Landlord & Tenant

Supreme Ct., N.Y. Cty.

(Kenney, J.)

In tenants' action against corporate landlord and landlord's individual principal seeking damages for a rent overcharge, tenants sought summary judgment. The court granted tenants summary judgment on the issue of liability, holding that the corporate landlord's fraud justified piercing the corporate veil.

Corporate landlord had initially brought a nonpayment proceeding in Civil Court. That court awarded tenants a rent abatement based on landlord's fraud in creating and registering a fictitious tenant to inflate the legal regulated rent for tenant's apartment. Civil Court did not award tenant any other damages because tenant did not present evidence about what the legal regulated rent for their apartment should be. Tenants then brought this action seeking damages. Tenants submitted evidence that another apartment in the same building with the same number of rooms had a legal regulated rent of $180.92. Tenants initially leased their own apartment in 2003 for $1800 per month. In seeking to pierce the corporate veil, tenants submitted evidence that the landlord's principal had used cash to make improvements to the apartment.

In awarding tenants summary judgment on the issue of liability, the court held that Civil Court's determination of an overcharge was preclusive on that issue. On the issue of damages, the court noted that tenants had submitted calculations only for the four years prior to their complaint, so the court did not have to go outside the four-year look-back period. The court agreed with tenant that because of the fraud, the rent for the comparable apartment with the lowest rent ' $180.92 ' provided the appropriate base for tenant's rent, but noted that tenant had not indicated whether they had ever received any portions of the rent abatement awarded to them by Civil Court. As a result, a hearing was necessary on that issue. The court then held that tenants would be entitled to treble damages, again because Civil Court's finding of fraud was entitled to preclusive effect. Finally, the court held that tenants were entitled to pierce the corporate veil and recover from the landlord's principal, who owns 99% of the corporate landlord, because the individual landlord exercised complete dominion over the corporation and used that dominion to commit a fraud.

Tenants Can Waive Treble Damages to Obtain Class Certification

Rebibo v. Axton Owners, Inc.

NYLJ 10/29/12

Supreme Ct., N.Y. Cty.

(Scarpullo, J.)

In an action seeking damages for a rent overcharge, tenants sought class certification pursuant to CPLR sections 901 and 902. The court granted the motion, holding that members of the class could waive their treble damages claim in order to obtain class certification.

Tenants live in a building that received J-51 tax abatements and exemptions for rehabilitation work. The Court of Appeals decision in Roberts v. Tishman Speyer Properties, L.P., 13 NY2d 270, established that landlord was entitled to keep apartment in the building rent-stabilized while accepting those tax benefits. Tenants brought this action to recover excess rents they allegedly paid while the building participated in the J-51 program, and sought class certification. Landlord contended that class certification as improper because CPLR section 901(b) bars recovery of treble damages in a class action.

In certifying the class, the court held that the rent stabilization law resembles Labor Law section 198 because both statutes provides for compensatory or treble damages depending on defendant's state of mind. Because courts have held that plaintiffs can waive their right to treble damages under the Labor Law in order to obtain class certification, the court held that the same rule applies under the Rent Stabilization Law. The court then held that tenants had established all of the other requisites for class certification.

Corporate Landlord's Fraud Justifies Piercing Corporate Veil

Conason v. Megan Holding, LLC

NYLJ 10/25/12, p. 21, col. 3

Supreme Ct., N.Y. Cty.

(Kenney, J.)

In tenants' action against corporate landlord and landlord's individual principal seeking damages for a rent overcharge, tenants sought summary judgment. The court granted tenants summary judgment on the issue of liability, holding that the corporate landlord's fraud justified piercing the corporate veil.

Corporate landlord had initially brought a nonpayment proceeding in Civil Court. That court awarded tenants a rent abatement based on landlord's fraud in creating and registering a fictitious tenant to inflate the legal regulated rent for tenant's apartment. Civil Court did not award tenant any other damages because tenant did not present evidence about what the legal regulated rent for their apartment should be. Tenants then brought this action seeking damages. Tenants submitted evidence that another apartment in the same building with the same number of rooms had a legal regulated rent of $180.92. Tenants initially leased their own apartment in 2003 for $1800 per month. In seeking to pierce the corporate veil, tenants submitted evidence that the landlord's principal had used cash to make improvements to the apartment.

In awarding tenants summary judgment on the issue of liability, the court held that Civil Court's determination of an overcharge was preclusive on that issue. On the issue of damages, the court noted that tenants had submitted calculations only for the four years prior to their complaint, so the court did not have to go outside the four-year look-back period. The court agreed with tenant that because of the fraud, the rent for the comparable apartment with the lowest rent ' $180.92 ' provided the appropriate base for tenant's rent, but noted that tenant had not indicated whether they had ever received any portions of the rent abatement awarded to them by Civil Court. As a result, a hearing was necessary on that issue. The court then held that tenants would be entitled to treble damages, again because Civil Court's finding of fraud was entitled to preclusive effect. Finally, the court held that tenants were entitled to pierce the corporate veil and recover from the landlord's principal, who owns 99% of the corporate landlord, because the individual landlord exercised complete dominion over the corporation and used that dominion to commit a fraud.

Tenants Can Waive Treble Damages to Obtain Class Certification

Rebibo v. Axton Owners, Inc.

NYLJ 10/29/12

Supreme Ct., N.Y. Cty.

(Scarpullo, J.)

In an action seeking damages for a rent overcharge, tenants sought class certification pursuant to CPLR sections 901 and 902. The court granted the motion, holding that members of the class could waive their treble damages claim in order to obtain class certification.

Tenants live in a building that received J-51 tax abatements and exemptions for rehabilitation work. The Court of Appeals decision in Roberts v. Tishman Speyer Properties, L.P. , 13 NY2d 270, established that landlord was entitled to keep apartment in the building rent-stabilized while accepting those tax benefits. Tenants brought this action to recover excess rents they allegedly paid while the building participated in the J-51 program, and sought class certification. Landlord contended that class certification as improper because CPLR section 901(b) bars recovery of treble damages in a class action.

In certifying the class, the court held that the rent stabilization law resembles Labor Law section 198 because both statutes provides for compensatory or treble damages depending on defendant's state of mind. Because courts have held that plaintiffs can waive their right to treble damages under the Labor Law in order to obtain class certification, the court held that the same rule applies under the Rent Stabilization Law. The court then held that tenants had established all of the other requisites for class certification.