Paramount Leasehold, L.P., vs. 43 rd Street Deli, Inc., d/b/a Bella Vita Pizzeria

Rosenberg & Estis successfully represented the plaintiff, Paramount Leasehold, L.P., in obtaining summary judgment against defendant 43 rd Street Deli, Inc. d/b/a Bella Vita Pizzeria on a claim for unpaid percentage rent and interest for a period of approximately six years, totaling nearly $420,000, due to Paramount under its lease with the Pizzeria. At issue was a provision in the Pizzeria’s lease providing for payment of a percentage rent equal to 10 percent of the amount by which the tenant exceeded its sales margins.

The Pizzeria’s lease required the Pizzeria to self-report the amount of income it received each month. The lease also provided that there would be no oral modification or waiver of the terms of the lease, and that any waiver or modification must be in writing.

Because the tenant failed to pay a percentage rent or report any earnings, and then refused to allow Paramount to conduct an audit of the Pizzeria’s gross sales records in accordance with the lease, Paramount commenced suit and moved contemporaneously for a preliminary injunction that prevented the tenant from destroying relevant books and records. In response to a subpoena from Paramount, the tenant’s accountants turned over copies of tax returns from December 1, 2004 through November 30, 2010, and it was determined from those returns that the amount of percentage rent owed under the lease for those years was $263,114.55 before interest. Paramount then moved for summary judgment in that amount, plus interest. The Pizzeria opposed the motion, arguing that it did not pay a percentage rent over the years, or self-report its earnings, because the landlord had orally waived the requirement.

The Court noted that “a nonbreaching party should not have to litigate the issue based only on the breaching party’s unsupported and uncorroborated representation that it orally waived a provision. This is the very reason why many contracts require waivers to be in writing. Such a bald representation is all tenant presents here.”

The Court also noted that had the tenant provided the landlord with the required reporting or cooperated with an audit that the landlord had requested, the Pizzeria could have opened the doors to negotiation. Because the Pizzeria did not report its earnings or allow the audit, Paramount was then entitled to conduct its own audit under the terms of the lease.

The Court granted Rosenberg & Estis‘ motion for summary judgment, allowing Paramount to proceed with the entry of a money judgment against the Pizzeria, for the percentage rent and interest owed, totaling nearly $420,000.

(Supreme Court, Appellate Division, First Department, Decided 02/23/16)
(Rosenberg & Estis, P.C. Team: Norman Flitt)