Friedman Kaplan’s Appellate Practice Obtains 6 to 1 Reversal from New York’s Highest Court

June 25, 2019

On Tuesday, June 25, 2019, New York’s Court of Appeals issued a landmark decision in favor of Friedman Kaplan’s clients regarding the interpretation of New York statutory law.

The appeal concerned Section 421-g(6) of the N.Y. Real Property Tax Law, passed in 1995 to revitalize downtown Manhattan, which was, at that time, substantially vacant. The law offered developers a 13-year tax abatement if they converted unused commercial buildings into residences. In exchange, the law required apartments in converted buildings to be “fully subject to control” under the rent stabilization laws. At issue on appeal was whether, despite the requirement that the apartments be “fully subject to control,” the apartments were eligible for decontrol under New York’s luxury decontrol laws. In mid-1995, after the Assembly had passed the bill that would become Section 421-g(6), but before it was voted on by the Senate, then-New York City Mayor Rudolph Giuliani (whose office had drafted the bill) sent a letter to Senator Joseph Bruno asserting that apartments in 421-g buildings would be eligible for decontrol.

In two lawsuits, developers of three 421-g buildings asserted that, consistent with Mayor Giuliani’s letter, apartments in 421-g residential buildings were eligible for luxury rent decontrol. The First Department, relying on legislative history, ruled for the developers and reversed tenant victories in the Supreme Court.

Friedman Kaplan partner The Hon. Robert S. Smith (Ret.), former Associate Judge of the New York State Court of Appeals, argued the tenants’ appeal, asserting that the statute’s plain language barred developers from deregulating the apartments, that the developers’ interpretation rendered the statute self-defeating, and that a statute’s plain text cannot be changed by manipulating its legislative history.

In a 6-1 decision, the Court of Appeals agreed that the plain language prohibited deregulation, ruling for Friedman Kaplan’s clients. “We’re delighted at the outcome and we think the court did the right thing,” said Judge Smith.

The developers were represented by The Hon. Jonathan Lippman (Ret.) of Latham & Watkins LLP, The Hon. James McGuire (Ret.) of Holwell Shuster & Goldberg LLP, and Magda Cruz of Belkin Burden Wenig & Goldman, LLP.

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