The law firm of Graubard, Mollen, Horowitz, Pomeranz & Shapiro ("Firm") was a tenant in a commercial lease with a landlord, 600 Third Avenue Associates ("Associates"). The lease provided that the Firm was to pay interest at the highest applicable rate, on any rent paid more than ten days late. The lease was modified in 1992 requiring that the Firm maintain a $1,000,000 letter of credit in exchange for an adjustment in rent and a provision obviating any liability of the individual partners for any money judgment against the Firm. The Firm stopped paying rent in March 1993 claiming that Associates' elevator renovation project had "partially evicted" them by restricting access to the building. Associates subsequently withdrew money from the letter of credit and filed a Notice to Cure, stating that the Firm had defaulted on their obligations by failing to replenish the letter of credit.

The Firm sought declaratory judgment in New York Supreme Court to relieve them of their obligation to pay rent due to partial eviction and claiming that Associates had exhausted their remedies by withdrawing money from the letter of credit. The court granted the Firm's motion for a Yellowstone injunction, a preliminary injunction that prevents the landlord from evicting a commercial tenant until the landlord-tenant dispute is resolved. The court also ordered the Firm to pay an amount equivalent to the monthly rent into an escrow account. Upon a finding that the Firm was in default, the trial court vacated the Yellowstone injunction, awarded the escrow to Associates and ordered the Firm to pay interest on the rent due as per the lease. On appeal, the Appellate Division held that the condition under the Yellowstone injunction superseded the interest provision of the lease and vacated the interest award. Associates moved for leave to appeal, which was denied. However, the Appellate Division certified the question of whether their decision was correct.

Whether conditions placed on a Yellowstone injunction can relieve a tenant of an obligation under a lease.

No. A Yellowstone injunction does not alter the terms of a lease; it suspends the landlord's ability to terminate the lease.

State of the Law Before Graubard

Dicta from First National Stores, Inc. v. Yellowstone Shopping Center, Inc., 21 N.Y. 2d 360 (N.Y. 1968) gave rise to the Yellowstone injunction, which is a preliminary injunction. During a landlord-tenant dispute, a tenant may request this injunction prior to the expiration of a cure period. The injunction tolls that period, and allows the lease to remain valid until the dispute has been resolved.

The legislature later amended Real Property Actions and Proceedings Law section 753 by adding subsection four, which seemed to eliminate the need for the Yellowstone injunction. The statute provides that in a Civil Court summary proceeding the court may grant the losing tenant a ten day period in which to cure the default at issue. The statute and the Yellowstone injunction both provide recourse for the tenant. The Court of Appeals, however, in Post v. 120 East End Ave. Corp., 62 N.Y. 2d 19 (N.Y. 1984), distinguished between the two by holding that while under the statute the Civil Court cannot acquire jurisdiction until the lease has expired, the Yellowstone injunction keeps the lease from expiring.

Examining the rights of parties under a Yellowstone injunction, the Court of Appeals in Waldbaum v. Fifth Ave. of Long Island Realty Assocs., 85 N.Y. 2d 600 (N.Y. 1995) held that the injunction only serves to keep landlords from terminating a lease. The Court further held that the injunction cannot release tenants from their obligations under the lease.

Effect of on Graubard Current Law

The Court clarified that a Yellowstone injunction does not relieve the tenant of any existing duties under the lease. Although the trial court has the authority to stipulate conditions prior to granting a Yellowstone injunction, these conditions do not replace or alter the terms of the lease. The court held that fairness dictates that the landlord receive the interest due under the lease.

Unanswered Questions

Yellowstone injunctions have only been issued in commercial landlord- tenant disputes. Are there any circumstances under which a Yellowstone injunction would be extended to a non-commercial situation?

Survey of the Law in Other Jurisdictions

While other jurisdictions recognize the application in certain circumstances of the basic principles of a "Yellowstone Injunction", the case law in other states is not as developed in this area as it is in New York. See Sugarland Run Limited Partnership v. Hechinger Company, et. al., 1994 WL 1031406, *5 (Va. Cir. Ct. 1994) (rejecting applicability of a so called "Yellowstone Injunction" in dispute over tenancy provisions in shopping mall lease). Case law in other jurisdictions addresses more broadly what remedies are available as the result of a landlord-tenant dispute. New York courts are in good company in looking to the agreed-upon contract provisions of a lease to dictate what remedies are available to parties in a landlord-tenant dispute. For example, California courts consult the language of a lease to determine whether a tenant's chosen remedy is valid. See Lee v. Placer Title Co., 28 Cal.App.4th 503, 513 (1994). In Lee v. Placer Title Co., the California Court of Appeal found that a provision in a lease could limit remedies available to the tenant in the event of a breach, despite the otherwise available common law remedy of constructive eviction. Other jurisdictions, however, allow courts to use discretion in determining an appropriate remedy where a lease does not specify one. In the District of Columbia, the Court of Appeals upheld the discretion of a trial court in assessing damages due a landlord under a protective order, which protects the landlord from a prolonged period of litigation without rent while the tenant remains in possession. See Mullin v. N Street Follies Limited Partnership, 712 A.2d 487, 495 (D.C. 1998) (limiting remedy to back payments and excluding interest, costs, and the amount of unpaid rent preceding the filing of the action).