Scott E. Mollen

Alleged Discrimination—Issues of Fact as to Whether Landlord Discriminated Against Non-Hasidic Tenants With Respect To Leasing and Repairs—Res Judicata—Collateral Estoppel—NY Does Not Have Compulsory Counter-Claim Rule—Continuing Violation Theory

Two individual plaintiffs, represented by a tenants' association (collectively “plaintiffs”) asserted federal and state claims of “housing discrimination” against the defendant landlord. The landlord moved for summary judgment on all claims based on res judicata, collateral estoppel, statute of limitations (SOL), failure to state a claim, and lack of “genuine disputes as to any material facts.” The court granted the landlord's motion in part and denied the motion in part.

The plaintiffs are or were long-time residents of rent stabilized apartments. The subject building is located in the South Williamsburg neighborhood of Brooklyn, New York.

The complaint alleged that beginning in or about 2001, Latino tenants began to move out of the building, based on their “own volition” or “after accepting buy-outs 'after years of not getting repairs…”” The plaintiffs alleged that the landlord failed to repair apartments and once non-Hasidic tenants had moved out, the landlord renovated the apartments and new Hasidic Jewish tenants moved into the apartments. One individual plaintiff is the only remaining Latino tenant in the building. All of the other tenants in the building were alleged to be Hasidic.

The plaintiffs contended that once the current landlord acquired the building in 2010, he continued a campaign, which had been commenced by the prior landlord, of marginalizing and discriminating against Latino residents in favor of Hasidic Jewish residents. The plaintiffs and other Latino tenants had allegedly suffered from a lack of repairs and services, while “preferential repairs” and superior services were provided to Hasidic Jewish tenants. They also alleged that the landlord provided “contact” people for Latino residents who were different than the “contact” people provided to the Hasidic Jewish residents.

There had been a Housing Court trial with respect to the landlord's effort to recover possession of an apartment occupied by a plaintiff, for the landlord's personal family use. The Housing Court ruled in favor of the landlord and issued warrants of eviction. The Housing Court found that the landlord had acted in good faith in pursuing that proceeding.

The plaintiffs further claimed that they had been told by an “unidentified male worker” that he had been instructed to provide “poor repairs” and such worker had made “things worse” or had refused to make requested repairs. During such time period, an apartment in the building had allegedly been gut-renovated and subsequently leased to Hasidic tenants. The plaintiffs claimed that while they lacked proper repairs, “high quality building materials and new appliances” were “brought into the building for renovation of…apartments” that would be leased to new Hasidic tenants.

City records listed 30 open building violations, “all of which conditions” were in apartments occupied by the plaintiffs. The records also showed hundreds of “closed housing code violations,” most of which involved units occupied by Hispanic tenants.

Additionally, a plaintiff had reportedly been told there were no vacancies. The landlord had asserted that apartments were “typically rented through word-of-mouth to friends or relatives of friends.” The plaintiffs alleged that “rental applications required potential tenants to indicate the synagogue affiliation for themselves and their parents” and vacant apartments were “ultimately rented, but exclusively to Hasidic residents.”

The Housing Court had found that the respondents were afforded “every opportunity to prove…that (defendants') intent to terminate their tenancy was discriminatory, rather than a good faith intention to provide homes for his daughters and their families.” However, the plaintiff in the Housing Court litigation disputed whether she had such “opportunity” to pursue her discrimination claim, given the “severe limitations of the forum” and the “limited discovery” on the issue of intent.

The plaintiffs had commenced the subject action in federal court, seeking a permanent injunction barring the defendants from discriminating against them and related relief. They alleged discrimination on the basis of race by, inter alia, failing to provide adequate repairs and heat—in violation of the Fair Housing Act (FHA); the NYC Human Rights Law (NYHRL), and New York City Human Rights Law (NYCHRL), and by intentionally refusing to lease vacant apartments to them—in violation of the FHA and Section 1982 of the Civil Rights Act of 1866.

The subject court (court) explained that since an individual plaintiff and the tenants' association “were not parties or privy to parties in the prior action in the Housing Court… res judicata is plainly inapplicable to these plaintiffs.”

With respect to the plaintiff who was a party in the Housing Court action, the court held that res judicata did not bar her instant claims. The Housing Court addressed the landlord's “personal use” application and found that his intent was not discriminatory. However, the subject case involves allegations of inadequate “repairs and services under the FHA, NYHRL, NYCHRL,” and refusal to lease vacant apartments to plaintiffs in violation of the FHA and Section 1982, “all of which occurred prior to the eviction and do not involve the same cause of action.”

The court would not review the “validity of the warrant of eviction but to the extent that the rest of plaintiff's claims do not hinge on a review thereof,” the court would consider such claims. Furthermore, the state court judgment “would not have preclusive effect over this case as to (the Housing Court plaintiff) unless respondents had been required to raise these claims in the state case.” Unlike the federal court, New York courts do not have any “compulsory counterclaim rule.” Therefore, “res judicata will not necessarily bar claims that could have been counterclaims in a prior action.” “Only a defendant who is silent in the first action and then tries to bring a second action that would undermine 'the rights or interests established in the first action' is barred under New York's res judicata rule.”

Since the Housing Court had addressed different issues, the doctrine of collateral estoppel was also inapplicable. The Housing Court did not consider “the standards of establishing discrimination under the federal and state statutes pursuant to which plaintiffs bring their instant claims.” The Housing Court solely determined whether the landlord's eviction proceedings had been commenced in good faith. The Housing Court could make a finding of bad faith, but it lacked jurisdiction “to award equitable relief based upon a finding of discrimination.” Thus, the court denied the landlord's motion to dismiss claims involving “repairs and vacancies” on the grounds of res judicata and collateral estoppel.

The court then explained that the SOL “for certain discrimination claims, including the FHA, can be effectively extended under the 'continuing violation' theory, whereby the plaintiff claims not just an isolated violation, but an on going policy of discrimination which extend into the limitations.” However, the courts in the Second Circuit have “been loath to apply [the continuing violation doctrine] absent a showing of compelling circumstances.”

Courts have applied the continuing violation theory in the housing context, “where the type of violation is one that could not reasonably have been expected to be made the subject of a lawsuit when it first occurred because its character as a violation did not become clear until it was repeated during the limitations period.” Courts have held that the continuing violation theory is inapplicable where the plaintiff “was on notice of what she believed was discrimination but 'failed to act in preservation of her rights in spite of her knowledge.'”

Here, the plaintiffs were on “longstanding notice of what they believed was discrimination based on their race, at least as early as 2011.” One plaintiff believed she had been discriminated against since 2011 and another plaintiff believed Hispanics were being treated differently since around 2005 to 2007. The court held that the plaintiffs were barred from bringing claims dating back to 2011 on the continuing violation theory. Thus, all FHA claims prior to Dec.15, 2014 and §1982, NYHRL and NYCHRL claims prior to Dec. 15, 2013 were dismissed.

Additionally, the court found that there were genuine disputes of material facts. After the plaintiff established a prima facia case of discrimination, the burden shifted “to the defendants to produce a legitimate, non-discriminatory reason for their actions.” If defendants make such showing, “the burden shifts back to the plaintiff to demonstrate defendants' proffered reason is pretextual, and discrimination was the real reason for the defendants' actions.”

Here, the plaintiffs had established potential violations of housing discrimination laws. The court found that the evidence was sufficient for a reasonable fact finder to conclude that the defendants had engaged in discriminatory conduct. Although the defendants cited the prior Housing Court litigation, they failed to proffer “nondiscriminatory reasons for their failure to provide adequate accommodations and repairs….” The court opined that the defendants' “motivations behind the alleged violative conduct,” presented material issues of fact which must be adjudicated by the fact finder.

The court further noted that decisional precedent required it “tread lightly in deciding whether summary judgment should be granted in a discrimination case that turns on intent,” and explained that “[i]t is the rare occasion when discrimination boldly smacks one in the face, rather, it is 'often accomplished by discreet manipulations and hidden under a veil of self-declared innocence.'” Accordingly, the court denied the defendants' motion to dismiss the remainder of the plaintiffs' claims, denied the defendants' motion to dismiss FHA claims that accrued on or after Dec. 15, 2014 claim and NYHRL and NYCHRL claims that accrued on or after Dec. 15, 2013. The court dismissed certain other claims in their entirety.

273 Lee Avenue Tenants Ass'n v. Steinmentz, U.S. District Court, EDNY, Case No. 16-CV-6942, Aug. 16. 2018, Kuntz, J.

Land Use—Environmental—Town Board of Appeals' SEQRA Declaration Overturned—SEQRA Declaration Lacked a Reasoned Elaboration—Opponents Not Entitled to Cross-Examine Applicant's Witnesses—Board Not Constrained by Rules of Evidence and May Conduct Informal Hearings

A church sought to build a 25,806 square foot two-story cultural center (center) next to an existing church structure (plan). The plan included the demolishing of certain houses and construction of related parking. The Town Board of Appeals (board) had granted the church's applications for “various special exceptions and variances,” subject to certain conditions. The board also found that the center would “not have a significant impact on the environment; in particular, the character of the existing community.”

Three nearby homeowners had commenced an Article 78 petition, seeking to annul the board's determinations. They argued that the board's decisions failed to contain “the required proper analyses with respect to: (1) the determination under the NYS Environmental Quality Review Act (SEQRA) that the (plan) would not have a significant effect on the environment; (2) the grant of use and area variances; and (3) the failure to preserve existing trees on the site.” The petitioners also asserted that the board gave “excessive deference to the Religious Land Use and Institutionalized Persons Act, 42 U.S.C. §2000cc,” held a procedurally defective administrative hearing and one board member had a potential conflict of interest.

The court held that the board's SEQRA declaration was “fatally flawed.” Although the court commended the board for the “time, effort and thought it put into the hearing and its zoning decision,” it found that the SEQRA declaration lacked a “required explanation.” The board took the requisite “hard look” at the project, but did not provide a “reasoned elaboration” for its SEQRA determination. The court found that the board's decision which purported to be a “negative SEQRA declaration,” was “in truth, at best a conditioned negative declaration.” The court also opined that the board's zoning decision “cannot support its environmental determination.” Since the board's SEQRA declaration was vacated, the board's zoning resolutions were invalid. The court also rejected the procedural objections as to the conduct of the administrative hearing, e.g., that their due process rights were allegedly violated when their request to cross-examine the church's witnesses was denied.

The court explained that a “zoning Board of Appeals is not constrained by the rules of evidence and they may conduct informal hearings.” Board hearings are “not quasi-judicial in nature and do not require the swearing of witnesses or cross-examination of them.” The petitioners had not identified relevant testimony or exhibits that they had been denied from presenting. The court concluded that although the board hearing may not have been “perfect,” it “certainly was fair—their position was heard loud and clear over the course of a 12-hour hearing.”

The petitioners also claimed a conflict existed because a board member (“A”) is the “sister-in-law of an attorney who used to be a member of the law firm representing (the church), and because the law firm's current managing partner was a campaign manager for her estranged husband.” The petitioners had not cited any violations of “Article 18 of the General Municipal Law” and had not identified any “pecuniary or material interest-direct or indirect—of “A” in the outcome of the applications.” Furthermore, “A” had not cast the deciding vote, “which was unanimous” and, the managing member of the law firm did not represent the church at the hearing.

The board found that the plan could result in “one or more potentially large or significant adverse impacts.” The board noted that the plan could result in a “change in the use or intensity of the land… and the proposed action may impair the character or quality of the existing neighborhood.” The board found that the applications were “unlisted actions” under SEQRA and stated that a SEQRA determination would be made following hearing testimony and review of evidence submitted at a public hearing. Following the public hearing, the board had issued a “one paragraph resolution declaring that the center and accompanying use and area variances 'will not have a significant effect on the environment.'” That was the “entire pertinent scope of the board's declaration. No explanation. No rationale. No articulation of the basis of its determination.”

If a lead agency “fails to set forth a reasoned elaboration the determination may be annulled.” Here, the court found that there was no “reasoned elaboration” of the board's decision.

The respondents argued that support for the board's determination “can be found in the record” and the court should “not second-guess the board's determination.” However, the court noted that “judicial review of an administrative determination is limited to the grounds invoked by the agency or board” and “[t]he grounds for the administrative decision must be contained within the determination reviewed so that the court can 'discern the rationale for the administrative action taken and undertake intelligent appellate review there.'”

The court stated that it “cannot search the record for a rational basis to support the board's determination, substitute its judgment for that of the board or affirm the underlying determination upon a ground not invoked by the board in the first instance.” Thus, the court refused to “search the voluminous record… supply an appropriate analysis that should have been articulated by the board, and affirm the board's findings.”

The court further observed that if the board intended that its “zoning decision” should support the board's SEQRA determination, that would be “bad practice and is not judicially favored.” A “SEQRA review may not serve as a vehicle for determining zoning issues.” “Zoning determinations are no substitute for the separate analysis focusing on the environment required by SEQRA.” Thus, the board's zoning decision could not “supply an appropriate rationale for its unconditional negative SEQRA declaration.” Moreover, the zoning decision was “not unconditional.” It required that the center not be used when the church is being used and that no ingress or egress is to be permitted on a certain street and church employees were not to park on the street.

The court stated that assuming that the board “effectively conflated its SEQRA and zoning analyses, it cannot be said that the negative declaration is unconditional, even though on its face it purports to be.” Rather, it is a “conditioned negative declaration.”

The court also found that the board did not comply with “procedures outlined in 6 NYCRR 617.7(d) for the issuance of a conditioned negative declaration for unlisted actions.” The board had not, e.g., completed a full environmental assessment form and imposed conditions had not appeared in the board's declaration. Accordingly, the court held that the “purported unconditional negative declaration is improper.”

Additionally, “the board's implicit SEQRA determination that the residential character of the existing community will not be significantly impacted relies upon certain anticipation actions by (the church).” Those future actions were not conditions of approval in either the zoning or SEQRA decisions and the court could not tell if the board would still “conclude that the character of the existing community is not significantly impacted,” if those future actions were not taken. Accordingly, the court granted the petition and vacated the board's determinations.

Matter of Healy v. Town of Hempstead Bd. of Appeals, Sup. Ct., Nassau Co., Index No. 3214/2017, decided Aug. 28, 2018, Steinman, J.

Scott E. Mollen is a partner at Herrick, Feinstein.