The eminent domain battle Wednesday: an easy call for the Court of Appeals or a fresh look at blight, "public purpose," and relative benefits?

The case challenging eminent domain (Goldstein, et al. vs. New York State Urban Development Corporation d/b/a/ Empire State Development Corporation, or ESDC), to be heard Wednesday in the Court of Appeals in Albany may be the only case standing in the way of arena construction, even though other lawsuits challenging Atlantic Yards are expected.

(It should be webcast, beginning at 2 pm, with oral arguments to last about an hour.)

So stakes are high. Should the Court of Appeals rely on a line of cases that have expanded the notion of "public use" to "public purpose," and which have expanded the understanding of blight from clearing slums to removal of "stagnation," it will uphold the dismissal of the case, concluding that the state constitution offers no tighter protections than does the federal one.

Should the court, however, look more expansively and closely at the case, it could raise serious questions. Consider that blight was presented as justification for eminent domain well after Atlantic Yards was announced and the menu of promised public benefits has shifted and arguably diminished, according to evidence that emerged after the project was initially passed in December 2006, a record the ESDC wants very much to exclude.

The court could also avoid both lines of inquiry by ruling more narrowly in favor of the defendants, saying the case was filed too late and/or presents no new constitutional questions. Or it could rule more narrowly in favor of the petitioners on the basis of failure to weigh costs and benefits, or the argument that state funding for such a project requires it be limited to low-income residents.

Larger implications

The implications go beyond the dispute and parties in this case. The city of New York has filed an amicus (friend-of-the-court) brief, supporting dismissal of the case, saying longstanding state practices shouldn't be disturbed, given the importance of eminent domain as a tool for redevelopment. Examples cited include Times Square and MetroTech.

The libertarian Institute for Justice (IJ)--which brought the 2005 Kelo v. New London case to the U.S. Supreme Court--has filed an amicus brief asking the state court to depart from its precedent, pointing to state courts in Michigan and Ohio that reversed themselves in 2004 and 2006, respectively.

And last week the IJ issued a report saying that New York is "one of the worst states in the nation when it comes to abusing eminent domain for private gain." In both documents the IJ cites an article by William Stern, former CEO of the Urban Development Corporation, arguing that eminent domain was not needed for the revival of Times Square, a project over which he presided.

Why accept case?

Why is the Court of Appeals even hearing the case?

It's a bit of a mystery, given that the case--after a version was rejected at three levels of federal court--was dismissed unanimously at the Appellate Division (where eminent domain cases in New York begin). Unlike in the parallel case challenging the environmental review, there was no blistering concurrence to give ammunition to appellants seeking clarification from the state's highest court. (A request for the Court of Appeals to hear that case is pending.)

Then again, in this case, the petitioners make ample citation of that concurrence by Judge James Catterson, who said the ESDC was being used as a tool of the developer.

There's been little doubt about the contours of eminent domain jurisprudence in New York, says the ESDC, which, along with Forest City Ratner, has expressed no doubt about the outcome in this case.

In fact, the ESDC asks that the case be summarily dismissed without getting to the merits, saying the case wasn't filed on time and that it's essentially an effort to re-litigate the same public use issues on which the petitioners (now nine property owners and renters, organized and funded by Develop Don't Destroy Brooklyn, or DDDB) lost in federal court.

Need for clarification

The Court of Appeals has not in the 20th century ruled on a challenge to eminent domain under the state constitution, so it's possible that the court is simply taking the opportunity to harmonize its interpretation of the federal constitution with the state one.

Or, perhaps, it's open to be swayed. As the IJ states in its amicus brief:
There are two competing visions of the judicial role at the heart of this case. One, the one that animated the opinion below, mirrors the approach of federal courts in dictating nearly complete deference to eminent domain determinations. The other, the one adopted by most state courts, holds that courts have an important role in preventing pretextual or unnecessary takings through eminent domain.

The Court of Appeals, like many high courts, is not immune to politics, and has split on some issues, notably in a 2006 ruling that same-sex couples do not have a constitutional right to marry--an issue the court revisits this week--and just last month narrowly upholding Gov. David Paterson's right to choose a Lieutenant Governor.

Fifty-fifty or small chance for plaintiffs?

Michael Rikon, a veteran attorney who represents eminent domain condemnees, filed an amicus brief in this case, asking the Court of Appeals to follow Ohio and Michigan. "The Court of Appeals takes very few cases, even where we feel there was absolute error or disagreement within the various appellate divisions," he told me. "The very fact that this case is going to be heard is very significant. I think it could either way."

Rikon filed a brief on behalf of Willets Point United, which represents businesses fighting eminent domain in the Willets Point section of Queens. The other amicus brief, also on the side of the appellants, was filed on behalf of the Fifth Avenue Committee (FAC), the Pratt Area Community Council (PACC), and the Prospect Heights Neighborhood Development Council (PHNDC).

Libertarian law professor Ilya Somin, however, was more pessimistic, writing:
New York case law is among the most hostile to property rights in the entire country, allowing the condemnation of virtually any property for any reason… New York is also one of only seven states that have enacted no eminent domain reform law whatsoever since the Supreme Court’s controversial 2005 decision upholding “economic development” condemnations in Kelo. For these reasons, I am not optimistic about the property owners’ chances in this case. However, the litigation might still do some good by focusing greater attention on eminent domain abuse in New York. Moreover, there is always the possibility that the state supreme court will change its ways, as several other state high courts have done in recent years.

Note that, despite a recommendation made last year by a New York State Bar Association task force to study changes in the 33-year-old Eminent Domain Procedure Law (EDPL), no special commission has been appointed by Paterson--an argument, perhaps, for more judicial intervention.

Judges to watch

In the 4-3 case involving the Lieutenant Governor, Chief Judge Jonathan Lippman (appointed by Democratic Gov. Paterson) was joined in the majority by Judges Carmen Beauchamp Ciparick (appointed by Democratic Gov. Mario Cuomo), Susan P. Read (appointed by Republican Gov. George Pataki) and Theodore T. Jones Jr. (appointed by Democratic Gov. Eliot Spitzer). The dissent, by Judge Eugene Pigott, was joined by Judges Victoria A. Graffeo and Robert S. Smith; all were appointed by Pataki.

In this case, party lines did seem to make a difference, observes Albany Law School academic Vincent Martin Bonventre. And on criminal cases, Bonventre writes, the court is divided, though more in three parts than two.

In eminent domain cases, more conservative judges generally favor property owners, while more liberal judges favor the state. About eminent domain, however, this court has been far less divided.

Lippman is a longtime friend of Assembly Majority Sheldon Silver, a supporter of the Atlantic Yards project. He was on the appellate court panel that in September 2008 heard the appeal of the case challenging the AY environmental review; he asked some thoughtful questions and didn't betray his hand. He did not participate in the decision, having been elevated to the Court of Appeals.

From Muller to Yonkers

The challenge asks the court to disregard the U.S. Supreme Court’s controversial Kelo decision and instead rely on New York’s Constitution, an issue untested post-Kelo in state courts. Early nineteenth-century cases based on the state constitution have never been expressly overruled.

However, as stated in the appellate decision, 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 literal public use--as the state constitution seemingly demands--was not required.

The petitioners’ brief, however, counters that Muller was responding to a very different world, in which slums--real blight--constitute 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.

The petitioners' 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…"

Moreover, the city's brief notes that, since the 1936 Muller case, state courts have consistently interpreted "public use" to mean "public purpose," and codified in the EDPL in 1977 as "public use, benefit, or purpose."

The petitioners respond that the Public Use Clause should trump that.

The city's brief also argues that, even if there were a distinction between "public use" and "public purposes," some elements of this case, "such as the improved transit, open space, and sports arena, fall well within the literal definition of 'public use' as espoused by Appellants."

The city's brief sets a high hurdle:

Incredibly, Appellants' argument with respect to the blight finding makes absolutely no reference to Yonkers Community Development Agency v. Morris ("Gradually as the complexity of urban conditions became better understood, it has become clear that the areas eligible for such renewal are not limited to 'slums' as that term was formerly applied, and that, among other things, economic underdevelopment and stagnation are threats to the public sufficient to make their removal cognizable as a public purpose.")

The ESDC brief notes that the terms "substandard" and "insanitary" have been given a liberal definition by the courts and that Yonkers allows for underdevelopment and diversity of land ownership that makes assemblage of property difficult.

In a reply brief, the petitioners mostly ignore Yonkers--a notable omission that surely invites challenges during oral argument.

The Willets Point brief, however, does mention it:
In 1975, the Court of Appeals decided Yonkers Community Development Agency v. Morris, which allowed the condemnation of private property placed in an urban renewal plan for the removal of “substandard” conditions. In fact, the properties were not substandard but were taken for the expansion of Otis Elevator Company, a leading industrial employer in the City of Yonkers. The court applied the liberal rather than literal definition of a “blighted” area and permitted the taking. If one thinks that this was outrageous, consider that even after receiving such municipal largess, Otis quit Yonkers in 1982.

What's outside the record?

While the original case was filed in state court in August 2008--after a federal case filed in 2006 was ultimately rejected--the petitioners' brief makes ample citation of recent episodes that bolster the argument that the state is bending over backwards to accommodate developer Forest City Ratner.

The city says that matters after the Appellate Division's May 2009 decision should be rejected as outside the record.

The ESDC says the appellants "rely on purported facts that are not part of administrative or judicial record" and that only the administrative record before ESDC when it made its eminent domain determination on 12/8/06 should be at issue.

In response, the petitioners allow that "[w]hile newspaper articles present a closer question, there is no doubt that this Court 'may properly take judicial notice of facts appearing in the public records of this State," meaning decisions and documents produced by the ESDC, Metropolitan Transportation Authority (MTA), and New York City Independent Budget Office (IBO).

The reply brief states:
Surely Respondent cannot condemn Petitioners’ homes and business based on one version of the MGPP; make major revisions to the MGPP [Modified General Project Plan] nearly three years later; decline to issue modified EDPL findings about those revisions (thereby arguably precluding Petitioners from obtaining judicial review of the revisions under the EDPL); and prevent this Court from even considering whether Respondent’s supposedly “minor” changes to the Project are material to Petitioners’ claims.

So, will the court take notice of the ESDC's willingness to amend city and state funding agreements to deliver subsidies faster to Forest City Ratner, a willingness to allow a reduction of approximately 35% of project square footage (the brief erroneously calls it a formal reduction), and an acknowledgment that affordable housing contingent upon subsidies?

Will it address the IBO's 2009 report that concluded that the arena--not the project, as stated in the brief--would cost the city nearly $40 million over 30 years, while Forest City Ratner would receive $726 million in government subsidies and benefits for the arena? (The ESDC's response, not part of the record in this case, was weak.)

If so, then the case would get more complicated.

Kelo and relative benefits

The state says Kelo isn't relevant, given that Atlantic Yards is about blight, while Kelo was only about eminent domain justified by economic development. The petitioners say that's not true, because the ESDC has claimed that the Project will generate significant economic benefits.

However, they argue, the Kelo issue can be put aside if the court relies on its own cases that seemingly require the condemnor to weigh the public benefit that will be realized by the seizure against the private benefit.

The ESDC says it wasn't relevant, and the Appellate Division agreed, given the importance of blight removal. Beyond that, the court said:
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 city brief states:
A reading of the cases makes clear that the analysis is qualitative, not quantitative, and that what the courts look to is the nature and predominance of the public purposes, which are patently present here.

That, however, is called into question by the recent evidence, notably the IBO report, and the petitioners call the Appellate Division's statement "conclusory."

Would a comparative benefit analysis be unworkable, as the ESDC suggests? Respond the petitioners:
[T]here is nothing particularly difficult or “unworkable” about analyzing the benefits that accrue to a private party and comparing them to the anticipated public benefits. Mathematical precision is not required.

Stare decisis

The ESDC says the appellants ignore stare decisis, the doctrine that precedent should be followed, and points to a long line of cases codified into the Eminent Domain Procedure Law (EDPL), which allows for "public use, benefit or purpose."

The petitioners respond:
Moreover, this Court has made clear that the appropriateness of resting a decision on stare decisis is at its nadir where, as here, the Court is called upon to interpret the Constitution. This is so because when the Constitution has been interpreted incorrectly, “legislative change is practically impossible.”

In addition, stare decisis is even more inapplicable in this case given the Supreme Court’s express suggestion in Kelo v. City of New London that States consider whether their Constitutions “plac[e] further restrictions on [their] exercise of the takings power” than the Fifth Amendment does.

Questions of pretext

The IJ brief states:
The court below gave remarkably short shrift to the contention that the project at issue in this case is simply a pretext for conferring benefits on private developer Forest City Ratner, apparently holding that a taking cannot be pretextual as long as there is any purported public benefit associated with the taking…. This rule--that the only pretextual takings are those with literally no conceivable public benefit--seems at odds with the very notion of pretextual takings: there is always, in every pretext case, an asserted public purpose, which serves as a pretext for the would-be condemnor's true, illegitimate purpose. The lower court's rule is grossly out of step with the practice of other state courts (and even federal courts).

...It is especially important to look at questions of pretext where, as here, the purported public use dovetails with the preexisting commitments and plans of private parties.

The brief on behalf of the FAC, PACC, and PHNDC argues similarly:
Here, the ESDC did not make a blight finding until at least two years after the AYRP was announced, and that determination is based on such compelling public health and safety issues as "graffiti," "weeds," and "underutilization." It is disingenuous for Respondent to now allege that blight clearance was its primary purpose all along. The arena for a private professional sports team owned by the developer was conceived of years prior to the completion of the blight study upon which the taking now relies. The record strongly indicates that blight removal (whatever that means)--not "slum clearance"--is nothing more than a convenient pretext for the otherwise invalid condemnation.

Article XVIII, section 6

The petitioners 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 low-income residents.

The Appellate Division had agreed the clause applies only to low-income projects and the ESDC follows up on that argument.

This argument--highly convoluted to the lay reader--takes up a significant proportion of the briefs in the case, Should the court focus on it, it's possible the court could put the public use debate in large part aside.

One interesting policy argument, from the brief filed by the FAC, PACC, and PHNDC: because affordable housing was a substantial justification for approval, the ESDC should not be permitted to exercise eminent domain without an enforceable guarantee that the housing units will be reserved for occupancy at affordable rates by low-income persons.

The petitioners' reply brief states:
But Article XVIII makes clear that the decision to cite blight as the primary justification for taking Appellants’ homes and businesses – coupled with the decision to solicit and accept huge State subsidies for the Project – has consequences for the ability to build market-rate housing.

Nonetheless, Respondent chose to describe the Project not as a housing or “residential project” but as a “mixed use project” with a “civic” component (the arena) and a “land use improvement” component (slum clearance and economic development). This was no doubt done because, under Respondent’s own enabling legislation, a “residential project,” in accordance with Article XVIII, is defined as one which is “designed and intended for the purpose of providing housing accommodations for persons and families of low income.”

What does it all mean?

As the IJ brief suggests there are both narrow and broader frames for looking at this case and this project.

The city's brief offers a standard justification for condemnation, based on ESDC documents:
While surrounding neighborhoods have since experience a boost... the project site has not enjoyed similar redevelopment, largely because of the remaining below-grade and open air rail yards, but also because many properties remain vacant, in poor repair and underutilized.

Then again, it depends on whom you ask. As I pointed out in October 2006, a 1999 New York Times Real Estate Section article headlined A Diverse Neighborhood Spruces Up in a Turnaround contained this prescient passage:
Two decades after an economic downturn left Prospect Heights spotted with shuttered and abandoned buildings, the neighborhood is undergoing a revival. Newcomers are renovating long-neglected brownstones and Vanderbilt Avenue, a main commercial streets, new tenants trickle in as existing merchants spruce up their facades.
…Speaking of the industrial buildings in the border area on Dean and Pacific Streets Mr. McLaren said: ''It's the last large concentrated amount of square footage in brownstone Brooklyn. These are no handyman specials. You need to have sophistication in navigating city bureaucracy to make them work.''

(Emphasis added)

The Willets Point brief argues:
An independent judiciary should not be limited to a rubber stamp of approval.
…Furthermore, the decisions made to condemn are not legislative determinations. The determinations are not made by any elected officials, but by a hand full [sic] of appointees who are responsible to no one. It is simply incredible that these decisions have been held unreviewable. The decision making process to condemn private property is not made by a representative deliberate assembly.

The ESDC, by contrast, contends:
Petitioners' dissatisfaction with the state of eminent domain law as it has existed for many decades reflects a political stance that would best be addressed to the elected branches of government.

Clearly, the case does have a political component. The judges on the Court of Appeals must consider whether the elected branches' unwillingness to update eminent domain law is a spur for them to act in this case.