UNIVERSITY HEALTHY CHOICE CORP v. BRONX COMMUNITY COLLEGE AUXILIARY ENTERPRISES CORP (2022)

Recitation, as required by C.P.L.R. 2219(a), of the paper considered in the review of this Order to Show Cause:

Papers Numbered

Order to Show Cause, Affidavit in Support, and Exhibits Thereto 1

Memorandum of Law in Support 2

Memorandum in Opposition and Exhibits Thereto 3

Affirmation of Susan G. Fiore in Opposition 4

Affirmation in Opposition 5

Affirmation in Support 6

Upon due deliberation having been had, the motion is decided as follows:

Plaintiff UNIVERSITY HEALTHY CHOICE CORP., (hereinafter referred to as “UHC” or “Plaintiff”) moves by ORDER TO SHOW CAUSE and all papers therewith for an Order pursuant to CPLR § 6301 and § 6311, granting a preliminary injunction enjoining and restraining the termination of Plaintiff's license and agreement for food service operations and catering at Bronx Community College of the University of the City of New York, and prohibiting interference with the rights of Plaintiff and permitting Plaintiff to open and operate the food services at Bronx Community College, pending a hearing and determination of the proceeding of the further Order of the Court. Defendants BRONX COMMUNITY COLLEGE AUXILIARY ENTERPRISES CORP., BRONX COMMUNITY COLLEGE OF THE CITY OF NEW YORK and THE CITY OF NEW YORK (hereinafter referred to as “BCC” or “Defendants”) having filed opposition hereto, and oral arguments having been held virtually by Microsoft TEAMS on February 16, 2022 whereby all parties were present, upon due deliberation having been had, the motion is decided as follows:

UHC is the Contractor/licensee of the food service facility located at the Bronx Community College at the University of the City of New York (BCC) campus (NYSCEF Doc. No. 7, 3). On or about March 11, 2011, UHC executed a “Food Service Operations Contract” with Defendant Bronx Community College Auxiliary Enterprises Corporation to provide food services for BCC and related events and activities. The Contract was to expire on June 30, 2021 (NYSCEF Doc. No. 2, P. 1-3). The Contract granted UHC a license to occupy, maintain and operate the cafeteria and a café in the Roscoe C. Brown Student Center located at 2155 University Avenue, Bronx, New York (NYSCEF Doc. No. 7, 3). Pursuant to the Contract, UHC invested over $900,000 in the two spaces in which they were licensed to operate as required under Section 5.15 of the Contract pursuant to the Capital Improvement and Furnishing Plan (NYSCEF Doc. No. 7, 4; NYSCEF Doc. No. 2, P. 13). The term of the Contract was initially 10 years and 3 months; however, because the construction took longer than expected, the food service facilities finally opened for business on November 5, 2012, approximately a year and a half after the Contract was executed. Plaintiff claims that because of the delay in opening, the Senior Vice President of Administration at the time, Ms. Mary Coleman, agreed to extend the Contract by two (2) years, which would result in the expiration of the Contract on or about June 30, 2023, to afford UHC the ability to recover the expenses of the Contract under the Capital Improvement and Furnishing Plan ¹ . Further, Plaintiff alleges that pursuant to the Contract extension and the original Contract, UHC was to be given two (2) options to renew the agreement, which would presumably afford them a total of 20 years to recover the monies spent on construction (NYSCEF Doc. No. 7, 4).

Due to the COVID-19 pandemic which greatly impacted New York and the entire country, the City of New York closed educational campuses, including BCC, to in-person student operations, and shortly thereafter to the rest of the staff operations, in March of 2020. UHC remained on-site to provide services to the staff until they, too, were required to vacate the campus, at which time UHC was also required to vacate the campus under various mandates by the City and State of New York (NYSCEF Doc. No. 7, 7). Plaintiff asserts that over $500,000 of their equipment and furniture were secured in their offices at BCC pending the campus reopening. (NYSCEF Doc. No. 7, 8).

Plaintiff asserts that in August of 2020, BCC was to begin in-person classes again but Plaintiff was notified by BCC administrators that they would not be offering indoor dining. Plaintiff offered to provide food trucks, which was rejected by BCC (NYSCEF Doc. No. 7, 9). In August of 2021, BCC announced reopening for in-person learning. UHC contacted BCC to let them know that UHC would need to do cleaning and arrange for food deliveries for the incoming Fall 2021 student body at the food service locations. In order to begin preparations, UHC went to the BCC campus, and was told by BCC security that they would not be allowed in the facility. UHC claims that there was no notice afforded them that they would not be allowed into the facility (NYSCEF Doc. No. 7, 10). The only response was an email indicating that UHC's license had expired and would not be renewed, and that indoor dining would not be offered, so the cancellation of the license was inconsequential (NYSCEF Doc. No. 7, 11).

Upon learning that on January 28, 2022, BCC was going to open in-person dining in their space, operated by someone other than UHC, UHC commenced this action by filing a Summons and Complaint on January 18, 2022, seeking a declaratory judgment that their license is extended to February 2023 pursuant to the Contract extension granted by Ms. Coleman, and that due to the cessation of operations due to the pandemic, the license should be extended to December 2025. They further seek an order and judgment for the recovery of “actual possession of the cafeteria and café” as well as recovery of catering bills, damages and a permanent injunction (NYSCEF Doc. No. 7, 15). The instant Order to Show Cause seeking a Temporary Restraining Order and Injunctive Relief (TRO) was filed on January 20, 2022, seeking a preliminary injunction enjoining and restraining the termination of Plaintiff's license and agreement for food service operations and catering at Bronx Community College of the University of the City of New York, and prohibiting interference with the rights of Plaintiff and permitting Plaintiff to open and operate the food services at Bronx Community College, pending a hearing and determination of the proceeding of the further Order of the Court.

In support of their Order to Show Cause for a preliminary injunction, UHC asserts that they have invested over $1,000,000 into the cafeteria and café and the extension of time would allow UHC to recover their investment. Plaintiff alleges that if UHC is not allowed to resume food service operations, it will result in the layoffs of employees whose jobs they rely on to support their families. They argue that in the absence of immediate action by the Court, a decision in their favor would result in someone else already occupying and using their space, equipment and furniture and that it “may be too late for my employees” (NYSCEF Doc. No. 7,13-17). UHC claims that their business has “suffered catastrophically” due to the closures during the pandemic, and that the “ongoing harm” to UHC is “irreparable” due to reputation and business damage if someone else is allowed to use their location (NYSCEF Doc. No. 7,18-19). UHC argues that the status quo of allowing UHC to continue to use and occupy the cafeteria and café must remain until the dispute over the license extensions has been resolved.

In opposition, Defendants claim that Plaintiff obtained an improper ex parte TRO barring Defendants from an expired food service Contract. They allege that the Contract, by its express terms, expired on June 30, 2021, and that the extensions Plaintiff alleges they are entitled to are refuted by the plain terms of the Contract itself. They argue that the TRO was improper because there has been no showing of “significant prejudice by reason of giving notice” pursuant to Uniform Civil Rule § 202.8-e. They further argue that UHC faced no “immediate and irreparable” harm arising from its expired Contract to provide food services as required by CPLR § 6313(a). Defendants argue that Plaintiff was notified that the Contract had expired in an email exchange that took place on August 2, 2021 (NYSCEF Doc. No. 13). Defendants assert that Plaintiff has not met the required elements of a preliminary injunction; Plaintiff cannot meet the heightened standard of demonstrating a likelihood of success of the merits because the Contract terms are clear and that facts simply show that the dining facility has been closed since March of 2020 and the Contract expired in June 2021, when the campus was still closed. They argue that the status quo would be disturbed, rather than preserved, by the relief sought by Plaintiff. Defendants further argue that Plaintiff has failed to make a showing of irreparable harm because the Contract was for a license, not a lease, and UHC has no proprietary interest in the cafeteria and café, and the Contract expressly provided that it could be suspended or terminated at will without cause by Defendants and, as such, UHC's claims of irreparable harm are foreclosed. They assert that in-person dining is not being offered and Plaintiff's misconception is meritless; the printout Plaintiff relies upon to show that in-person dining has resumed expressly states “The Cafeteria will remain closed until further notice” (NYSCEF Doc. No. 23, P. 12). Further, Plaintiff's claims of economic loss are compensable by money damages and thus does not constitute irreparable harm. Defendant argues that Plaintiff's attempt to show a proving of the Contract extension is barred by the Statute of Frauds, and that the balance of equities favors Defendants. Defendants further assert that with respect to UHC's property, they had been requested on multiple occasions to remove personal items. They ultimately argue that Plaintiff's failure to serve a notice of claim deprives the Court of subject matter jurisdiction relating to claims against BCC and the City of New York.

The Court has discretion to grant a preliminary injunction where the moving party has established (1) a likelihood of success on the merits; (2) irreparable harm if the injunction is denied; and (3) a balance of the equities in favor of the injunction. See, Nobu Next Door, LLC v. Fine Arts Housing, Inc., 4 NY3d 839, 840 (2005). The first requirement almost always necessitates the presentation of evidence; speculation and conclusory statements do not suffice. See, U.S. Re Companies, Inc. v. Scheerer, 41 AD3d 152 (1st Dept. 2007). The second requirement, whether Plaintiff will suffer irreparable harm, is case-specific. It is commonly held that harm is not irreparable if an “adequate remedy at law” exists, but “adequacy” is a flexible notion. Lesron Junior, Inc. v. Feinberg, 13 AD2d 90, 93-94 (1st Dept. 1961). To be adequate, the relief should be “as practicable and efficient as an equitable remedy.” Board of Higher Education of the City of New York v. Marcus, 311 N.Y.S.2d 579, 584 (Sup. Ct. Kings Co. 1970). As to the third requirement of a balance of equities, the court should be able to determine that the harm to the plaintiff without injunctive relief will be greater than the harm to the defendant if injunctive relief is granted. Nassau Roofing & Sheet Metal Co. v. Facilities Development Corp., 70 AD2d 1021 (3rd Dept. 1979).

In addition to the three requirements, the Court requires the moving party show that the mandatory injunction is essential in order to maintain the status quo. Bachman v. Harrington, 184 NY 458 (1906). “Because preliminary injunctions prevent the litigants from taking actions that they are otherwise legally entitled to take in advance of an adjudication on the merits, they should be issued cautiously and in accordance with appropriate procedural safeguards” Uniformed Firefighters Ass'n v. New York, 79 NY2d 236, 241 (1992). In order to benefit from a preliminary injunction that would impact the status quo, or which grants the ultimate relief sought, a Plaintiff must meet a heightened standard of demonstrating a “substantial” likelihood on the merits. See, C.C. v. New York City Dept. of Educ., 2021 U.S. Dist. LEXIS 189344; 2021 WL 4507550 (S.D. NY 2021) (citations omitted). “A mandatory preliminary injunction (one mandating specific conduct, by which the movant would receive some form of the ultimate relief sought as a final judgment), is granted only in ‘unusual’ situations, ‘where the granting of the relief is essential to maintain the status quo pending trial of the action’ ” Jones v. Park Front Apartments, LLC., 73 A.d3d 612 (1st Dept. 2010). The drastic remedy of a mandatory injunction may be granted where the court weighs the conflicting considerations of benefit to the party seeking injunction and harm to the party subject to the injunction which would follow granting of such a drastic remedy. Nat Holding Corps. v. Banks, 22 A.D3d 471 (2nd Dept. 2005).

The License

Plaintiff seeks a preliminary injunction enjoining and restraining the termination of Plaintiff's license and agreement for food service operations and catering at BCC, prohibiting interference with the rights of Plaintiff and permitting Plaintiff to open and operate the food services locations at the cafeteria and café pending a hearing of the proceeding.

Pursuant to the Food Service Operations Contract between Plaintiff and Defendants, Section 2.1 clearly states:

2.1 Rights. Subject to the terms and conditions herein, Corporation hereby grants to Contractor, and Contractor accepts from Corporation, a license to manage and provide Food Service Operations at the College during the term of this Contract for the sole purpose of providing food and beverages to the College community and visitors to the College campus (NYSCEF Doc. No. 2, P. 2).

Section 3 of the Contract, specifically Section 3.1, clearly states, “The term of this Contract is 10 years and three months, beginning on March 1, 2011 and ending on June 30, 2021.” (NYSCEF Doc. No. 2, P. 3). With respect to Plaintiff's assertions that they were entitled to renewal options, the Contract specifically states in Section 3.2, “Corporation has two successive five-year renewal options. Corporation will exercise each option if it is in its best interest.” (NYSCEF Doc. No. 2, P. 3 (emphasis added)).

Further, Section 19.6 of the Contract states:

19.6 Merger; Amendment. This contract supersedes any and all other agreements, written or oral, between the parties hereto, and constitutes the entire agreement between the parties with respect to the subject matter hereof. Accordingly, this Contract may not be altered, amended, modified, or otherwise changed, except by a document in writing signed by each party (NYSCEF Doc. No. 2, P. 28).

The scope and term of the Contract are quite clear: Plaintiff was granted a license to operate on BCC's campus for a period of 10 years, three months beginning March 1, 2011. While a lease is the “conveyance of ‘absolute control and possession of property at an agreed rental’ ” a license “is a revocable privilege given ‘to one, without interest in the lands of another, to do one or more acts of a temporary nature upon such lands.’ ” Union Square Park Community Coalition, Inc. v. New York City Department of Parks and Recreation, 22 NY3d 648, 656 (2014) (citations omitted). A broad termination clause giving the “grantor the ‘right to cancel whenever it decides in good faith to do so’ is strongly indicative of a license as opposed to a lease.” Id. at 656.

The Contract provides the Defendants with a broad termination clause pursuant to Section 14.2.3: “Corporation my suspend or terminate this Contract upon immediate notice to Contractor should Food Service Locations be destroyed of damaged, either in whole or in part, or rendered unusable” Section 14.5 further broadens the termination clause, providing that “The rights of termination referred to in this Contract are not intended to be exclusive and are in addition to any other rights available to either party in Law or in equity.” (NYSCEF Doc. No. 2, P. 26).

A servant or licensee acquires no possessory interest in property. P & A Bros. v. City of NY Dept. of Parks & Recreation, 184 AD2d 267, 269 (1st Dept. 1992) (citing Napier v. Spielmann, 196 NY 575). “A party has an absolute, unqualified right to terminate a Contract on notice pursuant to an unconditional termination clause without court inquiry into whether the termination was activated by an ulterior motive.” Big Apple Car v. City of New York, 204 AD2d 109 (1st Dept. 1994) (citations omitted).

This Court finds that Plaintiff had a revocable license with Defendants, which was freely terminable pursuant to the Contract. The Contract terminated by its natural life on June 30, 2021. Plaintiff alleges that they were granted a 2-year written extension, but no extension has been proffered as proof. Section 19.6 of the Contract therefore controls the parameters of the Contract, in that the Contract as written and provided to the Court supersedes all other agreements and constitutes the entirety of the agreement between the parties. Further, Despite Plaintiff claiming that they had no notice that the Contract was expired, an email sent by Kay Ellis of BCC to UHC on August 2, 2021, states, “As discussed, your contract has indeed expired and has not been renewed” (NYSCEF Doc. No. 13). A subsequent follow up email dated August 23, 2021, states in no uncertain terms, “As previously communicated, our system and records show that the contract is expired and is in no way authorized for extension or renewal. The contract was already reviewed by our Business Office and has been confirmed” (NYSCEF Doc. No. 15). The Contract language clearly states that any such renewal is at BCC's best interest and is not guaranteed. (See, Contract Section 3.2).

Further, pursuant to Plaintiff's own assertions, Plaintiff was unable to enter the location while the College was closed due to the pandemic. In fact, the Cafeteria and Café were rendered unusable once the campus was closed; the closure of the campus was not at the will of Defendants, but pursuant to Governor Andrew Cuomo's Executive Order No. 202.4 of March 16, 2020 (“Notwithstanding any prior directives, every school in the state of New York is hereby directed to close no later than Wednesday, March 18, 2020”) which was extended by subsequent Executive Orders (see Governor Andrew Cuomo's Executive Order Nos. 202.18, 202.28, 202.45). Therefore, the Food Services Locations at Defendants’ campus were thus rendered unusable from the period of March 18, 2020 through the end of the Contract on June 30, 2021, as there was no in-person dining for that period, and had the Contract not naturally expired on June 30, 2021, the Defendants would have been within their rights to terminate the Contract pursuant to their termination clause.

Capital Improvement and Furnishing Plan Investment

Plaintiff argues that UHC has invested over $1,000,000 in construction of the cafeteria and café, and that they are entitled to a license extension in order to recover their costs from their investment, as an offer of irreparable injury, as well as hardship on its employees if the license is terminated. Defendants argue that Plaintiff was contractually required to pay a minimum of $900,000 in capital improvements and furnishings for the Food Service Locations, and that at the termination of the license, title to all improvements would transfer to the Defendants. Defendants argue that Plaintiff's invocation of reliance interests based on the money invested by them pursuant to the Capital Improvement and Furnishing Plan does not constitute irreparable injury.

Section 5.15 of the Contract addresses the Capital Improvement and Furnishing Plan: “Contractor must invest a minimum of $900,000 in capital improvements and furnishings for the Food Service Locations (’Capital Improvement and Furnishing Plan’)” (NYSCEF Doc. No. 2, P. 13). Section 5.15.4 states, “Upon expiration or termination of this Contract, title to all improvements made to the Food Service Locations pursuant to the Capital Improvement and Furnishing Plan, including furnishings and fixtures, will transfer to Corporation or College, free of liens.” (NYSCEF Doc. No. 2, P. 14).

The case most on point to address this issue is In re: Yachthaven Restaurant, Inc., 103 B.R. 68 (E.D. NY 1989). In Yachthaven, a bankruptcy matter, the debtor argued that the City of New York permitted substantial improvements in the approximate amount of $1,000,000 to be made and argued that it would be inequitable to allow the license to be terminated. Consideration for the license was payment of a monthly rent as well as the obligation to make improvement expenditures, which was an integral part of the contract. The court in Yachthaven held that there was no problem with the termination of the license, as the parties knew the terms of the license and sub-license agreement, and “they knew full well if they did not live up to the covenants therein, their interests would terminate and would force the forfeiture of any expenditures made.” Id. at 78 (see also, Yum Yum Flushing Meadows Restaurant, Inc. v. Stern, N.Y.L.J., Sept. 7, 1988, pg. 18, col. 2 (Sup.Ct. NY Co., Kirschenbaum, J.)).

It is undisputed by the parties that the Contract required a minimum of $900,000 to be invested pursuant to the Capital Improvement and Furnishing Plan, improvements which were to be made before the Food Services Locations were to open for business. There is nothing in the licensing Contract that afforded the Plaintiff the ability to recover the funds invested. As such, Plaintiff's argument that UHC is entitled to a license extension to recover investments that they were contractually obligated to make pursuant to the licensing agreement is without merit. Additionally, Plaintiff's argument that loss of employment for its employees due to the license termination, although likely to cause hardship, does not constitute irreparable damages when argued in favor of a preliminary injunction, as the employees would be entitled to reinstatement and back pay if they prevail in the underlying action. See, Suffolk County Ass'n of Municipal Employees, Inc. v. County of Suffolk, 163 AD2d 469 (2d Dept. 1990).

The Preliminary Injunction

As discussed above, the Court has discretion to grant a preliminary injunction where the moving party has established (1) a likelihood of success on the merits; (2) irreparable harm if the injunction is denied; and (3) a balance of the equities in favor of the injunction. See, Nobu Next Door, supra. Plaintiff has failed to meet its burden of proof to show entitlement to a preliminary injunction.

Plaintiff has not established a likelihood of success on the merits; had the premises been subject to a lease and not a license, Plaintiff would have had a proprietary interest in the Food Service Location and thus would have been afforded greater rights, but this is not so. As the Contract only provides for a license to operate food service operations, there are no statutory or other means to apply a tolling or extension of the Contract.

Further, Plaintiff's argument of irreparable harm, namely the reimbursement of their investments in the Capital Improvements and Furnishing Plan from their profits, their employees being terminated, and their reputation being harmed due to the termination of the license, do not rise to a showing of irreparable harm sufficient for a granting of a preliminary injunction. As previously discussed, Plaintiff was granted a license to operate on BCC's campus; a license which was revocable at will and did not grant UHC any property interest in the cafeteria and café. The license expired on June 30, 2021; and was terminable without cause due to the premises becoming unusable due to the pandemic. Damage to UHC's business reputation must be “imminent, not remote or speculative” and evidence supporting this assertion must be more than mere conclusory allegations (see, Golden v. Steam Heat, 216 AD2d 440 (2d Dept. 1995); Cubas v. Martinez, 33 AD3d 96 (1st Dept. 2006); 91st St. Co. v. Robinson, 242 AD2d 502 (1st Dept. 1997). Plaintiff has failed to show that their business reputation is in imminent danger of harm. Economic loss is compensable by money damages, and therefore does not constitute irreparable harm. DiFabio v. Omnipoint Communications, Inc., 66 AD3d 635 (2d Dept. 2009).

Finally, in determining the balance of equities, the Court must find in favor of the Defendants. The Contract granted Plaintiff a revocable license, which the Defendants elected to terminate at the end of the natural life of such. The fact that the Food Services Locations were shut down due to the Pandemic was outside of the Defendants’ control and rendered the Food Services Locations unusable. The contract afforded the defendants the opportunity the right to renew in their best interests; as the Food Services Location remained closed well past the expiration of Plaintiff's license, Defendant was within their rights to elect not to renew the license. To force parties to continue to perform under a terminating contract when one party no longer wishes to continue the contract is disfavored by the courts, see, European Fine Art Found. V. Artvest Partners LLC, 2018 NY Slip Op 31041 (Sup. Ct. NY Cnty. 2018); Mariott Intl., Inc. v. Eden Roc, LLLP, 104 AD3d 583 (1st Dept. 2013).

As such, Plaintiff's application for a preliminary injunction enjoining and restraining the termination of Plaintiff's license and agreement for food service operations and catering at BCC and prohibiting interference with the rights of Plaintiff and permitting Plaintiff to open and operate the food services at BCC is hereby denied.

Lack of Subject Matter Jurisdiction Pursuant to Education Law § 6224

Defendants argue that Plaintiff's failure to serve a notice of claim deprives this Court of subject matter jurisdiction as to claims against the City and the College pursuant to Education Law § 6224(2), General Municipal Law §§ 50-e and 50-i, and Administrative Code § 7-201(a), which forbids a plaintiff from maintaining any cause of action against the City of New York and a community college of the City University of New York, of which BCC applies, unless Plaintiff serves a notice of claim on CUNY for adjustment within 90 days of the events giving rise to the claim, plus a waiting period of 30 days before filing suit.

The application currently before this Court is for a preliminary injunction, which this Court has jurisdiction to decide. Damages are not being determined at this time and would be addressed in the underlying action. As Defendants’ application to dismiss was not properly made in the form of a cross-motion in relation to the preliminary injunction application, the Court declines to decide this issue on the merits at this time.²

Accordingly, it is

ORDERED and ADJUDGED that Plaintiff's Order to Show Cause seeking a preliminary injunction enjoining and restraining the termination of Plaintiff's license for food service operations and catering at Bronx Community College of the University of the City of New York, and prohibiting interference with the rights of Plaintiff and permitting Plaintiff to open and operate the food services at Bronx Community College is denied. It is further

ORDERED and ADJUDGED that any and all stays in effect on this matter are hereby lifted. It is further

ORDERED and ADJUDGED that Plaintiff is directed to serve a copy of this Order with Notice of Entry upon Defendants within thirty (30) days of entry.

This constitutes the Decision and Order of the Court.

FOOTNOTES

1.   However, it should be noted that UHC has not provided proof of the Contract extension. UHCC claims that their office and files at BCC were “violated by someone with access and our files were removed once we are able to do a search of all of Ms. Coleman's letters and files, we will find a copy of the extension agreement” (NYSCEF Doc. No. 7, 5).

2.   Notably, Defendants filed a separate Motion to Dismiss on February 18, 2022, asserting, among other things, the lack of jurisdiction for failure to file a Notice of Claim. That matter is currently returnable on April 18, 2022 (See, NYSCEF Doc. No. 32).

Wilma Guzman, J.