Julie Conason, et al., Respondents,v.Megan Holding, LLC, et al., Appellants.BriefN.Y.January 13, 2015To be Argued by: UMAR A. SHEIKH (Time Requested: 30 Minutes) APL 2013-00352 New York County Clerk’s Index No. 106560/11 Court of Appeals of the State of New York JULIE CONASON and GEOFFREY BRYANT, Plaintiffs-Respondents, – against – MEGAN HOLDING, LLC and EMMANUEL KU, Defendants-Appellants. REPLY BRIEF FOR DEFENDANTS-APPELLANTS MARINO PARTNERS LLP Attorneys for Defendants-Appellants 15 Fisher Lane, Suite 200 White Plains, New York 10603 Tel.: (914) 368-4525 Fax: (914) 368-4527 Dated: May 9, 2014 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES ................................................................................... iii PRELIMINARY STATEMENT ............................................................................... 1 ARGUMENT ............................................................................................................. 5 I. THE ORDER ON APPEAL CONTRADICTS THE PLAIN LANGUAGE OF C.P.L.R. § 213-a FOUR YEAR STATUTE OF LIMITATIONS EXPRESSED BY THE LEGISLATURE, IS AN UNCONSTITUTIONAL EX POST FACTO LAW, AFFIRMS ERRONEOUS APPLICATIONS OF THE LAW, AND MUST BE REVERSED .................................... 5 A. There is No Need to Speculate on the Legislature’s Intent Hinted at in Thornton and upon which Respondents Heavily Rely, Because Both the Plain Language of the Statute and the Legislative History of the RRRA Demonstrates the Legislature Intended to and Did Codify a Four-Year Statute of Limitations for Residential Rent Overcharge Claims, and Respondents’ Failure to Comply with the Same Renders their Request for Statutory Relief Time-Barred .................................. 6 B. Absent a Showing that Respondents Carried their Burden of Having Brought their Claim Within Four Years of the First Rent Overcharge in November 2003, the Burden of Proof Never Shifted to Defendants- Appellants to Rebut Respondents’ Specific Allegations of a Fraudulently Set Rent or Abuse of the Corporate Form ............................................................................................ 8 C. The Order on Appeal Retroactively, (1) Altering the Evidentiary Proof Requirements for a Rent Overcharge Determination, (2) Extending an Expired Statute of Limitations, and (3) Applying Treble Damages and Attorney’s Fees on an Expired Overcharge Claim, Exacts an Unconstitutional Ex Post Facto Law and Must Be Reversed. .................................................................... 12 ii D. Respondents are Not Entitled to Collateral Estoppel Because the Findings of Fraud Were Not Necessary to the Civil Court’s Final Judgment of Respondents’ Breach of the Warranty of Habitability Claim, Even if the Civil Court Action Was Fully and Fairly Litigated ............ 13 E. Respondents Never Satisfied their Heavy Burden of Showing that Ku So Dominated Megan During the Period of the Transactions Attacked (November 2003 – October 2007). .......................................................................... 15 II. RESPONDENTS STILL DO NOT EXPLAIN WITH PROOF IN ADMISSIBLE FORM, IDENTIFIABLE IN THE RECORD BELOW, WHY THEY FAILED TO BRING THEIR RENT OVERCHARGE CLAIM WITHIN FOUR YEARS OF THE FIRST OVERCHARGE AS ALL LITIGANTS MUST, PARTICULARLY WHERE THE CLAIM IS SOLELY FOR A “FINANCIAL INJURY,” STRICTLY MONEY DAMAGES. .................................................... 16 III. AT THE END OF THE DAY THESE RESPONDENTS BLEW THROUGH THREE STATUTES OF LIMITATIONS AND DESERVE NO SPECIAL EXCEPTION TO EXEMPT THIS RESIDENTIAL RENT OVERCHARGE ACTION FROM THE LEGISLATIVE TIME BAR .......................................................................................... 18 CONCLUSION ........................................................................................................ 22 iii TABLE OF AUTHORITIES Page(s) Cases: 19 W. 45th St. Realty Co. v Darom Elec. Corp., 233 A.D.2d 184 (1st Dep’t 1996) .................................................................. 13 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 746 N.Y.S.2d 131 (2002) ..................................................... 11 Calder v. Bull, 3 U.S. 386, 1 L. Ed. 648 (1798)..................................................................... 12 Direnna v. Christensen, 57 A.D.3d 408 (1st Dep’t 2008) ...................................................................... 4 Gramatan Home Investors Corp. v. Lopez, 46 N.Y.2d 481, 414 N.Y.S.2d 308 (1979) ..................................................... 14 Grimm v. State Div. of Hous. and Community Renewal Off. of Rent Admin., 15 N.Y.3d 358, 938 N.E.2d 924 (2010) ...................................................... 4, 5 Hoover v. New Holland North America, Inc. 2014 N.Y. Slip. Op. 02215, WL 1280439 April 1, 2014) ............................. 10 Lawrence Const. Corp. v. State, 293 N.Y. 634, 59 N.E.2d 630 (1944) .............................................................. 7 Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1483, 128 L. Ed. 2d 229 (1994) ............................ 12 Matter of Cintron v. Calogero, 15 N.Y.3d 347, 912 N.Y.S.2d 498 (2010) ................................................... 4, 5 Molino v. Putnam County, 29 N.Y.2d 44 (1971) ...................................................................................... 14 iv Myers v. Frankel, 184 Misc.2d 608, 708 N.Y.S.2d 566 (App. Term, 2d Dep’t 2000) ................. 3 Myers v. Frankel, 740 N.Y.S.2d 366, 292 A.D.2d 575 (2d Dep’t 2002) ..................................... 3 Stogner v. California, 539 U.S. 607, 123 S. Ct. 2446, 156 L. Ed. 2d 544 (2003) ............................ 12 Thornton v. Baron, 5 N.Y.3d 175, 800 N.Y.S.2d 118 (2005)i ...............................................passim TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335 (1998) .................................................................................... 15 Van Valkenburgh, Nooger & Neville, Inc. v. Hayden Pub. Co., 30 N.Y.2d 34, 330 N.Y.S.2d 329 (1972) ....................................................... 11 Vega v. Restani Const. Corp., 18 N.Y.3d 499, 942 N.Y.S.2d 13 (2012) ................................................... 9-10 Zuckerman v. City of New York, 49 N.Y.2d 557 (1980) .................................................................................... 17 Zumpano v. Quinn, 6 N.Y.3d 666, 849 N.E.2d 926 (2006) ............................................................ 4 Statutes & Other Authorities: U.S. Constitution ...............................................................................................passim C.P.L.R. § 213-a ................................................................................................passim C.P.L.R. § 3212 ........................................................................................................ 10 i We note for the Court that the citations to the Thornton case in the Appellants’ Brief inadvertently contained a typographical error, citing to the case as “5 N.Y.2d” instead of 5 N.Y.3d”. We apologize to the Court for the same. v 9 NYCRR § 2526.1(a) ............................................................................................... 9 9 NYCRR § 2526.1(a)(2)(1) ................................................................................ 2, 19 9 NYCRR § 2526.1(a)(2)(ii) .................................................................................... 20 Rent Stabilization Law § 26-511(d) ................................................................... 17, 18 Rent Stabilization Law § 26-516(a)(2)(i) ..................................................... 8, 19, 20 Rent Regulation Reform Act of 1997 ........................................................................ 1 Rosenberg, Collateral Estoppel in New York, 44 St. Johns L.Rev. 165 ................. 14 1 PRELIMINARY STATEMENT Respondents simply cannot defy the gravity of the governing four-year statute of limitations C.P.L.R. § 213-a, which completely disposes of this action for willful rent overcharge because it is time barred. There is nothing left to analyze. As argued extensively in Defendants-Appellants’ Brief, the Order on Appeal creating a common law fraud exception to the four-year statute of limitations pays short shrift to the Legislature’s statutory proscription (R. 637) and must be reversed as plain error of law. Further, the Order must be reversed because it is the unauthorized exercise of legislative powers, is unconstitutional under the Ex Post Facto Clause of the U.S. Constitution binding on state legislatures and judiciaries, and because it affirms the lower court’s erroneous construction of law on accrual of the rent overcharge statutes of limitations, collateral estoppel and piercing the corporate veil on summary judgment. Amended by the New York Legislature through the Rent Regulation Reform Act (“RRRA”) of 1997, and still in effect, C.P.L.R. § 213-a - and corresponding enactments, in the plainest, unequivocal terms precludes Respondents’ garden variety rent overcharge action because Respondents did not bring this action within four years of when their claim accrued: Four years from the first rent overcharge, November 2003. (R. 74-78). An action on a residential rent overcharge shall be commenced within four years of the first overcharge 2 alleged [“Mandatory Limitations Section”] and no determination of an overcharge and no award or calculation of an award of the amount of any overcharge may be based upon an overcharge having occurred more than four years before the action is commenced. [“Reinforcement Section”]. This section shall preclude examination of the rental history of the housing accommodation prior to the four-year period immediately preceding the commencement of the action. [“Recovery Section”]. C.P.L.R. § 213-a (emphasis). C.P.L.R. § 213-a’s language is tracked in the Rent Stabilization Code 9 N.Y.C.R.R. § 2526.1(a)(2) with, A complaint pursuant to this section must be filed with the DHCR within four years of the first overcharge alleged, and no determination of an overcharge and no award or calculation of an award of the amount of an overcharge may be based on an overcharge having occurred more than four years before the complaint is filed. Not only do Respondents never cite the express language of the statutes upon which they stake their claim to a rent overcharge, treble damages, and attorneys fee award, Respondents offer not a single case from this Court or the Appellate Division below that exempts them from carrying their threshold burden under C.P.L.R. § 213-a’s Mandatory Limitations Section, to bring their residential rent overcharge claim within four years of the first overcharge alleged. Their assertion that “it is well established that the statute of limitations runs …from each illegally collected rent payment, as a rent overcharge involves continuing payments which occur each month” (Respondents Brief , “Resp. Br.” at 21) is suspect when 3 juxtaposed against the statutory language, supra, and in any event has already been rejected by the appellate courts below. (See Myers v. Frankel, 292 A.D.2d 575, 740 N.Y.S.2d 366 (2d Dep’t 2002) modifying order of the Appellate Term, Second Department, Myers v. Frankel, 184 Misc.2d 608, 612, 708 N.Y.S.2d 566 (App. Term, 2d Dep’t 2000) and rejecting that court’s finding that a rent overcharge was of a “continuing nature”, and granting landlord’s motion for dismissal of the rent overcharge counterclaim as time-barred because it was not brought within four years of when their claim accrued, i.e., when the tenants first entered into possession and paid an alleged unlawful rent). The fact that the Civil Court expended precious judicial resources making factual findings of a fraudulently set rent (R. 11; 57- 62) which pre-dates Respondents’ tenancy on a stale rent overcharge claim that it would ultimately dismiss, never absolved Respondents of their threshold burden. To wit, the Legislature denied the Civil Court, or any court or DHCR for that matter, of jurisdiction to make any determination of liability for rent overcharge when said claim was based on a residential rent overcharge having occurred, more than four years before the action was commenced by way of their Civil Court counterclaim in April 2009. (R. 44). (Respondents misrepresent to this Court in their brief that they brought their claim in 2008, without citing to the Record any support for this 4 assertion (Resp. Br. at p. 23). The first overcharge alleged by Respondents occurred in November 2003. Respondents flat out concede that there is no tolling of the four year statute of limitations, based on Megan’s alleged fraud in November 2003, and also concede that they are not entitled to any equitable recoupment. (Resp. Br. at p. 24). Yet they do not explain how they, unlike the tenants in Grimm v State Div. of Hous. and Community Renewal Off. Of Rent Admin., 15 N.Y. 3d 358, 938 N.E.2d 924 (2010), Thornton v. Baron, 5 N.Y. 3d 175, 800 N.Y.S.2d 118 (2005), and Matter of Cintron v. Calogero, 15 N.Y.3d 347, 912 N.Y.S.2d 498 (2010) - to the extent these cases are even on point, failed to commence their action within four years of the first overcharge mandated by C.P.L.R. § 213-a. Beyond Respondents’ effusive jury argument about Megan Holding LLC’s and thus Emmanuel Ku’s alleged fraud in charging them an unlawful rent – clearly designed to elicit a knee- jerk response from this Court to ignore the law set by the Legislature and punish Defendants-Appellants, they identify no law that gives them special status distinct from any other tenant-plaintiff, see Direnna v. Christensen, 57 A.D.3d 408 (1st Dep’t 2008) or any other civil litigant who did not bring their claims within the statutory limitation period, see Zumpano v. Quinn, 6 N.Y.3d 666, 849 N.E.2d 926 (2006) (adult plaintiffs who alleged molestation at the hands of priests as children were time barred under the applicable statute of limitations) and were shut out at 5 the court house doorsteps. No such law exists except by the judicial fiction of the Order on Appeal which must be set aside because it conflicts with the duly enacted, Legislature’s clear command that is C.P.L.R. § 213-a. In short, if the statutory right –there is no common law right - to recover on a residential rent overcharge is not vindicated within four-years of the first overcharge (start of the accrual period), failure to comply with the time conditions the Legislature sets, effects a total bar for a rent overcharge award at any time thereafter. Respondents did not commence this statutory residential overcharge action until one year and six months after the four year limitations period expired on October 31, 2007, and their claim is time barred. No exceptions. Accordingly, the Appellate Division’s Order affirming the lower court must be reversed, and Defendants-Appellants’ motion for summary judgment dismissing the Amended Complaint granted. I. THE ORDER ON APPEAL CONTRADICTS THE PLAIN LANGUAGE OF C.P.L.R. § 213-a FOUR YEAR STATUTE OF LIMITATIONS EXPRESSED BY THE LEGISLATURE, IS AN UNCONSTITUTIONAL EX POST FACTO LAW, AFFIRMS ERRONEOUS APPLICATIONS OF THE LAW, AND MUST BE REVERSED. The statute of limitations set by the Legislature, C.P.L.R. § 213-a, absolutely bars this action for rent overcharge. Had Respondents commenced this action on or before October 31, 2007 this would not be the case. But the law as written, duly 6 enacted and upheld and continually re-affirmed by this Court in Thornton, 5 N.Y.3d 175 (2005), Grimm, 15 N.Y.3d 358 (2010), and Matter of Cintron, 15 N.Y.3d 347 (2010) makes no exception to tenants who bring their claim after the four year statute of limitations period expires. A. There is No Need to Speculate on the Legislature’s Intent Hinted at in Thornton and upon which Respondents Heavily Rely, Because Both the Plain Language of the Statute and the Legislative History of the RRRA Demonstrates the Legislature Intended to and Did Codify a Four-Year Statute of Limitations for Residential Rent Overcharge Claims, and Respondents’ Failure to Comply with the Same Renders their Request for Statutory Relief Time-Barred. Respondents cannot nor do they even attempt to deny that when the RRRA was passed in 1997, the Legislature intended to codify a four year statute of limitations for contesting rent overcharges, and to prohibit challenges to the rent or the service of rent registration statements four years prior to the most recent registration statements on file. (See Add. Brief 2, 12, 22). Thus this Court’s explanation in Thornton, 5 N.Y.3d 175, 800 N.Y.S.2d 118 (2005) that it “surely was not the intention of the Legislature when it enacted the RRRA” id. at 181, to let exorbitant rents registered by unscrupulous landlords through fictitious tenants to go unchallenged, was unnecessary. The RRRA’s legislative history speaks for itself and amplifies the unequivocal legislative intention that whatever the circumstances in how an excessive rent came to be, four years was the line in the 7 sand for challenging or contesting that rent. This Court has never deviated from that language and Respondents have simply failed to timely bring their claim. “A statute must be read and given effect as it is written by the Legislature, not as the court may think it should or would have been written if the Legislature had envisaged all the problems and complications which might arise in the course of its administration.” Lawrence Const. Corp. v. State, 293 N.Y. 634, 639, 59 N.E.2d 630, 632 (1944). Respondents encourage this Court to essentially re-write the C.P.L.R. § 213-a statute, so that only “honest” landlords are worthy of its protections despite the Legislature having declined to make any distinctions between rent overcharges that are the function of a landlord’s moral penchants. (Resp. Br.19-20). In any event, Thornton, 5 N.Y.3d 175, does not hold sway in this case the way that Respondents project1 given the marked difference in procedural posture there and narrow question answered by that Court: while the subtenant-plaintiffs having brought their rent overcharge claim against the tenant within four years of the first overcharge alleged, they were denied asserting this claim against the property owners and defendant 390 West End Associates for whom the four-year 1 Respondents argument that “this Court addressed the very issue that appellants ask the Court to reconsider: the application of CPLR § 213-a to a rent overcharge claim” (Resp. Br. at p. 19) misstates the case and what the Thornton Court considered to be the very narrow question before it. That question did not contain anything more than a indirect reference to C.P.L.R. § 213-a, affirming that the RRRA “clarified and reinforced the four year statute of limitations applicable to rent overcharge claims.” Id. at 180, 120. 8 statute of limitations had run by the time plaintiff joined them as a party eight years after their rent overcharge claim accrued. Id. at fn. 2. The Thornton Court stated, “Only one question is before us: How is the legal regulated rent of the apartment to be established?” Id. at 180. Thus, Thornton was not about when a four year statute of limitations on a residential rent overcharge accrues, or whether illusory tenancies remove statute of limitations requirements altogether. It was about how to calculate the legal regulated rent for the subtenant plaintiff’s unit, an inquiry only which tenants who bring their rent overcharge claims on time may avail themselves of. These Respondents may not count themselves among this group of tenants. The Legislature was clear and unequivocal in not distinguishing between “honest” and “unscrupulous” landlord when it said that a tenant’s failure to bring their claim within four (4) years rendered the rent unchallengable. See C.P.L.R. § 213-a; RSL § 26-516(a)(2)(i). B. Absent a Showing that Respondents Carried their Burden of Having Brought their Claim Within Four Years of the First Rent Overcharge in November 2003, the Burden of Proof Never Shifted to Defendants-Appellants to Rebut Respondents’ Specific Allegations of a Fraudulently Set Rent or Abuse of the Corporate Form. In several places in Respondents-Plaintiffs’ opposition they assert that neither Megan nor Ku ever denied committing fraud. (Resp. Br. 13-15; 27, 38). Not only is this patently false, for this Court need only reflect on the contents of 9 the Verified Answer submitted as an exhibit in opposition to and in support of the respective motions for summary judgment (R. 187-195; 403), but it fundamentally mistakes questions of law for questions of fact. But more importantly, the only question of fact that mattered of legal consequence to this case was, “Did Respondents bring their rent overcharge action within four years of the first overcharge alleged in November 2003?” The unassailable, undisputed answer to the foregoing is “no” they did not, and their claim for a rent overcharge award is time barred under the C.P.L.R., the Rent Stabilization Code and the Administrative Code of the City of New York, 9 N.Y.C.R.R. § 2526.1(a). Once Appellants demonstrated that the claim was not brought within four (4) years, Respondents failed to carry their burden of proving that they did timely commence this action within the four-year statutory period, to create any triable issue of fact on the rent overcharge claim. Contrary to Respondents’ claim asserted in their opposition (Br. at p. 23), the only burden shifters here are Respondents, who have failed to carry their burden establishing that they brought their rent overcharge claim within the four year statute of limitations. Defendants-Appellants on the other hand, met their prima facie showing on summary judgment proving as a matter of law that Respondents did not bring their claim on time and thus this action is time barred. See Vega v. Restani Const. Corp., 18 N.Y.3d 499, 503, 942 N.Y.S.2d 13, 15 10 (2012) (the proponent of summary judgment has the burden of making a prima facie showing of the absence of any material fact to be resolved at trial, and failure to carry this burden requires denial of the motion, “regardless of the sufficiency of the opposing papers”) (internal citations quotations omitted). Id; See also this Court’s recent decision in Hoover v. New Holland North America, Inc., (2014 N.Y. Slip Op. 02215, WL 1280439 April 1, 2014) (only after a party establishes prima facie entitlement to summary judgment does the evidentiary burden of proof shift to the nonmoving party to adduce proof in admissible form that material issue of fact exists requiring a trial). Id at * 18; C.P.L.R. § 3212. Here the burden never shifted to Defendants - Appellants because they showed as a matter of law that Respondents’ rent overcharge claim is untimely. Summary judgment should have been denied to Plaintiffs regardless of whether Defendants decided to address the multiple purported factual allegations raised about a fictitious tenant and Ku’s personal loans to Megan, simply because Respondents did not meet their burden of showing that they commenced this action, “within four years of the first overcharge alleged.” C.P.L.R. § 213-a. Period. End of story. On the other hand, Respondents did nothing to overcome Appellants’ proof that the claim is time-barred. As they have conceded, they are not relying on any tolling of the statute of limitations. Instead, they try to blur the line between timely 11 bringing a claim and (once a claim is timely brought) the calculation of the base date and any overcharge. Curiously, Respondents advance that a “landlord[‘s] [...] duty to refrain from illegally overcharging a tenant … ignore[s] the implied covenant of good faith and fair dealing,” (Resp. Br. at p. 23) to somehow suggest that Appellants have impermissibly shifted the burden of proof. But the implied covenant of good faith and fair dealing is implied in the context of contracts, see 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153, 746 N.Y.S.2d 131, 135 (2002), (“[i]n New York, all contracts imply a covenant of good faith and fair dealing in the course of performance”); Van Valkenburgh, Nooger & Neville, Inc. v. Hayden Pub. Co., 30 N.Y.2d 34, 45 330 N.Y.S.2d 329, 333 (1972) (this implied contract covenant applies to all contracts from book publishing to house building), and not statutory rent overcharge proceedings. Respondents never brought a cause of action for breach of contract, the Lease at issue (R. 74-82). Instead, they brought a garden variety statutory rent overcharge, which factual bases arise outside of, and predate the terms of the Lease contract, and the contract rent.2 2 If Respondents were sincere about the applicability of the good faith and fair dealing argument surely they would have made some kind of rental payments for the unit since May 2009, even if said rental payment merely encompassed what they believed the lawful rent should be. However, landlord Megan Holding LLC has not received any rent payments from Respondents in close to five (5) years. Surely, good faith and fair dealing works both ways. 12 C. The Order on Appeal Retroactively, (1) Altering the Evidentiary Proof Requirements for a Rent Overcharge Determination, (2) Extending an Expired Statute of Limitations, and (3) Applying Treble Damages and Attorney’s Fees on an Expired Overcharge Claim, Exacts an Unconstitutional Ex Post Facto Law and Must Be Reversed. The Appellate Division’s Order, creating a judge made common law fraud exception to the four year statute of limitations codified in C.P.L.R. § 213-a is an ex post facto law prohibited by the U.S. Constitution Article I, §10 cl. 1. Respondents dismiss as “absurd” Defendants-Appellants’ valid arguments that the Appellate Division’s Order is a prohibited ex post facto law without any analysis of the three different ways the Order runs afoul of the constitutional prohibition. (Resp. Br. at 23). Respondents overlook that the Order changes the rules of evidence to permit different testimony than what C.P.L.R. § 213-a (in effect as amended since 1997), allows vis-a-vis a determination of a rent overcharge having occurred more than four years before an action is commenced – i.e., the Reinforcement Section. See Calder v. Bull. 3 U.S. 386, 390-391, 1 L. Ed. 648 (1798). Or how the Order retroactively extends the limitations period to hold Megan and Ku liable for rent overcharge long after the statutory limitations period expired. See Stogner v. California, 539 U.S. 607, 123 S. Ct. 2446, 2449, 156 L. Ed. 2d 544 (2003). Nor do Respondents give any consideration to how retroactive imposition of treble damages, damages that are exemplary and punitive in nature for a willful rent overcharge poses serious constitutional problems under the Ex 13 Post Facto Clause. See Landgraf v. USI Film Products, 511 U.S. 244, 281, 114 S. Ct. 1483, 1505, 128 L. Ed. 2d 229 (1994). The real question here is how the law, a basic four year statute of limitations with its own built in accrual period, could be so twisted and altered from its original, clear intent, bent in all manner of unconstitutional form, to allow these Respondents a damages hearing on an expired cause of action for residential rent overcharge. The Order on Appeal affirming the lower court’s grant of Respondents’ summary judgment motion simply cannot stand under the weight of the U.S. Constitution’s Ex Post Facto Clause and must be reversed. D. Respondents are Not Entitled to Collateral Estoppel Because the Findings of Fraud Were Not Necessary to the Civil Court’s Final Judgment of Respondents’ Breach of the Warranty of Habitability Claim, Even if the Civil Court Action Was Fully and Fairly Litigated. Even where the Defendants-Appellants had a full and fair opportunity to litigate,3 the collateral estoppel doctrine does not apply because those findings related to a claim that was dismissed and not necessary to the final judgment award 3 Ku was not a party to the Civil Court action, and could not have been deemed in privity with Megan on a veil piercing theory given that court’s limited jurisdiction to try suits in equity. “Since piercing the corporate veil is a form of equitable relief, which the Civil Court does not have jurisdiction to grant we reverse the transfer to the Civil Court.” 19 W. 45th St. Realty Co. v Darom Elec. Corp., 233 A.D.2d 184, 185 (1st Dep’t 1996). 14 of breach of the warranty of habitability. See Gramatan Home Investors Corp. v. Lopez, 46 N.Y.2d 481, 485, 414 N.Y.S.2d 308, 310-311 (1979), “Collateral estoppel, … holds that, as to the parties in a litigation and those in privity with them, a judgment on the merits by a court of competent jurisdiction is conclusive of the issues of fact and questions of law necessarily decided therein in any subsequent action.” (Emphasis added). See also, Molino v. Putnam County, 29 N.Y.2d 44, 50 (1971) (dissent, explaining the necessity requirement before collateral estoppel will lie – i.e., that the finding has to be essential to the earlier judgment in order to be given preclusive effect in a subsequent judgment) (citing to Rosenberg, Collateral Estoppel in New York, 44 St. Johns L.Rev. 165, 182.). Although, Respondents altogether ignore this element of the collateral estoppel doctrine, as did the lower courts, findings of fact on a dismissed rent overcharge claim were not necessary or essential to the Civil Court’s finding that Megan had breached the warranty of habitability. Accordingly, the Civil Court’s findings were not entitled to preclusive effect in the Supreme Court action and therefore the Order on Appeal improperly affirmed the misapplication of the collateral estoppel doctrine and should be reversed. 15 E. Respondents Never Satisfied their Heavy Burden of Showing that Ku So Dominated Megan During the Period of the Transactions Attacked (November 2003 – October 2007). The Appellate Division’s Order and Respondents give undue weight to a personal loan application to NYCB bank where Ku did business dated August 2009, (R. 639; Resp. Br. 11) months after Respondents stopped paying rent to support a finding of Ku’s domination of Megan. But nothing, much like the rest of Respondents’ evidence submitted (See Resp. Br. 11-12), even remotely demonstrates Ku’s domination of Megan during the period where they allege financial injury, the transactions attacked. See TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998). No expert report conducting any forensic accounting analysis accompanied Respondents’ motion for summary judgment seeking to pierce the corporate veil to explain any of the alleged inter-mingling of assets. (R. 26 - 267). We only have counsel’s conclusions as to the same. Accordingly, Respondents did not satisfy their heavy burden of piercing Megan’s corporate veil, to hold Ku liable for their stale rent overcharge claim, least of all on a motion for summary judgment. 16 II. RESPONDENTS STILL DO NOT EXPLAIN WITH PROOF IN ADMISSIBLE FORM, IDENTIFIABLE IN THE RECORD BELOW, WHY THEY FAILED TO BRING THEIR RENT OVERCHARGE CLAIM WITHIN FOUR YEARS OF THE FIRST OVERCHARGE AS ALL LITIGANTS MUST, PARTICULARLY WHERE THE CLAIM IS SOLELY FOR A “FINANCIAL INJURY,” STRICTLY MONEY DAMAGES. The only mention of anything that ventures on any kind of explanation or excuse for Respondents’ failure to timely interpose their statutory claim for rent overcharge appears in the purported undisputed “FACTS” section of Respondents’ opposition. (Resp. Br. at pp. 4-5). Specifically Respondents claim, the initial lease between the parties did not contain a rent stabilization rider, in violation of Rent Stabilization Law of 1969 [Administrative Code of City of NY] [‘RSL’] §26-511(d) (R. 49, 74-83) … As a result, respondents were not given the statutorily required information disclosing how their initial rent was calculated. It is apparent that the rider was purposefully withheld because it would have alerted respondents to their claim. (Id.) The citations identified in the record for this alleged missing rent stabilization rider are the sworn affidavit of Respondent Geoffrey Bryant and the Lease itself. However, upon closer scrutiny Geoffrey Bryant makes no mention of not having received a rent stabilization rider with the Lease that appears in the record. Bryant does not affirm that the Lease he received was incomplete. He only says that the Lease he was submitting on his motion for summary judgment was a “true and accurate copy.” 17 In fact the real undisputed facts in the record below show that the source of this allegation of a missing rent stabilization rent rider to the October 10, 2003 Lease is none other than the affirmation of Respondents’ counsel, James B. Fishman in support of their summary judgment motion. “The initial lease contains no ‘Rent Stabilization Lease Rider’, in violation of Rent Stabilization Law § 26- 511(d), and no indication as to how the plaintiffs’ initial rent was calculated.” (R. 30-31, ¶ 13). That Respondents’ counsel asserts an unsubstantiated inference, as fact even though counsel was not present at the Lease signing to know what Respondents received in October 2003 or what the Lease contained is disconcerting at best, see Zuckerman v. City of New York, 49 N.Y.2d 557, 563-64 (1980) (attorney affirmations without personal knowledge can constitute acceptable proof in admissible form if it is the vehicle for evidentiary proof in admissible form substantiating the attorney’s statements; but absent a showing under this exception to personal knowledge or good excuse, a court will consider the omission as a “failure to tender evidentiary proof in admissible form.” Id. at 563). What is even more troubling than Respondents’ failure to tender proof in admissible form that the Lease did not contain a rent stabilization rider, is how the Appellate Division in its Order accepted as fact counsel’s assertion - without support from Respondents - that there was no Rent Stabilization rider attached to 18 the Lease. (R. 635). All this to say, whether or not Respondents received a rent stabilization lease rider that complied with RSL § 26-511(d), still does not suffice as an excuse for waiting until it was too late for Respondents to bring their rent overcharge claim in April 2009, more than five years and six months from when their claim accrued, especially in light of Respondents’ position that there is no tolling of the statute of limitations. III. AT THE END OF THE DAY THESE RESPONDENTS BLEW THROUGH THREE STATUTES OF LIMITATIONS AND DESERVE NO SPECIAL EXCEPTION TO EXEMPT THIS RESIDENTIAL RENT OVERCHARGE ACTION FROM THE LEGISLATIVE TIME BAR. Whether the claim is for residential rent overcharge, treble damages on a timely commenced rent overcharge for willful overcharge or determination of a lawful rent, there are governing statutes of limitations under the rent regulation laws, not a single one of which Respondents can demonstrate they have complied with. Instead, Respondents just pretend that they do not exist, as they have with the two (2) year statute of limitations for treble damages. “Appellants go so far as to argue, in all apparent seriousness, that treble damages may not be awarded where a tenant does not assert his or her claim for rent overcharge within two years after commencing occupancy (Brief 39, 73). There is no authority whatsoever for that position, which also defies common sense.” (Resp. Br. at p. 24). 19 Apparently Respondents do not consider §26-516(a)(2)(i) of the Administrative Code of the City of New York which reads and is reprinted herein for the benefit of Respondents and the Court, No penalty of three times the overcharge may be based upon an overcharge having occurred more than two years before the complaint is filed or upon an overcharge which occurred prior to April first, nineteen hundred eighty-four. . . . This paragraph shall preclude examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this subdivision. N.Y. Code, or RSL, § 26-516(a)(2)(i) (West 2014) (Emphasis added) or even the Rent Stabilization Code, 9 N.Y.C.R.R. § 2526.1(a)(2)(1) which tracks the same language, “a penalty of three times the overcharge may not be based upon an overcharge having occurred more than two years before the complaint is filed,” as existing authority limiting treble damages to tenants who bring overcharge claims within two (2) years of an overcharge that occurred and no more. And again, Respondents did not heed this statutory notice either. Appellants did not write these statutes, the Legislature did, and it is not difficult to grasp the meaning of the clear language at hand: If a tenant is basing their rent overcharge claim on an willful overcharge that predates their complaint by more than two years, as is the case here, then the tenant may not recover a treble damages penalty against the landlord for willful overcharge. Two years is the cut- off period for treble damages. 20 Likewise, Respondents neglected to bring any challenge to the annual rent registration statements Megan filed for Respondents unit as provided under RSL § 26-516(a)(2)(i). Where the amount of rent set forth in the annual rent registration statement filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter.” RSL §26- 516(a)(2)(i) (West 2014) (Emphasis). The Rent Stabilization Code also contains similar language setting four years as the statute of limitations for examining “the rental history of the housing accommodation prior to the four-year period preceding the filing of a complaint pursuant to this section, and section 2522.3 of this Title, shall not be examined.” 9 N.Y.C.R.R. § 2526.1(a)(2)(ii). In sum, in review of the record and procedural history of this case a distinctive pattern emerges between the law and Respondents. Respondents do not believe they are subject to the law of the statute of limitations because they believe they were financially wronged. Neither do the courts below. If there is a statute of limitations that applies to Respondents’ claims for affirmative relief –e.g., the four year statute of limitations C.P.L.R. § 213-a, on a rent overcharge award it is a statute Respondents do not feel bound to respect, as they have complied with not one. The courts below have given Respondents a pass for each of the three statutes of limitations blown, allowing them to recover for rent overcharge, treble damages 21 and attorneys’ fees. (R. 639-640), at the expense of Defendants-Appellants’ rights to the statutory and constitutional protections afforded by the statute of limitations established by the New York Legislature. Respondents are the windfall beneficiaries of the lower courts’ good graces, despite what the Legislature through C.P.L.R. § 213-a mandates be the just and proper result in this case: The instant rent overcharge action is time barred. 22 CONCLUSION For all these reasons, and those set forth more fully in Defendants- Appellants’ Brief, and because the rent overcharge Complaint is time-barred, the newly created common law fraud exception to the four-year statute of limitations contradicts the statute and is an Ex Post Facto Law, and Respondents made an inadequate showing on their piercing the corporate veil claim, the motion court’s summary judgment award on Respondents’ rent overcharge, treble damages, attorney fees and piercing the corporate veil claims and the Appellate Division’s Order affirming same, should be reversed on the law, and Defendants-Appellants’ summary judgment motion dismissing the Complaint in its entirety, granted, and this Honorable Court award any other and further relief it deems just, proper and equitable. DATED: May 9, 2014 Respectfully submitted, MARINO PARTNERS LLP _______________________________ Umar A. Sheikh, Esq. Misha M. Wright, Esq. Of Counsel Attorneys for Defendants-Appellants Megan Holding LLC and Emmanuel Ku 15 Fisher Lane, Suite 200 White Plains, NY 10603 (914) 368-4525