Tuesday, August 04, 2009

In eminent domain brief, an effort to include recent episodes (MTA, etc.) and a reliance on Catterson's concurrence

There are a couple of interesting aspects to the brief filed Friday (and announced yesterday) on behalf of nine renters and property owners challenging eminent domain for Atlantic Yards in the state’s highest court, the Court of Appeals. (Oral argument will be October 14.)

First, while the original case was filed in state court in August 2008--after a federal case filed in 2006 was ultimately rejected--the new brief makes ample citation of recent episodes that bolster the argument that the state is bending over backwards to accommodate developer Forest City Ratner. Whether such information and argument will be admissible is another question.

Also, in describing the action of the condemning authority, the Empire State Development Corporation (ESDC), the brief also makes ample citation of Justice James Catterson’s February 2009 concurrence in the Appellate Division’s decision upholding the ESDC’s environmental review.

Though Catterson felt compelled to concur in the result, his opinion was scathing, with the tone of a dissent. (Develop Don’t Destroy Brooklyn, which has organized and funded both cases, also is asking the Court of Appeals to consider the environmental case, in which it and 25 other groups are petitioners.)

Disregarding Kelo

Also, though the press release claimed Atlantic Yards Eminent Domain Challenge Asks Court of Appeals to Reject Kelo, the challenge more precisely asks the court to disregard the U.S. Supreme Court’s controversial 2005 Kelo v. City of New London decision and instead rely on New York’s Constitution, a challenge previously untested in state courts.

The brief argues that the project, and the use of eminent domain thereof, “is unconstitutional for at least two fundamental and independent reasons.” The brief states:
First, the Project violates the public use clause set forth in Article I, Section 7 of the New York Constitution. That clause, which provides that “[p]rivate property shall not be taken for public use without just compensation,” must be read restrictively to allow the State to exercise its eminent domain power only where the targeted property is to be held open for use by all members of the public. This interpretation of the phrase “public use” is compelled by the plain meaning of the term, the intent of the New York citizens who first enacted the provision in 1821, and by a raft of decisions from this Court during the 19th and early 20th centuries – a time considerably closer to its enactment than more modern cases that have been infected by the U.S. Supreme Court’s aggressive attempts to render meaningless the comparable provision in the Fifth Amendment.

Those earlier cases have never been overruled or repudiated. They leave no room for doubt.

The brief also states:
The threatened seizure of Appellants’ homes and businesses violates the public use clause for an additional reason as well. Even this Court’s modern cases have made it plain that the momentous decision to condemn someone’s home and give it to someone else, requires the condemnor to weigh the public benefit that will be realized by the seizure against the benefit that will accrue to the recipient of property. If the private benefit outweighs the public, the taking violates the public use clause.

The appellants also argue that the Project violates Article XVIII, section 6 of the New York Constitution, which seemingly requires that the occupancy of any state-funded housing project designed to eliminate blight must be restricted to displaced low-income residents. The Appellate Division had agreed the clause applies only to low-income projects.

Setting out the facts

The facts section of the brief describes a developer-driven project in which FCR got the government to
(1) wield the power of eminent domain to seize the 68 parcels of private property and transfer them to Ratner; (2) direct the MTA to sell the rail yard to Ratner without competitive bidding; (3) award the entire Project to Ratner, including billions in tax breaks and direct subsidies, without a competitive selection process of any kind; (4) bypass all local zoning laws; and (5) bypass local law mandating approval by the 51-member legislative body, the New York City Council.

The brief notes that, when the project was officially announced in December 2003, the main public benefit was economic development, with no mention of the existence of blight nor its remediation. Rather, blight was not mentioned as a justification until 2005, when the U.S. Supreme Court considered Kelo and narrowly agreed that eminent domain for economic development passed muster.

The blight study

The brief, relying on Catterson, notes:
Although [consultant] AKRF was retained to analyze “trends” in the preselected area, it did not do so. Indeed, “the blight study failed to comport with the majority of the specific criteria set out in AKRF’s contract.”

Neither the Catterson opinion nor AKRF’s contract had been brought up in previous legal papers, and in May, the Appellate Division didn't agree with any criticism of the Blight Study:
This study, replete with empirical data, amply supports ESDC's finding that the project site is underdeveloped and characterized by unsanitary and substandard conditions, and thus provides an adequate foundation for its conclusion that the land is substandard.

Benefit to Ratner

Neither the ESDC nor the MTA would provide profit projections, despite language apparently instructing them to do so. The brief states:
Nowhere in the 23,000 page record compiled by ESDC is there the merest mention of Ratner’s windfall. Indeed, during argument before the Appellate Division, the ESDC conceded this point and argued instead that the benefit to Ratner was not relevant to determining whether the taking of Appellants’ properties is justified under the New York State Constitution’s Public Use Clause.

I’d add that, in legal papers, the ESDC initially claimed that a KPMG report did qualify as quantifying the benefit, though that argument was withdrawn.

The Appellate Division, however, concluded that there was no need to measure the private benefit:
Furthermore, in light of the evidence in the record that much of the land to be acquired is substandard, and that the taking is rationally related to the purpose of remedying these substandard conditions, any incidental profit that may inure to Forest City from the remediation of the blighted project site does not "undercut the public purpose of the condemnation of the substandard land"... It has long been recognized as a matter of State constitutional law that where the public good is expected to be enhanced by a project, "it does not matter that private interests might be benefited"…. In any event, on the record presented here, it cannot be said that the project's public benefits are "incidental or pretextual in comparison with benefits to particular, favored private entities."


The initial petitioners’ brief, as well as the new one, argue that case law requires such a comparison.

Benefits decreasing

The brief goes on to describe recent actions that suggest that public benefits are decreasing, including
the decision to jettison Frank Gehry’s highly touted designs (2) the sole source “renegotiation” of Ratner’s winning “competitive” proposal to purchase the MTA’s railyard by (a) reducing the upfront payment from $100 million to $20 million... (b) scaling back on the new “state-of-the-art” railyard... (c) dividing the land into parcels... (d) granting Ratner the right to rename the subway station to include the name “Barclays Center”... (3) announcing that the General Project Plan would be amended: (a) so that the ESDC can stage EDPL Article 4 condemnation proceedings seeking to transfer title to Appellants’ properties and obtaining orders directing the Sheriff to commence evictions, which will in turn make it easier for Ratner to abandon the Project after building only the arena, and will reduce costs by delaying payment of just compensation, if any, for as long as ten years; (b) to reflect new arena and project designs by a “value-engineering” firm; (c) to increase cost estimates, even though construction costs generally have been reduced due to the economic downturn; (d) to allow that the Project could take as long as 25 years to complete; (e) to indicate that the “Urban Room” public space will not be built for an indefinite period, if ever; and (f) to jettison the prior site plan and renderings by Frank Gehry...

However, the brief also cites recent testimony by the New York City Independent Budget Office that concluded that the project would be a net loss for the city. It quotes Gary Dellaverson, the Chief Financial Officer for the MTA, who said Forest City’s plan to get arena bonds issued before the end of the year was “the principal driver of the timing” to renegotiate the railyard deal.

Also, though they are not necessarily of legal import, the brief cites a column and editorial from the New York Post arguing against the MTA deal.

Also, the brief notes that the MTA Resolution, which in places tracks virtually verbatim the Modified General Project Plan (“MGPP”) approved by the ESDC on Dec. 8, 2006, omitted all references to blight, a state-of-the-art arena, and a state-of-the-art rail storage and inspection facility.

This argument takes off from an observation in my blog, though AYR isn’t cited.

In NY, public use more restrictive?

The appellate decision, rejecting the petitioners’ original state claim noted that, in the 19th century,
the courts recognized quite early on that some takings, which would benefit private enterprises such as railroad companies, would also inure to the benefit of the public and thus constitute "public use." For example, in the 1837 case of Bloodgood v The Mohawk & Hudson R.R. Co. (18 Wend 9), from which the petitioners quote the language of a dissenting Justice, the majority concluded that the Legislature had the constitutional power "to authorize the taking of private property for the purpose of making railroads or other improvements of the like nature — whether such improvements be made by the state itself, or through the medium of a corporation or joint stock company."

In the latest brief, the petitioners note that they had quoted a concurrence, not a dissent, which
explained in detail why the taking of private property, even for an unquestioned public use such as a railroad, comes within a hair’s breath of violating the Public Use Clause when the railroad itself is privately owned.

The appellate decision also noted that the Court of Appeals, in a 1936 case known as Matter of New York City Hous. Auth. v Muller, agreed that the Housing Authority could exercise the power of eminent domain, that it was no longer required that the public actually use property obtained via eminent domain and that
the public benefit to be achieved by the taking was to protect and safeguard the entire public from the menace caused by the existence of slums. As Muller aptly illustrates, the literal interpretation of the concept of public use which the petitioners urge us to apply was abandoned long before... Kelo.


The petitioners’ brief, however, counters that Muller was responding to a very different world, in which slums were a societal menace:
Needless to say, families and children dying from rampant fires and pestilence is not analogous to “graffiti,” “weeds,” and “underutilization” in an area around a below ground railyard that itself was created and left open by the government.

Constitutional Convention and EDPL

The brief notes that, in the last state Constitutional Convention, held in 1967, the proposed constitution included a revised Public Use Clause which provided, in pertinent part, that “Private property shall not be taken or damaged, as such term is defined by law, for public use or purpose without just and timely compensation.”

It was rejected.

However, the Appellate Division decision stated that the Eminent Domain Procedure Law (EDPL) trumped all of that:
Further undercutting the petitioners' position is the fact that the more expansive formulation of "public use" recognized by the courts for many years was codified in 1977 when the EDPL was enacted to create a uniform procedure for the exercise of the power of eminent domain. In this regard, EDPL 207 expressly authorizes this Court, in reviewing a condemnation determination, to consider whether "a public use, benefit or purpose will be served by the proposed acquisition" (EDPL 207[C][4]). Thus, the petitioners' contention that the Public Use clause of the New York Constitution permits property to be acquired only where it will be held open for use by the public is wholly at odds with the very statutory authority which permits this Court to review ESDC's determination.

In a footnote, the petitioners respond:
To be sure, as the court below recognized, in addition to authorizing parties aggrieved by proposed condemnations to sue for state and federal constitutional violations... the EDPL also authorizes challenges to condemnations that do not serve “a public use, benefit or purpose,” see EDP... Needless to say, however – and contrary to the court’s intimation – insofar as the Public Use Clause “is wholly at odds with . . . statutory authority,” it is the Public Use Clause that controls, not the other way around.

That argument poses a significant challenge; should the Court of Appeals agree that "public purpose" is insufficient to justify the use of eminent domain, it could jeopardize far more than the Atlantic Yards project. Thus, expect not only the ESDC to respond but also amici (friends of the court) such as mayors and other local officials.

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