SCZESNIK v. MB LANDAU LLC (2026)

DECISION & ORDER

In a class action, inter alia, to recover damages for rent overcharges in violation of Rent Stabilization Law of 1969 (Administrative Code of City of NY) § 26–512 and for declaratory relief, the plaintiffs appeal from an order of the Supreme Court, Queens County (Timothy J. Dufficy, J.), entered August 15, 2023.  The order, insofar as appealed from, denied those branches of the plaintiffs' motion which were for summary judgment on the issue of liability and dismissing the defendants' counterclaim for an award of attorneys' fees and the defendants' first, seventh, ninth, and twelfth affirmative defenses.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the plaintiffs' motion which was for summary judgment dismissing the defendants' counterclaim for an award of attorneys' fees, and substituting therefor a provision granting that branch of the motion;  as so modified, the order is affirmed insofar as appealed from, with costs payable to the defendants.

In May 2018, the plaintiffs commenced this class action against 111–32 76th Avenue, LLC (hereinafter the original landlord), inter alia, to recover damages for rent overcharges in violation of Rent Stabilization Law of 1969 (Administrative Code of City of NY) § 26–512 and for declaratory relief.  The plaintiffs alleged, among other things, that they were tenants who resided in an apartment building located in Flushing (hereinafter the premises).  The plaintiffs also alleged that although the premises participated in the J–51 tax benefit program, the original landlord failed to re-register certain apartments as rent stabilized with the New York State Division of Housing and Community Renewal that had previously been improperly deregulated until November 2018 and that the failure to re-register the apartments as rent stabilized was part of a fraudulent scheme to deregulate the apartments in the premises.

Thereafter, the Supreme Court granted the plaintiffs' motion to substitute 111–CL 2012, LLC, and MB Landau, LLC, subsequent owners of the premises, as defendants in the action.  The court subsequently granted the plaintiffs' motion to amend the complaint to add other owners of the premises as defendants in the action.

In February 2023, the plaintiffs moved for summary judgment on the issue of liability and dismissing the defendants' counterclaim for an award of attorneys' fees and affirmative defenses.  In support of the motion, the plaintiffs asserted, among other things, that they were overcharged for rent and that such rental overcharges should be calculated pursuant to the “default formula” codified under Rent Stabilization Code (9 NYCRR) former § 2522.6(b)(3) on the ground that “the base date rent is the product of a fraudulent scheme to deregulate the apartment” (id. former § 2522.6[b][2][iii] ).  In an order entered August 15, 2023, the Supreme Court, inter alia, denied those branches of the plaintiffs' motion which were for summary judgment on the issue of liability and dismissing the defendants' counterclaim for an award of attorneys' fees and the first, seventh, ninth, and twelfth affirmative defenses.  The plaintiffs appeal.

“2023 NY Senate Bill S8011, 2023 N.Y. Assembly Bill A8506, which amended part B of the Laws of 2023, chapter 760, by adding section 2–a ․ (see L 2024, ch 95, § 4) regarding the standard required to allege a fraudulent scheme to deregulate under the Rent Stabilization Law, has retroactive effect” and applies to this matter (Gunther v. 29th St. PVP, LLC, 238 A.D.3d 859, 860, 235 N.Y.S.3d 330;  see Gomes v. Vermyck, LLC, 238 A.D.3d 26, 228 N.Y.S.3d 208).  Under that standard, “the plaintiffs must establish that the defendant knowingly engaged in a fraudulent scheme to deregulate an apartment unit under the totality of the circumstances” (Gomes v. Vermyck, LLC, 238 A.D.3d at 45, 228 N.Y.S.3d 208).

Here, under the totality of the circumstances, the plaintiffs failed to establish, prima facie, that the defendants knowingly engaged in a fraudulent scheme to deregulate the apartments in the premises (see Gunther v. 29th St. PVP, LLC, 238 A.D.3d at 861, 235 N.Y.S.3d 330;  Gomes v. Vermyck, LLC, 238 A.D.3d at 52, 228 N.Y.S.3d 208).  Since the plaintiffs failed to establish their prima facie entitlement to judgment as a matter of law on the issue of liability, the Supreme Court properly denied that branch of their motion which was for summary judgment on the issue of liability, without regard to the sufficiency of the defendants' opposition papers (see Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316, 476 N.E.2d 642).

The plaintiffs also failed to establish their prima facie entitlement to judgment as a matter of law dismissing the first, seventh, ninth, and twelfth affirmative defenses (see generally State Farm Fire & Cas. Co. v. Dan Heller Plumbing & Heating, Inc., 243 A.D.3d 944, 245 N.Y.S.3d 344).  Accordingly, the Supreme Court properly denied that branch of the plaintiffs' motion which was for summary judgment dismissing those affirmative defenses, regardless of the sufficiency of the defendants' opposition papers (see Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d at 853, 487 N.Y.S.2d 316, 476 N.E.2d 642).

“ ‘Under the American rule, attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule’ ” (Lang v. Zlotnick, 236 A.D.3d 635, 636, 229 N.Y.S.3d 470, quoting Sage Sys., Inc. v. Liss, 39 N.Y.3d 27, 30–31, 177 N.Y.S.3d 525, 198 N.E.3d 768).  “[A] contractual provision assuming an obligation to indemnify a party for attorneys' ․ fees must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed” (Pickett v. 992 Gates Ave. Corp., 114 A.D.3d 740, 741, 979 N.Y.S.2d 853 [internal quotation marks omitted];  see Hooper Assoc. v. AGS Computers, 74 N.Y.2d 487, 491, 549 N.Y.S.2d 365, 548 N.E.2d 903;  Kefalas v. Valiotis, 197 A.D.3d 698, 703, 153 N.Y.S.3d 147).  Here, the plaintiffs demonstrated, prima facie, that there was no agreement, statute, or court rule that would entitle the defendants to an award of attorneys' fees even if they prevail in this action (see Alpha/Omega Concrete Corp. v. Ovation Risk Planners, Inc., 197 A.D.3d 1274, 1282, 154 N.Y.S.3d 113).  In opposition, the defendants failed to raise a triable issue of fact.  Although the leases at issue included provisions that allowed for an award of attorneys' fees to the landlord in actions to enforce its rights under the leases if it were the prevailing party, those provisions are inapplicable to this action, in which the plaintiff tenants seek damages for rent overcharges in violation of the Rent Stabilization Law of 1969.  Accordingly, the Supreme Court should have granted that branch of the plaintiffs' motion which was for summary judgment dismissing the defendants' counterclaim for an award of attorneys' fees (see id. at 1283, 154 N.Y.S.3d 113).

The plaintiffs' remaining contentions do not warrant reversal.

DUFFY, J.P., WOOTEN, LANDICINO and QUIRK, JJ., concur.