Downing v. First Lenox Terrace Assocs.

Decision Date25 April 2013
Citation2013 N.Y. Slip Op. 02853,965 N.Y.S.2d 9,107 A.D.3d 86
PartiesElise DOWNING, et al., Plaintiffs–Appellants, v. FIRST LENOX TERRACE ASSOCIATES, et al., Defendants–Respondents.
CourtNew York Supreme Court — Appellate Division

107 A.D.3d 86
965 N.Y.S.2d 9
2013 N.Y. Slip Op. 02853

Elise DOWNING, et al., Plaintiffs–Appellants,
v.
FIRST LENOX TERRACE ASSOCIATES, et al., Defendants–Respondents.

Supreme Court, Appellate Division, First Department, New York.

April 25, 2013.


[965 N.Y.S.2d 10]


Emery Celli Brinckerhoff & Abady LLP, New York (Matthew D. Brinckerhoff and Adam R. Pulver of counsel), and Himmelstein, McConnell, Gribben, Donoghue & Joseph, New York (William Gribben, David Hershey–Webb and Ronald S. Languedoc of counsel), for appellants.

Pryor Cashman LLP, New York (David C. Rose, Donald S. Zakarin and Todd E. Soloway of counsel), and Michael B. Kramer & Associates, New York (Michael B. Kramer of counsel), for respondents.


PETER TOM, J.P., RICHARD T. ANDRIAS, DIANNE T. RENWICK, LELAND G. DeGRASSE, SHEILA ABDUS–SALAAM, JJ.

ANDRIAS, J.

[107 A.D.3d 88]In this putative class action, plaintiffs, 13 tenants or former tenants of a residential complex owned by defendants, allege that defendants unlawfully deregulated their apartments under the luxury decontrol provisions of Rent Stabilization Law (Administrative Code of City of N.Y.) § 26–501 et seq., while receiving tax incentive benefits under the City of New York's J–51 program ( see Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d 270, 280, 890 N.Y.S.2d 388, 918 N.E.2d 900 [2009] ). Plaintiffs seek, among other things, a declaration that all apartments in the complex are subject to rent stabilization, injunctive relief, and a money judgment. While plaintiffs demanded treble damages pursuant to Rent Stabilization Law § 26–516(a) in their amended complaint, they have since waived that request and seek only reimbursement of the alleged rent overcharges plus interest.

Supreme Court erred when it dismissed the putative class action pursuant to CPLR 901(b) and the individual claims on the ground that they should be brought before the Division of Housing and Community Renewal (DHCR). Because plaintiffs now seek to recover only their actual damages plus interest, rather than enhanced damages, and because Supreme Court has concurrent jurisdiction with DHCR with respect to overcharge claims, defendants' motion to dismiss should be denied.

Pursuant to Rent Stabilization Law § 26–516(a), “[i]f it is determined that the owner's decision to charge the excessive rent was deliberate, or done knowing that the rent as charged was unlawful, a finding of willfulness is entered and a penalty equal to three times the amount of the overcharge must be imposed” (Matter of H.O. Realty Corp. v. State of N.Y. Div. of Hous. & Community Renewal, 46 A.D.3d 103, 107, 844 N.Y.S.2d 204 [1st Dept. 2007] ). “If the owner establishes by a preponderance of the evidence that the overcharge was not willful,” the tenant must be awarded the amount of the overcharge, plus interest “from the date of the first overcharge ... at the rate of interest payable [107 A.D.3d 89]on a judgment pursuant to

[965 N.Y.S.2d 11]

section 5004 of the [CPLR]” (Rent Stabilization Code [9 NYCRR] § 2526.1[a][1] ).

Pursuant to CPLR 901(b), “[u]nless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained in a class action.” However, even where a statute creates or imposes a penalty, the restriction of CPLR 901(b) is inapplicable where the class representative seeks to recover only actual damages and waives the penalty on behalf of the class, and individual class members are allowed to opt out of the class to pursue their punitive damages claims ( see Cox v. Microsoft Corp., 8 A.D.3d 39, 778 N.Y.S.2d 147 [1st Dept. 2004]; Pesantez v. Boyle Envtl. Servs., 251 A.D.2d 11, 12, 673 N.Y.S.2d 659 [1st Dept. 1998]; Ridge Meadows Homeowners' Assn. v. Tara Dev. Co., 242 A.D.2d 947, 665 N.Y.S.2d 361 [4th Dept. 1997]; Super Glue Corp. v. Avis Rent A Car Sys., 132 A.D.2d 604, 606, 517 N.Y.S.2d 764 [2d Dept. 1987] ).

Relying on Asher v. Abbott Labs., 290 A.D.2d 208, 737 N.Y.S.2d 4 [1st Dept. 2002], lv. dismissed98 N.Y.2d 728, 749 N.Y.S.2d 478, 779 N.E.2d 189 [2002], defendants argue that the penalties of Rent Stabilization Law § 26–516(a) are mandatory and cannot be waived. In Asher, this Court held that

“private persons cannot bring a class action under the Donnelly Act because the treble damages remedy provided in General Business Law § 340(5) is a ‘penalty’ within the meaning of CPLR 901(b), the recovery of which in a class action is not specifically authorized and the imposition of which cannot be waived” (290 A.D.2d at 208, 737 N.Y.S.2d 4).

However, under General Business Law § 340(5), treble damages are awarded upon a finding of liability; the statute does not require a finding of willfulness or bad faith. In contrast, Rent Stabilization Law § 26–516(a) only requires treble damages where the landlord cannot demonstrate that it did not act willfully, and is analogous to Labor Law 198(1–a), under which plaintiffs have been allowed to waive their right to liquidated damages to preserve the right to maintain a class action, provided that putative class members are given the opportunity to opt out of the class in order to pursue their own liquidated damages claims ( see Pesantez, 251 A.D.2d at 12, 673 N.Y.S.2d 659] ).

Rent Stabilization Code (9 NYCRR) § 2520.13, which states that “[a]n agreement by the tenant to waive the benefit of any provision of the RSL or this Code is void,” does not require a different result. “[P]laintiffs are seeking to waive their entitlement[107 A.D.3d 90]to treble damages unilaterally, not through agreement. Thus, allowing the class action to proceed would not frustrate the RSC's purpose of [avoiding] situations whereby the landlord attempts to circumvent the [RSC's] benefits” ( Rebibo v. Axton Owners, Inc., 2012 N.Y. Slip Op 32624[U], n. 2, 2012 WL 5230637 [Sup. Ct., N.Y. County 2012] [internal citation and quotation marks omitted] ).

Significantly, plaintiff's waiver of treble damages will not subvert a protection afforded by the rent stabilization scheme. On behalf of the putative class, plaintiffs seek a declaration that their apartments are subject to rent stabilization and the rent regulatory provisions of the Rent Stabilization Law, that any petitions for deregulation submitted by defendants to DHCR are invalid, and that any deregulation orders issued by DHCR are null and void. Plaintiffs also seek an...

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  • Dugan v. London Terrace Gardens, L.P., Index No. 603468/2009
    • United States
    • New York Supreme Court
    • August 16, 2013
    ...of recovery, and (2) class members retain the right to opt out of the class to pursue the punitive relief. Downing v. First Lenox Terrace Assoc., 107 A.D.3d 86, 89 (1st Dep't 2013); Borden v. 400 E. 55th St. Assoc., L.P., 105 A.D.3d 630 (1st Dep't 2013); Gudz v. Jemrock Realty Co., LLC, 105......
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    • New York Supreme Court
    • September 9, 2013
    ...and (2) class members retain the right to opt out of the class to pursue the punitive relief. Downing v. First Lenox Terrace Assoc., 107 A.D.3d 86, 89, 965 N.Y.S.2d 9 (1st Dep't 2013); Borden v. 400 E. 55th St. Assoc., L.P., 105 A.D.3d 630, 964 N.Y.S.2d 115 (1st Dep't 2013); Gudz v. Jemrock......
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    • United States
    • New York Supreme Court
    • August 16, 2013
    ...of recovery, and (2) class members retain the right to opt out of the class to pursue the punitive relief. Downing v. First Lenox Terrace Assoc., 107 A.D.3d 86, 89 (1st Dep't 2013); Borden v. 400 E. 55th St. Assoc., L.P., 105 A.D.3d 630 (1st Dep't 2013); Gudz v. Jemrock Realty Co., LLC, 105......
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    ...be dismissed, even at the pre-answer stage, for failure to state a cause of action (see generally Downing v. First Lenox Terrace Assoc. , 107 A.D.3d 86, 91, 965 N.Y.S.2d 9 [1st Dept. 2013], affd sub nom. Borden v. 400 E. 55th St. Assoc., L.P. , 24 N.Y.3d 382, 998 N.Y.S.2d 729, 23 N.E.3d 997......
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