Landlord Pinnacle Group Challenges Class Action

Print More

Two months after a federal judge granted class action status to a group of tenants suing the Pinnacle Group, the formal process of finding people who think they were wronged by the giant landlord is on hold. Pinnacle has asked the Second Circuit Court of Appeals for permission to challenge that class certification, and a ruling on that motion could come any day.

Until that ruling comes, those who might have been eligible to join the class, which would include all current and some former rent-regulated residents of Pinnacle buildings, aren’t receiving official notification of their right to add their name to the suit. But that hasn’t stopped the plaintiffs and their supporters like Manhattan Borough President Scott Stringer from informally starting to recruit people to join the case. On Saturday, plaintiff Kim Powell and a representative from Stringer’s office briefed a tenant group about it.

Pinnacle lawyer Ken Fisher predicted in an interview with City Limits that the plaintiffs will get few takers. He said that a poll of Pinnacle’s residents found that 70 percent of tenants were satisfied with their landlord. “Ultimately, we don’t think many people are going to come forward.”

Powell disagrees. She says her law firm tells her that “their phone is non-stop ringing. They are backlogged for months.”

The back and forth reflects Powell and Pinnacle’s extremely acrimonious relationship. In one incident, Powell’s mother Margaret Powell, who shares Powell’s apartment, was arrested in 2006 for writing graffiti on an elevator. Powell says the graffiti was to protest poor service by Pinnacle. The prosecutor dropped the charges against Margaret Powell, and Pinnacle dropped a civil complaint when she agreed to refrain from creating “nuisances” and pay back rent.

The lawsuit started in 2007, when a group of 10 Pinnacle tenants sued the landlord, owner of some 20,000 rent regulated apartments across the city, alleging that the company had raised rents improperly and filed eviction notices frivolously as part of a scheme to drive rent-regulated tenants out of their apartments so the landlord could raise rents or sell the units as condos or co-ops.

The suit claimed that Pinnacle had violated not just state law but also the federal Racketeer Influenced and Corrupt Organizations act, or RICO. The tenants sought an injunction compelling Pinnacle to stop the alleged practices and asked the court to force Pinnacle to pay damages to tenants who’d been wronged. It also asked for certification of Pinnacle tenants as a class.

In April, District Judge Colleen McMahon granted that certification, but she has yet to issue any findings on the merits of the case yet. Even if the Second Circuit upholds McMahon’s decision, it will be many months before any ruling on the truth of the residents’ claims. Five of the original plaintiffs have already settled and left the case.

Supporters of the remaining plaintiffs—residents of three Pinnacle-owned buildings in Harlem—have cast the case as a potential landmark victory for renter’s rights, and a potential model for actions against other landlords.

But if the Second Circuit accepts Pinnacle’s bid for an appeal hearing, the ultimate ruling might also set a precedent—not for tenants, but for other citizens who try to sue under RICO.

RICO applies when some person or group commits at least two different crimes in furtherance of the same criminal enterprise. It is a tool for prosecutors but also for private citizens. If a person can prove they’ve been harmed by a RICO enterprise they can collect three times as much as the illegal acts cost them.

Since Pinnacle hasn’t filed an appeal yet, it’s unclear what other arguments it might make to the Second Circuit. But Pinnacle has already argued that under RICO, private citizens can’t ask for injunctive relief—a thorny point on which federal courts have split.

In broader arguments against the tenants’ case, Pinnacle also claims that the tenants’ charges aren’t specific enough to meet RICO standards: For instance, when the lawsuit alleges that Pinnacle committed mail fraud by sending notices of fraudulent rent increases through the mail, it doesn’t say exactly who committed the alleged crime. Pinnacle also claims that the tenants lack standing and have already had their day in court (in housing court or in administrative proceedings).

Beyond the legal arguments, Pinnacle—the target of bad press for years—is also showing concern for its public image.

The Rent Stabilization Association, a landlord lobby group, has filed a friend-of-the-court brief with the District Court asserting that Pinnacle’s rates of apartment turnover and deregulation of rent-regulated units compare favorably with citywide averages.

Pinnacle’s campaign to clear its name led it to send a freedom of information law (or FOIL) request in 2008 to Stringer asking the beep for letters and emails from constituents that would support Stringer’s statement that year that “The name Pinnacle is just simply a code word for mass eviction.” When the BP released some records but withheld others saying they were exempt from FOIL , Pinnacle sued. Stringer handed over the remaining documents. Fisher claims none of the complaints Stringer gathered were substantive, but Stringer’s office disputes that.

Some of the concerns about Pinnacle have attracted the attention of law enforcement officials—former Attorney General Spitzer, his successor Andrew Cuomo and former Manhattan District Attorney Robert Morgenthau.

In 2006, Spitzer and Morgenthau launched investigations of Pinnacle. Late that year, Spitzer said his investigators had found some instances of Pinnacle overcharging tenants at one building. Pinnacle agreed to several conditions, including hiring a forensic accounting firm to evaluate its rents. Fisher claims that forensic study validated Pinnacle’s rents in 95 percent of cases, but the plaintiffs say Pinnacle provided false information to the accountants.

In a statement to City Limits, the Manhattan DA’s office said its probe “didn’t lead to a criminal prosecution.” But, added spokeswoman Jennifer Kushner, “the Pinnacle Group agreed to the placement of a monitorship within the company for a period of time.” Under the agreement with Spitzer, Pinnacle agreed to make regular reports on its rent law compliance for a year.

Cuomo’s office also investigated Pinnacle. In late 2008, the office announced, with little fanfare, that its investigators, posing as potential tenants, were told that Section 8 vouchers were not accepted at one Pinnacle building, in violation of the rules of a subsidy program in which that building had participated. Pinnacle agreed to better inform employees and tenants of renters’ rights, create a waiting list for Section 8 renters for when any apartments are available, and, separately, set aside apartments for Section 8 renters.

But Pinnacle admitted no wrongdoing—and denied Cuomo’s findings—in their agreement with the AG. In fact, “Pinnacle has never acknowledged any deliberate wrongdoing and certainly not on the scale that’s being alleged, and no court or regulator has ever found deliberate wrongdoing,” Fisher said. “That’s not to say that Pinnacle hasn’t made mistakes.”

State regulators have documented some of those mistakes. “There have been many instances or cases where DHCR issued an order finding that a rent overcharge had occurred—and the rent was subsequently reduced and a refund ordered—for an apartment at a building owned by Pinnacle. We’ve also had a smaller amount of orders that reduce rent for decreases in services,” says Jim Plastiras, a spokesman for the state Department of Housing and Community Renewal, which oversees rent regulated apartments.

But Plastiras adds: “We have not issued any orders where there has been a finding of harassment, however, and there have also been instances where we’ve issued orders to say there had not been an overcharge or a decrease in services.”

Fisher says: “Pinnacle is proud if its record of providing safe and well-managed housing to thousands of New York families.” When the company makes mistakes, “they work hard to correct them when they do and the notion of some vast conspiracy as claimed in this lawsuit is completely overblown.”

Leave a Reply

Your email address will not be published. Required fields are marked *