Opinion ID: 6933480
Heading Depth: 2
Heading Rank: 2

Heading: New York’s anti-eviction provisions.

Text: In our original opinion we did not address New York’s claim that the tenant’s statutory freedom from eviction survives repudiation. Under New York’s rent regulations, the landlord is forbidden (except under certain limited circumstances) from evicting any tenant who proffers the monthly rent payments in a timely manner. See N.Y.Comp.Codes R. & Regs. tit. 9, § 2524.1(a) (“As long as the tenant continues to pay the rent ... no tenant shall be denied a renewal lease or be removed from any housing accommodation”, except on specified grounds) (governing rent-stabilized tenancies); see also N.Y.City Admin.Code § 26-408a (“No tenant, so long as he or she continues to pay the rent ... shall be removed from any housing accommodation which is subject to rent control ... notwithstanding the fact that the tenant has no lease or that his or her lease ... has expired or otherwise terminated_”). Do these anti-eviction laws bar the RTC from effecting a complete dissolution of the tenancy? That question requires us to address an issue we did not reach in our prior opinion: “conflict” preemption. See Diamond, 18 F.3d at 125 (“Having held that § 1821(e) expressly authorizes RTC to repudiate the tenancies at issue, we have no occasion to reach or address ‘conflict’ preemption_”). We did not reach the issue because rent-regulated tenancies are contractual and thus fall within the express scope of FIRREA. We still adhere to this view; however, we should have directly addressed the more narrow question of whether, after repudiation, the RTC is still bound by the rent regulations to accept the state-regulated rent in exchange for the tenant’s continued occupation of the property. We do not think that New York’s rent regulations bar the RTC from taking steps necessary to fully effect a repudiation of the tenancy- It is basic that the supremacy clause of the Constitution “invalidates state laws that ‘interfere with or are contrary to, the laws of congress....’” Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258 (1981) (quoting Gibbons v. Ogden, 9 Wheat. 1, 211, 6 L.Ed. 23 (1824)). Although preemption may arise in several ways, only one concerns us: “when the state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’” Michigan Canners & Freezers Assoc., Inc. v. Agricultural Marketing & Bargaining Bd., 467 U.S. 461, 469, 104 S.Ct. 2518, 2523, 81 L.Ed.2d 399 (1984) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941)). Such “conflict” preemption will be found where “state law ... interferes with the methods by which the federal statute was designed to reach [its] goal.” International Paper Co. v. Ouellette, 479 U.S. 481, 494, 107 S.Ct. 805, 813, 93 L.Ed.2d 883 (1987). The goal of FIRREA is to stem the “financial hemorrhaging” resulting from the large number of failures in the thrift industry. See Diamond, 18 F.3d at 113. To that end, “Congress required that RTC conduct its operations ‘in a manner which [ ] maximizes the net present value return from the sale or other disposition of thrift assets that come into its hands.” Id. (quoting 12 U.S.C. § 1441a(b)(3)(C)(i), and citing S.Rep. No. 19, 101st Cong., 1st Sess. 352 (1989) U.S.Code Cong. & Admin.News 1989, p. 86). It is pursuant to this overarching mandate that “Congress armed [RTC] with the power to disaffirm or repudiate contracts or leases that RTC in its discretion determines to be burdensome.” Id. (citing 12 U.S.C. § 1821(e)(1)). Therefore, the entire purpose underlying RTC’s repudiation power is the maximization of return on assets. To that end, Congress conferred on the RTC power to repudiate leases it deems burdensome. Here, the burden is the regulated rent and the diminished asset value that the rent-regulation causes. A state law that obliged the RTC to accept the tenancy in exchange for the regulated rent payment would simply continue the (repudiated) leasehold subject to the same burden. It is obvious that this state of affairs would nullify the FIRREA power to repudiate burdensome leases. We are mindful that when analyzing a preemption issue we must be more deferential where a state is exercising its traditional police powers. See, e.g., Cipollone v. Liggett Group, Inc., — U.S. -, 112 S.Ct. 2608, 2617, 120 L.Ed.2d 407 (1992); Ray v. Atlantic Richfield Co., 435 U.S. 151, 157, 98 S.Ct. 988, 994, 55 L.Ed.2d 179 (1978); Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947). But where there is a direct and irreconcilable conflict, the state law must yield. See Michigan Canners & Freezers, 467 U.S. at 469, 104 S.Ct. at 2523. General preemption “principles are not inapplicable here simply because real property law is a matter of special concern to the States: ‘The relative importance to the State of its own law is not material when there is a conflict with a valid federal law, for the Framers of our Constitution provided that the federal law must prevail.’” Fidelity Federal Savings & Loan Assoc. v. De La Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982) (quoting Free v. Bland, 369 U.S. 663, 666, 82 S.Ct. 1089, 1092, 8 L.Ed.2d 180 (1962)). In this case, the non-eviction aspect of the state’s rent-regulation scheme directly interferes with the “accomplishment and execution of the full purposes and objectives of Congress.” Michigan Canners & Freezers, 467 U.S. at 469, 104 S.Ct. at 2523 (citations omitted). The tenancies at issue are rooted in contract; RTC has the power to repudiate the contracts, and therefore the underlying tenancies. If the state anti-eviction law were to govern, the repudiation would be fruitless. We therefore hold that, to the extent that the anti-eviction provisions of New York’s rent regulations interfere with the operation of § 1821(e), the state regulations and laws are preempted by FIRREA.