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In request for stay on Atlantic Yards construction, DDDB attorney charges ESDC and FCR with malfeasance, says their lawyers breached ethical conduct

Maybe the Barclays Center arena should never have gotten started.

Maybe the arena construction is proceeding thanks only to the "malfeasance" of the Empire State Development Corporation (ESDC) and developer Forest City Ratner (FCR) in withholding the Atlantic Yards Development Agreement until after a crucial court argument in January.

Those are the messages of a blistering legal motion filed by the attorney for Develop Don't Destroy Brooklyn and allied groups, urging state Supreme Court Justice Marcy Friedman to follow up her November 9 ruling on the project timetable and stay construction on the entire project.

Friedman, partly reversing a March 10 decision that endorsed the ESDC's claim that a ten-year buildout of the project was reasonable (despite the Metropolitan Transportation Authority's agreement to allow 22 years to sell FCR Vanderbilt Yard development rights), on November 8 declared that the ESDC had failed to address the impact of the Development Agreement, which it had kept under wraps and which allows 25 years for project construction.

Friedman remanded the proceedings "to ESDC for findings on the impact of the Development Agreement and of the renegotiated MTA agreement on its continued use of a 10 year build-out for the Project, and on whether a Supplemental Environmental Impact Statement is required or warranted."

Why a stay is needed

Leaving the timetable to the ESDC, however, is not what the petitioners want.

(The parties met this morning with Friedman to establish a hearing schedule in the case; an argument on the motion for a stay, has been scheduled for noon on December 22.)

Argues DDDB attorney Jeff Baker in an Affirmation (below), a stay of all construction is needed to maintain the status quo, not just to prevent further harm to the environment, "but to assure that ESDC makes an honest appraisal of the potential environmental impacts of the project and seriously considers the consequences of a 25-year construction schedule."

Baker argues that, had the Development Agreement (referred to as the MDA, or Master Development Agreement), been presented to the court in a timely manner, and had the ESDC and FCR been truthful to the court, the project would not have gone forward without a new evaluation of environmental impact.

And that would have delayed project approval beyond the end-of-2009 deadline to get crucial tax-exempt bonds issued.

“Put simply, the ESDC colluded with Forest City Ratner to deceive the Court. Unless and until the ESDC follows the Court order, any work at the project site would be in violation of state environmental law and an affront to the community that would have to live with Ratner’s developer’s blight for decades,” said DDDB legal director Candace Carponter in a statement.

BrooklynSpeaks, the coalition of groups in a companion case, also filed for a stay.

“Because the ESDC approved the 2009 MGPP without a reasoned basis for assuming Atlantic Yards would be complete in ten years, the agency violated New York State environmental law. As such, the work proceeding at the site now is underway illegally,” said attorney Al Butzel, in a statement. “ESDC and FCRC had a responsibility to disclose the true extent of the renegotiated construction schedule. They should not be rewarded and allowed to continue as if they had complied with the law.”

At issue is the 1100-space "interim" parking lot slated for Block 1129, the southeast block on the site. "[I]t could stay that way for up to 25 years," said Gib Veconi of the Prospect Heights Neighborhood Development Council. "The State needs to disclose the noise, traffic, and air quality impacts of that likely scenario before moving forward."

(Presumably the parking lot would begin to shrink should construction continue on that block.)

Ethical breach

Baker lays out the sequence behind the case, noting the lawsuit was filed in a timely fashion after ESDC's September 2009 approval of the MGPP.

The MDA, signed 12/23/09, was not released until 1/25/10, was six days after a hearing in the initial case challenging the MGPP.

At the hearing, ESDC said the developer would be required to use "commercially reasonable efforts" to complete the project by 2019.

The MDA contradicted that, but it was not entered into the court record: "upon ESDC's and FCRC's vehement objections, the Court again denied permission," Baker writes.

Perhaps because of the necessity for legal diplomacy, Baker refrains from criticizing the judge for her own error, what Friedman in her ruling called a "misapprehension" of the value of the MDA.

He blames the defendants for an ethical breach:
Considering the deference courts traditionally grant state agencies as applied in this case, it is understandable that the Court believed the representation of Respondents' attorneys that the MDA contained meaningful contractual guarantees of timely completion. However, the Court's trust in the good faith of a state agency and the ethical conduct of Respondents' attorneys, all of whom are from otherwise respected, major law firms, was misplaced. As noted in this Court's November Decision, ESDC, as the respondent, has an obligation to submit a complete record of the facts and "[i]t is axiomatic that ESDC also had an obligation to accurately summarize the bases for its determination in the proceedings before this court. Thus, once the Development Agreement was executed, ESDC had an obligation to bring it to the attention of the court in order to correct the totally incomplete representations."
Charge of collusion

Only because the state agency and the developer "colluded in their misrepresentations to the Court" could arena construction begins, argues Baker.

"ESDC failed in its public obligation to evaluate the Project honestly in the context of its known schedule for completion," he states, while FCR, "motivated by profit, used its influence with ESDC to avoid meaningful review, although it never intended to complete the project within the supposed ten-year timeframe and, to the contrary, was actively negotiating contracts providing far longer timeframes."

Is it too late?

Friedman expressly chose not to stay arena construction in her ruling, and Baker notes that Forest City likely "will argue that it has already secured vested rights and that it is too late to halt construction."

Continuing construction, he argues, could only bolster FCR's claims to vested rights and would prejudice future review, since a legitimate analysis will entail a full consideration of development alternatives.

FCR, he says, proceeded with construction at its own risk, knowing the impact of "its own culpability."

Baker tries to argue that the project hasn't gone too far, with much of the investment state and city funds for infrastructure "germane to any redevelopment project." That's not fully clear.

He also cites an October document prepared for the ESDC and bondholders that states that, as of August 31, less than 10 percent of total project cost associated with the arena and required transit improvement had been expended. Presumably, a good chunk more has been spent three months later.

He's on stronger ground in arguing that, while Phase 1 may have more significant penalties for delay, that doesn't mean it should proceed while ESDC evaluates the impact of Phase II.

Why? The project has always been considered as a whole, with most of the long-term benefits found in the second phase, including subsidized housing and open space. Moreover, the ESDC never argued that Phase 1 or the Arena has an "independent utility."

In fact, given that most purported benefits wouldn't come until the end of the project, and such stages are even less likely, Baker states, "ESDC cannot proceed with the arena stage of the Project, where the adverse environmental impacts are greatest and the mitigation measures most uncertain."

Even if the Court agrees some kind of arena would be built, it would be appropriate to stay further construction until the environmental review is complete, since "it must be presumed that any further SEQRA review may result in changes to the Project design" and, if construction continues, its progress "will constrain consideration of the full range of alternatives."

The BrooklynSpeaks argument

A companion case was brought by members of the BrooklynSpeaks coalition. Attorney Al Butzel states in an Affirmation that the counsel for ESDC said the MDA represented added nothing new:
It was as a result of this misrepresentation--and ESDC's failure to provide the Court with a document that it had to know bore directly on the Petititioners' claims--that the Court was misled into concluding that there was enough in the record--albeit barely to support ESDC s continued use of the 10 year buildout.
Had the MDA been available, the decision in March would have been different, Butzel states, and bond proceeds could not have been released.

Like Baker, Butzel argues that the state agency and the developer "should not be rewarded for their misrepresentations to the Court and their concealing of the terms of the MDA."

And work currently under way is proceeding illegally, he states. The ESDC should have analyzed the impact of delayed construction, an extended "interim" surface parking lot, and the delays in asserted benefits.

(He also asserts that additional demolition on the southeast block, Block 1129, "will expand the area of disruption to a new area deeper in the Prospect Heights residential neighborhood." Opposing counsel surely will respond that significant demolition on that block has already occurred.)

Divergence with DDDB on arena

BrooklynSpeaks had long wanted to mend Atlantic Yards, not end it, and its legal strategy offers somewhat more flexibility.

Butzel suggests that, if the Court decided to give ESDC "a limited amount of time to comply with SEQRA [State Environmental Quality Review Act]" state law, continued work on the arena might proceed, "but all other work, including any attempt to convert Block 1129 to a parking lot, should be absolutely enjoined unless and until there is full compliance with SEQRA and ESDC has reconsidered its approval of the MGGP."

Presumably the ESDC would respond that the parking lot is needed to serve the arena.

If no stay, 45 days?

If no stay is granted, the petitioners request a schedule, no longer than 45 days, for ESDC to decide whether a ten-year buildout is realistic and if it doesn't, to identify a realistic construction schedule for the project, Butzel states.

While DDDB and fellow petitioners join the request for a compliance schedule as an alternative to a complete stay, Baker noted that it's not a full substitute, as it will allow construction to continue and "likely predetermine the outcome of any further review by ESDC, in addition to rewarding FCR and ESDC for their malfeasance."

The problem of indefinite interim parking

In an affidavit, Danae Oratowski, Chair of the Prospect Heights Neighborhood Development Council, a BrooklynSpeaks member, cites the 11/4/10 meeting of the Atlantic Yards District Service Cabinet held at Brooklyn Borough Hall.

She notes that FCR executive Jane Marshall said the surface parking lot on Block 1129 would be used for the arena and also B2 residential parking.

Oratowski states:
I and members of the PHNDC are concerned that if FCRC is allowed to build the surface parking lot on Block 1129 as described by Ms. Marshall, it may remain in place for a decade or more--perhaps as long as the 25-year schedule allowed under the Development Agreement for Phase II construction. Because the Atlantic Yards FEIS considered interim parking on Block 1129 temporary, it did not study the impact of the lot on the surrounding community. Given that the Development Agreement could, at a minimum, allow the lot to remain in place for a decade, the impact of the parking lot on neighborhood character, noise, air quality, storm water and security must be known before its construction is allowed to proceed.
Baker Affirmation Order to Show Cause 11/24/10

Butzel Supporting Affirmation Application for Stay

Oratowski Affirmation Request for Stay

Butzel Affirmation Order to Show Cause