Reyes v. Erickson

• Decision Date: 03 January 2003
• Docket Number: No. 02 Civ. 4406(SHS).,02 Civ. 4406(SHS).
• Citation: 238 F.Supp.2d 632
• Court: U.S. District Court — Southern District of New York
• Parties: Gregory REYES, Jacquelin Gonzales, Juan Pagan, Remery Camacho, Byron Deacensoa, Madeline R. Valentin, Eugenia Alicia, Plaintiffs, v. Sandra ERICKSON, Clay Cluster Corp., Erickson Property Management, Inc., Sandra Erickson Real Estate, Inc., Sandra Erickson Agency, Inc., Sandra Erickson Management, Neighborhood Partnership Housing Development Fund Company, Inc., City of New York/Department of Housing, Preservation and Development, Jerilyn Perine, John Warren, Anne-Marie Hendrickson, Wendell B. Walters, Albert Valez, Eric Johnson, James Gardella, the Enterprise Foundation, Inc., the Council of the City of New York, Victor Robles, Gifford Miller, Melinda R. Katz, New York City Housing Partnership Inc. Defendant.

238 F.Supp.2d 632

Gregory REYES, Jacquelin Gonzales, Juan Pagan, Remery Camacho, Byron Deacensoa, Madeline R. Valentin, Eugenia Alicia, Plaintiffs, v. Sandra ERICKSON, Clay Cluster Corp., Erickson Property Management, Inc., Sandra Erickson Real Estate, Inc., Sandra Erickson Agency, Inc., Sandra Erickson Management, Neighborhood Partnership Housing Development Fund Company, Inc., City of New York/Department of Housing, Preservation and Development, Jerilyn Perine, John Warren, Anne-Marie Hendrickson, Wendell B. Walters, Albert Valez, Eric Johnson, James Gardella, the Enterprise Foundation, Inc., the Council of the City of New York, Victor Robles, Gifford Miller, Melinda R. Katz, New York City Housing Partnership Inc. Defendant.

No. 02 Civ. 4406(SHS).

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

January 3, 2003.

Howard Gotbetter, New York, NY, for Gregory Reyes, Jacquelin Gonzalez, Juan Pagan, Remery Camacho, Byron Deacensoa, Madeline R. Valentin, Eugenia Aliciea.

Michael L. Goldman, Goldman & Rio, New York, NY, for Sandra Erickson, Clay Custer Corp. Erickson Property Management, Inc, Sandra Erickson Real Estate Inc., Sandra Erickson Agency, Inc., Sandra Erickson Management.

OPINION AND ORDER

STEIN, District Judge.

This action arises out of a dispute concerning the manner in which the New York City Department of Housing, Preservation, and Development ("HPD") administered its Neighborhood Entrepreneurs Program ("NEP") with respect to a cluster of buildings on Clay Avenue in the Bronx, New York ("the Clay Avenue buildings"). Plaintiffs are seven rent-paying Latino tenants of those buildings, which were transferred by HPD to a "neighborhood entrepreneur" — defendant Sandra Erickson — pursuant to NEP in July 2000. Plaintiffs allege that because of their Latino heritage and because of their language barriers and educational limitations, they were discriminated against and unfairly denied an opportunity to become owners of the buildings pursuant to a city program that permits tenants to manage, and if successful, eventually purchase their building as a low-income cooperative. (Am. Compl.¶¶ 1-8, 45) ("Compl.").

Plaintiffs bring this action against 21 city and private defendants pursuant to 42 U.S.C. §§ 1981 and 1983 and the Housing and Community Development Act (HCDA), 42 U.S.C. § 5309 and several of its implementing regulations, 24 C.F.R. §§ 6.1 and 91.1. Plaintiffs also assert state law claims pursuant to the New York State Human Rights Law and the Administrative Code and Charter of the City of New York. Defendants now move to dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction, and pursuant to Fed. R.Civ.P. 12(b)(6) for failure to state a claim for relief. As set forth below, those motions are granted in their entirety because (1) this Court lacks subject matter jurisdiction over the tenants' claims pursuant to 42 U.S.C. § 1983, 42 U.S.C. § 5309, and 24 C.F.R. §§ 6.1 and 91.1; (2) the allegation pursuant to 42 U.S.C. § 1981 fails to state a claim for relief; and (3) this Court declines to exercise supplemental jurisdiction over the remaining state law claims.

BACKGROUND

NEP is a program that enables neighborhood-based private property managers — known as "neighborhood entrepreneurs" — to manage and subsequently own clusters of occupied and vacant city-owned buildings.¹ HPD and the Neighborhood Partnership Housing Development Fund Company, Inc. ("NPHDFC"), a not-for-profit corporation, assist in obtaining financing for the rehabilitation and permanent ownership of clusters of buildings and provide technical assistance to owners and managers.

When a building enters NEP, the city leases it to NPHDFC. During and after the lease period, a neighborhood entrepreneur based in the community rehabilitates and manages the building pursuant to a management and development agreement with the NPHDFC. See 28 RCNY § 35-07. If successful in these efforts, the neighborhood entrepreneur may ultimately become the long term owner of the buildings. See 28 RCNY § 35-08.

NEP has an opt-out provision pursuant to which the tenants of a building selected for NEP may apply to have the building opt out of NEP and instead enter HPD's Tenant Interim Lease ("TIL") program, which gives tenants the opportunity to manage and, if successful, eventually purchase their building as a low-income cooperative.² See 28 RCNY § 35-04. For a building to opt out of NEP and enter the TIL program, residential tenants of record in a building must form a tenant association, submit an application to HPD, and meet minimum rent collection and other requirements. See 28 RCNY § 34-03(b). If the application is accepted, the tenant association then enters into a temporary leasing arrangement with the city. During the period of the lease, the tenant association must work to improve the building and learn to manage it. See 28 RCNY § 34-04.

HPD has broad discretionary powers over whether a tenant association that is participating in the TIL program may continue to do so. The HPD regulations governing NEP provide numerous conditions, the violation of which would allow HPD to terminate the Tenant Interim Lease, including a Tenant Association's failure to comply with management standards, to pay bills or collect rent in a timely fashion, or if "for any other reason, it is no longer in the best interests of the City to keep the Building in the program." 28 RCNY § 34-07.

In this action, plaintiff tenants allege that the Clay Avenue buildings entered NEP in late 1999 or early 2000 but that plaintiffs were given no notice of this action or information about the TIL program until the summer of 2000. (Compl.¶ 22.) Defendant Sandra Erickson was appointed the neighborhood entrepreneur for the Clay Avenue buildings in July 2000. (Compl.¶ 23.) Plaintiffs allege that the city failed to give them proper notice of two required public hearings regarding the eventual sale and disposition of the buildings to the Erickson defendants and that city defendants were unresponsive to plaintiffs' inquiries about NEP and the possibility of their participation in the TIL program. (Compl.¶¶ 26-36.)

DISCUSSION

1. Legal Standards

An action must be dismissed for lack of subject matter jurisdiction pursuant to Fed R. Civ. P. 12(b)(1) when the trial court lacks the power to adjudicate the case. A plaintiff bears the burden of proving the existence of subject matter jurisdiction by a preponderance of the evidence. See Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000).

In reviewing a motion to dismiss a complaint pursuant to Fed.R.Civ.P. 12(b)(6), a court must accept as true the factual allegations in the complaint. See Weinstein v. Albright, 261 F.3d 127, 131 (2d Cir.2001); Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir.1995). Dismissal of the complaint is proper only when "it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The review is limited, and "[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir.1995) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)). The Court's function on a motion to dismiss is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient." Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.1985).

2. The Section 1983 Claims Must Be Dismissed for Lack of Subject Matter Jurisdiction

The United States Court of Appeals for the Second Circuit has held that a district court lacks subject matter jurisdiction to hear a plaintiff's 42 U.S.C. § 1983 claim when the plaintiff has failed to pursue the alleged underlying constitutional violation in a New York state court proceeding brought pursuant to Article 78 of the New York Civil Practice Law and Rules ("C.P.L.R."). See Hellenic American Neighborhood Action Comm. v. City of New York, 101 F.3d 877, 881-82 (2d Cir.1996). This rule applies to those claims that are appropriate for an Article 78 proceeding and the allegations are that state agencies have engaged in random and unauthorized acts. The rule does not apply when plaintiffs allege that statutory and administrative procedures that were properly followed are themselves unconstitutional. See John Gil Constr., Inc. v. Riverso, 72 F.Supp.2d 242, 251 n. 13 (S.D.N.Y.1999) (discussing Hellenic, 101 F.3d 877).

In this action, plaintiffs do not challenge the constitutionality of the underlying procedures governing NEP and the TIL program. Instead, they contend that municipal defendants' decisions to place the buildings at issue into NEP and not to assist plaintiffs in acquiring one of the buildings pursuant to a tenant management program was arbitrary and unauthorized. For instance, plaintiffs allege that: HPD made contradictory statements in a document about the identity of a building's ultimate owner (Compl.¶ 25); a mayoral hearing was scheduled without proper notice (Compl.¶ 32); and HPD officials were unresponsive to plaintiffs' requests for information about the TIL program. (Compl.¶¶ 26-27.)

Article 78 of the New York C.P.L.R., an amalgam of the common law writs of certiorari to review, mandamus, and prohibition, provides both a hearing and a means of redress for petitioners — such as plaintiffs in this action — who seek to challenge municipal decisions pursuant to NEP and the TIL program. See, e.g., DeJesus v. Roberts, 296 A.D.2d 307, 746 N.Y.S.2d 1 (1st Dep't 2002); Johnson v. City of New York, 192 A.D.2d 352, 596 N.Y.S.2d 33 (1st Dep't 1993); 502 West 135th Street Tenants Ass'n v. Zimroth, 160 A.D.2d 453, 554 N.Y.S.2d 127 (1st Dep't 1990). "[A] petitioner in an Article 78 proceeding ... is...