Opinion
650361/09
11-09-2011
Lorraine Borden, o/b/o herself and all others similarly situated, Plaintiff, v. 400 East 55th Street Associates L.P., Defendant.
Attorney for Plaintiff: WOLF HOLDERSTEIN ADLER / ET AL BERNSTEIN LIEBHARD LLP Attorneys for Defendant: ROSENBERG & ESTIS
Attorney for Plaintiff: WOLF HOLDERSTEIN ADLER / ET AL BERNSTEIN LIEBHARD LLP
Attorneys for Defendant: ROSENBERG & ESTIS
Judith J. Gische, J.
Recitation, as required by CPLR § 2219 [a] of the papers considered in the review of this (these) motion(s):
PapersNumbered
Notice of Motion...............................................................................................................1
TT affirm., exhibits...........................................................................................................2
JT amended affirm. in opp., exhibits................................................................................3
RJA affirm in further support, exhibits..............................................................................4
JT supplemental affirm. in opp., exhibit...........................................................................5
Upon the foregoing papers the decision and order of the court is as follows:
This case raises another emerging issue, arising in the aftermath of the Court of Appeals decision in Roberts v. Tishman Speyer (13 NY3d 270 [2009]). In Roberts, supra, the Court of Appeals determined that where a landlord is receiving the benefit of a J-51 tax abatement, no apartment in the building may be deregulated pursuant to the luxury decontrol laws, even where the building had been subject to rent stabilization before the tax abatement. Prior to Roberts, the New York State Division of Housing and Community Renewal ("DHCR") had taken the position that where participation in the J-51 program was not the sole reason for the rent regulated status of a building, particular apartments could be luxury decontrolled. As a consequence, many landlords decontrolled particular apartments in buildings, charging tenants market rents, while at the same time receiving J-51 tax abatements. Since Roberts, tenants, like the plaintiff, Lorraine Borden ("Borden"), have brought legal actions seeking: [1] to have their apartments declared subject to rent stabilization, [2] recalculation of the permissible rent that may be charged and [3] refunds of any rent overpayment. Some of these actions, including the instant one, have been styled as class actions, raising issues about whether a class action is an appropriate procedural vehicle for addressing post Roberts claims.
Borden now moves to certify this case as a class action, to have herself appointed the class representative and her counsel appointed as counsel for the class. Defendant opposes the motion. As will be more fully set forth below, while this court finds that a class action would otherwise be appropriate, Borden's failure to establish that she is an adequate class representative, requires that the motion for certification be denied at this time, but without prejudice to renew.
Notwithstanding that the complaint is unverified and the motion is not supported by any sworn statement from Borden, many of the facts are either undisputed or established through documents and public records. Borden became a lease tenant of apartment 4F ("apartment") located at 400 East 55th Street in Manhattan (building") pursuant to a one year written lease, commencing November 1, 2006. The monthly rent at that time was $2,650. The lease was extended, in writing, for an additional two years, commencing November 1, 2007. During the extension, the monthly rent was increased to $2,875. After the decision in Roberts, Borden and the owner could not agree on the level of lawful rent that could be charged for the apartment. Borden tried to tender certain monies for rent, but the defendant rejected it as being below that to which it was entitled. Efforts to agree that rent should be paid without prejudice proved unfruitful. Defendant has, consequently, interposed a counterclaim against Borden for rental arrears.
The building is owned by defendant, 400 East 55th Street Associates LP ("owner"). According the rent registration records on file with the DHCR, the apartment was deregulated based upon vacancy luxury decontrol. According to public documents on file with the New York City Department of Finance, the owner received J-51 tax abatements for tax years 1991/92 through 2010/11.
There are 128 residential units in the building. Approximately 53 of the units are deregulated.
Discussion
Pursuant to CPLR 901(a), a party seeking class action certification must establish the existence of the following five prerequisites: 1) the class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable, 2) there are questions of law or fact common to the class which predominate over any questions affecting only individual members; 3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; 4) the representative parties will fairly and adequately protect the interests of the class; and 5) a class action is superior to other available methods for the fair and efficient adjudication of the controversy. CPLR 902 also requires the court to examine: 1) the interest of members of the class in individually controlling the prosecution or defense of separate actions; 2) the impracticability 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; and 5) the difficulties likely to be encountered in the management of a class action.
The burden of establishing the perquisites to class certification rests with the plaintiff. Once met, however, Article 9 of the CPLR is to be liberally construed in favor of granting class certification. Globe Surgical Supply v. GEICO, 59 AD3d 129 (2nd dept. 2008).Nevertheless, the decision to certify a class lies within the sound discretion of the court. City of New York v. Maul, 14 NY3d 499 (2010).
Borden, through her attorneys, argues that she meets all of the relevant criteria. In opposition, the owner argues that: Borden cannot meet the commonality and superiority elements; Borden is not adequate or a typical representative of the class and the numerosity requirement is not met.
Numerosity
Borden claims that there are 53 deregulated units in the building and argues that the class presumably consists of the 53 tenants currently residing in these deregulated apartments, as well as former tenants who were charged market rents. While there is no mechanical test for satisfying numerosity, a class that consists of 53 or more members is sufficiently numerous to meet this requirement. Dabrowski v. Abax, Inc., 84 AD3d 633 (1st dept. 2011)(certifying class of between 50 to 100 laborers); .Pesantez v. Boyle Environmental Serv., Inc., 251 AD2d 11 (1st dept. 1998)(certifying class of 39 employees); Caesar v. Chemical Bank, 118 Misc 2d 118 affd. 106 AD2d 353 (1st dept. 1984); Galdamez v. Biodi Const. Corp., 13 Misc 3d 1224(A) (NY Sup. Ct. 2006).
The owner does not deny that there are 53 deregulated apartments at the building. It nonetheless argues that "merely because a tenant was not treated as a rent stabilized tenant does not establish that such tenant was overcharged in violation of the rent stabilization laws." (Defd.'s amended MOL p.18). At bar, deregulation of an apartment at the same time a landlord is receiving a J-51 tax abatement is a violation of the rent stabilization laws. It serves as the basis for this court to establish a tenant's rights under rent stabilization. The fact that a precise number of class members is not known, is not a bar to class certification. Kudinov v. Kel-Tech Const. Inc., 65 AD3d 481 (1st dept. 2009). Likewise, the fact that individual class members may ultimately be entitled to differing measures of damages and/or that some may receive nominal or even no relief does not defeat class certification. Kudinov v. Kel-Tech Const. Inc., supra; Gudz v. Jemrock Realty Company, 2011 WL 2516324 (NY Sup. Ct. NY co. 2011). In this case, even were a tenant not entitled to monetary damages, s/he might still be entitled to a declaration that the apartment is subject to rent stabilization.
The numerosity requirement is, therefore, met.
Commonality
In determining whether there is sufficient commonality of issues among the class members, the court of Appeals has recognized that "commonality cannot be determined by any mechanical test' and that the fact that questions peculiar to each individual may remain after resolution fo the common questions is not fatal to the class action. Rather it is predominance, not identity or unanimity,' that is the lynchpin of commonality." (Citations omitted); City of New York v. Maul, supra, at 376.
At bar, the factual and legal issues associated with liability for each member of the proposed class are nearly identical, involving the identification of an apartment as deregulated and the receipt of a J-51 tax abatement. While there may be differences in whether the deregulation was the result of luxury income decontrol or luxury vacancy decontrol (see: Gersten v. 56 7th Avenue LLC , ___AD3d___ [1st dept. 2011], 928 NYS2d 515 [nor]), those difference are not sufficient to affect the predominance of common issues. Nor is the fact that the calculation of the regulated rent for each class member different a sufficient basis to deny class certification. First, contrary to the owner's argument, the post Roberts jurisprudence is beginning to define common formulas for calculating the overcharges. See: 72A Realty Associates v. Lucas, (32 Misc 3d 47 [AT1 dept. 2011]); Dodd v. 98 Riverside Drive, index No. 106968/10, Decision dated October 18, 2011, (nor). The fact that there may be additional considerations for a particular tenant, or particular group of tenants in establishing rents, can be accommodated by the use of subclasses or the appointment of a special master. Godwin Realty Associates v. CATV Enterprises, Inc., 275 AD2d 269 (1st dept. 2000); Gudz v. Jemrock, supra. The DHCR letter, relied upon by the owner, is not legal precedent and does not otherwise persuade the court of the absence of uniform formulas in setting post Roberts levels of rents for affected apartments.
Typicality
Borden's claims are typical of the class, in that she is a tenant who entered into an unregulated apartment lease, that charged a market rent, while the landlord was actually receiving a J-51 tax abatement for the building.Her claims, therefore, are based upon the same course of conduct and legal theories as all of the other members of the proposed class.Ackerman v. Price Waterhouse, 252 AD2d 179, 201 (1st dept. 1998).
Adequacy of Representation
Three factors have been identified by the courts in considering the adequacy of representation. They are: [1] conflict of interest between the representative and the class members, [2] personal characteristics of the proposed class representative and [3] the quality of counsel. The personal characteristics of the proposed representative are to include such things as familiarity with the law suit and/or his or her financial resources. Ackerman v. Price Waterhouse, supra at 202, Globe Surgical Supply v. GEICO, supra at 144.
To the extent owner claims that counsel is not fit to represent the class, the argument is rejected. The law firm of Berstein Liebhar, LLP not only has extensive experience in class action litigation, but it is counsel for the tenants in the Roberts case. It is intimately familiar with all of the legal issues of this particular litigation. Whatever transient difficulties in communication that may exist between opposing counsel, does not serve as a basis to deny class certification.
The owner argues that Borden is an unfit representative because: it has interposed a counterclaim against her; she has inappropriately waived the class' right to seek treble damages; and she has not provided any personal statement in connection with this case, making it impossible to determine her personal fitness to serve.
The counterclaim interposed against Borden does not create any conflict between her and the other potential class members. Nor does it raise any prospect that Borden will be preoccupied with defenses unique to her. Globe Surgical Supply v. GEICO, supra at 145. The counterclaim is for non-payment of rent and it is inextricably intertwined with the issues raised in the class action in chief, that being the level of permissible regulated rent that may be charged to each class member.
Nor is the waiver of treble damages particularly troubling in this case. In addition to other relief, the complaint originally sought "treble damages for Defendant's willful overcharges occurring after March 5, 2009, the date of the Supreme court, Appellate Division's decision in Roberts v. Tishman Speyer Props, L.P. " (complaint ¶5).
Borden has, through counsel, now waived her claim for treble damages. CPLR §901(b) prohibits a class action to collect a penalty, unless specifically authorized by statute. See also: Sperry v. Crompton Corporation, 8 NY3d 204 (2007). Courts, however, permit a class representative to waive penalties and allow the claims for compensatory damages only to continue. Cox. v. Microsoft Corp., 8 AD3d 39 (1st dept. 2004); Super Glue Corp. v. Avis Rent A Car System, 132 AD2d 604 (2nd dept. 1987). To the extent that the owner argues the waiver impinges on Borden's adequacy as a class representative, the court finds that should any class member wish to pursue a right to treble damages for willful overcharge, s/he may opt out and bring an individual action therefor. Weinberg v. Hertz Corp., 116 AD2d 1 (1st dept. 1987) affd. 69 NY2d 979 (1987).
The court is not persuaded by the owner's argument that the penalties for willful overcharge cannot be waived. A claim for overcharge is one for compensable injuries, which may be recovered in the absence of willfulness. RSL §26-516. The trebling penalty is not available where a landlord can prove that the overcharge was not willful. Thus far, the post Roberts jurisprudence has rejected the trebling of damages, because the market rents were charged in accordance with DHCR rules and regulations, negating any willfulness. Even post Roberts, the issues of how to calculate the base rent for overcharge purposes remains to be decided by appellate courts or the legislature. See: 72A Realty Associates v. Lucas, 32 Misc 3d 47 (AT1 dept. 2011); Dodd v. 98 Riverside Drive, index # 106968/10, Decision dated October 18, 2011, (nor).The final issues for the court to consider regarding Borden's ability to serve have to do with her personal characteristics. There is no statement from Borden herself, not even a verified complaint. We only have her attorneys' observations about her adequacy as a representative.
To the extent that personal characteristics include a representative's ability to finance the litigation, Borden's attorneys represent that they will assume financial responsibility for prosecuting the action. Under such circumstances, Borden's particular financial circumstances are not germane to the issue of her adequacy. Wilder v. May Department Store, 23 AD3d 646 (2nd dept. 2005).
Nevertheless, it is important that the proposed class representative demonstrate that s/he possess an adequate understanding of the litigation, including a knowledge of the claims and progress of the litigation. Faila v. Metropolitan Life Insurance Company, 53 AD3d 251 (1st dept. 2008). Ackerman v. Price Waterhouse LLP, supra. This must be established through a tender of evidence and not conclusory statements. Pludeman v. Northern Leasing Sys, Inc. 74 AD3d 420 (1st dept. 2010). In this regard, the motion falls short. Borden has neither provided her own affidavit nor has she verified the complaint. Whatever the court knows about her is only through the observations of counsel. This is completely inadequate. The court needs to hear from the representative herself in order to determine that she is able to willing and able to serve, that she has an adequate understanding of the claims in the litigation and that she is able to make decisions both in her individual capacity and fiduciary capacity for the class. Both sides raise hearsay information about Borden's physical and mental state. The lack of evidence, however, works to Borden's detriment because it is her burden to prove her adequacy. In the absence of, at base line, Borden's personal affidavit, the court cannot conclude that she is a proper class representative. Even if an affidavit is provided, the court reserves the right to require such other and further information as may be necessary for the court to make a determination.
While the court otherwise believes that a class action is an efficient and superior method of resolving the post Roberts issues, the class cannot be certified at this time.
CONCLUSION
The motion for class certification is, therefore, denied, without prejudice to renew, upon proper papers, which at a minimum contain an affidavit from the plaintiff demonstrating that she is an adequate class representative. Such renewal shall be made within 30 days of service of this decision upon counsel with Notice of Entry.
This constitutes the decision and order of the court.
Dated: New York, NY
November 9, 2011
SO ORDERED:
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J.G. J.S.C.