Landy Sues, New SLA Rules, More PPP?

Originally Published : July 16, 2020


When art and love and passion and all the beautiful human traits and pursuits are banished from the soul and replaced with the cold, empty, calculating reach for money and power and ego, you get…..Landy.  As expected, Landy filed a lawsuit in federal court challenging 1932A.  He had to because it threatens all of those things that Landy cares about and it calls into question her very existence.  For without the money and the power, Landy sees himself as less than.  Man, Landy needs a therapist! So much insecurity and self loathing. Ultimately, a sad story.  For now, screw Landy and his “poor me” posturing.

You see, Landy’s Lawyers found some very sympathetic plaintiffs and filled their papers with heartwarming portrayals of Landy as hard working, rags to riches, salt of the earth do-gooders whose retirement savings and, indeed very lives, are in peril due to the fact that they can’t collect rent from restaurants. Now, I’m sure this is true in many cases and we feel for those true mom and pop Landys who share our boat, but guess what?  They are also the ones that are being reasonable and negotiating with us and working out deals and you know, being human. This battle is not about them though. It’s about the soulless, nasty Landys that control most of the retail spaces in our city. 

Odd how these three, struggling, small property owner plaintiffs made their way to the super connected, high powered and very expensive law firm, Patterson Belknap.  Gee, I wonder if any other industry Landys are involved here and who the heck is footing the bill?   Anyway Landy Lawyers, your crappy complaint ain’t gonna fly and you are going to lose your case and you and Landy then can sue each other over your failures and unpaid bills.

Here is a recap of Landy’s position:

1- The 1932A  Guaranty Law is unconstitutional because it does not allow landy to harass tenant’s for past due amounts (1st Amendment) and because the government has no right to mess with their private agreements (contracts clause).

2 – The City Council and Mayor have no authority to enact the emergency law as that authority sits with Governor Cuomo only.

That’s about it.  The court will have to decide if the city did have the right to enact 1932A and if it did, was the law needed for an emergency purpose. The lawyers for the City will file a response next and off we go through the winding road of litigation.

The Complaint is filled with all kinds of hyperbole, drama and misdirection.  Some highlights:

– Referring to the suite of laws enacted by the Mayor –  “Three local laws, which the City of New York rushed to passage, however, are poised to make that situation worse, by running roughshod over vital and fundamental rights guaranteed to all Americans by the U.S. Constitution.”

– “They sweep too broadly, sometimes benefitting well-capitalized tenants who need no relief, while leaving many small property owners, like Plaintiffs, struggling to get by.”  – The ol’ fliparoo.  Now, it’s Landy who needs the relief, not restaurants.

– “Stripped of their ability to collect rental income, and with tax bills and mortgage payments quickly mounting, Plaintiffs are threatened with being left unable to reap the benefits of the livelihood they built from the ground up”. Welcome to the club.

– More bad business owners that are not paying rent include – “Well-capitalized, nationwide retailers seeking to re-negotiate or forego rent payments; and retailers, restaurants and bars that are fortunate to be backed by wealthy individuals or otherwise have the means to pay their rent.”  We will have a field day with this argument.

 – Some rando stats – “a major commercial landlord reported that a number of their commercial tenants who are financially sound with resources to pay rent have decided not to pay rent at all.”

 – “Without money to pay their property tax bills, many property owners are in jeopardy of losing their properties. Notwithstanding the financial distress in which a substantial number of property owners find themselves, many, including Plaintiffs, are doing what they can to assist distressed tenants under similar financial stress.”  Poor Landy!

– To show that this law is unfair – “…Council Member Justin Brannan spotlighted his “concerns that [the Guaranty Bill] may end up helping Louis Vuitton as much it helps Lousie[’s] [P]izza.”  Hilarious.

 – w/r/t guarantys – “Without these guaranties, the underlying leases would be rendered virtually worthless”. Just not true.

Of course, the plaintiff’s conveniently fail to mention that Landy is holding on to a lot of security deposit that they can use to mitigate damages and they can relet the spaces etc…  

We are also starting to lobby Governor Cuomo to issue and Executive Order ratifying the City law.   It would strengthen our case so much and give us that much more confidence moving forward.  Stay tuned.

So, how might this play out? (it’s a little wonky but we have to know what’s coming).

Here is Lee Jacobs, here is how the timeline breaks down:

While federal litigations follow a strict schedule, such schedules can be changed by agreement between the parties or by judge’s approval.  This is what we know and what we can expect.  In short, the timeline to solution is unfortunately not short, and that doesn’t take into account any decreased court operations or suspension of deadlines due to further outbreaks of COVID-19.

The federal lawsuit, entitled Melendez et al v. The City Of New York, et al, Case No.: 1:20-cv-05301, before the Hon. Gregory Woods in the Southern District of New York was filed on July 10, 2020.  The Defendants, including the City of New York and Mayor Bill DeBlasio, were served with the Complaint today (July 16, 2020).  This means unless any extensions are granted, the City of New York must respond to the Complaint within 21 days (i.e. August 6, 2020).  

The City can respond to this challenge in one of two ways.  It can file its answer and proceed to fight this challenge through a normal litigation calendar—typically 9 to 12 months to come to conclusion.  However, should the City choose to challenge this lawsuit immediately, it can file a Pre-Answer Motion to Dismiss seeking to dismiss the suit in its entirety.  Should the City choose to file this motion, it generally takes 3 months for the motion to be fully briefed (meaning written and submitted) and argued before the judge.   And if the City loses the motion, the case would then most likely be placed on a general litigation calendar.  

Regardless of the track the City picks, or how the Court rules, either side (the City or the Landlords) can challenge the ruling and seek to have it overturned through an appeal to a higher court.  So in short, while it may seem that a decision may be coming in the relatively near future, there are no guarantees that it will be a “final” decision.  

Said differently, while we hope that 1932-A remains a valid law, there are many avenues for it to be challenged. Until all of those challenges are exhausted, or the statute of limitations on when a landlord can sue a personal guarantor expires (6 years from now); personal guarantors to a lease may have to look over their shoulders for the foreseeable future, unless they come to a negotiated mutually agreed upon surrender and release of their premises.   

More PPP?

We are watching Congress as they come back next week.  It seems Queen McBee and Speaker P. have some negotiating to do as they both are feeling pressure to get more relief to small businesses.  Will it be the 120 Billion Dollar Restaurants Act or more PPP?  It’s anyone’s guess but we expect something to pop within the next 3 weeks or so.  

New SLA Rules

Oh, and Governor Cuomo dropped some bombs today, so here is Mr. Levey with his take:

Joey Regs Says:

I don’t know about you guys, but I’m excited for the 2020 baseball season to finally begin next week.  Sure, it will be a bit bizarre, 60-game season and minimal or no fans, but it’s better than nothing.  Apparently our Governor is a big baseball fan as well.  Today he formally announced his new policy called “Three strikes and you’re…closed.”

Cuomo has been warning us for weeks about this and some operators just refuse to listen.  He said no street parties; no Mardi Gras.  And he meant it.  If this persists, we’ll likely all pay the price.  Andrew is serious about COVID- 19, and even more serious about keeping our numbers down.  And I can’t blame him, honestly.  The best shot we have at getting back to a life that even somewhat resembles the one we all had in February, is to be smart, be vigilant and follow the guidelines to keep this thing from spreading.

Cuomo is fed up with operators running their businesses in an irresponsible manner, so he’s standing by with his hammer.  He’s got various agencies out there, actively inspecting hospitality businesses, and they’re looking specifically for violations of social distancing guidelines/ COVID-19 non-compliance.  Depending on which agency nabs you, the fines can vary, BUT they all eventually get referred to the NY State Liquor Authority.  And their schedule is roughly this:

First Offense: $1,500 – $2,500
Second Offense: $6,000 – $7,500
Third Offense: $15,000+suspension or revocation

In other words, there are penalties to pay for not listening, and they get steeper with each offense.  Three strikes, and your business is closed.  Now, does this mean that you always get your three strikes, like America’s pastime? Nope.  Egregious violations can result in immediate loss of liquor license or closure well before a third strike. Additionally, any establishment facing disciplinary charges by the State Liquor Authority will have its name and location posted publicly and updated on a weekly basis. This is serious, folks.  Please let’s all be smart out there.  If we’re not, he’ll start taking more shit away too.  Oh, what a perfect segue…

The Governor had some more good news in today’s presser.  All restaurants and bars statewide will now be subject to some fun new requirements-notably that they must now only serve alcohol to people who are ordering and eating food and that all service at bar tops must only be for seated patrons who are socially distanced by six feet or separated by physical barriers. Also, there is to be no walk-up bar service.

If you think that any of this is a coincidence, think again.  If our numbers go up or people stop paying attention, the Gov will be standing by with a hammer every single time.  Let’s not make this any harder on ourselves than it already is and let’s be safe and responsible out there.  We’re hardly out of the woods yet, and Cuomo is gonna keep reminding us of that fact.

RIP – K -Pauls and Odessa – Heartbreaking.