Scott E. Mollen

Landlord-Tenant—Rent Stabilization—Mitchell Lama Buy Out—Nine Plus Year “Dormant Litigation Resuscitated”


Plaintiff tenants had moved, inter alia, for an order “vacating” the defendants’ “demand to resume prosecution of the action and serve and file a note of issue or extending the time to file a note of issue,” or in the alternative, “extending the time to file a notice of issue.” A defendant argued that the plaintiffs had delayed prosecuting this matter for almost ten years. The pleadings had been filed in July 2007. Until May 2016, “no discovery was sought or exchanged, no RJI was filed nor were any court conferences sought.” In May 2016, the plaintiffs served defendants with a notice demanding entry onto the premises and soon thereafter, the moving defendant served a demand that plaintiffs resume prosecution. The defendant did not oppose the plaintiffs’ demand for entry onto the premises.

The plaintiffs responded in July by seeking an extension of time to file their note of issue. The court held that the plaintiff’s response constitutes “a sufficient and timely response to the demand.” The court further noted that “numerous cases establish that a motion seeking such an extension constitutes a sufficient, timely response to a 90-day notice” and that “from February 2017 to November 2017, the parties sought adjournments” based on “productive” and “ongoing” settlement negotiations. Accordingly, the court granted the plaintiff’s motion to the extent that their time to file a note of issue was extended pursuant to a stipulation dated January 29, 2018.

Comment: Adam Leitman Bailey’s law firm represents a group of renters at the “West Village Houses complex,” which involves 42 buildings and 420 units. The plaintiffs had started a declaratory judgment against the original sponsor/developer of the complex in 2007. The complaint primarily sought a declaration that the plaintiffs’ leases were protected under the Rent Stabilization Code, since the “entire complex” had “received J-51 tax benefits.”

Bailey explained that the Court of Appeals, in the Roberts v. Tishman Speyer case, had conferred “rent stabilized status to tenants living in buildings receiving J-51 benefits.” However, that decision came down in 2009, “after the conversion process had already run its course having been approved by the attorney general.” Bailey noted that the complex had been converted to “free market with an affordable protection freeze that expires in March 2018.” He further explained that the renters had not taken action for almost a decade, because they were allegedly “led astray” by public officials. He asserted that the conversion was “illegal” and involved improper conduct by the owner and the government. Finally, Bailey noted that rents will climb from approximately $1,500 to between $8,000 to $12,000 per month.

Jeffrey Turkel of Rosenberg & Estis, attorney for a defendant, advised that both parties have moved for summary judgment on the rent regulatory status.

West Village Houses Renters Union v. WVH Housing Development Fund, Sup. Ct., N.Y. Co., Index No. 118482/2006, decided Feb. 2, 2018, Jaffe, J.



Environmental—Contribution and Indemnification Denied—The United States Did Not Claim Injury to “Property”—It Claimed Failure to Comply With The Clean Water Act and An EPA Order—Damages Distinguished From Penalties

A magistrate judge had issued a report and recommendation which recommended that a third-party complaint be dismissed as to most of the third-party defendants and the defendants’ motion for leave to amend the third-party complaint be denied. The U.S. District Court (court) adopted the magistrate’s recommendations.

The United States had commenced a Clean Water Act (CWA) enforcement action against the defendants. The complaint alleged that “the defendants, and/or others acting at the defendants’ direction, or with their consent and knowledge [defendants], unlawfully discharged ‘fill material’—such as rock, soil, and construction debris—into wetlands that are owned by the defendants and which fall within the definition of ‘waters of the United States,’ 33 U.S.C. §1362(7), as that term is defined by regulation.”

The first cause of action alleged that the defendants had “engaged in ‘unauthorized discharges’ by ‘filling…impacted wetlands without a permit.” The second cause of action alleged violation of an Environmental Protection Agency (EPA) Administrative Order (the EPA order). The EPA order had, inter alia, “directed the defendants to ‘cause no unpermitted discharges into “waters of the United States,’” and to “promptly” comply with 33 U.S.C. §1344, “by removing fill material and restoring impacted wetlands to their pre-existing condition.”

The United States sought civil penalties pursuant to 33 U.S.C. §1319(d) and an injunction requiring the defendants to comply with the CWA, in addition to “requiring the defendants to ‘undertake measures, at [their] own expense…to restore waters of the United States…and to conduct…mitigation for unauthorized impacts to waters of the United States.”

The defendants filed a third-party complaint. The third-party complaint identified “twenty-five third-party defendants” and alleged that the defendants had “‘permitted’ each third-party defendant to dump fill” on the subject property. The defendants sought contribution and indemnification from the third-party defendants. The third-party defendants had moved for a judgment on the pleadings pursuant to FRCP 12(c).

The court explained that “[t]he plain language of New York’s contribution statute, C.P.L.R. §1401,” requires dismissal of the defendants’ contribution claim. “Section 1401 provides, in relevant part, that ‘two or more persons who are subject to liability for damages for the same…injury to property…may claim contribution among them.” Thus, in order to state a claim for contribution, the defendants had to allege that “the third-party defendants are ‘liabl[e] for damages for the same…injury to property’….” Here, the United States had not alleged that the defendants were “liable for ‘injury to property.’” Rather, the United States alleged that the defendants were “liable for violations of the [CWA].”

The first cause of action had alleged that the defendants failed to seek a permit permitting discharge of fill into waters of the United States and that “[t]he crux of this cause of action is not the discharge of fill; it is,…, the discharge of fill without a permit.” The court noted that “[a]lthough the United States…seeks, at a general level, to prevent environmental injury to property, what the United States seeks to rectify through this lawsuit is an alleged failure to comply with the CWA’s permitting requirements.” Thus, the United States had not alleged an “‘injury to [the] property’ on which fill was allegedly discharged.” Accordingly, the United States had not alleged an “injury to property.”

The second cause of action also did not allege an “injury to property.” That cause of action alleged that “the defendants have ‘failed to comply’ with the EPA order, which, [inter alia] ordered the defendants to ‘cause no discharges’ of fill material into waters of the United States, ‘except as authorized by a valid permit issued by the Corps.’” This claim essentially alleged a violation of the EPA order rather than “injury to property.” The United States sought to “ensure that a federal agency’s orders are obeyed.”

The court reasoned that the remedies sought by the United States make clear that a contribution claim is precluded by CPLR §1401. That section permits “contribution when ‘two or more persons…are subject to liability for damages.” Here, “[i]f the defendants are…liable to the United States,…, they are not liable for ‘damages’; they are liable for what the relevant statute terms ‘a civil penalty.’” The court explained that “[d]amages and penalties are,…, distinct remedies.” Damages are “punitive and some limit on the regulator’s discretion to impose them is necessary.” Penalties are “remedial and naturally limited to the loss caused by the defendant.” The court stated that “§1401’s plain text does not allow contribution for penalties.”

In addition to seeking civil penalties, the United States sought “an order that the defendants, at their own expense, restore the affected wetlands and ‘conduct…mitigation for unauthorized impacts to waters of the United States, as appropriate.’” The court explained that although “clean up costs, restoration costs, and mitigation costs may intuitively seem to be the equivalent of tort damages, these costs are not recoverable under §1401.” The subject litigation was commenced pursuant to “33 U.S.C. §1319(b), which authorizes the United States to bring ‘a civil action for appropriate relief, including a permanent or temporary injunction.’” Section 1319(b) further vests “district courts with ‘jurisdiction to restrain…violation[s] [of certain provisions of the CWA] and to require compliance.’” Therefore, “any clean-up, restoration, and mitigation costs that might be ordered in this case would be ordered as a form of injunctive relief” and “equitable relief, ‘such as injunction or restitution,’ is not the same as ‘compensatory damages.’”

Neither the defendants nor the court had found any cases interpreting §1401 “to permit contribution for equitable relief that requires a party to expend funds—either in the form of restitution, disgorgement, or costs incurred in complying with an injunction.” Moreover, “the word ‘damages’ in §1401 is a legal term of art” and refers to “a judicial award in money, payable as compensation to one who has suffered a legally recognizable injury or harm.”

The court further stated that the United States did “not seek ‘compensation.’” Rather, it sought “an order requiring the defendants to pay for expenses incurred in complying with an injunction.” The court noted that “[t]he term ‘damages’ in §1401 does not,…, encompass the costs that may be incurred in complying with a §1319(b) restoration injunction” and therefore, “§1401 does not permit the defendants to seek contribution for the relief the United States” sought in this case.

Additionally, a party “cannot obtain…indemnification unless it has been held to be vicariously liable without proof of any negligence or actual supervision on its own part.” Thus, “that indemnification ‘is not available where the party seeking indemnification was “partially at fault” or “responsible in any degree” in situations where the parties violated the same duty to the plaintiff.’”

The magistrate had noted that “even if the third-party defendants had an independent duty to ‘obtain or confirm the existence of a permit before discharging fill material’ (. . .), that duty ‘would not absolve [the defendants], as the landowner, of [their] independent duty under the [CWA] to obtain or confirm the existence of a permit before allowing the third-party defendants to discharge fill material on [the defendants’] property’…And it certainly would not discharge the defendants of their duty to comply with the EPA order, as the second cause of action alleges they failed to do.” Furthermore, the defendants admitted that “they ‘permitted’ the third-party defendants to dump fill” and that “means that the defendants are at least allegedly ‘partially at fault,’ or allegedly ‘responsible in [some] degree.’” Therefore, the court held that “the defendants may not obtain indemnification” based on the relief the United States sought in the subject case.

U.S. v. Whitehill, USDC, WDNY, Case No. 14-CV-188, decided Jan. 18, 2018, Arcara, J.


Scott E. Mollen is a partner at Herrick, Feinstein.