New York Law Journal: High Court Not Likely to Hear Rent Law Challenge, Experts Say

 

High Court Not Likely to Hear Rent Law Challenge, Experts Say

Harmon v. Kimmel, 11-496, was filed against New York City in 2008 by James Harmon and his wife Jeanne. Southern District Judge Barbara S. Jones (See Profile) dismissed the case in February 2010.
Second Circuit Judges Amalya L. Kearse (See Profile), Robert D. Sack (See Profile) and Robert A. Katzmann (See Profile) affirmed the dismissal in a summary order in March 2011. The Harmons then petitioned the U.S. Supreme Court for writ of certiorari. Earlier this month, the Court asked the city to file a response to the petition by Jan. 4. The deadline has been extended to Feb. 3.
New York City landlords have been subject to various forms of rent regulation since the early 20th century, and no broad legal challenge to those regulations has ever succeeded. Yet the Supreme Court’s unusual step of asking for a response brief on a petition for writ of certiorari has drawn attention to the case, which the Harmons maintain can be distinguished from earlier cases on rent regulation.
The Harmons own and live in a five-story brownstone on West 72nd St. in Manhattan. The building has been in the Harmon family since 1949; Mr. Harmon inherited it in 1994. The building contains three rent-stabilized apartments. Mr. Harmon alleges that the rent he is able to charge for these apartments is about 59 percent lower than market rent for the neighborhood.
Mr. Harmon, who is representing himself, also alleges that his tenants have no financial need for rent regulation, and that one of them has a house in the Hamptons with a monthly mortgage payment of $1,500. This, he says in his petition, illustrates that there is no compelling public policy behind the Rent Stabilization Law, referred to throughout the petition as the RSL.
“Contrary to popular myth, the RSL is not targeted to help the needy, and here it does not,” Mr. Harmon writes. “A person could make millions of dollars annually and still qualify for a rent stabilized apartment. The RSL is not about affordable housing. It is all about luck…a racket in which property owners and market rate tenants always lose…and that is a matter of common knowledge.”
“The City has at its disposal and uses many other government-funded alternatives to rent regulation as the means to achieve legitimate goals of public housing policy,” he added.
Mr. Harmon’s petition attacks the original justification for rent-stabilization laws: a state of housing emergency. The current rent-stabilization regime was put in place to deal with a housing shortage after World War II. In the intervening years, the state Legislature has deemed it to be a state of housing emergency when the vacancy rate in the city is below 5 percent. This, Mr. Harmon claims, has in effect made rent stabilization indefinite, rather than responsive to any kind of short-term emergency.
In the absence of an emergency, rent stabilization is an unconstitutional taking of his property under the Fifth Amendment and a violation of Mr. Harmon’s due process rights under the Fourteenth Amendment, he claims.
Mr. Harmon attacked the Second Circuit for “closing its eyes to the undeniable and undenied reality that the tenants, not the Harmons, are in physical possession of three apartments under the legal compulsion of the RSL.”
He also rejected the main legal precedent relied on by the lower courts, the Supreme Court ruling in Yee v. City of Escondido, 503 U.S. 519, 529 (1992). In that case, the Court ruled that a law barred a property owner from evicting a tenant living in a trailer home. The Second Circuit cited the case in finding that when “a property owner offers property for rental housing, the Supreme Court has held that governmental regulation of the rental relationship does not constitute a physical taking.”
Mr. Harmon argues that the Court’s reasoning in Yee applies only to the special case of trailer homes, where a tenant puts a large amount of money and work into setting up his or her residence on the landlord’s property.
He points to a passage in Yee to support this argument: “A different case would be presented were the statute, on its face or as applied, to compel a landowner over objection to rent his property or to refrain in perpetuity from terminating a tenancy.”
THIS IS THAT DIFFERENT CASE,” the petition said, in bold and italic font.
Challenge Assessed
Real estate attorneys who are not involved in the Harmon case, however, say they are not convinced that it will distinguish itself from previous challenges to rent stabilization.
Timothy L. Collins of Collins Dobkin & Miller, a tenants’ attorney and a former executive director of the New York City Rent Guidelines Board, said that Mr. Harmon’s suit “rests on a fundamentally wrong-headed view of rent regulation.”
The purpose of rent regulation was not to provide affordable housing to the needy but “to control profiteering in a market that is plagued with chronic housing shortages,” said Mr. Collins, who sat on the guidelines board, which sets rent increases for stabilized apartments, from 1987 through 1994.
Mr. Collins said he did not believe Mr. Harmon’s arguments about the limits of emergency powers would get much traction in the U.S. Supreme Court.
“That argument tries to displace the Legislature’s proper role in determining whether an emergency exists, and it fails to recognize the unique problems that New York has faced for two centuries,” Mr. Collins said.
“It’s well settled law that rent regulation is not a taking,” said William J. Gribben of Himmelstein McConnell Gribben Donoghue & Joseph, an attorney for tenants.
“I’ve seen these kinds of arguments before,” Mr. Gribben said. “It’s his home. ‘You can’t do this to me.’ Well, yes the state can.”
Jeffrey Turkel of Rosenberg & Estis, who represents landlords, said he did not think the Supreme Court was likely to hear the case.
“The chance of getting a grant of certiorari from the United States Supreme Court is very small in any case, and many of the arguments that he’s raised, the Court has heard before, although the facts of this case are certainly unique,” Mr. Turkel said.
Scott E. Mollen of Herrick Feinstein, who also represents landlords, was similarly skeptical.
“Other owners and owner organizations have argued that the purpose of rent regulation is no longer justified,” he said. “This is not a novel argument. Most of the courts have said that’s a legislative determination.”
Mr. Mollen pointed to one case as an exception that proved the rule, Manocherian v. Lenox Hill Hospital, 84 N.Y.2d 385. That case challenged an amendment of the Rent Stabilization Law that allowed Lenox Hill Hospital, as a non-profit, to act as the single rent-stabilized tenant in a building and sublet the apartments it rented to its employees. This meant that there could never be any vacancy increases, among other obstacles for the landlord. The law was declared unconstitutional.
Unlike ordinary rent stabilization, rent stabilization in that case was “not tied to any particular tenant’s occupancy” and “the subject statute would have materially diminished the value of its property in perpetuity,” Mr. Mollen said.
“One of the things that the courts often do is focus on whether an owner is complaining that they’ve lost the entire economic value of their investment, or are they really arguing that they’ve lost the ability to maximize the return on their investment?” Mr. Mollen said.
Mr. Harmon, he said, seemed to be arguing the latter, and courts generally do not consider that a taking. If his property were “under water”—that is, if rent stabilization prevented him from collecting enough rent to pay maintenance and taxes—the Rent Stabilization Law already allows emergency applications for relief.
Mr. Gribben said that the fact that the Supreme Court asked for additional briefing probably meant that one or more of the justices was interested in the issue. But he said that Mr. Harmon’s most natural allies on the Supreme Court, the politically conservative justices, would likely hesitate to interfere with municipal law because of their “professed disdain for judicial activism.”
Sherwin Belkin of Belkin Burden Wenig & Goldman, who was recently retained as counsel to a party intending to file an amicus brief on Mr. Harmon’s behalf, said that Mr. Harmon’s case was different because it asserted a due process claim in addition to a takings claim. In affirming the dismissal of the case, the Second Circuit had held that the due process claim was subsumed in the takings claim, but Mr. Belkin said he disagreed.
“At the end of the day I think these are very distinct constitutional challenges with different standards,” said Mr. Belkin, who declined to name the amicus.
He also said that Mr. Harmon was not arguing that rent stabilization was unconstitutional on its face, but that it is unconstitutional as it is now applied, distinguishing it from most previous challenges.
Mr. Harmon said he believed his case presented an unusually strong challenge to rent regulation, noting that he had a number of high-profile amici on his side, including the Atlantic Legal Foundation, Pacific Legal Foundation, Cato Institute, Center for Constitutional Jurisprudence, Rent Stabilization Association of NYC, Small Property Owners of New York and Small Property Owners of San Francisco Institute. He also said that his petition was unusually comprehensive, citing opinions of current and former Supreme Court justices Oliver W. Holmes, William H. Rehnquist, Thurgood Marshall, Anthony Kennedy, Antonin Scalia and Sonia Sotomayor.
“I hope that this enough for the Governor and the Mayor to join our request for the Supreme Court to grant cert,” Mr. Harmon said.

Source: New York Law Journal

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