BROADWAY 41ST STREET REALTY v. NYS URBAN DEV.
Decision Date | 29 March 1990 |
Docket Number | No. 89 Civ. 3213 (PKL).,89 Civ. 3213 (PKL). |
Citation | 733 F. Supp. 735 |
Parties | BROADWAY 41ST STREET REALTY CORP. and Rosenthal & Rosenthal Inc., Plaintiffs, v. The NEW YORK STATE URBAN DEVELOPMENT CORPORATION, Vincent Tese, as Chairman of the New York State Urban Development Corporation, The City of New York, Edward I. Koch, as Mayor of the City of New York, and Times Square Center Associates, Defendants. |
Court | U.S. District Court — Southern District of New York |
LeBoeuf, Lamb, Leiby & MacRae (Jacob Friedlander, Jonathan E. Polonsky and Lynn A. Dummett, of counsel), and Norman Dorsen, New York City, for plaintiffs.
Dewey, Ballantine, Bushby, Palmer & Wood (Eric J. Lobenfeld, Saul P. Morgenstern, Elizabeth M. Guggenheimer, Karen A. Estilo, of counsel), Berle, Kass & Case (Stephen L. Kass, Jean M. McCarroll, Deborah Goldberg, of counsel), and New York State Urban Development Corp. (Valerie Caproni and Joseph Petillo, of counsel), New York City, for defendants New York State Urban Development Corp. and Vincent Tese.
Peter L. Zimroth, Corp. Counsel for City of New York (Robert J. Pfeffer and Susan M. Shapiro, of counsel), New York City, for defendants City of New York and Edward I. Koch.
Kaye, Scholer, Fierman, Hays & Handler (Jo Davis and Darrell M. Joseph, of counsel), New York City, for defendant, Times Square Center Associates.
Plaintiffs Broadway 41st Street Realty Corporation ("Broadway 41st") and Rosenthal & Rosenthal Inc. ("Rosenthal") brought suit for damages and injunctive relief against certain public and private entities engaged in the 42nd Street Development Project (the "Project"). The amended complaint alleges that defendants have effected a de facto taking of plaintiffs' property, have conducted a conspiracy to mislead the public by disseminating false information on the timing and details of the Project, and have commenced bad faith condemnation proceedings in state court which should be enjoined. Plaintiffs have alleged that defendants have acted in these ways under the color of state law in violation of 42 U.S.C. § 1983.
Defendants The New York State Urban Development Corporation (the "UDC"), Vincent Tese, Chairman of the UDC, The City of New York (the "City"), and Edward I. Koch, Mayor of the City (collectively, the "public defendants") and Times Square Center Associates ("TSCA") have moved the Court to dismiss the amended complaint under Fed.R.Civ.P. 12(b) and pursuant to the abstention doctrine. In addition, defendant Vincent Tese argues that he is not a proper defendant under 42 U.S.C. § 1983, and that the amended complaint should be dismissed against him.
Plaintiffs Broadway 41st and Rosenthal are owner of and tenant in, respectively, an office building located at 1451 Broadway in New York City. The building, located on the north side of 41st Street, is within the boundaries of the 42nd Street Development Project, a joint public-private plan to develop the real estate in the area of west 42nd Street in Manhattan. Under condemnation proceedings filed by the UDC in New York State Supreme Court on May 2, 1989, plaintiffs' property would be condemned and transferred to defendants for redevelopment. On May 10, 1989, plaintiffs filed a complaint in this Court, which was amended on June 29, 1989. Defendants thereafter moved to dismiss the amended complaint. Before discussing in detail the amended complaint and defendants' motions to dismiss, a thorough consideration of the factual background is needed concerning the history and current status of the Project, prior attempts to oppose it in the courts, and the pending condemnation proceedings in state court.
The 42nd Street Development Project officially began in 1980 with a Memorandum of Understanding between the City and the UDC which set forth a plan to redevelop a once classic, and now infamous, area of midtown Manhattan. The Project called for a significant reconstruction of the area in order to realize its commercial potential, eliminate blight, and create beneficial spill-over effects into adjacent underdeveloped areas.1 The original plan called for four office towers, a hotel, eight renovated theatres, a wholesale mart, restaurants, retail spaces, and a renovated subway station. After the Memorandum of Understanding was signed by the City and the UDC, the UDC made official findings indicating the benefits of the Project pursuant to Sections 16 and 10 of its own enabling statute, the New York State Urban Development Corporation Act. N.Y.Unconsol.Laws § 6251 et seq. (McKinney 1979 & Supp.1989). The Board of Estimate of the City of New York approved the Project on November 8, 1984, and authorized the Mayor to enter into specific agreements with the UDC and certain designated developers.
There were many who did not share UDC's and the City's rosy view of the Project. Indeed, over the next several years, a total of 42 lawsuits were commenced concerning the project, seeking injunctive and monetary relief on a wide variety of grounds. Affidavit of Eric J. Lobenfeld, Esq., sworn to on August 3, 1989, Exhibit M ("Lobenfeld Aff.").2 A sampling of the plethora of litigation includes an unsuccessful challenge on antitrust grounds, on first amendment, equal protection, and due process grounds, under New York City's Uniform Land Use Review Procedure, and under the Clean Air Act.3 Counsel for Public Defendants assert that 16 of these lawsuits have been brought by the same plaintiffs as in this litigation, or their principals, affiliates, or counsel. Lobenfeld Aff., Exhibit N. The Court takes note of the repeated appearances of certain litigants over the past several years, and the consequential delay that litigation has caused to the Project. Yet this Court is mindful that those whose home or business is subject to imminent seizure by the state may have legitimate grievances. An extended series of lawsuits might be expected.
In June, 1987, the UDC and the City contracted with a private developer, Times Square Center Associates, for the development of the four office tower sites which straddle Seventh Avenue at the eastern end of the Project. No contracts have yet been executed for the development of the wholesale mart, the hotel, or the theatres or restaurants. Amended Complaint, ¶ 18. Though the four office tower sites will probably be the largest and most expensive parts of the construction, it is clear that UDC and the City are in need of significantly more private investment to carry out the Project as originally planned.
The agreements between the UDC and TSCA govern to a great degree how compensation will be paid to owners of the condemned properties. In order to guarantee compensation, TSCA posted a $155 million letter of credit and placed it in an escrow account. The Public Defendants allege that this amount represents slightly more than 120% of the appraisal value of the property being condemned. Memorandum of Law in Support of the Public Defendant's Motion to Dismiss the Amended Complaint at 7. It is unclear, however, at what date these appraisal values were calculated. The terms of the escrow agreement allow TSCA to block release of the funds if "Significant Litigation" is pending. Thus if TSCA believes that pending litigation significantly threatens its ability to gain title of or to develop the properties, it may block disbursement of the funds held in escrow.
On May 2, 1989, UDC filed a petition in New York State Supreme Court to condemn properties within the Project area pursuant to the New York Eminent Domain Procedure Law (the "EDPL"). The petition seeks court permission authorizing UDC to file an acquisition map with the court and thereby gain title in fee to such properties. Certain properties owned or leased by plaintiffs are among those specified to be condemned. The state court is at present only considering issues arising under Article 4 of the EDPL which creates procedures for the filing of acquisition maps (§ 402), the vesting of title (§ 402), and the possession of condemned properties by the condemnor (§ 405). The state proceedings are not at this time considering issues of compensation under Article 5 of the EDPL. The final appraisal of property values and the award of just compensation will not be reviewed by the state court unless and until UDC prevails in the Article 4 phase of the condemnation proceedings.
On May 10, 1989, plaintiffs filed this action in federal court. Defendants promptly moved to dismiss the complaint, and plaintiffs thereafter filed an amended complaint on June 29, 1989. The pending motions relate to the amended complaint. The first claim for relief of the amended complaint alleges that defendants have effected a de facto taking of plaintiffs' property in violation of the Takings Clause of the fifth amendment to the U.S. Constitution, as applied to the states through the fourteenth amendment, and 42 U.S.C. § 1983. The second claim for relief charges a conspiracy amongst defendants to effect such an unconstitutional taking in violation of § 1983. The third claim for relief alleges that the Project, in its present scaled-down form, violates the Public Use Clause of the fifth amendment to the U.S. Constitution, as applied to the states through the fourteenth amendment, and § 1983.
The thrust of plaintiffs' argument is as follows: the imminent threat of the condemnation of properties within the Project area, having existed now for nearly ten years, has caused a pronounced decline in the value of plaintiffs' properties. Thus, even though there has been no de jure taking, plaintiffs deserve to be compensated at the present time due to the consequences of defendants' actions. Defendants have been aware over the past several years that the Project would not go forward in a timely fashion, if at all, and yet they have allegedly perpetuated a myth of imminent condemnation through intentional misrepresentations to the public. In addition, plaintiffs allege that the...
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