605 Fifth Property Owner, LLC v. Abasic, S.A.

Background

605 Fifth Property Owner, LLC sued Abasic, S.A. to enforce an unconditional guarantee. Under that guarantee, Abasic agreed to guarantee the obligations of its subsidiary, NTS W. USA Corp., under a commercial lease. NTS had planned to operate a retail outlet at the leased property, but it was unable to operate profitably during the COVID-19 pandemic and later filed for bankruptcy without making rental payments.

During the bankruptcy case, NTS rejected the lease and sought to avoid its lease obligations. The Bankruptcy Court ruled against NTS, and the District Court affirmed that ruling. That decision was on appeal to the Second Circuit when this opinion was issued.

In an earlier round of this dispute, Owner sued Abasic to enforce the same guarantee. The court granted Owner summary judgment, ruling that the guarantee was enforceable, had not been discharged during NTS’s bankruptcy, and was not defeated by Abasic’s other defenses. Final judgment was entered for Owner, and that judgment was on appeal.

Owner filed this action seeking damages that accrued under the guarantee after it filed its summary-judgment motion in the earlier round. Abasic asserted the same defenses it had previously asserted. In opposing Owner’s motion, however, Abasic argued only that this case should be stayed while its appeal of the earlier judgment was resolved. Abasic did not dispute its liability under the guarantee or Owner’s damages calculation.

Stay

The court denied Abasic’s request to stay the case. A stay pauses court proceedings, and the party requesting one bears the burden of showing that it is needed. The court applied the factors generally used to decide whether to stay proceedings involving related litigation, rather than the separate test used for staying an order pending appeal.

The court found that Owner had an interest in promptly recovering money owed under the guarantee. Abasic, by contrast, had shown an interest in delaying the case but had not shown that a stay was otherwise justified. The court also found that judicial efficiency favored deciding the case promptly and that the public interest favored efficient enforcement of unconditional guarantees.

Amendment

The court granted Owner’s request to treat its complaint as amended. The amendment added rent that became payable after the complaint was filed. Because the earlier litigation had already placed Abasic on notice of its continuing liability under the guarantee, and Abasic identified no prejudice from the amendment, the court deemed the complaint amended to allege $1,254,729.07 in unpaid rent.

Summary Judgment

Summary judgment is a decision without a trial when there is no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law. The court held that the prior judgment controlled this action under claim preclusion and issue preclusion. Claim preclusion prevents parties from relitigating claims that were or could have been raised in an earlier case. Issue preclusion prevents relitigation of legal or factual issues that were actually decided and necessary to an earlier judgment.

The court found that the two actions involved the same parties, guarantee, claims, and defenses. It also explained that the earlier judgment had preclusive effect even while an appeal was pending. In addition, the court stated that the reasoning of the earlier summary-judgment decision would require the same result even without giving that judgment preclusive effect.

The court granted summary judgment to Owner on its breach-of-contract and attorney-fee claims and on each of Abasic’s defenses. In its conclusion, the court stated that Abasic was liable to Owner for $1,254,729.07, attorney’s fees, and legal costs. Owner was directed to submit a proposed judgment by November 18, 2022.