The opinion
State of New York OPINION
Court of Appeals This opinion is uncorrected and subject to revision
before publication in the New York Reports.
No. 1
In the Matter of Regina
Metropolitan Co., LLC,
Respondent,
v.
New York State Division of
Housing and Community Renewal,
Appellant,
Leslie E. Carr et al.,
Intervenors-Respondents.
(And Another Proceeding).
-------------------------------------------
No. 2
Joel Raden et al.,
Appellants,
v.
W7879, LLC, et al.,
Respondents.
-------------------------------------------
No. 3
James Taylor et al.,
Respondents,
v.
72A Realty Associates, L.P.,
Appellant,
et al.,
Defendant.
-------------------------------------------
No. 4
Elizabeth Reich, et al.,
Appellants,
v.
Belnord Partners, LLC, et al.,
Respondents.
Case No. 1:
Ester Murdukhayeva, for appellant.
Niles C. Welikson, for respondent.
Darryl M. Vernon, for intervenor-respondents.
Community Housing Improvement Program, Inc. et al.; Stephenie Futch, et al., amici
curiae.
Case No. 2:
Seth A. Miller, for appellants.
Nativ Winiarsky, for respondents.
Jacobus Gomes, et al., amici curiae.
Case No. 3:
Joel M. Zinberg, for appellant.
Robert E. Sokolski, for respondents.
Stuart Davidson-Tribbs, et al., amici curiae.
Case No. 4:
Darryl M. Vernon, for appellants.
Deborah E. Riegel, for respondents.
Peter Gunther, et al., amicus curiae.
PER CURIAM:
In our tripartite form of government, the Legislature determines the public policy of
this State, recalibrating rights and changing course when it deems such alteration
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appropriate as it grapples with enduring problems and rises to meet new challenges facing
our communities. It is the distinct role of the courts to interpret the laws to give effect to
legislative intent while safeguarding the constitutional rights of impacted individuals. We
fulfill both core functions in these four appeals, which present a common issue under the
Rent Stabilization Law (RSL): what is the proper method for calculating the recoverable
rent overcharge for New York City apartments that were improperly removed from rent
stabilization during receipt of J-51 benefits prior to our 2009 decision in Roberts v Tishman
Speyer Props., L.P. (13 NY3d 270 [2009]).
As explained below, when leave was granted in these cases, the RSL mandated that,
absent fraud, an overcharge was to be calculated by using the rent charged on the date four
years prior to filing of the overcharge complaint (the “lookback period”) as the “base date
rent,” adding any legal increases applicable during the four-year lookback period and
computing the difference between that legal regulated rent and the rent actually charged to
determine if the tenant was overcharged during the recovery period. In such cases,
consideration of rental history predating the four-year lookback and statute of limitations
period was prohibited. While the appeals to this Court were pending, the Legislature – as
is its prerogative – enacted the Housing Stability and Tenant Protection Act of 2019
(HSTPA), making sweeping changes to the RSL, the majority of which are not at issue in
these appeals. As relevant here, Part F of the HSTPA includes amendments that, among
other things, extend the statute of limitations, alter the method for determining legal
regulated rent for overcharge purposes and substantially expand the nature and scope of
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owner liability in rent overcharge cases (see L 2019, ch 36, Part F). The tenants in these
cases urge us to apply the new overcharge calculation provisions to these appeals that were
pending at the time of the HSTPA’s enactment, some of which seek recovery of
overcharges incurred more than a decade before the new legislation.
The validity of Part F is not in question here – but significant issues are raised
concerning whether the presumption against retroactive application of statutes has been
rebutted and, if so, whether application of certain amendments relating to overcharge
calculation in Part F to these appeals involving conduct that occurred years prior to its
enactment comports with fundamental notions of substantial justice embodied in the Due
Process Clause. Retroactive application of the overcharge calculation amendments would
create or considerably enlarge owners’ financial liability for conduct that occurred, in some
cases, many years or even decades before the HSTPA was enacted and for which the prior
statutory scheme conferred on owners clear repose. Because such application of these
amendments to past conduct would not comport with our retroactivity jurisprudence or the
requirements of due process, we resolve these claims pursuant to the law in effect when
the purported overcharges occurred. Notwithstanding the hyperbole employed by our
dissenting colleagues, our analysis of the narrow legal issue presented by application of the
overcharge calculation amendments to these appeals turns entirely on conventional and
time-honored principles of judicial review. “We are, of course, mindful . . . of the
responsibility . . . to defer to the Legislature in matters of policymaking,” but it is the role
of the judicial branch “to interpret and safeguard constitutional rights and review
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challenged acts of our co-equal branches of government – not in order to make policy but
in order to assure the protection of constitutional rights” (Campaign for Fiscal Equity v
State of New York, 100 NY2d 893, 925, 931 [2003]). As to the HSTPA, today we fulfill
this quintessential judicial function in holding that a limited suite of enforcement
provisions may not be applied retroactively and opine in no way on the vast majority of
that legislation or its prospective application.
These rent overcharge cases arose in the wake of our 2009 decision in Roberts,
interpreting RSL provisions relating to New York City’s J-51 program, which offered tax
benefits to building owners who made capital improvements to their residential properties.
Buildings electing to receive J-51 benefits become subject to the rent stabilization scheme
(RSL [Administrative Code of City of NY] § 11-243[b], [i][1], [t]). From 1993 until the
enactment of the HSTPA in 2019, the RSL contained “luxury deregulation” provisions,
permitting an owner of a stabilized unit to deregulate if the rent exceeded a statutory
threshold and (1) the tenant vacated or (2) the tenants’ combined income exceeded a
statutory threshold (former RSL §§ 26-504.1, 26-504.2). As early as 1996, first in an
opinion letter and later promulgated as an agency regulation, the Division of Housing and
Community Renewal (DHCR) 1 took the position that statutory language precluding luxury
deregulation of apartments during receipt of J-51 benefits did not apply to buildings that
were already subject to the RSL prior to receipt of those benefits (see Roberts, 13 NY3d at
1
DHCR is the State agency tasked with administering the RSL and the J-51 program.
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281-282; former Rent Stabilization Code [RSC] [9 NYCRR] § 2520.11[r][5], [s][2]). In
Roberts, this Court rejected DHCR’s long-standing statutory interpretation and concluded
that luxury deregulation was unavailable in any building during receipt of J-51 benefits (13
NY3d at 285-287). In 2011, the Appellate Division held that Roberts applied retroactively
(Gersten v 56 7th Ave. LLC, 88 AD3d 189, 198 [1st Dept 2011], appeal withdrawn 18
NY3d 954 [2012]).
Each of these cases involves an apartment that was treated as deregulated consistent
with then-prevailing DHCR regulations and guidance before this Court rejected that
guidance in Roberts. Indeed, the tenants took occupancy years prior to Roberts following
a deregulation later revealed by that decision to have been improper, believing they were
renting non-stabilized apartments at market rents. None of these tenants promptly
challenged the deregulated status of their apartments and years – in some cases, over a
decade – passed during which the tenants and their landlords renewed and renegotiated
free-market leases. 2 After we decided Roberts, these tenants commenced overcharge
claims under the RSL. In Regina Metro., the tenants filed an administrative complaint with
2
In Matter of Regina Metro. Co., LLC v New York State Div. of Hous. & Community
Renewal (164 AD3d 420 [1st Dept 2018]), the tenants took occupancy in 2005 at a market
rent of $5,195 per month, filing this overcharge claim in 2009; in Raden v W7879, LLC
(164 AD3d 440 [1st Dept 2018]), the tenants took occupancy in 1995 at a market rent of
$2,350 per month, commencing this action in 2010; in Taylor v 72A Realty Assoc., L.P.
(151 AD3d 95 [1st Dept 2017]), the tenants took occupancy in 2000 at a market rent of
$2,200 per month, initiating suit in 2014; and in Reich v Belnord Partners, LLC (168 AD3d
482 [1st Dept 2019]), the tenants took occupancy in 2005 at a market rent of $18,500 per
month (plus a $350 per month electricity charge), bringing the overcharge claim in 2016.
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DHCR and, in the remaining three cases, the tenants commenced actions in Supreme Court.
The central issue below in each of these cases – sent to this Court by leave of the Appellate
Division before enactment of the HSTPA – was how to calculate the “legal regulated rent”
in order to determine whether a recoverable overcharge occurred and its amount. 3 Before
we address the tenants’ request that we resolve these appeals under the new law, we must
determine the parties’ rights under the statutory scheme in effect when the overcharges
occurred.
I.
In an overcharge claim, the tenant seeks monetary damages for excessive rent paid
during the recovery period. 4 The method for calculating the amount of recoverable
3
In Regina Metro., DHCR calculated the legal regulated rent by reconstructing what the
rent would have been on the base date had the apartment never been deregulated, but the
Appellate Division rejected that method as contrary to the evidentiary four-year “lookback”
rule barring review of rental history outside the four years prior to the imposition of the
overcharge claim (see 164 AD3d at 422, 424-426). Raden and Reich were decided
consistent with the Appellate Division’s approach in Regina Metro. In Raden, the
Appellate Division affirmed a $448.50 judgment for overcharge damages calculated by
applying the four-year lookback rule (see 164 AD3d at 441-442) and, in Reich, the
Appellate Division affirmed an order dismissing the overcharge claim, where the owners’
assertion that application of the four-year lookback rule would result in no recoverable
damages during the four-year limitations period was unchallenged (see 168 AD3d at 482).
However, in Taylor, the Appellate Division concluded that the reconstruction method –
which it later rejected in Regina Metro. – was the proper method for determining an
overcharge claim even in the absence of fraud, denying summary judgment to the owner,
which argued that if the court applied the four-year lookback rule, there was no overcharge
(see 151 AD3d at 105-106).
4
There is significant disagreement between us and the dissent concerning the pre-HSTPA
law. Critically, there is a distinction between an overcharge claim and a challenge to the
deregulated status of an apartment, although the two types of claims are repeatedly
conflated by the dissent, which confuses the overcharge claims presented here with the sole
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damages – i.e., the overcharge – is governed by the RSL. We therefore examine the text
of the relevant statutes, as the best indicator of legislative intent (Majewski v Broadalbin-
Perth Cent. School Dist., 91 NY2d 577, 583 [1998]), mindful that legislative history may
also be considered as an aid to interpretation (Altman v 285 W. Fourth LLC, 31 NY3d 178,
185 [2018]; see Riley v County of Broome, 95 NY2d 455, 463-464 [2000]). When a statute
is part of a broader legislative scheme, we construe its language “in context and in a manner
that harmonizes the related provisions and renders them compatible” (Matter of M.B., 6
NY3d 437, 447 [2006] [internal punctuation and citation omitted]).
The rules governing calculation of an overcharge are found in the provisions of the
RSL addressing enforcement and the statute of limitations for overcharge claims (RSL §
26-516; CPLR 213-a). Before the enactment of the HSTPA, overcharge claims were
subject to a four-year statute of limitations that precluded the recovery of overcharges
incurred more than four years preceding the imposition of a claim (former RSL § 26-
issue presented in Kuzmich v 50 Murray St. Acquisition LLC (34 NY3d 84 [2019]),
namely whether plaintiffs were entitled to a declaration that their apartments were subject
to rent stabilization. Despite the suggestion to the contary, there has long been a statute of
limitations restricting recovery of monetary damages in overcharge claims and this remains
true under the HSTPA (see CPLR 213-a; found in CPLR article 2 [entitled “Limitations of
Time”]). Because the apartments in each of these cases were returned to rent stabilization
following our decision in Roberts, the focus here is the tenants’ entitlement to overcharge
damages; a separate declaratory judgment claim challenging the status of the apartment is
before us only in Taylor. While an overcharge may arise from an improper deregulation,
this is by no means the exclusive or even the most common explanation for the collection
of excessive rent – overcharge claims are routinely brought to challenge the rent associated
with apartments that have never been destabilized. Nor is there a basis for the dissent’s
view that the overcharge calculation amendments in Part F were intended to specifically
address Roberts cases; neither the legislation nor its history supports such a conclusion.
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516[a][2]; former CPLR 213-a; see Conason v Megan Holding LLC, 25 NY3d 1 [2015]).
The statutes further directed that “no determination of an overcharge and no award or
calculation of an award of the amount of an overcharge may be based upon an overcharge
having occurred more than four years before” initiation of the claim (former RSL § 26-
516[a][2]; see former CPLR 213-a). 5
A provision added as part of the Rent Regulation Reform Act of 1997 (1997 RRRA)
expressly “preclude[d] examination of the rental history of the housing accommodation
prior to the four-year period preceding” commencement of the overcharge action (former
RSL § 26-516[a][2], as amended by L 1997, ch 116; see former CPLR 213-a, as amended
by L 1997, ch 116) – language that “clarified and reinforced the four-year statute of
limitations” (Thornton v Baron, 5 NY3d 175, 180 [2005]). This categorical temporal
limitation on reviewable records – the “lookback” rule – was complemented by a record
retention provision directing that certain owners “shall not be required to maintain or
produce any records relating to rentals of such accommodation for more than four years
prior to the most recent registration or annual statement for such accommodation” (former
RSL § 26-516[g]; see RSC § 2523.7[b] [“An owner shall not be required to produce any
rent records in connection with (overcharge) proceedings . . . relating to a period that is
5
The RSL also limited the imposition of treble damages – recoverable unless the owner
established by a preponderance of the evidence that the overcharge was not willful – to the
last two years of overcharges preceding filing of the complaint (former RSL § 26-
516[a][2][i]). Treble damages could not be imposed on overcharges occurring prior to
April 1984 (id.).
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prior to the base date”]). The record retention provision permitted owners to dispose of
records outside the four-year period (former RSL § 26-516[g]; see Matter of Cintron v
Calogero, 15 NY3d 347, 354 [2010]; Thornton, 5 NY3d at 181), further evincing the
Legislature’s intent that records predating the recovery period not be used to calculate
overcharges. Together, the statute of limitations, lookback provision and record retention
rules formed an integrated scheme for calculating overcharges based on a closed universe
of records pertaining only to the apartment’s rental history in the four years preceding the
filing of the complaint.
Consistent with the lookback rule, the enforcement provisions provided that, except
for certain claims filed shortly after initial registration of a unit, “the legal regulated rent
for purposes of determining an overcharge, shall be the rent indicated in the annual
registration statement filed four years prior to the most recent registration statement,” i.e.,
the base date rent, plus “any subsequent lawful increases and adjustments” (former RSL §
26-516[a][i]). Owners of rent-stabilized apartments are generally required to file annual
rent registration statements with DHCR (RSL § 26-517[f]), and where registration
statements were filed during the lookback period, the base date rent was discerned from
those statements. But owners are no longer required to file such statements once the
apartment has been deregulated. Thus, where the apartment had been deregulated more
than four years prior to the filing of an overcharge complaint, and the tenant failed to
promptly challenge the deregulated status of the apartment, there might be no rent
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registration on file for the base date or, indeed, any time within the four-year lookback
period.
This scenario is addressed in DHCR’s regulations, which harmonized RSL § 26-
516(a)(i) with the four-year lookback restriction. With exceptions not relevant here, the
regulations provided that “[t]he legal regulated rent for purposes of determining an
overcharge shall be deemed to be the rent charged on the base date, plus in each case any
subsequent lawful increases and adjustments” (RSC § 2526.1[a][3][i] [emphasis added];
see also id. § 2520.6[e]). Under the pre-HSTPA law, the base date rent was therefore the
rent actually charged on the base date – i.e., four years prior to the overcharge complaint –
even if no registration statement had been filed reflecting that rent.
In a series of cases, we confirmed that reviewing rental history outside the four-year
lookback period was inappropriate for purposes of calculating an overcharge, but we
recognized a limited common-law exception to the otherwise-categorical evidentiary bar,
permitting tenants to use such evidence only to prove that the owner engaged in a
fraudulent scheme to deregulate the apartment. In Thornton, the owner engaged in an
egregious, fraudulent scheme to remove apartments from stabilization by conspiring with
tenants, who shared in the illegal profits, by falsely agreeing the apartment was not being
used as a primary residence (and utilizing the courts as a tool to obtain false declarations
to that effect) to rent at market rates and then sublease at even higher rates (5 NY3d at 178-
179). For overcharge calculation purposes, the Court acknowledged the preclusive effect
of the four-year lookback rule, deeming the last regulated rent charged before that period
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to be “of no relevance” (id. at 180). We held that the legal rent should be based on a
“default formula,” otherwise reserved for cases where there are no reliable rent records,
setting the base date rent as “the lowest rent charged for a rent-stabilized apartment with
the same number of rooms in the same building on the relevant base date” (id. at 179-181
and n 1).
We elaborated on this fraud exception to the lookback rule in Matter of Grimm v
New York State Div. of Hous. & Community Renewal, holding that where a tenant had
made a “colorable claim of fraud” by identifying “substantial indicia,” i.e., “evidence,” of
“a landlord’s fraudulent deregulation scheme to remove an apartment from the protections
of rent stabilization,” that apartment’s “rental history may be examined for the limited
purpose of determining whether a fraudulent scheme to destabilize the apartment tainted
the reliability of the rent on the base date” (15 NY3d 358, 366-367 [2010]). Consistent
with Thornton, we directed that, if review of the rental history revealed such a fraudulent
scheme, the default formula should be used to calculate any resulting overcharge (id. at
367). We confirmed this procedure in Conason, where the owner created a fictitious tenant
and fictitious renovation to justify a rent increase (25 NY3d at 9, 16-17). Our holding in
Matter of Boyd v New York State Div. of Hous. & Community Renewal (23 NY3d 999
[2014]), rejecting a challenge to DHCR’s use of the rent actually charged four years prior
to filing of the claim to calculate an overcharge in the absence of fraud, provided further
clarification that the four-year lookback rule generally precluded review of rental history
outside that period.
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The rule that emerges from our precedent is that, under the prior law, review of
rental history outside the four-year lookback period was permitted only in the limited
category of cases where the tenant produced evidence of a fraudulent scheme to deregulate
and, even then, solely to ascertain whether fraud occurred – not to furnish evidence for
calculation of the base date rent or permit recovery for years of overcharges barred by the
statute of limitations (Grimm, 15 NY3d at 367). 6 In fraud cases, this Court sanctioned use
of the default formula to set the base date rent. Otherwise, for overcharge calculation
purposes, the base date rent was the rent actually charged on the base date (four years prior
to initiation of the claim) and overcharges were to be calculated by adding the rent increases
legally available to the owner under the RSL during the four-year recovery period. Tenants
were therefore entitled to damages reflecting only the increases collected during that period
that exceeded legal limits.
In the wake of Roberts, courts and DHCR grappled with a surge of claims filed by
tenants alleging overcharges arising from the improper deregulation of their apartments
years (in some cases more than a decade) before – claims like those now before this Court.
For example, the plaintiffs in Raden, who took occupancy of their apartment in 1995 at a
6
Our decision in Cintron did not authorize consideration of rental history outside the four-
year lookback period. Rather, we held that rent reduction orders issued prior to that period
that remained in effect during the recovery period were part of the reviewable four years
of rental history (15 NY3d at 356; see also Scott v Rockaway Pratt, LLC, 17 NY3d 739
[2011]). Such consideration did not contradict the record retention limitations because
“DHCR can take notice of its own orders and the rent registrations it maintains to ascertain
the rent established by a rent reduction order without imposing onerous obligations on
landlords” (Cintron, 15 NY3d at 355-356).
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market rent, commenced this action in 2010 seeking recovery of overcharges based on a
reconstruction of the rent they should have been charged had the apartment never been
deregulated. Likewise, in Taylor, similar relief was sought in an overcharge claim filed in
2014 brought by a tenant who took occupancy in 2000. In stark contrast to Thornton,
Grimm and Conason, in which tenants came forward with evidence of fraud, 7 in these
Roberts cases, the owners removed apartments from stabilization consistent with agency
guidance. Deregulation of the apartments during receipt of J-51 benefits was not based on
a fraudulent misstatement of fact but on a misinterpretation of the law – significantly, one
that DHCR itself adopted and included in its regulations. As we observed in Borden v 400
E. 55th St. Assoc., L.P., a finding of willfulness “is generally not applicable to cases arising
from the aftermath of Roberts” (24 NY3d 382, 389 [2014]). Because conduct cannot be
fraudulent without being willful, it follows that the fraud exception to the lookback rule is
generally inapplicable to Roberts overcharge claims. 8
7
Fraud consists of “evidence [of] a representation of material fact, falsity, scienter, reliance
and injury” (Vermeer Owners v Guterman, 78 NY2d 1114, 1116 [1991]; see e.g. Ambac
Assur. Corp. v Countrywide Home Loans, Inc., 31 NY3d 569 [2018]; Pasternack v
Laboratory Corp. of Am. Holdings, 27 NY3d 817, 827 [2016]). In this context, willfulness
means “consciously and knowingly charg[ing] . . . improper rent” (Matter of Lavanant v
New York State Div. of Hous. & Community Renewal, 148 AD2d 185, 190 [1st Dept
1989]; see Matter of Old Republic Life Ins. Co. v Thacher, 12 NY2d 48, 56 [1962]
[interpreting “willful” in a regulatory context to mean “intentional and deliberate”]).
8
Contrary to the Raden tenants’ assertion, the owners in that case established that the
deregulation was not fraudulent or willful because it was consistent with DHCR’s
guidance. That they deregulated the apartment in 1995 – prior to the formal guidance
DHCR issued the following year that such deregulation was proper – does not constitute
evidence of a fraudulent scheme to deregulate. Rather, during a time of uncertainty
concerning the scope of the J-51 benefit scheme, the owners correctly anticipated the
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After Roberts there was understandable confusion regarding how the decision
should be implemented, including whether Roberts should be given retroactive effect and,
if so, how that should be accomplished. In overcharge cases where tenants had not
challenged the status of their apartments within four years of deregulation, including these
appeals, the improper deregulation predated the lookback period and, thus, the rent charged
on the “base date” was a free market rent that had not been registered. Tenants who
challenged an improper deregulation and initiated an overcharge claim within four years
would be entitled to monetary damages encompassing the rent increase that occurred when
the apartment was moved to the free market. But tenants who commenced a claim more
than four years later and could not show fraud would be entitled, by virtue of the
interrelated four-year statute of limitations and lookback rule, to recover only the increases
added to the market base date rent that were over the legal limits during the recovery period.
This rule was applied properly in many cases (see Reich, 168 AD3d 482; Raden, 164 AD3d
at 441; Stultz v 305 Riverside Corp., 150 AD3d 558 [1st Dept 2017], lv denied 30 NY3d
909 [2018]; see also Todres v W7879, LLC, 137 AD3d 597 [1st Dept 2016], lv denied 28
NY3d 910 [2016]). Yet, in some Roberts cases, DHCR and the lower courts deviated from
the four-year limitations period and lookback rule in the absence of fraud.
The decision in 72A Realty Assoc. v Lucas (101 AD3d 401, 402 [1st Dept 2012]),
which preceded our analysis in Boyd, represents such a deviation. In Lucas, the Appellate
interpretation DHCR would ultimately adopt concerning the luxury deregulation
provisions. Thus, the affirmed finding of fact that there was neither willfulness nor fraud
is supported by the record and beyond our review.
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Division held that the four-year lookback rule should not be applied, even though the court
did not find a colorable claim of fraud, in part because the rent charged four years prior to
the complaint was a free market rent following improper deregulation. Citing Lucas,
DHCR (in Regina Metro.) and the Appellate Division (in Taylor) determined that, even in
the absence of fraud, an overcharge in a Roberts case should not be calculated in
accordance with the four-year lookback rule but, instead, by reconstructing what the legal
regulated rent would have been on the base date if the apartment had not been improperly
deregulated. DHCR and the Taylor court determined that this reconstruction should be
conducted by identifying the last legal regulated rent before improper deregulation – even
though the apartment was deregulated more than four years prior to imposition of the claim
– and applying all permissible rent increases between the date of that regulated rent and
the base date (Regina Metro., 164 AD3d at 422-423; Taylor, 151 AD3d at 105-106).
The reconstruction method, applied by DHCR in Regina Metro. and approved by
the Taylor court, violated the pre-HSTPA law by requiring review of rental history outside
the four-year limitations and lookback period in the absence of fraud. 9 The tenants’ theory
9
We also reject the tenants’ arguments in Taylor and Reich that the rent should have been
frozen under RSL § 26-517(e), which provides that “[t]he failure to file a proper and timely
. . . rent registration statement” precludes an owner from collecting rent increases until a
registration is filed. To the extent this provision is relevant to overcharge cases, the owners
in Taylor and Reich filed registration statements for the years covered by the four-year
recovery period and lookback rule (records prior to that period cannot be reviewed absent
fraud). The fact that, in Taylor, these registration statements were filed retroactively is
addressed by a separate statutory surcharge for late registration. In any event, rent freezing
is inapplicable in Roberts cases where the failure to timely register resulted directly from
DHCR’s endorsement of a misunderstanding of the law (see Taylor, 151 AD3d at 106;
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that Thornton, Grimm and Conason preclude adoption of a market base date rent is
mistaken. Although in those cases we characterized base date rents resulting from fraud
as “illegal” or “unreliable,” we never suggested that an alternative method of setting the
base date rent could apply to a less blameworthy owner where not authorized by the
statutory scheme. Indeed, use of the reconstruction method violated the legislative
mandate that “no award or calculation of an award of the amount of an overcharge may be
based on an overcharge having occurred more than four years before” (former RSL § 26-
516[a][2]; see former CPLR 213-a). Moreover, it utilized rental history in a manner that
this Court refused to sanction even in fraud cases, in which we authorized consideration of
rental history outside the lookback period only for the “limited purpose” of determining
whether a fraudulent scheme existed (Grimm, 15 NY3d at 367).
We are also unpersuaded by the tenants’ arguments that use of a default formula or
the other alternative approaches to determining base date rent 10 would comply with pre-
Matter of Park v New York State Div. of Hous. & Community Renewal, 150 AD3d 105,
113 [1st Dept 2017]).
10
In some Roberts cases, lower courts approved use of the “sampling” method, authorized
in the RSC for cases where the rent charged on the base date is unknown, in which DHCR
sets the base date rent by averaging the rents of other similar stabilized apartments charged
on the base date (see e.g. Matter of 160 E. 84th St. Assoc. LLC v New York State Div. of
Hous. & Community Renewal, 160 AD3d 474 [1st Dept 2018] [reasoning that the market
base date rent could not be accepted under Lucas and that a default formula was
inappropriately punitive in a case without fraud]). Likewise, in Regina Metro., the
Appellate Division rejected the reconstruction approach applied by DHCR as violative of
the four-year lookback rule but indicated in dicta that, on remittal, sampling could be within
DHCR’s discretion (164 AD3d at 428). As we explain, that suggestion was mistaken.
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HSTPA law if applied to these cases. Even if employed in a manner compatible with the
lookback rule, nothing in the RSL indicates that such methods apply here. While the
alternative methods proposed by the tenants are reflected in the regulations, they are
available only “[w]here the rent charged on the base date cannot be established” (RSC §
2526.1[a][3][ii]) – a situation not present in any of these Roberts cases. 11
The tenants and DHCR urge several bases for creating an exception to the standard
pre-HSTPA overcharge calculation method that would enable courts to use these
alternative approaches, but their arguments do not withstand scrutiny. First, an exception
predicated on the fact that the base date rent was higher than what would have been
permitted under the RSL for a stabilized apartment would swallow the four-year lookback
rule. In every overcharge case, the rent charged was, by definition, illegally inflated –
otherwise there would be no overcharge. Prior to the HSTPA, nothing in the rent
stabilization scheme suggested that where an unrecoverable overcharge occurred before
the base date, thus resulting in a higher base date rent, the four-year lookback rule operated
11
In that scenario, section 2526.1(a)(3)(ii) directs that “the rent shall be determined by the
DHCR in accordance with section 2522.6,” which sets forth a framework for setting the
legal regulated rent where “(i) the rent charged on the base date cannot be determined; or
(ii) a full rental history from the base date is not provided; or (iii) the base date rent is the
product of a fraudulent scheme to deregulate the apartment; or (iv) a rental practice
proscribed under section 2525.3(b), (c) and (d) of this Title [which concern conditional
rentals designed to deprive tenants of the protections of rent stabilization] has been
committed” (RSC § 2522.6[b][2]). In such a case, DHCR sets the legal regulated rent using
the lowest number resulting from four formulas, which include the sampling method (id. §
2522.6[b][3]). These RSC provisions are inapplicable by their terms in an overcharge case,
such as a Roberts case, where the base date rent is the result of a mere mistaken overcharge
(not fraud) and the rent charged on the base date is known.
- 17 -
- 18 - Nos. 1-4
differently. To the contrary, the limitations provisions – in order to promote repose –
precluded consideration of overcharges prior to the recovery period (former RSL § 26-
516[a][2]; former CPLR 213-a), and it is clear from Boyd that use of a potentially inflated
base date rent, flowing from an overcharge predating the limitations and lookback period,
was proper in the absence of fraud. Likewise, no exception is justified by the fact that the
inflated base date rent in Roberts cases resulted from improper deregulation, as opposed to
an improperly high increase to a stabilized rent. The RSL makes no such distinction, and
there is no indication that, under the pre-HSTPA law, an overcharge resulting from
improper (but non-fraudulent) luxury deregulation warranted anything but the application
of the standard lookback provisions.
Nor is it necessary to recognize an additional common law exception that would
create or increase the amount of overcharge damages in order to give proper effect to
Roberts. Civil liability is always bounded by the public policy of repose embodied in
statutes of limitations (see Ajdler v Province of Mendoza, 33 NY3d 120, 130 n 6 [2019]
[“(T)he (s)tatute of (l)imitations . . . expresses a societal interest or public policy of giving
repose to human affairs”], quoting John. J. Kassner & Co. v City of New York, 46 NY2d
544, 550 [1979]). Overcharge liability under the RSL is no different. That Roberts
revealed particular conduct to be illegal does not mean that tenants must be able to recover
a certain measure of monetary damages for associated rent increases despite their failure
to seek recovery within the limitations and lookback periods. Critically, our decision in
Roberts has led to the return of many apartments to the rent stabilization scheme, including
- 18 -
- 19 - Nos. 1-4
those at issue in these appeals; one amicus estimates the number of Roberts apartments at
upwards of 50,000. While the statute of limitations and lookback period preclude tenants
in those apartments from recovering certain damages they could have recovered if their
claims had been initiated earlier, as a result of Roberts they may now enjoy rent
stabilization protection.
Indeed, in Taylor, regardless of any entitlement to monetary damages, the tenants’
request for a declaration that the apartment was rent-stabilized at the time of their complaint
was properly granted. RSL § 26-504(c) provides pathways by which an apartment in a
building receiving J-51 benefits may be deregulated at the conclusion of the benefit
period. 12 Particularly relevant here, section 26-504(c) states that “if such dwelling unit
would have been subject to [the RSL or the Emergency Tenant Protection Act (ETPA)] in
the absence of [J-51 benefits or certain other programs], such dwelling unit shall, upon the
expiration of such benefits, continue to be subject to [the RSL or ETPA] to the same extent
and in the same manner as if [section 26-504(c)] had never applied thereto.” Thus, in
buildings affected by Roberts, all of which were subject to the RSL regardless of J-51
12
Apartments subject to the RSL solely due to receipt of J-51 benefits generally are
deregulated upon the first vacancy after expiration of benefits or at the moment of
expiration, if every lease and renewal issued to the tenant in occupancy included a notice
stating that the unit would be “subject to deregulation upon the expiration” of benefits and
the approximate date of expiration (RSL § 26-504[c]).
- 19 -
- 20 - Nos. 1-4
benefits, apartments revert to their original rent-stabilized status after expiration of J-51
benefits. 13
We therefore decline to create a new exception to the lookback rule and instead
clarify that, under pre-HSTPA law, the four-year lookback rule and standard method of
calculating legal regulated rent govern in Roberts overcharge cases, absent fraud.
Applying the correct interpretation of the pre-HSTPA law to the present cases, in Regina
Metro. the Appellate Division properly annulled DHCR’s overcharge determination, which
violated the lookback rule by relying on a reconstructed rent, despite finding that the
overcharge was not willful (and there was no colorable fraud claim). In Raden, the de
minimis overcharge was properly calculated using the standard method, accepting the rent
charged on the base date as the base date rent and adding legal increases. In Reich, the
complaint was properly dismissed based on the tenants’ failure to allege a colorable claim
13
This is not to say that tenants of those apartments necessarily are entitled to rent
stabilization for the duration of their tenancy. Under the law in place before the HSTPA,
the RSL contained luxury deregulation provisions, one of which permitted deregulation of
occupied apartments where both the rent and the occupants’ combined income exceeded
enumerated levels (see former RSL §§ 26-504.1, 26-504.3). Nothing in the statutory
scheme would have precluded the owner from pursuing luxury deregulation after J-51
benefits expired (see generally Park, 150 AD3d at 112). The fact that the owner had not
provided notices advising the tenants of its participation in the J-51 program is irrelevant
because the clause in RSL § 26-504(c) relating to buildings subject to the RSL regardless
of J-51 benefits does not contain the notice requirement applicable to buildings subject to
rent stabilization only by virtue of receipt of J-51 benefits (see Lucas, 101 AD3d at 402
and n). Thus, the analysis in Lucas, automatically affording rent-stabilized status for the
duration of the tenancy, should not be followed when determining rent-stabilized status
under pre-HSTPA law. While the apartment in Taylor was properly declared rent-
stabilized as of the time of the complaint, the apartment was thereafter susceptible to luxury
deregulation under the pre-HSTPA law.
- 20 -
- 21 - Nos. 1-4
of fraud and the absence of allegations indicating that, applying the standard overcharge
calculation method, there was an overcharge during the recovery period. And in Taylor,
modification of the Appellate Division order is necessary to grant summary judgment
dismissing the overcharge claim based on the owner’s unrebutted evidence that there were
no overcharges using the standard calculation method.
II.
Normally, our analysis would end here. But the HSTPA, enacted in June 2019 and
consisting of 15 parts, substantially revised New York’s rent stabilization scheme by,
among other things, eliminating luxury deregulation, amending mechanisms for rent
increases and providing for the expansion of regulation to new geographic areas (L 2019,
ch 36). Here, although the alleged overcharges occurred years in the past, well before the
HSTPA was enacted, the tenants ask us to apply certain amendments revising the
enforcement provisions of the RSL with respect to overcharge claims, all contained in Part
F of the legislation. 14 Although we generally do not review issues raised for the first time
14
We disagree with the suggestion in the dissent that it is premature or inappropriate to
address the issues posed by retroactive application of Part F of the HSTPA. Soon after the
HSTPA was enacted, parties in Regina Metro. and Taylor sent letters pursuant to Rule
500.6 advising the Court of the new legislation; the tenants asserted that Part F of the
HSTPA applied to these appeals and the owners contended that the legislation was not
intended to be applied retroactively and that such application would be unconstitutional.
The impact of the HSTPA was also raised by DHCR in its reply brief in Regina Metro.,
with the agency noting, among other things, that the owner’s arguments were foreclosed
by the Part F amendments. Multiple parties requested an additional opportunity for
supplemental briefing in connection with these issues. The parties in Reich raised the
applicability of the HSTPA and associated retroactivity and constitutional issues in their
briefs, all filed after the enactment of the HSTPA. The Court provided the parties in all
four cases an opportunity, if they so desired, to submit supplemental briefing on the issues
- 21 -
- 22 - Nos. 1-4
on appeal, we may consider the applicability of this new legislation enacted while these
appeals were pending in this Court, “which could not have been raised below as those
proceedings predated the amendment” (Matter of Gleason [Michael Vee, Ltd.], 96 NY2d
117, 121 n [2001]). 15 In the context of legislation as significant as the HSTPA, the question
we address here is relatively narrow – we have no occasion to address the prospective
application of any portion of the HSTPA, including Part F. We address the new legislation
only to determine whether certain Part F amendments discussed below must be applied
of whether the HSTPA should be applied to these pending appeals, as well as “the propriety
and desirability of this Court determining such questions in the first instance on this
appeal,” resulting in the filing of supplemental letter briefs in each case. All but one of the
parties that addressed the latter question urged the Court to resolve these open issues
without delay, noting there would be no benefit in remittal in light of the recent Appellate
Division decision holding that relevant HSTPA Part F amendments apply retroactively to
pending cases (see Dugan v London Terrace Gardens, L.P., 177 AD3d 1 [1st Dept 2019])
– precedent that would be binding on Supreme Court. The parties further cited concerns
about incurring unnecessary additional delay and litigation costs in cases that have been
pending for years. Under the circumstances, it is appropriate to address the statutory
interpretation and constitutional issues, which were promptly raised by the parties, have
been briefed and are presented for our review.
15
That three of these appeals (but not Raden) come to us as certified questions from non-
final orders does not divest us of jurisdiction over the impact of recently-enacted
legislation. McMaster v Gould (240 NY 379 [1925]), in which we declined to consider the
applicability of a statute enacted after the Appellate Division certified a question to this
Court from a nonfinal order, is inapposite. The question in that case was certified under a
largely abandoned practice of framing the certified question with language specifically
referencing the particular legal issue presented below in a manner that cabined our review
to the law that existed at that time. The contemporary practice of broadly certifying the
question whether the Appellate Division order was properly made gives this Court the
flexibility to address any issue properly presented to us. In any event, the Appellate
Division order in Raden is final, rendering the certified question – and any limitation that
might be imposed by its framing – irrelevant to our resolution of that appeal, which presents
the same issues relating to retroactive application of portions of the HSTPA.
- 22 -
- 23 - Nos. 1-4
retroactively to past conduct – and therefore govern these appeals, as urged by the tenants.
We conclude that the overcharge calculation amendments cannot be applied retroactively
to overcharges that occurred prior to their enactment.
Part F extended the four-year limitations period for overcharge claims to six years,
provided that an overcharge complaint “may be filed . . . at any time” and eliminated the
provision – present, in substance, since 1983 – stating that “no determination of an
overcharge and no award or calculation of an award of the amount of an overcharge may
be based upon an overcharge having occurred more than four years before the complaint is
filed” (RSL § 26-516[a][2]; see CPLR 213-a). It also entirely abolished the lookback rule
in favor of new requirements: the base date rent is no longer defined as the rent charged or
reflected in a registration statement on the base date but that reflected in the “most recent
reliable” registration statement filed six “or more” years before the most recent registration
(RSL § 26-516[a][i]). Examination of rent history that predates the period covered by the
former lookback rule is no longer precluded. Instead, DHCR and courts are now required
to “consider all available rent history which is reasonably necessary” to investigate
overcharge claims and determine legal regulated rent, regardless of the vintage of that
history and including records kept by owners, tenants and agencies (id. § 26-516[a][i], [h]).
Part F likewise lengthened the four-year record retention period to six years and provides
that an owner’s “election not to maintain records” does not limit the authority of DHCR or
a court to examine the rental history further (id. § 26-516[g]). Whereas the RSL previously
- 23 -
- 24 - Nos. 1-4
provided for only two years of treble damages for willful overcharges, treble damages are
now recoverable for the entire six-year limitations period (id. § 26-516[a][2]). 16
The tenants argue that these amendments should be applied to these appeals based
on the provision stating that Part F “shall take effect immediately and shall apply to any
claims pending or filed on and after such date” (see L 2019, ch 36, Part F, § 7). The owners
argue that the effective date language does not evince a clear legislative intent to apply the
new overcharge calculation provisions retroactively, particularly to cases no longer
pending in DHCR or the trial court and further contend, in any event, that retroactive
application of the new overcharge calculation methodology to these appeals would violate
due process protections in the State and Federal Constitutions. We must first assess
whether applying these amendments to overcharges that occurred before the HSTPA’s
enactment truly implicates the concerns historically associated with retroactive application
of new legislation.
In Landgraf v USI Film Prods., the Supreme Court articulated a contemporary
framework for analyzing retroactivity – adopted by this Court – which recognized that
application of a new statute to conduct that has already occurred may, but does not
necessarily, have “retroactive” effect upsetting reliance interests and triggering
16
The HSTPA also makes it harder for owners to prove a lack of willfulness, by deleting
from RSL § 26-516(a) a provision stating that treble damages could not be imposed “based
solely on said owner’s failure to file a timely or proper initial or annual rent registration
statement” and adding that, after an overcharge complaint has been filed and served on an
owner, the voluntary adjustment of rent or tender of an overcharge refund shall not be
considered as evidence of a lack of willfulness.
- 24 -
- 25 - Nos. 1-4
fundamental concerns about fairness (511 US 244 [1994]; see also American Economy Ins.
Co. v State of New York, 30 NY3d 136, 149 [2017], cert denied, 138 S Ct 2601 [2018]).
Landgraf harmonized the “apparent tension” between the presumption against retroactive
application of statutes and statutory construction canons applied in prior cases to discern a
statute’s temporal scope, which concerned statutes with no truly retroactive effect (511 US
at 263-280; see e.g. Bradley v Sch. Bd. of City of Richmond, 416 US 696 [1974] [holding
a newly enacted statute authorizing the award of a reasonable attorney’s fee to a prevailing
party in a school desegregation case could be relied on in a pending action to support a
claim for such a fee for legal services rendered before the statute was enacted]; Thorpe v
Hous. Auth. of City of Durham, 393 US 268, 278-279 [1969] [holding that a new agency
policy imposing “a very simple notification procedure” that a housing authority had to
follow prior to evicting a tenant, which did not alter the lease terms or take away the
housing authority’s legal ability to evict, was applicable to an eviction proceeding
commenced before the policy was issued but not yet completed]; see also Landgraf, 511
US at 285 n 37 [likewise limiting the continued utility of the tenet that new “remedial”
statutes apply presumptively to pending cases]).
A statute has retroactive effect if “it would impair rights a party possessed when he
acted, increase a party’s liability for past conduct, or impose new duties with respect to
transactions already completed,” thus impacting “substantive” rights (Landgraf, 511 US at
278-280; see also American Economy, 30 NY3d at 147). On the other hand, a statute that
affects only “the propriety of prospective relief” or the nonsubstantive provisions
- 25 -
- 26 - Nos. 1-4
governing the procedure for adjudication of a claim going forward has no potentially
problematic retroactive effect even when the liability arises from past conduct (Landgraf,
511 US at 273; see e.g. Ex parte Collett, 337 US 55, 71 [1949] [transfer of a civil action]). 17
For example, in Matter of Raynor v Landmark Chrysler, this Court held that a legislative
amendment revising the “time and manner” of insurers’ payments for future workers’
compensation awards arising from prior injuries did not have retroactive effects because
“the statute neither altered the carrier’s preexisting liability nor imposed a wholly
unexpected new procedure” (18 NY3d 48, 57 [2011]). 18
Landgraf illustrates this distinction. There, the Supreme Court addressed whether
1991 amendments to Title VII of the Civil Rights Act of 1964 applied to pending litigation.
Prior to 1991, the primary monetary relief available under Title VII was back pay for lost
17
The Part F amendment relevant in Collazo v Netherland Prop. Assets LLC (decided
herewith), a forum-selection provision clarifying that courts and DHCR have concurrent
jurisdiction with respect to overcharge claims “subject to the tenant’s choice of forum” (L
2019, ch 36, Part F, § 1), is a procedural statute that raises no retroactivity concerns when
applied in that case, where Supreme Court granted a pre-answer motion to dismiss the
action with the expectation that the merits of the claim would be adjudicated by DHCR.
At this early stage of litigation, the issue in Collazo is which forum should resolve the claim
in the first instance. “Application of a new jurisdictional rule usually takes away no
substantive right but simply changes the tribunal that is to hear the case” (Landgraf, 511
US at 274 [citation and internal quotation marks omitted]).
18
Likewise, it was “debatable” whether the statute in American Economy had a retroactive
effect on insurers by barring future applications to a workers’ compensation fund that
covered workers whose closed cases reopened unexpectedly (30 NY3d at 149). The
insurers were always legally liable for the closed cases, which arose out of their own
policies, and the fund merely provided them potential relief from the uncertain future
coverage costs associated with those cases, so its closure on a going-forward basis
subjected the insurers to the possibility of such future costs but did not impose new legal
liability (id. at 149, 141-145).
- 26 -
- 27 - Nos. 1-4
wages, recoverable only if unlawful discrimination had a concrete effect on the plaintiff’s
employment (511 US at 252-254). The 1991 act “significantly expand[ed] the monetary
relief potentially available to plaintiffs” – and “allow[ed] monetary relief for some [cases]
that would not previously have justified any relief under Title VII” – by providing for
compensatory damages (including for future pecuniary losses and nonpecuniary losses)
and punitive damages and making monetary damages recoverable even absent a concrete
effect on employment, as well as created a right to a jury trial in certain damages cases
(id.). The Court deemed the jury trial provision purely procedural with no retroactive effect
if applied to cases that had been commenced but had not yet proceeded to trial before the
statute was enacted (id. at 280-281 and n 34). On the other hand, the punitive damages
provision was “clearly” retroactive if applied to conduct occurring before the statute’s
enactment, as it reflected a punishment for past acts (id. at 281). The compensatory
damages provision – which was “quintessentially backward looking” – also would have
had a retroactive effect because, in cases where money damages were previously
unrecoverable, it would “attach an important new legal burden” and could “be seen as
creating a new cause of action” (id. at 282-283). The Court noted that, even in cases where
monetary damages were previously available, the new provision “resemble[d] a statute
increasing the amount of damages available under a preestablished cause of action” that
would, if applied to pending cases, “undoubtedly impose . . . a ‘new disability’ in respect
to past events,” explaining that the “extent of a party’s liability, in the civil context as well
- 27 -
- 28 - Nos. 1-4
as the criminal, is an important legal consequence” in determining retroactivity (id. at 283-
284 [citation omitted]).
Here, if applied to past conduct, the amendments to the statute of limitations,
overcharge calculation and damages provisions in Part F of the HSTPA would impose new
liability and thus have a “retroactive effect” – altering substantive rights in multiple ways.
The statute of limitations with respect to overcharge claims has been treated as running
backward from the date of initiation of the claim, previously permitting recovery of
overcharges occurring only in each of the four years preceding the complaint. Thus, the
relevant illegal conduct for which a tenant can recover is the overcharge committed in any
given year during the recovery period. Expansion of the limitations period from four to six
years clearly has a retroactive effect because it permits recovery for nonfraudulent conduct
occurring during an additional two years preceding the former recovery period – conduct
that was beyond challenge under the prior law. Likewise, the imposition of treble damages
for four additional years of overcharges – conduct not previously subject to treble damages
– clearly increases the scope of liability for past wrongs if applied retroactively, as the
Supreme Court indicated in Landgraf (id. at 281).
Critically, for purposes of calculating the amount owed for any overcharge, Part F
now renders reviewable rent increases that were shielded by the prior lookback rule,
permitting reconstruction of the legal regulated rent based on any relevant records in the
apartment’s entire rental history. Although the tenant can directly recover only for
overcharges occurring during the six years preceding the complaint, the damages
- 28 -
- 29 - Nos. 1-4
calculations for those years may now effectively incorporate conduct – illegal increases –
preceding that period and occurring at any point in the rental history. This amendment is
not merely, as the dissent contends, a procedural change regarding what evidence can be
considered (dissenting op at 19-20); it expands the scope of owner liability significantly
based on conduct that was inoculated by the old law. 19 In the same way that the
compensatory damages provision in Landgraf would have provided monetary relief for
conduct that, while illegal, previously did not provide a right to such relief, the effect here
would be to permit recovery, previously barred by the lookback rule and limitations period,
for past conduct that violated the RSL. Even if the amendments could be viewed in some
cases as merely increasing damages for conduct that already gave rise to monetary relief,
the dissent is wrong that such “tinker[ing] with the recoverable amount” has no retroactive
effect (dissenting op at 20, 25-26). Under Landgraf, statutes that expand “[t]he extent of a
party’s liability” under the same cause of action have retroactive effect (511 US at 283-284
[observing that in no case “in which Congress had not clearly spoken, ha(d) (the Court)
read a statute substantially increasing the monetary liability of a private party to apply to
conduct occurring before the statute’s enactment”]).
19
The dissent further asserts that, prior to the addition of the lookback rule provision in
1997, review of all rental history to establish the base date rent was permitted (dissenting
op at 19). The dissent is mistaken (see n 26, infra) – but even adopting the dissent’s view,
the repeal of the lookback rule upset over twenty years of repose. Likewise, the dissent’s
repeated reliance on cases that predate Landgraf reflects an unwillingness to engage with
contemporary retroactivity jurisprudence (dissenting op at 23-24, 51).
- 29 -
- 30 - Nos. 1-4
This retroactive effect becomes even more pronounced when considered in tandem
with the HSTPA amendments to the record retention requirements. Those amendments
expand the retention period by two years and, although the provision still nominally
permits an owner to destroy some records – now after six years – the new law states that
“an owner’s election not to maintain records shall not limit the authority of [DHCR] and
the courts to examine the rental history and determine legal regulated rents” (RSL § 26-
516[g]). Thus, the HSTPA effectively provides that an owner can be penalized indirectly
for a disposal of records that was legal under the prior law but will now hinder the owner’s
ability to establish the legality of (and non-willfulness of any illegal) rent increases outside
the lookback period, which – under the new legislation – impact recovery even in the
absence of fraud. 20
Retroactive application of the overcharge calculation provisions in Part F implicates
all three Landgraf retroactivity criteria by impairing rights owners possessed in the past,
increasing their liability for past conduct and imposing new duties with respect to
20
The record retention provision does not exist in a vacuum but, before the HSTPA, was
closely related to the lookback rule. Although the dissent suggests that consideration of
the record retention amendment is somehow inappropriate (dissenting op at 42-43), it is
impossible to fully assess the retroactive impact of the HSTPA’s new overcharge
calculation method without acknowledging that, previously, owners were permitted by
those interrelated provisions to dispose of records after four years. The impact of the
amendment is evident in a case like Reich, where the building has changed ownership twice
since the tenants took occupancy fifteen years ago. If the HSTPA were applied to permit
reconstruction of the base date rent in such a case, the change in record retention rules
exacerbates the retroactive effect by hindering justification of rent increases taken outside
the prior four-year lookback period, thereby impairing landlords’ ability to defend
themselves in an action alleging overcharges more than four years in the past.
- 30 -
- 31 - Nos. 1-4
transactions already completed. This is true even though rent stabilization is a highly
regulated area. As we explained in American Economy when addressing the rights of
employers’ insurers under another highly regulated regime – workers’ compensation – this
is an area designed with “flexibility,” in which “[t]he allocation of economic benefits and
burdens has always been subject to adjustment” (id. at 148-149, quoting Becker v Huss
Co., 43 NY2d 527, 541 [1978]). “The Constitution merely mandates that a landlord earn
a reasonable return,” and no party doing business in a regulated environment like the New
York City rental market can expect the RSL to remain static, as we have repeatedly made
clear in cases challenging prospective legislation altering the formula for rent increases
under prior schemes (see I.L.F.Y. Co. v City Rent & Rehabilitation Admin., 11 NY2d 480,
492 [1962]; Bucho Holding Co. v Temporary State Hous. Rent Commn., 11 NY2d 469
[1962]). But applying these amendments to past conduct is not related to legislative
decisions about proper division of economic burdens going forward, and it does not simply
upset expectations about the continuing future availability of a favorable regulatory
mechanism. Rather, by increasing overcharge exposure relating to owners’ past acts,
retroactive application of the provisions would undermine considerable reliance interests
concerning income owners already derived from rents collected on real property years – if
not decades – before.
Because the overcharge calculation provisions, if applied to past conduct, would
impact substantive rights and have retroactive effect, the presumption against retroactivity
is triggered. As opposed to a decisional change in the common law – which typically but
- 31 -
- 32 - Nos. 1-4
not invariably applies “to all cases still in the normal litigating process” (Gurnee v Aetna
Life & Cas. Co., 55 NY2d 184, 191 [1982] [citation omitted] [permitting retroactive
application of interpretation of insurance law “to all claims not barred by the Statute of
Limitations”]) – generally, a statute is presumed to apply only prospectively (Majewski,
91 NY2d at 584). Retroactive legislation is viewed with “great suspicion” (Matter of
Chrysler Props. v Morris, 23 NY2d 515, 521 [1969]). This “deeply rooted” presumption
against retroactivity is based on “[e]lementary considerations of fairness [that] dictate that
individuals should have an opportunity to know what the law is and to conform their
conduct accordingly” (Landgraf, 511 US at 265). As the Supreme Court has cautioned,
careful consideration of retroactive statutes is warranted because “[t]he Legislature’s
unmatched powers allow it to sweep away settled expectations suddenly and without
individualized consideration” and “[i]ts responsivity to political pressures poses a risk that
it may be tempted to use retroactive legislation as a means of retribution against unpopular
groups or individuals” (id. at 266).
In light of these concerns, “[i]t takes a clear expression of the legislative purpose . .
. to justify a retroactive application” of a statute (Gleason v Gleason, 26 NY2d 28, 36
[1970] [internal quotation marks and citation omitted]), which “assures that [the legislative
body] itself has affirmatively considered the potential unfairness of retroactive application
and determined that it is an acceptable price to pay for the countervailing benefits”
(Landgraf, 511 US at 272-273). The ultimate question here, therefore, is one of statutory
interpretation: whether the Legislature has expressed a sufficiently clear intent to apply the
- 32 -
- 33 - Nos. 1-4
overcharge calculation amendments retroactively to these pending appeals. There is
certainly no requirement that particular words be used – and, in some instances retroactive
intent can be discerned from the nature of the legislation (see e.g. Eastern Enters. v Apfel,
524 US 498 [1998]; Usery v Turner Elkhorn Min. Co., 428 US 1 [1976]). But the
expression of intent must be sufficient to show that the Legislature contemplated the
retroactive impact on substantive rights and intended that extraordinary result. Even within
the same legislation, language may be sufficiently clear to effectuate application of some
amendments to cases arising from past conduct but not others with more severe retroactive
effect (see Landgraf, 511 US at 280-281; Matter of Beary v City of Rye, 44 NY2d 398,
410-411 [1978]).
If retroactive application would not only impose new liability on past conduct but
also revive claims that were time-barred at the time of the new legislation, we require an
even clearer expression of legislative intent than that needed to effect other retroactive
statutes – the statute’s text must unequivocally convey the aim of reviving claims. For
nearly a century, this Court has recognized that “[r]evival is an extreme exercise of
legislative power. The will to work it is not deduced from words of doubtful meaning.
Uncertainties are resolved against consequences so drastic” (Hopkins v Lincoln Trust Co.,
233 NY 213, 215 [1922] [Cardozo, J.]). Indeed, it is a bedrock rule of law that, absent an
unambiguous statement of legislative intent, statutes that revive time-barred claims if
applied retroactively will not be construed to have that effect (see e.g. Thomas v Bethlehem
Steel Corp., 63 NY2d 150, 155 [1984]; Beary, 44 NY2d at 412-413). For example, in 35
- 33 -
- 34 - Nos. 1-4
Park Ave. Corp. v Campagna, plaintiff contended that a newly enacted statute permitting
a court to grant relief from an unconscionable lease or clause – which the Legislature
deemed “applicable to all leases, regardless of when executed” – revived a time-barred
claim to rescind a lease (48 NY2d 813, 814-815 [1979]). Citing the need for clear and
unequivocal language “to effect so drastic a consequence,” the Court reasoned that the
language rendering the statute “applicable to all leases” was “ambiguous,” failing to
convey a sufficiently clear intention to resurrect time-barred claims (id. at 815).
When the Legislature has intended to revive time-barred claims, it has typically said
so unambiguously, providing a limited window when stale claims may be pursued. For
example, Jimmy Nolan’s Law, which we addressed in Matter of World Trade Ctr. Lower
Manhattan Disaster Site Litig. (30 NY3d 377 [2017]), expressly “revived” certain time-
barred claims related to World Trade Center cleanup and rescue work, permitting suit
during a discrete one-year window period (see General Municipal Law § 50-i[4][a], as
added by L 2009, ch 440, § 2). Similar unequivocal “revival” language accompanied by a
limited period for commencement of time-barred claims appears in the statute reviving
toxic tort cases, including those arising from exposure to the drug diethylstilbestrol
ingested by pregnant women (L 1986, ch 682 § 4), addressed in Hymowitz v Eli Lilly &
Co. (73 NY2d 487 [1989]). The Legislature has historically acted with deliberation and
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- 35 - Nos. 1-4
clarity when upsetting the strong public policy favoring finality, predictability, fairness and
repose served by statutes of limitations. 21
The “claims pending” language in the Part F effective date provision is insufficient
to indicate that the Legislature intended retroactive application in a manner that revives
time-barred claims, such as by extending the statute of limitations to permit recovery of
two annual overcharge claims that were time-barred under the prior law. This language
bears no resemblance to the express claim revival language in the statutes addressed by
World Trade Ctr. and Hymowitz – yet the claim revival effect if the relevant amendments
to the HSTPA were to be applied retroactively is substantially more far-reaching than that
of the orderly and even-handed claim revival method used in those statutes, which created
a narrow window for commencement of time-barred suits. If applied to past conduct, the
relevant HSTPA amendments would not only revive claims for two additional years but,
by changing the overcharge calculation methodology to enable review of any illegal rent
increase in the history of the apartment, would also substantially alter the nature of the
liability by resurrecting nonfraudulent overcharges that initially occurred more than four
years prior to the complaint but continue to impact the calculation of the current rent. Just
as the statutory language in 35 Park Ave. Corp., rendering the new legislation “applicable
to all leases, regardless of when executed” (48 NY2d at 814-815), fell short of our standard,
21
When that intent is unambiguous, a claim revival statute withstands challenge under the
Due Process Clause if it is “a reasonable response in order to remedy an injustice” (World
Trade Ctr., 30 NY3d at 400), such as remedying the plight of sick plaintiffs who were
unable to commence timely claims because of the long period of latency between exposure
and the manifestation of illness (Hymowitz, 73 NY2d at 503-504, 514).
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- 36 - Nos. 1-4
here the generic reference to “any claims pending” upon enactment does not provide the
requisite textual assurance that the Legislature considered the significant impact of reviving
barred claims, upsetting the strong public policy favoring repose, and that it desired that
result.
This does not entirely resolve the statutory interpretation question, however,
because as we have explained, retroactive application of Part F would have significant
impacts beyond claim revival, specifically on the scope and nature of damages recoverable
with respect to timely claims. While the presumption against claim revival effect may only
be overcome by the Legislature’s unequivocal textual expression that the statute was
intended, not only to apply to past conduct, but specifically to revive time-barred claims
(see 35 Park Ave. Corp., 48 NY2d at 815), the general presumption against retroactive
effect may be overcome by either an express prescription of the statute’s temporal reach or
a less explicit but “comparably firm conclusion” – applying “normal rules of construction”
– of legislative intent to apply the enactment to conduct that occurred previously
(Fernandez-Vargas v Gonzales, 548 US 30, 37 [2006] [citation omitted]; see also
Majewski, 91 NY2d at 584). Although the HSTPA Part F effective date provision does
not express an intent to revive time-barred claims under our heightened claim revival
standard, read in the specific context of this legislation, the “claims pending” language is
sufficiently clear to evince legislative intent to apply the amendments to at least some
timely overcharge claims that were commenced prior to enactment.
- 36 -
- 37 - Nos. 1-4
Each of the HSTPA’s fifteen parts contains its own effective date provision,
indicating the Legislature considered the issue of temporal scope for each. The legislation
is almost entirely forward-looking – only Part F’s effective date provision contains
language referring to prior claims. In contrast, many of the HSTPA’s other effective date
provisions, such as that applicable to the amendments eliminating vacancy and longevity
bonuses, state only that the parts of the legislation to which they apply “shall take effect
immediately” (see L 2019, ch 36, Part A § 7, Part B § 8, Part C § 5, Part D § 8, Part G § 7,
Part J § 2, Part L § 3), in some cases indicating when the amendments contained therein
expire (id. Part E § 3, Part H § 5, Part K § 18). Others expressly provide that the relevant
part applies prospectively only, such as by indicating that it takes effect immediately but
applies to actions “commenced on or after such effective date” or that certain amendments
take effect at some point in the future, such as “on the thirtieth day after this act shall have
become a law” (id. Part M § 29; see also id. Part N § 2 [Part N “shall take effect
immediately and shall only apply to plans (for conversion of an apartment to a
condominium or cooperative) submitted . . . after the effective date”], Part O § 14 [Part O
“shall take effect on the thirtieth day after it shall have become law”]). Therefore, this is
not a case where the Legislature passed comprehensive legislation, including general
“claims pending” language, without differentiating between the parts it intended to apply
retroactively and those that could reasonably be given only prospective effect. Moreover,
Part F relates almost entirely to the calculation of overcharge claims, and any such claim
- 37 -
- 38 - Nos. 1-4
that was pending at the time the HSTPA was enacted necessarily involved conduct that
occurred prior to the statute’s enactment.
Read in context, and because some of the Part F provisions have effects beyond
reviving time-barred claims, the “claims pending” language must be construed as evincing
a retroactive intent. 22 At the very least, “claims pending” indicates the Part F provisions
were intended to apply to overcharge claims where the calculation issue remained
unresolved as of the June 2019 effective date. Indeed, in Landgraf, the Supreme Court
indicated that similar language referencing “pending” cases would have been sufficient in
that case to reflect a retroactive intent (see Landgraf, 511 US at 259-260 [referencing
language in a prior version of the statute stating the provisions “shall apply to all
proceedings pending on or commenced after the date of enactment”]). Therefore, although
there was no clear directive to revive time-barred claims, we conclude that the Legislature
evinced a sufficiently clear intent to apply Part F to timely pending claims, such as Regina
Metro. and Taylor, where the overcharge calculation issue was unresolved at the time the
HSTPA was enacted. 23 It is therefore necessary to reach the constitutional challenge.
22
To be sure, the language in the Part F effective date provision is less precise than the
clause in the 1997 RRRA stating it was applicable to “any action or proceeding pending in
any court or any application, complaint or proceeding before an administrative agency on
the effective date” (L 1997, ch 116, § 46; see Matter of Partnership 92 LP v New York
State Div. of Hous. & Community Renewal, 11 NY3d 859 [2008]), but given the contrast
between the Part F language and that used in the remaining parts of the HSTPA, it is
sufficient to convey a retroactive intent.
23
The tenants ask us to construe “claims pending” as encompassing any case pending on
appeal which, in cases where the overcharge was already calculated, would involve
reopening of the record for additional discovery and recalculation of the base date rent –
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- 39 - Nos. 1-4
III.
To comport with the requirements of due process, retroactive application of a newly
enacted provision must be supported by “a legitimate legislative purpose furthered by
rational means” (American Economy, 30 NY3d at 157-158, citing General Motors Corp. v
Romein, 503 US 181, 191 [1992]). Of course, as with prospective elements of legislation,
legislative direction concerning the scope of a statute carries a presumption of
constitutionality, and the party challenging that direction bears the burden of showing the
absence of a rational basis justifying retroactive application of the statute (Turner Elkhorn,
428 US at 15). Nevertheless, the Supreme Court has made clear that “retroactive
legislation does have to meet a burden not faced by [purely prospective] legislation,” which
is satisfied when “the retroactive application of the legislation is itself justified by a rational
legislative purpose” (Pension Benefit Guar. Corp. v R.A. Gray & Co., 467 US 717, 730
[1984] [emphasis added]).
Because “[r]etroactive legislation presents problems of unfairness that are more
serious than those posed by prospective legislation” (Romein, 503 US at 191), “the
justifications for [prospective legislation] may not suffice for [the retroactive aspects]”
(R.A. Gray & Co., 467 US at 730). We have suggested that, in order to comport with due
process, there must be a “persuasive reason” for the “potentially harsh” impacts of
essentially, relitigation of the entire case. Given our resolution of the constitutional issue,
we need not determine whether that broad view of “claims pending” reflects legislative
intent because, at a minimum, “claims pending” encompasses cases like Regina Metro. and
Taylor, in which the overcharge calculation still had to be performed.
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- 40 - Nos. 1-4
retroactivity (Holly S. Clarendon Trust v State Tax Commn., 43 NY2d 933, 935 [1978];
see Chrysler Props., 23 NY2d at 522 [there was no “persuasive case” supporting retroactive
application]). Our acknowledgement that retroactive legislation must be supported by a
rational basis commensurate with the degree of retroactive effect does not represent a
“bifurcation” between the rational basis analyses for prospective and retroactive legislation
(see dissenting op at 36). Consideration of the scope of legislation is critical to a rational
basis analysis, regardless of whether it is solely prospective or also involves retroactive
effects.
In tax cases, an area where retroactive application of statutes is more highly
tolerated, if for a short time (James Sq. Assoc. LP v Mullen, 21 NY3d 233, 246 [2013],
citing Matter of Replan Dev. v Department of Hous. Preserv. & Dev. of City of N.Y., 70
NY2d 451, 455 [1987] and Welch v Henry, 305 US 134, 146 [1938]), we have highlighted
particular factors relevant to the due process analysis for retroactive legislation. In Replan,
we explained that whether a retroactive statute comports with due process principles is a
“question of degree” that turns on the length of the retroactivity period, the taxpayer’s
forewarning of a change in legislation as relevant to reliance interests and the public
purpose for retroactive application (70 NY2d at 456). Our consideration of these factors –
derived from Supreme Court precedent – “does not differ from the prohibition against
arbitrary and irrational legislation that applies generally to enactments in the sphere of
economic policy” (Caprio v New York State Dept. of Taxation & Fin., 25 NY3d 744, 752
[2015], quoting United States v Carlton, 512 US 26, 30 [1994]). Instead, in requiring that
- 40 -
- 41 - Nos. 1-4
there be a non-arbitrary justification for retroactive application of a statute, the rational
basis test incorporates the equitable considerations that Replan highlights more directly.
Likewise, the Supreme Court has indicated that it applies the same due process analysis in
the tax context that applies to any other economic legislation (Carlton, 512 US at 30), albeit
recognizing that retroactivity is more tolerable in tax legislation (see United States v
Darusmont, 449 US 292, 296-298 [1981]; Welch, 305 US at 146, 149-150). 24
In determining whether retroactive application of a statute is supported by a rational
basis, the relationship between the length of the retroactivity period and its purpose is
critical. Generally, there are two types of retroactive statutes that courts have found to be
constitutional: those employing brief, defined periods that function in an administrative
manner to assist in effectuating the legislation, and statutory retroactivity that – even if
more substantial – is integral to the fundamental aim of the legislation. For example, in
the first category, courts have rejected challenges to the legislative practice of incorporating
a clear, limited retroactivity period intended to prevent parties from taking advantage of a
lengthy legislative process to circumvent a statute. In R.A. Gray & Co., the Supreme Court
24
The due process standard for gauging the propriety of retroactive tax statutes was
articulated differently in the past. In earlier decisions relied on in Replan, the Supreme
Court framed the inquiry as whether the statutes in question were “so harsh and oppressive
as to transgress the constitutional limitation” (Welch, 305 US at 147). That this inquiry
was not historically labeled as a “rational basis” test does not undermine the conclusion by
both this Court and the Supreme Court that, in practice, the analysis “d[id] not differ” from
the one applied to other types of retroactive statutes (Caprio, 25 NY3d at 752, quoting
Carlton, 512 US at 30). Thus, there is no basis to dispute the continuing validity of Replan
or James Square (applying Replan) which, contrary to the dissent’s suggestion (dissenting
op at 36), remain good law.
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- 42 - Nos. 1-4
rejected a due process challenge to retroactive application of a statute that required
employers that withdrew from a multiemployer pension plan to pay a fixed debt to the plan
and expressly extended that penalty to those who withdrew within the five months prior to
enactment (467 US at 720, 725). After observing that Congress had been “quite explicit”
that the statute was made retroactive in order to “prevent employers from taking advantage
of a lengthy legislative process and withdrawing while Congress debated,” the Court
emphasized that the retroactivity period was limited in scope to achieve its aim, noting, “as
the amendments progressed through the legislative process, Congress advanced the
effective date chosen so that it would encompass only that retroactive time period that
Congress believed would be necessary to accomplish its purposes” (467 US at 730-731).
Falling within the latter category – instances where retroactive application was
central to the statutes’ purpose – in Turner Elkhorn the Supreme Court upheld legislation
requiring coal operators to compensate miners who had already left the industry for the
disability caused by the latent effects of exposure to coal dust, resulting in black lung
disease, or pneumoconiosis (428 US at 15, 18-20). The Supreme Court reasoned that the
retroactive imposition of liability on the coal operator that previously employed the miner
was “justified as a rational measure to spread the costs of the employees’ disabilities to
those who have profited from the fruits of their labor” (id. at 18; but see Eastern Enters. v
Apfel, 524 US 498 [1998] [deeming retroactive application of a coal miner health care
benefit scheme, requiring participation by a company that ceased coal mining operations
in 1965, unconstitutional]). Similarly, in American Economy – where we assumed without
- 42 -
- 43 - Nos. 1-4
deciding that a statute closing a fund that previously benefitted workers’ compensation
insurance carriers liable for “reopened” claims had a retroactive impact – we concluded
application of the statute to injuries incurred under workers’ compensation insurance
policies finalized prior to the effective date was necessary to achieve its purpose (30 NY3d
at 158-159). There, the workers’ compensation fund was closed to relieve the burden on
employers supporting its costs, which had increased dramatically in the six years preceding
the legislation due to skyrocketing medical costs and an unexpected surge in reopened
cases (id. at 143). If that closure was not applied to claims arising from past injuries, the
fund “would have incurred substantial new liabilities for many years, given the duration of
many workers’ compensation cases,” and “the relief to businesses sought by the legislature
would have been indefinitely delayed” (id. at 158). In cases where retroactivity is integral
to full achievement of the fundamental purpose of the legislation, a rational basis for the
retroactive effect may be readily identifiable. 25
On the other hand, even short periods of retroactivity will be invalidated absent the
requisite rational basis. In Chrysler Properties, we sustained a constitutional challenge to
25
The Supreme Court has also considered whether impacted parties had forewarning of the
retroactive effect. In Romein, employers and the Michigan Supreme Court interpreted a
state statute permitting reduction of certain workers’ compensation benefits to apply to
workers injured prior to enactment, despite a contrary legislative resolution (503 US at
184-185). The Supreme Court upheld a second statute clarifying the original intent and
mandating reimbursement of benefits wrongfully withheld during the period between
enactment of the original statute and the clarifying legislation, indicating that there was no
substantial reliance issue because the employers “knew they were taking a risk” when they
acted based on a statutory interpretation that contravened that expressed by the legislature
(id. at 191-192).
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- 44 - Nos. 1-4
retroactive application of a statute providing New York City a new right to seek judicial
review of adverse determinations of the State Tax Commission, despite the relatively brief,
four-month period of retroactivity set forth in the effective-date provision (23 NY2d at
518-519). Because there previously was no right to challenge such determinations, we
concluded that a taxpayer who was issued a refund order only one month before the new
law was entitled to payment because the taxpayer “had obtained a sufficiently certain right
to the money” and the Legislature made the amendment retroactive “without any
discernable reason” (id. at 517-519). Likewise, in James Square, we invalidated the
retroactive application of amendments to the Empire Zones Program Act that changed the
criteria for receipt of tax benefits, noting businesses had no forewarning of the change, and
that a 16-month period of retroactivity was excessive because businesses had “gained a
reasonable expectation that they would secure repose in the existing tax scheme” (21 NY3d
at 248-250 [internal quotation marks omitted]). We emphasized that retroactively denying
tax credits did not further any aim of the statute – by spurring investment or preventing
abuses of the program – but “simply punished . . . participants more harshly for behavior
that already occurred and that they could not alter” (id. at 250). Unlike the statutes at issue
in R.A. Gray & Co., Turner Elkhorn or American Economy, where the retroactive scope
was directly related or integral to furtherance of the legislative goals, in Chrysler Properties
and James Square we concluded retroactive application would be irrational given the extent
of settled interests, degree of repose and lack of a permissible basis for unsettling those
interests.
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- 45 - Nos. 1-4
Those same concerns are amplified here. The HSTPA’s overcharge calculation and
treble damages provisions, if applied retroactively, would more severely impact
substantive rights than the provision in James Square, which involved a tax statute, an area
where courts are generally more tolerant of retroactivity. Before the HSTPA, the combined
effect of the statute of limitations and lookback rule provided owners substantial repose
relating to rent increases collected more than four years prior to the filing of the complaint.
In sharp contrast, the HSTPA amendments directing review of all available rental history
to reconstruct the legal regulated rent on the base date may be applied to incorporate
increases (whether fraudulent, erroneous or simply lacking in adequate documentation
many years after the fact) in the apartment’s distant rental history, thereby expanding a
tenant’s total overcharge recovery well beyond what was provided under the prior law.
This retroactivity period cannot be characterized as brief; rather, the Legislature
appears to have intended that the retroactive period be bounded only by the length of the
apartment’s rental history. Such a vast period of retroactivity upends owners’ expectations
of repose relating to conduct that may have occurred many years prior to the recovery
period. Having reasonably relied on pre-HSTPA statutory and regulatory provisions to
destroy records (see former RSL 26-516[g]; Cintron, 15 NY3d at 354; Thornton, 5 NY3d
at 181; Matter of Gilman v New York State Div. of Hous. & Community Renewal, 99
NY2d 144, 149 [2002]) – records that are now needed under the HSTPA to establish the
legality of prior rent increases and a lack of willfulness – owners may be held liable under
the HSTPA for purported historical overcharges that were once supported by
- 45 -
- 46 - Nos. 1-4
documentation. Turning to the treble damages provisions, where owners are unable to
meet their burden to prove a negative – lack of past willfulness – the HSTPA makes treble
damages mandatory for all six years of the new recovery period, rather than the two years
preceding filing of the complaint. These provisions either increase the penalty or impose
a new penalty for damages that previously were not trebled.
There can be no doubt here that the HSTPA Part F amendments represent a clear
rejection of prior rent stabilization enforcement policy and effectuate a significant
readjustment of substantive rights relating to overcharge recovery, distinguishing this
legislation in critical ways from that applied to past conduct in Romein, which clarified the
Michigan legislature’s original intent that was expressed in a legislative resolution but
disregarded by employers and courts. As explained further below, “judicial confusion”
regarding how to calculate overcharges in Roberts cases (dissenting op at 32) cannot alone
transform the substantive amendments made in Part F as to all overcharge cases into mere
clarifying amendments like those in Romein. In the same way, the Part F amendments are
quite different from the 1997 RRRA amendment adding the lookback rule to the RSL’s
enforcement provisions, which this Court applied to a pending case in Partnership 92 (11
NY3d at 860) (see n 22, supra). As we explained in Thornton, that lookback rule
amendment merely clarified past legislative intent and reinforced existing statutory
language which, since 1983, made clear that damages could not be calculated based on an
overcharge that occurred more than four years prior to the filing of the claim (5 NY3d at
- 46 -
- 47 - Nos. 1-4
180). 26 No Landgraf analysis was necessary with respect to application of the 1997
lookback rule to pending cases because, unlike the sea change created by the HSTPA Part
F amendments, it did not have a truly retroactive effect on liability. Moreover, although
we applied the lookback rule amendment to past conduct in Partnership 92, we were more
circumspect with regard to other amendments in the 1997 RRRA. In Gilman, we held that
DHCR acted irrationally when it applied an amendment relaxing evidentiary requirements
26
The impetus for the lookback amendment was explained when a bill containing
substantially the same amendment was proposed in 1996. The legislative history for the
1996 bill makes clear that the Legislature originally intended the four-year statute of
limitations “not only to limit the award for a rent overcharge to the four-year period
preceding the complaint but also the examination of the rental history prior to that four-
year period” (Senate Introducer’s Memorandum in Support, 1996 N.Y. Senate Bill No.
S.7492). Nonetheless, “court decisions ha[d] erroneously interpreted the language of the
statute . . . to permit examination of the rental history of an apartment prior to the four-year
period” (id.). These legislative materials clarified that, “[n]otwithstanding the judicial
opinions to the contrary, it was and is the intention of the Legislature to preclude the
examination of the prior rental history” (id.). Indeed, since 1983, the statutory scheme
contained a four-year limitations period and expressly stated that “no award of the amount
of an overcharge may be based upon an overcharge having occurred more than four years
before the complaint is filed” (1983 McKinney’s Session Laws of N.Y. at 1791; L 1983,
ch 403, § 14). The lookback amendment was included in the 1997 RRRA, among others,
“to simplify the administration of rent laws while protecting the rights of tenants and
owners” (Governor’s Approval Mem, Bill Jacket, L 1997, ch 116 at 40). As the dissent
notes, the 1997 RRRA as a whole “dramatically” and “historic[ally]” reformed New York’s
rent stabilization scheme (dissenting op at 48 n 19; see Senate Introducer’s Mem in Support
and Governor’s Approval Mem, Bill Jacket, L 1997, ch 116 at 36, 40) – including by
creating a new vacancy bonus allowance, narrowing succession rights, establishing new
penalties for harassment of tenants, amending the procedure for vacancy decontrol,
authorizing the state to enter contracts exempting new construction from regulation,
requiring deposit of rent payments into escrow during the pendency of certain landlord-
tenant disputes and permitting owners to offer financial incentives to tenants in small
buildings to vacate for the construction of new housing in that space (Senate Introducer’s
Mem in Support, Bill Jacket, L 1997, ch 116 at 36). The amendment adding the lookback
rule was only one in this “extensive[]” suite of amendments (id.), and the breadth of the
total legislative package has no bearing on the clarifying nature of that sole amendment.
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- 48 - Nos. 1-4
for admission of owner records to permit an owner to reopen the record, nearly a decade
after the tenant commenced the proceeding and during the administrative appeal,
expressing concern that “the rules were changed in midstream” (99 NY2d at 147, 149-152).
This Court’s precedent regarding the 1997 RRRA is more nuanced than the dissent
acknowledges and is compatible with our analysis identifying the significant retroactive
effects that would arise if Part F is applied to pending cases.
Indeed, the effects of the HSTPA amendments expanding overcharge liability
implicate the concerns that the Supreme Court expressed in Eastern Enterprises in striking
down retroactive application of a statute that required former mine operators to fund the
health benefits of retired miners who worked for the operator before it left the industry
(524 US 498). Even though the statute reflected similar policy goals as the scheme upheld
in Turner Elkhorn, it was invalidated (by the plurality on Takings Clause grounds, with a
concurrence on due process principles) based on the extreme degree and arbitrary nature
of the retroactive effect (524 US at 530-537, 547-550). 27 It is clear from Eastern
27
The plurality in Eastern Enterprises observed that the Court’s prior decisions had “left
open the possibility that legislation might be unconstitutional if it imposes severe
retroactive liability on a limited class of parties that could not have anticipated the liability,
and the extent of that liability is substantially disproportionate to the parties’ experience”
and expressly clarified that it “need not address [the] due process claim” (524 US at 528-
529, 538), and the one-justice concurrence – the deciding vote – viewed the statute as
violative of the former mining operators’ due process rights (id. at 539). Only the four
dissenting justices opined that due process was satisfied. Indeed, there may be some
correlation between due process and takings analyses of retroactive legislation (see id. at
537). The owner in Taylor asserted that retroactive application of the overcharge
calculation amendments, which would impact income earned in the past from its real
property, amounted to an unconstitutional taking. We need not reach that claim because
we resolve the retroactivity issues on statutory interpretation and due process grounds.
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- 49 - Nos. 1-4
Enterprises that there are limits on retroactive imposition of liability even when it is related
to a rational statutory goal.
Moreover, retroactivity concerns are further heightened where, as here, the new
statutory provisions “affect[] contractual or property rights, matters in which predictability
and stability are of prime importance” (Landgraf, 511 US at 271). While the lease
agreements between the owners and tenants were necessarily subject to the requirements
of the RSL, curtailing the parties’ freedom of contract in significant degree, when the
governing law (essentially incorporated in the annual leases) is altered retroactively years
later, long after the expired contracts have been performed, the impact on contract rights is
unusually significant. Such alteration – if applied retroactively – impairs real property
rights by diminishing or possibly eliminating the constitutionally protected return on
investment owners realized in the past related to the use of their properties (see generally
I.L.Y.F. Co., 11 NY2d at 492). The HSTPA does much more than require a party to
shoulder a new payment obligation going forward – and its destabilizing effect is especially
severe.
That potential effect is demonstrated by the cases before us. In Regina Metro., for
example, as noted by the Appellate Division dissent, application of the standard calculation
methodology under the former rule resulted in overcharge damages of $10,271.40, while
the reconstruction method erroneously utilized by DHCR – which appears consistent with
the HSTPA’s new approach – resulted in damages of $285,390.39 (Regina Metro., 164
AD3d at 433 [Gische, J., dissenting]). In Reich, proper application of the pre-HSTPA
- 49 -
- 50 - Nos. 1-4
statutes resulted in no overcharge, but a comparison of the market rent actually charged
during the recovery period – over $18,000 per month – against a reconstructed stabilized
rent under the HSTPA considering rental history dating back to the tenants’ initial
occupancy of the apartment in 2005 (or before) could result in an enormous retroactive
increase in liability. The same profound impact on overcharge calculations would occur
in Taylor and Raden, involving tenants that took occupancy well over a decade before they
sued.
Unlike cases where retroactive application rationally furthered a legislative goal,
such as closing a state-administered fund benefitting insurers that imposed unsustainable
costs on employers (see American Economy, 30 NY3d 136) or preventing legislation from
being undermined by those seeking to escape its impact before enactment (see R.A. Gray
& Co., 467 US 717) – there is no indication here that the Legislature considered the harsh
and destabilizing effect on owners’ settled expectations, much less had a rational
justification for that result. While prospective application of Part F to overcharges
occurring after the effective date may serve legitimate and laudable policy goals, no
explanation has been offered, much less a rational one, for retroactive application of the
amendments to increase or create liability for rent overcharges that occurred years – even
decades – in the past.
Part F contains no statement of legislative findings. Such a statement is contained
elsewhere in the legislation, noting the continuing housing emergency; the need “to prevent
speculative, unwarranted and abnormal increases in rents”; the acute shortage of housing
- 50 -
- 51 - Nos. 1-4
accommodations caused by high demand and decreased supply; and the need, with respect
to those being charged market rents, to avoid profiteering and other disruptive practices (L
2019 ch 36, Part G, § 2). Prospective application of Part F could be understood to address
these concerns by deterring future overcharges, but retroactive application to cases pending
in the appellate pipeline does not do so; the HSTPA cannot deter conduct that has already
occurred (James Sq., 21 NY3d at 250). Likewise, to the degree that prospective application
of certain provisions of the HSTPA is justified because the Legislature has concluded that
those provisions will act to preserve the stock of stabilized housing or moderate rents going
forward, retroactive application of the amendments to increase the amount of an overcharge
judgment (or create overcharge liability where none existed) does not return apartments to
rent stabilization or ensure the propriety of rents collected in the future. Rather than serving
any of the policy goals of rent stabilization (which it would not), retroactive application of
the overcharge calculation amendments would merely punish owners more severely for
past conduct they cannot change – an objective we have deemed illegitimate as a
justification for retroactivity (see James Sq., 21 NY3d at 249-250; see also Turner Elkhorn,
428 US at 17-18 [“we would . . . hesitate to approve the retrospective imposition of liability
on any theory of deterrence or blameworthiness”] [citations omitted]).
The dissent asserts that the overcharge calculation amendments were intended to
ameliorate the overcharges arising from deregulations later revealed to be improper by
Roberts and to address post-Roberts judicial confusion regarding how to calculate such
overcharges and that, thus, retroactive application of such amendments to pending cases is
- 51 -
- 52 - Nos. 1-4
supported by a rational basis (see dissenting op at 30-32, 38-39). 28 This argument is
unsupported by the text of the statute or its legislative history, which makes no reference
to Roberts. The amendments impact far more than overcharges associated with the “14-
year period of unlawful deregulation involving 50,000 [Roberts] apartments” referenced
by the dissent (dissenting op at 39). The overcharge calculation amendments apply to all
overcharge claims – not merely those flowing from an improper deregulation, much less a
Roberts deregulation. Thus, not only is there no basis to conclude that addressing Roberts
was the Legislature’s intent, neither would these broadly applicable amendments constitute
a rational response to Roberts.
Relatedly, although the new treble damages provisions function distinctly from the
integrated overcharge calculation provisions, retroactive application of any Part F
amendments that would newly impose treble damages for past conduct is also
impermissible. 29 Treble damages are generally viewed as punitive (Vermont Agency of
28
Of course, to the degree the dissent argues that the Legislature “enact[ed] the HSTPA”
– in its entirety – in order to “step[] in” concerning courts’ uncertainty about calculation of
overcharges in Roberts cases (dissenting op at 31), that assertion is patently untenable
given the breadth of the HSTPA’s amendments, which extend far beyond the realm of
overcharge claims in general, and particularly far beyond the specific category of Roberts
overcharge claims.
29
The dissent’s assertion that we may not consider the propriety of retroactive application
of the HSTPA amendments concerning treble damages is misplaced (dissenting op at 44).
The owners’ conduct in deregulating the apartments consistent with pre-Roberts DHCR
guidance was not willful, and treble damages cannot be imposed on that basis. But the
HSTPA – by providing that a voluntary tender of a refund or adjustment of rent after filing
of an overcharge claim cannot evidence a lack of willfulness – indicates that conduct after
an improper deregulation may be relevant to treble damages under the new law. Relying
on another distinct provision that can be analyzed separately, the tenants also argue that a
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Natural Resources v United States ex rel. Stevens, 529 US 765 [2000]; State of N.Y. ex
rel. Grupp v DHL Express [USA], Inc., 19 NY3d 278 [2012]; see also Senate Introducer’s
Mem in Support, Bill Jacket, L 2019, ch 36 [describing treble damages as “punitive”]).
They function as such in the RSL, under which actual damages are also available and there
are no limitations on the amount of the annual overcharge that may be trebled (see
Landgraf, 511 US at 281 [“Retroactive imposition of punitive damages would raise a
serious constitutional question”]; dissenting op at 45-46 [identifying constitutional
concerns with retroactive imposition of treble damages]).
The Legislature is entitled to impose new burdens and grant new rights in order to
address societal issues and, in enacting the HSTPA, it sought to alleviate a pressing
affordable housing shortage that it rationally deemed warranted action. But there is a
critical distinction for purposes of a due process analysis between prospective and
retroactive legislation. As the Supreme Court has observed, retroactive legislation that
Part F amendment mandating the assessment of tenants’ attorneys’ fees on owners found
liable for an overcharge (when previously such attorneys’ fees were discretionary) should
be applied to pending claims. The Supreme Court has held that new legislation providing
reasonable attorneys’ fees to a prevailing party may be applied in pending cases because
“[a]ttorney’s fee determinations . . . are collateral to the main cause of action and uniquely
separable from the cause of action to be proved at trial” (see Landgraf, 511 US at 276-277
[internal quotation marks and citation omitted] [explaining that Bradley (416 US 696), in
which the Court applied such a provision in a pending case, “did not alter the well-settled
presumption against application of the class of new statutes that would have genuinely
‘retroactive’ effect” in part because of the collateral nature of attorneys’ fee
determinations]). Attorneys’ fees have yet to be addressed in Regina Metro., in which the
overcharge claim must be resolved before DHCR. However, attorneys’ fees are no longer
at issue in Taylor or Reich, in which there is no recoverable overcharge, or in Raden, where
the tenants abandoned their request for attorneys’ fees by failing to move specifically for
such relief in Supreme Court.
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- 54 - Nos. 1-4
reaches “particularly far” into the past and that imposes liability of a high magnitude
relative to impacted parties’ conduct raises “substantial questions of fairness” (Eastern
Enters., 524 US at 534). In the retroactivity context, a rational justification is one
commensurate with the degree of disruption to settled, substantial rights and, in this
instance, that standard has not been met. Thus, the overcharge calculation and treble
damages provisions in Part F may not be applied retroactively, and these appeals must be
resolved under the law in effect at the time the overcharges occurred. The parties’
remaining arguments lack merit, are rendered academic or are otherwise unreviewable.
In an attempt to delegitimize our analysis by association, our three dissenting
colleagues raise the ghost of Lochner v New York (198 US 45 [1905]), an outdated and
long-discredited Supreme Court precedent that has nothing to do with retroactivity
(dissenting op at 2, citing Lochner). In Lochner, under the guise of due process analysis,
the Supreme Court struck down economic legislation it viewed as unwise from a public
policy standpoint (see Ferguson v Skrupa, 372 US 726, 730 [1963]). We agree
wholeheartedly with the dissent that legislative judgments are presumptively constitutional
and are subject to a rational basis analysis in which the policy preferences of judges have
no role. Although the dissent repeatedly suggests otherwise, in stark contrast to the holding
in Lochner, in this case we are not invalidating or “striking down” the overcharge
calculation provisions in the HSTPA. The only question presented and resolved here is
whether those provisions – whose validity is not otherwise at issue in these appeals – may
- 54 -
- 55 - Nos. 1-4
be applied retroactively. The dissent never seriously engages with this issue or the
substantial body of precedent governing it.
In this regard, the rational basis test – although extremely deferential – must be
meaningfully applied to ensure basic principles of fairness and substantial justice, lest we
abdicate our responsibility to the citizens of this State. As Justice Holmes wrote when
dissenting in Lochner – espousing a view that later prevailed in the Supreme Court – “the
word ‘liberty,’ in the 14th Amendment, is perverted when it is held to prevent the natural
outcome of a dominant opinion, unless it can be said that a rational and fair [person]
necessarily would admit that the statute proposed would infringe fundamental principles
as they have been understood by the traditions of our people and our law” (Lochner, 198
US at 76 [Holmes, J., dissenting] [emphasis added]). The modern rejection of Lochner has
never been understood to require courts to abandon “fundamental principles” of fairness –
not even when reviewing economic legislation. There are few principles as fundamental
or, in the words of the Supreme Court, as “elementary” or “deeply rooted” as the notion
that government may not irrationally impose or expand liability for past conduct (Landgraf,
511 US at 265).
Indeed, the legislation imprudently struck down in Lochner was not retroactive at
all – it merely set a prospective cap on bakers’ working hours (198 US at 52). If that
legislation had directed that the cap be applied retroactively, requiring recoupment of
wages bakers earned years if not decades in the past when working excess hours (or profits
their employers earned as a result of the productivity associated with those hours), we
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would certainly look upon such retroactive application with skepticism. While it may be
unusual – but not unprecedented (see Moe v Sex Offender Registry Bd., 467 Mass. 598, 6
NE3d 530 [2014] [retroactive application of amendments requiring publication of sex
offender registry information violated due process rights of sex offenders]; Neiman v
American Nat. Property and Cas. Co., 236 Wis.2d 411, 613 NW2d 160 [2000] [retroactive
application of amendment increasing cap on wrongful death damages violated defendant’s
due process rights]; San Carlos Apache Tribe v Superior Court, 193 Ariz. 195, 972 P2d
179 [1999] [retroactive application of amendments revising surface water law violated due
process rights of tribes]) – to decline to apply a statute retroactively on due process grounds,
it is also unusual for parties to ask the Court to apply retroactively legislation that alters
substantive rights in the way that Part F does.
We may have a fair disagreement over whether there is a rational justification for
retroactive application of the HSTPA’s overcharge calculation provisions, but the dissent’s
misguided attempt to cast as improper our application of a meaningful standard of
constitutional review merits a response. We are persuaded by the words of Justice Breyer
who, although disagreeing with the result in Eastern Enterprises, cautioned against the
misplaced fear that reliance on the Due Process Clause in assessing the propriety of
retroactive application of a statute somehow “resurrect[s] Lochner” (524 US at 557
[Breyer, J., dissenting]).
“[A]n unfair retroactive assessment of liability upsets settled
expectations, and it thereby undermines a basic objective of
law itself. To find that the Due Process Clause protects against
this kind of fundamental unfairness—that it protects against an
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unfair allocation of public burdens through this kind of
specially arbitrary retroactive means—is to read the Clause in
light of a basic purpose: the fair application of law, which
purpose hearkens back to the Magna Carta. It is not to resurrect
long-discredited substantive notions of ‘freedom of contract’”
(id., quoting Ferguson, 372 US at 729-732 [internal citations
omitted]).
Our “Court . . . plays a crucial and necessary function in our system of checks and balances.
It is the responsibility of the judiciary to safeguard the rights afforded under our State [and
Federal] Constitution[s]” (People v LaValle, 3 NY3d 88, 128 [2004]). Our narrow holding
here – determining that newly-enacted overcharge calculation provisions may not be
applied retroactively – constitutes nothing more than an appropriate exercise of this
quintessentially judicial authority.
Accordingly, in Regina Metro., the Appellate Division order, insofar as appealed
from, should be affirmed, with costs to petitioner Regina Metropolitan Co., LLC, and the
certified question answered in the affirmative; in Raden, the Appellate Division order
should be affirmed, with costs, and the certified question not answered as unnecessary; in
Taylor, the Appellate Division order should be modified, without costs, in accordance with
this opinion and as so modified affirmed, and the certified question answered in the
negative; and in Reich, the Appellate Division order should be affirmed, with costs, and
the certified question answered in the affirmative.
- 57 -
Matter of Regina Metropolitan v DHCR; Raden v W7879; Taylor v 72A Realty Associates;
Reich v Belnord Partners
Nos. 1-4
WILSON, J. (dissenting):
For the first time in its history, our Court has struck down, as violative of substantive
due process, a remedial statute duly enacted by the legislature: Part F, section 7 of the
Housing Stability and Tenant Protection Act of 2019 (HSTPA). According to the majority,
when our legislature stepped in to remedy the unlawful deregulation of tens of thousands
of rent-regulated dwellings, occurring because of the 13-year lapse between DHCR’s
erroneous statement of the law and this Court’s correction of it, the legislature violated the
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-2- Nos. 1-4
United States Constitution by deciding that landlords could retain some, but not all, of the
unlawfully obtained rent overcharges.
The majority’s justification is that “the prior statutory scheme conferred on owners
clear repose” to retain unlawful rent overcharges “that occurred, in some cases, many years
or even decades before the HSTPA was enacted” (majority op at 3). But the prior rent
control law offered no clear repose; rather, it produced differing judicial and administrative
interpretations about how to calculate rent overcharge awards for past conduct. The
legislature stepped in and resolved that question, as is its right. Moreover, even had the
prior statute granted “clear repose,” the legislature remains free to alter damage awards for
unlawful rents obtained by unlawful past conduct. The very “claim-revival” jurisprudence
cited by the majority establishes the legislature’s right to do so.
One hundred and sixteen years ago, in People v Lochner (177 NY 145, 175 [1904]),
our Court understood that the legislature, not the courts, is charged with making laws to
advance the public welfare and that courts must give a wide berth to such legislative
judgments, so long as they do not trample constitutionally protected rights. The United
States Supreme Court reversed us. Time has not been kind to Lochner v New York (198
US 45 [1905]). It is regarded as one of the Supreme Court’s most misguided decisions.
The majority’s description of it as “long-discredited” (majority op at 54) is charitable.
With today’s decision, the disgraced era of Lochner makes its tragic return home.
To find portions of the HSTPA unconstitutional on substantive due process grounds, the
majority has disregarded jurisdictional rules and prudential concerns. It proceeds to
mischaracterize the HSTPA’s express application to “claims pending” as rendering it a
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-3- Nos. 1-4
retroactive “claim revival” statute. Answering a question not raised below, the Court
decides it with a legal analysis not argued by the parties, applied to imagined factual
circumstances on a nonexistent factual record.
In wielding substantive due process as a sword to strike down remedial economic
legislation, the majority vitiates the political choices of New York’s legislature in passing
the HSTPA. The amendments to the legislative scheme surrounding rent stabilization
reflect the legislature’s judgment, approved by the Governor, about the consequences for
landlords who have violated New York law. In place of that judgment, the majority has
substituted its own: the Court must “safeguard” the “substantive” “contractual or property
rights” of New York’s landlords. Indeed, late in its opinion, the majority identifies the
substantive right protected by its resurrection of Lochner: the “substantive rights relating
to overcharge recovery” (majority op at 46). That is, the rights of landlords to retain illegal
overcharges wrongfully obtained from tenants. 1
Make no mistake: the legislature unequivocally instructed that Section F of the
HSTPA was to apply to “claims pending.” The majority admits the legislature “intended
[Part F] to apply to overcharge claims where the calculation issue remained unresolved as
1
As discussed in Section V, infra, we had no constitutional concerns whatsoever when, in
1997, the legislature curtailed tenants’ right to recover overcharges in the exact provisions
that the legislature now removed via the HSTPA (see L 1997, ch 116; Matter of Partnership
92 LP v DHCR, 11 NY3d 859 [2008] [applying the Rent Regulation Reform Act of 1997
retroactively to limit a tenant’s recovery in a rent overcharge action pending at the time of
the statute’s enactment]). The majority cannot explain why landlords have a substantive
right to retain ill-gotten rents while tenants have no substantive right to recover them. The
answer, of course, is that neither group has an interest in the rent regulation laws that is
protectable by substantive due process.
-3-
-4- Nos. 1-4
of the June 2019 effective date” (majority op at 38). As much as the majority protests it is
“not invalidating or ‘striking down’ the overcharge calculation provisions in the HSTPA”
(majority op at 54), it is striking down, as violative of substantive due process, the
legislature’s clear command: “This act shall take effect immediately and shall apply to any
claims pending or filed on and after such date” (L 2019, ch 36, Part F, § 7). 2 This is
Lochner redux: a grotesque usurpation of the legislature’s role in determining economic
regulation when no fundamental rights are at issue.
Because Part F of the HSTPA contains economic regulations that reflect a
legislative policy judgment and do not infringe on fundamental rights, it should be
evaluated under the well-settled rational basis standard (West Coast Hotel Co. v Parrish,
300 US 379, 391 [1937]). The rational basis standard is not demanding (see People v
Knox, 12 NY3d 60, 69 [2009]). Indeed, it is “the most relaxed and tolerant form of judicial
scrutiny” (Dallas v Stanglin, 490 US 19, 26 [1989]). Simply, courts are barred from
declaring economic legislation unconstitutional under the Due Process Clause of the
Fourteenth Amendment if the regulation is conceivably rationally related to a legitimate
government interest and is neither arbitrary nor discriminatory (see Nebbia v New York,
291 US 502, 537 [1934]). By finding a due process violation here, the majority ignores
nearly a century of Supreme Court precedent in which the Court applied that rational basis
test to state regulations (see Ferguson v Skrupa, 372 US 726, 729 [1963] [collecting cases]).
2
The effective date of the statute was June 14, 2019.
-4-
-5- Nos. 1-4
Since 1937, the Supreme Court has never struck down an economic regulatory
statute, duly enacted by a legislature, on substantive due process grounds. Neither had we,
until now. Because economic regulations, such as the rent control regulations before us,
are not subject to any sort of heightened scrutiny and readily pass the rational basis test, I
dissent. 3
In 1894, reform-oriented Republicans took control of every branch of New York
government, after years of Democratic dominance backed by the notorious Tammany Hall
organization (see Paul Kens, Lochner v. New York: Economic Regulation on Trial 38
[1998]). When the legislature reconvened for its 1895 session, bakers on the Lower East
Side were on strike over working hours and conditions (id. at 49). At the time, most
bakeshops were housed in unfinished, stooped-ceilinged tenement basements. Workweeks
were typically more than seventy hours, and in some cases over 100 hours, for less than
$12 per week (before boarding costs that workers were required to pay) (id. at 13). 4 The
3
Although I disagree with some portions of the majority’s analysis of the law pre-HSTPA,
I do not address those, because HSTPA will be applied as written for claims that were not
yet pending as of its effective date (see majority op at 4 [“we… opine in no way on the vast
majority of that legislation or its prospective application”]).
4
For a general account of sweatshop working conditions in turn-of-the-century New York,
see e.g. Jacob Riis, How the Other Half Lives (1890); see also Abraham Cahan, “A
Sweatshop Romance,” in The Imported Bridegroom and Other Stories (1898) (“They say
a day has twenty-four hours. That’s a bluff. A day has twelve coats . . . . I have still two
-5-
-6- Nos. 1-4
work was hot, grueling, unsanitary and unsafe. Although New York had enacted a statutory
eight-hour workday in 1867, the law contained no enforcement mechanism and included a
section providing that “no person shall be prohibited from working as many hours extra
work as he or she may see fit” (id. at 26). The bakeshop law (codified, as relevant, L 1897,
ch 415, § 110) set a ten-hour per day and sixty-hour per week limit for bakery employees.
It also made any violation of the law a misdemeanor punishable by a $20 to $100 fine on
first offense (People v Lochner, 73 AD 120, 123 [4th Dept 1902]). The bakeshop law
passed unanimously in the Assembly and Senate and was signed by the Governor that May.
A Utica bakeshop proved to be the law’s downfall. Joseph Lochner, a longtime
adversary of Utica’s journeyman bakers’ union, was arrested in April 1901 for violating
the bakeshop law by allowing (or compelling) his employee, Aman Schmitter, to work
more than sixty hours per week. It was Lochner’s second violation of the law, for which
he faced a fine of $50. After his conviction in Oneida county court, Lochner argued on
appeal that the bakeshop law prohibited him from freely entering into contracts, in violation
of the Privileges and Immunities and Equal Protection clauses of the Fourteenth
Amendment, and the Due Process Clause of the state Constitution (Lochner, 73 AD at 121).
The Appellate Division sided with the state, holding that the statute was a valid exercise of
the legislature’s police power to create economic regulations and that the judiciary must
coats to make of the twelve that I got yesterday. So it’s still Monday with me. My Tuesday
won’t begin before about two o’clock this afternoon”).
-6-
-7- Nos. 1-4
not disturb such a regulation if it “really relates to, and is convenient and appropriate to
promote, the public health” (id. at 124, quoting In re Jacobs, 98 NY 98, 100 [1885]).
We agreed. As we held, many states had adopted statutes to address working
conditions in various industries, and the Supreme Court had regularly upheld them as not
violative of the Fourteenth Amendment (Lochner, 177 NY at 148-149, citing Barbier v
Connolly, 113 US 27 [1884] [upholding a San Francisco ordinance banning overnight work
in public laundries]; Holden v Hardy, 169 US 366 [1898] [upholding Utah’s eight-hour
workday for mineworkers]). The standard for Fourteenth Amendment review of a statute
was plain: “If the act and the Constitution can be so construed as to enable both to stand,
and each can be given a proper and legitimate office to perform, it is the duty of the court
to adopt such construction” and “it is not necessary to the validity of a penal statute that
the Legislature should declare on the face of the statute the policy or purpose for which it
was enacted” (Lochner, 177 NY at 159 [internal citations omitted]). The Court needed
only to find a conceivable way in which the statute was addressed to the benefit of the
public, which the bakeshop law was.
The Supreme Court held otherwise, spawning the dominant canon of review for
state economic regulation from 1905 until its demise in 1937, and the dominant anticanon
for the 83 years since (see Jamal Greene, The Anticanon, 125 Harv L Rev 379, 418 [2011]).
In Lochner, the Court held that New York deprived bakers of the “the general right of an
individual to be free in his person and in his power to contract in relation to his own labor”
(198 US 45, 58 [1905]). The Court articulated a new, heightened protection for some class
of economic liberty, including the right to contract freely:
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-8- Nos. 1-4
“Statutes of the nature of that under review, limiting the hours
in which grown and intelligent men may labor to earn their
living, are mere meddlesome interferences with the rights of
the individual, and they are not saved from condemnation by
the claim that they are passed in the exercise of the police
power and upon the subject of the health of the individual
whose rights are interfered with, unless there be some fair
ground, reasonable in and of itself, to say that there is material
danger to the public health, or to the health of the employees,
if the hours of labor are not curtailed. If this be not clearly the
case, the individuals whose rights are thus made the subject of
legislative interference are under the protection of the Federal
Constitution regarding their liberty of contract as well as of
person; and the legislature of the state has no power to limit
their right as proposed in this statute” (Lochner, 198 US at 61).
Justice Oliver Wendell Holmes, dissenting in an enviable 650 words, articulated the
once and future position of the Court: “state constitutions and state laws may regulate life
in many ways which we as legislators might think as injudicious, or if you like as
tyrannical, as this, and which, equally with this, interfere with the liberty to contract” (id.
at 75-76 [Holmes, J., dissenting]). Justice Holmes vigorously maintained that it is up the
people and their political representatives to determine the extent of economic regulation,
not a constitutional question for courts.
In the roughly 30-year Lochner era that followed, an estimated 200 state statutes
were found to be unconstitutional as violative of due process because they interfered with
the right to contract—what would come to be known as the first wave of the “substantive
due process” doctrine (see Erwin Chemerinsky, Constitutional Law [5th ed], § 8.2.2, citing
Benjamin Wright, The Growth of American Constitutional Law 154 [1942]). In Block v
Hirsh (256 US 135 [1921]), Justice Holmes, this time writing for the Court, drove a crack
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-9- Nos. 1-4
into Lochner’s armor. During the pendency of a lease, the District of Columbia passed
new legislation regulating rental property. The landlord objected to the application of the
new legislation to the preexisting lease, claiming to do so would deprive him of due
process. The Court upheld the statute, noting that “we have no concern of course with the
question whether those means were the wisest, whether they may not cost more than they
come to, or will effect the result desired” (id. at 158).
Unbowed by the Supreme Court’s Lochner-era jurisprudence, and perhaps
emboldened by Block, in 1933, this Court upheld a New York statute setting the price of
milk against a due process challenge (People v Nebbia, 262 NY 259 [1933]). That proved
the turning point. The next year, reviewing Nebbia, the Supreme Court retreated to its
proper deferential posture:
“So far as the requirement of due process is concerned, and in
the absence of other constitutional restriction, a state is free to
adopt whatever economic policy may reasonably be deemed to
promote public welfare, and to enforce that policy by
legislation adapted to its purpose. The courts are without
authority either to declare such policy, or, when it is declared
by the legislature, to override it. If the laws passed are seen to
have a reasonable relation to a proper legislative purpose, and
are neither arbitrary nor discriminatory, the requirements of
due process are satisfied, and judicial determination to that
effect renders a court functus officio” (291 US at 537).
The coups de grâce came in West Coast Hotel v Parrish (300 US 379 [1937]) and
United States v Carolene Products (304 US 144 [1938]), where the Court clarified that so
long as legislation did not violate a specified constitutional right, “restrict[] those political
processes which can ordinarily be expected to bring about repeal of undesirable
legislation,” or exhibit “prejudice against discrete and insular minorities,” a reviewing
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- 10 - Nos. 1-4
court must defer to a legislature that employs reasonable means towards a legitimate
purpose (Carolene Products, 304 US at 153-153 n 4; Nebbia v New York, 291 US 502, 537
[1934]).
The post-Lochner consensus has held for nearly a century, resting on two principles.
The first principle is separation of powers. The legislature, not the courts, determines the
extent of economic regulation aimed at goals like health, safety, prosperity and equity. The
second principle is that the “freedom to contract” and associated economic liberties are not
constitutionally protected rights. Legislation that threatens someone’s pocketbook is not
subject to any heightened constitutional scrutiny in the way that, for instance, legislation
that discriminates based on sex or race is.
During World War II, civilian industries were mobilized for war. The construction
workers who had not become soldiers were put to work making planes, munitions and other
wartime necessities. Housing construction dramatically slowed (see Herbert Levy, Rent
Control in New York City: Another Look, 47 NY St BJ 193, 194 [1975]). In the war’s
aftermath, New York City faced a severe housing shortage. Although the federal
government had frozen New York City rents during the war, those controls were repealed
in 1947, leaving military alumni and their booming families vulnerable (see Rent
Regulation after 50 Years: An Overview of New York State’s Rent Regulated Housing
1993, New York State Division of Housing and Community Renewal, Office of Rent
Administration [1994]). In 1949, the federal government empowered the States to enact
- 10 -
- 11 - Nos. 1-4
rent control laws by giving States authority “to assume administrative control of rent
regulation and the power to continue, eliminate or modify the Federal system” (id.).
Throughout the 1950s and 60s, New York City took charge of its rent-controlled
housing, easing wartime-like rent control laws as it grew more prosperous and as more
housing was built. However, by 1969, the City’s housing crisis was once again dire: “the
Vietnam War caused a steep rise in the rate of inflation and locally, housing production
slumped. The overall vacancy rate which stood at 3.2% in 1965 fell drastically to 1.23%
in 1968” (id.). War, once again, led to a rapid escalation in New York City rents, which
encouraged the City to enact the Rent Stabilization Law of 1969. That local law laid the
groundwork for New York’s rent stabilization scheme underlying the cases before us, first
passed as the Emergency Tenant Protection Act of 1974 (L 1974, ch 576) and subsequently
amended in 1983, 1993, 1997, and again in 2019.
The legislature’s purpose in rent regulation is conceptually no different than in
regulating the hours of bakers or, for that matter, in any law seeking to regulate the welfare
of New Yorkers. At bottom, each of the many changes to the rent regulation laws has
reflected a legislative judgment about how those benefits and burdens must be weighed so
that New York does not slip back into the unregulated tenements of Lochner or the
strictures of wartime rent control. The HSTPA is just the next set of changes that reflect a
legislative response to the current state of New York’s housing woes, akin to legislative
acts in countless other fields.
- 11 -
- 12 - Nos. 1-4
As the majority acknowledges, “no party doing business in a regulated environment
like the New York City rental market can expect the [Rent Stabilization Law] to remain
static” (majority op at 31). As with the workers’ compensation system at issue in American
Economy Ins. Co. v State of New York (30 NY3d 136 [2019]), “the allocation economic
benefits and burdens has always been subject to adjustment,” therefore rendering claimed
rights to stasis “inchoate” (id. at 148 [internal citations omitted]). Neither landlord nor
tenant has any fundamental right to the regulations of the moment, especially within a
highly regulated industry such as rent stabilization (see Schutt v New York State Div. of
Hous. & Community Renewal, 278 AD2d 58, 58 [1st Dept 2000] [“since rent regulation
does not confer vested rights, petitioners’ argument that the application of the RRRA’s
limitation period to pending cases violates due process by depriving them of the benefit of
pre-RRRA rent regulation provisions law more favorable to their claims is without merit”]
[internal citations omitted]). Rather, the legislature is free to calibrate its policy decisions
to the needs of war, peace and everything in between, so long as its legislation is not
irrational. That is the lesson of Lochner’s interment.
The majority knows that “legislative judgments are presumptively constitutional
and are subject to a rational basis analysis in which the policy preferences of judges have
no role” (majority op at 54). Under the majority’s view, voiding sections of the HSTPA is
not the product of heightened review but rather the product of the rational basis test
- 12 -
- 13 - Nos. 1-4
“meaningfully applied” (id.), by which the majority means applied, for the first time since
1937, to strike down economic legislation making a policy choice about social welfare. 5
In order to justify “meaningful” application of the rational basis standard, the
majority asserts that, unlike other economic regulation, the HSTPA threatens “substantive
rights” (majority op at 28, 31, 33, 45, 46, 56) and “considerable reliance interests” (majority
op at 31). The majority insists it is not applying Lochnerian analysis, but then concludes
that the HSTPA violates due process because its “impact on contract rights is unusually
significant” (majority op at 49). It is odd to refer to a landlord’s retention of an illegal rent
as a “contract right.” Indeed, the “substantive right” to which the majority refers is not the
right of landlords to earn a reasonable return, it is the right to keep rents collected in
violation of the rent stabilization laws. 6
The majority tries to distinguish its holding from Lochner by asserting that the
HSTPA is retroactive whereas the bakeshop laws were prospective (majority op at 55).
That completely misunderstands what makes Lochner odious. Lochner did not err because
it found that wage and hour laws violated the freedom of contract when in reality they did
not; it erred because it treated the freedom to contract as a right that could not be overcome
5
The normal application of the rational basis test is not “meaningless” just because it was,
until now, used to validate rather than eviscerate legislation. Allowing the elected
legislature, rather than the courts, to determine how to regulate our economy, reflects our
meaningful commitment to the separation of powers and democracy.
6
To be clear, there is not a scintilla of evidence in the record that any of these landlords—
or any others—will fail to realize a reasonable profit if, as the legislature commanded,
Section F of the HSTPA is applied to pending claims.
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by a legislature’s rational attempt to make policy decisions that impaired the economic
positions of some while benefitting others. Regardless, as explained at length in section
IV infra and throughout, the majority’s attempt to distinguish Lochner fails because
retroactive legislation is subject to the same rational basis review as prospective legislation
(see Landgraf v USI Film Prods., 511 US 244 [1994]; American Economy Ins. Co. v State
of New York, 30 NY3d 136 [2019]). Today’s majority is analytically indistinguishable
from Lochner: it applies a substantive due process analysis to invalidate a statute based on
economic interests that the majority treats as if they were constitutionally protected rights,
when they are not.
Using the instant cases to re-animate the dead hand of Lochner requires a couple of
grisly maneuvers. First, we lack jurisdiction to address the HSTPA; second, for prudential
reasons if nothing else, striking down a statute on substantive due process grounds when
the argument is made for the first time in this Court without record support for the claimed
burden and equitable factors (see e.g. majority op at 31 [citing HSTPA’s effect on
“considerable reliance interests”]) is both unwise and injudicious.
In these cases, we lack jurisdiction to consider the HSTPA. All four cases are in
our Court on certified questions from the Appellate Division. In McMaster v Gould (240
NY 379 [1925]), we considered the very jurisdictional issue raised here: when a new statute
is enacted after the Appellate Division sends a case to us via certification, do we consider
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whether the Appellate Division’s decision was correct under the new statute or under the
law as it was when the Appellate Division rendered its decision? Our decision was clear:
“If the court below was right when it certified the question it is still right” regardless of any
later changes to the statute (id. at 385). Lest there be any doubt, we very shortly before, in
Robinson v Robins Dry Dock & Repair Co., explained that when an appeal comes to us in
some way other than via a certified question (e.g., as of right from a double dissent or by a
leave grant from a final judgment), “the appellate court may dispose of the case in
accordance with the law as changed by the statute” (238 NY 271, 281 [1924]).
The majority’s attempt to sweep away our longstanding precedents by asserting that
the breadth of the Appellate Division’s question determines whether we may apply a statute
enacted after the Appellate Division’s decision is utterly groundless (see majority op at 22
n 15). Appellate Division practice cannot overrule Court of Appeals precedent. McMaster
directs that, when a certified question asks whether the Appellate Division order was
properly made, we must answer that question: was the order proper at the time it was made?
The only case cited by the majority to assert that we have jurisdiction to reach the
challenges to the HSTPA is Gleason v Michael Vee, Ltd. (96 NY2d 117, 122 [2001]).
However, Gleason was not before us on a certified question. It was a final decision as to
which leave was granted, so it falls squarely under Robinson’s rule, not McMaster’s. The
majority’s further claim that certifying specific legal questions is an “largely abandoned
practice” is irrelevant (majority op at 22 n 15; see Olsen v Town of Richfield, 81 NY2d
1024 [1993]; Flick v Stewart-Warner Corp., 76 NY2d 50 [1990]).
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B.
Even if we possessed jurisdiction to consider a constitutional challenge to the
HSTPA, we should not invalidate a statute on substantive due process grounds when the
argument is considered for the first time before us on an empty record.
A party seeking to invalidate a statute on substantive due process grounds bears the
burden to prove that the legislature acted without a rational basis (see Usery v Turner
Elkhorn, 428 US 1, 15 [1976]). Because the HSTPA was enacted after the Appellate
Division rendered its decisions in these cases, the parties’ briefs in the lower courts,
naturally, did not mention the statute and there was no evidence in the record concerning
the statute—it did not exist. The majority emphasizes the burdens placed on landlords by
the HSTPA without evidence that any substantial burdens exist in the real world. The
Court now invalidates Part F, section 7 of the HSTPA based on a hypothesized calamity,
announcing the severity of the burden as a matter of law, substantiated by nothing. It
appears that, although we lack the power to find facts, we have the power to imagine them.
The prudent course here would be to do as we did in Post v 120 E. End Ave. Corp.:
remit these appeals to Supreme Court (or, in the case of Regina, to DHCR) (62 NY2d 19,
29 [1984] [“The amended statute should be applied to this appeal but because the facts
have not been developed, we reverse and remit the matter to the Supreme Court for further
proceedings”]). In that way, the parties could develop a record that would allow the careful
determination of standing, preservation and burden, issues that would be first determined
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in courts (or an agency) able to find facts and then could come to us on a record that frames
our legal determination.
I turn, next, to the fundamental proposition underlying the majority’s substantive
analysis of the HSTPA: that the HSTPA is retroactive because it shifts the statute of
limitations and revives previously extinguished claims. That is a false premise.
To understand why the HSTPA is not a retroactive “claim revival” statute, one must
keep three time-periods in mind: (1) the amount of time within which a tenant may
challenge the unlawful deregulation of an apartment; (2) the amount of time for which a
tenant can claim damages sustained as a result of an unlawful deregulation; and (3) the age
of the records a court (or DHCR) can examine to determine what the rental rate would have
been if an apartment had not been unlawfully deregulated.
As to the first time period, there is not, and there has never been, a time limit on
when a tenant can claim that a unit has been unlawfully deregulated. Both before and after
the HSTPA, tenants have always been able to challenge an unlawful deregulation of an
apartment, no matter how far in the past the deregulation occurred (see e.g. Roberts v
Tishman Speyer Properties, L.P., 13 NY3d 270 [2009] [tenants brought suit in 2007 for an
unlawful deregulation in 1993]; Kuzmich v 50 Murray Street Acquisition LLC, 34 NY3d
84 [2019] [tenants brought suit in 2016 for an unlawful deregulation in 2003]; Gersten v
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56 7th Ave. LLC, 88 AD3d 189 [1st Dept 2011] [tenants brought suit in 2009 for an
unlawful deregulation in 1999]).
As to the second time period, in 1983, the legislature set a four-year limit on rent
overcharges that could be recovered as a result of an unlawful deregulation (see L 1983,
ch 403, § 35). So, although a tenant could always seek a declaration that a unit was
unlawfully deregulated twenty years ago, that tenant could recover overcharges sustained
only in the four years prior to bringing the complaint. In 1995, if a tenant sued because a
unit had been unlawfully deregulated in 1975, the tenant could claim damages for rent
overcharges for the years 1991-1995. However, the court (or DHCR) could look back to
1975 to determine what the proper rent would have been for the years 1991-95, had the unit
not been unlawfully deregulated, and from that could determine the overcharge, if any, for
those years.
As to the third time period, in the 1997 RRRA, the legislature amended the rent laws
to limit courts (and DHCR) to looking back no more than four years from the filing of the
complaint to determine the base rate from which the appropriate rental rate could be
calculated (L 1997, ch 116 § 32; see Executive Chamber Memorandum in Support, Bill
Jacket L 1997, ch 116 at 40). Accordingly, as a result of the 1997 RRRA, a tenant who
sued for overcharges in 2002 for an unlawful deregulation occurring in 1975 was limited
to the use of records from 1998 or later to establish the rate that should have been charged
from 1998 forward. Thus, even after the 1997 amendments, tenants could challenge an
unlawful deregulation no matter how many years before that deregulation had occurred and
could obtain both an injunction returning the apartment to rent regulated status and a
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measure of damages. Both before and after the 1997 RRRA, the period of allowable
damages was four years, even if a landlord had unlawfully received decades worth of
overcharges.
The HSTPA left the first time period unchanged. Tenants may still bring an action
to declare that a unit was unlawfully deregulated at any time. The HSTPA lengthened the
second time period, allowing the recovery of six years of overcharges instead of four. Even
if a landlord has been overcharging tenants for decades, a tenant can still recover only a
portion of the overcharge, though a larger fraction than before. Finally, the HSTPA
eliminated the third time period altogether, by repealing the four-year lookback period
embodied in the 1997 RRRA. That repeal allows the courts and DHCR to consider
whatever evidence would best establish the rent had the unlawful deregulation never
occurred. Simply put: pre-HSTPA, the remedy for an unlawful deregulation, from any
time in the past, was four years of damages calculated in one way; post-HSTPA, the remedy
is six years of damages calculated in a different way—the way they were calculated until
1997.
The majority’s mischaracterization of the changes to the second and third time
periods drives its retroactivity claim. Neither change created or extended a statute of
limitations. From 1983 until 1997, if a tenant had suffered 20 years of illegal overcharges,
the tenant could recover four years of damages determined (in some cases) by looking back
20 years to establish a base rate, carrying that rate forward, and applying it to the four-year
period immediately preceding the complaint. From 1997 until 2019, tenants could still
recover four years of damages, but the damages were cabined by requiring that the base
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rate could not be constructed by use of information more than four years before the
complaint was filed. The cause of action stemming from the unlawful deregulation
remained untouched. 7 Now, through the HSTPA, the legislature has again tinkered with
the recoverable amount and relaxed the evidentiary restriction somewhat. Doing so does
not revive claims, nor does it make the HSTPA retroactive.
At no point during rent stabilization’s long history could a landlord who unlawfully
deregulated an apartment use the passage of time to escape an action for (1) a declaration
that the apartment was unlawfully deregulated, (2) an order returning it to regulation, and
(3) some measure of monetary damage. Therefore, there has never been a statute of
limitations as to challenges to the wrongful deregulation of apartments. New York’s
constantly evolving rent laws have once again altered the remedy available to injured
tenants, but the claim has always been the same and has never been subject to a limitations
period.
7
Indeed, as the majority notes, some of the present plaintiffs are challenging unlawful
deregulations that took place “more than a decade” ago (majority op at 12). Just several
months ago, we upheld rent overcharge claims in which the unlawful deregulation occurred
well outside the four-year lookback period (Kuzmich, 34 NY3d 84). The majority observes
that the issue before us in Kuzmich was purely a question about declaratory relief, but that
is merely the posture in which the issue came to us: the case itself s
This text is long and has been trimmed here. Open the source document for the complete record.