source: Caselaw Access Project

author: Per Curiam. Simons, J.

license: Public Domain

text:
    In the Matter of Edward J. Greenfield, a Justice of the Supreme Court, First Judicial District, Petitioner. State Commission on Judicial Conduct, Respondent.
    Argued April 25,1990;
    decided June 14, 1990
    POINTS OF COUNSEL

      Milton S. Gould, Jonathan D. Kantor and Jay Fischer for petitioner.

      Robert H. Tembeckjian and Gerald Stern for respondent.

      Leon D. Lazer, David Lazer and Daniel M. Cohen for the Association of Justices of the Supreme Court of the State of New York, amicus curiae.

   OPINION OF THE COURT

Per Curiam.

The Commission on Judicial Conduct has found the petitioner, a Justice of the Supreme Court in Manhattan, guilty of misconduct for failing to render decisions promptly in eight cases pending before him. The. Commission also determined that a censure is the appropriate sanction. Petitioner has requested. review pursuant to the State Constitution which confers on this court plenary power to review the law and the facts as well as the sanction (NY Const, art VI, §22 [d]; Judiciary Law §44 [9]; see also, Matter of Quinn v State Commn. on Judicial Conduct, 54 NY2d 386, 391). Petitioner concedes that the delays were inexcusable but claims that under all the circumstances they do not constitute misconduct warranting disciplinary sanctions. On review of the record we have concluded that it discloses serious administrative failings in petitioner’s handling of the cases in issue, but no persistent or deliberate neglect of his judicial duties rising to the level of misconduct.

Petitioner has been a Judge for more than 25 years. He was first elected in 1963 as a Civil Court Judge in the City of New York. He was elected to the Manhattan Supreme Court in 1968 and was reelected in 1982. His current term is due to expire in 1996 but he will reach State constitutional retirement age of 70 in December of 1992.

In 1988 the Commission on Judicial conduct filed a complaint against petitioner containing a single charge alleging that he "delayed unduly and inexcusably in deciding motions and otherwise disposing of pending matters” in nine particular cases. The complaint alleges that he thereby violated the Rules of Judicial Conduct, particularly the rule requiring a Judge to promptly dispose of pending matters (Rules of Judicial Conduct [22 NYCRR] § 100.03 [a] [5]). Petitioner conceded that thé delays occurred and stipulated to the facts in the cases at issue. After a hearing at which the petitioner testified the Referee sustained the charge with respect to all but one of the cases which he concluded was not unduly delayed.

The Commission confirmed the Referee’s report and determined that the petitioner should be censured. It stated that petitioner’s "repeated failure to dispose promptly of the business of his court, prompting Article 78 proceedings to compel decisions in four cases, constitutes misconduct and is cause for public discipline.” Two members of the Commission dissented with respect to the sanction and voted that the petitioner be admonished.

Throughout his judicial career, petitioner has disposed of approximately 25,000 cases. He often worked evenings, weekends and holidays and volunteered for difficult cases. There is no suggestion that he was not devoting his full time and energies to his judicial activities. At the hearing petitioner testified that he was always optimistic that he could accomplish anything set before him. The record shows that he was overly optimistic with respect to his management abilities, as he also acknowledged during the hearing. Between 1979 and 1987 several cases remained neglected on his docket.

The delays range between seven months for a decision on a motion to restore a complaint in a tort action against a utility, to over nine years on several discovery motions in an admiralty case. Decisions on motions in two other admiralty cases were delayed for nearly four years in one case, and over seven years in the other. In one complicated real estate dispute the parties had to wait nearly eight years for a decision on the merits after a nonjury trial in 1979. The parties in four cases commenced article 78 proceedings to compel petitioner to render a decision. In all but one of those cases, which was settled, the petitioner decided the matter soon after the motion was made. Several times the Appellate Division noted that these delays were unreasonable, and court administrators spoke to the petitioner about them. In 1987 petitioner’s case load was reduced so that he could dispose of those matters which were still overdue, and he complied.

At the hearing petitioner was cooperative and contrite and sought to explain the delays. He candidly admitted that the three admiralty cases "got away” from him. These were complicated suits involving multiple parties who had made motions and cross motions, most of which related to discovery. Petitioner mistakenly believed that all outstanding motions had been resolved. When the oversight was brought to his attention he decided all of these motions in late 1986 and early 1987. But he also conceded that in other cases at issue here, he was aware that the parties were awaiting a decision and he kept putting them off, despite repeated inquiries from counsel. He stated that these cases were extremely complex and required him to set aside a large "block of time” to review a voluminous record and research complicated questions of law, which he was unable to do because of the daily pressure of an ever increasing case load.

This may explain the delays; but as petitioner himself acknowledged at the hearing, it does not justify them. The question is whether these administrative failings constitute judicial misconduct.

The canons of judicial ethics require a Judge to "dispose promptly of the business of the court” (22 NYCRR 100.3 [a] [5]). Generally any violation of the judicial canons, such as those dealing with honesty and integrity, call for disciplinary measures (Matter of Boulanger, 61 NY2d 89), without consideration of whether the Judges conduct in many, most or all other matters may be above reproach (Matter of Sardino v State Commn. on Judicial Conduct, 58 NY2d 286). However a Judge’s failure to promptly dispose of pending matters generally does not warrant "judicial discipline but rather administrative correction” (Matter of Alvino, 100 NJ 92, 98, 494 A2d 1014, 1016; see also, Overton, Grounds for Judicial Discipline in the Context of Judicial Disciplinary Commissions, 54 Chicago-Kent L Rev 59, 65). As the Supreme Court of New Jersey observed in the Alvino case (at 96-97, at 1016): "Not every failure of a judge to conform to the standards of the Code amounts to judicial misconduct or merits formal discipline. While Judges are held to the very highest standards of performance in this state, they are not infallible. It was never intended that each and every failure to conform to the standards of the Code would lead to judicial discipline. Some shortcomings were undoubtedly contemplated as inevitable, and assuming good motives, they were not thought to provide cause for either criticism or discipline.”

The Commission concedes that it does not have jurisdiction over all delays. It recognizes that ordinarily delays do not constitute misconduct and that if the Commission were to exercise general oversight of court calendars it would be exceeding its authority and would interfere with, if not displace, the role of the independent judicial officers and those specifically charged with managing the court system. It urges, however, that at some point a Judge’s failure to dispose of pending matters must be viewed as misconduct within its jurisdiction.

Because most of the delays in this case are so lengthy and inexcusable it is tempting to accept the Commission’s argument without reflection, ignoring the fact that the rule it proposes has no defined or definable limits and would overlap the jurisdiction clearly granted to those administering the courts. Basically it would permit the Commission to intervene in the administrative process whenever it believes that a Judge has failed to dispose of pending matters within unspecified time limits in an unspecified number of cases and on a case-by-case basis.

In our view a clearer line must be drawn between the role of the Commission and court administrators in order to avoid confusion and provide adequate notice to members of the judiciary as to when and under what circumstances delays in disposing of pending matters ceases to be a purely administrative concern and becomes a matter warranting punitive sanctions. We have concluded that generally these matters can and should be resolved in the administrative setting and that the more severe sanctions available to the Commission should only be deemed appropriate and necessary when the Judge has defied administrative directives or has attempted to subvert the system by, for instance, falsifying, concealing or persistently refusing to file records indicating delays. This is consistent with existing precedents in this State (see, e.g., Matter of Leff, Aug. 20, 1982, reported in Ann Report of State Commn on Judicial Conduct, Mar. 1983, at 119; Matter of Lenney, 71 NY2d 456; Matter of Reeves, 63 NY2d 105; see also, NY Const, art VI, § 22 [a] ["persistent failure to perform his duties”]) and should provide a more useful and workable precedent, particularly in light of the current regulations permitting court administrators to closely monitor a Judge’s case load.

Litigants should not be put to the added expense of having to appeal erroneous decisions hastily made when the court could have prevented the error if it had devoted additional time to reviewing the case and researching the applicable law. On the other hand, litigants should not be expected to wait years for a decision because a Judge wants to produce a scholarly writing; neither should they be required to commence collateral proceedings to compel the Judge to render a decision. The law is a learned profession but it is also a practical one. A Judge’s personal interest in promoting or preserving a reputation as a scholar cannot be given priority over the needs of the parties, and the legal system, for prompt resolution of pending disputes. These are circumstances which require administrative attention and action. And if the Judge fails to comply with administrative orders, his conduct must necessarily be deemed an appropriate subject for disciplinary action.

There is also much that administrators can do in future cases to eliminate the types of delay which occurred here. Regulations are now being enforced uniformly and strictly which provide for reporting of matters not resolved within fixed time limits and require every Judge to furnish reasons for all delays (Rules of Chief Judge, 22 NYCRR 4.1; Rules of Chief Administrator part 115). This permits and requires court administrators to assess the reasons for the delay and take appropriate action. The primary responsibility, of course, remains on the individual Judge to manage case inventories so that pending matters are promptly decided. But under the present system, court administrators should be able to complement that responsibility by bringing to all Judges’ attention matters which might otherwise have been overlooked. Similarly, in complex cases, where it is claimed that additional time is necessary to properly resolve the matter, administrators should be able to adjust the Judge’s case load to provide the amount of time needed.

The problem unique to this case is that these reporting rules were in their infancy when most of the delays occurred. At that time, as the dissent notes, there were similar Appellate Division rules, but as the petitioner’s Administrative Judge observed at the hearing, those predecessor rules were not consistently applied and enforced. It was not until recently, when the rules were adopted State-wide and routinely enforced by the Office of Court Administration, that administrators received sufficient information to be made aware of such delays before they became substantial in number or duration. When the responsible officials finally learned of the full extent of the petitioner’s problems in this case, firm administrative action was interposed. His case load was reduced and he immediately turned to and completed those matters which were long overdue. In the context of his overall performance these were isolated incidents. It cannot be said that he was not devoting sufficient time to his over-all duties or was indifferent to them generally. On the contrary it appears that he assumed that he was always able to do more than his share and could not bring himself to ask for help or write a decision which did not meet the high standards which he had set for himself although that caused delay which burdened others. These are failings but, without more, not the kind of derelictions commonly associated with misconduct warranting formal penalties.

Accordingly the determined sanction should be rejected, without costs, and the charge dismissed.

Simons, J.

(dissenting). The issue is whether the failure of a Judge to dispose of the business of the court promptly may constitute misconduct and, if it may, whether petitioner’s delays were serious enough to warrant his censure. The majority concedes that delay can constitute misconduct and that the Commission generally has jurisdiction of such cases. That is a hollow victory for the Commission, however, because the majority goes on to hold that it was without power to discipline petitioner in this case. The delays here, it holds, involved no more than a problem in the day-to-day operation of the courts. Concededly, some delays, because of their nature and duration, are purely administrative concerns and drawing the line between them and those serious enough to constitute misconduct may be difficult. But this case hardly involves drawing lines. Petitioner’s inexcusable failure to dispose of court business in eight cases for periods as long as nine years must, under any rational interpretation of our rules, constitute misconduct. Accordingly, I dissent.

I

Respondent, the State Commission on Judicial Conduct, has been authorized by the Constitution and Judiciary Law to "receive, initiate, investigate and hear complaints” concerning the performance of Judges or Justices in the Unified Court System and to sanction them for cause (NY Const, art VI, § 22; Judiciary Law § 44 [2]). Cause may be provided by a violation of the Rules of the Chief Administrator of the Courts which state that the judicial duties of a Judge take precedence over all others and that among those duties is the obligation to dispose promptly of the business of the court (22 NYCRR 100.3, 100.3 [a] [5]). Significantly rule 100.3 (a) (5) is cast in terms of prompt disposition of the court’s business, rather than proscribing inordinate delay. These rules were adopted with the approval of this court (Judiciary Law § 212 [2] [b]) and are consistent with provisions found in the Code of Judicial Conduct, approved by the American Bar Association, and similar standards applied in every jurisdiction in this Nation (see, Code of Judicial Conduct, Preamble; Canon 3A [5]). They are necessary predicates to years of institutional efforts to avoid judicial delay and the court congestion which results from it.

Petitioner refers to no standards, established by decision or otherwise, specifying what is excusable delay and what is not. Significantly, however, both the Legislature and the Chief Judge have spoken on the general subject. The Legislature has directed that motions relating to a provisional remedy shall be decided within 20 days and all others within 60 days (CPLR 2219 [a]), and the Chief Judge has enacted rules which require that every Judge shall notify the Chief Administrator of all matters pending before him or her and undecided more than 60 days (or in some cases less) after final submission by the parties (22 NYCRR 4.1). Manifestly, delay is a subjective concept and not every failure to decide a matter within these time limits is misconduct, but the provisions do establish a frame of reference when considering what may warrant discipline.

Although these guides do not establish a bright line separating an excusable violation of the rules and misconduct, none is needed in this case. If the requirement that a Judge shall promptly dispose of the business of the court has any meaning, it bans delays involving a number of cases over an extended period of years and respondent’s determination that petitioner was chargeable with misconduct for violating it is inescapable.

II

It will be helpful to add some facts from the record to those set forth in the majority opinion.

The nine matters investigated by the Commission involved actions and proceedings before petitioner between 1979 and 1987. Respondent found he delayed in eight of the nine cases specified in the charge. The longest delay, occurring in two of the counts, was nine years, three months (Starkaiser and Public Administrator) but in those two cases petitioner also had failed to timely dispose of five applications for interlocutory relief for periods ranging in length from four to eight years. The other seven counts involved delays of seven months to more than eight years.

Petitioner acknowledges that although he lost track of two or three cases, he knew that most of the matters were undecided for extended periods of time. Indeed, he could not avoid knowing of the delays. There was evidence that attorneys called or wrote the Judge’s Chambers repeatedly, speaking with the Judge personally or with his staff, to urge that a decision be rendered. In one matter, the evidence established that counsel made over 24 calls to request a decision. Moreover, on six occasions article 78 proceedings were instituted to compel a decision or to have the matter transferred to another Judge for a decision on the record. One of the early article 78 proceedings involved Silk & Bunks v Danzig, an action for accounting and to impress a trust on property allegedly wrongfully taken. The court directed the return of part of the property and when defendant failed to comply, plaintiff moved for a contempt order. The matter was fully submitted in January 1983 and notwithstanding counsel’s repeated requests thereafter for a decision, none was forthcoming. Finally, plaintiff instituted mandamus proceedings in the Appellate Division. At oral argument, the Assistant Attorney-General representing petitioner offered as excuse petitioner’s belief that a settlement of the matter was being negotiated and promised a decision by June 12, 1984. Petitioner did not decide the motion, however, and the court summarily granted plaintiff an order of mandamus on June 14, 1984. The parties subsequently settled the case without receiving a decision on the unresolved motion.

Notwithstanding this unfortunate incident, petitioner was a respondent in four subsequent article 78 proceedings instituted by litigants unable to obtain decisions on pending matters. In one case, Corporation of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v Solow Bldg. Corp., plaintiff’s counsel made several attempts to obtain a decision and was repeatedly assured that one was forthcoming. When he received none, he instituted an article 78 proceeding seeking to have the matter transferred to another Judge for the purpose of rendering a decision on the record. Counsel was subsequently persuaded to withdraw the proceeding by petitioner’s sworn affidavit stating that he would render a decision promptly. Nine months passed without him doing so, however, and plaintiff commenced another proceeding. By the time it came before the Appellate Division, the issue had become moot because after the second article 78 proceeding was instituted, and almost eight years after the matter was submitted to him, petitioner decided the case. Nevertheless, the Appellate Division took the unusual step of going beyond a perfunctory dismissal of the petition for mootness, criticizing petitioner and declaring his delay inexcusable (see, Matter of Corporation of Presiding Bishop of Church of Jesus Christ of Latter-Day Saints v Greenfield, 131 AD2d 355, 356).

Moreover, the Church case was not the only matter in which the Appellate Division publicly criticized petitioner for inordinate delay (supra). In Schwartz v Tessler (131 AD2d 335) the court reversed an order denying a motion for a new trial, noting as it did so that there was no reason for the delay of more than two years and five months between submission and decision (id., 337). In DeCandia v Hudson Waterways (130 AD2d 352, 353), the court affirmed, without opinion, but added that it could perceive no reason for petitioner’s "inordinate” delay (3 years and 10 months) in deciding the motion to dismiss the third-party complaint (id., at 353).

Thus, when the majority asserts that when petitioner’s "oversight was brought to his attention” he resolved the pending matters (majority opn, at 296), it should be remembered that the "oversight[s]” were "brought to his attention” many times, over many years, by complaining litigants, article 78 proceedings, repeated administrative cajoling and Appellate Division criticism and that the matters were not fully resolved until petitioner was relieved of part of his calendar.

m

Petitioner admits that the delays were inexcusable but he denies that he has been guilty of any misconduct. He maintains generally that censure is not warranted because he has already been "sanctioned” enough by the statements contained in the Appellate Division’s decisions and the continued complaints of the local and State-wide administrators calling him to task.

Petitioner’s principal legal contention is that the Commission was without jurisdiction in these matters and that its actions constituted an "unwarranted intrusion” into the courts because the time taken to dispose of cases is a matter of individual judicial discretion. In his view, the only remedies for judicial delay are administrative supervision or article 78 proceedings. At most he would admit that the Commission may review a Judge’s conduct for "persistent failure to perform duties”, presumably under a standard that measures the number of delays against the number of cases handled over a career. Petitioner, claiming to have handled 25,000 cases since taking office, maintains the delays in this case do not rise to the level of a persistent failure to perform duties. It is doubtful that under petitioner’s standard any Judge’s delays, no matter how numerous or how egregious, could constitute misconduct. But more to the point, the Commission was investigating nine cases, not 25,000.

As for his suggested solution for the problem, obviously the administrative efforts did not remedy the delays here, and even though article 78 proceedings did produce some decisions they are not an acceptable alternative for addressing misconduct. Litigants go to court to solve their problems, not multiply them. It can be little comfort to them, therefore, to learn that having reluctantly entered the courtroom they have acquired a new adversary, the assigned Judge, who must be sued in one or more legal proceedings before they obtain a decision in their case.

Although the majority rejects petitioner’s contention that the Commission lacks jurisdiction in cases involving delay and it finds petitioner guilty of "lengthy” and "inexcusable” delay (majority opn, at 297), it adds a gloss to our rule which substantially changes its meaning. The majority finds no misconduct because (1) the delay was not accompanied by aggravating factors and (2) the petitioner acted with good intentions. Thus, it injects considerations appropriate to mitigation once misconduct has been found but which are not relevant to the determination of misconduct. Its failure to distinguish between the two inquiries not only recasts the plain language of a rule we have approved but it incorrectly links misconduct to irrelevant considerations of judicial administration.

First, the majority construes the rule to require delay plus some additional violation before misconduct is established, and asserts that the plus is not present in this case. The rule is not violated, it holds, unless there is delay coupled with other derelictions (see, majority opn, at 298, citing Matter of Lenney, 71 NY2d 456; and Matter of Reeves, 63 NY2d 105; Matter of Leff, Aug. 12, 1982, reported in Ann Report of State Commn on Judicial Conduct, Mar. 1983, at 119). The rule contains no such qualifying conditions and nothing should be added to it. To require delay plus some other misconduct, such as falsification of records or insubordination, is to proscribe the other conduct, not to proscribe delay.

Second, the majority holds that if petitioner acted in good faith a finding of misconduct is unwarranted under the rules. It cites in support of this principle only a New Jersey case (Matter of Alvino, 100 NJ 92, 494 A2d 1014, 1016) which involved inadvertent delays of undisclosed length in "some” matters (see, majority opn, at 297). In New York, however, good intentions do not change prohibited conduct to permitted conduct. On the contrary, our cases have consistently adopted the view that misconduct remains misconduct, even though the offending Judge acts in good faith. This is so because the violation results from the unexcused failure to meet judicial standards, not from the Judge’s motives, and because the damage to the litigants individually and the court system as a whole is the same whether the delay is intentional or not. The appearance of impropriety cases offer an appropriate parallel (see, e.g., Matter of Edwards, 67 NY2d 153, 155 [interceding with another Judge concerning pending charges against son]; Matter of Lonschein, 50 NY2d 569, 572-573 [interceding with city licensing officials on behalf of friend]; see also, Matter of Harris, 72 NY2d 335, 336-337 [conducting charity fund drive in the courtroom]). Motive may be relevant in determining the appropriate discipline imposed but it is not relevant when evaluating the seriousness of delay to determine misconduct.

At bottom, the majority’s analysis is unsound not only because it recasts the plain language of our rule but because it links delay with the Judge’s response to administrative action. Under the majority’s theory, if the administrators failed to perform their duties in overseeing the prompt disposition of the court’s business, individual Judges could not be guilty of misconduct. No matter how egregious the Judges’ delay they could not be guilty of insubordination, contumacious conduct, or the like, in resisting the administrators. Administrative action is simply irrelevant when measuring delay or misconduct resulting from delay. Delay is delay and petitioner’s conduct is neither more nor less censurable because of administrative shortcomings, if such there were. But notwithstanding the majority’s analysis, the administrators did act here and petitioner’s knowing delay and his failure to take any steps to correct his delays under the extreme conditions presented was certainly "willful” and satisfies the majority’s test.

There is a more fundamental reason why petitioner should be censured. Petitioner admittedly knew the rules and he had to know under the circumstances that he had grossly violated them by failing to decide several matters. He was personally responsible for observing the rules regulating his conduct and, having failed to do so, he should be answerable for his failures regardless of any administrative lapse.

Finally, the majority, again confusing administration with misconduct, suggests that the Commission’s action in this case constituted an unwarranted interference with the administration of the courts. However, nothing the Commission did usurped responsibilities of independent judicial officers or court administrators, intruded into the operation of the court system, or interfered with the disposition of the courts’ calendars. The responsibility for those matters remained with the courts and their officers and the Commission proceeded to address solely petitioner’s misconduct. Given the forthright language of our rules and the egregious delays in this case, the Commission had every reason to conclude that petitioner had been guilty of serious misconduct and that it was obliged by the Constitution and the statute to pursue the charge against him. The majority’s holding that it was wrong in doing so ousts the Commission from its constitutional jurisdiction in this area.

IV

Our rules proscribing delay embody the simple truth that the courts, like all public institutions, exist for the benefit of those they serve. If there is one thing that parties appearing in court are entitled to ask of the judicial system, it is that matters submitted to the court be decided. If they are not, the litigants are helpless. They cannot fire the Judge or obtain a substitute. Even a bad decision is better than none at all because at least it can be corrected on appeal. Indeed, in the cases before us, the matters, if only they had been decided, could have completed the full appellate process several times over in less time than it took petitioner to act.

Certainly the problems of busy Trial Judges struggling to cope with increasing work loads cannot be minimized. Many Judges fall behind at one time or another but in most cases the delay is so insignificant that no one would seriously allege misconduct or contend that discipline is warranted. Unlike violations involving corruption or venality, where even one violation requires condemnation and discipline, the determination that a Judge has been guilty of inexcusable procrastination requires a consideration of the length of the delay and its causes. However, Judges must endeavor to dispose of their business promptly and when confronted by delays of the magnitude of those confronting petitioner, they must establish priorities to take into account the time necessary for decision. They must not only judge well but they must also organize their work well. Their conscious failure to recognize these concerns and dispose of the matters before them or, if unable to do so promptly, to take steps to eliminate delays, constitutes a violation of our rules.

There is no evidence that petitioner made adequate provision for his problems or that he ever, because of overwork or disability, asked for administrative relief. Indeed, notwithstanding his precarious situation in a number of cases, and the obvious distractions and demands on his time from the complaints and article 78 proceedings against him, the record indicates that petitioner continued to seek out new difficult cases, apparently unconcerned about the potential for prejudice or destruction of the litigant’s claims in cases pending before him and indifferent to the immeasurable loss of public confidence in the court system resulting from his failure to decide them. Nonetheless, the majority hold that the Commission cannot discipline him for such violations and that the court will not do so. If the Commission was not justified in acting in this case, then I cannot envision one in which it could act to discipline a Judge for failing to promptly dispose of the court’s business.

Accordingly, I dissent.

Chief Judge Wachtler and Judges Titone, Hancock, Jr., and Bellacosa concur in Per Curiam opinion; Judge Simons dissents and votes to accept the determined sanction in an opinion in which Judge Alexander concurs; Judge Kaye taking no part.

Determined sanction rejected, etc.

      . The Commission dismissed one count involving a case in which an article 78 proceeding was instituted against petitioner.

      . In his brief petitioner suggests, and counsel repeated the contention at oral argument, that an article 78 proceeding is the sole remedy contemplated by the Legislature with respect to delay and that if the Judge disposes of the underlying matter before the article 78 proceeding is decided, he is entitled to absolution. The argument was not pressed and it is refuted by provisions in the Constitution, Judiciary Law, The Code of Judicial Conduct and Rules of the Chief Administrator of the Courts which proscribe delay and provide the mechanism for enforcement of the rules.

      . I cannot excuse petitioner’s conduct because of his illnesses, as the majority does. Most of his problems in these cases passed the excusable conduct stage long before the illnesses occurred and petitioner does not rely on them to excuse or explain the delay.

      . The majority assures us that administrative action will suffice in the future because new reporting rules should produce better results. Similar rules have been in effect since court unification in 1979, however (see, Historical Note following 22 NYCRR 4.1), and by order of the Appellate Divisions long before that. Petitioner was subject to such rules during the entire period involved in this proceeding and neither the rules nor the extensive efforts of others had any noticeable affect on his performance. Although petitioner contended that the rule requiring him to file status reports on cases pending more than 60 days did not apply to some of the matters before him, he knew of those time constraints and the rule concededly applied to several of the matters before him.

      . The majority’s concern over hasty or ill-considered decisions is, in the context of this case, absurd (see, majority opn, at 298).


author: Bellacosa, J.

text:
    Murray Schneider, as President of the New York State Federation of School Administrators, AFSA, AFL-CIO, and the Council of Administrators and Supervisors, Local 12, NYSFSA, et al., Respondents-Appellants, v Thomas Sobol, as Commissioner of Education, Appellant-Respondent, and New York State United Teachers, IntervenorAppellant-Respondent.
    Argued May 30,1990;
    decided June 28, 1990

      POINTS OF COUNSEL

      Richard J. Trautwein and Robert E. Diaz for appellant-respondent.

      Richard A. Shane and James R. Sandner for intervenorappellant-respondent.

      Robert Saperstein for respondents-appellants.
   OPINION OF THE COURT

Bellacosa, J.

Excellence In Teaching (EIT) is a State-wide program created in 1986. To implement EIT objectives, State funds are annually appropriated "to improve salaries for teachers” (Education Law § 1950 [15] [a]; § 3602 [27] [a]). Plaintiffs are school principals, department chairpersons and other school administrators primarily, who also teach but who are paid as administrators. They challenge the regulation of the Commissioner of Education defining an "eligible teacher” for EIT purposes as anyone who teaches class and is compensated under teachers’ salary schedules. The regulation excludes from eligibility those who, while also teaching, are primarily administrators compensated under an administrative or supervisory salary schedule (8 NYCRR 175.35 [e] [1] [i]). The courts below upheld the challenge of plaintiffs — the excluded ineligible groups and individuals — on State and Federal equal protection grounds (US Const 14th Amend; NY Const, art I, § 11). On the Commissioner’s and intervenor New York State United Teachers’ (NYSUT) appeals as of right, we reverse and declare the regulation constitutional, as it draws a rational categorization serving the objectives of the EIT statute.

As part of the 1986 aid-to-localities State budget, the Legislature and the Governor established and appropriated money for the EIT program to supplement the salaries of teachers throughout the State, employed by local school districts and boards of cooperative educational services (BOCES) (see, Education Law § 1950 [15]; § 3602 [27], as added by L 1986, ch 53, §§20, 49). The goal was to promote the recruitment and retention of quality teachers by providing supplementary compensation to offset budget shortfalls experienced by local school districts and BOCES. Initially, funds are "set aside” to increase the salaries of first-, second- and third-year teachers whose salaries fall below certain median salary figures; then, remaining funds are used "to improve salaries for teachers * * * in general” (Education Law § 1950 [15] [a]; § 3602 [27] [a]). The Legislature specified that EIT moneys were to be distributed to eligible teachers — undefined in the statute— through negotiations between the individual school districts or BOCES and the certified or recognized collective bargaining agents in each district (see, Education Law § 1950 [15] [a]; § 3602 [27] [a]; see also, Matter of Board of Educ. v Watertown Educ. Assn., 74 NY2d 912; Matter of City School Dist. v New York State Pub. Employment Relations Bd., 74 NY2d 395). The average salary supplement to each full-time teacher for the 1988-1989 EIT apportionment was estimated between $600 and $800. This litigation attacked the regulation only insofar as it affects the allocation of the residual funds available to supplement salaries of "teachers * * * in general”.

The statute directs the Commissioner of Education to adopt implementing regulations, subject to the approval of the Director of the State Division of the Budget (Education Law § 1950 [15] [f]; § 3602 [27] [f]). Pursuant to this authority, in the absence of a statutory definition and keyed to the specific objectives of this program, the Commissioner attempted to define the universe of teaching personnel in the widely diverse school districts and BOCES. Those qualifying to receive EIT funds under the Commissioner’s definition of an "eligible teacher” are: "[A] school employee who provides nonsupervisory educational services * * * under one of the following teachers’ certificates or licenses issued pursuant to Part 80 of this Title or in a comparable position in the city school districts of New York or Buffalo, provided that such term shall not include a school employee who is compensated for such educational services under an administrative or supervisory salary or salary schedule” (8 NYCRR 175.35 [e] [1] [i] [emphasis added]).

Two categories of educators thus qualify for the EIT supplements: (1) full-time teachers who are paid as such; and (2) educators who teach and are compensated under teachers’ salaries schedules, plus a stipend for additional administrative duties they may also perform. A third category — plaintiffs included — are expressly ineligible, as they are some-time teachers deemed, however, to serve principally in administrative and supervisory capacities by reason of their being compensated under administrative salary schedules.

The gravamen of plaintiffs’ equal protection claim, on their own and their professional organizations’ behalfs, is that the combined duties performed by educators in their disenfranchised group do not vary from the combined duties performed by the educators in the eligible group, who just happen to be paid differently from them, i.e., on teachers’ salaries schedules. Plaintiffs argue that the method of compensation is a differentiation without a difference for BIT purposes, and treats similarly functioning persons unequally and, therefore, unconstitutionally.

Supreme Court, on cross motions for summary judgment, granted plaintiffs’ motion and declared the regulation invalid. The judgment was given prospective effect only. On cross appeals, the Appellate Division upheld the lower court’s invalidation of the regulation but modified to reinforce the prospective effective date. The Commissioner and NYSUT appealed as of right, and we now reverse, grant defendants’ cross motion for summary judgment, and declare the regulation constitutional. The plaintiffs’ cross appeal should thus be dismissed as academic.

No one disputes that the "rational basis” test governs here. In such instance, " 'it does not offend the Constitution simply because the classification "is not made with mathematical nicety or because in practice it results in some inequality” ’.” (Alevy v Downstate Med. Center, 39 NY2d 326, 332, quoting Dandridge v Williams, 397 US 471, 485.) We have said that "[ijf any conceivable state of facts will support the classification, said provisions will not be held violative of the equal protection clause” (Maresca v Cuomo, 64 NY2d 242, 250 [emphasis added]; see also, Matter of Doe v Coughlin, 71 NY2d 48, 56-57). The challenged regulation draws a legitimately discrete line, having a fair and substantial relationship to the purposes of the BIT legislation. Thus, despite varying imprecisions which may be hypothesized, this case satisfies the governing precepts.

The BIT program provides finite apportioned funds to local school districts and BOCES, with the paramount purpose "to improve salaries for teachers” (Education Law § 1950 [15] [a]; § 3602 [27] [a] [emphasis added]), in order to relieve the economic hardship of underpaid educators without increasing the financial burden of school districts. A potent nucleus of the Commissioner’s argument is the uncontroverted evidence that the average salaries of school administrators as a group are consistently higher than comparable salaries of teachers as a group. It is not irrational or illogical for the Commissioner to exclude from eligibility for EIT salary enhancements those educators who primarily serve as administrators and supervisors, as determined by their administrator’s compensation categorization, even though they happen also to teach. All professional educators who provide education services to pupils under a teaching certificate, who are paid categorically as teachers, are eligible for EIT enhancements under the regulation, even though some of them also perform some administrative duties. The key for all these eligible teachers is that they are compensated alike under a generic full-time teachers’ salaries categorization. The randomness, fortuity or historically accidental nature of some of the salaries and categorizations are thus irrelevant features and variations under the governing precepts of the rational basis test. The regulation, in order to avoid chaos from the myriad of differing teaching and teaching-type jobs all over the State and in order to expand eligibility consistent with the purposes of the legislation, pivots essentially and primarily on "salaries for teachers”, a root phrase found in the enabling statute itself, and on the teaching function as identified in part by the form of compensation categorization. Courts have no basis to brand such a regulation irrational, inasmuch as it is keyed to the identified State interest of enhancing the salaries of underpaid teachers and enjoys a presumptive constitutionality at the threshold as well.

The context and stage of this litigation also provide illumination on and confirmation of our decision. This is the second time plaintiffs have challenged the Commissioner’s regulatory definition of "eligible teacher” under the EIT statute. The first regulation, adopted in the summer of 1986 after EIT became law, had tied EIT apportionment eligibility to membership in teachers’ bargaining units. The Appellate Division affirmed a lower court’s determination, finding the initial regulation invalid on equal protection grounds (Schneider v Ambach, 135 AD2d 284). Notably, in the prior litigation, the Appellate Division determined that the Commissioner was not mandated by statute to extend EIT eligibility to administrators and supervisors at all (id., at 286), and that the Commissioner, in fulfilling his statutory duty to implement the EIT legislation, could determine the class of eligible EIT beneficiaries more restrictively than the class of educators defined as "teacher” under the Education Law (see, Education Law § 3101 [defining teachers to include supervisors and administrators]; Schneider v Ambach, 135 AD2d, supra, at 287). The Appellate Division, however, went on to find a denial of equal protection based upon a lack of "any functional, economic or geographic basis” to distinguish between the plaintiffs and those supervisors or administrators who were members of teachers’ bargaining units (id., at 288). That determination was not further appealed and the Commissioner went back to the drawing board to craft the regulation now before us.

On this appeal, the Commissioner and NYSUT assert that the new regulation creates a functional and economic predicate for EIT eligibility which is authorized and consonant with the statutory language and the legislative intent which spurred the creation of EIT. We conclude they are correct because the line drawn between those paid as administrators and those paid as teachers, based on the categorical compensation method, is a distinction keyed at least somewhat proportionately to empirical data and is designed to assure that the essential statutory purpose of providing supplements to the salaries of teachers, as underpaid educators, is achieved. Moreover, the Commissioner’s line-drawing based on the uncontroverted evidence also preserves the residual EIT funds for the "teachers-in-general” group and reduces the diversion of these limited funds away from needy targeted teachers, paid as such, to relatively more highly compensated school administrators, paid as such.

The Commissioner’s authority to adopt regulations implementing and fairly executing the EIT program in a manner consistent with the statute’s stated purpose is broad. The categorizations he has finally evolved find support, too, in the legislative history of the EIT statute. The issue of whether teaching administrators, in gross, were entitled to EIT supplements was hotly debated and ultimately rejected by the Legislature (see, Bill Jacket, L 1986, ch 53). So, the selection of "teachers’ salaries” compensation schedules as the line of demarcation, allowing only some teaching administrators to qualify, is not bereft of legislative justification; rather, it is consistent with the words, history and intent of the statute.

An additional observation may be helpful. The distribution made under the regulatory definition is not arbitrary or capricious, but rather serves both functional and economic purposes. Because educators who are paid administrative salaries receive those salaries undifferentiated to the tasks performed, there is no practical method of determining the portion earned respectively for administrative duties and the portion received for teaching. On the other hand, eligible teachers under the challenged regulations, who receive teachers’ salaries plus stipends for performing additional and separate administrative duties, can be sorted out consonantly with the purposes of this important legislation.

We conclude, therefore, that the distinction made in the regulation is rationally related to the empirical data available and to the legislative intent behind the EIT program, which is to use State funds to augment the salaries of underpaid teachers qua teachers. The regulation should be upheld. To strike down the Commissioner’s action because he benefited more teachers than he absolutely had to, on the ground that he should have included even more people would be ironic and wrong. The EIT program should now proceed as intended and formulated, with only those designated eligible teachers who are paid categorically as teachers receiving EIT salary supplements.

Accordingly, the order of the Appellate Division should be reversed, with costs to defendant and intervenor-defendant; plaintiffs’ motion for summary judgment should be denied; and defendants’ cross motion for summary judgment should be granted, and 8 NYCRR 175.35 ’ (e) (1) (i) declared constitutional. Plaintiffs’ cross appeal should be dismissed as academic.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Titone and Hancock, Jr., concur.

Order reversed, with costs to defendant and intervenor-defendant, plaintiffs’ motion for summary judgment denied, defendants’ cross motion for summary judgment granted, and 8 NYCRR 175.35 (e) (1) (i) declared constitutional. Cross appeal dismissed as academic in view of the disposition of the appeal.


author: Simons, J.

text:
    In the Matter of Cowen & Company et al., Appellants, v Jeffrey M. Anderson, Respondent.
    Argued June 6,1990;
    decided July 10, 1990

      POINTS OF COUNSEL

      Matthew Farley, Brian F. McDonough and Thomas A. Roberts for appellants.

      Theodore G. Eppenstein and Madelaine Eppenstein for respondent.

      William J. Fitzpatrick and Gerard J. Quinn for Securities Industry Association, Inc., amicus curiae.

   OPINION OF THE COURT

Simons, J.

Petitioner Cowen & Company is a member of the American Stock Exchange (Amex) and petitioner Christopher Stark is one of its registered representatives. They seek to stay arbitration before the American Arbitration Association (AAA) of a dispute with one of their customers, respondent Jeffrey Anderson. The courts below denied the stay. The issue presented is whether the agreements entered into between petitioners and respondent permit respondent to arbitrate his claims before the AAA or limit him to arbitration before various securities industry self-regulatory organizations, i.e., the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers. We conclude that the agreements permit arbitration before the AAA and therefore affirm the order of the Appellate Division.

In July 1986 respondent opened securities accounts with petitioners. When he did so, he signed an "Option Agreement” and "Margin Agreement”, both in standard form, which contained clauses providing that disputes between the parties should be settled by arbitration in "accordance with the rules, then in effect” of the New York Stock Exchange, American Stock Exchange or the National Association of Securities Dealers. The agreements gave respondent the option to elect the forum.

On December 29, 1988 respondent served a notice of intention to arbitrate claims arising out of the alleged mishandling of his accounts before the AAA. Petitioners applied for a stay contending that respondent could only elect arbitration before the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers. Respondent maintained in opposition that arbitration before AAA was proper because the "rules of the Amex”, referred to in the option and margin agreements, included the "Amex Window” (Amex const, art VIII, § 2 [c]) which authorized him to do so.

The Supreme Court denied the stay, holding that the rules of the American Stock Exchange include a right on the part of respondent to " 'elect to arbitrate before the American Arbitration Association * * * unless the customer has expressly agreed, in writing, to submit only to the arbitration procedure of the Exchange’ ” (quoting Amex const, art VIII, § 2 [c]). The court concluded respondent had not limited himself to arbitration before the Amex in the agreements and, therefore, that the exception precluding arbitration before the AAA did not apply. The Appellate Division affirmed and we granted leave to appeal.

Arbitration agreements are contracts and their meaning is to be determined from the language employed, by the parties under accepted rules of contract law (Matter of American Ins. Co. [Messinger — Aetna Cas. & Sur. Co.], 43 NY2d 184, 193-194; Stanley & Son v Trustees of Hackley School, 42 NY2d 436, 438-440; cf., Sablosky v Gordon Co., 73 NY2d 133, 137). The option and margin agreements before the court authorize respondent to elect arbitration "in accordance with the rules * * * [of the] American Stock Exchange.” The Amex constitution, in turn, defines the term "rules of the Exchange” to "include the Constitution and all rules adopted pursuant thereto” (Amex const, art I, § 3 [a] [emphasis added]). The "Arbitration Procedure” of the Amex, outlined in its constitution, states that "the customer may elect to arbitrate before the American Arbitration Association * * * unless the customer has expressly agreed * * * to submit only to the arbitration procedure of the Exchange” (Amex const, art VIII, § 2 [c]). Inasmuch as respondent did not agree to limit the arbitration to the self-regulating organizations, the plain language of the stock and margin agreements grant him the right under the Amex constitution to elect to arbitrate the dispute before the AAA.

Petitioners rely on several Federal cases to support their contention that the option and margin agreements were intended to and did override the provision of the Amex constitution and limit arbitration to one of the three specifically named self-regulatory bodies. However, the contract language in three of those cases is significantly different from the language petitioners used. Thus, in Merrill Lynch, Pierce, Fenner & Smith v Georgiadis (903 F2d 109, 110 [2d Cir]), the customer signed a "Standard Options Agreement” which stated, " '[a]ny controversy between us * * * shall be settled by arbitration only before the National Association of Securities Dealers, Incorporated, or the New York Stock Exchange, or an Exchange located in the United States upon which listed options transactions are executed’ ” (emphasis added). When the customer attempted to invoke the "Amex Window” by filing a demand for arbitration with the AAA, the Court of Appeals construed the language of the agreement strictly and limited arbitration to one of several designated fora. Although the "Amex Window” allowed the customer to arbitrate before the AAA, the parties had agreed otherwise and their agreement was held controlling.

Similarly, in Piltch v Merrill Lynch, Pierce, Fenner & Smith (714 F Supp 537 [D DC]), the customers signed a standard option agreement providing in part that " '[a]ny controversy * * * arising out of such option transactions or this agreement shall be settled by arbitration before the National Association of Securities Dealers, Incorporated, or the New York Stock Exchange, or the American Stock Exchange, only. ’ ” (714 F Supp, at 537 [emphasis added].) The court held that because they had agreed to settle all disputes before the three self-regulatory organizations listed in the options agreement, they were not entitled to use the "Amex Window” to elect the AAA forum (see also, PaineWebber Inc. v Pitchford, 721 F Supp 542, 543 [SD NY], affd sub nom. PaineWebber, Inc. v Rutherford, 903 F2d 106 [no arbitration before AAA where customer agreement stated " Xa)ny controversy between us * * * shall be settled by arbitration, in accordance with the rules, then obtaining, of either the Arbitration Committee of the New York Stock Exchange, American Stock Exchange, National Association of Securities Dealers or where appropriate, Chicago Board Option Exchange or Commodities Futures Trading Commission’ ” (emphasis added)]).

These cases, rather than supporting petitioners’ argument, illustrate that they could easily have limited the forum for arbitration to one of the three named organizations by so stating in the option and margin agreements had they chosen to do so. Unlike the clauses in the agreements in the cases cited above, however, petitioners’ agreements do not expressly state that respondent is bound to arbitrate their claim "only before” the three self-regulatory organizations or that the customer must submit to arbitration in accordance with the procedures of a particular entity. They state instead arbitration shall be "in accordance with the rules” of the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers. The term "rules” is not defined or limited by the agreements and respondent is, therefore, entitled to rely on the provision in the Amex constitution.

Petitioners have cited some Federal District Court cases which refused to interpret the term "rules of the Amex” to encompass the Amex Window provision in the Amex constitution and construed customer agreements similar to those at issue here as foreclosing arbitration before the AAA (see, Hybert v Shearson Lehman/American Express, 1989 WL 64450 [US Dist Ct, ND Ill, June 8, 1989]; Bear Steams & Co. v Karol & Assocs., 728 F Supp 499, 500, 503-504 [ND 111]; PaineWebber Inc. v Astrella, No. 89-2268 [US Dist Ct, NJ, Sept. 6, 1989]). We prefer to rest our decision upon settled rules of contract law and read the language according to its clear meaning. Indeed, even if the language of petitioners’ agreements could be considered ambiguous we would construe it most strongly against petitioners and favorably to respondent because petitioners drafted the agreements (Matter of PaineWebber, Inc. v Webb, 155 AD2d 938; see, Jacobson v Sassower, 66 NY2d 991, 993; 67 Wall St. Co. v Franklin Natl. Bank, 37 NY2d 245, 249).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Judges Kaye, Alexander, Titone, Hancock, Jr., and Bellacosa concur; Chief Judge Wachtler taking no part.

Order affirmed, with costs.

      . "I agree that any controversy arising out of or relating to my account with you * * * shall be settled by arbitration in accordance with the rules then in effect of the New York Stock Exchange, the American Stock Exchange or the NASD as I may elect.”

      . "Any controversy arising out of or relating to my accounts * * * shall be settled by arbitration in accordance with the rules, then in effect, of the NASD or the Board of Directors of the New York Stock Exchange, Inc. or the American Stock Exchange, Inc. as I may elect.”

      . The section provides in part:
      "Sec 2. Arbitration shall be conducted under the arbitration procedures of this Exchange, except as follows. * * *
      "(c) if any of the parties to a controversy is a customer, the customer may elect to arbitrate before the American Arbitration Association in the City of New York, unless the customer has expressly agreed, in writing, to submit only to the arbitration procedure of the Exchange.”


author: Kaye, J.

text:
    In the Matter of Versailles Realty Company et al., Appellants, v New York State Division of Housing and Community Renewal, Respondent.
    Argued June 6,1990;
    decided June 28, 1990

      POINTS OF COUNSEL

      Allen H. Weiss and Michael W. Gunzburg for appellants.

      Iris J. Korman, Dennis B. Hasher and Rudolph Rosa Di Sant for respondent.
   OPINION OF THE COURT

Kaye, J.

A regulation promulgated by the Division of Housing and Community Renewal (the DHCR) which prohibits rent increases for major capital improvements (MCI’s) funded out of the cash reserve fund established by a newly converted cooperative corporation is a proper exercise of the agency’s authority, as is the application of that regulation to all administrative proceedings pending at the time of its adoption. We therefore affirm the Appellate Division order that denied the rent increases sought by petitioners.

Shortly after the cooperative conversion of their Forest Hills apartment building — with a significant number of units remaining as rent-stabilized units — in summer 1985, petitioners installed new windows throughout the building. The $121,508 cost of that improvement was paid out of the cooperative corporation’s reserve fund, and petitioners promptly sought MCI rent increases from the rent-stabilized tenants. After the District Rent Administrator allowed the rent increases and during the pendency of the tenants’ petitions for administrative review, in May 1987 the Rent Stabilization Code was amended. The revised Code enacted by the DHCR provided that no MCI rent increase was to be granted "to the extent that, after a plan for the conversion of a building to cooperative or condominium ownership is declared effective, such improvement is paid for out of the cash reserve fund of the cooperative corporation or condominium association.” (9 NYCRR 2522.4 [a] [9].) The Code further specified that, unless undue hardship or prejudice resulted, the amended Code provisions would be applicable to all pending proceedings (9 NYCRR 2527.7). Pursuant to the new regulation, the Commissioner granted the tenants’ administrative appeal from the District Rent Administrator’s order, and disallowed the rent increases.

In this article 78 proceeding, the Commissioner’s denial of petitioners’ requested rent increases — a determination subsequently affirmed by the Appellate Division — is challenged on two grounds. Petitioners urge, first, that the DHCR exceeded its authority in promulgating the reserve fund exception and second, that the retroactive application of the exception was erroneous as a matter of law. Both contentions lack merit.

With respect to petitioners’ first contention, we described the standard of review for a challenge to a regulation in Ostrer v Schenck (41 NY2d 782, 786) as a high one: "The function of a reviewing court is a limited one. The challenger of a regulation must establish that the regulation 'is so lacking in reason for its promulgation that it is essentially arbitrary.’ ” Similarly, in Molina v Games Mgt. Servs. (58 NY2d 523, 529), we noted that the "Legislature may establish administrative agencies to accomplish its purposes and such agencies may be given the power to adopt rules and regulations to advance the purpose for which they were created. The regulations so adopted, if reasonable, have the force and effect of law.”

Petitioners’ challenge to the regulation is essentially twofold: that it is in excess of the authority to promulgate regulations delegated to DHCR and not in furtherance of the purposes of the Code; and that, even if within the scope of DHCR’s authority, the regulation is so manifestly unreasonable as to be invalid.

Effective August 2, 1985, the Legislature delegated to DHCR the authority to promulgate amendments to the Rent Stabilization Code (L 1985, ch 888, § 2, amending Administrative Code of City of New York § YY51-6.0 [b]). As the Appellate Division noted, addressing an issue similar to the one before us, "by delegating to DHCR the authority to adopt an amendment to the Code which 'protects tenants and the public interest’ (Administrative Code § 26-511 [c] [1], formerly § YY51-6.0 [c] [1]), the Legislature clearly provided the agency with a broad mandate, which would inevitably require some changes in the legal relationship between landlords and tenants.” (Festa v Leshen, 145 AD2d 49, 61.) The reserve fund regulation is plainly within the scope of the agency’s mandate. Indeed, as the DHCR points out, there were few such applications before the changes in the law regarding cooperatives and condominiums (see, Administrative Code ch 51 [recodified as § 26-703]). Thus, DHCR was exercising its power “to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation.” (Matter of Nicholas v Kahn, 47 NY2d 24, 31.) Contrary to petitioners’ claim, the challenged regulation bears no resemblance to the regulation we struck down in Boreali v Axelrod (71 NY2d 1); none of the four "coalescing circumstances” that led us to conclude there was an intrusion into the legislative domain is present here (see, 71 NY2d, at 11-14, supra).

DHCR’s regulation was also rational. The Rent Stabilization Law allows the DHCR to grant rent increases in excess of standard guideline increases in various circumstances, including increases for MCI’s, as determined by the agency. By permitting the cost of such improvements to be shifted permanently to the tenants — continuing even after actual costs have been recouped — owners are encouraged to make voluntary investments in the improvement of their buildings, which also redounds to the benefit of the tenants (see, Matter of Ansonia Residents Assn. v New York State Div. of Hous. & Community Renewal, 75 NY2d 206). Accordingly, where an MCI in a cooperative is funded through a special assessment of all proprietary lessees, the cooperative corporation may be eligible to file for an MCI rent increase. By contrast, in order to secure approval for a cooperative conversion, the offeror is required to establish a minimum reserve fund, which is to be used exclusively “for making capital repairs, replacements and improvements necessary for the health and safety of the residents” (Administrative Code § 26-703). Plainly, there is no analog to the owner’s voluntary investments for which permanent rent increases may be allowed. (See also, 9 NYCRR 2522.4 [a] [10] [rent increase denied for MCI funded by government grant].)

Furthermore, it is not the owner of the reserve fund — the cooperative corporation — that would collect the rent increase from the rent-stabilized tenants. Rather, the increased rent would benefit only the holders of unsold shares — their landlords. It is hardly irrational for the DHCR to conclude that when MCI’s are funded out of legally mandated reserve funds, permanent rent increases would not only fall outside the statutory purposes but also could result in the sort of "profiteering” (Administrative Code § 26-501) the law was designed to prohibit.

Nor was it illegal or irrational for the DHCR to apply the amended Code to all pending proceedings, as 9 NYCRR 2527.7 requires it to do, barring proof of hardship or prejudice. Addressing petitioners’ contention that they were somehow deprived of a vested interest, we note that the new regulation did not supplant an existing enactment that would have allowed them the rent increases; it simply filled a gap in the law (see, moreover, Matter of St. Vincent’s Hosp. & Med. Center v New York State Div. of Hous. & Community Renewal, 109 AD2d 711, affd 66 NY2d 959). Petitioners’ contention that, at the time they incurred the expense, rent increases were routinely allowed out of cooperative corporations’ reserve funds, is simply not supported by the record. Finally, the regulation applying amendments in the Code to all pending administrative proceedings, as an exercise of administrative discretion, is in no sense irrational.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Wachtler and Judges Simons, Alexander, Titone, Hancock, Jr., and Bellacosa concur.

Order affirmed, with costs.