United States District Court, S.D. New York
January 5, 2004.
YVETTE PHARR, et al., Plaintiff's -against- EVERGREEN GARDENS, INC., and GRENADIER REALTY CORP., Defendants
The opinion of the court was delivered by: HAROLD BAER, JR., District Judge
OPINION & ORDER
Defendants Evergreen Gardens, Inc. and Grenadier Realty Corp. move to
dismiss plaintiff's' complaint. For the following reasons, defendants'
motion is granted.
Defendant Evergreen Gardens, Inc. ("Evergreen") is the landlord of
buildings located at 950 and 955 Evergreen Avenue in the Bronx, New
York; defendant Grenadier Realty Corp. ("Grenadier") is Evergreen's
licensed real estate broker and managing agent;*fn1 and plaintiff's are
present and former tenants of Evergreen residing in the buildings.
Plaintiff's allege that Grenadier, on behalf of Evergreen, sent monthly
invoices for rent which both Evergreen and Grenadier knew were false, in
that they contained hidden and illegal charges. These hidden and illegal
charges consisted of billing bathrooms as habitable rental rooms and
terraces as one-half of a habitable rental room, even though the rules
and regulations promulgated by Evergreen and agreed to by plaintiff's
define bathrooms as water closets and prohibit tenants from making any
other use of them. Plaintiff's allege that these acts constitute 1) mail
fraud, in violation of 18 U.S.C. § 1341;*fn2 2) participating in the
affairs of an enterprise through a pattern of racketeering
activity namely, mail fraud in violation of
18 U.S.C. § 1962(c); 3) conspiracy to engage in a pattern of
racketeering activity, in violation of 18 U.S.C. § 1962(d); and 4)
unfair and deceptive business practices, in violation of N.Y. General
Business Law § 349. Defendants move to dismiss the complaint on the
basis of 1) res judicata, 2) statute of limitations, and 3) lack of
injury and standing.
The history of the legal battle between the parties is as follows: In
December 1996, defendants applied for a rent increase pursuant to the
Private Housing Finance Law and regulations promulgated by the New York
City Department of Housing Preservation and Development ("HPD").
Plaintiff's with counsel participated in this process. On July 16, 1998,
HPD granted this request for a rent increase. In November 1998,
Plaintiff's brought an Article 78 challenge to HPD's decision in which
they claimed, inter alia, that "the actual number of rooms as determined
by the Commissioner deviates significantly from the Certificate of
Occupancy." Justice Suarez of the New York State Supreme Court dismissed
this challenge as untimely and the appellate division affirmed.*fn3
Plaintiff's filed another claim in Bronx County Supreme Court in October
2001 based on rent overcharges, including the inflated room count, and
breach of the warranty of habitability. The court initially rejected
defendants' claim of issue preclusion with respect to the room-count
claim but subsequently dismissed the claim on the basis, it appears, of
Defendants raise several grounds for dismissal, including that the
claim is time-barred because it was brought more than four years*fn5
after the discovery of the alleged injury, regardless of when the fraud
was discovered. Since this ground is dispositive, I need not discuss the
As defendants note, the Supreme Court rejected a rule whereby a civil
RICO claim accrues when the plaintiff discovers (or should have
discovered) the injury and the pattern of racketeering activity. See
Rotella v. Wood, 528 U.S. 549, 553 (2000); the Court preferred*fn6 a
rule where the statute begins when the plaintiff discovers the injury.
See id. Defendants contend that the fraud and the injury alleged by
plaintiff occurred in 1998, when the rent increase went into effect and
when plaintiff's filed a similar lawsuit. Plaintiff's contend that
defendants have not shown that any of the plaintiff's knew or should have
known about the injury in 1998. However, it is clear that some of the
same people named as plaintiff's in this action were aware as early as
November 1998 that the number of rooms was allegedly more than the number
noted on the certificate of occupancy. It was then or earlier that they
attempted to challenge HPD's rent increase. Thus, even if they did not
know the details of the room-count discrepancy, the plaintiff's
or some of them knew of the discrepancy no later than November
1998. Since this suit was instituted some four and a half years later, it
is beyond the statute of limitations and must be dismissed.
Plaintiff's contended at oral argument that the four-year statute of
limitations does not preclude this suit, because this is a continuing
violation and there is a violation each time the rent bills are sent
out. The Second Circuit recognizes a "separate accrual" rule for RICO
claims "under which a new claim accrues, triggering a new four-year
limitations period, each time plaintiff discovers, or should have
discovered, a new injury caused by the predicate RICO violations."
Bingham v. Zolt, 66 F.3d 553, 559 (2d Cir. 1995). Contrary to
plaintiff's' contention, the fact that defendants mailed allegedly
unlawful rent bills each month up to the
present does not make plaintiff's' claim timely. As the Circuit has
stated, "non-independent injuries will not cause a new limitations period
to accrue." Id. at 560; see also In re Merrill Lynch Ltd. Pshps. Litig.,
7 F. Supp.2d 256, 265 (S.D.N.Y. 1997) ("[F]or an injury to trigger the
accrual of a new RICO claim, the injury must be new and independent.").
It is beyond peradventure that the plaintiff's' injury from the rent
checks mailed within the past four years is not "a new and independent
injury." The injury the plaintiff's allegedly suffered due to the rent
bills mailed within the four-year statute of limitations is identical to
the injury they suffered when the defendants allegedly unlawfully
increased the room count. Thus, the fact that defendants continued to
mail allegedly unlawful rent bills does not make plaintiff's' claim
timely, as they knew or should have known about the illegal room count
more than four years prior to the commencement of this lawsuit.
For the foregoing reasons, defendants' motion to dismiss is granted.
The Clerk of the Court is instructed to close this and any open motions
and remove the case from my docket.
IT IS SO ORDERED.