By KIMBERLY ACEVEDO
According to Martin Shlufman, who represented the victorious landlords, if the appeal isn't reversed, Long Beach has two options for paying his clients: either include the judgment in the budget or bond the amount.
Either way, Shlufman said, the taxpayers are paying.
Due to their intent to appeal, the city declined to comment on specific issues but an official said they stand by a statement issued last week by the city council president Joel Crystal:
The recent decision by Judge [Eli] Wager does not deter us from our dedication to this cause and our residents. We intend an immediate appeal of this ruling and are confident that the City of Long Beach will prevail based upon the law.
After the city apparently failed to conduct a formal vacancy survey in 1996 and to follow through on an alleged promise to enact vacancy decontrol, several Long Beach landlords filed a $20 million lawsuit seeking to end the rent controls which, they say, resulted in lost rental income and a drop in the value of their buildings.
Two weeks ago, a former justice appointed as a special referee awarded Executive Towers' owner Samuel Walton $4 million and David Paulsen of Paulsen Real Estate Corp., which owns the Crystal House on Shore Road, $2 million. The damages were calculated based upon losses that would have been incurred through a vacancy rate of greater than five percent between March 1996 and August 2000.
According to the Emergency Tenant Protection Act, when an apartment building's vacancy rate exceeds five percent, rent control is eliminated. And while special referee Eli Wager found the rate to exceed five percent only during a four month period March to May 1996 damages were determined until August 2000, which was when the city passed a resolution to re-impose rent stabilization.
While Wager found the vacancy rate exceeding five percent for the four months, he did not find it to be the case during May 1996 to August 2000, a source close to the case said. And that has city officials up in arms as the damages were awarded for that time frame, the source said.
The city could have re-imposed rent regulation if they believed the vacancy rate was below five percent, Shlufman said. They could have adopted a resolution instead of waiting to go to trial.
During a public hearing in 1996, the city moved against a resolution that called for vacancy decontrol meaning rent would be stabilized for current tenants but would end when they moved out.
That year, vacancy decontrol was considered a done deal and the passing of the resolution was in the bag, New York State Tenants & Neighbors Coalition associate director Michael McKee said. What he believes triggered the city's change of direction was the 300 angry residents who filled city hall during the public hearing.
The tenants disapproved, McKee said.
With vacancy decontrol squashed, several landlords filed suit for lost revenue in May 1996. Dismissed from federal court in 1998, the suit was handed to the State Supreme Court of Nassau County where the landlords won a decision in January 2001. Wager, who heard the case, was then appointed to determine the damages award.
McKee described Wager's decision as outrageous and, he believes, the suit should not have been decided by Wager in the first place. Wager, a former Supreme Court Justice, is affiliated with Farrell Fritz PC, a prominent Uniondale law firm that McKee said often represents landlords. From that alone, McKee believed Wager should have recused himself from the case.
But Shlufman said that both the city and landlords agreed on Wager. And, he added, they were provided a list of ten former judges to chose from.
He was the one person we both agreed on, Shlufman said. In fact, he added, the city knew Wager was with Farrell Fritz, PC because the hearings took place at their office.
Wager, though, told the Herald he was assigned by the court, and added, my firm had nothing to do with it. The fact that my firm would be biased is silly. The decision speaks for itself.
Wager also defended that decision.
I did my best with the case and I decided on the facts of the case, Wager said.
As for the trying the case at Farrell Fritz, Wager said it was a convenient location that both parties agreed to. Otherwise, he added, a court room would have been used. No one from Farrell Fritz interfered with the case, he added.
