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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: September 28, 2019

Tenant Could Not Bring and Then Consolidate Two Actions to Avoid No Counterclaims Provision in Lease

On September 20, 2019, Justice Borrok of the New York County Commercial Division issued a decision in W.J. Enterprise, Inc. v. Nomad 28th St. LLC, 2019 NY Slip Op. 32761(U), holding that a tenant could not bring and then consolidate two actions to avoid a no counterclaims provision in a lease, explaining:

WJ argues that, by commencing the Second Action rather than asserting its claim as a counterclaim in the First action, Nomad is attempting an end run of the discovery process, and urges this court to consolidate the two actions. Nomad argues that the parties’ Lease precludes consolidation because it contains no set-off and waiver of counterclaims provisions that should not be circumvented by the consolidation of the two lawsuits.

Specifically, section 2(C) of the Lease provides:

Tenant shall pay all Fixed Rent and Additional Rent due hereunder … in advance, in equal monthly installments on the first day of every month, without any prior notice, demand, off-set, deduction or abatement whatsoever

Section 20(N) provides:

If Landlord commences any summary proceeding for nonpayment of rent, Tenant will not interpose any non-mandatory counterclaim of whatever nature or description in any such proceeding

Nomad argues that WJ is attempting to consolidate the Second Action with the [First Action] in an effort to, in effect, off-set its obligation to pay rent to Landlord in (violation of§ 2(C) of the Lease) and to interpose an unrelated counterclaim against Landlord in response to its claim for unpaid rent (in violation of§ 20(N) of the Lease). Generally, consolidation of two related actions would be appropriate where they involve the same parties and common questions of law and/or fact, and the latter filed action would be consolidated into the first filed action. However, where a lease contains a waiver of counterclaim provision, such provision may not be circumvented by consolidating the landlord’s summary proceeding with the Supreme Court action. Waiver of counterclaim provisions in a lease are enforceable and, where the parties have agreed to such waiver in a lease, they are bound by its terms. For the avoidance of doubt, and as discussed on the record, to the extent that the issues in this proceeding are materially related to the Second Action, WJ may always move for a stay of the Second Action in Part 52.

(Internal quotations and citations omitted).

We frequently litigate disputes over the sale or leasing of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.

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