Harvey M. Stone and Richard H. Dolan

This column reports on several significant, representative decisions handed down recently in the U.S. District Court for the Eastern District of New York. Judge Jack B. Weinstein declined to dismiss claims of housing discrimination related to the requirement that Latino tenants of rent-stabilized apartments produce “proof of citizenship.” Judge Raymond J. Dearie found that plaintiff had failed to make a valid formal or informal refund claim within the statute of limitations. And Judge Weinstein stated the reasons for a probationary sentence with financial restitution.

Housing Discrimination—Motion to Dismiss Denied

In Tejada v. Little City Realty, 18 CV 483 (E.D.N.Y., April 10, 2018), Judge Weinstein denied defendants’ motion to dismiss claims under the Fair Housing Act, 42 U.S.C. §3604, New York City Human Rights Law, N.Y.C. Admin. Code §8-107(5), New York City Housing Code, N.Y.C. Admin. Code §27-2004(a)(48), and New York Rent Stabilization Laws, N.Y.C. Admin. Code §26-516(a)(2).

The complaint alleged that, from 2001 through 2017, defendants discriminated against Latino residents of two rent-stabilized apartment buildings in Sunset Part, Brooklyn, by targeting them with a “proof of citizenship” requirement upon renewal of tenancy, subjecting them to unwarranted eviction proceedings, and by making discriminatory statements. Non-Latino plaintiffs allegedly were charged unlawfully inflated prices when succeeding to the units of the displaced Latinos.

Defendants sought to dismiss the federal claims as time-barred, and the remaining claims both on that ground and for lack of subject matter jurisdiction.

Weinstein rejected the time-bar argument across the board. Though different limitary periods applied to the various claims, all were timely under the “continuing violation” doctrine. The claims under the New York Rent Stabilization Law were independently preserved also by allegations of defendants’ fraud. Slip op. 9-13, 15-16.

The exercise of supplemental jurisdiction over the non-federal claims was appropriate because they arose from a common nucleus of operative fact with the federal claims. To the extent the non-Latino plaintiffs alleged overcharges unrelated to their race, for example, that pattern of overcharging was part of the course of conduct by which Latino tenants had been displaced, and non-Latino tenants suffered by having their contact with an integrated community limited. Slip op. 13-15. While the non-federal claims “may call for additional discovery and some evidence beyond what is required for the federal claims, these considerations are outweighed by the ‘advantages of trying these closely related claims together.’” Slip op. 14, quoting Brown v. Bronx Cross Cty. Medical Grp., 834 F. Supp. 105, 109 (S.D.N.Y. 1993).

Tax Loss Carryback Refund Claims

In UKP Holdings v. United States, 15 CV 6431 (E.D.N.Y., April 6, 2018), Judge Dearie granted the government’s motion for summary judgment based on lack of subject matter jurisdiction given plaintiff’s failure to file a valid informal tax refund claim. The government’s waiver of immunity to suit in tax refund claims is conditioned upon taxpayers filing their claims within the statute of limitations.

Plaintiff sought a carryback tax refund based on 2008 capital losses. Plaintiff filed a Corporate Application for a Tentative Refund Form 1189 (Form 1189) seeking to carry its 2008 losses back to 2007. But the requested carryback only to 2007 was a critical mistake. On the facts here, plaintiff was required by statute to carry its losses back to the 2005 tax year. In subsequent discussions between plaintiff’s counsel and IRS representatives, the IRS did not identify any error in plaintiff’s tentative carryback request and plaintiff did not refile its application. According to plaintiff, the IRS erroneously told the company that it need not file amended returns to reflect the carryback, and in other ways gave plaintiff poor or incorrect advice. The IRS denied plaintiff’s request for a tentative refund for 2007 because plaintiff’s Form 1189 was filed more than a year after the close of 2008, the loss year, and plaintiff should have requested a carryback to 2005. In addition, plaintiff failed to file amended 2005 through 2008 tax returns before the three-year statute of limitations expired.

Under the informal refund claim doctrine, a taxpayer must provide notice of the refund claim, describe the legal and factual basis for the refund, and include a written component. By seeking a refund for the wrong tax year on its Form 1189, plaintiff’s informal refund claim was not valid. In any event, plaintiff’s filing of IRS Form 1189 could not salvage the claim. As expressly noted on the form itself, it “is not treated as a claim for credit or refund.”

Nor did plaintiff’s communications with IRS personnel put the IRS on notice that plaintiff sought to carry back 2008 losses. There was “no evidence that UKP communicated to a single IRS employee that it sought to carryback its losses to 2005 or sought a refund on its 2005 taxes.” Slip op. 11. The court declined to impose a duty on the IRS to investigate the underlying facts and laid the blame on “UKP’s failure to exercise appropriate care in understanding the nuances and deadlines applicable to its deadline request.” Slip op. 13; slip op. 22-23.

Similarly, plaintiff could not rely on the doctrine of equitable estoppel against the government, because it could not have reasonably relied on the IRS’ alleged misrepresentations and omissions. Plaintiff could not show that any misrepresentations by the IRS constituted affirmative misconduct, and “UKP knew or should have known the legal and statutory requirements for filing a carryback claim, as well as the applicable statute of limitations.” Slip op. 15.

Sentencing—Downward Departure

In United States v. Hopkins, 17 CR 278 (E.D.N.Y., March 27, 2018), Judge Weinstein explained the reasons for imposing a sentence of probation and restitution where the guidelines called for 18 to 24 months’ incarceration.

Defendant, a 42-year-old man, was a custodian at a U.S. Post Office service center at JFK Airport. His girlfriend, a co-defendant, worked for the New York City Human Resources Administration. As part of her job, she had access to Social Security numbers and other information of Supplemental Nutrition Assistance Program (SNAP) recipients. Defendant used this information to make purchases and withdraw cash, delaying access to food for intended beneficiaries. Defendant and his girlfriend stole $59,022 in food stamp benefits. Defendant also stole $13,178 in goods from a mail room at JFK Airport.

Defendant pled guilty to SNAP benefits fraud, 7 U.S.C. §2024(b), and theft of mail by a postal service employee, 18 U.S.C. §1709. The minimum range for food stamp fraud, the higher of the offense levels, was 18 months.

There was a videotaped sentencing hearing. In departing downward, Weinstein cited the following factors (among others):

• Defendant, a first-time offender, has eight children, including six minors, and attempts to care for and support them.

• As an adult, he has a record of continuous employment, now threatened by this conviction.

• He presents a low risk of recidivism. “A heavy jail sentence might increase the risk of reoffending.” Slip op.7.

• If he is kept out of prison, he can earn a living, pay restitution and support his family financially and emotionally. Heavy community service, rather than imprisonment, serves the public without burdening the taxpayer.

Defendant was therefore sentenced concurrently to four years’ probation and payment of restitution for the total financial loss, at the rate of 10 percent of his earnings.

Harvey M. Stone and Richard H. Dolan are partners at Schlam Stone & Dolan. Bennette D. Kramer, a partner of the firm, assisted in the preparation of the article.