'Res Judicata' Precluded Tenant's Claim to Continue Operating

Facts: The owner of retail space sent a notice informing its tenant that it was in breach of the lease because it hadn’t installed a fire alarm system. The tenant refused to install a system, and the owner was fined by the city. The owner filed a petition with a court to evict the tenant. A judge ruled in favor of the owner in that declaratory judgment action.

The tenant later sued the owner, claiming that it had the right to stay in the space and the lease shouldn’t have been terminated. The owner asked a New York trial court to dismiss the claim because the judge’s decision in the declaratory action is “res judicata”—meaning the matter had already been decided and, therefore, couldn’t be relitigated—regarding the owner’s right to take back the space.

Decision: A New York trial court ruled in favor of the owner.

Reasoning: A matter may not, generally, be relitigated once it has been “judged on the merits.” The trial court noted that to invoke the doctrine of res judicata the owner would have to show that the critical issue in the current lawsuit was necessarily decided in the prior action and that the tenant had been afforded a “full and fair opportunity to contest that issue.”

The judge in the declaratory action indicated that she reviewed the parties’ depositions before concluding that the default notices were not “invalid.” She discussed the tenant’s acknowledgment that it received the notices and failed to act appropriately. The judge also stated that the tenant testified that it understood when it received the notice of default, that the problem was that it had to install a fire alarm and that it had to cure—that is, fix—this problem within a certain time period.

Because it was clear that the issues in the case previously had been determined by the judge, the trial court ruled in the owner’s favor. Thus, the tenant could be evicted from its space. 

• Granville Payne Retail, LLC v. PS Food Corp., May 2015