a(\ Melvile Law Center Defendant. 225 Old Country Road Melvile, New York Plaintiff, PRESENT:

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1 a(\ INDEX No SUPREME COURT - STATE OF NEW YORK IAS TERM PART 14 NASSAU COUNTY PRESENT: HONORABLE GRISTEDE' S OPERATING CORP./NAMDOR INC., - against - LEONARD B. AUSTIN Justice Motion RID: 6- Submission Date: Motion Sequence No. : 001,002/MOT D Plaintiff, COUNSEL FOR PLAINTIFF Finkel, Goldstein, Rosenbloom & Nash, LLP 26 Broadway - Suite 711 New York, New York CENTRE FINANCIAL LLC., Defendant. COUNSEL FOR DEFENDANT Lazer, Aptheker, Rosella & Yedid, P. Melvile Law Center 225 Old Country Road Melvile, New York ORDER The following papers were read on Plaintiff' s motion for a Yellowstone injunction and Defendant's motion to stay arbitration. Order to Show Cause dated May 30, 2007; Affidavit of Louis P. Palermo sworn to on May ; Plaintiff's Memorandum of Law; Order to Show Cause dated June 4, 2007; Affirmation of Zachary Murdock, Esq. dated June 1, 2007;

2 Affidavit of Louis P. Palermo sworn to on June 11, 2007; Plaintiff' s Reply Memorandum of Law; Affidavit of Robert Preston sworn to on June 12, 2007; Affirmation of Zachary Murdock, Esq. dated June 18, Plaintiff Gristede s Operating Corp.lNamdor Inc. ("Gristede ) moves for a Yellowstone 1 injunction enjoining termination of it's lease dated July 1, 1996 relative to the premises at Birch Hill Square Shopping Center, Locust Valley, New York. Defendant Centre Financial LLC ("Centre ) moves to stay the arbitration between Plaintiff, as claimant, and Defendant, as respondent, (Case no E ) before the American Arbitration Association. BACKGROUND This declaratory judgment action arises as a consequence of Centre notification to Gristede s that it was in default under the terms of its commercial lease dated July 1, 1996 with respect to premises located in the Birch Hil Square Shopping Center, Locust Valley, New York. The Notice of Default, dated May , was sent subsequent to Gristede service of a Demand to Arbitrate. The arbitral issue was whether Centre s refusal to consent to Gristede s request to assign its lease to Bayou Brothers Food Corp., based on Gristede s alleged default in the payment of rent and additional rent, and the fact that the proposed assignee was not a " high qualiy chain grocery store" as required under of the lease, was unreasonable. (1968). See First National Stores. Inc. v. Yellowstone Shopp;na Center. Inc., 21 N. Y. 2d 630

3 As set forth in the Notice of Default, the alleged violations of the lease include: failure to pay late charge of 4% vis-a-vis late payment of minimum rent due April 1, 2007; failure to provide certified statement per of lease (subsequently addressed and not a ground relied upon in the Notice of Termination); and failure to continuously and uninterruptedly keep the demised premises fully stocked and staffed during all business hours on all business days when the shopping center is open for business. The letter further states that the landlord (Centre) would utilze those remedies available under the lease in the event that tenant (Gristede s) failed to cure the enumerated defaults and that the tenant has no right to arbitrate the issue of reasonableness of Defendant's refusal to consent to the proposed assignment until all defaults are cured and the tenant is in full compliance with the terms and conditions of the lease. follows: With respect to assignment, of the lease provides, in relevant part, as (e)xcept as may be expressly provided otherwise in this Lease, Tenant shall not, voluntarily, by operation of law or otherwise, assign, sell, mortgage, pledge or in any manner transfer this Lease or any interest therein, or sublet the Demised Premises or any part or parts thereof, or grant any concession or license or otherwise permit occupancy of all or any part of the Demised Premises by any person, without the consent of Landlord, which consent shall not be unreasonably withheld or delayed... In its letter dated March 2, 2007, Centre rejected Gristede s proposed assignment of its lease to Bayou Brothers Food Corp. ("Bayou Brothers ) on the

4 grounds that the proposed assignee, with only one store, does not fit the definition of a chain store as required by of the lease pursuant to which the: (tjenant shall use and occupy the Demised Premises only for a high quality chain grocery store and supermarket under the name Gristede s or Sloan (or such other name as may be used by a supermarket which is an assignee or sublessee of this Lease permitted or consented to under Article XI hereof. In its Demand for Arbitration, dated March 23, 2007, Gristede s requested specific performance requiring Centre to accept Bayou Brothers as tenant. Notwithstanding the fact that it had served a Demand for Arbitration, Plaintiff, after receiving a Notice of Termination dated May 25, 2007 from Centre, commenced this action seeking both a declaration that it is not in material default of the lease and that Centre does not have the right to terminate the lease. In addition to money damages, Gristede s also seeks to permanently enjoin Centre from taking any action to terminate the lease and/or interfere with it's possession of the premises. Although the arbitration proceeding was commenced on June 5, 2007, after a full day s testimony, the proceeding was suspended. Grestide s now moves for relief in the form of a Yellowstone injunction enjoining Centre from taking any steps to cancel or terminate the lease relating to the Locust Valley premises during the pendency of this action. Centre opposes the application and seeks to stay the pending arbitration contending that if both the arbitration proceeding and the instant action proceed concurrently, there is a risk of

5 conflicting determinations between the two fora on the issue of whether, and the extent to which, Defendant is in default under the subject lease. On the question of the propriety of granting a Yellowstone injunction enjoining Centre from taking any steps to terminate Gristede s lease at the Birch Hill Square Shopping Center, Centre maintains that, given Gristede s default in the payment of April late charges, and May rent, as set forth in the Notice of Default, and its failure to cure either of said defaults within the time afforded under the lease, Centre is well within its rights to serve the Notice of Termination in accordance with the terms of the lease. Moreover, Centre asserts an additional uncured non-monetary default with respect to the Continuous Operations provision of the lease which it claims Gristede s violated by shutting down two vital departments entirely - - the butcher and fresh fish departments; and sharply curtailing the bakery department. The primary thrust of Gristede s application for a Yellowstone injunction is that the April 2007 rent has been paid, that there are no amounts owing under the lease and that it has been, and continues to be, in compliance with all other terms of the lease with the store s shelves properly stocked in all departments. Such claims directly contradict Centre s assertion that the claimed lease violations remain uncured. DISCUSSION The purpose of a Yellowstone injunction is to avoid forfeiture of the leasehold by tolling the period during which the tenant must cure a default thus avoiding termination of the lease according to its terms. Hempstead Video. Inc. v. 363 Rockaway Assoc..

6 LLP., 38 AD. 3d 838, 839 (2 Dept. 2007). It forestalls cancellation of the lease in order to afford the tenant an opportunity to obtain a judicial determination of its breach the measures necessary to cure it and those required to bring the tenant into future compliance with the terms of the lease. Waldbaum. Inc. v. Fifth Ave. of Long Island Realty Assocs., 85 N.Y. 2d 600, 606 (1995). It neither nullifies the remedies to which a landlord is otherwise entitled nor rewrites the lease. Reade v. 405 Lexington. L.L.C., 19 AD. 3d 179, 180 (1 Dept. 2005). In contrast to the usual preliminary injunction, which requires a showing of a probability of success on the merits, the danger of irreparable injury in the absence of an injunction and a balancing of the equities in the movant's favor ( Nobu Next Door. LLC v. Fine Arts Housing. Inc., 4 N.Y. 3d (2005)), requisites Gristede s has failed to demonstrate, a Yellowstone injunction wil be granted to a commercial tenant who demonstrates that: (1) it holds a commercial lease; (2) the landlord served a notice to cure, or a notice of default on the tenant, or faces the threat of lease termination; (3) it sought injunctive relief prior to expiration of the cure period and termination of the lease; and (4) it has the ability and desire to cure the alleged default by any means short of vacating the premises. Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Ave. Associates. 93 N.Y. 2d 508, 514 (1999); Purdue Pharma. LP v. Ardsley Partners. LP. 5 AD. 3d (2 Dept. 2004); and Marathon Outdoor. LLC v. Patent Construction Systems Div. of Harsco Corp. 306 AD. 2d 254 (2 Dept. 2003).

7 While a tenant is not required to prove its ability to cure the claimed default prior to obtaining a Yellowstone injunction, there must be a basis for believing that the tenant desires to cure and has the ability to do so through any means short of vacating the premises. WPA/Partners LLC v. Port Imperial Ferry Corp. 307 AD. 2d 234, 237 (1 Dept. 2003). Here, it appears that Gristede s primary interest is in closing its store, selling its assets and assigning the lease. Its allegations do not indicate that it has any interest inter alia in remaining at the premises and curing the alleged violation of the Continuous Operation provision. See, 403 W. 43 Street Rest. Inc. v. Ninth Ave. Realty LLC, 36 AD. 3d 464 Dept. 2007); and JM Parking Corp. v. East 112 Realty Corp. 298 AD. 2d 258 Dept. 2002). There is no basis for a Yellowstone injunction where it is sought after the expiration of the period to cure or after the service of a Notice of Termination. King Party Center of Pitkin Ave.. Inc. v Minco Realty. LLC, 286 AD. 2d 373, 374 (2 Dept. 2001); and E. Nichols. Inc. v American Shopping Centers. Inc. 115 AD. 2d 856, (3 Dept. 1985). Plaintiff' s application for Yellowstone relief was made beyond the applicable cure periods under the lease: Notice of Default dated May 3, 2007 under Lease (d) - 10 days (Non-payment of minimum rent); and Notice of Default dated May 3, 2007 under Lease (e) - 15 days (Payment of additional moneys due).

8 Thus, this Court is without power to grant a Yellowstone injunction. Long Island Gynecological Services. P. C. v Stewart Ave. Assoc. Ltd. Partnership, 224 AD. 2d (2 Dept. 1996); and Metal Tek Products Inc. v. M&S Properties. L.P., 238 NYLJ 7, p. 19 co/. 3 (Sup. Ct., Nassau Co. 7/11/07). 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. Assoc. v. Trump Empire State, 245 AD. 2d 225, 228 Dept. 1997). It bears noting that the Notice of Default served by Centre specifically informs the tenant that if each of the specified defaults was not cured within the time set forth in the applicable subsections of of the lease, each incurred default would constitute an event of default for which the landlord intended to pursue the remedies available to it under the lease. One Main. LLC v. Le K Restaurant Corp., 1 AD. 3d 365, 366 (2 Dept. 2003). Gristede s assertion that the reasonable expectations of both parties under the lease were supplanted or modified by the parties' course of conduct flies in the face of the contentious nature of the parties' relationship and the No Waiver clause set forth in of the lease which states that: (NJo consent, approval or waiver, express or implied, by Landlord or Tenant to or of any breach of any covenant agreement or obligation of the other shall be construed as a consent or waiver to or of any other breach of the same or any other covenant, agreement or obligation unless in each case so stated in a writing signed by Landlord or Tenant, whichever the case may be.

9 Excel Graphics Technologies, Inc. v CFG/AGSCB 1 A.D. 3d 65 Dept. 2003), Iv. dism. 2 N.Y. 3d 794 (2004). The most efficacious course, under the circumstances, is to stay arbitration of the issue of the reasonableness of Centre s refusal to approve the proposed assignment until the issue of whether Gristede s is in default under the subject lease is resolved. Should it be determined that Gristede s did, in fact, default under the lease as noticed, failed to timely cure, and was given proper notice of termination, the reasonableness of Centre s refusal to approve the assignment would be moot. It is noted that, with respect to the landlord's right to terminate the lease upon an event of default, after tenant's failure to cure defaults within the cure periods following Notice, of the lease provides, in relevant part, that the (Ilandlord shall have the right, at its option, to serve upon Tenant a notice that this Lease wil terminate on a date to be specified in such notice, which date shall not be less than ten (10) days after such notice (Tenant hereby waiving, to the maximum extent permitted by law, any further notices or longer notice periods), and upon the date so specified this Lease shall terminate but Tenant shall remain liable as hereinafter set forth. Whether the default provisions under the lease create a " condition, " as Gristede s asserts in its Supplemental Memorandum of Law, or a "conditional limitation is not germane to a consideration of the merits of a necessity of staying arbitration. Accordingly, it is Yellowstone injunction or the

10 ".,! "-' \\ \... GRISTEDE' S OPERATING CORP.lNAMIDOR INC. v. CENTRE FINANCIAL LLC further ORDERED, that Plaintiffs motion for Yellowstone injunction is denied; and it is ORDERED, that Defendant's motion to stay arbitration in the matter between the parties bearing American Arbitration Association Case No E is granted and the arbitration is hereby stayed pending further order of this Court; and it is further ORDERED, that counsel shall appear for a preliminary conference on September, 2007 at 9:30 a. This constitutes the decision and Order f th urt. Dated: Mineola, NY August Hon. NARD J; f\ug 2 '\1 ltereo t. \"t"".. v 1'.. C\. C9\J \ r' OUN1'c K'S. OFF\CE