The Yellowstone Injunction, a Practical Application
Many commercial landlords and tenants are readily familiar with the term “Yellowstone injunction,” which enjoins a landlord’s termination of the subject lease until a lawsuit commenced by the tenant determines the merits of the alleged default. To obtain a Yellowstone injunction, a tenant must demonstrate that: (1) it holds a lease, (2) the landlord served a notice to cure, (3) the tenant sought the Yellowstone injunction prior to the expiration of the cure period, and (4) the tenant has the ability and desire to cure the alleged default. New York courts are inclined to grant Yellowstone injunction applications to avoid a forfeiture of a tenant’s interest in a valuable asset – a commercial lease. Tenants are best able to take advantage of this inclination by emphasizing its “ability and desire” to cure the alleged default.
This tendency was reinforced in the recent decision issued by Hon. Joan M. Kenney in Pureform Movement, LLC v. 2374 Concourse Associates, LLC, Index No. 150758/15 (Supreme Court, New York County Nov. 4, 2016). In Pureform, Landlord served a notice to cure on Tenant claiming that Tenant was in default of it lease obligation to obtain the approvals and permits needed to operate a fitness center within the rented space. Tenant submitted an application for a Yellowstone injunction prior to the expiration of the cure period supported by affidavits demonstrating that Tenant had provided Landlord with detailed drawings and plans for the work needed to obtain the required approvals and permits. In opposition, Landlord conceded that it had received Tenant’s drawings and plans, and focused on Tenant’s prior operation of a fitness center within the space for over two years without obtaining the necessary permits and approvals.
Judge Kenney granted the application based on her holding that Tenant “ha[d] shown that it was prepared and it has the ability to assist in curing the alleged defaults.” Thus, the application was granted because Tenant gave Judge Kenney the comfort that Tenant would cure the default if the Judge ultimately found in Landlord’s favor.
Practically speaking, where a tenant submits evidence demonstrating its ability and desire to cure the alleged default, as Tenant did in Pureform, the landlord is often best served seeking a settlement of the dispute to avoid the likely issuance of the injunction and the legal fees it will incur while the action proceeds for as much as 2-3 years with the injunction in place.