Rent Stabilization Ass'n of City of New York v. Dinkins, 1259

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Citation5 F.3d 591
Decision Date21 October 1993
Docket NumberD,No. 1259,1259
PartiesRENT STABILIZATION ASSOCIATION OF the CITY OF NEW YORK, on behalf of its members, Plaintiff-Appellant, v. David N. DINKINS, as Mayor of the City of New York, City of New York, Aston L. Glaves, as Chairman of the Rent Guidelines Board, Joseph L. Forstadt, Oda Friedheim, Ellen Gesmer, Galen Kirkland, Harold Lubell, Victor Marrero, Agustin Rivera, and Janice Robinson, as members of the Rent Guidelines Board, Angelo Aponte, as Commissioner of the NYS Division of Housing & Community Renewal, and Elliot Sander, as Deputy Commissioner for Rent Administration of the NYS Division of Housing & Community Renewal, Defendants-Appellees. ocket 92-9240.

Jonathan E. Polonsky, New York City (Thomas P. Higgins, Thelen, Marrin, Johnson & Bridges, Law Offices of Susan M. Standish, of counsel), for plaintiff-appellant.

Alan G. Krams, Asst. Corp. Counsel of the City of New York, New York City (O. Peter Sherwood, Corp. Counsel of the City of New York, Barry P. Schwartz, Julian Bazel, Asst. Corp. Counsels, City of New York, of counsel), for Municipal defendants-appellees.

Marilyn T. Trautfield, Asst. Atty. Gen., State of N.Y. New York City (Robert Abrams, Atty. Gen. of the State of N.Y., of counsel), for State defendants-appellees.

Before TIMBERS, MESKILL and PRATT, Circuit Judges.

MESKILL, Circuit Judge:

This is an appeal brought by appellant Rent Stabilization Association of the City of New York (RSA) from a judgment entered in the United States District Court for the Southern District of New York, Stanton, J., dismissing the action on the ground that the complaint fails to state a claim upon which relief may be granted. The RSA, on behalf of its members, seeks declaratory and injunctive relief from New York City's rent stabilization scheme contending that it violates the Takings Clause of the Fifth Amendment because it does not allow a landlord to earn a "just and reasonable return" on his property. The RSA also argues that the scheme violates the substantive component of the Due Process Clause.

We affirm the judgment of the district court because we believe that the RSA has asserted only "as applied" challenges to New York's rent stabilization scheme and that it lacks associational standing to raise those challenges.

BACKGROUND

The RSA is a not-for-profit corporation, with a voluntary membership of over 25,000 owners of buildings located throughout New York City. These buildings contain roughly one million rent-stabilized apartments. The RSA provides various services for its members, including the prosecution of legal actions All rents for rent-stabilized apartments in New York City are subject to regulation under the New York City Rent Stabilization Law, City Admin.Code Secs. 26-501 to 26-520, reprinted in N.Y.Unconsol.Laws after Sec. 8617, at 531 (McKinney 1987) (Rent Law), and the Rent Stabilization Code, N.Y.Comp.Codes R. & Regs. tit. 9, Sec. 2520 et seq., reprinted in N.Y.Unconsol.Laws after Sec. 8634, at 718 (McKinney 1987) (Rent Code). Pursuant to section 26-510 of the Rent Law, the Mayor of New York City appoints nine members to the Rent Guidelines Board (Board): two tenant representatives, two property owner representatives and five "public members each of whom shall have had at least five years experience in either finance, economics or housing." Rent Law Sec. 26-510(a). The Board annually establishes mandatory limits on rent adjustments for dwellings subject to rent stabilization. However, the set rates may be modified for an individual landlord if that landlord is successful in his application for a hardship adjustment. The hardship provisions are intended to act as a safety valve, to relieve owners faced with extraordinary financial difficulty due to the rent levels set.

to preserve the rights of its members. The RSA brought this action on behalf of its members seeking relief from (1) the standards and exceptions in the hardship adjustment provisions of the Rent Stabilization Law and Code, and (2) the internal policies and guidelines for determining hardship applications. The RSA claims that these elements of the rent stabilization scheme violate the Takings Clause of the Fifth Amendment and that these internal policies and guidelines are arbitrary and irrational so as to deprive RSA members of substantive due process.

There are two types of hardship relief: comparative hardship and alternative hardship. Comparative hardship increases are governed by section 26-511(c)(6) of the Rent Law and section 2522.4(b) of the Rent Code. This type of increase is available if the building owner's average net annual income for the past three years has been less than the building's average net annual income for the three year period spanning 1968 to 1970. 1 The increase is capped, however, such that the sum of (a) the increase, and (b) the building's net operating income in the current year does not exceed 8.5 percent of the equity in the property. Moreover, a landlord may collect only a six percent hardship increase annually.

Under section 26-511(c)(6-a) of the Rent Law and section 2522.4(c) of the Rent Code, an alternative hardship rent increase is available if the building's annual operating expenses exceed 95 percent of the annual gross rental income. The owner must have held title to the property for at least three years prior to an application for this type of increase. Moreover, it is not available to owners of buildings converted to cooperatives and condominiums, and three years must have passed since any prior hardship increase. As with the comparative hardship increase, this adjustment may not exceed six percent annually.

The district court granted the defendants' motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6). Rent Stabilization Ass'n of New York City v. Dinkins, 805 F.Supp. 159, 166 (S.D.N.Y.1992). The court found that the RSA's facial takings claims failed to assert the appropriate constitutional test and in any event failed to set forth a truly facial attack on the statute. Id. at 161-63. The court also found that the RSA lacked standing to assert its "as applied" claims with respect to both the takings and due process challenges. Id. at 163-66.

DISCUSSION
I. Standard of Review

We review de novo the district court's grant of a motion to dismiss for failure to state a claim. Citibank, N.A. v. K-H Corp., 968 F.2d 1489, 1494 (2d Cir.1992). The facts alleged in the pleadings and documents either attached as exhibits or incorporated by The standard of review of a dismissal for lack of standing is not quite as clear. Although we realize that dismissals for lack of standing may be made pursuant to Fed.R.Civ.P. 12(b)(6) rather than 12(b)(1), 2 like many cases under 12(b)(1) (but not under 12(b)(6)), it may become necessary for the district court to make findings of fact to determine whether a party has standing to sue. Thus, we must modify our standard of review of 12(b)(6) dismissals in the standing context. We adopt the standard used by several of our sister circuits to review dismissals under 12(b)(1): If the trial court dismissed on the basis of the complaint alone or the complaint supplemented by undisputed facts evidenced in the record, our standard is de novo review, but if the court also resolved disputed facts, we will accept the court's findings unless they are "clearly erroneous." See Herbert v. Nat'l Academy of Sciences, 974 F.2d 192, 197 (D.C.Cir.1992); Ynclan v. Dep't of Air Force, 943 F.2d 1388, 1390 (5th Cir.1991). In the present case, the district court did not need to resolve any disputed facts, so we will review de novo everything in this appeal.

reference are considered, Samuels v. Air Transport Local 504, 992 F.2d 12, 15 (2d Cir.1993), and the complaint may not be dismissed unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957) (footnote omitted).

II. Takings Clause
A. Character of the RSA's Challenges

On appeal, the RSA contends that it has mounted three distinct facial attacks under the Takings Clause against the Rent Law. We do not agree. We believe that the RSA's complaint alleges only "as applied" objections to the law. 3

The first "facial" challenge addresses allegations with respect to the comparative hardship provision, while the second such challenge addresses allegations regarding the alternative hardship provision. In these two challenges, the RSA alleges that certain landlords are never able to obtain an increase under the respective hardship provision. For instance, RSA alleges that owners of buildings that have been converted to cooperatives or condominiums are never eligible for alternative hardship increases. We are hard pressed to discover any constitutional argument in these allegations, however, facial or otherwise, because the RSA nowhere contends that some landlords who cannot obtain one type of hardship adjustment also cannot obtain the other. There is nothing unconstitutional in a statute that denies a landlord the benefits of one hardship provision but permits him to obtain a constitutionally adequate return on his investment under a second provision, even under the RSA's The RSA also complains that both hardship provisions "cause unnecessary and unreasonable delays" in mitigating confiscatory rents because no owner is eligible for any hardship increase unless (1) he has owned the building for more than three years, and (2) he has not received any hardship increase in the past three years.

takings theory. See footnote 3. In any event, as we explain below, these challenges are not "facial" in nature.

The RSA's allegedly "facial" challenges seem to be aimed exclusively at the two...

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