APPELLATE DIVISION FIRST DEPARTMENT REVERSES DISMISSAL OF LENOX TERRACE J-51 CLASS ACTION

April 25, 2013

Hundreds of tenants at Lenox Terrace in Harlem and possibly thousands of tenants throughout the city may benefit from a ruling today by the Appellate Division, First Department in Downing v. First Lenox Associates. The case was one of three class action cases decided today related to the Court of Appeals Roberts decision that held that apartments could not be deregulated while a building is in receipt of a J-51 tax abatement.

In 2010, following the Roberts decision, tenants at Lenox Terrace commenced a class action to compel the landlord to return hundreds of unlawfully deregulated apartments to rent-stabilization, to readjust inflated rents and to return rent overcharges.  The apartments were unlawfully deregulated while the buildings were in receipt of J-51 tax benefits.  In late 2011, Supreme Court Judge Charles E. Ramos dismissed the class action on the basis that it was impermissible to bring a class action seeking treble damages which are considered a “penalty.”  The Lenox Terrace plaintiffs had waived their claim to treble damages but Judge Ramos held that treble damages could not be waived.             
In reversing the lower court, the Appellate Division, First Department held that treble damages could be waived by the plaintiffs as long as class members had the option of “opting out” of the class and seeking such damages.

The case will now be sent back to the lower court for further proceedings.

“This is a tremendous victory for tenants at Lenox Terrace whose apartments were unlawfully deregulated and who are paying inflated rents and are due refunds,” said David Hershey-Webb, HMGDJ partner and lead attorney on the case for HMGDJ.   “It is also a victory for our class action co-counsel, Emery Celli Brinckerhoff & Abady.”  Matthew D. Brinckerhoff argued the case before the court on behalf of the tenants

The decision has positive ramifications for thousands of tenants throughout the city who may be paying inflated rents and be entitled to rent refunds, including the tenants in four other class actions currently being pursued by HMGDJ.