Judge Applies Stuyvesant Town Ruling Retroactively

From the New York Law Journal

NYLJ, August 5, 2010, Noeleen G. Walder

A state judge handed tenants a major victory today when he refused to
dismiss a $215 million class action suit against the former owner of
the massive Stuyvesant Town and Peter Cooper Village complex.The
former owner, MetLife, had insisted that a 2009 Court of Appeals
ruling overturning the conversion of rent-stabilized apartments to
market rates created a new legal principle, which should not be
applied retroactively.

MetLife argued that it had relied in good faith on a 1996 advisory
letter issued by the New York State Division of Housing and Community
Renewal (DHCR), which concluded that owners could seek luxury
decontrol of housing units receiving J-51 tax abatements, so long as
the receipt of the benefits was not the only reason the units were
subject to rent regulation.

Today, Manhattan Supreme Court Justice Richard B. Lowe III (See
Profile) held that the Court of Appeals' decision in Roberts v.
Tishman Speyer Properties, 13 NY3d 270, "merely interpreted" the Rent
Regulation Reform Act of 1993 "in accordance with the Legislature's
intent at the time the statute was enacted."

"Therefore, the retroactive application of the Decision is neither
'unexpected and indefensible by reference to the law as it existed…nor
an 'arbitrary change[] in the law,'" the judge wrote in Roberts v.
Tishman Speyer Properties, 100956- 07. The ruling affects roughly
4,400 deregulated units, according to Alexander Schmidt of Wolf
Haldenstein Adler Freeman & Herz, who represents the Stuyvesant Town
plaintiffs.

He said the result was "gratifying" for the "thousands of present and
former Stuyvesant Town and Peter Cooper Village residents who paid
excessive rents for many years."

But Mitchell Posilkin, general counsel for the Rent Stabilization
Association of New York, which was involved as amicus at the Court of
Appeals, called the impact of the decision "potentially devastating."

"There has been wholesale reliance on the luxury deregulation
provisions and the interpretation of those provisions by the DHCR and
HPD [New York City Department of Housing Preservation and Development]
by owners, lenders, and the entire real estate community," he
explained in an interview.

Mr. Posilkin said that "over the years, even the attorneys for tenants
acquiesced to this interpretation."

"We are stunned that the court could come to the conclusion that it
did," he said.

A spokesman for MetLife said, "We are studying the opinion in order to
determine our next steps."

MetLife was represented by Debevoise & Plimpton.

@|Noeleen G. Walder can be reached at nwalder@alm.com