from e erci in it ri t to terminate a lea e un er appropriate circum tance 42 No ca e re eal a i nificant recantin of t i retrenc ment, an it woul e i in enuou to u e t t at t e court a e imply ole out Yellowstone in unction wit out enuine le al an factual analy e t ere are certainly nota le eci ion con trainin or refinin t e Yellowstone octrine 4 ou t e willin ne of t e Fir t epartment an ot er court to i ue Yellowstone in unction i ifficult to mea ure, it i unlikely, a e on t e eer num er of Yellowstone ca e in recent eca e , t at t e reme y a een reine in ince t e 19 0 44 ur ey of New York upreme Court ca e wit motion for Yellowstone in unction o er t e la t e eral year i not re eal i nificant u icial ia , wit rou ly e ual enial an rant of Yellowstone re ue t owe er, minimal application of Yellowstone oe
9. See N Y CON art V , 0 40. See, e.g., 2 E t t Corp ark E partment , nc , 499 N Y 2 , up Ct 19 tatin t at w en Yellowstone relief i una aila le t e appropriate tan ar i , t erefore, t e eneral tan ar for in uncti e relief 41 Bati ta, supra note 24, at 1, 42. Id. at See, e.g., Ca pi Ma i on 9 oc , nc , 44 N Y 2 4 9, 4 0 pp i 19 1 t i mea ure, e i ne to protect a ain t t e forfeiture of tenant u tantial property intere t, oul not pro i e a licen e to wit ol t e mont ly maintenance an ot er c ar e from t e efen ant co operati e corporation for an in efinite perio of time 4 Mo t recently, in 159 MP Corp., t e ma ority el t at a wai er of Yellowstone in unction in a lea e a reement wa enforcea le an not a ain t pu lic policy 1 9 M Corp Re ri e Be for , LLC, 1 N Y , 9 pp i 201 44. See Frey, supra note 1 , at 1 2 u e tin t at court rant Yellow tone in unction to tenant a freely a can y i i en to c il ren on alloween 0 BROO J COR F N & COM L Vol 14 not uarantee fair eci ion for pre ent partie or preclu e t e po i ility of t e octrine future e pan ion
E PROPER APPLICATION OF T E YELLOWSTONE INJUNCTION Before analy in t e contro er ial ca e , two e ample of proper Yellowstone relief are pre ente for contra t n Stix Restaurant Group, LLC v. Christos Realty Inc t e plaintiff tenant, ti , entere a commercial lea e in May 2012 4 fter work wa one to reno ate t e pace for ti nee , a contractor file a mec anic lien a ain t t e property 4 ortly after, t e lan lor er e ti wit a notice of efault a e on t e lien tatin t at t e lea e woul e terminate if t e efault wa not cure wit in ten ay 4 ti an were t at it a cure an alle e t at if it coul not reac an a reement re ar in t e mec anic lien, it coul pro i e a on for t e lien ut nee e a itional time to ecure t e on 4 e court rante t e Yellowstone in unction on t e con ition t at t e lien e on e wit in t ree week , rea onin t at t e tenant coul only cure y on in t e mec anic lien ut t at it oul e i en an opportunity to o o 49 n eci in to rant t e Yellowstone in unction, t e court may a e con i ere t e relati ely uick action taken y t e tenant an t e fact t at it a rou t a eparate action a ain t t e contractor to cancel t e lien 0 e eral factor ren ere Stix para i matic for Yellowstone relief e efault were limite in ot i e an cope n ea ily re ol e mec anic lien oe not nece arily in icate t e ame un e ira le trait in a tenant t at a lan lor coul rea ona ly infer from mont of un ue rent or ankruptcy imin an initiati e are al o critical Nearly nine year remaine on t e ten year lea e e court may a e reco ni e t i a in icatin t e importance of maintainin t i lea e ol , e pecially for a tenant in t e re taurant in u try ti not only acte uickly in 1 re pon e to t e efault notice an court filin , ut al o ou t to reme y t e i ue in t e eparate claim a ain t t e contractor e e are all in icia of oo fait an clean an , w ic are fun amental ualitie of any plaintiff eekin e uita le relief 2
4 ti Re t rp , LLC C ri to Realty nc , 1 201 , 201 N Y Mi c LE 4211, at 1 up Ct ept 1 , 201 4 . Id. at 1 2 4 . Id. 4 . Id. at 2 49. Id. at 0. Id. at 4 1. Id. 2. See, e.g., illiam Fit u , N Y 444, 4 2 1 e w o eek e uity mu t o e uity 2019 Revising the Yellowstone Injunction 1
not er ca e w ere Yellowstone relief wa proper, t ou for ifferent rea on , i Pomodoro Grill, Inc v. I.M.V. 1290, LLC e court, con i erin t e u tantial property intere t of laintiff , an t e on oin i pute etween t e partie , 4 rante t e Yellowstone in unction wit re pect to t e alle e mec anic lien, fire co e iolation , an a i pute i n ince t e partie a e i a ree to almo t e ery fact concernin t e i n an t eir cre i ility coul not e etermine on it face to maintain t e tatu uo, t e court or ere t at t e ori inal i n or a u tantially imilar i n e returne to w ere t e ori inal i n wa locate until furt er etermination of t e Court, unle t e partie a ree ot erwi e n a tumultuou ituation like Pomodoro, maintainin t e tatu uo coul e t e court mo t e uita le approac Una le to etermine w ic party wa ein e ploitati e, t e court acte fairly an allowe ot i e more time to at er e i ence an cre i le te timony owe er, mo t ca e ealin wit Yellowstone relief a e le con olute fact t an Stix or Pomodoro ey typically feature mun ane conflict on le contentiou i ue , uc a unpai rent or unprocure in urance, w ic o erw elmin ly oul not re uire a court e uita le inter ention
II IMPROPER ETTIN FOR T E YELLOW TONE OCTRINE e t ru t of t i Note turn on t e econ an fourt factor of t e Yellowstone te t, w ic re uire t at t e tenant mu t e in efault un er it lea e an a e t e a ility to cure in or er to eek Yellowstone relief efault are enerally cate ori e a monetary or non monetary Monetary efault may re ult from a tenant failure to pay rent, common e pen e or payment re uire un er t e lea e Bankruptcy coul e con i ere an
Rea ona le min may i a ree o er w et er t i wa really a Yellowstone in unction ou t e eci ion e plicitly or ere a Yellow tone n unction, e en a umin t e Yellow tone application wa untimely, t e plaintiff a met t e tan ar for in uncti e relief pur uant to C L R 01 y e ta li in a likeli oo of ucce on t e merit , irrepara le in ury if t e in unction i not rante an a alancin of e uitie in it fa or omo oro rill, nc M V 1290, LLC, 201 2, 201 N Y Mi c LE 9 , at 12 1 up Ct u 1 , 201 4. Id. at 14. . Id. at 19 20. . See id. ap in in urance co era e are incura le accor in to t e Court of ppeal o eci in uc ca e i nearly automatic See el im Corp Cent Mkt , nc , 19 N E 2 29 , 29 9 N Y 19 See, e.g., Julianna Collection Corp VB 990 O Mem er LLC, No 1 21 201 , 201 N Y Mi c LE 424 up Ct u 9, 201 c ulman, Blit & illiam on, LL VB 990 O LLC, No 1 9 1 , 201 N Y Mi c LE 9 up Ct u , 201 e plainin in urance ap in Yellowstone ca e rau ar Mollen orowit omeran & apiro 00 ir e oc ., 1 N E 2 11 , 120 N Y 1999 2 BROO J COR F N & COM L Vol 14 in erently monetary efault 9 ut it may e e amine eparately ue to it uni ue nature an t e re uirement of t e Bankruptcy Co e t e Co e Non monetary efault may relate to, inter alia, ap in or lack of in urance co era e, impro ement an alteration , an a i nment or u lettin a ain t t e term of t e lea e not er re uirement implie y t e econ an fourt factor i t at t e tenant a a cure perio , pre cri e y t eir lea e, w ic t e court may toll Ca e eci e a e on t e e i tence or e piration of t e tenant cure perio will e e amine u e uently ain, t i Note oe not u e t t at New York court a e een ca alierly i uin Yellowstone in unction to un e er in tenant or t at t e octrine a een mi applie or o eru e 0 owe er, ome plaintiff a e ou t to e ploit Yellowstone relief, 1 an t ere are a pect of t e octrine t at may e clarifie or mo ifie to ren er it a more effecti e u icial tool
A YELLOWSTONE INJUNCTION AN TENANT IN MONETARY EFAULT n e emplary ca e of a monetary efault i Definitions Personal Fitness, Inc. v. 133 E. 58th Street LLC e tenant c ronically faile to pay rent, t u forcin t e lan lor to rin ten nonpayment action in e en year 2 e ppellate i i ion, Fir t epartment, affirme t e enial of t e tenant re ue t for a Yellowstone in unction Monetary efault , uni uely, are effecti ely cura le in tantaneou ly if t e tenant can pay C ronic nonpayment, a in Definitions Personal Fitness, may in icate to a u e an o iou unwillin ne an ina ility to cure owe er, in ca e w ere t e nonpayment a een le e re iou , u e may a e a ar er time i cernin w ic tenant are cau t in ire trait an w ic a e a y le al coun el n M.J.G. Merchant Funding Group LLC v. Matlin Patterson Global Advisers LLC, t e tenant wa late on e eral mont of rent 4 e court enie t e Yellowstone in unction re ue t, uncon ince y t e tenant inappo ite affi a it an t e a ertion t at i ank account a een acke , an t at t e fun to co er t e
9 Notwit tan in t o e cle er, if not, manipulati e in i i ual w o are not in ol ent ut trate ically file for ankruptcy protection 0. See Frey, supra note 1 1. See generally 0 u on Owner, LCC Rector, C urc ar en & Ve trymen of rinity C urc in t e City of N Y , 9 N Y 2 4 up Ct 2009 enyin a Yellowstone in unction an conclu in t at t e tenant attempte to u e it ut own in con truction a le era e to force t e lan lor to rene otiate it lea e 2 efinition er Fitne , nc 1 E t t LLC , 9 N Y 2 4 , 4 pp i 201 . Id. 4 M J Merc Fun in rp LLC Matlin atter on lo i er LLC, No 02 201 , 201 N Y Mi c LE 2 , at up Ct Fe , 201 2019 Revising the Yellowstone Injunction rent c eck a een frau ulently wire out of t e account Like Definitions, t e court in M.J.G. wa confi ent in enyin Yellowstone relief a e on a continue pattern of monetary efault e Court of ppeal coul remo e t e e ca e , often eci e wit apparent ea e, from t e realm of Yellowstone wit out eopar i in it efficacy for tenant in non monetary efault Finally, tenant in monetary efault, particularly for failure to pay rent, may fin t em el e u ect to a u tantial un ertakin u mitte to t e court until t e i pute i re ol e ou un ertakin are i cretionary for RO an Yellowstone in unction , t ey remain an imperfect olution w ic can re uire tenant to make lar e payment 9 w ile enyin t e lan lor t e u e of t o e fun 0 ey can al o ur en t e u icial ocket y nece itatin a itional earin 1 or creatin u e uent i pute relate to t e appointe amount 2 Un ertakin can e eriou o tacle , particularly for tenant alrea y in financial i tre , an w ile t ey are not man atory, a u e mi t feel o li ate to re uire an un ertakin to compen ate for t e le er ur en for Yellowstone relief Con er ely, a u e may re uire a maller un ertakin from a tenant, w o a re ue te tra itional in uncti e relief an i willin an a le to meet t at i er e i entiary ur en, ecau e uc a tenant i more likely to ultimately uccee t an one eekin only a Yellowstone in unction 4 not er in icator t at Yellowstone oul only apply to non monetary efault i t e ifference in u icial prece ent re ar in w et er a
. Id. at 12 1 promi e, en a ement, or tipulation Un ertakin i fre uently u e in t e pecial en e of a promi e i en in t e cour e of le al procee in y a party or i coun el, enerally a a con ition to o tainin ome conce ion from t e court or t e oppo ite party Undertaking, E L C ON RY ttp t elaw ictionary or un ertakin la t i ite No 19, 2019 . See N Y C L R 12 , 1 c Con ol 201 N Y C L R 1 c Con ol 201 9. See 1 ark lace L , LLC Con ol E i on Co of N Y , 9 9 N Y 2 2 , 2 up Ct 2011 or erin plaintiff to i e an un ertakin of 1, 19 00 e amount i u ect to u icial i cretion, a u e may only re uire a nominal un ertakin See, e.g., LF 420 Broa way, LLC 420 Broa way Corp , No 0 2011, 2012 N Y Mi c LE 4, at 1 up Ct Jun 29, 2012 or erin a nominal un ertakin of 1000 0. See rau ar Mollen orowit omeran & apiro 00 ir e oc , 1 N E 2 11 , 120 21 N Y 1999 1. See, e.g., 1 9 M Corp Re ri e Be for , LLC, 1 N Y , 111 pp i 201 2. See, e.g., Bl er Local 2B J en ion Fun 101 Lt ip, 9 1 N Y 2 2, pp i 2014 . See, e.g., eit en 1 0 E t t pon or Corp , 44 N Y 2 44, 4 pp i 19 2 increa in t e un ertakin from 20,000 to 1 0,000 ecau e in uncti e relief woul not pro i e un er t e circum tance erein a e uate an complete relief 4. See supra te t accompanyin note 29 4 BROO J COR F N & COM L Vol 14 con itional limitation a e on t e failure to pay rent i enforcea le For re i ential tenant in New York, a con itional limitation a e olely on a failure to timely pay rent a een foun to e a ain t pu lic policy e ame i not true for commercial tenant n t e commercial ettin , court will enforce uc con itional limitation a ent a owin of frau , uncon ciona ility, or a fait i i tinction etween monetary efault y re i ential an commercial tenant i i nificant, an t e tate oul e more concerne wit pre entin unnece ary re i ential e iction t an wit protectin commercial lea e of for profit entitie owe er, Yellowstone e plicit a aila ility to commercial tenant , w o alrea y mu t a ere to a i er tan ar of timely rent payment wit re pect to con itional limitation , track prece ential t rea acro common law w ic reflect t e merit of limitin Yellowstone application to ca e wit non monetary efault e eart of ca e rantin Yellowstone relief to tenant in monetary efault i a ilent acknowle ement y t e court t at t e reme y i e entially inappropriate in uc ituation n Hollymount Corp. v. Modern Business Associates., Inc., t e econ epartment tate t at mo t of t e iolation in t e in tant ca e were rent relate an t u not e er in of Yellowstone protection 9 Ne ert ele , t e court rante a Yellowstone in unction ecau e certain alle e iolation were not rent related an were in ee cura le 0 e Court of ppeal oul rule t at Yellowstone relief i inappropriate in ca e of monetary efault uc a ol in woul make t e octrine clearer an re uce t e ca eloa y eliminatin , from t e out et, tan in for t e ame claim t at are mo t likely to e enie in court
B YELLOWSTONE INJUNCTION AN TENANT FACIN BANKRUPTCY Bankruptcy it elf may e roun for a efault in a commercial lea e 1 tenant filin for ankruptcy may e completely una le to continue payin
con itional limitation i , a term foun in a lea e t at tate t at t e lea e i terminate if certain con ition are not met Conditional Limitation, E L C ON RY, ttp t elaw ictionary or con itional limitation la t i ite ec 2 , 201 ueen rt u li er , nc nima in allery, nc , No 2 0 2002, 2002 N Y Mi c LE 1 9, at N Y Ci Ct Fe 2 , 2002 . Id. ere i , apparently, no ca e in w ic a court flippantly rante Yellowstone relief to a tenant wit a complete ina ility to meet t eir monetary o li ation 9 ollymount Corp Mo ern Bu oc , nc , 2 N Y 2 11 , 114 pp i 19 0. Id. emp a i a e . 1. See, e.g., NE YOR C Y B R N, MO EL RE L LE E N COMMEN , R CLE 1 EF UL , 1 1 ttp www2 nyc ar or RealE tate Form Retail 20Lea e 20form 20 20F N L 20 1 10 p f la t i ite Oct 2 , 2019 au e tuart, 0 N Y 2 4 4, 4 4 pp i 1992 Un er t e a reement a efault inclu e le ee ecomin in ol ent or ankrupt 2019 Revising the Yellowstone Injunction rent or it a et may e tie up in ot er court an wit ot er cre itor 2 Bankrupt tenant may uickly lea to acant torefront , w ic pro i e no practical or economic enefit for anyone n uc a ituation, t e a ility to terminate a lea e an reclaim po e ion of t e pace i in t e lan lor , an ar ua ly t e eneral pu lic , e t intere t Lan lor can t en re let t e property an e in eneratin new income, rat er t an tryin to e tract t o e ame earnin from ot er ource i e , ot er tenant e uate ca flow i e ential to lan lor a ility to tay afloat in t e City, ince it a ome of t e i e t commercial real e tate ta e in t e nation 4 e pu lic enerally enefit w en a new u ine open in t e pace formerly occupie y a ankrupt tenant Broa ly, t e pu lic may enefit t rou t e i er ta e t at an acti e u ine woul enerate, compare to lower re enue from ta in unoccupie real e tate More narrowly, t ere are t o e in i i ual , or corporate actor , w o can enefit irectly y lea in t e now a aila le pace an ecomin t e new tenant to pro i e oo or er ice to t e eneral population w ile per onally profitin i i all e pecially true in t e City, w ere uttere torefront are anat ema to many important in u trie , inclu in real e tate, touri m, retail, etc Bankruptcy y tenant i anot er cenario, e entially a u et of monetary efault, w ic emon trate t e appropriatene of rawin a i tinction etween monetary an non monetary efault in t e Yellowstone conte t wit ot er monetary efault , ankruptcy coul ypot etically e re ol e uickly owe er, one oe not, for oo rea on, e pect t at ankruptee will u enly fin t e mean to pay t eir e t ccor in ly,
2. See, e.g., 4 U LLC M LLC, 992 N Y 2 1 , 1 pp i 2014 . See ap ne owlan , New York City Moves to Collect Retail Vacancy Data, RE L VE July 2 , 2019 , ttp www retail i e com new new york city mo e to collect retail acancy ata 9499 ere no ou t t at t e epi emic of treet le el retail acancie in New York City i e a tatin from a lo of acce to oo for New Yorker , lo of employment for new Yorker , lo of rent re enue for lan lor an lo of ta re enue for t e City an tate 4. See, L NCOLN N OF L N & OL CY & M NN C R FOR F C L E CELLENCE, 0 E RO ER Y COM R ON U Y FOR E N 201 t l pr 201 , ttp www lincolnin t e u ite efault file pu file 0 tate property ta compari on for 201 full 1 p f . See Jeffrey Batter all, Commercial Leases and Section 365 of the Bankruptcy Code, 4 M B N R L J 29, 1 2 1990 . See generally 4 Ways to Capitalize on the “Retail Crisis” in NYC, OREFRON M NE, ttp www t e torefront com ma 4 way capitali e retail cri i nyc la t i ite Oct 4, 2019 pre entin Monitor in Competitor Clo ure a t e fir t way to capitali e on t e retail cri i Moreo er, t e ri e of online oppin a ma e it increa in ly ifficult for e en t e i e t name retailer to maintain i p y ical pace in New York City Ma or tren affectin tenant an u ine e like t i will ine ita ly impact lan lor a well See Rac el ram , Stores Take Flight from Fifth Avenue in Manhattan, N Y ME pr 4, 201 , ttp www nytime com 201 04 04 u ine tore fift a enue man attan ralp lauren tml . See generally V C N NE YOR M N M N N U ERE OREFRON ttp www acantnewyork com la t i ite ec 21, 201 mappin t e acant commercial pace t rou out t e City BROO J COR F N & COM L Vol 14 t e ifference etween monetary an non monetary efault are reflecte y t e Bankruptcy Co e t e Co e Bankruptcy tru tee cannot a ume commercial lea e un er w ic t e tenant i in monetary efault, i e , if t ey owe e eral mont rent Fir t, t e Co e i tin ui e 9 etween re i ential an nonre i ential lea e , counterintuiti ely pro i in fewer protection for re i ential lea e ol er t an New York tate law 90 ankruptcy tru tee may a ume a nonre i ential lea e, un er w ic t e e tor i in efault, a lon a t e tru tee cure , or pro i e a e uate a urance t at t e tru tee will promptly cure, uc efault ari in from any failure to perform non-monetary obligations un er an une pire lea e of real property 91 lt ou t i i tinction ari e in a a tly ifferent le al conte t, t e ri in policy concern are relate e Co e, like First National, reco ni e t e potential alue of a commercial lea e ol an e ten tenant certain protection Like many Yellowstone ca e , t e Co e reco ni e t at a tenant likeli oo of maintainin a lea e ol i a tly imini e w en t eir efault are monetary But unlike Yellowstone, t e Co e oe not rea ily pro i e protection to uc tenant n a itional parallel to ankruptcy law i t e priority of a lan lor cre itor claim e ankruptcy tru tee uty to cure non monetary efault i i tinct from t e eneral uty to pay t e e tor cre itor f t ere i a efault in a commercial lea e, t at efault mu t e cure , an t e lan lor mu t e compen ate efore ot er cre itor can e ati fie wit uc fun 92 Finally, t e Co e ar a tru tee from a umin any nonre i ential lea e w ic , a een terminate un er applica le nonbankruptcy law prior to t e or er for relief 9 e Yellowstone octrine oul not ur en New York fe eral ankruptcy court 94 or complicate t e role of a New York ankruptcy tru tee, w o repre ent eit er a tenant or lan lor , y a lin t em wit t e potential for lon le al attle o er w et er a lea e wa
9. See 11 U C 1 201 90. See, e.g., N Y RE L RO C Con ol 201 am J Le itin, Resolving the Foreclosure Crisis: Modification of Mortgages in Bankruptcy, 2009 L REV , 2 2009 e plainin w y t e Co e pro i e le protection for re i ential property t an ot er a et 91 11 U C 1 201 emp a i a e 92 ary pencer Jr , A Simple Solution for Stub Rent? How Proposed Changes to the Treatment of Stub Rent Could Lead to Unforeseen Consequences, REV B N N & F N L 91 , 92 201 u e tin t at one rea on for t i priority i a lan lor on oin re uirement to pro i e certain er ice to t e tenant wit little uarantee of compen ation an re ar le of t e tenant financial tatu 9 11 U C c 201 emp a i a e 94. See e.g., In re Family owtime eatre , nc , B R 9 Bankr E N Y 19 In re e en tar Re t , nc , 122 B R 21 Bankr N Y 1990 otel yracu e, nc City of yracu e n u e ency, 1 B R 24, 2 Bankr N N Y 199 1 Broa way Mar Re t Corp aramount rp , nc In re 1 Broa way Mar Re t Corp , B R 490 Bankr N Y 200 In re rti anal 201 , LLC, No 1 12 19, 201 Bankr LE 1 , at 4 Bankr N Y No , 201 ankruptcy ca e ealin wit Yellowstone in unction 2019 Revising the Yellowstone Injunction properly terminate t e First National court u e te , t i oul remain a ri t line rule9 an t e Co e acknowle ement of i tinction etween monetary an non monetary efault oul per ua e t e court t at t i i an appropriate line to raw
C YELLOWSTONE INJUNCTION AN LEA E WIT E PIRE CURE PERIO ara o ically, t e court a e refu e to e ten Yellowstone relief in ome ca e ecau e t e lea e i not pro i e for a cure perio at all 9 t fir t lance t i i lo ically con i tent wit t e Yellowstone octrine an it re uirement a court cannot e ten w at oe not e i t in t e fir t place an e pire or unpro i e cure perio to allow t e efaultin party to cure owe er, t e pu lic policy concern o er t e forfeiture of a lea e ol a , at time , urmounte t i lo ical o tacle ere are e eral ca e w ere court rante Yellowstone relief to tenant w o e cure perio a tec nically e pire e e rulin are contrary to t e pirit an rationale of t e First National eci ion.9 e ori in of t i tren were pre a e y Ju e itone i ent in TSS-Seedman’s, Inc. v. Elota Realty Co. i n effect, t e ma ority a el t at, re ar le of t e lea e pro i ion , t e law will imply a ri t to cure t at e ten until uc time a t e lan lor act upon t e tenant efault cannot a ree to uc a re ult, owe er, ince it iolate t e well e ta li e principle t at, a ent a owin of frau , mutual mi take or ot er accepta le a i of reformation, t e court i powerle to rea into a lea e a ri t to cure eyon t e ri t pecifie in t e lea e it elf 9 n 19 , Ju e itone wa writin a ea of i time ome recent ca e a e profe e loyalty to First National yet imultaneou ly i ue u ement t at eem in erently at o t erewit 99 n Long Island Gynecological Servs., P.C. v. 1103 Stewart Ave. Assocs. Ltd. Pshp. LIGS , t e lan lor ent t e tenant a notice of efault for multiple iolation of t e lea e 100 e tenant a t irty ay to cure t e alle e efault , ut faile to cure an file for a Yellowstone in unction nine ay after t e cure perio
9 Fir t Nat l tore , nc Yellow tone oppin Ctr , nc , 2 N E 2 , 1 N Y 19 9 . See Boyar ky Froccaro, 4 9 N Y 2 0 , 10 11 up Ct 19 4 9 Frey, supra note 1 , at 1 t i ironic t at Yellowstone, w ic ictate u icial control o er ympat y, a now ecome t e la el for a octrine t at twi t tra itional tan ar for e uita le relief preci ely for ympat etic purpo e 9 ee man , nc Elota Realty Co , 1 N E 2 4 , 49 N Y 19 99. See, e.g., Lon lan ynecolo ical er , C 110 tewart e oc Lt p, N Y 2 9 9, 9 2 pp i 199 artner LLC ort mperial Ferry Corp , N Y 2 2 , 2 9 pp i 200 Ray & Cut nc 240 LLC, No 111411 200 , 200 N Y Mi c LE at 10 up Ct Jan 1 , 200 100. Long Island Gynecological Servs., N Y 2 at 9 1 BROO J COR F N & COM L Vol 14 e pire 101 e upreme Court enie on t e Yellowstone application a untimely 102 owe er, t e econ epartment re er e on t e roun t at ecau e t e efault coul not a e een cure wit in a t irty ay perio , t e tenant wa t erefore entitle to more t an t irty ay to cure, an it motion for a Yellowstone in unction wa , un er t e particular circum tance of t i ca e, timely, an oul a e een rante 10 n effect, y e ten in t e cure perio , LIGS re i e a lea e t at oul , y it own term , a e terminate efore t e tenant file for Yellowstone relief 104 ou t e eci ion wa at o wit First National ecau e, a in First National, t e tenant cure perio a e pire prior to t e application for in uncti e relief, one mi t con i er t e po ition of a u e force to c oo e etween tretc in a narrow le al octrine or uttin own an a ortion center y u icial ecree mitte ly, in LIGS an TSS-Seedman’s, t e court wa e ten in , or re i in , a pre e i tin cure perio 10 n e en reater affront to First National woul e to create a cure perio w en t ere wa none pro i e for in t e lea e 10 u far court a e ecline to o t i 10 an a e pre ente , in t i re pect, t e e pan ion of t e Yellowstone octrine Nota ly, t e econ epartment re er e t e LIGS ol in in 2010 10 owe er, t e Fir t an econ epartment i a ree on w et er t e e piration of a tenant cure perio an receipt of a termination notice preclu e an application for a Yellowstone in unction 109 e Fir t epartment allow an e ception akin to t e LIGS rule, w ic t e econ epartment a an one in Korova Milk Bar of White Plains, Inc. v. PRE Props., LLC 110 e econ epartment a opte a tricter formulation t at a tenant w o fail to file for Yellowstone relief wit in t e cure perio i
101. Id. 102. Id. 10 . Id. at 9 2 104 i ca e mi t a e come out ifferently in t e Fir t epartment, w ic , at that time, took an oppo in po ition re ar in alrea y e pire lea e cure perio See o o Elec , nc et ar Rlty Co nc , 200 N Y Mi c LE 42 , at 4 up Ct Jan 22, 200 ere, t ere i no ri t to cure, or w ere t e cure perio a en e prior to t e eekin of a Yellowstone in unction, t e motion for a Yellowstone in unction mu t e enie 10 . See ee man , nc Elota Realty Co , 1 N E 2 4 , 49 N Y 19 Long Island Gynecological Servs., N Y 2 at 9 1 10 . See Fir t Nat l tore , nc Yellow tone oppin Ctr , nc , 2 N E 2 , 1 N Y 19 10 . See, e.g., 0 Yorktown Foo Corp 0 ownin ri e, LLC, 9 N Y 2 2 , 2 up Ct 2012 enyin relief ecau e no notice to cure a een i ue an t erefore t e wa no cure perio to e ten ueen rt u li er , nc nima in allery, nc , No 2 0 2002, 2002 N Y Mi c LE 1 9, at 9 N Y Ci Ct Fe 2 2002 enyin relief ecau e t e lea e i not pro i e for a cure perio for t e failure to pay rent 10 oro a Milk Bar of ite lain , nc RE rop , LLC, 94 N Y 2 499, 01 pp i 2010 109. See Vill Ctr for Care li o Realty & er Corp , 94 N Y 2 11, 1 14 pp i 2012 110. Korova Milk Bar, 94 N Y 2 at 01 2019 Revising the Yellowstone Injunction 9 fore er arre from uc relief, no matter what the provisions of the lease tate concernin efault incapa le of cure wit in t e tate time an regardless of what efforts they had undertaken to effectuate t e cure 111 Con er ely, t e Fir t epartment till follow a more fle i le con ention for tenant w o are una le to cure t eir efault wit in t e time pro i e in t e notice to cure, w ere all t at t e term of t e lea e re uire from t e tenant i commencement of ili ent effort to cure t e efault wit in t e allotte time, er ice of a notice of termination does not necessarily bar necessarily bar subsequent Yellowstone injunctive relief 112 ile t e Fir t epartment ofter tan ar may appeal to one en iti itie , it i contrary to First National ol in an rationale11 a compare to t e rule in t e econ epartment 114 f t e Court of ppeal wi e to i re ar t e import of termination notice an free om of contract, t ey mi t a e one o in First National y creatin a con tructi e lea e or irectly en oinin t e termination n tea , t e ori inal narrow ol in a e ol e into t e pre ent ay octrine, w ic , at lea t in t e Fir t epartment, e entially allow w at wa pre iou ly pro i ite un er a trict rea in of First National.11 e mo t appealin a pect of a Yellowstone in unction i t e low e i entiary ur en for tenant i oul e t e only eparture from tra itional C LR relief permitte y t e Court of ppeal t e a ility to cure in tea of t e likeli oo of ucce e court oul not a e t e power to re i e lea e y e ten in or creatin cure perio e Court of ppeal oul a opt t e econ epartment rationale in Korova Milk Bar, w ic clearly comport wit First National an eliminate t e Fir t epartment e ception a in t e ame tan ar in t e Fir t an econ epartment woul al o promote u icial economy in two ine trica ly linke uri iction wit o erlappin lan lor , tenant , an lawyer
111. Vill. Ctr. for Care, 94 N Y 2 at 14 emp a i a e i cu in t e rule a opte y t e Korova court 112. Id. at 11 emp a i a e 11 Fir t Nat l tore , nc Yellow tone oppin Ctr , nc , 2 N E 2 , 1 N Y 19 notin , [s]tability of contract obligations must not be undermined by judicial sympathy. 114. Compare Korova Milk Bar, 94 N Y 2 at 01 n application for Yellowstone relief mu t e ma e not only efore t e termination of t e u ect lea e ut mu t al o e ma e prior to t e e piration of t e cure perio et fort in t e lea e an t e lan lor notice to cure , with Vill. Ctr. for Care, 94 N Y 2 at 14 e e i tence of a perio in w ic a iolation may e cure does not depend on the contents of the notice of default, but upon the terms of the lease uotin Empire tate Bl oc rump Empire tate artner , N Y 2 1, 4 pp i 199 11 e First National court refu e to rant a re ue t for a RO an a preliminary in unction ecau e t e lan lor er e t e notice of termination prior to t e tenant o tainin a RO from t e ppellate i i ion an t e lea e a t erefore e pire on it own term First Nat’l., 2 N E 2 at 0 1 0 BROO J COR F N & COM L Vol 14
III NARROWIN T E YELLOWSTONE OCTRINE e Yellowstone octrine i ere to tay a a u icial reme y o, w ere po i le, court oul take tep to impro e it i will elp trial u e an lawyer y treamlinin ca e in w ic Yellowstone in unction are ou t n , more importantly, it will enefit t e City lan lor an tenant
A BENEFIT TO LAN LOR AN JU ICIAL ECONOMY f anyt in i to e leane from t e erita le mountain of ca e turnin on t e Yellowstone in unction, it i elpful to reco ni e t at t e Court of ppeal a it an tie in First National. Before t e fir t Yellowstone in unction wa e er i ue , t e court cite rofe or Borc ar for t e propo ition t at, eclaratory relief i sui generis an i a muc le al a e uita le 11 E uita le con i eration u e t t at in a proper ca e, a court a t e fulle t li erty in mol in it ecree to t e nece itie of t e occa ion But, it cannot rant e uita le relief if t ere i no accepta le a i for oin o 11 lternati ely, t e le al a pect of eclaratory relief i omew at akin to tan in i t i tenant in a ituation w ic ren er it re ue t for eclaratory relief le itimate i tu of war etween law an e uity a o e t e Yellowstone in unction t rou out it e elopment in LIGS, lower court , w en eekin to e ten t eir power of e uity to fact pattern w ic too clo ely re em le t o e in prece ential ca e eci e y i er court , are con traine y reliance on t e Yellowstone factor , re tricti e prece ent , an t e eneral principle of First National er ap , t i i anot er unfore een con e uence of t e Yellowstone octrine t e four factor te t may pre ent New York court from truly fle in t eir e uita le power an u in t eir u icial i cretion to mol e uita le reme ie to in i i ual ituation e e ten ion etween law an e uity un erlie t e t ree i ue e amine in t i Note Ca e w ere tenant cannot cure imply ecau e t eir lea e o not contain a cure perio pro i ion are perfectly uita le for e uita le relief Yet, t e lower court are ackle y t e pro forma re uirement of t e four factor te t i ar ument a ume a e ree of etermini m in t e court ,11 ut t e olution a ance in t i Note apply wit e ual force, re ar le of t e e tent to w ic Yellowstone act a a formal u icial re triction i Note a ance a ti tenin of t e Yellowstone octrine, w ic mi t e een a furt er re trictin t o e u e w o c oo e to act wit in Yellowstone’ framework rat er t an rantin relief un er t e C LR owe er, t e net
11 . Id. at 0 uotin E N BORC R , ECL R ORY JU MEN 2 9 2 e 1941 11 . Id. 11 articularly u e on t e lower court , w o may feel con traine y t e le al framework an proce ure of t e Yellowstone octrine, w at mi t e terme u icial framework etermini m 2019 Revising the Yellowstone Injunction 1 re ult woul e to ecrea e t e ran e of cenario , an t u t e pool of potential claimant t at currently fall wit in Yellowstone’ cope, an t ere y increa e t e num er of ca e w ic mu t e re ol e un er t e tra itional tan ar of in uncti e relief t i unclear w et er Yellowstone potential enefit for tenant outwei t e co t for lan lor an t e eneral pu lic, e pecially in t e City e tra itional iew t at tenant are t e un er o an t erefore nee a i nificant array of protection from t eir lan lor mi t e recon i ere in a market efine y i acancy rate cau e y rowin online retail, ri in rent , an re ulatory ur en 119 ou la Elliman ur ey owe t at of all retail pace in Man attan wa acant in 201 w ile in 201 t e fi ure ro e to 20 120 ome u e t t i i ecau e lan lor are ol in out for e elopment, ale eal , or lar er, more relia ly ol ent tenant 121 n 201 , Mayor Bill e Bla io ai e woul like to ee a acancy ta impo e on lan lor w o maintain empty retail pace for too lon 122 owe er, t i iew i ot cynical an financially irre pon i le Lan lor often ea ily epen upon t eir incomin rent ca flow erefore, lan lor pre uma ly prefer any tenant t at i oin u ine , a le to pay rent, an u e t e pace peacefully, to a clo e torefront 12 Empty pace epri e t e lan lor of rent an may in ure t eir reputation ey al o re uire more maintenance, an t erefore e pen e , y t e lan lor compare to rente pace w ere uc re pon i ilitie an co t are typically orne y t e tenant un er t e lea e 124 u , ome lan lor are willin to take elow market rent if t ey can fin a uality tenant ecau e t ey care a out t e city an t ey know t ere not in wor e for t e nei or oo t an a ark tore 12 ain t t i ack rop of t e City
119 CO M R N ER, C Y OF N Y OFF OF E COM ROLLER, RE L V C NCY N NE YOR C Y REN N C U E , 200 201 2019 120 Corey il annon, This Space Is Available, N Y ME ept , 201 , ttp www nytime com interacti e 201 09 0 nyre ion nyc torefront acancy tml 121. Id. See also Erin u on, Why One Fifth of Manhattan Storefronts Are Vacated, E RE L E L ept 9, 201 , ttp t ereal eal com 201 09 09 w y one fift of man attan torefront are acant 122 Ric Cal er, De Blasio: I Will Lobby for Vacancy Tax on Landlords of Empty Storefronts, N Y O Jan 9, 201 , ttp nypo t com 2019 01 09 e la io i will lo y for acancy ta on lan lor of empty torefront 12 . But see Ric Cal er et al , De Blasio Eyes Vacancy Tax for Greedy Landlords Seeking Top Dollar, N Y O Mar 0, 201 , ttp nypo t com 201 0 0 e la io eye acancy ta for ree y lan lor eekin top ollar f t e e lan lor a e eep pocket an lar e property portfolio , it may make more financial en e to claim a ta lo on acant property t an to rent at a non optimal alue 124. See COM RE EN VE U E O COMMERC L LE N N NE YOR C Y, N Y C E OF M LL BU ERV , at 1 1 , ttp www1 nyc o a et ownloa p f a out report commercial lea e ui e acce i le p f la t i ite Oct 2 , 2019 NE YOR C Y B R N, MO EL RE L LE E N COMMEN , R CLE 10 RE R N M N EN NCE, ttp www2 nyc ar or RealE tate Form Retail 20Lea e 20form 20 20F N L 20 1 10 p f la t i ite Oct 2 , 2019 12 il annon, supra note 122 2 BROO J COR F N & COM L Vol 14 ailin retail market, it oe not e oo e t e court y tem to create it own inefficiencie for commercial lan lor or to promote inefficiencie for it elf Rat er, t e court oul , wit in t e confine of t eir u icial power an limitation , promote a fle i le lea in en ironment to pro uce more e uita le re ult for lan lor an tenant Limitin t e cope of t e Yellowstone in unction i a mall tep in t at irection w ic woul a e few, if any, ne ati e con e uence for eit er t e lan lor or t e tenant, ince tenant a e a ariety of ot er imilar reme ie an Yellowstone in unction rarely, if e er, enefit a commercial lan lor Moreo er, ometime tenant u e Yellowstone to t e lan lor etriment an lan lor are ri tfully concerne a out it potential a u e 12 Glaze Teriyaki, LLC v. MacArthur Properties I, LLC, re ol e in 201 , i a likely e ample of a y coun el takin a anta e of t e City an tate protection for tenant 12 n No em er 201 , t e u e or ere Yellowstone relief u ect to t e tenant curin t e certain iolation at t e tenant e pen e, to w ic t e tenant lawyer replie fair enou 12 But t e iolation were ne er cure an t e tenant Yellowstone re ue t wa re ecte in Fe ruary 2014 129 n Fe ruary 201 , a earin wa el to etermine w et er t e tenant a cure t e iolation 1 0 e pite t e lan lor e pert te timony t at t e iolation remaine uncure , t e court foun t at t e lan lor a faile to pro e any co e iolation an en oine it for terminatin t e lea e 1 1 Finally, t e ca e reac e t e ppellate i i ion, Fir t epartment, w ic re er e , rein tate t e lan lor counterclaim , rante a u ement of po e ion an a warrant of e iction an reman e t e i ue of monetary ama e to t e upreme Court 1 2 i ca e took o er t ree year , at in front of at lea t t ree u e , an lea e one feelin t at t i unnece ary, prolon e proce oul a e een a oi a le it out i nificantly more information a out t e e pen iture an o li ation of t e partie , at lea t one incontro erti le o er ation can e leane from Glaze Teriyaki it took too lon an occupie too many court re ource to re ol e t i i ue e two Yellowstone in unction t e tenant ou t coul only a e a e to t e e impe iment Limitin
12 . See, e.g., 1 Broa way Mar Re t Corp aramount rp , nc In re 1 Broa way Mar Re t Corp , B R 490, 04 Bankr N Y 200 Lan lor i concerne t at i mi al of t e ca e will re ult in continuin liti ation in t e tate court, inclu in a itional attempt at in unction , w ic will lea to e tor continue occupancy, nonpayment of rent, non con truction of t e Coolin ower, unaut ori e ni tclu e ent , an po i ly ot er mi c ief 12 la e eriyaki, LLC Mac rt ur rop , N Y 12 pp i 201 12 . Id. at 12 129. Id. 1 0. Id. at 129 1 1. Id. 1 2. Id. at 1 0 2019 Revising the Yellowstone Injunction
Yellowstone a aila ility woul pre ent tenant from u in it in t i manner an promote u icial economy
B BENEFIT TO TENANT ile narrowin t e cope of Yellowstone will enefit lan lor an t e court , tenant are t e party t at Yellowstone wa e i ne to elp an any c an e to t e octrine mu t e wei e a ain t t e enefit it pro i e t em From t e tenant per pecti e, t e Yellowstone in unction i a alua le tool for maintainin a lea e, w ic oul not e i en up li tly or a an one owe er, t e econ epartment recently rule t at wai er of t e ri t to eek a Yellowstone in unction, in commercial lea e , are enforcea le an not a ain t pu lic policy 1 awki lan lor , e pecially t o e wit awki real e tate coun el, will reco ni e t i an uc wai er will oon ecome oilerplate in commercial lea e 1 4 e eci ion to wai e t e ri t ultimately re t wit t e tenant le ee, w o can now u e t e wai er a a ar ainin c ip But, t e enforcea ility of uc wai er will ultimately re uce t e num er of tenant w o can eek Yellowstone relief in t e fir t place,1 an w ile Yellowstone a it flaw , it i un enia ly a ia le reme y for New York commercial tenant w ic t e court oul pre er e for t e proper ituation
CONCLU ION e Yellowstone in unction i a alua le reme y for t e City commercial tenant 1 owe er, e eral c an e woul impro e it efficacy an functionality Fir t, limitin tan in for Yellowstone relief to non monetary efault woul re uce t e num er of application t e court mu t ear an ine ita ly eny non monetary re uirement mi t al o pre ent ankrupt tenant from ettin Yellowstone relief econ , t e Court of ppeal oul a opt t e Korova Milk Bar rule, in w ic tenant w o ne lect to file for Yellowstone relief wit in t e cure perio are fore er
1 1 9 M Corp Re ri e Be for , LLC, 1 N Y , 90 pp i 201 1 4 a i B a e & anielle C Le er, Goodbye ‘Yellowstone’ Road: Is This the End of the ‘Yellowstone’ Doctrine?, N Y L J Mar 20, 201 , ttp www law com newyorklaw ournal 201 0 20 oo ye yellow tone roa i t i t e en of t e yellow tone octrine 1 . See, e.g., Nati e iniar ky, Commercial Tenants and Waiver of Real Property Law § 227; Outside Counsel, N Y L J u 2 , 2014 , ttp www law com newyorklaw ournal alm 1202 02 2 Commercial enant an ai er of Real roperty Law ect22 i cu in ow wai er w ic e ta li t at a tenant i not lia le to pay rent u e uent to it urren er of t e premi e in t e e ent t at t e e truction occurre wit out it fault or ne lect, ecame tan ar in commercial lea e in New York City 1 . See also Cal well m acka e Co , nc , N Y 2 2 , 2 9 pp i 200 e ten in t e Yellowstone in unction to Loft tenant w o, un er Multiple wellin Law rticle C, are con i ere re i ential t ou t ey may ol a commercial lea e i i an intere tin ca e, an t ere may e ot er cla e of tenant in New York to w om Yellowstone oul e e ten e 4 BROO J COR F N & COM L Vol 14
arre from uc relief 1 e court oul e relati ely un ackle w en craftin reme ie in e uity owe er, re i in an e pire cure perio , or imply pullin one out of t in air, i e actly t e type of u icial e a ior t at t e First National court teere clear of w en it ecline to re i e t e tenant e pire lea e e Yellowstone in unction i a u eful, yet imperfect, octrine By a re in t e i ue pre ente erein, t e New York Court of ppeal coul impro e acce to u tice an pro i e an amia le, more ta le le al en ironment for lan lor an commercial tenant t rou out New York
Gabriel W. Block*
1 Vill Ctr for Care li o Realty & er Corp , 94 N Y 2 11, 14 pp i 2012 citin Becker arkin ental upply Co 4 0 e t i e artner , LLC, 2 N Y 2 4 pp i 2001 B , Col ate Uni er ity, 201 J Can i ate, Brooklyn Law c ool, 2020 Many t ank to Bill illiam , il on C ow, an t e re t of t e E itorial taff for t e in alua le contri ution an tirele re i ion t at ma e t i Note po i le