Melendez v. City of N.Y.

503 F.Supp.3d 13

MELENDEZ, et al., Plaintiffs,

v.The CITY OF NEW YORK, et al., Defendants.

No. 20-CV-5301 (RA)

United States District Court, S.D. New York.

Signed November 25, 2020

Claude Gabriel Szyfer, Stroock & Stroock & LaVan LLP, Esther Youngjoo Kim, Hyatt Marcel Howard, Alejandro Hari Cruz, Timothy Harold Smith, Stephen P. Younger, Patterson, Belknap, Webb & Tyler LLP, New York, NY, for Plaintiffs Marcia Melendez, Jarican Realty Inc., 1025 Pacific LLC, Ling Yang, Top East Realty LLC, Haight Trade LLC.

Claude Gabriel Szyfer, Stroock & Stroock & LaVan LLP, Stephen P. Younger, Patterson, Belknap, Webb & Tyler LLP, New York, NY, for Plaintiffs Elias Bochner, 287 7th Avenue Realty LLC.

Pamela Ann Koplik, Carlos Fernando Ugalde Alvarez, NYC Law Department, Office of the Corporation Counsel, New York, NY, for Defendants.

OPINION & ORDER

RONNIE ABRAMS, United States District Judge:

In the spring of this year, the COVID-19 pandemic ravaged New York, hitting the state harder than nearly anywhere else on earth. In response, New York State enacted a slate of statutes, administrative orders, and executive orders aimed at combatting both the public health and economic devastation wrought by the disease. New York City, the epicenter of the outbreak within the state, passed multiple local ordinances of its own, aiming to achieve the same goals. Three of those ordinances are being challenged here today.

The first of these three laws is "the Residential Harassment Law," which amended a decade-old ordinance prohibiting residential landlords from harassing tenants out of their lawfully-occupied dwellings. The Residential Harassment Law added to the existing law a prohibition on harassment of "person[s] impacted by COVID-19," a term broadly defined to include essential workers, those diagnosed with COVID, caretakers of those with COVID, and persons unemployed or with additional financial responsibilities as a direct result of the pandemic.

The second of the laws, "the Commercial Harassment Law," likewise amended a pre-existing ordinance prohibiting commercial landlords from harassing tenants out of their lawfully-occupied properties. It added a similar prohibition on harassment of those "impacted by COVID-19," a term the law broadly defined to include those diagnosed with COVID, caretakers of those with COVID, persons who could not attend work because of quarantine or child-care difficulties, and businesses closed as a direct result of the pandemic.

The third law, entitled "Personal Liability Provisions in Commercial Leases," is known as the "Guaranty Law." This law limits the ability of commercial landlords to enforce a "personal guaranty"—that is, a contractual promise by a third-party, typically the principal of the business-tenant, to pay rent, utilities, or taxes in the event that the tenant defaults on those payments. The Guaranty Law only applies when the guarantor is a natural person other than the tenant, and only covers payments due between March 2020 and March 2021, but its effects are permanent: the landlord may never collect from the personal guarantor for those payments, even after the pandemic ends.

The three plaintiffs challenging these laws today are the owners of small commercial and residential buildings in Brooklyn, Queens, and Manhattan. They allege that the laws cause them severe economic harm by impeding their ability to profit from their properties. Specifically, they claim that the Harassment Laws prevent them from pursuing routine efforts to collect rent from their tenants, while the Guaranty Law prevents them from recouping income pursuant to personal guaranties in connection with defaulting businesses. They urge this Court to find that these laws violate three constitutional rights: the right to free speech, the right to due process, and the Contract Clause.

Plaintiffs have expressed some legitimate concerns, and the Court recognizes the toll the pandemic has taken on them, in addition to their tenants, all New Yorkers, and millions more around the world. Nonetheless, for the reasons articulated below, the Court cannot conclude that these three challenged laws violate any of Plaintiffs’ constitutional rights. First, because the Court finds—as the City insists—that the Harassment Laws do not prevent landlords from making routine rent demands, these laws do not implicate Plaintiffs’ free speech rights. Moreover, because the Harassment Laws are sufficiently clear on what constitutes harassment, the Court further concludes that these laws do not violate due process. And because this Circuit's jurisprudence affords broad deference to the good-faith efforts of policymakers to regulate in the interest of the public good, the Court must conclude that the Guaranty Law does not violate the Contract Clause. Finally, the Court holds that these ordinances are not in conflict with the State's efforts to respond to the pandemic, and so they are not preempted.

Plaintiffs’ suit is thus dismissed in its entirety.

BACKGROUND¹

I. The State's Response to the Pandemic

The New York State Legislature, together with the Chief Administrative Judge of the New York Courts and the Governor, have responded to the COVID-19 crisis with numerous state-wide regulations aimed to protect the health, safety, and economic wellbeing of the people of New York.

On March 3, 2020, the New York State Legislature amended section 29-a of the New York Executive Law, granting the Governor the power to "issue any directive during a state disaster emergency" that the Governor deemed "necessary to cope with the disaster." See SB S7919; N.Y. Exec. Law Art. 2-B § 29-a. The amendment also expanded the Governor's existing authority to temporarily suspend "any statute, local law, ordinance, or orders, rules or regulations," as necessary to aid with coping with the disaster. Id.

Following this expansion in authority, the Governor passed a series of executive orders—over seventy as of the date of this opinion. See EXECUTIVE ORDERS , governor.ny.gov/executive-orders (last visited November 25, 2020). On March 7, 2020, the Governor passed EO 202, which declared a state of emergency in New York until September 7, 2020. N.Y. Exec. Order No. 202 (Mar. 7, 2020), Dkt. 38 Ex. B.² The order "authorize[d] all necessary State agencies to take appropriate action to assist local governments and individuals in containing, preparing for, responding to and recovering from this state disaster emergency." The Governor subsequently filed a series of executive orders mandating the closure of the vast majority of businesses in the state. See, e.g. , N.Y. Exec. Order No. 202.3 (Mar. 16, 2020), Dkt. 29 Ex. 18 (prohibiting bars and restaurants from serving food or beverages on premises and closing gyms and movie theatres); N.Y. Exec. Order No. 202.5 (Mar. 18, 2020), Dkt. 38 Ex. D (closing indoor malls, amusement parks, aquariums, zoos, and arcades); N.Y. Exec. Order No. 202.6 (Mar. 18, 2020), Dkt. 38 Ex. E (closing all non-essential businesses); N.Y. Exec. Order No. 202.7 (Mar. 19, 2020), Dkt. 29 Ex. 20 (ordering barbershops, salons, and tattoo parlors to close).³

The Governor also passed a series of executive orders regulating commercial and residential real estate. For example, Executive Order 202.8 announced a ninety-day moratorium on commercial and residential evictions and foreclosures. N.Y. Exec. Order No. 202.8 (Mar. 20, 2020), Dkt. 29 Ex. 21. Executive Order 202.9 instructed the Superintendent of the Department of Financial Services to ensure that "any person or entity facing a financial hardship due to the COVID-19 pandemic" be given the opportunity for a forbearance of mortgage payments. N.Y. Exec. Order No. 202.9 (Mar. 21, 2020), Dkt. 38 Ex. H. Executive Order 202.28 mandated that residential landlords allow tenants facing financial hardships due to the pandemic to use their security deposits to pay past-due rent, and prohibited landlords from demanding late payment fees for rent due and owing from March to August. N.Y. Exec. Order No. 202.28 (May 7, 2020), Dkt. 29 Ex. 23.⁴

In June 2020, the state legislature passed a series of laws further regulating real estate. On June 17 it passed the Emergency Rent Relief Act ("ERRA"), which is to remain in effect until July 2021. 2020 Sess. Law News of N.Y. Ch. 125 (S. 8419) § 3, Dkt. 29 Ex. 26. Section 2.2 of the act authorized the state housing commissioner to establish a residential rent relief program for those affected by COVID-19. Id. § 2.2. Section 2.4 provided for rental subsidies, capped at 125 percent fair market rent, to be paid directly to landlords in the form of a rent-voucher. Id. § 2.4. Priority for these vouchers is to be given to those with greatest social and economic need. Id. § 2.7. That same day, the legislature amended the State Banking Law, adding § 9-x, which requires all entities regulated by the New York Department of Financial Services to grant forbearance on all monthly mortgage payments for up to 180 days, subject to certain restrictions. N.Y. C.L.S. Bank § 9-x (2020), Dkt. 39. Ex. EE. On June 30, the legislature passed the Tenant Safe Harbor Act ("TSHA"). 2020 Sess. Law News of N.Y. Ch. 125 (S. 8192-B), Dkt. 29 Ex. 27. The TSHA prohibits courts from issuing warrants of eviction against those residential tenants who have suffered financial hardship during the COVID-19 period—a period of time defined to include "March 7, 2020 until the date on which none of the ... Executive Order[s] issued in response to the COVID–19 pandemic continue to apply in the county of the tenant's or lawful occupant's residence." Id. §§ 1, 2.1. The TSHA instructed courts to consider factors such as change in income and liquid assets in determining whether a tenant suffered "financial hardship." Id. § 2.2(b). Section 3 of the law provided that—notwithstanding the other restrictions it imposed—courts may still award a judgment for rent due and owing in a summary proceeding. Id. § 3.

Finally, the Chief Administrative Judge of the New...