Thursday, February 08, 2007

“Public purpose” enters uncharted territory in marathon eminent domain “seminar”

The marathon hearing in the Atlantic Yards eminent domain case yesterday at times felt like a law school seminar, as Magistrate Judge Robert M. Levy tossed hypothetical situations at lawyers for the plaintiffs and the defendants. Given a case that tests the boundaries of the law, Levy challenged them to suggest rules for determining when the balance of public and private purposes behind a project is so wrong that a court must intervene—and seemed unwilling to swiftly dismiss the case, as the lawyers for the defense hope. About 100 people listened intently in the federal courtroom in Downtown Brooklyn.

The highly charged—and factually contested--nature of the conflict emerged most clearly near the end of the hearing. Douglas Kraus, the attorney representing the Empire State Development Corporation, tried to rebut statements made by plaintiffs’ attorney Matthew Brinckerhoff, who asserted that, while the state claims it aims to remove blight with the 22-acre project, the arena-plus-16-towers development was initially announced as promoting jobs, housing, and new tax revenue.

Kraus said that Brinckerhoff was looking at the wrong documents. The reason there was nothing in the 2/18/05 Memorandum of Understanding (that the ESDC signed with New York City and developer Forest City Ratner) about blight, he insisted, is that “the Atlantic Terminal area was determined blighted in 1968… This project is and always was about eliminating that blight.”

However, as plaintiff Daniel Goldstein (right) of Develop Don't Destroy Brooklyn later pointed out to reporters, that area--known as the Atlantic Terminal Urban Renewal Area (ATURA)--includes the Metropolitan Transportation Authority’s 8.5-acre Vanderbilt Yard but not the properties on adjacent blocks owned or rented by the 13 plaintiffs. And the ESDC has insisted—against current evidence regarding the Brooklyn real estate boom—the proposed project site would stagnate without the Atlantic Yards development.
(Photos of Goldstein and Brinckerhoff by Jonathan Barkey.)

Forest City Ratner lawyer Jeffrey Braun got up and suggested that Brinckerhoff’s criticisms of the project had been aired in the wrong forum. “Those are terrific arguments to the ESDC and they were made to the ESDC,” he said. “They were not proper arguments for a federal court.”

But Braun (right) pushed farther. “I don’t think the fact that Forest City Ratner allegedly initiated” the project was crucial, he said. (Kraus had earlier made the point that developer-initiated projects were not unusual.) “This is not Times Square, the crossroads of the world,” Braun said, referencing a previously-cited eminent domain case. “This is extremely derelict”—an assertion that drew angry gasps from the audience, which included a plurality, at least, of Atlantic Yards opponents who know that the blocks surrounding the Vanderbilt Yard have been the subject of notable, if uneven, development and that the value of property has been rising. (Note correction of original report, which used the words "completely derelict.")

“Vanderbilt Yard is an open trench,” he said, and Forest City Ratner should not be penalized for coming to a public agency with a good idea. (The city, which now realizes that railyards—such as Hudson Yards—are quite valuable, had made no attempt to market it before Atlantic Yards was announced in 2003.)

Brinckerhoff, who was not above spinning certain facts himself—wasn’t the project also announced as bringing sports and community spirit to Brooklyn?—chose not to dispute the assertions made by Kraus and Braun. Rather, he thanked Levy for his patience during the long afternoon.

Afterward, Brinckerhoff sounded confident. Though lawyers for the defense had argued forcefully about the weight of precedent in eminent domain law, Brinckerhoff noted that Levy—whose job it is to issue a lengthy report and recommendations to Judge Nicholas Garaufis—was not producing a verdict on the case but instead addressing a motion to dismiss the complaint, which requires much less proof by the plaintiffs. Levy said he’d work expeditiously on his report, but it should take weeks, at least.

The ESDC’s Kraus (right), coatless and less inclined to argue his case in the media, shrugged off questions from the television and radio reporters clustered in the cold outside the courthouse.

Public purpose

The Constitution permits eminent domain for “public use,” and legal doctrine has evolved to endorse “public purpose,” which the defendants say easily encompasses the affordable housing, open space, transit improvements, and arena that the project would bring, along with the removal of blight.

But the plaintiffs stress that the process was wrong—“a sham and a pretext,” in Brinckerhoff’s words--favoring one developer, whom the city and state backed from the start. They argue that a controversial decision in the Supreme Court's 2005 Kelo vs. New London eminent domain case, along with the concurrence penned by Justice Anthony Kennedy, change the game.

Kennedy warned against “impermissible favoritism” and cited several factors in the Kelo record that showed no such favoritism. Among them are two elements that arguably do not apply to the Atlantic Yards project: the substantial commitment of public funds by the State to the development project before most of the private beneficiaries were known; evidence that respondents reviewed a variety of development plans and chose a private developer from a group of applicants rather than picking out a particular transferee beforehand.

“I have a general question,” Levy said, midway through the hearing. “So long as defendants can articulate a public use, the project is per se constitutional?”

“I would say yes,” Braun responded.

Levy pressed on. What if, as the plaintiffs allege, there was favoritism, he mused. He offered a scenario of obvious corruption: “Is that to be analyzed differently?”

Braun spoke carefully. “It’s not a question that is before the court. It seems to me that if you have very serious allegations of fundamental corruption, the deferential standard might not apply.”

Kraus, having more time to think, said, “The short answer is: That’s why we have prosecutors.” He added, “It’s not our clients’ motives that they really care about—it’s the project.”

Levy continued in his Socratic mode: “Could any development pass the Kelo test as long as a school is included, or some housing?”

“I’d be reluctant to go maybe that far,” Kraus responded, positing a scenario in which a 22-acre project contained a one-half acre park and above-market housing.

“That’s my dilemma,” Levy replied. “How do you know where to draw the line? How do I know it when I see it?”

Kraus hearkened back to the public use findings that are part of the ESDC’s “extensive record” regarding this project.

Added Braun, “I think the standard is de minimis,” or of such minimum importance that the court should ignore it, a reference to Kennedy’s statement in his concurrence that “the projected economic benefits of the [New London] project cannot be characterized as de minimis.”

Levy asked: Shouldn’t the determination be made after more fact-finding?

“In this case, it would be torturing the defendants,” Braun responded.

“Are you invoking the Geneva Convention?” Levy asked, to laughter.

Plaintiffs respond

After the defense roundly disparaged the plaintiffs’ characterization of the public use claims, Brinckerhoff (right) got nearly an hour to make his case. First, he said, that the stance toward plaintiffs in such a hearing “is extremely deferential. Inferences must be drawn in our favor.”

“It won’t be torture,” he added. “These are governmental entities that are supposed to have transparent processes.” If the case proceeds, the plaintiffs will pursue discovery--the pretrial disclosure of facts and documents--to bolster their case.

The facts in the case, Brinckerhoff said, give rise to certain inferences. “The site was chosen and the map was drawn by Ratner,” he said. An MTA spokesperson had publicly said Forest City Ratner controlled the site long before any official bid.

The developer had responded to the MTA’s RFP but had not included the pro forma estimating its revenues and profits, as required. The Extell Development Corp. had bid $150 million for the railyard, but the MTA refused to meet with them, while Forest City bid $50 million—and later upped it to $100 million. (FCR contends that railyard improvements up the value of its bid.)

“We have our facts. They have theirs,” Brinckerhoff said. “What they can’t say is we’re creating a work of fiction when all we’re doing is compiling facts and suggesting a conclusion.”

And he scoffed at warnings that success in this case could open the floodgates to endless similar challenges. “Any competent government official will make sure not to set up a sequence of events like what happened here,” he predicted.

Brinckerhoff cited the issue—raised in this blog and by others—that the Atlantic Yards economic benefits would be much less than estimated, because the state’s projections “ignore a whole lot of public costs.”

“The standard is: was the primary motive to benefit Ratner?” Brinckerhoff asked. “How will we know until we know exactly what the benefit to the public is, and the benefit to Ratner?”

He also criticized the blight study, paid for by the developer, and the role of consultants AKRF, who wrote most of the ESDC documents in the environmental review and have a history of being “pro-development.”

Though the defendants didn’t catch it, Brinckerhoff tripped up on a few numbers. “We allege there were 15 vacant lots in the takings area,” he said. “Three years, later, 123 vacant lots.” That suggests a vacant plain in Prospect Heights. Actually, there are 123 tax lots, and the vacancies went from 15 to 90, but most are condos, so the actual number of street-level vacant lots has gone from four to 19.

Brinckerhoff took aim at the precedents that the defendants cited. “In every case they’ve relied on,” he said, “there was a development plan decided before any beneficiary” was identified. He cited a case regarding Times Square, in which the city and state signed an MOU, then issued a discussion document before the state prepared a General Project Plan and invited proposals. “That’s the sequence, and it’s important,” he said.

And in Kelo, he said, the beneficiary was unknown when the city of New London planned eminent domain.

In another case, Rosenthal, “instead of bypassing all city input, it wasn’t approved until it was voted on by the Board of Estimate,” Brinckerhoff said. “Here there’s no representative by legislative anything.” (His citation of the Board of Estimate was a tad ironic, since his partner Richard Emery won a landmark case in which the board—with one vote from each borough president, plus the mayor, City Council president, and city Comptroller--was declared unconstitutional.)
[Note: the initial version of this article mentioned only the borough presidents, who represent counties of significantly different sizes.]

Another hypothetical

Levy suggested a hypothetical situation in which a project clearly represents public use, but was given to the governor’s brother-in-law. “Let’s say there’s an undeniable public use and an undeniable private benefit. What’s the answer?”

Brinckerhoff pulled it back to the threshold issue. “As soon as you have a fact that gives rise to a strong inference of private purpose,” he said, “you certainly get past a motion to dismiss…. You’re going to have to weigh how much public benefit is there.”

Levy observed that a public benefit was an objective standard, but “you’re asking us to look at a subjective standard.” Does the inquiry end if the public use “is not pretextual” or has major benefit?

“It doesn’t end,” said Brinckerhoff, who then acknowledged, “It certainly is uncharted territory.”

Levy tried to draw a line: “If, as a matter of law, the court found there was a public benefit, doesn’t the inquiry stop there if the benefit is not incidental or pretextual?”

Brinckerhoff said that the plaintiffs had to prove that the benefits are pretextual. “If we are not able to prove that," he acknowledged, "arguably we lose.”

While some issues, like the projected economic benefits, may upon further inquiry provide the plaintiffs with much ammunition, others might wind up in a battle of experts. Raising the issue of affordable housing, Brinckerhoff said that, despite the addition of 2250 units, the ESDC’s Final Environmental Impact Statement says the project “will displace 2920 units.” (That’s one reading, but the issue is more subtle and contested.)

Stadiums a special case?

Levy pointed out that Justice Sandra Day O’Connor’s dissent in Kelo acknowledged that certain kinds of takings comply easily with the public use requirement, including, as O’Connor wrote, “a railroad, a public utility, or a stadium.”

Would the inclusion of a stadium or arena justify the finding of public use, Levy asked.

Brinckerhoff suggested that there’s a big difference between railroads or highways and a sports facility. “There’s substantial dispute over whether an arena confers any public benefit at all.” He noted that the Atlantic Yards arena would have to be evaluated along with “the high-rises, the traffic.”

Though no one raised it in court, O’Connor’s dissent cites two cases to back up her “railroad, a public utility, or a stadium” statement. One case involves a railroad, the other, a public utility. It’s as if she plucked the stadium example out of the ether.

ESDC & the governor

Several issues argued in preliminary papers got an airing yesterday. For example, Peter Sistrom, representing the state of New York, challenged the plaintiffs’ assertions that former Gov. George Pataki “wholly controls ESDC.” (The case is officially Goldstein vs. Pataki.) He said that the governor appoints only some members, and the ESDC is “independent of the state.”

As reported in this blog, however, the members generally had made contributions to Pataki’s campaigns or otherwise served the administration.

There were eight lawyers representing four groups of defendants: the ESDC, Forest City Ratner, Gov. Pataki, and city officials. The plaintiffs had three lawyers at the table, though several volunteer members of the Develop Don't Destroy Brooklyn legal team were in the audience.

Is it the right time?

In the early part of the hearing, lawyers for the defense addressed meaty but more technical procedural issues. The case is not ripe, argued ESDC lawyer Preeta Bansal, asserting that the eminent domain process “has not yet run its course.”

Levy, after asking Bansal about the legal precedents, gave the first hint that he was enjoying the intellectual challenge. “What’s difficult and fascinating about this case, in addition to the merits,” he said, is that case law has not sorted out “the procedural issues.”

Overlapping cases?

Bansal also argued that the federal courts should stay out of a case better litigated in state court. She pointed to an ongoing state case filed by tenants in two buildings owned by Forest City Ratner challenging the ESDC's use of eminent domain to demolish their buildings and override their rights as rent-stabilized tenants.

“We think there is an alliance of interests,” Bansal said. In court documents, ESDC lawyers have noted that the lead plaintiff in the state case, Leigh Anderson, and plaintiffs in the federal eminent domain case, had joined together in another suit last year to block Forest City from demolishing five properties it owned.

“What if the Anderson plaintiffs win?” Levy asked.

“It has a collateral estoppel effect,” Bansal replied, citing the legal doctrine in which re-litigation of an issue is barred once a court has already made a decision.

Levy pointed out that the plaintiffs in Anderson don’t claim they have standing to challenge condemnations under eminent domain. He asked if the state courts could rule without addressing the defense claims that Atlantic Yards represents “public use.”

Brinckerhoff entered the fray. “There’s no reason to believe the [state] appellate division is going to render an opinion about [federal] constitutionality,” he said, noting that the plaintiffs in the state case were using under state constitutional grounds. Bansal said that Anderson claims that “private roads” will be built in garages, etc. “Our answer is it’s for public use.”

Brinckerhoff argued that case law cautioning federal courts from intervening in state processes pointed to “detailed systems.” However, regarding New York’s eminent domain law, he said, “There’s no reason this court has any less competence to make a decision.”

To the merits

After those procedural issues, the discussion turned to the merits of the case, which occupied most of the afternoon. “The procedural issues are very interesting and complex and difficult,” said the gravelly-voiced Kraus. “But if you put all these issues to one side, we feel very strongly that the plaintiffs’ claim can be dismissed because it really doesn’t assert a cause of action.”

“When a proposed taking serves a legitimate public purpose,” that’s the end of the inquiry,” he said. “Any other rule… would very quickly transform the courts into super-planning boards of last resort.”

He reminded the court that the ESDC had found that the project would bring affordable housing, transit improvements, open space, a new arena, and jobs, and would remove blight. Yes, the plaintiffs dispute the amount of the jobs and tax revenue and the impact of the housing, he said, but that’s not the issue.

As for the plaintiffs’ caution about developer initiatives, he said, the governing law “tells ESDC to encourage maximum participation by the private sector.” (The distinction between “maximum participation” and a developer-driven process likely will be argued.)

Kraus pointed to the redevelopment of Washington, DC pursuant to eminent domain. “I find it hard to believe that the [developers] woke up one morning and read the Washington Post” and decided to apply for contracts. “That just didn’t happen.” If plaintiffs believe that, he continued, with sarcasm, “I’d like to talk to them about buying a nice bridge.”

As for Kelo, which the plaintiffs have placed front and center, Kraus asserted that it simply didn’t apply, since—as argued in the legal memoranda—it dealt only with economic development, not the removal of blight. Rather, the Atlantic Yards project would be “removing an enormous blighted area” and create “public facilities like parks and an arena.” (The publicly-accessible open space would distinctly not be a park, however.)

Even if the plaintiffs wanted to follow Kennedy’s concurring opinion, Kraus said, the justice doesn’t lay out sufficient guidelines. “I would suggest this concurrence is a very, very slender reed to adopt a rule of intensive scrutiny.”

So what kind of case might trigger an alarm? Kraus suggested a case in which a store owner might pressure city officials to condemn a neighboring store for his use. The issue, he said, was reminiscent of Justice Potter Stewart’s famous formulation about hard-core pornography: “You know it when you see it."

(Kraus's reference was to an immediate neighbor; still, NoLandGrab points out that Forest City Ratner owns the Atlantic Terminal and Atlantic Center malls across Atlantic Avenue from the proposed Atlantic Yards site.)

Legislative body

FCR attorney Braun took on the contention, raised by the plaintiffs at a hearing last year, that the courts should look more carefully at an eminent domain finding by an unelected, nonlegislative agency. Two major cases, he said, regarded state or city agencies empowered to pursue condemnations.

“Regardless of who initiated it,” he said, the project “went through an elaborate public process,” citing ESDC hearings and public meetings before the City Planning Commission and various community boards. (The community boards, however, had no say, nor did the City Council, because Mayor Mike Bloomberg agreed that the project should bypass the Uniform Land Use Review Procedure and instead follow the state’s fast-track process.)

Housing issues

Braun returned to the project’s purported benefits, citing “7000 units” of housing. (There would be 6430 onsite, plus perhaps 600 to 1000 offsite, though the latter are not memorialized in state documents.)

“What’s the definition of affordable housing?” Levy asked, with no inflection.

The audience, recognizing the highly-malleable definition, erupted in chuckles. (Of the 2250 affordable units, only 900 would go to households at or below Brooklyn’s median income.)

“Below market,” Braun continued, unbowed. “We have a long history of public intervention in the housing market.”

The political process

As the hearing wound down, Levy presented the ESDC's Kraus with the brother-in-law example: “If there’s a public use and it benefited the brother-in-law, it wouldn’t violate the constitution?”

“That’s right,” Kraus responded. “It might violate state ethics laws. It might be an issue for the prosecutors.”

“If his client thinks this is a terrible process,” Kraus said of Brinckerhoff, “They can express themselves in the next election.”

There were a few groans from the audience. Outside of court, Mayor Mike Bloomberg had spoken harshly about the eminent domain challenge, asserting:
Without eminent domain, we'd be living in a city that was built 100 years ago and nothing ever been done… But we just have to have eminent domain or you wouldn't have any building going on… These are just people trying to stop a project, which will create housing and jobs and entertainment and revitalize our city, particularly a part of Brooklyn which was going to be a new Ebbets Field, just to show you how long that piece of property has stood vacant with just some rail tracks on it.


Again, the dispute was back to the facts. The Vanderbilt Yard has not been empty but a functioning railyard, with an increasingly growing value that finally makes it attractive for development. And while a new Ebbets Field might have been built nearby, it would not have been built on the project site.

1 comment:

  1. A key issue seems to be the expected future value of the proposed new use of the condemned land. There appears to be no guarantee, as in the case of Kelo v. New London, that the tax revenues will rise after condemnation. Very little of the announced New London building has yet taken place; tax revenues have probably declined.

    I suppose I would be accused of being disingenuous if I proposed a replica of the pre-9/11 World Trade Center to be constructed on the the Atlantic Yards site and demanded that current proceedings stop in favor of the completion of my higher value "WTCII".

    In any case, shouldn't there be a public auction and requirement of a bond posted of these would-be developers before they condemn land using the Kelo model?

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