New York Zoning and Municipal Law Blog

An article entitled " 'Atlantic Yards' Condemnation Upheld," written by Steven Silverberg, founding partner of Silverberg Zalantis LLP, is featured in the March, 2008 ALM Law Journal Newsletter, New York Real Estate Law Reporter. The article discusses the recent decision by the Second Circuit Court of Appeals to dismiss the challenge by several property owners to the condemnation of their properties in order to construct a huge private development in downtown Brooklyn, New York. See: http://www.lawjournalnewsletters.com/newsletters/home/ljn_nyrelaw.html

The Second Circuit Court of Appeals upheld dismissal of the challenge to condemnation of private property for the Atlantic Yards Project in Brooklyn stating in the case Goldstein v. Pataki, decided on February 1, 2008: “…eminent domain has its costs, it has its benefits, and in all but the most extreme cases, Supreme Court precedent requires us to leave questions of how to balance the two to the elected representatives of government, notwithstanding the hardships felt by those whose property is slated for condemnation.” The Court found that neither the fact that the area at issue would be developed privately nor the fact that the individual property owners’ lots are not themselves blighted changed the public purposes of the project to remove blight and provide affordable housing.

The well publicized proposal is to construct a new sports arena for the New Jersey Nets, sixteen high rise apartment buildings and several office towers in a portion of downtown Brooklyn which the Court described as being “afflicted for decades with substantial blight.” Plaintiffs are 15 property owners whose homes or businesses are in a less blighted portion of the project area which are slated for condemnation.

Plaintiffs claimed violations of the “Public Use Clause” of the Fifth Amendment and the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the United States Constitution, along with a New York State law claim. The basis for the action was the allegation that the “public use” for the project is merely a pretext and any incidental public benefit is secondary to the primary purpose of the project, which Plaintiffs’ claim is to allow a private taking in order to advance the personal fortune of the developer, Bruce Ratner.

The District Court, on a motion to dismiss, dismissed the federal claims and declined to retain supplemental jurisdiction over the state claim. Finding that “pretext” was an argument that could be advanced under the Supreme Court decision in Kelo v. City of New London, the District Court determined a reasonable juror could not conclude removal of blight and construction of 2,250 new units of affordable housing were mere pretexts. The District Court also concluded, based upon a prior holding by the Circuit Court in Brody v. Port Chester, that the due process challenge to the New York Eminent Domain Procedure Law would fail.

On appeal, Plaintiffs claimed that government officials had abdicated their eminent domain authority and had been co-opted by Mr. Ratner in order to increase his personal profit. While the Circuit Court noted that the Fifth Amendment requirement that private property may not be taken without just compensation has been understood to include the prohibition of taking private property for the benefit of another private person without “a justifying public purpose” the court also observed that “the primary mechanism for enforcing the public-use requirement has been the accountability of political officials to the electorate, not the scrutiny of the federal courts.”

The Court concluded the role of the Courts is the narrow one of determining if the exercise of eminent domain is “rationally related to a conceivable public purpose” (citing Hawaii Housing Authority v. Midkiff). It found the Complaint on its face conceded “several well-established categories of public uses, among them the redress of blight, the creation of affordable housing, the creation of a public open space, and various mass-transit movements.”

Finally, the Court determined that the “single sentence” in the Kelo decision referring to pretext did not open the door “to require federal courts in all cases to give close scrutiny to the mechanics of a taking rationally related to a classic public use as a means to gauge the purity of the motives of the various government officials who approved it.”

In what the Appellate Division, Second Department called a case of first impression, the court has ruled an attempt by the Village of Haverstraw to acquire a property by condemnation for affordable housing violated the Eminent Domain Procedure Law. In the case 49 WB, LLC v. Village of Haverstraw the court found the Village failed to demonstrate a public purpose.

The Village proposed to condemn the property at issue for acquisition by a local not-for- profit, HOGAR. In finding that the acquisition of the property had a public purpose the Village had determined that (1) HOGAR would provide a community outreach health center, (2) provide an office for HOGAR and (3) the site would be suitable to construct 16 units of affordable housing. The Court found: (1) the Village failed to demonstrate that HOGAR was more likely to provide a community outreach health center than the current owner who had a plan for such use and therefore “failed to articulate how or in what manner the condemnation …fosters any benefit to the public which would not be obtained absent condemnation”; (2)HOGAR already leased space in the building and the owner had offered a long term lease, further “there is no foundational support in the record to conclude that any “public” benefit would flow from having a private, not-for-profit corporation such as HOGAR be an owner of its office space rather than a tenant”; and (3) the condemnation, through a complex analysis outlined below, actually results in fewer affordable housing units for the Village.

The Court found that the entire affordable housing argument was tied to a private development of the Village’s waterfront. The Court noted that in exchange for permission to construct a large development on the Village’s waterfront, the waterfront developer was required to “participate” in the development of 85 units of affordable housing. The developer intended to contribute to HOGAR’s acquisition of the property and therefore, the Court found, would get credit for participating in the 16 units of affordable housing HOGAR proposed for the site. This would reduce the developer’s obligation to build affordable housing by the 16 units. But the Court found that the present owner already proposed 6 units of affordable housing on the site which, unlike HOGAR’s proposal, did not include “participation” by the developer and would not be credited to the developer’s requirement of 85 units. Therefore, by pursuing the condemnation and giving the developer credit for HOGAR’s 16 units, the Village was actually losing the 6 additional units that would have been constructed by the owner of the property. The Court concluded allowing the present owner to construct 6 units would net the Village 91 units of affordable housing rather than 85. Thus the purported public purpose of providing more affordable housing was illusory.

The Court found, based upon this analysis, “the condemnation solely benefits the private entities.” Significantly the Court then limited its holding by stating: “we do not suggest that private owners of property can avoid the proper exercise of a municipality’s condemnation authority by merely offering to utilize the property in the same manner as intended by the municipality. Instead, our opinion rests upon the evidentiary record that the Village invoked its power of condemnation for the sole purpose of benefiting private and not public interests.”

Another issue was whether the challenge had been brought within the 30 day statute of limitations. The court noted that EDPL 204(A) provides for publication of notice of the determination and findings in “at least” two successive newspapers. In this case the Village published notice in five successive newspapers. The court found that since the publication was not “complete” until the last date of publication, even though the three additional days of publication were optional by the Village, the time to appeal did not run under EDPL 207 (A) until thirty days from the date publication was completed.

Finally, the Court found 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 no actual acquisition procedure had been commenced the Court determined there was no right to recover fees and costs.