TOM, J.P., SAXE, CATTERSON, MOSKOWITZ, MANZANET–DANIELS, JJ.
Debevoise & Plimpton LLP, New York (Bruce E. Yannett of counsel), for appellants.Wolf Haldenstein Adler Freeman & Herz LLP, New York (Alexander H. Schmidt of counsel), for respondents.
TOM, J.P., SAXE, CATTERSON, MOSKOWITZ, MANZANET–DANIELS, JJ.
Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered August 5, 2010, which denied the motion of defendants Metropolitan Insurance and Annuity Company and Metropolitan Tower Life Insurance Company to dismiss this action as against them pursuant to CPLR 3211(a)(1) and (7), unanimously affirmed, with costs.
In January 2007, plaintiffs commenced this action ( Roberts v. Tishman Speyer Props., L.P., 62 A.D.3d 71, 73, 874 N.Y.S.2d 97 [2009][ Roberts I ], affd. 13 N.Y.3d 270, 890 N.Y.S.2d 388, 918 N.E.2d 900 [2009] ). In the complaint, plaintiffs contended they represented a class of “all persons who are or were, or become, residential tenants of Stuyvesant Town and Peter Cooper Village who have signed or will sign a market lease or any lease other than a Rent Stabilized lease for any period during which Defendants (and any successors or assigns) were receiving or are scheduled to receive real estate tax benefits under New York City's J–51 program.” Plaintiffs sought a declaration that Stuyvesant Town and Peter Cooper Village remain subject to rent stabilization as long as defendants receive J–51 tax benefits; plaintiffs also sought the difference between their rents and rent-stabilized rents for the four-year period preceding the commencement of their action. They estimated their damages at not less than $215 million.
In Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d 270, 890 N.Y.S.2d 388, 918 N.E.2d 900 [2009][ Roberts II ], the Court of Appeals set out defendants' position as “[defendants] moved to dismiss the complaint for failure to state a cause of action, arguing that the RRRA's exception to deregulation for apartments that ‘became or become’ subject to the RSL ‘by virtue of’ receiving J–51 tax benefits did not apply to the properties because they did not ‘become subject to’ the RSL ‘by virtue’ of the receipt of J–51 tax benefits. Rather, the apartment complex ‘became subject to rent stabilization in or prior to 1974,’ nearly two decades before MetLife [i.e., Met Insurance and Met Tower] first received J–51 benefits” (13 N.Y.3d at 282–283, 890 N.Y.S.2d 388, 918 N.E.2d 900).
Supreme Court originally dismissed the complaint, but this Court unanimously reversed ( Roberts I, 62 A.D.3d at 75, 874 N.Y.S.2d 97). The Court of Appeals affirmed ( Roberts II, 13 N.Y.3d at 280, 287, 890 N.Y.S.2d 388, 918 N.E.2d 900). MetLife has now moved to dismiss, arguing that Roberts II should not be applied retroactively.
The motion court properly gave retroactive effect to Roberts II. The motion court rejected MetLife's argument that retroactive application of Roberts II would violate due process: “MetLife's argument is based upon its assertion that the Decision was unforeseen, ... [T]he Decision was not unforeseen, ... Therefore, the retroactive application of the Decision is neither ‘unexpected and indefensible to the law as it then existed’ nor an ‘arbitrary change[ ] in the law’ ” [internal citations omitted]. The background or default rule is that judicial decisions have retrospective effect ( see e.g. Harper v. Virginia Dept. of Taxation, 509 U.S. 86, 94, 113 S.Ct. 2510, 125 L.Ed.2d 74 [1993]; Gurnee v. Aetna Life & Cas. Co., 55 N.Y.2d 184, 191, 448 N.Y.S.2d 145, 433 N.E.2d 128 [1982], cert. denied 459 U.S. 837, 103 S.Ct. 83, 74 L.Ed.2d 79 [1982] ). Prospective application is an exception which should not be permitted to swallow the rule ( see People v. Favor, 82 N.Y.2d 254, 263, 604 N.Y.S.2d 494, 624 N.E.2d 631 [1993] ).
“The threshold question ... is whether [the case whose retroactivity is at issue] is really a ‘new’ rule of law at all” ( Favor, 82 N.Y.2d at 262–263, 604 N.Y.S.2d 494, 624 N.E.2d 631; see also Matter of Americorp Sec. v. Sager, 239 A.D.2d 115, 117, 656 N.Y.S.2d 762 [1997], lv. denied 90 N.Y.2d 808, 664 N.Y.S.2d 269, 686 N.E.2d 1364 [1997] [“ Before reaching any of [the three] factors, the threshold question of whether the ruling at issue is really a new rule of law at all must be answered”] [emphasis added] ). “ ‘A judicial decision construing the words of a statute ... does not constitute the creation of a new legal principle’ ” ( Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609, 616 n. 3, 861 N.Y.S.2d 246, 891 N.E.2d 279 [2008], quoting Gurnee, 55 N.Y.2d at 192, 448 N.Y.S.2d 145, 433 N.E.2d 128; see also People v. Hill, 85 N.Y.2d 256, 262, 624 N.Y.S.2d 79, 648 N.E.2d 455 [1995] [“Since [the case whose retroactivity was in question] construed the words of a statute, it established no new legal principle.... The construction of a statute is ... the exercise of determining the intent of the Legislature when the act was passed”] ).
Defendants claim that “the requirement that a decision announce a new principle of law is not a threshold requirement to the three-prong Gurnee test.” This ignores the clear language of Favor, 82 N.Y.2d at 262, 604 N.Y.S.2d 494, 624 N.E.2d 631 and Americorp, 239 A.D.2d at 117, 656 N.Y.S.2d 762.
Defendants note that when the Favor Court quoted Gurnee, the Court said, “ ‘[a] judicial decision construing the words of a statute [ for the first time ] does not constitute the creation of a new legal principle’ ” [emphasis added] (82 N.Y.2d at 263, 604 N.Y.S.2d 494, 624 N.E.2d 631). Defendants contend that Roberts II should not be deemed a first-time construction of a statute because it overruled established DHCR precedent. However, both Favor and Gurnee talk of judicial decisions construing a statute. A DHCR opinion letter or regulation is not a judicial decision. In addition, when the Court of Appeals more recently quoted Gurnee in Pachter, 10 N.Y.3d at 616 n. 3, 861 N.Y.S.2d 246, 891 N.E.2d 279, it did not add “for the first time.” Similarly, Hill, which postdates Favor, did not add the “first time” requirement (85 N.Y.2d at 262, 624 N.Y.S.2d 79, 648 N.E.2d 455).
It is true that courts sometimes engage in a tripartite analysis even after deciding that the case whose retroactivity is at issue did not establish a new rule of law ( see e.g., Americorp, 239 A.D.2d at 117–18, 656 N.Y.S.2d 762). However, in Pachter, the Court of Appeals rejected the defendant's “argument that our conclusion should be applied prospectively only” without further analysis (10 N.Y.3d at 616 n. 3, 861 N.Y.S.2d 246, 891 N.E.2d 279).