ALL PARTIES VIA NYSCEF In rendering its decision, the Court has considered all submissions including: 1. Plaintiff’s Order To Show Cause for a Temporary Restraining Order and Yellowstone Injunction; letter dated July 23, 2024 by Daniel Gorman with additional information in connection with Yellowstone Injunction, 2. Defendants’ Memorandum of Law In Opposition, Affidavit of Victor Caroleo with Exhibits AAA, BBB, CCC, D and EEE, Affidavit of Dan D. Kohane with Exhibits A-C; and 3. Plaintiff’s Memorandum of Law In Reply. Long Island Garden Department was founded by Victor Caroleo in or about 1976. As time progressed, Long Island Garden Department grew into a full-service commercial wholesale and retail nursery business with locations in Coram, Dix Hills, and Speonk. Don Caroleo is Victor Caroleo’s son. He took over Long Island Garden Department from his father sometime during 2005. Three of the Defendants named in the caption: Narrow Way, Realty LTD., 3 Girls 1 Boy LLC, and Don Caroleo Ventures, LLC are the landlords in this Yellowstone proceeding. Plaintiff’s application is premised upon the principles set forth in First National Stores, Inc. v. Yellowstone Shopping Ctr., Inc., (21 NY2d 630 [1968]) and its progeny. In Yellowstone, the tenant failed to cure a breach of the lease despite receipt of a notice of default which afforded the tenant a ten-day period to cure. The tenant instituted legal proceedings but did not obtain a temporary restraining order prior to the landlord’s service of a termination notice. The Court of Appeals concluded that the time to cure could not be extended after it had already lapsed, and the landlord had terminated the lease (id. at 637-38). As a consequence of the Yellowstone decision, the practice has developed of permitting tenants to obtain a stay of the cure period, before it expires, so that the lease may be preserved until the merits of the dispute can be resolved in court. The purpose of a Yellowstone injunction is to toll the running of the cure period so that after a determination of the merits, the tenant may cure any established defect and avoid forfeiture of the lease (King Party Ctr. of Pitkin Avenue, Inc. v. Minco Realty, LLC, 286 AD2d 373, 374 [2d Dept 20011; see Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Avenue Assocs., 93 NY2d 508, 515 [1999]). “A Yellowstone injunction maintains the status quo so that a commercial tenant, when confronted by a threat of termination of its lease, may protect its investment in the leasehold by obtaining a stay tolling the cure period so that upon an adverse determination on the merits the tenant may cure the default and avoid a forfeiture of the lease” (JT Queens Carwash, Inc. v. B8-16 Northern’Blvd., LLC, 101 AD3d 1089, 1089-90 [2d Dept 2012]). But for the availability of a toll, the tenant would be forced into an “all or nothing” position: the tenant could stand on its rights, refuse to cure, and litigate the issue when the landlord sought to dispossess the tenant, risking the lease if the tenant’s defense failed; alternatively, the tenant could simply cure, thus accepting the landlord’s position, even though it may have a legitimate basis for disagreement (see Post v. 120 E. End Ave. Corp., 62 NY2d 19, 24-26 19841). Yellowstone injunctions — which toll the cure period — have been “commonplace” and are routinely granted (id. At 24-25). “Since a Yellowstone injunction is designed to avoid the tenant’s forfeiture of its valuable leasehold interest while it challenges the propriety of the landlord’s default notice, courts ‘accept[ed] far less than the normal showing required for preliminary injunctive relief.” (Marathon Outdoor, LLC v. Patent Constr. Sys., Div. of Harsco Corp., 306 AD2d 254, 255 [2d Dept 2003], quoting Heavy Cream v. Kurtz, 146 AD2d 672, 673 [2d Dept 1989]). Instead, to obtain Yellowstone relief, a tenant must show: (1) it holds a commercial lease; (2) it has received from the landlord a notice of default; (3) the application for a temporary restraining order was made prior to the termination of the lease; and (4) it has the desire and ability to cure the alleged default by means short of vacating the premises (JT Queens Carwash, Inc., 101 AD3d at 1090: Korova Milk Bar of White Plains, Inc. v. PRE Properties, LLC, 70 AD3d 646 [2d Dept 2010]; Purdue Pharma, LP v. Ardsley Partners, LP, 5 AD3d 654 [2d Dept 2004]; Mayfair Super Markets, Inc. v. Serota, 262 AD2d 461 [2d Dept 1999]; Long Is. Gynecological Servs., P.C. v. 1103 Stewart Ave. Assocs. L.P., 224 AD2d 591 [2d Dept 1996]). A “tenant is not required to admit that it is in default in order to seek a Yellowstone injunction so long as it stands ready to cure any defaults in the event that it is ‘determined that the tenant’s evaluation’ of the circumstances was ‘improper” (Berghold v. Kirschenbaum, 248 AD2d 498, 498 [2d Dept 1998], quoting Finley v. Park Ten. Assocs., 83 AD2d 537, 538 [1st Dept 1981]). The threat of termination of the lease and forfeiture, standing alone, have been considered sufficient to permit the maintenance of the status quo by injunction (see Post v. 120 East End Avenue Corp., supra, 62 NY2d at 26). The crux of Defendant’s opposition is that Plaintiff is not entitled to a Yellowstone injunction because: (1) he failed to timely request the Yellowstone injunction; (Defs’ Opp. Mem. at 9-10). The purpose of a notice to cure, also referred to as a notice of default, is to specifically “apprise the tenant of claimed defaults in its obligations under the lease and of the forfeiture and termination of the lease if the claimed defaults [are] not cured within a set period” (Filmtrucks, Inc. v. Express Indus. & Term. Corp., 127 AD2d 509, 510 [1st Dept 1987); see also ShopRite Supermarkets, Inc. v. Yonkers Plaza Shopping, LLC, 29 AD3d 564, 566 [2d Dept 2006]; PS Food Corp. v. Granville Payne Retail, LLC, 45 Misc3d 1216[A] [Sup Ct, Kings County 2014), affd 140 AD3d 1046 [2d Dept 2016]). To be adequate, a notice to cure must unequivocally and unambiguously inform the tenant how it has violated the lease and the conduct required to prevent eviction (Notices to cure, late notices and termination notices, 4G N.Y. Prac., Com. Litig. In New York State Courts §148:39 [5th ed.]) (emphasis added) A notice to cure should provide “(1) the specific paragraphs in the lease with which [tenant] had allegedly failed to comply, (2) the manner in which it was claimed that [tenant] had not met the requirements of those paragraphs, (3) the time within which [tenant] had to comply, and (4) the consequences for failure to correct the alleged deficiencies” (King Party Ctr., 286 AD2d at 375; see also Notice to cure, generally, G N.Y. Prac, Landlord and Tenant Practice in New York §13:13). A notice to cure is insufficient where it fails to apprise the tenant of the condition that the landlord wishes to have cured or fails to reference the specific section of the lease that addresses the condition (PS Food Corp., 45 Misc3d 1216[A]; see, e.g. 200 W. 58th St. LLC v. Little Egypt Corp., 7 Misc3d 1017[A] [NY City Civ Ct 2005] [holding that, where the notice charged the respondent with "selling the same merchandise as other tenants in the building at a substantially lower price" without identifying the merchandize or co-tenants and further charged the respondent with "blocking access to other stores" without identifying the other stores, the notice was insufficient]). The court must determine if the notice of default sufficiently apprised plaintiff of the lease provisions violated (PS Food Corp., 45 Misc3d 1216[A]). To determine the adequacy of a predicate notice, the standard is one of reasonableness in view of the attendant circumstances (id.). Similarly, a termination notice must reference specific prohibitions within the lease that have been violated that warrant termination (Chinatown Apts., Inc. v. Chu Cho Lam, 51 NY2d 786 [980]). The notice of termination must allege “that the defaults specified in the notice to cure, which were curable, had not been cured during the cure period” (31-67 Astoria Corp. v. Landaira, 54 Misc3d 131[A] [App Term, 11th & 13th Jud Dists 2017]). A termination notice “that fails to set forth the facts upon which the landlord relies for eviction is defective” (id.). Termination notices must be clear, unambiguous and unequivocal in order to serve as the catalyst which terminates a leasehold (SAAB Enters. v. Bell, 198 AD2d 342, 343 [1993], lv denied 83 NY2d 756 [1994), quoting Ellivlcroy Realty Corp. v. HDP 86 Sponsor Corp., 162 AD2d 238, 238 11990); see City of Buffalo Urban Renewal Agency v. Lane Bryant Queens, 90 AD2d 976, 977 [1982], affd 59 NY2d 825 [1983]). The alleged defaults “must be stated with particularity, so that the tenant may know what to defend against and how to interpose valid legal defenses against the landlord’s claims” (Carriage Ct. Inn. Inc. v. Rains, 138 Misc2d 444, 445 [NY City Civ Ct 1988]; see also Notice of termination, generally-content of notice, G. N.Y. Prac, Landlord and Tenant Practice in New York §13:19 [The alleged default must be stated with sufficient factual particularity so that the tenant: (1) may be apprised of the nature of the claim; (2) may effect appropriate responsive action; and (3) is ultimately permitted an opportunity to interpose a valid legal defense]). (emphasis added). A “Landlord is bound by the notices served…which are not subject to amendment”1 (Bray Realty, LLC v. Pilaj, 59 Misc3d 130[A][App Term 2018); Chinatown Departments, 51 NY2d 786 [defects in a notice of termination cannot be cured by amendment]; Singh v. Ramirez, 20 Misc3d 142[A] [App Term, 2d & 11th Jud Dists 2008] [holding predicate notice to cure cannot be amended and that landlord is "bound by the notice served"]; see also Notices to cure, late notices and termination notices, 4G N.Y. Prac., Com. Litig. In New York State Courts §148:39 [5th ed.]). “In the construction of all contracts under which forfeitures are claimed, it is the duty of the court to interpret them strictly, in order to avoid such a result, for a forfeiture is not favored in law” (Lyon v. Hersey, 103 NY 264, 270 [1886]; Kirschenbaum v. M-T-S Franchise Corp., 77 Misc. 2d 1012, 1014 [Civ Ct, NY County 1974] ["A court should seek to strictly construe the document against a draftsman to avoid the gross hardship of forfeiture of lease"]). On January 14, 2020, SiteOne purchased the assets of Long Island Garden Department from its sole shareholder, Don Caroleo. The leasehold transactions stem from an asset purchase agreement (“APA”), for a sum in excess of $30 million. The purchase included all goodwill and the assets of Long Island Garden Department. SiteOne did not purchase the real property where the Long Island Garden Department businesses operated. SiteOne entered into landlord-tenant agreements with the aforementioned real property owners of the Long Island Garden Department locations. The Court has been provided with copies of all leases along with the application for a temporary restraining order and a Yellowstone Injunction, dated July 8, 2024. The leases executed on the date of the closing of the APA had an expiration date of December 31, 2024. As part and parcel of the transaction SiteOne negotiated options to renew each lease three times for an additional three years, totaling nine years of exclusive use of the properties by SiteOne. SiteOne exercised all its renewal rights for each property. There is no allegation by the Defendants that SiteOne has ever missed a rent or additional rent payment. Each of the lease’s contain the same provision relative to insurance. The relevant and material portions of each lease are found at section 10.2. “INSURANCE TO BE MAINTAINED BY TENANT.” The most relevant section of the insurance clause reads as follows: The insurance policies to be maintained by tenant herein shall (a) be issued by insurance companies authorized to do business in the state in which the land is located; (b) endeavor to provide that said insurance shall not be canceled or materially modified without first providing thirty (30) days prior written notice to landlord; and (c) in the case of commercial general public liability insurance, name Landlord as an additional insured. Tenant shall provide Landlord with certificates of such insurance within thirty (30) days of the effective date. Also, relevant and material to this dispute are sections 19.1 (Tenant Breach Provisions) and 20.2. (Landlord’s Remedies Upon Tenant Breach). The Court has considered sections 10.2, 19.1, and 20.2 of the three leases. The Court has considered the Affidavit of Victor Caroleo dated July 23, 2024. He identifies himself as the Chief Executive Officer of Narrow Way, Realty LTD. (“Narrow”), and sole member of Don Caroleo Ventures, LLC (“Ventures”), two of the Landlord defendants in the caption. He further notes that, together with 3 Girls 1 Boy LLC (“3G 1B,” also a landlord), and together with Narrow and Ventures, they are the “landlords.” Each landlord owns one of the properties at issue. Plaintiff entered into leases with the landlords in connection with an Asset Purchase Agreement, pursuant to which the Plaintiff’s purchased the assets of landlord’s affiliate, the Garden Department Corp. In substantiation of landlord’s claim, Mr. Caroleo notes “I am advised that Plaintiff breached its obligations under all three leases, because it failed to obtain insurance from “insurance companies authorized to do business” in New York from December 1, 2022, through December 23, 2023. (emphasis added) Mr. Caroleo swears that in May of 2024, the landlords sent the Plaintiff three separate notices to cure the alleged violation and to provide the insurance evidence required under paragraph 10.2 of the leases (“notices to cure”). Mr. Caroleo notes in his Affidavit “I am advised that Plaintiff breached its obligations under all three leases, because it failed to obtain insurance from ‘insurance companies authorized to do business’” in New York from December 1, 20, 2022 to December 23, 2023. The Plaintiff’s responded, according to Mr. Caroleo, by providing information showing that from December 1, 2022, through December 23, 2023, the “all risk” insurance policy requested by the leases was issued by Ascot Specialty Insurance Company (“Ascot Specialty”), an out of state insurance company, “who I am advised is not authorized to do business in New York.” The Court notes that nowhere is it alleged that an all-risk policy was not in place during the time period suggested by Mr. Caroleo. Were the Defendants insured or not as an additional insured in the all-risk policies submitted by Ascot Specialty on behalf of its customer, SiteOne Landscape Supply, LLC? The Court finds that all the Landlords were protected as additional insureds. The Defendants submitted an affidavit of a purported expert Dan D. Kohane with Exhibits A-C. The Court has reviewed the Affidavit and reminds the Defendants that it is improper, without the Court’s request, to have an expert submit an affidavit regarding the applicable statutory law and its interpretation. Nevertheless, the Court is convinced the definition of “authorized” as opposed to “licensed” and/or “registered” is unclear on the papers submitted. Those descriptive words (licensed and registered) are not in either the APA or leases. The May 24, 2024, Notice to Cure read as follows: PLEASE TAKE NOTICE, that Tenant is violating a substantial obligation of Tenant’s tenancy, and Article 10, paragraph 10.2 of the Lease, in that Tenant is required to maintain certain insurance coverage and furnish to Landlord a copy of such insurance policy or a certificate evidencing such insurance and Tenant has: (a) failed to provide Landlord with a copy of such insurance policy or a certificate evidencing such insurance being in effect; and (b) possibly failed to maintain the required insurance coverage and/or proper insurance in the types and amounts set forth in the Lease. (emphasis added) CThe Court concurs with Plaintiff’s remarks that: Defendants did not provide any notice to SiteOne of any alleged issues with SiteOne’s insurance coverage relating to the terrorism exclusion prior to filing their opposition to SiteOne’s Yellowstone application the day before the hearing. The May Letters, which speculated only that SiteOne “possibly” was not in insurance compliance, do not provide notice at all, much less mention terrorism coverage. (Affirmation of Daniel E. Gorman, dated July 8, 2024, NYSCEF Doc. No. 3. (“Gorman Aff.”), Exs. 9, 10, 11.) And the July Defaults, while purporting to take issue with the New York authorization of Ascot, are silent regarding terrorism. This was defective notice, as SiteOne argued in its Yellowstone application. The latest “defaults” suffer from a lack of notice that is all the more defective. There is nothing in the parties’ Leases that permits “notice by opposition brief.” The Plaintiff’s application for a Yellowstone injunction to preserve the status quo of the parties and prevent termination of the lease agreement is Granted. The stay is extended so that the merits of the dispute can be resolved in court. Defendants are requesting a bond in the sum of $3 million. Directing the placement of a bond is in large measure at the discretion of the Court. The Court requires no bond at this time on the condition that Plaintiff continues to timely submit all rent and additional rent, and all other charges set forth in the leases. The foregoing constitutes the decision and ORDER of this Court. Dated: October 2, 2024
