June 18, 2019

The New York State Court of Appeals, which is the highest court in the State of New York, recently issued a landmark ruling calling into question the viability of the so-called “Yellowstone” injunction.  In 159 MP Corp. v. Redbridge Bedford, LLC, N.E.3d, 2019 WL 1995526 (N.Y. May 7, 2019), 2019 N.Y. Slip Op. 03526, the Court enforced a commercial lease clause whereby the tenant waived the right to bring a declaratory action against the landlord.

By way of background, since 1968 commercial tenants in New York have had the opportunity to seek a “Yellowstone” injunction under the Court of Appeals decision in First National Stores v. Yellowstone Shopping Center, 21 N.Y.2d 630 (1968).  In common parlance, the Yellowstone injunction allows a commercial tenant to stay a termination notice during the pendency of a lawsuit while the tenant cures a default and obtains a final court ruling.  Without a Yellowstone Injunction the lease could terminate in which case the court would no longer have jurisdiction over the matter and the tenant would be without a legal remedy (and consequently without a lease).

The Court of Appeals’ decision in Redbridge Bedford, LLC, supra, is significant because it calls into question whether certain commercial tenants will still have the ability to obtain a Yellowstone injunction to preserve their lease.  Commercial landlords will now (presumably) begin routinely adding declaratory judgment waiver/summary proceeding clauses to their leases.

The Court’s rationale in Redbridge Bedford, LLC was that where both parties are represented by counsel in a commercial transaction, such a waiver clause is not void as against public policy.  Query whether the Court would reach the same result if the tenant signed the lease without legal representation, or if the clause were drafted in an ambiguous manner.

Given the strong dissent by the minority Justices, it is possible that the New York State legislature will address this issue.  Until that happens, there is somewhat of a “gray” area in the law and both landlords and tenants would be wise to consult with their attorney before executing a lease.

A copy of the court’s decision in Redbridge Bedford, LLC can be found online:

https://law.justia.com/cases/new-york/court-of-appeals/2019/26.html

For more information about commercial leasing matters, please contact us at (914) 338-8050.

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The Law Offices of Keith R. Betensky, Esq.
The Empire Building
26 Village Green, Suite 4
P.O. Box 22
Bedford, New York 10506-0022
(914) 338-8050
keith@betenskylaw.com
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