The New York Court of Appeals ruled Tuesday that a lawsuit from Tax Equity Now New York (TENNY), which alleges disparities in the New York City property tax system are disproportionately burdening low-income and majority-people-of-color neighborhoods, can go forward in the New York state courts.
Judge Jenny Riviera, writing for the court, ruled that the Appellate Division’s prior dismissal of the case for failure to state a claim was improper. Under New York state law, a plaintiff is required to include a claim upon which the plaintiff is entitled to relief. A defendant can file a motion to dismiss the case and the courts may grant the motion if there is a defect in the claim that would make relief for the plaintiff impossible.
Judge Riviera clarified that under New York state law, a plaintiff’s filing must only “allege facts that ‘fit within any cognizable legal theory,'” so plaintiffs must only show that relief under the legal theory put forward in the filing is possible, even if unlikely, in order to move the lawsuit forward. Judge Riviera went on to state that:
… although TENNY’s complaint failed to state claims against the State defendants, the complaint exceeds our pleading standard and sufficiently alleges causes of action against the City defendants under section 305 (2) of Real Property Tax Law (RPTL) and the federal Fair Housing Act (FHA) (42 USC § 3601 et seq) on the general basis that the system is unfair, inequitable and has a discriminatory disparate impact on certain protected classes of New York City property owners.
Judge Riviera went on to conclude that TENNY’s claims in relation to the taxation of Class One (residential properties with up to three units) and Class Two properties (residential properties that do not fall into Class One) can go forward; however, all other causes of actions against the state of New York and the city of New York City were appropriately dismissed.
Judge Michael Garcia dissented from the ruling in part, stating that “The majority ignores TENNY’s failure to allege the required connection between the tax policies it challenges and higher tax rates in majority-minority communities.” Judge Garcia concluded, writing:
Instead of all interested stakeholders participating through their elected representatives in an effort to balance competing interests, our new rule virtually guarantees that the parties here will craft new tax policy in a settlement conference room—a result all the more disturbing as it flows from our own error of law.
Judge Anthony Cannataro also dissented, largely agreeing with Judge Garcia’s concerns about issues with the tax scheme being addressed outside of a legislative context.
This ruling comes after a lengthy pre-trial process. TENNY originally filed its suit in 2017, claiming that the New York City tax system is not based on fair market value, which TENNY contended violates the New York Constitution and the RPTL. Both the state of New York and the city of New York City filed to dismiss the case alleging it wasn’t adequately pleaded under both state and federal law. The New York Supreme Court denied the motion to dismiss from the city but granted the state’s motion. Then the Supreme Court’s Appellate Division dismissed the only remaining causes of action in the lawsuit. Then, after a lengthy back and forth, TENNY was granted leave to appeal, and oral arguments were held on January 17 before the New York Court of Appeals.
Researchers with New York University’s (NYU) Furman Center, who released their findings in January, analyzed data for Class One properties finding “a significant correlation between the racial composition of neighborhoods and the average effective property tax rate of neighborhoods.” The researchers found that, in 2018, neighborhoods with the lowest share of Black residents would have paid about $10 million more than what they pay currently in property taxes under a New York City property tax scheme applied universally city-wide, while neighborhoods with the highest share of Black residents would have paid about $17 million less.
