Saturday, July 19, 2008

Reality Denied!

The following is in the nature of a catch-up to set forth here something I wrote as a comment earlier on the Atlantic Yards Report site which I think it is worthy of independent consideration. The comment analyzes the tension between reality and legality when judges "presume" about public official actions things that are not reality. It appeared at “Have courts affirmed the `significant positive impact’ of AY? Nope” posted Sunday, February 03, 2008

At the time of the comment, the Second Circuit Court of Appeals had just upheld the dismissal of the Atlantic Yards eminent domain case. Since that time, the U.S. Supreme Court did not grant certiorari say whether the Second Circuit’s dismissal was, or was not, improper. (It was probably too soon since the 2005 Kelo case was quite recent. Though Kelo was controversial and unpopular the court considers eminent domain cases infrequently.) Of course, we consider the Second Circuit’s dismissal improper. The Supreme Court will one day grant certiorari to another analogous case and in ruling will probably make clear that the Second Circuit should not have dismissed the case. Until the Supreme Court grants certiorari to that next analogous case, the way to know what the Supreme Court thinks the Second Circuit should have done is to review what Supreme Court itself said in the Kelo case. A review to determine what the Supreme Court would think was one of the purposes of this comment.

Here follows the comment as it originally appeared-


Reality denied? How can Bruce Ratner claim that the courts have dealt with the supposed “merits” of his Atlantic Yards megadevelopment since the courts have yet to deal with the facts concerning his dealings? His claim reminds us forcefully that the courts often have the luxury of doing their business in a manner divorced from reality. But before the courts can award themselves the luxury of divorcing from reality and ignoring facts they must first examine threshold facts. Given the egregious illegitimacy with which our public officials have behaved, if our courts do not overturn those actions the wrong standard of review is being applied.

Justice Kennedy in his concurring opinion in the Kelo case, essential to the 5-4 decision, said that when dealing with eminent domain to effect a private-owner-to-private owner transfer “(a) court confronted with a plausible accusation of impermissible favoritism to private parties should treat the objection as a serious one and review the record to see if it has merit . .” Sandra Day O’Connor worries in her dissent that Justice Kennedy’s suggestion “that courts may divine illicit purpose by a careful review of the record and the process” may create a test ill-motivated public officials will flunk only if their intelligence level is at or below that of the "stupid staff[er]."

It is in part a question of whether anything is to be presumed about the actions and motivations of public officials when eminent domain powers are stretched to take property from one private owner to give it to another. Justice Chase, quoted by Justice O’Connor in Kelo, wrote that legislative acts to force such transfer from one private owner to another are “contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority” and that “(i)t is against all reason and justice, for a people to entrust a Legislature with such powers; and, therefore, it cannot be presumed that they have done it." What may be presumed has a lot to do with whether and how closely the courts will be dealing with the reality of facts.

Justice Kennedy takes as a given that there should be “meaningful judicial limits on the government's power to condemn any property it likes.” In his concurring opinion he allows that there are circumstances under which the legitimacy of government action will not be presumed and also the possibility that there will be situations where the stretching of eminent domain will actually be presumed to lack legitimacy.

The nation’s reaction to the Kelo decision was largely one of shock, with many thinking it went much too far. Polls showed that most Americans disagreed with it, some polls showing that the number who disagreed exceeded 90%. Reforms have been enacted in most states (but not yet in New York). Kelo may indeed have gone too far, but Justice Kennedy spoke in Kelo of drawing lines beyond which it should not be used to validate further stretches of the power of eminent domain. Public outcry has clearly demanded to know where the line is to be drawn and demand that it not be drawn to allow any additional stretching of this formidably frightening instrument of misconduct.

Justice Kennedy allows in his opinion for “categories of cases in which the transfers are so suspicious, or the procedures employed so prone to abuse, or the purported benefits are so trivial or implausible, that courts should presume an impermissible private purpose” and he speaks of the application of a potential more stringent standard of review “appropriate for a more narrowly drawn category of takings” speaking of “private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause.”

Those of us who have closely observed the compounded misconduct respecting the Atlantic Yards megadevelopment, those of us who have done so as intelligent and informed Brooklynites, as experienced government officials or members of the real estate industry know that the presumptions that lead to the stark facts in this morass are unflattering to our government officials. Even without having the benefit of our intimate observations Justice Kennedy states some pretty good tests in the Kelo decision that should lead to a similarly sobering assessment of the facts. In order NOT to apply higher, more stringent (in the case of Atlantic Yards, reality-sensitive) standards of review, Justice Kennedy in Kelo found that all of the following standards had `graced’ the government actions in the Kelo case, virtually none of which, if any, apply to Atlantic Yards:

1. After a “careful and extensive” court “inquiry” it must be deemed that “the development plan” WAS NOT, either:
a. “of primary benefit to ... the developer,” or
b. “only of incidental benefit to the city."

In the case of Atlantic Yards:
c. There has been no “careful and extensive” court “inquiry”
d. The development IS of “primary benefit to ... the developer,” and
e. The project is, at best, arguably of “only of incidental benefit to the city"- (Truth to tell, if you really know economic development, its effect would be devastatingly blighting.)

2. There shouldn’t be discernable evidence of “impermissible favoritism.”

In the case of Atlantic Yards what else would one call the colossal award of building 17 enormous buildings to a single developer without competitive bids when the same work could have been bid out to multiple developers?

3. Similarly, there should be “evidence that” the government “reviewed a variety of development plans and chose a private developer from a group of applicants rather than picking out a particular transferee beforehand.”

In the case of Atlantic Yards “a particular transferee” was picked beforehand and a development plan (singular) came afterwards, generated by that particular picked transferee rather than by government officials (or traditional input from the public).

4. There should be “the substantial commitment of public funds by the State to the development project before most of the private beneficiaries were known.” And “(t)he identity of most of the private beneficiaries were unknown at the time the city formulated its plans.”

Again, the opposite was the case; the idea of committing public funds surfaced only after the private beneficiary (singular) was known.- (Justice Kennedy observed in Kelo that all the beneficiaries were still not even known at the time of the decision.)

5. Eminent domain should be “in the context of a comprehensive development plan meant to address a serious city-wide depression.”

In the case of Atlantic Yards, the proposed taking is not in the context of the city’s comprehensive development plans but in contravention of them. At the developer’s instigation, the Atlantic Yards condemnation footprint makes highly irregular changes to 40-year-old city plans to accomplish superfluous condemnation to generate additional excessive profits for Forest City Ratner (See the inclusion of the Ward Bakery Building block). The megadevelopment is inconsistent with the adjoining contemporaneously city-planned Atlantic Terrace project and the relatively recent abutting Atlantic Commons. As for the “serious city-wide depression”: there is no such depression either serious or city-wide and there certainly isn’t one to be found in the areas proposed to be condemned.

6. At the risk of repeating, Justice Kennedy a second time states a test that “Benefitting” the developer should not be "the primary motivation or effect of this development plan."

Everyone knows that the plan, in this case generated by the developer, never even laughably withstands this test. The unspeakable sweetness of the deal the developer is being given on so many fronts underscores this point- The developer is being promised 139 years of exemption from city real estate taxes on a sports arena where the public is paying for 100% of the escalating (now at least $637.2 million) cost of a this asset, gifted to the developer as part of the no-bid deal. Hundreds of millions more government dollars exclusively benefitting Ratner have been piled onto the project in addition to this.

7. The “government's actions” should be “reasonable and intended to serve a public purpose.”

Atlantic Yards was an example of government on the lam, hiding out and evading as much public review as possible. The megadevelopment the private developer came up with is hardly a reasonable integration with the city fabric and its incessant focus on what will benefit the developer is at the unremitting expense of public benefit. When the facts are examined, the project will certainly cause blight.

8. “The projected economic benefits of the project” should not be such that they can “be characterized as de minimus” and “the purported benefits” should not be “trivial or implausible.”

All the “major” projected benefits of Atlantic Yards are ostensible only. The developer and ESDC have never been able to put out straight or consistent facts about the project and tend to withhold actual facts at all. The detriments of the megadevelopment are severe. No one should have any problem characterizing any possible real benefit as “de minimus.”

9. The government should comply with its “elaborate procedural requirements that facilitate review of the record and inquiry into the city's purposes.”

The Atlantic Yard process was government on the lam, hiding out and side-stepping requirements like ULURP.

10. “(T)ransfers should not be suspicious.”

What is to be made of Judge Madden’s footnote that the MTA had “stated that it had `sold’ Forest City the right to develop the Vanderbilt Yards, but retracted those statements in September 2003."

11. “(T)he procedures employed” should not be “prone to abuse.”

There are many reasons ESDC procedures are prone to abuse. They are not used for the purposes originally intended. They have not been updated to keep pace with the ULURP reforms that have been more recently enacted. ESDC is needlessly obscure and lacks transparent accountability. To the extent it is accountable it is too much accountable only to the Governor and that involved questionable personal ties to the private developer himself.

When these things cannot be truly said to grace the actions of government, and where the opposite is so palpably true, as is the reality with Atlantic Yards, the rest of the justifications for private-to-private-owner eminent domain transfers all fall away as fictional, even the incantatory mantra of Justice Stevens about “the City” writing for the Supreme Court majority in Kelo to bless the eminent domain powers exercised in that case:

Justice Stevens:

1. “The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community. .. .
2. “the City is endeavoring to coordinate a variety of commercial, residential, and recreational uses of land, . . . .
3. “The City has invoked a state statute that specifically authorizes the use of eminent domain . . ..”

No, not in the case of Atlantic Yards. Government officials didn’t formulate a plan- A plan was formulated by the private developer (and not to benefit the community). Government officials were involved in coordinating nothing, they were involved only in deferring to the private developer who more often than not was the only one who really knew what was being done. Government officials did not invoke a state statute to authorize the use of eminent domain, a private developer did. The best that can be said is that Ratner had on his staff former government officials previously involved with eminent domain in their former positions and familiar enough with it to figure out how to stand the process on its head.

Atlantic Yards is the poster child for the extremes to which eminent domain abuse could conceivably be taken under Kelo. It delivers the Full Monty in terms of hitting and surpassing every possible demarcation point mentioned by Justice Kennedy, probably every possibility his imagination could then envision. In addition, it clearly fulfills Justice O’Connor’s prophecy in Kelo that:

“ . . .the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more. The Founders cannot have intended this perverse result.”

Kelo was criticized because the constitutional standard of condemnation for “public use” became condemnation for `private use for anticipated public benefit.’ At least in Kelo the government was arguably in charge of the condemnation process. In the case of Atlantic Yards, however, the proposed condemnation is not only for private use (without truly discernable public benefit, even anticipated): this condemnation for private use is, in essence, being privately conducted by the entity seizing the benefit.

It would be chilling to the utmost degree to even suggest that the US Supreme Court wouldn’t overturn the illegitimate Forest City Ratner Atlantic Yards process upon appeal.

Elsewhere in the U.S. Kelo precipitated resounding cries for thoughtful reform and appropriate protection of private property, more respectful of the principles that concerned the nation’s founders. In New York Kelo was, in the mind of Bruce Ratner and the government officials willing to be complicit with him, the declaration of an open and free hunting season for those willing to abuse their fellow citizens exclusively for personal private gain.

As a lawyer and as a former Attorney General, Governor Spitzer should know that the illegitimate Atlantic Yards procedures do not deserve to be upheld under Kelo. He also should know that even if such actions could ever be upheld as a matter of law they would not represent justice, just as they also do not represent good or transparent government. That is why people reform laws and why they sometimes simply refrain from indulging in opportunities for abuse.

There are glimmering disavowals of this megadevelopment by our politicians, including particularly from Mayor Bloomberg (and once-upon-a-time Deputy Mayor Doctoroff) that recognize not only that the process here was bad, but that bad process led to bad result as well. City Council Speaker Christine Quinn has similarly, via her participation in an open letter to the MTA covering many parallels concerning Hudson Yards, embraced almost all of the important criticisms of Atlantic Yard’s abysmally blightful design.

So much good will result when the project is finally killed and hundreds of millions of dollars are recovered by the City Council and State for uses that will be actually beneficial.

In the case of Atlantic Yards, let’s let Bruce Ratner live in his fantasy land of unreality (where Frank Gehry is a native Brooklynite?). Let’s all the rest of us, the courts included, live with a real world of real facts where things are honesty regarded. It’s a reality we deserve to live in.

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