Tenants Seek Class Action Suit for Unlawful Deregulation

November 12, 2014

In October 2014, New York’s highest court heard arguments on three cases that raise the question as to whether tenants can pursue class action lawsuits against owners based on claims of unlawful deregulation while the buildings received J-51 tax benefits. In each case the Appellate Division, First Department, had ruled that the statute generally prohibiting a class action to recover a penalty did not bar tenants from suing as a class to recover rent overcharges based on unlawful deregulation.

In October 2014, New York’s highest court heard arguments on three cases that raise the question as to whether tenants can pursue class action lawsuits against owners based on claims of unlawful deregulation while the buildings received J-51 tax benefits. In each case the Appellate Division, First Department, had ruled that the statute generally prohibiting a class action to recover a penalty did not bar tenants from suing as a class to recover rent overcharges based on unlawful deregulation. The tenant who sought approval of a class action had waived her right to seek triple damages for rent overcharge, and other individual class members would be allowed to opt out of the class to pursue their triple damages claims if they believed there was a lawful basis to do so. Owners appealed these decisions, and the Court of Appeals will now determine whether these class actions can proceed [Gudz v. Jemrock Realty Company, LLC, 105 AD3d 625 (1st Dept. 2013); Borden v. 400 East 55th Street Associates, LP, 105 AD3d 630 (1st Dept. 2013); and Downing v. First Lenox Terrace Associates, 107 AD3d (1st Dept. 2013)].

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