A Manhattan judge has denied tenants class-action status in a rent-overcharge lawsuit — a decision that landlord attorneys hailed as another sign that the courts are safeguarding owners from legislative overreach.
Supreme Court Judge Lynn Kotler rejected class certification for tenants suing Remik Holdings, their landlord at 230 West 147th Street. The tenants allege that Remik fraudulently deregulated apartments at their 100-unit building and charged higher rents while receiving tax breaks from the city’s J-51 program, which rewards landlords for making building-wide improvements.
The courts have ruled that buildings receiving J-51 must offer their tenants rent-stabilized leases, triggering a slew of lawsuits alleging landlords failed to do so. Class-action status vastly increases the potential for damages in such cases, as does the rent-stabilization law passed by the state last year.
But the West 147th Street tenants failed to convince Kotler, who penned a withering assessment of their argument. Because the Court of Appeals recently quashed retroactive application of the rent law for such cases, Kotler wrote, tenants can’t depend on it to strengthen claims for class certification. Nor did she buy their evidence about units having been removed from rent regulation.
“All plaintiffs’ counsel can do is point to [the] defendant’s ‘tax bills,’ which have not even been provided to the court, as so-called proof that a vast majority of the subject building’s apartments have been unlawfully deregulated during the J-51 period,” wrote Kotler.
Attorneys for tenants brought at least two dozen such overcharge cases after the changes to the rent law expanded the look-back period to assess awards for damages.
“With the increased frequency of tenants bringing overcharge lawsuits, this decision sends a message that courts are not going to rubber-stamp class-certification motions,” said Devin Kosar, an attorney at Rosenberg & Estis, who represented the defendants in the case.
Kosar saw the ruling as reassurance that the courts are sympathetic to landlords who were left reeling after the new rent law — the Housing Stability and Tenant Protection Act — increased their liability for overcharge claims.
“Tenants were using the HSTPA provisions to their advantage in rent-overcharge class-action lawsuits as a way to increase their potential recovery against landlords,” said Kosar. “We felt here, the tenants were trying to exploit provisions of the HSTPA after the fact [to] meet their requirements for class-certification.”
Attorneys for the plaintiffs did not return a request for comment.
Last month’s landmark Court of Appeals decision, which ruled that the new rent law cannot apply retroactively to overcharge cases, was regarded as a win for the real estate industry. Now the legal community is closely monitoring its impact on other overcharge cases.
Tenant attorneys, who are also closely watching how lower courts interpret the high court’s April 2 ruling, known as Regina, downplayed the importance of Kotler’s April 30 decision. Patrick Tyrell, a staff attorney at Mobilization for Justice, a nonprofit organization that provides free civil legal services, said the outcome of the case depended on the judge to whom it fell.
“I disagree with the conclusion that this proves that Regina is going to limit class certifications in overcharge cases,” said Tyrell. “I think it’s a much more case-by-case approach.”
But the Court of Appeals ruling might lead legislators to consider the constitutionality of future bills and use more caution when drafting legislation.
“It speaks to the inherent political tension between branches of government,” said Tyrell. “I would imagine that if courts continue to limit progressive legislation in the coming years, it will affect the way bills are drafted.”