Opinion
Civil Action No. CV002592 (DGT)
August 28, 2001
Kevin K. Tung, Esq., Flushing, N Y, Attorney for Plaintiff.
Michael D. Hess, Corporate Counsel of the City of New York, New York, NY, Attorney for Defendants.
Plaintiff, RKO Delaware, Inc. (hereinafter "RKO Delaware") brings this action against the City of New York, the New York City Landmarks Preservation Commission (hereinafter the "Landmarks Commission") and the New York City Department of Buildings (hereinafter the "Department of Buildings") (hereinafter collectively the "defendants") asserting an inverse condemnation claim.
Defendants now move to dismiss the complaint on the ground that plaintiff's claims are not ripe for review. Defendants also contend that plaintiff has not alleged the type of economic injury that would give rise to a takings claim. Further, defendants argue that plaintiff's claim is barred by the statute of limitations. Plaintiff cross-moves for an injunction.
Defendants also raise the point that plaintiff cannot interpose these claims because it acquired the property in 197, years after the property in question had been subject to the complained of regulatory actions. Defendants do not address the substance of this argument in their submissions. The fact that equitable owner shifted titles to the property among several corporations controlled by him may not preclude such owner from raising a takings claim. However, there is no need to address this issue since plaintiff's case should be dismissed for other reasons discussed herein.
Background (1)
As required for purposes of a motion to dismiss, the following facts, as alleged by RKO Delaware, are taken as true.
RKO Delaware is a domestic corporation organized and existing under the laws of Delaware. See Amend. Compl. ¶ 1. It is the successor in interest and current owner in fee simple of real property known as 135-29 to 45 Northern Boulevard, Flushing, NY. See id. ¶ 7. The premises consist of the theater formerly known as the "RKO Keith Theater." See id. In 1984, the Landmarks Commission declared a portion of the lobby of the premises a historical landmark pursuant to the provisions of § 25-303 of the New York City Administrative Code. See id. ¶ 8. Plaintiff's predecessors are all controlled by Thomas Huang and his family who bought this property subsequent to the designation. See id. ¶ 7.
In 1986, the Landmarks Commission issued Certificates of No Effect that permitted the owner of record at that time to commence renovations of the premises. See id. ¶ 8. Farrington Northern Development Corp. was the owner of record at that time. See id.
On March 2, 1987, the Landmarks Commission and the Department of Buildings issued a notice of violation and a stop work order because the owner had performed work outside the scone of the original permit, which resulted in damage to the landmark. See id. ¶¶ 9, 10. The designated landmark, located in the lobby of the premises on the first floor, occupies about 2,000 square feet, while the premises consist of over 128,000 square feet with multiple floors. See id. ¶ 19. The stop order, however, affects the entire 128,000 square feet area. See id.
On March 8, 1989, the Landmarks Commission issued a Certificate of Appropriateness that authorized the restoration of certain non-designated portions of the site as well as the landmark lobby subject to the condition of filing a full set of Buildings Department construction drawings with the Landmarks Commission. See Exhibit D, Decl. in Opp. to P's Cross-Mot. for Inj. However, the Certificate of Appropriateness did not lift the stop work order in effect until the work approved by the earlier Certificate of No Effect had been completed and inspected for compliance. See id. Any interior or exterior work other than that authorized by the Certificate of Appropriateness had to be approved by the Landmarks Commission pursuant to a separate application.See id.
Plaintiff does not allege that it has submitted such drawings to the Commission.
Plaintiff alleges that it submitted numerous proposals, plans, and estimates regarding the work required to cure the violations and negotiated at length with the Landmarks Commission. See Amend Compl. ¶ 12. Plaintiff also alleges that none of the proposals submitted by the owners have been accepted by the Landmarks Commission. See id. However, plaintiff does not allege any facts that specify the nature of its proposals and the reasons given by the Commission for rejecting them.
The only specific and undisputed facts on this issue are provided by John Graham, an architect and Landmark Preservationist with the Landmarks Commission, in an affidavit in support of defendants' motion to dismiss the complaint. See Graham Affid. The affidavit is the defendant's version of the facts and is irrelevant for purposes of the motion to dismiss. but does provide some context for the discussion. Its contents are as follows.
On February 6, 1990, the owner submitted an application for a development proposal different from the proposal approved by the Certificate of Appropriateness of March 8, 1989. See id. ¶ 13. However, the owner withdrew the application before the scheduled hearing. See id.
On October 12, 1990, the owner applied to reinstate the Certificate of No Effect for the installation of new storefront and other exterior and interior work, but failed to apply for repairing and restoring the damaged designated lobby. See id. ¶ 14. The Landmarks Commission did not process the application pursuant to its policy, codified at section 2-04 of Title 63 of the Rules of the City of New York, which prohibits processing new applications if there is an outstanding violation against the property. See id.
In February of 1991, the owner applied to restore and seal off the designated lobby. See id. ¶ 16. However, it also wanted to move ahead with the storefront work. See id. Therefore, pursuant to Section 2-04 of Title 63 of the Rules of the City of New York, the Landmarks Commission required that an escrow or other acceptable form of assurance be provided o ensure that the restoration work would be done. See id. ¶ 15. Mr. Graham alleges that before the Landmarks Commission had issued any approvals, further illegal work was performed at the site. See id. ¶¶ 17, 18. Subsequently, in August of 1991, that owner decided not to proceed with the escrow account and sought only a permit to restore and seal off the landmark lobby. See id. ¶ 19. The Landmarks Commission held a hearing at which no decision was made. See id.
On October 8, 1991, the Landmarks Commission conducted a site visit to the property and discovered that the owner was working on the designated lobby without permits which resulted in further damage to the landmark.See id. ¶ 20. The Landmarks Commission requested some sort of monetary assurance from the owner to guarantee that it would complete the restoration. See id. In January of 1992, the owner asked the Landmarks Commission not to act on the pending February 1991 application because it needed more time to secure financing. See id. ¶ 21.
On April 4, 1992, the owner proposed a phased restoration with $40,000 in escrow. See id. ¶ 22. On March 3, 1993, after a number of meetings to discuss the details of this proposal, the Landmarks Commission approved the application for a phased-in restoration and reduced escrow.See id. The Landmarks Commission amended the Certificate of Appropriateness to include these provisions. See id. The owner never took any action following this approval. See id.
Nearly five years later, on February 4, 1997, the Landmarks Commission issued a Certificate of No Effect to seal off the designated lobby in order to allow the owner to address environmental and health and safety violations occurring on the premises. See id. ¶ 24.
On August 12, 1999, plaintiff submitted an application to, among other things, install new storefronts, new windows and to patch and repair coping and stucco. See id. ¶ 25. The Landmarks Commission notified plaintiff that it will not issue any permits until the owner cures the outstanding violations. See id.
In July of 2000, the Landmarks Commission held a meeting with plaintiff. At the meeting, Mr. Graham informed plaintiff that its application was incomplete and that it had to submit additional materials to address the continued deterioration of the premises. See id. ¶ 26. Plaintiff was also told that the application for storefront work will not be processed because of the outstanding violations that were never cured. See id. ¶ 27. However, plaintiff was informed that, in accordance with section 2-04 of Title 63 of the Rules of the City of New York, the Landmarks Commission would process an application limited to work necessary to address the unsafe conditions at the building. See id.
Plaintiff further alleges that ever since 1987, no work has been performed on the premises and it has not been able to make any use of the property. See Amend. Compl. ¶¶ 11, 15. Plaintiff also alleges that defendants' refusal to issue permits is calculated. See id. ¶ 16. Plaintiff supports that allegation by citing a statement made on May 18, 2000 by a spokesman for Borough President Claire Shulman that the property has been "eyed for a possible Education Construction Fund Site which would allow it to be developed as public school and commercial venture." Id.
This allegation is contradicted by Mr. Graham's statements that illegal work was performed on the premises subsequent to the issuance of the Certificate of Appropriateness. See Graham Affid. ¶¶ 17, 18. 20. However, for purposes of this motion plaintiff's version of the facts is assumed to be true.
(2)
RKO Delaware is now suing defendants for violation of its substantive due process rights and for taking its property without just compensation. See id. ¶ 6, 27, 29. It has cross-moved for an order directing defendants to issue necessary permits for the renovation of the seven stores and offices above the offices at the subject property. See Cross-Motion for Injunction. RKO Delaware is also asking for reasonable attorney, appraisal, and engineering fees pursuant to 28 U.S.C.S. § 1346(a)(2) or § 1419. See Amend. Compl. ¶ 28.
During oral arguments on this motion held on April 16, 2001, the parties agreed to attempt to work out the dispute. This court agreed to defer filing the opinion in the case until June 1, 2001 in order to give plaintiff an opportunity to comply with the Landmarks Commission's requirements to obtain a permit. The court was subsequently informed by counsel for the defendant that some progress had been made but that the parties needed more time so that plaintiff could complete its application. Accordingly, an order granting a stay of the motion until September 1, 2001 was issued, and the parties were told to notify the court of the status of the case by that date. By a letter dated August 22, 2001, counsel for the defendant advised the court that plaintiff had still not completed an application despite there being only a small detail concerning bronze entrance doors which remained to be clarified, and that both parties were now requesting that the court lift the stay and file its opinion. The plaintiff, although disputing the reasons for the parties' failure to reach an agreement, confirmed in an August 24, 2001 letter that he did indeed agree to a lifting of the stay and an opinion being filed in the case.
Discussion (1) Takings Claim
Defendants contend that plaintiff's takings claim is not ripe for review. Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108 (1985), established a two-pronged test for analyzing ripeness of takings-type claims. The first prong requires the government entity charged with implementing the regulations in question to have reached a "final decision." Id. at 186. The second prong requires the plaintiff to have sought compensation through "reasonable, certain and adequate" State provisions for obtaining compensation. Id. at 194.
A "final decision" is a "definitive position on the issue that inflicts an actual, concrete injury." Williamson County Reg'l Planning Comm'n, 473 U.S. at 193, 105 S.Ct. at 3120. In Williamson, the Court found that the plaintiff developer had not yet obtained a final decision because it failed to seek "variances that would have allowed it to develop the property according to its proposed plan." Id. at 188, 105 S.Ct. at 3117;see also Suitum v. Tahoe Reg'l Planning Agency, 520 U.S. 725, 739, 117 S.Ct. 1659, 1657 (1997) (the agency made a final decision because it "[had] no discretion to exercise over [the plaintiff's] right to use her land); MacDonald, Sommer Frates v. County of Yolo, 477 U.S. 340, 351-352, 106 S.Ct. 2561, 2568 (1986) (the agency did not render a final decision because the possibility remained that "some development will be permitted") Penn Central Transp. Co. v. New York City, 438 U.S. 104, 136-137, 98 S.Ct. 2646, 2665 (1978) (the plaintiff's claim was unripe because, since the property owners had submitted only one development plan, it was unclear whether the city commission would deny approval of any use of the plaintiff's property); Southview Assocs., Ltd. v. Bongartz, 980 F.2d 84, 98 (the claimant failed to satisfy the final decision requirement because the rejection of its proposal did not preclude the claimant from submitting another proposal)
Plaintiff contends that the Landmarks Commission's requirement that it restore the landmark lobby before it can do any work on any other part of the premises is the final decision of the Landmarks Commission because it denies the owner all economically viable use of its property. However, the fact that the owner cannot derive any beneficial use from the property at this point, more than ten years after the Commission placed the condition on the development of the property, is arguably a result of plaintiff's own failure to maintain the property. More importantly, plaintiff's allegations are insufficient to conclude that the Commission has reached a final decision because it clearly has discretion to allow RKO Delaware to conduct construction work on the premises. In addition, even though RKO Delaware alleges that it submitted numerous plans and proposals to the Landmarks Commission, it fails to allege that it is precluded from submitting another proposal to the Commission. Thus, the facts alleged in plaintiff's complaint are insufficient to establish that the Landmarks Commission has reached a final decision.
RKO Delaware further argues that seeking permits from either the Landmarks Commission or the Department of Buildings would be "futile" because the City government officials have already declared that the plaintiff's property is "eyed for a possible Education Construction Fund Site which would allow it to be developed as a public school and commercial venture." The Second Circuit has recognized a "futility exception" to the final decision requirement in Southview Assocs., Ltd., where it held that the exception did not apply because it could be inferred that the agency would be receptive to other proposals of the claimant. Southview Assocs., Ltd., 980 F.2d at 159.
However, the Second Circuit is yet to determine what the precise contours of the futility exception are. Other circuits have adopted a narrow interpretation of the exception. The First Circuit has stated that "a sort of inevitability is required; the prospect of refusal must be certain." Goldfine v. Kelly, 80 F. Supp.2d 153, 159 (S.D.N.Y. 2000) (quoting Gilbert v. City of Cambridge, 932 F.2d 51, 61 (1st Cir. 1991)). The Ninth Circuit has held that "mere allegations by a property owner that it has done everything possible to obtain acceptance of a development proposal will not suffice to prove futility." Id. (quotingHerrington v. County of Sonoma, 857 F.2d 567, 570 (9th Cir. 1988). A plaintiff can successfully invoke the futility exception where it filed at least one "meaningful application." See id. (quoting Gilbert, 932 F.2d at 61 and Kinzli v. City of Santa Cruz, 818 F.2d 1449, 1454-55 (9th Cir. 1987)). Other factors considered by courts in applying the exception are the defendant's hostility, delay and obstruction. See id. at 160. However, since in Williamson the claim was not found ripe despite an eight-year application process, "an excessive delay would have to be considerable." Id. at 161 (quoting Kinzli, 818 F.2d at 1454 n. 5)
Plaintiff's allegation that defendants refuse to issue permits because the property is "eyed for a possible Education Construction Fund Cite which would allow it to be developed as a public school and commercial venture" is insufficient to invoke the futility exception. No concrete facts have been offered to suggest that this vague statement made in May 2000, fourteen years after plaintiff obtained the initial permit to do renovation work, has had any effect or impact on the difficulties plaintiff has had with the Landmarks Commission. Moreover, RKO Delaware has failed to allege sufficient non-conclusory facts that would suggest that it has made a "meaningful application" to the Landmarks Commission. Plaintiff also does not allege any facts indicating that the prospect of refusal of all of its proposals is certain. Thus, taking all of the plaintiff's allegations as true, it cannot be concluded on this record that RKO Delaware can successfully invoke the futility exception to the final decision requirement.
Plaintiff has supplemented the record with a May 8, 2001 letter from the New York City School Construction Authority that informs the plaintiff that the property is indeed being considered for a possible school site. See Ex. D attached to Pl.'s Letter of August 24, 2001. However, the letter merely informs the plaintiff that the School Construction Authority will make visits to the site over the next several months to determine whether the property should be acquired for the proposed purpose. See id. There is no indication that this effort is in any way coordinated with the actions of the Landmarks Commission or that it makes plaintiff's attempt to obtain a permit from the Commission futile.
Plaintiff's takings claim is also subject to the state compensation prong of the Williamson ripeness test. "[If] a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just. compensation." Williamson County Reg'l Planning Comm'n, 473 U.S. at 195, 105 S.Ct. at 3121. The second prong of theWilliamson test applies to physical as well as regulatory takings. See Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 380 (2d Cir. 1995).
A state compensation procedure will be deemed adequate even if it is "unsure and undeveloped." Southview Assocs., Ltd., 980 F.2d at 99 (holding a takings claim unripe because the plaintiff had not attempted to obtain compensation under the Vermont State Constitution's takings clause, even though no court ever had interpreted that clause to require compensation for a regulatory taking); see also Villager Pond, Inc., 56 F.3d at 380 (holding that so long as a remedy is available under the state constitution's provision, the plaintiff has not yet met the preconditions for a valid takings claim). Nor does a compensation procedure have to be statutory. See Southview Associates, Ltd., 980 F.2d at 100.
The New York State Constitution provides that "private property shall not be taken for public use without just compensation." N.Y. CONST. art. I, § 7(a). Moreover, New York State law recognizes that a compensable de facto taking may be established by a showing of "legal interference with the physical use, possession or enjoyment of the property or a legal interference with the owner's power of disposition of the property." City of Buffalo v. J.W. Clement Co., 28 N.Y.2d 241, 255 (1971); see also Goldfine, 80 F. Supp.2d at 161 (quoting City of Buffalo and finding that New York State law provides adequate remedy for a de facto taking). Since RKO Delaware has never sought compensation in the New York State courts, its takings claim is not ripe on two grounds.
If, however, plaintiff is arguing that the Landmarks Commission's condition that it restore the landmark lobby before it can do any work on any other part of the premises is a taking, its claim is properly characterized as an unconstitutional conditions claim. A condition on development of property is a taking if either the condition is not rationally related to the government's purpose for regulating or if the burden created by the condition is not roughly proportionate to the government's justification for regulating. See Dolan v. City of Tigard, 512 U.S. 374, 114 S.Ct. 2309 (1994); Nollan v. California Coastal Comm'n, 483 U.S. 825, 107 S.Ct. 3141 (1987).
It is obvious that the condition that plaintiff restore the landmark damaged by previous construction work before any other work may be conducted on the premises is rationally related to the government's policy of landmark preservation. Moreover, the burden of restoring the landmark lobby that occupies only two percent of the premises is not roughly disproportionate to the benefit of preserving the landmark. Thus, plaintiff cannot bring a successful unconstitutional condition claim.
(2) Substantive Due Process Claim
Defendants contend that plaintiff's substantive due process claim based on arbitrary and capricious government conduct is also not ripe. The first prong of the Williamson ripeness test is applicable not only to takings claims but also to substantive due process claims premised on arbitrary and capricious government conduct. See Southview Assocs., Ltd., 980 F.2d at 96-97. A substantive due process claim premised on arbitrary and capricious government conduct is not immune from ripeness inquiry because, unless an agency made a final decision, a court cannot determine whether the government's conduct was arbitrary or capricious.See id.
However, since the requirement that a plaintiff seek compensation in state courts is derived from the Takings Clause, the second prong of the Williamson test is inapplicable to a substantive due process claim premised on arbitrary and capricious government conduct. See Southview Assocs. Ltd., 980 F.2d at 97.
As previously discussed, RKO Delaware failed to satisfy the final decision requirement of the Williamson ripeness test. To satisfy that requirement plaintiff would have to allege that Landmarks Commission arbitrarily or capriciously decided to prevent it from developing or renovating the property. The Landmarks Commission has not made any such decision yet. Therefore, plaintiff's substantive due process claim is also not ripe for review.
Conclusion
Because plaintiff has not alleged sufficient facts to allow the court to conclude that it satisfies the final decision requirement of theWilliamson ripeness test and has not sought compensation from the state, both of its claims are not ripe for review. For this reason, defendants' motion to dismiss is granted with leave to replead for plaintiff to allege sufficient facts that would satisfy the final decision requirement. Plaintiff's cross-motion for an injunction is denied.