In a sharply worded ruling, a Manhattan judge blocked the New York Department of State’s efforts to take away the licenses of the founders of the once-leading appraisal firm Mitchell, Maxwell & Jackson. The judge found that the state had failed to follow due process and specifically did not bring precise charges against company founders Steven Knobel and Jeffrey Jackson.
The ruling annulled the DOS decisions from December 2012 and May 2013 to revoke their residential real estate appraiser licenses. That revocation had been tabled — with the appraisers continuing to hold their licenses — pending the outcome of this case.
The case began after former MMJ top appraiser Marianne Mueller was fired in 2010 as the residential market soured. She filed a complaint with the DOS, claiming MMJ improperly affixed her signature to 14 appraisals, which led to the DOS ruling in December 2012, which was affirmed by the agency in May 2013.
In addition, Mueller filed a lawsuit in 2010 against MMJ, Knobel and Jackson, accusing them of withholding commissions, and improperly placing her signature on appraisals. That case is ongoing.
Even though the ruling was critical of the DOS actions, it did leave open the possibility the state could once again bring charges against the men.
“The New York Department of State is currently reviewing the decision,” an agency spokesperson said. “We have no other comment at this time.”
The case highlights the power the state has to not only issue licenses, but also revoke them. And in this case, the state judge found the licensing agency did not follow the law.
One real estate insider, who asked not to be identified being critical of the DOS, said the case was troubling to license holders.
“It is frightening to consider how many of these cases don’t come to the level of judicial review,” the source said. “This spotlights the defects at the lower level and the highest level” of the agency.
One real estate attorney said the ruling should provide some comfort for brokers and appraisers, who are licensed by the state.
“It should be reassuring to holders of professional licenses issued by NY State to know that the system is designed with an independent layer of judicial review over state agencies to assure that such license holders’ due process rights are not violated,” said Terrence Oved, a partner at the law firm Oved & Oved, who was not involved in the case.
Knobel and Jackson filed the so-called Article 78 in Supreme Court in May 2013, seeking to annul the DOS’s decision earlier that month. That ruling broadly adopted an administrative law judge decision to revoke the appraisers’ licenses, issued in December 2012.
Knobel and Jackson claimed the decision lacked due process, and was overly harsh, as well as being “arbitrary and capricious.”
Justice Alice Schlesinger, in her ruling handed down on Jan. 31, 2014, essentially supported Knobel and Jackson’s contention.
“I find that [Knobel and Jackson] are right when they argue that they were denied due process for inadequate notice of the charges against them,” Schlesinger wrote.
She did not rule on the underlying charges, however. “This dismissal is without prejudice to any further action the [DOS] may have the right to take,” she wrote.
An attorney for Mueller, Adam Russ, said he and his client were disappointed in the decision.
“However, we remain confident in the process and expect that the Department of State will take the necessary steps to rectify the procedural deficiencies noted by the court and arrive at an appropriate conclusion,” said Russ, a partner at the law firm Wasser & Russ.
Nevertheless, Knobel and Jackson were pleased with the ruling, despite the damage that has been done to their company since the case began.
“We are still in business, but a much smaller company,” Jackson told The Real Deal. “We suffered large losses in revenue when the banks pulled their business which forced us to lay off dozens of people.”
But they are not folding up shop, he said.
“We have already started rebuilding.”