author: Graffeo, J.

text:
    [946 NE2d 159, 921 NYS2d 171]
    Penguin Group (USA) Inc., Appellant, v American Buddha, Respondent.
    Argued February 9, 2011;
    decided March 24, 2011

      POINTS OF COUNSEL

      Cowan Liebowitz & Latman, P.C., New York City (Richard Dannay and Thomas Kjellberg of counsel), for appellant.
    I. The dominant role of the Internet in commerce and culture illustrates the justification for the rule that out-of-state copyright infringement injures New York authors and publishers and their copyrights in New York. (Farkas v Farkas, 36 AD3d 852; McGraw-Hill Cos., Inc. v Ingenium Techs. Corp., 375 F Supp 2d 252; Mario Valente Collezioni, Ltd. v Confezioni Semeraro Paolo, S.R.L., 115 F Supp 2d 367; Cello Holdings, L.L.C. v Lawrence-Dahl Cos., 89 F Supp 2d 464; Brandt v Toraby, 273 AD2d 429; Peterson v Spartan Indus., 33 NY2d 463; Exclaim Assoc. Ltd. v Nygate, 10 Misc 3d 1063[A], 2005 NY Slip Op 52106[U].) II. The legislative history and the remedial purpose of CPLR 302 (a) (3), and New York case law, compel recognition that copyright infringement injures New York authors and publishers and their copyrights in New York. (Feathers v McLucas, 15 NY2d 443; Reyes v Sanchez-Pena, 191 Misc 2d 600.) III. “Injury” under CPLR 302 (a) (3) does not occur only where the initial tort is committed. (Kramer v Hotel Los Monteros S. A., 57 AD2d 756; Carte v Parkoff, 152 AD2d 615; Hermann v Sharon Hosp., 135 AD2d 682; McGowan v Smith, 52 NY2d 268; Ingraham v Carroll, 90 NY2d 592; Iconoclast Advisers LLC v Petro-Suisse Ltd., 17 Misc 3d 1101[A], 2007 NY Slip Op 51784[U].) IV. The statute itself anticipates and obviates a “Pandora’s box.” (Kramer v Hotel Los Monteros S. A., 57 AD2d 756; Reyes v Sanchez-Pena, 191 Misc 2d 600; Ingraham v Carroll, 90 NY2d 592; Royalty

      Network Inc. v Dishant.com, LLC, 638 F Supp 2d 410; McGraw-Hill Cos., Inc. v Ingenium Techs. Corp., 375 F Supp 2d 252; McGowan v Smith, 52 NY2d 268; Allen v Auto Specialties Mfg. Co., 45 AD2d 331.) V. This Court has already applied CPLR 302 (a) (3) (ii) in the intellectual property context. (Sybron Corp. v Wetzel, 46 NY2d 197; Friedr. Zoellner [New York] Corp. v Tex Metals Co., 396 F2d 300; Sung Hwan Co., Ltd. v Rite Aid Corp., 7 NY3d 78.) VI. Injury to a New York copyright owner comprises more than derivative economic injury in New York. (Taylor Corp. v Four Seasons Greetings, LLC, 403 F3d 958; Capitol Records Inc. v Thomas-Rasset, 680 F Supp 2d 1045; Christopher Phelps & Assoc., LLC v Galloway, 492 F3d 532; Sardi’s Rest. Corp. v Sardie, 755 F2d 719; Warner Bros. Entertainment Inc. v RDR Books, 575 F Supp 2d 513; Universal City Studios, Inc. v Reimerdes, 111 F Supp 2d 294, affd sub nom. Universal City Studios, Inc. v Corley, 273 F3d 429; Fantis Foods v Standard Importing Co., 49 NY2d 317.) VII. New York has a substantial interest in providing its authors and publishers with convenient and effective redress for injuries arising from copyright infringement. (In re Charter Communications, Inc., 393 F3d 771; World-Wide Volkswagen Corp. v Woodson, 444 US 286; McGee v International Life Ins. Co., 355 US 220; Colder v Jones, 465 US 783; Kulko v Superior Court of Cal., City & County of San Francisco, 436 US 84; Shaffer v Heitner, 433 US 186.) VIII. American Buddha’s activities are far beyond merely local in character. (LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210; Grimaldi v Guinn, 72 AD3d 37; Farkas v Farkas, 36 AD3d 852; Allen v Canadian Gen. Elec. Co., 65 AD2d 39; Energy Brands Inc. v Spiritual Brands, Inc., 571 F Supp 2d 458; Ingraham v Carroll, 90 NY2d 592; McGowan v Smith, 52 NY2d 268.)

      Online Media Law, PLLC (Charles H. Carreon, of the Arizona bar, admitted pro hac vice, of counsel), for respondent.
    I. Congress expressly preempted the field of copyright law; thus, an affirmative answer to the certified question would impermissibly intrude upon the exclusive jurisdiction of the federal courts. (Durham Indus., Inc. v Tomy Corp., 630 F2d 905; Cipollone v Liggett Group, Inc., 505 US 504; United States v Price, 361 US 304.) II. The District Court decision was correct under New York law. (Ruhrgas AG v Marathon Oil Co., 526 US 574; Insurance Corp. of Ireland v Compagnie des Bauxites de Guinee, 456 US 694; DiStefano v Carozzi N. Am., Inc., 286 F3d 81; Bank Brussels Lambert v Fiddler Gonzalez & Rodriguez, 171 F3d 779; Best Van Lines, Inc. v Walker, 490 F3d 239; Fantis Foods v Standard Importing Co., 49 NY2d 317; University Sports Publs.

      Co., Inc. v Rizzo, 14 Misc 3d 1211[A], 2006 NY Slip Op 52488[U].) III. The certifying panel has invited this Court into error by proposing a course of action that would certainly result in an erroneous decision. (Sybron Corp. v Wetzel, 46 NY2d 197; Goldstein v California, 412 US 546; Capitol Records, Inc. v Naxos of Am., Inc., 4 NY3d 540; Metropolitan Life Ins. Co. v Massachusetts, 471 US 724; Teamsters v Lucas Flour Co., 369 US 95; Bates v Dow Agrosciences LLC, 544 US 431; Shaw v Delta Air Lines, Inc., 463 US 85; Felder v Casey, 487 US 131; Free v Bland, 369 US 663.) IV. The law of personal jurisdiction would be rendered ridiculous if this Court were to attempt to prescribe the situs of injury based on the type of rights that plaintiff alleged were injured. V. Answering the certified question in the affirmative would not resolve the instant case and in fact would result in another dismissal for lack of jurisdiction by the District Court after remand. VI. The District Court properly held that Digital Millennium Copyright Act procedures, the merits, and the literary efforts of opposing counsel were irrelevant. (Sterling Natl. Bank & Trust Co. of N.Y. v Fidelity Mtge. Invs., 510 F2d 870; Galgay v Bulletin Co., Inc., 504 F2d 1062; Arlio v Lively, 474 F3d 46.)

      Public Citizen Litigation Group (Michael H. Page, of the District of Columbia bar, admitted pro hac vice, of counsel), for Public Citizen, amicus curiae.
    I. This Court’s decisions involving the situs of injury in commercial tort cases are controlling here. (Sybron Corp. v Wetzel, 46 NY2d 197; Zippo Mfg. Co. v Zippo Dot Com, Inc., 952 F Supp 1119.) II. Under Sybron Corp. v Wetzel (46 NY2d 197 [1978]) and its progeny, the situs of injury under CPLR 302 (a) (3) is generally where the critical events associated with the dispute took place, which might include where major customers are actively solicited away. (Feathers v McLucas, 15 NY2d 443; Spectacular Promotions, Inc. v Radio Sta. WING, 272 F Supp 734; American Eutectic Welding Alloys Sales Co. Inc. v Dytron Alloys Corp., 439 F2d 428; Friedr. Zoellner [New York] Corp. v Tex Metals Co., 396 F2d 300; Fantis Foods v Standard Importing Co., 49 NY2d 317; Davidson Extrusions v Touche Ross & Co., 131 AD2d 421; Interface Biomedical Labs. Corp. v Axiom Med., Inc., 600 F Supp 731; Benifits by Design Corp. v Contractor Mgt. Servs., LLC, 75 AD3d 826; Polansky v Gelrod, 20 AD3d 663.) III. Penguin Group (USA) Inc.’s interpretation of CPLR 302 (a) (3) is inconsistent with New York Legislature’s desire to avoid chilling speech. (American Eutectic Welding Alloys Sales Co., Inc. v Dytron Alloys Corp., 439 F2d 428; Spectacular Promotions, Inc. v Radio Sta. WING, 272 F Supp 734; Ehrenfeld v Bin Mahfouz, 9 NY3d 501; Legros

      v Irving, 38 AD2d 53; Montgomery v Minarcin, 263 AD2d 665; New York Times Co. v Sullivan, 376 US 254.)

      Kilpatrick Stockton LLP, New York City (Marc Lieberstein of counsel), for International Trademark Association, amicus curiae.
    The Court of Appeals should answer only the Second Circuit’s certified question as it relates to copyrights. (Los Angeles v Lyons, 461 US 95; Long Is. Light. Co. v County of Suffolk, N.Y., 604 F Supp 759; Chloé v Queen Bee of Beverly Hills, LLC, 616 F3d 158; Dastar Corp. v Twentieth Century Fox Film Corp., 539 US 23; Energy Brands Inc. v Spiritual Brands, Inc., 571 F Supp 2d 458; PDK Labs., Inc. v Proactive Labs., Inc., 325 F Supp 2d 176; Citigroup Inc. v City Holding Co., 97 F Supp 2d 549.)

      Davis Wright Tremaine LLP, New York City (Elizabeth A. McNamara of counsel), for American Association of Publishers and others, amici curiae.
    I. Digital piracy causes direct injury to publishers in New York. (Sybron Corp. v Wetzel, 46 NY2d 197; Sung Hwan Co., Ltd. v Rite Aid Corp., 7 NY3d 78; Fantis Foods v Standard Importing Co., 49 NY2d 317; Kramer v Hotel Los Monteros S. A., 57 AD2d 756; Weiss v Greenberg, Traurig, Askew, Hoffman, Lipoff, Quentel & Wolff, 85 AD2d 861; McGraw-Hill Cos., Inc. v Ingenium Techs. Corp., 375 F Supp 2d 252; Cello Holdings, L.L.C. v Lawrence-Dahl Cos., 89 F Supp 2d 464; Mario Valente Collezioni, Ltd. v Confezioni Semeraro Paola, S.R.L., 115 F Supp 2d 367.) II. An understanding of copyright law informs the nature of the injury experienced by publishers whose works are pirated and makes plain that such publishers have been injured within the state under CPLR 302 (a) (3). (Sybron Corp. v Wetzel, 46 NY2d 197; DiStefano v Carozzi N. Am., Inc., 286 F3d 81; Salinger v Colting, 607 F3d 68; Sung Hwan Co., Ltd. v Rite Aid Corp., 7 NY3d 78; eBay Inc. v Merc-Exchange, L. L. C., 547 US 388; Twentieth Century Music Corp. v Aiken, 422 US 151; Princeton Univ. Press v Michigan Document Servs., Inc., 99 F3d 1381; Basic Books, Inc. v Kinko’s Graphics Corp., 758 F Supp 1522; Fox Film Corp. v Doyal, 286 US 123; Merkos L’Inyonei Chinuch, Inc. v Otsar Sifrei Lubavitch, Inc., 312 F3d 94.) III. New York law recognizes the importance of publishing to the state. (Immuno AG. v Moor-Jankowski, 77 NY2d 235; Matter of Beach v Shanley, 62 NY2d 241; Davis v Costa-Gavras, 580 F Supp 1082.)
   OPINION OF THE COURT

Graffeo, J.

The United States Court of Appeals for the Second Circuit has asked us a question regarding the scope of long-arm jurisdiction under CPLR 302 (a) (3) (ii) in the context of a federal copyright infringement action.

Plaintiff Penguin Group (USA) is a large trade book publisher with its principal place of business in New York City. Defendant American Buddha is an Oregon not-for-profit corporation whose principal place of business is in Arizona. It operates two Web sites—the American Buddha Online Library and the Ralph Nader Library—that are hosted on servers located in Oregon and Arizona.

Penguin commenced this copyright infringement action against American Buddha in the United States District Court for the Southern District of New York, alleging that American Buddha infringed on Penguin’s copyrights to four books: “Oil!” by Upton Sinclair; “It Can’t Happen Here” by Sinclair Lewis; “The Golden Ass” by Apuleius, as translated by E.J. Kenney; and “On the Nature of the Universe” by Lucretius, as translated by R.E. Latham. The complaint alleges that American Buddha published complete copies of these works on its two Web sites, making them available free of charge to its 50,000 members and anyone with an Internet connection. The electronic copying and uploading of the works was apparently undertaken in Oregon or Arizona.

American Buddha’s Web sites assure its users that its uploading of these works and the users’ downloading of them do not constitute copyright infringement because they are protected under sections 107 and 108 of the Copyright Act (17 USC § 101 et seq.), which govern fair use and reproduction by libraries and archives. Penguin disputes that any exception to the Copyright Act applies to American Buddha’s activities.

American Buddha moved to dismiss the complaint for lack of personal jurisdiction, arguing that its ties to New York were too insubstantial. In response, Penguin asserted that it had secured long-arm jurisdiction over American Buddha by virtue of CPLR 302 (a) (3) (ii), which provides jurisdiction over nondomiciliaries who commit tortious acts outside the state that result in' injuries within New York. American Buddha countered that CPLR 302 (a) (3) (ii) was inapplicable because Penguin did not suffer an in-state injury.

The District Court granted American Buddha’s motion and dismissed the complaint, holding that Penguin was injured in Oregon or Arizona, where the copying and uploading of the books took place (2009 WL 1069158, 2009 US Dist LEXIS 34032 [SD NY]). The court determined that Penguin suffered only a “purely derivative economic injury” in New York based on its domicile here, which was insufficient to trigger CPLR 302 (a) (3) (ii). (2009 WL 1069158 at *4, 2009 US Dist LEXIS 34032 at *11.) Although the court acknowledged that the Internet could be a complicating factor in analyzing personal jurisdiction, it concluded that the Internet played “no role in determining the situs of [Penguin’s] alleged injury” since the claimed infringement occurred in Oregon or Arizona. (2009 WL 1069158 at *4, 2009 US Dist LEXIS 34032 at *12.)

Recognizing a split of authority in the New York district courts regarding the application of CPLR 302 (a) (3) (ii) to copyright infringement cases against out-of-state defendants, the Second Circuit certified the following question to us:

“In copyright infringement cases, is the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R. § 302 (a) (3) (ii) the location of the infringing action or the residence or location of the principal place of business of the copyright holder?” (609 F3d 30, 32 [2d Cir 2010].)

The Second Circuit invited this Court to “alter this question as it should deem appropriate” (id. at 42) and noted that, “in the context of certifying a question to the New York Court of Appeals[,] . . . the allegation of distribution over the Internet may be a factor in the Court’s interpretation of the statute in question” (id. at 39) .

Because the Internet plays a significant role in this case, we narrow and reformulate the certified question to read:

“In copyright infringement cases involving the uploading of a copyrighted printed literary work onto the Internet, is the situs of injury for purposes of determining long-arm jurisdiction under N.Y. C.P.L.R § 302 (a) (3) (ii) the location of the infringing action or the residence or location of the principal place of business of the copyright holder?”

In answer to this reformulated question and under the circumstances of this case, we conclude it is the location of the copyright holder.

CPLR 302 (a) (3) (ii) allows a court in New York to exercise personal jurisdiction over an out-of-state defendant when the nondomiciliary:

“3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he . . .
“(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.”

Consequently, a plaintiff relying on this statute must show that (1) the defendant committed a tortious act outside New York; (2) the cause of action arose from that act; (3) the tortious act caused an injury to a person or property in New York; (4) the defendant expected or should reasonably have expected the act to have consequences in New York; and (5) the defendant derived substantial revenue from interstate or international commerce (see LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210, 214 [2000]). If these five elements are met, a court must then assess whether a finding of personal jurisdiction satisfies federal due process (see id. at 216). The only issue before us concerns the third requirement—whether an out-of-state act of copyright infringement has caused injury in New York.

Penguin, supported by amici curiae American Association of Publishers and other national publishing organizations, argues that a New York-based copyright holder sustains an injury in New York for purposes of CPLR 302 (a) (3) (ii) when its copyright is infringed through the out-of-state uploading of its protected work onto the Internet. American Buddha and amicus curiae Public Citizen respond that this case is controlled by Fantis Foods v Standard Importing Co. (49 NY2d 317 [1980]), where we held that a derivative economic injury felt in New York based solely on the domicile of the plaintiff is insufficient to establish an in-state injury within the meaning of the statute. Both parties raise compelling arguments.

Our analysis begins with Fantis Foods, where we found personal jurisdiction to be lacking in the absence of a “direct injury” within New York. In that case, Standard, a New York wholesaler of feta cheese, asserted a claim for conversion against a Greek entity that had diverted a cheese shipment—meant to be shipped to Standard in Chicago—to a competitor while the shipment was in Greece or on the high seas. We concluded that personal jurisdiction over the Greek defendant did not lie under CPLR 302 (a) (3) (ii) because:

“In final analysis the only possible connection between the claimed conversion and any injury or foreseeable consequence in New York is the fact that Standard is incorporated and maintains offices there. It has, however, long been held that the residence or domicile of the injured party within a State is not a sufficient predicate for jurisdiction, which must be based upon a more direct injury within the State and a closer expectation of consequences within the State than the indirect financial loss resulting from the fact that the injured person resides or is domiciled there” (id. at 326).

In a different commercial tort context, in Sybron Corp. v Wetzel (46 NY2d 197 [1978]), we held that an injury had occurred in New York under CPLR 302 (a) (3) (ii). The defendant in Sybron, a nondomiciliary corporation, hired a former employee of Sybron—a competitor engaged in manufacturing in New York—allegedly to obtain Sybron’s protected trade secrets. Recognizing that the locus of injury in commercial cases “is not as readily identifiable as it is in torts causing physical harm” (id. at 205), we determined that Sybron sustained a sufficiently direct injury in New York to support jurisdiction under CPLR 302 (a) (3) (ii) since its claim was based on more than just its in-state domicile. Rather, Sybron had alleged that it acquired the trade secrets at issue in New York and, further, that the defendant’s unfair competition threatened to pilfer Sybron’s significant New York customers.

Fantis Foods and Sybron both cited favorably to American Eutectic Welding Alloys Sales Co. v Dytron Alloys Corp. (439 F2d 428 [2d Cir 1971]). There, the plaintiffs, two related New York corporations, brought an action against an out-of-state competitor alleging that it induced their employees to work for the competitor and to use confidential information to lure away plaintiffs’ customers in Kentucky and Pennsylvania. The Second Circuit identified three options for determining the situs of injury under CPLR 302 (a) (3) (ii) in a commercial tort case: “(1) any place where plaintiff does business; (2) the principal place of business of the plaintiff; and (3) the place where plaintiff lost business” (id. at 433, quoting Spectacular Promotions, Inc. v Radio Sta. WING, 272 F Supp 734, 737 [ED NY 1967, Weinstein, J.]). The court determined that the third choice “seemfed] most apt,” observing that “[t]he place where the plaintiff lost business would normally be a forum reasonably foreseeable by a tortfeasor” (id.). Because plaintiffs alleged a loss of business only in Kentucky and Pennsylvania, the claim against the competitor was dismissed for lack of personal jurisdiction in New York. The court rejected plaintiffs’ reliance on their New York domicile, reasoning that any “derivative commercial injury” predicated on a loss of sales in other states was too remote to establish an in-state injury within the meaning of the statute (id.).

The injury in the case before us is more difficult to identify and quantify because the alleged infringement involves the Internet, which by its nature is intangible and ubiquitous. But the convergence of two factors persuades us that a New York copyright owner alleging infringement sustains an in-state injury pursuant to CPLR 302 (a) (3) (ii) when its printed literary work is uploaded without permission onto the Internet for public access. First, it is clear that the Internet itself plays an important role in the jurisdictional analysis in the specific context of this case. It is widely recognized that “the digital environment poses a unique threat to the rights of copyright owners” and that “digital technology enables pirates to reproduce and distribute perfect copies of works—at virtually no cost at all to the pirate” (House Commerce Comm Rep on Digital Millennium Copyright Act of 1998, HR Rep 551, 105th Cong, 2d Sess, at 25, reprinted in 10 Nimmer on Copyright, Appendix 53, at 37). Indeed, the rate of e-book piracy has risen in conjunction with the increasing popularity of electronic book devices (see Trivedi, Writing the Wrong: What the E-Book Industry Can Learn from Digital Music’s Mistakes with DRM, 18 JL & Pol’y 925, 928 [2010]).

The crux of Penguin’s copyright infringement claim is not merely the unlawful electronic copying or uploading of the four copyrighted books. Rather, it is the intended consequence of those activities—the instantaneous availability of those copyrighted works on American Buddha’s Web sites for anyone, in New York or elsewhere, with an Internet connection to read and download the books free of charge. Unlike American Eutectic, where the locus of injury was clearly circumscribed to two other states, the alleged injury in this case involves online infringement that is dispersed throughout the country and perhaps the world. In cases of this nature, identifying the situs of injury is not as simple as turning to “the place where plaintiff lost business” (American Eutectic, 439 F2d at 433) because there is no singular location that fits that description.

As a result, although it may make sense in traditional commercial tort cases to equate a plaintiffs injury with the place where its business is lost or threatened, it is illogical to extend that concept to online copyright infringement cases where the place of uploading is inconsequential and it is difficult, if not impossible, to correlate lost sales to a particular geographic area. In short, the out-of-state location of the infringing conduct carries less weight in the jurisdictional inquiry in circumstances alleging digital piracy and is therefore not dispositive.

The second critical factor that tips the balance in favor of identifying New York as the situs of injury derives from the unique bundle of rights granted to copyright owners. The Copyright Act gives owners of copyrighted literary works five “exclusive rights,” which include the right of reproduction; the right to prepare derivative works; the right to distribute copies by sale, rental, lease or lending; the right to perform the work publicly; and the right to display the work publicly (see 17 USC § 106). Hence, a copyright holder possesses an overarching “right to exclude others from using his property” (eBay Inc. v MercExchange, L. L. C., 547 US 388, 392 [2006] [internal quotation marks and citation omitted]).

Based on the multifaceted nature of these rights, a New York copyright holder whose copyright is infringed suffers something more than the indirect financial loss we deemed inadequate in Fantis Foods. For instance, one of the harms arising from copyright infringement is the loss or diminishment of the incentive to publish or write (see Twentieth Century Music Corp. v Aiken, 422 US 151, 156 [1975]; see also Princeton Univ. Press v Michigan Document Servs., Inc., 99 F3d 1381, 1391 [6th Cir 1996], cert denied 520 US 1156 [1997] [“(P)ublishers obviously need economic incentives to publish scholarly works ... If publishers cannot look forward to receiving permission fees, why should they continue publishing marginally profitable books at all? And how will artistic creativity be stimulated if the diminution of economic incentives for publishers to publish academic works means that fewer academic works will be published?”]). And, the harm to a plaintiffs property interest in copyright infringement cases “has often been characterized as irreparable in light of possible market confusion” (Salinger v Colting, 607 F3d 68, 81 [2d Cir 2010]).

Moreover, the absence of any evidence of the actual downloading of Penguin’s four works by users in New York is not fatal to a finding that the alleged injury occurred in New York. In Sybron, we made clear that a tort committed outside the state that was likely to cause harm through the loss of business inside the state was sufficient to establish personal jurisdiction regardless of whether damages were likely recoverable or even ascertainable (see 46 NY2d at 204; see also Sung Hwan Co., Ltd. v Rite Aid Corp., 7 NY3d 78, 85 [2006]). Courts often issue injunctive relief in copyright infringement cases to halt impermissible uses because “to prove the loss of sales due to infringement is . . . notoriously difficult” (Salinger, 607 F3d at 81 [internal quotation marks and citation omitted]). In any event, it is undisputed that American Buddha’s Web sites are accessible by any New Yorker with an Internet connection and, as discussed, an injury allegedly inflicted by digital piracy is felt throughout the United States, which necessarily includes New York.

In sum, the role of the Internet in cases alleging the uploading of copyrighted books distinguishes them from traditional commercial tort cases where courts have generally linked the injury to the place where sales or customers are lost. The location of the infringement in online cases is of little import inasmuch as the primary aim of the infringer is to make the works available to anyone with access to an Internet connection, including computer users in New York. In addition, the injury to a New York copyright holder, while difficult to quantify, is not as remote as a purely indirect financial loss due to the broad spectrum of rights accorded by copyright law. The concurrence of these two elements—the function and nature of the Internet and the diverse ownership rights enjoyed by copyright holders situated in New York—leads us to view this case as closer to Sybron than Fantis Foods. Thus, we conclude that the alleged injury in this case occurred in New York for purposes of CPLR 302 (a) (3) (ii).

Finally, contrary to American Buddha’s assertion, our decision today does not open a Pandora’s box allowing any nondomiciliary accused of digital copyright infringement to be haled into a New York court when the plaintiff is a New York copyright owner of a printed literary work. Rather, CPLR 302 (a) (3) (ii) incorporates built-in safeguards against such exposure by requiring a plaintiff to show that the nondomiciliary both “expects or should reasonably expect the act to have consequences in the state” and, importantly, “derives substantial revenue from interstate or international commerce.” There must also be proof that the out-of-state defendant has the requisite “minimum contacts” with the forum state and that the prospect of defending a suit here comports with “traditional notions of fair play and substantial justice,” as required by the Federal Due Process Clause (International Shoe Co. v Washington, 326 US 310, 316 [1945] [internal quotation marks and citation omitted]; see also World-Wide Volkswagen Corp. v Woodson, 444 US 286, 291-292 [1980]). These issues are beyond the scope of this certified question and their resolution awaits further briefing before the federal courts.

Accordingly, as reformulated, the certified question should be answered in accordance with this opinion.

Chief Judge Lippman and Judges Ciparick, Read, Smith, Pigott and Jones concur.

Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.27 of the Rules of the Court of Appeals (22 NYCRR 500.27), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question answered in accordance with the opinion herein.

      . The Ralph Nader Library is not affiliated with Ralph Nader.

      . The Second Circuit also stated that “[t]here is a possible question at the threshold that neither the district court nor the parties have addressed and which we do not here decide: whether a copyright—in and of itself an intangible thing—has a physical location for jurisdictional purposes and, if so, what that location is” (609 F3d at 36 n 4). The Second Circuit resolved to “accept for the purposes of this appeal the district court’s implicit conclusion that copyrights have a location and that their location in this case is in New York State” (id.). We, too, accept this characterization in answering the certified question.

      . Of course, we take no position on the merits of Penguin’s claims.

        . In its brief, Penguin asserts that its claim is solely against American Buddha and that it is “loath to sue its readers,” particularly where they are assured by American Buddha’s Web sites that downloading the works contained therein would not constitute copyright infringement.

      . We do not find it necessary to address whether a New York copyright holder sustains an in-state injury pursuant to CPLR 302 (a) (3) (ii) in a copyright infringement case that does not allege digital piracy and, therefore, express no opinion on that question (compare McGraw-Hill Cos., Inc. v Ingenium Tech. Corp., 375 F Supp 2d 252, 256 [SD NY 2005] [“The torts of copyright and trademark infringement cause injury in the state where the allegedly infringed intellectual property is held”] with Freeplay Music, Inc. v Cox Radio, Inc., 2005 WL 1500896, 2005 US Dist LEXIS 12397 [SD NY 2005] [holding that personal jurisdiction over a nondomiciliary in a copyright infringement case did not exist because the injury occurred where the alleged out-of-state infringement took place]).


source: Caselaw Access Project

author: Chief Judge Lippman. Smith, J. (dissenting).

license: Public Domain

text:
    [946 NE2d 731, 921 NYS2d 633]
    In the Matter of Madeline Acosta, Respondent, v New York City Department of Education et al., Appellants.
    Argued February 9, 2011;
    decided March 24, 2011

      POINTS OF COUNSEL

      Michael A. Cardozo, Corporation Counsel, New York City (Jane L. Gordon and Edward F.X. Hart of counsel), for New York City Department of Education and others, appellants.
    I. As the Supreme Court and the Appellate Division dissent correctly determined, the decision to deny Madeline Acosta’s application for security clearance was neither arbitrary nor capricious nor an abuse of administrative discretion. (Matter of Arrocha v Board of Educ. of City of N.Y., 93 NY2d 361; Matter of Boatman v New York State Dept. of Educ., 72 AD3d 1467; Matter of Peckham v Calogero, 12 NY3d 424; Matter of Bonacorsa v Van Lindt, 71 NY2d 605; Matter of Malverty v Waterfront Commn. of NY. Harbor, 133 AD2d 558, 71 NY2d 977; Soto-Lopez v New York City Civ. Serv. Commn., 713 F Supp 677; Schultz v Waterfront Commn. of N.Y. Harbor, 35 AD2d 373; Matter of Polednak v Levitt, 167 AD2d 274, 78 NY2d 852; Matter of Sinker [Sweeney], 89 NY2d 485.) II. Even if the Appellate Division majority was correct, Madeline Acosta’s only remedy should be the annulment of the New York City Department of Education’s determination. (Matter of Formica Constr. Inc. v Mintz, 65 AD3d 686; Matter of Gallo v State of N.Y., Off. of Mental Retardation & Dev. Disabilities, 37 AD3d 984; Matter of Meth v Manhattan & Bronx Surface Tr. Operating Auth., 134 AD2d 431; Matter of Marra v City of White Plains, 96 AD2d 17; Matter of El v New York City Dept. of Educ., 23 Misc 3d 1121[A], 2009 NY Slip Op 50883[U]; Black v New York State Off. of Mental Retardation & Dev. Disabilities, 20 Misc 3d 581.)

      Kaufman, Dolowich, Voluck & Gonzo, LLP, Woodbury (Matthew J. Minero of counsel), for Cooke Center for Learning and Development, appellant.
    I. The undisputed facts establish no basis for any independent claim against Cooke Center for Learning and Development for terminating respondent’s employment. (Maas v Cornell Univ., 94 NY2d 87; Ozdemir v Caithness Corp., 285 AD2d 961; Leon v Martinez, 84 NY2d 83; Biondi v Beekman Hill House Apt. Corp., 257 AD2d 76; Silvester v Time Warner, 1 Misc 3d 250; Matter of Goldstein v Lewis, 90 AD2d 748, 59 NY2d 706; Matter of Campo Corp. v Feinberg, 279 App Div 302, 303 NY 995; Matter of Laverack & Haines v New York State Div. of Human Rights, 88 NY2d 734; Matter of CUNY-Hostos Community Coll. v State Human Rights Appeal Bd., 59 NY2d 69; Matter of Balban v State Div. of Human Rights, 104 AD2d 709.) II. Respondent is not entitled to reinstatement or monetary relief from Cooke Center for Learning and Development under any circumstances. (Matter of Gallo v State of N.Y., Off. of Mental Retardation & Dev. Disabilities, 37 AD3d 984; Black v New York State Off. of Mental Retardation & Dev. Disabilities, 20 Misc 3d 581.)

      MFY Legal Services, Inc., New York City (Carolyn E. Coffey, Christopher Lamb and Andrew Goldberg of counsel), for respondent.
    I. The Appellate Division decision should be affirmed because the New York City Department of Education’s determination was without sound basis in reason and was made without regard to the facts. (Matter of Arrocha v Board of Educ. of City of N.Y., 93 NY2d 361; Matter of Boatman v New York State Dept. of Educ., 72 AD3d 1467; Matter of Gallo v State of N.Y., Off. of Mental Retardation & Dev. Disabilities, 37 AD3d 984; Matter of Bonacorsa v Van Lindt, 71 NY2d 605; Matter of El v New York City Dept. of Educ., 23 Misc 3d 1121[A], 2009 NY Slip Op 50883[U]; Matter of Pell v Board of Educ. of Union Free School

      Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222; Matter of Sled Hill Cafe v Hostetter, 22 NY2d 607; Matter of Marra v City of White Plains, 96 AD2d 17; Matter of Cantor v New York State Racing & Wagering Bd., 73 AD2d 544.) II. The Appellate Division’s decision should be affirmed because the New York City Department of Education’s determination was infected by errors of law. (Leatherman v Tarrant County Narcotics Intelligence & Coordination Unit, 507 US 163; Matter of Marra v City of White Plains, 96 AD2d 17; Black v New York State Off. of Mental Retardation & Dev. Disabilities, 20 Misc 3d 581.) III. The Court should disregard the New York City Department of Education’s attacks on Ms. Acosta’s credibility and its improper references to confidential settlement negotiations. (Matter of Featherstone v Franco, 95 NY2d 550.) IV. Under CPLR 7806, the Appellate Division is authorized to remand this proceeding to the Supreme Court to fashion appropriate relief. (Matter of Police Benevolent Assn. of N.Y. State Troopers v Vacco, 253 AD2d 920; Matter of Hartje v Coughlin, 70 NY2d 866; England v Sanford, 78 NY2d 928.) V The Court should not decide questions raised by Cooke Center for Learning and Development that were not certified by the Appellate Division. (Patrician Plastic Corp. v Bernadel Realty Corp., 25 NY2d 599; Gise v Brooklyn Socy. for Prevention of Cruelty to Children, 262 NY 114; Telaro v Telaro, 25 NY2d 433.)

      Juan Cartagena, General Counsel, Community Service Society, New York City (Paul Keefe of counsel), and Judith M. Whiting for Community Service Society and others, amici curiae.
    I. The New York City Department of Education’s decision was arbitrary and capricious because the agency ignored favorable information it was legally required to consider under Correction Law article 23-A. (Matter of Bonacorsa v Van Lindt, 71 NY2d 605; Matter of El v New York City Dept. of Educ., 23 Misc 3d 1121[A], 2009 NY Slip Op 50883[U]; Matter of Arrocha v Board of Educ. of City of N.Y., 93 NY2d 361.) II. The First Department’s finding that Ms. Acosta posed no risk to persons or property is supported by case law, public policy and sociological research. (Matter of City of New York v City Civ. Serv. Commn., 141 Misc 2d 276; Ford v Gildin, 200 AD2d 224; Matter of Burnham v State of N.Y. Ins. Dept., 63 AD2d 627; Matter of Marra v City of White Plains, 96 AD2d 17; Matter of Sled Hill Cafe v Hostetter, 22 NY2d 607; Matter of Circus Disco v New York State Liq. Auth., 51 NY2d 24; Matter of G. J. & S. Pizza v McLaughlin, 78 AD2d 653; Matter of Cojer Rest. v New York State Liq. Auth., 47 AD2d 612; Matter of Hayes v New York State Liq. Auth., 39 AD2d 482; Matter of Arrocha v Board of Educ. of City of N.Y., 93 NY2d 361.)

      Davis Polk & Wardwell LLP, New York City (Nancy B. Ludmerer, Christopher Lynch, Justin Sommers and Steven N. Feldman of counsel), for New York City Bar Association, amicus curiae.
    I. This Court has set out standards governing both administrative decisions generally and Correction Law article 23-A determinations in particular. (Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222; Matter of Peckham v Calogero, 12 NY3d 424; Matter of Farina v State Liq. Auth., 20 NY2d 484; Matter of Sled Hill Cafe v Hostetter, 22 NY2d 607; Matter of King v New York State Div. of Parole, 83 NY2d 788; Matter of Perpente v Moss, 293 NY 325; Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753; Matter of Central NY Coach Lines v Larocca, 120 AD2d 149; Matter of Scudder v O’Connell, 272 App Div 251; Matter of Formica Constr. Inc. v Mintz, 65 AD3d 686.) II. By dispensing with Correction Law article 23-A’s requirements, the New York City Department of Education’s denial of respondent’s security clearance was arbitrary and capricious. (Matter of Mary M. v Clark, 118 Misc 2d 98; Matter of Rodriguez v Ward, 64 AD2d 792; Matter of Natural Resources Defense Council v New York City Dept. of Sanitation, 83 NY2d 215; Galapo v City of New York, 95 NY2d 568; Black v New York State Off. of Mental Retardation & Dev. Disabilities, 20 Misc 3d 581; Matter of King v New York State Div. of Parole, 83 NY2d 788.) III. In light of the conduct of the New York City Department of Education and other agencies in this and other cases, this Court should clarify agency obligations under Correction Law article 23-A. (Matter of Arrocha v Board of Educ. of City of N.Y., 93 NY2d 361; Matter of Bonacorsa v Van Lindt, 71 NY2d 605; Matter of Formica Constr. Inc. v Mintz, 65 AD3d 686; Matter of Gallo v State of N.Y., Off. of Mental Retardation & Dev. Disabilities, 37 AD3d 984; Matter of Davis-Elliott v New York City Dept. of Educ., 31 AD3d 266; Matter of El v New York City Dept. of Educ., 23 Misc 3d 1121[A], 2009 NY Slip Op 50883[U].)

      Kelley Drye & Warren LLP, New York City (Robert E. Crotty and Marie E. Choi of counsel), for Senator Bill Perkins and others, amici curiae.
    The New York City Department of Education’s denial of Ms. Acosta’s application for employment violated the public policy of the State of New York and the plain language of the statute which states that the public policy of the State of New York is to “encourage the licensure and employment of persons previously convicted of one or more criminal offenses” (Correction Law § 753 [1] [a]). (Carney v Philippone, 1 NY3d 333; Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653.) II. The New York City Department of Education’s denial ignores the legislative history of Correction Law article 23-A, which clearly demonstrates that the Legislature intended to protect individuals such as Ms. Acosta from precisely the type of discrimination in which appellants engaged. (Riley v County of Broome, 95 NY2d 455; Rankin v Shanker, 23 NY2d 111; People v Finnegan, 85 NY2d 53; People v Mower, 97 NY2d 239; Matter of Scotto v Dinkins, 85 NY2d 209; Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Matter of Albano v Kirby, 36 NY2d 526.)
   OPINION OF THE COURT

Chief Judge Lippman.

We conclude that the New York City Department of Education (DOE) failed to comply with the requirements of the Correction Law and thus acted arbitrarily in denying petitioner’s application for security clearance.

I.

As a general matter, it is unlawful in this state for any public or private employer to deny any license or employment application “by reason of the individual’s having been previously convicted of one or more criminal offenses” (Correction Law § 752; see Executive Law § 296 [15]). This general bar was enacted to further certain goals that the Legislature has identified as among the “general purposes” of the Penal Law, namely, “the rehabilitation of those convicted” and “the promotion of their successful and productive reentry and reintegration into society” (Penal Law § 1.05 [6]). As Governor Hugh L. Carey’s memorandum approving the legislation that codified this general prohibition noted, “the key to reducing crime is a reduction in recidivism,” and “[t]he great expense and time involved in successfully prosecuting and incarcerating the criminal offender is largely wasted if upon the individual’s return to society his willingness to assume a law-abiding and productive role ifrustrated by senseless discrimination” (Governor’s Approval Mem, Bill Jacket, L 1976, ch 931, 1976 McKinney’s Session Laws of NY, at 2459 [“Providing a former offender a fair opportunity for a job is a matter of basic human fairness, as well as one of the surest ways to reduce crime”]).

There are, however, two significant exceptions to this general prohibition. The first exception arises where “there is a direct relationship between one or more of the previous criminal offenses and the specific license or employment sought or held by the individual” (Correction Law § 752 [1]). The Legislature has clarified that a “ ‘[d]irect relationship’ means that the nature of criminal conduct for which the person was convicted has a direct bearing on his fitness or ability to perform one or more of the duties or responsibilities necessarily related to the license, opportunity, or job in question” (Correction Law § 750 [3]). This “direct relationship” exception is not at issue on this appeal.

It is the Correction Law’s second exception to the general rule barring the adverse treatment of an application for a license or employment based on an applicant’s prior criminal conviction that concerns us here. The second exception allows for the adverse treatment of such applications where “the issuance or continuation of the license or the granting or continuation of the employment would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public” (Correction Law § 752 [2]). We have previously noted that the Legislature has not provided a statutory definition of the phrase “unreasonable risk” in this context “for the obvious reason that a finding of unreasonable risk depends upon a subjective analysis of a variety of considerations relating to the nature of the license or employment sought and the prior misconduct” (Matter of Bonacorsa v Van Lindt, 71 NY2d 605, 612 [1988]).

Although the “unreasonable risk” analysis under the second exception is a subjective one, section 753 (1) of the Correction Law provides that, “[i]n making a determination” as to whether either the “direct relationship” exception or the “unreasonable risk” exception applies, “the public agency or private employer shall consider” the following eight factors:

“(a) The public policy of this state, as expressed in this act, to encourage the licensure and employment of persons previously convicted of one or more criminal offenses.
“(b) The specific duties and responsibilities necessarily related to the license or employment sought or held by the person.
“(c) The bearing, if any, the criminal offense or offenses for which the person was previously convicted will have on his fitness or ability to perform one or more such duties or responsibilities.
“(d) The time which has elapsed since the occurrence of the criminal offense or offenses.
“(e) The age of the person at the time of occurrence of the criminal offense or offenses.
“(f) The seriousness of the offense or offenses.
“(g) Any information produced by the person, or produced on his behalf, in regard to his rehabilitation and good conduct.
“(h) The legitimate interest of the public agency or private employer in protecting property, and the safety and welfare of specific individuals or the general public.”

A failure to take into consideration each of these factors results in a failure to comply with the Correction Law’s mandatory directive (see Matter of Arrocha v Board of Educ. of City of N.Y., 93 NY2d 361, 364 [1999] [“the Board must consider” (emphasis added) the Correction Law § 753 (1) factors]).

II.

When petitioner was 17 years old, she was convicted of the serious crime of first degree robbery. After serving over three years in prison she was granted parole in December 1996. The record reflects that, since then, she has become a productive and law-abiding member of society. She earned a Bachelor’s degree in 2001 from the City University of New York (CUNY), and, while working and attending classes at CUNY, volunteered with an organization that provides assistance to inmates in developing skills that will help them reintegrate into society upon being released. After earning her college degree, in addition to starting a family, she worked in positions of responsibility at two law firms.

Desiring employment that would allow her to spend more time with her family, in 2006 petitioner left her law firm position and took a part-time position at the Cooke Center for Learning and Development (the Cooke Center). The Cooke Center is a not-for-profit private corporation that provides, among other things, preschool special education services in New York City through a contract with the DOE. The record reflects that petitioner worked four days per week and was engaged primarily in clerical activities with no responsibility for providing any instruction to the Cooke Center’s preschool students.

In August 2006, three months after she started working for the Cooke Center, petitioner’s supervisor asked her to be fingerprinted for DOE security clearance purposes (she had previously disclosed her 1993 conviction to the Cooke Center). The DOE subsequently notified petitioner that, in light of her prior criminal conviction, she would be interviewed at the DOE’s offices on September 28, 2006. At the bottom of the notice petitioner received, in underlined and bold typeface, she was advised that she could “submit a written personal statement explaining the events and circumstances surrounding your conviction(s) record,” and, “[i]n addition, you may also submit the following: current employment verification (on company letterhead) verifying title/dates of service, references from friends/ neighbors/church and any achievements you have made either before or after your conviction(s).”

At the interview with the DOE’s investigator, petitioner provided the DOE with two letters of reference from the Cooke Center. She also provided a number of other documents evidencing her education, rehabilitation and volunteer work over the 13 years since her conviction, including her diploma, various certificates of achievement, and various letters of appreciation. Of particular relevance on this appeal, one of the letters of reference from the Cooke Center specified that petitioner was hired, in part, on the basis of “her model references from past employers and colleagues.”

At the September 28, 2006 interview, petitioner was advised that three people at the DOE would be reviewing her file, but the investigator she was meeting with that day would be the only one meeting with her in person. He stated that the two other reviewers “do not have time to review the stack of documents” petitioner submitted because “they have numerous other files to look at”; thus, he suggested she revise her “personal statement to include more information summarizing the documents” she submitted “since they will not be looking at all the documents,” only her personal statement. The interviewer asked no questions concerning the details surrounding her conviction, no questions concerning her former employment at the two law firms, and no questions concerning her job duties at the Cooke Center. Petitioner states that “[t]he whole interview lasted no more than five minutes.” The record contains an affidavit from the investigator who interviewed petitioner, but the only aspect of her description of the interview that he specifically challenges is its length, estimating, in part on the basis of the relevant sign-in sheet, that he met with petitioner for approximately 30 minutes.

By letter dated October 12, 2006, the DOE notified petitioner that her application was denied. The DOE’s letter acknowledged that New York law generally prohibits the denial of employment on the basis of prior criminal convictions, but then referenced the “unreasonable risk” exception to that general prohibition. The letter explained that petitioner’s “application is denied due to the serious nature of your convictions” because, “[i]n light of these convictions, granting employment will pose an unreasonable risk to the safety and welfare of the school community.” The Cooke Center subsequently terminated petitioner’s employment because, as petitioner acknowledges on this appeal, the Cooke Center’s contractual relationship with the DOE necessitated her termination in the event the DOE denied her application for security clearance.

This petition against the DOE and the Cooke Center, among others, followed. Supreme Court dismissed the petition. The Appellate Division, with two Justices dissenting, reversed, concluded that the DOE acted arbitrarily in denying petitioner’s application, granted the petition and remanded the matter to Supreme Court to fashion an appropriate remedy (62 AD3d 455 [1st Dept 2009]). The Appellate Division subsequently certified a question to this Court concerning the propriety of its order. We agree with the Appellate Division that the DOE acted arbitrarily in this matter.

III.

It is, of course, improper for courts to “engag[e] in essentially a re-weighing” of the Correction Law § 753 factors (Arrocha, 93 NY2d at 367), but, on this record, it is plain that the DOE failed to consider all of the factors in making its determination as to whether the “unreasonable risk” exception applied to petitioner’s application, rendering its denial of that application arbitrary and capricious.

We first note that this conclusion is not mandated by the fact that the DOE did not state with specificity its detailed analysis with respect to each of the eight factors in its denial letter to petitioner, as it was not required to do so in the letter notifying her of its decision (but see Correction Law § 754 [providing that, if requested, a public agency or private employer that denies a person’s application for a license or employment on the basis of that person’s prior criminal conviction “shall provide, within thirty days of a request, a written statement setting forth the reasons for such denial”]). Nor does the DOE’s apparent inability to point to any contemporaneously created record that demonstrates that it considered each of the eight factors in reviewing petitioner’s application necessarily require a finding that the DOE acted arbitrarily, though, of course, such documentation, if it existed, might tend to show that the DOE had fulfilled its obligation under the Correction Law.

Rather, on this record, the DOE’s own statements demonstrate that it failed to comply with the statute and acted in an arbitrary manner. An affidavit from the DOE’s Director for Employee Relations for the Division of Human Resources, prepared by the DOE in connection with this proceeding, provides “considerations and observations” relevant to the DOE’s decision to deny petitioner’s application. Among the considerations listed in this affidavit is that petitioner “did not provide references from any previous employers.” However, the interview notice petitioner received from the DOE did not state that she should provide references from previous employers, and her interviewer did not ask her to provide those references. Moreover, one of the Cooke Center references that she did provide to the DOE mentioned the “model references from past employers” that the Cooke Center had reviewed and relied upon in hiring her. Thus, had the DOE reviewed this reference letter, it would have known that the letters from past employers it now says were missing were not only available but were highly favorable to petitioner.

This illuminates a larger, more serious issue regarding the DOE’s consideration of petitioner’s application. The Correction Law requires the DOE to “consider” “[a]ny information produced by the person, or produced on his [or her] behalf, in regard to his [or her] rehabilitation and good conduct” in determining whether the “unreasonable risk” exception applies to an application (Correction Law § 753 [1] [g]). Yet, on this record, it is plain that, other than her personal statement, the DOE did not consider the documentation that petitioner submitted in support of her application.

The arbitrary nature of the DOE’s action here becomes even more evident given the “general policy” the DOE Director’s affidavit states that the DOE follows with respect to first-time applicants. The Director’s affidavit notes that this application was petitioner’s “first application for security clearance from the DOE,” and, as a matter of “general policy, the DOE takes a closer review of first-time applicants with criminal histories who have not worked with children in order to emphasize to the applicant that the DOE takes the safety and welfare of its students very seriously.” We have no doubt that the DOE takes the safety and welfare of the entire school community very seriously, and its efforts in that regard are laudable. However, in light of the DOE’s failure to comply with the statutorily mandated minimum requirement of reviewing all of the documentation petitioner submitted (see e.g. Correction Law § 753 [1] [g]), it is difficult to conclude on this record that the “closer review” purportedly applied here amounted to anything more than a pro forma denial of petitioner’s application on the basis of her prior criminal conviction. Such a denial, without consideration of each of the Correction Law § 753 factors, is precisely what the statute prohibits.

The Legislature has determined that, as a general rule, it is unlawful for a public or private employer to deny an application for a license or employment on the ground that the applicant was previously convicted of a crime. This general prohibition advances the rehabilitation and reintegration goals of the Penal Law. Furthermore, barring discrimination against those who have paid their debt to society and facilitating their efforts to obtain gainful employment benefits the community as a whole. The “direct relationship” exception and the “unreasonable risk” exception to this general rule may be resorted to only upon a consideration of each of the eight factors enumerated in Correction Law § 753 (see Arrocha, 93 NY2d at 364).

IV

Finally, we note that petitioner does not dispute that, in light of the Cooke Center’s contract with the DOE, the DOE’s denial of petitioner’s application for security clearance obligated the Cooke Center to terminate her employment. The Cooke Center’s motion to dismiss the petition as against it, therefore, should have been granted.

Accordingly, the order of the Appellate Division should be modified, without costs, by granting the motion of Cooke Center for Learning and Development to dismiss the petition against it, and, as so modified, affirmed. The certified question should be answered in the negative.

Smith, J. (dissenting).

It is easy to sympathize with this petitioner, and to be dismayed by the decision of the Department of Education (DOE) to deny her security clearance. From what we know, petitioner’s achievement in overcoming her very troubled youth is impressive, and could be inspiring to others. But I would not give in to the temptation to second-guess the DOE, which has the duty to protect not only the public’s money and property, but also the children committed to its charge.

The question for the DOE—not the courts—to decide was whether granting petitioner a security clearance “would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public” (Correction Law § 752 [2]). Considering the interests at stake, the DOE could reasonably believe that anything more than a very small risk would be “unreasonable,” and that there might be more than a very small risk here. In 1993, petitioner was arrested on two separate occasions, and charged with crimes including two first degree robberies involving the use or threatened immediate use of a dangerous instrument (Penal Law § 160.15 [3]). She pleaded guilty and received a sentence of 4 to 12 years. She was paroled in 1997 and discharged from parole in 2000. These events were history, but not ancient history, when she applied for a security clearance in 2006. The DOE could have reasonably wanted to know more about them.

Petitioner chose to tell them very little. Invited to “submit a written personal statement explaining the events and circumstances surrounding your conviction(s) record,” she responded, and later expanded her response. This is all that her expanded statement says about the crimes:

“I was 17 years old at the time of my incarceration. Before my incarceration I attended school full time. I was a senior at John Jay High School when I became involved in an abusive relationship. He was physically abusive and he forced me to participate in the robberies he wanted to commit and at the time I thought for my own safety I would go along with it. We were not arrested committing a crime. I was on my way home from school when I attempted to board the train with train pass that had someone else’s name on it. The officer at the station requested for me to produce identification to match the train pass. I didn’t have identification. The officer ran a check on the name and found out it was reported stolen. We were both arrested. I soon severed all ties with him. I take responsibility for my part and honestly feel remorseful for allowing for those things to happen in my presence. I was sentenced to 4-12 years. He was sentenced to 6-18 years because he was accused of having a weapon.”

Among the facts petitioner did not disclose is how many robberies there were; what weapon was used; what was done to intimidate the victims; and what petitioner did to help. Reading petitioner’s statement, one cannot learn why a judge thought that she deserved a 4-to-12-year sentence. I can hardly blame petitioner for not wanting to dwell on these very unpleasant details; but I also cannot blame the DOE for deciding that it should not give petitioner clearance without knowing more than it did.

It seems to me that, despite its disclaimer, the majority has done what it acknowledges courts should not do: It has reweighed the relevant factors, and decided that it disagrees with the DOE’s evaluation of them. The majority quibbles with the DOE over a minor point—whether the absence of references from previous employers is significant, where petitioner was apparently able to provide such references at an earlier time (majority op at 319). Stretching to find a “larger, more serious issue,” the majority asserts that the DOE’s procedure was flawed because it failed to “consider the documentation that petitioner submitted in support of her application” (majority op at 319). I find it extremely hard to believe that either the DOE’s decision or the majority’s here would be different if a DOE employee had turned over every page of the considerable stack of certificates of recognition that petitioner submitted.

It seems obvious that the majority’s real difference with the DOE is substantive, and not procedural—the majority thinks the DOE made a mistake. Perhaps it did, but it did not act so arbitrarily that we are justified in annulling its ruling.

Judges Ciparick, Graffeo, Pigott and Jones concur with Chief Judge Lippman; Judge Smith dissents and votes to reverse in a separate opinion in which Judge Read concurs.

Order modified, etc.


author: Read, J.

text:
    [946 NE2d 717, 921 NYS2d 619]
    Arthur Goldenberg, Appellant, v Westchester County Health Care Corporation, Also Known as Westchester County Medical Center, et al., Respondents.
    Argued February 15, 2011;
    decided March 24, 2011

      POINTS OF COUNSEL

      La Sorsa & Beneventano, White Plains (Gregory M. La Sorsa of counsel), for appellant.
    I. The lower court erred in finding that there was a complete failure to file a summons and complaint. (Page v Marusich, 30 AD3d 871; Louden v Rockefeller Ctr. N., 249 AD2d 25; Shivers v International Serv. Sys., 220 AD2d 357; Benton v Kreitzer, 7 AD3d 554; Republic Ins. Co. v Northern Aire Dev., 94 AD2d 764; Piffath v Esposito, 58 AD2d 577; Rochester Poster Adv. Co. v Town of Penfield, 51 AD2d 870; Rybka v New York City Health & Hosps. Corp., 263 AD2d 403; Daly v 26-28 Mkt. St., Inc., 21 AD3d 853.) II. Plaintiffs reliance on the 2007 amendment to CPLR 2001 was appropriate. Therefore, the court erred in denying plaintiffs application to file the summons and complain nunc pro tunc. (Sangiacomo v

      County of Albany, 302 AD2d 769; Matter of Mendon Ponds Neighborhood Assn. v Dehm, 98 NY2d 745; Matter of Miller v Waters, 51 AD3d 113.) III. Defendants waived the commencement defect defense by not specifically raising it in either of their answers and in failing to move within 60 days. (John M. Horvath, D.C., P.C. v Progressive Cas. Ins. Co., 24 Misc 3d 194; Federici v Metropolis Night Club, Inc., 48 AD3d 741; Page v Marusich, 30 AD3d 871; Sirkis v Cohen, 23 AD3d 369; Dimond v Verdon, 5 AD3d 718; Matter of United Servs. Auto. Assn. v Kungel, 72 AD3d 517.)

      Wilson Elser Moskowitz Edelman & Dicker LLP, White Plains (Richard E. Lerner and Faisal A. Kahn of counsel), for respondents.
    I. The Second Department did not misconstrue CPLR 2001 or the case law interpreting the provision. (Matter of Miller v Waters, 51 AD3d 113; Sangiacomo v County of Albany, 302 AD2d 769; Parker v Mack, 61 NY2d 114; Matter of Mendon Ponds Neighborhood Assn. v Dehm, 98 NY2d 745.) II. The Second Department did not misconstrue the filing statutes or the case law interpreting those provisions. (Matter of Mendon Ponds Neighborhood Assn. v Dehmr 98 NY2d 745; Rybka v New York City Health & Hosps. Corp., 263 AD2d 403; Page v Marusich, 30 AD3d 871; Louden v Rockefeller Ctr. N., 249 AD2d 25; Mohammed v Elassal, 226 AD2d 509; Bradley v St. Clare’s Hosp., 232 AD2d 814; Cinqumani v County of Nassau, 28 AD3d 699; Giblin v Nassau County Med. Ctr., 61 NY2d 67.) III. The Second Department appropriately concluded that defendant raised timely objections to plaintiffs commencement errors and the untimeliness of the attempted action. (John M. Horvath, D.C., P.C. v Progressive Cas. Ins. Co., 24 Misc 3d 194.)
   OPINION OF THE COURT

Read, J.

On May 25, 2007, plaintiff Arthur Goldenberg commenced a special proceeding to file a late notice of claim for medical malpractice against defendant Westchester County Health Care Corporation (WCHCC). Goldenberg attached a copy of a proposed complaint to the petition as an exhibit. On September 25, 2007, Supreme Court granted the petition and directed Goldenberg to serve a notice of claim within 20 days.

On October 9, 2007, Goldenberg served WCHCC with a notice of claim as well as a summons and complaint, both without an index number. On October 11, 2007, Goldenberg filed affidavits of service with the Chief Clerk of the Westchester Supreme and County Courts; these affidavits displayed the index number for the special proceeding. The served complaint differed in two respects from the proposed complaint: a cause of action for lack of informed consent was added, and continuous treatment from January 2006 through July 5, 2006 was alleged. In short, Goldenberg did not purchase an index number and file a summons and complaint with the County Clerk to commence the lawsuit before serving WCHCC, as he should have (see CPLR 304, 305, 306-a, 306-b; see also Matter of Mendon Ponds Neighborhood Assn. v Dehm, 98 NY2d 745 [2002]).

WCHCC responded with an answer and amended answer dated October 24 and November 1, 2007, respectively. The statute of limitations was raised as an affirmative defense in both pleadings; failure to obtain personal jurisdiction was included as an additional affirmative defense in the amended answer. The parties do not dispute that the one-year-and-90-day statute of limitations applicable to this malpractice action expired at the latest on February 5, 2008, after tolling for the period Golden-berg’s petition to file a late notice of claim was pending (see Public Authorities Law § 3316 [1]; Giblin v Nassau County Med. Ctr., 61 NY2d 67 [1984]).

On February 26, 2008, three weeks after the statute of limitations lapsed, WCHCC moved to dismiss Goldenberg’s lawsuit as untimely, using an index number secured for purposes of making the motion. Goldenberg cross-moved for an order permitting him to file a summons and complaint nunc pro tunc and adopting the index number affixed to the motion, for which he pledged to reimburse WCHCC.

On September 29, 2008, Supreme Court granted WCHCC’s motion, and denied Goldenberg’s cross motion. The judge opined that the proposed complaint proffered in the special proceeding was not “the functional equivalent of a filing” as urged by Goldenberg. First, the proposed complaint did not “materially conform” to the complaint served on WCHCC in light of the differences between the two; second, under CPLR 304 a “filing” that commences an action requires a summons. Supreme Court further concluded that CPLR 2001 did not relieve Goldenberg’s plight. Quoting the Practice Commentaries, the judge noted that the 2007 revision of CPLR 2001 did “not excuse a complete failure to file within the statute of limitations,” and was meant to address mistakes in the “method” of filing, not mistakes in “what” was filed (see Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C304:3, at 25). Goldenberg appealed.

On December 22, 2009, the Appellate Division affirmed, principally on the ground that the complaint actually served in the action “dramatically differed, substantively and materially, from the proposed complaint which the plaintiff filed in the prior proceeding” (68 AD3d 1056, 1057 [2d Dept 2009]). On May 4, 2010, we granted Goldenberg leave to appeal (14 NY3d 709 [2010]). We now affirm.

As an initial matter, WCHCC did not waive its objection to Goldenberg’s filing error. WCHCC timely interposed affirmative defenses of lack of personal jurisdiction and expiration of the statute of limitations in its amended answer (see Harris v Niagara Falls Bd. of Educ., 6 NY3d 155 [2006] [commencement infirmity not waived where defendant timely protested in preanswer motion to dismiss]; see also Siegel, NY Prac § 63, at 94 [4th ed 2005]). These affirmative defenses are properly raised in either an answer or a pre-answer motion to dismiss (see CPLR 3211 [e]). And because its jurisdictional objection was not to improper service, WCHCC was not, as Goldenberg also argues, required to move to dismiss within 60 days of service of its answer (see id.; see also Siegel, NY Prac § 111, at 201). As a result, the outcome in this appeal turns on whether CPLR 2001, as amended in 2007, vests Supreme Court with discretion to forgive the particular kind of mistake made by Goldenberg. We conclude that it does not.

The bill that amended CPLR 2001 was introduced at the request of the Chief Administrative Judge upon the recommendation of the Advisory Committee on Civil Practice. Its purpose was to allow trial courts to fix or, where nonprejudicial, overlook defects in the filing process, including the failure to acquire or purchase an index number, so long as the applicable fees were eventually paid (see L 2007, ch 529). The introducer’s memorandum states that the bill was offered in response to our decisions in Matter of Fry v Village of Tarrytown (89 NY2d 714 [1997]) and Matter of Gershel v Porr (89 NY2d 327 [1996]) (see Senate Introducer’s Mem in Support, Bill Jacket, L 2007, ch 529, at 5). Gershel and Harris both involved failure to pay the proper filing fee; in Fry, the petitioner did not file a signed copy of an order to show cause along with his petition. In each of these cases the correct initiatory papers were filed. As the introducer’s memorandum emphasizes, the amendments to section 2001 were not meant to

“excuse a complete failure to file within the statute of limitations. Moreover, in order to properly commence an action, a plaintiff or petitioner would still have to actually file a summons and complaint or a petition. A bare summons, for example, would not constitute a filing. The purpose of this measure is to clarify that a mistake in the method of filing, AS OPPOSED TO A MISTAKE IN WHAT IS FILED, is a mistake subject to correction in the court’s discretion” (id. at 5-6 [capitalization in original; emphasis added]).

Here, plaintiff never filed, a summons and complaint. The closest he came was the proposed complaint attached to the petition he filed when seeking permission to file a late notice of claim, itself a prerequisite to the commencement of this action. Given the absence of a summons, there was “a complete failure to file within the statute of limitations,” which CPLR 2001 does not allow a trial judge to disregard.

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

Chief Judge Lippman and Judges Ciparick, Graffeo, Smith, Pigott and Jones concur.

Order affirmed with costs.

      . The proposed complaint did not specify the date on which Goldenberg’s treatment ended.

      . After our decision in Mendon Ponds, the Legislature amended the CPLR to make it more obvious that the “clerk” with whom civil papers commencing an action or special proceeding must be filed is the County Clerk in the county where the matter is to be tried (see L 2007, ch 125).

      . When the commencement-by-filing system was first adopted, the filing of a petition in a special proceeding had to be accompanied by a notice of petition or an order to show cause. Because notices of petition and orders to show cause must include return dates (CPLR 403), which were not readily acquired before the petition was filed, this created a logistical problem. As a result, the Legislature amended the CPLR to provide for commencement of a special proceeding by the filing of a petition alone (see L 2001, ch 473).

      . Because of our disposition of this appeal, we do not address whether the trial judge would have possessed discretion under CPLR 2001 to make allowances for or ignore the differences between the proposed and served complaints if a summons had, in fact, been filed.


author: Smith, J. Ciparick, J. (dissenting).

text:
    [946 NE2d 720, 921 NYS2d 622]
    In the Matter of Mercedes Casado et al., Respondents, v Marvin Markus, as Chair of the New York City Rent Guidelines Board, et al., Appellants.
    Argued February 8, 2011;
    decided March 24, 2011

      POINTS OF COUNSEL

      Michael A. Cardozo, Corporation Counsel, New York City (Fay Ng, Pamela Seider Dolgow, Spencer Fisher and Virginia Waters of counsel), for appellants.
    In establishing guidelines for rent adjustments, the Rent Guidelines Board has the authority to consider distinctions among housing accommodations determined by the Legislature to be subject to the Rent Stabilization Law (RSL) and the Emergency Tenant Protection Act (ETPA). For decades, the Board has been making distinctions among accommodations when it has adopted guidelines and the ETPA and the RSL do not prohibit this long-standing practice. The Legislature has acquiesced to the Board’s construction of its authority under the ETPA and the RSL by its failure to amend the statutes. (State of New York v Patricia II., 6 NY3d 160; Stein v Rent Guidelines Bd. for City of N.Y., 127 AD2d 189;
      Matter of Catholic Med. Ctr. of Brooklyn & Queens v Department of Health of State of N.Y., 48 NY2d 967; Matter of Mercy Hosp. of Watertown v New York State Dept. of Social Servs., 79 NY2d 197; Matter of Apartment House Council of Nassau County, Inc. v Nassau County Rent Guidelines Bd., 52 AD3d 702; Incorporated Vil. of Great Neck Plaza v Nassau County Rent Guidelines Bd., 60 AD2d 593; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274; People v Ortega, 69 NY2d 763; Matter of Consolidated Edison Co. of N.Y. v Department of Envtl. Conservation, 71 NY2d 186; Kuppersmith v Dowling, 93 NY2d 90.)

      Legal Aid Society, New York City (Ellen B. Davidson, Steven Banks, Scott Rosenberg and Judith Goldiner of counsel), and South Brooklyn Legal Services Inc., Brooklyn (John C. Grey, Edward Josephson and Rachel Hannaford of counsel), for respondents.
    I. The Rent Guidelines Board exceeded its authority when it issued supplemental longevity increases in orders 40 and 41 and thus those orders are void. (People v Mobil Oil Corp., 48 NY2d 192; Strauch v Town of Oyster Bay, 263 App Div 833; Matter of KSLM-Columbus Apts. v New York State Div. of Hous. & Community Renewal, 6 AD3d 28, 5 NY3d 303; La Guardia v Cavanaugh, 53 NY2d 67; Matter of Tall Trees Constr. Corp. v Zoning Bd. of Appeals of Town of Huntington, 97 NY2d 86; Matter of Tze Chun Liao v New York State Banking Dept., 74 NY2d 505; Matter of Shankman v Axelrod, 73 NY2d 203; Matter of City of New York v State of N.Y. Commn. on Cable Tel., 47 NY2d 89; Vink v New York State Div. of Hous. & Community Renewal, 285 AD2d 203; Matter of Foy v Schechter, 1 NY2d 604.) II. The Rent Guidelines Board’s reliance on legislative inaction and past practices does not allow it to avoid the plain meaning of its authorizing statute. (Roberts v Tishman Speyer Props., L.P., 13 NY3d 270; Clark v Cuomo, 66 NY2d 185; United States v Price, 361 US 304; Flanagan v Mount Eden Gen. Hosp., 24 NY2d 427; Matter of Fanelli v New York City Conciliation & Appeals Bd., 90 AD2d 756, 58 NY2d 952; Matter of 2084-2086 BPE Assoc. v State of N.Y. Div. of Hous. & Community Renewal, 15 AD3d 288; Matter of Ansonia Residents Assn. v New York State Div. of Hous. & Community Renewal, 75 NY2d 206; Rent Stabilization Assn. of N.Y. City v Higgins, 83 NY2d 156; Festa v Leshen, 145 AD2d 49; Stein v Rent Guidelines Bd. for City of N.Y., 127 AD2d 189.)

      Rosenberg & Estis, P.C., New York City (Jeffrey Turkel and Alexander Lycoyannis of counsel), for Rent Stabilization Association of New York City, Inc. and another, amici curiae.
    Rent Guidelines Board (RGB) Order Nos. 40 and 41 should be reinstated as a valid exercise of RGB’s authority under Rent Stabilization Law (Administrative Code of City of NY) § 26-510 (b). (Matter of Community Hous. Improvement Program v New York State Div. of Hous. & Community Renewal, 230 AD2d 66; City of New York v New York State Div. of Hous. & Community Renewal, 97 NY2d 216; Stein v Rent Guidelines Bd. for City of N.Y., 127 AD2d 189; Matter of Chessin v New York City Conciliation & Appeals Bd., 100 AD2d 297, 62 NY2d 977; Coalition Against Rent Increase Passalongs v Rent Guidelines Bd. for City of N.Y., 104 Misc 2d 101; Department of Fin. of City of N.Y. v New York Tel. Co., 262 AD2d 96, 94 NY2d 755; Matter of Kolb v Holling, 285 NY 104; Matter of Lockport Union-Sun & Journal v Preisch, 8 NY2d 54; Household Fin. Corp. v Goldring, 263 App Div 524, 289 NY 574.)

      Elizabeth R. Fine, General Counsel, the Council of the City of New York, New York City (Jeffrey P. Metzler and Lauren G. Axelrod of counsel), for the Council of the City of New York, amicus curiae.
    I. The Rent Guidelines Board exceeded its statutory authority by setting a different rate of rent increase for long-term tenants. (Abiele Contr. v New York City School Constr. Auth., 91 NY2d 1; Matter of Flynn v State Ethics Commn., Dept. of State, State of N.Y., 87 NY2d 199; Saltser & Weinsier, Inc. v McGoldrick, 295 NY 499; People ex rel. City of Olean v Western N.Y. & Pa. Traction Co., 214 NY 526; Matter of Quinby v Public Serv. Commn., 223 NY 244; Roberts v Tishman Speyer Props., L.P., 13 NY3d 270; Lindh v Murphy, 521 US 320; Field v Mans, 516 US 59; Two Guys from Harrison-N.Y. v S.F.R. Realty Assoc., 63 NY2d 396.) II. The Rent Guidelines Board cannot substitute its own policy preferences for those of the Legislature. (Weiss v City of New York, 95 NY2d 1; Matter of Chemical Specialties Mfrs. Assn. v Jorling, 85 NY2d 382; Manocherian v Lenox Hill Hosp., 84 NY2d 385; Shapiro v Dwelling Mgrs., 92 AD2d 52, 60 NY2d 612; Boreali v Axelrod, 71 NY2d 1; Ragsdale v Wolverine World Wide, Inc., 535 US 81; FDA v Brown & Williamson Tobacco Corp., 529 US 120; Kerwick v New York State Bd. of Equalization & Assessment, 117 AD2d 65.) III. The Rent Guidelines Board’s remaining arguments have no merit. (Roberts v Tishman Speyer Props., L.P., 13 NY3d 270; Clark v Cuomo, 66 NY2d 185; United States v Price, 361 US 304; Stein v Rent Guidelines Bd. for City of N.Y., 127 AD2d 189; Matter of Muriel Towers Co. v City of N.Y. Rent Guidelines Bd., 117 Misc 2d 837, 94 AD2d 982, 60 NY2d 643; Matter of Chessin v New York City Conciliation & Appeals Bd., 100 AD2d 297, 62 NY2d 977;
      Coalition Against Rent Increase Passalongs v Rent Guidelines Bd. for City of N.Y., 104 Misc 2d 101; Matter of Cintron v Calogero, 15 NY3d 347; Matter of Crucible Materials Corp. v New York Power Auth., 13 NY3d 223; People v Gilmour, 98 NY2d 126.)
   OPINION OF THE COURT

Smith, J.

Petitioners challenge the validity of two orders of the New York City Rent Guidelines Board (RGB) that make a distinction between low-rent apartments in which there has been no recent vacancy and other apartments, allowing larger rent increases, in percentage terms, for apartments in the former category. We hold that the RGB has the power to make this distinction.

I

The RGB orders in issue here govern rent levels for the years ended September 30, 2009 and September 30, 2010. The two orders are identical in all relevant ways except for the amounts of the increases allowed. The parties focus on the first of the two, as will we.

The part of that order that concerns us sets out the rent increases permitted in renewal leases of apartments. It makes separate provision for apartments in which heat is provided by the landlord at no charge to the tenant, and those in which it is not; and it also distinguishes between one-year and two-year renewal leases. In each category, the order authorizes a percentage rent increase: for apartments where heat is provided, 4.5% for a one-year lease and 8.5% for a two-year lease; where heat is not provided, 4% for a one-year lease and 8% for a two-year lease.

However, “where the most recent vacancy lease was executed six years or more prior to the date of the renewal lease under this Order,” the order makes the percentage increases subject to a dollar floor, calculated to affect apartments in which the old rent was less than $1,000 a month. For example, where heat is provided, the authorized increase in a one-year renewal lease is 4.5% or $45, whichever is greater; for a two-year lease it is 8.5% or $85, whichever is greater; and so forth. Thus, if the old rent on an apartment that had had no vacancy for six years or more was, say, $450, a landlord who provided heat and offered a one-year renewal lease could charge an additional $45—a 10% increase.

The RGB’s purpose in taking this approach was to remedy what it saw as an inequity. Ordinarily, the permissible rent for a rent-stabilized apartment depends on the rent charged in the past, with relatively modest increases authorized annually by the RGB, and larger increases (or, at higher rent levels, decontrol) when the apartment becomes vacant. But the costs of maintaining an apartment and providing services to its occupant are often not in proportion to historical rents. Where the rent is relatively small and there is no vacancy for many years, the disproportion can become acute, with small annually-authorized increases that do not come close to covering increased costs. Those costs have to be paid somehow, so if percentage increases are uniform, the increases must be set at a level that allows landlords to make larger profits on the apartments that get larger increases, and to use those profits to pay the costs for the lower-rent apartments. In other words, tenants paying higher rents must subsidize those paying lower rents.

Perhaps that subsidy could be justified on the ground that tenants paying higher rents are generally wealthier. An analysis by the RGB staff, however, showed that the subsidy appears to be unfair even when tenant income is taken into account. The analysis (which excluded senior citizens receiving rent increase exemptions) showed that the median rent-to-income ratio for tenants living in their apartments six years or more was lower than the same ratio for all tenants—and would continue to be lower even if minimum increases in the range of those at issue here were imposed. The RGB therefore decided to adopt the minimums.

This case began as two CPLR article 78 proceedings, one relating to each of the RGB’s orders; the proceedings have been consolidated. Petitioners are two rent-stabilized tenants, both of whom have lived in their apartments for more than six years and pay less than $1,000 a month in rent, and a tenants’ rights organization. They seek to annul the orders to the extent they allow minimum dollar increases. Petitioners make no claim that the minimum increases are unreasonable or unfair, but assert that the RGB lacks the power to permit them.

Supreme Court granted the relief petitioners sought (27 Misc 3d 340 [2010]), and the Appellate Division affirmed (Matter of Casado v Markus, 74 AD3d 632 [1st Dept 2010]). We granted leave to appeal (15 NY3d 712 [2010]), and now reverse.

II

Petitioners’ primary argument is that the RGB has no power to create classes of housing accommodations—meaning, petitioners say, that the RGB is forbidden to draw any distinctions within any of the three “classes” of housing accommodations— apartments, hotel units and lofts—established by the New York City Council. Petitioners base this argument on two provisions of law: New York City Administrative Code § 26-510 (b), which is part of the Rent Stabilization Law (RSL), originally enacted in 1969 by the New York City Council (Local Law No. 16 [1969] of City of NY, codified as amended at Administrative Code § 26-501 et seq.); and section 3 (a) of the Emergency Tenant Protection Act (ETPA), enacted by the State Legislature in 1974 (L 1974, ch 576, § 4, codified as amended at McKinney’s Uncons Laws of NY § 8621 et seq.). At the same time it enacted the ETPA, the Legislature repealed and reenacted the parts of the RSL relating to the RGB, making no relevant change in the language of section 26-510 (b) (L 1974, ch 576, § 9).

In its current form, section 26-510 (b) authorizes the RGB to “establish annually guidelines for rent adjustments,” and to file with the City Clerk annually “a statement of the maximum rate or rates of rent adjustment, if any, for one or more classes of accommodations” (Administrative Code § 26-510 [b]). ETPA § 3 (a) (Uncons Laws § 8623 [a]) says that in New York City “[t]he existence of [a] public emergency requiring the regulation of residential rents for all or any class or classes of housing accommodations . . . shall be a matter for local determination . . . by the local legislative body.” (The power given the New York City Council by this section of the ETPA was largely revoked by the State Legislature in 2003 [see L 2003, ch 82, § 1, codified at Uncons Laws § 8605].) Petitioners claim that these enactments, read together, reserve the power to create “classes of housing accommodations” to the City Council exclusively, and that the City Council has not delegated and could not delegate to the RGB any power to draw distinctions between accommodations of the same class. Petitioners’ argument does not persuade us.

On its face, the RSL does not prohibit the RGB from distinguishing some kinds of apartments from others. The language that empowers the RGB to establish “the maximum rate or rates of rent adjustment . . . for one or more classes of accommodations” (Administrative Code § 26-510 [b]) does not, as a simple matter of grammar, say or imply that there must be only one “maximum rate ... of rent adjustment” for each class. And the ETPA language that petitioners rely on (which has been in any event largely nullified by later legislation) has nothing to do with the issue before us. To say that a “local legislative body” may determine when a “public emergency” exists requiring rent regulation for “all or any class or classes of housing accommodations” (Uncons Laws § 8623 [a]) is to say nothing at all about whether, or by whom, multiple levels of rent increases may be permitted within each class.

In fact, the RGB has always made some distinctions between apartments, even though apartments are generally considered one “class” of housing accommodation. Most obviously, the RGB prescribes different rental rates for one-year and two-year leases. Petitioners say that this is an exception to the general rule against the making of distinctions within a “class,” and assert that the exception is authorized by Administrative Code § 26-511 (c) (4) (reenacted by the State Legislature, L 1985, ch 907, § 1). That code provision, however, says nothing about the RGB’s power to make distinctions: it says that landlords shall be required “to grant a one or two year . . . lease at the option of the tenant.” It is true that this requirement would make little sense if rent increases for one- and two-year leases had to be the same, because almost all tenants would elect two-year leases; but this reinforces our point—the Legislature must have assumed that the RGB would make common-sense distinctions when it fixed the increases allowed for apartments.

The RGB has made a number of other distinctions within the apartment “class.” It has allowed landlords to charge extra when electricity is included in the rent, and to collect “fuel adjustment surcharges” (see Stein v Rent Guidelines Bd. for City of N.Y., 127 AD2d 189, 190, 196 [1st Dept 1987]; Matter of Chessin v New York City Conciliation & Appeals Bd., 100 AD2d 297, 304 [1st Dept 1984]). Indeed, the order challenged in this case distinguishes between apartments in which heat is provided by the landlord and those in which it is not. Petitioners say that all these distinctions are invalid, and have survived only because the power to create them has never been challenged; they assert that they could, but chose not to, attack the heat-based distinction contained in the order now at issue. To us, however, the fact that such distinctions have long been accepted without question is further confirmation that nothing in the governing legislation can fairly be read to prohibit them.

We therefore reject petitioners’ argument that the RGB may not permit any increases that are larger, in percentage terms, for some apartments than for others. But petitioners also attack the dollar minimum increases now at issue on a narrower ground. They point out that the problem addressed by these mínimums—the plight of landlords who are unable for a long time to obtain vacancy increases—has been dealt with to some degree by state legislation. New York City Administrative Code § 26-511 (c) (5-a), adopted by the Legislature in 1997 (L 1997, ch 116, § 19), governs the rent increases permitted after an apartment becomes vacant. In general, the permissible vacancy increase is 20%, but where there has been no previous such increase within eight years “the legal regulated rent may be further increased” according to a formula stated in the legislation. Petitioners argue, in substance, that by giving landlords this form of relief, the Legislature implicitly prohibited the RGB from giving another form of relief for the same evil.

Again, petitioners’ argument does not persuade us. There is no conflict between the RGB’s dollar minimum increases, which give some benefit to landlords of low-rent, slow-turnover apartments while their tenants remain in possession, and the state legislation, which gives relief regardless of rent level after a slow-turnover apartment has finally become vacant. It is true that some landlords may, eventually, benefit from both provisions, but the two benefits, even where cumulative, are not logically inconsistent. Nor is the state legislation so detailed and comprehensive as to imply that the Legislature has preempted the field.

Petitioners rely on Matter of New York State Tenants & Neighbors Coalition, Inc. v Nassau County Rent Guidelines Bd. (53 AD3d 550 [2d Dept 2008]), which invalidated an order of the Nassau County Rent Guidelines Board permitting rent increases that would vary with tenants’ income. The New York State Tenants Court held that “the Board exceeded its statutory authority in establishing a separate class of accommodation based on tenant income” (id. at 552). To the extent that the Second Department in New York State Tenants—like the First Department here—accepted the argument that there can be no distinction in the rent increases allowed within a “class of accommodation” it was mistaken, for the reasons we have explained.

This does not mean that the result in New York State Tenants was necessarily wrong. It could be argued that, in making distinctions based on tenant income, the Nassau County Rent Guidelines Board trespassed on a sensitive policy area that is within the Legislature’s special province (see Boreali v Axelrod, 71 NY2d 1 [1987]). We do not pass on the merit of that argument as it applies to the New York State Tenants case. But we find the argument inapplicable here, where the RGB has dealt with a narrower, more technical and less sensitive issue.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the petitions dismissed.

Ciparick, J. (dissenting).

Because I believe that the New York City Rent Guidelines Board (RGB or Board) lacks authority to promulgate orders imposing dollar minimum increases solely on tenants who have been living in their apartments for six years or more and paying less than $1,000 per month in rent, I respectfully dissent.

I find it unnecessary to reach the question of whether the RGB has authority to create any distinctions whatsoever within the extant classes of accommodation, since it patently lacks power to draw the particular distinction at issue here. As the majority explains, the Board’s authority is derived from Administrative Code of the City of NY (Rent Stabilization Law of 1969) § 26-510 (b), under which it may “establish annually guidelines for rent adjustments.” Even assuming that the Board, pursuant to this delegation, can set multiple rates for each class of housing, its ability to do so is limited by well-settled principles of administrative law.

Under the two orders at issue on this appeal, a tenant who has been living in an apartment for six years or more is subject to a minimum increase, whereas a more recent tenant in an identical apartment paying identical rent is not so subject. The rationale behind these orders is apparently, as Supreme Court explained, “to attempt to equalize the rental amounts that long-term and short-term tenants pay, because the operating expenses for those apartments are the same” (27 Misc 3d 340, 346 [2010]), yet long-term tenants generally pay less than more recent tenants for the same apartments.

Of course, it is no coincidence that long-term tenants are the greatest beneficiaries of rent stabilization, or that, in the majority’s words, “tenants paying higher rents must subsidize those paying lower rents” (majority op at 334). This inequality is due, in large part, to the Rent Regulation Reform Act of 1997 (L 1997, ch 116, § 19), which amended the Rent Stabilization Law to provide that a vacancy lease can increase a unit’s rent by up to 20%, and even more where there has been no vacancy increase in the prior eight years or the rent is particularly low (Administrative Code of City of NY § 26-511 [c] [5-a]). The evident purpose of these changes was to bring apartments closer to market rent as they become vacated (see Governor’s Approval Mem, Bill Jacket, L 1997, ch 116, at 38-39). Critically, the Legislature did not couple the large rent increases it was authorizing for new tenants with any alteration in how rent increases were calculated for current tenants. Under this scheme, by design, there is a large rent gap between new tenants and those whose tenancies predate the amendment, and it will increase as many apartments experience repeated vacancies.

“It is a fundamental principle of administrative law that an agency cannot promulgate rules or regulations that contravene the will of the Legislature” or are “ ‘out of harmony’ with an applicable statute” (Weiss v City of New York, 95 NY2d 1, 4-5 [2000]), yet the RGB did exactly that. By creating varied rates with the intended effect of minimizing the degree to which landlord costs are disproportionately covered by higher-paying apartments, the Board sought to mitigate a rent disparity the Legislature created.

More broadly, it is axiomatic that, “[a]s an arm of the executive branch of government, an administrative agency may not, in the exercise of rule-making authority, engage in broad-based public policy determinations” (Rent Stabilization Assn. of N.Y. City v Higgins, 83 NY2d 156, 169 [1993], citing Boreali v Axelrod, 71 NY2d 1, 9 [1987]). It strikes me as a great usurpation of power for the RGB to create separate increases based on what it perceives as a structural inequity in the rent laws. The Board found it problematic that long-term tenants shoulder such a small percentage of landlord costs, and this determination, in our view, crosses “the difficult-to-define fine between administrative rule-making and legislative policy-making” (Boreali, 71 NY2d at 11).

Indeed, the RGB has conceded throughout this litigation that any distinctions in rate increases must be based on factors sufficiently connected to the housing accommodations themselves. It seems to have accepted the reasoning of Matter of New York State Tenants & Neighbors Coalition, Inc. v Nassau County Rent Guidelines Bd. (53 AD3d 550, 552 [2d Dept 2008]), which relied on Boreali and Weiss in striking down a rent increase contingent on tenants’ income. We see no relevant distinction between creating varied rates of increase based on income, which the Board concedes would be ultra vires, and varied rates based on duration of tenancy.

Finally, I note that under the majority’s reasoning there is no limit to the amount that the Board can increase rents at the lowest end of the rent-stabilized spectrum for the purpose of evenly distributing maintenance costs that in many buildings are shared by long-term, newer, and market-rate tenants. To me, it is obvious that such equalization is anathema to the purpose of the Rent Stabilization Law, and therefore beyond the Board’s authority.

Accordingly, I would affirm the order of the Appellate Division.

Chief Judge Lippman and Judges Graffeo, Read and Pigott concur with Judge Smith; Judge Ciparick dissents and votes to affirm in a separate opinion in which Judge Jones concurs.

Order reversed, etc.

       In Supreme Court, “the RGB concede [d] that it may not create classes of accommodations based on factors, such as the income of the tenants, that are not sufficiently connected to the housing accommodations themselves.” (27 Misc 3d at 349.) Far from repudiating this view on appeal, the Board reiterated during oral argument before us that a rate distinction based on income would be inappropriate.