Background
Three Buds, LLC entered into a lease agreement with NCTBP Calabrese, LLC to operate a cannabis dispensary business at premises owned by NCTBP. Under the lease, NCTBP was required to provide a certificate of occupancy for the space. Before Three Buds could open, a construction accident caused a partial floor collapse at the building, triggering a notice of condemnation. Three Buds could not occupy the premises, and the structural issues were never resolved by the landlord or its principal, Doug Calabrese.
Three Buds sued NCTBP and Calabrese personally, asserting breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment, and sought to pierce the corporate veil to hold Calabrese individually liable. The trial court denied Three Buds’ motion for partial summary judgment across the board. Three Buds appealed the denial on all four theories.
The Court’s Holding
The Fourth Department partially modified the order, granting partial summary judgment on the breach of contract claim against NCTBP while affirming denial on the remaining claims.
On breach of contract, the court agreed that Three Buds met its prima facie burden. The lease existed; Three Buds performed; NCTBP failed to repair or replace the necessary structural elements as the lease required. The court rejected the trial court’s conclusion that a contingency clause created a condition precedent that had to be satisfied first, and further rejected the notion that the inability to obtain a certificate of occupancy was an independent defense—because NCTBP’s own structural failure caused that inability.
On piercing the corporate veil, the court affirmed the denial. The determination whether to pierce the veil is fact-intensive and ill-suited to summary judgment. Three Buds’ affidavit was largely “upon information and belief” and was otherwise conclusory, failing to show that Calabrese exercised complete domination over NCTBP and used that domination to commit a fraud or wrong against Three Buds.
On the implied covenant of good faith and fair dealing, the court affirmed the denial because Three Buds’ good-faith claim was premised on the same conduct—failure to maintain or repair the building—as the breach of contract claim. A good-faith claim must implicate a duty independent of the contract and cannot be duplicative of the breach claim.
On unjust enrichment, the court affirmed because the parties had an express lease governing the subject matter. Unjust enrichment is a quasi-contract remedy that is precluded when a valid written contract governs the dispute.
Key Takeaways
- In a lease dispute, a landlord cannot defeat summary judgment on breach of contract by blaming the tenant’s inability to obtain a certificate of occupancy when that inability was caused by the landlord’s own failure to maintain or repair the premises as required by the lease.
- Corporate veil piercing is not appropriate on summary judgment without specific, non-conclusory evidence that the principal exercised complete domination over the entity and used that domination to commit a wrong—affidavits “upon information and belief” will not suffice.
- A breach of the implied covenant of good faith and fair dealing cannot survive summary judgment when it rests on the same conduct as the breach of contract claim; the duty must be truly independent of the contract obligations to state a separate claim.
Why It Matters
New York’s cannabis dispensary build-out remains a contested legal landscape, and lease disputes between dispensary operators and landlords are increasingly reaching the appellate courts. This decision confirms that a cannabis tenant who is blocked from opening due to a landlord’s structural breach of a lease can recover on contract—the landlord cannot deflect liability by pointing to the resulting certificate-of-occupancy failure it caused.
The ruling also provides a useful reminder of the limits of alternative theories. In commercial lease litigation, unjust enrichment fails when there is an express contract, and a good-faith-and-fair-dealing claim that mirrors the breach claim will be dismissed. Counsel for commercial tenants—particularly in the cannabis industry where landlord-tenant disputes are common and often economically devastating—should focus their summary judgment motions on contract breach rather than supplementary equitable theories.