Bldg. & Realty Inst. of Westchester & Putnam Cntys. v. New York, 19-CV-11285(KMK)

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtKENNETH M. KARAS, UNITED STATES DISTRICT JUDGE
PartiesBUILDING AND REALTY INSTITUTE OF WESTCHESTER AND PUTNAM COUNTIES, INC., et al., Plaintiffs, v. STATE OF NEW YORK, et al., Defendants, and COMMUNITY VOICES HEARD, Defendant-Intervenor. G-MAX MANAGEMENT, INC., et al., Plaintiffs, v. STATE OF NEW YORK, et al., Defendants, NEW YORK TENANTS & NEIGHBORS, and COMMUNITY VOICES HEARD, Defendant-Intervenors.
Docket Number20-CV-634 (KMK),19-CV-11285(KMK)
Decision Date14 September 2021

BUILDING AND REALTY INSTITUTE OF WESTCHESTER AND PUTNAM COUNTIES, INC., et al., Plaintiffs,
v.

STATE OF NEW YORK, et al., Defendants,

and COMMUNITY VOICES HEARD, Defendant-Intervenor. G-MAX MANAGEMENT, INC., et al., Plaintiffs,
v.

STATE OF NEW YORK, et al., Defendants,

NEW YORK TENANTS & NEIGHBORS, and COMMUNITY VOICES HEARD, Defendant-Intervenors.

Nos. 19-CV-11285(KMK), 20-CV-634 (KMK)

United States District Court, S.D. New York

September 14, 2021


Kenneth J. Finger, Esq. Finger & Finger, A Professional Corporation White Plains, NY Counsel for Plaintiffs Building and Realty Institute of Westchester and Putnam Counties, Inc.; Apartment Owners Advisory Council; Cooperative and Condominium Council; Stepping Stones Associates, L.P.; Lisa DeRosa as Principal of Stepping Stones, L.P.; Jefferson House Associates, L.P.; Shub Karman, Inc.; DiLaRe, Inc.; Property Management Associates; Nilsen Management Co., Inc.

Randy M. Mastro, Esq. William J. Moccia, Esq. Akiva Shapiro, Esq. Gibson, Dunn & Crutcher, LLP New York, NY Counsel for Plaintiffs G-Max Management, Inc.; 1139 Longfellow, LLC; Green Valley Realty, LLC; 4250 Van Cortlandt Park East Associates, LLC; 181 W. Tremont Associates, LLC; 2114 Haviland Associates, LLC; Siljay Holding LLC; 125 Holding LLC; Jane Ordway; Dexter Guerrieri; Brooklyn 637-240 LLC; 447-9 16th LLC

Michael A. Berg, Esq. Shi-Shi Wang, Esq. New York State Office of the Attorney General New York, NY Counsel for Defendants State of New York; Ruthanne Visnauskas in her official capacity as Commissioner of New York State Division of Housing and Community Renewal; Division of Homes and Community Renewal; Letitia James in her official capacity as Attorney General of the State of New York; Woody Pascal in his official capacity as Deputy Commissioner of the New York State Division of Housing and Community Renewal

Rachel K. Moston, Esq. Claudia Brodsky, Esq. New York City Law Department New York, NY Counsel for Defendant City of New York

Caitlin J. Halligan, Esq. Sean Patrick Baldwin, Esq. Michael Duke, Esq. Thaddeus C. Eagles, Esq. Babak Ghafarzade, Esq. Selendy & Gay, PLLC New York, NY Counsel for Intervenors Community Voices Heard and N.Y. Tenants & Neighbors

Ellen B. Davidson, Esq. The Legal Aid Society New York, NY Counsel for Intervenors Community Voices Heard and N.Y. Tenants & Neighbors

OPINION AND ORDER

KENNETH M. KARAS, UNITED STATES DISTRICT JUDGE

On December 10, 2019, a group often Plaintiffs who are landlords and organizations in Westchester County, New York filed a Complaint against the State of New York ("New York" or the "State"), Ruthanne Visnauskas in her official capacity as Commissioner of the New York State Division of Housing and Community Renewal ("Visnauskas"), and the Division of Homes and Community Renewal ("DHCR") (collectively, "BRI Defendants"), alleging that recent amendments to the Emergency Tenant Protection Act of 1974 (the "ETPA") violate their constitutional rights (the "BRI Action"). (See BRI Compl. (Dkt. No. 1, Case No. 19-CV-11285).)[1] Specifically, BRI Plaintiffs allege violations of the Fifth and Fourteenth Amendments and the Contract Clause, U.S. Const, art. I, § X, cl. 1; id. amends. V, XIV. (Id. at 92-96.)[2] BRI Plaintiffs request that this Court declare the Housing and Stability Tenant Protection Act (the "HSTPA") as unconstitutional and seek an injunction against its enforcement. (BRI Compl. at 95-98.)[3] The BRI Defendants move this Court to dismiss the BRI Complaint brought by BRI Plaintiffs for lack of jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). (BRI Defendants' Motion To Dismiss (Dkt. No. 60).) Community Voices Heard ("CVH") filed a parallel Motion To Dismiss the BRI Complaint against the BRI Defendants for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). (CVH Motion To Dismiss (together the "BRI Motions") Dkt. No. 62).)[4]

The BRI Action is one of five federal actions that real estate groups have filed in the United States District Courts for the Southern and Eastern Districts of New York, seeking to challenge the long-standing system of rent stabilization authorized under New York State law.[5]This opinion, however, concerns two cases: the BRI Action and G-Max Management, Inc. et al. v. State Of New York et al. (20-CV-634). G-Max is a related case filed on January 23, 2020, brought by a group of 13 Plaintiffs who are "small landlord owners" (the "G-Max Plaintiffs"). The G-Max Plaintiffs filed the G-Max Complaint against the State of New York, Visnauskas, Letitia James in her official capacity as Attorney General of New York ("James"), Woody Pascal in his official capacity as Deputy Commissioner of the New York State Division of Housing and Community Renewal ("Pascal"), and New York City (collectively, "G-Max Defendants"), alleging violations of the Fifth and Fourteenth Amendments; the Contract Clause, U.S. Const. art. I, § X, cl. 1; id. amends. V, XIV; the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3601 et seq.; and various provisions of the New York State Constitution (the "G-Max Action"). (See G-Max Compl. (Dkt. No. 1, Case No. 20-CV-634).)[6] G-Max City Defendant moves this Court to dismiss the G-Max Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (G-Max City Defendants' Motion To Dismiss (Dkt. No. 67).) G-Max State Defendants move this Court to dismiss the G-Max Complaint against the G-Max Plaintiffs for lack of jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). (G-Max State Defendants' Motion To Dismiss (Dkt. No. 70).) CVH and New York Tenants & Neighbors ("T&N") filed a parallel Motion To Dismiss the G-Max Complaint against the G-Max Defendants for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). (CVH Motion To Dismiss (together the "G-Max Motions") Dkt. No. 72).)[7] Because of the overlapping claims and issues of law in the two cases, the Court addresses the motions filed in both cases in this Opinion and Order.[8]

For the reasons stated herein, the BRI and G-Max Defendants and Intervenors CVH and T&N Motions To Dismiss are granted without prejudice.

I. Background

A. Factual Background

In 1969, the City of New York (the "City") enacted the first rent-stabilization laws with the Rent Stabilization Act of 1969 (collectively, "RSL.") RSL were "a means to control a perceived penchant toward unreasonably high rent increases on the part of landlords." Gramercy Spire Tenants' Ass'n v. Harris, 446 F.Supp. 814, 825 (S.D.N.Y.1977). At the time, the New York City Council "found that many owners of non-rent-controlled buildings were demanding exorbitant and unconscionable rent increases" and these increases were "causing severe hardship to tenants of such accommodations and . . . uprooting long-time city residents from their communities." Id. (citation and quotation marks omitted). RSL apply to privately owned buildings, built between February 1, 1947 and March 10, 1969 for buildings with six or more units. N.Y.C. Admin. Code § 26-504(a). Cited in the RSL legislative findings, the conditions of rent environment in New York City were described as "exactions of unjust, unreasonable and oppressive rents and rental agreements . . . profiteering, speculation and other disruptive practices tending to produce threats to the public health, safety and general welfare N.Y. Unconsol. Law § 26-501 (McKinney). Essentially, RSL place limits on the amount of rent that can be charged, limit the percentage and frequency of rent increases, and entitle tenants to certain protections such as lease renewal, eviction prevention under many circumstances, and the ability to file complaints against landlords. Id. §§ 26-501 et seq. RSL created a system of rent regulation that covers nearly one million apartments, which house over two million people, or about one in three residents in the City. Timothy L. Collins, An Introduction to the New York City Rent Guidelines Board and the Rent Stabilization System (rev. ed. Jan. 2020), https://rentguidelinesboard.cityofnewyork.us/wp-content/uploads/2020/01/intro2020.pdf

In 1974, the ETPA was passed, which extended rent stabilization to any Westchester, Rockland, or Nassau County municipality with a rental vacancy rate of five percent or less that opted in. N.Y. Unconsol. Law §§ 8621 et seq. see also Massagli v. Bastys, 532 N.Y.S.2d 638, 641 (Sup. Ct. 1988) (describing applicability of ETPA to Westchester, Rockland, and Nassau counties prior to its amendment in 2019); HSTPA, Part G, § 3. The ETPA has been described as "a form of local option legislation, which authorized the City of New York (and other specified localities) to declare the existence of a public emergency requiring the regulation of residential rents." Gramercy Spire, 446 F.Supp. at 819. The ETPA covers roughly 25, 000 rent-stabilized apartments in the 21 municipalities in Westchester County. (BRI Compl. ¶ 1, at 98.) Once the existence of a public emergency is declared, the ETPA places limits on the rents that property owners can charge tenants. The ETPA also created a Rent Guidelines Board ("RGB") to regulate how much the rents of ETPA units could be increased for one- and two-year periods. Under the ETPA, landlords are generally obligated to offer one- or two-year renewal leases to each tenant prior to expiration of the current lease. Further, landlords are required to make rent adjustments in their rent-regulated apartments in accordance with standards set forth in the ETPA, in addition to complying with local building and housing laws. N.Y. Unconsol. Law § 8624 (McKinney 2019). RSL and regulations have since been renewed and modified several times.

In June 2019, the New York State Senate again amended the State's RSL and enacted the HSTPA. As amended, the HSTPA expands previous incarnations of the New York rent stabilization statutes in various ways - it places additional limits on rent...

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