Yellowstone[1] injunctions are an important consideration in New York commercial landlord-tenant disputes. This type of injunction can protect a tenant’s leasehold interest in a subject property by staying termination of a leasehold while an alleged default is litigated. While it does not nullify the remedies to which a landlord is otherwise entitled, it can prevent a landlord from terminating a lease for a default that is disputed in litigation.
To qualify for a Yellowstone injunction, a commercial tenant must demonstrate that: (1) it holds a commercial lease, (2) the landlord sent it a notice of default, notice to cure, or a threat of termination, (3) it requested relief before termination of the lease and expiration of the cure period in the lease and the landlord’s notice to cure, and (4) it is prepared and able to cure the alleged default by any means other than leaving the premises.[2] The injunction maintains the status quo while the case is pending by essentially tolling the cure period, so that even if the landlord is successful in proving the default in litigation, the tenant retains an opportunity to then cure the default.
The Appellate Division, Second Department recently decided an appeal involving a motion to vacate a Yellowstone injunction, as one of four appeals in an ongoing commercial real estate litigation. In 255 Butler Associates, LLC v. 255 Butler, LLC, Index. No. 511560/15, 2022 N.Y. Slip Op 05066 (2d Dep’t Aug. 31, 2022), the Court affirmed a decision of the Supreme Court, Kings County denying a motion to vacate a Yellowstone injunction, finding that there were no compelling or changed circumstances that would justify granting the motion.
255 Butler Associates involved a landlord-tenant dispute over whether a failure to “diligently pursue” development of a building into a multi-unit commercial complex amounted to a breach of the lease (as well as other alleged defaults). In a previous decision,[3] the Second Department found that the tenant had timely requested a Yellowstone injunction, even though the tenant made the request after the time period set forth in the landlord’s notice to cure had expired. This was because the landlord had sent a subsequent notice of termination, which set forth a second cure period keeping with the provisions of the lease. Because the request for injunctive relief was made before that second cure period expired, the Second Department held that the tenant met the requirements for a Yellowstone injunction.
In the new appeal, the Second Department reviewed the Supreme Court’s decision denying the landlord’s motion to vacate the Yellowstone injunction. Under Second Department law, “a Yellowstone injunction ‘is addressed to the sound discretion of the court and may be granted upon compelling or changed circumstances that render continuation of the injunction inequitable.’”[4] For example, one case found that a Yellowstone injunction would be vacated if the tenant failed to pay real estate taxes owed on the leased property.[5] In 255 Butler Associates, the Second Department held that “the landlord failed to point to any compelling circumstance or new evidence which would warrant vacatur of the Yellowstone injunction,” and accordingly found that the motion was properly denied.
[1] Yellowstone injunctions originate from First Nat. Stores, Inc. v. Yellowstone Shopping Ctr., Inc., 21 N.Y.2d 630, 237 N.E.2d 868 (1968), hence the name.
[2] Good Fortune Rest., Inc. v. Kissena Group, LLC, 185 A.D.3d 1013, 1013 (2d Dep’t 2020).
[3] 255 Butler Assoc., LLC v. 255 Butler, LLC, 173 A.D.3d 649 (2d Dep’t 2019).
[4] 255 Butler Associates, LLC, 2022 N.Y. Slip Op 05066, 2022 WL 3904631, at *2 (quoting 456
Johnson, LLC v. Maki Realty Corp., 177 A.D.3d 829, 830 (2d Dep’t 2019)).
[5] See 456 Johnson, LLC, 177 A.D.3d at 830.
