AEL Wins Appellate Victory for Hospital System

September 19, 2022 - David M. Eskew

AEL’s streak of successful appellate victories continues with our recent victory on behalf of clients Mount Sinai Health System (“MSHS”), South Nassau Communities Hospital (“SNCH”), and South Nassau Medical Group, P.C. (“SNMG”) in South Nassau v. 105 Rockaway Realty, LLC, a dispute regarding the terms of a lease for commercial office space in a building in the Rockaways in Queens. Scott R. Landau and Kenneth M. Abell represented MSHS, SNCH, and SNMG in this matter. 

In this case, the parties disputed whether SNMG owed any responsibilities under a lease given that an express condition precedent in the lease had not occurred. Specifically, the lease had expressly conditioned SNMG’s obligations thereunder on SNCH “obtaining, on terms acceptable to it,” an equity ownership in a certain Ambulatory Surgery Center (“ASC”) that was to be established in the same building. Though it was undisputed that the condition had not actually occurred, the landlord claimed that SNMG could not use the failure of the condition as a basis for “escaping” its obligations because satisfaction of the condition was within the control of its affiliate, SNCH. The landlord also asserted a claim against MSHS, which had later become the parent of SNCH, for tortious interference with contract, alleging that it had “directed” South Nassau not to invest in the ASC.

Given the plain and express language of the condition precedent, we moved for pre-discovery summary judgment seeking a declaration that SNMG did not have responsibilities under the lease because the condition precedent did not occur. Following the trial court’s granting summary judgment (and dismissing the landlord’s tortious interference claim against MSHS), the landlord appealed, arguing that there were open questions of fact regarding whether SNMG and SNCH had sufficiently negotiated to invest in the ASC, and that reversal and remand was accordingly required for discovery into whether they had violated the implied covenant of good faith and fair dealing implicit in the lease. 

On August 24, 2022, the Second Department rejected the landlord’s appeal and affirmed the trial court’s decisions. In so ruling, the Second Department agreed with our argument that the six (6) word condition precedent in the lease contemplated the exercise of discretion by SNCH/SNMG, and thus that that the obligations the landlord sought to imply into the lease were inconsistent with the actual terms of that agreement. The court thus held that the questions of fact raised by the landlord were not actually material, and that reversal and remand was thus not necessary because there was no dispute as to the actual material question at issue – whether or not the condition precedent had been met (it had not). The court also affirmed dismissal of the landlord’s tortious interference with contract claim against MSHS, for failure to raise a triable issue of fact that the lease had actually been breached. 

AEL are accomplished commercial and appellate counsel who have achieved victory for clients in myriad business litigations and disputes. We are proud to have obtained victories for our great clients MHSH, SNCH, and SNMG in this matter, and look forward to helping our clients achieve success in commercial disputes and appellate matters in the future. You can read more about our commercial litigation practice here.