Court of Appeals upholds AY eminent domain 6-1

In a decision (PDF) that gives the crucial--but perhaps not final--boost to the Atlantic Yards project, the state's highest court, the Court of Appeals, approved the use of eminent domain by a 6-1 margin, saying that it's not the role of the courts to intervene in agency decisions, given the wide latitude in state law to decide on blight.

The case, which involves nine petitioners (homeowners, commercial property owners, and residential and commercial renters) is known as Goldstein, et al. vs. New York State Urban Development Corporation d/b/a/ Empire State Development Corporation (or ESDC).

Project backers had long expressed confidence about the result, given the state court's general deference to agency decisionmaking, but the court's willingness to accept the case in the first place--the Appellate Division had unanimously upheld the Empire State Development Corporation (ESDC) in the first round--had left some room for ambiguity.

Moreover, two of the seven judges seemed skeptical of the ESDC during the oral argument October 14, though the judges spent the most time on procedural issues and the attorney for the nine petitioners faced similar skepticism. One of those judges, Robert Smith, filed a blistering dissent that stated:

[T]he majority is much too deferential to the self-serving determination by Empire State Development Corporation (ESDC) that petitioners live in a "blighted" area, and are accordingly subject to having their homes seized and turned over to a private developer.

...It is clear to me from the record that the elimination of blight, in the sense of substandard and unsanitary conditions that present a danger to public safety, was never the bona fide purpose of the development at issue in this case.

Two judges concurred in the result but not the opinion, saying that they didn't think the petitioners should even have been in court, having filed too late, thus filing the 30-day limit of the Eminent Domain Procedure Law (EDPL). They said essentially that the merits of the case had been sufficiently addressed in federal court.
No bar to groundbreaking?

Developer Forest City Ratner still must get arena bonds sold by the end of the month, and they may be hampered by the remaining cloud of litigation and the lowered market for sports facilities, but this was the largest roadblock, and there is no bar to a promised groundbreaking in the next month or so.

Develop Don't Destroy Brooklyn, which organized and funded the lawsuit (and whose spokesman, Daniel Goldstein, was the lead plaintiff), said it would file a new lawsuit because the court ruled only on the record from 2006, which promised much greater benefits than are now likely.

At a press conference held outside Freddy's Bar and Backroom, at 6th Avenue and Dean Street, which is scheduled to be demolished after the exercise of eminent domain, DDDB lawyers contended that the new lawsuit could stop ESDC from moving forward with condemnation. DDDB warned that Brooklyn would end up looking like New London, where eminent domain was used but never exercised, leaving a ghost town in its wake. (Photo by Tracy Collins)

Coverage and statements

Here's coverage in the Times, the Brooklyn Paper, Reuters, The Record, Bloomberg News, the Daily News, the Observer, and Crain's.

Forest City Ratner issued a statement:

“Once again the courts have made it clear that this project represents a significant public benefit for the people of Brooklyn and the entire City,” Mr. [Bruce] Ratner said. “Our commitment to the entire project is as strong today as when we started six years ago. Today, however, this project is even more important given the need for jobs and economic development.”

Mr. Ratner said construction activity on the yards will continue, with the intent that the Nets will play ball in the Barclays Center in the 2011-2012 NBA Season.

The ESDC issued a statement:

“Today the State's highest court, like every other court that has considered the issue, upheld the use of eminent domain to facilitate development of the Atlantic Yards Project. Empire State Development is as committed as ever to seeing the completion of this Project. With this major hurdle overcome, we can now move forward with development which will accomplish its goals of eliminating blight, and bringing transportation improvements, an arena, open space, affordable housing and thousands of jobs to the people of Brooklyn and the State of New York.”

Brooklyn Borough President Marty Markowitz issued a statement:

"The ruling by the State Court of Appeals reinforces previous decisions supporting the numerous public benefits of the Atlantic Yards project—during these difficult economic times and into Brooklyn’s bright future—including the creation of affordable housing, solid union jobs and permanent employment opportunities for Brooklynites who need work. Today’s decision from our state’s highest court marks what amounts to the final step in the legal process to make it happen. Finally, we will bring a national professional sports team and a world-class facility back to our borough after 52 years! Brooklyn’s shovels are, and have been, ready. So, let’s pick them up and get to work!”

Assemblyman Hakeem Jeffries issued a statement:

"I am extremely disappointed with the decision of the Court. The power of eminent domain is extraordinary and should only be authorized in limited circumstances where, unlike in this case, there is a clear and robust public benefit. The use of eminent domain to benefit a private developer to build a basketball arena for a team owned by a foreign billionaire is an abuse of this extraordinary power, and I hope that Governor Paterson will choose not to exercise it."

Agencies decide on blight

The 23-page majority opinion by Chief Judge Jonathan Lippman--one who seemed skeptical in part during oral argument--stated:

[I]t is indisputable that the removal of urban blight is a proper, and, indeed, constitutionally sanctioned, predicate for the exercise of the power of eminent domain.

[Appellants] are doubtless correct that the conditions cited in support of the blight finding at issue do not begin to approach in severity the dire circumstances of urban slum dwelling described by the Muller court in 1936, and which prompted the adoption of article XVIII at the State Constitutional Convention two years later... We, however, have never required that a finding of blight by a legislatively designated public benefit corporation be based upon conditions replicating those to which the Court and the Constitutional Convention responded in the midst of the Great Depression. To the contrary, in construing the reach of the terms "substandard and insanitary" as they are used in article XVIII -- and were applied in the early 1950's to the Columbus Circle area.

A political issue

Lippman's opinion gave a nod to charges of state overreach, but said it was a legislative issue:

It may be that the bar has now been set too low -- that what will now pass as "blight," as that expression has come to be understood and used by political appointees to public corporations relying upon studies paid for by developers, should not be permitted to constitute a predicate for the invasion of property rights and the razing of homes and businesses. But any such limitation upon the sovereign power of eminent domain as it has come to be defined in the urban renewal context is a matter for the Legislature, not the courts.

Always a longshot

Still, the case was always a longshot for the plaintiffs, who first went to federal court, where, had the case proceeded to trial, there would have been an opportunity to gather documents and question witnesses via discovery. The case, however, was dismissed at the trial court and appellate level, and a request to have the Supreme Court accept an appeal was denied.

In state court, there was no such opportunity for fact-finding, so the case relied on relatively brief oral arguments and extensive legal papers.

Smith's dissent

In his 11-page dissent, Smith wrote:

Rather, the 20th century cases created what may be called a "blight exception" to the public use limitation. The critical question on this appeal is whether that exception applies, a question that can be better understood after a more detailed description of the way our "public use" law has developed.

Under the 19th century understanding of public use, the taking at issue in this case would certainly not be permitted. It might be possible to debate whether a sports stadium open to the public is a "public use" in the traditional sense, but the renting of commercial and residential space by a private developer clearly is not.

Our 20th century cases, while not all consistent and containing some confusing language, are best read as modifying, rather than nullifying or abandoning, the established public use limitation.

Smith tried to make a distinction between the majority's citation of Muller and the current Atlantic Yards case:

Muller did not involve transfer to an ordinary privatedeveloper: the property in question was to be rented by the City, or by "limited dividend corporations," to people of low income.

Pretext issue

Smith agreed with the petitioners that the blight argument seemed a pretext, writing:

According to the petition in this case, when the project was originally announced in 2003 the public benefit claimed for it was economic development -- job creation and the bringing of a professional basketball team to Brooklyn. Petitioners allege that nothing was said about "blight" by the sponsors of the project until 2005; ESDC has not identified any earlier use of the term. In 2005, ESDC retained a consultant to conduct a "blight study." In light of the special status accorded to blight in the New York law of eminent domain, the inference that it was a pretext, not the true motive for this development, seems compelling.

The Blight Study

Smith savaged the Blight Study conducted by consultants AKRF:

ESDC's consultants did their best. Proceeding lot by lot through the area in which petitioners live, they were able to find that a number of buildings were not in good condition; petitioners claim that this results in large part from the fact that Ratner's plan to acquire the properties and demolish the buildings had been public knowledge for years when the blight study was conducted. Choosing their words carefully, the consultants concluded that the area of the proposed Atlantic Yards development, taken as a whole, was "characterized by blighted conditions." They did not find, and it does not appear they could find, that the area where petitioners live is a blighted area or slum of the kind that prompted 20th century courts to relax the public use limitation on the eminent domain power.

Major roadblock cleared

Develop Don't Destroy Brooklyn had already tried to manage expectations, pointing to other pending litigation, including a case challenging the ESDC's approval of the Modified General Project Plan--a similar case was filed by groups in the BrooklynSpeaks coalition--and a case challenging the Metropolitan Transportation Authority's revision of the Forest City Ratner's deal for the Vanderbilt Yard.

Also pending for many months at the Court of Appeals is a request for an appeal in the case challenging the environmental review.

And what if?

What if it had gone the other way? When asked at a public meeting in July if the Empire State Development Corporation (ESDC) had an alternate plan should the Court of Appeals rule against the use of eminent domain, ESDC counsel Joe Petillo didn't answer the question directly, essentially indicating there was no plan.

When asked in early November by Crain's New York Business if he had an alternate plan, developer Bruce Ratner responded, “We'll figure something out.”

The decision, arguably, could have gone either way, given that other state courts, notably that in Michigan's Hathcock case, had changed course in recent years. Also, the U.S. Supreme Court, in its controversial 5-4 Kelo vs. New London decision in 2005 upholding eminent domain, invited state legislatures and courts to revise eminent domain to local circumstances.

Some 43 states have done so, though New York has not even established a temporary commission on eminent domain, as recommended by a State Bar Association task force.

Also, given the recent front-page news that, not only would there be no development in the near term in New London but that Pfizer would be moving out, the state court had ample opportunity to reflect on the impact of history.

But the majority opinion gave no nod to Kelo or the latest news from New London, in part because it relied only on the record as of 2006.

Finality and fallibility

Any final decision, of course, can lead to a retort quoting the 1953 concurring opinion by Supreme Court Justice Robert H. Jackson in Brown v. Allen:

We are not final because we are infallible, but we are infallible only because we are final.

Of course, more language from Jackson's concurrence-he was writing about the court's reversal of a decision, rather than upholding a lower court--would have given aim had the court in this case gone the other way:

However, reversal by a higher court is not proof that justice is thereby better done. There is no doubt that if there were a super-Supreme Court, a substantial proportion of our reversals of state courts would also be reversed.

In concurrence

Judges Susan Read and Eugene Pigott concurred in the result but, in a 25-page concurrence, said that the petitioners had violated a 30-day time limit to file the case. Read (joined by Pigott) wrote:

What has happened in this case is precisely the result that the Legislature sought to prevent when it enacted the Eminent Domain Procedure Law -- the sidelining of a public project on account of prolonged litigation.

Read acknowledged that, as noted in the majority opinion, "serial litigation of condemnation claims has been exceedingly rare," but suggested that the majority's optimism that such a tactic would remain such was misplaced:

After all, we have now opened up and exposed for all to see a whole new strategy for determined foes of a public project to exploit.