Casey v. Whitehouse Estates, Inc.

• Decision Date: 23 March 2017
• Docket Number: Index 111723/11
• Citation: 2017 NY Slip Op 33319 (U)
• Parties: KATHRYN CASEY, LAURIE CAGNASSOLA, GERALD COHEN, BETTY FURR, FRANCESCA GAGLIANO, CAROLYN KLEIN, JOSEPH MORGAN, RICHARD ROSE, JESSICA SAKS and KIRK SWANSON, on behalf of themselves and all others similarly situated, Plaintiffs, v. WHITEHOUSE ESTATES, INC., KOEPPEL & KOEPPEL, INC., DUELL 5 MANAGEMENT LLC d/b/a DUELL MANAGEMENT SYSTEMS, and WILLIAM W. KOEPPEL, Defendants. and PAMELA RENNA, VITINA DEGREZIA a/k/a VITINA LUPPINO, Proposed Intervenor-Plaintiffs,
• Court: New York Supreme Court

2017 NY Slip Op 33319(U)

KATHRYN CASEY, LAURIE CAGNASSOLA, GERALD COHEN, BETTY FURR, FRANCESCA GAGLIANO, CAROLYN KLEIN, JOSEPH MORGAN, RICHARD ROSE, JESSICA SAKS and KIRK SWANSON, on behalf of themselves and all others similarly situated, Plaintiffs, and PAMELA RENNA, VITINA DEGREZIA a/k/a VITINA LUPPINO, Proposed Intervenor-Plaintiffs, v. WHITEHOUSE ESTATES, INC., KOEPPEL & KOEPPEL, INC., DUELL 5 MANAGEMENT LLC d/b/a DUELL MANAGEMENT SYSTEMS, and WILLIAM W. KOEPPEL, Defendants.

Index No. 111723/11

Supreme Court, New York County

March 23, 2017

Unpublished Opinion

DECISION/ORDER

HON GERALD LEBOVITS, J.S.C.

In this residential landlord/tenant class action for rent overcharge the named class-member plaintiffs move for leave to serve an amended complaint as well as for partial summary judgment while defendants cross-move for an order to deny summary judgment and to establish and enforce use and occupancy payments (motion sequence number 006). Several potential class-member plaintiffs also move separately, by order to show cause, for leave to intervene in this action and for an order to stay or enjoin the special proceeding that defendants have commenced against them in the Civil Court of the City of New York, Housing Part (motion sequence number 008).^[1] The motion, cross motion, and order to show cause are all disposed of in accordance with the following decision.

BACKGROUND

Plaintiffs Kathryn Casey, Laurie Cagnassola, Gerald Cohen, Betty Furr Francesca Gagliano, Carolyn Klein, Joseph Morgan, Richard Rose, Jessica Saks, and Kirk Swanson (plaintiffs) are all tenants of a building (the building) located at 350 East 52nd Street in the County, City, and State of New York. See notice of motion (motion sequence number 006) exhibit G (complaint), ¶ 1. Plaintiffs have been certified as a class pursuant to an order of this court (Singh, J.) dated August 6, 2012. Id., exhibit M. Defendants Whitehouse Estates, Inc. (Whitehouse), is alleged to be the building's former owner; co-defendants Koeppel & Koeppel, Inc. (K&K), Duell 5 Management LLC d/b/a Duell Management Systems (Duell), and William W. Koeppel (Koeppel, and collectively, defendants) are alleged to be the building's managing agents, and also to hold ownership interests in the building. Id., exhibit G (complaint) ¶¶ 16-19. As will be discussed, the building's current owner is alleged to be an entity called Eastgate Whitehouse LLC (Eastgate). See plaintiffs' memorandum of law (motion sequence number 006) at 9. The dispute in this action concerns plaintiffs' assertion that defendants illegally deregulated 78 of their rent-stabilized and/or rent-controlled apartment units and overcharged them market rent rates, while at the same time receiving tax abatements for the building pursuant to the J-51 program, which forbids that deregulation. See notice of motion (motion sequence number 006), exhibit G (complaint), ¶¶ 30-40.

Plaintiffs assert that defendants first registered 139 of the building's apartment units as rent stabilized in 1984 and that defendants thereafter participated in the J-51 tax abatement program from 1991 through 2014. See plaintiffs' mem of law at 3-4. Plaintiffs present copies of registration records from the New York State Division of Housing and Community Renewal (DHCR) and the New York City Department of Taxation and Finance (DTF) to support these claims. See notice of motion (motion sequence number 006), exhibits D, E. The class-member plaintiffs' individual tenancies commenced between 2002 and 2011. Id., exhibit M. Plaintiffs next present a copy of a letter, dated September 28, 2011, that defendants sent to all the building's tenants stating that they (i.e., defendants) had removed a number of the building's apartment units from rent regulation in contravention of the Court of Appeals decision in Roberts v Tishman Speyer Props., L.P. (13 N.Y.3d 270 [2009]), and that those units would "need to be converted back to stabilization rates," with new leases provided, as necessary. Id., exhibit F. Plaintiffs disputed defendants' recalculation of their rents and commenced this action on October 14; 2011. Id., exhibit G. Defendants then sent plaintiffs two letters: the first, dated October 20, 2011, from defendants' consultant Stephen Trynosky (Trynosky), annexed copies of DHCR registration records for each individual apartment unit and set forth a purported calculation of each apartment's "maximum legal regulated rent" (the Trynosky letter); and the second, dated January 12, 2012, from defendants' counsel, stated that, in view of plaintiffs' decision to commence this action, the building's tenants should ignore the Trynosky letter (the counsel letter). Id., exhibits H, J. Thereafter, on March 8, 2012, defendants filed "revised rent registration statements" for the building with the DHCR for the years 2007-2011. See notice of cross motion (motion sequence number 006), exhibit C.

Plaintiffs moved to be certified as a class (motion sequence number 002). They present a copy of this court's August 6, 2012 decision (Singh, J.), which found, in pertinent part, as follows:

"It is clear that common questions of law and fact predominate in the instant case. The litigation involves a single building and a single landlord. To determine damages, this Court must answer two questions common to each class member: 1) how to determine the tenant's base rent; and 2) how to devise a formula for calculating damages." Id., exhibit M at 11.

Plaintiffs allege that, despite a lengthy discovery period, defendants have failed to produce complete rent registration records for all the building's apartment units, with the result that "the rental history records are filled with large gaps, or in many cases ... are completely nonexistent" or make claims for vacancy increases in various units' rents without including documentation to evince that any repair work was done to justify the increases. Id., exhibits N-X; plaintiffs' mem of law at 9. Plaintiffs conclude that, as a result, "the legal regulated rents for all. . . apartments must be calculated by applying the DHCR's default formula." Plaintiffs' mem of law at 9.

For their part, defendants cite to a portion of the transcript of a hearing held before Justice Singh on May 21, 2014, in which the court ruled on defendants' earlier motion to preclude (motion sequence number 004); and on plaintiffs' cross motion for a preliminary injunction (motion sequence number 005). The transcript included the following order:

"I am directing the landlord to bring a motion for use and occupancy if he so chooses. In the event the landlord decides it's too onerous, then I am going to direct the tenants to pay use and occupancy. In the event the landlord chooses not to bring a motion for this court to set use and occupancy in these cases, the tenants are directed to pay use and occupancy in whatever their last expired lease was when this action was commenced, and that shall be paid prospectively until the completion of this case.

"Further, within 45 days, any prior rents that have not been paid shall be paid to the landlord.

"In the event these amounts aren't paid, then the landlord has the right to go into Housing Court to commence a nonpayment proceeding against those tenants who are in arrears based on the rents in their last lease when this action was commenced." Notice of cross motion (motion sequence number 006), exhibit A at 20.

Defendants assert that a number of plaintiffs are either in default of their obligation to pay use and occupancy, or have refused to pay rent increases; and that, as a result, defendants have had to commence proceedings in Housing Court to collect these amounts. See defendants' mem of law at 2. Defendants also assert that "Housing Court has refused to enforce the obligation to pay use and occupancy," allegedly owing to a lack of "clarity" regarding Justice Singh's May 21, 2014 order, and has dismissed several of the aforementioned proceedings without prejudice. Id. Consequently, defendants have cross-moved for an order to fix plaintiffs' current use and occupancy and to require them to pay it pendente lite (motion sequence number 006). The court notes that defendants' moving papers do not delineate the class-member plaintiffs against whom they commenced non-payment proceedings Housing Court or which of those proceedings was actually dismissed. The court further notes that defendants also commenced at least one holdover proceeding in Housing Court (L&T Index Number 78632/15) against the tenants of the building's penthouse apartment, Pamela Renna and Vitina DeGrezia a/k/a Vitina Luppino (the proposed intervenors). These tenants have moved separately by order to show cause for leave to intervene in this action (motion sequence number 008).

As was previously mentioned, plaintiffs commenced this action on October 14, 2011 by filing a summons and complaint that sets forth causes of action for (1) a declaratory judgment and injunctive relief; (2) money damages for rent overcharge; and (3) attorney's fees. See notice of motion (motion sequence number 006), exhibit G. On December 13 2011, defendants filed an answer that asserted numerous affirmative defenses, including (1) failure to state a claim for relief; (2) Duell is an agent of a disclosed principal; (3) K&K is an agent of a disclosed principal; (4) lack of subject matter jurisdiction; (5) failure to exhaust administrative remedies; (6) plaintiffs' claims are barred by statute; (7) plaintiffs' claims are barred by the doctrine of laches; (8) plaintiffs are barred from proceeding as a class; (9) plaintiffs' claims for treble damages are barred by the Rent Stabilization Law (RSL); (10) the RSL does not permit class action claims; (11) some plaintiffs' rents are less than the amount...