Empire Gen Holdings, Inc. v. Governor of .N.Y.

• Decision Date: 25 June 2013
• Parties: EMPIRE GEN HOLDINGS, INC. and Empire Generating Co., LLC, Plaintiffs, v. The GOVERNOR OF the STATE of New York, in his official capacity, and the State of New York, Defendants.
• Court: New York Supreme Court

40 Misc.3d 984
967 N.Y.S.2d 919
2013 N.Y. Slip Op. 23213

EMPIRE GEN HOLDINGS, INC. and Empire Generating Co., LLC, Plaintiffs,
v.
The GOVERNOR OF the STATE of New York, in his official capacity, and the State of New York, Defendants.

Supreme Court, Albany County, New York.

June 25, 2013.

[967 N.Y.S.2d 921]

Hiscock & Barclay, LLP, David Burch, Jr., Esq., Syracuse, attorneys for plaintiffs.

Eric T. Schneiderman, Esq., Attorney General of the State of New York, Aaron Baldwin, Esq. AAG, Albany, attorneys for the defendants.

JOSEPH C. TERESI, J.

[40 Misc.3d 986]Plaintiffs ¹ commenced this declaratory judgement/ injunction action seeking a declaration that Tax Law §§ 33 and 34² are

[967 N.Y.S.2d 922]

uNCONSTITUTIONAL, AN INJUNctioN prohibiting their enforcement and attorney's fees. Prior to answering, Defendants claim that the complaint fails to state a cause of action and move to dismiss pursuant to CPLR 3211(a)(7). Plaintiffs opposed the motion. Because Defendants demonstrated their entitlement to dismissal, their motion is granted and the complaint is dismissed.

It is well established that this Court, when considering a motion to dismiss pursuant to CPLR 3211(a)(7), “must afford the complaint a liberal construction, accept the facts as alleged in the pleading as true, confer on the plaintiff[s] the benefit of every possible inference and determine whether the facts as alleged fit within any cognizable legal theory.” ( Torok v. Moore's Flatwork & Foundations, LLC, 106 A.D.3d 1421, 966 N.Y.S.2d 572 [3d Dept. 2013], quoting Scheffield v. Vestal Parkway Plaza, LLC, 102 A.D.3d 992, 958 N.Y.S.2d 232 [3d Dept. 2013];Simkin v. Blank, 19 N.Y.3d 46, 945 N.Y.S.2d 222, 968 N.E.2d 459 [2012] ). “[T]he dispositive inquiry is whether [Plaintiffs have] a cause of action and not whether one has been stated.” ( Alaimo v. Town of Ft. Ann, 63 A.D.3d 1481, 1482, 883 N.Y.S.2d 321 [3d Dept. 2009], quoting IMS Engineers–Architects, P.C. v. State, 51 A.D.3d 1355, 858 N.Y.S.2d 486 [3d Dept. 2008] ).

[40 Misc.3d 987]Here, accepting Plaintiffs' allegations outlined below as true, they have no cause of action that fits within a cognizable legal theory.

Prior to June 2004, BASF Corporation (hereinafter “BASF”) owned a parcel of real property located in the City of Rensselaer, New York (hereinafter “South 40”). The South 40, however, was polluted. Plaintiffs entered an agreement with BASF, whereby the South 40 would be remediated and redeveloped.

In June 2004, Plaintiffs, BASF and the New York State Department of Environmental Conservation (hereinafter “DEC”) entered into a Brownfield Site Cleanup Agreement (hereinafter “BSCA”). Such agreement obligated Plaintiffs and BASF to remediate the South 40, subject to DEC oversight and approval. In March 2008, DEC approved Plaintiffs' final engineering report of remediation. Upon such completion and approval, DEC issued a “Certificate of Completion” and Plaintiffs claimed a “site preparation [tax] credit.” Such tax credit was received by Plaintiffs in tax year 2008, and is not at issue herein.

Plaintiffs then turned to redevelopment and its related tax credit. They built a 65 megawatt natural gas fired electric generating plant (hereinafter “the facility”) on the South 40. The facility was placed into service in September 2010, at which time it began generating electricity. For such redevelopment project Plaintiffs claim they were due, for tax year 2010, a tax credit of $86,951,916 (hereinafter “full redevelopment tax credit” ³). Defendants do not dispute the projects' completion, the amount of the full redevelopment tax credit or Plaintiffs' eventual entitlement to it.

[967 N.Y.S.2d 923]

The Tax Credit Deferral Provisions, however, prohibited Plaintiffs from claiming the entire $86,951,916 in tax year 2010. Instead, the Tax Credit Deferral Provisions significantly reduced Plaintiffs' 2010 tax credit to $1,663,633 and deferred Plaintiffs' receipt of the balance of the full redevelopment tax credit to future years. Due to such delay, Plaintiffs' complaint seeks redress under multiple constitutional theories, each of which will be addressed separately.

Plaintiffs first and sixth causes of action set forth “Takings Clause” challenges, both of which fail to state a claim. [40 Misc.3d 988]“The Takings Clause prevents government actors from depriving private persons of vested property rights except for a public use and upon payment of just compensation.” ( James Square Associates LP v. Mullen, 21 N.Y.3d 233, ––– N.Y.S.2d ––––, –––N.E.2d –––– [2013], quoting Landgraf v. USI Film Products, 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 [1994] [internal quotation marks omitted, emphasis added] ). “The determination of whether a property interest exists to support a taking claim is typically the threshold inquiry.” ( Gazza v. New York State Dept. of Envtl. Conservation, 89 N.Y.2d 603, 614, 657 N.Y.S.2d 555, 679 N.E.2d 1035 [1997];Preble Aggregate Inc. v. Town of Preble, 263 A.D.2d 849, 694 N.Y.S.2d 788 [3d Dept. 1999] ).

Here, because Plaintiffs had no “vested property right” to the tax credit they seek they have no Takings Clause cause of action. As set forth above, Plaintiffs challenge their delayed receipt of the full redevelopment tax credit. Tax Law § 21(3) establishes such credit and provides, in pertinent part, that it is “allowed for the taxable year in which such qualified tangible property is placed in service on a qualified site with respect to which a certificate of completion has been issued to the taxpayer.” (Tax Law § 21 [3] ). The parties agree that the facility constitutes “qualified tangible property” and that the South 40 is a “qualified site,” which received a “certificate of completion.” ( Id.). Nor do the parties dispute, as alleged in the complaint, that the facility was placed “in service” in September 2010. ( Id.). Such undisputed facts establish that all of Tax Law § 21(3)'s elements were satisfied in September 2010; it was not until then that Plaintiffs right to their full redevelopment tax credit “vested.”

By September 2010, however, Plaintiffs' full redevelopment tax credit had already been deferred. On August 11, 2010, the Tax Credit Deferral Provisions became effective “immediately.” (L. 2010, ch. 57, pt. Y, § 1) Because Plaintiffs' Tax Law § 21(3)'s tangible property tax credit was deferred in August 2010, prior to its vesting, the credit was “nothing more than an expectancy interest... an insufficient basis upon which to find a takings clause violation.” ( Novara ex rel. Jones v. Cantor Fitzgerald,...