160 A.D.3d 176
N.Y. App. Div.2018Background
- Plaintiffs (two related commercial tenants) signed 20-year leases (with 10-year option) for supermarket and storage space; leases included a rider paragraph (67(H)) waiving tenants' right to bring any declaratory judgment action regarding the lease or any notice under the lease and stating disputes were to be adjudicated via summary proceedings.
- In March 2014 landlord successor Redbridge served 10-day Notices to Cure alleging multiple building, safety, and permit violations and threatening termination if not cured.
- Plaintiffs sued in Supreme Court seeking declaratory and injunctive relief (including a Yellowstone injunction to stay the cure period) and damages; they moved for Yellowstone relief one day before the cure period expired.
- Supreme Court denied the Yellowstone motion and granted landlord's cross-motion for summary judgment dismissing the declaratory, injunctive, and estoppel claims on the ground that the lease waiver barred declaratory/Yellowstone relief; it did not address public policy below because it was not argued there.
- Appellate Division affirmed: held the waiver of declaratory judgment remedies encompassed Yellowstone relief, was enforceable between sophisticated parties, did not violate public policy under the record, and left tenants other remedies (summary proceeding defenses, damages claims) intact. Justice Connolly dissented, arguing the broad waiver violated public policy because it foreclosed affirmative judicial relief (lessor-initiated summary proceedings only) and therefore should be unenforceable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a lease provision waiving the tenant's right to bring declaratory judgment actions (and implicitly Yellowstone relief) is enforceable | Waiver is unenforceable as against public policy; tenants must retain access to declaratory relief/Yellowstone to protect leasehold | Waiver negotiated at arm's length by sophisticated parties is valid; freedom to contract favors enforcement | Enforceable here: waiver bars declaratory and Yellowstone relief and court properly denied Yellowstone injunction |
| Whether Yellowstone relief was timely sought | Plaintiffs timely moved one day before cure period expired and obtained temporary stays on appeal | Landlord contended waiver barred relief regardless of timing | Court found Yellowstone relief timely sought but barred by waiver clause |
| Whether waiver left tenants without meaningful judicial remedies (public policy concern) | Waiver eliminates tenant-initiated summary proceedings (RPAPL 721 primarily permits landlord or out-of-possession lessee), so plaintiffs would have no affirmative judicial forum — thus public policy forbids enforcement | Landlord: waiver was limited, tenants retained damages claims and rights to defend any landlord-initiated summary proceeding; freedom to contract controls | Court: waiver was limited and tenants still had remedies (defenses in summary proceedings, damages); public policy did not render waiver void under these facts |
| Whether the fourth cause of action (breach of contract) was improperly dismissed | Plaintiffs argued breach claim was distinct and survives waiver | Landlord argued the breach claim was essentially a disguised request for declaratory relief barred by waiver | Court held the fourth cause was in substance a request for declaratory relief and thus dismissed it under the waiver |
Key Cases Cited
- First Natl. Stores v. Yellowstone Shopping Ctr., 21 N.Y.2d 630 (N.Y. 1968) (establishes Yellowstone injunction: stay of cure period pending declaratory action)
- Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Ave. Assoc., 93 N.Y.2d 508 (N.Y. 1999) (sets four-element test for Yellowstone relief)
- Post v. 120 E. End Ave. Corp., 62 N.Y.2d 19 (N.Y. 1984) (explains relationship between declaratory actions and injunctive relief in landlord-tenant context)
- John J. Kassner & Co. v. City of New York, 46 N.Y.2d 544 (N.Y. 1979) (limitations on enforceability of contractual waivers where public policy protects societal interests)
- Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624 (N.Y. 2006) (addresses enforceability of contractual choice-of-law/forum and related freedom-to-contract principles)