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NYC Tenants' Settlement Upheld in Alleged Landlord Fraud Case

By Betty Wang, JD on October 03, 2013 | Last updated on March 21, 2019

A NYC tenant settlement affecting more than 20,000 rent-regulated tenants has been upheld by the United States Court of Appeals for the Second Circuit. On Monday, the federal appeals court ruled that a 2011 settlement of a tenants' class-action lawsuit was indeed reasonable and fair, The New York Times reports.

This ruling has paved the way for these tenants to seek individual compensation from their landlord over rent overcharges and any other complaints.

But why did the settlement come into question in the first place?

The Original Lawsuit

Originally, in 2007, a class action group of tenants filed a lawsuit against a New York landlord giant, the Pinnacle Group. They alleged that the company engaged in a conspiracy to fraudulently raise the rent in more than 400 buildings owned in the city.

A settlement deal was finally reached in 2011. Under the terms of that settlement, Pinnacle was to pay $2.5 million to help the current and former tenants make legal claims for damages, among other stipulations.

The Breakaway Tenants

After the 2011 settlement, however, a breakaway group of tenants (around 1% of the more than 20,000 class members, according to the Times) appealed. They attempted to renegotiate the agreement, objecting to it on the grounds that it excluded particular claims that were worth much more -- millions, apparently -- than what Pinnacle agreed to pay.

However, the appeals court didn't see that these claims were worth taking back to trial. Instead, they noted that the exclusions were reasonable, and commented on the fact that class settlements were always going to involve compromises, one way or the other, reports the Times.

Also under the Pinnacle settlement, according to the Times, was the agreement to have court-appointed administrators hear out the tenants' individual complaints regarding illegal rent prices, harassment, and any other tenants' rights issues. In turn, the administrator would then determine compensation for the tenants' claims -- which could reach up to more than $10 million depending on the number of tenants who choose to act.

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