Pinnacle Tenants Call Proposed Settlement a Sham

On October 5, in a church packed to standing room only, some 300 Harlem tenants who live or have lived in Pinnacle-Praedium–owned buildings waited to hear lawyers, tenant representatives, and state Senator Bill Perkins inform them about a proposed settlement for a class-action lawsuit that began in 2007. 

The suit, initiated by the grass-roots group Buyers and Renters United to Save Harlem (BRUSH), charged that the Pinnacle Group’s predatory behavior towards its tenants was so criminal it qualified as a “racketeering influenced and corrupt organization” (RICO) under federal law. Five tenants were plaintiffs in the suit, representing the 60,000 people who lived in 21,000 apartments owned by Pinnacle.

A proposed settlement to the suit was announced in early September, but it left many tenants dissatisfied. Under its terms, Pinnacle will pay $2.5 million to groups helping tenants sue for damages. However, none of the groups recommended by the five  class representatives are included; the proposed list is made up of organizations selected by Pinnacle, agencies that don’t serve Pinnacle tenants. While the company may have to follow stricter rules for raising rents or commencing evictions, and it may still be liable for damages, the proposal is unclear as to which tenants would be eligible for damages or rent reductions. In fact, whole categories of renters are definitely excluded.

The evening’s discussion revolved around that proposal. Those present were the lucky ones. They would leave with at least some vague idea of their rights and options. Thousands of other Pinnacle tenants not present that night were left completely in the dark—and facing a court deadline two days away that would affect their futures as tenants. They had to decide by Oct. 7 whether to stay in the lawsuit or opt out of it.

Pinnacle tenants had orginally received notice of the proposed settlement in mid-September. They were given only three weeks to decide whether it was a good deal or a bad deal. Within those three weeks, they had to request a copy of the settlement papers and then review them—with or without advice  of counsel. By Oct. 7, they had to choose whether to stay in the lawsuit, opt out, submit a written objection, or make a request to attend the Fairness Hearing scheduled for Oct. 20. Many said this left them in a quandary, because they were being asked to make a decision based on settlement terms they have not been told, and the notices they received don’t state who will ultimately be eligible to file a claim. 

Tenant representatives had requested that a mailing be sent to all the affected tenants, so they could attend the meeting and learn what their rights were and what the proposed settlement’s impact on the community would be. Neither Pinnacle nor the tenants’ lawyers were willing to provide the mailing lists that would have assured full tenant participation. The attorneys said the full lists were not accessible.

Many tenants did not receive the notice of the proposed settlement in the mail. BRUSH affiliates determined that the notice letters were not posted in all buildings either currently or formerly owned or managed by Pinnacle. The notices were not delivered to tenants in any languages other than English.

The historic class-action suit arose out of a series of community campaigns aimed at holding the Pinnacle Group, along with its president and CEO, Joel Wiener, accountable for being an extremely aggressive predatory landlord. The company started as a small business and mushroomed into a large conglomerate real-estate investment business backed by funding from the Praedium Group, a $7 billion real-estate investment company that specializes in “underperforming and undervalued assets.” 

Praedium had once boasted on its Web site that it encouraged its client to do “proactive leasing, strategic capital improvements, and reduce expenses.” Tenant advocates interpreted this as code language for raising rents through displacement, harassment, and trumped-up major capital improvements; driving rent-regulated tenants out; and cutting back essential building services.

The RICO suit outlined basic facts. In 2005, after buying up more than 400  buildings in Manhattan, the South Bronx, central Brooklyn, and Queens, the Pinnacle Group began a strategy of removing low-income, working-class, longtime, and elderly tenants, using tactics including rent overcharges, harassment, lack of repairs, frivolous court actions, challenging tenant succession rights, and outright intimidation. In one two-year period, the company issued 5,000 eviction notices in Housing Court. Rent-regulated tenants were identified as obstacles to lucrative profits. 

In 2006–2007, Daily News reporter Juan Gonzalez wrote an investigative series exposing Pinnacle and Wiener’s misdeeds. Public anger, multiple tenant demonstrations, and petitions yielded an investigation by the state attorney general’s office under Eliot Spitzer and Andrew Cuomo. In 2008, Pinnacle was forced to pay $1 million in rent overcharges to 300 tenants.

Jenner & Block, a Chicago-based firm, took the case on a pro bono basis. In 2010–11, it negotiated the proposed settlement under the supervision of federal Magistrate Judge Ronald Ellis. Ellis was appointed as mediator by federal judge Colleen McMahon, who initially approved the class certification.

The five tenants who represented the class strongly oppose the settlement. “How can you say the settlement is fair, reasonable, and adequate,” asked one of them, Marge Charron, “when you cannot quantify the number of tenants who will benefit or not benefit from the proposed settlement, since little or no information was gathered directly from the files of the Pinnacle Group?”

They assert that the proposal compromises away the legal rights of most of the affected tenants. For example, tenants who live or used to live in “carryover buildings,” which Pinnacle bought from landlords who illegally overcharged tenants, are excluded from the proposed settlement claim process. They will not receive compensation and will not have their rent reduced—and by staying in the lawsuit, they in effect give up all their rights to sue Pinnacle. 

The proposed settlement also excludes tenants who signed leases before 2004. These tenants will also neither collect damages nor have their rents reduced. This could leave their apartments with illegally high rents for future tenants. 

The settlement’s oversight plan is inadequate, says Kim Powell, a class representative and cofounder of BRUSH. If it were more carefully crafted, she says, it would “ensure that the court-ordered notice was given to both former and current tenants and properly posted in all Pinnacle buildings, strictly adhered to by Pinnacle under the proposed protocol agreement terms. This is particularly important given their alleged deceptive practices. It’s like asking a burglar to watch the money in the vault.”

 Unless there is an oversight plan that requires Pinnacle to submit written reports, she adds, the settlement would enable the company to continue its pattern of deceit and fraud. “This is not the first or second time they’re being accused of such practices,” she says. “It could not be the last, if no carefully crafted oversight plan is created and implemented and they’re not adequately reprimanded for their poor and potentially illegal management practices.”

During the October 5 forum, the Jenner & Block lawyers suggested that the groups of tenants excluded from the settlement could opt out of the lawsuit and seek recourse from another agency or judicial forum. However, in some instances, the agreement may already have precluded them from filing a complaint or case against the company. The lawyers argued that the tenants should accept the proposed settlement, saying it would spare them the trouble of a protracted legal process. 

Tenants said the lawyers had difficulty explaining to them how they would actually benefit from the proposed settlement, since there were few records or answers from Pinnacle. While Pinnacle’s lawyers had all nine of the original plaintiffs file depositions, no Pinnacle employees were questioned—and neither was Joel Wiener.

Many tenants at the meeting opposed the proposed settlement, stating that it is flawed, inadequate, and a mere slap on the wrist for Pinnacle. Other tenants believe that the tenant lawyers have already decided the settlement was final, although they have had limited dialogue with the class representatives and have not heeded their objections to some of the agreement’s terms.

As a result, many of the Pinnacle tenants believe the proposed settlement should be extinguished or modified, and that they should get more time to consult with attorneys. On Oct. 7, staff attorneys from the Northern Manhattan Improvement Corporation and the Urban Justice Center filed a motion with Judge McMahon to delay the process so tenants have more time to weigh their options. 

Many tenant advocates believe the proposed settlement surrenders renters’ rights. They want to pursue the case against Pinnacle until they achieve a resolution that truly benefits tenants.