Dugan v. London Terrace Gardens, L.P.
| Decision Date | 16 August 2013 |
| Docket Number | Index No. 603468/2009,Index No. 603696/2009 |
| Parties | WILLIAM DUGAN, MARSHA D'YANS, GEORGETTE GAGNON, LOWELL D. KERN, MICHAEL MCCURDY, JOSE PELAEZ, TRACY SNYDER, MICHAEL J. WALSH, LESLIE M. MACK, and ANITA ZITIS, on Behalf of Themselves and All Other Persons Similarly Situated, Plaintiffs v. LONDON TERRACE GARDENS, L.P., Defendant JAMES DOERR, on Behalf of Himself and All Other Persons Similarly Situated, Plaintiffs v. LONDON TERRACE GARDENS, L.P., Defendant |
| Court | New York Supreme Court |
Snyder, Walsh, Mack, and Zitis
Matthew D. Brinckerhoff Esq. and Adam R. Pulver Esq.
Emery Celli Brinckerhoff & Abady LLP
William Gribben Esq. and Ronald S. Languedoc Esq.
Himmelstein, McConnell, Gribben, Donoghue & Joseph
For Plaintiff Doerr
Ronald Aranoff Esq., Christian Siebott Esq.,
Tania T. Taveras, and Gabriel G. Galletti Esq.
Bernstein Liebhard LLP
Robert D. Goldstein Esq. and Paul N. Gruber Esq.
Borah, Goldstein, Altschuler, Nahins & Goidel, P.C.
Richard M. Goldstein Esq. and Harry Frischer Esq.
Proskauer Rose LLP
Michael J. Siudzinski, Assistant Attorney General of the
State of New York
I. BACKGROUND
Plaintiffs in these two actions, on behalf of themselves and similarly defined classes of tenants at defendant's building complex London Terrace Gardens, claim that defendant charged them excessive rents under applicable rent stabilization laws and equivalent rent control laws. Roberts v. Tishman Spever Props., L.P., 13 N.Y.3d 270 (2009). London Terrace Gardens consists of almost 1,000 apartments. Plaintiffs claim defendant unlawfully removed over 50% of these units from rent stabilization or control and charged their tenants excessive rent.
The court's prior decision, affirmed by the First Department, denied defendant's motion to dismiss or stay each action to permit the New York State Division of Housing and Community Renewal (DHCR) to resolve plaintiffs' claims. Dugan v. London Terrace Gardens, L.P., 34 Misc. 3d 1240, 2011 WL 7553528 (Sup. Ct. N.Y. Co. 2011), aff'd, 101 A.D.3d 648 (1st Dep't 2012). Pursuant to that decision, the court retains jurisdiction todecide whether plaintiffs' apartments are subject to the rent stabilization and control laws at issue, whether the tenants have been charged excessive rent, and what rent was to have been charged for what past period and is to be charged currently. This decision addresses plaintiffs' motions to consolidate the two actions and certify a plaintiff class and third party defendant DHCR's motion to dismiss defendant's third party complaints in each action. Plaintiffs have resolved by a stipulation their motions insofar as they sought to appoint lead counsel for the class.
II. THE APPLICABLE RENT STABILIZATION AND CONTROL LAWS AND
The "luxury decontrol" provisions of the New York City Rent Control Law and Rent Stabilization Law allow a landlord to remove apartments from rent control or stabilization and charge market rent when tenants' incomes exceed specified thresholds. N.Y.C. Admin. Code §§ .26-403.1, 26-504.3. Once a landlord removes apartments from rent regulation and charges market rent, the landlord is no longer subject to the various other requirements attendant to rent regulation. These companion obligations include renewal the tenants' leases for a prescribed period, adherence to the original lease terms with limited rent increases, provision of the same services, and liability for harassment of tenants.
Where landlords receive a New York City "J-51" tax exemption or abatement for their apartments under New York Real Property Tax Law § 489(1) (a) and New York City Administrative Code §§ 11-243 and 11-244 (formerly §§ J51-2.5 and J51-5), the apartments are subject to rent regulation, N.Y.C. Admin. Code §§ 11-243 (i) (1), 26-504(c), and the luxury decontrol provisions do not apply. N.Y.C. Admin. Code §§ 26-403 (e) (2) (j) and (e) (2) (k), 26-504.1, 26-504.2(a). DHCR's Rent Stabilization Code and its Rent and Eviction Regulations for rent controlled units, interpreting the luxury decontrol statutes, however, allowed a landlord to avail itself of luxury decontrol of apartments that already were rent stabilized or controlled when the landlord began receiving a J-51 tax exemption or abatement for those apartments. DHCR's regulations also allowed a landlord to continue charging market rent for apartments already deregulated under luxury decontrol when the landlord began receiving J-51 tax benefits for the building, but the New York City Department of Housing Preservation and Development (HPD) had reduced them in proportion to the percentage of deregulated apartments in the building.
Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86, determined that this regulatory interpretation, 9 N.Y.C.R.R. § 2520.11(r) (5) (i) and (s) (2) (i), of the Rent Stabilization Law, N.Y.C. Admin. Code §§ 26-504.1 and 26-504.2(a), was contrary to the statutes' terms that a landlord may not avail itself of luxury decontrol where the apartment "became subject to" rent stabilization "by virtue of receiving" a J-51 tax exemption or abatement. The statutory terms prohibiting luxury decontrol of rent controlled apartments receiving J-51 tax benefits, N.Y.C. Admin. Code § 26-403(e) (2) (j) and (e) (2) (k), are identical to §§26-504.1 and 26-504.2(a), just as DHCR's regulations misinterpreting each statute are comparable. 9 N.Y.C.R.R. §§ 2200.2 (f) (19) (v) and (20) (ii), 2520.11 (r) (5) (i) and (s) (2) (i).
The Roberts ruling, however, in turn raises further issues. The extent to which these issues now have been resolved or will require resolution in this litigation and their suitability for classwide resolution bear on the pending motions.
First is the extent to which defendant's unlawful decontrol of apartments when tenants' incomes exceeded the thresholds for luxury decontrol, despite defendant's receipt of a J-51 tax exemption or abatement, must be remedied retroactively, requiring the landlord to repay past overcharges to tenants. Related to retroactivity is when plaintiffs' claims accrued and whether they survive under the applicable statute of limitations.
The Appellate Division subsequently has resolved that the Court of Appeals' interpretation in Roberts of the Rent Stabilization Law, N.Y.C. Admin. Code §§ 26-504.1 and 26-504.2(a), and the analogous provisions of the Rent Control Law, N.Y.C. Admin. Code § 26-403 (e) (2) (j) and (e) (2) (k), is to be applied retroactively. Roberts v. Tishman Speyer Props., L.P., 89 A.D.3d 444, 445-46 (1st Dep't 2011); Gersten v. 56 7th Ave. LLC, 88 A.D.3d 189, 198 (1st Dep't 2011). Retroactive application is warranted primarily because the Court of Appeals' decision did not establish a new principle of law, either by abruptly overruling past precedent on which litigants may haverelied, or by resolving an issue for the first time in a way not foreshadowed. Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d 184, 191-92 (1982); London Terrace Gardens, L.P. v. City of New York, 101 A.D.3d 27, 31 (1st Dep't 2012); Gersten v. 56 7th Ave. LLC, 88 A.D.3d at 197-98; Hilton Hotels Corp. v. Commissioner of Fin. of City of N.Y., 219 A.D.2d 470, 477 (1st Dep't 1995). See People v. Hill, 85 N.Y.2d 256, 262-63 (1995); People v. Favor, 82 N.Y.2d 254, 262-63 (1993) ; Americorp Sec. v. Saqer, 239 A.D.2d 115, 117-18 (1st Dep't 1997); Matter of Taihem F., 222 A.D.2d 322, 323-24 (1st Dep't 1995). Rather than creating a new principle of law, the decision simply construed a statute not judicially construed previously, hence mandating retroactive application. Roberts v. Tishman Speyer Props., L.P., 89 A.D.3d at 445-46; Gersten v. 56 7th Ave. LLC, 88 A.D.3d at 197-98.
Consequently, since no other judicial principle of law or judicial interpretation governed previously, and only an administrative interpretation was adopted, no caution is necessary in the displacement of a previously relied upon judicial principle or interpretation by a newly announced principle or interpretation. Instead, retroactive operation of the original judicial construction in Roberts is necessary to promote its effect. Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d at 192-93; Hilton Hotels Corp. v. Commissioner of Fin, of City of N.Y., 219 A.D.2d at 477-78. See People v. Hill, 85 N.Y.2d at 262-63; People v. Favor, 82 N.Y.2d at 262, 265-66; Americorp Sec. v. Sager, 239 A.D.2d at 117-18.
Finally, retroactive application will not impose inequitable results. Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d at 192-93; Hilton Hotels Corp. v. Commissioner of Fin. of City of N.Y., 219 A. D.2d at 477-78. See People v. Hill, 85 N.Y.2d at 262-63; People v. Favor, 82 N.Y.2d at 262, 266; Americorp Sec. v. Saqer, 239 A.D.2d at 117-18. Retroactive application of Roberts will protect tenants pursuant to the Rent Stabilization and Rent Control Laws, rather than allowing landlords to profit from a faulty administrative interpretation of the statutes. Gersten v. 56 7th Ave. LLC, 88 A.D.3d at 198.
To this end, the Appellate Division also refused to impose a statute of limitations, either the four years for rent overcharges, C.P.L.R. § 213-a; N.Y.C. Admin. Code § 26-516(a); Gersten v. 56 7th Ave. LLC, 88 A.D.3d at 200-201, or "the six years for breach of a lease, C.P.L.R. § 213(2); 72A Realty Assoc. v. Lucas, 101 A.D.3d 401, 402 (1st Dep't 2012); Gersten v. 56 7th Ave. LLC, 88 A.D.3d at 199-200, for the purpose of determining the rent regulatory status of apartments claimed to have been illegally deregulated while the landlord received J-51 tax benefits. While no statute of limitations bars plaintiffs' challenge to the regulatory status of their apartments, the court still must determine the operative statute of limitations on...
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