Tuesday, June 08, 2010

Second look at Columbia eminent domain argument, with FAQ; will bad faith claim be the key? Also, law professors debate public use, land assembly

After watching the newly-posted webcast of the June 1 oral argument in the eminent domain case (Kaur v. N.Y.S. Urban Development Corp.) at the Court of Appeals regarding the Columbia University expansion, I've expanded and amended my original post, which was based solely on an audio file.

The 40-minute argument is well worth watching. Empire State Development Corporation (ESDC) attorney John Casolaro, cerebral and persistent, seemed aggrieved when he had to defend weaker positions. The property owners' attorney, Norman Siegel, was about as passionate as you can get in the relatively restrained confines of an appellate court.

Chief Judge Jonathan Lippman, with the help of a few colleagues, did a good job ensuring that the major issues got highlighted. (The Atlantic Yards oral argument got bogged down in places, by contrast.)

And Judge Robert Smith, the dissenter in the AY case (Goldstein v. N.Y.S. Urban Development Corp.), more than once played devil's advocate, challenging Siegel to convince him to vote to overturn that very recent precedent, set last November nine days before the Appellate Division, in a split decision, ruled against the ESDC in the Columbia case.

And I can offer a few more observations and predictions.

Will the Court reverse the Appellate Division's surprising decision not to grant deference to the ESDC's finding of blight?

Well, even Smith reminded Siegel that the Atlantic Yards case stands "for the proposition that we'll defer to the agency to a considerable extent."

So, how could Siegel get around that?

He said there was bad faith in regard to the way the ESDC went about hiring environmental consultants--one of which worked simultaneously for Columbia--and the arbitrary standards used by those consultants to determine blight.

That sounds like a strong argument.

Yes, but Smith noted that the "Atlantic Yards people" said the project was "all a set-up for Ratner, that he picked out the area. And when he asked Siegel if it was any different, Siegel didn't quite answer.

Will the court follow Siegel's standards?

Maybe in part, but unlikely in whole. He said those doing blight studies must be independent and neutral, and the study must be done before a project is launched. Had the court believed in the latter rule, it would've ruled in favor of the plaintiffs in the Atlantic Yards case.

So on what issue will the case turn?

Quite likely how closely the court is willing to look at the allegations of bad faith. It didn't do so in the case of Atlantic Yards. There's more evidence in the Columbia case, but is that a difference of degree or kind?

In the the legal blog of the Albany Government Law Review, one student contributor suggests that Kaur "could be the long invoked hypothetical case by the Court of Appeals that would justify a judicial halt to the condemnation proceedings even if the taking meets constitutional mandates."

Also, there's the issue of the ESDC's denial of several Freedom of Information Law (FOIL) requests, an issue on which the Court of Appeals has previously supported the petitioners in the Columbia case.

What was Siegel's least credible moment?

When he claimed, "I’m not that familiar with the record in Atlantic Yards."

What was Siegel's strongest moment?

When he cited a memo from an ESDC lawyer that stated, We are going to manufacture support for condemnation.

What was ESDC attorney Casolaro's weakest moment?

When, asserting that condemnation of property for any educational institution meets the public use test, he agreed that even a local trade school would qualify.

What was his strongest moment?

When he agreed with a judge's suggestion that the court need not address the issue of eminent domain for an educational facility if it agrees that the record supports a finding of blight.

What's the best argument for reform of eminent domain laws?

When Lippman, in a moment that was either incredibly ignorant or faux-naive, asked if there is "statutorily-provided discovery in this kind of situation." Answer: no, and that's why the law favors condemnors more than in any other state.

The quiet press

I'm still astounded that none of the city's three daily newspapers saw fit to cover the oral argument, given the importance of the case, and the prominence of coverage when the Appellate Division found for the landowners challenging eminent domain--for example, a front-page story 12/4/09 in the New York Times.

Such neglect is an example, along with such things as the non-coverage of New York University's takeover of Polytechnic University, that Atlantic Yards is hardly the only story that the press has found it too difficult to cover comprehensively.

A debate over eminent domain

A couple of law professors have been looking at the larger issues raised by the case.

In The Misguided Battle over Eminent Domain in New York, New York University Law Professor Rick Hills writes:
I stand by my earlier prediction that the Court of Appeals will reverse the appellate division's decision barring the condemnation. But the doctrinal battle between the appellate division and the Court of Appeals really is rooted in empty, incoherent blather that can never be a satisfying basis for a doctrine. "Blight" is an epithet in search of a definition, while "public use" is either merely a requirement of public benefit (in which case, it is judicially unmanageable) or a requirement of public title (in which case, it is a perverse encouragement of statist inefficiency).

The concepts of "public use" and "blight" ignore the real and fundamental dilemma raised by over-fragmented land -- viz.: (a) land markets tend to do a poor job of re-assembling over-fragmented parcels but (b) assemblers use eminent domain to hog all of the post-assembly surplus, to the justified resentment of the dispossessed owners. Absent some assembly mechanism beyond arms' length private bargaining, Manhattanville will be locked into drab industrial uses -- gas stations, storage facilities, auto repair, etc -- that, I strongly suspect, the owners themselves would quickly jettison if they could get a reasonable share of the "post-assembly" value.
I'm not sure that's true, given that a rezoning would accomplish at least part of solution, allowing larger buildings, if not the assemblage of a large site.

A solution?

Here's Hills's solution:
The best answer to this dilemma is the creation of a mechanism by which the neighborhood's owners can collectively decide whether to sell their land. Such neighborhood self-governance would protect the owners' autonomy as well as their power to extract some share of the post-assembly value; It would also protect both society and the owners themselves from the owners' own strategic behavior in parcel-by-parcel bargaining. Michael Heller and I have proposed such a mechanism -- the land-assembly district -- that, whatever its faults, surely outperforms the twin evils of pure private property or pure eminent domain. Until such a device is created by a state legislature, however, we will be locked into the fruitless battle between advocates of private property who declare that eminent domain is unfair and advocates of eminent domain who assert that private holdouts make individual bargaining inefficient. The tragedy is that both sides of this fruitless argument are right.
A response

In Is the Debate Over Eminent Domain “Empty and Incoherent”?, George Mason University Law Professor Ilya Somin, a libertarian, responded that requiring "either government ownership of condemned property or at least a right of access by the general public (as in the case of land used by common carriers or public utilities)" would reduce “statist inefficiency,” and block eminent domain in cases such as Kelo v. New London and Poletown in Detroit.

He doesn't mention Atlantic Yards, but remember that a basketball arena was considered accessible to the public, albeit for a fee.

Narrowing blight

Somin writes:

Hills is right to suggest that “blight” is a vague term. Still, it is more than just an “epithet.” As I argue in this article, there is a strong case for using government intervention (though not necessarily condemnation) to eliminate blight defined as conditions on one property that inflict serious harm on the entire neighborhood, for example by spreading disease. If the effects are spread out over a large area, private parties face a collective action problem in trying to alleviate them.

On the other hand, there is no good justification for using eminent domain or other government coercion to alleviate “blight” defined merely as a lesser degree of development than government bureaucrats consider to be desirable. Market competition can generally do a good job of determining which land should be developed and to what extent. Indeed, defining “blight” so broadly that virtually any area can be declared blighted and condemned will actually undermine development by rendering property rights insecure, thereby deterring investment. Such blight condemnations merely enable politically powerful interest groups to take property that they covet from the politically weak.

Preventing holdouts

Somin responds to Hills's
standard argument that we need eminent domain to prevent holdouts from blocking valuable assembly projects. I have answered this claim at some length in this article (204–10). Interested readers should also check out this excellent article by Notre Dame property scholar Daniel Kelly. To briefly summarize, Kelly and I point out that private developers can effectively prevent holdouts by assembling property using secret purchases that prevent potential holdouts from learning that a major assembly project is ongoing. Therefore, they cannot use that knowledge to try to extract so large a share of the profit that the project becomes infeasible. This is how Disney assembled the land it needed for Disney World. Of particular relevance to the Columbia University case, it is also how Harvard University has routinely assembled property it needed in the Boston area. Secret assembly doesn’t perfectly solve all holdout problems. But it does work quite well.
But what if some landowners simply disagree? With the Atlantic Yards project, had the government not only owned the arena (as it would in a fig leaf of formality) but took a significant share of revenues, there would have been a stronger argument for public use.

Somin writes that he will later comment on the "land assembly districts" proposal, which he considers an improvement over the status quo, "but still inferior to strict enforcement of “public use” constitutional limits on takings."

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