An ad for Law Offices of John J. Ciafone Esq.

The New York Court of Appeals on Tuesday upheld a $380,000 fine that was indirectly levied against a Queens-based attorney, whose law firm was improperly advertised on five buildings he owned through a set of corporate entities. 

The state high court ruled that the fine was lawfully imposed by an agency in New York City against corporations owned by John Ciafone, despite his indirect ownership of the buildings. 

Associate Judge Rowan Wilson of the New York Court of Appeals wrote, for a unanimous court, that Ciafone couldn't avoid a city law that required a permit for advertising his law firm on the buildings, even if he owned the corporations, which in turn owned the properties. 

"Petitioner corporations, although admittedly owned either by Mr. Ciafone or by both Mr. Ciafone and his spouse, are indisputably distinct legal entities from John J. Ciafone and John J. Ciafone, P.C," Wilson wrote.

The New York City Law Department said in a statement it was pleased with the decision.

"The common good is served when the city is able to implement and enforce its common sense laws governing outdoor advertising. Not every neighborhood should be considered a home for ads best seen in Times Square," the department said. "These laws protect the quality of life. "

Ciafone, in a phone interview with the New York Law Journal, criticized the city's policies that led to the fines.

"As a small business owner in the city of New York, I'm offended by the outrageous conduct of this city to collect and essentially destroy small businesses with their outrageous fines," Ciafone said.

"Why are you holding me to the level of an outdoor advertisement in Times Square? I'm not the same kind of entity, or person," he continued.

At issue in the case was whether the corporations owned by Ciafone should be considered so-called "outdoor advertising companies," which are defined in New York City's laws as entities that make space available to others for purposes of marketing. 

The law requires outdoor advertising companies to obtain permits from the city before posting signs that appear to promote the services of another entity.

That didn't happen in this case. Signs advertising Ciafone's law practice, the Law Offices of John J. Ciafone Esq., were posted on five buildings in Brooklyn and Queens without a permit from the city.

Each of those five buildings are owned by four corporations. Those four corporations are owned by either Ciafone or his wife, according to his attorneys.

The New York City environmental control board fined the corporate entities $380,000 over the signs because, as they argued, Ciafone isn't the actual owner of the buildings. The properties are owned by Ciafone's corporations, not Ciafone himself, the city argued. 

The Court of Appeals, on Tuesday, agreed with the city. Wilson wrote that, because the corporations had made space available for advertising—even though the signs were marketing their owner—they were considered outdoor advertising companies.

"Thus, by advertising a distinct legal entity on their buildings, petitioner corporations made space available to others and are OACs under the Code," Wilson wrote.

Ciafone wasn't a party to the lawsuit. The challenge was brought against the city, instead, by the set of corporate entities he purports to own. They were represented before the Court of Appeals by Lindsay Garroway, a partner at Cohen, Hochman & Allen in Manhattan.

Garroway had argued before the Court of Appeals in November that New York City lawmakers would have never enacted a law intended to fine small business owners like Ciafone hundreds of thousands of dollars for advertising his firm on buildings he indirectly owned.

In a statement Tuesday, Garroway made the same point and urged the New York City Council to amend the law that was used to fine her clients.

"We respect the Court's decision, but we disagree with its interpretation of the law passed by the City Council," Garroway said. "There is no way the City Council intended this result when it passed the law, and we urge City Council to reconsider and reframe the law to protect small business owners like my client."

Outside the legal trapeze of the case, Ciafone is the owner of the buildings, she had argued, albeit through the corporate entities. That should allow the corporations to escape the fines, she argued.

That was the case in a different matter involving a business owner named Joseph Nativo. He was able to avoid the city's fines because he showed he was advertising his own business on a building he owned. Nativo owned the building directly, rather than through a corporation.

The Court of Appeals, on Tuesday, ruled that Ciafone's case wasn't the same as what happened with Nativo.

At the end of the day, Wilson wrote, Ciafone wasn't the direct owner of the buildings on which his law firm was advertised. There's no getting around that, he wrote.

"Because Mr. Ciafone, his professional corporation and petitioner corporations are separate legal entities, petitioner corporations are OACs under the plain language of Administrative Code § 28-502.1," Wilson wrote.

It was Ciafone's choice to own the buildings through a set of corporate entities, rather than directly in his own name, Wilson wrote. That choice comes with some advantages, like tax and liability benefits. It also comes with different standards, he said.

"The New York City Council could rationally conclude that a corporation engaged in the provision of advertising to others, even others who have an ownership interest in the corporation, should be subjected to greater financial disincentives for violating signage laws than natural persons who are advertising themselves," Wilson wrote.

The case was an appeal from the Appellate Division, First Department, which had also ruled that the fines couldn't be avoided by showing Ciafone owned the buildings through corporate entities. They upheld the penalty in a 3-2 vote.

The two dissenting justices, in that decision, had called it "logically absurd" for city officials to leave the fines in place.

READ MORE:

Court of Appeals Weighs $380K Fine Over Attorney Ads on Corporate-Owned Buildings

Corporate Ownership of Building Put Lawyer Ad Signs in Violation of Billboard Law: Court