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, Plaintiff vs. London Terrace Gardens, L.P., Defendant, 603468/2009
Supreme Court, New York County, Part 46, Lucy A. Billings, J.
Cite as: Dugan v. London Terrace Gardens, L.P., 603468/2009, NYLJ 1202498153508, at *1 (Sup., NY, Decided June 6, 2011)
ADDITIONAL CASE:
James Doerr, on Behalf of Himself and All other Persons Similarly Situated v. London Terrace Gardens, L.P., 603696/2009
ATTORNEYS:
For the Plaintiff: Matthew D. Brinckerhoff Esq., Emery Celli Brinckerhoff & Abady LLP, Dugan, D'Yans, Gagnon, Kern, McCurdy, Pelaez, Snyder, Walsh, Mack, and Zitis, New York, NY.
William Gribben Esq. and Ronald S. Languedoc Esq., Himmelstein, McConnell, Gribben, Donoghue & Joseph, New York, NY.
For Plaintiff Doerr: Ronald Aranoff Esq., Hanna R. Neier Esq., and Christian Siebott Esq., Bernstein Liebhard LLP, New York, NY.
For the Defendant: Robert D. Goldstein Esq. and Paul N. Gruber Esq., Borah, Goldstein, Altschuler, Nahins & Goidel, P.C., New York, NY.
Harry Frischer Esq., Richard M. Goldstein Esq., and Steven H. Holinstatt Esq., Proskauer Rose LLP, New York, NY.
DECISION AND ORDER
I. BACKGROUND
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Plaintiffs in these two actions, consolidated for this decision, on behalf of themselves and similarly defined classes of tenants at defendant's building complex London Terrace Gardens, claim that defendant has charged them excessive rents under the Court of Appeals' interpretation of applicable rent stabilization laws. Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d 270 (2009). London Terrace Gardens consists of almost 1,000 apartments. Plaintiffs claim defendant has unlawfully removed approximately 30percent of these units from rent stabilization or
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control and charged their tenants excessive rent.
Defendant moves to dismiss or stay each action to permit the New York State Division of Housing and Community Renewal (DHCR) to resolve plaintiffs' claims concerning whether their 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. C.P.L.R. §§2201, 3211(a). Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86, determined that DHCR's misinterpretation since 2000 of the rent stabilization laws at issue had caused rent overcharges to tenants of other large building complexes in New York County. Nevertheless, defendant insists that DHCR assume primary jurisdiction over the rent to be charged in defendant's building complex.
This decision more comprehensively explains the court's prior order denying defendant's motion. The court withheld this decision previously in an abundance of caution not to jeopardize the progress of settlement negotiations over the past year. At the parties' last appearance, however, defendant demonstrated that that promising progress had reached a standstill.
II. THE APPLICABLE RENT STABILIZATION AND CONTROL LAWS AND THEIR INTERPRETATION
The "luxury decontrol" provisions of the New York City Rent
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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 no longer: must renew the tenants' leases or renew them for any prescribed period, is limited to the original lease terms or limited in negotiable rent increases, must provide the same services, or is subject to prohibitions against 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
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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 that the current two actions still must determine. First is the extent to which defendant's unlawful decontrol of apartments
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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.
Third is whether defendant lawfully may avail itself of luxury decontrol for apartments to which it attributes no J-51 tax benefits, while receiving them for other apartments in its building, because HPD reduced them in proportion to the percentage of decontrolled apartments in the building. The Appellate Division in Roberts 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." Roberts v. Tishman Speyer Props., L.P., 62 A.D.3d 71, 80 (1st Dep't), aff'd, 13 N.Y.3d at 284 (emphasis added). In affirming, the Court of Appeals did not repeat that holding, but, when referring to the legislative history of Administrative Code §§26-504.1 and 26-504.2(a), emphasized that it "plainly indicates that 'at no point' would the luxury decontrol provisions apply to buildings which 'received' tax exemptions." Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 287 (emphasis added). In fact the Rent Stabilization Law itself *6 requires that it apply to: "Dwelling units in a building…receiving the benefits of section 11-243 or section 11-244." N.Y.C. Admin. Code §26-504(c) (emphases added). See Independence Plaza N. Tenants' Assn. v. Independence Plaza Assoc., LP, 29 Misc. 3d 868, 877 (Sup. Ct. N.Y. Co. 2010). Related to all the above issues is the extent to which any prior judicial or DHCR adjudicatory decisions specifically regarding plaintiffs' rent levels affect determination of the retroactivity and limitations of plaintiffs' claims and the lawfulness of decontrol in proportion to a reduction in the tax benefits.
In sum, defendant seeks that all these issues be resolved consistently throughout New York's residential real estate rental market, which only a central administrative forum like DHCR is capable of accomplishing. Defendant posits that DHCR will resolve these issues by considering all affected parties' interests.
While DHCR's resolution of the issues through rulemaking well might consider all stakeholders' interests, defendant concedes that DHCR in over 18 months still has not amended its rules to conform to Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86. Were the court to grant a stay, plaintiffs might lose their apartments without rent regulation while waiting
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indefinitely for DHCR to act. For these reasons alone, such an indefinite stay would be inequitable, denying plaintiffs a prompt and permanent adjudication of their claims. C.P.L.R. §2201; Nezry v. Haven Ave. Owner LLC, 28 Misc. 3d 1226, 2010 WL 3338545, at *5 (Sup. Ct. N.Y. Co. 2010).
Nevertheless, even if DHCR may be counted on to act, a remand to DHCR of these building-wide actions or other building by building or unit by unit actions would prompt an adjudication only within the same context as the particular action. DHCR would be even further limited in these two actions, as it is unauthorized to decide whether to certify a class, determine its parameters, adjudicate plaintiffs' classwide claims, or grant the classwide relief plaintiffs seek. C.P.L.R. §905. See 9 N.Y.C.R.R. §§2207.1, 2207.5, 2207.6, 2526.1, 2527.1. On the other hand, DHCR remains free to set and implement policy on a broader scale, consistent with the governing statutes, and after considering the broader impact on all interests.
III. RETROACTIVITY
Of particular concern to defendant is the retroactive application of Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86, which would affect buyers and sellers of residential rental property, their lenders, and taxing authorities, who calculated prospective rental values based on DHCR's
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interpretation of the Rent Stabilization Law that the Court of Appeals upset. Owners of residential rental property applied for and obtained J-51 tax benefits for many years for buildings where the owners had removed apartments from rent regulation under luxury decontrol in reliance on DHCR's interpretive regulations. If now required to repay the difference between the market rents charged and the regulated rent, owners well might repay more than the value of the tax benefits. Buyers of these buildings and lenders that financed them invested in them in reliance on collection of market rents for those apartments removed from rent regulation. The increased rental values in turn increased the local, state, and federal taxes paid on the buildings.
However magnanimous defendant's concern for other property owners, prospective owners, lenders, and governmental tax revenues, yet again, the only interests to be considered here are defendant's financial constraints if required to repay years of high overcharges to many tenants. Defendant's interests of course are balanced against the protection of tenants intended to be protected over that time from rent increases above the regulated levels. The Court of Appeals recognized, moreover, that even a heavy burden on a building owner is "no reason to eschew what we view as the only correct interpretation of the
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statute": a view that applies equally throughout the period the statute has been in effect and simply allows defendant to collect a lawful rent. Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 287.
The issue here is not whether a new statute or new regulation is to be applied retroactively, but is whether the courts' interpretation, at their first opportunity, of a statute in effect since 1993, will now govern its application over that time. Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d 184, 191-92 (1982); 72A Realty Assoc. v. Lucas, __ Misc. 3d __, 2011 WL 2135625, at *1 (App. Term 1st Dep't May 24, 2011). In determining whether the interpretation of the Rent Stabilization Law, N.Y.C. Admin. Code §§26-504.1 and 26-504.2(a), in Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86, and the analogous provisions of the Rent Control Law, N.Y.C. Admin. Code §26-403(e)(2)(j) and (e)(2)(k), are to be applied retroactively, the court examines three questions. (1) Did the Court of Appeals' decision establish a new principle of law, (a) by abruptly overruling past precedent on which litigants may have relied, or (b) by resolving an issue for the first time in a way not foreshadowed? (2) If another judicial principle of law or judicial interpretation governed previously, will retroactive operation of a newly announced principle or
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interpretation promote or retard its operation? (3) Will retroactive application impose inequitable results? Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d at 191-92; 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. Sager, 239 A.D.2d 115, 117 (1st Dep't 1997); Matter of Taihem F., 222 A.D.2d 322, 323-24 (1st Dep't 1995).
Absent any past precedent to the contrary, Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86, resolved an issue for the first time. People v. Favor, 82 N.Y.2d at 263; Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d at 192; Matter of Taihem F., 222 A.D.2d at 323. Therefore only the extent to which that resolution was not foreshadowed and not to be expected and to which its retroactive application will produce inequity, which in turn would consider any inequitable financial impact on defendant if required to repay massive overcharges, are to be examined.
Despite any such impact, the very fact that Roberts enunciated a principle of law that did not overrule past precedent on which litigants may have relied, but was defensible based on the past law, the 1993 statute, nonetheless will militate in favor of retroactive application when the retroactivity issue is reached.
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Rogers v. Tennessee, 532 U.S. 451, 464 (2001); People v. Hill, 85 N.Y.2d at 263; Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d at 192; 72A Realty Assoc. v. Lucas, 2011 WL 2135625, at *1. See Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 287. So will "the plain text," id. at 285, and "the most natural reading of the statute's language" that has remained intact since its enactment, as well as its legislative history when enacted, id. at 286, that foreshadowed the Court of Appeals' interpretation of the Rent Stabilization Law. People v. Hill, 85 N.Y.2d at 262; People v. Favor, 82 N.Y.2d at 263. Defendant's reliance on DHCR's erroneous interpretation still may be a consideration, on the other hand, in examining whether overcharges were intentional, warranting an award of treble damages. 72A Realty Assoc. v. Lucas, 2011 WL 2135625, at *2. See N.Y.C. Admin. Code §§26-413(d)(2), 26-516(a); 9 N.Y.C.R.R. §§2206.8(b), 2526.1(a)(1); Bradbury v. 342 W. 30th St. Corp., __ A.D.3d __, 2011 WL 2119376, at *2 (1st Dep't May 31, 2011); H.O. Realty Corp. v. State of N.Y. Div. of Hous. & Community Renewal, 46 A.D.3d 103, 107-108 (1st Dep't 2007); Nagobich v. New York State Div. of Hous. & Community Renewal, 200 A.D.2d 388 (1st Dep't 1994); Roker Realty Corp. v. Gross, 163 Misc. 2d 766, 768 (App. Term 1st Dep't 1995).
IV. PLAINTIFFS' CLAIMS
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Plaintiffs bring their actions on behalf of a class of former, current, and future tenants at London Terrace Gardens residing in apartments that were subject to rent stabilization or rent control, but were treated as unregulated under luxury decontrol, since 2003 when defendant began receiving almost $2,000,000 in J-51 tax benefits. Plaintiffs seek a declaratory judgment that these apartments be returned to their prior regulated status, that any pending petitions before DHCR to deregulate apartments are void, and that any prior deregulation orders by DHCR are void. To return the apartments to regulated status, plaintiffs seek injunctive relief ordering defendant to register the unregulated apartments with DHCR and to offer the tenants renewal leases approved by DHCR. Plaintiffs seek damages equal to the excessive rents charged when plaintiffs' apartments were treated as unregulated during defendant's receipt of J-51 tax benefits.
Plaintiffs in one or both of these two actions, moreover, do not just claim rent overcharges under the Rent Stabilization Law or Rent Control Law. Plaintiffs also claim deceptive business practices, promissory estoppel, and reformation of their rental contracts.
V. PRIMARY JURISDICTION
A. The Court's and DHCR's Concurrent Jurisdiction
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Where an administrative agency with the necessary expertise may dispose of issues, the court, despite its concurrent jurisdiction, N.Y. Const. art. VI, §7; N.Y. Jud. Law §140-b; Sohn v. Calderon, 78 N.Y.2d 755, 766 (1991), may in its discretion suspend its action until resolution of the issues in an administrative proceeding. See id. at 768; Wong v. Gouverneur Gardens Hous. Corp., 308 A.D.2d 301, 303 (1st Dep't 2003); Acosta v. Loews Corp., 276 A.D.2d 214, 218-19 (1st Dep't 2000); Nasaw v. Jemrock Realty Co., 225 A.D.2d 385, 386 (1st Dep't 1996). The court then may take the agency's determination into account in the court's ultimate disposition. These issues may be factual, technical, or legal if they concern interpretation or application of statutes the agency is authorized to implement. Capital Tel. Co. v. Pattersonville Tel. Co., 56 N.Y.2d 11, 22 (1982); Wong v. Gouverneur Gardens Hous. Corp., 308 A.D.2d at 303-304; Davis v. Waterside Hous. Co., 274 A.D.2d 318 (1st Dep't 2000). DHCR's field of expertise, without question, is issues related to rent regulation, Sohn v. Calderon, 78 N.Y.2d at 768; Davis v. Waterside Hous. Co., 274 A.D.2d at 319, including the determination of the regulated rent over a retroactive period and the award of refunds and penalties for landlords' overcharges to tenants. 390 W. End Assoc. v. Nelligan, 35
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A.D.3d 306 (1st Dep't 2006); Wasserman v. Gordon, 24 A.D.3d 201, 202 (1st Dep't 2005); 390 W. End Assoc. v. Zouker, 302 A.D.2d 227, 228 (1st Dep't 2003); Davis v. Waterside Hous. Co., 274 A.D.2d at 319.
No authority, however, supports the dismissal or stay of a court action until an administrative proceeding resolves the issues raised, except in the following circumstances. (1) The legislature specifically has conferred exclusive, rather than primary, jurisdiction on the administrative agency to resolve the issues in the first instance. Sohn v. Calderon, 78 N.Y.2d at 766-67; Wong v. Gouverneur Gardens Hous. Corp., 308 A.D.2d at 304-305 & n.*; Vazquez v. Sichel, 12 Misc. 3d 604, 607 (Civ. Ct. N.Y. Co. 2005). See Capers v. Giuliani, 253 A.D.2d 630, 632-33 (1st Dep't 1998); County Dollar Corp. v. Douglas, 160 A.D.2d 537, 538 (1st Dep't 1990); Pocantico Home & Land Co., LLC v. Union Free School Dist. of Tarrytowns, 20 A.D.3d 458, 461-62 (2d Dep't 2005). (2) Plaintiffs seek referral to the agency for resolution of their claims. Crimmins v. Handler & Co., 249 A.D.2d 89, 91 (1st Dep't 1998). See Missry v. Ehrlich, 1 Misc. 3d 723, 731 (Civ. Ct. N.Y. Co. 2003). (3) An administrative proceeding relating to the issues preceded the court action or still is pending. Wong v. Gouverneur Gardens Hous. Corp., 308 A.D.2d at 302, 305; Davis v. Waterside Hous. Co., 274 A.D.2d at
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319; Nasaw v. Jemrock Realty Co., 225 A.D.2d at 386. See Acosta v. Loews Corp., 276 A.D.2d at 218; Missry v. Ehrlich, 1 Misc. 3d at 731. Defendant does not contend that any of these circumstances pertains here.
Without such a proceeding previously or currently pending, none of the factors that militate in favor of DHCR's primary jurisdiction carries any force. No coordination between the court action and DHCR's proceeding is necessary. There is no risk of inconsistent dispositions, nor will any DHCR determinations be forthcoming to inform the court. Wong v. Gouverneur Gardens Hous. Corp., 308 A.D.2d at 303; Davis v. Waterside Hous. Co., 274 A.D.2d at 318-19; Missionary Sisters of the Sacred Heart v. Meer, 131 A.D.2d 393, 395 (1st Dep't 1987); Vazquez v. Sichel, 12 Misc. 3d at 611. See Capital Tel. Co. v. Pattersonville Tel. Co., 56 N.Y.2d at 22; Heller v. Coca-Cola Co., 230 A.D.2d 768, 770 (2d Dep't 1996).
B. DHCR's Limited Authority
DHCR's province is to administer the requirements embodied in the Rent Stabilization Law and Rent Control Law. While those statutes may leave room for DHCR's interpretation through implementing regulations, its interpretation of statutes the agency is charged with implementing "is entitled to varying degrees of judicial deference depending on the extent to which
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the interpretation relies on the special competence the agency is presumed to have developed" in administering the statutes. Rosen v. Public Employment Relations Bd., 72 N.Y. 2d 42, 47 (1988).
Here, Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86, has interpreted the statutory requirements at issue and left no room for DHCR's variance from those strictures. The Court of Appeals found not only that DHCR's interpretation of those statutory requirements was at variance from those strictures, but also that interpretation of those statutory requirements:
does not call upon us to interpret a statute where "specialized knowledge and understanding of underlying operational practices or…an evaluation of factual data and inferences to be drawn therefrom" is at stake such that we should defer to the administrative agency's interpretation.
Id. at 285 (quoting KSLM-Columbus Apts., Inc. v. New York State Div. of Hous. & Community Renewal, 5 N.Y.3d 303, 312 (2005)). Where the issue requires accurate reading and analysis of statutes and apprehension of legislative intent, there is no basis for reliance on an administrative agency's expertise. Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86. "Application of statutory…standards and determination of whether they have been followed are regularly within the court's province." Vazquez v. Sichel, 12 Misc. 3d at 612 (citing
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Missionary Sisters of the Sacred Heart v. Meer, 131 A.D.2d at 395-96; State of New York v. Winter, 121 A.D.2d 287, 289 (1st Dep't 1986)).
In many instances the court would act within its discretion whether the court were to recognize DHCR's primary jurisdiction or to exercise its concurrent jurisdiction. In this precise situation, however, the court, specifically and definitively, is unauthorized to allocate primary jurisdiction to DHCR. Gerard v. Clermont York Assoc., LLC, 81 A.D.3d 497, 498 (1st Dep't 2011). To apply the doctrine of primary jurisdiction to "legal issues left open after the Court of Appeals' decision in Roberts v. Tishman Speyer Props., L.P. (13 N.Y.3d 270 [2009]), including whether the decision is to be applied retroactively," would be an abuse of discretion. Gerard v. Clermont York Assoc., LLC, 81 A.D.3d 497.
The absence of such discretion or authority stems from the undeniable reality that DHCR is in fact without the expertise and not well suited to determine the broadly applicable determinations defendant readily acknowledges this action demands. As outlined, they include the retroactive effect of Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d at 285-86, application of the governing statute of limitations to the accrual of plaintiffs' claims, the lawfulness of decontrol in
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proportion to a reduction in J-51 tax benefits, the preclusive effect of prior judicial or DHCR decisions, class certification, and grounds for relief beyond the Rent Stabilization Law and Rent Control Law. "It is the courts, not the Division of Housing and Community Renewal, that should address these issues in the first instance." Gerard v. Clermont York Assoc., LLC, 81 A.D.3d at 497-98.
C. The Issues to Be Determined Exclusively by the Court
On defendant's focal issue of retroactivity, the extent to which the Court of Appeals' statutory interpretation was foreshadowed and to which its retroactive application will produce inequity are not within DHCR's particular field of expertise. Nor does DHCR determine which statute of limitations applies to claims. DHCR applies only two: the four years applicable to overcharge claims for rent stabilized units, set by C.P.L.R. §213-a and Administrative Code §26-516(a), and the two years for rent controlled units, set by Administrative Code §26-413(d)(2). Hicks v. New York State Div. of Hous. & Community Renewal, 75 A.D.3d 127, 132-33 (1st Dep't 2010). DHCR does not determine circumstances under which tenants may not claim four years retroactively, as defendant may urge here, or under which tenants may claim more than four years retroactively, as plaintiffs may urge here, particularly as to their claims for
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promissory estoppel and contract reformation. C.P.L.R. §213.
Insofar as defendant's decontrol of apartments in proportion to a reduction in J-51 tax benefits involves defendant's waiver of J-51 benefits, the legality of such a unilateral waiver and its effectiveness to terminate rent regulated status is for the court to determine. State of New York v. Fashion Place Assoc., 224 A.D.2d 280, 281-82 (1st Dep't 1996); Independence Plaza N. Tenants' Assn. v. Independence Plaza Assoc., LP, 29 Misc. 3d at 882. In fact defendant has suggested a more far reaching waiver: refunding all the J-51 tax benefits received and continuing as deregulated all apartments that would have reverted to a regulated status under Administrative Code §§26-403(e)(2)(j) and (e)(2)(k), 26-504.1, and 26-504.2(a), "by virtue of" the benefits received. Insofar as such decontrol depends on prorating or refunding J-51 benefits, that determination is by HPD, which administers the tax benefits. 28 R.C.N.Y. §5.01(a). HPD's regulations specifically prescribe that, "to be eligible to receive tax benefits under the Act and for at least so long as a building is receiving the benefits of the Act,…all dwelling units in buildings…shall be subject to rent regulation," 28 R.C.N.Y. §5.03(f)(1) (emphases added), and that "rent regulation shall not be terminated by the waiver or revocation of tax benefits." 28 R.C.N.Y. §
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5.03(f)(3)(ii). See Independence Plaza N. Tenants' Assn. v. Independence Plaza Assoc., LP, 29 Misc. 3d at 875-77.
Defendant makes no showing that DHCR's specialized expertise equips DHCR to usurp these determinations. Were DHCR to permit what HPD prohibits, only the court is empowered to resolve such an inter-agency conflict. Were HPD to permit defendant's "repayment of benefits actually received" and a "retroactive termination of the benefits," the court may determine that defendant's retroactive claim of nonreceipt or HPD's retroactive termination of J-51 benefits "is a mere legal fiction," id. at 880, "based on an impermissible waiver…of benefits that is ineffective, under 28 R.C.N.Y. §5.03(f)(3)(ii), to terminate rent stabilization coverage of plaintiffs' units." Independence Plaza N. Tenants' Assn. v. Independence Plaza Assoc., LP, 29 Misc. 3d at 881. See State of New York v. Fashion Place Assoc., 224 A.D.2d at 281. Insofar as the relief plaintiffs seek involves invalidating prior DHCR proceedings and orders, while DHCR may be empowered to dismiss proceedings before it and vacate its prior orders, plaintiff tenants are entitled to the court's declaration regarding the invalidity of those proceedings or orders and the court's reversal of such agency actions if warranted. Grimm v. State of N.Y. Div. of Hous. & Community Renewal, 15 N.Y.3d 358, 366-67 (2010); Gilman v. New
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York State Div. of Hous. & Community Renewal, 99 N.Y.2d 144, 150-51 (2002); Devlin v. New York State Div. of Hous. & Community Renewal, 309 A.D.2d 191, 196 (1st Dep't 2003); Crimmins v. Handler & Co., 249 A.D.2d at 90-91. See Drucker v. Mauro, 30 A.D.3d 37, 39 n.* (1st Dep't 2006); 721 Ninth Ave., LLC v. New York State Div. of Hous. & Community Renewal, 8 A.D.3d 41, 45 (1st Dep't 2004); Futterman v. New York State Div. of Hous. & Community Renewal, 264 A.D.2d 593, 595 (1st Dep't 1999).
Finally, it is undisputed that DHCR is unauthorized to adjudicate claims under statutes that do not pertain specifically to rent stabilization or control or claims under the common law, including plaintiffs' deceptive business practices, promissory estoppel, and contract reformation claims. While DHCR must consider equitable factors when establishing the regulated rent, this authority is tightly circumscribed. 9 N.Y.C.R.R. §§2202.22(b), 2522.7. It provides not for equitable relief, but only for balancing equitable factors in arriving at monetary relief: the very "types of factors courts regularly weigh" in exercising monetary or equitable jurisdiction, but hardly comparable to the court's powers to adjudicate and grant plaintiffs' claims for equitable relief. Vazquez v. Sichel, 12 Misc. 3d at 610. See Nasaw v. Jemrock Realty Co., 225 A.D.2d at
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386. Thus, even if plaintiffs' claims for rent overcharges under the Rent Stabilization Law or Rent Control Law were remanded to DHCR and decided against plaintiffs, their other claims would remain for the court to decide. See Batas v. Prudential Ins. Co. of Am., 281 A.D.2d 260, 261 (1st Dep't 2001).
Similarly, it is undisputed that DHCR is unauthorized to decide whether to certify a class, determine its parameters, or adjudicate plaintiffs' claims for classwide relief. C.P.L.R. §905. See 9 N.Y.C.R.R. §§2207.1, 2207.5, 2207.6, 2526.1, 2527.1. Even if DHCR were to address the named plaintiffs' claims, their co-tenants would be without redress unless they commenced their own actions. Although defendant may claim a class action is unnecessary, the need for a class action is the court's and not DHCR's determination.
D. The Issues to Be Determined by the Court or DHCR
Denying defendant's current motion to dismiss or stay the action does not mean that the court, having set the parameters of retroactivity, the statute of limitations, the lawfulness of decontrol in proportion to a reduction in tax benefits, and the preclusive effect of prior judicial or DHCR decisions, might not then remand the action to DHCR. In deciding these issues, the court may determine whether each apartment included in these
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actions was subject to rent stabilization or control over a past period. Plaintiff tenants are entitled to the court's determination of their rent regulatory status and whether they have been overcharged for rent. Thornton v. Baron, 5 N.Y.3d 175, 180-81 (2005); Bradbury v. 342 W. 30th St. Corp., __ A.D.3d __, 2011 WL 2119376, at *3; East W. Renovating Co. v. New York State Div. of Hous. & Community Renewal, 16 A.D.3d 166, 167 (1st Dep't 2005); Wolfisch v. Mailman, 182 A.D.2d 533 (1st Dep't 1992). See Rabouin v. Metropolitan Life Ins. Co., 307 A.D.2d 843, 844 (1st Dep't 2003). As a fundamental principle, the Rent Stabilization Law and Rent Control Law expressly prohibit impairment, diminution, or dislocation of those rights. N.Y.C. Admin. Code §26-511(b). More specifically bearing on primary jurisdiction, those determinations "are within the court's conventional expertise" and do not require expertise or resources beyond the court's competence. Vazquez v. Sichel, 12 Misc. 3d at 612. See Madison-Oneida Bd. of Coop. Educ. Servs. v. Mills, 4 N.Y.3d 51, 59 (2004); Missionary Sisters of Sacred Heart v. Meer, 131 A.D.2d at 395-96; Roker Realty Corp. v. Gross, 163 Misc. 2d at 767-68.
Yet for each apartment returned to a prior regulated status, it then may be necessary to determine the initial regulated rent to which the rent level must be restored and when, annual
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increases, and increases based on major capital improvements or on individual apartment improvements. Once the court makes the first category of more broadly applicable determinations, for which an administrative agency is not well suited, the agency may be more suited to the second category of determinations on the measure of damages to each plaintiff, by reconstructing the base rent and allowable rent increases specific to individual units. Wasserman v. Gordon, 24 A.D.3d at 202; 390 W. End Assoc. v. Zouker, 302 A.D.2d at 227-28; Nezry v. Haven Ave. Owner LLC, 28 Misc. 3d 1226, 2010 WL 3338545, at *3-4. At this juncture, however, dismissal or even a stay of these actions is impermissible and, at best, premature. Gerard v. Clermont York Assoc., LLC, 81 A.D.3d at 497-98.
VI. CONCLUSION
For the foregoing reasons, the court denies defendant's motions to dismiss or stay these actions. C.P.L.R. §§2201, 3211(a).
