The opinion of the court was delivered by: VICTOR MARRERO, District Judge
In this diversity action, plaintiffs Michael and Frank Ring (the
"Rings") leased commercial space (the "Premises") to defendant HearMe.
Defendant GameSpy Industries, Inc. ("GameSpy") purchased a large portion
of HearMe's assets, including the business conducted at the Premises.
HearMe attempted to assign its lease to GameSpy, but the Rings resisted.
GameSpy eventually vacated the Premises before the end of the lease term.
The Rings move the court for partial summary judgment and argue that
either HearMe or GameSpy owes them the unpaid rent through the end of the
lease term. HearMe and GameSpy, also moving for summary judgment, point
the finger at one another as to who is bound by the lease, but they agree
that no rent is due beyond the time period during which GameSpy's
business occupied the Premises. Partially resolving all three motions for
summary judgment, the Court concludes that, although the Rings did not
waive their right
to withhold consent to assignment of the lease, the Rings
unreasonably withheld that consent, in violation of the lease. The Court
will determine the remedy for such breach by later submissions, or at
In June 1999, HearMe (then known as Mpath Interactive, Inc.) leased the
Premises, comprising commercial space on 23rd Street in Manhattan, from
the Rings for a five-year term (the "Lease"). In January 2001, GameSpy
purchased certain HearMe assets, including the internet gaming media
business HearMe conducted at the Premises. GameSpy did not alter in any
way the business on the Premises the same employees conducted the
same business as before, except under new ownership. Later that month,
HearMe wrote a letter to the Rings purporting to assign its lease to
GameSpy. The Rings responded with a letter notifying HearMe that it
considered the purported assignment to violate the Lease. The letter also
requested that HearMe provide the Rings certain financial information
The Lease requires the Rings' consent to any assignment, and it permits
the Rings to cancel the Lease altogether within
60 days of any assignment request. However, the Lease states that,
if the Rings have not cancelled within the 60-day window, and if the
tenant provides the name and reasonable financial information of the
proposed assignee, the Rings may not unreasonably withhold their consent
to the assignment.*fn2
In the following months, the Rings attempted to negotiate an
independent lease with GameSpy for a higher monthly rent, instead of an
assignment. HearMe continued to pay rent for February, March and April
2001. GameSpy also tendered rent checks for those same months, as well as
for May and June 2001, but the Rings never cashed GameSpy's checks.
Negotiations for a new lease with GameSpy were not successful, and at
some point in the summer of 2001, Frank Ring went to the Premises and,
allegedly in loud, abusive language, told GameSpy employees that they had
no right to occupy the Premises, and that their rent checks (which the
Rings had not
cashed) were insufficient. In August 2001, the Rings wrote a letter
to GameSpy stating that they would accept the checks tendered, "under
protest and without prejudice to [their] rights." Ring Aff. Ex. H. The
letter stated that the payments would be accepted only "as use and
occupancy for the premises," not as the basis for a landlord-tenant
relationship. Id. The letter suggested that the Rings would
initiate eviction proceedings, unless the parties could agree on a
suitable lease agreement. Id.
GameSpy vacated the Premises one week later and stopped payment on the
rent checks it had tendered to the Rings. The Rings assert that, despite
their best efforts, they have not been able to re-lease the Premises.
II. STANDARD FOR A SUMMARY
The Court may grant summary judgment only "if the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c). The Court must first look to
the substantive law of the action to determine which facts are material;
"[o]nly disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of summary
judgment." Anderson v. Liberty
Lobby, Inc., 477 U.S. 242
, 248 (1986). Even if the
parties dispute material facts, summary judgment will be granted unless
the dispute is "genuine.'" Id. at 249. "The mere existence of
a scintilla of evidence in support of the [non-moving party's] position
will be insufficient; there must be evidence on which the jury could
reasonably find for the [non-moving party]." Id. at 252.
Throughout this inquiry, the Court must view the evidence in the light
most favorable to the non-moving party and must draw all reasonable
inferences in favor of that party. See Hanson v. McCaw Cellular
Communications, Inc., 77 F.3d 663, 667 (2d Cir. 1996).
All three summary judgment motions depend, at least in part, upon
whether HearMe's purported assignment of the Lease to GameSpy was valid.
The Lease requires that the Rings consent to any assignment, and it is
undisputed that they did not formally do so. HearMe first argues that the
Rings waived their right to withhold consent because their actions
accepting rent from HearMe and GameSpy and permitting GameSpy to
remain on the Premises for over five months amounted to a waiver
of the Rings' right to withhold consent. The Court disagrees.
Under New York law, waiver occurs where there "is an
intentional abandonment or relinquishment of a known right or
advantage which, but for such waiver, the party would have enjoyed."
Alsens American Portland Cement Works v. Degnon Contracting
Co., 118 N.E. 210 (N.Y. 1917). Waiver is "essentially a matter of
intention." Id. When a landlord accepts rent from a tenant
while knowing of a lease violation which would otherwise permit the
landlord to terminate the tenancy, New York courts normally deem the
violation waived. See, e.g., Woollard v. Schaffer Stores Co.,
5 N.E.2d 829, 832 (N.Y. 1936). The "primary reason" for such a rule is the
inconsistency inherent in the landlord's treating the tenant as both a
tenant (in accepting rent) and as a trespasser (in maintaining the right
to terminate the tenancy). See Jefpaul Garage Corp. v. Presbyterian
Hosp., 462 N.E.2d 1176, 1178 (N.Y. 1984).
However, a waiver may not be inferred from the landlord's acceptance of
rent when, by the terms of a lease's "no-waiver" clause, the parties
"have expressly agreed otherwise." Id. In other words, "the
parties to a commercial lease may mutually agree that conduct, which
might otherwise give rise to an inference of waiver, shall not be deemed
a waiver of specific bargained for provisions of a lease." Excel
Graphics Technologies, Inc. v. CFG/AGSCB 75 Ninth Ave., L.L.C.,
767 N.Y.S.2d 99, 103 (App. Div. 1st Dep't 2003). Allowing an
inference of waiver under such circumstances would effectively
render meaningless a part of the lease. Id.
In this case, the parties agreed to a no-waiver clause in the Lease,
The receipt by Owner of rent with knowledge of the
breach of any covenant of this lease shall not be
deemed a waiver of such breach and no provision of
this lease shall be deemed to have been waived by
Owner unless such waiver be in writing signed by
Owner. . . . Acceptance by Owner of rent from
anyone other than Tenant shall not be deemed
. . . as a consent by Owner to an assignment
. . . to such payor. . . .
Ring Aff. Ex E at 48. By the unambiguous terms of this no-waiver
provision, the Court will not construe the Rings' acceptance ...