No Yellowstone Injunction Where Tenant Cannot Cure Breach of Lease

On March 5, 2019, the First Department issued a decision in Bliss World LLC v. 10 W. 57th St. Realty LLC, 2019 NY Slip Op. 01509, holding that a tenant was not entitled to a Yellowstone injunction when it could not cure the lease breaches, explaining:

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.

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. 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.

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. 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.

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.

(Internal quotations omitted).

We litigate Yellowstone injunctions--a motion to prevent a landlord from evicting a commercial tenant for defaults under the lease--for both landlords and tenants. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding the termination of a commercial lease because of a default under the lease.