Undertaking Required for Yellowstone Injunction is to Compensate Landlord if Injunction Improvidently Granted, Not to Cure All Alleged Breaches

On March 8, 2023, Justice Chan of the New York County Commercial Division issued a decision in 1516 Roof LLC v. 469 Holdings, LLC, 2023 NY Slip Op. 30694(U), holding that the undertaking required for a Yellowstone injunction is to compensate the landlord if the injunction was improvidently granted, not to cure all alleged breaches, explaining:

Following the grant of Yellowstone injunction, a court is to set an undertaking at an amount rationally related to the quantum of damages which the landlord would sustain in the event that the tenant is later determined not to have been entitled to the injunction. On commercial landlord-tenant matters, one aspect of damages includes delay in receiving a market rate rent for the commercial space.

The court disagrees with Tenant that no undertaking should issue and Tenant’s reliance on WPA/Partners is unavailing. There, it was undisputed that considerable value had already invested by the tenant in improvements on the property; here, Tenant only offers amounts of its expenditures, which it has failed to establish have improved the property, especially given that the custom-made elevators are currently being stored. Meanwhile, Landlord mistakenly bases the undertaking on amounts to complete the lobby and elevator work rather· than on damages caused by the grant of Yellowstone relief.

Considering the nominal amount of rent charged and the overall circumstances presented, the court determines that the posting of an undertaking in the amount of $250,000 is reasonable and adequate.

(Internal citations omitted).

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