Atlantic Hgts. Specialty Script Corp. v. Downstate at LICH Holding Co., Inc., Index No. 507208/2015, 03/28/16 (Demarest, J.)

RPAPL §713(7); CPLR 3211(c); Breach of Contract; Collateral Estoppel; Good Faith and Fair Dealing; Preliminary Injunction.

By: Madeline Collins | Staff Writer

Plaintiff acquired a retail pharmacy from Long Island College Hospital (“LICH”) pursuant to an Asset Purchase Agreement (“the Agreement”). Upon the closing of the Agreement, Plaintiff and LICH entered into two additional agreements: (1) a License Agreement for Plaintiff to occupy property on Henry Street and (2) a Lease Agreement for Plaintiff to occupy rentable property in “the Fuller Pavilion,” on Hicks Street. Later, LICH conveyed its interest in the properties to Defendant, who subsequently entered into an agreement to purchase both properties for residential use with Defendant Fortis. The agreement required both properties to be delivered vacant. In order to comply with its agreement with Defendant Fortis, Defendant Downstate issued a 30-day notice of termination to Plaintiff pursuant to the License Agreement. Plaintiff, however, did not comply with the 30-day notice.

Defendant Downstate commenced a summary holdover proceeding seeking to evict Plaintiff from the Henry Street property and to recover possession of the Hicks Street property occupied by Plaintiff’s pharmacy. Citing the license agreement, the court found in favor of Defendant Downstate.

In response to the court’s judgment, Plaintiff commenced the instant action seeking a declaratory judgment that Defendants breached the Lease and License Agreement. Plaintiff alleged multiple claims including breach of contract, breach of good faith and fair dealing, frustration of purpose, and tortious interference with a contractual relationship. Plaintiff argued that Defendants’ conduct was illegal. In opposition, Defendants moved to dismiss all seven of plaintiff’s causes of action pursuant to CPLR 3211 on the bases of collateral estoppel and failure to state a cause of action, arguing that some of Plaintiff’s claims had already been litigated in prior proceedings, and that Plaintiff’s other claims did not state a claim for which relief can be granted.

Ultimately, the court granted both Defendants’ motions to dismiss all claims except the breach of contract claim. First, the court held that collateral estoppel does not preclude litigation of a ruling made as an alternative basis for the lower court’s decision. The doctrine of collateral estoppel bars causes of action from being re-litigated when those causes of action were already addressed and adjudicated in a prior action. Here, collateral estoppel did not bar Plaintiff from bringing the breach of contract claim in regards to the Hicks Street property. Similarly, the Court cited the doctrine of collateral estoppel when it dismissed Plaintiff’s claims of breach of good faith and fair dealing and breach of contract in regards to the Henry Street property. Indeed, in a prior action, both causes of action were litigated. Thus, the court granted Defendants’ motions as to this point.

Second, Plaintiff’s breach of contract and frustration of purpose claim against Defendant Downstate was found to be indistinguishable from Plaintiff’s breach of contract claim in regards to the Hicks Street property, and therefore, was dismissed as duplicative thereof. Third, the court also dismissed Plaintiff’s cause of action for tortious interference with a contractual relationship against Defendant Fortis. A claim for tortious interference with contract requires the existence of a valid contract between the plaintiff and a third party, defendant’s knowledge of that contract, defendant’s intentional procurement of the third party’s breach of the contract without justification, actual breach of the contract, and damages resulting therefrom. Here, the court found that Defendant Fortis did not intentionally procure Defendant Downstate’s breach of the contract with Plaintiff without justification.

Atlantic Hgts. Specialty Script Corp. v. Downstate at LICH Holding Co., Inc., Index No. 507208/2015, 03/28/16 (Demarest, J.)

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