ON YELLOWSTONE INJUNCTIONS AND COVID

HEALTHY CHOICE CONCEPTS INC. v. GLENS FALLS HOSP., 2020 NY Slip Op 20337 - NY: Supreme Court, Warren December 16, 2020:

"....Plaintiff commenced this action by the filing of a summons and complaint on August 7, 2020, seeking a declaratory judgment that it is not in violation of the Lease Agreement. In this regard, plaintiff alleges that "during the period in question, due to the COVID-19 global health pandemic, the Governor of the State of New York declared a State of Emergency and issued numerous Executive Orders which both prohibited and substantially limited [its] operations" and, as a result, the defaults must be excused under § 28 of the Agreement. This section provides as follows:

"In the event that either party shall be delayed or hindered in or prevented from the performance of any covenant, agreement, work, service, or other act required under this Lease to be performed by such party and such delay or hindrance is due to strikes, lockouts, failure of power or other utilities, injunction or other court or administrative order, governmental law or regulations which prevent or substantially interfere with the required performance, condemnations, riots, insurrections, martial law, civil commotion, war, fire, flood, earthquake, or other casualty, acts of God, or other causes not within the control of such party, the performance of any covenant, agreement, work, service, or other act shall be excused for the period of delay and the period for the performance of the same shall be extended by the period."

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At the outset, the Court notes that Executive Order 202.28 — issued on May 7, 2020 — prohibited the initiation or enforcement of an eviction against a commercial tenant for nonpayment of rent until August 20, 2020. Executive Order 202.55 — issued on August 5, 2020 — then extended this prohibition to September 4, 2020; Executive Order 202.64 — issued on September 18, 2020 — extended it to October 20, 2020; Executive Order 202.70 — issued on October 20, 2020 — extended in to January 1, 2021; and finally, Executive Order 202.81 — issued on December 11, 2020 — extended it to January 31, 2021. Defendant is thus prohibited from commencing an eviction proceeding against plaintiff until January 31, 2021 — notwithstanding the outcome of this motion — with that date subject to further extension by future Executive Orders. The issues raised in the motion have not been rendered moot, however, as the moratorium cannot be extended indefinitely.

That being said, a Yellowstone injunction has been described by the Court of Appeals "as a `creative remedy' crafted by the lower courts to extend the notice and cure period for commercial tenants faced with lease termination" (159 MP Corp. v Redbridge Bedford, LLC, 33 NY3d 353, 365-366 [2019], quoting Graubard Mollen Horowitz Pomeranz & Shapiro v 600 Third Ave. Assoc., 93 NY2d 508, 514, [1999]). More specifically, "[a] Yellowstone injunction maintains the status quo so that a commercial tenant, when confronted by a threat of termination of its lease, may protect its investment in the leasehold by obtaining a stay tolling the cure period so that upon an adverse determination on the merits the tenant may cure the default and avoid a forfeiture" (Graubard Mollen Horowitz Pomeranz & Shapiro v 600 Third Ave. Assoc., 93 NY2d at 514).^[1] "The party requesting a Yellowstone injunction must demonstrate that:

`(1) it holds a commercial lease; (2) it received from the landlord either a notice of default, a notice to cure, or a threat of termination of the lease; (3) it requested injunctive relief prior to the termination of the lease; and (4) it is prepared and maintains the ability to cure the alleged default by any means short of vacating the premises'" (id., quoting 225 E. 36th St. Garage Corp. v 221 E. 36th Owners Corp., 211 AD2d 420, 421 [1995]).

Here, plaintiff has clearly satisfied the first three elements necessary to obtain a Yellowstone injunction. Indeed, defendant concedes this point. Insofar as the fourth element is concerned, plaintiff contends that "there is a material dispute regarding the existence of a default" with respect to both rental arrears and hours of operation. More specifically, plaintiff contends that it has been "hindered in or prevented from" making rental payments and maintaining required hours of operation by a "cause[] not within [its] control" — namely, the ongoing COVID-19 pandemic — and as such, the defaults must be excused under § 28 of the Lease Agreement.

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It has "long [been] recognized that the law . . . disfavors forfeiture" of a lease (WPA/Partners LLC v Port Imperial Ferry Corp., 307 AD2d 234, 237 [2003]), and the standard for granting a Yellowstone injunction is "far less than the showing normally expected for the grant of preliminary injunctive relief" (Golub Corp. v Northeastern Indus. Park, 188 AD2d 729, 730 [1992]; see Post v 120 E. End Ave. Corp., 62 NY2d 19, 25-26 [1984]). Indeed, in WPA/Partners LLC v Port Imperial Ferry Corp. (supra), the Appellate Division, First Department described this standard as follows:

"[T]he tenant need not at this juncture prove its ability to cure; rather, `[t]he proper inquiry is whether a basis exists for believing that the tenant . . . has the ability [to cure] through any means short of vacating the premises'" (id. at 237, quoting Herzfeld & Stern v Ironwood Realty Corp., 102 AD2d 737, 738 [1984]).

Here, the Court finds that plaintiff has satisfied the fourth element necessary to obtain a Yellowstone injunction. Without making any determination as to whether § 28 of the Lease Agreement is applicable, plaintiff's contentions in this regard are at least reasonable. Indeed, many businesses are struggling to survive amidst the ongoing pandemic — this is the very rationale underlying Executive Order 202.28 and its progeny. Plaintiff has also demonstrated its ability to make the January 2020 payment, and expressed its willingness to increase its hours of operation once the pandemic begins to subside.