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Argument today over attorneys' fees in Atlantic Yards timetable case; was ESDC's failure to study extended buildout "substantially justified"?

Attorneys for the two community coalitions that won an uphill battle to require a Supplementary Environmental Impact Statement (SEIS) for the second phase of Atlantic Yards will argue in state court today for more than $300,000 in attorney fees--an effort vigorously opposed by the Empire State Development Corporation (ESDC).

The Equal Access for Justice Act (EAJA) provides that fees and other expenses to the prevailing party "in any civil action brought against the state, unless the court finds that the position of the state was substantially justified or that special circumstances make an award unjust."

Given that the ESDC argues that its position was "substantially justified," the case may serve as a proxy for the larger argument over Atlantic Yards.

If Justice Marcy Friedman fails to award fees to the lawyers for the coalitions led by Develop Don't Destroy Brooklyn and BrooklynSpeaks, that could indicate she agrees that the state entity's failure to study the potential impacts of a 25-year project buildout--as opposed to the ten years long anticipated and the 15 years evaluated when the project was re-approved in 2009--was "substantially justified."

The case will be heard today at 10 am in Manhattan Supreme Court at 60 Centre Street, IAS MOTION Part 60, Room 248.

The benefits of delay

Still, the decision not to conduct that SEIS was substantially beneficial to Atlantic Yards; it likely would have stretched the timetable to approve the new Modified General Project Plan from 2009 to 2010, thus making Forest City Ratner ineligible for tax-exempt bonds that will save it more than $100 million.

Also, Friedman in March 2010 ruled against the petitioners in the first round of the case, despite what she called a "deplorable lack of transparency" on the part of the state. A victory for the community groups could have placed a cloud over arena construction in several ways.

Indeed, had she accepted into the record the belatedly released Development Agreement, which clearly indicated a potential 25-year timetable with no penalties to ensure a ten-year buildout, her ruling requiring an SEIS might have have thrown a wrench into the drawdown of arena bonds.

After reopening the case, Friedman in July 2011 found the "ESDC’s use of the 10 year build date in approving the 2009 MGPP [Modified General Project Plan] lacked a rational basis and was arbitrary and capricious. That was upheld by the Appellate Division, and an appeal was refused by the Court of Appeals. (The SEIS has not yet begun.)

A previous argument for sanctions

Lawyers for DDDB in 2011 argued unsuccessfully for sanctions against ESDC and Forest City Ratner, and their lawyers, for withholding the Development Agreement, thus causing additional legal fees.

Those sanctions were denied, but this new case is different; it's been brought after an ultimate victory in the underlying case.

The previous rejection required "frivolous conduct." In this instance, the "statute presumes an award of attorneys' fees in order to balance the unequal position of a citizens group challenging an illegal government action," wrote DDDB attorney Jeff Baker in an 8/3/12 memo.

At issue

"In this instance, ESDC cannot argue that it was substantially justified in sticking to the fiction of a 10-year project when it admitted that at the time of its review in the Summer of 2009, it knew that the contract documents would allow construction to be extended as long as 25 years," wrote  Baker in a 5/10/12 affirmation.

"Nevertheless, it denied that reality during its review and decision in September 2009 and continued that misrepresentation to the Court until Petitioners' Motion to Renew when it was faced with the clear documentary evidence of the 25-year timeline."

"This is not an instance of reasonable minds disagreeing," he wrote. "By avoiding preparing an SEIS in 2009, ESDC and FCRC were motivated by meeting the IRS deadline for completion of the bond sale by the end of the year."

"Given the immense resources of ESDC and the very limited resources of the Petitioners, as well as the conduct of the parties in the proceeding, there are no special circumstances," wrote BrooklynSpeaks attorney Al Butzel in a 5/11/12 affirmation. (While BrooklynSpeaks is the umbrella group, the actual lead petitioner is the Prospect Heights Neighborhood Development Council.)

"Equally important, there is no basis for ESDC to claim that its position... was 'substantially justified,'" Butzel added. "Both this Court and the Appellate Division found that ESDC's obstinate adherence to the 10-year-build out was arbitrary and capricious... Moreover, ESDC effectively suppressed critical information."

Fees sought

Both Baker and Butzel indicated that they gave their clients, nonprofit organizations with limited resources, substantial discounts, but are seeking recovery under the statute, which ensures that awards are based on "prevailing rates."

In both cases, they note that substantial legal work was required to reopen the case, go through multiple hearings before Friedman, and then appeals--much of which would not have been required had the case been resolved appropriately in the first place.

Thus Baker's firm, as well as other attorneys contributing to the DDDB effort, seeks $165,288.40. Butzel seeks $144,712.60. In both cases, those sums are well more than double the actual bills.

Neither set of community organizations has much of a budget these days, so the award of fees may be key to getting the attorneys paid.

The ESDC argues that "petitioners have not provided an adequate basis for their application to obtain payment of attorney fees at billable rates far exceeding those charged to them."

Three issues in dispute

The ESDC offers three reasons why the court shouldn't award attorneys fees. First, it argued, ESDC is technically a public benefit corporation--not a state agency--and thus "a legally distinct entity."

The petitioners respond that such an interpretation would thus shield entities like the ESDC from liability.

Secondly, ESDC argues that the petitioners were not actually “prevailing parties” within the meaning of the law, given that they lost other parts of the lawsuit, such as an effort to annul the 2009 Modified General Project Plan.

The petitioners respond that the ESDC's vigorous effort to appeal the order to do an SEIS indicates the significance of the victory.

Finally, ESDC says the fee request "should be denied because ESDC’s position that an SEIS was not required to study a delay in Phase II of the Project – although rejected by the courts – was 'substantially justified' within the meaning of EAJA."

The petitioners respond that even Friedman's initial upholding of the timetable called ESDC's reasoning only "minimally" supported by the intent to require the developer to use "commercially reasonable efforts" to complete the project in ten years and that the judge decried a "deplorable lack of transparency."

In a passage that may well be at issue in the argument today, the ESDC argues that Friedman's ultimate decision nonetheless pushed the envelope:
The Court in its Final Decision cited excerpts from the CEQR [City Environmental Quality Review] Technical Manual that refer to duration [of a project] as a factor to be
 considered in the analysis of environmental impacts (Final Decision at 11-12), but these excerpts provide no direction with respect to methodologies to be employed to assess the impacts of a delay in construction. It is fair to say that ESDC will therefore be breaking new ground when it prepares the SEIS ordered by the Court.
At the heart of the appellate court argument in February of this year was whether an intense buildout of the 17-building project within a decade would be worse than an extended, if less intense, buildout over 25 years. That was the position of the ESDC; the petitioners argued that there were unique impacts caused by extended construction, and the courts agreed.