The opinion of the court was delivered by: LOUIS L. STANTON
Defendants move to dismiss the complaint pursuant to Fed R. Civ. P. 12 (b)(6) for failure to state a claim upon which relief can be granted.
Plaintiff Rent Stabilization Association brings this action on behalf of its members to challenge certain provisions of the New York City Rent Stabilization Law, and the rent stabilization regulations of the New York State Division of Housing and Community Renewal, as an unconstitutional taking
and denial of due process
in violation of the Fifth and Fourteenth Amendments to the United States Constitution.
I. The Statutes and Regulations
In 1969, citing "a serious public emergency" in housing, the City of New York enacted the Rent Stabilization Law (the "RSL") to supplement its existing regime of rent control.
In 1983 the administration of the RSL was transferred from the city to the New York State Division of Housing and Community Renewal (the "DHCR"), and the RSL has been codified under the DHCR's Rent Stabilization Code (the "RSC").
With some exceptions, the RSL applies to apartments in buildings of six or more units which are not subject to rent control. RSL §§ 26-504 to 26-507. Under the RSL the Mayor of New York appoints a nine member board
which establishes mandatory annual rent increase guidelines. In reaching its determination, the board considers the following factors under RSL § 26-510(b):
(1) the economic condition of the residential real estate industry in the affected area including such factors as the prevailing and projected (i) real estate taxes and sewer and water rates, (ii) gross operating maintenance costs (including insurance rates, governmental fees, cost of fuel and labor costs), (iii) costs and availability of financing (including effective rates of interest), (iv) over-all supply of housing accommodations and overall vacancy rates, (2) relevant data from the current and projected cost of living indices for the affected area, [and] (3) such other data as may be available to it.
Plaintiff Rent Stabilization Association, Inc. ("RSA") is a not-for-profit corporation which represents over 25,000 landlords in New York City. It conducts investigations, participates in hearings and prosecutes litigation on behalf of owners of rent stabilized apartments (Complaint P 4). RSA brings this suit on behalf of its members.
In its first claim for relief plaintiff alleges that the RSL effects a taking, both "on its face" and "as applied,"
by depriving owners of rent-stabilized property of the opportunity to obtain a just and reasonable return on their property (Complaint PP 23-84). Plaintiff particularly challenges the board's disregard of the effect of inflation on owners' revenue (Id. PP 29-36), and contends that the hardship provisions are "incapable of correcting the confiscatory effects of the board guidelines" since they also ignore inflation and are limited measures beset by delay and expense (Id. PP 37-84).
In its second claim for relief plaintiff challenges the hardship provisions on the basis that their administration deprives plaintiff's members of property without due process of law (Id. PP 85-89).
Plaintiff seeks to enjoin the enforcement and administration of the RSL unless adequate provisions are made either to compensate the owners or to correct the inequities of the system; to enjoin the board from establishing maximum rent increases that do not provide owners with a just and reasonable return; and to order the state defendants to review hardship applications without delay and with a full and fair opportunity for owners to be heard.
I. The Standard for Dismissal
In considering a 12 (b)(6) motion to dismiss,
the allegations in the complaint must be taken as true. "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1973). Accord, Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102 (1957) ("[A] complaint should not be dismissed for ...