According to the just-filed appeal in the case, known as Goldstein v. Pataki, the Supreme Court should take a look because its controversial 2005 Kelo v. New London decision leaves open the possibility of challenging an eminent domain decision if the taking occurs as a “pretext” to benefit a private party.
The tension between those two postures raises an interesting challenge, given that an appellate court cursorily dismissed the pretext issue in a decision February 1. The court stated that other cases in which courts had considered pretext differed from Atlantic Yards, because the latter would contain some undeniable public benefits while the others did not.
But the appeal stresses another angle, not the quantity of public benefits--which is in dispute--but that of legitimacy. The appeal notes that courts evaluating Atlantic Yards relied on Supreme Court precedent like Berman v. Parker (1954) and Hawaii Housing Authority v. Midkiff (1984), which defer to legislative decisions, while a 2007 case decided by the District of Columbia Court of Appeals, Franco v. National Capital Revitalization Corporation, declares that Kelo allows inquiry into the question of pretext.
Thus, the appeal states:
The question of where on the continuum between significant indicia of legitimacy... and virtually none... a case must fall to warrant substantial deference is not an easy one. Until it is answered and uniform standards are articulated, some courts will continue to arbitrarily apply Berman and Midkiff, as the Second Circuit did here, and others will countenance factual inquiries into the legislative motives behind a taking, as did the court of last resort for the District of Columbia in Franco.
That is one of three issues the appeal asks the Supreme Court to resolve, thus allowing the case to proceed to discovery, the pre-trial litigation process during which each party requests relevant information and documents. However, the court’s job is not to give every appellant another shot but to resolve conflicting claims of law to provide national guidance.
Given that the appeal gained respectful coverage yesterday from longtime Supreme Court correspondent Lyle Denniston, the issues it raises--including the question of whether a non-legislative agency like the Empire State Development Corporation (ESDC) deserves less deference than an elected body--may well push the court to take it seriously. Still, given that the court accepts fewer than 2% of cases present, the case remains a long shot.
[Develop Don't Destroy Brooklyn rounds up coverage in the dailies; note that the conservative New York Sun, concerned about eminent domain issues, put the story on the front page. The Times alone ignored the story.]
Defendants in the case, including the ESDC, developer Forest City Ratner, and city and state officials, have 30 days to file a response to the petition. Amicus briefs, which likely will attract the attention of some of the many parties weighing in on Kelo--property rights supporters, planners, and municipal officials--are also due in 30 days. Defenders of eminent domain for urban redevelopment likely will point--as the appellate court did--to the potential for plaintiffs seeking to depose municipal officials and gain confidential e-mails--would “add an unprecedented level of intrusion into the process.”
Plaintiffs’ attorney Matthew Brinckerhoff predicted that the court will most likely decide whether to hear the case before the term ends at the end of June. If not by then, it will be held until the first week in October. If accepted, it would be briefed over the summer and into early fall, and would most likely be argued in December or January, with a decision by no later than June 2009.
Only four votes are needed for the nine-member court to grant certiorari and hear the case. Given that the four most conservative justices on the court either opposed Kelo or likely would oppose it, the court might be disposed to revisit eminent domain. Indeed, the third major issue it raises is whether guidelines in Kelo, which addressed an exercise of eminent domain for the purposes of economic development, can be applied to eminent domain used, as in Atlantic Yards, for other purposes, such as the removal of blight.
Still, they may not act without the support of Justice Anthony Kennedy, whose nonbinding concurrence in Kelo left open the possibility that the court would look askance at eminent domain decisions that lack the procedural checks and balances--such as the selection of one developer out of several--absent in the New London case. Indeed, the plaintiffs in the Atlantic Yards case stress the differences between the two cases.
Given that three residential tenants have left the case, there are now eleven plaintiffs, residential and commercial property owners and residential and commercial tenants. (The case names 13 plaintiffs, but there are overlapping corporate entities.)
The case was filed in October 2006 and dismissed by a federal judge in June 2007 and the appellate court on February 1. A Develop Don't Destroy Brooklyn press release yesterday stated, ”The plaintiffs argued that the use of eminent domain for the Atlantic Yards project violates the United States Constitution because the taking of their property is not primarily for the public's benefit. While Ratner claims that the project is justified as a public benefit, in fact Ratner is the only [one] who stands to gain--and handsomely so--from the seizure of plaintiffs' homes and businesses.”
That’s a difficult posture to maintain, given that the plaintiffs don’t challenge certain elements of the public benefit, as defined by the ESDC, such as improvements in the transit infrastructure or the creation of open space. And it’s likely to generate a fierce counterattack. Indeed, that’s likely why Brinckerhoff spoke more carefully, “Unless the Supreme Court intervenes, the government will continue to have carte blanche 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.”
The petition argues that the eminent domain map is questionably drawn, given that a large rectangular parcel--mainly containing the Newswalk condominium between Pacific and Dean streets and Sixth and Carlton avenues--is cut out. The petition says that the site is owned “by a developer who, early on, cut a deal with Ratner to spare his property from condemnation.” The citation to a Village Voice article, however, leads to some ambiguity, since the article states, “The big players in this drama deny that Newswalk got any special treatment—even though the Brooklyn Papers, a chain of community newspapers, quoted a spokesman as suggesting that [developer Shaya] Boymelgreen would profit from the arena plan.”
(Perhaps wary of presenting newfangled news sources like blogs to the Supreme Court, the plaintiffs cite only articles published in print publications.)
The petition states:
Ratner’s vision faced significant hurdles: (1) approximately half of the site—68 separate parcels and 123 tax lots—was privately owned in a prosperous community where property values were increasing rapidly (the “Takings Area”); (2) the other half of the site was primarily a below-grade open rail yard owned by the state Metropolitan Transportation Authority, a public authority controlled by respondents George Pataki and Michael Bloomberg (3) the massive scope of the Project violated scores of local zoning laws, including density, height, and use restrictions; and (4) the selection of private developers for projects that receive billions of dollars in tax breaks and direct subsidies are typically subject to competitive selection.
Ratner’s plan to overcome these daunting hurdles was simple: secure the support and assistance of respondents Pataki and Bloomberg. Only Pataki and Bloomberg could: (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. Id.
No later than 2003, Ratner, a top political supporter of Pataki (who was known to have presidential aspirations at the time), secured the unqualified support of his old law school friend. From that point onward, the Project, and the billions in profit it would generate for Ratner and his companies, was a fait accompli.
While property values have been increasing rapidly, the prosperity of the community as a whole likely will be contested. And while published articles point to Ratner and Pataki as old friends, the plaintiffs have produced no evidence of corrupt activity.
Not up to city "to find a better deal"
Neither the brief, nor any document in the case, yet addresses the single most comprehensive explanation for the decision--made before Kelo emerged--to choose Ratner’s plan, that given by Andrew Alper, then president of the New York City Economic Development Corporation, at a 5/4/04 City Council hearing:
The developer came to us with what we thought was actually a very clever plan. It is not only bringing a sports team back to Brooklyn, but to do it in a way that provided dramatic economic development catalyst in terms of housing, retail, commercial jobs, construction jobs, permanent jobs.
So, they came to us, we did not come to them. And it is not really up to us then to go out and try to find a better deal. I think that would discourage developers from coming to us, if every time they came to us we went out and tried to shop their idea to somebody else. So we are actively shopping, but not for another sports arena franchise for Brooklyn.
Whether or not there's corruption, as the plaintiffs allege, the question remains as to whether the city and state did sufficient due diligence; after all, 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 commission their own analysis.
The plaintiffs argue that public purposes of the project such as the provision of affordable housing could be achieved without the use of eminent domain; however, a sports arena at and over the railyards likely would include eminent domain. And there’s a limited number of basketball franchises, which helps explain the city’s decision.
Then again, the city’s process in redeveloping Willets Point in Queens--in which a plan must emerge before developers are sought--shows that since the 2005 Kelo decision it’s treading more carefully.
The railyard bid
The petition argues:
The Project was so wired that the chief spokesperson for the MTA told reporters, on two separate occasions in 2004, that the rail yards, which accounted for about 40% of Ratner’s site, had already been conveyed to Ratner in a private deal. Later, in May 2005, the MTA retracted those statements, and announced a “competitive” selection process. The MTA’s request for proposals (“RFP”) to purchase and develop the rail yards was a sham. The time allotted for responses was a mere 42 days. This was a significant advantage for Ratner, who, unlike others, had devised his mammoth Project years earlier.
It points out that the MTA’s July 2007 RFP for the Hudson Yards was 1369 pages and gave respondents 92 days. In the Atlantic Yards case, the brief argues, another developer, Extell, offered $150 million cash for a project limited to the rail yards, and, unlike Ratner’s $50 million cash bid, complied with the requirement that all submissions include a twenty-year profit and loss projection. However, the agency instead negotiated only with Ratner.
The brief erroneously states that the $50 million bid was accepted by the MTA; rather, it was upped to $100 million. FCR contends that the total value of its bid, including railyard improvements, is far higher, though Develop Don’t Destroy Brooklyn disagrees.
Issues of blight
The petition points out that, when Atlantic Yards was formally announced in December 2003, the benefits were sports and economic developments--actually, “Jobs, Housing, and Hoops”--not the removal of blight. Nor was blight mentioned in Memoranda of Understanding signed in 2004 and 2005. When the ESDC retained consultant AKRF to conduct a blight study, the petition states:
The sole objective of the study was to justify Ratner’s property selection. Rather than a review of Ratner’s site and its environs, the study examined exclusively the properties Ratner had selected for acquisition years before. Not a speck of land bordering the irregularly shaped Project site was evaluated for blight.
Given that the study declared that properties were declared blighted for “underutilization,” meaning that they not fulfill more than 60% of the square footage allowable, the petition suggests that “the entire City of New York, indeed most any urban city, would be declared blighted under these standards.”
Questions of public benefits
The Fifth Amendment allows taking of property for "public use," which the Supreme Court has redefined as "public purpose" or "public benefit." In the Atlantic Yards case, all other “alleged public benefit justifications,” the petition contends in a bit of a stretch, are “false.”
The arena would be accessible to the public but only for a price. The Court of Appeals noted that Justice Sandra Day O’Connor’s dissent in Kelo acknowledged that “a railroad, a public utility, or a stadium” are all accepted public uses. However, as the petition points out, O’Connor offered no citations to back up the latter.
The petition notes that the Independent Budget Office of New York City calculated, based on a $100 million city contribution, that the arena would generate than $1 million per year in new tax revenue for the city, but since the city committed an additional $105 million to Ratner, the arena would lead to “a $70 million loss.” That precise figure is debatable, given that some portion of the additional city spending would address the project as a whole, but a focus on the arena has more legitimacy given that it's now the priority for the project.
No government agency has conducted a full cost-benefit inquiry for the project. A libertarian law professor, Ilya Somin, wrote that Goldstein v. Pataki was decided correctly because one of the shortcomings of Kelo is that it ignores costs.
The petition alleges that “The Project will not create affordable housing,” based in part on the recent news--after the previous court decisions--that residential construction “could be put off for years.” While it’s true that affordable housing funds are “no longer available, and there is no established timeline” for the affordable housing, it doesn’t mean, as the petition alleges, that “the promise of affordable housing will never be realized.”
The legal question, however, is not whether the affordable housing will be delivered but whether the ESDC plausibly believed it would be. There’s no evidence that the ESDC considered the shortfall in tax-exempt bonds for affordable housing.
The petition notes that the ESDC’s environmental review “concluded that the Project could indirectly eliminate 2,929 at-risk households” but then goes on to allege more definitively that "nearly 3000 low-income households will be displaced in exchange for the ever-dwindling possibility that it might create 2,250 affordable units—a net affordable housing loss.”
The petition, as with the original complaint, does not address the planned addition of open space nor the addition of mass transit. While the original complaint charged that the project would not create jobs, that unfounded allegation does not appear; it was not part of the appellate decision.
Meanwhile, the petition notes:
Ratner will receive special discretionary perks, including without limitation a minimum of $305 million in capital contributions from the City and State, zoning overrides, a government blank check eliminating the risk of “extraordinary infrastructure costs,” low-cost financing for the arena, housing, property, and mortgage tax exemptions, City land conveyed for one dollar, and the guaranteed transfer of petitioners’ properties.
It adds that Ratner has refused to disclose predicted profit, but it “has been conservatively estimated at one billion dollars.” (There’s no footnote, but the figure comes from a real estate professional quoted in New York magazine.)
The appellate decision
The petition observes that the Second Circuit Court of Appeals relied on Midkiff’s guidance that a court’s “‘review of a legislature’s public use determination is limited” to whether “the exercise of the eminent domain power is rationally related to a conceivable public purpose.’” Moreover, the court said that the pretext issue in Kelo was limited to cases in which economic development, rather than other benefits, were at issue.
The petition gets to the sequencing the issue:
The court of appeals did not address petitioners’ argument that the only way to harmonize this Court’s precedents was to allow pretext claims to proceed past the pleading stage in those rare circumstances where, as here, the traditional indicia of a legitimate taking decision are plainly absent—e.g., inter alia, where (1) a legislative body plays no role in determining public purpose, (2) the properties slated for condemnation are selected by the private beneficiary in the first instance, rather than as part of a comprehensive government-initiated plan, (3) no alternative development sites are ever considered (i.e., sites that would not require condemnation at all, or sites that would burden those who the developer spared when he drew an oddly shaped, non-contiguous takings map), (4) the sole beneficiary of the land transfer is known before the decision to condemn, (5) no competitive process for selecting the private beneficiary is employed, (6) only a single plan (the developer/beneficiary’s plan) is ever considered, (7) the public benefit justification is identified after the decision to condemn, and (8) the normal process for approving massive zoning variances and assessing public benefit (here, review by the local legislature, the New York City Council) is bypassed entirely.
Indeed, the court of appeals only addressed those issues in part; as the petition charges, the court “did not explain its belief that the executive-dominated nature of the condemner was irrelevant.”
Affording substantial deference to legislative judgments concerning the use of eminent domain to advance legitimate public purposes makes sense. Paying the same deference to a quasi-governmental corporation controlled by a governor and comprised of unelected “proxy” directors does not.
Two other appellate courts, the brief points out, “have both recognized that the deference required by Berman and Midkiff is not absolute.”
And while the appellate court found no problem that Ratner proposed the project, the court failed to confront the highly probative and undisputed fact that petitioners’ homes and businesses were never identified by the government in the first instance as necessary to further a pre-determined public purpose—a purpose that incidentally would also benefit an unknown private developer—but instead were selected by a developer who was known to be the primary, indeed only, beneficiary of the taking.
The petition argues that the appellate court erred in suggesting that Kelo’s holdings were limited to economic development, given that the case acknowledged it’s hard to distinguish between an economic development justification and any other public purpose.
Differences with Kelo
The petition notes differences with Kelo:
In Kelo, this Court held that the takings were not intended to confer a private benefit because they were: (1) “executed pursuant to a ‘carefully considered’ development plan,” (2) the “trial judge and all the members of the Supreme Court of Connecticut agreed that there was no evidence of an illegitimate purpose,” and (3) the record evidence “clearly demonstrate[d] that the development plan was not intended to serve the interests of Pfizer, Inc., or any other private entity” because “the identities of those private parties were not known when the plan was adopted.”
However, there was a trial in Kelo, while the Brooklyn case hasn’t gone to trial and, the petition alleges, “the court of appeals rejected inferences favorable to petitioners,” even though it was supposed to interpret them in a light favorable to them.
Bridging the analytical divide
The petition suggests that Berman, Midkiff, and Kelo offer conflicting guidance:
First, courts considering a Public Use Clause claim must treat legislative judgments concerning whether a taking is necessary to accomplish a public purpose with substantial deference. ...
Second, the Public Use Clause unquestionably prohibits the government from seizing a private citizen’s property when the purpose of the taking is to benefit another, more favored private citizen. ...
These two principles create a clear analytical divide in Public Use Clause cases. On one side are cases in which the facts present sufficient indicia of legitimate public purpose such that no further intrusion into the legislative prerogative can be countenanced. On the other side are cases that have none, or almost none, of these important indicia of legitimacy, thereby vitiating any judicial deference that otherwise would presumptively apply.
Unmentioned: the courts in the Atlantic Yards case focused on the quantity of public purpose to trump claims concerning the legitimacy of the process.
What’s the standard?
The petition acknowledges that some questions remain open, and thus deserving of the court's intervention:
While no courts have expressly addressed the quantum of indicia of legitimacy necessary to warrant substantial deference to a takings decision, this Court’s cases identify what those indicia are. Substantial deference was afforded, and the takings were upheld, in Kelo, Midkiff, and Berman. A careful examination of these cases reveals that such deference is afforded when specific indicia of legitimacy are present.
Among the factors:
- Legislative Decision
- Public Purpose Goal Identified at the Outset
- Carefully Considered Comprehensive Plan
- Consideration of Multiple Plans
- Comprehensive Plan Includes Takings Map
- Private Beneficiaries Unknown
- Competitive Selection Process
- Funds Committed Before Beneficiary Known
- Procedural Requirements That Facilitate Inquiry Into Purposes
Those cases, however, were addressed in the appellate decision--a fact unmentioned in this petition--and deemed not relevant because, as the appellate court wrote, “it appears that in each of these district court cases, the plaintiff had contested whether any public use would be served by the taking.”
(emphasis in original)
So that sets up a knotty question. The agency approving Atlantic Yards may have found more public use in this case than in other cases courts found illegitimate.
But the sequence in this case gives rise to charges of illegitimacy. Will that be the controlling factor?