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In dismissal of eminent domain case, court cautions against appeal

In another blow to the Atlantic Yards opposition, a three-judge panel of the U.S. Court of Appeals for the Second Circuit yesterday unanimously upheld Judge Nicholas Garaufis’s dismissal of the Atlantic Yards eminent domain case and even suggested that a U.S. Supreme Court appeal would be tough to mount.

While the court acknowledged that eminent domain is an “immediate and intrusive” power for which “monetary compensation may understandably seem an imperfect substitute,” federal judges may not act on their sympathies, and Supreme Court precedent requires them to let elected representatives balance the costs and benefits.

The Atlantic Yards project clearly has some benefits, which the plaintiffs acknowledge, the court said, and that's essentially the end of the inquiry. Then again, its reading of the plaintiffs’ allegations about economic benefits and blight will be disputed, as will be its willingness to grapple with some allegations of a sweetheart deal.

Judicial deference to elected officials

The court concluded the 24-page opinion: This case has been very well litigated on both sides. At the end of the day, we are left with the distinct impression that the lawsuit is animated by concerns about the wisdom of the Atlantic Yards Project and its effect on the community. While we can well understand why the affected property owners would take this opportunity to air their complaints, such matters of policy are the province of the elected branches, not this Court.

That brought the issue full circle, echoing the statement in court 2/7/07 by Empire State Development Corporation (ESDC) attorney Douglas Kraus, “If his clients or if other members of the community think this was really a terrible project, they can express themselves in the next election when they vote for their City Council representatives, their State Senators, their State Assembly members, their Congresspersons, and their federal Senators."

That's an awkward fit with this case, as none of those officials had a vote on Atlantic Yards, and even Deputy Mayor Dan Doctoroff now acknowledges that such a project should go through the city’s land use review process, which does include a vote by City Council members. The ESDC, while a creation of the legislature, is essentially controlled by the governor.

Plaintiffs' attorney Matthew Brinckerhoff said in a statement, "Today's decision is disappointing. We disagree with its conclusion.... The court today affirmed that the government is free to take private homes and businesses and give them to influential citizens as long as one can imagine a conceivable benefit to the public, no matter how small or unlikely it may be. Indeed, it does not matter if all evidence points to a secret back room deal. All corrupt politicians need do to insulate themselves from judicial scrutiny is claim a benefit to the public. This is wrong.”

Developer Forest City Ratner issued a statement quoting Bruce Ratner: “Today's decision is more than another victory for Atlantic Yards. It is a victory for public good and the importance of investing in diverse communities throughout the City. Atlantic Yards will bring thousands of affordable homes and needed jobs to Brooklyn. We believe, and the courts have repeatedly agreed, that these are real benefits that will have a significantly positive impact on the borough and the City.”

Supreme Court appeal?

Plaintiffs’ attorney Brinckerhoff said, “We intend to ask the U.S, Supreme Court to hear our case.” That’s a longshot--the court accepts fewer than 2% of the petitions it receives.

Then again, eminent domain is a hot-button issue, and it only takes four justices to accept a case. While the four conservative justices likely would sympathize with any case that seeks to narrow eminent domain, given the 5-4 vote upholding eminent domain in the 2005 Kelo v. New London decision, they likely will be careful to pick what they consider the right case, one that will attract a vote from Justice Anthony Kennedy, the swing justice on this issue.

Still, the appellate court yesterday went out of its way to cast doubt on an appeal, suggesting in a footnote that Kennedy, whose nonbinding concurrence in Kelo buttressed the plaintiffs’ skepticism, would not look askance at this case.

I’m not so sure, as noted below. Then again, questions remain as to whether Kelo is directly on point, since it addressed eminent domain solely for economic development, while there are multiple justifications, including the removal of blight, in the Atlantic Yards case.

An appeal raises the question of how many of the 14 plaintiffs would remain in the case. Two of six rental tenants had signed settlement agreements, as of the beginning of January, but had not officially left the case. An additional two--perhaps three--were negotiating, according to attorney Jennifer Levy.

While it may be in Forest City Ratner’s interest to settle with residential tenants (and perhaps residential owners) rather than see the state evict them via eminent domain, such settlement is less likely with commercial owners and tenants. The state might well try to proceed with condemnation shortly.

(Brinckerhoff also said the case could be refiled in state court, though it's tough to imagine a state court would be more receptive to such claims. An appeal of a separate case, in which a state judge denied claims challenging the legitimacy of the environmental review, is pending.)

Mixed motives?

The plaintiffs’ theory of the case charged official malfeasance, which may be a stretch. Develop Don't Destroy Brooklyn legal director Candace Carponter said, "Our support of the fight of citizens to live safely in their homes, and operate safely in their business, will continue. We maintain that the government's motivation in using eminent domain for Atlantic Yards is not to benefit the public, but rather, to benefit a single, very rich and powerful developer.

The court observed: Beyond being conclusory, the claim that the “decision to take Plaintiffs’ properties serves only one purpose” defies both logic and experience. “Legislative decisions to invoke the power to condemn are by their nature political accommodations of competing concerns.” Brody v. Vill. of Port Chester.

As I wrote in November, I’m not sure discovery would turn up evidence of a backroom deal. (Even if it did, ESDC lawyer Preeta Bansal claimed in court that such corrpution wouldn't violate the public use clause, as long as there were public benefits.) It might simply show a city and state grateful for and not too skeptical of the project, as evidence already suggests.

Remember, as former New York City Economic Development Corporation President Andrew Alper told City Council 5/4/04:
The developer came to us with what we thought was actually a very clever plan.... And it is not really up to us then to go out and find to try to a better deal.

Nor was there much due diligence. For example, the ESDC and governor's office both on 3/4/05 issued press releases relying on revenue projections made by the developer’s paid consultant, Andrew Zimbalist, rather than conducting their own analyses. And both the ESDC and the New York City Economic Development Corporation conducted fiscal impact analyses without looking at a range of costs.

Fishy sequence?

The court yesterday acknowledged that “a fact pattern may one day arise in which the circumstances of the approval process so greatly undermine the basic legitimacy of the outcome reached that a closer objective scrutiny of the justification being offered is required.” However, in this case, the “objective basis” of the public use is not in doubt, so even if the project may not achieve its intended goals, as long as the state rationally could have believed that eminent domain would lead to those goals, the court should not intervene.

So the court in this case did not consider the Atlantic Yards approval process fishy, even though, for example, the developer was backed by the city and state 18 months before an RFP was issued for the MTA’s Vanderbilt Yard, the key component of the project footprint. The court's only mention of that charge was that the MTA was not a defendant. (Should it have been?) The plaintiffs also pointed out that there was no RFP at all for the project site as a whole, which had not been identified as blighted before Forest City Ratner's proposal.

Public benefits

The appeals court cited Garaufis’s conclusion that the plaintiffs acknowledged that the project “would serve several well-established public uses such as the redress of blight, the construction of a sporting arena, and the creation of new housing, including 2,250 new units of affordable housing,” so a reasonable juror couldn’t conclude that the public benefits were pretexts.

The court stated:
The appellants have conceded, if only reluctantly, that the Atlantic Yards Project will target a long-blighted area, result in the construction of a publicly owned (albeit generously leased) stadium, create a public open space, increase the quantity of affordable housing, and render various improvements to the mass transit system.

That generous lease would be $1 a year. The total quantity of affordable housing, as noted below, is in dispute.

Skewed process?

The plaintiffs, in the appeal, argued that Garaufis ignored specific allegations regarding a process that favored Ratner. The court’s summary:
First, the appellants point to a series of allegations that follow logically from the acknowledged fact that Ratner was the impetus behind the Project, i.e., that he, not a state agency, first conceived of developing Atlantic Yards, that the Ratner Group proposed the geographic boundaries of the Project, and that it was his plan for the Project that the ESDC eventually adopted without significant modification. Second, the appellants emphasize certain allegations that relate not to the passage of the Project, but to some purported departures from convention in the process through which the MTA (which is not a defendant in this case) accepted a bid from the Ratner Group to develop land owned principally by the MTA. Third, certain allegations are invoked to suggest that the public uses being proffered by appellees (and relied upon by the district court) were post hoc justifications, for example, the charge in the appellants’ brief that “Defendants never claimed that the Takings Area was blighted until years after the Project was officially announced and Kelo had been decided.” Fourth, while conceding that the ESDC has at all times abided by the letter of the strict requirements of state law, the appellants make various conclusory allegations in the complaint to suggest that the ESDC has nonetheless violated the spirit of these rules, to wit, that the “ESDC . . . engaged in a sham ‘public’ review process whose outcome was predetermined long before.”

Costs dwarf benefits?

The court observed:
Read carefully, however, the specific allegations in the complaint foreclose any blanket suggestion that the Project can be expected to result in no benefits to the public... Instead, their collective import is that the costs involved, measured in terms of either government spending or the impact the Project will have on the character of the neighborhood and its current residents, will dwarf whatever benefits result.

Well, if some costs dwarf the benefits, does that ultimately render them negligible? For example, in an allegation not addressed in the opinion, the plaintiffs pointed out that the state calculated the net economic benefit “without regard to the attendant public costs.” Once the costs are factored in, they alleged, “the net economic benefit is either negligible or non-existent.”
(The court opinion notes that, according to precedent, it is “construing the complaint liberally, accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiff’s favor." It's debatable whether the court did so fully.)

On the other hand, as the court noted, the plaintiffs did not allege that the increase in open space or improvements to mass transit were not public benefits.

Blight debate

The complaint distinguishes between the railyard blocks, part of ATURA, the Atlantic Terminal Urban Renewal Area, and the Takings Area, the blocks on Pacific and Dean streets where plaintiffs have property or live. The court pointed out that the plaintiffs conceded that ATURA had been designated as blighted. The court said:
The blight study commissioned by ESDC in 2006 determined that the conditions of blight extended well into the Takings Area, and the complaint alleges no facts to the contrary.

On the other hand, the complaint does challenge the blight study:
Even accepting the six characteristics of blight described by AKRF for each lot in the Blight Study, only 27% of the 73 parcels examined, at most, could be considered blighted. Only 19% of the Takings Area blocks and tax lots could be considered "blighted"; and that 19% is owned entirely by FCRC. None of the "blighted" properties is owned by the plaintiffs.

Affordable housing

As for affordable housing, the court pointed out that the plaintiffs concede that a significant amount of below-market housing would be built, but simply argue that it wouldn’t offset the impact of the luxury housing--which the court said wasn't enough to deny a public benefit.

The allegations went further; the plaintiffs contend that secondary displacement calls into question the net gain in affordable housing.

Would the Kelo dissenters agree?

The court suggested that the dissenters in Kelo wouldn’t look askance at this case:
We find it instructive that Justice [Sandra Day] O’Connor... agreed without reservation that, in addition to redressing blight, the “sovereign may transfer private property to private parties . . . who make the property available for the public's use–such as with a railroad, a public utility, or a stadium.”... As such, the instant challenge to the Project hinges on a proposition of law that would appear to fare no better under the Kelo dissent.

Brinckerhoff argued last October that “the notion that a stadium is a public use is just wrong.” (O’Connor in her Kelo dissent identified a stadium as a public use, but without any citations.) “A stadium is a private, money-making enterprise,” he said, not different from a hotel that offers public access.

Investigating motives

The court looked askance at the plaintiffs’ desire to gain discovery into the approval process via depositions, e-mails, and other communications, suggesting it “would add an unprecedented level of intrusion into the process.”

The court suggested that the plaintiffs were contending that the Kelo majority was quietly trying to overrule precedent and “require federal courts in all cases to give close scrutiny to the mechanics of a taking rationally related to a classic public use as a means to gauge the purity of the motives of the various government officials who approved it.”

Brinckerhoff had said in court that such scrutiny would apply to only a few cases, when it was clear that a private party had driven the process

Kennedy's concurrence and question of favoritism

The appellate court, in a footnote, took note of the Kennedy concurrence and suggested he wouldn't embrace the plaintiffs here:
Justice Kennedy, who joined with the majority opinion, nonetheless wrote separately to state his view that a “court confronted with a plausible accusation of impermissible favoritism to private parties should treat the objection as a serious one and review the record to see if it has merit, though with the presumption that the government’s actions were reasonable and intended to serve a public purpose.” Justice Kennedy may well have intended this caveat to apply exclusively to cases where the sole ground asserted for the taking was economic development.... None of the Equal Protection Clause cases Justice Kennedy relied upon involved deposing legislators or subpoenaing their confidential emails. Accordingly, even assuming, arguendo, we were to apply a version of Justice Kennedy’s standard here, we would scrutinize objectively and find no “plausible” accusations of favoritism.

The appellate court waved away the appellants’ argument that, unlike in Kelo, Atlantic Yards was proposed by the developer rather than the result of a response to an RFP. It stated: However, here, New York long ago decided by statute not to restrict the ESDC’s mandate to those “projects in which it is the prime mover.”

That’s true, but the court didn't address Kennedy’s observation that Kelo was OK because “the substantial commitment of public funds by the State to the development project before most of the private beneficiaries were known” and “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.”

Both those conditions were absent in the Atlantic Yards sequence.

The court also noted that Kelo was solely about economic development, while there are several justifications for Atlantic Yards. Then again, the majority opinion in Kelo acknowledged: There is, moreover, no principled way of distinguishing economic development from the other public purposes that we have recognized.

The unelected ESDC

The appellate court rejected the argument that the ESDC doesn’t deserve deference as a state agency, noting that the Supreme Court has extended deference to both “Congress and its authorized agencies." The court also agreed that the ESDC's role was appropriate, given that the statute encourages "maximum participation by the private sector of the economy.”

Then again, that language stems from the 1968 desire of legislators for an agency to have significant power to clean up the slums, to invest its own money, then sell off projects to the private sector.

Recusal not a factor

What about the after-the-argument recusal of Judge Edward Korman, who acknowledged responding positively to an Atlantic Yards mailer? That might have given opponents some optimism.

But Chief Judge Dennis Jacobs, appointed in his stead, joined in the unanimous opinion, having read the briefs and having been furnished with a transcript and audio recording of the 10/9/07 oral argument. At the oral argument, Korman had been the most skeptical of the plaintiffs' argument, but none of the three judges were particularly skeptical of the defendants' case.


  1. On the subject of whether there should be “deference” to those of our public officials who have and are behaving in a fashion that is so obviously suspiciously motivated:

    1. It is not just the “Arena” it is also, the peculiar “wrenching” of the irregular condemnation footprint (around the Boymelgreen property- and outside of the 40 year urban renewal area and plan) that takes shameless advantage of the opportunity for superfluous condemnation to generate additional excessive profits for Forest City Ratner (See the inclusion of the Ward Bakery building block).

    2. And the sequence of events makes clear that decisions here have been initiated and driven by a private developer, not by a legitimate public or government planning process.

    3. And, here are some quotes from Kelo:

    JUSTICE O’CONNER: (Dissenting)

    “Yet for all the emphasis on deference, Berman and Midkiff hewed to a bedrock principle without which our public use jurisprudence would collapse: "A purely private taking could not withstand the scrutiny of the public use requirement; it would serve no legitimate purpose of government and would thus be void." Midkiff, 467 U. S., at 245; id., at 241 ("[T]he Court's cases have repeatedly stated that 'one person's property may not be taken for the benefit of another private person without a justifying public purpose, even though compensation be paid' " (quoting Thompson v. Consolidated Gas Util. Corp., 300 U. S. 55, 80 (1937))); see also Missouri Pacific R. Co. v. Nebraska, 164 U. S. 403, 417 (1896). To protect that principle, those decisions reserved "a role for courts to play in reviewing a legislature's judgment of what constitutes a public use ... [though] the Court in Berman made clear that it is 'an extremely narrow' one." Midkiff, supra, at 240 (quoting Berman, supra, at 32).”

    * * *

    “Finally, in a coda, the Court suggests that property owners should turn to the States, who may or may not choose to impose appropriate limits on economic development takings. Ante, at 19. This is an abdication of our responsibility. States play many important functions in our system of dual sovereignty, but compensating for our refusal to enforce properly the Federal Constitution (and a provision meant to curtail state action, no less) is not among them.”

    * * *

    “ . . .the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more. The Founders cannot have intended this perverse result.”

    * * *

    JUSTICE KENNEDY: (concurring as part of the majority)

    “Likewise, the trial court concluded that "[t]here is nothing in the record to indicate that ... [respondents] were motivated by a desire to aid [other] particular private entities." - - - That is palpably NOT TRUE in the case of Atlantic Yards.

    LAST THOUGHTS: Good Lord deliver us if we are to rely on the likes of government officials like Mr. Spitzer and ESDC to protect us from misconduct of government. - Can we at least look to our City Council? They can at once recognize the substantial abuses here and recover many hundreds of million dollars of public funds that could, instead, be used for uses that are worthwhile.


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