The central question on this appeal is whether public construction of an enormous oceanfront beach dune, for which plaintiff condemned an easement on defendants' land, conferred a special benefit on defendants' beach front property in Harvey Cedars. The dune is one part of a line of dunes, created by the Army Corps of Engineers (Corps), that will eventually run the length of the ocean side of Long Beach Island (LBI).The formerly-spectacular ocean view from defendants' house is now partially blocked by the twenty-two-foot high dune, which occupies one-third of their land. However, their house is now safer from storm damage because the dune was constructed. Judge E. David Millard concluded that construction of the dune did not confer a special benefit on the property. Instead, he found that the only benefit conferred was the general benefit for which the dune was constructed, i.e., to protect the island and its inhabitants from the destructive impact of hurricanes and nor’easters. We find no legal error in that ruling, which is consistent with established case law.

 

Peter Wegener of Bathgate Wegener in Lakewood represents the Karans and Lawrence Shapiro of Ansell, Grimm and Aaron represents Harvey Cedars. The ruling on the case will affect many of the beach replenishment cases not yet filed on Long Beach Island. Funding for the project comes primarily from the U.S. Army Corps of Engineers, the federal agency in charge of beach replenishment projects. Smaller portions are paid by the NJDEP and the smallest portion by the Borough of Harvey Cedars. Nevertheless, in true Cassandra fashion, Mayor Oldman of Harvey Cedars and Attorney Shapiro opined that these projects will not happen if the verdict is allowed to stand. Mr. Shapiro would like to change the law regarding the general benefits. As reported in the Asbury Park Press, Mayor Oldman said, “I don’t think the lower courts looked at it correctly....For us and the Army Corps of Engineers, this has a lot to do with the beach replenishment and the future of it.’’

See our previous blog entry Court upholds eminent domain award for beach replenishment project  for related information.

By William J. Ward and Winifred E. Campbell

Yesterday the Appellate Division unanimously dismissed a condemnation complaint filed by the Essex County Vocational-Technical Schools Board of Education (ECVS) for the acquisition by eminent domain of property owned by New United Corporation, consisting of 7.5 acres adjacent to Interstate 280, which was the former site of the United Hospital facility in Newark. Download New United Corporation v. Essex County Vocational-Technical School Board of Education.

The court ruling was based on the condemnor’s failure to engage in bona fide negotiations as required by N.J.S.A. 20:3-6, et al., of the Eminent Domain Act. The ECVS used its power of eminent domain with the intent to construct a county-wide regional school that would consolidate several existing technical and vocations schools in surrounding communities. In overturning the condemnation, the court stated, “[t]he record reveals nothing that remotely resembles bona fide negotiations by the Board of Education.”

The Eminent Domain Act requires the condemnor to engage in “bona fide negotiations” with a condemnee before commencing an eminent domain action. N.J.S.A. 20:3-6. This provision “encourage[s] public entities to acquire property without litigation…saving both the public and the condemnee the expense and delay of court action.” Township of W. Orange v. 769 Assocs., LLC, 198 N.J. 529 (2009).  A cornerstone to protecting the Constitutional rights of property owners is the requirement that government entities seeking to exercise their power of eminent domain deal “forthrightly and fairly” with property owners. Jersey City Redevelopment Agency v. Costello, 252 N.J. Super. 247, 257 (App. Dic.), certif.. den. 126 N.J. 332 (1991).

The ECVS’s failure to comply with the Eminent Domain Act’s pre-litigation requirements is fatal. The Appellate Division remanded the matter to the trial court for final judgment dismissing the complaint without prejudice. This decision emphasizes the importance of government candor and fairness in protecting the landowner’s Fifth Amendment rights.

Pursuant to N.J.S.A. 20:3-26(b) the property owner will be entitled to attorneys’ fees and costs incurred in contesting the eminent domain action in both the law and appellate division. R.2:11-4. See our prior blog post, Property owners get counsel fees on abandonment of condemnation (April 4, 2009). In addition, the property owners may claim damages pursuant to N.J.S.A. 20:3-24.

This decision represents a major setback for Essex County. The County had originally purchased a portion of the site as the intended relocation of the Essex County Hospital in Cedar Grove for $6.5 million. The relocation of the hospital never occurred, the County allowed its investment to deteriorate from lack of maintenance, and it changed its agenda. New United Corp. alleged that this change in direction by the County was a direct result of multiple law suits and court orders obligating the County to repair and maintain its portion of the site. In addition, the County deposited its estimated compensation of $4.8 million in the Superior Court Trust Funds for the acquisition in the eminent domain proceeding. Thus, the County has made a total investment of $11.3 million in this project with nothing to show for it.

William J. Ward, Esq. argued the case on behalf of First Steps Services for Children, Inc. and Winifred Campbell, Esq. assisted in writing the appellate brief. 

Sackett v. U.S.Environmental Protection Agency
Supreme Court of the United States No. 10–1062.
Argued January 9, 2012—Decided March 21, 2012

by Winifred E. Campbell, Esq.

Last week the United States Supreme Court handed a decisive win to property owners battling to protect their due process rights against baseless environmental regulation. In Sackett v. EPA, the Sacketts were denied their due process rights when they attempted to challenge the Environmental Protection Agency’s (EPA) determination that the Sackett property was encumbered with wetlands. Download Sackett v. EPA.    

The Sacketts purchased a 0.63 acre lot in a residential, platted subdivision in Idaho intending to build a house. All permits were granted by the local municipality and gravel was laid in preparation for building the foundation of the home. Without warning, evidence, or explanation, the EPA issued the Sacketts a “compliance order,” demanding construction stop and the land be returned to its pre-gravel condition. According to their attorneys at the Pacific Legal Foundation, the Sacketts were told by the EPA that it controlled the land because the land is “wetlands.” Failure to comply with the EPA’s order racked up fines of $75,000 a day.

The Supreme Court held the Sacketts may institute a civil action under the Administrative Procedure Act (APA), 5 U.S.C. §706(2)(A). The APA provides for judicial review of “final agency action for which there is no other adequate remedy in a court.” 5 U.S.C. §704. The EPA’s compliance order is a “final agency action.” Moreover, applying for a wetlands permit and then filing suit under the APA when the permit is denied does not provide an adequate remedy for the EPA’s action. Remanded.

Winifred E. Campbell is an associate with Carlin & Ward, P.C.
 

by Scott A. Heiart, Esq.

Yesterday the New Jersey Appellate Division affirmed a jury award in the amount of $375,000 for the acquisition of an easement in order to construct a dune in conjunction with a beach replenishment project.  Download the decision.

In 1973, Harvey and Phyllis Karan built their “dream house” on the New Jersey shore in Harvey Cedars. Their home was uniquely situated with sweeping views of the beach, shoreline, and ocean. The Borough of Harvey Cedars, as part of a large-scale beach replenishment project in 2008, used eminent domain to take numerous easements from beach-front property owners to construct an enormous dune.

Harvey Cedars offered the Karans $300 for the taking, arguing any loss of views was de minimus and that they would receive a “special benefit” due to the added protection against beach erosion and future storm damage. The Karans argued the loss of view was so significant it reduced the value of their property by $500,000.

In contrast, a special benefit is one that cannot be shared by the general public and can serve as an offset that lowers the amount of just compensation owed to a property owner. See Village of Ridgewood v. Sreel Inv. Corp., 28 N.J. 121, 131-32 (1958).

The trial court in Karan held that  the project constituted a general benefit and prevented Harvey Cedars from presenting evidence to the contrary. The Appellate Division affirmed, holding that “the protection offered to defendants’ property by the dune construction is a classic example of a ‘general benefit’” and no offset is warranted. The court continued, “while defendants’ property may be benefited in somewhat greater degree than its inland neighbors” such a fact is not a legally cognizable “special benefit” for purposes of valuation in a condemnation case.

Harvey Cedars has 20 days to file notice in order to petition the New Jersey Supreme Court for certification on this critical issue. For now, yesterday’s ruling stands as another victory for property owners in their fight to be adequately compensated for the taking of their property.

See our previous blog post on Harvey Cedars beach replenishment cases.

See Appeals panel awards Ocean County couple $375K in sand dune replenishment dispute published Tuesday, March 27, 2012, in The Star-Ledger.
 

Scott A. Heiart, Esq. is a partner with Carlin & Ward, P.C. in Florham Park, New Jersey.

by Winifred E. Campbell, Esq.

The United States House of Representatives passed with bi-partisan support H.R. 1433, The Private Property Rights Protection Act, on February 29, 2012. The bill aims to bar the federal government from using eminent domain for economic development. The bill would also withhold federal development funding to states that take private property for economic development. The bill is now being considered by the Senate.

The proposed Private Property Rights Protection Act is in response to the 2005 U.S. Supreme Court decision in Kelo v. City of New London. In Kelo, the Court upheld the condemnation of private property for transfer to other private owners to support “economic development.” The Kelo decision was met with outrage across the country. Frequently, the use of condemnation for economic development benefits wealthy developers at the expense of the poor and politically weak.

New Jersey has been slow to respond to Kelo. The state’s strongest reaction may be seen in Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, where the New Jersey Supreme Court reined in the definition of “blighted” property. Too frequently, municipalities were deeming property as “blighted” because it was not being used in an optimal manner. See our previous blog post, Reversal of Blight: Eminent Domain and Redevelopment.

It remains to be seen whether the Senate will choose to send a strong message in response to the Kelo decision by passing The Private Property Rights Protection Act.

Winifred E. Campbell, Esq. is an associate at Carlin & Ward licensed to practice in New Jersey and and Pennsylvania.

In a rare example of a case meeting the stringent standard for inverse condemnation, the Appellate Division, in a ruling issued October 25, 2011, reversed the trial court and found the circumstances of that case constituted a taking in Ciaglia v. West Long Branch Zoning Board of Adjustment. The standard, which is a deprivation or substantially all of the beneficial use of the property, was met in this instance. The case was remanded to the trial court for the institution of an eminent domain case.

The court, in a per curiam unpublished opinion, discussed the detailed factual background of the property, which resulted in a conveyance to the plaintiff of a lot which did not meet current municipal standard. The judges called for a “heightened sensitivity on the part of local land use agents…in order to avoid regulatory takings that would be funded by the municipal treasury. “ (p. 18)

On two occasions, the plaintiff, Joseph Ciaglia, attempted to get approval of variances in order to build a single family home on the lot and was denied. In these circumstances, the court found that there had been a regulatory taking and that Ciaglia was entitled to compensation. The court followed and felt it was bound by the precedent set in the Moroney case. See Maroney v. Mayor and Council of Borough of Old Tappan, 268 NJ Super 458 (App. Div. 1993), cert denied, 136 NJ 295 (1994). In the Maroney case, the plaintiff had not exhausted his administrative rights to seek variance relief regarding the lot in question in that case. Here, Ciaglia had on two occasions sought variance approval and been denied; accordingly, the court remanded the case to the law division for the institution of condemnation proceedings.

Based upon our review, we are satisfied that Ciaglia was entitled to substantially the same remedy awarded in Moroney. That is, a judgment requiring the Borough to commence procedures pursuant to the Eminent Domain Act of 1971 (the Act), N.J.S.A. 20:3-1 to -50 leading to its acquisition of Lot 20. We leave it to the Law Division to decide whether to appoint commissioners sua sponte, see Moroney, supra, 268 N.J. Super. at 461, or to oblige the Borough to follow some or all of the procedural minutiae of the Act.12 See, e.g., 769 Assocs., LLC, supra, 198 N.J. at 537.

The appeal was argued on September 21, 2011, before Judges Graves, J.N. Harris, and Koblitz.
 

On February 11, 2011, the Fordham Urban Law Journal presented a continuing legal education conference at the Fordham University School of Law entitled, “Taking New York: The Opportunities, Challenges, and Dangers posed by the Use of Eminent Domain in New York.” Many attorneys and non-attorneys from the eminent domain field spoke about various aspects of the challenges which have arisen in this area of the law in recent years.

One of the key issues discussed during the conference was the differing definitions of “blight” in each state, which is a major factor in determining whether a government may appropriate property by way of its eminent domain powers. Professor Lynn Blais of the University of Texas School of Law pointed out that while most states have enacted legislation limiting the use of eminent domain to take property for economic development or to be transferred to a private entity, such legislation has, at the same time, provided for an exception to this limitation in the case of “blight.” In other words, an eminent domain taking of property for non-public purposes can take place if a showing can be made that such a taking is necessary for the eradication of “blight” on the property. The following questions then arise: how is the concept of “blight” to be defined by the state legislature or constitution, and how is much judicial review of that definition can be exercised by the courts? The varying approaches to this issue by different states can be seen in the New York State Court of Appeals in Kaur v. New York State Urban Dev. Corp., 933 N.E.2d 721, 892 N.Y.S.2d 8 (2010), and the New Jersey Supreme Court in Gallenthin v. Paulsboro, 191 N.J. 344, 924 A.2d 447 (2007).

The contrasting New Jersey approach to determining blight in eminent domain cases was expounded upon by Vice Dean Ronald K. Chen of the Rutgers University School of Law. Like the New York Constitution, the ”Blighted Areas Clause” of the New Jersey Constitution provides that the clearance and redevelopment of blighted areas is a public purpose which triggers the eminent domain powers of the government. N.J. State Constitution, Art. VIII, Sec. 1 and 3. Unlike the New York State Court of Appeals in Kaur, the New Jersey Supreme Court in Gallenthin did not grant “blind deference” to the Borough of Paulsboro’s designation of a 60 acre parcel of undeveloped wetlands as “blighted.” Instead, the Gallenthin court held that the government may not designate private property for redevelopment unless there is “substantial evidence” that the property meets the definition of “blighted area,” which the court defined as one that is characterized by “deterioration or stagnation that has a decadent effect on surrounding property.” 924 A. 2d at 460. Clearly, an undeveloped wetlands parcel would not meet the court’s definition of “blighted.” The impact of the decision is that the New Jersey judiciary has the power to overrule a finding of “blight” by the legislature or an administrative agency in an eminent domain case.

In short, the Fordham Law Eminent Domain Conference highlighted the distinction between the hands-off approach to eminent domain cases by the New York Court of Appeals and the more interventionist philosophy of the New Jersey Supreme Court. The long-term effect of this distinction is that, post-Kaur, New York property owners will be essentially powerless to challenge a blight designation by the legislature or other administrative agencies, no matter how egregiously inaccurate such a designation may be. New Jersey property owners, on the other hand, may still hope to seek judicial relief from an unjust determination of blight as a result of the Gallenthin decision.

Janice Dooner Lynch, Esq., guest blogger, is a graduate of Princeton University and Fordham University School of Law and is currently in private practice in New York.

Ed. comment -  Neither the New York or New Jersey Legislatures have modified their respective eminent domain statutes as of the posting of this blog, although 43 states, according to the Institute for Justice, have modified their eminent domain procedures post Kelo. See our related blog posts on Kaur and Gallenthin. - William J. Ward, Esq.

The New Jersey Supreme Court issued a unanimous 7-0 opinion written by Justice Jaynee LaVecchia remanding Klumpp v. Borough of Avalon  to the trial court to consider compensation for a beach replenishment taking which occurred first in 1965. Download the eminent domain decision here.

The Klumpps had built an ocean front home in 1961, which was destroyed by the famous nor’easter storm of 1962. After the home was destroyed, the Borough of Avalon appropriated the property for beach replenishment. No compensation was offered to the Klumpps. The Klumpps continued to be the record owner on the tax maps of Avalon and paid taxes. In 1995, the Klumpps sought permits to rebuild. By this time, Avalon no longer permitted access to the Klumpps property off the local road 75th Street. In addition, the Borough in 1995-96 denied Klumpp building permits and access permits thereby rendering the property useless. The Appellate Division found there had been both a physical taking in 1965 and a regulatory taking circa 1995 both denying the Klumpps all beneficial use and enjoyment of their property.  See our previous blog post of August 6, 2009,  Inverse condemnation at the beach. At no time did the Borough of Avalon offer any form of compensation to the Klumpps. The Supreme Court agreed with the Appellate Division and found there had been both a regulatory and physical taking of Klumpps property without compensation, contrary to the New Jersey Constitution, Article I ¶20 and the 5th and 14th amendments of the U.S. Constitution.

The critical ruling by the court in favor of Klumpp was the Supreme Court’s rejection of the statute of limitations argument set forth by the Borough of Avalon. The Court related the critical taking events to 1995-1996, when the Klumpps were denied building permits by Avalon. In remanding the matter to the trial court for consideration of inverse condemnation and just compensation, several interesting legal issues will come into play.

What is the date of valuation? N.J.S.A. 20:3-30(a)-(c) provides for a date of valuation to be the earliest of three events:

a) date of entry
b) date of interference with use and enjoyment of the property
c) date of the filing of the complaint

Because this is an inverse condemnation under N.JS.A. 20:3-26(b) the owners are due counsel fees and costs. See Township of West Orange v. 769 Associates and our blog post on April 9, 2009.

In addition, there is a large interest component to compensation. N.J.S.A. 20:3-31 provides for the payment of interest from the date of taking to the date of payment. Depending on the date of value selected by the court, the interest would be calculated from that date to the date of payment. Case law provides for annual compound interest. See Borough of Wildwood Crest v. Smith 235 NJ Super 404 (App.Div 1988). The interest rate is set by Rule 4:42-11(a)(iii) and varies from year to year. Current market value of a beach front lot is estimated to be in excess of $2 million by the Klumpps. Depending on the date of valuation, interest and the calculation of attorney’s fees and costs they will be amply compensated but probably not in excess of $2 million.

Related links:

New Jersey Law Journal (June 24, 2010): Court Stops Sands of Time to Allow Suit Over 1960s Beach Land Taking

Press of Atlantic City (June 23, 2010): Edward and Nancy Klumpp can seek compensation for beach lot taken by Avalon in 1962, state Supreme Court decides  

New Jersey Digital Legal Library: New Jersey Supreme Court Oral Arguments in Klumpp v. Avalon (March 22, 2010)

Fox Five News, Good Day New York segment, Eminent Domain Battle with Rosanna Scotto (May 21, 2010).

"In recent years there has been an increase in legal challenges to the law when 'blight' is used as the primary reason by the state for a takeover...'The eminent domain process is subject to abuse. Where the controversy comes in is in redevelopment projects under the Local Redevelopment Housing Law (in NJ) that says certain areas of a city are blighted,' Ward told co-host Rosanna Scotto."

The unanimous panel remanded the Broadway Corridor cases back to the trial judge, Monmouth County Assignment Judge Lawrence Lawson. Instead of dismissing the eminent domain complaints, the court is fashioning a remedy which is not supported by the law.

Here the court arrived at a conclusion similar to the decision in City of Long Branch v. Anzalone, and City of Long Branch v. Brower, which both involved the MTOTSA neighborhood. The appellate panel, led by one of the judges who heard the Anzalone case and two who did not, invited Long Branch to revisit the blight issue and attempt to meet “the substantial, credible evidence” standard for proof of blight. Here the court wrote in its opinion:

However, our courts have cautioned that the "substantial evidence" standard requires "a record that contains more than a bland recitation of applicable statutory criteria and a declaration that those criteria are met." Gallenthin, supra, 191 N.J. at 373. That standard similarly prohibits a municipality from exercising eminent domain on findings that are "supported by only the net opinion of an expert." Ibid. Instead of simply describing the physical and financial status of the properties to be taken, the municipality or its expert must perform "an analysis of the statutory criteria as [they] applied to each of the properties in the designated" redevelopment area, and of how each property's condition reflected or contributed to the area's blight. ERETC, supra, 381 N.J. Super. at 279-80.

The city will not be able to prove blight under this standard. Why not dismiss outright? That’s the law.
 

Contrary to popular opinion, the decision written by Justice Zazzali in Gallenthin v. Paulsboro did not establish new law. It reiterated what has always been the law: Blight must be established by substantial, credible evidence. A mere recitation of the statutory criteria found in N.J.S.A 40A:12A-5 (a-h) is not enough. Blight must be proven. This is not a novel idea. What is apparent in the case law is that municipalities and their selected developers were blighting properties indiscriminately without the requisite proof. The clear message in Gallenthin was that this practice would no longer be tolerated by the state’s highest court, and the lower courts have fallen in line.

This does not mean that redevelopment is dead, but it does means that eminent domain abuse, as practiced by some municipalities on behalf of politically connected developers, will not be tolerated. Municipalities will have to be more creative in their redevelopment efforts. This will force real negotiations for acquisition of properties.

Keeping the case alive only gives the city of Long Branch leverage to negotiate fees and costs. Per N.J.S.A. 20:3-26 (6) See our blog on West Orange v. 769 Associates (April 9, 2009).  Then when a number is agreed upon, Long Branch will dismiss the cases. The statute only pays for attorneys’ fees and costs. The ancillary damages to property owners such as Gopal Panday, who lost his business in the process, and the Lighthouse Mission and Rev. Kevin Brown, who has since moved from Long Branch, remain uncompensated. They will not be able to regain what was lost here.
 

LINKS

City of Long Branch v. Anzalone eminent domain settlement agreement (September 18, 2009)

Long Branch case reversed, remanded (August 7, 2008)

N.J. Supreme Court clarifies 'blight' meaning in Gallenthin eminent domain case (June 13, 2007)

Kelo anniversary, the eminent domain abuse saga continues (June 23, 2006)

Nevertheless, these two cases create a muddle in New York Eminent Domain law regarding blight and its use to acquire properties. A recent poll conducted by Crane’s New York finds public opinion mixed on which of these two court decisions is better for New York City. A majority voted: “Neither. Until it becomes more transparent, the eminent domain process is bad for the city, no matter what project it affects.”

Ten days later, on Thursday, December 3, 2009, the New York Appellate Division ruled 3-2 in favor of the property owners in the Columbia University project. In the Matter of Kaur v. New York State Urban Dev. Corp., the court rejected so called “underutilization” as a justification for a declaration of blight and condemnation of plaintiff’s properties. Download the decision. Judge Catterson, under a heading titled "The Folly of Underutilization," called for the removal of “underutilization” as a justification for blight:

The time has come to categorically reject eminent domain takings solely based on underutilization. This concept put forward by the respondent transforms the purpose of blight removal from the elimination of harmful social and economic conditions in a specific area to a policy affirmatively requiring the ultimate commercial development of all property regardless of the character of the community subject to such urban renewal. See Gallenthin Realty Dev. Inc. v. Borough of Paulsboro, 191 N.J. 344, 365, 924 A.2d 447, 460 (2007) ("Under that approach, any property that is operated in a less than optimal manner is arguably blighted.' If such an all-encompassing definition of "blight" were adopted, most property in the State would be eligible for redevelopment"); In re Condemnation by Redevelopment Authority of Lawrence County, 962 A.2d 1257, 1265 (Pa. 2008), appeal denied, 973 A.2d 1008 (Pa. 2009) (holding use to less than full potential does not constitute "economically undesirable" land use); Sweetwater Valley Civic Assoc. v. City of National City, 18 Cal.3d 270, 555 P.2d 1099 (1976); Southwestern Illinois Dev. [*14]Auth. v. National City Envtl., 304 Ill.App.3d 542, 556, 710 N.E.2d 896, 906 (1999), aff'd, 199 Ill2d 225, 768 N.E.2d 1 (2002), cert. denied, 537 U.S. 880, 123 S.Ct. 88, 154 L.Ed.2d 135 (2002) ("If a government agency can decide property ownership solely upon its view of who would put that property to more productive or attractive use, the inalienable right to own and enjoy property to the exclusion of others will pass to a privileged few who constitute society's elite"). (Slip opinion at 24-25)

In this regard, the Kaur opinion is in line with the New Jersey Supreme Court in Gallenthin v. Paulsboro. See our blog post, N.J. Supreme Court clarifies 'blight' meaning in Gallenthin eminent domain case (June 13, 2007.)

Another important aspect of Kaur is its examination of Justice Kennedy’s concurrence in Kelo, described by Prof. Patty Salkin in her blog, Law of the Land:

Perhaps the most important aspect of the decision is the Court’s careful examination of Justice Kennedy’s concurring opinion in Kelo, and the finding that this case is an example of what Kennedy warned about – situations where “improper motive in transfers to private parties with only discrete secondary benefits to the public.” Judge Catterson recounts Justice Kennedy’s test for pretext: 1) city’s awareness of a depressed condition; 2) formulation of a comprehensive development plan; 3) substantial commitment of public funds; 4) city’s review of a variety of development plans; and 5) city’s choice of a private developer from a group of applicants rather than picking a particular transferee beforehand. While all of these elements were present in the Kelo case, in the Columbia case, Judge Catterson finds that: 1) when the City and State started to look at the expansion project, the area was not depressed; 2) there was no comprehensive development plan to address area-wide economic depression; 3) no public funds were being used to support the project – Columbia is paying for 100% of the project; 4) no competing plans were submitted – although the community board submitted a 197-a plan that acknowledged the importance of the expansion project, the plan clearly indicated no support for the use of eminent domain; and 5) the ultimate beneficiary of the project was predetermined from the beginning – Columbia University.

The Court of Appeals will hear the Kaur case based on the dissent (3-2) and its conflict with the Atlantic Yards case. Chief Judge Lippman, writing for the majority in the Atlantic Yards case, thinks the issue of blight is best addressed by the New York Legislature:

It may be that the bar has now been set too low – that what will now pass as "blight," as that expression has come to be understood and used by political appointees to public corporations relying upon studies paid for by developers, should not be permitted to constitute a predicate for the invasion of property rights and the razing of homes and businesses. But any such limitation upon the sovereign power of eminent domain as it has come to be defined in the urban renewal context is a matter for the Legislature, not the courts. Properly involved in redrawing the range of the sovereign prerogative would not be a simple return to the days when private property rights were viewed as virtually inviolable, even when they stood in the way of meeting compelling public needs, but a re-weighing of public as against private interests and a reassessment of the need for and public utility of what may now be out-moded approaches to the revivification of the urban landscape. These are not tasks courts are suited to perform. They are appropriately situated in the policy-making branches of government. (Slip opinion at 17-18)

In contrast, the New Jersey Supreme Court reiterated its standard of review in Gallenthin vs. Paulsboro: Blight has to be proved by substantial, credible evidence. The courts insist on more than a cursory review of the properties or a recitation without substantiation of the statutory blight criteria. Thus, there is a trend toward a more restrictive interpretation of the law. Chief Justice James Zazzali, writing for a unanimous court, said that while the New Jersey Legislature enlarged the power of eminent domain to include the taking of private property for redevelopment, the judiciary is the final arbiter. By placing the responsibility for defining the limitations of eminent domain primarily with the Legislature, the New York Court of Appeals abdicates its ultimate role.

Beaches in many states are the recipients of oceanfront accretion as a result of beach replenishment projects. Most states, including Florida and New Jersey, set the property boundary at the mean high water line: The state owns the area between the mean high water line and the low water line. Up to this point, any natural or man-made accretion that changes the mean high water line belonged to the riparian owner. The state of Florida wants to make this additional land public land. The Florida Supreme Court, in a 5-2 decision, agreed. See SCOTUS Wiki for all the documents in this case and our prior blog post, "SCOTUS grants cert in beachfront renourishment case."

In order to rule in favor of the Florida property owners, at least 5 of the 8 justices hearing the case need to agree with the position of the property owners who are contesting the Forida legislation and the Florida Supreme Court decision. This would require an in depth review of Florida law in order to overrule the Florida Supreme Court -- a big step, considering the deference usually accorded state courts in interpreting state law. But the Florida property owners argue that the court below misinterpreted long standing Florida law with respect to the ownership of beachfront property. 

The New Jersey case, City of Long Branch v. Liu concerns several issues. See blog post, "Eminent domain at the mean high water line." The New Jersey Supreme Court spent most of its time questioning Liu’s attorney, Peter Wegener, regarding the title to the additional 225 feet of beachfront land, which accrued to the property as a result of a 1998 beachfront replenishment project undertaken by the Army Corps of Engineers. Liu's property was condemned in 2001 as part of the Beachfront North redevelopment project implemented by Long Branch.The issue is whether this land belonged to Liu and should have been valued in the underlying condemnation case, or was this property “state land” belonging to the public and entitled to public use under the “public trust doctrine.” See our blog,"Eminent domain and the public trust doctrine."

New Jersey law until this point has held that the riparian owner owns to the mean high water line. The line changes over time due to erosion and accretion, both natural and man-made. Justices Rivera-Soto and Albin sharply questioned Mr. Wegener on this point. Wegener forcefully argued for Liu’s ownership of the property, subject only to the public access as established in prior court opinions. (See Bubis v. Kassin .) An opinion will mostly likely be decided after SCOTUS issues its opinion in the Florida case.

A centerpiece of the petitioners' argument was an attempt to convince the court that the term public use, as used in the New York State Constitution, should be limited to its original intent. This would necessitate overturning a long line of case law which has significantly broadened the concept of public use. The justices, questioning petitioners' lawyer Matthew Brinkerhoff, appeared to reject this argument; it is unlikely they will narrow the definition of public use in the opinion that results from this case.

There was a strong argument put forth by the respondents' attorney Phillip Karmel that the action in the state court presently before the court of appeals was not filed within the 30 day limitation contained in the statute, New York State’s Eminent Domain Procedure Law (EDPL). The petitioners rely on a six-month grace period to support their application that the action was timely filed. The petitioners initially pursued their remedies in the Federal Courts without success. They subsequently filed an action in the state court relying on the six month grace period to meet the procedural requirements of the statute. Respondents argue that this does not comport with the procedure set forth in the EDPL. The danger in this procedural argument is that, if the respondents position is adopted by the court, the case could be dismissed without addressing the underlying merits or substantive issues. We have seen appellate courts avoid controversial decisions by utilizing procedural devices to bypass the real issues at the heart of the case.

The justices seemed troubled over the possibility that public subsidies were made for market-rate housing, which as Chief Justice Lippman pointed out, appears to constitute the majority of the project. Article 18 section 6 permits public subsidies for low and moderate income housing:

No loan, or subsidy shall be made by the state to aid any project unless such project is in conformity with a plan or undertaking for the clearance, replanning and reconstruction or rehabilitation of a substandard and unsanitary area or areas and for recreational and other facilities incidental or appurtenant thereto. The legislature may provide additional conditions to the making of such loans or subsidies consistent with the purposes of this article. The occupancy of any such project shall be restricted to persons of low income as defined by law and preference shall be given to persons who live or shall have lived in such area or areas.

Mr. Karmel insisted that all of the $100M in state support of this project was for infrastructure for the arena site, and not for the market-rate housing. “Market-rate housing – this is the largest component, right?” the judge asked.

Karmel ducked the question by answering, “By acreage, I’m not sure.” Certainly 5000 market-rate units, which comprise the majority of units in this project, is significant; and this, not the arena for the Nets, is the clear objective of real estate developer Bruce Ratner.

Another issue that may result in a remand is the rebuttal argument made by petitioners’ attorney Matthew Brinckerhoff that there was no analysis of the balance between public and private benefit to the developer as required by New York law.

The hopes of the property owners rest with a court willing to make a ruling that restricts the use of eminent domain and sets forth precise guidelines that must be followed when private property is taken for a public use. Some might say, as Justice Lippman suggested during oral argument, “What is the role of the Legislature in all of this?” And the answer is that, in an ideal world, the Legislature should be the catalyst for eminent domain reform. But we have seen that legislators are too tied to developers to ever pass meaningful reform. So the courts have become the last, best hope for the property owner. 

Click here to view the video of the October 14 NY Court of Appeals oral argument in Goldstein  v. New York Urban Development Corp. 

Daniel Goldstein is the lead plaintiff as well as the catalyst and co-founder of Develop Don’t Destroy Brooklyn, the group that has been fighting developer Bruce Ratner’s efforts to condemn their neighborhood for an arena (the  proposed home for the New Jersey Nets), 16 towers with 5000 residential units, and retail and office uses.

Earlier efforts by the property owners in the Federal Court were dismissed. See Goldstein v. Pataki, 488 F. Supp. 2nd 254 (EDNY 2007). Aff’d 516 F 3d 50 (3nd Cir. 2008). At the heart of the petitioners’ state court action is the provision of the New York Constitution Article I, Paragraph 7, which states that “private property shall not be taken for public use without just compensation.”
 

The petitioners also urge the court to weigh the relative public vs. private benefits that would occur as a result of the project as called for in Aspen Creek v. Town of Brookhaven, 12 NY 3d 738. The City of New York has filed an amicus brief supporting the use of eminent domain to foster economic development. The Virginia based Institute for Justice has filed an amicus brief on behalf of the plaintiffs. The Insitute recently published Building Empires, Destroying Homes: Eminent Domain Abuse in New York. (Click on the link to download the PDF.)

In an article published today in Reason Magazine, Goldstein wrote: "We're simply asking for the state's constitutional Public Use Clause to be applied, which, despite the cries of the vested interests, will not stymie development in New York City. If it is not applied, then today our homes can be seized in an abusive manner, but tomorrow it will be your home just because some politically connected, backroom-dealing rich guy can get his cronies to determine that his enrichment is somehow for the public's use."

Other relevant publications on this topic:
Atlantic Yards Report by Norman Oder: The eminent domain battle Wednesday: an easy call for the Court of Appeals or a fresh look at blight, "public purpose," and relative benefits?

The Volokh Conspiracy by Ilya Somin: New York's Highest Court to Hear Important Eminent Domain Case

Law of the Land by Patty Salkin: Atlantic Yards Eminent Domain Case Heads to NY High Court Tomorrow.

Previous posts on this blog:
Proponents of Atlantic Yards win Appellate round 

Brooklyn's Eminent Domain: Henry & Daniel v. Goliath 

Brooklyn's Eminent Domain: DDDB v. ESDC 

A comprehensive review and amendments to the statutes governing eminent domain in New Jersey are needed, including the Eminent Domain Act of 1971, the Local Redevelopment and Housing Law and the Relocation Assistance Act and regulations.

These laws form the statutory framework governing the acquisition of property by state agencies and local government. They also provide protections to the owners and occupants of real estate acquired for a public project.

On June 15, a draft eminent domain bill was voted out of the Senate Community and Urban Affairs Committee, three years after the Assembly passed its version. Five years after the U.S. Supreme Court's decision in Kelo v. City of New London, which called for the states to enact their own legislation, 43 states have passed eminent domain reform. New Jersey has not. Senate President Richard Codey needs to move the eminent domain reform bill to a vote.

Right now, the law stands as written, with piecemeal relief provided by judicial decisions in New Jersey courts. Case by case, property owners are forced to overcome the presumption of validity of the statutes and municipal actions taken in designating their properties in need of redevelopment. This is a difficult and expensive burden for the average residential or small business owner.

The Local Redevelopment Law must address the definition of blight, the notice given to the property owners including tenants, and the time frame for filing a prerogative writ case contesting the blight designation. The Legislature must cap blight designations — seven years is sufficient to implement a project. A municipality should be able to develop plans, designate developers, acquire properties necessary for redevelopment and start construction within that time frame.

Blight designations that linger create the very conditions the municipality seeks to address. Asbury Park is a perfect example: blighted in 1984, two redevelopers have missed the market in 25 years. This must not be repeated.

Property owners under a blight designation remain under the threat of condemnation. They are reluctant to invest in their real estate and often are prohibited from redeveloping their own properties by the plan and the exclusive designation of one redeveloper. Property owners have difficulty obtaining loans, and sell at a discount because of the threat of eminent domain.

The Relocation Assistance Act and regulations are administered by the same agency displacing the owners and occupants. The same agency has full say over any decision by the Office of Administrative Law and can reverse an administrative law judge who finds the displaced owner is entitled to benefits. This is a blatant conflict of interest. Instead, the decision of the judge should be final and appealed in the courts. Owners forced to litigate to obtain benefits should be awarded reasonable counsel fees and costs if they are successful. Otherwise, the legal costs necessary to obtain statutory rights can exceed the benefits being sought.

Displaced residential owners are given many benefits — rental supplements, reimbursement of closing costs and attorneys' fees, which are not provided to businesses. Businesses need equal benefits. The business discontinuance allowance is capped at $10,000. This is a miniscule amount for most businesses, which may be put out of business after acquisition or relocation to another community. Business discontinuance allowance should be expanded to compensate the dislocated owner adequately for a business that becomes defunct.

Ed. Note: The op-ed, Time to act on eminent domain reform was published in the opinion section of the  Asbury Park Press on September 23, 2009 and can be found online at this link.