Plaintiff, MARTIN I. NAGEL, an attorney admitted to practice before. the courts of the State of New York, makes this affirmation upon

Transcription

1 FILED: NEW YORK COUNTY CLERK 09/02/ :17 AM INDEX NO /2014 NYSCEF DOC. NO. 4 RECEIVED NYSCEF: 09/02/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X THE CITY OF NEW YORK, -against- Plaintiff, CITY OASES, LLC, MINA GUIRGUIS, SZILVIA PATKOS, HAMID KERMANSHAH a/k/a ABDOLHAMID KERMANSHAH, ABDOLMAJID KERMANSHAH a/k/a MAJID KERMANSHAH, WILSHIRE LIMITED, THE LAND AND BUILDING KNOWN AS 59 FIFTH AVENUE, BLOCK 570, LOT 6, County of New York, City and State of New York, RAHMAN NY INC., THE LAND AND BUILDING KNOWN AS 5 WEST 31 ST STREET, BLOCK 833, LOT 36, County of New York, City and State of New York, and JOHN DOE and JANE DOE, numbers 1 through 10, fictitiously named parties, true names unknown, the parties intended being the managers or operators of the business being carried on by defendants CITY OASES, LLC, RAHMAN NY INC., and/or WILSHIRE LIMITED, Index No. AFFIRMATION IN SUPPORT OF PLAINTIFFS MOTION FOR A PRELIMINARY INJUNCTION, A TEMPORARY RESTRAINING ORDER, AND APPOINTMENT OF A TEMPORARY RECEIVER Defendants X MARTIN I. NAGEL, an attorney admitted to practice before the courts of the State of New York, makes this affirmation upon information and belief, based entirely upon my review of records maintained by, and information and statements obtained from various departments of the city government, and from statements made by officers or agents of plaintiff THE CITY OF NEW YORK

2 [ CITY ], under the penalties of perjury pursuant to Rule 2106 of the Civil Practice Law and Rules: I. INTRODUCTORY STATEMENT 1. I am Assistant Counsel to the Mayor's Office of Special Enforcement and Assistant Corporation Counsel to Zachary w. Carter, Corporation Counsel of the City of New York. 2. The premises which are the subject of this action are two separate buildings: the building known as 59 FIFTH AVENUE, BLOCK 570, LOT 6, County, City and State of New York [ 59 FIFTH AVENUE ], and the building known as 5 WEST 31 ST STREET, BLOCK 833, LOT 36, County, City and State of New York [ 5 WEST 31 ST STREET ] (collectively the Subject Premises or Buildings ). The 59 FIFTH AVENUE Building is a 4-story class A multiple dwelling containing apartments which are being illegally operated and made available for short-term transient stays of less than 30 days. The 5 WEST 31 ST STREET Building is a 10-story interim multiple dwelling of which the 9 th and 10 th floors are being illegally operated and made available for short-term transient stays of less than 30 days. 3. I make this affirmation in support of plaintiff s motion seeking an order, pursuant to Section of the New York City Administrative Code [ Admin. Code ], appointing a Temporary Receiver to manage and operate the Buildings, during the pendency of this action. As explained herein, appointment 2

3 of a temporary receiver is warranted due to defendants having ingnored repeated notices of violations directing discontinuance of the illegal occupancies and the immediate curing of fire safety violations, multiple rulings of the New York City Environmental Control Board, and findings of guilt and the imposition of monetary penalties by the New York City Criminal Court for fire safety violations at the Subject Premises. 4. I also make this affirmation in support of plaintiff s motion seeking an order, pursuant to Section 306 of the Multiple Dwelling Law [ MDL ], Sections 7-707, 7-710, , , of the Admin. Code, and Sections 6301 and 6311 of the Civil Practice Law and Rules, for an order preliminarily enjoining the defendants, their agents, employees and/or representatives, and all persons acting individually or in concert with them, during the pendency of this action: a. From using or occupying, or permitting the use or occupancy of, any of the units in the buildings located at 59 Fifth Avenue, New York, New York, and 5 West 31 st Street, New York, New York (collectively the Subject Premises or the Buildings ) for transient occupancy and/or as transient hotels or hostels; b. From booking or advertising any units at the Subject Premises for transient occupancy; 3

4 c. From removing or in any other manner interfering with the furniture, fixtures, goods and movable property used in conducting, maintaining or permitting the nuisances complained of in this action; and d. From disposing of, modifying, or in any other manner interfering with the digital or paper documents, photographs and records maintained in connection with the management, operation, use and occupancy of the Subject Premises. 5. In addition, this affirmation is submitted in support of plaintiffs motion, pursuant to Section 306 of the MDL, Sections 7-710, (d), , and of the Admin. Code, and Section 6313 of the Civil Practice Law and Rules, for a temporary restraining order pending the hearing and determination of this motion, enjoining the defendants, their agents, employees and/or representatives, and any and all persons acting individually or in concert with them: a. To provide immediate and unrestricted access to personnel of the Mayor s Office of Special Enforcement [ OSE ] into the Buildings located at 59 FIFTH AVENUE, New York, New York, and 5 WEST 31 ST STREET, New York, New York, for the purpose of inspecting the Buildings and any parts thereof, 4

5 and any signs or service equipment contained therein or attached thereto, at all reasonable times, pursuant to relevant and applicable regulations and unhindered by defendants, to determine their compliance with the provisions of the New York City Building Code, the New York City Fire Code, the New York City Administrative Code, the New York Multiple Dwelling Law, and other applicable laws and rules;; b. From using or occupying, or permitting the use or occupancy of any units in the Subject Premises for transient use and/or as transient hotel rooms or hostels, except those units currently so occupied, and from further permitting the use or occupancy of such currently occupied units for transient use and/or as transient hotel rooms or hostels immediately after the current occupants leave; c. From permitting the use or occupancy of any additional units at the Subject Premises for transient use and/or as transient hotel rooms or hostels; d. From permitting the use or occupancy of any unit at the Subject Premises by any persons not 5

6 currently occupying such unit for transient use and/or as transient hotel rooms or hostels; e. From registering any new persons at the Subject Premises for transient occupancy; f. From booking or advertising any units at the Subject Premises for transient use; e. From removing or in any other manner interfering with the furniture, fixtures, goods and movable property used in conducting, maintaining or permitting the nuisances and violations complained of in this action; and f. From disposing of, modifying, or in any other manner interfering with the digital or paper documents, photographs and records maintained in connection with the management, operation, use and occupancy of the Subject Premises. 6. This application is predicated upon the fact that defendants have been advertising, booking, operating, and allowing units at the Subject Premises for transient use and occupancy, permitting and encouraging stays of less than 30 days, despite laws which make such use and occupancy illegal. Moreover, defendants continue to do so despite repeated violations issued by the New York City Department of Buildings [ DOB ] and Fire Department [ FDNY ] and corresponding orders 6

7 directing the discontinuation of such illegal use and occupancy, despite determinations by the Environmental Control Board finding such use and occupancy at the Buildings to be illegal and a class 1 hazardous violation, and despite defendants having pled guilty in Criminal Court to fire safety violations stemming from the illegal use and occupancy. 7. The manner in which the Buildings are being operated and maintained in violation of law causes irreparable damage to plaintiff, THE CITY OF NEW YORK, and to its citizens. Consequently, the public health, safety and welfare require the issuance by this Court of: a temporary restraining order pursuant to NYC Admin. Code Sections 7-710, , and , and CPLR 6313; a preliminary injunction, pursuant to Section 306 of the MDL, Sections 7-707, 7-710, and of the Admin. Code, and Sections 6301 and 6311 of the CPLR; and, pursuant to Section 7-713(a) of the Admin. Code, the appointment of a temporary receiver to properly manage these properties in accordance with the law. 8. Moreover, defendants previous refusal to provide access to CITY inspectors in the face of continuing violations which have been held to be hazardous requires the issuance of an order directing that immediate and unhindered access be provided to the CITY s inspectors without interference by the defendants and/or their employees or representatives. See Admin. Code 7

8 Section [Right of Entry for Department of Buildings Commissioner or authorized representatives]. II. PARTIES 9. Defendant CITY OASES, LLC is a limited liability company organized under the laws of the State of New York, and upon information and belief is the lessee and/or manager or operator of numerous apartments in the Buildings located at 59 FIFTH AVENUE and 5 WEST 31ST STREET which are being advertised, marketed, operated, maintained, and made available for illegal short-term, transient occupancies for periods of less than thirty (30) days. 9. Defendant MINA GUIRGUIS is upon information and belief a principal member of Defendant CITY OASES, LLC, the tenant in apartments being illegally operated for transient occupancy in the Buildings located at 59 FIFTH AVENUE and 5 WEST 31ST STREET, and is actively engaged in the management and operation of CITY OASES, LLC. 10. Defendant SZILVIA PATKOS is upon information and belief a principal member of Defendant CITY OASES, LLC, the tenant in apartments being illegally operated for transient occupancy in the Buildings located at 59 FIFTH AVENUE and 5 WEST 31ST STREET, and is actively engaged in the management and operation of CITY OASES, LLC. 8

9 11. Defendant HAMID KERMANSHAH a/k/a ABDOLHAMID KERMANSHAH is, upon information and belief, a natural person, a brother of Defendant ABDOLMAJID KERMANSHAH a/k/a MAJID KERMANSHAH, a principal officer of WILSHIRE LIMITED and RAHMAN NY INC., and is actively engaged in the management and control of the real properties located at 59 FIFTH AVENUE and 5 WEST 31ST STREET. 12. Defendant ABDOLMAJID KERMANSHAH a/k/a MAJID KERMANSHAH is, upon information and belief, a natural person, a brother of Defendant HAMID KERMANSHAH a/k/a ABDOLHAMID KERMANSHAH, a principal officer of RAHMAN NY INC. and WILSHIRE LIMITED, and is actively engaged in the management and control of the real properties located at 59 FIFTH AVENUE and 5 WEST 31ST STREET. 13. Defendant WILSHIRE LIMITED, a business corporation organized under the laws of the State of New York, is, upon information and belief, the owner of record of the real property located at 59 FIFTH AVENUE, New York, New York. A copy of the last filed deed that I have obtained from the Office of the City Register is annexed as Exhibit A. 14. Defendant RAHMAN NY INC, a business corporation organized under the laws of the State of New York, is, upon information and belief, the owner of record of the real property located at 5 WEST 31ST STREET, New York, New York. A copy of the 9

10 last filed deed that I have obtained from the Office of the City Register is annexed as Exhibit B. 15. Defendant THE LAND AND BUILDING KNOWN AS 59 FIFTH AVENUE, BLOCK 570, LOT 6, County, City and State of New York [ 59 FIFTH AVENUE ], is one of the two real properties whereupon the activities complained of have taken place and continue to take place. 16. Defendant THE LAND AND BUILDING KNOWN AS 5 WEST 31ST STREET, BLOCK 833, LOT 36, County, City and State of New York [ 5 WEST 31ST STREET ], is the other one of the two real properties whereupon the activities complained of have taken place and continue to take place. 17. Defendants JOHN DOE and JANE DOE, numbers 1 through 10, are fictitiously named parties, true names unknown, the parties intended being the managers or operators of the businesses being carried on by defendants CITY OASES, LLC, WILSHIRE LIMITED, or RAHMAN NY INC. III. BACKGROUND 18. Units in residential apartment buildings in New York City have increasingly been utilized as transient occupancy units for tourists and other short-term occupants rather than occupied by tenants who intend to establish a permanent residence; this notwithstanding occupancy and fire safety rules which prohibit such use. 10

11 19. The practice has been abetted by the phenomenal growth of the internet travel industry, and comes at a time when available housing accommodations for the residents of New York City remain at historically low levels. According to the findings of the 2011 Housing and Vacancy Survey prepared by the New York City Department of Housing Preservation and Development ( HPD ), the vacancy rate for rental housing units city-wide between February and May, 2011, was 3.12 percent, similar to that found in the 2008 Housing and Vacancy Survey prepared by HPD (2.88 percent between February and June of 2008), and about the same as the 3.09 percent rate found in the 2005 Housing and Vacancy Survey A report issued in April, 2014 by Reis, Inc., a real estate research firm, found a city-wide vacancy rate of only 2.8 percent in the first quarter of See, Bloomberg News, U.S.Apartment Rents Rose 3.2% as Occupancies Climbed, April 2, 2014, at viewed on August 18, A copy of the April 2, 2014 news article from Bloomberg News is annexed hereto as Exhibit C. 1 The 2011 findings of the Survey can be viewed at The triennial survey due for 2014 is still in preparation. For earlier Surveys, see 11

12 21. In Manhattan, the vacancy rate reported in the 2011 Housing and Vacancy Survey was 2.80 percent, compared to 2.70 percent in the 2008 Survey. More dramatic is the May 2014 Rental Market Analysis prepared by CitiHabitats, which reports a Manhattan rental vacancy rate of only 1.17 percent. A copy of the CitiHabitats Analysis is attached as Exhibit D. 22. All of these figures are significantly below the 5 percent level which is the legally defined threshold for a housing emergency by Section 3 of the Emergency Tenant Protection Act of 1974, codified as Section 8623 of McKinney s Unconsolidated Laws. 23. The expansion of illegal transient occupancies in apartment units significantly exacerbates the pressure on the New York City housing market. This is exemplified by an analysis of Airbnb.com listings in New York City conducted by the Office of the New York Attorney General earlier this year. According to the analysis, as of January 31, 2014, Airbnb listed 19,521 transient accommodations in New York City. Of these listings 12,423 or 63.6% were for entire apartments. See, copy of Affidavit of Sumanta Ray, attached as Exhibit E. Over 12,000 apartments were thus converted from permanent housing for New Yorkers into illegal transient accommodations. 12

13 24. The spread of illegal transient occupancies, which some elected officials from New York City have termed an epidemic, creates a number of serious problems for the City: (1) an illegal siphoning off of a significant portion of the city s housing stock, occurring most acutely in the affordable housing stock sector; (2) harassment of permanent tenants by owners who seek to evict those tenants illegally in order to pursue a more lucrative transient market; (3) a burgeoning number of transient occupants intermixed with permanent residents whose presence poses significant security risks in buildings not equipped to handle the security problems associated with transient occupancy, as well as a degradation of quality of life for residents; (4) serious safety hazards, in particular with regard to fire protection, as code requirements for permanent residency buildings are not nearly as stringent as those for units and buildings geared to transient occupancy, but also with regard to severe overcrowding with rooms being filled with bunk-beds; and (5) a growing number of complaints from tourists who book accommodations over the internet, in most cases responding to advertisements unaware that rooms are being offered in violation of the law, only to find that the accommodations are in apartment buildings parading as hotels which often lack the barest essentials that short-term guests would normally expect. 25. These illegal hotel 2 accommodations, made available in buildings designed for permanent residency, are 2 A phrase used colloquially and for convenience to refer to illegal transient occupancies those for stays of less than 30 days in permanent residence buildings. 13

14 advertised on numerous web sites without any indication that they are illegal or that they fail to have the fire safety protections mandated for transient occupancies in New York City. The typical tourist is thus unwittingly led to book accommodations which are not only illegal, but also pose a heightened risk to his or her health and safety. 26. The fire safety risks attendant on transient accommodations, and the additional fire protection measures mandated for such accommodations are detailed in the Affidavit of James Colgate, DOB Assistant Commissioner of Technical Affairs and Code Development for the New York City Department of Buildings, sworn to on August 20, 2014 [ Colgate Fire Safety Affid. ] and the Affidavit of Thomas Jensen, Chief of Fire Protection for the New York City Fire Department, sworn to on August 19, 2014 [ Jensen Affid. ]. 27. Notwithstanding warnings which can be found on a web site like TripAdvisor, Rentals.html, such as Why are vacation apartment rentals a bad idea in New York City? Unlike most of the rest of the world, short-term vacation apartment rentals in NYC are often outright scams or likely to be illegal. 14

15 You pay your money, you takes [sic] your chances. Take a hotel instead. A short-term vacation apartment rental in New York City is a gamble. No one knows what the exact odds are, but it's better to steer clear of them. Renting an apartment for a visit is probably the most popular and most volatile topic on the NYC Forum (emphasis in original) - the average tourist will reasonably assume that the place they book is legal and safe, and will often express surprise when they discover that this may not be the case, as reflected, for example, in the following posting on the TripAdvisor forum for New York City: Re: Renting a vacation apartment - a collection of posts Jan 26, 2012, 1:04 PM Just realized that an apartment rental may not be a sound or legal choice. Is this what you are meaning? I did not know that it is illegal for less than a 30 day rental in NY. Thanks. While that forum thread has a range of opinions on the question of booking illegal accommodations, the status of accommodations is clearly a concern for many. 28. The proliferation of illegal transient accommodations is of concern not only to tourists, but also to 3 Renting_a_vacation_apartment_a_collection_of_posts-New_York_City_New_York.html. A representative excerpt from the thread from which the quote is drawn is attached as Exhibit F. 15

16 the citizens of New York City. The City government continually receives complaints from many sources; calls to 311, letters and s from the public, communications from elected officials and community groups - regarding excessive noise from tourists, late night partying, overflowing trash, vomit in hallways, fires, loud fighting, drugs, elevators damaged by constant suitcase traffic, a constant flow of unknown persons coming in and out of buildings, lack of building personnel to provide security, and the like. See, Affidavit of Elan Parra, Acting Director of the Mayor s Office of Special Enforcement, sworn to on August 13, 2014 [ Parra Affid. ]. IV. STATUTORY FRAMEWORK A. TRANSIENT OCCUPANCIES PROHIBITED IN CLASS A MULTIPLE DWELLINGS - NEW YORK MULTIPLE DWELLING LAW, AND NYC HOUSING MAINTENANCE AND BUILDING CODES 29. In order to address the problem of short-term transient occupancies, the New York State Legislature enacted Chapter 225 of the Laws of New York State of 2010 ( Chapter 225 ). Chapter 225, which went into effect on May 1, 2011, prohibits renting for less than 30 days any unit in Class A multiple dwellings, as defined under the New York Multiple Dwelling Law ( MDL ) and the New York City Housing Maintenance Code ( HMC ). 16

17 30. Before the enactment of Chapter 225, New York s MDL and HMC provided that Class A multiple dwellings were to be occupied, as a rule, for permanent residence purposes. MDL 4.a.8(a), HMC a.8.(a). In January 2009, the Appellate Division, First Department, contrary to long-held administrative understanding, viewed the term as a rule to mean that owners of Class A SRO buildings could rent a significant portion of their rooms for nonpermanent or transient occupancy, so long as the majority of the rooms were used for nontransient occupancy. See, City of N.Y. v. 330 Continental LLC, 60 A.D.3d 226, , 873 N.Y.S.2d 9, (1st Dept. 2009) The State Legislature enacted Chapter 225 in response to the court s decision, amending MDL 4.a.8(a), HMC a.8.(a), the New York City Building Code , and other related laws, to make clear, among other things, that the rental of any unit in a Class A building for less than 30 days is prohibited. Chapter 225 became effective May 1, The stated purposes of Chapter 225 were to (1) prevent building 4 After the enactment of Chapter 225, this case was settled, with the defendants agreeing to a permanent injunction prohibiting operation of units in their properties for short-term stays of less than 30 days, and to pay the City of New York $600, Section 8 of the Chapter 225, as amended by Chapter 566 of the Laws of 2010, made the prohibition applicable to all buildings in existence on May 1, 2011, and to all buildings constructed after May 1,

18 owners from circumventing the strict fire safety standards applicable to hotels; (2) prevent unfair competition to legitimate hotels that have made substantial investments to comply with building codes; (3) protect the rights of permanent occupants who must endure the inconvenience of hotel occupancy in their buildings; and (4) preserve the supply of affordable permanent housing. See, New York State Assembly Memorandum in Support of Legislation (S B, 233rd Leg. (N.Y (Sponsor s Memo) Bill No. A10008). 32. Both Section 4.a.8(a) of the MDL, and Section a.8(a) of the HMC, as amended by Chapter 225, in identical language expressly prohibit short-term occupancies in Class A multiple dwellings: A class A multiple dwelling shall only be used for permanent residence purposes. For the purposes of this definition, "permanent residence purposes" shall consist of occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more and a person or family so occupying a dwelling unit shall be referred to herein as the permanent occupants of such dwelling unit. (quotes in original, emphasis added) i. Remedies for Violations of the MDL 33. Section 304 of the MDL provides (except for situations not applicable to the case at bar) that every person who shall violate or assist in the violation of any 18

19 provision of this chapter [except in situations not applicable to the case at bar] shall be guilty of a misdemeanor 34. Section 306 of the MDL [in Subsection 1] authorizes the City to bring an action in New York Supreme Court to restrain, correct or abate a violation of the MDL:... in case any multiple dwelling or structure or any part thereof or the lot on which it is situated is constructed, altered, converted or maintained in violation of any provision of this chapter [the MDL] or of any order or notice of the department, or in case a nuisance exists in any such dwelling or structure or part thereof... or to prevent any illegal act, conduct or business in or about such dwelling, structure or lot... Subsection 2 of MDL Section 306 further provides for interim injunctive and other relief pending final judgment. ii. New York City Building Code 35. The prohibition against using Class A multiple dwellings for short-term occupancies was incorporated into the occupancy group classifications of the Administrative Code (Section ) and New York City Building Code (BC ), by Sections 5 and 6 of Chapter 225 of the Laws of NYC Admin. Code prohibits an alteration or change in the use or occupancy of any building unless and until a written permit has been issued by DOB in accordance with 19

20 the requirements of the Building Code, and a certificate of occupancy issued for the new use or occupancy. 37. NYC Admin. Code defines alteration to be Any construction, addition, change of use or occupancy, or renovation to a building or structure in existence. 38. The NYC Admin. Code provides that no change may be made in the occupancy or use of an existing building which is inconsistent with the last issued certificate of occupancy of such building or which would bring it under some special provision of the code or other applicable law or regulation. 39. NYC Admin. Code provides that a building in existence prior to January 1, 1938, and legally used or occupied without a certificate of occupancy may continue to be so used only so long as there is no change in the existing use or occupancy. 40. NYC Admin. Code provides that through apply to all completed buildings. 41. Thus a change from permanent to transient use or occupancy without first having obtained a certificate of occupancy for that changed use or occupancy is unlawful. 42. NYC Admin. Code authorizes the City to bring an action to restrain, correct or abate a violation of 20

21 the Building Code or to compel compliance with an order of the Commissioner of Buildings. 43. NYC Admin. Code authorizes the City in such an action to apply for restraining orders, preliminary injunctions or other provisional remedies, with or without notice B. DECEPTIVE TRADE PRACTICES NEW YORK CITY CONSUMER PROTECTION LAW 44. The New York Supreme Court in City of New York v. Smart Apartments LLC, 39 Misc 3d 221 (Sup.Ct., NY Co. Engoron, J. (2013), in holding that the marketing of transient accommodations is covered by the City s Consumer Protection Law, ( CPL ) granted a temporary restraining order and preliminary injunction against the advertising and booking of illegal transient accommodations in New York City The CPL, at Admin. Code , prohibits unfair trade practices: No person shall engage in any deceptive or unconscionable trade practice in the sale, lease, rental or loan or in the offering for sale, lease, rental, or loan of any consumer goods or services, or in the collection of consumer debts. 6 The case was subsequently settled with the defendant agreeing to a permanent injunction against such practices, a $1,000,000 penalty, and the creation of a fund for consumer restitution. 21

22 46. CPL (a) defines deceptive trade practices to be: Any false, falsely disparaging, or misleading oral or written statement, visual description or other representation of any kind made in connection with the sale, lease, rental or loan or in connection with the offering for sale, lease, rental, or loan of consumer goods or services which has the capacity, tendency or effect of deceiving or misleading consumers. Deceptive trade practices include but are not limited to: (1) representations that goods or services have sponsorship, approval, accessories, characteristics, ingredients, uses, benefits, or quantities that they do not have goods or services are of a particular standard, quality, grade, style or model, if they are of another; (2) the use, in any oral or written representation, of exaggeration, innuendo or ambiguity as to a material fact or failure to state a material fact if such use deceives or tends to deceive (4) offering goods or services with intent not to sell them as offered. 47. CPL (d) authorizes the CITY to bring an action seeking temporary and permanent injunctive relief to halt deceptive trade practices: Whenever any person has engaged in any acts or practices which constitute violations of any provision of this subchapter or of any rule or regulation promulgated thereunder, the city may make application to the supreme court for an order enjoining such acts or practices and for an order granting a temporary or permanent injunction, restraining order, or other order enjoining such acts or practices. 22

23 48. Section (e) further provides that actual injury to consumers need not be shown to establish a cause of action. 49. As a guide to interpretation, Section provides that the CPL is to be construed so as to supplement the rules, regulations, and decisions of the federal trade commission and the courts interpreting 15 U.S.C. Sec 45(a)(1), but not in an inconsistent manner. i. The offering, booking and rental of transient accommodations is a good or service within the purview of the Consumer Protection Law 50. Consumer goods or services are defined in CPL (c) as those which are primarily for personal, household or family purposes. The statute, (d), further defines a consumer to be A purchaser or lessee or prospective purchaser or lessee of the consumer goods or services or consumer credit, including a co-obligor or surety. 51. Two New York court decisions make abundantly clear that the rental of transient accommodations is a good or service, as those terms are used in the CPL. 52. In Polonetsky v. Better Homes Depot, Inc., 97 N.Y.2d 46 (2001), the Court of Appeals held that the sale of houses 23

24 bundled with a package of services falls within the scope of the CPL. 53. In 23 Realty Associates v. Teigman, 213 A.D.2d 306 (1st Dept. 1995), a brokerage service advertised leasehold space as rent-stabilized apartments in a converted hotel, when in fact the hotel designation had never been changed. The Court, in concluding that the circumstances fell within the scope of the CPL, held that [a] residential lease is, after all, a purchase of services from the landlord (and, by extension, his agent) (Park W. Mgt. Corp. v Mitchell, 47 N.Y.2d 316, 324, cert. denied, 444 U.S. 992), and further noted that [a]n apartment dweller is today viewed, functionally, as a consumer of housing services--as much a consumer as the purchaser of any other goods or services (Commonwealth v Monumental Props., 459 Pa 450, , 329 A.2d 812, ). 54. If advertising of long-term apartment rentals, and selling of homes with a package of services constitute consumer services and goods under the CPL, a fortiori, the advertising, booking and rental of accommodations for transient use and occupancy, with a package of services [including the booking of reservations, and providing furniture, linens, towels, kitchen utensils, internet service, heating and air conditioning, TVs, etc.], likewise constitute consumer services and goods under the CPL. 24

25 55. This was the conclusion reached by the Court in the Smart Apartments case, supra, 39 Misc.3d 221. ii. The offering of a service or product prohibited by law, such as illegal accommodations, is a deceptive trade practice 56. A merchant impliedly represents that its products and services may lawfully be sold and that it is authorized and legally entitled to sell and receive payment for them. See, e.g., Benik v. Hatcher, 750 A.2d 10, 25 (Md. 2000) ("Implicit in any advertisement is a representation that the transaction is lawful"). Where that is not the case, the merchant has engaged in a deceptive practice. See, e.g., FTC v. World Media Brokers, 415 F.3d 758 (2005)(deceptive to fail to inform consumers that it is illegal to buy and sell foreign lottery tickets); Karst v. Goldberg, 88 Ohio App. 3d 413 (1993)(deceptive to fail to inform consumer that a satellite television system was sold with an illegal unscrambler chip); Kugler v. Haitian Tours, Inc., 293 A.2d 706 (Sup. Ct. N.J. 1972) (selling consumers a divorce package for a Haitian divorce not recognized as lawful in the consumer's state of residence deemed a deceptive practice); Walts v. First Union Mortgage Corp., 259 A.D.2d 322 (1st Dept. 1999) (charging prohibited insurance premiums deceptive), appeal dismissed, 94 N.Y.2d 795 (1999); Sterling v. Ackerman, 244 A.D.2d 170 (1st Dept. 1997) (charging unlawful Medicare fees 25

26 deceptive); State v. E.F.G. Baby Prods., 40 A.D.2d 340 (3rd Dept. 1973) (charging legally prohibited cancellation fees deceptive as well as illegal). 57. As in these cited cases, it is a deceptive trade practice to advertise, book and provide short-term accommodations in apartments where such accommodations are illegal. iii. The offering of a service or product which is unfit for its intended use, such as accommodations which do not meet fire safety requirements, is a deceptive trade practice 58. A merchant impliedly represents that the products it is selling are effective for the purposes for which they are sold. As the FTC has observed, "[w]hen a product is sold, there is an implied representation that the product is fit for the purposes which it is sold. When it is not, deception occurs." FTC Policy Statement on Deception, appended to Matter of Cliffdale Associates, 103 F.T.C. 110, 1984 FTC LEXIS 71, at *176 (1984), viewable at See also, Matter of Int'l Harvester Co., 104 F.T.C. 949, 1984 FTC LEXIS 2 at * (1984)("by the very act of offering goods for sale the seller impliedly represents that they are reasonably fit for their intended uses", and [t]he concept of reasonable fitness includes a further implied representation that the products are free of gross safety 26

27 hazards, although not necessarily of all or relatively improbable dangers ). 59. FTC v. Figgie International, Inc., 994 F.2d 595 (9 th Cir. 1993), cert. den., 510 U.S (1994), involved the marketing of heat detectors as fire safety devices. Despite a change in standards by the National Fire Prevention Association, recommending the use of smoke detectors in addition to heat detectors, the company s promotional materials continued to advise consumers that heat detectors were all that was necessary. The Court based its remunerative remedies on the previously affirmed FTC s cease and desist order which had found that the way in which the heat detectors were marketed was a deceptive trade practice. Matter of Figgie International, Inc., 107 F.T.C. 313 (1986), aff d., 817 F.2d 102 (4th Cir. 1987). 60. In New York an innkeeper (or hotelier) has a common law duty to exercise reasonable care for guests' safety. Taieb v. Hilton Hotels Corp., 131 A.D.2d 257 at 260 (1st Dept. 1987)(hotel liable to guest injured while exiting during fire caused by hotel s negligence). See also, Friedman v. Shindler s Prairie House, 224 A.D. 232 (3rd Dept. 1928)(hotel liable under common law duty for death of guest who jumped from window during fire). 61. Innkeepers are also required to comply with fire protection statutes and other public regulations. 66 N.Y.Jur. 2d 27

28 Hotels, Motels, and Restaurants 98; Bernucci v. Marfre Holding Corporation, 171 Misc. 997 (Sup.Ct., NY Co., 1939). 62. A merchant offering transient accommodations to consumers implicitly represents that those accommodations are of a certain quality that they are reasonably safe, having met local safety standards and requirements. When they are not, the consumer has been misled as to a material fact and the merchant has engaged in a deceptive trade practice. C. HEIGHTENED FIRE SAFETY REQUIREMENTS FOR TRANSIENT OCCUPANCIES NEW YORK CITY FIRE AND BUILDING CODES 63. Transient residential occupancies in New York City (classified by the New York City Building Code, Section , as Group R-1 occupancies) are required to be designed, constructed and operated at a significantly higher standard of safety than non-transient occupancies (classified by the New York City Building Code, Section , as Group R-2 occupancies). This is the case under both the Fire and Building Codes, as detailed in the Affidavits of James Colgate, DOB Assistant Commissioner of Technical Affairs and Code Development for the New York City Department of Buildings [ Colgate Affid. Fire Safety ], and Thomas Jensen, Chief of Fire Protection for the New York City Fire Department [ Jensen Affid. ]. 64. Reasons for the more stringent requirements include the fact that transient occupants do not have the familiarity 28

29 with their surroundings that long-term occupants have, nor are they aware of the layouts and configuration of exits and/or fire escapes. They are not familiar with local fire-safety and evacuation procedures such as elevator evacuation, fire alarm notifications, exit signs, and do not know what telephone number to call to reach the fire department in case of emergency. Nor have transient occupants received the fire safety notices required in residential buildings that describe their building s combustible or noncombustible construction, whether or not they should remain in place or evacuate during a smoke condition. See, Colgate Affid. Fire Safety, at paragraph Several notable fires, including hotel fires such as the MGM Grand Hotel fire in Las Vegas in 1980, which left 85 dead and hundreds injured, 7 resulted in remedial legislation in New York and other States, including New York City s Local Law 16 of That legislation required retroactive upgrades to many classes of buildings including hotels. 66. For instance, under the Building Code, beginning in 1984, all hotels were required to retroactively install exit signs at the entrance to every exit stair as well as emergency 7 See, Investigation Report on the MGM Grand Hotel Fire, NFPA (rev. 1982), retrieved at 29

30 lighting in case of power failure. 8 Existing apartment houses classified as R-2 were never required to install exit signs or emergency lights. Therefore, these older apartment houses, without these important upgrades, are not deemed safe for transient occupants. Other retroactive upgrades required of existing R-1 transient occupancies, but never required of existing R-2 permanent residential occupancies, include the 1984 requirement for sprinklers or other fire protection measures to protect elevator lobbies on each story. 9 See Colgate Affid. - Fire Safety, at paragraph The New York City Fire Code, as detailed in the Affidavit of Thomas Jensen, Chief of Fire Prevention [Jensen Affid.], likewise imposes a series of requirements on transient residential occupancies beyond those which are applicable to permanent occupancies. See Jensen Affid., especially at paragraphs The life-saving value of these fire safety requirements has been well proven over time. A summary by the National Fire Protection Association of hotel fires resulting in ten or more fatalities in the United States from 1934 through 8 See Sections (b), (b) of the 1968 New York City Building Code, Section 45, 46 of Local Law 16/ See Section of the 1968 Building Code, Section 33 of Local Law 16/

31 2006 shows that, with the exception of the Dupont Plaza fire in San Juan, Puerto Rico in 1986 a fire which occurred in a jurisdiction that at the time did not have the fire safety standards which had earlier been enacted in New York and other states there have been no major hotel fire tragedies since the institution of the more stringent fire safety standards for transient occupancies The importance of these fire safety requirements was also highlighted in a hotel fire which occurred in 2007 in the United Kingdom and left three persons dead. As reported by the BBC, the owners of the hotel, who admitted to criminal charges that they had failed to provide proper fire detection and alarm systems and failed to make a proper risk assessment, were fined 80,000 plus 62,000 in costs. The brother of two of the victims opined that "The best thing that could come out of this is that the tourism agencies and hotels sit up and take note. There are still premises and hotels around the country that are not complying with fire regulations." See, Exhibit B, attached to Colgate Affid. Fire Safety. D. THE NEW YORK CITY NUISANCE ABATEMENT LAW 10 The summary is attached as Exhibit A to the Colgate Affid. Fire Safety. For information on the Dupont Plaza fire see, e.g., fema.gov/disasters_firesum_dupont.html. 31

32 70. The New York City Council enacted the Nuisance Abatement in 1977, finding that: Public nuisances exist in the City of New York in the the use or alteration of property in flagrant violation of the building code, zoning resolution multiple dwelling law all of which interfere with the interest of the public in the quality of life and total community environment, the tone of commerce in the city, property values and the public safety; the council further finds that the continued occurrence of such activities and violations is detrimental to the health, safety, morals and general welfare of the people of the City of New York and of the businesses and visitors thereof. Admin. Code Section (emphasis added). 71. Under the scheme of the Nuisance Abatement Law, various conditions are declared to be public nuisances, including certain violations of the Building Code, and the occurrence of criminal nuisances: Public nuisance defined. The following are declared to be public nuisances:... (d) Any building, erection or place, other than a one-or two-family dwelling classified in occupancy group J-3 pursuant to section of this code, which is in violation of article five of subchapter two of chapter one of title twenty-six or of article three, four, six, ten, twentytwo or twenty-four of subchapter one of chapter one of title twenty-seven of this code;... (l) Any building, erection or place, including one- or two-family dwellings, wherein there is occurring a criminal 32

33 nuisance as defined in section of the penal law. Admin. Code Section Criminal nuisance is defined in Penal Law Section as follows: A person is guilty of criminal nuisance in the second degree when: 1. By conduct either unlawful in itself or unreasonable under all the circumstances, he knowingly or recklessly creates or maintains a condition which endangers the safety or health of a considerable number of persons; or 2. He knowingly conducts or maintains any premises, place or resort where persons gather for purposes of engaging in unlawful conduct. Criminal nuisance in the second degree is a class B misdemeanor. 73. Pursuant to Sections and of the Administrative Code, the Corporation Counsel is authorized to bring and maintain an action in the Supreme Court to permanently restrain the above-mentioned public nuisances, as well as the person or persons conducting, maintaining or permitting such public nuisances, from further conducting, maintaining or permitting the nuisances. 33

34 74. During the pendency of an action brought to secure such a permanent injunction, the Court is empowered to grant a preliminary injunction, enjoining the public nuisance, and certain ex parte relief, including a temporary restraining order: Pending an action for a permanent injunction as provided for in section of this subchapter, the court may grant a preliminary injunction enjoining a public nuisance within the scope of this subchapter and the person or persons conducting, maintaining or permitting the public nuisance from further conducting, maintaining or permitting the public nuisance A temporary restraining order may be granted pending a hearing for a preliminary injunction where it appears by clear and convincing evidence that a public nuisance within the scope of this subchapter is being conducted, maintained or permitted. Admin. Code sec (a). 75. Pursuant to Admin. Code Section 7-710(a) a temporary restraining order may be granted without notice restraining the defendants and all persons from removing or in any manner interfering with the furniture, fixtures and movable property used in conducting, maintaining or permitting the public 11 References in Subsection (d) of are to the 1968 Building Code, which has been superseded by the 2008 Building Code. Section of the Admin. Code, enacted in conjunction with the 2008 Building Code, provides for equivalent references between the 1968 and 2008 Codes. 34

35 nuisance and from further conducting, maintaining or permitting the public nuisance 76. In addition Admin. Code Section 7-713(a) provides for the appointment of a temporary receiver: In any action wherein the complaint alleges that the nuisance is being conducted or maintained in the residential portions of any building or structure or portion thereof which are occupied in whole or in part as the home, residence or sleeping place of one or more human beings, the court may, upon motion on notice by the plaintiff, appoint a temporary receiver to manage and operate the property during the pendency of the action in lieu of a temporary closing order. A temporary receivership shall not continue after final judgment unless otherwise directed by the court. Upon the motion of any party, including the temporary receiver, or on its own initiative, the appointing court may remove a temporary receiver at any time. E. COMMON LAW PUBLIC NUISANCE 77. Under common law principles in New York, a public nuisance is an offense against the State: It consists of conduct or omissions which offend, interfere with or cause damage to the public in the exercise of rights common to all (New York Trap Rock Corp. v. Town of Clarkston, 299 NY 77, 80), in a manner such as to offend public morals, interfere with the use by the public of a public place or endanger or injure the property, health, safety or comfort of a considerable number of persons (Melher v. City of New York, 190 NY 481, 488; Restatement, Torts, notes preceding 822, p. 217). 35

36 Copart Industries v. Consolidated Edison, 41 N.Y.2d 564, 568 (1977); City of New York v. Smokes-Spirits.Com, 12 N.Y.3d 616, 626 (2009) (quoting Copart Industries v. Consolidated Edison, Co., 41 N.Y.2d 564, 568 [1977]). 78. Similarly the Restatement of Torts 2d, 821B, defines a public nuisance to be an unreasonable interference with a right common to the general public, and further describes circumstances which can constitute a public nuisance to include significant interference with public safety, public peace, and conduct proscribed by a statute, ordinance or administrative regulation. 79. The operation of illegal transient accommodations was held to constitute a public nuisance in City of New York v. Smart Apartments LLC, 39 Misc 3d 221, 226 (Sup.Ct., NY Co. Engoron, J. (2013): This definition [of public nuisance] certainly covers placing unwary tourists in firetraps and subjecting them to the possibility of serious injury or death (tragic hotel fires, not to mention gardenvariety apartment house conflagrations, are a staple of front-page news). 80. It is well settled that a governmental entity such as plaintiff CITY may bring an action to abate a public nuisance. City of New York v. Smart Apartments LLC, supra, New York Trap Rock Corp. v. Town of Clarkstown, 299 N.Y. 77, 83, 36

37 (1949); City of New York v. Smokes-Spirits.Com, 12 N.Y.3d 616, 626 (2009). 81. Preliminary injunctive relief, including temporary restraining orders, are available remedies against common law public nuisances. See, City of New York v. Smart Apartments LLC, supra 12, Hoover v. Durkee, 212 A.D.2d 839 (3rd Dept. 1995); City of Rochester, Petitioner, v. Premises Located at South Washington Street, 180 Misc. 2d 17 (Sup.Ct., Monroe Co., 1998); State v. Joint Board, Nursing Home & Hospital Employees Div., 56 A.D.2d 310 (2nd Dept. 1977); United Steelworkers of America v. United States, 361 U.S. 39 at (1959). V. STATEMENT OF FACTS A. The Buildings in Which Defendants Allow and Operate Illegal Transient Accommodations, Their Classification, and the Violations Found on Inspection i. 59 FIFTH AVENUE, MANHATTAN 82. The four-story building known as 59 FIFTH AVENUE is a Class A multiple dwelling, as defined by the MDL and HMC. It is a Heretofore Converted Class A multiple dwelling, reflecting 12 Preliminary relief including temporary restraining orders has also been granted in private lawsuits commenced by condominiums seeking to enjoin the operation of illegal hotels in their buildings. See, Board of Managers of the South Star v. Grishanova, 985 N.Y.S.2d 72, 2014 NY Slip Op 3204 (1 st Dept. 2014), Board of Managers of Gramercy Condominium v. Blodgett, N.Y.Co. Index No /2013 (TRO granted Feb. 8, 2013, viewable on ecourts). 37

38 the fact that it was erected before April 18, 1929, as a one- or two-family dwelling, and converted prior to April 18, The current Certificate of Occupancy for the building lists as permissible occupancies two apartments on each of the second and third floors, and one apartment in the attic for a total of five class A apartments. See, Affidavit of DOB Assistant Commissioner James Colgate, sworn to on August 20, 2014, for a description of the property and its legal use and occupancy [ Colgate Affid. Legal Occupancy ], at paragraphs A copy of the applicable Certificate of Occupancy [No ] for 59 FIFTH AVENUE is annexed to the Affidavit of DOB Building Inspector Vladimir Pugach, sworn to on August 25, 2014 [ Pugach Affid. ], as Exhibit A. 84. As a result of community complaints, personnel from the Mayor s Office of Special Enforcement ( OSE ) inspected the building on December 3, 2011, and again on August 25, 2012, to determine whether it was being operated in violation of law and whether the use, occupancy and arrangement of the building posed a danger to the health, welfare and safety of the occupants or of the public generally. 85. During the December 3, 2011 inspection, OSE personnel found, among other building violations, that the two Class A apartments on each of the second and third floors had been converted into three Class A apartments on each of those 38