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Yanella Gudz, Etc., Plaintiff-Respondent v. Jemrock Realty Company

April 25, 2013

YANELLA GUDZ, ETC., PLAINTIFF-RESPONDENT,
v.
JEMROCK REALTY COMPANY, LLC, DEFENDANT-APPELLANT.



Gudz v Jemrock Realty Co., LLC

Decided on April 25, 2013

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Tom, J.P., Sweeny, Moskowitz, Manzanet-Daniels, Gische, JJ.

Order, Supreme Court, New York County (Eileen A. Rakower, J.), entered October 26, 2011, which, upon reargument, adhered to a prior order, same court and Justice, entered June 20, 2011, granting plaintiff's motion for class certification, affirmed, without costs. Appeal from the prior order, dismissed, without costs, as academic.

Plaintiff's rent overcharge claim did not seek a "penalty" within the meaning of CPLR § 901(b), because she waived her right to treble damages under Rent Stabilization Law (RSL) (Administrative Code of City of New York) § 26-516(a). The waiver was effective, since, unlike the mandatory penalty provided under the Donnelly Act (General Business Law § 340[5]; see Asher v Abbott Labs., 290 AD2d 208 [1st Dept 2002], lv dismissed 98 NY2d 728 [2002]), treble damages are not the sole measure of recovery, and an owner found to have overcharged may submit evidence to overcome the statutory presumption of willfulness (see Downing v First Lenox Terrace Assoc., __ AD3d __, and Borden v 400 E. 55th St. Assoc., __ AD3d __ [decided simultaneously herewith]).

Although plaintiff did not waive her right to reimbursement for alleged overcharges and interest, these claims did not render her action an action for a penalty for purposes of CPLR 901(b), even though such recovery is denominated a penalty by the RSL, because they lack a punitive, deterrent and litigation-incentivizing purpose (see Sperry v Crompton Corp., 8 NY3d 204, 212-213 [2007]) and are, in fact, compensatory (see Mohassel v Fenwick, 5 NY3d 44, 50-51 [2005]).

Nor did the attorneys' fees request seek a penalty, as the general right to attorneys' fees in landlord-tenant proceedings (Real Property Law § 234) does not apply to administrative proceedings (see Matter of Blair v New York State Div. of Hous. & Community Renewal, 96 AD3d 687 [1st Dept 2012]), and the RSL provision should be understood as having the same non-punitive purpose as the statute applicable to actions and summary proceedings. Notably, the reference in Rent Stabilization Code (9 NYCRR) § 2526.1(d) to attorneys' fees as an "additional penalty," while otherwise not dispositive, is absent from the attorney fee provision in the legislatively enacted RSL.

Interpreting the requirements of the class action statute liberally, as we must (see City of New York v Maul, 14 NY3d 499, 509 [2010]), we agree with the motion that those requirements were satisfied. We reject defendant's contention that plaintiff was required to provide an affidavit focused solely on her financial ability to adequately represent the class, which was adequately shown by counsel's assumption of the risk of costs and expenses in the litigation.

We have considered defendant's other contentions and find them unavailing. All concur except Moskowitz and Manzanet-Daniels, JJ. who dissent in a memorandum by Manzanet-Daniels, J. as follows: MANZANET-DANIELS, J. (dissenting)

This appeal requires us to consider what constitutes a "penalty" for purposes of the class action statute, CPLR 901(b), and whether a putative class representative may waive such penalty and still be deemed an adequate class representative.

CPLR 901(b) expressly provides that "[u]nless a statute creating or imposing a penalty, or a minimum measure or recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action" ([emphasis supplied]). CPLR 901(b) thus precludes the maintenance of a class action seeking a penalty.

An award of treble damages under the Rent Stabilization Law (RSL) clearly constitutes a "penalty." For one, such a recovery is denominated a penalty by the RSL (compare Bogartz v Astor, 293 NY 563 [1944] [double payment recoverable under Workers" Compensation Law not a penalty because the statute referred to "double compensation"]). RSL (Administrative Code of City of NY) § 26-516(a) states that if DHCR finds that an owner has collected rent in excess of that authorized by the statute, the owner "shall be liable to the tenant for a penalty equal to three times the amount of such overcharge."

While one third of the award constitutes compensation for actual damages, the remaining two-thirds serves to punish the defendant on account of the willfulness of the violation, acting as a deterrent (see Sperry v Crompton Corp., 8 NY3d 204, 212-213 [2007]). As noted by the Court of Appeals, "These provisions are designed to discourage ...


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