Blinds To Go (U.S.) Inc. v. Times Plaza Dev.

Decision Date18 October 2011
Citation88 A.D.3d 838,2011 N.Y. Slip Op. 07390,931 N.Y.S.2d 105
PartiesBLINDS TO GO (U.S.), INC., respondent,v.TIMES PLAZA DEVELOPMENT, L.P., appellant.
CourtNew York Supreme Court — Appellate Division

OPINION TEXT STARTS HERE

Kenneth J. Glassman, New York, N.Y., for appellant.Westerman Ball Ederer Miller & Sharfstein, LLP, Mineola, N.Y. (Richard Gabriele of counsel), for respondent.WILLIAM F. MASTRO, J.P., CHERYL E. CHAMBERS, LEONARD B. AUSTIN, and JEFFREY A. COHEN, JJ.

In an action to recover damages for breach of a lease, the defendant appeals from a judgment of the Supreme Court, Kings County (F. Rivera, J.), dated October 7, 2010, which, upon a jury verdict, is in favor of the plaintiff and against it in the principal sum of $4,172,734.35.

ORDERED that the judgment is reversed, on the facts and in the exercise of discretion, with costs, and a new trial is granted on the issue of damages only. The findings of fact on the issue of liability are affirmed.

On February 21, 2001, the plaintiff tenant (hereinafter the tenant) and the defendant landlord (hereinafter the landlord) entered into a lease of certain premises in Brooklyn for a period of 10 years, renewable for 2 additional 5–year periods, for the purpose of operating a retail store selling custom-made window blinds. The lease contained a provision that if the tenant closed its business on the property for a period of three months or more, the landlord could elect to “recapture” the premises and rent it to another entity.

By September 2003 the tenant had not opened for business or commenced construction to open for business. By letter dated September 25, 2003, the landlord elected to terminate the lease pursuant to the “recapture” provision. The tenant commenced the instant action challenging the landlord's termination of the lease. By order dated April 2, 2004, the Supreme Court granted the landlord's motion pursuant to CPLR 3211 to dismiss the complaint. The tenant surrendered the keys and possession of the premises to the landlord. By decision and order dated June 20, 2005, this Court reversed the order dated April 2, 2004, on the ground that, since the tenant never commenced any business operations at the premises, the recapture provision was inapplicable ( see Blinds to Go, Inc. v. Times Plaza Dev., L.P., 19 A.D.3d 524, 797 N.Y.S.2d 529).

In September 2010 the case proceeded to trial before a jury on the issues of whether the landlord breached the lease and, if so, whether the tenant sustained damages as a result of the breach. The jury found that the landlord breached the lease and that the tenant sustained damages in the principal sums of $16,666.66 for the loss of its security deposit, $16,666.66 for loss of rent and taxes paid for one month, $13,395.03 for the loss of fees, costs, and expenses paid in connection with preparing the store to open, and $3,751,006 for lost profits. In addition, the Supreme Court awarded the tenant $375,000 in legal fees upon a stipulation between the parties that if the verdict were sustained on appeal, $375,000 was a reasonable amount of legal fees pursuant to a provision of the lease which provided that the prevailing party was entitled to legal fees reasonably incurred.

On appeal, the landlord does not challenge the jury's finding that it breached the lease. Although there is no evidence of an actual eviction of the tenant from the premises, the tenant may be entitled to damages resulting from a constructive eviction, which occurs when a tenant relinquishes possession as a result of the landlord's breach of the lease, depriving the tenant of the beneficial use and enjoyment of the premises ( see Barash v. Pennsylvania Term. Real Estate Corp., 26 N.Y.2d 77, 83, 308 N.Y.S.2d 649, 256 N.E.2d 707; P.W.B. Enters. v. Moklam Enters., 243 A.D.2d 350, 663 N.Y.S.2d 163).

The landlord contends that the jury verdict on the issue of damages for lost profits is not supported by legally sufficient evidence. The landlord's contention, however, is unpreserved for appellate review, since it did not raise the issue of damages for lost profits when it moved for judgment as a matter of law at the close of the tenant's case ( see Olchovy v. L.M.V. Leasing, 182 A.D.2d 745, 746, 582 N.Y.S.2d 764). Nevertheless, the weight of the evidence presented at trial on the issue of damages for lost profits does not support the jury verdict ( see Lolik v. Big V Supermarkets, 86 N.Y.2d 744, 746, 631 N.Y.S.2d 122, 655 N.E.2d 163; Nicastro v. Park, 113 A.D.2d 129, 132–133, 495 N.Y.S.2d 184). Lost profits may be recoverable for breach of a contract if it is demonstrated with certainty that such damages have been caused by the breach, and the alleged loss is capable of proof with reasonable certainty. There also must be a showing that the particular damages were fairly within the contemplation of the parties to the contract at the time the contract was made ( see Kenford Co. v. County of Erie, 67 N.Y.2d 257, 260, 502 N.Y.S.2d 131, 493 N.E.2d 234). In the case of a “new business,” there generally “does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty” ( id. at 261, 502 N.Y.S.2d 131, 493 N.E.2d 234). However, there is no per se rule barring new enterprises from recovering lost profits, so long as lost profits may be established with reasonable certainty ( see Cifone v. City of Poughkeepsie, 234 A.D.2d 331, 650 N.Y.S.2d 797; see also Staten Is. N.Y. CVS, Inc. v. Gordon Retail Dev., LLC, 57 A.D.3d 760, 870 N.Y.S.2d 74).

The tenant notes that its business, which sells custom-made window blinds directly to the retail customer, was part of a chain. It...

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