In the Matter of Paul Murphy, Respondent,v.New York State Division of Housing and Community Renewal, Appellant, SouthBridge Towers, Inc., Respondent.BriefN.Y.September 4, 2013To be Argued by: DAVID HERSHEY-WEBB (Time Requested: 15 Minutes) New York County Clerk’s Index No. 101005/10 Court of Appeals of the State of New York In the Matter of the Application of PAUL MURPHY, Petitioner-Respondent, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules – against – NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent-Appellant, – and – SOUTHBRIDGE TOWERS, INC., Respondent. BRIEF FOR PETITIONER-RESPONDENT HIMMELSTEIN, MCCONNELL, GRIBBEN, DONOGHUE & JOSEPH Attorneys for Petitioner-Respondent Paul Murphy 15 Maiden Lane, 17th Floor New York, New York 10038 Tel.: (212) 349-3000 Fax: (212) 587-0744 Date Completed: January 18, 2013 i TABLE OF CONTENTS Page PRELIMINARY STATEMENT ................................................................. 1 QUESTIONS PRESENTED ........................................................................ 3 COUNTERSTATEMENT OF THE CASE A. Counterstatement of Facts and Procedural History ........................... 4 B. Statutory and Regulatory Provisions ................................................. 11 1. Background of Mitchell-Lama Succession ................................. 11 2. Specific Requirements of Succession in a Mitchell-Lama ......... 14 3. Purpose of the Income Affidavits ............................................... 17 ARGUMENT POINT I THE COURTS BELOW PROPERLY CONSTRUED THE MITCHELL-LAMA SUCCESSION REGULATIONS TO REQUIRE GRANTING SUCCESSION TO A LIFELONG FAMILY MEMBER GIVEN THE UNIQUE FACTS OF THIS CASE .................................... 17 A. The Mitchell-Lama Succession Regulations Do Not Preclude Succession in the Rare Case Where No Income Affidavit Was Filed, Tenant Had a Compelling Reason Not to File and Other Evidence Established Co-Occupancy ................................................ 18 B. Administrative Convenience Is No Justification To Preclude a Meritorious Succession Claim ........................................................... 22 C. Denying Succession to a Long-Term Family Member Who Has Co-Occupied an Apartment with His Mother His Entire Life is Contrary to the Purpose of the Mitchell-Lama Statute ...................... 26 ii POINT II THIS COURT HAS REPEATEDLY REJECTED THE MECHANISTIC APPLICATION OF REGULATIONS WHICH UNDERMINE THE PURPOSE OF THOSE REGULATIONS AND COMPEL ABSURD RESULTS .................................................... 27 POINT III DHCR’S REJECTION OF PAULA MURPHY’S EXPLANATION FOR FAILING TO FILE AN INCOME AFFIDAVIT LACKED A RATIONAL BASIS ................................................................................. 33 CONCLUSION ............................................................................................ 37 iii TABLE OF AUTHORITIES Page(s) Cases: Braschi v. Stahl Associates Co., 74 N.Y.2d 201 (1989) .............................. 2, 11 Callwood v. Cabrera, 49 AD3d 394 (1st Dep’t 2008) ................................ 3 Cintron v. Calogero, 15 N.Y.3d 3 478 (2010) ............................................. 31 Cognata v. New York City Dept. of Hous. Prev. and Dev., 2008 NY Slip Op 33595U (N.Y. Sup. Ct. Dec. 1, 2008), aff’d 82 A.D.3d 482 (1st Dep’t 2011) ......................................................................................... 21, 22 Eastside Exhibition Corp. v. 210 East 86th Street Corp., 18 NY3d 617; 942 NYS2d 19 (2012) .............................................................................. 31-32 Festa v. Leshen, 145 A.D.2d 49 (1st Dep’t 1989) ........................................ 12 Gilbert v. Perine, 52 AD3d 240 (1st Dep’t 2008) ....................................... 3 Goodman v. Ross, 274 A.D. 811 (2nd Dep’t 1948) ...................................... 12 Grigorie v. New York City Department of Housing, Preservation and Development, 75 AD3d 430 (1st Dept 2010) ..................................... 24 Grimm v. DHCR, 15 N.Y.3d 358 (2010) ..................................................... 31 Jenkins v. Fieldbridge Assoc., 65 A.D.3d 169 (2nd Dep’t) .......................... 18 Kahn v. New York City Dept. of Hous. Preserv. & Dev., 28 Misc. 3d 1206A (Sup. Ct., N.Y. Co. 2010) ......................................... 20 Kaplan v. New York City Dept. of Hous. Preserv. & Dev., 37 Misc. 3d 1217A (Sup. Ct., N.Y. Co. 2012) ......................................... 23 Kupfersmith v. Dowling, 93 N.Y.2d 90 (1999) ............................................ 18, 23 iv Lesser v. Park 65 Realty Corp., 140 A.D.2d 169 (1st Dep’t 1988), app. dism., 72 N.Y.2d 1042 (1988) .......................................................... 2, 12, 13 Matter of Callwood v. Cabrera, 49 AD3d 394 (1st Dept 2008) .................. 21, 24 Matter of Dworman, Seymour, Sudarsky v. DHCR, 94 N.Y.2d 359 (1999) .............................................. 18, 28, 28n.9, 29, 30, 30n.10 Matter of Gilbert v. Perine, 52 AD3d 240 (1st Dept 2008) ......................... 21, 24 Matter of Greichel v. DHCR, 39 A.D.3d 421 (1st Dep’t 2007) ................... 21, 22 Matter of Meyers v. DHCR, 68 AD3d 1518 (3rd Dept 2009).............. 14, 17, 21, 22 Matter of Miney v. Donovan, 68 A.D.3d 876 (2nd Dep’t 2009) ................... 21, 22 Matter of Pietropolo v. New York City Dept. of Hous. Preserv. & Dev., 39 A.D.3d 406 (1st Dep’t 2007) ............................................................... 23 Matter of Renda v. New York State Div. of Hous. & Community Renewal, 22 A.D.3d 382 (1st Dep’t 2005) ................................................................ 23, 24 Matter of Schorr v. Department of Housing Preservation and Development, 10 NY3d 776 (2008) .................................................. 32, 33 Matter of Taylor v. DHCR, 73 AD3d 634 (1st Dept 2010) .......................... 21, 22 Roberts v. Tishman-Speyer, 13 NY3d 270 (2009) ....................................... 32 Waitzman v. McGoldrick, 121 N.Y.S. 2d 515 (Sup Ct, Kings Co 1953) .......................................................................... 12 Statutes: 9 NYCRR §5.3(a)(7) .................................................................................... 17 9 NYCRR §1727 .......................................................................................... 11n.6 9 NYCRR §1727-2.4.................................................................................... 17 9 NYCRR §1727-2.5(a) ............................................................................... 17 v 9 NYCRR §1727-2.6(a) ............................................................................... 17 9 NYCRR §1727-3.6.................................................................................... 16n.8 9 NYCRR §1727-8.2.................................................................................... 4n.1, 15 9 NYCRR §1727-8.2(a)(5) ........................................................................ 15-16, 19 9 NYCRR §1727-8.3(a) ............................................................................... 15 9 NYCRR §2523.5 ....................................................................................... 13 41 N.Y. PHFL §11 (McKinney’s 2002) .................................................... 11, 26-27 EHRCL §56(4) ............................................................................................. 12 New York City Rent and Eviction Regulations §2204.6[d] ........................ 12 RSL §26-516 ................................................................................................ 31n.11 Other Authority: N.Y.S. Reg., June 5, 1991 .......................................................................... 14, 16, 20 N.Y.S. Reg., December 4, 1991 ................................................................... 11 N.Y.S. Reg., December 24, 1991 ................................................................. 2 “Southbridge director charged in fraud case,” Downtown Express, January 7-12, 2006 ................................................................................... 35 Press Release from Office of the New York State Inspector General dated February 21, 2008 ........................................................................... 35 U.S. Charges State Housing Official With Fraud and Theft of Government Funds,” Press Release issued by United States Attorney for Southern District dated December 22, 2005 ....................................... 35 PRELIMINARY STATEMENT In this appeal the New York State Division of Housing and Community (“DHCR”) seeks reversal of the unanimous decision of the Appellate Division, First Department (“Decision”) which found that it was arbitrary and capricious for the DHCR to deny Respondent Paul Murphy’s claim for succession to the Mitchell- Lama cooperative apartment of his mother, Paula Murphy, where he has lived his entire life. The Appellate Division properly rejected DHCR’s interpretation of the succession regulations which the IAS court had characterized as “myopic” as applied to the specific and unique facts of this case. It is undisputed that Paul Murphy, the son of shareholder Paula Murphy, lived in the subject apartment with his mother for 17 years, since he was one month old. The sole reason for DHCR’s denial of his succession claim was the absence of a 1998 annual income affidavit. Paula Murphy had explained that the reason she had not filed the income affidavit was that she feared that a corrupt, and ultimately convicted, DHCR housing official residing at the same housing development would have access to and misuse her private financial information. DHCR argues that it is precluded from ever considering any reason for a tenant’s failure to file an income affidavit. DHCR elevates the principle of administrative convenience over determination of a meritorious succession application in arguing that a lifelong 2 family member must move out of the only home he has ever known, given the facts of this case. The right of succession in private regulated housing goes back more than 50 years. The purpose of succession rights is to offset the “harsh consequences resulting from displacement from one’s home upon the death or departure of a named tenant, with whom a family member, not named on the lease, resided.” Lesser v. Park 65 Realty Corp., 140 A.D.2d 169, 171 (AD 1st 1988), app. dism., 72 N.Y.2d 1042 (1988). When DHCR adopted its Mitchell-Lama succession regulations in 1991 it did so in light of recent this Court’s decision in Braschi v. Stahl Associates Co., 74 N.Y.2d 201 (N.Y. 1989) which affirmed the importance of succession. N.Y. Reg., December 24, 1991 at 16-17. The Mitchell-Lama succession regulations are designed to strike the right balance between administrative convenience, rights of applicants on waiting lists and the rights of long-term family members seeking to remain in their homes. The lower courts correctly found that in denying succession to a lifelong resident on the basis of one missing income affidavit, where his mother provided a reasonable, and indeed compelling, explanation for not filing, the DHCR applied the regulations in an arbitrary and capricious manner. The Decision is consistent with the language of the succession regulations, 3 appellate decisions which focus on the merits of a succession claim, prior decisions in Callwood v. Cabrera, 49 AD3d 394, 395 (1st Dep't 2008) and Gilbert v. Perine, 52 AD3d 240, 241 (1st Dep't 2008), and decisions of this court which reject mechanistic applications of regulations in a manner which undermines their purpose and compels absurd results. The Decision must be affirmed. QUESTIONS PRESENTED Where the record established that Paul Murphy resided in a Mitchell-Lama cooperative apartment with his mother since he was an infant until she vacated and he was listed on seven years of income affidavits prior to her vacating, was it rational for DHCR to deny his succession claim on the sole basis that his mother failed to file the 1998 income affidavit due to legitimate privacy concerns relating to a corrupt DHCR housing management official who resided at the development? The lower courts correctly answered in the negative. Did the DHCR have a rational basis to reject Paula Murphy’s explanation for failing to file the relevant income affidavit? The lower courts correctly answered in the negative. 4 COUNTERSTATEMENT OF THE CASE A. Counterstatement of Facts and Procedural History Paul Murphy moved into 90 Gold Street, #7C, New York, New York 10038 in May 1981 with his mother and father, Kevin and Paula Murphy. Paul Murphy was one month old at the time. Paul Murphy was named as a shareholder, along with his parents, in the May 15, 1981 “Agreement of Lease” for the apartment1. Administrative Record at p. 60 (hereinafter “AR_”). On or about October 5, 2004, Mr. Murphy submitted an application for succession for himself and his uncle, James Soucy2 Record on Appeal at p. 47 (hereinafter “R_”). In support of the succession application Paul Murphy submitted every document requested by the Housing Company as proof of his co- occupancy (R8). The Housing Company issued a decision denying Mr. Murphy’s succession 1 The DHCR Mitchell-Lama regulations define tenant/cooperator as “Any person or persons named on the lease as lessee or lessees or who is or are a party or parties to a rental agreement and obligated to pay rent or carrying charges for the use or occupancy of a housing accommodation.” 9 NYCRR §1727-8.2. As Mr. Murphy’s name was never removed from the lease, he was a tenant/cooperator at the time of his succession claim and should have been permitted to remain in the apartment on that basis alone. 2 Mr. Murphy originally named only his father in the application, although he had resided with both of his parents. Mr. Murphy mistakenly indicated the incorrect date of his parents’ vacatur as 2001. The date of vacatur was later clarified as January 2000 (R47). 5 claim on February 28, 20073 solely on the basis that no income affidavits had been submitted for calendar years 1998 and 1999 (R46-R57). The Housing Company did not dispute the claim that Mr. Murphy had resided with his mother in the apartment for 17 years, that he was named in the lease or that he had appeared on at least seven years of income affidavits prior to his mother’s vacating the apartment and on six years of income affidavits subsequent to her vacating. Mr. Murphy appealed the decision to the DHCR. In his appeal Mr. Murphy argued that he had submitted the necessary documentation to establish co- occupancy with his mother for the requisite two years prior to her permanent vacatur in January 2000. Administrative Record at p. 49 (hereinafter “AR_”). Mr. Murphy also argued that he was a tenant because his name appeared on the original lease. Mr. Murphy asserted that his mother, Paula Murphy, had not filed the relevant income affidavits because of “mismanagement issues” (A253) and also submitted an affidavit4 in which she further elaborated, explaining that she had not filed the 1998-1999 income affidavits because there was “corruption at 3 A succession claim by Mr. Murphy’s uncle, James Soucy was also denied on separate grounds. Mr. Soucy did join in this appeal. 4 The affidavit which was signed on or about November 16, 2007 was inadvertently not notarized. A notarized version of the identical affidavit was annexed to the Mr. Murphy’s Verified Petition as Exhibit “E” (R66). 6 Southbridge Towers and I did not want to provide my financial information. A Southbridge Towers Board member and DHCR employee, Jody Wolfson, was indicted on embezzlement charges. I knew that if I did not file income affidavits that I would pay the surcharge” (AR263). In support of his succession application Mr. Murphy submitted the following supporting documents listing his address as the subject apartment: the initial occupancy agreement listing Kevin, Paula and Paul as shareholders; a secondary school transcript for the period 1994-19995; New York State drivers license issued June 14, 1998; Statement of Dividends and Distributions for the tax years 1998 and 1999; Federal and State income taxes for tax year 1998 and tax records for tax years 2000-2004; annual income affidavits for 1990-97 and 2000-2006 (R56 and AR9-163). Mr. Murphy also submitted affidavits from his parents as to his occupancy and their vacatur (AR238-239). Mr. Murphy also submitted extensive evidence indicating that the apartment was his mother’s primary residence during the relevant period (AR226-228 & 482-559). DHCR Deputy Commissioner Richmond McCurnin issued an order on October 14, 2009 (“DHCR Order”), affirming the Housing Company’s denial of 5 The Secondary School Transcript from Saint Ann’s School not only indicates that Mr. Murphy resided at 90 Gold Street, Apt 9C but that he completed courses in Latin, Trigonometry and Electronics and High School Chorus, among others, during his last semester. 7 Mr. Murphy’s succession claim (AR560). The sole basis of the DHCR’s order was that Ms. Murphy had not filed the 1998 calendar year income affidavit in 1999. The DHCR noted that the 1997 income affidavit, filed on May 1998 could be considered proof of occupancy for the year 1998 since it was submitted within the relevant two-year period (AR569). Therefore, the sole basis of the decision was one missing income affidavit. On December 18, 2009, Mr. Murphy filed a Request for Reconsideration with the DHCR (R70). In his Request for Reconsideration Mr. Murphy argued that the DHCR had overlooked evidence of the corruption of its own employees in failing to credit his mother’s reason for not filing the 1998 and 1999 income affidavits. Mr. Murphy submitted an affidavit from Ms. Murphy outlining in more detail the specifics of her concerns about Ms. Jody Wolfson (R81). In her affidavit Ms. Murphy explained that “…I have known Ms. Wolfson for about 30-years. I met her originally when we were both teenagers and we were once friends. “…Sometime in the second half of 1998 I was told by a friend of mine at Southbridge that Ms. Wolfson was going into the management office and looking at income affidavits to find out people’s personal financial information. I was also told that Ms. Wolfson was telling people how much money I made and that since I made a certain amount of 8 money I should not be living at Southbridge. “…Since I did not want my personal confidential financial information improperly spread throughout the development by Ms. Wolfson, I decided not to file my 1998 and 1999 income affidavits. I knew that the penalty for not filing was that I would pay a surcharge. I did pay a surcharge for those years. “…As I stated in my prior affidavit, Ms. Wolfson was indicted in 2005. Upon information and belief she reached a plea agreement to avoid jail. Upon information and belief she still resides at Southbridge and still works for the DHCR.” (R81-82) Mr. Murphy also submitted supporting documentation regarding the conviction of Ms. Wolfson, an assistant housing management representative for DHCR who resided at, and later served on the Board of Directors of Southbridge, for federal offenses relating to her activities at Southbridge, as well as the conviction of Mark Marcucilli, a DHCR Assistant Director of Housing and Southbridge resident (R95-R102). Ms. Wolfson was convicted of illegally transferring her Southbridge Tower apartment to an ineligible tenant (R102) and “falsifying income affidavits.” DHCR Brief at p. 28. Mr. Marculli was convicted of felony charges of conspiracy, mail fraud and theft of government funds (R95- R102). 9 Mr. Murphy’s Request for Reconsideration was not determined as Mr. Murphy filed an Article 78 petition challenging the DHCR order on January 25, 2010 (R31). In its cross-motion to dismiss the Article 78, the DHCR submitted an affidavit of Richmond McCurnin as well as exhibits indicating that Mr. McCurnin was involved in approving the election of Ms. Wolfson to the Southbridge Board of Directors in 2003, despite concerns over a possible conflict of interest (R114- 132). A March 3, 2003 memorandum to Richard McCurnin and Marcia Hirsch from DHCR counsel Sheldon Melnitsky outlines the possible conflict of interest issues regarding having Ms. Wolfson serve on the Board while being employed by DHCR (R146). Mr. McCurnin argued in his affidavit that the federal crimes Ms. Wolfson was charged with were merely “improprieties” (R126). He also argued that Ms. Murphy’s claims regarding Ms. Wolfson were not credible because Ms. Wolfson did not run for the Southbridge Board of Directors until 2002. He did not deny, however, that she was a DHCR Housing Management Assistant residing at Southbridge during the relevant period. Ibid. Although the federal investigation concerned criminal activity from 2000-2005 (R96), Mr. McCurnin stated that 10 DHCR was not aware of any problems until her indictment in December 2005 (R132). DHCR was, therefore, fully aware of the issue when it was considering Mr. Murphy’s appeal of his succession application denial. The DHCR also offered evidence in support of Ms. Murphy’s claim that Ms. Wolfson would likely have had access to income affidavits. Her responsibilities, according to the conflict of interest memorandum, included reviewing the “processing of apartment applications by certain housing companies” (R146). On October 8, 2010 Hon. Alice Schlesinger issued a decision (“IAS Court Decision”) in which she found the DHCR Order to be arbitrary and capricious. In her well-reasoned decision, Judge Schlesinger found, in relevant part, that “This case illustrates DHCR's myopic interpretation of the tenant succession regulations, resulting in a decision that arbitrarily ignores extensive documentary evidence submitted by petitioner and turns a blind eye to the public policy favoring the continuation of long-term, rent- regulated tenancies… “…None of the cases cited by the parties, nor any found by this Court, support DHCR's interpretation of the regulation to bar succession rights based solely on the absence of a single income affidavit, in the face of overwhelming proof in the applicant's favor…” IAS Court Decision at R6. On January 12, 2012, in a unanimous decision (“AD Decision”), the Appellate 11 Division, First Department, affirmed (R183). B. Statutory and Regulatory Provisions 1. Background of Mitchell-Lama Succession The Mitchell-Lama program was established in 1955 to address the “seriously inadequate” shortage of “safe and sanitary” housing for families and persons of low income in New York State. 41 N.Y. Priv. Hous. Fin. Law (“PHFL”) §11 (McKinney’s 2002). Mitchell-Lama developments can be either rentals or co-ops and may be supervised by either DHCR or the New York City Department of Housing and Urban Development (“HPD”). DHCR formally adopted regulations providing the right of succession in Mitchell-Lama buildings, for both family and non-traditional family members, in 1991. N.Y.S. Reg., December 4, 1991. The regulations were adopted in part to conform to this Court’s decision Braschi v. Stahl Associates Co., 74 N.Y.2d 201 (1989) Ibid.6 In revising its regulations to conform to Braschi, DHCR recognized that the same policy rationale underlying succession in privately owned rent regulated apartments applied in Mitchell-Lamas buildings. The adoption of succession 6 The regulations are codified at 9 NYCRR §1727. The regulations were renumbered in 2009. The numeration in effect in 2004, when the succession application was submitted, is used herein. 12 regulations, which permit long-term family members to remain in occupancy after the head of household vacates, is consistent with the purpose of the Mitchell-Lama program to provide housing to persons “and families.” Succession rights for rent regulated tenants go back at least as far as the 1946 Emergency Housing Rent Control Law (“EHRCL”). See EHRCL §56(4). See also Goodman v. Ross, 274 A.D. 811 (2nd Dep’t 1948); Waitzman v. McGoldrick, 121 N.Y.S. 2d 515 (Sup Ct, Kings Co 1953). When the city adopted rent control in 1962 it promulgated regulations which included a tenant succession provision. See Rent and Eviction Regulations of HDA §56[d], presently subchapter D of DHCR’s New York City Rent and Eviction Regulations §2204.6[d]. Succession rights under rent stabilization were recognized by the Conciliation and Appeals Board (“CAB”), precursor to the DHCR. The CAB “in ruling on complaints of surviving family members who feared eviction, considered whether the owner had expressly or impliedly consented to the family member’s occupancy. If he or she had consented the CAB would prohibit eviction of the family member.” Festa v. Leshen, 145 A.D.2d 49 (1st Dep’t 1989); Lesser v. Park 65 Realty Corp., 140 A.D.2d 169 (1st Dep’t 1988), app. dism., 72 N.Y.2d 1042 (1988). 13 In 1987 the DHCR amended the Rent Stabilization Code to include succession provisions. 9 NYCRR § 2523.5 The Appellate Division, First Department in Lesser summarized the purpose of the new regulations: The family succession provisions of the new Rent Stabilization Code were enacted in response to the harsh consequences resulting from displacement from one's home upon the death or departure of a named tenant with whom a family member, not named in the lease, resided. The need for these provisions was especially critical in light of legal developments in recent years in this particular area which have rendered many such family residents vulnerable to eviction, and the new Code provisions in issue were intended to "prevent wholesale evictions" of these persons and create order out of the uncertainties prevailing in the law. Lesser at 789. The rent-control and rent-stabilization succession provisions are remedial statutes and should be construed so as to carry out the reform intended and spread its beneficial effects as widely as possible. Ibid. DHCR adopted succession provisions for Mitchell-Lama housing, similar to the succession provisions for private rent regulated housing, to serve the same remedial purpose of preventing dislocation of long-term residents. DHCR also had to consider the factors unique to Mitchell-Lama housing. Therefore, the DHCR 14 Mitchell-Lama succession provisions are intended to strike “a balance among various competing policies, including the interests of those on the long waiting lists for housing as well as those family members who have actually lived with a tenant and whose income was properly reported during such time so as to arrive at a fairly allotted rent.” Matter of Meyers v. DHCR, 68 AD3d 1518, 1520 (3rd Dept 2009). The DHCR Mitchell-Lama provisions, while setting forth certain requisites for succession, are not intended to apply to every circumstance where a resident seeks succession. In its Notice of Revised Rule Making in connection with the 1991 regulations the DHCR stated in that “these regulations are not intended to cover all possibilities that may occur but are intended to meet the probable occurrences that may transpire as a result of a tenant’s permanent absence from a housing unit and the rights and obligations of those who may claim to be entitled to succeed such tenant.” N.Y.S. Reg., June 5, 1991, p.21. 2. Specific Requirements of Succession in a Mitchell-Lama Under the DHCR Mitchell-Lama succession regulations7, a “Tenant/cooperator” is defined as “Any person or persons named on the lease as lessee or lessees or who is or are a party or parties to a rental agreement and obligated 7 Amicus HPD has adopted comparable regulations. 15 to pay rent or carrying charges for the use or occupancy of a housing accommodation.” 9 NYCRR §1727-8.2. The DHCR succession regulations provide that: “Unless otherwise prohibited by occupancy restrictions based upon income limitations pursuant to Federal or State law, regulations or other requirements of governmental agencies, if the tenant has permanently vacated the housing accommodation, any member of such tenant's family, as defined in section 1727-8.2(a)(2) of this Subpart, who has resided with the tenant in the housing accommodation as a primary residence for a period of not less than two years, has been listed on the income affidavit and/or on the Notice of Change to Tenant's Family as required under section 1727-3.6 of this Part, or where such person is a senior citizen or a disabled person as defined in section 1727- 8.2(a)(3) and (4) of this Subpart, respectively, for a period of not less than one year, immediately prior to the permanent vacating of the housing accommodation by the tenant, or from the inception of the tenancy or commencement of the relationship, if for less than such periods, may request to be named as a tenant on the lease and on the stock certificate.” 9 NYCRR §1727-8.3(a). “Primary residence” is defined in the regulations as: “The housing accommodation in which the person actually resides and maintains a permanent and continuous physical presence. Proof of such residency shall be the listing of such person on the 16 annual income affidavit and/or the filing of the Notice of Change to Tenant’s Family as set forth in section 1727-3.68 of this Part, together with other evidence such as certified copies of tax returns, voting records, motor vehicle registration and drivers license, school registration, bank accounts, employment records, insurance policies, and/or other pertinent documentation or facts.” 9 NYCRR §1727-8.2(a)(5). The succession regulations do not address “all possibilities that may occur” when a tenant vacates. N.Y.S. Reg., June 5, 1991 at p. 21. The regulations, for instance, presuppose that the tenant had filed the annual income affidavit and do not address the instance where no income affidavit has been filed for a specific year. The regulations do not make the income affidavits the sole basis for a succession determination but provide for the consideration of other evidence. The succession regulations also do not state that failure to be listed on an income affidavit would in all instances preclude succession. 8 §1727-3.6 reads: “Housing companies shall notify all tenants, and shall provide in all leases, that the housing company must be advised in writing within 90 calendar days of any additions to or deletions from the tenant's family who reside in the housing accommodation, or the persons who for a period of 30 days or more occupy the housing accommodation, and that such changes shall be reflected in all subsequent affidavits of income submitted by the tenant.” 17 3. Purpose of the Income Affidavits The primary purpose of income affidavits is unrelated to succession. Mitchell- Lama tenants are required to file annual income affidavits listing the occupants of the apartment and their income to insure that occupants are qualified to remain in the project and to adjust rents if necessary. 9 NYCRR §1727-2.4, 1727-2.5(a). The primary purpose of the income affidavits is to “arrive at a fairly allotted rent.” Meyers at 1520. The failure to file an annual income affidavit results in the tenant having to pay a surcharge (the maximum rent allowable) and could result in commencement of a summary proceeding to recover possession of the apartment. 9 NYCRR §1727- 2.6(a) and 5.3(a)(7). ARGUMENT POINT I THE COURTS BELOW PROPERLY CONSTRUED THE MITCHELL- LAMA SUCCESSION REGULATIONS TO REQUIRE GRANTING SUCCESSION TO A LIFELONG FAMILY MEMBER GIVEN THE UNIQUE FACTS OF THIS CASE The courts below properly interpreted the Mitchell-Lama succession regulation to require granting succession to Paul Murphy, a lifelong family member, 18 notwithstanding the fact that his mother failed to file the 1998 income affidavit. The Appellate Division correct held that the “relevant inquiry” in a succession application is “primary residence during the relevant time period,” not whether or not an income affidavit has been filed (R184). While deference is generally afforded to an administrative agency’s interpretation of its regulations, a regulation should not be interpreted in a manner that is contrary to its purpose or results in an absurd outcome. Matter of Dworman, Seymour, Sudarsky v. DHCR, 94 N.Y.2d 359 (1999); Jenkins v. Fieldbridge Assoc., 65 A.D.3d 169 (2nd Dep’t). “Courts must scrutinize administrative rules for genuine reasonableness and rationality in the specific context presented by a case.” Kupfersmith v. Dowling, 93 N.Y.2d 90, 99 (1999). A. The Mitchell-Lama Succession Regulations Do Not Preclude Succession in the Rare Case Where No Income Affidavit Was Filed, Tenant Had a Compelling Reason Not to File and Other Evidence Established Co-Occupancy As the IAS court stated, DHCR has “arbitrarily applied the applicable regulations to give the annual affidavit the significance of a trump card, invalidating all other evidence in the case” (R81-82). As DHCR correctly asserts, the primary purpose of the income affidavit in a succession application is to prove 19 primary residence. DHCR Brief at p. 20. The regulation states that “[p]roof of such residency shall be the listing of such person on the annual income affidavit and/or the filing of the Notice of Change to Tenant’s Family..together with other evidence…” 9 NYCRR §1727-8.2(a)(5). The crux of the regulation is “proof.” The regulation does not state that the only proof of residency is listing on the income affidavit. To the contrary, the regulation provides for the submission of other evidence. The succession regulations, in requiring that a succession applicant be listed on the income affidavit that has been filed, presume that an income affidavit has actually been filed by the tenant. DHCR concedes this point when it argues that for “over twenty years” DHCR has required succession applicants to “demonstrate that their names appeared on income affidavits filed during the two year before the prior tenant vacated the apartment.” DHCR Brief at p. 18. The regulations do not address the unique circumstance where no income affidavit was filed and the tenant had a compelling reason for not filing. The DHCR does not cite a single case where it has denied a succession application where no income affidavit was filed and good reason was giving for not filing. As DHCR stated in its Notice in 1991 “these regulations are not intended to cover all possibilities that may occur but are intended to meet the probable 20 occurrences that may transpire as a result of a tenant’s permanent absence.” N.Y.S. Reg., June 5, 1991 at p.21. Reading the regulations to preclude granting succession in all cases where no such affidavit was filed serves no evidentiary or public policy purpose. The requirement that a succession applicant appear on the income affidavit when an income affidavit has been filed serves an evidentiary and public policy purpose. The failure to appear on an income affidavit that has been filed is evidence that a successor either did not co-occupy the apartment or that the tenant is trying to conceal the occupant’s income. An income affidavit is a sworn statement listing all of the occupants of the apartment. The fact that a tenant has submitted a sworn statement that a particular person is not occupying the apartment during the relevant period is strong evidence of that fact. Income affidavits are “potentially case dispositive proof on the question of petitioner's residence.” Kahn v New York City Dept. of Hous. Preserv. & Dev., 28 Misc. 3d 1206A (Sup. Ct., N.Y. Co. 2010)(succession denied where claimant did not appear on income affidavits which had been filed). The deliberate submission of a false affidavit also reflects a degree of culpability warranting the severest sanction. 21 DHCR has consistently denied succession applications where an applicant’s name did not appear on income affidavits that had been filed by the tenant and/or where the applicant failed to submit other additional proof of co-occupancy. Matter of Meyers v. DHCR at 68 A.D.3d 1518 (3rd Dept 2009); Matter of Greichel v. DHCR, 39 A.D.3d 421 (1st Dep’t 2007); Matter of Callwood v. Cabrera, 49 AD3d 394, 395 (1st Dept 2008); Matter of Gilbert v. Perine, 52 AD3d 240, 211 (1st Dept 2008); Cognata v. New York City Dept. of Hous. Prev. and Dev., 2008 NY Slip Op 33595U (N.Y. Sup. Ct. Dec. 1, 2008), aff’d 82 A.D.3d 482 (1st Dep’t 2011); Matter of Taylor v. DHCR, 73 AD3d 634 (1st Dept 2010); Matter of Miney v. Donovan, 68 A.D.3d 876 (2nd Dep’t 2009). There was no filing of a false affidavit in this case. There was no attempt to avoid paying a higher rent. There was no attempt to deceive the housing company. Instead, there was proof of co-occupancy for 17 years, regular compliance with the income affidavit requirement for multiple years both before and after Ms. Murphy vacated, and a compelling explanation for failing to file the relevant income affidavit. In two of the above decisions, the Appellate Division, First Department noted that the succession applicants had given no explanation for their failure to appear on the income affidavits. Callwood at 395; Gilbert at 211. In those cases the court 22 properly recognized that if a reasonable excuse has been proffered for failing to fully comply with the regulations, and other evidence conclusively established the requisite co-occupancy, succession would be warranted. DHCR cites a number of the above decisions (Miney, Meyers, Cognata, Taylor and Greichel) for the proposition that succession is precluded in all instances where a person does not appear on the relevant income affidavits. None of the decisions, however, concerns the absence of income affidavits altogether, as opposed to the absence of the succession claimant’s name on income affidavits that were filed by the tenant. As correctly held by the IAI court below, “[n]one of the cases cited by the parties, nor any found by this Court, support DHCR’s interpretation of the regulation to bar succession rights based solely on the absence of a single income affidavit, in the face of overwhelming proof in the applicant’s favor” (R6). B. Administrative Convenience Is No Justification To Preclude a Meritorious Succession Claim Regardless the fact that Paul Murphy actually co-occupied the apartment with his mother for 17 years, DHCR argues that his succession claim must be denied because requiring the filing of an income affidavit as a condition of succession promotes administrative convenience by establishing a bright-line test. 23 The DHCR and HPD have a legitimate interest in being able to process succession applications in an efficient manner. Administrative convenience, however, should not be so inflexible as to override the fair determination of a clearly meritorious succession claim based upon a unique set of circumstances. “Courts must scrutinize administrative rules for genuine reasonableness and rationality in the specific context presented by a case.” Kupfersmith at 99. A succession determination is always a fact-laden inquiry. In the course of every succession claim, DHCR or HPD must consider a wide range of evidence to determine residency and co-occupancy, even where a succession applicant appears on the income affidavit. Matter of Pietropolo v. New York City Dept. of Hous. Preserv. & Dev., 39 A.D.3d 406 (1st Dep't 2007); Kaplan v New York City Dept. of Hous. Preserv. & Dev., 37 Misc. 3d 1217A (Sup. Ct., N.Y. Co. 2012); Matter of Renda v. New York State Div. of Hous. & Community Renewal, 22 A.D.3d 382 (1st Dep’t 2005). In Renda the succession claimant appeared on the income affidavits and DHCR considered statements by a number of witnesses and other evidence to conclude that succession was not warranted. Unlike this case, the applicant’s succession claim in Renda was “utterly unsupported by school records, a motor 24 vehicle registration or driver's license, bank accounts, employment records or any documentation” Renda at 383. Courts also have considered other evidence of co-occupancy even where the tenant did not appear on the income affidavit. Grigorie v. New York City Department of Housing, Preservation and Development, 75 AD3d 430 (1st Dept 2010)(court notes that the successor did not file New York City Resident income taxes.); Callwood, 49 AD3d 394; Gilbert, 52AD3d 240. Since all succession claims entail a fact finding, regardless of whether or not successor appears on the income affidavit, the additional consideration of a tenant’s explanation for failing to file an income affidavit, in the very rare case where an income affidavit has not been filed and where there exists conclusive evidence of co- occupancy, would not increase the agency’s burden in any meaningful way. Were “administrative convenience” the paramount goal, regardless of the overall validity of a succession claim, the regulation would state that being listed on the income affidavit was the only criteria for succession and that no other evidence should be considered. The regulation, instead, provides that the DHCR will consider evidence in addition to the income affidavit. Rejecting an irrefutably valid succession claim in the name of “administrative convenience” is not consistent with 25 the purpose of the regulation, the long history of succession provisions for regulated housing or the Mitchell-Lama program overall. DHCR also argues that requiring the filing of an income affidavit as a condition of succession provides an incentive for tenants to file accurate income affidavits. The Decision did not do away with the requirement of filing an income affidavit and is not a green-light to tenants to avoid the filing requirement. A tenant who fails to file the required income affidavit does so at great risk to herself and any potential successor. The Decision simply held that in the rare instance where no income affidavit is filed, the tenant provides a reasonable excuse, and co-occupancy is otherwise established, succession is not precluded. In addition, the requirement of filing an income affidavit as a condition of succession is just one of several “incentives” to insure that such affidavits are filed. There are two additional stringent penalties for failure to file an income affidavit: 1) the tenant has to pay the maximum surcharge; 2) the tenant could be evicted. In this case, Ms. Murphy paid the income surcharge. Amicus HPD’s argument that Ms. Murphy was already paying the surcharge and that therefore there was no incentive for her to file overlooks the fact that she risked being evicted, as well as having her son’s succession claim denied. Given that 26 there was no benefit to Ms. Murphy in not filing but rather, considerable risk (that she would be evicted and that her son would be denied succession), the Decision is no invitation to tenants fail to file income affidavits. Furthermore, barring Paul Murphy’s valid succession claim in this instance punishes an innocent party, a lifetime occupant of the apartment who was in high school when the 1998 income affidavit was required to be filed and just out of high school when his parents vacated. HPD also makes the argument that granting Paul Murphy succession is unfair to Mitchell-Lama applicants on the waiting list. Every grant of succession limits the number of apartments available to applicants on the waiting list. There is no unfairness, however, in permitting a lifelong family member, who has negligible income, to remain in his home. C. Denying Succession to a Long-Term Family Member Who Has Co- Occupied an Apartment with His Mother His Entire Life is Contrary to the Purpose of the Mitchell-Lama Statute The Mitchell-Lama program was established in 1955 to address the “seriously inadequate” shortage of “safe and sanitary” housing for persons and families of low and moderate income in New York State. 41 N.Y. Priv. Hous. Fin. Law §11 27 (McKinney’s 2002). Given the explicit reference to “families” in the PHFL, the lower court decisions are consistent with the purpose of the Mitchell-Lama statute and the Legislature’s intent. It is inconceivable that the Legislature intended for a lifelong family member to be forced to leave his home under the specific facts of this case, particularly one whose income at the time became eligible for succession was negligible (A162). POINT II THIS COURT HAS REPEATEDLY REJECTED THE MECHANISTIC APPLICATION OF REGULATIONS WHICH UNDERMINE THE PURPOSE OF THOSE REGULATIONS AND COMPEL ABSURD RESULTS DHCR and HPD argue that the Appellate Division impermissibly created an exception to the Mitchell-Lama succession regulations. As argued above, the court below did not create an exception to the regulations but rather interpreted them in a manner consistent with both the language of the regulations and their purpose. Furthermore, this Court has repeatedly rejected DHCR’s overly rigid application of its regulations where such interpretation undermines the purpose of the regulations and compels absurd results. 28 In Matter of Dworman, Seymour, Sudarsky v. DHCR, 94 N.Y.2d 359 (1999)9, DHCR argued that it was bound by the applicable statute to reject answers to luxury deregulation petitions that were filed by tenants after 60 days, regardless of the cause of the delay. As it does here, DHCR argued that there was a bright-line rule which permitted no exceptions. The statute in Dworman, like the income affidavit requirement, could be read to prohibit any exceptions: “Clearly the Act intends for tenants to provide income verification information to DHCR within 60 days after the Division serves notice of the landlord's petition to deregulate: the Act states that the notification "shall require the tenant or tenants to provide the information to the division within sixty days of service" (Rent Stabilization Law [Administrative Code] § 26-504.3 [c] [1]). And clearly the Act gives DHCR authority to issue an order of deregulation if at least 60 days have passed and the tenant has not responded: the Act states that DHCR ‘shall issue’ an order of deregulation ‘[i]n the event that the tenant or tenants fail to provide the information required pursuant to paragraph one of this subdivision’ (id., § 26-504.3 [c] [3]).” Dworman at 370. This Court held that, nonetheless, where a tenant offered a good excuse for a late filing, the DHCR was not bound by a rigid application of the statute but could accept the filing. This Court then found that, in two of the cases before it, it was 9 Dworman was a consolidated appeal of three administrative proceedings involving three tenants, Mr. Dworman, Mr. Seymour and Mr. Sudarsky. 29 arbitrary and capricious to grant the owner’s deregulation petition without considering the tenants’ excuses. Id. at 374. In Dworman, the tenant was on vacation in Europe when the form was due. In Sudarsky, the tenant accidentally returned the form to the landlord rather than the DHCR. Ibid. In Dworman this Court considered some of the same public policy issues that are present in this case. Most importantly, the Court looked to the Legislature’s intention that deregulation petitions should be decided on the merits. Dworman at 372. The Court also cautioned that its ruling was not an invitation to tenants to disregard the deadline set forth in the code. Id. at 373. Similarly, the courts below did not invite tenants to avoid filing income affidavits, but instead held the DHCR is not precluded, in all instances, from considering a tenant’s explanation for not filing. In both Dworman and the present case the issue is whether a long-term tenant (or lifelong family member) can remain in his or her home despite having failed to comply with a technical requirement the primary purpose of which is, according to the agency, to facilitate administrative convenience. In Dworman this Court correctly held that tenants whose income is below the statutory threshold should not lose their homes because they did not file a timely answer, where there was a good reason for not doing so. In this case the courts below correctly held that a lifelong 30 resident should not lose his home because his mother failed to file an income affidavit, where she had a compelling reason for not doing so. The fallacy of DHCR’s absolutist position is made clear in Dworman where the DHCR conceded that if a tenant’s failure to return an answer form was the result of being incapacitated that it would not issue an order of deregulation. Id. at 372. Similarly here, the DHCR does not argue that a failure to file an income affidavit would preclude succession if the tenant was, for instance, in a coma, or out of town caring for a relative dying of cancer.10 No doubt DHCR will argue that Dworman is distinguished by the fact that there is a difference between permitting a late filing of an answer to a deregulation petition and overlooking the non-filing of an income affidavit. However, the DHCR’s rationale for a bright-line rule in both instances is the same: that 10 This Court in Dworman also noted that the DHCR itself regularly fails to comply with its own regulations. “[W]hile DHCR reads the Act to require invariant application of the 60-day rule to tenants, the Division apparently shows little regard for the equally precise deadlines the statute imposes on it. Subdivision (c) (1), for instance, requires DHCR to notify tenants within 20 days after the landlord has filed a petition for deregulation. In the cases at hand, however, DHCR waited nearly four months before notifying Seymour, and two months before notifying either Dworman or Sudarsky.” Dworman at 373. “[While the DHCR’s failure to comply with its own regulations does not divest it of jurisdiction].. DHCR's view of its own deadlines as merely ‘advisory’ weakens its argument that, by mandate of the statute, a tenant's tardiness in complying with deadlines imposed under the same enactment can never, under any circumstances, be forgiven.” Ibid. In this case, the DHCR determined Mr. Murphy’s succession application after three years, rather than 30 days (R136). 31 administrative convenience, in every single imaginable circumstance, overrides a determination on the merits. Similarly, in two cases involving the “Four Year Rule11,” DHCR argued that the relevant regulation absolutely barred any review of the rent stabilization rent history in an overcharge case more than four years prior to the filing of the complaint. Grimm v. DHCR, 15 N.Y.3d 358 (2010) and Cintron v. Calogero, 15 N.Y.3d 3 478 (2010). As it does here, DHCR sought in Grimm and Cintron to apply a bright-line rule regardless of the specific facts of a case. In both cases this Court held that the rigid Four Year Rule was not applicable due to the specific circumstances of those cases. In Grimm this Court found that where there is a “colorable claim of fraud” the rent history may be examined prior to the four years. In Cintron, this Court held that where there is a rent reduction order in effect prior to the four years, a landlord cannot evade its application by invoking the Four Year Rule. In both Grimm and Cintron, as in Dworman, this Court considered anomalous facts which required avoiding a mechanistic application of a bright-line rule. See also Eastside Exhibition 11 RSL §26-516 requires that overcharge complaints be filed within four years of the alleged overcharge and precludes examination of the rent history more than four years prior to the filing of a complaint. 32 Corp. v. 210 East 86th Street Corp., 18 NY3d 617; 942 NYS2d 19 (2012)(de minimis exceptions to “bright-line rules” warranted) Therefore, DHCR’s argument that the Appellate Division exceeded its jurisdiction lacks merit. Nor does the agency’s “decades long” interpretation of its regulation require deference by this Court. DHCR Brief at p. 24. First, an agency’s interpretation of a statute or regulation which leads to absurd results and is contrary its purpose is not entitled to deference. Roberts v. Tishman-Speyer, 13 NY3d 270, 284 (2009). Second, DHCR does not point to one instance where it has precluded succession where a single income affidavit was not filed. This Court’s decision in Matter of Schorr v. Department of Housing Preservation and Development, 10 NY3d 776 (2008), which DHCR argues is “controlling here,” does not compel a different result. While Paul Murphy meets all of the criteria for succession except for not being listed on one affidavit which was never filed, the tenant in Schorr met none of the criteria for succession. Not only did Mr. Schorr not appear on an income affidavit, it was not disputed that he had not lived in the apartment for nine years and did not reside in the apartment for two-years prior to the vacatur of his parents. Ibid. In Schorr, the tenant argued that, despite 33 being unable to establish co-occupancy, the housing company had waived its application of the relevant regulations. Ibid. In this matter, the courts below properly construed the succession regulations in light of the totality of the facts to grant succession to a lifelong family member. POINT III DHCR’S REJECTION OF PAULA MURPHY’S EXPLANATION FOR FAILING TO FILE AN INCOME AFFIDAVIT LACKED A RATIONAL BASIS DHCR argues that even if the regulations permitted it to consider a tenant’s excuse for not filing an income affidavit, there was “substantial evidence” supporting its rejection of Paula Murphy’s explanation. DHCR’s rejection of Paula Murphy’s explanation was not supported by substantial evidence and had no rational basis. Ms. Murphy provided a reasonable and compelling explanation for why she did not file the income affidavits at issue. Ms. Murphy feared that her financial information would be misused by a corrupt DHCR official who resided at Southbridge whom she believed was privy to the information included on income affidavits (R67). Ms. Murphy submitted specific and detailed facts in regard to 34 Ms. Wolfson whom she had known for 30 years (R81-82)12. Ms. Murphy stated that she “frequently saw Ms. Wolfson at the management office” and that she had been told by a friend that “Ms. Wolfson was going into the management office and looking at income affidavits to find out people’s personal financial information” and “telling people how much money I made and that since I made a certain amount of money I should not be living at Southbridge” (R82). Ms. Murphy’s fears were well founded. The record below establishes that during the time that Ms. Murphy and her son resided at the apartment, DHCR employees Jody Wolfson and Mark Marcucilli resided at Southbridge Towers (R58-R65). Ms. Wolfson was a DHCR Housing Management Assistant at the time (R146). She had the responsibility to “review the processing of apartment applications.” (Memorandum of Richmond McCurnin and Marcia Hirsch to Sheldon Melnitsky dated March 3, 2003 at R146) Part of the processing of apartment applications involves review of income affidavits. DHCR Brief at pp. 6-7. DHCR never denied Ms. Murphy’s claim that Ms. Wolfson had access to income affidavits or to her personal financial information. Ms. Wolfson eventually became a member of the Southbridge Towers Board of Directors, with 12 Amicus HPD argues that since Mr. Murphy initially believed, before knowing all the facts, that the income affidavits had been filed, his mother’s explanation was nothing but a “post hoc rationalization.” HPD Brief at p.15. The extensive evidence in the record belies that characterization. 35 the approval of the DHCR despite concerns about a conflict of interest (R146). Ms. Wolfson and Mr. Marcucilli were indicted in 2006 for federal crimes related to corruption at Southbridge and convicted in 2008. See “Southbridge director charged in fraud case,” Downtown Express, January 7-12, 2006 at R58; “U.S. Charges State Housing Official With Fraud and Theft of Government Funds,” Press Release issued by United States Attorney for Southern District dated December 22, 2005 at R61; Press Release from Office of the New York State Inspector General dated February 21, 2008 at R64. Ms. Wolfson was ultimately convicted of illegally transferring her Southbridge Tower apartment to an ineligible tenant (R102). Mr. Marculli was convicted of felony charges of conspiracy, mail fraud and theft of government funds. Ibid. DHCR argues, unconvincingly, that the facts above do not constitute substantial evidence to support Ms. Murphy’s reasonable belief that her personal financial information would be misused by Jody Wolfson. DHCR cites the fact that Ms. Wolfson was not on the Southbridge Board of Directors during 1998- 1999, but does not dispute that she was a DHCR employee at that time involved in housing management or that she had access to tenants’, including Ms. Murphy’s, financial information (R154). DHCR contends that “Ms. Wolfson’s crimes had 36 nothing to do with the misappropriation or misuse of other tenants’ financial information” but concedes that one of the charges against her was “falsifying income affidavits.” DHCR Brief at p. 28. DHCR also argues that the fact that Ms. Murphy did not take additional steps to safeguard her financial information or notify an official at the housing company amount to “inconsistencies.” DHCR Brief at p. 29. It is unclear what steps Ms. Murphy could have taken once her prior financial information had been provided and it is hardly inconsistent, and indeed rational, for a tenant who is fearful of a corrupt housing official to refrain from making a complaint given that official’s power over her tenancy and her family. Nor does the fact that Ms. Wolfson may have already had access to Ms. Murphy’s prior income information undermine Ms. Murphy’s concerns as one’s income may change each year. A prior misuse of one’s private financial information hardly negates a concern that additional information may be misused in the future. In addition, the fact that Paul Murphy did not have a similar concern hardly negates his mother’s concern, particularly since, as his income tax returns indicate, Paul Murphy had very little income (AR162). The fact that Paul Murphy made his own decision to comply with the income affidavit requirement should not be a factor in denying his succession claim. DHCR, the very agency that hired Ms. Wolfson, permitted her to serve on the Southbridge Board despite being a DHCR employee and permitted her to continue as a DHCR employee even after she was indicted (R149), had no rational basis to disbelieve Ms. Murphy's explanation for failing to file the relevant income affidavits. CONCLUSION The courts below correctly found that it was arbitrary and capricious for the DHCR to deny Mr. Murphy's succession claim on the sole basis that the 1998 income affidavit was not filed, where the evidence before the agency established that he had resided in the apartment with his mother since he was an infant, for a period of more than 17 years prior to her permanently vacating and where his mother explained that she failed to file the income affidavits due to her well-founded fears as to corruption of a DHCR official who also resided at Southbridge. The Decision must be affirmed. Dated: January 17, 2013 New York, New York 37