Posted On: November 29, 2009

New York Court of Appeals Upholds "Atlantic Yards" Condemnation

In a major decision, the New York Court of Appeals put a new gloss on the New York Eminent Domain Procedure Law (EDPL) allowing the condemnation by the Empire State Development Corporation (ESDC) of the so called "Atlantic Yards" area of Brooklyn to proceed. In Matter of Goldstein v. New York State Urban Development Corporation d/b/a Empire State Development Corporation, the court found that the ESDC had properly determined that the area at issue met the criteria for being "blighted." Therefore, the taking of private property for the development of 16 commercial and residential towers along with, most notably, a new arena for the "NBA Nets franchise" may proceed.

Initially the court addressed the issue of timeliness of the action. As previously noted in this Blog the EDPL sets forth a two part process for condemnation in New York. The first step is a determination under Article 2 of the EDPL that a site would serve a public purpose and is appropriate for condemnation. Once such a determination has been made a challenge must be brought in the Appellate Division within 30 days pursuant to EDPL section 207. However, in this case the petitioners initially brought an action in federal court and raised federal constitutional issues as well as state claims. The federal action was decided against the petitioners and the state claims dismissed without prejudice. The Court of Appeals therefore concluded that since the state claims were raised in federal court and dismissed without prejudice CPLR 205 (a), which allows a tolling of the statute of limitations under certain circumstances, tolled the statute of limitations in this case.

In a concurring opinion, Judge Read invokes what appeared to be the conventional wisdom prior to this decision. Judge Read argues that EDPL section 207 confers exclusive jurisdiction on the Appellate Division in an EDPL Article 2 challenge and therefore starting the action in another forum, even a federal court, does not toll the statute.

On the merits of the case, as outlined by the court, the petitioners argued "the State Constitution's takings clause, unlike its federal counterpart, has been consistently understood literally, to permit a taking of private property only for "public use," and not simply to accomplish a public purpose." The dissent by Judge Smith seems to view this statement as the position of the majority of the court as well. Yet, the next sentence of the majority opinion appears to reject this premise by stating: "...if this gloss on this State's takings laws and jurisprudence were correct — and it is not...." Thus, the majority appears to adopt the broader holdings of the federal courts in condemnation actions which reject the proposition that there may only be a taking for a public use "and not simply to accomplish a public purpose."

However, the court decides this case on other grounds holding "it 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. It has been deemed a "public use" within the meaning of the State's takings clause at least since Matter of New York City Housing Authority v Muller (270 NY 333 [1936]) and is expressly recognized by the Constitution as a ground for condemnation." The court's analysis continues finding that, while the area in question may not meet the classic description of a slum, the ESDC made findings that the area was substandard and insanitary and those terms have evolved over time to have a broader application than when the statutes were adopted for slum clearance purposes.

Further, the court limits the scope of judicial review of such findings. "It is important to stress that lending precise content to these general terms has not been, and may not be, primarily a judicial exercise. Whether a matter should be the subject of a public undertaking — whether its pursuit will serve a public purpose or use — is ordinarily the province of the Legislature, not the Judiciary, and the actual specification of the uses identified by the Legislature as public has been largely left to quasi-legislative administrative agencies. It is only where there is no room for reasonable difference of opinion as to whether an area is blighted, that judges may substitute their views as to the adequacy with which the public purpose of blight removal has been made out for that of the legislatively designated agencies..."

The court then goes on to state that it is possible that in determining blight "the bar has now been set too low" but declines to act stating that this is something for legislative determination.

The other argument raised by the petitioner is that the proposed condemnation violates Article XIII section 6 the State Constitution which provides that projects which receive state loans or subsidies must be for low income housing. The court distinguishes this provision of the Constitution finding that the project at issue is not one of large scale slum clearance where there will be a large displacement of low income families requiring relocation. Therefore the court concludes that low income housing is a "worthy objective" but not mandated for a project "that does not entail substantial slum clearance."

In a dissent, Judge Smith argues that the court has given too much deference to the "self-serving" determination of the ESDC. He concludes: "I think it is we who should perform the role of judges, and that we should do so by deciding that the proposed taking in this case is not for public use."

-Steven M. Silverberg

Posted On: November 22, 2009

Property Owner Who Successfully Challenges Finding of Public Purpose for Condemnation May Recover Attorney's Fees and Costs

The New York Court of Appeals ruled last week that a property owner who was successful in defeating an attempt to acquire her property by eminent domain may recover certain of her attorney's fees and costs. In Hargett v. Town of Ticonderoga the Court noted that in a prior action the Appellate Division had ruled that the Town's superintendent of highways had exceeded his authority in attempting to condemn property for purposes unrelated to his position. In the earlier action the property owner had challenged the initial finding by the Town that there would be a public purpose in taking her property.In the current action the property owner sought reimbursement pursuant to EDPL 702 for costs and attorney's fees incurred in the successful challenge to the finding of public purpose. The issue in the case was whether the reimbursement provisions of EDPL 702 would apply to this first stage of the condemnation process in which the Town targeted the property for acquisition or only after the Town actually commenced an acquisition/vesting procedure to condemn the property.

The Appellate Division Third Department denied the application relying upon the holding in Matter of 49 WB, LLC v. Village of Haverstraw in which the Appellate Division Second Department concluded that no reimbursement was available under similar circumstances. As previously discussed on this Blog in a June 23, 2007 post the Second Department in the Haverstraw case held that the petitioner was not entitled to attorney’s fees and costs under EDPL 702 (B) as no acquisition procedure had been commenced. EDPL has a two step process (1) determining public purpose and (2) acquisition. As Haverstraw had only identified the public purpose but no actual acquisition procedure had been commenced, the Court determined there was no right to recover fees and costs.

In reliance on the Haverstraw case the Town of Ticonderoga argued that EDPL 702 only provides for reimbursement during the vesting stage of a condemnation proceeding. The Court of Appeals, however, disagreed with that prior holding and concluded that under these circumstances the property owner is entitled to recover certain fees and costs. The Court held in the first stage of the eminent domain process, prior to an actual vesting procedure has been commenced, "reimbursement for attorney's fees and other costs incurred by a condemnee may be sought pursuant to EDPL 702 (B) after it is determined in an EDPL article 2 proceeding that the condemnor lacked authority to pursue the proposed acquisition." The Court concluded that this first stage was part of the "acquisition" process contemplated by the language in EDPL 702.

The Court qualified the extent of available reimbursement by stating reimbursement is available for "fees and costs incurred by a condemnee after a condemnor makes a determination and findings that are adverse to the condemnee pursuant to EDPL 203 and 204... However, we take no view here as to whether fees incurred before such an adverse determination may be said to be incurred "because of the acquisition procedure" within the meaning of EDPL 702 (B)." Thus, once a municipality makes a determination that a particular property would serve a public purpose, if a property owner successfully challenges that determination the property owner can seek reimbursement. Yet, whether the costs of preparing for the hearing conducted by the municipality in reaching its public purpose determination are also reimbursable is still an open question.

-Steven M. Silverberg

Posted On: November 22, 2009

New York Court of Appeals Finds Zoning Board Abused Its Discretion in Granting Use Variance

The New York Court of Appeals in In the Matter of Edward J. Vomero v City of New York, et al has unanimously held that the City of New York Board of Standards and Appeals abused its discretion in granting a use variance to use residentially-zoned property for commercial use. The Court reversed the decision of the Appellate Division, Second Department in which two justices had dissented, and reinstated the original judgment of the Supreme Court, Richmond County.

Under the New York City zoning code, a use variance may be granted only if: 1) use of the property for permitted uses would impose practical difficulties or unnecessary hardship because of the unique physical conditions of the property, 2) the owner cannot realize a reasonable financial return from use of the property for permitted uses because of such unique physical conditions, 3) use of the property for non-permitted uses would not alter the essential character of the neighborhood, and 4) the owner did not create the practical difficulties or unnecessary hardship.

The property at issue is a corner lot located in a residentially-zoned district on Staten Island abutting a six-lane wide street. The owner purchased the property for $275,500 and then demolished the existing house located on the land, all for the purpose of constructing a photography studio accessory to its catering hall located directly across the street in a commercially-zoned district. An appraisal was obtained seven months following purchase which showed that the vacant land could be sold for $375,000 for residential use. The land is similar in size to other residential properties located in the neighborhood.

The Court of Appeals cited its 2004 holding in Matter of Pecoraro v Board of Appeals of Town of Hempstead (2 NY3d 608 – 2004) that “(a) local zoning board has broad discretion when reviewing an application for a zoning variance, but its determination may be set aside if the record reveals that ‘the board acted illegally or arbitrarily, or abused its discretion,’” and found that “the zoning board’s decision to grant a use variance for the construction of a commercial structure in a residentially-zoned area was an abuse of discretion. The physical conditions of the parcel relied on by the board did not establish that the property’s characteristics were ‘unique’ … Proof of uniqueness must be ‘peculiar to and inherent in the particular zoning lot’ … rather than ‘common to the whole neighborhood’…The fact that this residentially-zoned corner property is situated on a major thoroughfare in a predominantly commercial area does not suffice to support a finding of uniqueness since other nearby residential parcels share similar conditions.”

-Bernis E. Shapiro