Yesterday in Kings County Supreme Court emerged the most complete—and, to the Empire State Development Corporation (ESDC), completely off-base—assault on the Atlantic Yards project ever heard in any courtroom, but it occurred before a handful of spectators and a single, not-so-engaged judge, well after most people, officials, and editors had relegated Atlantic Yards to the status of old news.
The case involves only three plaintiffs (two of whom are corporate entities owned by longtime footprint property owner Henry Weinstein), none of whom were present in the courtroom.
With charges that the project timetable is “a complete fantasy” and the project is “a betrayal of the public trust” and “an embarrassment to democracy,” it was, perhaps, the argument that attorney Matthew Brinckerhoff should’ve made last October before the Court of Appeals, the state’s highest court, in a stately setting before engaged judges and a packed house. But, rather than get to the fundamentals of the sweetheart deal, that oral argument ran aground on debates about the contours of the state’s public use clause and whether the case should have gone to the high court in the first place.
Also, as Brinckerhoff stressed yesterday in court, some of the key elements of the ESDC’s behavior came to light only after the Court of Appeals’s decision in November, as well as the previous, seemingly dispositive appellate ruling: “They timed their disclosures in order to avoid judicial review.”
ESDC attorney Philip Karmel, unbowed, responded forcefully and sometimes dismissively to Brinckerhoff’s kitchen-sink arguments, some of which were not exactly on point. Curiously enough, however, Karmel never explained why the crucial Development Agreement, released in January weeks after it was publicly promised, was withheld for so long.
(The case is officially known as Peter Williams Enterprises, Inc et al. v. Empire State Development Corporation, but three of the original six petitioners, including Williams, Freddy's Bar & Backroom, and Daniel Goldstein, left the case as a condition of reaching eminent domain settlements. Besides the Weinstein entities, the other petitioner is The Gelin Group, the corporate name for the owner, or at least occupier, of a home on Dean Street scheduled for condemnation in a later phase.)
The argument took place in a bland wood-paneled courtroom on the 17th floor of 320 Jay Street, a tan, 32-story tower built in 2005, handsome enough in a generic way. Located at the southwest corner of Johnston Street, the tower is also known as 12 MetroTech, a project built by Forest City Ratner, and thus might be considered something of the developer’s home court.
(Photos and set by Tracy Collins, from January 29 hearing on case trying to block condemnations, which raised many but not all of the same points.)
The case was a continuation of one heard August 6, where just a handful of spectators were present; I counted five in the anti-AY side. Yesterday, in a courtroom with a capacity for 95 people--and too small in January for the throngs--the crowd was even smaller.
The attorneys appeared solo at their respective counsel tables. On the right side of courtroom were Daniel Goldstein of Develop Don’t Destroy Brooklyn, wearing a loose guayabera rather than the suit he's worn when he's been a named plaintiff, and Steve Soblick of the Council of Brooklyn Neighborhoods and No Land Grab. (Goldstein was originally a plaintiff in this case but withdraw as part of his eminent domain settlement, a deal brokered, not without pressure, by Gerges. Patti Hagan, who led initial opposition to the project, was at Friday’s hearing.)
Across the aisle were FCR’s outside counsel Richard Leland (playing back-up to Jeffrey Braun, who was otherwise engaged), FCR general counsel David Berliner, tieless in a blazer, as if ready for the weekend, and VP Michael Rapfogel, otherwise known as the guy who lurked at a Goldstein press conference.
In contrast with Manhattan Supreme Court Justice Marcy Friedman, who asked several questions of the ESDC during a June 29 hearing in a separate case (brought by two coalitions of civic groups) arguing that the Development Agreement required a new environmental review, Gerges mostly stayed out of the argument.
Though the lean, bespectacled Gerges has a somewhat rabbinical mien, with a quick wit, he maintained a poker face, looking at times a bit pained, as if asking himself why he was being saddled with questions of such cosmic significance this late in the game.
The argument was interrupted periodically as the day's court reporter, more used to criminal rather than civil cases--while Gerges is the county condemnation judge, his docket mostly includes criminal cases--asked for clarification of names and terms.
And, quite unlike the Court of Appeals hearing, which had a tight focus on the judicial matters at hand, yesterday’s argument was punctuated by a recess so Gerges could sentence a bedraggled, physically unwell, and seemingly broken young man--who barely murmured and had no family in the room for backup--to prison.
Brinckerhoff (right) began by thanking Gerges for giving him the time to argue and “for taking this matter seriously,” a statement that seemed a bit aspirational, aiming to goad Gerges into doing exactly that.
Brinckerhoff said he was acting for his clients, for all those affected by the project, and “frankly, for the public at large,” who’ve suffered “a really profound betrayal of the public trust by the respondent Urban Development Corporation [aka ESDC] in league with the developer.”
Gerges kept his poker face. There has to be a point where new eminent domain findings must be issued, Brinckerhoff said, and “we bitterly disagree at where that point will be.”
Karmel leaned forward a bit tensely, taking notes.
Brinckerhoff said that his clients accept the Court of Appeals’s finding that there was a public use or benefit to the project as of December 2006.
Gerges encouraged him not to repeat what’s in the legal papers, but only to offer supplementary information.
“Let me be clear about what I’m attempting to do,” declared Brinckerhoff, whose pepper-and-salt beard and sometimes unruly curls give him somewhat more of a professorial than corporate air, though his boutique law firm does quite well. “There’s a whole set of facts found in the document,” and none of such new information was disclosed until after the petition in this case was filed in January. Such facts, “put the nail in the coffin on what’s been going on for years.”
And that, he said, is why his clients should be granted, at a minimum, leave to amend the record to add such facts “deliberately concealed from us.
Brinckerhoff began going over some old ground, reprising several arguments made in the eminent domain case and the earlier case before Gerges, challenging condemnation. (Those earlier arguments were unsuccessful, but in certain cases not seriously evaluated.) As of December 2006, he said, the record showed “many indicia of this not being a public use taking.”
Forest City Ratner conceived and drove the project, “We know that all the normal government processes were bypassed,” Brinckerhoff said. “All the local governmental officials were vehemently opposed to this project from the start.”
That’s not so; it applies mainly to City Council Member Letitia James, state Senator Velmanette Montgomery, and then-U.S. Rep. Major Owens. State Assemblyman Roger Green was an important supporter of the project; he’s been succeeded by Hakeem Jeffries, who’s been closer to the fence. (Owens was succeeded by project supporter Yvette Clarke.) And most not-quite-local officials outside of the immediate project area were not vehemently opposed.
“This was a done deal from the start,” Brinckerhoff continued. When the project was announced, he pointed out, “nobody ever said anything about blight, which ultimately became the raison d’etre. It was about economic development, about hoops, housing, and jobs.” (Or, as the slogan went, “Jobs, Housing, and Hoops.”)
And the study done to justify blight, he noted, was performed by an environmental consultant, AKRF, “that has never not found blight,” an important fact established at a public hearing held in January by state Senator Bill Perkins. ARKF, he noted, had been criticized by appellate court Justice James Catterson, who wrote a scathing concurrence in an Atlantic Yards case and a plurality opinion--later overturned--against the ESDC in the Columbia University eminent domain case.
“That’s ultimately what this case is about,” he said.
Ratner, he said, didn’t comply with the MTA RFP which required profit projections, an issue that’s never--as far as I know--been addressed by the courts.
“Two other quick things,” he added. At the time the project was approved, there was a belief that the project would be a net tax benefit. He cited a 2005 Independent Budget Office (IBO) report that found a modest benefit to the city--though he didn’t mention that the city and state relied on their own reports, which found a much larger gain.
He ticked off the justifications for the project: blight removal, an upgraded railyard, new tax revenues, job creation, and the creation of 2250 units of affordable housing.
Those, he said, were the findings in 2006. “The question now for the court is: what do you do about everything that happened after 2006?” he said.
In January 2007, in a deal that had to have been in the works for months, Forest City Ratner signed a naming rights deal for the arena with Barclays Capital that was reported at $400 million. (It’s since been cut to $200 million-plus.) It was a benefit purely to Ratner.
“Doesn’t that fact alone tip the balance?” Brinckerhoff asked rhetorically. “I think it does, actually, but there’s a lot more.”
He spoke with urgency but not agitation, more self-assured than in some previous exchanges, as if at peace with his last shot at getting the Atlantic Yards saga into the judicial record.
Then he described the deal struck by Ratner with developer Shaya Boymelgreen to take over the latter’s lease at a building owned by Henry Weinstein, despite a clause barring such an assignment. When the ESDC made its findings, it claimed that Forest City Ratner had control over Weinstein’s building, he said.
(It did, but offered an asterix indicating it was in dispute. However, as I wrote, the map color indicated Ratner’s control rather than the dispute. There should have been a neutral color.)
“Does that tip the balance, that kind of underhanded dealing?” Brinckerhoff asked. “I don’t know, but that combined with what I already said, and am about to say, clearly does.”
In the spring of 2007, he continued, it was revealed that there was a federal investigation of Forest City Ratner’s Ridge Hill project. Typically, he said, a governmental entity suspends all contracts until there’s a clear showing that the private entity is a legitimate recipient of government aid. (I haven’t seen any documentation on that.)
“Does that tip the balance? I think it might, but there’s a lot more,” he said, a slight air of a carnival barker in his voice.
Gerges, distracted somewhat, indicated to his clerk to bring in a prisoner for sentencing.
The missing market study
In September 2007, Brinckerhoff said, “we found out” that when AKRF was retained to do the Blight Study, it was supposed to look at market trends in the area. “Most people believe the area was developing on its own, and on an upswing,” he noted.
But AKRF either never did the market study, or it was never released. “That analysis had to have concluded that the area was surging,” he said.
“It’s all there in Justice Catterson’s opinion,” Brinckerhoff said, citing Catterson’s fiery February 2009 concurrence in the case upholding the dismissal of a challenge to the AY environmental review. (The existence of the contract requiring the market study was revealed on this blog.)
Brinckerhoff drew a connection between a February 2008 claim by then-FCR spokesman Loren Riegelhaupt “When it comes to sharing information with the public and governmental bodies, there’s no such thing as too much, as far as we are concerned" and Bruce Ratner’s notorious statement to Crain’s New York Business in November 2009, "Why should people get to see plans? This isn't a public project."
“That was really revelatory,” Brinckerhoff said. “We all knew it, but we didn’t think anyone would ever reveal it. They don’t want to tell the public what they’re doing. They do whatever they want. They timed their disclosures in order to avoid judicial review.”
Revising the deal
And after the state eminent domain case was unanimously dismissed by the Appellate Division--a decision widely seen as the end of the case--”they thought they were done,” he said. (The Court of Appeals surprisingly took the appeal.)
Next up, Brinckerhoff cited the revised June 2009 deal with the MTA to build a smaller, not larger, replacement railyard, and to pay only $20 million down, not the $100 million pledged, and to pay the rest at a gentle interest rate over some two decades.
Moreover, he said, while the professed primary goal of the project is blight removal, there’s no guarantee that the rest of the railyard would be decked over. “He can abandon it at any time,” Brinckerhoff said of Ratner, and the penalties “are not very great.”
(If FCR abandons the project after Phase 1, rather than spent $147 million on railyard improvements, it would forfeit an $86 million letter of credit.)
Brinckerhoff alluded to another case, in which he’s representing disabled riders against the MTA, noting that the agency is offering service cuts while entertaining a “massive sweetheart deal.”
“Is that enough to change the public benefit?” Brinckerhoff again asked rhetorically. His answer was yes. “This project is an abomination.”
Gerges interjected and cautioned Brinckerhoff to avoid rhetoric. “Just get to the facts,” the judge said. “Weren’t these exact items in your counterclaim and affirmative defense” in the earlier case?
“In part but not in full, and not in context,” responded Brinckerhoff.
That, Gerges said, is why he asked the attorney to highlight the new items. “I ruled on every item,” Gerges noted.
“I understand you ruled on them,” Brinckerhoff responded, with a tinge of grievance. But the main reason was that the claims were time-barred.
“The primary basis was the Court of Appeals decision,” Gerges said.
Brinckerhoff shot back, “We begged the Court of Appeals to consider the new evidence. It didn’t consider it because it was limited to the record as of December 2006.”
Gerges looked on a big grudgingly: “I’ll hear you out, but you also have all this in your papers.”
“The problem with this case,” Brinckerhoff declared, as if finding the Rosetta Stone after four years, “[is] it's about a cumulative process. It’s about context.”
“I read very carefully,” Gerges said, “but go ahead.”
“If I tried to go over everything,” Brinckerhoff countered, “we would be here for days.”
Looking at it whole
He said he recognized that the revised MTA deal survived a court challenge last December. “What I’m asking the court to do is look at it as a whole,” he said. “The reason nobody has recognized... just what a betrayal of the public trust it is, is that they’ve looked at it piecemeal.”
He cited the IBO’s new analysis from September 2009, which indicated the arena would be a loss to the city, but that Ratner would receive a total of $726 million in subsidies and benefits.
“The MTA came to its rescue, like all the big companies were being bailed out in 2008-09,” Brinckerhoff said disdainfully. “Does that change the equation?” he added. “But there’s still more, there’s a lot more.”
In June 2009, he said, “we found out the [project] square footage had been reduced by approximately 35%,” he said. “All those benefits have to be reduced--actually, all those losses have to be increased.” (Actually, a minimum for Phase 1 was revealed in the September 2007 City Funding Agreement, while a minimum for the project as a whole was revealed in a September 2009 ESDC board document.)
“In September of 2009, there was another big revelation,” Brinckerhoff said, citing a document that emerged as the ESDC board re-approved the project. It turns out, he said, that the promised 2250 units of affordable housing are conditioned on subsidies, “finite subsidies” that would be used “whether this development exists or does not exist. Those 2250 units are going to be created somewhere.”
“Everyone thought," Brinckerhoff said, "that as part of the trade-off, [Ratner] was going to have build the affordable housing."
The new facts
Gerges encouraged Brinckerhoff to get to the new facts.
“You know my rhetorical style,” Brinckerhoff said a bit placatingly. He went on to describe the Ridge Hill indictments that emerged in January, which showed Forest City Ratner enmeshed in the case, though not indicted or even mentioned.
“Does that mean that maybe somebody should take a closer look at Forest City Ratner?” he asked. “I think that it does."
Then, in January, 2010, “all of the documents that set forth what the actual deal is... finally get released,” Brinckerhoff said. “That’s why I’ve asked for leave to amend my petition.”
“The only thing that’s guaranteed is an arena and two towers,” he said. (Not quite. More precisely, nothing is guaranteed in the Development Agreement, but there are specific penalties for delays on the arena and the first three towers.)
“Ratner gets 15 years to begin construction of the platform,” Brinckerhoff stressed. “These are new facts, not in my petition. [Ratner] can now sit back and time it and wait.”
“We find that, overall, he has 25 years [to build the project],” Brinckerhoff continued. “The finding in 2006 is that this was a ten-year project.... It’s not rocket science. If you have an area that everyone believes to be blighted, that’s a fundamental part of the analysis.”
And, over 25 years, “instead of remediating that blight, there’s no guarantee at all,” he said.
We now know the timetable is “a complete fantasy," Brinckerhoff said, his argument cresting. "If that does not, with everything else I’ve laid out, give rise to a court to direct the UDC to determine whether there’s a public use or benefit, then nothing could. It’s the one small thing that the EDPL [Eminent Domain Procedure Law] requires.”
Yes, Brinckerhoff acknowledged, there can be alterations in a plan. But Leichter, the case the ESDC relies on to rebut his case, he said, “was a case about modest changes, not massive changes.” Even then, he noted, the courts said it required a new public hearing, if not new findings.
Brinckerhoff then offered a la-di-da account of the project as it stands. “Oh, it’s going to be 25 to 30 years and there’s no guarantee they’re going to remediate blight,” he said. “Oh, by the way, it’s a net loser to the public fisc.”
He addressed Gerges directly. “Someone, somehow, and you’re the only one that’s left for the people at large and my clients,” needs to take a look, Brinckerhoff said a bit imploringly. “It’s an embarrassment to democracy. It will eventually... be a chapter or a book of this city’s and this state’s history that will embarrass those on the other side of the equation.”
And then the parties took a break for the sentencing.
The ESDC response
Karmel, the ESDC attorney, got up, and with restrained disdain and full composure, asserted that none of the ESDC arguments had “been addressed in the rhetorical display we just witnessed.”
“We just heard counsel speak at great length,” Karmel said. “I did not hear a single change identified in the GPP [General Project Plan]. Virtually all the elements of the GPP are the same. The basic charges in the petition have been completely abandoned by petitioners.”
(I’m not so sure about that. See the petition.)
“We’re now moving on to all sorts of other miscellaneous observations that collectively are said to bring a claim,” Karmel said, calmly, in his forceful, somewhat grating style.
“Virtually everything we just heard has already already been considered by this court and decided by this court,” he said, alluding to Gerges’s decision in March. “Your Honor has already looked at” the alleged changes in the GPP.
Gerges issued his first and only specific charge to a lawyer. “I think counsel [Brinckerhoff] is raising the question” that changes came later. “Can you speak to that issue?”
“You said there was a statute of limitations problem,” Karmel said, referring to Gerges’s decision, “but even if we were to look at the merits,” the charges weren’t valid. He pointed to pages 43-44 of Gerges’s decision. “That finding is obviously dispositive.”
“On page 54, you observes correctly that the Eminent Domain Procedure Law does not require guarantee of project completion to permit the government to exercise eminent domain,” Karmel continued. “Virtually everything has already been litigated and decided.”
He noted that there was a public hearing last year. “After considering public comments that included all these type of arguments, the ESDC in September 2009 affirmed the 2009 General Project Plan,” he said.
He pointed to pages 34-40 of the 2009 Modified General Project Plan (MGPP), saying that the findings of public purpose are “virtually identical” to the findings in the 2006 MGPP.
The Development Agreement
Karmel then began to detail the issues Brinckerhoff brought up, starting with the most recent, the Development Agreement.
“Counsel, are all those things in your papers?” asked Gerges. “I don’t mind you highlighting, but I read these [papers carefully].”
“I’ll try to be succinct,” responded Karmel, who noted, not unreasonably, that Brinckerhoff had talked for a while.
Karmel noted that his adversary wanted to amend the petition because the Development Agreement was filed after the petition in this case.
“It is very clear that it in no respect justifies any claims against the project,” Karmel insisted. He pointed out that the document defines the project as described in the 2009 MGPP: “There’s no variance.” It requires that Forest City Ratner construct the project in conformity with the 2009 MGPP and the design guidelines, which haven’t changed, he said.
Karmel noted that, Forest City Ratner is required to use “commercially reasonable efforts to construct the project by 2019. While there’s a 25-year outside date, it’s “subject to the covenant that Forest City Ratner use commercially reasonable efforts.” And the documents, he asserted, include “detailed remedies.” (I’d point out that they apply mainly to the arena and first three towers.)
As for Brinckerhoff’s discussion of blight, the finding was not based on a timeline but “the substandard and insanitary conditions,” Karmel said.
As for the IBO report, he said the ESDC had responded to concerns in a document last September. (I'd point out that the IBO was unconvinced.)
Beyond that, the ESDC disclosed in the June 2009 Technical Memorandum that the poor state of the economy could lead to a delay, he said.
Similarly, he said, redevelopment in Times Square faced a time of real estate meltdown, leading to lawsuits such as Leichter. “In each of these cases, the courts said that’s not a basis to go back to square one,” Karmel said.
In Leichter, he contended, contrary to Brinckerhoff’s claims, even significant changes are OK once the condemning authority has ruled. “Here, we don’t even have significant changes,” he said with an air of incredulousness.
Some direct responses
Karmel then moved briefly through some of Brinckerhoff’s points. “We heard a lot of rhetoric that the Blight Study was defective,” he said. “That was already litigated.”
“We heard statements that the ESDC has lacked transparency,” he said. “I categorically deny that. All the arguments are based on documents in the public record.” (Well, he was skating over Friedman’s opinion and the delayed release of the Development Agreement, among other things.)
“We've heard criticism that elected officials didn’t vote on the project,” he said, but the state and city did vote to give money to the project. (That’s not the same thing.)
The arguments about subsidy, he said, have nothing to do with the Eminent Domain Procedure Law nor are valid on their own terms.
The naming rights deal, he said, was irrelevant, given that the ESDC in 2009 found the project was in the public interest.
And the Ridge Hill case in Yonkers has nothing to do with this project, Karmel said.
“We hear all sorts of quotations from Judge Catterson’s opinion,” he said, “but the Court of Appeals ruled in ESDC’s favor.”
Challenges to the MTA deal were already dealt with in the courts.
“We hear charges that the ESDC has betrayed the public trust,” he said. “I categorically deny that.”
As for charges that the project has shrunk, Karmel said, “the fact that the minimum is less than the maximum is not surprising. The fact that buildings may be somewhat smaller does not change the public use finding.”
He said it was “nothing new” that the affordable housing would be dependent on subsidies. “It was disclosed in 2006, page 16 of the MGPP.”
Sort of. It states:
The affordable units are expected to be built as part of the Mayor's New Housing Marketplace Plan and are expected to be financed through tax-exempt bonds provided under existing and proposed City and State housing programs such as the City's 50-30-20 program.What it doesn’t state is that subsidy unavailability would allow for extensive delays.
In any event, Karmel said, the Court of Appeals upheld the project, saying the finding of blight alone was sufficient, “so all these issues are peripheral.”
The Leichter case, he said, did not require a new hearing, as Brinckerhoff suggested, but held that the hearing the ESDC had held was sufficient. “That’s 100 percent on point,” he said, as Gerges maintained a look of strained endurance.
And the EDPL does not contain a public hearing requirement, Karmel said.
“There’s no statutory basis for this case,” he said in conclusion. “There’s no legal basis for this case. There’s no factual basis for this case.”
Brinckerhoff popped up for a brief rebuttal. The Leichter case, he suggested, stands for the proposition that the courts fill in the interstices left open by the EDPL’s statutory scheme.
“Did they have a public hearing?” he asked rhetorically. “Yes, they did.”
Did it address the EDPL? “No, it did not.”
The hearing notice he said, said nothing about the impact of the changes on the eminent domain findings.
“There’s a massive contradiction in what Mr. Karmel is telling you,” Brinckerhoff insisted. Either nothing’s changed, or to the extent it has changed, those changes were all considered.
“Mr. Karmel says he categorically denies a ‘deplorable lack of transparency,’” Brinckerhoff said, playing a bit of a trump card. “One thing you didn’t hear is an explanation of why their wonderful disclosures were timed in a way to avoid public review.”
“They love transparency--where’s the proof?” he asked incredulously. “It’s not there.”
“It’s clear now, crystal clear, it was part of a purposeful plot to deceive the public, deceive the judiciary,” Brinckerhoff said. “So far it’s been successful. To say he categorically denies it is offensive.”
Addressing Gerges, he implored, “I think, I hope, I pray that the court recognizes we should be allowed to put these facts in a petition and have them deny it.”
“They have never denied the allegations,” Brinckerhoff continued, getting ahead of himself. He caught his error and acknowledged there was an “answer of sorts” in the federal eminent domain lawsuit.
Karmel stood up. “I really hesitate to interrupt,” he said. “You have to look at the record” in the previous case before Gerges.
Gerges indicated for Brinckheroff to continue. Brinckerhoff said that the basis of Gerges’s decision in March doesn’t apply to this case.
Karmel got to clear the record, noting that the ESDC did respond to most of these issues in the previous case before Gerges.
Brinckerhoff acknowledged his mischaracterization and then, after less than 90 minutes, the hearing was done.