Realty Law Digest
Scott E. Mollen, a partner at Herrick, Feinstein, discusses "U.S. v. New York City Housing Authority," where a consent decree reforming NYCHA was rejected by the court and held to be not fair, reasonable or in the public interest; and “Hoffman v. Village of Larchmont,” where the Village was denied dismissal of its tortious interference with contract claim.
February 26, 2019 at 02:35 PM
15 minute read
Residential Landlord-Tenant—HUD-NYCHA—Proposed Consent Decree Rejected by Court - “Disastrous Human Toll Resulting From Complete Bureaucratic Breakdown of Largest Public Housing Agency in the United States”—Monitor Named
This decision involved a motion for court approval of a proposed consent decree between HUD and the city of New York (decree). The court denied the motion.
The United States (government) had alleged, inter alia, that NYCHA had deployed various strategies to “temporarily conceal the crumbling physical conditions of its housing.” Efforts to conceal “included (1) temporarily shutting off a building's water supply to hide water leaks; (2) plugging holes in walls and ceilings with newspaper and cork before painting over the hole; (3) building fake walls to conceal broken doors and dilapidated rooms; (4) locking doors and posting 'danger' signs to keep inspectors away from rooms with dangerous or unsanitary conditions; and (5) hiding improperly stored hazardous materials….”
The court found it “remarkable” that NYCHA had advised its staff to engage in such deceptive tactics by promulgating “internal guidelines, including the…distribution of a 'Quick Fix Tips' guide on how to conceal problematic conditions from HUD inspectors….” Furthermore, NYCHA admitted that it had “artificially inflated its HUD inspection scores,”
Although the parties emphasized the decree's provision for a monitorship and more than five months had elapsed since the filing of the decree, the parties had still not identified candidates to serve as the monitor. Thus, the court was being asked to approve the decree with “incomplete knowledge of its key monitorship component.”
The consent decree specified that the monitor's purpose was inter alia, to “ensure that NYCHA (1) complies with all lead paint laws, (2) provides housing that is decent, safe, sanitary, and in good repair,…and (3) does not make false or misleading statements to the United States, and (4) implements the terms of the…decree.”
The U.S. Court of Appeals for the Second Circuit had recognized the “strong federal policy favoring the approval and enforcement of consent decrees.” SEC v. Citigroup Glob. Mkts., Inc., 752 F 3d 285 (2d Cir. 2014). However, the court opined that the decree's “indefiniteness as to NYCHA's obligations and the enforcement mechanism forecloses approval of the settlement at this juncture.” The decree did not “entirely” define the “body of statutes and regulations with which NYCHA must comply….” “Many of NYCHA's obligations…” were “too indeterminate.” It was unclear whether certain sections of the decree “affirmatively enjoined NYCHA or merely set forth the monitor's duty to ensure that NYCHA complies with federal health and safety standards….”
Absent “additional concreteness” NYCHA could not “… know the acts that are restrained or required,” and the court could not “enforce compliance with its orders.” The court acknowledged that the decree could not “detail every act that NYCHA must take or forebear from taking” and an attempt to provide such detail “would almost certainly be a fool's errand in the context of institutional reform litigation, for which injunctions 'are not so much peremptory commands to be obeyed in terms as they are future-oriented plans designed to achieve broader policy objectives in a complex, ongoing fact situation.'”
The decree disclaimed the monitor's “responsibility for NYCHA's day-to-day operations” and did not contemplate the “judicial appointment of a receiver,” HUD reserved the right to appoint or to seek the appointment of a receiver, as well as to seek other administrative remedies.
The court found that the decree was not in the public interest because it represented an “unprecedented-judicial usurpation of responsibilities that Congress has expressly entrusted to HUD….” HUD had several “statutory and regulatory remedies” which did not “require the public housing agency's consent or contemplate judicial involvement…,” e.g., HUD's ability have a receiver appointed. HUD had previously taken over or sought a receiver for housing authorities in Chicago, Boston and the District of Columbia.
Additionally, the legislative history of 42 USC Section 1437(d)(j) “corroborates HUD's primary responsibility to reform failing public housing.” The court found it particularly “striking” that HUD was abdicating “its remedial responsibilities and powers…,” given the government's “allegations regarding the deplorable conditions of NYCHA housing and NYCHA's deliberate attempt to pull the wool over HUD's eyes.”
The court stated that the decree “relegates HUD to a narrow, auxiliary role in relaxing its own regulatory constraints to allow NYCHA to comply with the decree, lifting its earlier 'zero threshold' sanction requiring NYCHA to obtain HUD approval before drawing any federal funds, agreeing not to offset federal funding by the amount of the city's funding obligation, and meeting with the monitor and NYCHA to 'discuss strategies to improve NYCHA's ability to comply with its obligations under the decree.'”
The court warned that the decree “functionally cabins HUD to getting out of the way of the monitor and NYCHA.” “Congress envisioned” a central role for HUD….” Here, the parties attempted to establish “an elaborate monitorship to bring about organizational reform under the auspices of this Court and appropriate funding….”
The decree “implicates the fundamental separation of powers…by commandeering a court's equitable powers to fashion a comprehensive injunctive remedy parallel to-yet entirely unmoored from-the existing statutory and regulatory framework.” Moreover, HUD lacks “discretion to select which deficient public housing agencies it chooses to assist,” given its statutory obligation to “oversee all public housing agencies that receive federal funds.” The decree gave the monitor “discretion to determine the terms of the injunctions themselves” and that “also raises substantial public concern.”
The government had also criticized NYCHA's “unilateral appointment of a NYCHA insider” who lacked compliance experience as “chief compliance officer….” Although such act “was not in the spirit of the parties' agreement.” The decree had not yet been approved and NYCHA asserted that compliance work needed to continue.
There was also disagreement as to the monitors role. The government described such role in broader terms than NYCHA had described the role. NYCHA's implied that the monitor's role was that of “merely facilitating collaboration and providing increased accountability.” The court opined that based on NYCHA's “active deceit of federal regulators, however,” it was “doubtful” “whether such a passive role can assure any meaningful accountability….” Furthermore, NYCHA's interim chair had questioned whether the proposed monitorship might constitute a “prescription for difficulty, if not disaster.”
Additionally, if NYCHA or the government objects to a performance requirement, it could only be set aside by the court if the court found such requirement to be “arbitrary or capricious” and that is a “highly deferential standard of review.” This case was not an “institutional reform case that seeks to remedy constitutional violations; nor is it one in which Congress has bestowed broad authority upon the courts to remedy violations of civil rights statutes.” Rather, Congress “committed to HUD” authority and responsibility to reform federally supported public housing agencies.
Moreover, “adversarial positions the parties have staked after signing the…decree and during the pendency of the motion for approval also portend this court's defacto conscription into superintending NYCHA indefinitely-a role that judges are ill-equipped to assume.” The parties disagreed whether NYCHA had already defaulted as to “lead-safe work practices….” NYCHA tenants had requested the “firing or prosecution of NYCHA officials, and urged greater tenant participation in the negotiation and enforcement of the consent decree.”
The court further opined that the “human dimension cannot be ignored despite the parties' attempts to limit the court to a perfunctory review of the validity and form of the settlement.” The decree “sidelined” HUD and “displaces the congressional framework for remedying public housing failures with a parallel framework to be managed by the judiciary.” Apart from “general directives to comply with applicable statutes and regulations,” the decree did not “offer any specificity as to NYCHA's required or enjoined conduct.”
The decree “contemplates the future elaboration of the terms of the injunction through the development of performance requirements and plans.” The performance requirements and plans would be developed by a “monitor, approved by the government, and subject to judicial review only under an arbitrary capricious standard.”
The court held that the “decree is not fair, reasonable, or consistent with the public interest” and denied the motion to approve the consent decree. However, the court found that the decree was not the product of “improper collusion or corruption,” The decree had resulted from “intense negotiations” among the government, NYCHA, and the city.
The court explained that “whether the parties choose to address this public emergency through a judicially managed consent decree, or receivership under the U.S. Housing Act, or in some other way, it appears that half measures that merely maintain the status quo while shielding the powers that be from politically unpalatable solutions are doomed to fail.”
The court further noted that the “State of New York lurks in the wings with $550 million that may help fund NYCHA's capital needs” and that New York's governor, “having previously overhauled the Chicago Housing Authority during his tenure as HUD Secretary-may well understand better than others what is at stake.” The court doubted “that any solution will offer an immediate panacea, in large part due to NYCHA's crippling $31.8 billion capital deficit and its inexplicable disfunction in leaving untouched hundreds of millions of dollars allocated to it by the city.”
The court stated that “desperate times call for desperate-sometimes politically unpopular-measures, whether that be exploring public-private housing partnerships, infill development, or the sale of air rights. Other measures may be necessary and even less palatable, such as replacing NYCHA's management or abrogating collective-bargaining agreements and vendor contracts. Any of these measures requires political will at all levels, from the HUD Secretary, to the Governor, to the Mayor, and to NYCHA's Interim Chair. The well-being of more than 400,000 New Yorkers depends on it.”
Comment: HUD subsequently selected former federal prosecutor and chairman of a global investigative firm Guidepost Solutions, LLC, Bart Schwartz to be the NYCHA monitor. Mr. Schwartz previously served as a monitor and has investigated several high-profile situations which have involved mismanagement or corruption or both.
U.S. v. New York City Housing Authority, U.S. District Court, S.D.N.Y., Case No. 18 cv 5213, decided Nov. 14, 2018, Pauley, J.
Land Use—Village Allegedly Stopped Development of Dunkin Donuts Store—Property Owner Sued Village for Tortious Interference with Contract, Inverse Condemnation—Denial of Equal Protection and Private Nuisance
|A property owner sued a village, relating to its former tenant's application for a permit to operate a Dunkin' Donuts (Dunkin) franchise store. The application included a “demolition project,” The village described the proposed project as including demolition and “street widening, construction of new sidewalks, installation of new benches and planting of new trees, which it says took place in and around 2013.”
The owner alleged that the process had been “started and stopped over a period of years, causing severe disruption to the commercial properties” on the subject street and “rendering its own property essentially unusable and unleasable until the project was completed in April 2016.”
The owner had signed a lease with a Dunkin franchisee in June 2015. The owner alleged that starting in June 2015, the village “required repeated and unnecessary appearances by Dunkin…representatives before the (Village) Traffic Committee Planning Board, Architectural Review Board, and Zoning Board of Appeals (ZBA)”; “scheduled and repeatedly cancelled hearings to discuss the Dunkin…permit application, in order to delay consideration of the issue;” “required the submission of a burdensome traffic study;” and “repeatedly avoided providing Dunkin…with a final determination on its application.”
The owner alleged that Dunkin was advised that the Village “would not allow a Dunkin…drive-thru at the property on the ground that it would violate the Village's anti-idling law” and such conversation, allegedly caused Dunkin, on March 6, 2017, to terminate the lease.
In April, 2017, the owner served a notice of claim against the Village, alleging inverse condemnation, private nuisance, violation of the “Takings Clause,” and tortious interference with contract. The claim also cited the Village's “treatment of the Dunkin…application ….”
The owner alleged that at the “Village's urging, it filed a new application in June 2017,” The owner appeared before the planning board on July 10, 2017, but was told that relief should be sought from the ZBA. The ZBA thereafter approved the application for a special permit for the Dunkin drive-thru in its Oct. 4, 2017 meeting.
The owner alleged that the planning board then made it “clear that it would never allow a Dunkin…drive-thru…notwithstanding that (ZBA) approval of the special permit, again giving the anti-idling statute as the reason of denial.” Although the owner had asked for a written decision from the planning board, the planning board asserted, “that the application was incomplete and could not be voted on.” The planning board allegedly provided “no explanation” as to “what the reportedly made the application incomplete.”
The complaint cited other acts by the Village which evinced “bad faith” and violation of the Village's own procedures. The Village allegedly had made “spurious and unreasonable demands in bad faith, constituting tortious interference with the lease” and such conduct allegedly “amounted to an impermissible de facto taking of plaintiff's property.” The complaint asserted claims for “a taking of property, tortious interference with contract, denial of equal protection, inverse condemnation, and private nuisance.”
The Village moved to dismiss the complaint pursuant to CPLR 3211. The Village's defenses raised “issues of standing, necessary parties, failure to exhaust administrative remedies, statute of limitations, ripeness, and failure to include a cause of action in the notice of claim.”
The Village asserted that the application was deemed abandoned on April 3, 2017 based on the tenant's “repeated failures to appear” and although the ZBA had approved the project, the site plan approval application remained pending before the planning board.
The court denied the Village's motion to dismiss based on lack of standing since the owner need not “repeat the steps already taken by its lessee.” Moreover, although the owner was not the named applicant, “the Village's alleged conduct would impact the property owner, in that it would reduce or eliminate earnings from, and the value of, the property.” The court also held that the tenant was “not a necessary party.”
The court also held that the owner had not failed to exhaust its remedies. The owner, itself and through the tenant, “performed the required steps, but were repeatedly and unreasonably stymied.” The court stated that if it accepted the Village's argument, “the Village could delay indefinitely and not be answerable for its allegedly deliberate inaction.” Furthermore, the court rejected the “ripeness” defense, since the owner “should not be required to wait until the Village concludes its process before seeking relief.”
The Village had claimed, inter alia, that the planning board “only received funds on or about July 26, 2018 to open an escrow account necessary for the outside review” of the tenant's application. The court explained that such “factual assertions” could not be relied upon on a CPLR 3211 motion to dismiss. “[E]videntiary material outside the pleading's four corners” can be considered on a motion for summary judgment.
The Village also argued that the Equal Protection claim should be dismissed since it was not included in the notice of claim. The owner asserted that a 42 USC §1983 claim “does not require service of a notice of claim” and “in the land-use context,” a §1983 “protects against municipal actions that violate a property owner's rights to due process, equal protection of the laws and just compensation for the taking of property under the Fifth and Fourteenth Amendments to the United States Constitution….,”
The Village countered that state constitutional claims are subject to the notice of claim requirement. Since the complaint's “prayer for relief reflects that the claims of a taking and of a violation of equal protection are pleaded under the 42 USC §1983,” those claims survived the dismissal motion “regardless of whether they were timely raised in a notice of claim.”
However, court held that the “time-bar of General Municipal Law §50(e), which requires service of a notice of claim within 90 days of the alleged injury” and the right “to sue on that ground, precludes plaintiff's claims for inverse condemnation and private nuisance, which appear to be state law claims.” The demolition project was completed in April 2016. The claim was not served until April 25, 2017. The owner's cross-motion for declaratory relief was denied since such declaration would be “part of the ultimate relief sought in the complaint….”
Hoffman Invs. v. Vill. of Larchmont, Supreme Court, Westchester Co., Case No. 58581/2018, decided Nov. 15, 2018, Ruderman, J.
Scott E. Mollen is a partner at Herrick, Feinstein.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllGovernment Attorneys Are Flooding the Job Market, But Is There Room in Big Law?
4 minute readTrump, ABC News Settlement in Defamation Lawsuit Includes $1M in Attorney Fees For President-Elect
Can Law Firms Avoid Landing on 'Enemy' List During the Trump Administration?
5 minute readTrending Stories
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250