Opposition Brief — Rosenthal & Rosenthal Inc. v. New York State Urban Development Corp.

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IN THE ns a wee

Supreme Court of the United Sf F. SPANIOL, die

CLERK

OCTOBER TERM, 1985

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ROSENTHAL & ROSENTHAL INC. and

BROADWAY 41ST STREET REALTY CORPORATION,

Petitioners,

—_—_VvV.—

THE NEW YORK STATE URBAN DEVELOPMENT CORPORA-

TION; THE TIMES SQUARE REDEVELOPMENT CORPORA-

TION; WILLIAM J. STERN, as Chairman and President of

both the Urban Development Corporation and the Times

Square Redeveiopment Corporation; THE CITY OF NEW

YORK; EDWARD I. KOCH, as Mayor of the City of New

York; PARK TOWER REALTY CORPORATION; and GEORGE

E. KLEIN,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE SECOND CIRCUIT

NORMAN DORSEN

Counsel of Record for Petitioners

Rosenthal & Rosenthal Inc.

and Broadway 41st Street

Realty Corporation

40 Washington Square South

New York, New York 10012

(212) 598-2555

Of Counsel:

JACOB FRIEDLANDER

JOHN S. KINZEY

LEBOEUF, LAMB, LEIBY & MACRAE

520 Madison Avenue

New York, New York 10022

(212) 715-8000

QUESTIONS PRESENTED

In the wake of this Court’s decision in Hawaii Housing

Authority v. Midkiff, U.S. ____, 104 S.Ct. 2321 (1984),

commentators have concluded that the Court has effectively

precluded judicial review of whether a iocal government’s

decision to condemn private property is constitutional. Consis-

tent with this analysis, the lower courts in this case dismissed,

for failure to state a claim, a complaint that alleged that

petitioners’ building was being condemned not for a public

purpose, but arbitrarily and capriciously for the private benefit

of a politically influential real estate developer. The issues

raised by this dismissal are the following:

1. Are the lower courts and commentators correct that

Midkiff precludes effective judicial review of condemnation

decisions, or is their analysis inconsistent with Midkiff itself,

which expressiy states that there is a role, albeit limited and

deferential, for the courts to play in determining whether

takings are constitutional?

2. Assuming the Court decides that there remains a roie for

judicial review in condemnation cases, what standards should

the courts apply in distinguishing condemnations that are

lawful from those that are not?

PARTIES TO THE PROCEEDING

In addition to the parities named in the caption, Mario

Cuomo, as Governor of the State of New York, was a party to

the action in the district court. Petitioners agreed to dismiss

Governor Cuomo from the appeal.

STATEMENT PURSUANT TO RULE 28.1

The parent company of petitioner Rosenthal & Rosenthal

Inc. is Rosenthal, Inc., which is privately held. Petitioner

Broadway 4lst Street Realty Corperation has no parent corpo-

ration but is held by a non-public trust for the benefit of the

Rosenthal family.

ill

TABLE OF CONTENTS

a eg) 9 9 2

PARTIES TO THE PROCEEDING .................

eg OE ot a

ee Pr ar

ae

REASON FOR GRANTING THE PETITION........

THE COURT SHOULD GRANT CERTIORARI

BECAUSE THE TOWER COURT'S DECISION,

WHICH EFFECTIVELY PRECLUDES ANY

JUDICIAL REVIEW OF THE CONSTITU-

TIONALITY OF TAKINGS, IS INCONSISTENT

WITH THIS COURT’S HOLDING IN MIDKIFF

THAT THE COURTS HAVE A ROLE TO PLAY

IN DETERMINING WHETHER A TAKING IS

og gee

PAGE

iv

PAGE

A. The Lower Courts’ Dismissal! Of Petitioners’

Allegations That Their Building Is Being

Taken For Private Purposes Is Inconsistent

With Midkiff’s Reaffirmation Of The “Public

Use” Requirement .........ncccecccscceess 10

B. The Lower Courts’ Dismissal Of Petitioners’

Complaint Is Inconsistent With Federal Cases

Holding That Property Cannot Be Taken Ar

bitrarily And Capriciously ..............--- 1]

C. The Lower Courts Erroneously Decided The

Important Federal Issue Of Whether The

Power Of Eminent Domain May Be Used As

A Substitute For Taxation ................. 14

ee oft). + | Peers Tey rere yee eee 15

Pl: a Se rE ere ry er a er Te la

PDP, Ok vn co ck odncertauctadsnauarcaseenns 6a

APPENDIX C...... p etalaa ee kk AM ak che we be eee 8a

EE, OD oc vic coc auc avatecstancdsetdackaeaas 10a

RE, OE gc cc ksnkasncbiaadenecheboudeaasees 24a

cy. | | a PrrrerreTTerrr Tr Ter rer he ter sc 25a

TABLE OF AUTHORITIES

Cases PAGE

Baycol, Inc. v. Downtown Development Authority, 315

— £ 8 | Ree etre Terr rrr aren 10

Berman v. Parker, 348 U.S. 26 (1954). ...............5n, 9n

Ceurtesy Sandwich Shop v. Port of New York Author-

ity, 12 N.Y.2d 379, 190 N.E.2d 402, 240 N.Y.S.2d 1,

app. dis’d, 375 U.S. 78 reh’g denied, 375 U.S. 960

i Se rey eye e ere ee eri 14, 15, 15n

Denihan Enterprises, Inc. v. O’Dwyer, 302 N.Y. 451, 99

EE Gk whe K GR RKRAKE ORD SERS SS RENE 10

Hawaii Housing Authority v. Midkiff, U.S :

See as Se CE 4s wens Raden bawadaddaeees passim

Hilliard v. Commonwealth of Pennsylvania, 308 F.

Supp. 756 (W.D. Pa. 1970), aff’d, 438 F.2d 92 (3d Cir.

FORTS ei CRS kids bbb Cae ek b45Ae SCE ee 12

Madisonville Traction Co. vy. St. Bernard Mining Co..,

Se Ca ee ane bk kia eder bau tabaenneelasee 10n

Missouri Pacific Railroad Co. v. Nebraska, 164 U.S. 403

COME dA bRabhen ess vax eews Pel vekes bee 10n

Old Dominion Land Co. v. United States, 269 U.S. 55

GRWEEE avndsknecke4vduciksk caer Sn

Petition of Seattle, 96 Wash.2d 616, 638 P.2d 549 (1981) 10

Thompson v. Consolidated Gas Utilities Corp., 300 U.S.

Se GUT I ace vk sand ceaunckacseiseeeer ee 10n

United States v. Carmack, 329 U.S. 230 (1946), reh’eg

aubled, 529 U.S. TOO CIE i vc c vnc diectsasw 11, 12n

vi

PAGE

United States v. Certain Land in the Borough of

Manhattan, 233 F. Supp. 899 (S.D.N.Y.), aff'd, 336

ow eg te Ce eer er reee ee ee 12

United States v. State of New York, 160 F.2d 479 (2d

Cir.), cert. denied, 331 U.S. 832, reh’g denied, 331

tk ® 1), PPNOPVETeTTT ToL ytr ets vier er 12n

United States v. 0.08 Acres of Land, 246 F. Supp. 408

ce SU BUNES x 5.au vkx canbe 0600eebeeesueekeut 12

United States v. 2.9 Acres of Land, 554 F. Supp. 529 (D.

Ey, SUA Gu ab RR KN AA LS O4G60 hb RR EN AR EAE RO BRAS 12

United States v. 58.16 Acres of Land, 478 F.2d 1055 (7th

8 PVETET TEST Te eT eee er 1]

United States v. 101.88 Acres of Land, Etc., 616 F.2d

Fee a Re EE 00-00 6444-200 cd ekhe ee ceeheeks 11

United States v. 1,108 Acres of Land, 25 F.R.D. 205

fF 8 ee ATT Trier er ee ee ee 12

CONSTITUTION

Spee Gees MONE, Wen cca knatanesaskkeakekabenune 2,8

STATUTES

Judicial Code

A A foe | Re rot 2

ee Re ten BP ER Aa 4 iw 50556000 Asean keeeee 6

OTHER AUTHORITIES

2A Nichols on Eminent Domain § 7.08 (3d ed. 1981) .. 10

Note, Hawaii Housing Authority v. Midkiff: A Final

Requiem for the Public Use Limitation on Eminent

Domain?, 60 Notre Dame L. Rev. 388 (1985) ....... 8

Vil

PAGE

Note, Eminent Domain—The Pubiic Use Clause and

Judicial Review, 1985 Ariz. St. L.J. 237. ........... 7

Note, Public Use, Private Use, and Judicial Review In

Eminent Domain, 58 N.Y.U.L. Rev. 409 (1983). ....... 12n

Note, The Public Use Limitation on Eminent Domain

After Hawaii Housing Authority v. Midkiff: Does /t

Still Exist?, 12 N.Ky.L. Rev. 65 (1985) ............. S

The Federalist No. 78 (A. Hamilton) (The New Ameri-

can Library ed. 1961)

IN THE

Supreme Court of the United States

OCTOBER TERM, 1985

No.

~~

ROSENTHAL & ROSENTHAL INC. and

BROADWAY 41ST STREET REALTY CORPORATION,

Petitioners,

—_Vo—

THE NEW YORK STATE URBAN DEVELOPMENT CORPORA

TION; THE TIMES SQUARE REDEVELOPMENT CORPORA.

TION; WILLIAM J. STERN, as Chairman and President of

both the Urban Development Corporation and the Times

Square Redevelopment Corporation; THE CITY OF NEW

YORK; EDWARD I. KOCH, as Mayor of the City of New

York; PARK TOWER REALTY CORPORATION; and GEORGE

E. KLEIN,

Respondents.

>

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SECOND CIRCUIT

Rosenthal & Rosenthal Inc. (“Rosenthal”) and Broadway

4ist Street Realty Corporation petition fur a writ of certiorari

to review the judgment of the United States Court of Appeals

for the Second Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (Appendix A, infra,

la-Sa) is reported at 771 F.2d 44. The opinion of the district

court (Appendix D, infra, 10a-23a) is reported at 605 F. Supp.

612.

JURISDICTION

The judgment of the court of appeals (Appendix B, infra,

6a-7a) was entered on August 26, 1985. A timely petition for

rehearing and suggestion of rehearing en banc was denied

October 8, 1985. (Appendix C, infra, 8a-9a). The jurisdiction

of this Court is invoked pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISION INVOLVED

U.S. CONST. AMEND. V

“. . nor shall private property be taken for public use,

without just compensation.”

STATEMENT OF THE CASE

A. The Underlying Facts’

The constitutional issues in this case arise in the context of a

proposed multibillion dollar urban redevelopment project,

l The following recitation of facts is drawn both from the Complaint

and, because petitioners were denied discovery prior to the hearing on

respondents’ motions to dismiss, from documents submitted to the

district court as exhibits to petitioners’ memorandum of law in opposi-

tion to the motions to dismiss. At oral argument, petitioners offered to

amend their Complaint to incorporate the supplementary information

set forth in their memorandum as facts they would hope to prove after

discovery and trial. The district court’s opinion treated these supple-

mentary allegations as part of petitioners’ Complaint.

3

known as the 42nd Street Development Project (“the Project”)

that has been jointly planned by respondents New York State

Urban Development Corporation (“UDC”) and the City of

New York (“City”). If consummated, the Project would level

existing buildings in the historic Times Square area and replace

them with a new merchandise mart, a high-rise hotel, and four

new office towers ranging in height from 29 to 56 stories.

Respondent Park Tower Realty Corporation (“Park Tower”),

of which respondent Geo:g« E. Klein is the president and

principal stockholder, has beca chosen by the UDC and City to

build the new office towers. To make way for one of these new

buildings, petitioners’ building (hereinafter the “Rosenthal

Building”) will be condemned and demolished, notwithstand-

ing the fact that the Rosenthal Building, which is not located

on the single block of West 42nd Street that the respondents

claim is “blighted,” is structurally sound, fully occupied, at-

tractively furnished, and not substandard in any respect.

The ostensible goals of the respondents’ Project are “to

eliminate blight on 42nd Street between Broadway and Eighth

Avenue, to revitalize this vital cross-road and integrate it into

the theatrical, cultural and commercial life of the City.” Com-

plaint, ¢ 16 (28a). Petitioners have alleged a radically different

view of the Project’s intended purpose and effect.

Petitioners’ Complaint alleges that “[t]he planned taking of

the Rosenthal Building is neither for a public purpose, nor

rationally related to a public purpose, as required by the Fifth

and Fourteenth Amendments to the Constitution of the United

States.” Complaint, § 20 (29a). Specifically, the Complaint

alleges that if the Project is implemented, the present site of

the Rosenthal Building will not be used for a public or

governmental purpose, but will instead continue to be used as

the site of a private office building that will be financed,

constructed, managed and operated by Park Tower. This office

building will be nothing more than a typical commercial

enterprise, with Park Tower selecting the tenants, collecting the

4

rents, and paying operating expenses. Complaint, 44 21, 22

(29a-30a).

The Complaint further alleges that the proposed taking of

the unblighted and structurally sound Rosenthal Building is

not “rationally related” to the Project’s stated goal of

eliminating blight several blocks away on 42nd Street. Com-

plaint, ¢ 23 (30a). The site occupied by the Rosenthal Building

is not needed to achieve the Project’s goals. The only conceiv-

able connection between the proposed condemnation and the

Project is financial, in that Park Tower has agreed to share a

portion of its income from its new office buildings with the

City and UDC to subsidize theater renovations and subway

entrance improvements in the area of the Project. The Com-

plaint alleges that, as a matter of law, this use of the eminent

domain power as an indirect means of raising revenue for the

government, rather than to obtain real property necessary for a

public purpose, is not a valid Taking. Complaint, § 24 (30a).

The Complaint further alleges that the selection of the site of

the Rosenthal Building, rather than some other site, as the

location of one of the new office towers was not rational, but

was instead “completely arbitrary and capricious.” Complaint,

¢ 25 (30a). While attempting to condemn petitioners’ sound,

economically viable building on an unblighted block at the

edge of the Project, the respondents have excluded from the

Project, and chosen not to condemn, replace, or rehabilitate, a

large, rundown office building, the Candler Building, which is

located within the Project’s boundaries in the middle of the

42nd Street block that the respondents claim is blighted. The

only apparent reason for not condemning the dilapidated,

largely vacant Candler Building in connection with the Project

is political favoritism; at the time the Project was conceived,

the Candler Building was owned by a partnership including

Michael J. Lazar, a former Taxi and Limousine Commissioner

of the City of New York.’

2 Since the district court entered its judgment herein, Mr. Lazar sold

the Candler Building by deed dated January 4, 1985, for $14.75

Further evidence that the Project is structured for the benefit

of politically influential private developers, rather than for a

public purpose, is provided by the extraordinary lengths to

which officials of the State and City went to assure that

respondent George Klein, a substantial contributor to the

political campaigns of defendant Mayor Edward Koch, ob-

tained what they felt was his fair share of the Project’s

bounty.’

This intense political maneuvering is understandable in view

of the profits the Project will generate for those developers

fortunate enough, or politically well-connected enough, to

participate in it. The value of the tax abatements and other

incentives given to Park Tower has been estimated to be at least

$650 million. In return, Park Tower is asked only to make a

comparatively insignificant contribution of approximately $35

million to assist with theater restoration and subway entrance

improvements.

In sum, petitioners alleged that respondents’ talk of

“eliminating blight on 42nd Street” is a smokescreen.* The

million, which is $13.45 million more than he paid for it in 1980. Mr.

Lazar will reap further benefits from this Project because he has also

been designated by the UDC and City to participate in the renovation

of a number of 42nd Street theaters, notwithstanding his lack of

experience in the theater industry.

3 In August, 1983, the City of New York announced that it would

withdraw from the Project and redevelop the Project area itself,

because the UDC had rejected the City’s choice of respondents Park

Tower and Klein to develop a merchandise mart to be included in the

Project. The Project was salvaged only after an extraordinary “sum-

mit” meeting between respondent Koch and Governor Cuomo.

4 The atmosphere of “blight” which respondents claim to have found

on West 42nd Street has little to do with the state of repair of the

buildings found on that block; rather, respondents’ claim that the

block is blighted is based primarily on the nature of the activities

carried on in the street around those buildings, i.e., prostitution,

pornography, drug sales and street crime. However, respondents have

recognized that the Project will not eliminate the unsavory activities

that cecur on 42nd Street, which are the result of inadequate police

enforcement rather than physical conditions. The Project will simply

Project is, in truth, a private real estate development for the

benefit of politically influential individuals.

B. The Proceedings Below

Petitioners filed their Complaint, (Appendix F, infra, 2Sa-

32a), in the United States District Court for the Southern

District of New York on October 9, 1984. The complaint

sought to enjoin respondents from commencing condemnation

proceedings and from otherwise seeking to take petitioners’

property involuntarily in connection with the Project. Jurisdic-

tion was founded on 28 U.S.C. § 1331. All respondents made

motions to dismiss. On January 8, 1985, the district court

(Motley, Ch. J.) issued its Opinion granting these motions, and

dismissed the Complaint for failure to state a claim upon

which relief can be granted. (10a-23a).

Despite the absence of an evidentiary record, the district

court concluded that the Project itself and the taking of

petitioners’ property served a “substantial, legitimate public

purpose.” (19a). In reaching this conclusion, the court

accepted respondents’ assertions of public purpose and failed

to address, deeming them legally irrelevant, petitioners’ allega-

tions that the Project and the taking of the Rosenthal Building

were arbitrary and capricious. Similarly, the court summarily

dismissed petitioners’ allegations that the Rosenthal Building

will be taken only to subsidize certain public improvements

connected with the Project. The court’s failure to subject the

proposed taking to even a modicum of judicial review was

evidenced by its statement that “[e]ven if this court were to

conclude that this Project is a mammoth boondoggle, socially

and architecturally ill-advised, it would still be a question for

the political process, not a federal court.” (18a-19a).

On appeal, the United States Court of Appeals for the

Second Circuit affirmed the judgment of the district court in a

drive those activities into other areas of New York City, including the

streets of adjacent areas in northern Times Square where similar

activities have already taken root.

7

per curiam opinion dated August 26, 1985. (la-Sa). The court

of appeals, like the district court, assumed the validity of the

Project’s public purpose and did not offer reasons for holding

that petitioners’ allegations failed to state a claim that their

property was being taken unconstitutionally.

REASON FOR GRANTING THE PETITION

THE COURT SHOULD GRANT CERTIORARI BE-

CAUSE THE LOWER COURT’S DECISION, WHICH

EFFECTIVELY PRECLUDES ANY JUDICIAL REVIEW

OF THE CONSTITUTIONALITY OF TAKINGS, IS _ IN-

CONSISTENT WITH THIS COURT’S HOLDING IN

MIDKIFF THAT THE COURTS HAVE A ROLE TO

PLAY IN DETERMINING WHETHER A TAKING IS

FOR A PUBLIC USE.

In Hawaii Housing Authority v. Midkiff, —__. U.S. ___,

104 S.Ct. 2321 (1984), this Court reaffirmed both the breadth

of the eminent domain power and the deference that courts

should pay to a legislative determination that the power should

be exercised in a particular case. Of equal importance, the

Court also reaffirmed in Midkiff that “[t]here is, of course, a

role for courts to play in reviewing the legislature’s judgment

of what constitutes a public use, even when the eminent

domain power is equated with the police power.” 104 S.Ct. at

2329.

Despite this Court’s explicit reservation of some role for the

court in reviewing the constitutionality of takings, a number of

commentators have interpreted Midkiff as effectively barring

any judicial review whatsoever of public use determinations.

One author, expressing a view shared by others, has interred

the public use clause with stunning finality, writing that

Midkiff “suggest{s] that the public use requirement is now

constitutional surplusage. After Midkiff, there are no effective

limitations other than the requirement of just compensation.”

Note, Eminent Domain—The Public Use Clause and Judicial

Review, Ariz. St. L.J. 237, 237 (1985). See also Note, The

Public Use Limitation On Eminent Domain After Hawaii

Housing Authority v. Midkiff: Does It Still Exist?, 12 N.Ky.L.

Rev. 65, 85 (1985) (Midkiff “pushed the public use restriction

on eminent domain takings to its furthest point, if not to

complete extinction”); Note, Hawaii Housing Authority v.

Midkiff: A Final Requiem For The Public Use Limitation On

Eminent Domain?, 60 Notre Dame L. Rev. 388, 404 (1985)

(“To imply a power [of eminent domain] in government, to

give that power the broadest possible meaning, and then to

defer to the exercise of that power in the face of a specific

constitutional restriction, effectively nullifies the public use

limitation and disregards those individual rights which the fifth

amendment was designed to protect”)’.

Like these commentators, the district court below adopted

the view that Midkiff relegated all decisions relating to con-

demnation to the political arena. Referring to the “political

give and take in the legislative and executive branches,” (22a),

. The view that a public use determination is now unreviewable flows

in large part from the quotation in Midkiff of some of the more

restrictive dicta from earlier decisions of this Court. Those quotations,

however, must be read in the context of Midkiff’s continuing endorse-

ment of some remaining judicial role. For example, Midkiff drew

heavily on Berman v. Parker, 348 U.S. 26 (1954). In Berman, the

Court declared that “[s]ubject to specific constitutional limitations,

when the legislature has spoken, the public interest has been declared

in terms well-nigh conclusive.” /d. at 32. This formulation is inconsis-

tent with the Court’s major premise that judicial review is available

because one of the constitutional limitations is whether the taking is

for a public use. If the legislature’s declaration on that issue were truly

“conclusive,” the court would be confined to the role of a rubber

stamp, and there would be no constitutional limit at all.

Similarly, Midkiff quotes with apparent approval Berman’s refer-

ence to Old Dominion Land Co. v. United States, 269 U.S. 55, 66

(1925), to the effect that “deference to the legislature’s ‘public use’

determination is required ‘until it is shown to involve an impossibil-

ity.” " Midkiff, 104 S.Ct. at 2329. Surely this is an implausible standard

even in an area where great deference is due. Were this literally the

scope of judicial review, a court could intervene in nothing short of a

declaration that the Rosenthal Building was being taken for a “public

purpose” that was a physical impossibility.

9

the court effectively held that the judiciary has no role in

monitoring abuses in the exercise of the eminent domain

power:

The short answer is that the political process will stop the

worst excesses of [the New York real estate industry].

Within very broad constitutional parameters monitered

[sic] by the courts, our system leaves such land use

questions to the elected representatives of the people

. . . The court is confident, however, that the political

process will not permit defendant Klein or anybody else to

turn Central Park into condominium apartments.

(22a). The district court thus relegated petitioners to the

“remedies” of the political process that had led petitioners to

the courthouse in the first place.

While the court of appeals affirmed the district court in all

respects, it did not state its reasons for finding petitioners’

allegations legally insufficient. However, it is demonstrable

that the standard it applied for judging the constitutionality of

condemnation amounted to no judicial review at all, notwith-

standing Midkiff’s reservation of such a role. As will be shown

below, precedents which Midkiff left undisturbed suggest three

legal standards for distinguishing condemnations that are con-

stitutional from those that are not. First, a condemnation is

unconstitutional if it is for a private rather than a public use.

Second, a condemnation is unconstitutional if it is arbitrary or

capricious. Third, a condemnation is unconstitutional if it is

intended to raise revenue rather than to obtain property needed

for public purposes.

By affirming the dismissal of petitioners’ complaint, the

court of appeals necessarily ruled that Midkiff had rejected all

of these three standards drawn from prior cases. Unless the

Court intended in Midkiff to foreclose all judicial review under

the Takings Clause, the result reached by the court of appeals

cannot be reconciled with Midkiff. Accordingly, certiorari

should be granted to rectify this conflict and to clarify the legal

standards for determining the validity of condemnations.

10

A. The Lower Courts’ Dismissal Of Petitioners’ Allegations

That Their Building Is Being Taken For Private Purposes

Is Inconsistent With Midkiff's Reaffirmation Of The

“Public Use” Requirement.

In Midkiff, the Court expressly reaffirmed the centuries-old

rule that the Constitution “forbids even a compensated taking

where executed for no reason other than to confer a private

benefit on a particular private party.” 104 S.Ct. at 2331.° It is

well established that a condemnation is lawful under the

constitutional “public use” standard only if the condemned

property will be used predominantly or principally for a public

use. Thus, while incidental private benefit will not invalidate a

taking if it is derived from land which is put to a public use, an

acquisition which is primarily for private benefit is not for a

public use. 2A Nichols on Eminent Domain § 7.08 (3d ed.

1981). As one court put it, “ ‘the tail cannot wag the dog’ and

allow the public purpose to be only incidental to a predomi-

nantly private one.” Baycol, Inc. v. Development Authority,

315 So.2d 451, 456 (Fla. 1975). Similarly, in Denihan En-

terprises, inc. v. O’Dwyer, 302 N.Y. 451, 99 N.E.2d 235 (1959),

the court held that a taking is not for a public purpose “where

the public benefit is only incidental to the private,” 99 N.E.2d

at 238, and ordered a trial on the issue of public use. See also

Petition of Seattle, 96 Wash.2d 616, 638 P.2d 549 (1981)

(project with primarily private benefit held not for a public

purpose despite city council declaration to the contrary).

Petitioners alleged that their property was not being taken

for a valid public purpose, but was instead being condemned

solely or primarily for the private benefit of respondents Park

Tower and Klein. Succinctly put, petitioners sought an oppor-

tunity to prove below that it is entirely unnecessary to give

defendants Klein and Park Tower hundreds of millions of

6 Accord, Thompson v. Consolidated Gas Corp., 300 U.S. 55, 80

(1937): Madisonville Traction Co. v. St. Bernard Mining Co., 196 U.S.

239, 252 (1905); Missouri Pacific Railway Co. v. Nebraska, 164 U.S.

403, 417 (1896).

1]

dollars worth of incentives, or to allow them to construct

million of square feet of new office space at the heart of Times

Square, merely to finance a few million dollars worth of

subway entrance improvements and theater renovations, and

to dispiace street crime a few blocks farther north. In dismiss-

ing petitioners’ complaint, the lower courts necessarily held

that even comparatively minor public benefits are sufficient to

provide the necessary constitutional basis for a taking that is

overwhelmingly for the benefit and advantage of private indi-

viduals.

The Court’s reaffirmation in Midkiff that the constitution

prohibits takings for private purposes will prove an empty

gesture if, as the lower courts’ decisions imply, the constitu-

tionally required public purpose for a condemnation can be

found in public benefits that are trivial in relationship to the

private aspects of a proposed project. As this case illustrates, it

will always be expedient for a real estate developer to include a

few minor public amenities in an otherwise private project in

return for the opportunity to use the power of eminent domain

to assemble the site for a project. The novel and restrictive

interpretation of “public use” adopted by the lower courts is so

easily satisfied that it effectively reads the public use require-

ment out of the Constitution, a result in conflict with the

Court’s reaffirmation of this requirement in Midkiff.

B. The Lower Courts’ Dismissal Of Petitioners’ Complaint

Is Inconsistent With Federal Cases Holding That Property

Cannot Be Taken Arbitrarily And Capriciously.

The principle that property may not be taken arbitrarily and

capriciously is derived from this Court’s decision in United

States v. Carmack, 329 U.S. 230 (1946). Although Carmack

itself found it unnecessary to decide the issue, other federal

courts (including two circuit courts other than the Second

Circuit) thereafter applied the standard that arbitrary and

capricious takings are not constitutional. United States v.

101.88 Acres of Land, Etc., 616 F.2d 762, 767 (Sth Cir. 1980);

United States v. 58.16 Acres of Land, 478 F.2d 1055, 1058 (7th

12

Cir. 1973); United States v. 2.9 Acres of Land, 554 F. Supp.

529, 532 (D. Mont. 1982); Hilliard v. Commonwealth of

Pennsylvania, 308 F. Supp. 756, 760 (W.D. Pa. 1970); United

States v. 0.08 Acres of Land, 246 F. Supp. 408, 410 (E.D.

Tenn. 1965); United States v. Certain Land in the Borough of

Manhattan, 233 F. Supp. 899, 901 (S.D.N.Y.), aff’d, 336 F.2d

1021 (2d Cir. 1964); United States v. 1,108 Acres of Land, 25

F.R.D. 205, 208 (E.D.N.Y. 1960)’

Although Midkiff does not specifically address the “arbi-

trary and capricious” standard, it points out that the Court has

never proscribed a taking “where the exercise of the eminent

domain power is rationally related te a conceivable public

purpose.” 104 S.Ct. at 2329. Requiring a rational relationship

between a taking and a public use is fully consistent with the

“arbitrary and capricious” standard of adjudicating takings

established by the earlier federal cases.*

7 Carmack was also discussed by Judge Learned Hand in his dissent in

United States v. State of New York, 160 F.2d 479 (2d Cir.), cert.

denied, 331 U.S. 832, reh’g denied, 331 U.S. 869 (1947), in which the

State challenged the federal government's extended taking of a war-

time railroad easement in a forest preserve after cessation of hostilities.

Dissenting from the majority’s apparent resistance to the scope of

review implied by Carmack, Judge Hand stated:

[I]n deciding whether a taking has been “arbitrary” more is always

involved, | apprehend, than whether the United States has any

interest whatever to be subserved. As in the case of substantially

every right, the result depends upon a compromise between two

conflicting interests; what we mean is that the disparity between the

contrasted values must not be shockingly against the proposed

action. . . . [A]lthough summary disposition has of course its

place, it is most important that we should keep it in that place.

160 F.2d at 482 (L. Hand, J., dissenting).

8 Midkiff involved the constitutionality of a statute passed by a state

legislature, and there was no allegation that the statute was not being

applied evenhandedly by local officials. While considerable deference

is appropriate when the courts are asked to consider the legitimacy of

the considered judgment of a state’s sovereign legislative branch, it by

no means follows that the courts should turn a blind eye to the political

abuses of individual local politicians. See Note, Public Use, Private

Use, and Judicial Review in Eminent Domain, 58 N.Y.U.L. Rev. 409,

434 (1983).

13

As discussed above, petitioners’ complaint alleged that the

Rosenthal Building was being taken arbitrarily and capri-

ciously because, inter alia, respondents had chosen not to

condemn the rundown Candler Building located in the middle

of the “blighted” block of 42nd Street but owned by a

politically well-connected individual, while respondents were

attempting to take the structurally sound, fully utilized Rosen-

thal Building on a non-blighted block on the Project’s edge.

The court of appeals gave no reason for its conclusion that

these allegations failed to state a claim. In reaching this result,

however, the court necessarily rejected the holding of the other

federal courts cited above, left undisturbed by Midkiff, that

takings are unconstitutional if they are arbitrary and capri-

cious.”

9 In urging the lower court to affirm the dismissal of the complaint,

respondents relied heavily on Berman v. Parker, supra n.5. Berman

held, inter alia, that an urban development plan need not provide for

the preservation of the occasional sound building found in the midst of

a slum; rather the redevelopment agency may condemn and replace

every building within a project's boundary. Although respondents

made a strenuous effort to analogize the taking of the Rosenthal

Building to this holding of Berman, the analogy fails in three critical

respects. First, there was no suggestion in Berman that condemnation

decisions were infected by political favoritism. Second, while Berman

may stand for the proposition that the UDC and City could have

condemned every site within the Project's boundaries, that is not what

respondents have done. Both the Candler Building and the Rosenthal

Building are within the Project's boundary, yet respondents have

decided to condemn one and spare the other, and nothing in Berman

suggests that this decision can be made arbitrarily and capriciously.

Indeed, as the cases cited above demonstrate, the federal courts

continued to entertain challenges to arbitrary and capricious takings

after Berman was decided in 1954. Finally, while Berman may permit

local authorities to condemn all property within the area that is

blighted, nothing in Berman authorizes those authorities to expand the

boundaries of a Project arbitrarily to a non-blighted block, where the

Rosenthal Building is located, to create a more profitable office

complex for the Project's private developer.

14

C. The Lower Courts Erroneously Decided The Important

Feders! "sue Of Whether The Power Of Eminent

Dor » Be Used As A Substitute For Taxation.

In our system of government, state revenues -are raised

through taxation, which falls uniformly on similarly situated

citizens. Permitting governments to condemn selected property

solely to raise money would shift the burden of financing the

operations of government from the general public who pay

taxes to particular individual property owners who are unfor-

tunate enough to have their properties chosen for condemna-

tion.

Petitioners alleged that the taking of the Rosenthal Building

is an unconstitutional effort to use the powers of eminent

domain as a substitute for the power of taxation. While the

federal courts do not appeai to have addressed the issue, its

importance is reflected in the decisions of the New York courts,

which recognize that the taking of private property solely for

the purpose of raising revenue for the government does not

constitute a valid public purpose.

In Courtesy Sandwich Shop, Inc. v. Port of New York

Authority, Inc., 12 N.Y.2d 379, 190 N.E.2d 402, 240 N.Y.S.2d

1, app. dism’d, 375 U.S. 78, reh’g denied, 375 U.S. 960 (1963),

the New York Court of Appeals considered the constitutional-

ity of a statute that allowed the Port Authority to condemn 13

square blocks to erect a “World Trade Center.” The New York

Appellate Division had declared the statute unconstitutional,

holding that “the act granted a power to condemn property to

be used for no other purpose than the raising of revenues for

the expenses of the project.” 12 N.Y.2d at 388, 190 N.E.2d at

404, 240 N.Y.S.2d at 4. Reversing, New York’s highest court

held that the statute could be saved by reading it in a way that

did not allow “unfettered erection of structures that are solely

revenue producing.” /d. at 389, 190 N.E.2d at 405, 240

N.Y.S.2d at 7. Under Courtesy Sandwich Shop, the structure

to be erected on a condemned site must be “devoted to project

purposes.” 12 N.Y.2d. at 390, 190 N.E.2d at 406, 240 N.Y.S.2d

if

at 7."° The Rosenthal Building is not being taken to make way

for a public improvement such as a police station or park.

Even if it is assumed that the income derived from the new

office building to be built on this site will be used to support

subway improvements and theater renovations (rather than to

increase Pa. * Tower’s profits), this case squarely presents the

issue of whet, *t condemnations intended to derive revenue for

governmental ,.urposes are lawful. By affirming the dismissal

of petitioners’ complaint, the Second Circuit necessarily

refused to adopt the rule of Courtesy Sandwich Shop as a

constitutional restraint on the taking power.

CONCLUSION

As the foregoing demonstrates, the court of appeals decision

rejected as legally insufficient allegations that would have been

sufficient to state a claim under a// of the constitutional

standards that had been applied by federal and state courts to

adjudicate the constitutionality of takings prior to Midkiff.

Petitioners recognize that the Court may deem it appropriate

to restate or modify the standards applied in the earlier cases.

However, unless the Court grants certiorari and articulates the

standards that should be applied by the courts in condemna-

tion cases, it will confirm the analysis of commentators and the

courts below that potential condemnees have been relegated

entirely to the remedies of the political process. If petitioners’

allegations do not state a claim of unconstitutional taking in

this case, it is difficult, if not impossible, to understand how

any future condemnee will be able to fashion a complaint that

will withstand a motion to dismiss. While the court of appeals

may not have said so expressly, its decision must necessarily

10 While the incidental generation of government revenue by the new

structure will not invalidate an otherwise lawful taking under Courtesy

Sandwich Shop, condemnation solely or principally tor the purpose of

creating revenue for governmental purposes is unconstitutional,

16

have resulted from its view that Midkiff was intended to

foreclose all judicial review of condemnation decisions.

It would be extraordinary if, as the law reviews and the

lower courts suggest, this Court intended no judicial review of

sO vast a governmental power over individuals as the power to

condemn private property. The power to take property is

unique since, unlike other local governmental decisions, the

burden of condemnation falls disproportionately on the few

individuals whose property is taken. It is precisely because the

“political process” tends to favor well-connected insiders at the

expense of the individual that the courts are required to ensure

that governmental action is rational, taken in good faith, and

free of arbitrariness. This has always been a tenet of American

government:

By a limited Constitution, | understand one which con-

tains certain specified exceptions to the legislative author-

ity. . . . Limitations of this kind can be preserved in

practice no other way than through the medium of courts

of justice, whose duty it must be to declare all acts

contrary to the manifest tenor of the Constitution void.

Without this, all the reservations of particular rights or

privileges would amount to nothing.

The Federalist No. 78, at 466 (A. Hamilton) (The New Ameri-

can Library ed. 1961).

17

For ali of the foregoing reasons, certiorari should be granted

to permit this Court to clarify what judicial role it envisioned

in Midkiff and to define the standards by which the lower

courts are to review a determination of public use.

Respectfully submitted,

NORMAN DORSEN

Counsel of Record for Petitioners

Rosenthal & Rosenthal Inc.

and Broadway 41st Street

Realty Corporation

40 Washington Square South

New York, New York 10012

(212) 598-2555

Of Counsel:

JACOB FRIEDLANDER

JOHN S. KINZEY

LEBOEUF, LAMB, LEIBY & MACRAE

520 Madison Avenue

New York, New York 10022

(212) 715-8000

Dated: January 3, 1986

APPENDICES

la

Appendix A

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Cal. No. 1103—August Term, 1984

(Argued May 22, 1985 Decided August 26, 1985)

Docket No. 85-7104

+

ROSENTHAL & ROSENTHAL INC. and

BROADWAY 41ST STREET REALTY CORPORATION,

Plaintiffs-A ppellants,

—_V.—

THE NEW YORK SfATE URBAN DEVELOPMENT CORPORA-

TION; THE TIMES SQUARE REDEVELOPMENT CORPORA-

TION; WILLIAM J. STERN, as Chairman and President of

both the Urban Development Corporation and the Times

Square Redevelopment Corporation; THE CITY OF NEW

YORK; EDWARD I. KOCH, as Mayor of the City of New

York; PARK TOWER REALTY CORPORATION and GEORGE

E. KLEIN,

Defendants-A ppellees,

and

MARIO M. CUOMO, as Governor of the State of New York,

Defendant.

+

Before:

MANSFIELD, VAN GRAAFEILAND and PIERCE,

Circuit Judges.

2a

Appeal from a judgment of the United States District Court

for the Southern District of New York (Motley, C.J.) dismiss-

ing complaint seeking to enjoin condemnation proceedings

which are part of the Forty-Second Street Development Pro-

ject.

Affirmed.

+

NORMAN DORSEN, New York, iv.x. (LeBoeuf,

Lamb, Leiby & MacRae, Jacob Friedlander,

John S. Kinzey and Gwenellen P. Janov,

N.Y., N.Y., of Counsel) for Plaintiffs-A ppel-

lants.

PETER JAMES JOHNSON, New York, N.Y. (Leahey

& Johnson, P.C., Michael Conforti and

Kevin B. Lynch, N.Y., N.Y., of Counsel), for

Defendants-Appellees Urban Development

Corporation, Times Square Redevelopment

Corporation and William J. Stern.

DEAN G. YUZEK, New York, N.Y. (Shea & Gould,

Bernard D. Fischman and Judith L. Spanier,

N.Y., N.Y., of Counsel), for Defendants-

Appellees Park Tower Realty Corporation

and George Klein.

GARY SCHULLER, New York, N.Y. (Frederick

A.O. Schwarz, Jr., Corporation Counsel,

Joseph I. Lauer and Robert J. Pfeffer, N.Y.,

N.Y., of Counsel), for Defendants-A ppellees

City of New York and Edward I. Koch.

es

3a

Rosenthal & Rosenthal Inc. and Broadway 4Ist Street Realty

Corporation appeal from a judgment of the United States

District Court for the Southern District of New York (Motley,

C.J.) dismissing their complaint against appellees, New York

State Urban Development Corporation, ef a/., for failure to

state a claim upon which relief may be granted. Appellants,

lessee and owner of the Rosenthal Building located on West

Forty-First Street between Broadway and Seventh Avenue,

brought the instant action to enjoin appellees from commenc-

ing condemnation proceedings against their property and from

otherwise seeking to take the property involuntarily. Because

the proposed taking is rationally related to a conceivable public

purpose, we affirm the judgment of dismissal.

This case represents the most recent chapter in the saga of

the Forty-Second Street Development Project. The Project, a

tripartite undertaking by the City of New York, the New York

State Urban Development Corporation (UDC) and various

private developers, is the product of a lengthy, statutorily

mandated, land use review procedure which included extensive

public hearings and resulted in hundreds of pages of detailed

findings. Its primary goal is the elimination of the physical,

social and economic blight that has afflicted the Times Square

area of Manhattan for the past fifty years. See Natural Re-

sources Defense Council, Inc. v. City of New York, 672 F.2d

292, 294 (2d Cir.), cert. dismissed, 102 S. Ct. 1963 (1982).

As part of the Project, the UDC has designated appellee,

Park Tower Realty Corporation, as the developer of four new

office towers, ranging in height from twenty-nine to fifty-six

stories. If the Project proceeds as planned, the Rosenthal

Building will be condemned and razed to make way for one of

these new office buildings. Because appellants’ building is

structurally sound, fully utilized and is not blighted or sub-

standard, they allege that its condemnation will be “neither for

a public purpose, nor rationally related to a public purpose”

but, instead, will be “completely arbitrary and capricious”.

In an opinion dated January 8, 1985, the district court

ordered the dismissal of appellants’ complaint for failure to

4a

state a claim upon which relief might be granted. The court

found that the Project “addresses legitimate public purposes in

a reasonable way, and the inclusion of the Rosenthal building,

less than a block from the core area of blight, is certainly not

irrational”. Kelying upon Berman v. Parker, 348 U.S. 26

(1954), and upon the Supreme Court’s recent reaffirmation of

Berman in Hawaii Housing Authority v. Midkiff, 104 S. Ct.

2321 (1984), the district court held that so long as there was a

legitimate public purpose underlying the Project and so long as

the proposed condemnation was rationally related to that

purpose, the taking of the Rosenthal building met constitu-

tional requirements. We agree.

The power of eminent domain is a fundamental and neces-

sary attribute of sovereignty, superior to all private property

rights. Georgia v. City of Chattanooga, Tennessee, 264 U.S.

472, 480 (1924); Albert Hanson Lumber Company v. United

States, 261 U.S. 581, 587 (1923). This power, however, is

circumscribed by the “public use” requirement of the Fifth and

Fourteenth Amendments to the United States Constitution.

Hawaii Housing Authority v. Midkiff, supra, 104 S. Ct. at

2328-30. Under the public use clause, “one person’s property

may not be taken for the benefit of another private person

without a justifying public purpose, even though compensation

be paid.” Thompson v. Consolidated Gas Utilities Corp., 300

U.S. 55, 80 (1937). “But where the exercise of the eminent

domain power is rationally related to a conceivable public

purpose”, Hawaii Housing Authority v. Midkiff, supra, 104 S.

Ct. at 2329, courts long have recognized that the compensated

taking of private property for urban renewal or community

redevelopment is not proscribed by the Constitution. /d. at

2329-30.

No serious argument can be made that the Forty-Second

Street Development Project does not address legitimate public

purposes in a reasonable manner. This Court already has taken

note of the area’s blighted condition. See Natural Resources

Defense Council, Inc. v. City of New York, supra, 672 F.2d at

294, in which we referred to the “under-utilization of property

Sa

in the area, high vacancy rates above the ground floor, the

proliferation of pornographic uses, dilapidated store fronts,

the number of lots in tax arrears, dirty and unsafe street

conditions, and a high crime rate which requires increased

allocation of police service to the area.” Indeed, appellants do

not seek to enjoin the Project in its entirety, but only as it

affects their building.

However, the condemnation of appellants’ building to make

way for the redevelopment of the blighted area is a classic

example of a taking for a public use or purpose within the law

of eminent domain. It makes no difference that the property

will be transferred to private developers, for the power of

eminent domain is merely the means to the end. Hawaii

Housing Authority v. Midkiff, supra, 104 S. Ct. at 2331. Nor

does it matter that the Rosenthal Building is structurally sound

and fully utilized because “community redevelopment pro-

grams need not, by force of the Constitution, be on a piece-

meal basis—lot by lot, building by building.” Berman vy.

Parker, supra, 348 U.S. at 35. As the Supreme Court has made

clear, “[w]hen the legislature’s purpose is legitimate and its

means are nct irrational, . . . empirical debates over the

wisdom of takings—no less than debates over the wisdom of

other kinds of socioeconomic legislation—are not to be carried

out in the federal courts.” Hawaii Housing Authority v.

Midkiff, supra, 104 S. Ct. at 2330.

The judgment of the district court is affirmed.

++

6a

Appendix B

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Docket No. 85-7104

At a stated Term of the United States Court of Appeals for

the Second Circuit, held at the United States Courthouse in the

City of New York, on the twenty-sixth day of August one

thousand nine hundred and eighty-five.

Present:

HON. WALTER R. MANSFIELD,

HON. ELLSWORTH A. VAN GRAAFEILAND,

HON. LAWRENCE W. PIERCE,

Circuit Judges.

++

ROSENTHAL & ROSENTHAL INC. and

BROADWAY 41ST STREET REALTY CORPORATION,

Plaintiffs-A ppellants,

THE NEW YORK STATE URBAN DEVELOPMENT CORPPORA-

TION; THE TIMES SQUARE REDEVELOPMENT CORPORA-

TION; WILLIAM J. STERN, as Chairman and President of

both the Urban Development Corporation and the Times

Square Redevelopment Corporation; THE CITY OF NEW

YORK; EDWARD I. KOCH, as Mayor of the City of New

York; PARK TOWER REALTY CORPORATION and GEORGE

E. KLEIN,

Defendants-Appellees,

and

MARIO M. CUOMO, as Governor of the State of New York,

Defendant.

+

7a

Appeal from the United States District Court for the

Southern District of New York

This cause came on to be heard on the transcript of record

from the United States District Court for the Southern District

of New York, and was argued by counsel.

ON CONSIDERATION WHEREOF, it is now hereby ordered,

adjudged and decreed that the JUDGMENT of said District

Court be and it hereby is affirmed in accordance with the

opinion of this court with costs to be taxed against the

appellants.

ELAINE B. GOLDSMITH

Clerk

By: Edward J. Guardaro

Deputy Clerk

A TRUE COPY

Elaine B. Goldsmith

/s/ —

Clerk

8a

Appendix C

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 85-7104

At a stated term of the United States Court of Appeals, in

and for the Second Circuit, held at the United States Court-

house, in the City of New York, on the 8th day of October one

thousand nine hundred and eighty-five.

++

ROSENTHAL & ROSENTHAL INC. and

BROADWAY 41ST STREET REALTY CORPORATION,

Plaintiffs-Appellants,

—_—Vo—

THE NEW YORK STATE URBAN DEVELOPMENT CORPPORA-

TION; THE TIMES SQUARE REDEVELOPMENT CORPORA-

TION; WILLIAM J. STERN, as Chairman and President of

both the Urban Development Corporation and the Times

Square Redevelopment Corporation; THE CITY OF NEW

YORK; EDWARD I. KOCH, as Mayor of the City of New

York; PARK TOWER REALTY CORPORATION and GEORGE

E. KLEIN,

Defendants-Appellees,

and

MARIO M. CUOMO, as Governor of the State of New York,

Defendant.

Va

A petition for rehearing containing a suggestion that the

action be reheard in banc having been filed herein by counsel

for the Plaintiff-Appellants

Upon consideration by the panel that heard the appeal, it is

Ordered that said petition for rehearing is DENIED.

It is further noted that the suggestion for rehearing in banc

has been transmitted to the judges of the court in regular active

service and to any other judge that heard the appeal and that

no such judge has requested that a vote be taken thereon.

‘s/ ELAINE B. GOLDSMITH

Elaine B. Goldsmith

Clerk

10a

Appendix D

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

84 Civ. 7229 (CBM)

a

ROSENTHAL & ROSENTHAL INC. and

BROADWAY 41ST STREET REALTY CORPORATION,

Plaintiffs,

—against—

THE NEW YORK URBAN DEVELOPMENT CORPORATION; THE

TIMES SQUARE REDEVELOPMENT CORPORATION; WIL-

LIAM J. STERN as Chairman and President of both the

Urban Development Corporation and the Times Square

Redevelopment Corporation; MARIO M. CUOMO as Gov-

ernor of the State of New York; THE CITY OF NEW YORK;

EDWARD I. KOCH as Mayor of the City of New York; PARK

TOWER REALTY CORPORATION; and GEORGE E. KLEIN,

Defendants.

APPEARANCES:

LEBOEUF LAMB LEIBY & MACRAE

By: Jacob Friedlander

520 Madison Avenue

New York, New York 10022

NORMAN DORSEN

40 Washington Square South

New York, New York 10012

Attorneys for Plaintiffs

lla

LEAHEY & JOHNSON, PC.

By: Peter James Johnson

120 Wall Street, Suite 2220

New York, New York 10005

Attorneys for Defendants

N.¥.S. Urban Development Corporation,

Times Square Redevelopment Corporation,

and Stern.

ROBERT ABRAMS

Attorney General of the State of New York

By: Barrie L. Goldstein

Two World Trade Center

New York, New York 10047

Attorney for Defendant Cuomo

FREDERICK A.O. SCHWARTZ, JR.

Corporation Counsel

By: Gary Schuller

100 Church Street

New York, New York 10007

Attorney for Defendants Koch and

City of New York

SHEA & GOULD

By: Dean G. Yuzek

330 Madison Avenue

New York, New York 10017

Attorneys for Defendants Park

Tower and Klein

12a

MOTLEY, Ch. J.

OPINION

Plaintiffs, owner and lessee of an office building located on

the corner of 41st Street and Broadway in Manhattan, sue to

enjoin condemnation of their building to make way for the

proposed Forty-Second Street Development Project. Plaintiffs

allege that the proposed taking of their building is neither for

nor rationally related to a public purpose, and therefore

amounts to an unconstitutional taking in violation of the fifth

and fourteenth amendments. Plaintiffs bring their ciaim pur-

suant to 28 U.S.C. section 1983. All defendants have moved to

dismiss on essentially three different theories: 1) failure to state

a claim on which relief may be granted, 2) the doctrines, of

ripeness, abstention, and comity, and 3) improper joinder of

parties. The court halted all discovery in this action pending

resolution of the motions to dismiss, and ordered that these

motions be addressed solely to the face the complaint. There-

fore, since plaintiffs have had no opportunity to develop the

factual basis of their complaint, the court has taken no notice

of the factual affidavits submitted by defendants in support of

these motions. For the reasons set forth below, however,

defendants’ motion to dismiss is granted.

FACTS:

This case is one of several to arise out of the large scale joint

effort by the City and State to redevelop the Times Square

area. For purposes of these motions, the factual background

contained in the complaint will suffice.

On or about June 27, 1980, defendants Urban Development

Corporation (UDC) and the City entered into a Memorandum

of Understanding providing that the City and UDC would

jointly prepare a plan and designate a developer to redevelop

the Times Square vicinity, and that the UDC would have

responsibility for implementation of the plan. In November,

1982, the UDC formed the Times Square Redevelopment

l3a

Corporation (TSRC) as its subsidiary with primary responsibil-

ity for the development of Times Square.

Pursuant to the Memorandum of Understanding, the City

and the TSRC have formulated the Forty-Second Street Devel-

opment Project. The UDC has stated that the goals of the

Project are “to eliminate blight on 42nd Street between Broad-

way and Eighth Avenue, to revitalize this vital crossroad and

integrate it into the theatrical, cultural and commercial life of

the city.” Complaint paragraph 16.

The Project consists of several elements: Renovation of nine

theatres on 42nd Street, subway station improvements, a new

hotel, a large wholesale merchandise mart, and four new office

towers ranging from 29 to 56 stories in height. One of the four

towers, planned for the southern edge of the Project area,

would be built partially on the site now occupied by the

Rosenthal building. The site for the office towers will be

assembled by the UDC through the use of the power of

eminent domain. The actual construction of the buildings,

however, will be undertaken by the designated private devel-

oper, defendant Park Tower Realty, of which defendant Klein

is a principal. The buildings will be leased to Park Tower on a

long-term basis and operated by Park Tower as private office

buildings. In return, Park Tower will make contributions

towards the subway and theater improvements.

Since the filing of the complaint in October, the City’s Board

of Estimate has approved the project and the UDC has

published its findings in connection with the proposed condem-

nation, which could commence this spring. However, the con-

demnation may be delayed by the pendency of state and

federal proceedings challenging the project.

Plaintiffs have owned and done business in their building for

approximately 25 years. For the purposes of these motions, the

court accepts as true plaintiffs’ assertions that the building is

structurally sound, attractively maintained, fully occupied, and

in no way blighted. Plaintiffs maintain that since they do not

contribute to the spread of blight, the condemnation of their

building is not rationally related to the UDC’s stated goal of

l4a

combatting blight. Plaintiffs urge that the taking of their

building therefore be declared unconstitutional on two dif-

ferent grounds: First, that the building is being condemned

solely to make money for defendant Klein, which is alleged to

be a constitutionally illegitimate private purpose, and second,

that the use of condemnation to raise funds for subway and

theater renovations is an unconstitutional substitution for

taxation.

Defendants urge this court to abstain from reaching the

merits of plaintiffs’ claims on the basis that the controversy is

not yet ripe, and under the doctrines of abstention and comity.

Defendants suggest that proceedings challenging the Project’s

blight findings under section 207 of the State’s Eminent Do-

main Procedure Law should be allowed to proceed prior to any

federal court intervention. In addition, all defendants except

the UDC, the TSRC, and Stern argue that they are improperly

joined since they either lack the power of condemnation or will

not exercise it in this case; the injunctive relief sought therefore

cannot be had against them. Finally, all defendants urge that

the complaint be dismissed on its face under the well es-

tablished doctrine that the courts will not second-guess the

contours of a public redevelopment plan so long as a legitimate

public purpose for the plan exists.

Plaintiffs argue in turn that the imminence of state condem-

nation proceedings makes this case ripe for decision, that the

availability of a state forum does not require the federal court

to abstain from reaching a claim pursuant to section 1983, and

that in any event the available state forum is inadequate.

Plaintiffs further argue that the close cooperation between all

defendants in formulating and executing the Project makes

anpropriate their joinder as defendants here. Finally, plaintiffs

urge that notwithstanding the long line of cases requiring

judicial deference to state redevelopment plans, this case never-

theless requires the court to intervene to prevent a taking

entirely for private gain, which has never been approved in

pricr cases.

lSa

DISCUSSION:

Defendants’ procedural arguments can be disposed of sum-

marily. Any doubt that objections to the condemnation of

property for the Project presented a ripe controversy at the

time of the filing of this complaint have been dispelled by the

Project’s approval by the Board of Estimate and the publica-

tion of the UDC’s findings. Condemnation is imminent and so

is plaintiffs’ alleged loss. Moreover, assuming that plaintiffs

have pleaded a substantial constitutional cause of action, this

court sees no need to abstain in deference to possible state

proceedings filed after the commencement of this action.

The argument of some defendants that they are not proper

parties to this action gives the court more pause. However,

while the relief sought here technically is only injunction of the

condemnation of plaintiffs’ building, this court believes that

the concerted activity of all defendants in bringing about this

project justifies their joinder here. See Archer Gardens, Ltd. v.

Brooklyn Center Dev. Corp., 468 F. Supp. 609, 613 (S.D.N.Y.

1979) (private developer acting in concert with state officials is

proper party to section 1983 action challenging alleged taking).

If plaintiffs state a valid cause of action, it may be possible for

them to show that all defendants acted under color of state law

to deprive them of their rights. if there is no valid cause of

action, then the question is moot. The court proceeds, there-

fore, to the question of whether the complaint in this case

states a claim upon which relief may be granted.

Defendants rely largely on the landmark case of Berman v.

Parker, 348 U.S. 26 (1953), in which the Supreme Court

established the now-familiar principle that courts will not

second-guess the decisions of local government in land use and

redevelopment. Berman held that the elimination of blight is a

legitimate governmental goal and that condemnation and rede-

velopment are within the police powers of the state in attaining

that goal. /d. at 33-34. The Court rejected a property owner’s

claim that the taking was improper because his property was

not blighted and because the property in question would be put

into private hands. Since the government had legitimately

l6a

found the area blighted, the Court would not sit in judgment

over the boundary lines of the project. /d. at 35-36.

So well settled is the principle of deference to land use

decisions that at least one federal court has heid that it lacked

even subject matter jurisdiction over an attempt to challenge a

local sewage plan in the setting of a civil rights action. “Section

1983 was never intended as a vehicle for federal supervision of

land use policy.” City of Oak Creek v. Milwaukee Metropoli-

tan Sewage District, 576 F. Supp. 482, 487 (E.D. Wis. 1983).

Such a claim must be dismissed absent “compelling evidence of

a genuine civil rights violation.” /d.

The Supreme Court most recently reaffirmed the central

themes of Berman in Hawaii Housing Authority v. Midkiff, 81

L. Ed. 2d 186 (1984). In Midkiff, the Court upheid a state land

reform procedure aimed at breaking up large land holdings in

Hawaii, rejecting a claim that it amounted to an unconstitu-

tional taking. The Court concluded that since the purpose of

eliminating oligarchical control of land was a legitimate one,

Hawaii could use a condemnation-like proceeding to put land

ownership into more diverse hands.

The mere fact that property taken outright by eminent

domain is transferred in the first instance to private

beneficiaries does not condemn that taking as having only

a private purpose. The Court long ago rejected any literal

requirement that condemned property be put into use for

the general public.

Id. at 199.

These fixed principles narrow our inquiry. Recognizing this,

plaintiffs maintain that this case involves a purely private

taking with no public purpose whatsoever, which the Midkiff

court held would be unconstitutional and void. /d. at 200.

Plaintiffs argue strenuously that there is a serious factual

dispute as to the true nature of this project, and that their

version requires us to distinguish this case from Midkiff and

Berman.

Plaintiffs assert that the Forty-Second Street Project is a

very different kind of project from that which has been

17a

approved before. The Project, they argue, is not a wholesale

clearing of blighted areas and does not involve the upgrading

of housing as in Berman, but is merely an attempt to use

redevelopment to eliminate the social blight of drugs and crime

in Times Square. Here, plaintiffs argue, since defendants have

chosen not to level the whole neighborhood but selectively to

demolish, restore, or leave alone each building within the

project area, the decision of which buildings are to be demol-

ished must not be arbitrary and capricious if the Project is to

withstand the rational relationship test. This is not a case

where a private landowner seeks to protect a small pocket of

non-blight and holds up development of a blighted area.

Rather, plaintiffs argue, the project is being enlarged to take in

desirable, non-blighted property for the sole purpose of

generating additional profit for Klein.

Plaintiffs assert that the Candler and Hotel Carter buildings,

in much worse condition and more centrally located in the

project area, will be left untouched for illegitimate reasons—

the Candler building because its owner is said to be well-con-

nected politically, and the Hotel Carter because the government

allegedly seeks to avoid paying relocation costs to the welfare

families who live there.

Plaintiffs also point out that a “white paper” prepared by

the law firm of Cadwalader, Wickersham, and Taft for Mil-

stein Properties, a rival developer, raises serious questions of

improper political influence in the selection of Klein as devel-

oper. Plaintiffs allege that when Milstein was about to be

chosen as developer of the merchandise mart that will be built

as part of the Project, the City threatened to back out of the

Project unless Klein, who is a supporter of Mayor Koch, were

given half the job. Park Tower, plaintiffs assert, will earn

about $650 million on the Project, while contributing only

about five percent of that for subway and theater improve-

ments.

All of the foregoing, say plaintiffs, establishes that this is

primarily a private real estate development for Klein’s profit,

replacing one non-blighted office building with another, with

18a

marginal public benefit. To the extent that the developer

contributes money for public amenities, plaintiffs argue that

this is an improper use of eminent domain to raise money in

lieu of taxation. Even if legitimate, the comparatively modest

amount of money involved could be raised from two large

office towers, instead of the four planned. The only reason for

the additional two buildings, which necessitate the taking of

plaintiffs’ property, is to make more money for Klein. Plain-

tiffs insist that the complaint therefore states a cause of action

under Midkiff, because this allegedly private taking is not

rationally related to a public purpose.

In sum, plaintiffs argue that Midkiff and Berman provide

for a narrow role for courts which is appropriate to exercise

here: when a taking is planned solely for a private purpose, it

must be held unconstitutional. If the taking of the Rosenthal

building is permitted, they argue, New York real estate will be

fundamentally changed, because politically connected devel-

opers will be able to assemble sites for development with the

aid of eminent domain, freely condemning desirable property

adjacent to arguably blighted areas.

Plaintiffs are correct that Midkiff provides a narrow role for

this court—a very narrow role indeed. Absent evidence that a

proposed taking treads on a specific constitutional right, we

are concerned only that a taking is rationally related to some

legitimate public purpose. It is clear from the foregoing recita-

tion that many of plaintiffs’ assertions are far too broad to

address this limited concern, and are clearly precluded by the

settled law of Berman and Midkiff. It is too late in the day to

assert that it makes any difference that this Project does not

involve housing, that it will give property to private devel-

opers, that those developers will make a profit, that the

boundary lines could have been drawn differently, that plain-

tiffs’ property is not blighted, or even that the Project is pooriy

designed to serve its goais. These matters are, for better or

worse, squarely within the discretion of the political branches.

Even if this court were to conclude that this Project is a

mammoth boondoggle, socially and architecturally ill-advised,

19a

it would still be a question for the political process, not a

federal court.

But plaintiffs here allege more: They allege that fighting

blight is not, as a matter of fact, the motivation behind this

Project. They assert that the actual reason for the project is to

make money, specifically for a developer who is alleged to be a

close supporter of the Mayor and other .politicians. In other

words, without disputing that the state basically may do what

it likes so long as it intends to fight blight and might reasona-

bly believe that this project would further the goal, plaintiffs

assert that defendants here did not so believe or so intend.

They were motivated instead simply by the desire to make

money for Klein.

Defendants conceded at oral argument that if plaintiffs’

allegations, in this extreme form, were literally true, then the

complaint would state a cause of action. Defendants maintain,

however, that the suggestion that no public purpose of any

kind exists for the Forty-Second Street Project must be re-

jected on the face of the complaint. This court agrees. The

complaint itself refers to the broad public purposes behind this

Project: To eradicate blight in Times Square and to revitalize

the area culturally and commercially. Defendants argue that

this court can take judicial notice of the violent crime, drug

traffic, and physical deterioration of the Times Square area,

and plaintiffs do not appear to dispute the point. In fact,

plaintiffs do not even plead that the Project lacks a public

purpose. Instead, they limit their allegations to the purpose

underlying the taking of the Rosenthal building. See Com-

plaint paragraphs 21-23.

It is clear, then, that a substantial, !egitimate public purpose

underlies the Project, and that a large scale redevelopment

plan such as is described in the complaint is rationally related

to serving that purpose. Plaintiffs would have us avoid this

conclusion by permitting them to prove that the “true” motiva-

tion behind the project is private profit. Such an argument flies

in the face of reality, even as portrayed in plaintiffs’ own

pleading. It is not enough that the Project planners were

20a

partially motivated by the desire to make money for private

developers. Such mixed motivations seem politically inevitable

and perhaps are necessary to the success of this kind of

project. To constitute a purely private taking and thus fit

within the narrow exception of Midkiff, plaintiffs must dem-

onstrate that no public purpose exists for the Project. This they

cannot do.

To the extent that plaintiffs can prove favoritism in the

selection of one developer over another, there may be a

violation of state law necessitating a new selection, but this

does not go to plaintiffs’ constitutional claim. In order to state

a constitutional cause of action, plaintiffs would have to

charge a level of corruption beyond that pleaded or reasonably

inferred from the pleading here. Plaintiffs would have to be

able to plead that the public purposes put forth for the plan

were a sham and a fraud on the public, and that the project

existed to profit defendant Klein—not merely that it was

shaped in such a way as to make it more profitable for him.

Since this would amount to a serious allegation of public

fraud, it wouid have to be pleaded with specificity. Despite the

complaint’s conclusory allegation that the taking of the Rosen-

thal building is solely for Klein’s benefit, the court does not

understand the plaintiffs to allege that this kind of fraud is

taking place. Once a legitimate public purpose for the overall

project is conceded, however, the court cannot get involved in

parsing the particular degree of pubiic or private motivation

behind the inclusion of a particular site in the Project area, so

long as that inclusion could rationally be related to the public

purpose of the plan as a whole.

Plaintiffs also argue that since Midkiff approved Hawaii’s

plan aimed at breaking up oligarchical land holdings, New

York may not now use this Project to concentrate land owner-

ship in the Times Square area in fewer hands. This argument,

too, must be rejected. Midkiff does not represent Supreme

Court endorsement of diversified rather than centralized land

ownership. Rather, the case stands for the more general propo-

sition that states have broad discretion to define public pur-

2la

poses and to formulate plans within the police power to

address them. Nothing in the Constitution prevents a state

from deciding that in a particular area diversity of land

ownership stands in the way of full economic development,

and that assembling a major site to be developed as a piece is

the best way to serve the public purposes of eliminating blight,

creating jobs, and broadening the tax base.

In evaluating plaintiffs’ argument that the raising of money

for subway and theater renovation though the condemnation

of the Rosenthal building is a constitutionally illegitimate

substitute for taxation, the court must again look at the overall

goals of the project. It would be simplistic to view this

fundraising mechanism in a vacuum, apart from the total

development plan. Plaintiffs cite Courtesy Sandwich Shop v.

Port of New York Authority, 12 N.Y.2d 379, 388, 240 N.Y.S.2d

1, 5 (1963) for the proposition that a condemnation solely

undertaken to produce revenue, with no other primary pur-

pose, would be unconstitutional. In that case, however, the

New York Court of Appeals found acceptable the use of

portions of the World Trade Center development to produce

incidental revenue for other parts of the port development

project. Such incidental fundraising “does not vitiate the

public purpose of the development as a whole.” /d. at 390, 240

N.Y.S.2d at 7.

Similarly, it is perfectly legitimate that portions of the

Forty-Second Street Project will help generate funds to support

other aspects of the Project. The court rejects the suggestion

that since these office towers replace other office buildings

their only possible purpose is to raise a few million dollars for

subway and theater improvements. These buildings are a major

part of the overall redevelopment scheme, and it would be

quite reasonable for the project planners to conclude that this

kind of large scale redevelopment, bringing thousands of new

people into the neighborhood and radically changing the physi-

cal configuration of the area, would further the Project's

overall goals of eliminating blight and revitalizing Times

Square.

22a

Plaintiffs insist that if this taking is permitted the worst

excesses of the New York real estate industry will flour:sh

unchecked, with choice properties plucked at random fivwm

their rightful owners through eminent domain and turned over

to politically-connected developers. If the Forty-Second Street

Project is permitted to reach down to Forty-First Street to

encompass a non-blighted office building, ask plaintiffs, what

is to stop the state from condemning Herald Square or Gram-

mercy Park for redevelopment, with the profits to support

subway improvements and theater renovations?

The short answer is that the political process will stop it.

Within very broad constitutional parameters monitered by the

courts, our system leaves such land use questions to the elected

representatives of the people. It is through political give and

take in the legislative and executive branches that some areas

are landmarked, others designated for redevelopment, still

others left to the free market. This process does not always

result in plans that are wise, tasteful, or even fair. The court is

confident, however, that the political process will not permit

defendant Klein or anybody else to turn Central Park into

condominium apartments.

The federal courts remain available for challenges to truly

private or truly irrational takings, as the Supreme Court

acknowledged in Midkiff. We do not face such a situation

here, and need not dwell on hypotheticals. The Forty-Second

Street Project has emerged from the political process as a

comprehensive attempt to address the implacable problems of

crime and decay in Times Square. It addresses legitimate public

purposes in a reasonable way, and the inclusiea of the Rosen-

thal building, less than a block from the core area of blight, is

certainly not irrational. Absent a particularized pleading of

public fraud, or evidence of some other specific constitutional

violation, that is enough to pass the scrutiny of this court.

23a

For the foregoing reasons, the court holds that plaintiffs fail

to state a cause of action on which relief may be granted.

Defendants’ motion to dismiss is granted.

CONSTANCE BAKER MOTLEY

Chief Judge

Dated: New York, New York

January 8, 1985

24a

Appendix E

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK.

84 Civ. 7229 (CBM)

+

ROSENTHAL & ROSENTHAL, INC., ET ANO,

Piaintiffs,

—against—

THE NEW YORK STATE URBAN DEVELOPMENT CORP, ET AL,

Defendants.

~$—

JUDGMENT

Defendant(s) having moved for an order dismissing the

complaint, and the said motion having come before the Hon-

orable CONSTANCE BAKER MOTLEY, Chief Judge, U.S.D.J.,

and the Court thereafter on January 8, 1985, having handed

down its

OPINION (#57080) granting defendants’ motion to dismiss;

and the Court having further handed down an order discon-

tinuing this action, it is,

ORDERED, ADJUDGED AND DECREED: That the complaint

be and it is hereby dismissed.

/s/ (lilegible) _

Clerk

DATED: New York, N.Y.

January 11, 1985

25a

Appendix F

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

on

ROSENTHAL & ROSENTHAL INC., and

BROADWAY 41ST STREET REALTY CORPORATION,

Plaintiffs,

—against—

THE NEW YORK STATE URBAN DEVELOPMENT CORPORA-

TION; THE TIMES SQUARE REDEVELOPMENT CORPORA-

TION; WILLIAM J. STERN, as Chairman and President of

both the Urban Development Corporation and the Times

Square Redevelopment Corporation; MARIO M. CUOMO,

as Governor of the State of New York; EDWARD I. KOCH,

as Mayor of the City of New York; PARK TOWER REALTY

CORPORATION and GEORGE E. KLEIN,

Defendants.

~

COMPLAINT

Plaintiffs, by their undersigned attorneys, complain and

allege as follows:

JURISDICTION

1. This is a civil action to enjoin defendants from taking

plaintiffs’ property for the sole benefit of private parties, in

violation of the Fifth and Fourteenth Amendments to the

Constitution of the United States. Plaintiffs’ claims for relief

arise under the Constituticn and 42 U.S.C. § 1983, and the

Court has jurisdiction of this action pursuant to 28 U.S.C.

§ 1331(a) and 28 U.S.C. § 1343(3) and (4).

26a

PARTIES

2. Plaintiff ROSENTHAL & ROSENTHAL INC. (“Rosenthal”)

is a corporation organized and existing under the, laws of the

State of New York which maintains its principal place of

business at 1451 Broadway, New York, New York 10036.

3. Plaintiff BROADWAY 41ST STREET REALTY CORPORA-

TION is a corporation organized and existing under the laws of

the State of New York with its principal place of business

located at 1451 Broadway, New York, New York 10036.

4. Defendant NEW YORK STATE URBAN DEVELOPMENT

CORPORATION (“UDC”) is a corporate agency of the State of

New York established by the New York State Urban Develop-

ment Corporation Act, Title 16, McKinney’s Unconsolidated

Laws, Section 6251, ef seq. Pursuant to Section 6263 of the

Unconsolidated Laws, the UDC is authorized to acquire real

property through the exercise of the State’s power of eminent

domain. The UDC maintains its principal place of business at

1515 Broadway, New York, New York 10036.

5. Defendant TIMES SQUARE REDEVELOPMENT CORPORA-

TION (“TSRC”) is a subsidiary of defendant UDC created

pursuant to Section 6262 of the Unconsolidated Laws, which

maintains its principal place of business at 1515 Broadway,

New York, New York 10036.

6. Defendant WILLIAM J. STERN is the Chairman and

President of both the UDC and TSRC, and is made a defen-

dant in those official capacities. Defendant Stern authorized,

approved and participated in the actions of the UDC and

TSRC of which plaintiffs complain herein.

7. Defendant MARIO M. CUOMO is Governor of the State of

New York and is made a defendant in that official capacity.

Defendant Cuomo authorized, approved and participated in

the actions of UDC and TSRC of which plaintiffs complain

herein.

27a

8. Defendant CiTy OF NEW YORK (the “City”) is a cor-

porate municipality of the State of New York.

9. Defendant EDWARD I. KOCH is the Mayor of the City of

New York, and is made a defendant in that official capacity.

Defendant Koch authorized, approved and participated in the

actions of the City of which plaintiffs complain herein.

10. Defendant PARK TOWER REALTY CORPORATION (“Park

Tower”) is a corporation organized and existing under the laws

of the State of New York, with its principal place of business

located at 499 Park Avenue, New York, New York 10022. Park

Tower is not a corporate agency of New York State, as are the

UDC and TSRC, but rather is a private business enterprise

operated solely for the benefit and profit of its stockholders.

11. Defendant GEORGE E. KLEIN is the president, chief

executive officer, and principal stockholder of defendant Park

Tower. Defendant Klein authorized, approved and participated

in the actions of Park Tower of which plaintiffs complain

herein.

CLAIMS FOR RELIEF

12. Plaintiff Rosenthal is a financial institution engaged in

factoring and commercial! asset-vased finance. It employs over

200 people and its volume of business is approximately one

billion dollars annually.

13. For over twenty-five years, Rosenthal has maintained its

headquarters in a building (the “Rosenthal Building”) located

at the northwest corner of Broadway and 41st Street in New

York City. Rosenthal leases this building from plaintiff Broad-

way 4lst Street Realty Corporation, which is a company

beneficially owned by members of the Rosenthal family. The

Rosenthal Building is a seven story limestone building which

was constructed in or around 1930 for the First National City

Bank, the predecessor of Citibank, N.A. The Rosenthal Build-

ing is structurally sound, fully utilized, attractively furnished

and decorated, and is not “blighted” or substandard in any

respect.

28a

14. On or about June 27, 1980, the UDC and the City

entered into a Memorandum of Understanding which pro-

vided, inter alia, that the UDC and the City would jointly

prepare a “Development Program” for the vicinity of 42nd

Street and Seventh and Eighth Avenues in New York City, that

the Mayor of the City and the UDC would jointly designate

one or more developers to carry out the Development Pro-

gram, and that UDC would have responsibility for the imple-

mentation of the Development Program.

15. In or about November, 1982, the UDC formed TSRC as

its subsidiary and delegated to it primary responsibility for

implementing the Development Program.

16. Pursuant to the Memorandum of Understanding, the

UDC, the City and TSRC have formulated a program desig-

nated as the “Forty-Second Street Development Project.” The

UDC has stated that the goals of this Project are “to eliminate

blight on 42nd Street between Broadway and Eighth Avenue,

to revitalize this vital crossroad and integrate it into the

theatrical, cultural and commercial life of the city.”

17. The Forty-Second Street Development Project consists

of the following proposed elements:

(a) The renovation of nine theater buildings on 42nd

Street;

(b) The improvement and modernization of the Times

Square subway stations;

(c) The construction of a large hotel on 42nd Street near

Eighth Avenue;

(d) The construction of a merchandise mart on the East

side of Eighth Avenue between 40th and 42nd Streets;

and

(e) The construction of four new office towers, ranging

from 29 to 56 stories in height, at the southern end of

Times Square.

a

29a

18. If the current version of the Forty-Second Street Devel-

opment Project is implemented, one of the four proposed

office towers described in Paragraph 17(e) above will be built

on the site now occupied by the Rosenthal Building. Unless it is

restrained from doing so, the UDC plans to condemn the

Rosenthal Building using its power of eminent domain, and to

demolish the Rosenthal Building to make way for the proposed

new Office building.

19. The UDC intends to take the Rosenthal Building by

eminent domain notwithstanding that the Rosenthal Building is

not located within the area of 42nd Street between Eighth

Avenue and Broadway which the defendants claim to be

“blighted,” anc notwithstanding that the Rosenthai Building is

not, and has not been found by the defendants to be,

“blighted,” structurally unsound, underutilized, or deficient in

any respect.

20. The planned taking of the Rosenthal Building is neither

for a public purpose, nor rationally related to a public pur-

pose, as required by the Fifth and Fourteenth Amendments to

the Constitution of the United States.

21. If the proposed Forty-Second Street Development Pro-

ject is implemented, the present site of the Rosenthal Building

will not be used for any public puspose, but rather that site will

be used exclusively for the private benefit of defendant Park

Tower.

22. Park Tower has been designated by the UDC, TSRC,

and the City as the developer to construct the four proposed

office towers included in the Project. Although the UDC will

exercise its power of eminent domain to acquire the Rosenthal

Building as a site for Park Tower to develop, all of the

investment money necessary to compensate plaintiffs for the

taking of their building, to demolish the Rosenthal Building,

and to erect a new office building in its place will be provided

by Park Tower. Part Tower will manage and operate the new

building as a private commercial enterprise, selecting all ten-

30a

ants, collecting all rents, and paying all operating expenses.

The new office building will not be constructed for, or predom-

inantly occupied by, any public agency or authority, and no

public benefit will be achieved by the demolition of the

Rosenthal Building or its replacement by the proposed new

building.

23. The proposed taking of the Rosenthal Building is not

“rationally related” to a public purpose, as required by the

Fifth and Fourteenth Amendments to the Constitution.

24. To induce the UDC to exercise its power of eminent

domain for its private benefit, Park Tower has agreed to

contribute moneys to the City, UDC, and/or TSRC to be used

for the renovation of theater buildings and the improvement

and modernization of subway stations and other mass trans-

portation facilities within the area of 42nd Street that the City,

UDC and TSRC claim to be “blighted.” In condemning the

Rosenthal Building to obtain these moneys from Park Tower,

the defendants plan to use the power of eminent domain solely

as a means Of raising revenues, as a substitution for taxation,

which is not a constitutional use of that power. Aside from

producing this revenue for the City, UDC and TSRC, the

proposed taking of the Rosenthal Building is completely unre-

lated to the defendants’ stated goal of eliminating blight on

42nd Street, and the demolition and replacement of the Rosen-

thal Building is not necessary in any respect to achieve that

goal.

25. The decision by the City, UDC, and TSRC to select the

Rosenthal Building as a site which would be taken for private

development to finance the Forty-Second Street Developement

Project is also contrary to the Fifth and Fourteenth Amend-

ments to the Constitution because that decision is completely

arbitrary and capricious. Defendants do not propose to demol-

ish or replace a large office building, the Candler Building,

which is located on 42nd Street between Broadway and Eighth

Avenue, in the midst of the area defendants claim to be

blighted, and which, unlike the Rosenthal Building, is neither

jill

3la

structurally sound nor fully utilized. Further, defendants have

excluded from the proposed Project other buildings in the

Times Square vicinity which are affected by blight, underuti-

lized, and structuraliy unsound, and which are therefore more

appropriate buildings for inclusion in the Project than the

Rosenthal Building.

26. On October 4, 1984, the UDC, through its directors,

adopted a resolution which purports to make the findings that

the New York Eminent Domain Procedure Law (“EDPL”)

requires the UDC to make before it exercises its eminent

domain power tc acquire the Rosenthal Building and other real

property to be included in the proposed Forty-Second Street

Development Project. Although the UDC has undertaken in

the Memorandum of Understanding to seek the approval of

the City’s Board of Estimate of the proposed Project before

beginning condemnation proceedings, the UDC contends that

all of the statutory prerequisites of the EDPL have been

satisfied and the UDC, uniess restrained by this Court, will be

free to begin condemnation proceedings against the Rosenthal

Building immediately after the Board of Estimate gives its

approval, which is expected to occur on or about October 25,

1984.

27. Plaintiffs do not seek to enjoin the Forty-Second Street

Development Project in its entirety or any portion of that

Project that does not involve the taking of the Rosenthal

Building. However, the defendants’ inclusion of the Rosenthal

Building within that Project, and the proposed taking of

plaintiffs’ unblighted, structurally sound building by defen-

dants, solely to benefit a private party, Park Tower, and to

produce revenues that the UDC, TSRC and City will use for

other purposes, denies plaintiffs due process and equal protec-

tion of the law, in violation of the Fifth and Fourteenth

Amendments of the Constitution of the United States.

28. By virtue of the foregoing, the defendants, under color

of state law, have also deprived plaintiffs of rights, privileges,

32a

and immunities secured by the Constitution and laws of the

United States, in violation of 42 U.S.C. § 1983.

29. Plaintiffs have no adequate remedy at law.

WHEREFORE, plaintiffs respectfully pray that the Court

enter judgment: ai

A. Enjoining defendants from commencing condemnation

proceedings against piaintiffs’ property and from otherwise

seeking to take plaintiffs’ property involuntarily in connection

with the proposed Forty-Second Street Development Project;

B. Awarding plaintiffs the costs and disbursements of this

action, including their reasonable attorneys’ fees; and

C. Granting plaintiffs such other or further relief as the

Court deems just and proper.

Dated: New York, New York

October 9, 1984

LEBOEUF, LAMB, LEIBY

& MACRAE

By: /s/ JACOB FRIEDLANDER

Jacob Friedlander

520 Madison Avenue

New York, New York 10022

(212) 715-8000

—and—

/s/ NORMAN DORSEN

Norman Dorsen

40 Washington Square South

New York, New York 10012

(212) 598-2555

Attorneys for Plaintiffs