Opinion
No. 111723/11.
2012-08-6
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 & Koepell, Inc., Duell 5 Management LLC d/b/a Duell Management Systems, and William W. Koeppel, Defendants.
Emery Celli Brinckerhoff & Abady LLP, Matthew D. Brinckerhoff, Esq., Adam R. Pulver, Esq., Himmelstein, McConnell, Gribben, Donoghue & Joseph, William Gribben, Esq., Ronald S. Languedoc, Esq., Attorneys for plaintiffs. Walter Jennings, Esq., Attorney for defendants.
Emery Celli Brinckerhoff & Abady LLP, Matthew D. Brinckerhoff, Esq., Adam R. Pulver, Esq., Himmelstein, McConnell, Gribben, Donoghue & Joseph, William Gribben, Esq., Ronald S. Languedoc, Esq., Attorneys for plaintiffs. Walter Jennings, Esq., Attorney for defendants.
ANIL C. SINGH, J.
Plaintiffs in this action for rent overcharges move to certify the case as a class action pursuant to CPLR 901, to have themselves appointed the class representatives and their counsel appointed as counsel for the class. Defendants oppose the motion.
This is a putative class action brought by tenants of 350 East 52nd Street a/k/a 939 First Avenue in Manhattan. Defendants are the owner/landlord of the building, which contains approximately 137 apartments.
Beginning in 1993, the landlord began deregulating apartments pursuant to the luxury decontrol amendments to the RSL. In 1991, 1996, 2000 and 2003, defendants and/or their predecessors in interest were granted real estate tax benefits pursuant to New York City's J–51 program, which grants property owners tax abatements and exemptions for rehabilitative work done to their buildings.
Plaintiffs commenced the instant action by filing a class action complaint on October 14, 2011.
Plaintiffs Kathryn Casey, Laurie Cagnassola, Gerald Cohen, Betty Furr, Francesa Gagliano, Carolyn Klein, Joseph Morgan, Richard Rose, Jessica Saks, and Kirk Swanson are tenants who moved into the apartment building between 2002 and 2011.
Plaintiffs allege that their landlord illegally charged them market rate rents for their apartments. They allege that, as J–51 recipients, defendants were required to keep the apartments rent stabilized pursuant to the Court of Appeals decision in Roberts v. Tishman Speyer Properties, L.P., 13 NY3d 270 (2009). Plaintiffs are suing under the RSL for reimbursement of the excess rent amounts they allegedly paid defendants while defendants were participating in the J–51 tax benefit program. The complaint alleges that approximately 72 apartments have been improperly deregulated.
The first cause of action seeks an order and/or judgment: 1) declaring that plaintiffs' apartments are subject to rent stabilization or rent control and that defendants are required to offer renewal leases on forms approved by the DHCR and required by the RSL at legal regulated rents, or to continue their existing tenancy pursuant to the RCL with maximum legal rents as established by the RCL; 2) enjoining defendants from issuing any new lease or lease renewal that does not comply fully with the provisions of the RSL and RSC; 3) enjoining defendants from issuing a J–51 rider to any existing tenant who was not required to sign a J–51 rider at the inception of his/her tenancy; and 4) enjoining defendants from imposing any rent increases or other charges that do not comply fully with the provisions of the RSL and RSC.
The second cause of action seeks monetary damages for rent overcharges, including an award of treble damages based on the allegation that such rent overcharges by defendants were willful.
The complaint states that, if this action is certified by the court as a class action, plaintiffs will not pursue treble damages on behalf of the class (Complaint, para.60).
The third cause of action seeks a monetary judgment for plaintiffs' reasonable attorneys' fees, pursuant to Real Property Law section 234 and/or RSL and RSC section 2526.1 and/or CPLR 909.
Discussion
Plaintiffs are moving to certify this action as a class action, designating a class defined as “All current, former, and future tenants of 350 East 52nd Street whose apartments have been, are currently being, or will be, deregulated by, or subject to attempts to be deregulated by, defendants, their predecessors in interest, or their successors in interest, pursuant to Luxury Decontrol, while defendants are or have been in receipt of J–51 tax abatement benefits.” Defendants oppose the motion.
CPLR 902 states as follows:
Within sixty days after the time to serve a responsive pleading has expired for all persons named as defendants in an action brought as a class action, the plaintiff shall move for an order to determine whether it is to be so maintained. An order under this section may be conditional, and may be altered or amended before the decision on the merits on the court's own motion or on motion of the parties. The action may be maintained as a class action only if the court finds that the prerequisites under section 901 have been satisfied. Among the matters which the court shall consider in determining whether the action may proceed as a class action are:
1. The interest of members of the class in individually controlling the prosecution or defense of separate actions;
2. The impracticality or inefficiency of prosecuting or defending separate actions;
3. The extent and nature of any litigation concerning the controversy already commenced by or against members of the class;
4. The desirability or undesirability of concentrating the litigation of the claim in the particular forum;
5. The difficulties likely to be encountered in the management of a class action.
We begin by addressing whether the penalty provisions of the Rent Stabilization Law and Code prohibit class certification.
CPLR 901(b) states:
Unless 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 as a class action.
Defendants' ninth affirmative defense asserts that plaintiffs' claim for treble damages cannot be brought pursuant to Article 9 of the CPLR inasmuch as such claims seek to impose penalties upon defendants.
Defendants' contention is meritless for two reasons.
First, there is unambiguous precedent establishing that a statutory penalty or minimum recovery can be waived, thus confining the class recovery to actual damages and eliminating the bar of CPLR 901(b). Such waivers often occur, for example, in consumer fraud class actions brought under General Business Law section 349(h) (see Cox v. Microsoft Corp., 8 AD3d 39 [1st Dept., 2004]; Super Glue Corp. v. Avis Rent A Car System, Inc. 132 A.D.2d 604, 606 [2d Dept., 1987] ).
Second, a tenant may recover treble damages for rent overcharges only where the tenant is able to demonstrate a tenable claim that the landlord fraudulently or willfully evaded the RSC. It is clear to the Court, however, that treble damages for fraudulent or willful evasion of the RSC are precluded in the instant action based upon Roberts v. Tishman and its progeny.
It is undisputed that defendants' building received J–51 benefits. In Roberts, the Court of Appeals held that all apartments in buildings receiving J–51 tax benefits are subject to the RSL during the entire period in which the owner receives such benefits. Accordingly, the decontrol provisions of the RSL do not apply to building accommodations that became or become subject to the RSL, by virtue of receiving J–51 tax benefits.
Subsequently, in Gersten v. 56 7th Avenue LLC, 88 AD3d 189 [1st Dept., 2011], the First Department held that Roberts should be applied retroactively as it did not establish a new principle of law.
In 72A Realty Assoc. v. Lucas, 28 Misc.3d 585 [Civ.Ct., N.Y. County, 2010], the Civil Court of New York City addressed the issue of whether treble damages could be awarded against a landlord in light of Roberts. There, the Court wrote:
Petitioner is not guilty of fraud, or any intentional evasion of the RSL, such as the landlord in Thornton v. Baron (5 NY3d 175 [2005] ). Rather, petitioner, in setting an unregulated rent for respondent, was simply acting in a manner then consistent with Rent Stabilization Code (9 NYCRR) section 2520.11(r)(5) and (s)(2) that the Court of Appeals later ruled, in Roberts, to be a DHCR misinterpretation of RSL sections 26–504.1 and 26–504.2(a).... [S]ince the landlord herein committed no fraud or conscious evasion of the RSL, respondent is not entitled to an award of treble damages.
(72A Realty, 28 Misc.3d at 590.)
On appeal, the Appellate Term wrote:
With respect to tenant's rent overcharge counterclaim, we agree that no basis was shown for the court ... to impose treble damages upon landlord, tenant having failed to demonstrate a tenable claim of fraud or willfulness on the landlord's part.
(72A Realty Assoc. v. Lucas, 32 Misc.3d 47, 49–50 [App. Term, 1st Dept., 2011] ) (internal citations omitted). The reasoning of the Civil Court and Appellate Term in Lucus is persuasive.
Likewise, this Court recently applied similar legal analysis in Cohen v. 820 West End Avenue, L.L.C., Sup.Ct., N.Y. County, June 29, 2012, Wooten, J., Index No. 100223/11 [NYLJ dec.nylj.com/1202564197360]. There, Justice Wooten wrote:
Plaintiffs again assert that defendant has engaged in fraudulent conduct by (1) filing false registration statements each year after the 2001 vacancy and (2) not abiding by the First Department's decision in Roberts. Thus, plaintiffs maintain that there is a sound basis to use the default formula set forth in Thornton v. Baron, 5 NY3d 175 (2005), which is applied when there is fraud or an intentional evasion of the rent control law.
However, like the landlord in 72A Realty Assoc. v. Lucas, there is no evidence that defendant committed any fraud or purposeful evasion of the rent control law. Prior to Roberts, defendant was acting in a manner consistent with the DHCR's position that participation in the J–51 tax benefit program precluded luxury decontrol only where the receipt of the J–51 tax benefit was the sole reason for the imposition of rent regulation. Accepting plaintiffs' argument that defendant knowingly filed an unlawful incorrect Vacancy Decontrol Registration in 2001 would be “unduly punitive for what was action otherwise taken in good faith, relying upon the [DHCR's] own interpretation of the law” ( Rosenzweig v. 305 Riverside Corp., 35 Misc.3d 124[A], 2012 N.Y. Slip Op. 51103[U], *5 [Sup.Ct., N.Y. County 2012] ).
(internal citaitions omitted).
Similarly, the landlord in the instant action was acting in good faith reliance upon the DHCR's own interpretation of the law. Accordingly, the facts alleged cannot support a finding that the landlord fraudulently or purposefully evaded the Rent Stabilization Law, so the treble damage provisions of the rent regulations simply do not apply under the facts alleged.
Having addressed defendants' affirmative defense regarding plaintiffs' claim for treble damages, we turn next to whether plaintiffs have satisfied the criteria for class certification.
The burden of demonstrating the statutory prerequisites for class certification rests with the plaintiff (Emilio v. Robison Oil Corp ., 63 AD3d 667, 668 [2d Dept., 2009]; CLC/CFI Liquidating Trust v.. Bloomingdale's, Inc., 50 AD3d 446, 447 [1st Dept., 2008] ).
CPLR 901(a) lists five prerequisites to certification: (1) that the proposed class is so numerous that joinder of all members is impracticable; (2) that common questions of law or fact predominate among the class members; (3) that the claims brought by the proposed representatives are typical of the claims of the class; (4) that the proposed representatives are able to fairly and adequately protect the interests of the class; and (5) that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
CPLR article 9 is to be liberally construed (Argento v. Wal–Mart Stores, Inc., 66 AD3d 930, 933 [2d Dept., 2009] ). “The determination to grant class action certification rests in the sound discretion of the trial court” (Globe Surgical Supply v. Geico Ins. Co., 59 AD3d 129, 136 [2d Dept., 2008] ). “The primary issue on a motion for class certification is whether the claims as set forth in the complaint can be efficiently and economically managed by the court on a class-wide basis” ( Id.).
The amount of the rent overcharges will vary from tenant to tenant in this action. In some individual instances, the amount of damages may be so low that individual tenants would be discouraged from hiring a lawyer to pursue their claims. A class action affords such tenants who have been overcharged nominal amounts a means to be compensated. As the Practice Commentaries to CPLR 901 note:
One of the most frequently cited grounds for a finding of class-action superiority is the economic impracticability of individual actions. (This ground overlaps with CPLR 902(2).) When class members' claims are small in value, individual litigation simply is not a realistic prospect. See, e.g., Drizin v. Sprint Corp., 2004, 12 AD3d 245, 785 N.Y.S.2d 428 (1st Dep't); Super Glue Corp. v. Avis Rent A Car System, Inc., 1987, 132 A.D.2d 604, 607–08, 517 N.Y.S.2d 764, 768 (2d Dep't); Weinberg v. Hertz Corp., 1986, 116 A.D.2d 1, 7, 499 N.Y.S.2d 693, 697 (1st Dep't), affirmed, 1987, 69 N.Y.2d 979, 516 N.Y.S.2d 652, 509 N.E.2d 347 (“most of the individuals having claims averaging less than $31 would have no realistic day in court if a class action were not available”). In such cases, policy considerations bolster the superiority argument.
(Practice Commentary CPLR 901:8).
Upon careful consideration of all relevant circumstances, we find that plaintiffs meet all of the prerequisites of CPLR 901(a).
The complaint alleges that there are approximately 72 improperly deregulated apartments. The proposed class would include not only the current tenants of the apartments, but also any other tenants who resided in the units within the limitations period, and anyone who would reside there in the future. Based on these contentions, the Court finds that the numerosity requirement has been satisfied.
Under CPLR 901(a)(2), the Court must be satisfied that questions of law or fact common to the class predominate over any question affecting only individual members (Osarczuk v. Associated Universities, Inc., 82 AD3d 853, 855 [2d Dept., 2011] ). The issue of predominance cannot be determined by any mechanical test (Friar v. Vanguard Holding Corp., 78 A.D.2d 83, 103 [2d Dept., 1980] ). Rather, the Court must focus on whether class treatment will achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated ( Id., at 97).
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. The question of damages are dominated by common issues. 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. Accordingly, the commonality requirement has been satisfied.
Under CPLR 901(a)(3), the plaintiffs' claims must be typical of those of the rest of the class.
Here, the class representatives' claims are based on the same conduct by the landlord; assert the same legal theory; and are based on the same cause of action. Accordingly, the typicality requirement has been satisfied.
To evaluate whether plaintiffs are suitable class representatives, this Court must focus on three factors: whether any conflict of interest exists between the representatives and the class members; the representatives' familiarity with the lawsuit; and the competence and experience of class counsel (Pruitt v. Rockefeller Center Properties, Inc., 167 A.D.2d 14, 24 [1st Dept., 1991]; Ackerman v. Price Waterhouse, 252 A.D.2d 179, 202 [1st Dept ., 1998] ).
The named plaintiffs and the putative class members share a common goal—namely, ensuring that the landlord charges tenants of the apartment building no more than the maximum legal rent; that they be afforded the protections of the RSL and RSC; and that they receive compensation for past overcharges. Under such circumstances, there is no discernable conflict of interest.
Plaintiffs have submitted nine sworn affidavits in support of the motion for class certification. Plaintiffs Laurie Cagnassola, Kathryn Casey, Gerald Cohen, Betty Furr, Carolyn Klein, Joseph Morgan, Richard Rose, Jessica Saks, and Kirk Swanson state that they are ready, willing and able to assume the responsibilities and duties of a class representative; that they will not compromise the interests of the class members for their own personal gain; and that the proposed class counsel have explained the rights and responsibilities of a class representative.
Based on the sworn affidavits, the Court is satisfied that the class representatives understand the litigation, have knowledge of the claims, represent the interests of both themself and the proposed class, assist counsel in bringing this action, and fully understand that they are not entitled to treble damages.
As to counsel, plaintiffs have retained the law firms of Emery Celli Brinckerhoff & Abady LLP and Himmelstein, McConnell, Gribben, Donoghue & Joseph. The firms assert that they have represented tenants in two other cases involving J–51 and luxury decontrol, and that they have substantial expertise in landlord-tenant law and class action litigation.
In light of the above, we find that the adequacy of representation requirement of CPLR 901(a)(4) has been satisfied.
Finally, CPLR 901(a)(5) requires that a class action be “superior to other available methods for the fair and efficient adjudication of the controversy.”
Under the facts alleged, the alternatives to a class action would be individual actions by tenants or administrative proceedings. It is clear that this class action lawsuit conserves judicial resources by avoiding a multiplicity of lawsuits involving the same basic facts. Accordingly, plaintiffs have satisfied the final requirement of CPLR 901(a).
A consideration of the factors contained in CPLR 902 does not warrant a different result. Among the factors for the court to consider in determining whether the action may proceed as a class action under CPLR 902 are the inefficiency of prosecuting separate actions As we noted above, this class action will avoid a multiplicity of lawsuits by individual tenants, conserving scarce judicial resources.
Accordingly, the motion for class certification is granted.
The foregoing constitutes the decision and order of the court.