Necessary Parties | No Counterclaim in Lease | Right to Sue Letter

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Case Dismissed When “Necessary Parties” Were Not Timely Sued

Case Dismissed When “Necessary Parties” Were Not Timely Sued
Two recent rulings issued by the Appellate Division, Second Department in Greens at Half Hollow, LLC v. Suffolk County Department of Public Works, et al., (__ N.Y.S.3d ___, 2017 WL 600494 (2d Dept. Feb. 15, 2017)) and __ N.Y.S.3d __, 2017 WL 600509 (2d Dept. Feb. 15, 2017), provide a cautionary reminder of the necessity to identify and timely name all necessary parties to a litigation, and the limitations of appellate jurisdiction to hear appeals from intermediate rulings issued by a lower court in Article 78 proceedings.

The lawsuit was commenced by the owner of a private Sewage Treatment Plant (“STP”) in Suffolk County, New York as a hybrid proceeding/action (a common practice in which an Article 78 proceeding challenging a municipal determination is combined with a Declaratory Judgment Action seeking declaratory relief, rather than bringing two separate lawsuits). In the Article 78 portion of the lawsuit, the STP owner challenged a Rate Determination issued by the Suffolk County Department of Public Works which substantially reduced the rates that the STP owner had previously been charging to its five entity customers: the homeowner’s association of an 1,144 residential condominium development (which this firm successfully represented in the litigation), the home owner’s association of a 72 unit single family home development, two affordable housing developments and a State-run children’s hospital. In the Declaratory Judgment portion of the lawsuit, the STP owner sought to have the courtnullify an underlying 2002 agreement between the STP owner and Suffolk County, which governed the operation of the STP and the procedure for rate-making.

Although the litigation had been timely commenced within the Article 78 four month statute of limitations for challenging the Rate Determination, the STP owner had failed to name the connectees as parties. We moved to dismiss the hybrid action based upon such failure and also argued that its claims seeking declaratory relief with respect to the 2002 agreement were time-barred. The STP owner opposed, arguing that the connectees were not necessary and that its claims regarding the 2002 agreement were timely.

In an initial ruling, the lower court cited the well-settled standard that “necessary parties are persons who might be inequitably affected by a judgment in the action.” It concluded that the connectees were “necessary” because the STP owner was seeking to nullify the County’s setting of “a fair and reasonable rate” that it could charge to them, and that a ruling in its favor “would inequitably affect their rights.” The lower court accordingly directed the STP owner to join the missing parties to the lawsuit before it would render a ruling on the issue of timeliness. The STP owner joined the connectees in the lawsuit and also filed an appeal from this preliminary ruling. Following the joinder, the Supreme Court issued a second ruling dismissing the Article78 claims because the connectees had not been joined before the statute of limitations had expired, and it also held the claims challenging the 2002 agreement were either duplicative of the Article 78 claims (and therefore time-barred for the same reason) or that they should have been brought within four months of the date the 2002 agreement was entered into. The STP owner appealed from that ruling as well.

In resolving the appeal from the first ruling, which had directed the joinder, the Appellate Division dismissed the appeal to the extent that it related to the Article 78 branch of the hybrid proceeding, instructing that “no appeal lies as of right from an intermediate order entered in a proceeding pursuant to CPLR article 78,” and it declined to grant leave to appeal. This ruling serves as a cautionary reminder that the rules restricting appeals in Article 78 proceedings apply regardless of the fact that a party has mixed Article 78 claims with plenary claims in a hybrid proceeding. Here, the application of those rules caused the dismissal of the associated appeal.

In resolving the appeal from the second ruling, the Appellate Division instructed that, “[a] party whose interest may be adversely affected by a potential judgment must be made a party in a CPLR article 78 proceeding.” It held that the connectees were necessary parties because they “could have been adversely affected by the . . .challenge to a determination of the . . . Suffolk County Department of Public Works . . . concerning the rate it deemed to be ‘fair and reasonable’ for the [STP owner] to charge all entities served by its sewage treatment plant.” It also held that, because the connectees had not been joined in the lawsuit within the applicable four-month limitations period, all associated claims challenging the rate determination were properly dismissed as time barred. Finally, it concluded that, despite the fact that the non-Article 78 claims were “couched in declaratory judgment language, the relief sought in these causes of action is available in the context of a CPLR article 78 proceeding, and thus, the four-motion statute of limitations applies.” Accordingly, it affirmed the dismissal of those claims as well.

“No Counterclaim” Lease Provision Held Binding

“No Counterclaim” Lease Provision Held Binding

In East 10th Street Assoc., LLC v. Ritter Antik, Inc. a landlord moved for summary judgment in a commercial nonpayment summary proceeding against its tenants. It sought a money judgment for unpaid rent, and a judgment of possession and a warrant of eviction. Although the tenants interposed an answer with nine affirmative defenses, including actual and constructive eviction, and four counterclaims, including damages relating to the actual and constructive evictions, the Court granted the landlord’s motion because the tenants did not allege they were actually or constructively evicted during the period for which rent was sought, and because the “no counterclaim” provision in the lease was enforceable and precluded the counterclaims.

The defense of actual or constructive eviction is a time honored defense to the non-payment of rent. The wrongful eviction of a tenant precludes recovery of rent until possession is restored. An actual eviction is the physical removal or exclusion of the tenant from the real property by the landlord. A constructive eviction occurs where, although there has been no physical removal or exclusion of the tenant, a landlord’s wrongful act substantially and materially deprives the tenant of the beneficial use and enjoyment of the premises, so as to require the tenant to move out. The tenant must timely move out to claim constructive eviction. When actual ouster or untenantability is in relation to only a portionof demised premises, it normally calls for a cause of action by tenant for partial actual or constructive eviction. The different between the two is the suspension of all rent, although the tenant remains in possession of a portion in the case of partial actual eviction, and a pro rata abatement of rent in the case of a partial constructive eviction.

In this case the tenant had asserted there were water leaks in the premises “since inception of the tenancy.” When the leaks occurred, according to the tenants, the store’s inventory had to be moved and covered and the affected areas had to be dry vacuumed. The tenants detailed four occasions in 2012 and 2013 when leaks caused damage to the store and its inventory and required closing of the store: one month in 2013; approximately three weeks in late May 2014; two to three weeks in August, 2014; and November 20 through December 10, 2014. The tenants detailed two additional water leaks in 2015 and 2016: September 2015 for ten days; and December 2015-January 2016, for one month.

As in many leases, the lease here required that the tenant pay rent “without any set off or deduction whatsoever….”

The Court noted that while a commercial tenant may be relieved of its obligation to pay the full amount of rent due where it was actually or constructively evicted from either whole or part of the leasehold, a commercial tenant’s constructive eviction defense is not maintainable if the alleged condition predated the period for which arrears were sought. Here, the tenants did not allege that they were actually or constructively evicted from any portion of the premises during the period for which rent was sought, only a prior period. Therefore, by the tenant’s own recitation of the facts, the Court concluded that no actual or constructive eviction is asserted for the period relevant to the proceeding.

The lease also provided “that in the event Landlord commences any summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description of any such proceeding.” The Court recognized that these clauses are routinelyenforced, precluding tenants from interposing counterclaims in summary proceedings. “Where a no counterclaim clause in a summary proceeding is enforced, the tenant is ‘relegated to asserting the cause of action in a separate plenary action,’ otherwise summary proceedings would be unnecessarily delayed.” But, it also recognized an exception that “a no counterclaim provision in a commercial lease will not operate as a bar to a tenant’s asserting counterclaims in a summary proceeding when the counter claims are ‘inextricably intertwined’ with the landlord’s claims.”

Because all of the factual allegations supporting the tenants’ counterclaims related to periods prior to the period of time for which the landlord sought rent arrears, the Court concluded that counterclaims were “not temporally related to the petition” and, therefore, it held that the tenants’ counterclaims “were not inextricably in tertwined with the landlord’s claim for rent,” and “the no counterclaim provision in … the lease is enforceable in this proceeding.”

A Time Limit on a Right to Sue

A Time Limit on a Right to Sue

In Legrá v. Board of Education, a federal Court dismissed an action for, among other things, employment discrimination, retaliation, and harassment under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA), because the claims were filed more than 90 days after the plaintiff’s presumed receipt of the EEOC’s “right-to-sue” letter.

Before someone can file a federal discrimination lawsuit alleging discrimination on the basis of race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability, genetic information, or retaliation, they first have to file a charge with one of the field offices of the Equal Employment Opportunity Commission (“EEOC”) (unless the lawsuit is under the Equal Pay Act, which allows one to go directly to court without filing a charge). The EEOC will then give what is called a “Notice-of-Right-to-Sue,” otherwise known as a “right-to-sue letter,” at the time it dismisses the charge, usually, after completion of an investigation. This notice gives a plaintiff permission to file a lawsuit in a court of law.

Here, Ann Margaret Legrá, a Hispanic woman born in 1970, claimed disability due to asthma. On Nov. 12, 2014 — after the EEOC dismissed the discrimination claims against principal Boursiquot and assistant principal Goodman — she sued New York City’s Board of Education, Boursiquot, and Goodman for employment discrimination.

The defendant Board moved to dismiss the Title VII, ADEA and ADA claims on “statute of limitations” grounds. Statutes of limitations are laws passed by a legislative body to fix the maximum time after an event when legal proceedings may be commenced. They exist for bothcivil and criminal causes of action, and begin to run from the date of the injury, or the date it was discovered, or the date on which it should have been discovered with reasonable efforts. When the period of time specified in a statute of limitations passes, a claim can no longer be filed. The period of time varies depending on the jurisdiction and the type of claim.

Under the federal Code, an action alleging, as here, an employer’s violations of Title VII, ADEA, or the ADA must be commenced within 90 days of the plaintiff’s receipt of a right-to-sue letter from the EEOC. As the Court noted, “absent substantiated challenges, courts generally presume that a right-to-sue letter from the EEOC is received three days after it is mailed,” and in the “absence of a recognized equitable consideration, the Court cannot extend the limitations period by even one day.”

In this case, the EEOC mailed the right-to-sue letter on August 6, 2014. Legrá did not claim that she did not receive the letter, which was included in her complaint and contained “a clear notice that she must bring suit within ninety days of receipt of the letter.” Legrá also did not dispute that she received the letter promptly after it was mailed. Thus, the Court presumed that Legrá received the letter on August 9, 2014. She commenced her action 95 days later, on November 12, 2014. The Court dismissed her Title VII, ADA, and ADEA claims as “barred by the ninety-day statute of limitations.”

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