Tuesday, February 24, 2009

In a swift half-hour, eminent domain argument touches on balance of public and private benefit--but not much more

In a quick but somewhat disjointed 30-minute argument before a four-judge appellate court panel yesterday, attorneys in the Atlantic Yards eminent domain case touched lightly but inconclusively on several contested issues.

Does the state constitution, as the plaintiffs contend, require a stricter evaluation of public use--the bedrock of condemnation--than does the federal constitution? The judges in the ornate Brooklyn Heights courtroom of the Appellate Division, Second Department, seemed willing to consider the argument, but also injected skepticism.

The plaintiffs gained ground on one potentially important point. While the defendant Empire State Development Corporation (ESDC) had in legal papers claimed (without foundation) that a document quantified the private benefit to developer Forest City Ratner, that document went unmentioned.

Indeed, an ESDC lawyer conceded no such analysis comparing private and public benefit was performed, but quickly argued that no such analysis was required. Indeed, case law suggests that even if there's substantial benefit to a private entity, the condemnation should be confirmed if public purpose is dominant--and an ESDC lawyer claimed there's "overwhelming public benefit."

Still, one judge called the absence of such an analysis a "critical point."

Back to ESDC, or to higher court?

The bottom line, contended plaintiffs' attorney Matthew Brinckerhoff after the hearing, is that the case should be remanded to the ESDC. "Then we would finally find out what Ratner's profit projections were, and that could be compared to all the allegations of public benefit," he said.

The state found that public benefits include blight removal, affordable housing, transit improvements, open space, and a publicly-owned (though leased for $1) arena, and says that those benefits are palpable enough to preclude any balancing.

"This [profit] is something Ratner and his companies have zealously guarded," Brinckerhoff said. "What they don't want is for the public to understand that they're going to make billions of dollars when it was never bid out."

Should his clients lose in this court--and that's more likely than not, I'd say--the case likely will wind up in the state's highest court, the Court of Appeals, Brinckerhoff suggested. "They made it clear last week [in a ruling] that they're leaving open the possibility that the state constitution is not as forgiving of governmental takings as the federal government."

Assuming a decision on this case comes down within two months, the next step could last from two to seven months, he said. That would make it very tough to break ground, as the developer now predicts, in the spring or summer, and further confirms that 2012, not 2011, is a more likely best-case scenario for an arena opening. (The Nets just announced a new arena sponsor, in a seven-year deal for "low seven figures" a year.)

But it may not threaten the developer's goal of getting financing by the end of 2009, a deadline set by the Internal Revenue Service for tax-free bonds, though Develop Don't Destroy Brooklyn spokesman Daniel Goldstein, the lead plaintiff, said he doubted the deadline would be met.

Also pending is a decision in the appeal of the dismissal of the case challenging the AY environmental review; it was argued in September and a decision is overdue.

(Here's coverage in the Brooklyn Paper, the New York Observer, and the Bergen Record; the latter was the only daily newspaper to send a reporter.)

More discussion in federal court

The relatively brief hearing was a graphic reminder why the plaintiffs—originally 13 but now nine homeowners and business owners, and commercial and residential tenants—initially went to federal court, where, a little more than two years ago, their arguments questioning the public purpose of the project got a thoughtful and extended airing.

Ultimately a judge dismissed the case, concluding that there were sufficient public benefits to preclude bringing the case before a jury, an appellate court affirmed that decision, and the Supreme Court declined to hear the case.

The state’s Eminent Domain Procedure Law (EDPL), set up in 1977 to expedite and streamline eminent domain cases, allows only 15 minutes per side in oral arguments, with no witnesses nor discovery. The case starts in the mid-level court, the Appellate Division, and an appeal of an adverse decision is discretionary, unless there's a two-judge dissent.

The lawsuit, Goldstein et al. v. Empire State Development Corporation, is organized and funded by Develop Don’t Destroy Brooklyn.

Leading off

The judges yesterday seemed unsympathetic to the plaintiffs' argument, previously untested in court, that a section of the state constitution approved at the 1938 Constitutional Convention requires projects developed with state subsidies or loans to be restricted to low-income people.

Jennifer Levy of South Brooklyn Legal Services, the first attorney to argue for the plaintiffs, began somewhat nervously and soon found herself interrupted by Justice Randall Eng, who pointed out that this was a case not about sate funding for low-income housing but about an act of condemnation.

But the ESDC’s own approval of the project, Levy contended, violated the constitution. Furthermore, she pointed out, there’s a state funding component: $100 million for infrastructure.

“Why is that an issue here?” asked Presiding Justice Robert Spolzino (right), who asked the most questions.

Because ESDC’s receipt of state funding triggers Article 18, Section 6, she said.

Wouldn't more than 2000 affordable units be produced in the Atlantic Yards project, asked Justice Howard Miller.

“Yes,” said Levy, then catching herself to clarify that, while that may be the number as approved (actually: 2250), “we don’t know how it will be implemented.” (The plaintiffs' brief points out that the project could indirectly displace 2929 households, thus obviating the public benefit.)

After the hearing, Brinckerhoff noted that "the crazy thing" was that the project under discussion, Atlantic Yards as approved in December 2006, was unlikely to be built and no one knew exactly what it would be.

Slum clearance

Bolstering her point, Levy pointed out that the framers of the state constitution envisioned that slum clearance “would mean enormous displacement,” hence the provision for low-income housing.

There was no time to tease out the ironies of that statement, but Atlantic Yards is by no means a classic slum clearance case. There is no massive blight—remember, project proponent Roger Green declared that the neighborhood wasn’t blighted—nor would there be enormous immediate displacement (though there may be significant indirect displacement).

Eng asked what should happen.

The project should be remanded to the ESDC for review, Levy said.

She pointed out that courts have allowed the legislature to defined “low-income” as people who can’t afford to buy or rent on the private market. She noted that some of the Atlantic Yards units would rent for $2600 a month and be eligible to households earning 160% of Area Median Income (AMI)--the implication being that that was above-market.

Handoff to Brinckerhoff

Lead attorney Brinckerhoff, taking the remainder of the allotted 15 minutes, gained some steam, pointing out that the state offered many other benefits beyond the $100 million, such as “extraordinary infrastructure” (actually, that’s just a potential benefit) and “triple tax-free bonds.”

However, there was not enough time to argue, as he had in federal court and as expressed in briefs in this case, that Atlantic Yards seems to be a sweetheart deal, with, for example, a blight study limited to the properties Forest City Ratner sought and a likelihood that the arena would be a money-loser for the city in terms of tax revenues.

NYS and public use

Brinckerhoff told the panel “I’m sure you’re aware” of a Court of Appeals decision last Tuesday in a case known as In the Matter of Aspen Creek Estates, Ltd., v. Town of Brookhaven, in which the decision noted, "Finally, the parties have not argued, and we do not decide, whether the New York Constitution... imposes a more stringent standard for takings than does the Fifth Amendment as interpreted by" the U.S. Supreme Court's Kelo v. New London decision.

“Our argument,” he said, is that New York state does provide more protections than the federal constitution.

Spolzino responded skeptically. “There’s a century of decisions about public purpose,” he said. “A problem like this seems to fall under public purpose.”

Brinckerhoff suggested that the state constitution was strictly construed in early cases, but later cases relied on the federal constitution.

Relative benefit

He pointed to a 1951 state case known as Denihan Enterprises, Inc. v. O’Dwyer, which the court invalidated a deal between the city of New York and insurance company to build a parking garage and a small park. The court ruled that "the use is not public where the public benefit is only incidental to the private."

(Actually, the Court of Appeals found that the taxpayer had sufficiently pleaded its case to survive a motion to dismiss, stating, "We are here and now solely concerned with the legal sufficiency of plaintiff's complaint.")

“We have no record of what the private benefit will be,” Brinckerhoff declared.

"What about the Yonkers case," Spolzino asked, referring to a 1975 case known as Yonkers Community Develop. Agency v. Morris, and summarizing it as: once you have a finding of blight, the blight correction constitutes a public purpose.

Rulings in state cases on eminent domain, Brinckerhoff said, had been relying on the federal constitution, not the state constitution, which could be construed more narrowly.

(According to the state's brief, Yonkers affirmed that taking land for urban renewal was legitimate under both state and federal provisions.)

Questions of blight

Eng raised the issue of the railyard at the heart of the footprint. “We’re talking about acres and acres of blight,” he said.

“You consider it blighted,” Brinckerhoff responded.

It has been found to be blighted, Eng replied, referencing the state’s blight study.

“I’m not trying to say you can’t make a reasonable argument that that area is blighted,” Brinckerhoff conceded.

(It was a legitimate admission on legal grounds—the railyard is part of the Atlantic Terminal Urban Renewal Area, or ATURA, which is per se blighted, and all the plaintiffs have property outside ATURA. But it glossed over a much larger issue: the Vanderbilt Yard has been a working railyard rather than a fallow spot, and, as it finally became feasible as a site for high-rise development, the city and state never built a platform to entice developers nor put the site out for bid, until Forest City Ratner was anointed the site.)

However, he said, “you still have to argue the private benefit,” he said, stressing that there was no competing bid for the site (presumably he meant for the site as a whole; there was a belated RFP for the Vanderbilt Yard).

“There is no record—at all,” he said, of the state making a finding.

“That’s the critical point,” Spolzino said. “Had they made a record, we’d be in a position of sustaining judgment if it’s (a) reasonable (assessment).”

Brinckerhoff used his remaining moments to argue against defense contentions that the case was out of bounds. “You have to reach the merits” of the issue, he insisted.

Defense case

ESDC attorney Charles Webb began by criticizing Brinckerhoff for giving “very little attention to a significant issue,” the intent of the drafters of the state constitution.

Spolzino interrupted. “Could you address the last point,” he asked, wondering if the ESDC articulated the balance between private and public benefit.

There’s no requirement of such a finding, Webb said.

Is that an admission that ESDC did not make a finding, Spolzino asked.

Webb said no, stressing that the site was “afflicted for decades with substantial blight.”

Spolzino pressed the question, asking if a finding had been made.

“I don’t believe there is,” Webb conceded. “There’s no reason to. They don’t have to.”

(The Brooklyn Paper observed that Spolzino "appeared to be sympathetic to Brinckerhoff’s argument." I'll point out that Spolzino, in a separate case involving a challenge to the ESDC's relocation offer for AY footprint residents, seemed skeptical of the ESDC's arguments, but wound up joining the unanimous opinion in favor of the agency. Then again, he was the presiding judge who granted leave to appeal in the Aspen case, which led to the Court of Appeals' reference to not addressing whether the state constitution imposes a stricter standard when it comes to eminent domain.)

State vs. feds

What about the plaintiffs’ argument that there are “really no cases under the New York State constitution,” Spolzino asked.

Webb said there were, citing a 1936 case known as N.Y.C. Housing Auth. v. Muller, which had rejected the claim that public use literally required use by the public. (This was a case in which there was no private developer involved.)

“If we were arguing the case in 1909,” he said in a dig at his adversary, “I’m sure he would have a better set of authorities” to consult.

Procedural issues

“Let me go to the real issue: should they be here at all?” Webb asked rhetorically. “They made a calculated decision” to first go to federal court. Should other plaintiffs do that, and be permitted to refile their cases in state court, “the intent of the [EDPL] is completely thwarted.”

He also argued that, given that EDPL was enacted to expedite condemnation cases, any provision in the CPLR (Civil Practices Laws and Rules) that allowed the case to be delayed would be inconsistent. Brinckerhoff had argued that the CPLR applies to other special actions that are supposed to be expedited.

Prior to the EDPL, he noted, there was no provision for review prior to the government’s attempt to condemn property.

Was there no way to raise these issues, asked Spolzino.

“Not before the taking,” Webb responded.

The issue of procedural impropriety, however, got only a brief discussion; presumably, had the judges wanted to dismiss the case because it duplicated the federal lawsuit, they would have done so in an earlier legal round.

Finding of benefit?

ESDC attorney Philip Karmel soon took the podium. He noted that “ESDC made all the findings required,” pointing to page 20,078 from the absurdly voluminous record, which includes numerous documents created during the environmental review.

Spolzino questioned whether that page in the General Project Plan covered the question at issue.

It shows ESDC examined all aspects of how the project would be paid for, Karmel said, adding, “There’s overwhelming public benefit.”

He explained that while there may be no full explanation in the Determination and Findings of how the state’s $100 million appropriation would be used, there is an explanation in the General Project Plan.

Back to Article 18

In the final moments, Spolzino questioned Karmel about whether Article 18 had been violated.

Karmel said the petitioners had misinterpreted Section 6. While the petitioners say the ESDC has created a distinction between a low-income housing project and a project removing blight, he said ESDC was acting within the letter of the law.

“ESDC can address blighted conditions to create market-rate housing,” he said.

Beyond that, the project “would only displace 146 people."

“So your argument is, if Article 18 applies, it’s been satisfied,” Spolzino stated.

“Absolutely,” Karmel replied.

After a few more moments of discussion of Article 18, Section 6--the state's contention was that it applies only to low-rent housing projects, not a more wide-ranging project like AY--the argument was over.

Filing out

Dozens of people--perhaps half of the spectators, flooded out of the room, perhaps the last major court hearing in the Atlantic Yards saga. Among those looking on were ESDC general counsel Anita Laremont, BUILD president James Caldwell, Forest City Ratner executive MaryAnne Gilmartin, and additional lawyers on the case.

Those clustering around the defense lawyers seemed encouraged, even as Brinckerhoff, in the next room, with numerous Atlantic Yards opponents nearby, maintained that, no matter the outcome, the case would have to get a hearing in the state's highest court.

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