41-47 Nick LLC v. Odumosu, 2024 NY Slip Op 24167 (2024)

Citation: 41-47 Nick LLC v. Odumosu, 2024 NY Slip Op 24167 (2024)
Parent Document: 41-47 Nick LLC v. Odumosu, 2024 NY Slip Op 24167 (2024)
Jurisdiction: New York (state)
Effective Date: 2024-06-11
Original Source: https://www.courtlistener.com/opinion/9687483/41-47-nick-llc-v-odumosu/ ↗

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Citing to Burrows v 75-25 153rd St., LLC, 215 AD3d 105 (1st Dept 2023), petitioner argued that respondent had failed to sufficiently plead the common law elements of fraud as required by Regina Metro. Co., LLC v New York State Div. of Hous. & Community Renewal, 35 NY3d 332 (2020).[FN2]
The Burrows court dismissed a fraudulent overcharge claim as the tenants had failed to allege "a fraudulent scheme to deregulate" stemming from an "unlawfully inflated 'legal regulated rent' . . . so as to avoid the bar of the four-year lookback rule and to allow recalculation of the legal rent on the base date [] utilizing the default formula referenced in Regina, as a basis for overcharge damages." (Burrows, 215 AD3d at 109.) After New York courts almost universally agreed that common law fraud must be properly pleaded, Burrows held that the element of justifiable reliance could not be established "as a matter of law" if public records, specifically the DHCR rent registration history, could be examined to reveal a representation of fact upon which a tenant claiming a fraudulent scheme to deregulate could not have justifiably relied. (Id.) Burrows went so far as to apply this standard to current and predecessor tenants. After Burrows — disregarding the fact that DHCR rent registration histories are not available to tenants until after they sign the lease — claims of fraud were eliminated at the pleading stage because "disclosure in the publicly available rental histories of the discrepant figures for legal regulated rent and preferential rent negates any inference of fraud as a matter of law (emphasis added)."[FN3]
(Burrows at 113.) Burrows transformed the subjective element of justifiable reliance, not susceptible to dismissal before trial,[FN4]
into an objective, bright-line rule [*3]applied in this context to proceedings involving parties of unequal sophistication and bargaining power.

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