APPLICATION OF ZENK PEDICAB RENTAL & OPERATION, INC. and OSMAN ZENK, Petitioners, For a judgment pursuant to Article 78 of the Civil Practice Law and Rules
NEW YORK CITY DEPARTMENT OF CONSUMER AFFAIRS, Respondent, Index No. 103519/12
DECISION ORDER AND JUDGMENT
JOAN B. LOBIS Judge
Petitioners, Zenk Pedicab Rental & Operation, Inc., and Osman Zenk, bring this proceeding under Article 78 of the New York Civil Practice Law and Rules. Petitioners seek annulment of a final determination by Respondent New York City Department of Consumer Affairs ("DCA" or the "Agency"), dated April 11, 2012. In that decision, the Agency denied the application of Zenk Pedicab Rental & Operation, Inc. for renewal of its pedicab business license. For the reasons set forth below, the petition is granted.
Petitioner Osman Zenk began driving a pedicab in 2003. In 2004, he incorporated his pedicab business as Zenk Pedicab Rental & Operation, Inc. ("Zenk Pedicab" or "Company"). In 2007 Zenk sold 30 used pedicabs to his mother-in-law, Elda Pastor Medina, who subsequently opened her own pedicab business, Cycle Cab, Inc.
In 2007, New York City began regulating the operations of pedicab businesses. See N.Y. City Admin. Code §§ 20-248 et seq. In conjunction with that law, the Agency promulgated regulations. 6 R.C.N.Y. §§ 2-405 et seq. The Code limits pedicab owners to 30 pedicab registration plates. N.Y. City Admin. Code § 20-251(d). Zenk, as owner and President of Zenk Pedicab, successfully applied for a license on behalf of the Company and was issued 30 registration plates. His mother-in-law, as owner of Cycle Cab, Inc., also obtained a license and 30 registration plates for her pedicab operation. Both subsequently had their licenses renewed.
In February 2011, a New York Post article singled out Petitioner Zenk as a Turkish immigrant who arrived "here" in 2002 with "$2, 000 in his pocket" and "eating 'bananas all day'" while pedaling his pedicab "12 hours a shift." Candice M. Giove, A Wheel Cheater, N.Y. Post, Feb. 20, 2011. The article related that Zenk rented pedicabs from his "pedicab palace" on West 57th Street, a garage where he stores and rents storage for pedicabs, in violation of the 30-registration-plate rule. As a result of this article, the DCA investigated Petitioner's business and his mother-in-law's business. Both Petitioner Zenk and his mother-in-law were issued subpoenas duces tecum and were deposed by the DCA's legal staff.
Following the DCA's investigation, Zenk Pedicab's license to renew was denied in a letter by the Deputy General Counsel of DCA, dated April 11, 2012. The letter cited Section 20-251(d) of the Administrative Code of the City of New York, which in pertinent part provides "No pedicab business or pedicab owner shall hold more than thirty registration plates at any one time. A pedicab business shall be deemed to have more than thirty registration plates if: (1) an owner of such pedicab business has a direct or indirect beneficial interest in one or more other pedicab businesses and the businesses together have more than thirty registration plates; (2) a family member of the owner of such business has a direct or indirect beneficial interest in one or more other pedicab businesses and the businesses together have more than thirty registration plates . .. ." The DCA concluded that Mr. Zenk's mother-in-law was a "family member" for purposes of Section 20-251 (d). "Family member" is defined in the statute to mean "a member of the immediate family, including, but not limited to, a spouse, domestic partner, sibling, child, grandchild, parent, or grandparent." N.Y.City Admin. Code § 20-249(a). The Agency also found that together with his mother-in-law Mr. Zenk held more than thirty registration plates.
The DCA further informed Petitioners that even if Mr. Zenk's mother-in-law were not a family member for purposes of the Code, "it is apparent" that Mr. Zenk had "a beneficial interest" as prohibited under Section 20-251 (d) in his mother-in-law's pedicab business. In support of that conclusion, the DCA recited five factors gleaned from its investigation arising out of the New York Post article: 1) Zenk Pedicab had sold Cycle Cab, Inc., its pedicabs; 2) Cycle Cab, Inc., rents storage space for its pedicabs from Zenk Pedicab; 3) Ms. Pastor Medina, as owner of Cycle Cab, Inc., does not manage the day-to-day operations of her pedicab business but rather employs a business manager, Julio Saldero, who had been referred to her by her son-in-law, Mr. Zenk; 4) Mr. Zenk distributes the pedicabs for businesses that store pedicabs in his garage to drivers who appear at the garage to rent pedicabs from the companies; and 5) the business manager to whom Mr. Zenk referred his mother-in-law at one time had worked for Mr. Zenk's wife. The Agency further informed Mr. Zenk that his application was additionally denied because he lacked "the integrity and honesty required of licensees by section 20-101 of the Code" in failing to admit in his application to the beneficial interest and family member relationship that the Agency concluded existed as a matter of law.
Mr. Zenk and Zenk Pedicab now petition under Article 78 to challenge the DCA's determination. In conjunction with this proceeding, this Court has enjoined the Agency from redistributing the 30 registration plates that were previously held by the former licensee, Zenk Pedicab. Oral argument was held on December 4, 2012.
No hearing has been held in this action. While Petitioners contend that they should have been provided with a hearing, it is well-settled that denials of license renewals do not require that process. E&, Daxor Corp. v. N.Y. Dep't of Health. 90 N.Y.2d 89, 100 (1997).
Petitioners "are, of course entitled to administrative review that is not arbitrary, capricious or tainted by bias." Id . In an Article 78 proceeding, a court reviews an administrative action to determine, among others, whether an agency's decision violates lawful procedures, is arbitrary or capricious, or is affected by an error of law. E.g., In re Pell v. Bd. of Educ, 34 N.Y.2d 222, 231 (1974); In re Roberts v. Gavin, 96 A.D.3d 669, 671 (1st Dep't 2012). Where the issue is limited to "pure statutory interpretation, " a court is not required to defer to an agency but rather should consider the plain language of the statute. E.g., In re Dunne v. Kelly, 95 A.D.3d 563, 564 (1 st Dep't 2012).
In this case the DCA denied Zenk Pedicab's license on the grounds that its owner had a disqualifying family member relationship or alternatively had a beneficial interest in Cycle Cab, Inc. In reaching that legal conclusion the DCA construed the terms "family member" and "beneficial interest" under the Code.
This Court finds that the DCA's denial of Zenk Pedicab's license renewal is affected by an error of law and, therefore, is arbitrary and capricious. I first consider DCA's statutory construction of the phrase "family member." The test for a court deferring to an agency's statutory interpretation lies where an agency's interpretation has "warrant in the record' and a reasonable basis in law.'" In re Howard v. Wvman, 28 N.Y.2d 434, 438 (1971) (quoting N.L.R.B. v. Hearst Pubs., 322 U.S. Ill. 131 (1944)). While there is no disagreement in this record that the owner of Cycle Cab, Inc., is Mr. Zenk's mother-in-law, nowhere in its papers does DCA cite any reasonable basis in law, either statute, regulation or case law, to support its claim that Mr's Zenk's mother-in-law is a member of his immediate family as that term is defined in Section 20-249(a).
This Court's own independent review of the statutory and regulatory scheme governing pedicabs shows no basis to defer to the Agency's construction over the plain language of the statute. In 2007, New York City amended Title 20 of the Administrative Code, which governs consumer affairs. Chapter 2 of that Title governs licenses and subchapter 9 was added to regulate pedicabs. See N.Y. City Admin. Code §§ 20-248 et seq. In enacting the statute, the City included a definitions section. Id.§ 20-249. Section 20-249 defines the term "family member" as "a member of the immediate family, including, but not limited to, a spouse, domestic partner, sibling, child, grandchild, parent, or grandparent." N.Y. City Admin. Code § 20-249(a). Thus, only immediate family members trigger the prohibitions set forth in Section 20-251, limiting those to 30 registration plates. E.g., Caba v. Rai, 63 A.D.3d 578, 581 n.2 (1st Dep't 2009) (citing canon of statutory construction that the specific governs the general); Uhlfeder v. Weinshall, 47 A.D.3d 169 (1st Dep't 2007) (under ejusdem generis canon of construction general phrase becomes limited by specific words preceding it). In considering the plain meaning of the term "immediate family, " this Court notes that term relates to a "person's parents, spouse, children, and siblings." Black's Law Dictionary 620 (7th ed. ...