Legal Document: Second 820 Owner Llc v. Kaa Imports, Inc.

On June 08, 2020 a MEMORANDUM OF LAW IN SUPPORT was filed involving a dispute between Second 820 Owner Llc, and Kaa Imports, Inc., for Commercial - Contract in the District Court of New York County.

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FILED: NEW YORK COUNTY CLERK 07/15/2021 09:18 AM INDEX NO. 652308/2020
NYSCEF DOC. NO. 16 RECEIVED NYSCEF: 07/15/2021

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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SECOND 820 OWNER LLC,
Index No.: 652308/2020
Plaintiff,

-against-

KAA IMPORTS, INC.,

Defendant.
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MEMORANDUM OF LAW IN SUPPORT OF
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

RIVKIN RADLER LLP
477 Madison Avenue, Suite 410
New York, New York 10022
(212) 455-9555

Attorneys for Plaintiff

Of Counsel:

David M. Grill
Evan R. Schieber

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .......................................................................................................... ii
PRELIMINARY STATEMENT .................................................................................................... 1
RELEVANT FACTS ...................................................................................................................... 3
I. THE LEASE ........................................................................................................... 3
II. TENANT’S REPUDIATION OF ITS PAYMENT
OBLIGATIONS UNDER THE LEASE ................................................................ 5
III. THE PLEADINGS.................................................................................................. 5
ARGUMENT .................................................................................................................................. 6
I. OWNER SHOULD BE AWARDED SUMMARY JUDGMENT ON ALL OF
THE CLAIMS ASSERTED IN THIS ACTION .................................................... 6
A. OWNER IS ENTITLED TO SUMMARY
JUDGMENT ON THE FIRST CAUSE OF ACTION ............................... 7
B. OWNER IS ENTITLED TO SUMMARY JUDGMENT
ON THE SECOND CAUSE ACTION ....................................................... 8
II. TENANT’S BOILERPLATE AND UNSUPPORTABLE AFFIRMATIVE
DEFENSES MUST BE STRICKEN ...................................................................... 8
III. THE COMMON LAW DOCTRINES OF FRUSTRATION
OF PURPOSE AND IMPOSSIBILITY PROVIDE NO
GROUNDS FOR TENANT TO REPUDIATE ITS
CONTRACTUAL OBLIGATIONS ..................................................................... 10
CONCLUSION ............................................................................................................................. 16

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TABLE OF AUTHORITIES

Page(s)

Cases

1140 Broadway LLC v. Bold Food LLC,
2020 N.Y. Misc. LEXIS 10358, 2020 N.Y. Slip Op. 34017(U) (Sup. Ct. N.Y.
Cty. Dec. 3, 2020) ....................................................................................................................13

35 E. 75th St. Corp. v. Christian Louboutin, L.L.C.,
2020 N.Y. Misc. LEXIS 10423, 2020 N.Y. Slip Op. 34063(U) (Sup. Ct. N.Y.
Cty. Dec. 9, 2020) ....................................................................................................................13

558 Seventh Ave. Corp. v. Times Square Photo Inc.,
2021 N.Y. App. Div. LEXIS 3366, 2021 N.Y. Slip Op. 03244 (1st Dep’t May
20, 2021) ..................................................................................................................2, 11, 12, 13

Alvarez v. Prospect Hospital,
68 N.Y.2d 320, 508 N.Y.S.2d 923 (1986) .................................................................................7

B. v. D. Co. v. Marine Midland Bank-N.Y.,
60 A.D.2d 544, 400 N.Y.S.2d 63 (1st Dep’t 1977) ...................................................................8

BKNY1, Inc. v. 132 Capulet Holdings, LLC,
2020 N.Y. Misc. LEXIS 9898, 2020 N.Y. Slip Op. 33144(U) (Sup. Ct. Kings
Cty. Sept. 23, 2020) ...........................................................................................................12, 13

Blenheim LLC v. Il Posto LLC,
14 Misc. 3d 735, 827 N.Y.S.2d 620 (Civ. Ct. N.Y. Cty. 2006) ...............................................10

Cab Bedford LLC v. Equinox Bedford Ave, Inc.,
2020 N.Y. Misc. LEXIS 10861, 2020 N.Y. Slip Op. 34296(U) (Sup. Ct. N.Y.
Cty. Dec. 22, 2020) (Bluth, J.) .................................................................................................17

CAI Rail, Inc. v. Badger Mining Corp.,
2021 U.S. Dist. LEXIS 32564 (S.D.N.Y. Feb. 22, 2021) (Cronan, J.) ....................................14

Dr. Smood N.Y. LLC v. Orchard Houston, LLC,
2020 N.Y. Misc. LEXIS 10087, 2020 N.Y. Slip Op. 33707(U) (Sup. Ct. N.Y.
Cty. Nov. 2, 2020) (Love, J.) ...................................................................................................15

Gap Inc. v. Ponte Gadea N.Y. LLC,
2021 U.S. Dist. LEXIS 42964 (S.D.N.Y, Mar. 8, 2021) (Swain, J.) .......................................15

Holy Props. Ltd, L.P. v. Kenneth Cole Prods., Inc.
87 N.Y.2d 130, 637 N.Y.S.2d 964 (1995) ...............................................................................10

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International Marine Inv’rs & Mgmt. Corp. v. Wirth,
245 A.D.2d 544, 666 N.Y.S.2d 503 (2d Dep’t 1997) ................................................................8

Livigne v. D’Agostino Supermarkets, Inc.,
207 A.D.2d 776, 616 N.Y.S.2d 515 (2d Dep’t 1994) ................................................................9

MEPT 757 Third Avenue LLC v. Grant,
2021 N.Y. Misc. LEXIS 797, 2021 N.Y. Slip Op. 30592(U) (Sup. Ct. N.Y.
Cty. Mar. 1, 2021) (Bluth, J.)...................................................................................................16

Moran Enters., Inc. v. Hurst,
96 A.D.3d 914, 947 N.Y.S.2d 538 (2d Dep’t 2012) ................................................................10

South Rd. Assocs., LLC v. Int’l Bus. Machs. Corp.,
4 N.Y.3d 272, 793 N.Y.S.835 (2005) ........................................................................................8

Star Nissan, Inc. v. Frishwasser,
253 A.D.2d 491, 677 N.Y.S.2d 145 (2d Dep’t 1998) ................................................................8

Ten W. Thirty Third Assocs. v. A Classic Time Watch Co.,
2021 N.Y. Misc. LEXIS 1589 .................................................................................................14

UBS Real Estate Sec., Inc. v. Gramercy Park Land LLC,
2009 N.Y. Misc. LEXIS 6976, 2020 N.Y. Slip Op. 33464(U), (Sup. Ct. N.Y.
Cty. Dec. 11, 2009) ..................................................................................................................13

Verela v. Citrus Lake Dev., Inc.,
53 A.D.3d 574, 862 N.Y.S.2d 96 (2d Dep’t 2009) ....................................................................9

Vermont Teddy Bear Co, Inc. v. 538 Madison Realty Co.,
1 N.Y.3d 470, 775 N.Y.S.2d 765 (2004) ...................................................................................7

Wolet Constr. Corp. v. 216-20 Beach 87th St. Co.,
20 Misc. 3d 1126(A), 872 N.Y.S.2d 694 (Sup. Ct. Queens Cty. 2008) ..................................10

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PRELIMINARY STATEMENT

This Memorandum of Law is respectfully submitted on behalf of Second 820 Owner LLC

(“Owner” or “Landlord”), the Plaintiff herein, in support of Owner’s motion for an Order awarding

summary judgment on all causes of action in the Complaint, as follows: (i) pursuant to CPLR

3212, directing the entry of summary judgment in favor of Owner and against Defendant KAA

Imports, Inc. (“Tenant” or “Defendant”) on the First Cause of Action for the immediate entry of a

money judgment in the principal amount of $30,429.00, representing rent and additional rent due

through June, 2020, plus costs and interest; (ii) pursuant to CPLR 3212, directing the entry of

summary judgment in favor of Owner as against Defendant on the Second Cause of Action as to

liability, and severing that cause of action for a hearing to compute the amount of damages due

and owing to Owner; (iii) dismissing Defendant’s affirmative defenses; and (iv) awarding Owner

such other and further relief as this Court deems just and proper under the circumstances,

including, but not limited to, reasonable attorneys’ fees and the costs and disbursements of this

action.

Owner is the owner of a retail condominium unit (“Unit”) in the building located at 820

Second Avenue, New York, New York (“Building”). Tenant is a sophisticated entity who is a

party with Owner to written lease (“Original Lease”), dated October 28, 2003 as subsequently

amended pursuant to an Amendment of Lease, (“Amendment”), dated October 8, 2018, for a

portion of the ground floor storage space (hereinafter, the “Premises”), within the Unit at the

Building (hereinafter, the Original Lease and the Amendment are collectively referred to as the

“Lease”). The Lease is currently set to expire on February 28, 2029.

This straightforward action was necessitated by Tenant’s conceded refusal to pay rent due

under the Lease. Owner seeks summary judgment against the Tenant for monies that Tenant

acknowledges is owed under the agreement.

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Like many commercial tenants looking for a way to evade clear-cut lease obligations they

deem no longer financially advantageous during the recent COVID outbreak, in its Answer, Tenant

asserts a series of legally deficient affirmative defenses. Once the Court cuts through the maze of

irrelevant, single-line and boilerplate affirmative defenses, the Tenant’s defense to non-payment

of rent is principally grounded on the on the over-arching allegation that advent of the COVID-19

pandemic and compliance with government executive orders has frustrated the Lease’s purpose

and made it impossible to comply with the Lease.

There is no legal basis for Tenant to suspend its obligation to pay rent under this theory.

At the time Owner filed this action, although there were a consistent growing number of lower

court cases in New York uniformly rejecting the defenses of frustration of purpose and

impossibility, there were no reported First Department decisions on these defenses and their import

to commercial tenants whose businesses were financially disrupted during the pandemic. The

matter is no longer one of first impression in the First Department. In 558 Seventh Ave. Corp. v.

Times Square Photo Inc., 2021 N.Y. App. Div. LEXIS 3366, 2021 N.Y. Slip Op. 03244 (1st Dep’t

May 20, 2021) (“558”), the Appellate Division, First Department ruled on the applicability of the

defenses of frustration of purpose and impossibility invoked by Tenant here, finding that, as a

matter of law, these defenses are unavailable to relieve a commercial tenant from the payment of

rent during the COVID-19 pandemic. Thus, the law in this jurisdiction is now clear. Any claim

that the pandemic and compliance with the executive orders rendered compliance impossible or

impractical is a defense that is unavailable as a matter of law, particularly, where, as here, the

contract allocates the risk of an event to one of the parties.

In fact, the Lease, which was negotiated by sophisticated entities, expressly allocates the

risk of unforeseen government orders and other events outside the parties’ control to Tenant. In

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fact, critical to the disposition of this dispute, the Lease contains an express provision under which

Tenant is required to comply with all of its leasehold obligations even if government orders and

regulations prevent, substantially interfere with or delay Tenant’s ability to perform under the

Lease. The express language of the Lease, standing alone, forecloses any claim by Tenant that it

should be relieved of the obligation to pay rent due to the pandemic.

There are simply no legally recognizable defenses to the claims on which Owner seeks

summary judgment. As will be set forth more fully below, and also established in the

accompanying affidavit of Debra Boyle, duly sworn to on July 14, 2021 (“Moving Affidavit”),

given the plain language of the Lease, and the most recent decisions addressing the Tenant’s

defenses, nothing will permit Tenant to prevail on the unjustifiable positions it has taken.

Thus, the only question before this Court is a legal one, and that is whether Tenant may

ignore the plain language of the Lease or whether the Lease should be enforced according to its

terms. Since the case turns solely on contractual construction, it lends itself to summary judgment

as a matter of law.

RELEVANT FACTS

The relevant facts underlying this dispute are wholly undisputed and are fully set forth in

the Moving Affidavit. The following summary is provided for the convenience of the Court.

I. THE LEASE

On or about October 28, 2003 Owner’s predecessor-in-interest, as landlord, and Defendant,

as tenant, entered into the Original Lease, as subsequently amended pursuant to the Amendment,

dated October 8, 2018, for the Premises, within the Unit at the Building, as more particularly

described in the Original Lease. A copy of the Original Lease and Amendment are annexed to the

Moving Affidavit as Exhibit “A”.

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The Lease contains a number of material representations made by Tenant to ensure that in

the event of an uncontrollable incident or if extraordinary or unforeseen government regulations

were enacted that might interrupt Tenant’s business or cause hardship, these events would not,

under any circumstance, affect Tenant’s unconditional obligation to continue to pay rent.

For example, in Article 1, section D of the Original Lease, Tenant agreed to pay all rent

“without any set-off, offset, abatement or deduction whatsoever…”, See Moving Affidavit,

Original Lease, Exhibit “A”, Article 1, section D.

As is critical to this dispute, the parties recognized that a variety of events might occur,

including unforeseen government regulations, but Tenant specifically agreed that those events

would not relieve Tenant of any obligation to make payments of any monetary sums due under the

Lease. The Original Lease, at Article 26, provides:

26. INABILITY TO PERFORM. This Lease and obligation of Tenant to
pay Rent and additional rent hereunder and perform all of the other
covenants and agreements hereunder on the part of Tenant to be performed
shall in nowise be affected, impaired or excused because Landlord is
unable to fulfill any of its obligations under this Lease expressly or
impliedly to be performed by Landlord or because Landlord is unable to
make, or is delayed in making any repairs, additions, alterations,
improvements or decorations or is unable to supply or is delayed in
supplying any equipment or fixtures if Landlord is prevented or delayed
from so doing by reason of strikes or labor troubles or by accident or by
any cause whatsoever reasonably beyond Landlord's control, including but
not limited to, laws, governmental preemption in connection with a
National Emergency or by reason of any rule, order or regulation of any
federal, state, county or municipal authority or any department or
subdivision thereof or any government agency or by reason of the
conditions of supply and demand which have been or are affected by war
or other emergency or when, in the judgment of Landlord, temporary
interruption of such services is necessary by reason of accident,
mechanical breakdown, or to make repairs, alterations of improvements.

To put the terms embodied in the above provisions in their full, proper and only

perspective, the parties made it abundantly clear that, at the outset, they contemplated

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extraordinary government regulations and other unforeseen events outside of their control that may

impact Tenant’s obligations. And, the Lease provides that the risk associated with these events

would be allocated to Tenant. Under no circumstance does the Lease permit the Tenant to excuse

or suspend its obligation to pay rent because government regulations impacted or made its

operations impractical.

Furthermore, pursuant to the express terms of the Lease, Tenant is liable to Owner for any

and all reasonable costs and expenses incurred by Owner, in connection with Tenant’s defaults,

including, but not limited to, legal expenses and reasonable attorneys’ fees. See Moving Affidavit,

Original Lease, Exhibit “A”, at Article 18C.

II. TENANT’S REPUDIATION OF ITS PAYMENT OBLIGATIONS UNDER THE
LEASE

There is no dispute that Tenant has failed and refused to pay rent. At the time this action

was commenced, Tenant owed Owner, through June of 2020, the aggregate sum of $30,429.00 in

rent arrears, consisting of base rent. A copy of the Tenant ledger reflecting arrears through June

2020 is annexed to the Moving Affidavit as Exhibit “B”.

III. THE PLEADINGS

Having received no payment from Tenant, on or about June 8, 2020, Owner was compelled

to commence this action against Tenant seeking to recover all sums due under the Lease. A copy

of the Complaint is annexed to the Moving Affidavit as Exhibit “C”. In the Complaint, Owner

asserted the following causes of action: (i) in its First Cause of Action, Owner seeks judgment

against Tenant for rent and additional rent due through June 2020 in the sum of $30,429.00; and

(ii) in its Second Cause of Action, Owner seeks judgment against Tenant for attorneys’ fees and

costs incurred herein pursuant to the Lease, the exact amount to be determined at trial.

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Tenant interposed an Answer, a copy of which is annexed to the Moving Affidavit as

Exhibit “D”. In its Answer, Tenant interposes a host of fact-deficient affirmative defenses, none

of which are supported under the terms of the governing documents or well-established New York

law.

ARGUMENT

I. OWNER SHOULD BE AWARDED SUMMARY JUDGMENT
ON ALL OF THE CLAIMS ASSERTED IN THIS ACTION

Rule 3212 of the Civil Practice Law and Rules provides that a motion for summary

judgment “shall be granted if, upon all the papers and proof submitted, the cause of action or

defense shall be established sufficiently to warrant the court as a matter of law in directing

judgment in favor of any party.” CPLR 3212(b). In setting forth the standards for granting

summary judgment, pursuant to CPLR 3212, the Court of Appeals noted, in Alvarez v. Prospect

Hospital, 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 925-26 (1986), the following:

As we have stated frequently, the proponent of a summary judgment
motion must make a prima facie showing of entitlement to judgment
as a matter of law, tendering sufficient evidence to demonstrate the
absence of any material issues of fact. Failure to make such a prima
facie showing requires a denial of the motion, regardless of the
sufficiency of the opposing papers. Once this showing has been
made, however, the burden shifts to the party opposing the motion
for summary judgment to produce evidentiary proof in admissible
form sufficient to establish the existence of material issues of fact
which require a trial of the action [internal citations omitted].

There are no issues of fact in this case. The Court only needs to interpret the clear and

unambiguous terms of the Lease. It has long been the law in New York that Courts will enforce

contracts according to the plain meaning of its terms, especially in the context of real estate

transactions where commercial certainty is of paramount importance. As the Court of Appeals

articulated in the seminal case Vermont Teddy Bear Co, Inc. v. 538 Madison Realty Co., 1 N.Y.3d

470, 475, 775 N.Y.S.2d 765, 767 (2004):

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When interpreting contracts, we have repeatedly applied the
“familiar and eminently sensible proposition of law that when
parties set down their agreement in a clear, complete document, their
writing should...be enforced according to its terms.” We have also
emphasized this rule’s special import “in the context of real property
transactions, where commercial certainty is a paramount concern,
and where… the instrument was negotiated between sophisticated,
counseled business people negotiating at arm’s length.” (internal
citations omitted).

See also South Rd. Assocs., LLC v. Int’l Bus. Machs. Corp., 4 N.Y.3d 272, 277, 793 N.Y.S.835,

838 (2005) (“In cases of contract interpretation, it is well settled that when parties set down their

agreement in a clear, complete document, their writing should... be enforced according to its

terms”) (quotation marks and citations omitted). Where the terms of a written agreement are

clear and unambiguous, the intent of the parties must be found within the four-corners of the

contract. International Marine Inv’rs & Mgmt. Corp. v. Wirth, 245 A.D.2d 544, 545, 666

N.Y.S.2d 503, 504 (2d Dep’t 1997). Under well-recognized principles of contract construction,

the interpretation of an agreement and the issue of the parties’ obligations thereunder are solely

matters of law for the Court. Star Nissan, Inc. v. Frishwasser, 253 A.D.2d 491, 677 N.Y.S.2d

145 (2d Dep’t 1998) (question of the parties’ obligations under and the interpretation of various

terms of an agreement is a question of law for the court).

A. OWNER IS ENTITLED TO SUMMARY JUDGMENT
ON THE FIRST CAUSE OF ACTION

Pursuant to the Lease, Tenant agreed to absolutely and unconditionally pay base rent and

additional rent under the Lease “without any set-off, offset, abatement or deduction whatsoever

...” See Moving Affidavit, Original Lease, Exhibit “A”, Article 1, section D. Under New York

Law, this language constitutes an absolute waiver of defenses and mandates judgment in Owner’s

favor. See e.g. B. v. D. Co. v. Marine Midland Bank-N.Y., 60 A.D.2d 544, 400 N.Y.S.2d 63 (1st

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Dep’t 1977) (term of rent payment “without deduction or set-off” was a waiver of all defenses and

claims).

As a result of Tenant’s acknowledged, conceded and intentional defaults, Tenant owes the

sum of $30,429.00 in rent due through June 2020. See Tenant Ledger attached to Moving Affidavit

as Exhibit “B”.

B. OWNER IS ENTITLED TO SUMMARY JUDGMENT
ON THE SECOND CAUSE ACTION

For the same reasons, Tenant is liable for the reasonable attorneys’ fees and expenses

incurred by Owner in prosecuting this action, as demanded in the Second Cause of Action. The

Lease clearly and unambiguously requires Tenant to pay reasonable attorneys’ fees incurred by

Owner to enforce its rights under the Lease in the event that the Tenant is in default. In that regard,

it is well established under New York law that lease provisions providing for the recovery of

attorneys’ fees and expenses are valid and enforceable. See e.g., Livigne v. D’Agostino

Supermarkets, Inc., 207 A.D.2d 776, 777, 616 N.Y.S.2d 515, 516 (2d Dep’t 1994).

As such, Owner asks the Court to grant summary judgment declaring that Tenant is liable

to pay the attorneys’ fees and expenses incurred by Owner to prosecute this action and sever the

cause of action for a hearing to compute Owner’s damages.

II. TENANT’S BOILERPLATE AND UNSUPPORTABLE
AFFIRMATIVE DEFENSES MUST BE STRICKEN

In its Answer, Tenant interpose a litany of twenty-three (23) affirmative defenses, all of

which are without any factual support or legal foundation. See Moving Affidavit, Exhibit “C”. It

has long been held that conclusory and unsupported boilerplate defenses are insufficient to defeat

summary judgment. See, Verela v. Citrus Lake Dev., Inc., 53 A.D.3d 574, 575, 862 N.Y.S.2d 96,

97 (2d Dep’t 2009) (conclusory and unsupported assertions are insufficient to defeat a plaintiff’s

motion for summary judgment). Affirmative defenses pleaded as conclusions of law that are not

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supported by any facts are insufficient and must be dismissed. Moran Enters., Inc. v. Hurst, 96

A.D.3d 914, 947 N.Y.S.2d 538 (2d Dep’t 2012); Blenheim LLC v. Il Posto LLC, 14 Misc. 3d 735,

742, 827 N.Y.S.2d 620, 626 (Civ. Ct. N.Y. Cty. 2006). See also, Wolet Constr. Corp. v. 216-20

Beach 87th St. Co., 20 Misc. 3d 1126(A), 872 N.Y.S.2d 694 (Sup. Ct. Queens Cty. 2008)

(affirmative defenses dismissed as they were bereft of any factual detail).

Most of the duplicative affirmative defenses consist of a single sentence, none of which

allege any fact whatsoever in support of any individual defense. Thus, the first affirmative defense

(complaint barred due to Owner’s breach of unspecified obligations); the second affirmative

defense (losses were caused by unnamed other parties); the third affirmative defense (unclean

hands); the fourth affirmative defense (waiver); the fifth affirmative defense (unspecified wrongful

conduct of Plaintiff bars recovery); the sixth affirmative defense (failure to state a claim); the

seventh affirmative defense (statute of limitations); the eighth affirmative defense (breach of

agreements by Owner); the ninth affirmative defense (anticipatory repudiation); the tenth

affirmative defense (statute of frauds); the eleventh affirmative defense (Owner’s wrongful

conduct bars relief); the twelfth affirmative defense (failure of Owner to perform its own

obligations); the thirteenth affirmative defense (unspecified breach of covenant of good faith and

fair dealing); the fourteenth affirmative defense (accord and satisfaction); the fifteenth affirmative

defense (waiver, estoppel and/or ratification); the sixteenth affirmative defense (Tenant acted in a

reasonable manner); twentieth affirmative defense (Owner has not suffered any injury as a result

of Tenant’s conduct); twenty-first affirmative defense (the failure to mitigate damages)1; and

twenty-second affirmative defense (Owner’s claim are barred if it recovered from collateral

1
The defense that Owner’s failure to mitigate its damages somehow relieves Tenant of its responsibility to pay rent
due under the Lease is also flawed for the additional reason that a commercial landlord, like Owner, has no duty to
mitigate its damages as a matter of law. See Holy Props. Ltd, L.P. v. Kenneth Cole Prods., Inc. 87 N.Y.2d 130, 637
N.Y.S.2d 964 (1995).

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source); are all largely duplicative or irrelevant one-sentence legal theories bereft of any factual

support and must be summarily rejected.

The remaining affirmative defenses derive predominantly on the contention that because

the Covid-19 pandemic resulted in the government issuing executive orders that have allegedly

temporarily impacted Tenant’s ability to operate its premises, Tenant should be excused from the

payment of rent. In its Answer, Tenant seeks to justify its conceded non-payment of rent by

alleging, in one incarnation or another, that the enactment of the executive orders justifies Tenant’s

non-payment of rent under the doctrines of frustration of performance and impossibility and force

majeure. See Moving Affidavit, Exhibit “D”, Answer, seventeenth, eighteenth, nineteenth, and

twenty-third affirmative defenses.

III. THE COMMON LAW DOCTRINES OF FRUSTRATION OF PURPOSE AND
IMPOSSIBILITY PROVIDE NO GROUNDS FOR TENANT TO REPUDIATE
ITS CONTRACTUAL OBLIGATIONS

Tenant, a highly sophisticated entity, entered into a binding Lease whereby it expressly

acknowledged that even in the face of unforeseen and extraordinary government orders that

affected the Tenant’s use, Tenant remained obligated to pay all rent and other sums due. As such,

even if the Court accepts Tenant’s allegation that the executive orders for which Tenant was forced

to comply interfered with Tenant’s ability to operate, Tenant’s defenses under the doctrines of

“frustration of purpose” and “impossibility” and “force majeure” must fail.

The Courts in this State are now becoming well-acquainted with the kind of creative

defenses employed by commercial tenants seeking to do an end-run around the obligation to pay

rent under the doctrines of frustration of performance and impossibility. Those Courts that have

vetted these claims, including the First Department opinion in 558, supra, have consistently

rejected them. In fact, there is now a credibly developed body of COVID-19 cases, in which

Courts have made clear that commercial tenants, like Tenant, cannot avoid paying rent because of

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alleged COVID-19 related business shutdowns and downturns. As new decisions are issued, even

some from mere weeks ago, the Courts have adhered to this same rule of law.

Strikingly similar to the facts before this Court is a recent pronouncement on this issue in

the case of BKNY1, Inc. v. 132 Capulet Holdings, LLC, 2020 N.Y. Misc. LEXIS 9898, 2020 N.Y.

Slip Op. 33144(U) (Sup. Ct. Kings Cty. Sept. 23, 2020) (“BKNY1”), where a restaurant tenant

sought to be excused from the payment of rent because its inability to operate its commercial

restaurant as a result of COVID-19-related governmental restrictions frustrated the purpose of

the lease. As Tenant has done here, the tenant in BKNY1 relied on the common law concepts

of frustration of purpose and impossibility to relieve itself from the obligation to pay rent. The

BKNY1 court roundly rejected the claim that frustration of purpose served to discharge any

obligation, holding that “the frustrated purpose must be so completely the basis of the contract

that, as both parties understood, without it, the transaction would have made little sense.” Id.

at *3, 2020 N.Y. Slip Op. 33144(U), at 3 (quotation marks and citations omitted). The court

further noted that the initial term of the lease had not yet expired, and so even “a temporary

closure of plaintiff’s business…. could not have frustrated its overall purpose.” Id. at *3-4.,

2020 N.Y. Slip Op. 33144(U), at 3. See also, 558, supra (First Department holds that a

temporary store closure due to pandemic resulting in reduced revenues did not frustrate the

purpose of the Lease, nor render performance impossible).

Here, the principal theme that pervades Tenant’s defense to this action is that it should be

relieved of paying rent due to the executive orders that temporarily impacted Tenant’s ability to

operate its business at the Premises. However, even if Tenant’s performance was rendered

temporarily impracticable, as Tenant suggest, there is no legal basis for Tenant to be relieved of

any obligation under the Lease since New York does not recognize the defense of temporary

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commercial impracticability as a valid defense. See e.g., UBS Real Estate Sec., Inc. v. Gramercy

Park Land LLC, 2009 N.Y. Misc. LEXIS 6976, at *19-20, 2020 N.Y. Slip Op. 33464(U), at 14

(Sup. Ct. N.Y. Cty. Dec. 11, 2009) (recognizing that New York takes a “dim view of

‘impossibility’ defenses and have never suggested that when an impossibility defense does not

work a ‘temporary commercial impracticability’ defense might work better”. Court also notes that

to satisfy an impossiblity defense requires “more than a short-term inability to pay money”)

(citations omitted).

The court in BKNY1 also rejected the commercial tenant’s second argument, that it was

excused from paying rent based on the doctrine of impossibility of performance. See BKNY1,

2020 N.Y. Misc. LEXIS 9898, at *4, 2020 N.Y. Slip Op. 33144(U), at 4. Again, the court aptly

recognized that the doctrine did not apply where an unforeseen event merely renders

performance “burdensome,” absent “an express contingency clause” in the underlying contract

that excuses performance. This is now the modern prevailing view taken by the courts on this

issue. See 558, supra (First Department rejects defense of impossibility, where pandemic created

financial hardship and caused reduced revenues); See 1140 Broadway LLC v. Bold Food LLC,

2020 N.Y. Misc. LEXIS 10358, 2020 N.Y. Slip Op. 34017(U) (Sup. Ct. N.Y. Cty. Dec. 3, 2020)

(“1140 Broadway”) (Court rejects a commercial tenant’s invocation of the doctrines of

impossibility and frustration of purpose to excuse its non-payment of rent holding that even

accepting that government executive orders created hardship for the tenant to meet its financial

obligations was legally insufficient for those doctrines to apply); 35 E. 75th St. Corp. v. Christian

Louboutin, L.L.C., 2020 N.Y. Misc. LEXIS 10423, 2020 N.Y. Slip Op. 34063(U) (Sup. Ct. N.Y.

Cty. Dec. 9, 2020) (“35 E. 75th”) (in a commercial lease dispute, court rejects tenant’s defense

sounding in the doctrines of frustration of purpose and impossibility finding specifically that the

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effects of the pandemic are not a sufficient basis to avoid a contract or excuse payment, particularly

where the lease allocates the risk of loss to the tenant).

Most recently in Ten W. Thirty Third Assocs. v. A Classic Time Watch Co., 2021 N.Y.

Misc. LEXIS 1589; 2021 N.Y. Slip Op. 31137(U) (Sup. Ct. N.Y. Cty. Apr. 9, 2021) (Bluth, J.),

the Court in denying a motion to dismiss held that a commercial tenant/watch company, who

claimed that it could not pay rent because of the “horrible effects of the pandemic” and “shutdown”

of its business and sought to use the doctrines of frustration of purpose and impossibility of

performance as a defense, was required to pay rent. It held:

The Court recognizes that the pandemic has decimated
businesses around Manhattan and throughout the country. But that
does not mean that the Court can ignore defendants’ obligations.
The Court must also consider the rights of the other contracting
party, which must still maintain buildings and pay taxes even though
the Tenant has not paid rent for months…The point is that the Court
cannot just rip up a contract because a tenant faced financial
hardship due to the pandemic.

Id. at *4, 2021 N.Y. Slip Op. 31137(U), at 3-4 (emphasis added).

Similarly, in CAI Rail, Inc. v. Badger Mining Corp., 2021 U.S. Dist. LEXIS 32564

(S.D.N.Y. Feb. 22, 2021) (Cronan, J.) (“Badger”), the Court granted a landlord’s motion for

summary judgment for tenant’s breach of contract for failure to pay rent, holding that the landlord’s

claims are not barred by the doctrines of frustration of purpose or impossibility. In Badger, a

commercial tenant that leased rail cars, failed to pay its rent under its lease, claiming that “[t]he

onset of the COVID-19 pandemic and the enaction of stringent regulations... caused more than a

third of [the tenant’s] business to disappear virtually overnight.” Id. at *19 (internal quotations

omitted). The Court granted the landlord’s motion for summary judgment, holding, inter alia, that:

“[I]n New York, a party is not excused from a contract simply
because it becomes more economically difficult to
perform”....and “a change in market conditions or an increase in
the cost of performance are insufficient grounds to assert” New

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York’s frustration of purpose defense....“[W]here impossibility or
difficulty of performance is occasioned only by a financial
difficulty or economic hardship, even to the extent of insolvency
or bankruptcy, performance of a contract is not excused...[W]ere
the rules otherwise, they would place in jeopardy all commercial
contracts.” Id. at *22-23 (internal citations omitted) (emphasis
added).

Yet again, in Gap Inc. v. Ponte Gadea N.Y. LLC, 2021 U.S. Dist. LEXIS 42964 (S.D.N.Y,

Mar. 8, 2021) (Swain, J.), the Court granted the landlord’s motion for summary judgment on its

claim against the tenant for rent. In this case, Gap Inc., a tenant at a Manhattan location, claimed

that the “impact of the COVID-19 pandemic”, closure of two of its stores operating at the subject

premises, and “changes in the volume of foot traffic in the vicinity of the stores”, warranted Gap’s

release from its leasehold obligations, including the obligation to continue to pay rent. Gap alleged

frustration of purpose, among other defenses. The Court granted landlord’s motion for summary

judgment holding that, inter alia:

“It is not enough...that the transaction will be less profitable for an
affected party or even that the party will sustain a loss”, that “The
[New York] Court of Appeals explained that a defense to contract
performance such as impossibility should be applied narrowly and
only in extreme circumstances due in part to judicial recognition that
the purpose of contract law is to allocate risks.” (citations
omitted).... “Economic hardship, even to the extent of bankruptcy or
insolvency, does not excuse performance” under the doctrine of
impossibility (citation omitted), and stating that “The subject matter
of the contract-the physical location o

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