Court Opinion

ID: 5741339
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:42:11.322247+00
Date Added: 2024-06-11T08:41:04.622158
License: Public Domain

McGuire, J. (dissenting).
A provision of the lease between defendant landlord Solow Building Company II, L.L.C. (SBC) and Montgomery Securities, the predecessor in interest to plaintiff tenant Banc of America Securities LLC (BAS), obligates BAS not to make any alterations to the premises without SBC’s prior consent; SBC is obligated not to unreasonably withhold its consent and to approve or disapprove any proposed alteration within 10 business days of its receipt of BAS’ final plans and specifications. Paragraph (E) of article 35 of the lease provides in relevant part as follows:
“Except as hereafter provided in this paragraph, *251Tenant hereby waives any claim against Landlord which Tenant may have based upon any assertion that Landlord has unreasonably withheld or unreasonably delayed any consent requested by Tenant, and Tenant agrees that its sole remedy shall be an action or proceeding . . . for specific performance, injunction or declaratory judgment or an arbitration proceeding as and to the extent permitted by Article [41] hereof. In the event of such determination, the requested consent shall be deemed to have been granted; however, Landlord shall have no liability to Tenant for its refusal or failure to give such consent. Tenant’s sole remedy for Landlord’s unreasonably withholding or delaying consent shall be as provided in this Section [sic] E.”
Article 41 provides that “[i]f there is a dispute ... as to the reasonableness of Landlord’s refusal to consent to any Alteration . . . , Tenant may, at its option . . . submit such dispute to arbitration . . . under the Expedited Procedures provisions of the Commercial Arbitration Rules of the American Arbitration Association.” Consistent with the provisions of article 35 (E), article 41 specifies that:
“Landlord and Tenant agree that (i) the arbitrators may not award or recommend any damages to be paid by either party, (ii) in no event shall either party be liable for, nor be entitled to recover, any damages, and (iii) Tenant’s sole remedy arising out of such arbitrator’s decision shall be the right to . . . proceed on the basis that the requested approval [in] relation to such Alteration had been granted.”
BAS’ fourth cause of action seeks money damages for SBC’s alleged breaches of its contractual obligation to approve or disapprove in a timely fashion numerous alterations to the premises proposed by BAS. In moving for partial summary judgment dismissing this cause of action, SBC contended that the provisions of article 35 (E) limiting BAS’ remedies for such a breach to “an action or proceeding . . . for specific performance, injunction or declaratory judgment or an arbitration proceeding” barred BAS’ claim for money damages. In its opposition, BAS relied on Kalisch-Jarcho, Inc. v City of New York (58 NY2d 377 [1983]) and other decisions holding that an exculpatory clause of a contract will not relieve a party of liability for willful *252or grossly negligent acts. According to BAS, the repeated failure of SBC to perform its obligation to act on alteration proposals in a timely manner was part of an effort to “extort” $6 million from BAS. Although the lease requires BAS, upon substantial completion of any alteration, to pay SBC an amount equal to the “actual out-of-pocket expenses reasonably incurred” by SBC in connection with the alteration, SBC demanded that BAS pay a $6 million “review fee” above and beyond amounts already paid to SBC for such out-of-pocket expenses. Specifically, SBC claimed it was entitled to a review fee of 3% of BAS’ total construction costs for all the alterations BAS had made (since the inception of the lease) and was preparing to make, costs that amounted to an estimated $200 million. BAS maintained that SBC committed intentional and malicious misconduct tantamount to extortion by demanding the review fee, contemporaneously breaching its obligation to act on BAS’ alteration proposals in a timely manner and serving default notices on BAS for not paying the review fee.
In ruling on SBC’s motion for partial summary judgment, Supreme Court was not persuaded by SBC’s contention that as a matter of law its conduct was not such as would prevent enforcement of the contractual provision barring a claim for money damages. Noting that SBC relied on this Court’s decision in Metropolitan Life Ins. Co. v Noble Lowndes Intl. (192 AD2d 83 [1993], affd 84 NY2d 430 [1994]), Supreme Court stated that SBC “correctly asserts that a party’s deliberate abandonment of a contract in pursuit of its pecuniary interest fails to rise to the level of malicious or bad faith conduct necessary to avoid an otherwise applicable exculpatory clause” (2005 NY Slip Op 30143[U], *8). Nonetheless, Supreme Court distinguished Noble Lowndes Inti, on the ground that this Court had concluded “only after a full trial . . . that the conduct in question was not intentionally malicious or in bad faith as a matter of law” (id.). As Supreme Court also noted, “[c]ourts have repeatedly held that whether a party’s conduct was malicious, grossly negligent, or in bad faith is a question for the trier of fact” (id. at *9).
I disagree with Supreme Court and conclude that SBC’s motion for partial summary judgment dismissing the fourth cause of action should have been granted. As Supreme Court implicitly recognized, if the review fee demanded by SBC is supported by a plausible reading of the lease, BAS could not establish the kind of misconduct “smack[ing] of intentional wrongdoing” (Kalisch-Jarcho, 58 NY2d at 385) that would vitiate a limitation *253of liability provision in a commercial contract. But even if the review fee were not so supported, it would not follow that this level of misconduct would be established. To the contrary, to the extent that, as BAS maintains, the review fee is without any plausible basis in the lease, SBC’s demand for it is not likely to have intimidated a sophisticated party like BAS. Indeed, notwithstanding BAS’ references to the “extortionary” character of SBC’s demand, a demand so unsupported by the lease would instill derision rather than fear. An obvious popgun is not much of a threat or the weapon of choice for extortionists.
Although the review fee appears to be without any plausible support in the text of the lease, I need not decide the issue because I conclude, as a matter of law, that SBC’s conduct did not rise to the level of the misconduct, “smack[ing] of intentional wrongdoing” (Kalisch-Jarcho, 58 NY2d at 385), that would warrant disregarding a contractual exculpatory clause." In Noble Lowndes Inti, we rejected a similar claim of economic duress. There, we stressed that the Court of Appeals had held that a party threatened with a breach of contract unless it agreed to a higher price did not establish economic duress simply by proof of the wrongful threat not to perform. Rather, “ ‘[i]t must also appear that the threatened party could not obtain the goods from another source of supply and that the ordinary remedy of an action for breach of contract would not be adequate’ ” (Noble Lowndes Intl., 192 AD2d at 92, quoting Austin Instrument v Loral Corp., 29 NY2d 124, 130-131 [1971]). Here, BAS cannot show that SBC’s threat to terminate the lease unless it paid the review fee left it with no legal recourse. Under the lease, BAS was entitled either to bring an action for “specific performance, injunction or declaratory judgment” or to avail itself of the right to expedited arbitration proceedings. Even assuming that SBC was “acutely aware of how anxious” BAS was to have its alteration proposals approved, BAS wholly failed to show the inadequacy of the very remedies it agreed to in the lease.
*254As the Court of Appeals held in Noble Lowndes Intl., moreover, a refusal to perform a contractual obligation that is “motivated exclusively by [the nonperforming party’s] own economic self-interest” is not conduct that will vitiate an agreed-upon limitation of liability (84 NY2d at 439). BAS seeks to distinguish Noble Lowndes Inti, on the ground that “SBC’s conduct, unlike that of the defendant in Noble Lowndes Inti., had the specific and purposeful intention of causing BAS harm—the inability to use leased space which it knew BAS badly needed in its business—in the hope it would force BAS to pay SBC’s demanded ransom.” To the extent this argument rests on the claim of extortion, it is unavailing for the reasons stated above. Nor can BAS avoid the holding of Noble Lowndes Inti, by claiming that SBC acted with “the specific and purposeful intention of causing BAS harm.” Such an intent could be posited whenever a party to a contract acts to advance its economic self-interest at the expense of the other party. As BAS concedes, SBC’s ultimate goal was to advance its own economic self-interest. SBC should not be deprived of the agreed-upon limitation on liability merely because it may have acted with another motivation (cf. Matter of Pamilla v Hospital for Special Surgery, 223 AD2d 508, 509 [1996] [upholding dismissal of cause of action for tortious interference with prospective economic advantage because defendants’ actions “were at least partially motivated by their own self-interest”]).
Because BAS failed to adduce any facts from which misconduct by SBC “smack[ing] of intentional wrongdoing” (Kalisch-Jarcho, 58 NY2d at 385) could be found by the trier of fact (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]), Supreme Court should not have denied defendant’s motion for partial summary judgment on the ground that “whether a party’s conduct was malicious, grossly negligent, or in bad faith is a question of fact for the trier of fact.” Finally, BAS’ claim that SBC’s conduct constituted an abandonment of the lease is without merit (Kalisch-Jarcho, 58 NY2d at 386 n 8).
Accordingly, I would reverse and grant SBC’s motion for partial summary judgment dismissing the fourth cause of action for money damages based on SBC’s alleged breach of contract in failing to approve or disapprove in a timely and reasonable fashion BAS’ various proposed alterations to the leased space.
*255Marlow and Gonzalez, JJ., concur with Tom, J.P.; Saxe and McGuire, JJ., dissent in a separate opinion by McGuire, J.
Order, Supreme Court, New York County, entered July 29, 2005, affirmed, without costs.

 SBC argues that enforcement of the contractual clauses at issue in Kalisch-Jarcho and Corinno Civetta Constr. Corp. v City of New York (67 NY2d 297 [1986]) would have left the parties aggrieved by a breach “with no remedy whatsoever.” Because enforcement of the provisions of the lease barring a claim against SBC for money damages on account of any failure or refusal to give its consent would not leave BAS without a remedy, SBC contends as well that this provision would be enforceable even if BAS could make the showing required by Kalisch-Jarcho. Although BAS’ other remedies under the lease are relevant to its claim of extortion, I need not and do not address this broader contention.