Nichole Fabo, et al., appellants, v. 89 LLC (2026)

Submitted—January 15, 2026

DECISION & ORDER

In a class action, inter alia, to recover damages for rent overcharges, the plaintiffs appeal from an order of the Supreme Court, Kings County (Anne J. Swern, J.), dated October 17, 2024.  The order, insofar as appealed from, denied the plaintiffs' motion pursuant to CPLR 3025(b) for leave to amend the complaint.

ORDERED that the order is reversed insofar as appealed from, on the law and in the exercise of discretion, with costs, and the plaintiffs' motion pursuant to CPLR 3025(b) for leave to amend the complaint is granted.

The plaintiffs were tenants at 89 Hicks Street in Brooklyn.  They commenced this action against the defendant, the owner of the building, to recover, among other things, rent overcharges.  The plaintiffs alleged, inter alia, that the defendant failed to register the apartments as rent stabilized with the Division of Housing and Community Renewal (hereinafter DHCR) and that they were overcharged.  The plaintiffs obtained class certification.

Thereafter, the plaintiffs moved, among other things, for summary judgment on the complaint and for the appointment of a referee to compute the overcharges using the “default formula” described in Rent Stabilization Code (9 NYCRR) § 2522.6(b)(3).  At that time, Rent Stabilization Code § 2522.6(b)(2) stated that the default formula is applicable where either:  (i) the rent charged on the base date cannot be determined;  or (ii) a full rental history from the base date is not provided;  or (iii) the base date rent is the product of a fraudulent scheme to deregulate the apartment;  or (iv) a rental practice proscribed under section 2525.3(b), (c) and (d) of the Rent Stabilization Code has been committed.  In their motion, the plaintiffs claimed that the use of the default formula was applicable pursuant to Rent Stabilization Code former §§ 2522.6(b)(2)(iv) and 2525.3(d), arguing that the defendant engaged in a practice which deprived a tenant in possession of his or her rights under the code.  The defendant opposed the motion.  By order dated March 15, 2023, the Supreme Court, inter alia, denied those branches of the motion, rejecting those arguments as to the applicability of the default formula in this matter.

Thereafter, the plaintiffs moved pursuant to CPLR 3025(b) for leave to amend the complaint, seeking to add an additional claim that the legal regulated rents and any rent overcharges should be calculated using the default formula, noting that a recent DHCR decision clarified that the default formula was appropriate under the factual circumstances of this case (see In re Lucash, DHCR Dkt. No. LP110019–RT).  Specifically, the plaintiffs argued that, in In re Lucash, DHCR determined that the default formula was to be used pursuant to Rent Stabilization Code § 2522.6(b)(2)(i) where, in cases like the present matter, the rent charged on the base date cannot be determined because the apartments were temporarily exempt on the base date.  In an order dated October 17, 2024, the Supreme Court, among other things, denied the motion, determining that the summary judgment determination as to the use of the default formula was law of the case.  The plaintiffs appeal.

This Court is not bound by the law of the case doctrine and may consider the plaintiffs' contentions on the merits (see U.S. Bank Trust, N.A. v. Longo, 227 AD3d 1122, 1123).  Generally, the decision to allow a party to amend a pleading is a discretionary matter for the trial court (see Krichmar v. Krichmar, 42 N.Y.2d 858, 860;  Derago v. Ko, 189 AD3d 1352, 1353).  “Although leave to amend should be freely given in the absence of prejudice or surprise to the opposing party, the motion should be denied where the proposed amendment is palpably insufficient or patently devoid of merit” (Strunk v. Paterson, 145 AD3d 700, 701 [citation omitted];  see Matter of Teore v State of New York Div. of Hous. & Community Renewal, 234 AD3d 860, 863;  Derago v. Ko, 189 AD3d at 1354).  While “[n]o evidentiary showing of merit is required under CPLR 3025(b),” the court must still determine “whether the proposed amendment is ‘palpably insufficient’ to state a cause of action or defense, or is patently devoid of merit” (Lucido v. Mancuso, 49 AD3d 220, 229;  see Derago v. Ko, 189 AD3d at 1354).

Here, the proposed amendment, which relies on different reasoning as to the use of the default formula than was argued on the plaintiffs' motion for summary judgment, was not palpably insufficient or patently devoid of merit, as the plaintiffs' allegation that the default formula should be applied was supported by the determination of DHCR in a similar case.  Further, there was no prejudice or surprise resulting from the proposed amendment.

Accordingly, we grant the plaintiffs' motion pursuant to CPLR 3025(b) for leave to amend the complaint (see Deutsche Bank Natl. Trust Co. v David, 242 AD3d 1056).

IANNACCI, J.P., FORD, VENTURA and QUIRK, JJ., concur.

ENTER:

Darrell M. Joseph

Clerk of the Court