492 F.Supp.3d 33
E.D.N.Y2020Background
- In 2019 New York substantially amended its Rent Stabilization Law (RSL), limiting personal-use recoveries, repealing luxury/vacancy/longevity/preferential decontrol mechanisms, reducing recoverable capital-improvement pass-throughs, lengthening eviction stays, and raising co-op/condo conversion thresholds.
- Two related suits by landlords and landlord groups (CHIP Plaintiffs and Pinehurst Plaintiffs) challenged the amendments under § 1983: facial and as-applied Takings Clause claims (physical and regulatory takings), due process, and Contracts Clause theories.
- State defendants (New York, DHCR, DHCR Commissioner) asserted Eleventh Amendment immunity; city defendants (City, RGB, RGB members) remain subject to suit for damages and injunctive/declaratory relief where appropriate.
- The court dismissed facial Takings claims, all physical-takings claims (facial and as-applied), facial regulatory-takings claims, due-process claims, Contracts Clause claims, and most claims against state defendants on Eleventh Amendment grounds.
- The court allowed only certain as-applied regulatory-takings claims to proceed at this stage brought by Eighty Mulberry Realty Corporation and the Panagouliases, finding their Penn Central allegations sufficient to survive dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Eleventh Amendment immunity for state takings suits | Takings Clause is self-executing; just compensation remedy abrogates state immunity | Eleventh Amendment bars federal suits for takings when state provides its own forum/remedy | Dismissed takings claims against NY, DHCR, and Commissioner in official capacity for lack of jurisdiction (state courts remain available; Ex Parte Young still allows prospective relief) |
| Physical taking (facial & as-applied) | RSL’s restrictions constitute a permanent physical occupation or deprive bundle of rights | RSL is regulatory land-use control, owners retain title and disposition rights | Dismissed — plaintiffs failed to allege loss of title or full deprivation required for Loretto/Horne physical taking |
| Regulatory taking — Facial challenge | 2019 amendments cumulatively go ‘‘too far’’ and are unconstitutional in all applications | Facial regulatory-takings challenges are disfavored; effects vary owner-by-owner; precedent rejects facial attacks on RSL | Dismissed — facial challenge fails under Salerno and Penn Central because plaintiffs cannot show no set of constitutional applications |
| Regulatory taking — As-applied challenge | For specific owners, amendments drastically reduced property value and frustrated investment-backed expectations | Defendants: economic impact and expectations vary; some owners bought into rent-regulation background law | Survived for Eighty Mulberry and the Panagouliases (their acquisition timing and alleged losses plausibly satisfy Penn Central at pleading stage); dismissed for other Pinehurst plaintiffs |
| Due Process (substantive) | Amendments are irrational and counterproductive to housing supply/targeting; emergency findings arbitrary | Rational-basis review; legislature’s housing and neighborhood-stability goals are legitimate; deference to legislative judgment | Dismissed — statute survives rational-basis review; multiple legitimate state purposes suffice |
| Contracts Clause (as-applied) | Repeal of preferential-rate rules impairs existing leases and retroactively reduces rent in executed leases | Laws in effect at contract formation govern; legislative impairment serves legitimate public purpose and is reasonable | Dismissed — future lease effects not impaired; 74 Pinehurst’s alleged retroactive impairment fails Penn Central-like scrutiny (legitimate purpose and reasonable means) |
Key Cases Cited
- Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) (permanent physical occupation is a taking)
- Horne v. Department of Agriculture, 576 U.S. 350 (2015) (takings analysis treats deprivation of core property rights seriously)
- Yee v. City of Escondido, 503 U.S. 519 (1992) (regulation of tenancy is land-use regulation, not a physical occupation)
- Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978) (multi-factor test for regulatory takings)
- Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) (total deprivation of economically viable use requires compensation)
- Pennell v. City of San Jose, 485 U.S. 1 (1988) (facial takings claim premature without concrete factual record on hardship provisions)
- Knick v. Township of Scott, 139 S. Ct. 2162 (2019) (state-law remedies do not foreclose federal takings claims but did not resolve Eleventh Amendment conflict)
- Alden v. Maine, 527 U.S. 706 (1999) (states retain sovereign immunity beyond the text of the Eleventh Amendment)
- First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304 (1987) (Takings Clause supplies remedial concerns but did not decide immunity question)
- Federal Home Loan Mortgage Corp. v. New York State Division of Housing & Community Renewal, 83 F.3d 45 (2d Cir. 1996) (Second Circuit precedent rejecting takings challenge to RSL)