Chase Group Alliance v. City of New York Department of Finance, No. 09-2327 (2d Cir. 2010)

Annotate this Case

Download PDF

09-2327-cv Chase Group Alliance v. City of New York Department of Finance 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 AUGUST TERM, 2009 4 (Argued: January 20, 2010 Decided: September 14, 2010) 5 Docket No. 09-2327-cv 6 ----------------------------------------------------------------- 7 8 9 10 11 CHASE GROUP ALLIANCE LLC, ESQUIRE GROUP ESTATES LLC, VINTAGE VENTURES LLC, Plaintiffs-Appellants, v. 12 13 14 15 16 17 18 19 CITY OF NEW YORK DEPARTMENT OF FINANCE, MARTHA E. STARK, Finance Commissioner of New York, CITY OF NEW YORK, DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT, RAFAEL CESTERO, Commissioner of New York City Department of Housing Preservation and Development, DEBRA A. THOMAS, Director of Article 7A Programs at the New York City Department of Housing Preservation and Development, 20 ----------------------------------------------------------------- 21 B e f o r e: 22 Defendants-Appellees. WINTER, WALKER, and POOLER, Circuit Judges. Appeal from a dismissal of a complaint pursuant to Rule 23 12(b)(6) in the United States District Court for the Southern 24 District of New York (William H. Pauley III, Judge). 25 claim their right to due process was violated by liens placed 26 upon their properties by the City. 27 that New York law afforded appellants a right to notice and 28 access to a tribunal to assert their objections before the liens 1 Appellants Because the complaint alleges 1 were imposed, appellants right to due process was not violated. 2 We therefore affirm. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 ROBERT J. TOLCHIN (Oleg Rivkin, Fox Horan & Camerini, LLP, New York, New York, on the brief), The Berkman Law Office, LLC, Brooklyn, New York, for Appellants. JULIAN L. KALKSTEIN, Assistant Corporation Counsel of the City of New York (Michael Cardozo, Corporation Counsel of the City of New York; Larry A. Sonnenshein, of counsel), New York, New York, for Appellees. WINTER, Circuit Judge: Appellants are owners of three apartment buildings in New 19 York City. 20 agencies and officials, claiming that the City defendants imposed 21 liens on the properties without giving appellants prior notice of 22 the liens or securing the approval of the New York Housing Court, 23 as required by an order of that court. 24 their complaint. 25 that the Housing Court order afforded appellants a right to 26 notice and access to New York courts before the imposition of 27 valid liens. 28 process. They sued the City of New York and various City Judge Pauley dismissed We affirm because the complaint itself alleges The availability of this process satisfied due 29 BACKGROUND 30 Because this is an appeal from a dismissal under Fed. R. 31 Civ. P. 12(b)(6), we view the facts alleged in the complaint in 2 1 the light most favorable to the appellants. 2 Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). 3 The complaint alleged the following. Chambers v. Time Tenants of three 4 apartment buildings in New York City commenced an action in the 5 New York City Civil Court, Housing Part under Article 7A of the 6 New York Real Property Actions and Proceedings Law. 7 sought the appointment of a 7A Administrator to oversee the 8 properties and to remedy housing code violations. 9 Court issued an order appointing Peter Nakos as the 7A 10 11 The tenants The Housing Administrator for the properties. The Housing Court s order gave the 7A Administrator 12 authority to collect and use rents, subject to the Court s 13 direction, to remedy the conditions alleged in the Petition, any 14 violations of record issued by [the New York City Housing 15 Preservation Department ( HPD )] . . . and to undertake work as 16 authorized by the Real Property Actions and Proceedings Law § 17 778(1) . . . . 18 rent monies to [o]rder the necessary materials, labor and 19 services to remove or remedy the conditions alleged in the 20 Petition, and to remedy all violations currently on record with 21 HPD . . . . 22 borrow money when necessary. 23 Court s order provided that the 7A Administrator could: 24 25 Borrow funds from HPD or other governmental entity for repairs at the Premises that are necessary to The order authorized the 7A Administrator to use The 7A Administrator was also given authority to 3 In this respect, the Housing 1 2 3 4 5 6 7 8 9 10 11 However, the order limited the 7A Administrator s authority to 12 accept loans that would result in liens against the properties: implement the objectives of this Judgment and enter into an agreement with HPD or other governmental entity for the repayment of such monies. . . . The Administrator may apply for any loan from a bank or lending institution or grant available for the purposes of repair and rehabilitation of the Premises or which are otherwise made available through any governmentally administered or subsidized program. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 The Housing Court s order also set forth record-keeping and 28 reporting requirements. 29 issuance, the 7A Administrator was required to file with the HPD 30 and with all relevant parties a plan for the provision of 31 rehabilitative services. 32 Administrator submit to both the Housing Court and to HPD monthly 33 financial statements of all receipts and expenditures. 34 [A]ny loan which would result in a lien on the Premises may not be accepted without approval of the Court, which approval shall be sought upon notice to the Premises owner or attorney for the owner and all other parties to this proceeding. Said approval may be sought without formal motion procedure so long as at least eight days written notice of such approval is given to the owner or attorney thereof, and any other interested parties. The Court may set such procedures as are reasonable to hear any objections to such application, and if any party objects to its proposal loan they may bring an order to show cause or seek such other remedy as may be appropriate. Within thirty days of the order s The order further required that the 7A The provisions of the Housing Court s order mirror statutory 35 provisions in Article 7A that lay out the scope of authority 36 given to a 7A administrator. That law provides in relevant part: 4 1 Any administrator is authorized and empowered in accordance with 2 the direction of the court, to order the necessary materials, 3 labor and services to remove or remedy the conditions specified 4 in the judgment, and to make disbursements in payment thereof; 5 and to demand, collect and receive the rents from the tenants 6 . . . . 7 a 7A administrator s authority to encumber properties placed in 8 its care, Article 7A provides: N.Y. Real Prop. Acts. § 778(1) (emphasis added). As to 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Id. (emphasis added). 23 requirements. 24 submit work plans and make publicly available all receipts and 25 expenditures. In addition, such administrator is authorized and empowered in accordance with the direction of the court to accept and repay such moneys as may be received from the department charged with enforcement of the housing maintenance code of the city of New York for the purpose of replacing or substantially rehabilitating systems or making other repairs or capital improvements authorized by the court. All moneys expended by the department pursuant to the foregoing shall constitute a debt recoverable from the owner and a lien upon the building and lot, and upon the rents and other income thereof. Article 7A also sets out similar reporting For example, it requires that the administrator Id. at §§ 778, 779. 26 At some point after the appointment of Nakos as the 7A 27 Administrator, appellants purchased the properties in question. 28 They allege that the 7A Administrator subsequently accepted 29 $712,567.55 in loans from HPD, all of which the New York City 30 Department of Finance has purported to deem . . . to be liens 31 against the properties and has so filed them. 5 It further alleges 1 that HPD granted, and the 7A Administrator accepted, these loans 2 without prior notice to appellants or court approval. 3 complaint asserts that this conduct not only deprived appellants 4 of rights that the plaintiffs plainly were entitled to under the 5 Housing Court Order[] but also of their due process rights under 6 the Fourteenth Amendment.1 7 asserts that the 7A Administrator s unilateral decision to 8 encumber the properties deprived appellants of any opportunity 9 to contest the amount of the loans, or the necessity or The In this respect, the complaint 10 appropriateness of the work which the 7A administrator planned to 11 carry out with the proceeds of such loans. 12 The complaint requests that the district court issue an 13 order: 14 on the properties; (ii) prohibiting the City from either selling 15 or transferring the existing liens to a third party; and (iii) 16 directing that the City remove the existing $712,567.55 in liens 17 from the properties immediately. (i) enjoining the City from placing any additional liens 18 Applying the Mathews v. Eldridge, 424 U.S. 319 (1976), 19 balancing test, the district court granted the City s motion to 20 dismiss for failure to state a claim. 21 concluded that pre-deprivation process would: 22 Administrator's ability to carry out his functions in a timely 1 The district court (i) impede the 7A The complaint also alleges a violation of due process under the New York Constitution. 6 1 manner ; (ii) impose a costly burden on Defendants ; and (iii) 2 "endanger the safety of those living at the Properties by 3 impeding the 7A Administrator s actions." 4 considerations and the fact that appellants already were given 5 adequate notice of the pendency of the 7A Proceeding and ample 6 opportunity to respond and protect their interests, it found 7 that appellants had failed to state a due process claim. 8 This appeal followed. 9 Given these We affirm but on different grounds. DISCUSSION 10 As noted, we review the grant of a Rule 12(b)(6) motion to 11 dismiss de novo, "construing the complaint liberally, accepting 12 all factual allegations in the complaint as true, and drawing all 13 reasonable inferences in the plaintiff's favor." 14 F.3d at 152. 15 affirm the decision below on dispositive but different grounds. 16 Primetime 24 Joint Venture v. Nat l Broad. Co., 219 F.3d 92, 103 17 (2d Cir. 2000). 18 provide factual allegations sufficient to raise a right to relief 19 above the speculative level. 20 Inc., 551 F.3d 122, 124 (2d Cir. 2008) (internal quotation marks 21 omitted). Chambers, 282 Because our review is de novo, we are free to We will affirm only if the plaintiff fails to Burch v. Pioneer Credit Recovery, 22 Appellants claim that the imposition of liens on the 23 properties by the City violated their Fourteenth Amendment due 24 process rights. An essential principle of due process is that a 7 1 deprivation of life, liberty, or property be preceded by notice 2 and opportunity for hearing appropriate to the nature of the 3 case. 4 (1985) (internal quotation marks omitted). 5 must be reasonably calculated, under all the circumstances, to 6 apprise interested parties of the pendency of the action and 7 afford them an opportunity to present their objections. 8 v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). 9 With respect to determining the need to provide an opportunity to Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542 The requisite notice Mullane 10 be heard, Mathews identified three relevant factors: 11 private interest affected by official action; (ii) the risk of 12 erroneous deprivation under existing procedures and probable 13 value of additional or substitute safeguards; and (iii) the 14 interest of the government. 15 (i) the 424 U.S. at 335. The parties dispute whether Mathews entitles appellants to a 16 process affording a pre-deprivation hearing. 17 held that it does not, because of the need for expedition, the 18 cost to the defendants, and the danger to tenants of continuing 19 violations. 20 The district court We disagree. Absent exigent or emergency circumstances, the property 21 interest here was sufficiently significant, and the risk of 22 erroneous deprivation sufficiently great, that some pre- 23 deprivation procedural protection was required. 24 v. Doehr, 501 U.S. 1, 12, 18 (1991) ( [E]ven the temporary or 8 See Connecticut 1 partial impairments to property rights that attachments, liens, 2 and similar encumbrances entail are sufficient to merit due 3 process protection. . . . 4 failing to provide a preattachment hearing without at least 5 requiring a showing of some exigent circumstances, clearly falls 6 short of the demands of due process. ); Burtnieks v. City of New 7 York, 716 F.2d 982, 987 (2d Cir. 1983) ( Where a deprivation of 8 property is involved, the aggrieved individual must be given an 9 opportunity for a hearing before he is deprived of any 10 significant property interest, except for extraordinary 11 situations where some valid governmental interest is at stake 12 that justifies postponing the hearing until after the event. 13 (quoting Boddie v. Connecticut, 401 U.S. 371, 379 (1971)). 14 [T]he [state] provision before us, by However, the kind of pre-deprivation hearing required by due 15 process depends upon the nature of the issues and the relative 16 weight of the Mathews factors. 17 Senate, 599 F.3d 148, 158 (2d Cir. 2010); Spinelli v. City of New 18 York, 579 F.3d 160, 169-70 (2d Cir. 2009). In the present matter, 19 we believe that due process requires no more than notice and an 20 opportunity for the owner to contest the overall legitimacy of Monserrate v. New York State 9 1 the need for the proposed repairs and renovations and the 2 reasonableness of the amounts to be borrowed.2 3 As for the need for expedition, the hearing can be tailored 4 in the discretion of the pre-deprivation-hearing court to meet 5 whatever exigencies exist in a particular case. 6 497 F.3d 262, 270-71 (2d Cir. 2007); Interboro Inst., Inc. v. 7 Foley, 985 F.2d 90, 93 (2d. Cir. 1993); Oberlander v. Perales, 8 740 F.2d 116, 120-21 (2d Cir. 1984) (superceded by statute on 9 other grounds, as stated by Senape v. Constantino, 936 F.2d 687, Karpova v. Snow, 10 690 n.4 (2d Cir. 1991)). 11 the appointment of a 7A administrator should have resulted in 12 findings sufficient to constitute an adjudication of many of the 13 needed repairs and renovations. 14 statute also require the submission of plans for repairs and 15 renovations. 16 repair and renovation plan of some detail, including likely 17 costs, which justifies the amount to be borrowed. 18 19 The prior hearing held with regard to The Housing Court order and Likewise, obtaining a loan will typically require a Thus, the requirements of due process can be satisfied if lien or loan approval is largely based on papers already in 2 An owner of property for which an administrator has been appointed may be presumed to be informed of the property s deficiencies at the time of the appointment or at any later time when the owner had access to the property. An owner who purchases the property after the appointment of an administrator, thereby knowing of the existence of deficiencies that may result in loans that become liens, may be given some access in the discretion of the court but, having voluntarily accepted the obvious risks, is in no position to delay matters unreasonably by demanding to learn more about the property purchased. 10 1 existence (and usually in the record of proceedings of the 2 Housing Court); the hearing can be limited to the reasonableness 3 of the overall plan and its costs, avoiding quibbles over every 4 length of pipe or sheet of wallboard. 5 process requires that separate applications be made for each loan 6 rather than an application for the total amount to be borrowed 7 for particular aspects of the project. Moreover, nothing in due 8 As for the cost to the 7A administrator of seeking approval 9 for loans, there is nothing before us to suggest that such costs 10 will be exorbitant given the prior hearing leading to the 11 Administrator s appointment, the 7A administrator s need to 12 establish a plan before obtaining loans, and a hearing that 13 focuses on overall legitimacy of need and reasonableness of the 14 amount to be borrowed. 15 Moreover, the costs of seeking approval may benefit the 16 tenants, the intended beneficiaries of the statutory scheme, 17 because approval of the borrowing increases both the oversight 18 and accountability of the Administrator. 19 without oversight or accountability is no more in the tenants 20 interest than an owner s use of a pre-deprivation hearing to 21 increase the cost of the imposition of a lien. Authorizing borrowing 22 Any ongoing danger to tenants is a vital consideration, but 23 there is absolutely nothing before us to suggest that this was a 24 factor in the present matter. For example, the dates of the 11 1 Housing Court orders indicate that relevant events took place 2 over months and years. 3 We turn now to the question of whether appellants were 4 denied an appropriate pre-deprivation hearing. 5 may have adequately alleged that liens invalid under state law 6 were imposed on their properties, that allegation does not 7 suffice to state a claim under Section 1983 for relief based on a 8 procedural due process violation. 9 the state afford a party threatened with a deprivation of While appellants Due process requires only that 10 property a process involving pre-deprivation notice and access to 11 a tribunal in which the merits of the deprivation may be fairly 12 challenged. 13 New York City Bd. of Elections, 470 F.3d 458, 466-67 (2d Cir. 14 2006); Interboro, 985 F.2d at 93; Oberlander, 740 F.2d at 120. 15 No particular kind of tribunal is required so long as the one 16 provided is appropriate in light of issues at stake. 17 985 F.2d at 93; Oberlander, 740 F.2d at 120-21. See Loudermill, 470 U.S. at 542; Rivera-Powell v. 12 Interboro, If such a 1 process is in place, due process is satisfied.3 2 F.2d at 93-94; Oberlander, 740 F.2d at 120-21. 3 Interboro, 985 The problem with appellants claim is that the complaint 4 itself alleges that New York afforded them pre-deprivation 5 protection by means of court orders. 6 the Housing Court orders required notice and a court hearing, at 7 which appellants could contest proposed loans that might result 8 in liens. 9 appellants claim than a court order preventing the imposition of According to the complaint, It is hard to conceive of a remedy more attuned to 10 a lien without a notice, hearing, and court approval. 11 such an order is much of the relief they seek in the present 3 Indeed, Appellants arguments seek to gain some superficial appeal by conflating the governmental character of the party seeking to impose the liens, the City, with the governmental action challenged, the imposition of the liens. However, whether the party purporting to impose the liens is a public or private entity is irrelevant here because the constitutional harms claimed are the liens, the validity of which depends entirely on the Housing Court s authority. The appropriate constitutional analysis, therefore, focuses on the Housing Court s processes and does not turn in any way on whether the lien is asserted by the City or a private bank. Even if the pertinent constitutional harm was the City s purport[ing] to deem to have a lien, appellants would have difficulty surmounting the argument that no pre-deprivation notice and hearing was required because the deprivation was random and unauthorized. See Rivera-Powell v. New York City Bd. of Elections, 470 F.3d 458, 465 (2d Cir. 2006) ( When the state conduct in question is random and unauthorized, the state satisfies procedural due process requirements so long as it provides meaningful post-deprivation remedy. ). The complaint alleges nothing to suggest that any violation of the Housing Court s order was pursuant to a statute, code, regulation, or custom, see, e.g., Hellenic Am. Neighborhood Action Comm. v. City of New York, 101 F.3d 877, 880 (2d Cir. 1996) (noting that post-deprivation procedures will not necessarily satisfy due process [w]hen the deprivation occurs in the more structured environment of established State procedures, rather than random acts ), or made by a final decisionmaker, see e.g., Velez v. Levy, 401 F.3d 75, 91-92 & n.14 (2d Cir. 2005) (stating that post-deprivation remedies do not suffice where the government actor in question is a high ranking official with final authority over significant matters ) (internal quotation marks omitted). To the contrary, the complaint is at pains to emphasize that the purported imposition of a lien violated a Housing Court order. 13 1 action. 2 process that was constitutionally due at pertinent times. 3 The Housing Court order, therefore, provided all the The complaint does not allege what, if any, action was taken 4 by appellants or the Housing Court to enforce the Housing Court 5 order. 6 unsatisfactory ruling had emanated from the Housing Court, from 7 which they had taken an appeal, which is still pending. 8 even if the Housing Court erred, such an error does not itself 9 become a due process violation to be remedied in a Section 1983 Appellants suggested at oral argument that an However, 10 action. 11 Cir. 1990) ( A breach of procedural requirements does not create 12 a due process violation unless an individual was denied a fair 13 forum for protecting his state rights. ) (internal quotation 14 marks omitted). 15 due process does not mean that Section 1983 provides a remedy for 16 every error committed in the state proceeding. 17 appellate remedies are available, a Section 1983 action is not an 18 available vehicle for relief.4 19 Org. for Women v. Pataki, 261 F.3d 156, 168 (2d Cir. 2001) 20 (holding that even if the New York State Division of Human Rights See, e.g., McDarby v. Dinkins, 907 F.2d 1334, 1337 (2d The fact that a state proceeding is required by So long as state See, e.g., New York State Nat l 4 Similarly, we have recognized that a party cannot bring a Section 1983 claim for violation of the Takings Clause when no effort was made to seek compensation from the state, provided it has a reasonable certain and adequate provision for obtaining compensation. Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 379-80 (2d Cir. 1995) (quoting Williamson Cnty. Reg l Planning Comm n v. Hamilton Bank, 473 U.S. 172, 194 (1985)). 14 1 subjected discrimination claims to unreasonable delay in 2 processing, the plaintiffs could have brought an Article 78 3 proceeding to mandamus Division officials to perform certain 4 acts and therefore had adequate process). 5 This is not by any means to say that valid Section 1983 6 claims based on due process violations require exhaustion of 7 state remedies. 8 process violations, we nonetheless evaluate whether state 9 remedies exist because that inquiry goes to whether a But [w]hen § 1983 claims allege procedural due 10 constitutional violation has occurred at all. 11 470 F.3d at 468 n.12; see also N.Y. State Nat l Org. for Women, 12 261 F.3d at 169 ( Exhaustion simpliciter is analytically distinct 13 from the requirement that the harm alleged has occurred. 14 the jurisprudence, a procedural due process violation cannot have 15 occurred when the governmental actor provides apparently adequate 16 procedural remedies and the plaintiff has not availed himself of 17 those remedies. ) (internal quotation marks and alteration 18 omitted). 19 20 CONCLUSION We therefore affirm. 21 15 Rivera-Powell, Under

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.