Court of Appeals Upholds Atlantic Yards Condemnation

Just a week apart, in late November and early December 2009, the Court of Appeals and then the Appellate Division, First Department, made major pronouncements on the authority of the courts to review determinations that ]property is subject to condemnation for allegedly public purposes.

In the first of two high-profile holdings, the Court of Appeals in Matter of Goldstein v. New York State Urban Development Corporation upheld the finding that a group of properties that were not in and of themselves blighted could be taken by eminent domain to build the new Nets Stadium and a series of mixed-use towers. Next, in the equally high-profile case involving the proposed new Columbia University campus in West Harlem, the Appellate Division in Matter of Kaur v. New York State Urban Development Corporation rejected a finding of blight.

Matter of Goldstein

In Goldstein, which involves the so called Atlantic Yards area of Brooklyn, the Court of Appeals found that the lack of blight for the specific properties at issue did not matter if the overall purpose of the project is to remove blight stating that “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 noted that, while the area in question did 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. Therefore, the court held that current usage of those terms has a broader application than when the statutes were adopted to permit slum clearance.

In analyzing the appropriate criteria for judicial review, the Court of Appeals limited the scope of judicial review in cases where there is an administrative determination of a public purpose. The court found that whether something serves a public purpose is within the scope of the legislature to define and the application of the terms is within the realm of the “quasi-legislative administrative agencies” that implement the legislative determinations. “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 ' .”

Significantly, the Court of Appeals acknowledged that in determining the existence of blight it is possible “the bar has now been set too low” but still deferred to the legislature on the issue.

Matter of Kaur v. New York State Urban Development Corporation

The second case involves the Manhattanville area of West Harlem, which has been in the crosshairs of Columbia University for a number of years as the location for a new campus. Columbia began acquiring property in the area, but a number of property owners refused to sell to Columbia. The University then began working with the Empire State Development Corporation (ESDC) to acquire the holdouts through eminent domain. The court made specific findings as to the history of ownership of property within the targeted area, noting that in 2000 Columbia owned only two properties in the area, but by 2003, it owned 51% of the properties. In 2004, the New York City Economic Development Corporation (EDC), the ESDC and Columbia began meeting about development of the new campus.

By 2006, the ESDC hired Columbia's planning consultant to do a study of the area. The study, issued in 2007 noted that by 2007 Columbia controlled 72% of the properties. The study concluded the area was blighted as the majority of the lots in the area were substandard.

The Ruling

The court found: “EDC's 2002 West Harlem Master Plan, which was created prior to the scheme to balkanize Manhattanville for Columbia's benefit found no blight, nor did it describe any blighted condition or area in Manhattanville. Instead, as described above, the Plan noted that West Harlem had great potential for development that could be jump-started with re-zoning.”

Rather, the Appellate Division concluded the situation changed “only after the Plan was published in July 2002 that the rezoning of the 'upland' area was essentially given over to the unbridled discretion of Columbia. In little more than a year from publication of the Plan, EDC joined with Columbia in proposing the use of eminent domain to allow Columbia to develop Manhattanville for Columbia's sole benefit ' .”

The court noted, “Columbia not only purchased or gained control over most of the properties in the area, but it also forced out tenant businesses, ultimately vacating, in 17 buildings, 50% or more of the tenants. The petitioners clearly demonstrate that Columbia also let water infiltration conditions in property it acquired go unaddressed, even when minor and economically rational repairs could arrest deterioration ' . Thus, ESDC delayed making any inquiry into the conditions in Manhattanville until long after Columbia gained control over the very properties that would form the basis for a subsequent blight study.”

Taking what some might consider a more activist view than the Court of Appeals had taken a week before, the court rejected the “underutilization” of properties as the sole criteria in determining blight. Apparently the Appellate Division took this position because it found that Columbia, in acquiring, vacating and otherwise neglecting the properties had created most of the underutilization. The court went on to determine that the project had no “civic purpose ' .” Rather the court held “Columbia is virtually the sole beneficiary of the Project. This alone is reason to invalidate the condemnation especially where, as here, the public benefit is incrementally incidental to the private benefits of the Project.”

Conclusion

Most likely, the Kaur case will find its way to the Court of Appeals. It will be interesting to see if the Court of Appeals agrees with the finding of the Appellate Division that an entity cannot, in effect, create its own blight and then use the blighted condition to take nearby properties by eminent domain.

Steven M. Silverberg is a partner in Silverberg Zalantis LLP, White Plains, where hs concentrates his practice in municipal and land use law and related litigation. He blogs on related topics at www.blog.szlawfirm.net.

Just a week apart, in late November and early December 2009, the Court of Appeals and then the Appellate Division, First Department, made major pronouncements on the authority of the courts to review determinations that ]property is subject to condemnation for allegedly public purposes.

In the first of two high-profile holdings, the Court of Appeals in Matter of Goldstein v. New York State Urban Development Corporation upheld the finding that a group of properties that were not in and of themselves blighted could be taken by eminent domain to build the new Nets Stadium and a series of mixed-use towers. Next, in the equally high-profile case involving the proposed new Columbia University campus in West Harlem, the Appellate Division in Matter of Kaur v. New York State Urban Development Corporation rejected a finding of blight.

Matter of Goldstein

In Goldstein, which involves the so called Atlantic Yards area of Brooklyn, the Court of Appeals found that the lack of blight for the specific properties at issue did not matter if the overall purpose of the project is to remove blight stating that “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 noted that, while the area in question did 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. Therefore, the court held that current usage of those terms has a broader application than when the statutes were adopted to permit slum clearance.

In analyzing the appropriate criteria for judicial review, the Court of Appeals limited the scope of judicial review in cases where there is an administrative determination of a public purpose. The court found that whether something serves a public purpose is within the scope of the legislature to define and the application of the terms is within the realm of the “quasi-legislative administrative agencies” that implement the legislative determinations. “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 ' .”

Significantly, the Court of Appeals acknowledged that in determining the existence of blight it is possible “the bar has now been set too low” but still deferred to the legislature on the issue.

Matter of Kaur v. New York State Urban Development Corporation

The second case involves the Manhattanville area of West Harlem, which has been in the crosshairs of Columbia University for a number of years as the location for a new campus. Columbia began acquiring property in the area, but a number of property owners refused to sell to Columbia. The University then began working with the Empire State Development Corporation (ESDC) to acquire the holdouts through eminent domain. The court made specific findings as to the history of ownership of property within the targeted area, noting that in 2000 Columbia owned only two properties in the area, but by 2003, it owned 51% of the properties. In 2004, the New York City Economic Development Corporation (EDC), the ESDC and Columbia began meeting about development of the new campus.

By 2006, the ESDC hired Columbia's planning consultant to do a study of the area. The study, issued in 2007 noted that by 2007 Columbia controlled 72% of the properties. The study concluded the area was blighted as the majority of the lots in the area were substandard.

The Ruling

The court found: “EDC's 2002 West Harlem Master Plan, which was created prior to the scheme to balkanize Manhattanville for Columbia's benefit found no blight, nor did it describe any blighted condition or area in Manhattanville. Instead, as described above, the Plan noted that West Harlem had great potential for development that could be jump-started with re-zoning.”

Rather, the Appellate Division concluded the situation changed “only after the Plan was published in July 2002 that the rezoning of the 'upland' area was essentially given over to the unbridled discretion of Columbia. In little more than a year from publication of the Plan, EDC joined with Columbia in proposing the use of eminent domain to allow Columbia to develop Manhattanville for Columbia's sole benefit ' .”

The court noted, “Columbia not only purchased or gained control over most of the properties in the area, but it also forced out tenant businesses, ultimately vacating, in 17 buildings, 50% or more of the tenants. The petitioners clearly demonstrate that Columbia also let water infiltration conditions in property it acquired go unaddressed, even when minor and economically rational repairs could arrest deterioration ' . Thus, ESDC delayed making any inquiry into the conditions in Manhattanville until long after Columbia gained control over the very properties that would form the basis for a subsequent blight study.”

Taking what some might consider a more activist view than the Court of Appeals had taken a week before, the court rejected the “underutilization” of properties as the sole criteria in determining blight. Apparently the Appellate Division took this position because it found that Columbia, in acquiring, vacating and otherwise neglecting the properties had created most of the underutilization. The court went on to determine that the project had no “civic purpose ' .” Rather the court held “Columbia is virtually the sole beneficiary of the Project. This alone is reason to invalidate the condemnation especially where, as here, the public benefit is incrementally incidental to the private benefits of the Project.”

Conclusion

Most likely, the Kaur case will find its way to the Court of Appeals. It will be interesting to see if the Court of Appeals agrees with the finding of the Appellate Division that an entity cannot, in effect, create its own blight and then use the blighted condition to take nearby properties by eminent domain.

Steven M. Silverberg is a partner in Silverberg Zalantis LLP, White Plains, where hs concentrates his practice in municipal and land use law and related litigation. He blogs on related topics at www.blog.szlawfirm.net.