BLISS WORLD LLC v. 10 WEST 57TH STREET REALTY LLC (2019)

Order, Supreme Court, New York County (Barry R. Ostrager, J.), entered March 28, 2018, which granted plaintiff tenant's motion for the continuation of an existing Yellowstone injunction, and further enjoined defendant landlord from taking steps to terminate the lease or from commencing eviction proceedings based upon the second notice to cure during the pendency of the action, unanimously reversed, on the law, with costs and the motion denied.

The purpose of a Yellowstone injunction, which tolls the period in which a tenant may cure a claimed violation of the lease, is for a tenant to avoid forfeiture after a determination against it has been made on the merits, because the tenant will still have an opportunity to cure (Korova Milk Bar of White Plains, Inc. v. PRE Prop. LLC, 70 A.D.3d 646, 894 N.Y.S.2d 499 [2d Dept. 2001] ).

A necessary lynchpin of a Yellowstone injunction is that the claimed default is capable of cure.  Where the claimed default is not capable of cure, there is no basis for a Yellowstone injunction (166 Enter. Corp. v. IG Second Generation Partners, L.P., 81 A.D.3d 154, 158, 917 N.Y.S.2d 143 [1st Dept. 2011] ).  Here, the claimed defaults are the tenant's failure to procure insurance and improper assignment of the lease.  The tenant provides various steps that it will take to cure if it is ultimately found to be in material violation of the insurance provisions of the lease.  None of these proposed cures involve any retroactive change in coverage, which means that the alleged defaults raised by the landlord are not susceptible to cure (Three Amigos SJL Rest., Inc. v. 250 W. 43 Owner LLC, 144 A.D.3d 490, 491, 41 N.Y.S.3d 224 [1st Dept. 2016];  see also Prince Fashions, Inc. v. 60G 542 Broadway Owner, LLC, 149 A.D.3d 529, 530, 53 N.Y.S.3d 24 [1st Dept. 2017] ).

With respect to the assignment of the lease, although the tenant has generally stated that it is willing to cure any assignment violation, it does not explain how it will undo the assignment or indicate whether it is willing or able to do so (see Zona, Inc. v. Soho Centrale, LLC, 270 A.D.2d 12, 14, 704 N.Y.S.2d 38 [1st Dept. 2000], compare Artcorp Inc. v. Citirich Realty Corp., 124 A.D.3d 545, 546, 2 N.Y.S.3d 109 [1st Dept. 2015] ).  Although some of our decisions have indicated that seeking late consent from the landlord remains a cure in assignment cases, even were that theoretically true, there is no claim made here that this tenant would pursue that cure (see Gettinger Assoc., LLC v. Abraham Kamber & Co., LLC, 103 A.D.3d 535, 535, 960 N.Y.S.2d 37 [1st Dept. 2013] ).

There is an ongoing dispute between the parties regarding whether the landlord's claimed defaults are meritorious, either because they are not really defaults or they are not sufficiently substantial.  We do not resolve those disputes.  The denial of a Yellowstone injunction does not resolve the underlying merits of disputes about whether there is any default warranting termination of the lease in the first instance.  Consequently, it is not necessary to resolve those issues in the context of whether a Yellowstone injunction is warranted.  A reversal in this case does not relieve the landlord of proving the bona fides of the claimed default or prevent the tenant from defending itself.  These disputes will be resolved either in connection with the complaint and counterclaim in this action or in a subsequently commenced commercial summary holdover proceeding.

We reject the tenant's argument, that even if no Yellowstone injunction is warranted, it is still entitled to a preliminary injunction.  Yellowstone injunctions are available on a far lesser showing than preliminary injunctions (225 E. 36th Street Garage Corp. v. 221 E. 36th Owners Corp., 211 A.D.2d 420, 421, 621 N.Y.S.2d 302 [1st Dept. 1995] ).  Because the Yellowstone injunction fails, the preliminary injunction does as well.  In any event, no injunction is needed to preserve the status quo because the landlord cannot evict the tenant unless and until there is a determination of the merits in the landlord's favor.  If the tenant prevails, then there will be no eviction.  The right lost by the denial of a Yellowstone injunction is the right to cure any default.