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holding that it was "beyond peradventure" that each of defendants' monthly mailing of illegal rent bills did not give rise to an injury new and independent from the initial injury caused by the underlying illegality
Summary of this case from Zahl v. KosovskyOpinion
03 Civ. 5520 (HB)
January 5, 2004
OPINION ORDER
Defendants Evergreen Gardens, Inc. and Grenadier Realty Corp. move to dismiss plaintiff's' complaint. For the following reasons, defendants' motion is granted.
I. FACTS
Defendant Evergreen Gardens, Inc. ("Evergreen") is the landlord of buildings located at 950 and 955 Evergreen Avenue in the Bronx, New York; defendant Grenadier Realty Corp. ("Grenadier") is Evergreen's licensed real estate broker and managing agent; and plaintiff's are present and former tenants of Evergreen residing in the buildings. Plaintiff's allege that Grenadier, on behalf of Evergreen, sent monthly invoices for rent which both Evergreen and Grenadier knew were false, in that they contained hidden and illegal charges. These hidden and illegal charges consisted of billing bathrooms as habitable rental rooms and terraces as one-half of a habitable rental room, even though the rules and regulations promulgated by Evergreen and agreed to by plaintiff's define bathrooms as water closets and prohibit tenants from making any other use of them. Plaintiff's allege that these acts constitute 1) mail fraud, in violation of 18 U.S.C. § 1341; 2) participating in the affairs of an enterprise through a pattern of racketeering activity — namely, mail fraud — in violation of 18 U.S.C. § 1962(c); 3) conspiracy to engage in a pattern of racketeering activity, in violation of 18 U.S.C. § 1962(d); and 4) unfair and deceptive business practices, in violation of N.Y. General Business Law § 349. Defendants move to dismiss the complaint on the basis of 1) res judicata, 2) statute of limitations, and 3) lack of injury and standing.
Plaintiff's also allege that Evergreen is an enterprise affecting interstate commerce, within 18 U.S.C. § 1692, and that defendants agreed to make use of the U.S. mails to make other false representations.
Although not raised by defendants, this claim should be dismissed because there is no private right of action for violations of the federal mail-fraud statute. See Raffaele v. Designers Break, Inc., 750 F. Supp. 611, 613 (S.D.N.Y. 1990); Milburn v. Blackfrica Promotions, Inc., 392 F. Supp. 434, 435 (S.D.N.Y. 1974) ("Private litigants cannot sue to redress the offenses defined in [ 18 U.S.C. § 1341]."); Delta Education, Inc. v. Langlois, 719 F. Supp. 42, 50 (D. N.H. 1989) ("The plaintiff may allege mail fraud as the predicate acts for its RICO claim, but the mail fraud allegations themselves do not state a separate cause of action.").
The history of the legal battle between the parties is as follows: In December 1996, defendants applied for a rent increase pursuant to the Private Housing Finance Law and regulations promulgated by the New York City Department of Housing Preservation and Development ("HPD"). Plaintiff's with counsel participated in this process. On July 16, 1998, HPD granted this request for a rent increase. In November 1998, Plaintiff's brought an Article 78 challenge to HPD's decision in which they claimed, inter alia, that "the actual number of rooms as determined by the Commissioner deviates significantly from the Certificate of Occupancy." Justice Suarez of the New York State Supreme Court dismissed this challenge as untimely and the appellate division affirmed. Plaintiff's filed another claim in Bronx County Supreme Court in October 2001 based on rent overcharges, including the inflated room count, and breach of the warranty of habitability. The court initially rejected defendants' claim of issue preclusion with respect to the room-count claim but subsequently dismissed the claim on the basis, it appears, of claim preclusion.
The appellate division noted that "in light of petitioners' active participation in the application process itself and its subsequent failure to attend meetings at which they could comment on HPD's findings, there appears to be no likelihood that this petition, even if timely filed, would result in a favorable result for petitioners."
The court stated:
The Court's observation in its Order dated April 30, 2002, that `the issue of the number of rooms does not appear to have been presented to or considered by the Department of Housing Preservation and Development,' is of no consequence. The proper way to contest the decision of HPD dated May 7, 1998 was by way of an Article 78 proceeding, in which plaintiff's would have the opportunity to raise all issues regarding the decision, including the number of rooms and the amount of rent increases allowed. Whether or not the issue was raised is irrelevant. It could have and should have been raised. The failure to do so precludes any further litigation on this issue. [emphasis added]
II. DISCUSSION
Defendants raise several grounds for dismissal, including that the claim is time-barred because it was brought more than four years after the discovery of the alleged injury, regardless of when the fraud was discovered. Since this ground is dispositive, I need not discuss the others.As defendants note, the Supreme Court rejected a rule whereby a civil RICO claim accrues when the plaintiff discovers (or should have discovered) the injury and the pattern of racketeering activity. See Rotella v. Wood, 528 U.S. 549, 553 (2000); the Court preferred a rule where the statute begins when the plaintiff discovers the injury. See id. Defendants contend that the fraud and the injury alleged by plaintiff occurred in 1998, when the rent increase went into effect and when plaintiff's filed a similar lawsuit. Plaintiff's contend that defendants have not shown that any of the plaintiff's knew or should have known about the injury in 1998. However, it is clear that some of the same people named as plaintiff's in this action were aware as early as November 1998 that the number of rooms was allegedly more than the number noted on the certificate of occupancy. It was then or earlier that they attempted to challenge HPD's rent increase. Thus, even if they did not know the details of the room-count discrepancy, the plaintiff's — or some of them — knew of the discrepancy no later than November 1998. Since this suit was instituted some four and a half years later, it is beyond the statute of limitations and must be dismissed.
After eliminating one of two options for when a civil RICO action accrues, the Court noted that it did not "settle upon a final rule." Rotella, 528 U.S. at 554 n. 2. It left open the possibility of "an `injury occurrence' rule, under which discovery would be irrelevant." Id. (citingKlehr v. A. O. Smith Corp., 521 U.S. 179, 198 (1997) (Scalia, J., concurring in part and concurring in judgment)).
Plaintiff's contended at oral argument that the four-year statute of limitations does not preclude this suit, because this is a continuing violation and there is a violation each time the rent bills are sent out. The Second Circuit recognizes a "separate accrual" rule for RICO claims "under which a new claim accrues, triggering a new four-year limitations period, each time plaintiff discovers, or should have discovered, a new injury caused by the predicate RICO violations." Bingham v. Zolt, 66 F.3d 553, 559 (2d Cir. 1995). Contrary to plaintiff's' contention, the fact that defendants mailed allegedly unlawful rent bills each month up to the present does not make plaintiff's' claim timely. As the Circuit has stated, "non-independent injuries will not cause a new limitations period to accrue." Id. at 560; see also In re Merrill Lynch Ltd. Pshps. Litig., 7 F. Supp.2d 256, 265 (S.D.N.Y. 1997) ("[F]or an injury to trigger the accrual of a new RICO claim, the injury must be new and independent."). It is beyond peradventure that the plaintiff's' injury from the rent checks mailed within the past four years is not "a new and independent injury." The injury the plaintiff's allegedly suffered due to the rent bills mailed within the four-year statute of limitations is identical to the injury they suffered when the defendants allegedly unlawfully increased the room count. Thus, the fact that defendants continued to mail allegedly unlawful rent bills does not make plaintiff's' claim timely, as they knew or should have known about the illegal room count more than four years prior to the commencement of this lawsuit.
III. CONCLUSION
For the foregoing reasons, defendants' motion to dismiss is granted. The Clerk of the Court is instructed to close this and any open motions and remove the case from my docket.
IT IS SO ORDERED.