A landlord who brought a class-action suit against Hoboken over its handling of rent control can’t take the credit for prompting a change in the law and so won’t recover her legal fees.
Superior Court Judge Edward O’Connor Jr. ruled on Oct. 4 that the suit, DeNardo v. City of Hoboken, HUD-L-690-10, was not the catalyst for the change. Rather, the November 2011 ordinance was the result of consensus building that began with a City Council subcommittee formed before the suit was filed in February 2010, he held.
Though O’Connor found the law corrected the problems that would have been addressed by the injunctive relief sought in the suit, it did not moot the demand for compensatory damages.
Plaintiff and class representative Gina DeNardo had contended that her suit created the environment for a change in the law, after decades in which it was enforced in an arbitrary, capricious and unreasonable manner that violated the federal and state constitutions.
Hoboken on the other hand, counter-argued that the filing of the class action was akin to jumping on a moving train, because the city was already on the way to modifying the law.
Had O’Connor ruled the other way on the catalyst and mootness issues, DeNardo would have been able to pursue legal fees and costs, which are available to plaintiffs who prevail on constitutional claims in the absence of a favorable court ruling — if the litigation served as a catalyst for a voluntary change in the defendants’ conduct.
Class counsel Charles Gormally of Brach Eichler in Roseland estimates fees for the two-and-a-half-year-old suit total $750,000 to $900,000, without factoring in any enhancement.
DeNardo sued on behalf of owners of the approximately 8,000 apartment units in Hoboken that are subject to the rent-control law in place since the 1970s.
In April 2010, Judge Bernadette Castro certified a class, estimated by Gormally as having 3,500 to 4,000 members.
Gormally says the theory behind the case is that the literal requirements of the rent-control law had been affirmatively waived by the city administration for about 25 years.
From the 1980s until a few years ago, the city was allegedly not enforcing a proviso that landlords file registration forms showing the rents they were charging and vacancy decontrol forms indicating when a tenant moved out and thus the rent could be increased up to 25 percent.
The situation supposedly changed, however, in early 2007, when the city began enforcing the requirement in rent cases, to the disadvantage of landlords, who had a hard time proving they were charging legal amounts because they had not filed the forms and were not allowed to do so after the fact.
“The problem that created for class was that the papers that should have been filed since the ’80s and ’90s hadn’t been filed because they were told they didn’t have to,” says Gormally.
Ordinance Z-88 fixed the problem by allowing landlords to supplement the files going back in time, obviating the need for injunctive relief, says Gormally.
The ordinance was passed by the City Council in March 2011 and approved by voters on Nov. 8, 2011.
In a brief, DeNardo argued that the rent committee formed before the filing of the suit would not have come up with an ordinance and was merely meant to “manage the political issue.”
She contended that Hoboken had a “history of studying the problem, revealing the need to change, and then simply failing to act to change.” For example, no changes were proposed after a 1996 task force study that revealed a “whole host of familiar problems.”
The committee wrapped up in the fall of 2010 without proposing an ordinance, and one only began to emerge after meetings between class counsel and the city’s lawyers in November and December 2010, at which the idea was discussed, according to the brief.
And it was not until the class successfully fended off a summary judgment motion in January 2011 that the ordinance was proposed, claims DeNardo.
O’Connor’s ruling followed an 11-day plenary hearing.
Gormally says the court would not compel the Hoboken lawyers to testify but he used its lawyers’ billing records to show the meetings between counsel took place.
Victor Afanador, who represents Hoboken, says O’Connor credited testimony by city council members that “the process of amending the ordinance existed well before the class action lawsuit was filed.”
The political process was “the driving force behind passage, as opposed to the lawsuit or the threat of a lawsuit,” adds Afanador, of Lite DePalma Greenberg in Newark.
Gormally says no decision has been made on whether to seek an interlocutory appeal, but “we’ll ultimately revisit this catalyst finding when we get to the finish line.”