Section 8 Discrimination Cases Against Housing Providers, Brokerages, and Property Managers Face New Motions to Dismiss After New York Decision

In a significant decision for housing providers across New York and beyond, the New York Appellate Division, Third Department, affirmed the dismissal of a source-of-income discrimination enforcement action on constitutional grounds.

The case, The People of the State of New York v. Commons West, LLC, holds that enforcing New York’s source-of-income protections under Executive Law § 296(5)(a)(1) facially violates the Fourth Amendment when it effectively compels landlords to participate in the federal Section 8 Housing Choice Voucher Program which requires governmental inspections and providing records to the government.

Although the decision will likely be appealed to the New York Court of Appeals (highest state court), it currently stands as binding appellate authority throughout the state, and persuasive authority in all other states.

For defendants facing source-of-income discrimination claims, the ruling immediately alters the litigation landscape.

Key Takeaway: In People of the State of New York v. Commons West, LLC, the Appellate Division held that enforcing source-of-income discrimination laws to compel participation in the Section 8 Housing Choice Voucher Program violates the Fourth Amendment because the program requires consent to government inspections and access to records. As a result, defendants in Section 8 discrimination cases may now assert constitutional defenses and pursue motions to dismiss in courts and administrative proceedings across New York.

The Constitutional Conflict Behind the Case

New York law prohibits discrimination based on lawful source of income, including participation in the Section 8 Housing Choice Voucher Program.

The Third Department concluded, however, that enforcing this requirement against landlords forces them to submit to government inspections and provide records as a condition of renting to voucher holders.

Under federal Section 8 regulations:

• Local public housing authorities must inspect rental units before occupancy.
• Units must meet federal housing quality standards.
• Inspections must occur at least every two years.
• Landlords must provide records relating to rents and comparable units.
• Landlords must sign a Housing Assistance Payment (HAP) contract granting “full and free access” to the premises and records.

These requirements arise from 42 U.S.C. § 1437f and related federal regulations, including 24 CFR 5.703 and 24 CFR 982.405.

The Appellate Division concluded that forcing landlords to participate in a program requiring inspections and document access constitutes an unconstitutional condition.

Put simply, the government cannot require property owners to waive Fourth Amendment protections against unreasonable searches as a condition of complying with state anti-discrimination law.

A Credible Threat of Enforcement Is Enough

The court did not require proof that inspections had already occurred, and in the case before the court, they admittedly did not occur.

Instead, it held that a credible threat of enforcement was sufficient to establish the constitutional violation, which credible threat exists merely from participation in the Section 8 Program.

As the court explained, participation in the program requires landlords “to consent to governmental searches of their rental properties and records.”

Because enforcement of the Human Rights Law would compel landlords to enter a program requiring those searches, the action was dismissed.

Why This Decision Matters for Housing Providers

For landlords, property managers, and real estate brokerage professionals, the decision creates a significant new defense in source-of-income discrimination cases.

Until reversed by the Court of Appeals, defendants should evaluate whether to pursue motions to dismiss in matters pending before:

• New York State courts
• Federal courts
• The New York State Division of Human Rights
• The New York City Commission on Human Rights
• Other administrative enforcement bodies

In each forum, the constitutional analysis in Commons West may undermine enforcement of claims tied to Section 8 participation.

An Industry Inflection Point for Real Estate Brokerage / Property Management Compliance

The decision in People v. Commons West, LLC marks a turning point in how source-of-income discrimination cases are litigated across the real estate industry.

For years, enforcement actions involving Section 8 participation have targeted not only housing providers, but also real estate brokerages and their agents as well as property managers. Brokerage firms are frequently named as respondents based on statements by agents, listing language, or allegations that voucher-backed applicants were discouraged during the rental process.

This appellate ruling introduces a new constitutional dimension to those cases, which has been argued before, but now has binding effect.

If participation in Section 8 requires landlords to consent to government inspections and disclosure of records, and courts determine that compelling such participation violates the Fourth Amendment, then the legal foundation of certain source-of-income enforcement actions may be vulnerable.

For brokerage firms operating across New York, this raises broader compliance and litigation considerations. Defense counsel should begin levaraging this constitutional argument in administrative proceedings and court cases involving voucher-related discrimination claims.

Regulators and plaintiff-side attorneys will almost certainly attempt to limit the reach of the decision until the issue is resolved by the New York Court of Appeals, at least to only Section 8 rather than applying it to all forms of source of income discrimination as the decision was written broadly.

In the interim, Commons West has the potential to reshape how Section 8 discrimination claims are defended throughout the real estate industry.

All housing providers, real estate brokers, and property managers facing source-of-income discrimination claims should immediately evaluate whether a motion to dismiss is warranted in light of People v. Commons West, LLC.

If your business has been named in a Section 8 discrimination complaint, the defense strategy may have changed overnight.

Lieb at Law, P.C. represents housing providers, property managers, and brokerage firms in discrimination defense and constitutional challenges in state courts, federal courts, and administrative proceedings throughout New York, New Jersey, and Connecticut.

Contact our litigation team to evaluate whether this new precedent creates a viable motion to dismiss in your case.

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Co-Ownership Litigation in Business and Real Estate: Partition, Derivative Claims, and Dissolution Strategy

 When co-owners start fighting, the instinct is to “file something.”

That is usually the first mistake.

In ownership disputes involving businesses or real estate, the most important decision is not whether to sue. It is what procedural vehicle you choose. Partition. Derivative action. Direct fiduciary claims. Dissolution. Receivership. Each one changes leverage, remedies, timing, and valuation risk. If you choose wrong at the start, you spend the rest of the case trying to recover.

The partition trap

Two siblings inherit a mixed-use building. One wants to sell. The other wants to keep collecting rent. The knee-jerk reaction is a partition action. But the real question is simple: who owns the property?

• If title is held personally by the co-owners, partition may be correct.
• If an entity owns the property, partition is usually wrong. The dispute is about governance and control.

If the property qualifies as heirs property under RPAPL 993, statutory procedures can alter settlement posture, valuation mechanics, and timing. That analysis belongs at the beginning of the case, not after filing.

Partition disputes frequently overlap with broader business disputes and commercial litigation where ownership structure determines the remedy.

Direct vs. derivative: who was harmed?

In a 50/50 LLC, one member diverts company funds to a related entity. The first legal question is not how offensive the conduct feels. It is: who suffered the injury?

If the entity was harmed, the claim is derivative. If the owner suffered a distinct personal injury, the claim may be direct. Plead this incorrectly and you can lose standing before you ever reach the merits.

Derivative actions for breach of fiduciary duty, self-dealing, and misappropriation are common in ownership disputes. (For more on that, see our work on Derivative Actions and Fiduciary Litigation.)

Common lawsuits in co-ownership conflicts:

• Derivative actions for breach of fiduciary duty or waste
• Direct oppression or freeze-out claims
• Judicial dissolution petitions
• Partition actions involving co-owned real estate
• Books-and-records proceedings used as leverage in buyout disputes
• Emergency applications tied to asset diversion or deadlock

The receiver fantasy

Clients often ask for a receiver immediately. Courts do not grant receivers lightly. Receivership is extraordinary relief. Disagreement is not enough. Allegations are not enough. You need proof that property or business assets are at risk of being lost or materially injured.

Asking for a receiver without sufficient factual support can reduce credibility and weaken leverage in ongoing commercial litigation.

Dissolution is not always leverage

Lawyers often threaten dissolution early in a dispute. Sometimes it works. Sometimes it destroys enterprise value. If the business depends on vendor relationships, licensing, financing, or regulatory approval, public dissolution litigation can trigger cascading harm.

A strong complaint is not always a smart complaint. Litigation strategy must account for operational fragility.

Ethical landmines

Representing the entity versus representing an individual stakeholder is not a minor distinction. Blurring those roles creates conflict exposure and unnecessary motion practice. Ethical clarity is strategic clarity.

The real issue: leverage architecture

Ownership litigation is about designing leverage. The procedural vehicle controls standing, remedies, buyout dynamics, valuation exposure, and pace. The first filing often determines the trajectory of the case.

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Continuing Legal Education: Co-Ownership Litigation in Business & Real Estate

I am teaching a 1-credit live CLE on March 12, 2026 at 12 PM EST covering:

• Direct vs. derivative claim structure
• Partition eligibility and heirs property under RPAPL 993
• Receivership standards and strategic considerations
• Dissolution strategy and valuation risk
• Ethical boundaries in entity disputes
• Client management during active ownership conflicts

If you handle business breakups, governance disputes, or co-owned real estate conflicts, this program focuses on the front-end analysis that prevents avoidable damage.

Course details and registration: https://www.liebatlaw.com/cles/co-ownership-litigation

Andrew Lieb, Esq., MPH is the Managing Attorney of Lieb at Law, P.C., a litigation-focused firm handling high-stakes business disputes, commercial litigation, and ownership conflicts. Attorney profile: Andrew Lieb.

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DOL Proposes Another Independent Contractor Shift. Businesses Should Assume Litigation Is Coming.

On February 27, 2026, the U.S. Department of Labor’s Wage and Hour Division issued a Proposed Rule that may once again change how independent contractor status is determined under the Fair Labor Standards Act.

If finalized, this would be the third major shift in less than a decade.

The current standard took effect in 2024. Now the DOL is considering a return to the 2021 framework, with modifications.

The proposed return emphasizes two core factors:

1. The degree of control the worker actually exercises over the work; and
2. Whether the worker has a genuine opportunity for profit or loss.

The DOL’s stated reason is predictability. It argues that the 2024 “totality-of-the-circumstances” approach, where no factor carried predetermined weight, created uncertainty and discouraged legitimate independent contractor relationships. The agency believes a return to the 2021 “core factors” framework may reduce compliance costs and slightly increase independent contracting.

That is the policy argument.

The litigation reality is different.

This Is an Enterprise Risk Issue, Not a Technical HR Update

Independent contractor classification is no longer a drafting exercise. It is a balance sheet issue.

If misclassification is alleged, exposure can include:

• Unpaid wages and overtime
• Liquidated damages
• Attorneys’ fees
• Class or collective actions
• Parallel state claims under NY Labor Law
• Freelance Isn’t Free Act liability
• Retaliation claims
• Potential personal liability for owners and executives

If your revenue model relies on independent contractors, regulatory volatility does not reduce risk. It increases it.

Each swing in federal policy invites a new wave of audits, private litigation, and opportunistic claims.

Classification Risk Is Built Into How Your Business Operates

At Lieb at Law, P.C., we evaluate classification risk the way a litigator would, not the way a form agreement does.

We look at:

• Compensation and commission structures
• Control mechanisms in practice, not just on paper
• Use of technology for supervision or tracking
• Non-competes and restrictive covenants
• Termination authority
• Integration into core business functions
• How the model will appear to a jury

Independent contractor status is determined by economic reality. That reality is shaped by operations, not labels.

If your agreements say “independent contractor” but your workflows say “employee,” the contract will not save you.

Why Acting Now Matters

Public comment on the Proposed Rule is open through April 28, 2026. The final rule may look different. It may shift again in the next administration.

Waiting for regulatory stability is not a strategy.

The prudent move is to stress-test your model under both frameworks and determine:

• Where exposure exists today
• How a plaintiff’s lawyer would frame the case
• Whether your documentation aligns with actual practice
• Whether structural adjustments can reduce risk without breaking the business model

Independent Contractor Risk Audit

If your company engages independent contractors, now is the time to:

• Audit agreements and compensation structures
• Evaluate control and supervision practices
• Assess exposure under federal and state law
• Review notice, deduction, and payment compliance
• Align operational reality with legal positioning

Lieb at Law, P.C. represents businesses, founders, and executives in high-stakes misclassification and wage-and-hour litigation. We also conduct proactive classification audits designed to reduce litigation exposure before a claim is filed.

Regulatory instability is not a defense to misclassification. It is a reason to prepare.

To schedule a confidential strategy session, contact Lieb at Law, P.C.

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Circuit Court of Appeals Gives Plaintiffs a Tactical Way Out of Pre-Dispute Arbitration Clauses

In Bruce v. Adams & Reese, LLP, the 6th Circuit Court of Appeals held that a pre-dispute arbitration clause was invalid for an entire case because just one claim in the case involved sexual harassment based on a broad interpretation of the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 ("EFAA"). Specifically, EFAA 402(a) provides that "at the election of the person alleging conduct constituting a sexual harassment dispute or sexual assault dispute . . . no predispute arbitration agreement . . . shall be valid or enforceable with respect to a case which is filed under Federal, Tribal, or State law and relates to the sexual assault dispute or the sexual harassment dispute." At issue in this case was the definition of the term "case," and the Circuit Court defined that term as "encompassing a plaintiff's entire suit." Specifically, the Appellate Court held that "where a plaintiff brings multiple claims in a single suit against a party with whom she has an otherwise-valid arbitration agreement, and one of those claims alleges a 'sexual assault dispute' or a 'sexual harassment dispute,' the EFAA renders the arbitration agreement unenforceable with respect to each of the claims that comprise her case." As a result, a Plaintiff seeking to tactically avoid arbitration can plead a sexual harassment claim as well as their core claims to avoid the suit. However, an entity seeking to compel arbitration can counter, by not arguing that the other claims must still be arbitrated, but by arguing that the sexual harassment claim was not alleged under the applicable pleading standard in the first instance and nothing must be arbitrated. Nonetheless, the Appellate Court left "for another day the question of whether the Yost standard (federal pleading standard), the Diaz-Roa standard (Bell v. Hood’s jurisdictional standard), or some other standard represents the correct interpretation of the EFAA" when determining if the sexual harassment claim was properly alleged. There is going to be a lot of litigation coming on this issue because companies are not going to want to give up their pre-dispute arbitration clauses because creative Plaintiff's counsel have tactically negated arbitration obligations by loosely alleging a weak sexual harassment claim. 

Arbitration clauses are no longer bulletproof.

If your company relies on pre-dispute arbitration agreements, or you are challenging one, contact Lieb at Law, P.C. to assess your exposure and strategy now.

NYC Enacts Gender-Motivated Violence Protection Law

There is a new civil cause of action in NYC (Administrative Code of the City of New York section 10-1104) for crimes of violence motivated by gender that occurred prior to January 9, 2022. Now, any person claiming to be injured by a party who committed, directed, enabled, participated in, or conspired in the commission of a crime of violence motivated by gender may bring a civil claim against that party. This allows survivors to bring claims even if those claims would have otherwise been barred by the statute of limitations. However, the revitalization of claims is not permanent where claims brought under this law must now be commenced within 18 months of January 28, 2026. So, act immediately if this impacts you. Also, if you brought a claim between March 1, 2023 and March 1, 2025 that would satisfy the requirements of a cause of action under this section, you may now amend or refile (if dismissed) their claim to add a cause of action under this section. Finally, you can recover compensatory and punitive damages, injunctive and declaratory relief, attorney's fees and costs, and such other relief as a court may deem appropriate. 

HUD Steps Back on Disparate Impact: Why Courts, Not Agencies, Should Set the Rules

The Federal Government just made a smart move in proposing to remove HUD's discrimination effect regulations in housing (under the Fair Housing Act), which now exist at 24 CFR 100.5(b). Specifically, the notice of rulemaking in the Federal Register explains that setting standards to determine if discrimination occurred is better left to the Courts, who ruled on the issue of disparate impact discrimination and set standards in the 2015 case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. Therefore, as HUD puts it, as to its regulations, it has "determined they are unnecessary." Not only are they unnecessary, but have regulations on top of case law is confusing where landlords and brokers must look to varying sources to know how to behave and what is disallowed. Hopefully more regulations that establish standards to determine breaches of law will be deleted and we can go back to a less regulated world with more case holdings guiding behavior based on the specific facts at hand.

Have questions about fair housing compliance, discrimination claims, or enforcement risk? Talk to a litigation team that lives in the case law. Contact Lieb at Law, P.C.