We have often wondered at the quick demise of businesses that have spent a lot of money and time setting up a storefront, only to close 4 or 5 months later.  How could the owner invest so much and either mistake the customer base or make some other vast miscalculation?  Agatha LLC v Heller
2018 NY Slip Op 32636(U)  October 10, 2018  Supreme Court, New York County  Docket Number: 150619/2015 Judge: Debra A. James provides something of an example.  This was a theater in Times Square that went down in flames.

“Plaintiffs are Agatha LLC (Agatha) and a managing member, Catherine Russell. The essence of plaintiffs’ claims is that in challenging Agatha’s former landlord’s notices to terminate the
lease, Heller negligently failed to commence action and obtain a Yellowstone injunction, resulting in the termination of Agatha’s leasehold. ”

“In September 2013, Agatha rented space in a building in the Manhattan Times Square  neighborhood to create an Off-Broadway theater. The space “required substantial construction” before it could be opened to the public. Renovation was proceeding when, on August 15, 2014, the
landlord served Agatha with a 30-day notice of default, with a cure date of September 24, 2014, more than 30 days after the date of the notice. The 30-day notice stated that Agatha had failed to maintain the types and amounts of insurance required under the lease and had performed work and made alterations to the premises in violation of the lease. The notice stated that Agatha did not obtain the needed permits from the NYC Department of Buildings or the landlord’s prior written consent to change the premises. The notice listed alterations such as removing walls, flooring, ceilings, and lighting, and blocking windows. The notice further stated that the insurance defaults were incurable under the lease.”

“Both sides agree that the coverage reflected by Agatha’s insurance certificates did not comply with the insurance requirements in the lease. ”

“Heller alleges that he repeatedly and frequently told Russell that he did not do Supreme Court work, and that if the landlord did not agree to a resolution of the issues raised in the default notice, she would have to find another attorney who could go to the Supreme Court and obtain an injunction to renegotiate the insurance clause in the lease. He told Russell that she needed to get insurance that complied with the lease and that she would have a better chance of getting the
injunction if she did. He told her that she had 30 days from the date of the 30-day notice to get an injunction in Supreme Court. Heller further alleges that Russell understood that not getting the right insurance could mean loss of the lease.  Heller also says that he believed that Russell could not get the right insurance and that his job was to negotiate with the landlord to see if lower coverage was acceptable. ”

“Plaintiffs’ position is that, if Agatha had obtained a Yellowstone injunction, negotiations might have led to the
landlord agreeing that the tenant’s insurance did not have to be exactly what was called for in the lease. In the event the landlord did not agree, Agatha would cure the insurance defaults. Russell says that she could have obtained the correct amounts of insurance on a retroactive basis. ”

“Where an attorney’s motion to dismiss is premised on the argument that the client could not have succeeded on its underlying claim, the attorney must show that the plaintiff would have been unable to prove one of the essential elements of the claim (Burbige v Siben & Ferber, 152 AD3d 641, 642 [2d Dept 2017]; Velie v Ellis Law, P.C., 48 AD3d 674, 675 [2d Dept 2008]). ”

“Heller contends that Agatha either could not have qualified for a Yellowstone injunction and/or could not have cured the defaults. Thus, an essential element of the claim is absent as Agatha could not have prevailed over the landlord and avoided termination of the lease. The landlord’s notice advised Agatha that if the defaults were not cured by a certain date, the leasehold would be terminated. A Yellowstone injunction imposes a stay that prevents the landlord from terminating a leasehold by the cure date, thereby affording the tenant an opportunity to cure the
default specified in the landlord’s notice and avoid forfeiture of the leasehold (Universal Communications Network, Inc. v 229 W. 28th Owner, LLC, 85 AD3d 668, 669 [1st Dept 2011]; CC
Vending, Inc. v Berkeley Educ. Servs. of N.Y., Inc., 74 AD3d 559, 559 [1st Dept 2010]; Empire State Bldg. Assoc. v Trump Empire State Partners, 245 AD2d 225, 227 [1st Dept 1997]). If the tenant cannot cure the default, it loses its leasehold. To succeed on a motion for a Yellowstone injunction, the tenant must show “that it is prepared and has the ability to cure the alleged default [as specified in the notice] by any means short of vacating the premises” (CC Vending, 74 AD3d at 559). If the
default is not susceptible to cure, the Yellowstone application will be denied (see Zona, Inc. v Soho Centrale, 270 AD2d 12, 14 [1st Dept 2000]). ”

“Heller demonstrates that Agatha would not have prevailed in the case against the landlord.  Plaintiffs fail to show that there is an issue of fact in that regard. Additionally, nothing
is alleged here to show that Agatha would have gotten larger damages if a Yellowstone injunction had issued. Such claim is mere speculation.”

Print:
EmailTweetLikeLinkedIn
Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.