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INDEX NO.

652142/2015

FILED: NEW YORK COUNTY CLERK 06/17/2015 01:15 PM


NYSCEF DOC. NO. 15

RECEIVED NYSCEF: 06/17/2015

SUPREME COURT OF THE STATE OF NEW YORK


COUNTY OF NEW YORK
VERA WANG GROUP LLC f/k/a
Vera Wang Bridal House LLC,
Plaintiff,
v.

Index No. 652142/2015


Mot. Seq. #001

PREMIER 158 MERCER LLC,


Defendant.

PLAINTIFFS MEMORANDUM OF LAW


IN SUPPORT OF YELLOWSTONE INJUNCTION
Plaintiff Vera Wang Group LLC f/k/a Vera Wang Bridal House LLC (VWG or
Plaintiff), by and through its undersigned attorneys, Wachtel Missry LLP, respectfully submits
this memorandum of law in support of its motion brought by Order to Show Cause for a
Yellowstone injunction, preventing and enjoining its landlord, the defendant Premier 158 Mercer
LLC, from terminating Plaintiffs commercial tenancy based upon an invalid Three (3) Day Notice
To Tenant dated May 26, 2015 (the Notice of Default).
Preliminary Statement
VWG has been a tenant since December 2006 at 583-587 Broadway a/k/a 154-158 Mercer
Street, New York, NY, occupying the condominium unit known as the retail unit located on the
street, cellar, and sub-cellar levels in the condominium known as the 583-587 Broadway
Condominium (the Premises). This VWG flagship store in SoHo is its only free-standing readyto-wear flagship store in the world. This valuable Lease expires December 31, 2016 but VWG has
the option to renew the term for an additional five (5) years. Defendant acquired the Premises
earlier this year and on February 27 sent a letter to VWG claiming it owed $272,666.43 for real

estate tax escalations dating back to 2007. VWG had never been billed by its prior landlord for
such escalations, and as demonstrated below, the Lease does not permit Defendant to retroactively
bill for all the prior tax years. VWG directed its real estate counsel to attempt to resolve this dispute
with Defendants counsel, and counsel proceeded to exchange letters and calls for the next two
months. A month passed without communication and suddenly, Defendant sent its Notice of
Default giving Plaintiff 3 days over the weekend following Memorial Day to pay the disputed
amount or suffer the termination of its Lease. This Notice of Default was sent in such a fashion
and at such time as to maximize the likelihood that it would not even be seen by VWGs executives
until after the 3 days expired.
Defendants true motivation by its conduct is to reclaim the Premises and replace Plaintiff
with a tenant that would pay the going market rent, which would be at least twice the amount
presently paid by VWG. Because the Notice of Default is improper, the purported Notice of
Termination that followed is defective.
Accordingly, Plaintiff is entitled to a Yellowstone injunction to maintain the status quo
while the parties litigate the merits of the Notice of Default.
Statement of Facts
To avoid repetition, the Court is respectfully referred to the statement of facts set forth in
the Complaint and the Affidavit of Mr. William Mitchell, Executive Vice President and Chief
Operating Officer of Plaintiff Vera Wang Group LLC (the Mitchell Aff.), both of which are
annexed to the Affirmation of Steven J. Cohen, Esq. accompanying this memorandum of law.

Argument
I.
PLAINTIFF IS ENTITLED TO A YELLOWSTONE INJUNCTION
A.

Plaintiff Easily Meets the Legal Requirements for a Yellowstone Injunction


The purpose of a Yellowstone injunction is to maintain[] 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. (WPA/Partners
LLC v Port Imperial Ferry Corp., 307 AD2d 234, 236 [1st Dept 2003].)
To succeed on an application for a Yellowstone injunction, a tenant must demonstrate that:
(1) it holds a commercial lease;
(2) it has received from the landlord a notice of default;1
(3) the application was made prior to the termination of the lease;
and
(4) it has the desire and ability to cure the alleged default by any
means short of vacating the premises.
(ERS Enterprises, Inc. v Empire Holdings, LLC, 286 AD2d 206 [1st Dept 2001].) Because the law
disfavors forfeiture, a demonstration of success on the merits is not required for a Yellowstone
injunction. (WPA/Partners, 307 AD2d at 237.) Thus, a commercial tenant need not prove the more
stringent prerequisites to obtaining injunctive relief to prevail on an application for a Yellowstone
injunction. (Garland v Titan West Assocs., 147 AD2d 304 [1st Dept 1989].)
Preliminarily, here, there can be no serious dispute that the first two criteria are present
here: Plaintiff (i) holds a commercial Lease (Mitchell Aff., 1-3 and Exhibit A), and (ii) received

A Yellowstone injunction may be based on an alleged monetary default where the Landlord threatens to immediately
terminate the lease pursuant to a conditional limitation therein. (Lexington Ave. & 42nd St. Corp. v 380 Lexchamp
Operating, Inc., 205 AD2d 421, 423-24 [1st Dept 1994]; see also 3636 Greystone Owners, Inc. v Greystone Bldg., 4
AD3d 122, 1223 [1st Dept 2004] [Yellowstone relief is proper even when nonpayment of rent is the only issue.];
Unique Marble & Granite Org. Corp., v Hamil Stratten Props., LLC, 13 Misc 3d 1239[A] [Sup Ct, NY County 2006]
[the court may grant a Yellowstone injunction where the default in the lease is based on the nonpayment of rent.].)
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a Notice of Default from Defendant threatening cancellation of Plaintiffs tenancy under the Lease.
(Mitchell Aff., 12 and Exhibit G.)
B.

Plaintiff Made this Yellowstone Application before Termination of the Lease


Contrary to Defendants spurious claims in its Notice of Default and Notice of Termination,

Plaintiff makes this application for Yellowstone relief well before any claim of early termination
that could be supported, even arguably, by the language of the Lease.
First, failure to pay Rent or Tenants Tax Payment is not an Event of Default that triggers
a conditional limitation or right of Landlord to terminate the Lease.
Second, even assuming arguendo that it were, Landlord must provide Tenant, at minimum,
30 days to cure any alleged default before the Lease can be terminated according to its terms.
Third, Defendants Notice of Default is, in any event, fatally defective because it fails to
put Plaintiff on notice of the provisions of the Lease of which Plaintiff is supposedly in default.
1.

The Lease Provides No Right to Terminate for Nonpayment of Additional Rent

Article 6the only part of the Lease actually identified in any of Defendants notices as
the source of its purported right to cancel the Leasecontains the following conditional limitation
upon the occurrence of certain Events of Default:
If an Event of Default (i) described in Section A(5) hereof shall
occur, or (ii) described in Sections A(2), A(3) or A(4) shall occur
and Landlord, at any time thereafter, at its option, gives written
notice to Tenant stating that this Lease and the Term shall expire and
terminate on the date specified in such notice, which date shall not
be less than thirty (30) days after the giving of such notice, and if,
on the date specified in such notice, Tenant shall have failed to cure
the default which was the basis therefor, then this Lease and the
Term and all rights of Tenant hereunder shall expire and terminate
as of the date on which the Event of Default described in clause (i)
above occurred or as a [sic] the date specified in the notice given
pursuant to clause (ii) above, as the case may be, and Tenant shall
immediately quit and surrender the Premises.
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(Lease 6.1[B] [emphasis supplied].) An Event of Default occurs if:


(1) Tenant shall fail to pay any installment of Fixed Rent or Tenants
Tax Payment when due or
(2) if Tenant shall default in the observance or performance of any
other term, covenant or condition of this Lease on Tenants part to
be observed or performed and Tenant shall fail to remedy such
default within thirty (30) days after notice by Landlord to Tenant
thereof (or such lesser period of time as specifically set forth herein),
or
(3) Intentionally omitted Prior to Execution; or
(4) if Tenants interest in this Lease shall devolve upon or pass to
any person, whether by operation of law or otherwise, except as
expressly permitted under Article 7 hereof; or
(5) (a) if Tenant or Guarantor shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they
become due; (b) if Tenant or Guarantor shall make a general
assignment for the benefit of creditors; []
(6) in the case of any default which cannot reasonably be cured
within the thirty (30) day period referred to in (2) hereinabove, then
Tenant shall have as long as reasonably necessary to cure such
default provided that, (i) Tenant commences such cure within said
thirty (30) day period of Tenants desire to remedy, and (ii) Tenant
pursues completion of such cure with due diligence
(Lease 6.1[A].) Plainly, the language of the Lease creates no conditional limitation (or, for that
matter, right of early termination by Landlord) for an Event of Default described in Section A(1)
namely, the failure to pay any installment of Fixed Rent or Tenants Tax Payment when due.
(See Lease 6.1[A], reproduced supra.)
There is simply nothing in the Lease to support Landlords claimed right to cancel the
Lease for nonpayment of Tenants share of real estate tax escalations, or Landlords ability to do
so upon expiration of a three-day cure period (discussed infra).

2.

The Conditional Limitation Is Triggered Only If Landlord Gives Written Notice


Providing Tenant at Least 30 Days to Cure a Default under the Lease

The Lease by its terms can only be terminated at the option of Landlord upon thirty (30)
days notice at minimum. (Compare Lease 6.1[A][2] and 6.1[A][6], supra, [for defaults which
cannot reasonably be cured within the 30-day period, Tenant shall have as long as reasonably
necessary provided that Tenant starts to cure within such 30-day period].) Therefore, in
addition to having no right to cancel the Lease for the monetary default claimed by Defendant, the
Notice of Default here is further invalid for failing to provide the required 30-day cure period
required by the unambiguous language of the Lease.
Where, as here, a notice of termination is served before expiration of the operable cure
period, New York courts deem the notice ineffective, as the existence of a period in which a
violation may be cured does not depend on the contents of the notice of default, but upon the terms
of the lease. (Empire State Bldg. Assocs. v Trump Empire State Ptrs., 245 AD2d 225, 228 [1st
Dept 1997].) Specifically, where a notice of termination is premature under the terms of a lease,
the notice is invalid, and thus the service of the notice will not bar a tenant from obtaining
Yellowstone relief. (Vill. Ctr. for Care v Sligo Realty & Serv. Corp., 95 AD3d 219, 222 [1st Dept
2012], citing Empire State v Trump Empire, 245 AD2d at 229.)
Nowhere does Article 6 of the Lease so much as mention that Landlord shall have a right
to terminate unless Tenant cures an allegedly defective condition on three (3) days notice, as
Defendant falsely sets forth in the Notice of Default. Section 6.1(B) of the Lease provides that if
an Event of Default described in Section 6.1(A)(2), (3), (4) or (5) shall occur,
and Landlord, at any time thereafter, at its option, gives written
notice to Tenant stating that this Lease and the Term shall expire and
terminate on the date specified in such notice, which date shall not
be less than thirty (30) days after the giving of such notice, and
if, on the date specified in such notice, Tenant shall have failed to
cure the default which was the basis therefor, then this Lease and the
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Term and all rights of Tenant hereunder shall expire and terminate
as of the date on which the Event of Default described above
occurred.
(Lease 6.1[B].) Defendants Notice of Default and Notice of Termination merely proclaim by
fiat that Landlord has the right to cancel the Lease unless Tenant pays hundreds of thousands of
dollars in retroactive tax escalation charges upon three days noticea cure period so short so as
to appear insufficient on its face, and which is, in any event, ineffectual as it is entirely of
Defendants own invention and nowhere found in the Lease.
3.

The Notice of Default Fails to Identify Any Provision of the Lease upon which
the Alleged Default Is Predicated

Apparently aware that pointing Plaintiff to the applicable Lease provisions would do little
else but impeach its threat of termination, Defendants Notice of Default failed to identify a single
provision of the Lease giving rise to Plaintiffs supposed defaulta fatal defect under New York
law.
Failure to identify the provisions of the Lease giving rise to the default claimed in the
Notice of Default is defective for failing to demonstrate that [the demanded] remedial action was
required by the lease. (31 West 47th Street, LLC v Nellys Fine Jewelry, Inc., 8 Misc 3d 1014[A],
*5, 801 NYS2d 782 [City Civ Ct, NY County 2005], citing Chinatown Apartments, infra.) Indeed,
the very purpose of a Notice to Cure 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 default
is not cured within a set period of time. (Filmtrucks, Inc. v Express Indus. & Terminal Corp., 127
AD2d 509, 510 [1st Dept 1987] [emphasis supplied].)
In finding that it was compelled to hold that [landlords] notice was ineffective and could
not serve as the predicate for an automatic termination of the tenancy, the Court of Appeals held:

The deficiency in [landlords] notice arises from its failure to cite


any specific prohibition in the lease which had been violated.
Since respondent could not be expected to take remedial action
unless his landlord first demonstrated that such remedial action was
required by the lease, the omission in the notice must be considered
a fatal defect.
(Chinatown Apartments, Inc. v Chu Cho Lam, 51 NY2d 786, 788 [1980].) Here, Defendants
Notice of Default wholly fails to identify a single provision or article of the Lease under which it
was claiming a default. (Mitchell Aff., Exhibit G.) The Notice of Default simply demands that
Plaintiff pay its indebtedness to Landlord of $254,365.22, by on or before May 31, 2015, on
pain of
surrender[ing] up possession of [the] Premises to the Landlord, in
default of which the Landlord will exercise its right to terminate
your Lease, commence summary proceedings to recover possession
thereof, including filing a Petition for Eviction, in accordance with
the laws of New York State, and late fees and interest will continue
to accrue, all of which you are obligated to pay pursuant to the
Lease.
(Mitchell Aff., Exhibit G.) Without a single citation to the provisions of the Lease, the Notice of
Default then goes on to state that Tenants indebtedness to Landlord consists of a single lumpsum figure of $251,046.20, demarcated as a Previous Balance carried over for Tax Escalations
due for a five-year period 2009-2014, in addition to certain other, smaller sums claimed due as
late interest and penalties. (Id.)
This is insufficient to apprise Plaintiff of the Lease provisions of which it is allegedly in
violation. Accordingly, the Notice of Default here is fatally deficient for failing to identify any
provision of the Lease supposedly violated.
C.

Plaintiff Is Ready, Willing, and Able to Cure Any Default under the Lease
Finally, although the Notice of Default is substantively baseless as set forth above,

nevertheless, should the court determine that a default occurred, Plaintiff is ready, willing and able
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to cure any such defaults. (Mitchell Aff. 18.) A Yellowstone injunction is appropriate and
routinely granted under circumstances like these. In granting such relief, the First Department has
explained:
Where, as here, a tenant denies any default and demonstrates that
the landlord has given notice of default, and that a period of time
remains within which to cure the tenant is entitled to a grant of
preliminary relief. Since the tenant risks forfeiture of its leasehold,
and the law does not favor [such] forfeiture the tenant need not,
as a prerequisite to the granting of a Yellowstone injunction,
demonstrate a likelihood of success on the merits. Nor is a tenant
required to prove its ability to cure prior to obtaining a Yellowstone
injunction. The proper inquiry is whether a basis exists for believing
that the tenant desires to cure and has the ability to do so through
any means short of vacating the premises.
(Herzfeld & Stern v Ironwood Realty Corp., 102 AD2d 737, 738 [1st Dept 1984]. See also, e.g.,
225 E. 36th St. Garage Corp. v 221 E. 36th Owners Corp., 211 AD2d 420, 422 [1st Dept 1995]
[plaintiffs contention that they had made efforts and cured some of the purported breaches and
that they were continuing to take various steps to remedy other alleged defaults was sufficient].)
Here, Plaintiff has deposited the entire sum demanded in attorney escrow. (Mitchell Aff.
18 and Exhibit I.) Defendant also holds Plaintiffs security deposit in the amount of $217,500. (See
Lease 26.1.) Plaintiff has furthermore tendered its Fixed Rent for the months of June and July,
as well as Additional Rent payments billed by Defendant for the current Tax Year.
Accordingly, Plaintiff has more than adequately demonstrated that it has met all four
criteria required for the issuance of a Yellowstone injunction.
II.
PLAINTIFF IS LIKELY TO SUCCEED ON THE MERITS
While not a necessary showing on a motion for Yellowstone relief, Plaintiff is also likely to
succeed on the merits in this case.

A.

Provision of a Landlords Statement Is a Condition Precedent to Tenants


Obligation and Ability to Pay Its Share of Real Estate Tax Escalations
The tax escalation clause under the Lease provides that Tenants Tax Payment shall be

paid as Additional Rent, calculated based on Tenants allocated share of the amount, if any, by
which the Taxes2 payable for such Tax Year3 exceed the Taxes payable for the Base Tax Year.
Such Tenants Tax Payment shall be due and payable in two equal semi-annual
installments, in advance, on the first day of each June and December during each such Tax Year
based upon the Landlords statement. (Lease 1.5[A] [emphasis supplied].)
The Lease expressly provides: Landlord shall render Landlords statements with respect
to any Tax Year within six (6) months of the commencement of the Tax Year in question.
(Lease 1.7[C] [emphasis supplied].)
Each such Landlords statement rendered shall be conclusive and binding as to Tenants
Tax Payment, unless disputed by Tenant in writing within 120 days. (Lease 1.7[D.)
The only further right of Landlord to bill Tenant for real estate taxes after the first six
months of any given tax year is Landlords right to thereafter render a revised or corrected
Landlords statement, but only if there is an increase in Taxes payable to taxing authorities or
a superior mortgagee. (Lease 1.7[C]; see also 1.5[A].)
In other words, the amount due as Tenants Tax Payment for each Tax Year, if any, is
determined by the amount billed by Landlord in a Landlords statement which shall be rendered
in the first six months of the Tax Year in which the taxes are assessed. Tenant, then, must pay the

Taxes, in relevant part, means all real estate taxes and assessments which may be assessed, levied or imposed
upon all or any part of the Premises. (Lease Definition 54.)

Tax Year means the twelve month period commencing on July 1st of each year. (Lease Definition 55.)
Thus, a Tax Year under the Lease coincides with the NYC Property Tax (Fiscal) Year, which is July 1 to June 30.
(See http://www1.nyc.gov/site/finance/taxes/property-due-dates.page.)

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amount billed in Landlords statement in two semi-annual installments, at least 30 days before
such taxes are due from Landlord to the taxing authority.
That the Lease contemplates that Landlord may submit a revised or corrected statement
after the expiration of the six-month period necessarily means that Landlord shall have rendered
statements within the six-month period commencing on July 1 of any given Tax Year for which
Landlord seeks Tenants share.
New York courts have consistently held under circumstances like these that Landlords
issuance of a statement of taxes due is a condition precedent to Tenants payment of same.
Until February 1995, the plaintiff never submitted to the defendant
a statement showing the computation of the proportionate increase
in operating expenses, after the end of each calendar year as
required by the lease. As such, the plaintiff failed to perform a
condition precedent pursuant to the terms of the lease. Therefore,
the defendant was not liable for the additional rent due for the period
1990 through 1993.
(Walton v E. Analytical Labs, Inc., 246 AD2d 532, 533 [2d Dept 1998], citing Woodlaurel, Inc. v
Wittman, 199 AD2d 497 [2d Dept 1993]; see also Mount Sinai Hosp. v 1998 Alexander Karten
Annuity Trust, 110 AD3d 288, 297-98 [1st Dept 2013]; Weisblatt v Schwimmer, 249 AD2d 297
[2d Dept 1998]; Winfield Capital Corp. v Mahopac Auto Glass, Inc., 208 AD2d 715 [2d Dept
1994]; Redmont Realty Co., LLC v GG 105 Yellowstone Co. LLC, 2001 NY Slip Op 40585[U],
2001 WL 1729690, at *1 [App Term, 2d and 11th Districts 2001]; Ginsberg v Lo Bright Mfg. Co.,
Inc., 2001 NY Slip Op 40147[U], 2001 WL 1221652, at *2 [Sup Ct, Nassau County 2001].)
Fundamental tenets of contract law require that the provisions of the Lease, as with any
contract, be construed as a whole to determine the purpose and intent of the parties. (See, e.g.,
W.W.W. Assocs., Inc. v Giancontieri, 77 NY2d 157, 162 [1990].) Here, the other Lease provisions

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and the parties course of conduct support that the parties meant what the Lease expressly requires:
timely rendered Landlords statements.
Here, all tax bills at issue here were mailed directly to Landlord, BHM Associates.
(Mitchell Aff., Exhibit C.) The Lease expressly requires Landlord to submit a Landlords
statement within six months of the commencement of the Tax Year in question. (Lease 1.7[C].)
Thereafter, Landlord may revisit tenants tax escalation payments only if there is an actual change
in the amount due to taxing authorities or a superior mortgagee (Lease 1.5[A]), in which case, a
subsequent revised or corrected Landlords statement may be rendered. (Lease 1.7[C].) The
Lease further contemplates Landlords timely provision of Landlords statement because Article 1
also gives Tenant a qualified right to contest the amount of taxes assessed against the Premises, in
the event Landlord elects not to:
If Landlord elects not to contest the amount or validity of any Taxes
in any given year, then Tenant shall be permitted, at its own cost and
expense, with Landlords consent, which shall not be unreasonably
withheld or delayed, to contest the amount or validity of such Taxes
in any manner permitted by law, in Tenants name, and whenever
necessary, in Landlords name. Landlord will cooperate with Tenant,
at Tenants sole cost and expense, and execute any documents or
pleadings reasonably required and appropriate for such purposes.
(Lease 1.5[C].) This section, which provides Tenant with a right to contest property taxes
assessed against the Premises, would be rendered entirely meaningless unless Section 1.7(C)
required Landlord to provide timely notice to Tenant of Tenants Tax Payment claimed due in time
for Tenant to prepare and file a protest application before the expiration of a given Tax Year.
Even if the Lease is not read to expressly condition tenants tax escalation payments upon
the receipt of Landlords statement in first six months of the Tax Year, the provision of such
statement is nevertheless a constructive condition precedent to Tenants Tax Payment. Specifically,
as the First Department held in the analogous case Mount Sinai Hospital, whether the parties
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intended the Landlords statement to be a condition precedent to Tenants payment should be


construed from reading the Lease as a whole, (Mount Sinai Hospital, 110 AD3d at 297-98 [citing
Oppenheimer & Co. v Oppenhim, Appel, Dixon & Co., 86 NY2d 685, 690-91 (1995), Walton, and
Winfield, supra]), in accordance with longstanding equitable precepts and the covenant of good
faith implied in every New York contract. (Mount Sinai Hospital, 110 AD3d at 298-99 [holding
that tenants obligation to pay additional rent for a given year was constructively conditioned upon
landlords timely submission of a statement in accordance with the lease].)
Moreover, under these circumstances, equity mandates against entertaining Landlords
attempt to recover a windfall (as more fully set forth infra). There, as here, the landlord seem[ed]
to have entirely forgotten about the additional rent provisions of this lease until 2011, when it
retroactively billed tenant for the prior 12 years, the court there perceive[d] no unfairness to
deeming the landlord to have assumed the risk of its own failure to bring about events that were
entirely (and easily) under its control. (Mount Sinai Hosp., 110 AD3d at 300.)
Accordingly, construing the provisions of the Lease as a whole, it clearly contemplates that
Landlords statement of sums due as Tenants Tax Payment, if any, be received by Tenant early
enough in the Tax Year that it may take action as for provided in Section 1.5(C) above.
B.

Defendant Is Estopped from Recovering a Windfall for


Retroactive Property Taxes Paid by the Prior Landlord
By seeking to gain an inequitable windfall for property tax liabilities it never actually paid,

Defendant attempts to defeat the purpose for the tax escalation clause in the first place: to require
Tenant to offset and alleviate the burden of property taxes assessed and actually paid by the party
seeking Tenants share.
Where a landlord seeks additional rent from tenant based on a real estate tax escalation
clause, but landlord did not actually pay the underlying taxes, e.g., due to a tax exemption or
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because the tax liability was actually paid by a third party, New York courts have consistently held
that such tax escalation clauses are meant to provide relief for the landlord where assessed tax
required actual payment. (Ran First Associates v 363 E. 76th St. Corp., 297 AD2d 506, 509 [1st
Dept 2002] [emphasis supplied], citing Fairfax Co. v Whelan Drug Co., 105 AD2d 647, 648 [1st
Dept 1984].)
To hold otherwise would allow the [landlord] to reap a windfall not envisioned by the
parties agreement. (S.B.S. Assocs. v Weissman-Heller, Inc., 190 AD2d 529, 529-30 [1st Dept
1993]; see also Wellington Tower Associates, L.P. v New York First Ave. CVS, Inc., 3 AD3d 460,
461 [1st Dept 2004], [citing S.B.S.].)
Absent unequivocal language to the contrary, a tax escalation clause in a commercial lease
obligating tenant to pay, as additional rent, a portion of any increased property taxes assessed does
not entitle landlord to collect, as additional rent, taxes that were actually paid by a third party.
(1100 Ave. of the Americas Assocs. v Bryant Imports, Inc., 161 Misc 2d 582, 586, 616 NYS2d
848, 850 [App Term 1994], affd, 234 AD2d 101 [1st Dept 1996] [As in S.B.S. (supra), the
shifting of the obligation to pay the tax to other parties must be viewed as an event which releases
the tenant from any obligation to pay increased costs which are merely theoretical.].)
Here, Defendants predecessor-in-interest actually paid the prior years taxes, which upon
information and belief, were not accounted for or otherwise offset against the purchase price paid
at closing by Defendant to the prior Landlord.
Furthermore, Plaintiff is actually prejudiced by Defendants belated demand for Tenants
Tax Payment, retroactively, in a lump sum, upwards of five years after the fact. Had Landlord
timely issued bills or statements of the Tenants Tax Payment claimed due as required under the
Lease, Plaintiff would have exercised its rights thereunder to review and contest the amounts

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claimed due, including through Plaintiffs rights under Sections 1.5 and 1.7 of the Lease to institute
proceedings to contest any valuation and potentially lower the total taxes assessed against the
Premises to lower the amount due as Tenants Tax Payment.
Thus, under such circumstances, Defendant is estopped by New York law from recovering
an inequitable windfall for taxes it never actually paid.
III.
PLAINTIFF WILL BE IRREPARABLY HARMED BY DEFENDANTS
CONTINUED TREATMENT OF THE LEASE AS TERMINATED
Consistent with the maxim equity abhors forfeiture, a commercial tenant who has made
valuable improvements to the premises and faces dispossession under inequitable circumstances
may be caused irreparable harm. Where such tenant has, for instance, inadvertently failed to timely
exercise a renewal option, New York courts have held that [e]quity may intervene because
[tenant] might suffer a forfeiture if he has made valuable improvements on the property. (135
E. 57th St. LLC v Daffys Inc., 91 AD3d 1, 5 [1st Dept 2011], quoting J.N.A. Realty Corp. v Cross
Bay Chelsea, 42 NY2d 392, 397 [1977] [a tenant in possession, who has made a considerable
investment improvements on the premises and who would undoubtedly lose a considerable
amount of its customer good will if it lost its location, may suffer a forfeiture justifying equitable
intervention].)
Even where no substantial improvements to the premises were made, equitable relief to the
commercial tenant may be granted to preserve the tenants interest in a long-standing location
for a retail business because this is an important part of the good will of that enterprise, [and thus]
the tenant stands to lose a substantial and valuable asset. (Daffys, supra, citing J.N.A. Realty,
42 NY2d at 398; see also Zaid Theatre Corp. v Sona Realty Co., 18 AD3d 352, 355 [1st Dept 2005]

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[longstanding movie theater tenants goodwill was a valuable right warranting equitable protection
of its ability to cure a default after a determination of the merits].)
Equitable relief is clearly called for here. Plaintiff has expended approximately $3.5 million
in capital improvements at the Premises. (Mitchell Aff., 18.) This is VWGs only freestanding
ready-to-wear flagship store in the world. Plaintiff would undoubtedly suffer considerable good
will if it were unceremoniously evicted from its flagship store in SoHo with six and a half years
remaining on its Lease, including the renewal term. (Mitchell Aff., 19.) This presents a textbook
case for this Court to exercise equitable intervention and prevention of a forfeiture.
Conclusion
Based upon the foregoing, and as set forth in the pleadings and accompanying supporting
papers, Plaintiff Vera Wang Group LLC f/k/a Vera Wang Bridal House LLC respectfully requests
that the Court grant its motion for a Yellowstone injunction, and award such other and further relief
as the Court deems just and proper.
Dated: New York, New York
June 17, 2015

WACHTEL MISSRY LLP


By:

/s/Steven J. Cohen
Steven J. Cohen
Stella Lee
One Dag Hammarskjold Plaza
885 2nd Avenue, 47th Floor
New York, New York 10017
(212) 909-9500
cohen@wmllp.com
slee@wmllp.com
Attorneys for Plaintiff

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