Splash, LLC v Shullman Family Ltd. Partnership
Annotate this CaseDecided on October 8, 2013
Supreme Court, Westchester County
Splash, LLC, SPLASH MANAGEMENT GROUP, LLC, SPLASH BEDFORD HILLS, LLC, MARK CURTIS and CHRISTOPHER FISHER, Plaintiffs,
against
Shullman Family Limited Partnership, ROBERT SHULLMAN, MICHAEL SHULLMAN, and RUSSELL SPEEDERS CAR WASH, LLC, Defendants.
56585/2013
George J. Calcagnini, Esq.
Attorney for the plaintiffs
376 Route 202
Somers, NY 10589
By NYSCEF
Finger & Finger, P.C.
Attorneys for the defendants
158 Grand Street
White Plains, NY 10601
By NYSCEF
Francesca E. Connolly, J.
The following documents were read in connection with the plaintiffs' order to show cause for an order staying a summary proceeding to recover possession of real property pending in the Town of Bedford Justice Court, restraining and enjoining the defendants from evicting or removing the plaintiffs from the premises during the pendency of the action, and removing the summary proceeding to this Court and consolidating it with this action (Sequence No. 1), and defendants' cross-motion to dismiss the complaint for failure to state a cause of action (Sequence No. 2): [*2]
Plaintiffs' order to show cause, affirmation pursuant to 22 NYCRR 670.5 (e),
affirmation of plaintiffs' counsel, affirmation of Martabano,
affidavit of Curtis, exhibits1-16
Plaintiffs' memorandum of law17
Defendants' affirmation in opposition to order to show cause seeking
preliminary injunction, affidavit of Shullman, exhibits18-22
Defendants' notice of cross-motion, affirmation of defendants' counsel,
affidavit of Shullman, exhibits23-27
Defendants' memorandum of law28
Plaintiffs' affirmation in opposition to defendants' motion to dismiss
and in further support of order to show cause, affirmation of Martabano,
affidavit of Curtis, exhibits29-33
Plaintiffs' memorandum of law34
Defendants' reply affirmation in support of the cross-motion to dismiss35
Defendants' reply memorandum of law36
The plaintiffs commenced this action on April 30, 2013 alleging causes of action for tortious interference with business relations, breach of implied covenant of good faith, intentional property damage, and negligent property damage. On May 10, 2013, the plaintiffs moved by order to show cause to (1) stay a summary proceeding to recover possession of real property located at 527 North Bedford Road, Bedford Hills pending in the Town of Bedford Justice Court, (2) restrain and enjoin the defendants from evicting the plaintiffs from the premises during the pendency of this action, and (3) remove the summary proceeding to this Court and consolidate it with this action. The defendants oppose the plaintiffs' order to show cause and cross-move to dismiss the complaint for failure to state a cause of action. For the reasons set forth below, the plaintiffs' order to show cause and the defendants' cross-motion are both denied.
PROCEDURAL AND FACTUAL BACKGROUND
The Complaint
According to the complaint, the defendant Shullman Family Limited Partnership is the owner and landlord of the premises located at 527 North Bedford Road, Bedford Hills, New York. The plaintiffs, Splash, LLC, Mark Curtis and Christopher Fisher, are the occupants of the premises and are the respondents in a summary proceeding brought for their eviction from the premises as a result of remaining as "holdovers" after the expiration of the lease on April 30, 2013. The plaintiffs currently operate a car wash at the premises. On or about March 16, 2010, approximately three years before their lease with the defendants expired, the plaintiffs entered into a new lease for premises located nearby at 562-570 North Bedford Road, Bedford Hills, New York, with the intention of moving and re-establishing their car wash at that location. The new lease was made contingent upon the plaintiffs obtaining the required variances, permits, and approvals from the Town of Bedford Zoning Board of Appeals and Planning Board to allow the plaintiffs to construct and operate a car wash at the new location. In connection therewith, the plaintiffs sought and eventually obtained the [*3]required municipal approvals to develop the property.
The plaintiffs allege that the municipal hearing and approval process was delayed as a result of the defendants' actions in secretly soliciting neighbors at the new location to oppose the plaintiffs' applications before the Town of Bedford Zoning Board of Appeals and Planning Board in an attempt to cause the plaintiffs economic harm by preventing them from relocating their car wash business. The plaintiffs allege that the defendants acted in bad faith and with actual malice by secretly retaining a land use attorney and various experts, including traffic and noise experts, to oppose the plaintiffs' applications and file legal proceedings to stop or delay the plaintiffs from establishing their car wash at the new location. The plaintiffs further allege that the defendants instructed the land use attorney and the experts to fraudulently misrepresent to the officials of the Town of Bedford that they had been hired and retained by the neighbors, when they were, in fact selected, hired, retained, and paid by the defendants. As the result of the defendants' bad faith actions in opposing, obstructing, and delaying the approval process, the plaintiffs failed to receive the necessary variances, special use permits, and site plan approval with sufficient time to build their car wash at the new location and re-establish their business before their lease expired on April 30, 2013. The plaintiffs further allege that the defendants acted with actual malice and with the intent to cause the plaintiffs economic harm in that the defendants planned to open their own car wash business at the existing location and misappropriate the plaintiffs' customers and business to themselves.
Based upon these allegations, the complaint asserts causes of action for tortious interference and breach of the implied covenant of good faith contained in the plaintiffs' lease for the premises. The plaintiffs also assert causes of action for intentional and negligent property damage, claiming that they sustained property damage when the defendants' agents or employees intentionally, carelessly, or negligently punctured the waterproof materials on the roof of the premises while performing a site inspection in March 2013, which caused extensive quantities of water to leak into the premises.
The Plaintiffs' Order to Show Cause
The plaintiffs seek a preliminary injunction enjoining the defendants from evicting the plaintiffs from their existing place of business during the pendency of this action, staying the summary proceeding pending in the Bedford Town Justice Court, and removing that action to this Court and consolidating it with this action.
In support of the application, the plaintiffs submit an affidavit from the plaintiff Mark Curtis who explains the parties' history and the basis for the plaintiffs' claims. Curtis avers that, as the plaintiffs were attempting to gain the necessary permits to open a new car wash facility at a new location, the defendants secretly funded opposition from neighbors which delayed the approvals process. According to Curtis, the defendants' goal was to delay the municipal approval process so that the plaintiffs' lease at the defendants' location would expire before their new building could be built, at which point the defendants would open their own car wash business at the existing location and misappropriate to themselves the plaintiffs' customers and goodwill. [*4]
According to Curtis, in the Spring of 2011, the defendants sought and obtained site plan approval to open a Russell Speeder Car Wash on the leased premises, despite the fact that the plaintiff was not required to vacate the property until 2013. As evidence of the defendants' intent to open a new car wash business, the defendant put up posters and signs announcing the opening of their business as of May 1, 2013, they parked a truck across the street from the plaintiffs' existing business indicating that they would be opening and were now hiring, and handed out coupons to the plaintiffs' customers knowing that the coupons would cause the plaintiffs' customers confusion. Curtis also avers that the defendants attempted to hire away the plaintiffs' employees, told the plaintiffs' employees that they were putting the plaintiffs out of business, solicited business from some of the plaintiffs' car dealership clients by telling them that the plaintiffs would soon be out of business, attempted to cancel the plaintiffs' Con Edison electric service, conducted lengthy inspections on the plaintiffs' premises, made deliveries of new equipment to the plaintiffs' business, and spread rumors that they would have the police standing by to re-take possession of the premises. Curtis contends that the defendants' actions have tortiously interfered with the plaintiffs' business relations for leasing, developing, and building out their new location.
In support of the order to show cause, the plaintiffs also include an affirmation from their zoning and land use attorney, Charles Martabano, Esq., who avers that it has taken twice as long as it should have for the plaintiffs to obtain a building permit and, it is his belief, based upon circumstantial proof, that the defendants secretly funded and directed the opposition to plaintiffs' applications for variances and site plan approval for the car wash at the new location. According to Martabano, an attorney believed to have been hired by the defendants attended planning board and zoning board meetings purporting to represent neighbors of the new facility. Once the approvals were granted by the necessary local boards, the attorney then commenced a CPLR article 78 petition. Martabano opines that the attorney's tactics were primarily designed to delay the approvals process.
The Defendants' Opposition and Cross Motion
The defendants oppose the order to show cause contending that the plaintiffs cannot demonstrate a likelihood of success on the merits; the plaintiffs have an adequate remedy at law in that their damages are compensable by a money judgment; the plaintiffs have failed to establish that they would suffer irreparable harm in the absence of an injunction; the relief sought in the injunction is improper in that it would give the plaintiffs a permanent tenancy for an indeterminate term while the defendants would be prohibited from regaining access to its premises after the lease expired; and the issues that give rise to the preliminary injunction are defenses to the summary proceeding.
In an affidavit, the defendant Robert Shullman avers that the real reason for the neighbors' opposition and the delay in the municipal process was the fact that the plaintiffs' plans include constructing an oil change facility that would be partially located in a residential zone and therefore, a use variance was required. The neighbors opposed the application because their homes, located in a residential area, would be subject to a car wash and oil changing station, with the attendant pollution, noise, and traffic. Had the plaintiffs only sought approval for a car wash in a commercial facility, it is most likely they would not have experienced delays. Although the defendants deny that [*5]they funded the opposition, they contend that, assuming plaintiffs' claims to be true, they have the legal right to do so, whether openly or not. The defendants deny that the plaintiffs will be a true competitor with the defendants, as the plaintiffs will be offering services beyond what the defendants will offer, such as oil changes, and also, they contend that the car wash business is not unique and there is nothing they have done to steal the plaintiffs' customers or good will.
The defendants cross-move to dismiss the complaint for failure to state a cause of action, contending that the plaintiffs have failed to allege with particularity acts that would support a claim for tortious interference with prospective business relations or breach of the implied covenant of good faith. The defendants further contend that the property damage claim is without merit and was included for the sole purpose of avoiding a dismissal.
The Plaintiffs' Reply and Opposition to the Cross Motion
In opposition to the defendants' cross motion to dismiss, and in further support of their order to show cause, the plaintiffs clarify that they are seeking a stay of the summary proceeding for a period of about six months to allow them to build their new facility. They further contend that, had the defendants appeared before the Zoning Board of Appeals or Planning Board to voice objections under their own names, the Boards would have paid them little to no attention because they are not affected by the project. Also, since the defendants' property is located 900 feet away, they would lack standing to pursue an article 78 proceeding.
The plaintiffs submit a copy of a stipulation dated May 22, 2013 between the parties in the Justice Court action, wherein they agreed to an amount the plaintiffs will pay each month as use and occupancy during the pendency of the landlord-tenant proceeding, which the defendants will accept without prejudice.
The Defendants' Reply
In reply, the defendants contend that the central issue is not who was funding the opposition presentations before the Zoning Board of Appeals and Planning Board, but whether the plaintiffs are misusing the law to avoid the expiration of the lease by interposing specious and frivolous claims.
DISCUSSION/ANALYSIS
A. The Preliminary Injunction is Denied
The plaintiffs have failed to establish their entitlement to a preliminary injunction enjoining the defendants from evicting the plaintiffs from their existing place of business during the pendency of this action, staying the summary proceeding pending in the Bedford Town Justice Court, and removing that action to this Court and consolidating it with this action, and accordingly, the order [*6]to show cause is denied.
"The party seeking a preliminary injunction must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor" (Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 NY3d 839, 840 [2005]; see Matter of Advanced Digital Sec. Solutions, Inc. v Samsung Techwin, Co., 53 AD3d 612, 613 [2d Dept 2008]).
Here, the facts surrounding the defendants' involvement (or lack thereof) in the plaintiffs' land use approval process are in "sharp dispute" (see Related Propeties, Inc. v Town Board of Town/Village of Harrison, 22 AD3d 587, 590 [2d Dept 2005] ["Where the facts are in sharp dispute, a temporary injunction will not be granted"]; see also Advanced Digital Sec. Solutions, Inc. v Samsung Techwin Co., Ltd., 53 AD3d at 613). Moreover, the plaintiffs have failed to establish that they will be irreparably harmed if a preliminary injunction enjoining the eviction proceeding is not issued, or that they have a "clear right" to remain on the premises after the expiration of their lease (Omakaze Sushi Rest., Inc. v Ngan Kam Lee, 57 AD3d 497, 497 [2d Dept 2008] ["A party seeking the drastic remedy of a preliminary injunction must establish a clear right to that relief under the law and the undisputed facts"]). Further, the plaintiffs have an adequate remedy at law which, if they prevail on the merits, will fully compensate them for the defendants' alleged wrongful conduct, to wit: a judgment for damages (see 1659 Ralph Ave. Laundromat Corp. v Ben David Enters., LLC, 307 AD2d 288, 289 [2d Dept 2003] [the plaintiff failed to show irreparable harm where a suit for money damages provided an adequate remedy at law]; Byrne Compressed Air Equipment Co. v Sperdini, 123 AD2d 368, 369 [2d Dept 1986]). Under these circumstances, the drastic remedy of a preliminary injunction is not warranted.
This Court further declines to remove the summary proceeding from the Town of Bedford Justice Court to this court and consolidate it with this action, as the local court "is the preferred forum for the resolution of landlord-tenant disputes" (All 4 Sports & Fitness, Inc. v Hamilton, Kane, Martin Enterprises, Inc., 22 AD3d 512 [2d Dept 2005]).
B. The Defendants' Motion to Dismiss
1. Tortious Interference with Business Relations
Here, assuming that the allegations in the complaint are true and affording the plaintiff every favorable inference (see Simkin v Blank, 19 NY3d 46, 52 [2012]; Maas v Cornell University, 94 NY2d 87, 91 [1999]), the complaint states a cause of action for tortious interference with prospective business relations.
"[I]nducing breach of a binding agreement and interfering with a nonbinding economic relation' can both be torts, but . . . the elements of the two torts are not the same" (Carvel Corp. v Noonan, 3 NY3d 182, 189 [2004]). "[W]here there is an existing, enforceable, contract and a defendant's deliberate interference results in a breach of that contract, a plaintiff may recover damages for tortious interference with contractual relations even if the defendant was engaged in [*7]lawful behavior" (Guard—Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183, 191 [1980]). However, where there has been no breach of an existing contract, but only interference with existing or prospective economic relations, the plaintiff must show "more culpable" conduct on the part of the defendant (see Carvel Corp. v Noonan, 3 NY3d at 190). "[G]reater protection is accorded an interest in an existing contract (as to which respect for individual contract rights outweighs the public benefit to be derived from unfettered competition) than to the less substantive, more speculative interest in a prospective relationship (as to which liability will be imposed only on proof of more culpable conduct on the part of the interferer)" (Guard—Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d at 191) "Tortious interference with business relations applies to those situations where the third party would have entered into or extended a contractual relationship with plaintiff but for the intentional and wrongful acts of the defendant'" (M.J. & K Co., Inc. v Matthew Bender and Co., Inc, 220 AD2d 488, 490 [2d Dept 1995], quoting WFB Telecommunications, Inc. v NYNEX Corp., 188 AD2d 257, 257 [2d Dept 1992]).
To state a cause of action "for tortious interference with business relationships, a plaintiff must show that the defendant interfered with the plaintiff's business relationships either with the sole purpose of harming the plaintiff or by means that were unlawful or improper" (Nassau Diagnostic Imaging and Radiation Oncology Associates, P.C. v Winthrop-University Hospital, 197 AD2d 563, 563-564 [2d Dept 1993]). "Although his status as a competitor does not protect the interferer from the consequences of his interference with an existing contract, it may excuse him from the consequences of interference with prospective contractual relationships, where the interference is intended at least in part to advance the competing interest of the interferer, no unlawful restraint of trade is effected, and the means employed are not wrongful" (Guard—Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d at 190-191). " Wrongful means' include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure'" (Guard—Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d at 191).
Here, the defendants' alleged conduct was not "solely malicious," since "the defendants' actions were motivated, at least in part, by economic self-interest" (see Out of the Box Promotion, LLC v Koschitzki, 55 AD3d 575, 577 [2d Dept 2005]). Accordingly, the plaintiffs were required to demonstrate that the means employed by the defendants were wrongful (see id.). Construing the allegations in the complaint and in Curtis' affidavit in the light most favorable to plaintiffs (see Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998] [in opposition to a motion to dismiss, "a plaintiff may submit affidavits to remedy defects in the complaint and preserve inartfully pleaded, but potentially meritorious claims" (internal quotation marks omitted)]), the complaint alleges that the defendants' tactics were wrongful.
While circulating coupons to potential customers, as the defendants did here, is not wrongful (see Carvel Corp. v Noonan, 3 NY3d at 192 [the mere institution of a coupon program to entice customers with a better price does not constitute "economic pressure" rising to the level of "wrongful" or "culpable" conduct]), the defendants are also alleged to have funded frivolous opposition to the plaintiffs' land use approvals, told the plaintiffs' customers and employees that the plaintiff would soon be out of business, and abused their status as the plaintiffs' landlord to confuse [*8]the plaintiffs' customers and employees and conduct burdensome inspections of the premises. This alleged conduct goes far beyond mere persuasion or legitimate economic pressure (see Don Buchwald & Associates v Rich, 281 AD2d 329 [1st Dept 2001] [actions of the defendant former employees in surreptitiously stealing clients "went far beyond mere persuasion"]). Further, at this preliminary stage of the action, it is too early to say whether the defendants' alleged involvement in the plaintiffs' permit application process was frivolous (see Pagliaccio v Holborn, 289 AD2d 85 [1st Dept 2001] ["civil suits and threats thereof constitute improper means' only if such tactics are frivolous"]). Accordingly, the plaintiffs have sufficiently alleged that the defendants employed wrongful means to interfere with the plaintiffs' prospective economic relations with their present and future car wash customers as well as the plaintiffs' economic relations related to opening their proposed new location.
2. Breach of Implied Covenant of Good Faith
Assuming that the allegations in the complaint are true and affording the plaintiff every favorable inference (see Simkin v Blank, 19 NY3d 46, 52 [2012]; Maas v Cornell University, 94 NY2d 87, 91 [1999]), the complaint states a cause of action for breach of the implied covenant of good faith and fair dealing contained in the lease between the parties.
Within every contract is an implied covenant of good faith and fair dealing, which is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement (Aventine Inv. Mgmt., Inc. v Canadian Imperial Bank of Commerce, 265 AD2d 513, 513-514 [2d Dept 1999]). "For a complaint to state a cause of action alleging breach of an implied covenant of good faith and fair dealing, the plaintiff must allege facts which tend to show that the defendant sought to prevent performance of the contract or to withhold its benefits from the plaintiff (id. at 514).
Here, the plaintiffs had a right to receive the benefits of their lease to the defendants' property during the entire term of the lease, up to and including the final days of the lease term. However, in this case the defendants, undisputably the plaintiffs' landlords, are alleged to have deliberately destroyed and interfered with the plaintiffs right to receive fruits of the lease by attempting to hire away the plaintiffs' employees, spreading disinformation regarding the plaintiffs' business, conducting unreasonable inspections, and having equipment delivered to the premises. These actions, if true, could be found to have, in some degree, deprived the plaintiffs of their rights to receive the benefit of the lease (see Dalton v Educ. Testing Serv., 87 NY2d 384, 389 [1995] [The implied covenant of good faith and fair dealing "embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract'"], quoting Kirke La Shelle Co. v Paul Armstrong Co., 263 NY 79, 87 [1933]).
While this Court is considerate of the fact that a landlord will have to make plans to fill a vacancy when a current tenancy is set to expire, the implied covenant of good faith and fair dealing [*9]imposes a duty on the landlord to make such plans and arrange for the new tenant or use of the property in a way that does not destroy or injure the right of the present tenant to receive the fruits of its lease (see Med Mac Realty Co. v Lerner, 154 AD2d 656, 659 [2d Dept 1989] ["in all contracts there is a covenant of fair dealing and good faith and . . . a landlord is under a duty to refrain from unreasonably obstructing the tenant's use of the premises]).
3. Intentional and Negligent Property Damage
The allegations in the complaint, assumed to be true, are sufficient to state causes of action for intentional and negligent property damage and therefore, these causes of action survive the defendants' motion to dismiss. The defendants impliedly concede this point by moving to dismiss on the sole ground that the cause of action is a "throw in" to avoid dismissal of the complaint.
Based upon the foregoing, it is hereby
ORDERED that the plaintiffs' order to show cause is denied; and it is further
ORDERED that the defendants' cross motion to dismiss the compliant pursuant CPLR 3211 (a) (7) is denied; and it is further
ORDERED that the parties are directed to appear in the Preliminary Conference Part on November 18, 2013 at 9:30 a.m., in Room 811 of the Westchester County Courthouse at 111 Dr. Martin Luther King, Jr., Boulevard, White Plains, New York 10601; and it is further
ORDERED, that all other relief requested and not decided herein is denied.
This constitutes the decision and order of the Court.
Dated: White Plains, New York
October 8, 2013
HON. Francesca E. Connolly, J.S.C.
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