Stafford v. A&E Real Estate Holdings, LLC

2025 NY Slip Op 30665(U)

• Court: New York Supreme Court, New York County
• Decided: February 26, 2025
• Docket: Index No. 655500/2016
• Status: Unpublished

Opinion

Stafford v A&E Real Estate Holdings, LLC 2025 NY Slip Op 30665(U) February 26, 2025 Supreme Court, New York County Docket Number: Index No. 655500/2016 Judge: Joel M. Cohen Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 655500/2016 NYSCEF DOC. NO. 527 RECEIVED NYSCEF: 02/26/2025

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 03M -----------------------------------------------------------------------------------X JOHN STAFFORD, TIMOTHY HICKERNELL, JEFFREY INDEX NO. 655500/2016 NATT, DANIEL FEYKA, JULIAN JONES, DONALD G. HALL, THOMAS HUNTER, SEUN JAE OH, JANE KIM, DENISE STARAKIEWICZ, WOJTEK STARAKIEWICZ, MOTION DATE 07/30/2024 RYAN KORELL, EMAN ASIRI, MOHAMMAD A. HAQUE, RYAN M. HALEY, MARISOL MARTINEZ, WINFIELD MOTION SEQ. NO. 009 COOPER, MATTHEW SULLIVAN, ELISE CZAJKOWSKI, JOHN PETRALITO, ROYA BASSAM, MOLLY CROOG, SAM T. TANABE, JASON BAILEY, ALEXANDER DECISION + ORDER ON RICHARDS, HAJERA DEHQANZADA, ALI ABIDI, DERIC MOTION MIZOKAMI, JOHN RIVERA, ALVIN REALUYO, FABIENNE FERREIRA, K.M.O. VERA, KRISTIN MYERS, JESSE NEIL, CRAIG NADEAU, ANNMARIE COLUCCI, ROSHEN CARMAN, ALVIN FERNANDEZ, MARGARET PLESS, JOSE CALVILLO, EMMANUELLA PAUL, JESUS RIOS, NINA CHIDICHIMO, NATALIE HIRSH, CRAIG CONNOLE, ALEXANDRIA KIRCHER, EARL BARRETT- HOLLAWAY, SANTA PENA, DONNA DEMPSEY, SERENA FORBES, SOPHIA GREER, RUXANDRA STANCU, LEAH O'REILLY MCKUNE, RASUEL MCKUNE, DAVID WARTH, MOHAMMAD UDDIN, ELI JAMES, RICHARD DURO, NICHOLAS NAVIGLIA, MONICA THORNE, VINCENT WALLGREN, EILEEN WALLGREN, JEANNINE FRUMESS, EVAN JACOBS, WILLIAM RIVERS, GRACE SIERRA RIVERS, DANIEL REYES, OSCAR VALENCIA,

Plaintiffs,

-v- A&E REAL ESTATE HOLDINGS, LLC, A&E REAL ESTATE MANAGEMENT, LLC,

Defendants.

-----------------------------------------------------------------------------------X

HON. JOEL M. COHEN:

The following e-filed documents, listed by NYSCEF document number (Motion 009) 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342, 343, 344, 345, 346, 347, 348, 349, 350, 351, 352, 353, 354, 355, 356, 357, 358, 359, 360, 361, 362, 363, 364, 365, 366, 367, 368, 369, 370, 371, 372, 373, 374, 375, 376, 377, 378, 379, 380, 381, 382, 383, 384, 385, 386, 387, 388, 389, 390, 391, 392, 393, 394, 395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 406, 407, 408, 409, 410, 411, 412, 413, 414, 416, 417, 418, 419, 420, 421, 422, 423, 424, 425, 426, 427, 428, 429, 430, 431, 432, 433, 434, 435, 436, 437, 438, 439, 440, 441, 442, 443, 444, 445, 446, 447, 448, 449, 450, 451, 452, 453, 454, 455, 456, 457, 458, 459, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469,

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470, 471, 472, 473, 474, 475, 476, 477, 478, 479, 480, 481, 482, 483, 484, 485, 486, 487, 488, 489, 490, 491, 492, 493, 494, 495, 496, 497, 498, 499, 500, 501, 502, 503, 504, 505, 506, 507, 508, 509, 510, 511, 512, 513, 514, 515, 516, 517, 518, 519, 520, 521, 522, 523, 524, 525, 526 were read on this motion for CLASS CERTIFICATION .

Plaintiffs move for an order certifying a CPLR 906 “issue class” limited to resolving the

question “whether Defendants engaged in a methodical attempt to inflate rents” (NYSCEF 411 at

11). Assuming certification is granted, Plaintiffs also seek an order appointing certain Plaintiffs

as class representatives, approving the proposed Class Notice, approving Newman Ferrara LLP

as Class Counsel, and directing Defendants to provide class contact information.

For the reasons discussed below, Plaintiffs’ motion for class certification is denied.

Although Plaintiffs have creatively sought to create the appearance of a predominant common

issue, the evidentiary record presented on this vigorously contested motion for class certification

demonstrates that the purportedly common issue (that is, the existence of a “methodical attempt

to inflate rents”) is irrelevant to the prospective class members’ claims for relief, which

necessarily will require proof as to damages and liability on a claim-by-claim basis. In addition,

because resolution of the purported common issue would not meaningfully (if at all) streamline

the individual liability and damages determinations that would be required for every member of

the proposed class, Plaintiffs have not established that a class action is superior to other methods

of adjudication.

BACKGROUND

The named individual Plaintiffs allege that Defendants evaded New York City’s rent

regulations by failing to properly register their rent-regulated apartments, using impermissible

preferential rents, and deregulating (or increasing the legal regulated rent of) certain units based

on underperformed and/or nonqualifying Individual Apartment Improvements (“IAIs”). They

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sue individually and on behalf of a proposed class consisting of current and former tenants of

approximately 585 apartments across 22 buildings currently owned by Defendant A&E Real

Estate Holdings, LLC, which purchased the buildings from various prior owners between 2012

and 2015. The challenged rent increases and improvements occurred between 2003 and 2016,

with some attributable to Defendants and others initially attributable to several prior owners and

property management companies.

LEGAL STANDARD

CPLR 901 provides that a case can be maintained as a class action if (1) the class is so

numerous that jointer is impractical; (2) there are common issues of law or fact that predominate

over questions affecting individual class members; (3) the claims of the representative parties are

typical of the claims of the class; (4) the representatives will fairly and adequately protect the

interests of the class; and (5) a class action is superior to other methods of adjudication. Courts

commonly refer to these factors, respectively, as numerosity, predominance, adequacy of

representation, and superiority. The Plaintiffs must demonstrate that these elements are satisfied

with competent evidence in admissible form (Ackerman v Price Waterhouse, 252 AD2d 179 [1st

Dept 1998]).

CPLR 906 provides, in part, that “[w]hen appropriate, … an action may be brought or

maintained as a class action with respect to particular issues.” In an “issue class” case, such as

the one Plaintiffs propose here, CPLR 906 directs that “[t]he provisions of this article shall then

be construed and applied accordingly.” In that regard, Plaintiffs acknowledge that they must

demonstrate the predominance of common issues of law or fact among prospective class

members with respect to the issue for which they seek certification (NYSCEF 525 at 14).

Plaintiffs are correct that they need not demonstrate that common issues of law or fact

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predominate over individual issues with respect to the portions of the case as to which they do

not seek class certification (accord In re Nassau County Strip Search Cases, 461 F3d 219, 227

[2d Cir 2006]).

In addition to the factors set forth in CPLR 901, the Court must also consider the

following factors set forth in CPLR 902 in determining whether class certification is appropriate:

(1) the interest of the class members in individually controlling the prosecution or defense of the

separate actions; (2) the impracticability or inefficiency of prosecuting or defending separate

actions; (3) the extent and nature of any litigation concerning the controversy already

commenced by or against members of the class; (4) the desirability or undesirability of

concentrating the litigation of the claim in any particular forum; and (5) the difficulties likely to

be encountered in the management of a class action.

DISCUSSION

I. Predominance and Manageability

Because Article 9 of the CPLR shares much in common with its federal equivalent,

Federal Rule of Civil Procedure 23, New York courts have found federal jurisprudence to be

helpful in analyzing New York’s class action provisions (Friar v Vanguard Holding Corp., 78

AD2d 83, 96 [2d Dept 1980]). On the predominance factor, the United States Supreme Court

has held that the common issue “must be of such a nature that it is capable of classwide

resolution—which means that determination of its truth or falsity will resolve an issue that is

central to the validity of each one of the claims in one stroke” (Wal-Mart Stores, Inc. v Dukes,

564 US 338, 350 [2011]). The Court further observed that “[w]hat matters to class

certification…is not the raising of common ‘questions’—even in droves—but rather, the capacity

of a class-wide proceeding to generate common answers apt to drive the resolution of the

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litigation” (id. [citations omitted]). Here, as described below, the Court finds that the issue for

which Plaintiffs seek CPLR 906 certification is irrelevant to the merits of any class member’s

claim (see Packard v City of New York, 2020 WL 1467127, at *2 [SD NY, Mar. 25, 2020, No.

15-CIV-7130 (AT/SDA)] [declining to certify issue class where doing so “would not

meaningfully reduce the range of issues in dispute”]).

Plaintiffs propose that, following certification, they will seek a class-wide determination

by the Court that “Defendants engaged in a methodical attempt to illegally inflate rents[,]” after

which a referee will be appointed to conduct “individual damages proceedings” on an apartment-

by-apartment basis (NYSCEF 411 at 10-11). Plaintiffs’ proposed “damages” referee, however,

would in fact be a liability referee as well. Even assuming Defendants are found to have engaged

in a “methodical attempt to illegally inflate rents” across a number of their buildings, the referee

still must determine whether each class member in fact has been overcharged (i.e., liability)

before determining damages. These liability issues include, as to each member of the class,

whether the claimed IAIs qualify as improvements rather than mere repairs, whether qualifying

IAIs were ever (or were fully) performed, whether certain tenants must demonstrate (and if so,

whether they have demonstrated) 1 sufficient indicia of fraud to consider rental history beyond

the four-year statutory period, and whether certain “Clarifying Legislation” (L. 2023 ch. 760 and

L. 2024 ch. 95), as dubbed by Plaintiffs (NYSCEF 525 at 10), can be applied retroactively to

1 Plaintiffs argue that certain class members’ claims fall under two distinct exceptions to the four-year lookback period (often called the “Four Year Rule”), while others fall under two fact patterns recognized by appellate authorities as sufficiently indicative of fraud to overcome the Four Year Rule (NYSCEF 525 at 9-12; see Fuentes v Kwik Realty LLC, 186 AD3d 435 [1st Dept 2020] [noting that under pre-Housing Stability and Tenant Protection Act law, rent overcharge claims are generally subject to a four year limitations period, but that plaintiffs may look to older records where there is evidence of fraudulent behavior]).

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obviate the four-year statutory period for apartments with preferential rents, among other topics.

In these circumstances, certification of the proposed “issue class” would have negligible (of any)

benefit in terms of efficiency and case management (see In re Amla Litig., 282 F Supp 3d 751,

765 [SD NY 2017] [“[C]ertification is not appropriate if, despite the presence of a common

issue, certification would not make the case more manageable”] [internal citations and quotations

omitted]; Benner v Becton Dickinson & Co., 214 FRD 157, 170 [SD NY 2003] [“Where

substantial individual actions…would still be necessary after the…[liability] issue class trial, this

Court cannot find that issue certification materially advances the litigation”]).

Moreover, the need to convene a procedure in which hundreds or perhaps thousands of

individualized determinations are to be made (purportedly by a referee)2 regarding liability and

damages is likely to create difficulties in case management, which further weighs against

certification (CPLR 902 [5]).

II. Superiority

Similarly, because Plaintiffs’ proposed issue class achieves virtually nothing in the way

of judicial economy, Plaintiffs have not demonstrated that a class action is a superior means to

adjudicate the class members’ claims (CPLR 901 [a] [5]). Plaintiffs envision a summary

judgment-like process after class certification for the Court to “determine” whether Defendants

engaged in a “methodical attempt to inflate rents” (NYSCEF 526 [Oral Argument Transcript] at

57:17-58:10). As discussed above, such a finding (even if made) would not advance or

2 Plaintiffs make the optimistic assumption that the Court system has readily available referee resources to preside over this wave of individual proceedings in a timely and efficient manner. As a practical matter, there is a reasonable likelihood that the individual proceedings would have to be overseen by the Court itself, with the attendant impact on the management of the Court’s docket.

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streamline in any way the necessarily individualized claims of each class member that would

follow such a determination. Instead, the class procedure is being proposed effectively as a

procedural conduit to justify the Court’s oversight of hundreds of loosely connected individual

claims under a single docket number (id. at 50:15-19). That is not what CPLR Article 9

envisions.

In sum, although there might be some efficiencies for Plaintiffs in having their claims

against a common corporate defendant coordinated by a single law firm under a single docket

number, as a practical matter the litigation would proceed as hundreds of individual cases. In

those circumstances, a contrived “issue class” to decide an irrelevant issue, while leaving the

determination of the merits to subsequent proceedings, is not a superior method for resolving

Plaintiffs’ individual claims (cf Rosenfeld v A.H. Robins Co., 63 AD2d 11, 20 [2d Dept 1978]

[affirming denial of issue class certification where certification would achieve little in the way of

judicial economy “in view of the limited scope of issues which can be resolved on a classwide

basis”]).

III. The Court of Appeals’ decision in Maddicks is not to the contrary

Plaintiffs heavy reliance on Maddicks v Big City Props., LLC (34 NY3d 116 [2019]),

which found the trial court’s CPLR 3211 dismissal of class claims “based on allegations of a

methodical attempt to illegally inflate rents” to be premature (id. at 123), is misplaced. The

Maddicks Court began by emphasizing that “a motion to dismiss should not be equated to a

motion for class certification” (id. at 119). It went on to note that “[t]he prudent course charted

here, namely, viewing the allegations of the complaint through the [liberal construction] required

by Leon [v Martinez] (84 NY2d 83 [1994]) and leaving the class allegations for evaluation at the

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hearing stage envisioned by the legislature, leaves open the possibility that defendants will obtain

the same result—termination of the class claims—at the appropriate time” (id. at 126).

In this case, the appropriate time has arrived. Although this Court denied Defendants’

motion to dismiss Plaintiffs’ class allegations at the pleading stage (NYSCEF 168 at 13-15, affd

188 AD3d 583, 584 [1st Dept 2020]), it has now evaluated the merits of class certification as

envisioned by Maddicks based on a certification motion supported (on both sides) by a

substantial volume of evidence. And unlike a motion to dismiss, in which the Defendant must

establish conclusively that class certification is inappropriate as a matter of law, the burden on a

motion for class certification is reversed. In the current setting, Plaintiffs bear the burden of

affirmatively establishing the elements required for class certification, including predominance

and superiority. They have not carried that burden.

The evidentiary record shows that the challenged conduct originated among four

unrelated building owners and several unrelated property management companies over more

than a decade, raising numerous building-specific and apartment-specific issues. Moreover, as

noted above, the record indicates that individual determinations will be required as to liability

and damages for each class member, with no efficiencies to be gained by resolving on a class-

wide basis whether there was a “methodical” scheme to inflate rents. Thus, while Plaintiffs’

allegations were sufficient to survive a motion to dismiss, the supporting evidence does not

warrant granting a motion for class certification.3

3 The Court is aware that on remand from the Court of Appeals decision in Maddicks, another judge of this Court granted plaintiffs’ motion for class certification based on the factual record presented by the parties in that case (Maddicks v 106-108 Convent BCR, LLC, 2022 NY Slip Op 32752[U], 2 [Sup Ct, NY County 2022]). This Court’s determination is based on the particular factual record developed in this case.

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Similarly, Charron v Pinnacle Group N.Y. LLC (269 FRD 221 [SD NY 2010]), upon

which Plaintiffs also rely, does not support class certification on these facts. The Charron

plaintiffs were pursuing civil RICO claims against entities under common control, to which the

existence of a common fraudulent scheme was deemed highly relevant (id. at 225-26). Contrary

to the claims asserted here, the Charron court observed that “[t]his is, in short, a RICO class

action…not a collection of landlord-tenant disputes that belong in Housing Court or before the

DHCR” (id. at 234).

Accordingly, it is

ORDERED that Plaintiffs’ motion for class certification is denied; and it is further

ORDERED that, within 14 days of this decision and order, the parties file a joint letter

via NYSCEF proposing a schedule for next steps in the litigation with respect to the claims of

the named Plaintiffs.

This constitutes the decision and order of the Court.

2/26/2025 DATE JOEL M. COHEN, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION

□ GRANTED X DENIED GRANTED IN PART OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

□ CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE

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