Grunberg 77 LLC v. B.R. Guest Parent Holdings, LLC

Filing 83

OPINION re: 47 MOTION to Dismiss In Part The Second Amended Complaint. filed by 359 Columbus Avenue, L.L.C., B.R. Guest Parent Holdings, LLC. For the foregoing reasons, the Defendants' motion to dismiss is denied. It is so ordered. (Signed by Judge Robert W. Sweet on 11/5/2018) (rro)

UNITED STATES DI STRICT COURT
SOUTHERN DISTRICT OF NEW YORK

---- - -------------------- - - - -- -- ---x
GRUNB ERG 77 LLC ,
Pl a i nt i ff ,

17 Civ . 5627

- against -

(RWS)

OPINION

B.R . GUEST PARENT HOLDINGS , LLC ,
and 359 COLUMBUS AVENUE , L.L .C ,
(D/B/A ISABELLA' S)
Defendant s.
------------ --- ---- - ---------------- x
APPEARANCES:
At torneys for Pl aint if f
KEANE & BEANE
445 Hamilton Avenue , 15th Fl oor
White Pl ains , NY 10601
By : Edward J . Phillips

Attorneys f or Defendants
LAW OFFICES OF YANKWITT LLP
1 40 Grand Street , Su i te 501
White Plains , NY 10601
By:
Russell Marc Yankwitt , Esq .
Cra i g Matthew Cepler , Esq .

----'""Cr,J --====---- --- -.
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Sweet, D.J.

Defendants B.R. Guest Parent Holdings, LLC
("Guarantor" or "B.R. Guest") and 359 Columbus Avenue, LLC
("Tenant " )

(col le ctively , the "Defendants") have moved

pursuant to Fed. R. Civ . P. 12(b) (6) to dismiss in part the
Second Amended Comp laint ("SAC") o f Plaintiff Grunberg 77
LLC ("Plaintiff" or "Landlord"). Based on the conclusions
set forth below, the motion of the Defendants is denied.

I.

Prior Proceedings

This diversity action arises out of a lease dated
January 24, 2007 between Plaintiff's and Tenant's respective
predecessors-in-interest for the premises comprising the former
Isabella's restaurant at 359 Columbus Avenue, New York, New York
(the "Lease Agreement"). See Defs.' Ex. A. Defendant B.R. Guest
is a guarantor of Tenant's obligations under the Lease Agreement
pursuant to terms of a guarantee agreement (the "Guarantee").
See Defs.' Ex. B.

The SAC asserts claims for reimbursement of legal
fees, expenses and disbursements Plaintiff allegedly incurred in
defending two lawsuits brought by an Isabella's patron against
2

both Plaintiff and Tenant and alleging, inter alia, that the
premises' public entrance was not handicap accessible as
required by the Americans with Disabilities Act, as well as New
York State and City law (the "ADA Action"). SAC~~ 59-74.

On June 27, 2017, Plaintiff filed its initial
complaint in the Supreme Court of the State of New York, County
of New York . On July 24, 2017 , Defendants removed the case to
federal court on diversity grounds. On August 18, 2017 ,
Plaintiff filed its Amended Complaint . On April 26, 2018,
Plaintiff filed its SAC , which includes the claims addressed in
this motion in the Seventh and Eighth Causes of Action.

The motion to dismiss the Seventh and Eighth Causes of
Action in the SAC were heard and marked fully submitted on June
6 , 2018.

II.

Facts

a. The Lease Provisions

Under the terms of the Lease Agreement, Tenant, which
formerly operated the restaurant Isabella's at the demised

3

premises, was responsible for complying with all applicable laws
concerning its use and occupancy of the space.

For example, Paragraph 6 of the Lease Agreement
obligated Tenant, at its sole cost and expense, to:

"[P]romptly comply with all present and future laws,
orders and regulations of all state, federal,
municipal and local governments, departments,
commissions and boards .

with respect to the

demised premises building if arising out of Tenant's
use or manner of use of the premises, and with respect
to the portion of the sidewalk adjacent to the
premises .

whether or not arising out of Tenant's

use or manner of use thereof, or with respect to the
building if arising out of Tenant's use or manner of
use of the premises or the building (including the use
permitted under the lease)." Defs.' Ex. Ai 6.

Additionally, Paragraph 42(C) of the Lease Agreement
provided that any alterations to the premises undertaken by
Tenant "be done in compliance with .

. all applicable laws,

ordinances, directions, rules and regulations of governmental
authorities having jurisdiction, including, without limitation,

4

the Americans with Disabilities Act of 1990 and New York City
Local Law No. 57/87." Id. i 42(C).

The terms of the Lease Agreement also describe certain
maintenance obligations on the part of Tenant and Landl ord .

Paragraph 51 provided that Tenant would be responsible
for maintaining all exterior doors to the restaurant premises
"in good order and condition and repair," and stated that
"Tenant covenants and agrees that it will repair and replace
whenever necessary, at its own cost and expense, all exterior
doors leading to the Premises, and fittings appurtenant thereto,
including front door assemblies, jambs, transoms, checks and
hardware." Id. i 51.

Under Paragraph 49(0), Grunberg's maintenance
obligations were as follows:

"Landlord shall, at its sole cost and expense,
maintain and repair the roof, the common and public
areas and structural portions of the Building and all
Building systems and equipment which are not
exclusively serving the Premises and which are located
outside of the Premises." Id. i 49(0).
5

The Lease Agreement likewise set out a defense and
indemnity provision in favor of Grunberg. Paragraph 8 of the
Lease Agreement stated in relevant part:

"Tenant shall indemnify and save harmless Owner
against and from all liabilities, obligations,
damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance,
including reasonable attorney's fees,

suffered or

incurred as a result of any breach by Tenant .
any covenant or condition of this lease." Id.

of
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8.

Paragraph 8 of the Lease Agreement further provided
that:

"[I]n case any action or proceeding is brought against
Owner by reason of any such claim, Tenant, upon
written notice from Owner, will, at Tenant's expense,
resist or defend such action or proceeding by counsel
approved by Owner in writing, such approval not to be
unreasonably withheld." Id.

6

Defendant B.R. Guest's responsibilities are described
in the Guarantee, which stated in relevant part as follows:

"[Guarantor], acting as surety hereby absolutely and
unconditionally, for itself and its legal
representatives, successors and assigns, guarantees to
Owner and to its legal representatives, successors,
and assigns, the prompt and full performance and
observance by the Tenant and by its legal
representatives, entities, successors and assigns of
Tenant's obligation to pay rent, additional rent and
any charges (or damages in lieu thereof) and the
performance of all other obligations of Tenant
accruing under the Lease." Defs.' Ex. Bi 1.

The Guarantee also provided for a "Guarantee Period,"
which limited the Guarantor's obligations as follows:

"Notwithstanding anything contained herein to the
contrary, the Guarantor's aforesaid obligations shall
be limited to the period [of] time from the
commencement date of the Lease until such time as
possession of the Premises is delivered to Owner
vacant, free of all occupants and in the condition
7

required under the Lease as if such date were the date
originally set for the expiration of the term thereof
(the "Guarantee Period") without regard to any rent
acceleration provisions under the Lease, provided that
Tenant delivers to Owner written notice of its
intention to vacate the Premises at least sixty (60)
days prior to its delivery of possession to Owner in
the manner described above

. In the event that

Tenant fails to so deliver the aforementioned notice,
then this guarantee shall be for the full performance
of the Lease throughout the term thereof from the
commencement date of the Lease through the sixtieth
(60th) day following delivery of the Premises to Owner
vacant and free of all defaults and occupants in the
condition required in the lease." Id.

With respect to Tenant's surrender of the premises
within the Guarantee Period, Paragraph 60 of the Lease Agreement
stated in relevant part:

"Tenant hereby indemnifies and saves Owner harmless
from and against any and all claims, costs, losses and
liabilities resulting from any delay by Tenant
whatsoever in timely surrendering possession of the

8

Premises in compliance with all of the terms,
covenants and conditions of this Lease

Tenant

acknowledges and agrees that the damage to Owner as a
result of any such failure by Tenant will be
significant and will exceed the monthly installment of
fixed annual rent and additional rent previously
payable under this Lease , and will likely be incapable
of accurate measurement. As a consequence thereof,
Tenant agrees that in the event of such failure by
Tenant as set forth at length above, at the option of
Owner in li eu of the indemnity set forth above, Tenant
shall pay to Owner as liquidated damages for each
calendar month and for each portion thereof after the
expiration or sooner termination of the term of this
Lease until such time as Tenant surrendered to Owner
possession of the Premises in compliance with all of
the terms, covenants and conditions of this Lease, a
sum equal to two (2) times the average monthly
installment of fixed annual rent and additional rent
payable under this Lease during the last month of the
term hereof. The provisions of this Paragraph shall
survive the expiration or sooner termination of the
term of this Lease." Defs.' Ex. Ai 60 .

9

Thus, Paragraph 60 of the Lease Agreement stated that,
upon the termination of the Lease either pursuant to the
expiration of its term or Tenant's earlier surrender of
possession, Tenant was obligated to surrender the demised
premises "in compliance with all of the terms, covenants and
condit i ons of this Lease." Id.

b. Related Actions

On March 13, 2015 , an action was filed against
Grunberg and Tenant in the Southern District of New York. See
Thomas v. Grunberg 77 LLC and 359 Columbus Avenue, LLC, 15 Civ .
1925 (GBD)

("Thomas I").

The complaint in Thomas I alleged that

a designated whee l chair entrance to the restaurant serviced by a
portable wheelchair ramp, power-actuated door, and accessibility
signage (the "Wheelchair Entrance") had been bolted shut and
rendered inoperable . Defs.' Ex. D

~~

1-2. The Thomas I complaint

also alleged that numerous interior features of the restaurant
violated ADA requirements with respect to aisle widths, seating
and standing spaces, maneuvering spaces and other physical
constraints. Id.

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26 .

Upon receipt of the Thomas I complaint, Grunberg
demanded that Tenant (i) cure any unlawfu l condition relating to
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the Wheelchair Entrance; and (ii) defend and indemnify Grunberg,
as required under the Lease Agreement. Pl.'s Ex. 3 ,

~

16. In

response, Tenant proposed that its counsel jointly defend both
itself and Grunberg. Id.

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20. Grunberg declined Tenant's offer

of joint legal representation and advised Tenant that the
parties had conflicting interests insofar as responding to the
Thomas I lawsuit.

Id.

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21.

Tenant contended the door to the Wheelchair Entran ce
was outs ide of the demised premises, and within the exclusive
control of Landlord, because the terms of the Lease restricted
Tenant to making "nonstructural interior alterations" that are
"i n the Premises" and that "do not affect the Building
structure," among other things.

Id.

~

37. While Tenant denied

having conducted any construction work on the Wheelchair
Entrance, Tenant admitted to making improvements to it. Id.

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33 - 34. Specifically, Tenant acknowledged that it attempted to
improve the accessibility of the Wheelchair Entrance by
purchasing a portable ramp and installing an automatic door
opener , buzzer, and accessible signage. Id. Tenant likewise
conceded that the Wheelchair Entrance exclusively served the
restaurant premises, and that the residential portion of the
bui lding could not be accessed through any portion of the
restaurant premises. Id.

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36 .
11

During discovery in Thomas I , Grunberg learned that an
organization known as the Disability Rights Advocates

("ORA")

had threatened to bring litigation against Tenant in 2011 based
upon DRA's contention that the Wheelchair Entrance did not
comply with applicable legal requirements regarding access for
disabled individuals. Id.

~~

38-39. In response to the DRA's

threat, Tenant retained, at its sole cost and expense, an
architectural firm called Metzger/Metzger Associates

("M&M ") to

design a permanent wheelchair ramp for the restaurant.

Id. 1 40.

M&M generated at least four different architectural plans
depicting alternative locations and designs for a permanent
wheelchair ramp at the restaurant premises.

Id. 1 43. Tenant

proposed to Grunberg the only design that Tenant felt was
feasible.

Id. 1 47. This plan showed a permanent ramp running in

an easterly direction towards the main doorway for the
residential portion of the building.

Id. 1 47-48. In requesting

Grunberg's approval of this plan, Tenant advised Grunberg:

"These drawings show the ramp construct i on we are
proposed to build in order to comply , in part, with
the requirement for the Americans with Disabilities
Act of 2010." Id.

~

49.

12

Grunberg rejected Tenant's plan out of concern that it
would have created ingress/egress conflicts with the entrance to
the residential portion of the building, and it encouraged
Tenant to develop alternative design options.

Id.

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50-51.

However, Tenant never pursued any alternative ramp designs with
Grunberg and instead continued t o utilize a temporary ramp at
the Wheelchair Entran ce . Id.

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52.

Tenant never requested that Grunberg pay for any
portion of a permanent wheelchair ramp installation at the
restaurant.

Id.

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41. Grunberg claims that it did not learn

about DRA's communications with Tenant concerning the Wheelchair
Entrance until Tenant produced emails and correspondence between
ORA and Fox Ro thschild, LLP during discovery in Thomas I.

Id.

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45.

In Thomas I, motions were filed relating to the
plaintiff's claims alleging ADA violations on the interior of
its former restaurant. During oral argument on those motions,
Tenant's counse l, Ernest E. Badway, stated the following:

"[W]e're not disputing the fact that we would defend
[Grunberg]. We're not running away from that .
[J]ust so the record is clear , we're also not running
13

away from the fact that my client, the tenant
Isabella's, is responsible for the interior of the
premises . No one is running away from that." Pl.'s Ex.
4.

On July 28, 2017 , District Judge Daniels dismissed
Thomas I without prejudice for lack of subject matter

jurisdiction, as the plaintiff ' s ADA claim had become moot once
Tenant vacated the demised premises and its restaurant was
permanently closed. Defs .' Ex. C .

Concurrently with the Thomas I litigation, Grunberg
and Tenant were addressing a number of Tenant's open work
permits and a violation that had been lodged against the
property by the New York City Landmarks Preservation Commission
(the "LPC Violation") . Pl.'s Ex. 1 i

14 . The pendency of the LPC

Violation and open permits caused the New York City Department
of Buildings to block Grunberg from obtaining any building
permits to perform new work on the residential floors of its
building. Id. i 77.

By Notice to Cure, dated February 2, 20 1 7, Grunberg
demanded that Tenant cure its defaults under the Lease,
including, but not limited to , the LPC Violation . Id. i i 13-14.
14

When Tenant failed to cure its defaults, Grunberg terminated the
Lease effective as of March 24 , 2017 . Id.

~~

15 -1 6 . Grunberg

then commenced a summary holdover proceeding in Civil Court , New
York County , to remove Tenant from possession of the premises
and recover damages. See Grunberg 77 LLC v. 359 Columbus Avenue,

LLC (L&T Index No . 59134/17)

(the "Holdover Proceeding").

On June 27, 2017 , Grunberg commenced an action in the
Supreme Court , New York County, seeking damages against B.R.
Guest as guarantor under the Lease. See Notice of Removal Ex. A.
Guarantor removed the action to this Court . See Notice of
Removal. Grunberg subsequently filed an Amended Complaint that
named Tenant as an additional defendant. See 0kt. No. 12.

On October 26, 2017 , the plaintiff in Thomas I filed a
new action against Grunberg, Tenant and Guarantor in the Supreme
Court , New York County , alleging claims under the New York State
Human Rights Law and New York City Administrative Code. See

Thomas v . Grunberg 77 LLC, B.R. Guest Holdings LLC and 359
Columbus Avenue, LLC, 159556/2017 ("Thomas II"). Defs.' Ex. E.
The complaint in Thomas II chal lenged the accessibility of
Tenant's restaurant on multiple grounds and alleged, among other
things, the following:

15

(1)

"Numerous architectural barriers existed at
defendants' place of public accommodation that
prevented and/or restricted access to plaintiff,
a person with a disability." Id. ! 17.

(2)

"Plaintiff desired to access the entire
Isabella's premises but was deterred from doing
so due to architectural barriers." Id. ! 20.

(3)

"The services, features,

elements and spaces of

defendants' place of public accommodation were
not readily accessible to, or usable by plaintiff
as required by the Administrative Code§ 27-292

et seq." Id. ! 21.
(4)

"Because of defendants'

failure to comply with

the above-mentioned laws, including but not
limited [to] the Administrative Code, plaintiff
was unable to enjoy safe, equal and complete
access to defendants' place of public
accommodation." Id. ! 22.

The Thomas II action was still pending at the time the
instant motion was filed.

Phillips Deel. in Opp., ECF No. 45, at

13.

III.

The Applicable Standard
16

On a Rule 12(b) (6) motion to dismiss, all factual
allegations in the complaint are accepted as true and all
inferences are drawn in favor of the pleader. Mills v. Polar
Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). To survive a

Rule 12(b) (6) motion to dismiss, the complaint must contain
"sufficient factual matter, accepted as true, to 'state a claim
to relief that is plausible on its face.'" Ashcroft v.
556 U.S. 662, 663 (2009)

Iqbal,

(quoting Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007)). A claim is facially plausible when
"the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for
the misconduct alleged." Iqbal, 556 U.S. at 663
Twombly,

(quoting

550 U.S. at 556). Put differently, the factual

allegations must "possess enough heft to show that the pleader
is entitled to relief." Twombly,

550 U.S. at 557

(internal

quotation marks omitted).

While "a plaintiff may plead facts alleged upon
information and belief 'where the belief is based on factual
information that makes the inference of culpability plausible,'
such allegations must be 'accompanied by a statement of the
facts upon which the belief is founded.'" Munoz-Nagel v. Guess,
Inc., No. 12 Civ. 1312 (ER), 2013 WL 1809772, at *3

17

(S.D.N.Y.

Apr. 30, 2013)

(quoting Arista Records, LLC v. Doe 3, 604 F.3d

110, 120 (2d Cir. 2010)). However, the pleadings "must contain
something more than

a statement of facts that merely

creates a suspicion [of] a legally cognizable right of action."
Twombly,

550 U.S. at 555 (citation and internal quotation

omitted).

In resolving a motion to dismiss, courts may consider
not only the documents attached to the complaint as an exhibit
or incorporated in it by reference, but also documents that were
"integral to the plaintiff's claim," so long as the plaintiff
had notice of their contents. Cosmas v. Hassett,

886 F.2d 8, 13

(2d Cir. 1989).

IV.

The Motion to Dismiss is Denied

The Seventh and Eighth Causes of Actions in the SAC
seek reimbursement of the attorney's fees, expenses and
disbursements that Grunberg incurred in Thomas I and the
Holdover Proceeding, and which Grunberg has incurred and
continues to incur in Thomas II. Such relief is sought against
Tenant in the Seventh Cause of Action, and against Guarantor in
the Eighth Cause of Action. In addition, Grunberg's Seventh and
Eighth Causes of Action seek reimbursement of its attorney's
18

fees,

expenses and disbursements incurred in the instant action

as against Tenant and Guarantor, respectively.

Defendants contend that Grunberg was solely
responsible for ensuring that a public entrance to Tenant's
former restaurant was ADA compliant, and that Grunberg is not
entitled to recover its attorney's fees,

expenses and

disbursements incurred in defending Thomas I and Thomas II.
Defendants likewise contend that Guarantor cannot be held liable
under the terms of the Guarantee for Grunberg's attorney's fees,
expenses and disbursements incurred in Thomas II because those
costs were incurred after the Guarantee Period had terminated.
Defendants' motion does not purport to challenge Grunberg's
entitlement to seek recovery of its reasonable attorney ' s fees,
expenses and disbursements incurred in the Holdover Proceeding
or the instant action.

However , under Paragraphs 6 and 51 of the Lease
Agreement, Tenant had the contractual obligat i on to ensure that
its former restaurant was wheelchair accessible. Paragraph 6 of
the Lease Agreement obligated Tenant to comply with "all present
and future laws

. with respect to the building if arising

out of Tenant's use or manner of use of the premises or the
building (including the use permitted under the lease)." Defs.'
19

Ex. A! 6. Under Paragraph 51 of the Lease Agreement, Tenant was
responsible for maintaining all exterior doors to the restaurant
premises "in good order and condition and repair." Id. ! 51.
Paragraph 51 also stated that "Tenant covenant[ed] and agree[d]
that it [would] repair and replace whenever necessary, at its
own cost and expense, all exterior doors leading to the
Premises, and fittings appurtenant thereto, including front door
assemblies,

jambs, transoms, checks and hardware." Id. These

provisions establish that the exterior doors to Tenant's former
restaurant were part of its leasehold and within its possession
and control.

Furthermore, under Paragraph 42(C) of the Lease
Agreement, Tenant was responsible for ensuring that "[a]ll
alterations" at the premises complied with "all applicable laws
. including, but without limitation, the Americans with
Disabilities Act of 1990." Defs.' Ex. A ! 42. In Thomas I,
Tenant admitted to having "made improvements .

. to increase

[the] accessibility [of the Wheelchair Entrance] by purchasing a
portable ramp and installing an automatic door opener, buzzer
and accessible signage." Pl.'s Ex. 3 ! 32.

Finally, Paragraph 8 of the Lease Agreement contains a
defense and indemnity provision, which provided in relevant part
20

that "Tenant shall indemnify and save harmless Owner against and
from all liabilities [ .
of any breach by Tenant [ .

] suffered o r incurred as a result
. ] of any covenant or condition

of this lease." Defs.' Ex. A! 8. Paragraph 8 further stated
that "in case any action or proceeding is brought against Owner
by reason of any such claim, Tenant upon written notice from
Owner , will , at Tenant's expense, resist or defend such action
or proceeding by counsel approved by Owner." Id.

In support of their motion to dismiss, Defendants
focus on Paragraph 49(0) of the Lease Agreement, which addresses
Grunberg's obligation to maintain the building's roof and other
common areas, systems and equipment. That paragraph stated, in
~

relevant part:

"Landl ord shall, at its sole cost and expense,
maintain and repair the roof, the common and public
areas and structural portions of the Building and all
Building systems and equipment which are not
exclusi ve ly serving the Premises and which are lo c ated
outside of the Premises." Id. ! 49(0).

21

The Wheelchair Entrance is not the roof, a building
system, or building equipment, and it served Tenant's former
restaurant, rather than a common area of the building.

Based on these provisions of the Lease Agreement, the
SAC pleads a viable claim against Tenant for reimbursement of
Grunberg's reasonable attorney's fees, expenses and
disbursements incurred in connection with Thomas I and Thomas
II.

In addition, the SAC pleads a viable claim against
Guarantor for reimbursement of Grunberg's reasonable attorney's
fees, expenses and disbursements incurred in connection with
Th omas I and Thomas II.

Pursuant to the terms of the Guarantee, Guarantor's
obligations could terminate only when "possession of the
Premises [was] delivered to Owner vacant, free of all occupants
and in the condition required under the Lease as if such date
were the date originally set for the expiration of the term
thereof." Defs.' Ex. B.

~

1. The Lease Agreement required Tenant

to deliver possession of the premises "in compliance with all of
the terms, covenants and conditions of th[e] Lease." Defs.' Ex.
A~ 60. The SAC alleges that Tenant surrendered the premises to
22

Grunberg with uncured lease defaults, including the LPC
Violation . SAC~ 15. As such, Guarantor's obligations under the
Guarantee remained in effect after Tenant's surrender on May 30,
2017.

Guarantor also remained liable under the Guarantee
after Tenant's surrender of the premises on May 30, 2017 because
Tenant did not provide Grunberg with 60 days' notice of its
intention to vacate the premises in the condition required under
the Lease Agreement . The SAC alleges that Tenant gave notice of
its intention to surrender on April 13, 2017 , but actually
vacated the premises on May 30 , 2017 . SAC~ 21-22 . The Guarantee
provides that Guarantor remains liable "for the full performance
of the Lease throughout the term thereof from the commencement
date of the Lease through the sixtieth (60th) day following
delivery of the Premises to Owner vacant and free of all
defaults and occupants in the condition required in the Lease."
Defs.' Ex. 1

~

1.

Furthermore, guaranties "are commonly understood to
apply to obligations which accrue prior to the surrender of the
lease premises, and this obligation , once accrued, persists even
after surrender of the premises." Russo v. Heller , 80 A.D.3d
531, 531-32

(2011)

(citations omitted)
23

Consequently, even if

Guarantor's obligation under the Guarantee terminated upon
Tenant ' s surrender of the premises on May 30, 2017, Guarantor
would still be liable for the claims asserted in Thomas II ,
which are predicated upon Tenant's use and occupancy of the
premises prior to its surrender.

V.

Conclusion

For the foregoing reasons, the Defendants' motion to
dismiss is denied.

It is s o ordered .

New York, NY
November ) ' 2018

24