Tuesday, February 14, 2006

 

Judge won't block demolitions, disqualifies ESDC lawyer who worked for Ratner

After a lively and contentious three-hour hearing today, state Supreme Court Justice Carol Edmead denied a lawsuit by Atlantic Yards plan opponents to stop developer Forest City Ratner from demolishing five properties within the project footprint. That gives the developer some momentum--despite assertions that the project is in its early stages--but Edmead also gave those opponents a partial victory, endorsing their claims that the process has been unfair. She ruled that David Paget, a lawyer reviewing the project for the Empire State Development Corporation (ESDC), should be removed from the case because he recently worked on the project for Forest City Ratner.

Lawyers did not immediately announce an appeal, though Edmead as much as invited one on the latter issue. The case drew a standing-room-only crowd of some 80 people--mostly project opponents--to a small courtroom. Several press accounts (see below) emphasized the conflict-of-interest ruling.

While advocates (including Council Member Letitia James, representing herself and two other local elected officials) raised larger issues, such as the respective opposition to and support for the project in Brooklyn, Edmead based her demolitions ruling on a fairly narrow issue of law. It didn't matter that that the properties may have deteriorated under the control of the developer, or that recent inspections by city agencies did not lead those agencies to recommend demolition, or that the developer first approved, then denied, an invitation for James to bring an independent engineer to inspect the properties.

Rather, such an "emergency action" is considered a Type II action under state environmental law (SEQRA), and must be allowed unless the decision was "arbitrary and capricious or an abuse of discretion." The ESDC, in approving the demolitions, relied on reports, written and oral, from the developer's engineering firm, and internal consultations and site visits by its own personnel, and the judge said that was within the bounds of the agency's discretion. Demolitions may begin in ten days.

(Note that there are five properties, since a sixth building initially announced for demolition was not yet approved by the ESDC. The petitioners consider the six initially announced properties 12 buildings since one of the properties has a building behind it, and the Underberg Building is six joined structures. Subtracting that one building not yet approved for demolition, five properties and 11 buildings were at issue today. Given Edmead's ruling, the ESDC can similarly approve the sixth demolition. Picture from Forgotten NY.)

Develop Don't Destroy Brooklyn spokesman Daniel Goldstein commented, "We disagree with the Court's decision on the demolitions. We believe that Ratner's public safety claims warranting demolition, for most of the buildings, are a sham. If the buildings are near collapse and a threat to the public why are there no warning signs posted on the buildings and no public protection measures like sidewalk sheds?" He added that the disqualification of Paget placed ESDC's previous approval under a cloud, and that there was a burden on ESDC Chairman Charles Gargano--who had previously claimed no knowledge of a conflict--to restore faith in the agency. (The DDDB press release emphasized the disqualification, not the demolitions.)

Conflict of interest?

Paget, a well-respected environmental lawyer, has represented ESDC for nearly 30 years on various projects. In December 2003, Forest City Ratner, after discussions with the agency, retained Paget on the Atlantic Yards project. He provided advice to the developer through September 2005, but in February 2005, ESDC formally retained Paget as outside counsel, according to the ruling. "In short, the ESDC essentially hired the sponsor's current lawyer, at the sponsor's expense, to assess the environmental ramifications of the sponsor's project," Edmead wrote. (Note that the ESDC appeal says Edmead's fact sequence is off.)

Lawyers for ESDC and Forest City Ratner said the process was not adversarial, but collaborative, since both the developer and agency are interested in having the project move forward. Jeffrey Baker, an attorney for petitioner Develop Don't Destroy Brooklyn, instead characterized it as "an arm's length transaction."

Edmead agreed. She wrote in her decision, "Potentially, the interests of Ratner Companies, as an applicant or project sponsor, are adverse to the interests of the ESDC, which is charged with the responsibility to protect the environment and regulate the activities of individuals and corporations so that 'due consideration is given to preventing environmental damage.' The oft bottom-line, profit-making pursuits of real estate development corporations may not necessarily align with the stated, valid environmental interests of the ESDC."

She enjoined the ESDC from taking further action that requires Paget's services until new counsel is engaged, within 45 days. However, she also said from the bench, "I don't doubt that the court's determination may not stand, but I believe the objective public interest standard has not been met." Paget, she added, should not be in a dual role: "It has such a severe, crippling appearance of impropriety." (Note that a commentator to this blog suggests that her statement was pro forma.) She said that she was "very much swayed" by the arguments of Council Member James, though that might have referred to the judge's oral rhetoric more than the legal decision; the ruling had been in preparation, since the judge's law secretaries were able to finish it and deliver it to litigants just after the hearing concluded.

The press coverage

The Daily News, in a 2/15/05 article headlined Ratner aide, key buildings get heave-ho, declared it a mixed result, but gave an edge to the critics: Opponents of Bruce Ratner's controversial Nets arena complex lost a battle yesterday - but not the war.

The New York Sun, in an article headlined Opponents of Atlantic Yards Plan Say Court Ruling Is Auspicious, emphasized the conflict, leading:
Opponents of the proposed Atlantic Yards development in Brooklyn said a Supreme Court ruling yesterday is a signal that in future legal battles the courts will look favorably on their contention that the approval process is tainted.

The New York Post, in a brief article headlined HOOP LAWYER IS BOUNCED, led with the conflict: A judge called a technical foul yesterday on Bruce Ratner's bid to build a $3.5 billion basketball arena in Brooklyn.

The New York Times, in an article headlined Demolition Can Proceed for Brooklyn Arena Project, had the most thorough coverage, but emphasized the demolitions issue. The shorthand headline compresses the issue, since, while the demolitions are within the project footprint and it does give the project momentum, the project has not yet been approved, and the developer may choose to build other structures if the project is blocked.

The Times reported on issues raised by the conflict:
"There's a built-in ambiguity or inconsistency to the law there," said Philip Weinberg, a professor at St. John's University and an expert on environmental review. "The whole principle behind review is to have the agency deciding whether to go ahead with the project review the project's impact themselves. But they are also supposed to play it down the middle."

Leading off

Baker began his case by assuring the judge that his clients do not oppose "jobs, housing, or responsibility development." Rather, he said, "This case is solely about the objectivity and validity of the environmental review process." He said that ESDC and Forest City Ratner had not made the case for demolitions, noting there were no affidavits "from any trained professionals attesting to the imminent threat." He added that, since the announcement of the demolition plans, "there has been no action taken by Forest City Ratner to secure or demolish these buildings." He said that, on Monday, he saw no warning signs or scaffolding outside 461 and 463 Dean Street.

"There is no imminent threat," he said. "This has been a planned demolition from Day 1 that has been shoehorned in SEQRA [the state environmental review] to make it an emergency." Baker noted that demolition plans were completed for 461 and 463 Dean Street on 3/7/05, for 585 Dean Street on 3/4/05, for the Underberg Building (608-620 Atlantic Avenue) on 2/15/05, and for 620 Pacific Street on 6/30/05--all long before the 11/7/05 report by LZA Technology that called the buildings "an immediate threat to the preservation of life, health, and property." (At left, 620 and 622 Pacific Street.)

Baker said that the developer recognized that it would be difficult to demolish the buildings while the project was pending before the ESDC, and Paget "advised them... that there's a loophole, that there's an emergency."

Edmead challenged Baker's language. "Don't give me a spin." Baker withdrew his characterization of the plan as a "loophole," but said it was an "exception."

Baker pointed out that, according to affidavits from Forest City Ratner employees, the developer was delayed because, in May, the Metropolitan Transportation Authority began an RFP process that led to an additional bid for the agency's Vanderbilt Yard. "I can't imagine how the bidding process affected making necessary inquiries about the underlying structural integrity" of the buildings, Baker said, adding that company president Bruce Ratner had met with MTA Chairman Peter Kalikow twice in August.

He pointed out that there was no technical review of LZA's report by inhouse staff at ESDC, and no evidence that they had inquired about lesser steps to stabilize the buildings. "Every agency has technical expertise," he said. "We don't take an applicant's word for it. That's the reason we have government." Asking for a "hard look" to be taken, he acknowledged, "Maybe they warrant demolition, but not all of them," citing "particularly 461-463 Dean Street, which are an important element of the streetscape." (See photo at right.)

Edmead proffered a photo of a dilapidated structure behind 463 Dean Street. "You'd be hard-pressed to say this is a building you can shore up." Baker pointed out that engineer Jay Butler, hired as an expert for the plaintiffs, had pointed out that such a backyard structure is valuable since, if demolished, it cannot be rebuilt.

A lawyer and a client

After Jennifer Levy, representing low-income residents of Dean Street, pointed out that neither the Department of Buildings nor the Department of Housing, Preservation, and Development had issued the most serious violations after visiting four of 12 buildings, Council Member James stepped to the podium.

James, who with the judge was one of four black women in the room, began her statement in a personal style unlike that of the other lawyers. "Judge, I'm not naturally a woman of courage," she said. "I'm here today because someone has to stand up."

She offered a nonlegal analogy. "This weekend on Channel 13 I watched 'This Old House.' They restored a house in much worse shape than any of these buildings." She recounted how, after she asked for permission to tour the buildings with an engineer, Forest City Ratner at first said yes, but then said she could tour them herself. "Judge, I am many things, but an engineer I am not." (The two-story building at 620 Pacific Street is scheduled for demolition, as is the single-story building at 622 Pacific.)

James noted that Forest City Ratner, in its legal papers, said it wanted to avoid a dangerous building collapse, like one in Fort Greene. "I was there. That building is less than 50 feet from the BQE. That building fell because of vibrations from the BQE, as well as age."

As for the buildings at issue, she said, "These buildings were allowed to deteriorate. They left windows open. The roof was open." She called it a case of "demolition by intentional design, with intentional neglect."

James tried a kitchen sink approach, contending that, because some of the buildings contain asbestos, the demolitions will aggravate the community's high asthma rate, "be visually disturbing and will render this beautiful community blighted."

Paget's dual representation, she argued, "undermines the public faith and trust in government and taints the integrity of the project. SEQRA is a means of doing an analysis, not a means to arrive at a certain conclusion."

James reiterated that she and her fellow elected officials, State Senator Velmanette Montgomery and Rep. Major Owens, are not against development, but oppose development that destroys the character of the community and disrespects elected officials.

The judge pointed out that affidavits submitted by Forest City Ratner included endorsements of the project by numerous elected officials, including Borough President Marty Markowitz. "You represent a voice, not the only voice," Edmead said.

James responded, "I was elected to represent the interest of Prospect Heights. The reality is, overwhelmingly in my district, the community is opposed to the project and the process. We know the community like the back of our hand. I daresay that none of those elected officials can say the same." (Arguably, State Assemblyman Roger Green, a project supporter not in the room, could contest that.)

ESDC's case

Douglas Kraus, representing ESDC, emphasized that the project was in the early stages of review. "ESDC has not approved this project," he said. "We're not here to debate whether it is a good project or a bad project." (Apparently, he was not channeling ESDC Chairman Charles Gargano's endorsement of the Atlantic Yards plan.)

Kraus pointed out that the buildings are "virtually certain" to be demolished, either if the Atlantic Yards plan is approved or if Forest City Ratner decides to build on the property. Referencing James's explanation for the collapse of the building in Fort Greene, he said, "It can't be worse than the vibrations from the railyard, which is literally across the street." (James broke into a grin, perhaps recognizing that vibrations are hard to feel all the way on Dean Street, and that the rail cars move rather slowly anyway.)

As for 461 Dean Street, he said the building has no window: "Anyone can walk in off the street into that building, as I did." Nobody followed up by pointing out that the building might be better secured.

He pointed out that there's no requirement for the agency to consider alternatives to demolition nor to take a "hard look" at the case. The project itself is a Type I action, requiring such a level of scrutiny, but the emergency declaration is a Type II action, he noted.

As for whether the demolitions indicated that the project is a 'done deal,' he said, "That's total speculation. I couldn't see how anybody could help but understand that this process has along way to go."

FCR's case

FCR attorney Jeffrey Braun said that those working for the developer "are very proud of the project. It's going to physically close an enormous gash that cuts through the heart of Downtown Brooklyn." (His location was a bit off.)

He called the lawsuit "an attempt to hijack the process" that allows the public to comment during Environmental Impact Statement process. He pointed out that the legal test "is whether [ESDC's decision] was rational, rather than arbitrary and capricious. Courts cannot second-guess the agency's decision." As for failing to submit an affidavit from an engineer from LZA, he said, "We think that's superfluous."

Braun pointed out that "there are ten vacant building that my client owns or is in contract to buy that it has no intention to demolish." Either FCR decided against demolition on its own, he said, or LZA advised against it. "We're going to wait and see if the project is approved before those buildings are demolished," he said.

He said that ESDC's Rachel Shatz, who approved the demolition, "is a professional urban planner. She is entitled to bring her own evidence to bear," including the 70-slide Power Point presentation made to ESDC by LZA on 11/2/05.

"Pure ugly money terms"

Braun reiterated that the damaged buildings posed a safety hazard. "If you want to put it in pure ugly money terms, can the petitioners post a bond to protect Forest City Ratner from the financial consequences if one collapses?"

As for contentions that residents would be displaced or harassed, "we really take umbrage at that," he said, adding, "We are partners to a pioneering Community Benefits Agreement."

Some in the crowd, critical of the CBA, murmured contentiously. The judge quickly quieted them.

Braun offered his own take on 461 and 463 Dean Street, saying that a photo in the record didn't show cracking in the sidewalk and where concrete had been poured to stabilize the building.

Then he went off on a dangerous tangent. "In our view, even if there was something defective about [ESDC's approval of the demolitions], we'd be entitled" to proceed.

Judge Edmead pressed him: "You would need the approval of ESDC. Is that not right?"

Braun said no.

Edmead: "How can you ignore co-respondent ESDC?"

Braun: "I'm not saying it's a smart move."

Edmead: "It is bonehead stupid. Why are you arguing it?"

Braun said that, under another theory, demolition is not subject to SEQRA "because prudent ownership implies that they should be demolished separately and apart from the project."

Edmead said cuttingly, "I would not rest my partner bonus on that."

A bit later, Braun explained that the company received two interpretations, and that Paget had offered the more "expansive" one. "So as a practical matter, Forest City Ratner agreed to go through with it."

Another road?

The judge suggested that the petitioners might have gotten farther had they argued that the demolitions were a central part of the project, a Type I action that deserved a more rigorous level of review.

Baker said that both Type I and Type II actions deserved the same level of review.

Edmead said, "This all stems from the road you chose to take.... You unfortunately have limitations on the argument you're capable of making." The "hard look" standard does not apply to Type II actions.

She asked what the legal basis was to request a review by an independent engineer. Baker cited a case involving historic buildings in Albany, "but the case did not turn on that. It was an action by the county. The court said there's a question of fact: the independence of the analysis."

Baker said that the 90-minute discussion at ESDC proceeded without an engineer or an architect, and that nobody asked about specific details of the damage.

Edmead said, "To say they didn't do the review the way you think it should be done is not the standard."

Baker responded, "They're making you superfluous."'

Edmead asked where in the law there was a right to demand an independent review. Baker offered a case, and the judge was unimpressed, saying, "It would be more credible if you didn't put ridiculous spins that are not in the record."

Baker said that Shatz "parrots the report of LZA."

Edmead offered her own interpretation: "She indicates other people she consulted... Nothing in the law requires that she consult an engineer."

Conflict of interest

Baker said that "It's beyond question that Mr. Paget had a prior relationship with Forest City Ratner." He noted that an affidavit from FCR VP Jim Stuckey mentioned that Paget or other lawyers at his firm had worked with the developer on several occasions, but "curiously enough, Mr. Paget's affidavit doesn't mention it."

"ESDC has the final determination" on the project, Baker said. "ESDC has tremendous power, and should this project go forward, they will usurp and overrule the city zoning codes, something that's ten times in excess of what zoning would provide. It's an extraordinary power, and the people have a right to expect that the lawyer is doing that in an objective manner." (The ratio may be ten times for part of the project footprint, but not for all of it.)

Private parties, he said, have the right to waive a conflict of interest if they agree on the lawyer, "but does ESDC have the right? I submit: this is more than just an appearance of a conflict, it's a true conflict."

Extell alternative?

One reason that impartial legal counsel is important, he said, is that the ESDC scoping process should contain references to alternatives to the Atlantic Yards plan, including Extell Development Company's proposal to develop just the railyard.

Referencing the developer's lawyer, he said, "Mr. Braun points out that of course Extell's plan will be considered. But the draft scope didn't have any reference to the Extell plan."

At a meeting of the Borough Board Atlantic Yards Committee, Baker said, "people asked, 'How come the Extell plan was not included?' The response from Mr. Paget was, 'We are not privy to it.'" (The summary of that meeting does not include this, but the summaries are cursory.)

"To me, that exemplifies the conflict," Baker said, "to massage the process to get an outcome that favors the developer." He noted that ESDC and FCR "claim it's not an adversarial process, it's collaboration."

Where does that theory come from, the judge asked.

Collaboration or not?

ESDC lawyer Kraus acknowledged that it's not in SEQRA, but in the underlying statute that establishes the state agency, "to undertake projects that promote economic development... There's nothing in the statute that says it's collaborative, but it's the way the process works."

Edmead pointed out that there was already evidence that the developer and agency had differed: on whether Forest City Ratner could demolish the buildings without applying to the agency. "You could not possibly be collaborative," she said.

Kraus contended that the judge was misreading the law, that a state agency can waive a conflict, and that you can't object to a conflict unless you're in an attorney-client relationship.

Baker disagreed. "It's bizarre," he said. "It removes any challenge to a corrupt determination.... The people who live in and adjacent to the project have a right to say, 'This is a stacked deck.'"

Kraus pressed on, saying that community members could always later challenge a decision made by the ESDC. Edmead, as if hearkening back to the earlier issues, noted, "But the review of the determination is very limited."

Kraus said, "If you felt there was a conflict, the conflict has clearly been waived. It was also clearly contemplated that Mr. Paget would be involved representing ESDC when the environmental review got started."

Baker, however, said that Kraus was misreading the case law. "The public is not an adversary in this proceeding," he said. "We expect an objective look.... If they want to issue a final scope that may be tainted by Mr. Paget, go ahead."

He acknowledged that it was typical for developers to pay the cost of counsel hired by ESDC to evaluate their projects. "My question is, would they agree to do it if it weren't Mr. Paget."

FCR attorney Braun said, "Of course... There's been talk about a taint, but there's been nothing demonstrated. The final scope is going to look a lot different." He pointed out that Paget is the state's preeminent environmental lawyer, and that two lawyers at the table, including his own colleague and Baker, had worked for Paget's firm.

Edmead asked Braun why the developer didn't simply leave Paget "where he was, knowing ESDC would pick him up."

Braun said Paget's responsibility was to start the process of an environmental review. Edmead pointed out that Paget was still working for FCR. Braun responded, "He was working for the project."

That led the judge to comment about the "severe crippling appearance of impropriety," to order Paget's removal from his role as counsel to ESDC.

Comments:
The hearing today was very revelatory, and what was revealed said a lot about both the process, the structure of our government and development, and the terrible attitude held towards the community. Oh, the judge was a lesson as well.

I was stunned to hear the state agency in charge of reviewing the project (the Empire State Development Agency) say they were in a collaborative relationship with the developer. They said their whole purpose was to further development of projects they deemed worthy, and once they became involved the process should go forward collaboratively. So what are the rights of the community? Why have a review process at all? They clearly see it as an impediment to their stated function, to develop projects they approve without public input. I was more stunned to hear them argue that the public had no right to be a party to the case since the only contracts are between the ESDC and FCRC. THE LEAD STATE AGENCY DOESN'T WANT THE PUBLIC TO HAVE A VOICE IN THIS PROCESS! Fortunately the judge differed in her opinion.

The plaintiffs had an extremely difficult case to make for blocking the demolitions because of the circuitous way the law is structured, which highly favors the developers. The judge split hairs by saying the plaintiffs' attorney had "gone down the wrong path" in pursuing a decision under Article 78 as a Type 2 action rather than move to have it reviewed as a Type 1 action. (Type 1 involves an environmental review, which the entire project is already governed under. Type 2 does not allow for a "hard look" necessary to order an independent assessment.) The plaintiffs were in a bind constructed by the developer; the developer asked the ESDC for a Type 2 waiver, and the plaintiffs asked to have the Type 2 waiver nullified. To additionally ask that the review to which they responded be treated as a Type 1 would have opened the proceedings to tortuous claims by the developer about motives and accusations of "creating new law." Besides, the plaintiffs had precedent for expanding the treatment of Type 2 reviews, which the judge totally ignored (and which may work to the plaintiffs' benefit.)

I think the judge was very careful to walk a fine line in these deliberations and left plenty of room for appeal by both parties. FCRC and ESDC spent a lot of time trying to box her in by citing the minutiae of decision making processes frequently ignored, and saying flat out that Appeals Courts have said that a judge cannot overturn a decision by a State Agency (which is pure hooey, especially if the decision making process of the state agency can be seen as tainted by something like, oh, maybe conflict of interets...) Heavy handed, but she addressed it pretty handily. Her hint to the ESDC that her decision on the David Paget conflict of interest may not stand up to appeal was, I think, pro forma. It won't be overturned and I would be surprised if the ESDC even appeals it within the 45 day window. Not with the media attention this is going to get.

But her decision to not issue an injunction blocking the demolitions is much more open to successful appeal. As stated earlier, the plaintiffs' attorney cited precedent for expanding the traditional view of a Type 2 action to include the "hard look" usually reserved for a Type 1 action (EIS). By refusing to consider the cited precedents the judge has left the plaintiffs a HUGE opening for a successful appeal.

I also very much enjoyed the last act in her theater where she basically tried to get all plaintiffs and respondents to agree with the points she was using to issue her decisions, all the while stalling for time to have the decisions typed up by the time she finally pronounced them. She got the admissions she wanted from the ESDC and FCRC, but not from the plaintiffs, which I suspect might have been her expectation and intent. Pretty slick bench sitting, all told. Can't be said she was taking sides, but the possible outcomes her decisions enable are significant.
 
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