In a case of first impression in any appellate court in the State of New York, the Second Judicial Department in its January 2018 decision, held that a lease provision precluding a tenant’s right to pursue declaratory relief is a waiver of the commercial tenant’s right to seek and obtain a Yellowstone injunction. In doing so, The Court held that the private rights of the parties to contract superseded the parties entitlement to invoke judicially created legal doctrine; the Yellowstone injunction. In reaching its decision, The Court rejected the tenant’s argument that “public policy” required that the judge made law should prevail.
What is a Yellowstone injunction, and Why do Yellowstone injunctions matter?
The Yellowstone injunction was spawned by The Court of Appeals decision in 1968 (First Natl. Stores vs. Yellowstone Shopping Ctr., 21 N.Y.2d 630, 290 N.Y.S.2d 721), which created the implicit acceptance of a commercial tenant’s presumptive right of action to extend noticed cure periods and thereby forestall or avoid lease terminations and evictions until the merits of commercial lease disputes can be resolved by the courts. The significance of the ability to invoke a stay of the termination of a commercial lease, while the merits of the alleged breach are litigated and determined, cannot be overstated. In Yellowstone, the landlord served a ten day notice to cure upon the tenant alleging that the tenant had permitted the City Fire Department to issue a summons for a sprinkler violation, the tenant had a legitimate claim that it was not the responsible party. Without a vehicle to have a that question determined, a tenant may be summarily evicted without a chance to contest the validity or the interpretation of that lease provision. Over the years the legal doctrine of Yellowstone injunction evolved, a test enumerated and the doctrine has been put to use by litigants on many an occasion, but the doctrine remained one based upon declaratory judgment.
The Second Department’s recent decision in 159 MP Court v. Redbridge Bedford, LLC (2018 WL 635946 (N.Y.A.D. 2 Dept.) is a monumental development in the field of Yellowstone injunctions. Landlord’s will be adding verbiage to their leases that will cut-off this remedy in its entirety, saving landlord’s a lot of time and expense quibbling with tenants over contract disputes in the Supreme Court. The Court examined two lease provisions, that were central to its decision- practitioners should be on the look out for them. Paragraph 67(H) in the rider of each lease provided that the tenant:
“waives its right to bring a declaratory judgment action with respect to any provision of this Lease or with respect to any notice sent pursuant to the provisions of this Lease. Any breach of this paragraph shall constitute a breach of substantial obligations of the tenancy, and shall be grounds for the immediate termination of this Lease. It is further agreed that in the event injunctive relief is sought by Tenant and such relief shall be denied, the Owner shall be entitled to recover the costs of opposing such an application, or action, including its attorney’s fees actually incurred, it is the intention of the parties hereto that their disputes be adjudicated via summary proceedings.”
The Court also took into consideration paragraph 67(H), which provided that:
“[i]t is further agreed that in the event injunctive relief is sought by Tenant and such relief shall be denied, the Owner shall be entitled to recover the costs of opposing such an application, or action, including its attorney’s fees actually incurred, it is the intention of the parties hereto that their disputes be adjudicated via summary proceedings ” (emphasis added).
There is no telling if the other Appellate Courts will follow the Second Department’s lead in 159 MP Court v. Redbridge Bedford, LLC, but practitioners should be wary of the case, the lease provisions relied upon, and guide their actions accordingly.