To be argued by:
ROBERT K. WEILER
Time Requested: 20 minutes
STATE OF NEW UORK
COURT OF APPEALS
IN THE MATTER OF T I E APPLICATION OF
WL, LLC,
Respondent-Appellant,
v.
THE DEPARTMENT OF ECONOMIC DEVELOPMENT
(aMa "Empire State Development"),
THE DEPARTMENT OF TAXATION AND FINANCE,
THE EMPIRE ZONE DESIGNATION BOARD,
DENNIS M. MULLIN, as the Commissioner of the Department of
Economic Development, JAMIE WOODWARD, as the Acting
Commissioner of the Department of Taxation and Finance, and
O MUSOLINO, as the Chair or Chair-delegate of the
Empire Zone Designation Board,
Appellant-Respondent.
PLY BRIEF FOR
lRIESPONDENT-APPELLANT,
WL, LLC
BOUSQUET HOLSTEIN PLLC
Formerly known as Green & Seifter, Attorneys, PLLC
Robert K. Weiler, Esq.
Philip S. Bousquet, Esq.
Cecelia R.S. Cannon, Esq.
110 W. Fayette Street, Suite 900
Syracuse, New York 13202-1387
Dated: April 8,2013
TABLE OF CONTENTS
INTRODUCTION ........................................................................................................................... 1
POINT I - THE COURT SHOULD REVIEW THE REGULATION IN ISSUE
WITHOUT DEFERENCE TO THE DED AND GRANT WL THE
REQUESTED RELIEF ................................................................................................ 1
POINT I1 - THE STATE'S ARGUMENTS MISINTERPRET GENERAL MUNICIPAL
LAW, SECTION 959 AND THE 2000 AMENDMENTS AND SHOULD BE
REJECTED .................................................................................................................... 3
..................................... A. The Attorney General misconstrues GML Section 959(w) 4
B. The 2000 Amendments Did Not Create a New Program ....................................... 7
POINT I11 - EVEN UNDER RATIONALITY REVIEW, THE REGULATION MUST
BE REJECTED .......................................................................................................... 10
CONCLUSION .............................................................................................................................. 12
TABLE OF AUTHORITIES
Gases
............................................................................................ . Alweis v . Evans. 69 N T2d 199 (1987) 9
Blalock v . Olney. 17 A.D.3d 842 (3rd Dep't 2005) .......................................................... 1. 2. 3. 6. 7
Brown v . New York State Racing and Wagering Bd . 60 A.D.3d 107 (2d Dep't 2009) .................. 2
Carney v . Philippone. 1 I Y 3 d 333 (2004) ..................................................................................... 6
Degnan v . Constantine. 189 A.D.2d 423 (3rd Dep't 1993) ............................................................. 6
In re Matthew L., 65 A.D.3d 315 (2d Dep't 2009) ......................................................................... 10
................................................................... Matter of Salvati v . Eimicke. 72 N.Y.2d 784 (1988) 2. 3
Pajakv . Pajak. 56N.Y.2d394 (1982) .......................................................................................... 10
.............................................................................. Peckham v . Calogero. 12 N.Y.3d 424 (2009) 3
People v . Mobil Oil Corp.. 48 N.Y.2d 192 (1979) .......................................................................... 6
SIN Inc . v . Dep'tofFin . ofCityofNew York. 71 N.Y.2d616(1988) ........................................ 3
Trager v . Kampe. 287 A.D.2d 643 (2d Dep't 2001) ........................................................................ 6
Weingarten et al . v . Bd . of Tr . of the New York City Teachers' Ret . Sys . et al.,
98 N.Y.2d 575 (2002) ..................................................................................................... 1, 2, 3. 7
WL. LLC v . Dep't ofEcon . Dev.. 97 A.D.3d 24 (3rd Dep't 2012) ............................................... 2 7
Statutes and Legislative Materials
N.Y. C.P.L.R. Article 78 ................................................................................................................. 2
N.Y. Gen . Mun . Law 5959 ............................................................................................ 1 2, 3, 4, 11
N.Y. Gen . Mun . Law §959(a)(v)(5) .............................................................................................. 10
N.Y. Gen . Mun . Law §959(a)(v)(6) ...................................................................... 1 2, 3, 4, 5, 6, 10
N.Y. Gen . Mun . Law §959(w) ............................................................................................. 3,4,5, 6
5 NYCRR 5 1 1.9(c) ...................................................................................................................... 1, 5
Laws of 2000 (Ch 57, Part GG) ................................................................................... 4, 7, 9, 10, 11
Laws of 2009 (Ch 57, Part S-1, 51 etseq.) .................................................................................... 10
INTRODUCTION
WL, LLC. ("WL") submits this Brief in reply to the Brief For Respondents-Defendants-
Appellants In Response to Petitioner's Cross-Appeal dated March 25, 2013 (the "AG Reply
Br.")' This brief will address only the questions raised by WL's appeal and not the question of
retroactivity raised on the Attorney General's appeal.
POINT I
THE COURT SHOULD REVIEW THE
REGULATION IN ISSUE WTHOUT
DEFERENCE TO THE DED AND GRANT
WL THE REQUESTED RELIEF
As set forth in the WL Initial Brief, the Third Department applied the wrong legal
standard in reviewing the challenged Regulation (5. N.Y.C.R.R. Section 11.9(c)), because the
Third Department never analyzed whether the Regulation was inconsistent with GML Section
959 before applying a rationality review. WL Initial Brief at 11-14. The Regulation should have
been reviewed without deference to the interpretation of the Department of Economic
Development (the "DED") as to terms of common usage such as the word "total" in GML
Section 959(a)(v)(6). Id., citing Weingarten et al. v. Bd. of TK of the New York City Teachers'
Ret. Sys. et al., 98 N.Y.2d 575,579-580 (2002); Blalock v. Olney, 17 A.D.3d 842, 844 (3rd Dep't
2005).
Unless otherwise indicated, all capitalized terms shall have the meaning set forth in the Brief
for Respondent-Appellant, WL, LLC dated January 28, 2013 (the "WL Initial Brief').
References to counsel for the Respondents-Defendants-Appellants (the "State") shall be to the
"Attorney General." References to the Brief for Respondents-Defendants-Appellants, dated
September 25, 2012, shall be to the "AG Initial Br."
The Attorney General does not contest that the Third Department was obligated to
determine whether the Regulation was inconsistent with GML Section 959(a)(v)(6) (the "1:l
benefit-cost test"). Rather, the Attorney General states, "it is apparent from the Third
Department's Decision that it considered this issue but correctly found the regulation did not
conflict with or go beyond the statute." AG Reply Br. at 12.
In fact, the Third Department never made a consistency determination. Instead, the Third
Department assumed that the DED was entitled to deference and only applied a rationality test,
stating, "since this is a CPLR Article 78 mandamus proceeding, this Court is limited to
determining whether DED's decision restricting its review to the 2001-2007 time period is
arbitrary and capricious and without a rational basis." R.440; WL, LLC, 97 A.D.3d 24, 29-30
(3rd Dep't 2012). Thus, the Third Department failed to conduct a de novo review (without
deference to the DED) and reviewed only whether the Regulation and related determination were
not arbitrary and capricious and without rational basis. R.440; WL, LLC, 97 A.D. 3d at 29.
It is telling that the Attorney General never argues that the Court was not obligated to
conduct a consistency review as a threshold matter. AG Reply Br. at 12. It is also telling that
the Attorney General does not contest that the DED is not entitled to deference with respect to
the meaning of the common terms such as "total." AG Reply Br. at 11-12; see Weingarten, 98
N.Y.2d at 579-580; S m , Inc. v. Dep't ofFin. of City of New York, 71 N.Y.2d 616, 620 (1988);
Brown v. New York State Racing and Wagering Bd., 60 A.D.3d 107 (2d Dep't 2009); Blalock v.
Olney, 17 A.D.3d 842, 844 (3Td Dep't 2005). The cases cited by the Attorney General to support
his claim that the DED is entitled to deference are distinguishable because they involved
interpretation of terms that were not in common usage or where the litigant only raised an
"arbitrary and capricious" challenge. AG Reply Brief at 13, citing Matter of Salvati v. Eimicke,
72 N.Y.2d 784, 791 (1988) (involved interpretation of the phrase "Class A multiple dwelling,"
which was a statutory term of art); Peckham v. Calogero, 12 N.Y.3d 424,43 1 (2009) (the litigant
only challenged agency action under arbitrary and capricious standard).
As stated by this Court, "[Wlhere the language used in a taxing statute is neither special
nor technical, but consists of common words of clear import, there is little reason to defer to a
contrary interpretation given by the administrative agency. In such cases, the clear meaning of a
statutory provision cannot be altered by invocation of special administrative competence or
expertise[.]" SIN, Inc., 71 N.Y.2d at 620. No deference should be granted to the DED on the
questions involved in this appeal because they are matters of pure statutory interpretation and
involve terns of common usage such as the word "total." Id.; Weingarten, 98 N.Y.2d at 579-
580; Blalockv. Olney, 17 A.D.3d at 844.
For the reasons set forth in the WL Initial Brief and the reasons set forth herein, WL
respectfully requests the Court to apply the plain language of GML Section 959, reverse the
Opinion and Order of the Third Department, and grant WL the relief as requested in the WL
Initial Brief.
POINT I1
THE STATE'S ARGUMENTS MSINTERPRET
GENERAL MUNICIPAL LAW, SECTION 959 AND
THE 2000 AMENDNlENTS AND SHOULD BE
REJECTED
The Attorney General relies on two arguments to support the assertion that the
Regulation omitting the year 2000 from consideration in the calculation of the 1:l benefit-cost
test was consistent with the enabling statute, GML Section 959: fust, that GML Section 959 did
not require the DED to review all business annual reports ("BARs") but instead permitted review
of any three or more BARs; and second, that the Empire Zones Program was a "new program"
3
allegedly created by the 2000 Amendments (Chapter 57, Part GG of the 2000 Session Laws), and
it was rational to review only full taxable years 2001 and after.
The Attorney General's arguments fail for several reasons. First, the Attorney General
has advanced an interpretation of GML Section 959(w) that ignores the plain language of GML
Section 959(a)(v)(6) and unnecessarily places the two sections in conflict. Second, the Attorney
General's interpretation of the 2000 Amendments as creating an entirely new program is utterly
unsupported by the 2000 Amendments. These erroneous justifications for omitting WL's year
2000 investments from consideration should be rejected.
A. The Attorney General misconstrues GML Section 959(w).
The Attorney General incorrectly contends that the "at least three" language of GML
Section 959(w) authorized the omission of WL's year 2000 investments from the calculation of
the 1:l benefit-cost test, alleging that GML Section 959 (w) "specifically authorized the
determination to be based on fewer than all available BARS." AG Reply Br. at 1 1. In fact,
however, the "at least three" language merely carved out an exemption from decertification for
businesses which had been certified for fewer than three years. This language was not intended
to allow the Attorney General to consider less than the "total" remuneration, investment and
credits, as the Attorney General contends. AG Reply Br. at 11; WL Initial Brief at 16-18.
The Attorney General's argument is contrary to the face of GML Section 959(a)(v)(6),
which states that a business enterprise may be decertified if:
"the business enterprise has failed to provide economic returns to the
state in the form of total remuneration to its employees (i.e. wages and
benefits and investments in its facility greater in value to the tax benefits
the business enterprise used and had refunded to it[.]"
N.Y. Gen. Mun. Law §959(a)(v)(6).
The obvious requirement of GML Section 959(a)(v)(6) was for the DED to compare the
total investment and remuneration to the total tax benefits. If the total tax benefits exceeded the
total remuneration and investments, then the DED was directed to decertify the entity. If not, a
retention certificate should have been issued. N. Y. Gen. Mun. Law §959(a)(v)(6), (w); see WL
Initial Brief at 15.
Despite the obvious legislative instruction that total remuneration and investment be
compared to total tax benefits, the Attorney General latches on to "at least three" language of
GML Section 959(w) to contend that this language authorizes the DED to review less than
"total" remuneration, investment and benefits. The Attorney General's interpretation of GML
Section 959(w) fails for several reasons. See, e.g. WL Initial Brief. at 16-18.
First, the Attorney General's argument ignores the fact the DED's own regulation states
that the "at least three" language of GML Section 959(w) was intended to prevent decertification
of businesses that have been certified less than three years.2 AG Reply Br. at 11-12. This
regulation, 5 N.Y.C.R.R §11.9(~)(2), provides: "The DED shall revoke the certification of a
business enterprise upon a fmdmg that . . .a business enterprise that has submitted at least three
years of business annual reports has failed to provide economic returns to the State. . .greater
[in] value than the tax benefits[.]" 5 N.Y.C.R.R. §11.9(~)(2) (emphasis added). Because the
DED clearly acknowledged in 5 N.Y.C.R.R Section 11.9(~)(2) that the purpose of the "at least
three language" was to protect entities that had less than three years of BARs, the Attorney
The State mischaracterizes WL's arguments by saying that WL believes GML Section 959(w)
requires review of all of the B A h . State Reply Br. at 11. In fact, however, it is GML Section
959(a)(v)(6) which requires review of all BARs. GML Section 959(w) expressly references
GML Section 959(a)(v)(6) and therefore expressly requires the DED to follow the mandate of
GML Section 959(a)(v)(6) to review "total" remuneration, investment and tax benefits.
General is bound by this interpretation. Trager v Kampe, 287 A.D.2d 643, 643-644 (2d Dep't
2001); Degnan v. Constantine, 189 A.D.2d 423 (3rd Dep't 1993).
Second, the Attorney General's interpretation of GML Section 959(w), if accepted, would
lead to an express inconsistency between GML Section 959(a)(v)(6) and GML Section 959(w).
Under the Attorney General's construction of GML Section 959(w), the DED could have
reviewed any three BARS selected by the DED, even though GML Section 959(a)(v)(6) required
evaluation of "total" investment, remuneration and benefits.
As this Court has stated, "It is a well-settled principle of statutory construction that a
statute or ordimance must be construed as a whole and that its various sections must be
considered together and with reference to each other". People v. Mobil Oil Corp., 48 N.Y.2d
192, 199 (1979). When it is recognized that GML Section 959(w) was intended to protect
entities with less than three years of history (as the DED's own regulation does), GML Section
959(w) is easily reconcilable with the instruction in GML Section 959 (a)(v)(6) requiring review
all of remuneration, investments and credits from all years. In contrast, the Attorney General's
interpretation creates an absurd inconsistency in which the legislature would be requiring a
comparison of "total" investment, remuneration and tax benefits by allowing the DED to review
less than all of the data.
The Attorney General's interpretation must be rejected in favor of WL's interpretation,
because WL's interpretation is reasonable, consistent with the overall statutory scheme, and
gives effect to all parts of the statute without creating such a conflict. Carney v. Philippone, 1
N.Y.3d 333, 339 (2004) (the courts should reconcile and give effect to all provisions of the
statute being construed); Blalock v. Olney, 17 A.D.3d 842, 844 (3rd Dep't 2005) ("If apparently
conflicting provisions of a statute can be reconciled, they ought to be").
B. The 2000 Amendments Did Not Create a New Program
The Attorney General also attempts to justify the exclusion of WL's year 2000
investments by incorrectly asserting that the Empire Zone Program was first created in the year
2000 by the 2000 Amendments and was therefore a "new program". AG Reply Br. at 11, 15.
The Attorney General's "new program" argument is a blatant attempt to rewrite history and
advance an interpretation of the 2000 Amendments that is completely unsupported by the terms
of the legislation. The question of whether the 2000 Amendments created a new program is one
of pure statutory interpretation, and therefore the Attorney General is not entitled to deference on
this question. Weingarten 98 N.Y.2d at 579-580; Blalockv Olney, 17 A.D.3d at 844.
The Attorney General's "new program" argument fails for several reasons. First, the
argument depends on a holding of the Third Department which is patently incorrect on the face
of the law. The Third Department erroneously accepted as "rational" the Attorney General's
interpretation of 2000 Amendments as creating a "new program" in part because, according to
the Third Department, "the EZP [Empire Zones Program] has criteria as embodied in these
amendments that must be satisfied for certzjication to be granted that were not required of
entities when participating in the EZDP [Economic Development Zones Program] ... " (emphasis
added) R.441, WL, LLC 97 A.D. 3d at 29-30; see WL Initial Brief at 22.
In fact the 2000 Amendments do not make any substantive changes to Article 18-B of the
General Municipal Law, which sets forth the standards for certification and decertification, and
the structure and administration of the Program. The Attorney General on this appeal does not
refute this analysis. Compare WL Initial Brief at 18-22 with AG Reply Br. at 14-16.
Moreover, the Attorney General admitted that m ' s "Economic Development Zones
Program" certificate of eligibility remained in full force atid effect after the 2000 Amendments.
R.72, R.240, AG Initial Br. at 17; AG Reply Br. at 15.
The bulk of the Attorney General's "new program" argument rests on the mere fact that
the 2000 Amendments created new benefits, stating "The statute creating the Economic
Development Zones Program set forth distinctly different benefits and attendant eligibility
criteria." AG Reply Br. at 15. The Attorney General seems to be suggesting that credits
available under the Economic Development Zones Program were no longer available after the
2000 Amendments and were instead replaced with new credits. That is not the case. The 2000
Amendments did not repeal any of the old credits but simply added new ones in addition to those
that previously existed. See 2000 Session Laws, Chapter 57, Part GG. The addition of new
credits alone has little probative value on the question of whether the 2000 Amendments created
a new program, since new tax credits could be - and here, were - made as additions to an
existing program rather than as part of the enactment of a "new" program.
More significant is the fact that the 2000 Amendments made no differentiation between
certifications issued before and after the enactment of the 2000 Amendments with respect to
what businesses could apply for the tax credits. The 2000 Amendments explicitly incorporated
and referenced the pre-2000 Amendments certification requirements of the Economic
Development Zones Program by saying that the businesses which would be eligible for the new
tax credits were those "certified under article eighteen-B of the general municipal law prior to
July 1, two thousand five[.]" 2000 Amendments, 52.
Finally, the Attorney General has not even attempted to explain how a mere ministerial
directive in ihe 2000 Amendments that the words "economic development zone" be replaced
with "empire zone" throughout New York law could accomplish such a momentous undertaking
as to repeal an expansive and complicated administrative program involving thousands of
businesses and vested benefits and implement a whole new program. There simply is nothing in
the 2000 Amendments that refers to repeal of one program and the creation of another. The
Attomey General's theory of repeal by implication therefore must be rejected. Alweis v. Evans,
69 N.Y.2d 199,205 (1987) (repeal by implication is distinctly disfavored and a court "should not
lightly infer that the Legislature has repealed one of its own enactments when it has failed to do
so expressly").
To the contrary, the 2000 Amendments left untouched the administration of the Program,
the duties and responsibilities of Attorney General agencies (including the DED), the standards
for qualification for certification or decertification, or to any other standard or requirement for
certification as an empire zone enterprise. See WL Initial Brief at 18-22. The 2000 Amendments
added nothing to Article 18-B that could conceivably be deemed to alter eligibility or
requirements for certification or create a "new" program. Id. As set forth supra, even the
Attorney General has conceded that WL was not required to obtain a new certification to obtain
benefits.
Accordingly, the "new program" argument of the Attorney General should be rejected.
POINT III
EVEN UNDER RATIONALITY REVIEW,
TEE mGULATION MUST BE REJECTED
Alternatively, for the reasons set forth in Point I1 of this Brief and in the WL Initial Brief,
even under a rationality standard, the Regulation must be declared null and void. Applying
GML Section 959(a)(v)(6) to the undisputed facts, WL should be granted its retention certificate.
GML Section 959(a)(v)(6) used the absolute term "total" in mandating application of the
1: 1 benefit-cost test. The statute does not grant any discretion to the DED to impose a temporal
limitation on the investment and remuneration to be included in the 1 :1 benefit-cost test. The
statute simply said "total." N.Y. Gen. Mun. Law §959(a)(v)(6). This is contrasted to the GML
Section 959(a)(v)(5), the so-called "shirt-changer test", also enacted as part of the 2009
lnendments (2009 Session Laws Chapter 57, Part S-1) which expressly provides that the "shirt-
changer" test applies only to those business which were 'Ifirst certzfied pursuant to this article
prior to thefirst day ofAugust, two thousand two." GML §959(a)(v)(5) (emphasis added); 2009
Session Laws Chapter 57, Part S-1, 33; see also WL Initial Brief at 22-24..
The inclusion of specific years in GML Section 959(a)(v)(5), juxtaposed against the
omission of such a temporal restriction in GML Section 959(a)(v)(6), requires that GML Section
959(a)(v)(6) be construed as not containing any temporal restriction. WL Initial Brief at 22-23,
citing Pajrrkv. Pajak, 56 N.Y.2d 394,396-397 (1982) andIn re Matthew L., 65 A.D.3d 315,321
(2d Dep't 2009). By imposing a restriction to the years 2001-2007, the challenged Regulation
went beyond the authority granted in the statute and was invalid by whatever standard the Court
chooses to apply.
In addition, as indicated in Point ILB supra, the Third Department misunderstood the
2000 Amendments because the 2000 Amendments made no change whatsoever in certification
under the statute. Point I1.B supra The fact that additional tax provisions were added to the
statute did not create a new program but merely allowed parties who are eligible for certification
to seek additional benefits if they so qualified. Nothing in the 2000 Amendments affected the
then existing certifications or in any way modified or altered the right to remain certified or
imposed any new obligations for parties who were certified. See 2000 Amendments. The DED's
attempt to rewrite both history and GML Section 959 to impose restrictions which were clearly
excluded by the legislature and Governor should not be treated as "rational", but should be
deemed arbitrary and capricious.
Finally, the Attorney General asserts, without any support, that even assuming the
statute required consideration of "total" investments and remuneration, it was rational for the
DED to consider only 2001 forward because 2001 was "the first year a BAR reflecting a
company's performance in the new Program would have been available." State Reply Br. at 15.
The Attorney General's assertion is flatly contradicted by the record. The record reveals that
investment data for the year 2000 was reported in Section B of the 2000 BAR and employment
data in Section C of that BAR. ~ . 1 0 1 , ~ R.356-R.359. The 2000 BAR bears the legend "Empire
Zones Program" in the top left comer and in Section E. R.lO1. WL's performance data for 2000
was unquestionably available to the DED, and therefore this argument is also without merit.
For these and all of the reasons set forth in this Brief and in the WL Initial Brief, there is
no rational basis to sustain the Regulation and the Regulation should be declared null and void.
The original 2000 BAR did not contain the approximately $1,667,759 investment in the facility
made in the year 2000. (R.lO1). That BAR was later amended to include the $1,667,759
investment. (R. 120).
11
WL respectfully requests the Court to declare that WL is entitled to retain its certification and to
due issuance of its retention ~ertificate.~
CONCLUSION
WL requests the Court to grant WL the relief requested in the WL Initial Brief. See WL
Initial Brief at 37.
Dated: April 8,2013 BOUWUET HOLSTEIN PLLC
1 *~
. .
Phil+ S. Bousquet, Esq.
Cecelia R. S. Cannon, Esq.
Attorneys for WL, LLC
Office and P.O. Address
1 10 West Fayette Street
One Lincoln Center, Suite 900
Syracuse, New York 13202
Tel:(315) 422-1391
Fax:(3 15) 422-3549
The Attorney General asserts that WL has abandoned its due process arguments. That is not
the case. Rather, upon review of the Third Department decision, WL acknowledges that under
the Third Department's decision, the due process arguments were rendered moot. The Third
Department made a fmding of fact that, if the year 2000 is included in the calculation of the 1 : 1
benefit-cost test, WL is entitled to retain its certification. The Attorney General has not disputed
this finding. WL acknowledges that on the present record, if the year 2000 investment is not
included, WL would not have passed the 1: 1 benefit-cost test. Accordingly, due process is no
longer a concern. However, WL reserves the right to raise additional due process objections if
circumstances warrant.