In the Matter of the 60 East 12th Street Tenants' Association, et al., Appellants,v.New York State Division of Housing and Community Renewal, et al., Respondents. (And Another Proceeding.)

Brief

N.Y.September 13, 2016

RDS EN BERG& ESTIS, P.C. ATTORNEYS AT LAW State ofNew York Court of Appeals 20 Eagle Street Albany, New York 12207-1095 May 27,2016 Attn: John T. Asiello, Chief Clerk and Legal Counsel to the Court 733 Third Avenue New York, New York 10017 212.867.6000 Fax 212.551.8484 www. rosenbergestis. com Jeffrey Turkel 212.551.8490 jturkel@rosenbergestis.com Re: Matter of 60 East 12th Street Tenants' Assn. v NYS DHCR APL-2016-00068 Dear Mr. Asiello: This firm represents 12 Broadway Realty LLC ("Owner"). I submit this letter brief in (a) opposition to the appeal of The 60 East 12th Street Tenants' Association ("Tenants"), and (b) response to Tenants' letter brief ("TLB") of May 12, 2016. The facts and arguments upon which Owner relies are set forth in Owner's February 23 and April 3, 2015 briefs to the Appellate Division, to which the Court is respectfully referred. 1 Owner will focus herein on new arguments that Tenants have raised in their letter brief, as well as the various findings made by both the majority and the dissent in the Appellate Division's December 29, 2015 order. Please note that capitalized terms shall have the same meaning as in Owner's briefs to the Appellate Division. DISCLOSURE STATEMENT 12 Broadway Realty LLC has no parents, subsidiaries or affiliates. Its Managing Member is Realty 12 Associates Corp. INTRODUCTION The two primary questions in this appeal are set forth below: Pursuant to Rule 500.1l(f), all arguments made in Owner's briefs to the Appellate Division are hereby reserved. RE\37393\0098\628215vl ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW 1. What was the precise nature of the work that resulted in DHCR's 1995 Order? 2. Depending on the answer to that question, to what extent is Owner entitled to MCI rent increases relating to its 2007 MCI application? The Appellate Division correctly answered these questions as follows: Given (a) the inconsistent descriptions in DHCR's prior orders as to the nature of the work; and (b) the fact that Owner's predecessor was not aggrieved by the description of the prior work in DHCR's 1995 Order, such that collateral estoppel does not apply, the precise nature of the work must be determined on remit by DHCR -- the expert administrative agency in such matters -- which will then determine the extent to which Owner is entitled to MCI rent increases for the 2007 MCI application. The Appellate Division dissent had different answers to these questions: 1. Irrespective of the precise nature of the work leading to DHCR's 1995 Order, the description of the work in that order, even if erroneous, is entitled to collateral estoppel effect. 2. As such, DHCR should be barred from determining the precise nature of the work. In Ansonia Residents Assoc. v New York State Div. of Hous. and Community Renewal, 75 NY2d 206, 213 (1989), this Court held that "DHCR's determination that an alteration constitutes a major capital improvement within the meaning of section 26-511(c)(6)(b) necessarily entails the agency's expertise in evaluating factual data and is entitled to deference if not irrational or unreasonable." See also West Village Assoc. v New York State Div. of Hous. and Community Renewal, 277 AD2d 111, 112 (1st Dept 2000). With that in mind, Owner respectfully submits that this Court should affirm the Appellate Division's order. DHCR should be permitted on remand to use its expertise to determine the extent to which Owner's 2007 MCI application should be granted, and to examine all of the substantive, procedural, factual, regulatory, and precedential issues that will necessarily inform that determination. Contrary to the dissent's opinion, these are determinations for the expert - 2- RE\37393\0098\628215vl ROSENBERG& ESTIS. P.C. ATTORNEYS AT LAW administrative agency to make in the first instance. Any party thereafter aggrieved by DHCR's determination -- and there is no guarantee that Tenants will be aggrieved -- can seek judicial review from what will no doubt be DHCR's final order on the subject. TENANTS' ARGUMENTS REGARDING "A SECOND ROUND OF RESURFACING WORK" AND OWNER'S "FOURTH BITE AT THE APPLE" ARE WITHOUT MERIT At the outset, Owner must briefly respond to two erroneous arguments that pervade Tenants' papers and cloud the issues herein. A. Tenants have no Factual Proof to Support Their Claim of a "Second Round of Resurfacing Work" Tenants state as "fact" throughout their letter brief that the prior work was resurfacing (rather than pointing and waterproofing), such that the work that is the subject of Owner's 2007 MCI application is merely "a second round of resurfacing work." TLB, p. 2. Tenants' claim, however, is not based on inspections, photographs, testimony, or expert opinion. Instead, Tenants simply rely on the description in the 1995 Order (R. 188),2 which was thereafter contradicted by the description in the superseding and modifying 1998 Order (SRT. 19).3 The vast majority of tenants in the 60 East 12th Street Tenants' Association lived in the subject building when the prior work was performed on the outside of the building. Tenants could have submitted to DHCR dozens of affidavits from individual tenants stating that the prior work was resurfacing. Tenants did not do so, because the prior work was in fact pointing and waterproofing. 2 3 Numbers in parentheses refer to pages in the Record on Appeal in the 60 East 12th Street Tenants' Assn. Article 78 (Index No. 101393/13). Numbers preceded by "SRT." refer to pages in the Supplemental Record on Appeal in the 60 East 12 Street Tenants' Assn. Article 78. - 3- RE\3 7393\0098\628215v I ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW In contrast to Tenants' silence, Owner submitted to DHCR an affidavit from the architect who performed the instant resurfacing work. Based upon his physical inspection, the architect concluded without qualification that the prior work was pointing and waterproofing, not resurfacing (R. 82-83). The architect noted, and it is undisputed, that the prior work cost just $256,219 (R. 188), whereas the work that is the subject of the instant application cost $1,931,013.69, not including $249,452.62 in architect's fees (R. 39). In view of the foregoing, Tenants' claims -- that Artnor's MCI application "misrepresented the prior scope of work" (TLB, p. 11 ), and that Owner's 2007 MCI application "falsely stated that there had been no prior resurfacing work" (id. at 24) -- are untrue. There is no factual proof in the record that the prior work was resurfacing, and there is compelling evidence to the contrary. B. Owner's Alleged "Fourth Bite at the Apple" Tenants would have this Court believe that Owner has repeatedly sought "reconsideration" or "reargument" of various of its arguments herein, and that the Appellate Division erred in giving Owner "a fourth bite at the apple." TLB, p. 3. Tenants' claim is without merit. DHCR issued its first order herein on October 9, 2009 (R. 38-42). Owner promptly filed a request for reconsideration from that order (R. 30-37), which DHCR granted on November 9, 2009 (SRO. 18).4 DHCR issued its "Order Pursuant to Reconsideration" on June 30, 2011 (R. 132-34). Both Owner and Tenants filed Petitions for Administrative Review from that order (R. 140-58). 4 Numbers preceded by "SRO" refer to pages in the Supplemental Record on Appeal in the 12 Broadway Realty, LLC Article 78 (Index No. 101384/13). - 4- RE\37393\0098\628215vl RDSENBERG&ESTIS. P.C. ATTORNEYS AT LAW Owner did not seek reconsideration; like Tenants, Owner merely sought administrative review of various unfavorable portions ofDHCR's June 30, 2011 order. DHCR decided both Petitions for Administrative Review in its August 15, 2013 order (R. 159-62). Both parties were aggrieved by that order, and both parties commenced Article 78 proceedings therefrom. In the course of the Article 78 proceedings, DHCR moved to remit, resulting in Supreme Court's October 21, 2014 order (R. 13-27). Owner was aggrieved by that determination and perfected the appeal that resulted in the Appellate Division's December 29, 2015 order. Tenants, in tum, were aggrieved by the Appellate Division's order, resulting in the instant appeal. Accordingly, Owner has not repeatedly sought reconsideration or reargument with respect to any issue in this case. At each stage of the proceeding following the issuance of DHCR's June 30, 2011 order, Owner has appealed-- with some success- various unfavorable rulings. Owner is not seeking a "fourth bite" of anything, and, like Tenants, has every right to seek administrative and judicial review. THE FIRST DEPARTMENT CORRECTLY DECLINED TO GIVE DHCR'S 1995 ORDER COLLATERAL ESTOPPEL EFFECT The central issue in this appeal is whether collateral estoppel effect should be given to that portion of DHCR's 1995 Order which (a) described the prior work as "resurf ext walls etc." (R. 188), and (b) was thereafter superseded by DHCR's modifying 1998 Order, which described the same work as "waterproofing, pointing, masonry" (SRT. 19). The Appellate Division, relying on hornbook principles of collateral estoppel, held that the description of the work in the 1995 Order was not entitled to preclusive effect: - 5 - RE\3 7393\0098\628215v 1 RDSENBERG&ESTIS, P.C. ATTORNEYS AT LAW "In light of the inconsistency between the 1995 and 1998 orders, the court erred in finding that Owner is collaterally estopped by the 1995 order. Owner established that its predecessor did not have 'a full and fair opportunity to litigate in the prior proceeding,' since the 1995 order granted the full relief sought by the predecessor" (citations omitted). 134 AD3d at 588. The dissent found that the description in the 1995 Order was entitled to preclusive effect, 134 AD3d at 594, conclusorily stating that "[t]here is no indication that the then-owner challenged or sought to correct the seemingly different description of the work in the February 1998 order from that in the June 1995 order." !d. at 591. A. Collateral Estoppel Generally "The doctrine of collateral estoppel precludes a party from relitigating 'an issue which has previously been decided against him in a proceeding in which he had a fair opportunity to fully litigate the point."' Kaufman v Eli Lilly and Co., 65 NY2d 449, 455 (1985). The two- pronged test for applying collateral estoppel is as follows: "First, the identical issue necessarily must have been decided in the prior action and be decisive of the present action, and second, the party to be precluded from relitigating the issue must have had a full and fair opportunity to contest the prior determination." !d. Collateral estoppel is a flexible doctrine, see Buechel v Bain, 97 NY2d 295, 304 (2001), which "is rooted in principles of fairness." ABN AMRO Bank, NV. v MBIA Inc., 17 NY3d 208, 226 (2011) ("ABN AMRO"). The doctrine is grounded in the realities of litigation, and no rigid rules are possible. See Staatsburg Water Co. v Staatsburg Fire Dist., 72 NY2d 147, 153 (1988). - 6- RE\37393\0098\628215v I RDSENBERG&ESTIS. P.C. ATTORNEYS AT LAW "Collateral estoppel applies to an administrative proceeding." ABN AMRO, 17 NY3d at 226. In the context of administrative determinations, collateral estoppel "'is applied more flexibly.'" /d. As the Appellate Division correctly determined herein, preclusive effect should not be given to the description in the 1995 Order because (a) no issue therein was "decided against" Owner's predecessor; and (b) Owner's predecessor did not have a full and fair opportunity to litigate the 1995 Order because it was not aggrieved thereby, and thus had no ability to contest that order. In addition, inconsistent orders cannot be given preclusive effect. B. The Issue of the Nature of the Work was not "Decided Against" Owner's Predecessor In 1995, Owner's predecessor ("Artnor") filed an application with DHCR seeking MCI rent increases based on Artnor' s expenditure of $256,219 for certain exterior work (R. 188). In its 1995 Order, DHCR granted that application in full, awarding Artnor MCI rent increases based on every penny of the $256,219 expenditure. !d. There is no indication in the record that the parties contested or litigated the precise nature of the MCI work. Indeed, the Appellate Division observed that the description of the work in the 1995 Order was "without any elaboration or supporting fact findings." 134 AD3d at 587. The 1998 Order described the same work as "waterproofing, pointing, masonry" (SRT. 19), also "without any elaboration or findings." /d. Assuming that the "resurf ext walls" description in the 1995 Order constitutes a "finding" (albeit a finding contradicted by DHCR's modifying 1998 Order), said finding was in no way decided against Artnor. The requirement that a finding be decided against a party is simply another way of saying that the party must be aggrieved by that finding. As this Court has ruled, - 7- RE\37393\0098\6282!5v I ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW a party is not aggrieved where it has obtained "the full relief sought." Parochial Bus Systems, Inc. v Board of Educ. of City of N. Y, 60 NY2d 539, 545 (1983). "This is so even where that party disagrees with the particular findings, rationale or the opinion supporting the judgment or order below in his favor." !d. Put another way, "the concept of aggrievement is about whether relief was granted or withheld, and not about the reasons therefore." Mixon v TBV, Inc., 76 AD 3d 144, 149 (2d Dept 201 0); see also, Pennsylvania Gen. Ins. Co. v Austin Powder Co. 68 NY2d 465,472-73 (1986); Tantleffv Kestenbaum & Mark, 131 AD3d 955,956 (2d Dept 2015); Benedetti v Erie County Med. Center Corp., 126 AD3d 1322, 1323 (4th Dept 2015). Here, Artnor received one hundred percent of the MCI rent increases for which it applied, and was thus not aggrieved by DHCR's 1995 Order. Absent aggrievement, it cannot be said that any issue in the 1995 Order was decided against Owner's predecessor. As such, DHCR's 1995 Order is not entitled to preclusive effect as to the description of the work. Tenants assert that Artnor was aggrieved because the useful life for resurfacing is 25 years, whereas the useful life for pointing and waterproofing is only 15 years. TLB, p. 30. But Artnor would only have been aggrieved by the description of the work in the 1995 Order, and by its accompanying useful life, if Artnor (or its successor) thereafter elected to perform the same work within the useful life period. Here, Artnor performed pointing and waterproofing, whereas Owner performed resurfacing. Again, where the MCI projects are different, useful life is irrelevant, and a waiver is not necessary. - 8 - RE\37393\0098\628215vl ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW C. The Appellate Division Correctly Found that Owner's Predecessor did not have a Full and Fair Opportunity to Contest the Description of the Work in DHCR's 1995 Order 1. Lack of Aggrievement; Inability to Appeal Preclusive effect will only be given to an order where there was '"a full and fair opportunity to contest the decision now said to be controlling."' ABN AMRO, 17 NY3d at 226. As the Appellate Division ruled herein: "Owner established that its predecessor did not have 'a full and fair opportunity to litigate in the prior proceeding,' since the 1995 order granted the full relief sought by the predecessor" (citations omitted). 134 AD3d at 588. Owner respectfully submits that the Appellate Division was correct. Courts have consistently held that a party has not had a full and fair opportunity to contest an order where (a) the order did not aggrieve the party against whom preclusion is sought, such that (b) said party could not have appealed the prior order. As the Second Circuit wrote in Johnson v Watkins, 101 F.3d 792, 795 (2d Cir. 1996): "Under New York law, appellate review plays a critical role in safeguarding the correctness of judgments, and collateral estoppel cannot be applied without first considering the availability of such review. If a party has not had an opportunity to appeal an adverse finding, then it has not had a full and fair opportunity to litigate that issue. Hence, collateral estoppel will not bar reconsideration of an issue if there is an inability to obtain review ... " (internal citations omitted, italics supplied). Similarly, in Gadani v DeBrino Caulking Assoc., Inc., 86 AD3d 689, 691-92 (3d Dept 2011), the Third Department refused to invoke collateral estoppel against certain fourth-party plaintiffs: - 9 - RE\37393\0098\628215v I ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW "In considering whether the opponent of collateral estoppel had a full and fair opportunity to litigate an issue, we must consider 'the realities of the [prior] litigation, including the context and other circumstances which ... may have had the practical effect of discouraging or deterring a party from fully litigating the determination which is now asserted against' it. * * * Considering 'the realities of the litigation' in this case, we cannot agree with Supreme Court that fourth-party plaintiffs were required to challenge the finding in favor of fourth-party defendant during the most recent prior appeal; the verdict in their favor rendered the fourth-party action moot. Having obtained full relief, fourth-party plaintiffs were not aggrieved and had neither grounds to appeal nor an incentive to challenge the verdict" (citations omitted; material in brackets in original). In Davidov v Searles, 84 AD3d 859, 860 (2d Dept 2011), the Second Department similarly held: "The appellants established that, under the circumstances of this case, they did not have a full and fair opportunity to contest the prior determination finding Searles solely at fault in the happening of the accident. Because the order in the Scott action denied Davidov and V oskov relief with respect to the appellants' cross claims against them, the appellants were not aggrieved by the order, and could not appeal it" (citations omitted). See also, In re JPMorgan Chase Bank, N.A., 135 AD3d 762, 763 (2d Dept 2016) ("[a] party who did not have the opportunity to appeal a determination did not have a full and fair opportunity to contest it"); Urias v Daniel P. Buttafuoco & Assoc., PLLC, 120 AD3d 1339, 1342-43 (2d Dept 2014); Augustine v Sugrue, 8 AD3d 517,518 (2d Dept 2004). Conversely, courts will give preclusive effect to a determination where a party was aggrieved by the order in question, and thus had a right to appeal. See Feldman v Planning Bd. of Town of Rochester, 99 AD3d 1161, 1162-63 (3d Dept 2012); Noto v Bedford Apts. Co., 21 AD3d 762, 765 (1st Dept 2005). - 10- RE\37393\0098\628215vl RDSENBERG&ESTIS. P.C. ATTORNEYS AT LAW The dissent correctly acknowledged that an administrative appeal to DHCR may only be filed by "[a] party aggrieved by an agency determination." 134 AD3d at 589. Because Artnor was not aggrieved by the 1995 Order, it had no ability or standing to file a Petition for Administrative Review. See Heilweil v New York State Div. of Hous. and Community Renewal, 12 AD3d 300 (1st Dept 2004); see also Matter of Kulik, DHCR Adm. Rev. Dckt. No. KC- 710111-RT, issued March 25, 1998. As such, Owner's predecessor did not have a full and fair opportunity to appeal the description in the 1995 Order. 2. The "Realities of Litigation" The question of whether a party had a full and fair opportunity to contest a prior determination requires consideration of the realities of the prior litigation, including the context and other circumstances which may have had the practical effect of discouraging or deterring a party from fully litigating the determination which is now asserted against it. See Ryan v New York Telephone Co., 62 NY2d 494, 501 (1984). Here, the realities of the administrative proceedings concerning the 199 5 Order were that D H CR granted Owner's predecessor one hundred percent of the MCI rent increases requested. Owner's predecessor had no incentive to appeal from an order that gave it complete relief. D. Inconsistent Orders are not Entitled to Preclusive Effect There is an additional basis for holding that the 1995 Order is not entitled to preclusive effect as to the description of the prior work. As noted, the 1995 Order described the work as "resurf ext walls" (R. 188), whereas the modifying 1998 Order described the same work as "waterproofing, pointing, masonry" (SRT. 19). As the First Department held in Sherwood 34 - 11 - RE\37393\0098\628215vl ROSENBERG& ESTIS. P.C. ATTORNEYS AT LAW Assoc. v New York State Div. of Hous. and Community Renewal, 309 AD2d 529, 532 (1st Dept 2003), conflicting orders cannot be given preclusive effect: "Contrary to the determination of the lAS court, application of the doctrine of res judicata is not appropriate where there are two directly conflicting DHCR decisions as to DHCR's jurisdiction over the same building, each of which could arguably have preclusive effect on subsequent matters." See also, C&O Realty v Hart, NYLJ Feb. 27, 1995, at 27, col. 4 (App T 1st Dept). E. The Dissent's Errors 1. Collateral Estoppel and Finality The dissent's principal error is that it confused the concepts of finality and collateral estoppel. The dissent wrote: "A final administrative determination will not be reopened to give a party an opportunity to make a new argument based on the existing administrative record .... " 134 AD3d at 595. Certainly, collateral estoppel can only apply to a final administrative order. See Niagara Mohawk Power Corp. v Public Service Com 'n of State of N.Y., 66 NY2d 83, 88 (1985). Finality, however, is the beginning of the collateral estoppel inquiry, not the end. Once finality is established, the question arises as to whether collateral estoppel effect should be given to a final administrative order or a portion thereof, an inquiry that depends on a host of substantive and procedural issues that must be examined on a case-by-case basis. As established herein, all of those factors support the Appellate Division's determination that collateral estoppel effect should not be given to the description of the work in the 1995 Order. In support of its conclusion that "the Owner is collaterally estopped from arguing that the 1995 order mistakenly characterized the work," 134 AD3d at 594, the dissent relies on Gersten v - 12- RE\37393\0098\628215v I RDSENBERG&ESTIS, P.C. ATTORNEYS AT LAW 56 7th Ave., LLC, 88 AD3d 189 (1st Dept. 2011), appeal withdrawn 18 NY3d 954 (2012). The dissent characterized Gersten's holding as follows: "In Gersten, we made clear that unless a party can demonstrate the absence of a full and fair opportunity to litigate its issues before DHCR, the agency's determination on those issues will be entitled to collateral estoppel effect, and relitigation in court of the same issue determined the agency will be precluded" (citations omitted). 134 AD3d at 594. Owner respectfully submits that the dissent's reliance on Gersten is misplaced. In Gersten, DHCR issued an order in 1999 deregulating the tenants' apartment based on high income. Although the tenants were plainly aggrieved by that order, the tenants "never appealed the DHCR decontrol order through an administrative appeal; nor did they commence a CPLR article 78 proceeding." Gersten, supra, 88 AD 3d at 193. Ten years later, following this Court's determination in Roberts v Tishman Speyer Props., L.P., 13 NY3d 270 (2009), the tenants in Gersten commenced an action seeking a declaration that the un-appealed 1999 order of deregulation was invalid because the building in question was receiving J-51 benefits. The First Department rejected that argument, holding that the 1999 deregulation order was entitled to preclusive effect because (a) the order aggrieved the tenants; and (b) the tenants never appealed it: "A tenant aggrieved by a DHCR deregulation order may challenge it first in a petition for administrative review (PAR) before DHCR, and if still dissatisfied with the result, the tenant may seek review before Supreme Court in a proceeding under article 78 of the CPLR. In light of this elaborate statutory scheme, it is abundantly clear that plaintiffs here had ample opportunity to challenge the prior owner's application for luxury decontrol as being precluded by the receipt of J-51 benefits. - 13- RE\37393\0098\628215vl ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW * * * ... DHCR made public its policy on the issue - namely that J-51 benefits had no bearing on a landlord's right to apply for luxury decontrol - when it issued an advisory opinion in 1996, which it incorporated into the RSC in 2000. Thus, since it appears that nothing prevented plaintiffs from raising the J-51 benefits issue before DHCR, plaintiffs are now estopped from relitigating the issue 11 years later" (italics supplied). 88 AD3d at 203. Gersten is clearly distinguishable from the instant case. In Gersten, the tenants were aggrieved by an order and did not bother to appeal it. In the instant case, Artnor won, had no need to appeal, and, indeed, no standing to appeal. The tenants in Gersten had a full and fair opportunity to litigate the issue in question; Artnor did not. 5 The dissent's conflation of collateral estoppel and finality leads to other errors. The dissent writes that although DHCR can modify prior orders on proper grounds, "it does not have unfettered power to reopen final matters." 134 AD3d at 594. Neither DHCR, the Appellate Division, nor Owner has ever suggested that the 1995 Order should be "re-opened." Instead, the Appellate Division correctly determined that the description of the work in the 1995 Order was not entitled to preclusive effect because Artnor did not have a full and fair opportunity to litigate or appeal DHCR's description. The dissent's statement that the 1995 Order was "never challenged" by Artnor erroneously presumes that a party can appeal a factual error in an order that otherwise grants that party the full relief sought. Put another way, the dissent fails to distinguish between an order that is unappealed, and one that is unappealable. 5 The dissent next wrote: The dissent herein also wrote that "Owner has no basis to argue that it should be granted an opportunity to argue the merits of the 1995 order granting an MCI rent increase simply because it was not the owner of the building at the time." 134 AD3d at 595. Owner, in fact, raised no such argument. - 14- RE\3 7393\0098\628215v I RDSENBERG&ESTIS. P.C. ATTORNEYS AT LAW "Despite Owner's arguments to the contrary, there is no evidence that the 1995 order granting an MCI rent increase for exterior resurfacing was based on anything other than a proper factual showing, or that DHCR did not apply its own regulations and precedents to the facts when it granted the increase." 134 AD3d at 595. At the outset, the accuracy of the description in the 1995 Order is far from settled, given (a) the contrary description in the modifying 1998 Order (SRI. 19); (b) the language in DHCR's August 15, 2013 order herein, wherein DHCR's Commissioner described the work as "pointing and waterproofing" (R. 160); and (c) the fact that such work cost $256,219 (R. 188), whereas the latter work, which undisputably consisted of the removal and replacement of all exterior bricks, cost $1,931 ,013.69, not including $249,452.62 in related architect's fees (R. 39). The dissent goes even further afield when it writes: "In any event, Owner had a full and fair opportunity at the time of its MCI rent increase application, to make its arguments before the RA concerning the 1995 and 1998 orders." 134 AD3d at 595. The question here is whether Artnor had a full and fair opportunity to contest the 1995 Order in 1995, not many years later. In Staatsburg Water Co., supra, 72 NY2d at 153, this Court held as follows: "In the end, the fundamental inquiry is whether religitation should be permitted in a particular case in light of what are often competing policy considerations, including fairness to the parties, conservation of the resources of the court and the litigants, and the societal interests in consistent and accurate results. No rigid rules are possible, because even these factors may vary in relative importance depending upon the nature of the proceedings." - 15 - RE\37393\0098\628215v I ROSENBERG&ESTIS, P.C. ATTORNEYS AT LAW Here, it is undisputed that Owner expended almost $2 million to replace every exterior brick in the subject building. The dissent's inflexible collateral estoppel analysis does little more than deprive DHCR of the ability to determine, on the merits, the extent to which Owner is entitled to MCI rent increases, if at all, for work that has undoubtedly benefited Tenants. Because the 1995 Order should not be given preclusive effect, the Appellate Division properly remanded the matter to DHCR to determine, once and for all, whether the earlier work was exterior resurfacing or pointing and waterproofing. Tenants fear that inquiry; Owner does not. F. Tenants' Arguments Relating to Collateral Estoppel are Unavailing Tenants' claim that Owner is launching a "wholesale collateral attack on DHCR's final 1995 Order" (TLB, p. 7) is without merit. The 1995 Order granted Owner's predecessor a modest MCI rent increase, which Tenants, although aggrieved, did not appeal. Owner does not attack that order, or seek its reconsideration or modification. Instead, Owner simply asserts that the "description" in the 1995 Order is not entitled to preclusive effect in the instant proceeding. Along the same lines, Tenants assert that by its order herein, the Appellate Division "has undermined the principle of administrative finality that enables agencies to function." TLB, p. 8. Tenants miss the point. The issue here is not whether the 1995 Order is final, but whether that portion of the order describing the work is entitled to preclusive effect. Pursuant to Court of Appeals authority, it is not. It is also well-settled that inconsistent orders cannot be given collateral estoppel effect. See Sherwood 34 Assoc. v New York State Div. of Hous. and Community Renewal, 309 AD2d 529 (1st Dept 2003). Tenants attempt to minimize the obvious discrepancies between the 1995 - 16- RE\37393\0098\628215vl ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW and 1998 Orders, deriding the latter order as "ministerial," and characterizing the "waterproofing, pointing, masonry" description therein as "dicta," a "passing remark," "automatic," and language intended to merely "fill in the blanks." TLB, pp. 6, 15, 26-27, 34. In fact, the 1998 Order says what it says. As the Appellate Division ruled herein, the most sensible course of action is to allow DHCR, on remit, to examine and reconcile its prior orders. DHCR, rather than any Court, is in the best position to interpret the meaning and effect of its own determinations. See Wilcox v Pinewood Apt. Assoc., Inc., 100 AD3d 873, 874 (2d Dept 2012). Finally, Tenants' reliance on the doctrine of judicial estoppel (TLB, p. 31) is without merit. The dispute surrounding the 1995 Order is not whether Owner's predecessor is entitled to the increases, but whether DHCR correctly characterized the work as resurfacing. Neither Owner's predecessor nor Owner has taken the legal position that the 1995 Order correctly described the work, and Owner has argued since at least 2008 that the 1995 Order was incorrect in this regard (R. 33-35). Because Owner has never changed its position, judicial estoppel does not apply. TENANTS' ARGUMENTS REGARDING USEFUL LIFE SCHEDULES AND WAIVERS ARE WITHOUT MERIT Tenants repeatedly assert that Owner has proposed a "novel theory" that a landlord can obtain successive MCI rent increases for the same work, where the useful life of the initial work has not yet expired, and the landlord did not request a useful life waiver as to the subsequent work. TLB, passim. In fact, Owner has made no such claim. Instead, Owner unremarkably argues that where, as here, the two MCI projects are not the same, useful life schedules and waivers are irrelevant. - 17- RE\37393\0098\628215vl ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW DHCR's useful life schedules for MCI work are set forth at RSC § 2522.4(a)(2)(d). The purpose of the useful life schedule is to protect tenants from paying MCI rent increases for a second installation where the first installation is the same and its useful life has not yet expired. Thus, if the landlord seeks an MCI increase for work before the useful life of the prior work has expired, the landlord must first obtain a waiver from DHCR. Of course, tenants only need the protection of DHCR useful life/waiver policies where the new work and the old work are the same. Here, DHCR has yet to determine whether the prior work was the same as the resurfacing work that was the subject of Owner's 2007 MCI application. Certainly, DHCR considers resurfacing to be different from pointing and waterproofing. The "Schedule of Major Capital Improvements" set forth in RSC § 2522.4(a)(3) defines "pointing and waterproofing" as the refurbishing of the mortar between the bricks, which work is performed "as necessary on exposed sides of the building." RSC § 2522.4(a)(3)(19). Conversely, DHCR defines "resurfacing of exterior walls" as the installation of "brick or masonry facing on [the] entire area of all exposed sides of the building" (material in brackets supplied): in other words, the installation of all new brick. RSC § 2522.4( a)(3 )(21 ). DHCR' s useful life schedule assigns a 15-year useful life for pointing, and a 25-year useful life for resurfacing exterior walls. See RSC §§ 2522.4(a)(2)(d)(4) and (24). DHCR's decision to distinguish between pointing and resurfacing in its own regulations establishes that DHCR considers the two types of projects to be separate and distinct. As a matter of construction, where the Legislature (or the administrative agency, where a regulation must be interpreted) "uses different terms in various parts of a statute, Courts may reasonably - 18- RE\37393\0098\628215vl ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW infer that different concepts are intended." Rangolan v. County of Nassau, 96 NY2d 42, 47 (2001); see also Orens v. Novello, 99 NY2d 180, 187 (2002); Albano v. Kirby, 36 NY2d 526, 530. In addition, the two projects were clearly different in scope. The expenditure for the first project was $256,219 (R. 188), whereas Owner expended $1,931,013.69 on the complete replacement of every exterior brick on the surface of the subject building (R. 115-16). Owner's engineer opined, under oath, that the "complete Reconstruction of the outer layer of brick work of all Exterior Walls could not have been accomplished for $256,219.00, even in 1993" ( R. 83). Accordingly, DHCR will have to determine on remit whether the two projects were the same or different. If the earlier work were indeed resurfacing, DHCR will apply its useful life and waiver policies and rule accordingly. If the projects were different, the useful life and waiver policies do not apply. One last point should be made. Although Tenants cite various cases to support their claim that Owner's "novel theory" must fail, Tenants never explain why the Court, as opposed to DHCR, should decide these issues in the first instance. DHCR is the expert administrative agency charged by the Legislature with the duty of administering the Rent Stabilization Law and the RSC. Despite its admitted missteps to date, DHCR is perfectly capable of determining the nature of the prior work, and based on that determination, DHCR will apply its expertise to the various regulations, policies, and precedents concerning the useful life and waiver issues Tenants have raised. If the prior work is indeed resurfacing, and if Tenants' arguments regarding useful life schedules and waiver are correct, Tenants should not fear this Court allowing DHCR to do its job. - 19- RE\37393\0098\628215vl ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW TENANTS' CLAIMS REGARDING DHCR'S NEED TO RECONSIDER VARIOUS OF THE PARTIES' ARGUMENTS ARE WITHOUT MERIT At two points in this proceeding, DHCR determined that it had not adequately addressed various arguments raised below, such that it would need to issue a new order. The first such instance was when DHCR granted Owner's Request For Reconsideration ("RFR") from DHCR's October 9, 2009 Order (R. 30-37), resulting in DHCR's June 30, 2011 "Order Pursuant to Reconsideration" (R. 132-39). The second instance is when DHCR, in the Article 78 proceedings herein, moved Supreme Court for an order of remit so that DHCR could address all of the parties' contested issues once and for all (R. 91-92). In both instances, DHCR was correct in determining that a new order had to be issued. A. As the Appellate Division Found, DHCR Properly Granted Reconsideration as to its October 9, 2009 Order Owner requested reconsideration from DHCR's October 9, 2009 Order on October 20, 2009 (R. 30-37), well within the 35-day deadline within which to file a Petition for Administrative Review. Pursuant to RSC § 2527.8, DHCR granted reconsideration on November 9, 2009 (SRO. 19), also within the 35-day deadline, which it reiterated in a formal order dated November 19, 2009 (R. 131 ). It was proper for DHCR to reconsider its October 9, 2009 Order due to an irregularity in a vital matter. In Policy Statement 91-5, DHCR defined "irregularity in a vital manner" as an instance where DHCR fails to "accurately calculate the rent or penalty, or to comply with established rules of practice and procedure" (italics supplied). That definition is broad enough to encompass almost any situation where DHCR determines that its "original decision was -20- RE\37393\0098\628215v I ROSENBERG&ESTIS. P.C. ATTORNEYS AT LAW incorrect." Regal Homes Inc. v New York State Div. of Hous. and Community Renewal, 287 AD2d 508, 509 (2d Dept 2001 ). As a general matter, this Court has recognized the rent agency's broad power to alter its prior determinations. See Yasser v McGoldrick, 306 NY 924 (1954), aff'g 282 AD 1056 (2d Dept 1953); Porter v New York State Div. of Hous. and Community Renewal, 51 AD3d 417, 418 (1st Dept 2008), lv. denied 11 NY3d 703 (2008). DHCR's determination as to what constitutes an irregularity in a vital matter under RSC § 2527.8 is entitled to affirmance unless irrational. See Atkinson v New York State Div. of Hous. and Community Renewal, 280 AD2d 326 (1st Dept 2001); Popik v New York State Div. of Hous. and Community Renewal, 225 AD2d 334, 335 (1st Dept 1996); Estate of Goldman v New York State Div. of Hous. and Community Renewal, 228 AD2d 192 (1st Dept 1996) ("Respondent also did not abuse its discretion in re-opening the proceeding based on an irregularity"). Tenants have failed to establish that DHCR's 2009 grant of reconsideration was irrational or an abuse of discretion. Moreover, DHCR's determination that there was an irregularity in a vital matter is in full accord with Sherwood 34 Assoc., supra, wherein the First Department held that preclusive effect cannot be granted where the agency has issued inconsistent orders. DHCR's failure to reconcile its inconsistent orders plainly qualifies as a failure by DHCR "to comply with established rules of practice and procedure." DHCR Policy Statement 91-5. DHCR's 2009 decision to remit did not reflect the agency's desire to change its mind, or utilize a new legal theory. TLB, pp. 7, 21. - 21 - RE\3 739310098\628215v I RDSENBERG&ESTIS. P.C. ATTORNEYS AT LAW Tenants' claim that the 1995 and 1998 Orders were not inconsistent is without merit and has already been addressed. Owner notes that DHCR --not the Tenants or the Courts-- is in the best position to determine what the 1998 Order did or did not mean. B. DHCR Properly Moved Supreme Court to Remit the Matter for Further Processing Supreme Court, the Appellate Division, and the Appellate Division dissenters all agree that the underlying matter should be remitted to DHCR. The only dispute is the scope of the remit, a dispute that is resolved once it is recognized that the description of the work in the 1995 Order is not entitled to preclusive effect. Tenants assert in their letter brief that a remit is not appropriate so that the agency can establish or consider a new legal theory, or because the agency has merely changed its mind. TLB, pp. 7, 21, 34. DHCR has proposed no such thing. As the agency candidly admitted in its moving papers, a remit was required because "the tenants and owners raise significant issues not adequately dealt with in the final determination of the Commissioner" (R. 94). In short, DHCR should be allowed to perform its statutory function. The dissent's position -- that the Court should decide most of the substantive and procedural issues herein prior to remit because "[w]ithout the Court's guidance, it is likely that further error will occur," 134 AD3d at 596, misperceives a court's limited role on judicial review. TENANTS' ARGUMENT THAT DHCR'S OCTOBER 9, 2009 ORDER IS ENTITLED TO PRECLUSIVE EFFECT IS WITHOUT MERIT Tenants argued extensively below that DHCR's October 9, 2009 Order is entitled to preclusive effect because Owner allegedly never appealed therefrom. DHCR has now relegated this meritless argument, which the Appellate Division rejected, 134 AD3d at 587, to a footnote. -22- RE\37393\0098\628215v I ROSENBERG&ESTIS, P.C. ATTORNEYS AT LAW TLB, p. 8, fn. 3. Owner's response thereto can be found at Point I (C) of its February 23, 2015 brief, and Point I (B)(4) of its April3, 2015 reply brief. CONCLUSION The Appellate Division's Order should be affirmed in all respects. Respectfully submitted, ROSENBERG & ESTIS, P.C. By: - 23- RE\3 7393\0098\628215vl