Commercial Landlords May Employ A Strategy That Prevents Commercial Tenants From Exercising Yellowstone Rights
 
Recently, an appellate court decided that commercial landlords may employ a strategy that prevents commercial tenants from exercising Yellowstone rights. In 159 MP Corp. v. Redbridge Bedford, No. 2015-01523, 2018 N.Y. App. Div. LEXIS 557 (2d Dept. Jan. 31, 2018), the Court upheld a contractual lease waiver of the right to bring a declaratory judgment action as enforceable and not violative of public policy. The court determined that by waiving the right to bring a declaratory judgment, the tenants also waived their right to bring a motion for a Yellowstone injunction. The court rejected tenant's argument that the waiver violated public policy.

The court explained "[n]ot only is the freedom to contract constitutionally protected, but federal and New York courts have recognized that the autonomy of parties to contract is itself a sacred and protected public policy that should not be interfered with lightly." Id. at 16 (emphasis in original). "To hold that the waiver of declaratory judgment remedies in contractual leases between sophisticated parties is unenforceable as a matter of public policy does violence to the notion that the parties are free to negotiate and fashion their contracts with terms to which they freely and voluntarily bind themselves." Id. at 20.

"Declaratory and Yellowstone remedies are rights private to the plaintiffs that they could freely, voluntarily, and knowingly waive." Id. at 21.  Unless a contrary result is reached in the Court of Appeals, such waivers could begin to become routine in commercial leases. The Court's decision raises important considerations for the tenant.  The Court's decision will certainly result in the widespread use of the waiver language employed by the landlord in this case. 
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