New York State Ass'n of Realtors, Inc. v. Shaffer

• Decision Date: 30 September 1993
• Docket Number: No. CV 91-1897 (ADS).,CV 91-1897 (ADS).
• Citation: 833 F. Supp. 165
• Parties: NEW YORK STATE ASSOCIATION OF REALTORS, INC. and Clifford Hall, Plaintiffs, v. Gail S. SHAFFER, Individually and as Secretary of State of the State of New York, Defendant.
• Court: U.S. District Court — Eastern District of New York

833 F. Supp. 165

NEW YORK STATE ASSOCIATION OF REALTORS, INC. and Clifford Hall, Plaintiffs, v. Gail S. SHAFFER, Individually and as Secretary of State of the State of New York, Defendant.

No. CV 91-1897 (ADS).

United States District Court, E.D. New York.

September 30, 1993.

COPYRIGHT MATERIAL OMITTED

Michael T. Wallender, Albany, NY, Goldson & Radin by Howard W. Goldson, Commack, NY, for plaintiffs.

Robert Abrams, Atty. Gen., State of NY by August L. Fietkau, Asst. Atty. Gen., for defendant.

MEMORANDUM DECISION AND ORDER

SPATT, District Judge.

The plaintiffs commenced this action to obtain a declaratory judgment to declare that Chapter 696 of the New York State Laws of 1989 (N.Y. Real Prop. Law § 442-h) and the regulations promulgated thereunder to establish or enforce "nonsolicitation zones" are unconstitutional. The plaintiffs move for summary judgment pursuant to Fed.R.Civ.P. 56, invalidating Real Property Law § 442h(1) and (2) and 19 N.Y.C.R.R. Part 178 in total, as well as invalidating 19 N.Y.C.R.R. § 175.17(a), as applied by the defendant to truthful and non-misleading communications by real estate licensees which do not make a representation regarding the entry or prospective entry into the neighborhood of persons of a particular race, color, religion, or national origin.

The defendant moves for summary judgment pursuant to Fed.R.Civ.P. 56 dismissing the action on the ground that she is entitled to dismissal of the action as a matter of law.

BACKGROUND

The plaintiff, New York State Association of Realtors, Inc., represents real estate licensees throughout the State of New York and the plaintiff Clifford Hall is a real estate broker in Queens, New York. The defendant Gail Shaffer is the Secretary of State of the State of New York. This case centers around "nonsolicitation orders" issued by the Secretary of State which prevent licensed real estate brokers from soliciting prospective clients directly. The purported reason for these nonsolicitation orders is to prevent the practice of blockbusting. The term blockbusting is defined as a practice whereby individuals "prey upon the fears of property owners in racially transitional areas and thereby induce the kind of panic selling which results in community instability" (Zuch v. Hussey, 394 F.Supp. 1028, 1049 E.D.Mich. 1975, partially affirmed and remanded, 547 F.2d 1168 6th Cir.1977).

Blockbusting is prohibited by a federal statute which states that:

"it shall be unlawful ... for profit, to induce or attempt to induce any person to sell or rent any dwelling by representation regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, sex, handicap, familial status, or national origin" (42 U.S.C. § 3604e).

This statute was "intended by Congress to reach only real estate brokers and their agents" (Michigan Protection & Advocacy Service, Inc. v. Babin, 799 F.Supp. 695, 715 E.D.Mich.1992). The practice of blockbusting is also prohibited pursuant to a New York State statute which provides that:

"it shall be an unlawful discriminatory practice for any real estate broker, real estate salesman or employee or agent thereof ... to represent that a change has occurred or will or may occur in the composition with respect to race, creed, color, national origin or marital status of the owners or occupants in the block, neighborhood or area in which the real property is located, and to represent, directly or indirectly, that this change will or may result in undesirable consequences in the block, neighborhood or area in which the property is located, including but not limited to the lowering of property values, an increase in criminal or anti-social behavior, or a decline in the quality of schools or other facilities" (N.Y.Exec.Law § 2963-b).

In addition to the above statutes, the New York Secretary of State promulgated a regulation which stated that:

"No broker or salesperson shall induce or attempt to induce in order to sell or lease any residential property or to list same for sale or lease by making any representation regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion or national origin" (19 N.Y.C.R.R. § 175.17a).

This regulation was initially enforced by "cease and desist" orders. These orders prohibited brokers from soliciting homeowners who notified the Secretary of State that they did not desire to sell or lease their property and did not want to receive solicitations. In addition to the cease and desist orders, the Secretary of State issued nonsolicitation orders in the early 1970s which prevented licensed real estate brokers from actively soliciting homeowners in designated areas in Kings and Queens County.

The issuance of these nonsolicitation orders was challenged in 1979 by a group of realtors. In finding that the implementation of nonsolicitation orders by the Secretary of State was arbitrary and capricious, the New York Court of Appeals stated that:

"The evidence adduced by respondent falls far short of a showing that prohibited racial blockbusting tactics were prevalent throughout the two-county area encompassed by the order. Indeed, the proof does not even establish that such practices were imminent. Rather, it reveals only that homeowners in certain areas of the two counties were subjected to greater solicitation that they had been in the past. However, even in those two specified areas, there is no indication that the majority of those solicitations were purposely infected with racially based representations which placed undue pressure on those homeowners to list their houses for sale. Hence, the facts before respondent failed to establish any rational basis for promulgation of an order so broad in geographic scope and, therefore, the order was arbitrary and capricious" (Hawley v. Cuomo, 46 N.Y.2d 990, 992, 389 N.E.2d 827, 828, 416 N.Y.S.2d 232, 233 1979 emphasis added).

Apparently simultaneously with the above nonsolicitation orders, the Secretary of State issued an order for various communities within Bronx County which prevented real estate brokers in that area from soliciting listings from residents in any manner including, letters, postcards, telephone calls, door-to-door canvassing, window signs, billboards, advertisement by handbills or news publications, except those of general circulation. It was claimed that nonsolicitation orders restricted speech in an unconstitutional manner and exceeded the authority granted to the Secretary of State for the enactment of this type of regulation.

In reviewing the Bronx nonsolicitation order, the New York Court of Appeals stated that the order:

"leaps well beyond that legislative articulation and interdicts administratively all broker-initiated solicitation, not just the illegal solicitation as targeted by the Legislature. Thus, the Secretary has gone beyond administering the written law and has, under color of regulatory authority, actually rewritten and extended the law. The agency cannot make unlawful what the Legislature still has on the books as lawful" (Campagna v. Shaffer, 73 N.Y.2d 237, 245, 536 N.E.2d 368, 369, 538 N.Y.S.2d 933, 934 1989).

Following the Campagna decision in 1989, the New York State Legislature enacted N.Y. Real Property Law Section 442-h which states, in relevant part, that

"if, after a public hearing and a reasonable investigation, the secretary of state determines that the owners of residential real property within a defined geographic area are subject to intense and repeated solicitations by real estate brokers and salespersons to place their property for sale with such real estate brokers and salespersons, and that such solicitations have caused owners to reasonably believe that property values may decrease because persons of different race, ethnic, social, or religious backgrounds are moving or are about to move into the neighborhood or geographic area, the secretary of state may adopt a rule, to be known as a nonsolicitation order, directing all real estate brokers and salespersons to refrain from soliciting residential real estate listings within the subject area" (N.Y. Real Prop. Law § 442-h2a emphasis added).

It is asserted by the plaintiffs that this law "on its face and as applied imposes a content based restriction on permissible communication by real estate licensees" (Plaintiff's Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment, at p. 10).

It is undisputed that pursuant to this statute, on May 18, 1991 the Secretary of State imposed five-year nonsolicitation orders on communities within Queens, Nassau, Kings, and Bronx counties. According to the applicable regulations promulgated by the Secretary of State, which are similar to those regulations promulgated prior to the enacting of Section 442-h,

"a nonsolicitation order is a directive to all real estate brokers and real estate salespersons. The nonsolicitation order directs that all brokers and salespersons must refrain from soliciting listings for the sale of residential property within a designated geographic area. A nonsolicitation order prohibits any and all types of solicitation directed at or toward homeowners in the designated geographic area. The types of solicitation that are prohibited include but are not limited to letters, postcards, telephone calls, door-to-door calls, handbills, and postings in public areas...." (19 N.Y.C.R.R. § 178.1).

In addition, these regulations prevent realtors from establishing or relocating real estate offices within a nonsolicitation area without prior approval from the Secretary of State (See 19 N.Y.C.R.R. § 178.2).

Specifically, within Queens County, the Secretary of State imposed restrictions upon the communities of Richmond Hill, Woodhaven, Glen Oaks, Floral Park, Bellerose, Queens Village, Cambria Heights, Laurelton, Springfield Gardens, Brookville, and Rosedale (See 19 N.Y.C.R.R. § 178.8)...