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ZACHARY W. CARTER
Corporation Counsel of the City of New York
Attorney for the City of New York and
New York City Department of Parks and Recreation
100 Church Street
New York, New York 10007
(212) 356-2113
Zachary B. Kass
zkass@law.nyc.gov

UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------------:
In re
: Chapter 11
:
: Case No.: 18-14125
MANHATTAN RIVER GROUP, LLC,
: (SHL)
:
Debtor.
:
---------------------------------- -------------- x
CITY OF NEW YORK’S (I) OBJECTION TO DEBTOR’S MOTION
FOR ORDER EXTENDING DEBTOR’S TIME TO ASSUME OR
REJECT CERTAIN LICENSES, AND (II) CROSS MOTION FOR
ORDER (A) LIFTING AUTOMATIC STAY TO PERMIT
TERMINATION OF LICENSES UNDER 11 U.S.C. § 362(d)(1)
AND (B) IN THE ALTERNATIVE, DETERMINING THAT LICENSES
MAY NOT BE ASSUMED OR ASSIGNED UNDER 11 U.S.C. § 365

The City of New York and its agency, the New York City Department of Parks and
Recreation (the “Parks Department”) (collectively, the “City”), by its counsel, ZACHARY W.
CARTER, Corporation Counsel of the City of New York, hereby files: (I) this objection (the
“Objection”) to the motion (the "Extension Motion") of Manhattan River Group, the above
captioned Debtor and Debtor-in-Possession (the "Debtor"), seeking entry of, inter alia, an order
purportedly pursuant to §365(d)(4) of the Bankruptcy Code [Docket No. 26], extending the
Debtor’s time to assume or reject two License Agreements with the City, through July 18, 2019,
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the date that is 210 days after the order for relief in this case; and (II) this cross motion (the
“Cross Motion”) for an order (A) lifting the automatic stay to permit the termination of the License
Agreements pursuant to Section 362(d)(1), and (B) in the alternative, determining that the License
Agreements may not be assumed or assigned pursuant to Section 365. In support of its Objection
and Cross Motion the City respectfully represents:
BACKGROUND
1.

The facts relevant to the City’s Objection and Cross Motion are set forth in the

Declaration of David Cerron, Assistant Commissioner for Concessions and Internal Audit of the
Parks Department, dated May 13, 2019 (the “Cerron Decl.”) and the Declaration of Nate Grove,
Chief of Waterfront and Marine Operations of the Parks Department, also dated May 13, 2019 (the
“Grove Decl.”), which are being filed in support of the City’s Objection and Cross Motion. A
summary of the relevant facts is set forth below, to provide a context for the arguments to follow.
The Procedural Background
2.

The Debtor filed the Extension Motion on April 16, 2019. The Court entered an

order on the same date [Docket No. 27], setting an initial hearing on shortened notice on the
Extension Motion on April 22, 2019 (the “Initial Hearing”), and permitting any opposition to the
Extension Motion to be asserted at the Initial Hearing.
3.

The Extension Motion only made reference to a single License Agreement dated

June 25, 2009 for the Construction, Operation and Maintenance of a Full Service Restaurant and
Lounge at the Dyckman Marina (the “Restaurant License”), a copy of which was attached to the
Extension Motion as Exhibit A. At the Initial Hearing on the Extension Motion, however, the
Debtor asserted that it had inadvertently omitted from the motion a request for similar relief
respecting a second, separate license between the Debtor and the City for the operation of a marina
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(the “Marina License”). A copy of the Marina License is attached to the Cerron Declaration as
Exhibit A.
4.

The City appeared by counsel at the Initial Hearing on the Extension Motion, and

raised certain objections. In addition, the City reserved all of its rights regarding whether the
Restaurant License and the Marina License were subject to Bankruptcy Code Section 365(d)(4) or
any other provision of Section 365, as the Debtor had asserted in the Extension Motion.
5.

The Court determined to hold a further hearing on the Extension Motion and related

matters on May 6, 2019 (the “May 6 Hearing”). In addition, the Court directed the Debtor to inform
the City by May 1, 2019, whether it would agree to an immediate rejection of the Marina License.
The Court extended the Debtor’s time to assume or reject the Restaurant License and the Marina
License until the May 6 Hearing.
6.

The Debtor and the City thereafter had several conversations and communications in

an attempt to negotiate a settlement, which they agreed would be subject to appropriate
confidentiality protections, including those of Federal Rule of Evidence 408.
7.

At the Debtor’s request, the City agreed that it had no objection to the Debtor’s

informing the City of its decision with respect to the Marina License on May 2, 2019. The parties
were not able to reach a settlement, and on May 2, 2019, the Debtor filed a letter on the Court’s
docket (the “May 2 Letter”), a copy of which was sent to the City’s counsel, informing the City
and the Court of the Debtor’s intention to assume the Marina License “at confirmation.”
8.

At the May 6 Hearing, the Debtor requested that the Court extend its time to assume

or reject the Restaurant License and the Marina License until the confirmation of its projected
plan of reorganization. The City objected, and, argued that, at least as to the Marina License, the
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Court should no longer extend the time to assume or reject. The Court determined to hold a
further hearing on the Extension Motion on May 14, 2019 (the “May l4 Hearing”), and extended
the time for both licenses to that date. The Court also indicated that it would permit the City to
present a request for relief on shortened notice in connection with the May 14 Hearing. The City,
accordingly, is filing this Objection and Cross Motion to request such relief.
9.

On May 9, 2019, the Debtor filed two separate motions, one for authority to enter

into a management agreement with an entity known as 348 Hudson River Partners LLC (the
“Manager”) [Docket No. 34] (the “Management Motion”) and another for authority to obtain a
loan of $150,000 from an entity known as Waterfront Hospitality Partners LLC (the “Lender”)
[Docket No. 37] (the “Loan Motion”). The Court entered orders setting preliminary hearings on
these motions at the May 14 Hearing. The City has separately filed its preliminary objections to
these motions, and reserved its rights to further object in connection with any additional or final
hearings respecting them.
DISCUSSION
Introduction
10.

The Debtor now has made clear that its real interest (and that of its potential new

investors and/or plan funders) is in trying to salvage the restaurant operation. The Debtor has no
real interest in running a first class, full service marina, as is required in the Marina License. See,
Debtor’s May 2 Letter, p. 2; Management Motion, ¶¶ 9, 13. It only resists rejecting the Marina
License at this time because it wants to continue to utilize a portion of the marina property (the
Quonset hut) for the operation of the restaurant. In the meantime, the Debtor has defaulted on its
obligations under both the Restaurant License and the Marina License. This has caused – and
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continues to cause -- substantial harm to the City and to the public interest. See Cerron Decl., ¶¶
14-18; Grove Decl., at ¶¶ 11-27, 30-39. The Court should not permit this to continue.
11.

The Debtor has asserted that it intends to try to assume both the Restaurant License

and the Marina License in connection with the confirmation of a plan of reorganization (which it
has not yet proposed or filed). Thus, the usual, primary grounds for granting an extension of the
time to assume or reject – that the debtor needs additional time to make up its mind -- is not
relevant here. Accordingly, the City requests that this Court now turn to the merits of whether the
Debtor may legally assume either the Restaurant License or the Marina License, and whether it
should be afforded further protection of the automatic stay. The City submits that it should not.
The Agreements at Issue Are Both Licenses for the Use of Real Property
and “Cause” Exists Under Section 362(b)(1) to Lift the Automatic Stay
to Permit Termination
12.

In the Extension Motion, the Debtor asserted that it is a party to “the Licenses

which constitutes an unexpired executory contract for non-residential real property within the
meaning of Section 365(d)(4) of the Bankruptcy Code.” Extension Motion, ¶ 8. As noted above,
the City objected and reserved all of its rights regarding whether the Restaurant License and the
Marina License were subject to Bankruptcy Code Section 365(d)(4) or any other provision of
Section 365.
13.

Presumably, the Debtor takes the position that it may assume the Licenses pursuant

to Section 365. However, in cases that were remarkably similar to this one, Bankruptcy Courts
have had no trouble determining that a debtor with a mere license in real property under New
York Law was not entitled to assume such license. For example, In re Yachthaven Rest., Inc., 103
B.R. 68 (Bankr. E.D.N.Y. 1989), involved the World’s Fair Marina in Queens. The primary
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license was with a third party and the debtor had a sublicense to operate a restaurant and marina.
Bankruptcy Judge Duberstein noted that the “debtor's principal argument is that the license and
sublicense agreements are executory contracts and therefore the licensee is afforded the same
rights to assume and assign the license agreement as if it were a lease pursuant to § 365 of the
Bankruptcy Code. This argument is flawed by the very definition of a license.” 103 B.R. at 72
(Emphasis supplied). Judge Duberstein further explained:
With respect to real property, a license has been defined as an authority to
enter upon the lands of another to do a particular act or series of acts without
possessing any interest in the lands. 3 Warren's Weed on the New York Law of
Real Property, License § 102 (1989). Furthermore, it is personal to the licensee,
is not assignable by him and is revocable by the licensor. 49 N.Y. Jur. 2d
Licenses in Real Property § 195 (1985). It creates no burden running with the
land. It is the lowest order or privilege touching or affecting real property.
Lombardi v. Lombardi, 63 A.D.2d 1111, 406 N.Y.S.2d 396 (1978). It flows with
the person to whom it attaches, indivisible and inseparable from him and able to
be immediately withdrawn or extinguished at the will of the licensor. Schnipper
v. Flowood Realty Corp., 113 N.Y.S.2d 842 (1952 New York Mun. Ct.), rev'd on
other grounds, 122 N.Y.S. 2d 178 (App Term).
In re Yachthaven Rest., Inc., 103 BR 68, 72-73 (Bankr. E.D.N.Y. 1989). 1
14.

Judge Duberstein then determined that the agreement at issue was indeed a license

for the use of real property. He noted that the underlying document referred to the non-City party
as the licensee. In addition, the agreement contained a provision entitled “NO LEASE”, and
which stated: “It is expressly understood and agreed that no land is leased to licensee.” Judge
Duberstein also found significant that the City is precluded by law from alienating park land in

1

See also, In re Middle Bay Golfers' Assn., 2013 Bankr LEXIS 5108, at *36 (Bankr. E.D.N.Y. Dec. 5, 2013, No. 8-1370361-dte) (Under New York law, a license gives one party the authority to enter the land of another to do a particular
act or series of acts without possessing any interest in the land, and a licensee occupies the land so far as is necessary to
do the act with no further right of possession, citing In re Yachthaven Restaurant, Inc., supra.)

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the absence of a grant from the state legislature, citing Miller v. City of New York, 15 N.Y.2d 34,
203 N.E.2d 478, 255 N.Y.S.2d 78 (1964). He concluded:
Therefore, the City could not legally have intended to enter into anything other
than a license agreement. The intent of the parties could not have been
manifested more clearly by the actual written agreement and therefore the law
with respect to licenses will apply to the issues in this proceeding.
In re Yachthaven Rest., Inc., 103 B.R. at 73 (Emphasis supplied).
15.

Applying the law respecting licenses, Judge Duberstein found that the parties had

contracted that the Commissioner of Parks was entitled to terminate the license on appropriate
notice, provided that he was acting in good faith. He further found that it was clear that the City
had ample grounds for termination because of the substantial defects which existed on the
premises at the time of the Notice of Termination. 103 B.R. at 74.
16.

Similarly, In re M.J. & K. Co., 161 B.R. 586 (Bankr. S.D.N.Y. 1993), involved a

debtor who had an agreement to run a bookstore at Brooklyn Law School. Bankruptcy Judge
Garrity applied an analysis similar to that of Judge Duberstein to determine that the debtor had a
mere license to use real property under New York law. 2 Applying that analysis, Judge Garrity

2

On this point Judge Garrity wrote:
A license in real property is a contract which permits a party "to render services within an enterprise
conducted on premises or operated by another, who has supervisory power over the method of rendition of the
services . . . " Lordi v. County of Nassau, 246 N.Y.D.2d 502, 504 (2d Dept.), aff'd, 14 N.Y.2d 699, 250
N.Y.S.2d 54, 199 N.E.2d 155 (1964) (per curiam); see also In re Yachthaven Restaurant, Inc., 103 Bankr. 68,
72 (Bankr. E.D.N.Y. 1989) (license in real property authorizes licensee "to enter upon the land of another to
do a particular act or series of acts without possessing any interest in the lands") (citing 3 Warren's Weed on
New York Law of Real Property License § 102 (1989)); David P. Van Knapp, 61 N.Y. Jur. 2d Statute of
Frauds, § 123 at [**12] 196 (1987) ("[a] license with respect to real property is a privilege to do one or more
acts on land, without having an interest [in the land] therein.") The license is personal to the license, see
Simmons v Abbondandolo, 184 A.D.2d 878, 585 N.Y.S.2d 535 (3d Dept. 1992), and is created for a limited
purpose. See Harmatz v. Glickman, 13 Misc. 2d 271, 176 N.Y.S.2d 454, 454 (Sup. Ct. Kings Co. 1958); see

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construed the agreement as a license in real property. First, it was labelled a license to operate a
bookstore, and it included a provision that the agreement "shall not create any relationship of
landlord and tenant between the Law School and [the debtor], but the sole relationship shall be
that of a licensor and licensee." Second, it contained an express restriction that the debtor had a
right to use the space as a bookstore “and for no other purpose,” citing, Lordi v. County of
Nassau, 20 A.D.2d 658, 246 N.Y.S.2d 502, aff'd 14 N.Y.2d 699, 250 N.Y.S.2d 54, 199 N.E.2d
155 (limited right to operate a golf pro shop is a license in real property), and In re Yachthaven
Restaurant, Inc., 103 Bankr. 68 (right to operate, maintain and make improvements to marina
area and to operate restaurant at marina is a license in real property.) Finally, the law school was
vested with expansive supervisory controls over the conduct of the debtor's business, including
restrictions on the debtor's right to advertise outside the store without prior approval by the
licensor, mandatory hours of operation, and mandatory pricing requirements. In re M.J. & K. Co.,
161 B.R. at 592-593, citing numerous New York cases. 3

also 49 N.Y. Jur. 2d Easements and Licenses in Real Property § 199 at 330 (1987) ("[a] license to do an act on
land involves the occupation of the land by the licensee so far as is necessary to do the act and no further").
In re M.J. & K. Co., 161 B.R. 586, 591 (Bankr. S.D.N.Y. 1993).
3

Judge Garrity cited the following cases on this point:
See, e.g., Lordi v. County of Nassau, 246 N.Y.S. 2d at 505 (terms of agreement specified portion of premises
licensee could occupy and licensor had supervisory control over method in which licensee rendered service);
Layton v. A.I. Namm & Sons, Inc., 275 A.D. 246, 89 N.Y.S.2d 72 (1st Dept.), aff'd, 302 N.Y. 720, 98 N.E.2d
590 (1951). (agreement limited space within store where optician could conduct his business and permitted
licensor to alter that space); Kaypar Corporation v. Fosterport Realty Corporation, 1 Misc. 2d 469, 69
N.Y.S.2d 313 (Sup. Ct. Sp. Term Bronx Co.), aff'd, 272 A.D. 878, 72 N.Y.S.2d 405 (1st Dept. 1947)
(agreement allotted limited space to licensee for installation of coin operated washing machines and did not
provide for exclusive possession of that space); Planetary Recreations, Inc. v. Kerns, Inc., 184 Misc. 340, 54
N.Y.S.2d 418 (N.Y. Cty Ct. 1945) (agreement limited where licensee could operate coat check service and
did not allow for exclusive possession by licensee).

In re M.J. & K. Co., 161 B.R. 586, 592-593 (Bankr. S.D.N.Y. 1993).

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Judge Garrity noted that any right created in the debtor's estate by the license was

protected by the automatic stay. However, the nature and extent of those rights, if any, are fixed
by state law, citing Butner v. U.S., 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). The filing
of a petition under the Bankruptcy Code does not expand those rights; whatever rights a debtor
has in property at the commencement of the case continue in bankruptcy -- no more, no less. In re
M.J. & K. Co., 161 B.R. at 593 (Citations omitted). In the circumstances, Judge Garrity held that
the licensor in that case had the right to terminate the license, as long as it acted in good faith.
18.

Judge Garrity noted that pursuant to Section 362 (d)(1), a party in interest is entitled

to relief from the automatic stay if it can show “cause”, which is defined to include “the lack of
adequate protections of an interest in property of such party in interest.” See 11 U.S.C. § 362
(d)(1). When deciding whether to modify the automatic stay, “the court must consider the
particular circumstances of the case and ascertain what is just to the claimants, the debtor, and the
estate.” In re M.J. & K. Co., 161 B.R. at 590, citing In re Mego Int'l Inc., 28 Bankr. 324, 326
(Bankr. S.D.N.Y. 1983).; Bankr. S.D.N.Y. 1993). The standard for relief is broad and flexible,
and must be addressed on a case by case basis. Id. at 590-591.
19.

In that case, it was clear that the Debtor could not perform its obligations under the

license because it did not have sufficient inventory, and lacked the funds or credit needed to
purchase the texts needed by the students. Under these circumstances, Judge Garrity held that
cause existed to lift the automatic stay to permit termination of the license:
[The licensor’s] good faith in this matter is manifest. Termination of its
relationship with Debtor will promote the law school's policy of engaging in
short term service contracts and eliminate the uncertainties presently existing
regarding whether Debtor will be able to obtain the text books needed in the
Spring semester. Under these facts, and as a licensor at will, it cannot be required
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to continue its business relationship with Debtor. Accordingly, it is entitled to
relief from the automatic stay to serve the Proposed Notice and take appropriate
steps to recover possession of the Premises. See In re Chautauqua Capital Corp.,
135 Bankr. 779, 782 (Bankr. W.D.Pa. 1992).
In re M.J. & K. Co., 161 B.R. at 595 (Emphasis supplied).
20.

These Bankruptcy Court cases are in line with New York cases regarding licenses in

real property, particularly those involving park land.

For example, New York courts have

consistently held that licensees do not obtain an interest in the land. Rather, a licensee obtains a
“revocable privilege” to use another’s land temporarily for a specified fee. See Union Square
Park Community Coalition, Inc. v. New York City Dept. of Parks & Recreation, 22 N.Y.3d 648
(2014); Ark Bryant Park Corp. v. Bryant Park Restoration Corp, 285 A.D.2d 143 (1st Dep’t
2001). In Union Square, the court approved an agreement between the Parks Department and a
private corporation permitting the corporation to operate a seasonal restaurant in the Union
Square Park pavilion. The agreement was for a 15 year term with an annual “license fee” of
$300,000.00 in the first year, increasing to about $450,000.00 in the final year, or 10% of the
annual gross receipts, whichever amount was greater. The agreement also obligated the
corporation to make capital improvements totaling $700,000.00. In holding that the agreement
constituted a license, and not a lease, the court relied upon the following factors: (1) the
Department retained significant control over the daily operations of the restaurant including the
months and hours of operation, staffing plan, work schedules and menu prices, (2) use of the
premises would only be seasonal and not exclusive as the restaurant was required to make
outdoor seating available to the public during the summer months, and most importantly, (3) the
agreement broadly allowed the Department to terminate the license at will, as long as the
termination was not arbitrary and capricious. Id. at 657.
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In Ark Bryant Park Corp. v. Bryant Park Restoration Corp, 285 A.D.2d 143 (1st

Dep’t 2001), the City revoked the license of Bryant Park Restoration Corp. to enter into
agreements for food and beverage catering for special events in Bryant Park, effectively
terminating plaintiff’s catering sublicense. The Court found that the license did not grant any
party an interest in the property and that the City could revoke the license (and sublicense) at will
(“A license, within the context of real property law, grants the licensee a revocable nonassignable privilege to do one or more acts upon the land of the licensor, without granting
possession of any interest therein”).
22.

It is worth noting that in New York, because a licensee does not have an interest in

real property, courts will not issue an injunction to protect a licensee’s purported interest. See
D’Aversa v. Guido, 213 A.D. 355, 356-57 (2d Dep’t 1925) (“The agreement in question -- a
mere license revocable at will -- created no right in the defendant's property which a court of
equity would protect by injunction, and the plaintiff never having had any ground upon which
to invoke equitable jurisdiction, the court had no authority to try another and purely legal cause of
action”); Quik Park W. 57 LLC v. Bridgewater Operating Corp., 2015 NY Slip Op 30948(U) at
*13 (Sup. Ct. N.Y. County June 2, 2015) (Bransten, J.) (holding that a licensee had no interest in
the property itself “which a court of equity will protect by injunction”). Moreover, licensees, as
parties without an interest in the real property, may be removed from City property without legal
process. See P&A Bros., Inc. v. New York Dep’t of Parks & Recreation, 184 A.D.2d 267, 269 (1st
Dep’t 1992). Accordingly, if it were not for the protection of the automatic stay in this case, the
City would have been entitled to terminate long ago the licenses and recover the property for the
public benefit.
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The City respectfully submits that, in this case, cause exists for this Court to lift the

automatic stay to permit the City to terminate both the Restaurant License and the Marina
License. There can be no doubt that both agreements at issue here are licenses to use real
property. Both agreements are entitled “License Agreement” and each refers to the Debtor
throughout as the “Licensee.” Furthermore, each agreement contains an identical provision, at
Section 1.3, which states: “It is expressly understood that no land, building, space, or equipment
is leased to Licensee, but that during the Interim Period (as hereinafter defined) and the Term of
the License, Licensee shall have the use of the Licensed Premises for the purpose herein after
provided.” (Emphasis supplied).

Section 1.3 further contains a specific restriction on the

Licensee’s use of the premises: “Except as herein provided, Licensee has the right to occupy and
operate the Licensed Premises only so long as each and every term and condition in this License
is strictly and properly complied with and so long as this License is not terminated by
Commissioner.” Each agreement vests the City with expansive supervisory controls over the
conduct of the debtor's business, including: approval of all rates, fees and prices to be charged for
any goods or services (Section 10.1); mandatory hours of operation (Section 10.2); restrictions on
the sale of tobacco products (Section 10.3); restrictions on the debtor's advertising and promotion
programs and its signage (Sections 10.15 and 10.16); and restrictions on outside amplified music
(Section 10.18). 4 See In re M.J. & K. Co., 161 B.R. at 592-593, and the numerous cases cited
therein.

4

In addition, the Restaurant License contains numerous additional provisions vesting the City with supervisory control
over other special aspects of the operation of a restaurant, including: placement of vending machines (Sections 10.21);
sale of alcoholic beverages (Section 10.23); storage of flammable substances (Section 10.24); scheduling of special
events (Section 10.25); and the location, design and number of tables (Section 10.27). Likewise, the Marina License
contains additional provisions vesting the City with supervisory control of operations of the marina, including: repair

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In addition, as in the Yachthaven case discussed above, the City is precluded by law

from alienating park land in the absence of a grant from the state legislature. See, e.g., Miller v.
City of New York, 15 N.Y.2d 34, 203 N.E.2d 478, 255 N.Y.S.2d 78 (1964). See also, Cerron
Decl., ¶4. Accordingly, in this case, as in the Yachthaven case, the City could not legally have
intended to enter into anything other than a license agreement; the intent of the parties could not
have been manifested more clearly by the actual written agreement; and therefore the law with
respect to licenses should be applied to the issues in this proceeding. See In re Yachthaven Rest.,
Inc., 103 B.R. at 73.
25.

Thus, applying the law with respect to licenses, it is clear that the City has the right

to terminate each of the licenses, as long as it does not act in bad faith. See, e.g., In re M.J. & K.
Co., 161 B.R. at 595. See also, Section 3.2 of the Licenses which provides: “Notwithstanding
any language contained herein, this License is terminable at will by the Commissioner in his sole
and absolute discretion, at any time, however, such termination not be arbitrary and capricious.
Such termination shall be effective after twenty-five (25) days written notice is sent to
Licensee.” 5 In this case, the Debtor has defaulted numerous times on its obligations under each of
the licenses. In the case of the Marina License, these defaults are especially egregious and call
out for immediate redress. See Cerron Decl., ¶¶ 14-18; Grove Decl., at ¶¶ 11-27, 30-39. These
defaults have harmed the City and the public interest. The failure to promptly open the Marina

of the boat pump-out station (Section 10.23); providing for safe navigation and removal of sunken boats (Section
10.27); prohibition of rental or sale of jet skis (Section 10.28); repair of decks (Section 10.32); requirement that all
vessels on land or in water be in good operational condition (Section 10.33); restriction on use of marina or boat as a
permanent residence (Section 10.34); use of the Quonset Hut only for marina operations (Section 10.36); plans for
number and organization of moorings (Section 10.39); use by the general public of area to launch small boats free of
charge (Section 10.40).
5
See also, Section 3.3, regarding termination for cause; and Sections 3.4 through 3.10 for the consequences of
termination and provision for vacation of the property.

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for the current season would be particularly harmful to the public, particularly since the nearest
marina to the Dyckman marina in Manhattan is the 79th Street Boat Basin, which has an over-700
person waiting list. It presently takes over twelve years to receive a docking permit there. Grove
Decl., ¶ 32. Clearly, termination of the Marina License in these circumstances would be in good
faith. Accordingly, the City requests that the Court enter an order lifting the automatic stay for
cause, permitting the City to terminate the Marina License immediately.
Even If Section 365 Were Applicable, the Debtor Could Not Legally
Assume or Assign the Agreements at Issue
26.

As discussed above, the Debtor’s assertion that it should be afforded the same rights

to assume and assign the license agreements as if they were leases pursuant to Section 365, is
“flawed by the very definition of a license.” In re Yachthaven Rest., Inc., 103 B.R. 68, 72 (Bankr.
E.D.N.Y. 1989). However, even assuming arguendo that Section 365 did apply, the Debtor
would still not be able to assume or assign the agreements, for several reasons.
27.

Application of Section 365(c)(1). It appears that the Debtor intends to try to

reorganize by bringing in entirely new equity owners. The Marina License and the Restaurant
License contain identical provisions, at Section 14.1, which require the written approval of the
City in advance of any sale, transfer, assignment, sublicense of the License, or “a majority of the
shares of or interest in Licensee. . .” Section 14.1 further provides:
The term “assignment” shall be deemed to include any direct or indirect
assignment, sublet, sale, pledge, mortgage, transfer of or change in more than
49% in stock or voting control of or interest in Licensee, including any transfer
by operation of law. No sale or transfer of the stock of or interest in Licensee
may be made under any circumstance if such sale will result in a change of
control of Licensee violative of the intent of this Section 14, without the prior
written consent of Commissioner, which shall not be unreasonably withheld.
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Thus, it appears that the Debtor is contemplating a transaction which is an “assignment” within
the terms of the Licenses. However, under Section 365(c), it may not engage in that transaction
without the City’s approval.
28.

Although a debtor generally has the right to assume and assign an executory

contract or unexpired lease under Section 365(a) and (f), it may not do so if the non-debtor party
cannot be compelled to accept performance from an entity other than the debtor or debtor in
possession under applicable law. Thus, Section 365(c)(1) expressly provides: “The trustee may
not assume or assign any executory contract or unexpired lease of the debtor, whether or not such
contract or lease prohibits or restricts assignment . . . if – (1)(A) applicable law excuses a party,
other than the debtor, to such contract or lease from accepting performance from . . . an entity
other than the debtor or the debtor in possession whether or not such contract or lease prohibits or
restricts assignment . . . and (B) such party does not consent to such assumption or assignment.”
11 U.S.C. § 365(c)(1)(A), (B).
29.

Judge Duberstein recognized the applicability of Section 365(c) to the licenses

involved in the Yachthaven case:
11 U.S.C. § 365(c)(1) states that the Trustee may not assume an executory
contract if applicable non-bankruptcy law prohibits it. The courts have held §
365 does not deal exclusively with the problem of personnel service contracts
but includes situations where state or federal law can be said to bar assignment.
In re Pioneer Ford Sales, Inc., 729 F.2d 27 (1st Cir. 1984); In re Braniff
Airways, Inc., 700 F.2d 935 (5th Cir. 1983).
Section 3 of the New York City Charter allows the Mayor to issue executive
orders which have the force of law. The Mayor issued an order that states:
"Rights under a concession agreement, shall not be sold, assigned or otherwise
transferred without approval by the Concession Review Committee." The City is
responsible for screening for the benefit of the public all potential
concessionaires to make sure they are honest and professional. Therefore, we are
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satisfied that the requirements of § 365(c) are met and the license is not
assignable.

In re Yachthaven Rest., Inc., 103 BR 68, 78-79 (Bankr. E.D.N.Y. 1989) (Emphasis supplied).
30.

Similarly, here, the agreements at issues cannot be either assumed or assigned

without City consent. Each of the Licenses contains a virtually identical recitation on page 4:
“WHEREAS, Parks complied with the requirements of the Franchise and Concession Review
Committee (‘FCRC’) for the selection of concessionaires, including the issuance of a Request for
Proposals (‘RFP’) for the operation, maintenance and management of the [Licensed
Premises/Dyckman Marina].” See also Cerron Decl., ¶¶ 4-6, discussing the City’s compliance
with the law and rules regarding the granting of concessions, including the RFP process.
Accordingly, Section 365(c)(1) excuses the City from accepting the assumption or assignment of
the licenses without consent in these circumstances.
31.

The Debtor Cannot Provide Adequate Assurance of Future Performance

Under Section 365(b) or (f). Where there has been a default in an agreement, the debtor’s right
to assume under Section 365(a) is conditioned on its obligations to cure the defaults and to
“provide adequate assurance of future performance under such contract or lease.” Section
365(b)(1)(B),(C). Moreover, under Section 365(f) a debtor may assign a contract or lease only if
the assignee likewise gives adequate assurance of future performance by the assignee. Particularly
with respect to the Marina License, neither the Debtor nor its prospective new owners, really have
an interest in -- or capacity to -- operate a first class marina. See Debtor’s May 2 Letter.
Accordingly, here, the Debtor could not meet the requirements of either Section 365(b) or Section
365(f). See Cerron Decl., ¶¶ 14-18; Grove Decl., at ¶¶ 11-27, 30-39.
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The Debtor Cannot Promptly Cure Defaults Under Section

365(b)(1). Where there has been a default, the debtor’s right to assume and assign an
executory contract or unexpired lease pursuant to Section 365(a), is also conditioned on its
obligations to cure defaults and to compensate the non-debtor party for any actual
pecuniary loss resulting from such default. Section 365(b)(1)(A), (B).
The purpose of § 365(b)(1) is "to restore the 'debtor-creditor relationship . . .
to pre-default conditions,' bringing the [loan] back into compliance with its
terms." In re U.S. Wireless Data, Inc., 547 F.3d 484, 489 (2d Cir. 2008) (quoting
In re Taddeo, 685 F.2d 24, 26-27 (2d Cir. 1982) and citing 3 Collier on
Bankruptcy § 365.05[3], 365-54 (15th ed. rev. 2008)).
In re DBSI, Inc., 405 B.R. 698, 704 (Bankr. D. Del. 2009).
33. In this case, the Debtor has proven unable and/or unwilling to remedy the defaults
under the licenses, particularly under the Marina License. See Cerron Decl., ¶¶ 14-18; Grove Decl.,
at ¶¶ 11-27, 30-39. The City has no information regarding the personnel or actual or potential
financial resources of potential investors. In these circumstances, it is hard to imagine how the
Debtor or its prospective new owners could promptly cure – or give adequate assurance that it will
promptly cure -- all defaults under the Marina License and compensate the City for any actual
pecuniary loss. Accordingly, the Debtor cannot meet this requirement of Section 365 either.

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WHEREFORE, the City respectfully requests that the Court: (I) deny approval in all
respects of the Debtor’s Extension Motion; and (II) grant in all respects the City’s Cross Motion
for an order (A) lifting the automatic stay to permit the termination of the License Agreements
pursuant to Section 362(d)(1), and (B) in the alternative, determining that the License Agreements
may not be assumed or assigned pursuant to Section 365; and (III) that the Court grant to the City
such other and further relief as the Court determines to be just.
Dated:

New York, New York
May 13, 2019
ZACHARY W. CARTER
Corporation Counsel of the City of New York
Attorney for the City of New York and
The New York City Department of Parks and Recreation
100 Church Street
New York, New York 10007
Tel.: (212) 356-2113
e-mail: zkass@law.nyc.gov
By:

/s/ Zachary B. Kass
Zachary B. Kass (ZK-1944)
Senior Counsel

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