Rosenberg & Estis secures Article 78 victory

Manhattan, NY Rosenberg & Estis, P.C. has achieved a successful Appellate Division ruling overturning an administrative court decision and remanding the original matter for review.

Alex Estis, member of the firm’s Litigation Department, represented the appellant, a large property owner in Manhattan, in an Article 78 proceeding case before the New York State Supreme Court, in New York County, challenging the denial of motions to restore violations which had been granted on default to the calendar of the Office of Administrative Trials and Hearings (OATH)..

The Supreme Court ruled that, even though neither party raised the issue, the Article 78 petition was barred by res judicata because the claims had already been litigated in a prior case, which involved different violations issued to the client with respect to different facts and circumstances.  The Supreme Court further denied Estis’ client the opportunity to re-argue that issue, even though it had never been argued or briefed by the parties.  

The case arose because Rosenberg & Estis’ client did not appear at scheduled hearings at OATH with respect to certain summonses. After the penalties were fully paid, the owner asked OATH to reopen the cases and allow the underlying violations to be heard on their merits. OATH refused based on the above reasoning, as well as its position that payment of the summons constitutes an admission of the violation and, consequently, a waiver of the right to a hearing.

The Appellate Division agreed with Rosenberg & Estis, P.C. that the Supreme Court erred because the prior litigation involved different violations and different issues, so the claims had not previously been raised and res judicata did not apply and remanded the violations back to OATH for further proceedings.

In addition, the Appellate Division found that Supreme Court erred in acting sua sponte, by raising res judicata on its own initiative, notwithstanding that  neither party argued it, holding that res judicata must be raised by one of the parties, not by the court on its own, unless there are extreme circumstances. If further held that if the Supreme Court wishes to raise the issue of \res judicata sua sponte, it must give the parties a fair chance to address the issue.

“This decision underscores the importance of rigorous administrative review and the accurate application of the law,” said Estis. “For building-owners it means default judgments may not be final simply because payment was received by Oath. There may still be an opportunity for review.

“This case further highlights Rosenberg & Estis, P.C.’s advocacy for the position   that a court cannot deny an Article 78 Petition on the grounds of res judicata without affording the parties due process. We are pleased that the Court recognized this and gave our client its right to defend against the violations on their merits at OATH.”

The ruling represents a pivotal procedural correction, making clear that under OATH’s rules, paying a default-penalty does not automatically deprive an owner to the right to a hearing and gives owners — especially those who defaulted because they missed hearings — a chance to be heard, even if they have already paid a penalty.