Marnie Kudon led a Locke Lord team in defending a landlord in a commercial dispute over a substantial breach of the lease, in a case which has since been cited in the New York Law Journal, New York Real Estate Digest and the New York Commercial Division, among others.
Although the court ultimately granted the plaintiff’s Yellowstone injunction, the court did so on the condition that the parties hold an evidentiary hearing to determine whether the plaintiff satisfied the fourth prong of the litmus test – a rare event since courts generally grant the injunction and let the parties proceed with motions and trial. This decision was based off of due diligence Locke Lord performed on behalf of the client and submitted to the court in opposition illustrating that the plaintiff, a wine and liquor store, was conducting its business in violation of the Alcohol and Beverage Control (ABC) Laws by serving mixed drinks and liquor without a valid license. Although the ABC authority did not issue a violation since the plaintiff had ceased its conduct after service of a notice of default of the lease, the court still found that the evidence submitted, while inadmissible in its form as it was internet advertisements such as Twitter, Instagram, and Facebook, in connection with the plaintiff’s inconsistent sworn testimony on the record created some doubt as to whether the plaintiff had the “desire and ability to cure the default,” which is the last prong of the litmus test.
Apart from the alleged violation of the ABC laws contrary to the lease, Locke Lord argued that the plaintiff’s service of mixed drinks and liquor in violation of the ABC laws served to negate their insurance coverage as serving liquor without a valid license is a basis to disclaim coverage, thus leaving Locke Lord’s client, the owner of the property, without coverage in violation of the lease and solely responsible in the event that a claim was made arising from the plaintiff’s improper conduct. In New York, a commercial tenant’s failure to procure and maintain insurance as per the commercial lease throughout the term is an incurable default since a tenant cannot obtain retroactive insurance coverage.
Locke Lord obtained a favorable outcome for the client when the parties ultimately settled the case and the tenant agreed to vacate the premises.
Posted May 8, 2015.