COURT OF APPEALS of the STATE OF NEW YORK LANE NY. County Clerk Index No. 603556/2009 Plaintiff~Respondent, ?against- NOTICE OF MOTION FOR LEAVE TO APPEAL OBMAN 478/480, LLC, TO THE COURT OF APPEALS Defendant-Appellant. PLEASE TAKE NOTICE, that upon the annexed af?rmation of Magda L. Cruz, dated June 2, 2016, and the exhibits annexed thereto; the order of the Appellate Division, First Department, entered on January 7, 2016; the order of the Appellate Division, First Department, entered on April 28, 2016, denying reargument, or, in the alternative, leave to appeal to the Court of Appeals therefrom; the ?nal judgment entered on May 16, 2016 in the Of?ce of the County Clerk of the Supreme Court, New York County; a copy of the Record on Appeal from the court below, and a copy of each party?s briefs to the Appellate Division; and all of the papers and proceedings heretofore had herein, the defendant, JOBMAN 478/480, LLC., will move this Court at a Motion Term thereof at the Courthouse located at 20 Eagle Street, in Albany, New York, 12207, on, June 20, 2016, at 10:00 am, or as soon thereafter as counsel can be heard, for an order pursuant to CPLR granting leave to appeal to the Court of Appeals from the aforesaid January 7, 2016 order of the Appellate Division, First Department, and ?nal judgment entered thereon, which af?rmed the orders of the Supreme Court, New York County, entered on January 18, 2013 (Scarpulla, J.), April 14, 2015 (Scarpulla, J.), June 8, 2015 (Wright, .), and August 20, 2015 (Wright, .), and dismissed the appeal of the order of the Supreme Court, New York County, entered on October 1, 2013 (Searpulla, J.), respectively. PLEASE TAKE FURTHER NOTICE, that pursuant to CPLR ?2214(b), any answering papers to this motion shall be served by hand or overnight delivery at least seven (7) days prior to the return date of this motion. Yours, etc. Dated: New York, New York BELKIN BURDEN WENIG GOLDMAN, LLP June 2, 2016 Attorneys for Defendant~Appellant 270 Madison Avenue New York, New York 10016 (212) 867-4466 BY: Mag?aa L. (3er TO: BERNSTEIN LIEBHARD LLP ATT: Christian Siebott Attorneys for Plaintiff-Respondent 10 East 40th Street New York, New York 10016 (212) 779?1414 CLERK OF THE COURT OF APPEALS 20 Eagle Street Albany, New York 12207 1843446 STATE OF NEW YORK COURT OF APPEALS LANE Index No.: 603556/2009 Plaintiff~Respondent, . AFFIRMATION IN SUPPORT -agamst~ OF MOTION JOBMAN 478/480, LLC, FOR LEAVE T0 APPEAL Defendant-Appellant. MAGDA L. CRUZ, an attorney duly admitted to practice before the courts of the State of New York, hereby affirms the following to be true under the penalties for perjury pursuant to CPLR 2106: 1. I am a member of Belkin Burden Wenig Goldman, LLP, attorneys for defendant?appellant, Jobman 478/480, LLC (?Owner?). am fully familiar with the facts and circumstances set forth below. RELIEF SOUGHT BY THIS MOTION 2. This affirmation is respectfully submitted in support of Owner?s motion for an order: Pursuant to CPLR granting leave to appeal the final Order of the Appellate Division, First Department, entered on January 7, 2016 Order?), and final judgment entered thereon, affirming the orders of the Supreme Court, New York County, entered on January 18, 2013 (Scarpulla, J.), April 14, 2015 (Scarpulla, J.), June 8, 2015 (Wright, J.), and August 20, 2015 (Wright, J.), and dismissing the appeal of the order of the Supreme Court, New York County, entered on October 1, 2013 (Scarpulla, J.), on the ground that the holding of the AD Order conflicts with the New York City Rent Stabilization Law and Code, the New York City Rent Control Law and Regulations, decisions of the Court of Appeals and the Appellate Division, and involves a regulated housing matter with state-wide implications. 3. A copy of the AD Order, with Notice of Entry (dated and served by Plaintifmeespondent, Lane [?Tenant?], via e-mail on January 2016), is annexed hereto as Exhibit A. 4. A copy of the Supreme Court orders entered on January 18, 2013 (Scarpulla, J.), October 1, 2013 (Scarpulla, J.), April 14, 2015 (Scarpulla, J.), June 8, 2015 (Wright, J.), and August 20, 2015 (Wright, J.), are annexed hereto as Exhibits B, C, D, E, F, respectively. 5. As more fully discussed below, these orders summarily found, without a trial and as a matter of law, that Owner had fraudulently deregulated a Manhattan apartment fourteen (14) years before the commencement of this action, warranting re- stabilization of the apartment until Tenant vacates, recalculation of the rent pursuant to a punitive methodology (?default formula"), ?freezing? the recalculated rent retroactively for ten years, as well as prospectively, assessment of treble damages, pre-judgment interest (from the date when Tenant moved for summary judgment), post-judgment statutory interest (from a date before the judgment was entered), and leave to move for attorneys? fees. TIMELINESS OF THIS MOTION 6. The motion is timely as it is being made on June 2, 2016, that being within 30 days from the date of service of the notice of entry of the Appellate Division order denying leave to appeal the AD Order to this Court. CPLR ?5513(b). 7. The Appellate Division denied leave by order dated April 28, 2016. -2- Tenant served a copy of that order, with notice of entry on May 4, 2016 via email. (A copy of the Appellate Division order denying leave, with notice of entry and proof of service is annexed hereto as Exhibit G.) 8. Owner?s motion to the Appellate Division for leave to appeal the AD Order to this Court was made on February 5, 2016, that being within 30 days of service of notice of entry of the AD Order (As noted, Tenant served that notice of entry on January 13, 2016 via e-mail.) (A copy of Owner?s Notice of Motion to the Appellate Division for leave and other relief, dated and served on February 5, 2016, with proof of service, is annexed hereto as Exhibit H.) THE JURISDICTION OF THIS COURT TO GRANT LEAVE IN THIS CASE 9. CPLR ?5602(a)(1)(i) provides, in pertinent part, that: An appeal may be taken to the court of permission of the court of appeals upon refusal by the appellate division ?1616* 1. in an action originating the supreme from an order of the appellate division which finally determines the action and which is not appealable as of right[.] 10. This is an action that originated in the Supreme Court, New York County as a class action. A copy of the initial Summons with Notice, dated November 20, 2009, followed by the Class Action Complaint, dated April 30, 2010, is annexed hereto as Exhibit l. 11. Tenant subsequently amended his Class Action Complaint to consist solely of individual claims for declaratory relief, rent overcharge, and attorneys? fees. A -3- copy of Tenant?s Amended Complaint, dated December 28, 2011, is annexed hereto as Exhibit J. 12. The AD Order is a final order which disposes of all the issues in the action (CPLR ?5611), and satisfies the finality criteria articulated in Burke v. Crosson, 85 10 (1995). The AD Order has finally determined this action and there is nothing else before the lower court.1 13. On May 17, 2016, Tenant served notice of entry of a Judgment entered on May 16, 2016 pursuant to the AD Order affirming the final August 20, 2015 order of the Supreme Court. The Judgment awarded Tenant the sum of $876,619.10, with interest thereon from June 30, 2015 in the amount of $69,385.00, for a total of $946,004.10. A copy of said Judgment is annexed hereto as Exhibit K. 14. Owner has posted an undertaking in the Supreme Court for the full amount of said Judgment, such that the enforcement of the Judgment is currently stayed pending appeal. CPLR ?5519(a)(2). A copy of said undertaking is annexed hereto as Exhibit L. 15. Accordingly, this Court has jurisdiction to grant leave to appeal herein. RULE. 500.1(fl STATEMENT 16. Defendant?Appellant Owner, Jobman 478/480, LLC, is a limited liability company formed under the laws of New York. It has no parents, subsidiaries, or affiliates. 1 While Tenant was allowed to move for attorneys' fees by the Supreme Court in the affirmed orders entered June 8, 2015 (Exhibit E) and August 20, 2015 (Exhibit F), to date he has not done so. The pendency of this dormant claim does not negate finality here because the AD Order does not remit for a hearing on attorneys? fees, and there is no motion or application for attorneys' fees currently pending. Cf., Wallis v. Falken~8mith, 72 807 (1988); State Aid Ass?n v. Regan, 66 759 (1985). SALIENT FACTUAL BACKGROUND 17. The Court is respectfully referred to the Owner's Main Brief (Exhibit M), at pp. 9-40, for a complete recitation of the facts in this action, and the references to the relevant portions of the record establishing those facts. 18. Also annexed is Owner?s Reply Brief (Exhibit N), and Tenant?s Responding Brief (Exhibit O). 19. In sum, the appeal stems from litigation following this Court?s seminal decision in Roberts v. Tishman Speyer Props, L.P., 62 71 (1st Dep?t), aff?d, 13 270 (2009) (Read, J. and Graffeo, J. dissenting). Owner appealed five orders of the New York State Supreme Court to the extent they summarily determined, without a trial, that Owner had fraudulently deregulated the subject apartment; and then, summarily, without a trial: a. recalculated the rent by using a punitive default formula, b. froze that default rent for ten years, as well as prospectively, c. imposed treble damages, and d. imposed pre-judgment and post-judgment interest, for a total judgment amount of $876,619.10.2 See R. 4-18, 22-29, 33-42, 46-48, and 52-53.3 2 Tenant never docketed the $876,619.10 judgment, which was entered on August 20, 2015 (Exhibit F). instead, on May 16, 2016, Tenant entered and docketed a Judgment for $946,004.10 (Exhibit L). it is unclear how Tenant derived this number, which was over $69,000 above the August 20, 2015 judgment, and did not seem to include any tolting of interest as required by a so-ordered stipulation dated September 30, 2015, entered into at the Appellate Division (Manzanet?Daniels, J.). 3 References to the bound Record on Appeal are indicated by 20. This extraordinary outcome, which media reports have equated to winning the lottery,4 was unprecedented and, Owner respectfully submits, severely flawed, extremely unjust, and far beyond anything ever contemplated by this Court in Roberts. . QUESTION PRESENTED FOR REVIELV 21. In a 2009 action by Tenant, who entered into occupancy pursuant to a market lease in 2000, seeking a declaration of rent stabilization coverage, and damages for alleged rent overcharges, which were alleged to be willful only after the Appellate Division decision in Roberts v. Tishman Speyer Props, L.P., 62 71 (1St Dep't 2009), concerning an apartment in a building that previously received tax benefits (from July 1, 1997 to June 30, 2011), did Tenant establish, as a matter of law, that the apartment was fraudulently deregulated, five years before he entered into occupancy, fourteen (14) years before the commencement of this action, and two years before any tax benefits were received, warranting the summary re-stabilization of the apartment until Tenant vacates, application of a punitive methodology (?default formula") to recalculate the rent, (c)?freezing? the recalculated rent for ten years and prospectively, and assessment of treble damages, preujudgment interest (from the date when the Tenant moved for summary judgment), post~judgment statutory interest (from a date before the judgment was entered), and attorneys? fees? 22. The AD Order answered this question in the affirmative. 4 Yarkas, 8., Man Overcharged by Landlord Scores $2.5 Million Apartment for $784/Month (Plus Refund)?, The Gothamist. lottery qotta dreambhb; Marsh, J., ?Guy Gets Insane Rent Deal on Swanky pad After Landlord Scammed Him?, NY Post: Metro, Ross, 8., "Manhattan Apartment Rent lliegally Raised, Judges Rule, Giving Upper West Side Tenant Nearly $9006 Award", New York Daily News. REASONS WHY THE QUESTION PRESENTED MERITS REVIEW BY THIS COURT 23. The following discusses the major aspects of the case which both, the Supreme Court and the AD Order, failed to apprehend, and caused an unprecedented ruling that seems to deliberately ignore basic provisions in the City Rent Control Law, the Rent Eviction Regulations, and the Rent Stabilization Law and Code, and expands various Court of Appeals holdings to a degree never stated and, Owner submits, never intended by this Court. 24. They are, in short, significant and wide-ranging matters of law that call out for further review, and reversal, by this Court. 25. To begin, the context of this case is of critical importance. 26. This case was commenced by Tenant as a class action on November 20, 2009; less than one month after this Court?s landmark ruling in Roberts v. Tishman Speyer Props, L.P., supra. 27. Tenant, similar to the Roberts plaintiffs, had entered into occupancy of the subject apartment, (the ?Apartment") at 478 Central Park West, New York, NY, pursuant to a market lease, during a time when J-5?l tax benefits were being received at the building. 28. Although Tenant subsequently claimed that this is not a Roberts case, his initial class action complaint sought, in pertinent part, a judicial declaration that all apartments at the building should be rent stabilized during the J-51 tax benefit period, reimbursement of any rent overcharges paid by the affected tenants above the legal regulated rent (the complaint did not state how the legal regulated rent should be calculated), and treble damages for any overcharges occurring after March 5, 2009, the -7- date of the Appellate Division decision in Roberts. See Exhibit I. 29. Nowhere did the initial class action complaint allege fraud or unreliable rental records. Nowhere did the initial class action complaint allege that receipt of tax bene?ts was the ?sole? reason why the building or the apartments were subject to rent stabilization. Nowhere did the initial class action complaint allege that a rent freeze should be imposed or that pre-judgment interest should be awarded. 30. Two years later, on December 28, 2011, Tenant amended the complaint to withdraw all of the class claims, in order to pursue the action only in his individual capacity. 31. However, the amended complaint, likewise, did not allege fraud, unreliable rent records, J-51 being the ?sole? reason for rent stabilization coverage, or any other theory or penalty, other than what was originally pled as a class action. See Exhibit J. 32. The AD Order does not address the unpled nature of Tenant's fraud claim, or the numerous cases discussed in Owner?s briefs on this point, including the case heavily relied upon by Tenant, the lower court, and the Appellate Division: Grimm v. State Div. of Hous. Comm. Renewal, 15 358 (2010). These cases held that a colorable fraud claim in a rent overcharge case must be properly alleged in the pleadings or in the initial administrative complaint. See also, Tomic v. 92 East LLC, 2016 NY Slip Op 4/13/16) (Kern, J.) (rental history beyond the four year base date was not reviewable: ?plaintiffs have failed to plead fraud in the complaint as required by the Court of Appeals in Matter of merely asserts a rent overcharge claim based on defendant?s failure to file rent registration and fails to include -3- any allegations of fraud 33. By the time the amended complaint was sewed, all tax bene?ts had expired.5 34. in the absence of any discernable challenge to the legality of the base date rent other than a claim that the Apartment and rent were rent stabilized based on Roberts Owner moved for summary judgment dismissing the amended complaint. Owner premised its motion upon the limited nature of the pleadings, and a rent calculation, using the Four Year Rule formula under Rent Stabilization Code ?2520.6(e) which revealed that no overcharge had occurred (see chart at p. 23 of Owner?s Main Brief). 35. This method of rent calculation had been repeatedly endorsed, including by the Appellate Division, First Department in East West Renovating Co. v. New York State Division of Housing Community Renewal, 16 166 (1St Dep?t 2005), and most recently in Todres v. W7879, 137 Ansrd 597 (1st Dep?t 2016), when determining the legal rent of an apartment that should have been stabilized, absent any legally cognizable evidence of fraud. 36. Owner demonstrated that, specifically in the post-Roberts context, three courts had already determined that the Four Year Rule controlled when setting the legal regulated rent for re?stabilized units, and computing any overcharges. Dodd v. 98 Riverside Drive, LLC, 2011 NY Slip Op. (S. Ct. N.Y. Co. 10/18/11)Error! Bookmark not defined. (Gische, and 72A Realty Assocs. v. Lucas, 28 Misc. 3d 585 (Civ. Ct. N.Y. Co. 2010) (Wendt, J.), mod. in part, 32 Misc.3d 47 (App. T. 1St Dep?t 5 All J-51 tax benefits expired in this case on June 30, 2011 (R. 189-190). 2011). See also, Borden v. 400 E. 55?" St. Assoc. 24 382 (2014); Todres v. W7879, supra; Gomez v. Rossrock, 2016 WL 94579 (S. Ct., 1/6/16) (Mendez, and Cohen v. 305 Riverside Corp, 2014 WL 1314822 (8. Ct., N.Y. Co. 3/28/14) (Tingling, J.). Tenant?s Belated Fraud Claim - in Response to Owner?s?ummarv Motion A. 1995 Deregulation: 37. In response to Owner?s summary judgment motion, Tenant claimed, for the very first time, that the Four Year Rule should be disregarded pursuant to Grimm v. New York State Div. of Hous. and Community Renewal, 15 N.Y.3rd 358 (2010) because a 1995 rent increase, which resulted from vacancy decontrolEs years and multiple tenancies before Tenant moved in, and during a time when [19 tax bene?ts were being received at the building was fraudulent. 38. Tenant claimed it was fraudulent to raise the rent from $422.00 (former rent controlled rent) to $2,050.00 (initial rent stabilized rent) in 1995 because that increase exceeded the Rent Guidelines Board Special Guidelines. Tenant also claimed that the Apartment was improperly registered at various times with DHCR as exempt from rent stabilization, when it should have been registered as rent stabilized at all times. Tenant also claimed that he should have received a rent stabilized lease and rent stabilized renewal leases commencing from the time when he first entered into occupancy in 2000.7 6 That is, the vacating by a rent controlied tenant subsequent to July 1, 1971 (Ch. 371, L. 1971). 7 In his brief to the Appellate Division, Tenant added that the absence of a DHCR Rider of Tenant Rights attached to his initial or renewal teases was further indicia of fraud. (T. hr. at 2, 9, 12, 47, 48-49, 53, -10.. 39. Tenant?s belated fraud claim was wrong on multiple levels. 40. First, this Court specifically held in Grimm, supra, that a jump in the rent alone is insufficient to breach the Four Year Rule. The Grimm Court instructed: Generally an increase in the rent alone will not be suf?cient to establish a ?colorable claim of fraud,? and a mere allegation of fraud alone, without more, will not be suf?cient to require DHCR to inquire further. What is required is evidence of a landlord?s fraudulent deregulation scheme to remove an apartment from the protection of rent stabilization. 15 at 367 (emphasis supplied). 41. Tenant never presented any evidence of a ?fraudulent deregulation scheme." In fact, as a matter of law, the rent increase from $422.00 to $2,050.00 in 1995 was entirely lawful and beyond challenge. 42. See Owner?s Main Brief at pp. 11-13, and 5458 (Exhibit M), and Owner?s Reply Brief at pp. 8?16 (Exhibit N), where Owner shows how it established that the Apartment was rent controlled until 1990, when the rent controlled tenant vacated. At that point, the Apartment became vacancy decontrolled [Ch. 371, Laws of 1971 (Rent Control Vacancy and then transitioned to rent stabilization, as a matter of law. Ch. 576, Laws of 1974, Sec. 2 (Emergency Tenant Protection Act of 1974). 43. The Apartment was, thereafter, vacant for five years, until it was 59-61, at Exhibit 0). However, this was never raised in Tenant's pleadings, Tenant?s initial cross-motion for summary judgment, or Tenant's discovery motions. Moreover, the lower court NEVER made a finding that the DHCR Rider was not offered, or that if absent, its absence constituted fraud or warranted a rent freeze. The record demonstrates that Tenant?s beiated Rider assertion was meritless. Owner submitted an affidavit, dated September 17, 2014, averring that after the Roberts case was decided and after some of the issues undecided in that case were litigated in other cases, Owner provided Tenant ?with the necessary rent lease and riders, and treated [Tenant] as being subject to rent stabilization." (R. 751.) -11- rented in 1995 to the initial rent stabilized tenants, who, in accordance with applicable law, [Rent Stabilization Law Rent Stabilization Code and entered into a vacancy lease at a market rent of $2,050.00 and never filed a Fair Market Rent Appeal As such, the RGB Special Guideline had no application to the agreed upon rent because no FMRA was ever filed. See pp. 9-11 of Owner?s Reply Brief at Exhibit N. See also, Matter of Verbalis v. New York State Division of Housing and Community Renewal, 1 A.D.3rd 101, 102-403 (?lst Dep?t 2003). 44. most recent promulgated lease rider further confirms these well-settled - but wholly misunderstood by the AD Order regulatory principles. in the section of the rider which informs an incoming tenant how the lease rent was calculated, various scenarios are listed, including the one at bar: This apartment was Rent Controlled at the time the last tenant moved out. This tenant is the first rent stabilized tenant and the rent agreed to and stated in the lease to which this Rider is attached is The owner is entitled to charge a market rent to the ?rst rent stabilized tenant. The ?rst rent charged to the ?rst rent stabilized tenant becomes the initial legal regulated rent for the apartment under the rent stabilization system. However, if the tenant has reason to believe that this rent exceeds a ?fair market rent?, the tenant may file a ?Fair Market Rent Appeal? with DHCR. (at p. 3) (emphasis supplied). 45. Moreover, because the $2,050.00 rent was above the then statutory threshold for high rent vacancy deregulation, and no tax bene?t was in effect, the Apartment was lawfully luxury deregulated pursuant to the Rent Regulation Reform Act of 1993 when the initial rent stabilized tenants first took occupancy in 1995. See also, City Rent Control Law Rent Eviction Regulations [9 and Rent Stabilization Code ?2522.3(a) and -12.. 46. Various judicial and administrative decisions support the legality of the 1995 deregulation. Most notably, this Court held in Matter of [6 Second Generation Partners LP. v. New York State Div. of Housing Community Renewal, 10 474, 481 (2008) (consistent with the DHCR Rider language above): The procedure is clear. Where a rental unit moves from rent control to rent stabilization, the owner establishes ?the initial legal regulated rent? in the lease or rental agreement at any amount (RSC That rent is subject to the tenant?s right to seek a rent adjustment in a fair market rent appeal [see id]. (Emphasis supplied.) 47. Other pertinent decisions include: Matter of Gilman v. DHCR, 99 144, 149 FMRA is a procedural vehicle for a tenant to claim an overcharge in the initial stabilized rent"); Ramlie v. Soufer Family L.L.C., 287 388 (1st Dep?t 2001) (rejecting a claim that the failure to register an apartment as rent stabilized results in an initial legal regulated rent equal to the last rent under rent control); Central Park South Assoc. v. Haynes, 171 Misc.3d 463 (N.Y.C. Civ. Ct. 1996) (explaining how following vacancy decontrol, an apartment becomes rent stabilized at an agreed upon market rent and then can become luxury deregulated if the agreed upon market rent is above the deregulation threshold and the first-stabilized tenant does not file a FMRA). See, also, Matter of Marmelstein v. New York State Division of Housing and Community Renewal, 292 207 (1St Dep?t 2002), and Matter of Muller v. New York State Division of Housing Community Renewal, 263 296 (1st Dept 2000) (when a formerly rent controlled apartment has been vacant for more than four years, the rent charged and collected from the first incoming tenant becomes the legal regulated rent). See also, Payne v. N. Y.S. DHCR, 287 415 (1St Dep?t 2001) (holding that where there were no reviewable rent records in existence four years before occupancy because the apartment was vacant, the rent that the first tenant agreed to pay following the extended vacancy was the legal regulated rent). See also, Matter of Park, DHCR Adm. Doc. No.: BR410014RT (8/12/14) (rejecting a claim that a high rent increase following the vacancy of a formerly rent controlled apartment was evidence that an initial stabilized rent was tainted by fraud). (For the Court?s reference, Matter of Park is annexed hereto as Exhibit P. it was discussed in Owner?s Main Brief at pp. 54 and 60.) 48. In Verbalis, supra, the Appellate Division recognized and explained a number of differences between FMRAs and rent overcharge complaints. FMRAs lie within the exclusive jurisdiction of DHCR, whereas rent overcharge complaints can be determined by the courts or DHCR. FMRAs only pertain to the initial rent stabilized rent, whereas rent overcharge cases involve challenges to the rent at any other point in the apartments rental history. If a FMRA is granted, the rent is simply adjusted and a refund ordered. No penalties are imposed or treble damages permitted. Conversely, in a rent overcharge case, an overcharge is presumed to be willful, and the owner has the burden to rebut that presumption. Treble damages, and other penalties can be imposed. 49. The procedures, policies, purposes, and implications of each, are thus, entirely distinct. 50. These laws, regulations, and judicial and administrative precedents were ignored or misapprehended by the Supreme Court and the AD Order, which summarily found, without a trial, that the 1995 rent increase an entirely lawful act, pursuant to well?settled law -- and which occurred years before any J-51 tax benefit was received at the building, and years before Tenant entered into occupancy was part of a -14- ?fraudulent scheme to deregulate? the Apartment. 51. There was no such ?scheme?, and the AD Order summarily declaring there was in this context sets an extremely troubling precedent that has ramifications beyond the grave injustice suffered by this Owner. Owners in every permutation of Roberts now face unprecedented penalties for what had been longstanding and approved practices. 52. The rent increase from $422.00 (rent control) to $2,050.00 (initial rent stabilized) in 1995 was set in accordance with law, and was beyond challenge or review by DHCR or the courts, especially in an upled claim first raised in 2012 (in response to a summary judgment motion) by the Tenant of the fourth tenancy since 1995. Owner respectfully submits that summarily declaring that such lawful actions constitute fraudulent conduct amounts to an egregious error of law that should not be allowed to stand. B. No J-51 Tax Benefits Were in Effect At the Time of the Initial 1995 Deregulation: 53. The Supreme Court, and the AD Order, also disregarded or failed to apprehend that the 1995 high rent vacancy deregulation was not barred by Rent Stabilization Law because it occurred during a time when no J-51 tax bene?ts were being received at the building. See also, Owner?s Main Br. at 11?14. C. The Misplaced Claim About Apartment Improvements: 54. The Supreme Court and the AD Order mischaracterized the 1995 rent increase as ?unexplained? because the Owner did not produce documents to support apartment improvements. (See also, p. 6 of Exhibit and p. 6 of Exhibit D.) However, in response to Tenant?s belated fraud claim, Owner never claimed that apartment improvement costs were the reason for the 1995 rent increase. -15- 55, The only mention of apartment improvements by Owner was in an unrelated affidavit submitted a year and half earlier opposing Tenant?s motion for class certification (a motion which Tenant ultimately abandoned). The lease administrator for Owner's managing agent stated in passing, and solely in connection with the class certification motion, that ?at least $6,296.14 of individual apartment improvements were performed priorto plaintiff?s first lease." (R. 300.) 56. This isolated statement was not made to justify the 1995 rent increase or rebut any challenge to that rent. 57. Similarly, in a subsequent affidavit by the Owner?s leasing agent, sworn to January 13, 2013, submitted in support of Owner?s reargument and renewal motions, the Owner?s leasing agent stated that the Apartment had been gut-renovated prior to the 1995 tenancy. However, due to the passage of time, many of the records documenting the costs of the renovation were not readily available. (R. 469-470.? 58. It was, thus, extremely improper for the Supreme Court, and then the Appellate Division, to latch on to these remote statements by the lease administrator and the leasing agent as a basis for charging Owner with all sorts of nefarious omissions concerning the 1995 rent increase. 59. With or without any documentation of improvements following vacancy decontrol, the 1995 rent was lawful and not subject to challenge at all. See also, Boyd v. New York State Div. of Hous. and Community Renewal, 110 A.D.3rd 594 (1st Dep?t 2013), rev?d 23 N.Y.3ml 999 (2014), where this Court held that a tenant who challenges apartment 3 It is for this very reason that rental records more than four years old are, with few exceptions, not required to be maintained, without penalty. RSL ?26e516(g). -15- improvements in a conclusory manner (as Tenant here did) ?failed to set forth sufficient indicia of fraud to warrant consideration of the rental history before the four-year statutory period.? 23 N.Y.3rd at 1001. 60. The Supreme Court, as did the AD Order, disregarded or failed to apprehend that apartment improvements (to whatever extent they were made) were completely irrelevant to the legality or reviewability of the 1995 rent because the 1995 rent was established pursuant to Rent Stabilization Law and Rent Stabilization Code following the vacatur by the rent controlled tenant and a five year vacancy gap, with no FMRA ever having been filed. 61. The Supreme Court, and the AD Order, also disregarded or failed to apprehend that Tenant never particularized his belated claim about apartment improvements, first raised in motion practice (which would have been virtually impossible to do, since Tenant was the fourth tenancy after the 1995 deregulation). Tenant?s conclusory and untimely claim, therefore, should have been rejected pursuant to this Court?s holding in Boyd. 62. The Supreme Court, and the AD Order, also disregarded or failed to apprehend that by law, an owner could not be penalized for failing to maintain or produce rental records older than ?four years prior to the most recent registration." RSL ?26- See also, Owner's Main Br. at 58. 9 Before the commencement of this action, Owner had last registered the Apartment in July 2001. After the Appellate Division ruled that Roberts applies retroactively [Roberts v. Tishman Speyer Props, L.P., 89 444 (1st Dep?t 2011)], Owner filed iate registrations for the intervening years in April 2012. (R. 307- 330.) Therefore, at the earliest, Owner had no legal obligation to maintain or produce any records relating to the Apartment prior to July 1997. -17- 63. In short, fraud was never pied. And the belatedly alleged ?fraud? was not a fraud at all rather, it was a lawful rent which was not subject to challenge. These were fundamental and oven-arching errors committed by the Supreme Court and the AD Order. D. No Evidence of Any Intentional Evasion of the Rent Laws: (5) The MisreadinglMisapplication of Roberts to Improperly Exclude Owner. 64. As an additional ?indicia of fraud," the Supreme Court, as did the AD Order, erroneously accepted Tenant?s misplaced argument (contrary to his express pleadings) that Owner?s subsequent renting of the Apartment pursuant to market rate leases, and registering the Apartment with DHCR as exempt from rent regulation, was a willful violation of the rent laws because receipt of J-51 tax bene?ts in 1997 was the ?sole? reason for stabilization coverage. 65. As noted, Tenant had originally pled that Owner committed no willful overcharge prior to March 9, 2009, the date of the Appellate Division's decision in Roberts. See Exhibits and J. However, in opposing Owner?s summary judgment motion, almost three years after commencing this action, Tenant totally changed his theory and argued that the facts in this case were not akin to the Roberts scenario. 66. This belated change was demonstrably false, but wholly misconstrued by the Supreme Court and the AD Order. 67. The building is a pre-war building that had been rent regulated since the 1940?s. (R. 298-299.) 68. As noted above, the Apartment transitioned to rent stabilization from rent control, by operation of law, when the rent controlled tenant vacated in 1990. Chapter -13- 576, Laws of 1974, Sec. 2. See also, DHCR Fact Sheet #6 (?In NYC, when a tenant moves out of a rent controlled apartment, the apartment becomes decontrolled. If that apartment is in a building built before January 1, 1974, containing six or more units at any time, it becomes rent stabilized.? 69. The receipt of tax benefits in 1997 did not affect the regulatory status of the building or the Apartment under pre-Roben?s regulatory construction. After Roberts, the receipt of tax benefits served solely to, at most, ?re-regulate? the Apartment a second time. 13 at 286. 70. The statutory scheme is discussed in detail in Owner?s Reply Brief at pp. 9-10, 17?23 (Exhibit N), and not substantively rebutted by Tenant. 71. lnsunt I Apartment leaves rent control pursuant to Ch. 371, Laws of 1971 (Rent Control Vacancy Apartment enters rent stabilization pursuant to Ch. 576, Laws of 1974, I The initial legal regulated rent is the rent agreed to by the parties in the lease or rental agreement at any amount (RSC That rent is subject to the tenant?s right to seek a rent adjustment in a FMRA. Absent a timely FMRA never filed herein that initial rent cannot be challenged by the first or any subsequent rent stabilized tenant. I Apartment is high rent vacancy deregulated pursuant to of 1993 when the legal rent is over $2,000.00 (RSL I Apartment is re?regulated due to the receipt of tax benefits (Roberts ,1 g- construction of RSL 72. Notably, even if the legal rent was over $2,000.00, there is no question that the Apartment became rent stabilized following the vacancy by the rent controlled tenant (Ch. 576, Laws of 1974, Sec. 2), with possible deregulation thereafter. The receipt of J-51 tax benefits simply made it become rent stabilized again pursuant to Roberts. See 13 at 286 is nothing impossible, or even strained, about reading the verb ?become? [in RSL ?26~504.1] to refer to achieving, for a second time, a status already attained?). 73. Accordingly, regardless of the rent level after exiting rent control,10 the Apartment was rent stabilized, and the J-51 tax benefits served only to stabilize it a second time. This is squarely within the Roberts framework. 74. These facts and arguments were fully established in the record and raised below. See R. 111-114, 452, 460, 463, 469-471, 671-672, 748-753. 75. In a strained attempt to make Owner an outlier, the Supreme Court and the AD Order turned to a 1996 DHCR Advisory Opinion that this Court referenced in the Roberts opinion. 76. However, Owner never stated that it had specifically relied on that Advisory Opinion when it entered into market leases with Tenant and registered the Apartment as exempt from rent stabilization while in receipt of tax benefits. (Owner likely did not even know the Advisory Opinion existed as it was unreported.) Rather, 1? Tenant questions whether or not the deregulation threshold was reached after the Apartment left rent control. However, it is of no import. In either instance, the Apartment had been rent stabilized prior to the bene?ts being received. -20.. Owner stated that it had relied upon ?duly promulgated provisions of the Rent Stabilization Code in effect for many years." (R. 57.) 77. The Supreme Court and the AD Order, nonetheless, proclaimed that reliance upon the Advisory Opinion was unavailing because Owner was not like other Roberts owners. See, pp. 10?11 of Exhibit p. 2 (denominated p. 43) of Exhibit A. Then, when Owner demonstrated that it was no different than other Roberts owners (indeed, Tenant?s own pleadings acknowledged that it was), the AD Order dismissiver and inaccurately -- states that Owner?s ?arguments othenrvise [were] improperly raised for the first time on appeal.? 78. As with the apartment improvements claim discussed above, this is another instance of the Supreme Court and the AD Order attributing an argument to Owner that it had never made, or a material mischaracterization of Owner's arguments. 79. Owner had stated which was effectively conceded by Tenant in the initial class action complaint and in his individual amended complaint - that Owner had: i [Rleasonably relied on the duly promulgated provisions of the R80 and long-standing policies and procedures in exercising its right to luxury deregulate apartments in the [building]. I [R]easonably relied upon HPD's policy and procedure of allocating new tax benefits to only the rent regulated apartments in a building. I [Alcted in good faith in deregulating plaintiff?s apartment and charging market rate rent based upon its reliance on DHCR's regulations and long?standing policy and procedure. (R. 57, 113, 114.) 80. To the extent that the 1996 DHCR Advisory Opinion reflected regulations and long?standing policy and procedure prior to Roberts, there was no -21.. legitimate basis for the lower courts to conclude that Owner, was somehow different from the Roberts owners. 81. The description by the Roberts Court of the 15 years of deregulation that owners across the City (as well as the Roberts lower court, Justice Lowe thought was proper under pro-existing DHCR policy and Code regulation, is equally applicable Owner?s circumstances here: Because the [Stuyvesant Town/Peter Cooper Villagejproperties became subject to the RSL ?18 years before applying for J-51 tax benefits,? the lower court concluded the ?defendants did not become subject to rent stabilization by virtue of receiving" these benefits. 13 at 283. 82. Owner?s building, too, became subject to the RSL in 1969, 28 years before receiving tax benefits in 1997. As such, Owner?s building was like the Stuyvesant Town/Peter Cooper Village properties. The owners there, as the Owner here, reasonably believed that they ?did not become subject to rent stabilization by virtue of receiving? J-51 tax benefits. 83. Describing the former DHCR policy and practice, which fostered this belief, the Roberts Court stated: [ander interpretation, a building that first became subject to the RSL clue to receipt of J-51 benefits a- but is also subject to the provisions of the RSL for some other reason (see RSL ?26-504) would be subject to luxury decontrol because it would not be stabilized ?solely? because of benefits. 13 at 285. 84. Likewise, Owner?s building was subject to the provisions of the RSL for reasons in addition to the receipt of J-51. -22- 85. Accordingly, contrary to the Supreme Court's and the AD Order?s erroneous view (and Tenant's strained attempt to distinguish Owner?s status), under pre? Roberts DHCR policy, practice, and Code regulation, Owner fully demonstrated that it had not willfully violated the rent laws when it rented the Apartment pursuant to market leases and registered it as exempt while receiving J-51 tax bene?ts. 86. Owner was acting consistent with prior interpretation of law. Tenant?s conclusory, illogical, and unpled contentions to the contrary were not sufficient to take Owner out of the Roberts universe of owners, or escalate Owner?s pre-Roberts conduct to indicia of a ?fraudulent scheme to deregulate." See also, Borden v. 400 East 55?" Street Associates, LP, supra, where this Court rejected the notion that owners who acted in reliance upon ?own guidance when deregulating units" would be exposed to penalties for improper deregulation. The Court of Appeals pointedly opined in Borden that: [T]reble damages would be unavailable to the tenants because a finding of willfulness is qenerallv not applicable to cases arisinq in the aftermath of Roberts. For Roberts cases, defendants followed the Division of Housing and Community Renewal?s own guidance when deregulating the units, so there is little possibility of a finding of willfulness (Borden, 34 Misc.3d 2011 NY Slip Op [Sup Ct, NY County 2011]). Only after the Roberts decision did the DHCR's guidance become invalid. 24 at 398 (emphasis supplied)? 87. The Supreme Court and the AD Order completely disregard this Court's clear message in post-Roberts oases. That is, Owner was entitled to the same 11Tenant?s counsel was one of the plaintiffs' attorneys in Borden. One of the actions consolidated with Borden was commenced on the same day as the action here. The defendants and buildings involved in Borden are virtually identical to the Owner and building here. Notwithstanding Tenant?s counsel?s knowledge of this Court?s clear opinion in Borden, it aggressiveiy pursued trebie damages, and more, against an owner who was essentially identical to the owners in Borden and Roberts. -23.. presumption of non-willfulness as all Roberts-?like owners, when during a time that was being received at the building, it entered into a market lease with Tenant, and registered the Apartment as exempt, in accordance with pre?existing DHCR policy, practice and Code regulation. 88. This is a substantial error by the lower courts, that, in combination with the error concerning the 1995 deregulation, directly led to the summary finding of a ?fraudulent scheme to deregulate" and all of the resultant extreme and onerous penalties in the action at bar, without atrial. (ii) The Falsehood Concerning The Apartment Being Rent Stabilized ?Solely? Because of J-51 is Inconsistent With Tenant?s Claim that the Apartment was Rent Stabilized in 1995: 89. Tenant asserted that, unlike other Roberts buildings, the receipt of 51 tax benefits at the subject building was the ?sole? reason why the Apartment was rent stabilized. Using this false narrative (see supra) Tenant posited that, therefore, Owner allegedly fell outside the class of owners which DHCR had previously opined could luxury deregulate units while receiving J-51 tax benefits. 90. This false claim was belatedly (and obviously) made to try to place the instant action outside of Roberts and to create a specter of fraud, where none existed. 91. Thus, rather than this Owner being accorded the same analysis and understanding as has been accorded to all other Roberts?type owners, the lower courts vilified Owner and transformed lawful and reasonable actions into diabolical fraudulent schemes. 92. Tenant assertion was not only factually wrong and contrary to his prior pleadings, it was also wholly inconsistent with Tenant?s claim the Apartment was -24- improperly deregulated in 1995. 93. Specifically, Tenant averred that, on the one hand, the Apartment was rent stabilized in 1995 (when there was no Jn-51 in effect), but, on the other hand, also posited that it was rent stabilized in 2000 ?solely? because of However, as demonstrated above, the Apartment was, in fact, rent stabilized for reasons other than the building?s receipt of tax benefits from 1997 to 2011, and had become [e?stabilized in 1997 when J-51 tax benefits commenced. 94. The illogical nature of Tenant?s argument was simply adopted by the Supreme Court and the AD Order. D. Additional Errors Warranting Review by this Court 95. The Supreme Court declared, and the AD Order affirmed, that notwithstanding the expiration of the tax benefits, the Apartment would remain rent stabilized until Tenant vacated because a lease rider had not been attached to Tenant?s initial lease. The lower courts misapprehended that such lease rider was not required. 72A Realty Associates v. Lucas, 101 401 (1st Dep't 2012). 96. The express language of RSL ?26~504.2, as well as this Court?s decision in Roberts, state that the deregulation bar is in effect only during the period when tax benefits are being received. The J-51 tax benefits, here, fully expired on June 30, 2011. There is no legal basis for Tenant to be afforded rent stabilized protections past that date. 97. Further, this is the first known instance of a finding of a fraudulent deregulation scheme and a recalculation of rent under a punitive default methodology without a trial. Even in the cases relied upon by the lower courts, Lucas, supra, and -25- Grimm, supra, the fraud claims were remanded or remitted for further fact-finding. 98. Significantly, in Lucas the Appellate Division modified the Appellate Term?s and Civil Court's decisions (which had been a basis for Owner's rent calculation in its summary judgment motion), to the extent of holding that the Four Year Rule may not apply if the rent which resulted in deregulation was suspect. However, that determination cannot be made in the context of a summary judgment motion. 99. The Appellate Division in Lucas ruled that there must be discovery and trial. The Appellate Division in Lucas explained: [l]n light of the improper deregulation of the apartment [because of the J-51 bar] and given that the record does not clearly establish the validity of the rent increase that brought the rent- stabilized amount above $2,000, the free market lease amount should not be adopted, and the matter must be remanded for further review of any available record of rental history necessary to set the proper base date rent. 101 at 402.12 100. The Appellate Division in Lucas did 39; hold that an improper deregulation prior to Roberts, or a questioned rent increase, was per se fraud. Nor did the Appellate Division in Lucas state that a punitive default formula was the methodology to use for setting the new legal rent. 101. Predicated on the Appellate Division?s ruling in Lucas, 3 mistaken understanding of the 1995 rent, the issuance of market leases, and registrations listing the Apartment as exempt during the subsequent period, the Supreme Court, in the case at bar, summarily rejected the statutory Four Year Rule and ordered ?an immediate trial? to 12 To date, there has been no finding of actual fraud in Lucas, or resetting of the legal rent via a punitive default formula. -25- assess the amount of Tenant's purported damages. See Exhibit B. 102. In its initial order the Supreme Court did not state what speci?c formula it would apply in order to assess that amount. However, subsequently, in the context of discovery motions, the Supreme Court summarily ruled that the punitive default formula adopted in Thornton v. Baron, 5 N.Y.3ml 175 (2005) would be used to calculate the new legal rent in the case at bar. See Exhibit C. 103. Owner moved to renew in order to put forth additional evidence of lawful deregulation in 1995 and good?faith reliance upon pre-Roben?s interpretation of RSL 104. Owner explained the need for the Supreme Court to examine all relevant evidence in light of the Appellate Division?s reversal in Lucas (which had occurred after Owner moved for summary judgment) (R. 466). In addition, the Supreme Court had made significant adverse (albeit erroneous) findings in the context of discovery motions (R. 466?467), which the new evidence addressed. 105. Contrary to the AD Order?s statement that Owner ?failed to raise any arguments on appeal with respect to that [discovery] order?, Owner strenuously opposed the extreme and unprecedented ruling, arguing, among other things, that the punitive Thornton ?default formula? had never been applied in any Roberts type J-51 case, including Lucas. (R. 450-454). 106. Even in Grimm (a non-J-51 situation that post?dated Roberts), the Thornton ?default formula? was expressly eschewed by the Court of Appeals. 15 NY. at 366 (?Our holding should not be construed as concluding the default formula should be used in this case"). See also, Owner?s Main Br. at 58-63, and Owner's Reply Br. at 27? -27- 30. 107. Owner reiterated that Tenant had never proven the existence of any ?fraudulent scheme to deregulate? at the building (other than by the conclusory, belated and legally deficient allegations discussed above), much less proven any deliberate evasion of the rent laws by Owner. Owner's attorney affirmation in opposition to Tenant?s discovery motion specifically noted: In fact, like other New York City landlords at the time [when Tenant rented the Apartment], plaintiff's landlord was relying on long-standing DHCR precedent13 when it treated the apartment as deregulated, and did not engage in an intentional or fraudulent scheme to circumvent the Rent Stabilization Law. (R. 452.) 108. Owner further noted that in East W. Renovating Co. v. New York State Div. of Housing Community Renewal, 16 166 (1St Dep?t 2005), the Appellate Division had upheld application of the Four Year Rule to set the legal regulated rent of an apartment, despite an improper deregulation during a period when the building was receiving tax benefits. 109. The Appellate Division in East W. Renovating Co. recognized that the four year base date rent was a market rent. Nevertheless, it upheld the manner in which DHCR determined the legal rent: 13 The Supreme Court, and then, the AD Order, apparently took ?long?standing DHCR precedent? to exclusively mean the unpublished 1996 DHCR Advisory Opinion. However, as previously noted, that is ?393 what Owner had said it relied upon when issuing market leases for the Apartment and registering it as exempt during the J-51 period at the building. The Supreme Court, and the AD Order misstated Owner's position and then severely punished Owner for following the DHCR and HPD policy, practice, and regulation, that were in effect for more than 15 years throughout the City of New York, from the onset of luxury deregulation in 1993 until they came to a crashing halt in 2009 in Roberts. See Owner's brief at pp. 42-46. ln fixing the overcharge, DHCR set a base years prior to the filing of the overcharge complaint, and calculated the lawful increases forward from that date based on the free market rent that the tenants were paying immediately prior to the base date. 16 at 167. 110. Yet, in the case at bar, the AD Order took a radically different approach to the Tenant?s post-?Roberts rent overcharge complaint, ultimately making all of its extreme findings, calculations, and determination of damages, without a trial, and completely eviscerating the Four Year Rule. 111. Lastly, the lower courts, unlike any other court or administrative agency before it or since, rebuked and punished Owner for registering the Apartment as exempt during the J-51 period. However, Owner filed late registrations and amended registrations once the Appellate Division ruled that Roberts was retroactive. (R. 301-330.) 112. Owner also offered a rent stabilized renewal lease to Tenant once the Supreme Court declared the Apartment rent stabilized and the Appellate Division ruled that the Roberts holding would be retroactively applied. (R.750-751.) 113. In short, Owner complied with the rent laws once the regulatory status of the Apartment was determined. This should have negated any legal basis for a summary finding that Owner's acts prior to Roberts constituted ?indicia of a fraudulent deregulation scheme? or grounds to impose treble damages and a 10-year retroactive, and prospective, rent freeze at the grossly depressed default rent. See Owner?s Main Brief at pp. 61-69. 114. The enormity of the baseless windfall granted to Tenant was nothing -29- short of shocking. 115. In this regard, it is significant to note how inconsistently the Appellate Division has been ruling in post-Roberts cases. 116. As noted, in Lucas, the Appellate Division directed further fact-finding regarding whether the owner had committed any fraud when it deregulated the apartment while receiving J-51 tax benefits, and declined to direct that a punitive default formula be used to set the new rent. 117. Then, in Todres v. W7879, supra, a case almost factually identical to the case at bar, the Appellate Division found ?no fraudulent scheme to deregulate? and, held that the appropriate methodology for determining the plaintiff-tenant?s overcharge complaint was the Four Year Rule. 118. Owner submits that the holding in Todres applies with equal force to the case at bar. Both cases questioned a substantial rent increase that occurred following vacancy decontrol, which resulted in the apartment being deregulated under the high rent vacancy deregulation provisions of the Rent Stabilization Law (RSL 119. Both cases contained assertions that evidence of individual apartment improvement costs to justify the rent increase was either lacking or insufficient. 120. Both cases had J-51 tax benefits in effect during a time when the apartments were treated as deregulated, and the owners claiming a good faith reliance upon the interpretation of the deregulation law prior to this Court?s ruling in Roberts. 121. Further, at the time the apartment in Todres was deregulated, but for the existence of the J-51 tax benefit, it would have been exempt from rent regulation; just what Tenant claimed here. -30- 122. Significantly, these factors were not deemed to be ?indicia of fraud" in Todres; yet, here, they have been deemed to amount to a ?fraudulent scheme to deregulate" as a matter of law, in the absence of any trial. 123. There is no principled reason articulated in the AD Order for the extreme deviation from the Appellate Division?s own precedents in this area, much less from this Court's rulings since Roberts, in Grimm, Boyd, and Borden. 124. Owner vigorously, comprehensively, and accurately refuted all of Tenant?s belated and unpled allegations of fraud, and showed, by more than the preponderance of the evidence that any overcharge committed during his tenancy was not 125. Owner submitted substantial legal and factual evidence that the legal rent of the Apartment should have been set in accordance with the Four Year Rule, and as such, there was no overcharge. THIS COURT GRANT APPEALJHE AD ORDER 126. The fallout from the Roberts holding is at the heart of this case. 127. This sharply manifests a major concern that the Roberts Court voiced in both the majority and dissenting opinions. The Roberts Court recognized that absent a legislative act, there had never been a re-regulation of luxury housing, occupied by individuals who were never intended beneficiaries of rent protections. 13 N.Y.3rd at 287, 295. 128. Roberts? construction of the J-51 bar in RSL 26-5042 meant that thousands of apartments throughout New York City, reasonably believed to be exempted from rent regulations pursuant to and in compliance with (erroneous) guidance -31- and voluntarily rented at market rates by upper income individuals able to afford such market leases, were, fifteen years after the fact, held subject to stringent rent regulations. 129. How to calculate the legal regulated rent for all of these thousands of newly re~regulated apartments was, and continues to be, a major issue. To date, there is no single definitive answer. DHCR has provided no specific guideline or formula, electing instead to address the issue on an ad hoc basis. The courts, too, continue to grapple with the issue. See, Estis, W. and Jeffrey Turkel, ?How Grim is Grimm?, N.Y.L.J. Real Estate Trends, May 4, 2016. 130. While, as discussed above, early on it appeared that the Four Year Rule would control, and at minimum, owners who deregulated while receiving J-51 tax benefits, in good faith reliance upon DHCR policy and regulation, would not be found to have intentionally evaded the rent laws, the AD Order declined to follow that sound and rneasuredlead. 131. The AD Order involves the application of multi-faceted and complex regulations in a post-Roberts environment that encompasses tens of thousands of apartments throughout New York City. Given the gravity of the penalties summarily affirmed in such an unsettled landscape, and how such dire consequences could befall countless of similarly-situated owners owners who deregulated luxury apartments following vacancy decontrol; owners who deregulated luxury apartments before receiving J-51 tax benefits; owners who deregulated luxury apartments while tax benefits were being received, but did so in reliance upon DHCR policy, practice, and Code regulation before Roberts; owners who did not register luxury apartments believing they were lawfully deregulated; owners who executed market leases for luxury apartments they believed -32.. were lawfully deregulated; and owners who had no consistent guidance on how to re- calculate the legal rent of re-regulated luxury apartments pursuant to Roberts the AD Order should be reviewed by the Court of Appeals in order to settle these pressing and wide-ranging issues central to New York?s regulated housing policy. 132. The scope of the properties impacted by the AD Order, and the number of rent laws, regulations, and legal precedents that the AD Order has discounted in the case at bar a case that contains many recurring issues in post-Robert?s scenarios - - renders it a matter of State-wide importance for the regulated housing field. 133. In addition to Roberts, the AD Order also greatly expands two major Court of Appeals holdings: Grimm and Thornton. The expansion of those holdings eliminates numerous requisite elements carefully articulated by this Court, such as the requirement that a fraud claim be properly pled and particularized, not just based on a conclusory post? pleading assertion, or a mere increase in the rent that occurred decades in the past. 134. The AD Order also disregarded two post?Roben?s Court of Appeals decisions, Borden, and Matter of Boyd. These cases specifically involved the issues of treble damages and the application of the Four Year Rule in post-Roberts legal rent re~ calculations. The AD Order?s failure to adhere to their dictates is a matter warranting Court of Appeals review. 135. In Owner?s Reply Brief, more than eight (8) DHCR administrative decisions were discussed, showing that the Supreme Court had gone far astray from how DHCR was determining post-Roberts overcharge cases. Most notably, the use of a punitive default formula to set the new legal rents, and the imposition of treble damages, -33.. are repeatedly rejected by the state agency in the Roberts context. See pp. 13-46, 28-30 in Exhibit N. 136. it is respectfully submitted that the AD Order has created a serious anomaly in the law, severely infringing upon not only Owner?s rights in this action, but also numerous similarly-situated owners. It is a situation that amply warrants this Court?s intervention and rectification. CONCLUSION WHEREFORE, Owner respectfully submits that leave to appeal should be granted so that the Court of Appeals can address these substantial matters of statutory and regulatory construction, conflicts with prior administrative and appellate decisions, and regulated housing policy, together with such other and further relief as the Court deems just and proper under the circumstances. Dated: New York, New York June 2, 2016 Magda L. Cruz -34.. 19.05 66/1 8503 10