On August 14, the federal district court in Manhattan accepted Volunteers of Legal Service’s submission of a “friend of the court” brief, in support of two important laws for small business owners who are struggling to survive the economic devastation caused by the COVID-19 crisis.
And on November 25, the Hon. Ronnie Abrams, United States District Judge for the Southern District of New York, dismissed the lawsuit that threatened these protections. (Footnote 1)
Judge Abrams’ opinion acknowledged that the complaining landlords had “expressed some legitimate concerns, and the Court recognizes the toll the pandemic has taken on them, in addition to their tenants, all New Yorkers, and millions more around the world. Nonetheless… the Court cannot conclude that these challenged laws violate any of Plaintiffs’ constitutional rights.” The judge cited the “almost 1,000 pages of written testimony,” including those submitted by VOLS, that described “the harms [that advocates] believed the laws would ameliorate.”
The VOLS amicus brief defended two laws enacted by New York City Council in May 2020, including the Commercial Tenant Harassment Law and the Guaranty Law, each of which provides critical relief to small business owners at a time of unprecedented need during the pandemic. The Harassment Law expands the definition of harassment to include threats by a landlord on the basis of a commercial tenant’s status as being impacted by COVID-19. The Guaranty Law temporarily suspends business owners’ personal liability for commercial rent obligations from March 7, 2020 to September 30, 2020. VOLS was a strong advocate of these measures during the legislative process, offering written testimony to share the perspective of our small business clients, who are often the target of commercial tenant harassment and face personal financial ruin because of personal guaranties they were pressured to sign by landlords.
We are pleased to have presented to the Court the perspective of the New York City small business community in this highly consequential lawsuit. Since March 20, 2020, when the pandemic first reached New York City, the VOLS Microenterprise Project has served over 170 COVID-19-impacted businesses with over 220 distinct legal matters. Through this recent work — as well as through our twenty-year commitment to New York City’s small businesses, our collaboration with Brooklyn Legal Services Corporation A and TakeRoot Justice on the New York City Commercial Lease Assistance program, our issue advocacy through United for Small Business NYC, and our partnership with law firms through the Small Business Legal Relief Alliance — VOLS is deeply familiar with the challenges presently facing small businesses and their owners. We remain committed to serving the City’s small business community and will continue to advocate for smart and effective small business relief during these exceptionally difficult times.
- Click here to read comments by public officials about the case
- Click here to read a summary of our argument
- Click here to read Judge Abrams’ decision in Melendez v. City of New York
- Click here to review the granted motion to present the small business perspective (PDF).
- Click here to read the declaration by VOLS Microenterprise Project Director Arthur Kats against the landlords’ motion (PDF).
- Click here to read our full amicus brief in opposition to the landlords’ request to invalidate the Laws (PDF).
Comments by Public Officials on Victory in Melendez v. City of New York
“This is a major victory for small business owners who need protection from landlords during this unprecedented time. Restaurants and small businesses are the backbone of our economy, and they are struggling to keep afloat in this pandemic. They should not have to worry about harassment or the loss of their homes because of the economic hardships this virus has caused their businesses. It’s unfortunate that any landlord would try to fight our attempt to help small business owners, but we are thrilled that the court ruling allows us to continue to protect struggling New Yorkers during this difficult time,” said Council Speaker Corey Johnson.
“Judge Abrams’ decision today is a legal victory for the thousands of restaurants and small businesses across New York City that are on the verge of closure and can seek protection from further loss and damages because of my law temporarily suspending personal liability provisions in commercial leases. It’s clear that this decision shows the law advances a legitimate public interest during this time of grave national emergency, and I am not only confident that the law will hold up to any additional appeals if they occur, but that my law will help save countless other businesses while we beat back the COVID-19 pandemic,” said Council Member Carlina Rivera, lead sponsor of Local Law 55 of 2020.
“The legislation passed by the City Council represents the City’s dedication to the many small businesses, impacted by COVID-19, that are the backbone of New York City’s economy. Our businesses are hurting and these protections will allow them the opportunity to thrive in the future. I applaud the court’s ruling to uphold these vital laws,” said Council Member Adrienne Adams.
“Harassment and retaliation against COVID-19 impacted tenants pose an urgent risk, and tenants must be protected against unscrupulous landlords during these extremely difficult and uncertain times. That is why I sponsored Local Law 56 and I am happy that Judge Abrams upheld it,” said Council Member Ritchie Torres.
Additional Background on VOLS’ Amicus Brief and the Melendez v. City of New York Case
Less than two months after the two small business protection laws took effect, a group of landlords sued to overturn them, alleging that the laws violate the U.S. Constitution. The landlords claim that by prohibiting them from harassing their tenants, the Harassment Law interferes with their right to free speech. The landlords claim that the Guaranty Law violates another clause of the Constitution for rewriting their leases with their tenants, even though the law would likely prevent hundreds, if not thousands, of business owners from financial ruin. The landlords asked the court to declare that the laws are unconstitutional and if they are successful, the laws may be effectively be invalidated, taking away from small business owners the limited but essential relief that they provide.
The VOLS Microenterprise Project knows how critically important these laws are to small businesses and their owners, and we firmly argued that they are properly grounded in Constitutional law. On August 13, we requested permission from the court to argue in support of these laws as an amicus curiae, or “friend of the court.” We asserted that while landlords and the City are well represented in the case, the voice of the small business community is notably absent. Therefore, it is essential that VOLS join in advocacy for the small business community, since the case threatens to invalidate laws designed for their benefit, protection, and survival. The Court granted our request swiftly and our legal brief fighting for the New York City small business community was considered by the judge in this critical case.
In our argument, we urged the Court to reject the landlords’ efforts to second-guess the City Council’s correct determination that small businesses need the relief provided by the challenged Laws. We argued that neither the Harassment Law nor the Guaranty Law violate the U.S. Constitution and that any court order invalidating these laws would irreparably harm the small business community in New York City. In particular, we took the position that the Harassment Law does not prohibit landlords from making ordinary rent demands or explaining the consequences of failure to pay rent, but rather, prohibits landlords from engaging in harassment based on a tenant’s status as being impacted by COVID-19, which would cause commercial tenants to forego rights under their commercial leases. We also argued that the Guaranty Law only affects contracts minimally and insubstantially, and therefore, does not violate the Constitution. Finally, we argued that invalidating the Laws would not be in the public’s best interest because it would deal a devastating blow to the already struggling small business community and their owners, who need the relief provided by these Laws to overcome the economic effects of the pandemic.
We reminded the Court that small businesses are the backbone of the City’s economy, and we urged the Court to refrain from taking any action that would inflict further injury on the small business community, and consequently, the City’s economic recovery.
Footnote 1: The ruling found that the law intended to prevent harassment of small businesses negatively affected by COVID-19: 1) does not abridge landlords’ First Amendment free speech rights because they do not prevent landlords from making routine rent demands; and 2) does not violate the constitutional due process because it is sufficiently clear on what constitutes harassment. The Court further acknowledged that that law partially suspending personal liability on guaranties does impose a substantial impairment on contracts, but ultimately held that it does not violate the Contract Clause of the Constitution because it advances a legitimate public interest (supporting small business owners and broader economic recovery), while giving broad deference to the good-faith efforts of legislators to enact legislation that is reasonable and necessary to advance that interest. The Court also held that the municipal laws are not preempted by NYS laws.