Kaufmann's Carousel v. Sida

• Decision Date: 15 November 2002
• Citation: 750 N.Y.S.2d 212,301 A.D.2d 292
• Court: New York Supreme Court — Appellate Division
• Parties: In the Matter of KAUFMANN'S CAROUSEL, INC., et al., Petitioners,<BR>v.<BR>CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY et al., Respondents.

301 A.D.2d 292

750 N.Y.S.2d 212

In the Matter of KAUFMANN'S CAROUSEL, INC., et al., Petitioners,

v.CITY OF SYRACUSE INDUSTRIAL DEVELOPMENT AGENCY et al., Respondents.

November 15, 2002.

Harris Beach LLP, Pittsford (David E. Martin of counsel), for petitioners.

Hiscock Barclay Saperston & Day, Buffalo (Mark R. McNamara of counsel), for City of Syracuse Industrial Development Agency, respondent.

Rosenberg & Estis, P.C., New York City (Gary M. Rosenberg of counsel), for Carousel Center Company, L.P., respondent.

HAYES, KEHOE, BURNS and LAWTON, JJ., concur.

OPINION OF THE COURT

PIGOTT, JR., P.J.

Petitioners Kaufmann's Carousel, Inc. (Kaufmann's) and Lord & Taylor Carousel, Inc. (Lord & Taylor) jointly, and petitioner J.C. Penney Corporation, Inc. (JCPenney) (collectively, Carousel Center petitioners) commenced these original proceedings pursuant to EDPL 207 challenging the findings and determination of respondent City of Syracuse Industrial Development Agency (SIDA) insofar as SIDA authorized condemnation of certain interests that they have as tenants pursuant to leases and other agreements that would restrict the use of land both in and outside of the Carousel Center shopping mall (Carousel Center interests). Each of those petitioners operates a major retail department store in the shopping mall as an anchor tenant. Petitioner 843 Hiawatha Boulevard, LLC (Hiawatha) also commenced an original proceeding pursuant to EDPL 207 challenging the findings and determination of SIDA insofar as SIDA authorized condemnation of certain real property interests of Hiawatha in order to permit construction of additional roadway and related infrastructure improvements along the Hiawatha Boulevard travel corridor. The stated purpose of the proposed taking is to expand the Carousel Center shopping mall and integrate it with the nearby Carousel Landing shopping mall into a single major shopping center/tourist destination known as "DestiNY USA."

The Carousel Center petitioners contend that SIDA may not exercise its powers of eminent domain to acquire their leasehold and other intangible property rights without also acquiring the underlying real property interests, nor may SIDA curtail its obligations under its proprietary agreements with the Carousel Center petitioners or take property already devoted to a public use. They further contend that SIDA's attempt to alter or abrogate the provisions of their leases and other related agreements violates the Contract Clause of the United States Constitution. The Carousel Center petitioners also attack the validity of the condemnation in various other respects, contending that the determination did not comply with the procedural and substantive requirements of the EDPL and the State Environmental Quality Review Act ([SEQRA] ECL art 8). Hiawatha, on its part, contends that the stated purposes of the proposed condemnation are merely a pretext to acquire Hiawatha's real property in order to construct a golf course.

I The History Of The DestiNY USA Project

The proposed condemnation of petitioners' property interests is the latest in a series of actions dating back to 1987, when SIDA exercised its powers of eminent domain to acquire approximately 800 acres of land along Onondaga Lake in the City of Syracuse (City) for the purpose of developing a retail shopping mall to be known as Carousel Center. At that time, SIDA entered into a preferred developer agreement with the Pyramid Companies (Pyramid), a partnership engaged in the development of retail commercial properties. In 1990 Pyramid completed construction of Carousel Center in the northern portion of the lakefront area. In 1990 and 1991, the Carousel Center petitioners entered into long-term lease agreements with Pyramid to operate retail department stores as anchor tenants at Carousel Center.

On October 12, 1995, SIDA issued findings and a determination pursuant to EDPL 204 to acquire by condemnation approximately 55.7 acres of real property owned by various oil companies along the south shore of Onondaga Lake in the "Oil City" area, for the proposed development by Pyramid of another retail shopping mall to be known as Carousel Landing. The oil companies challenged SIDA's determinations in original proceedings pursuant to EDPL 207, and this Court confirmed the determination in each proceeding and dismissed the petitions therein (Mobil Oil Corp. v City of Syracuse Indus. Dev. Agency, 224 AD2d 15, appeal dismissed 89 NY2d 860, lv denied 89 NY2d 811).

In 1997 Pyramid made a proposal to integrate Carousel Landing with Carousel Center and to expand the resulting mall to approximately three times its present size. That plan has come to be known as the DestiNY USA project, which is purported to be one of the largest economic development projects in the history of the State of New York. SIDA initiated procedures under the EDPL to acquire certain property interests for DestiNY USA.

On April 30, 2002, SIDA conducted a public hearing pursuant to EDPL article 2. At the hearing, SIDA's attorney noted that SIDA had determined that the proposed expansion of the Carousel Center constituted a project that would serve public purposes, "including, without limitation, advancing job opportunities, general prosperity and public welfare of the People of the State of New York and the City of Syracuse and * * * advancing economic development and promoting tourism." He then identified "two general categories" of real property interests sought to be acquired by the condemnation. The first category, which he referred to as "right-of-way interests," are

"real property interests needed to permit construction, traffic infrastructure improvements, either identified as mitigation measures in connection with the prior * * * [SEQRA] review of the DestiNY USA project, and/or to allow construction of additional roadway and related infrastructure improvements designed to improve pedestrian access between the DestiNY USA project and surrounding areas, as well as to improve the * * * aesthetic conditions along the Bear Street and Hiawatha Boulevard travel corridors in support of the DestiNY USA project."

The second category of real property interests, which SIDA's attorney referred to as the "Carousel Center interests," "may" include:

"among other things, interests of tenants pursuant to leases or other agreements that may restrict the use of land outside the existing mall building or in the Carousel Center site, i.e., new building areas, parking, landscaping, et cetera, interests which may restrict use of common areas within the Carousel Center mall building, certain leasehold interests within the Carousel Center building which are needed to permit modification of interior areas, interests creating restrictions regarding visibility and signage interests restricting the name of the project, and any other applicable interests."

SIDA then issued its "Determination and Findings Pursuant to EDPL Section 204," dated April 30, 2002, finding that

"the acquisition of the Right-Of-Way Interests and Carousel Center Interests will help achieve the public purposes, uses and benefits expected to be derived from the DestiNY USA Project, as previously determined by SIDA * * * and will independently help achieve the public purposes, benefits and uses associated with the potential redevelopment of the Syracuse Lakefront."

SIDA determined that numerous public purposes would be served, including advancing the general prosperity and economic welfare of both the residents of the City and the general population of the State, promoting tourism and attracting visitors from outside the economic development region, ameliorating economic deterioration and promoting employment in the City, and increasing the property tax base as well as sales tax revenues.

II The Proceedings Commenced In This Court

Thereafter, Kaufmann's and Lord & Taylor commenced an original proceeding pursuant to EDPL 207 challenging SIDA's findings and determination. In their petition, they allege that they own leasehold interests and operate major anchor department stores in Carousel Center. They further allege that, as a necessary inducement to secure their presence in the mall, Pyramid entered into a series of agreements with them "designed to protect both their competitive position and their investment in the mall." Those agreements include leases and other agreements specifying the rights and interests of Kaufmann's and Lord & Taylor in the operation and future development of the Carousel Center. They also entered into a Construction, Operation and Reciprocal Easement Agreement with Pyramid, which granted them special rights in certain common areas, including the parking area immediately surrounding their department stores. In addition, they entered into Allocable Share Agreements and a Joint Improvement Agreement, which granted them additional substantive and collateral rights and interests in the Carousel Center. Those additional substantive and collateral rights and interests include rights and interests with respect to: (1) changes in the layout of Carousel Center, including its design and configuration, and the addition or withdrawal of any property comprising Carousel Center; (2) the parking and traffic circulation at Carousel Center; (3) the easements in and through Carousel Center, including those for parking, use of the common areas, access and ring roads, utility facilities, and accent and exterior lighting; (4) the design, phasing, and timing of all construction of improvements at Carousel Center; (5) the obligations of the other department stores in Carousel Center, the permitted and prohibited uses of the property, and the leasing of the available retail store space; and (6) the operation and management of Carousel Center under the Carousel Center name. Kaufmann's and Lord & Taylor further allege that they had written agreements with SIDA, including Non-Disturbance and Attornment Agreements, wherein SIDA agreed...