# Opposition Brief — City of New York v. Seawall Associates > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_0267%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Opposition Brief - **Published:** January 1, 1989 - **Citation:** 493 U.S. 976 ## Text October Term, 1989 eal IN THE i; NOV 2. 1963 Supreme Court of the United Hw FRc oH F. SPANIOL, J —-s ————-— —— —- -- oor THE CITY OF NEW YORK, et al., Petitioners, against SEAWALL ASSOCIATES, et ai., Respondents. THE COALITION FOR THE HOMELESS, Petitioner, against SEAWALL ASSOCIATES, et ai., Respondents. RICHARD WILKERSON, et ai., Petitioners, against SEAWALL ASSOCIATES, et al., Respondents. On Petitions for a Writ of Certiorari to the New York State Court of Appeals BRIEF IN OPPOSITION OF RESPONDENT SEAWALL ASSOCIATES = _____________________________________ Stroock & Stroock & LAVAN Seven Hanover Square New York, New York 10004-2594 (212) 806-5400 and DersHowiTz & EIGER, P.C. New York, New York 10005 (212) 513-7676 . os lo ta TABLE OF CONTENTS pr. Bs hao. |. COUNTERSTATEMENT OF THE CASE ... REASONS WHY THE PETITIONS SHOULD BE SET W558 4scsniagbeuaseass 1. This Court is Without Jurisdiction to Hear This ee Cle tie ere a 2 2. This Court’s Prior Decisions Concerning the Per Se Physical Taking Doctrine Fully Support the Decision PO Se abckeucaeutucas Peackek saa 3. This Court’s Prior Decisions Fully Support the De- termination Below That Local Law 9 is Facially Inva- lid As A Regulatory Taking ............... I a ee ree tl to se TABLE OF AUTHORITIES PAGE Agins v. City of Tiburon, 447 U.S. 255 (1980) ........... 14, 20 Armstrong v. United States, 364 U.S. 40 (1960) ......0.... 9 Beacon Hill Farm Assocs. v. Loudoun County Bd. of Supervisors, 875 F.2d 108i (4th Cir. 1989) ............ 14, 15 Benson v. Beame, 50 N.Y.2d 994, 409 N.E.Zd 948 (1980), appeal dismissed, 449 U.S. 1119 (1981) ......... 8 Block v. Hirsh, 256 U.S. 135 (1921) ........ 0... 7 Bowles v. Willingham, 321 U.S. 503 (1944) ....0......... 5, 6, 7 Callahan v. Fresh Pond Shopping Center, Inc., 388 Mass. 1051, 446 N.E.2d 1060, appeal dismissed, TD SA. ee COD © sn. teen lkw tee hereesaeeueaes 5, 7,8 Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211 (SMUD The City relies for this proposition on dicta contained in footnote 19 of the ! oretio opinion, in which this Court noted that “the statute migh! present a dif- ierent question” if it provided for the landlord's ownership of the cable installa- tion, rather than for its ownership and control by the third-party CATV com- pany. 458 U.S. at 440 n.19 (emphasis added) (see City’s Petition at 12, see also Coalition’s Petition at 28-29) Significantly, however, the City ignores the (footnote continued on following page) i 12 Loretto, which was properly rejected by the Court of Appeals. (A-26-27.) If Mrs. Loretto had been given complete freedom of choice as to which CATV companies could install their cables on her building against her will (rather than having the City decide which company would be granted the exclusive franchise to pro- vide CATV in her neighborhood), the physical occupation result- ing from the City’s law requiring that she allow their intrusion on her property would clearly have been no less a taking. See Loretto, 458 US. at 424. pr? Finally, as to the assertions by petitioners that because Local Law 9 is “temporary in duration,” it cannot effect a physical tak- ing (City’s Petition at 13-14; see also Coalition’s Petition at 27-28, 33 n.13, 37 and 44), they are based upon a misinterpretation of long-standing eminent domain law and a blatant denial of the re- ality of the practical effects of Local Law 9, in conjunction with other existing New York State laws, upon respondents. The fact is that the operation of Local Law 9’s rent-up provisions would com- pel Seawall to give up possession of its buildings to strangers (i.e., new tenants) indefinitely, and perhaps forever, regardless of the fact that the Local Law purports to require legislative “extension” every five years. Firstly, as has consistently been ignored by peti- tioners, all new tenants will obtain possessory interests protecting them from eviction (as well as limiting their rents) under existing New York rent control or rent stabilization laws, which are often, / (footnote continued from previous page) Court's explanation in that same footnote of why the landlord’s ownership of the cable might make a difference, i.e., because then, “if the landlord wished to repair, demolish, or construct in the area of the building where the installation is located, he need not incur the burden of obtaining the CATV company’s coop- eration in moving the cable.” /d. (emphasis added). In the present case, by con- trast, once any new tenant gains occupancy nghts, Local Law 9, together with other laws, deprives the owner of the ability to deal with his property as he chooses. The significance placed by the Loretto Court on_burdens placed by legislation upon a landlord’s core property nghts to demolish and/or construct buildings on his or her property is clearly relevant in the present case. See also Nollan, 483 U.S. at 833 n.2 (“[T]he night to build on one’s own property . . . can- not remotely be descnbed as a “government benefir”.) (emphasis added). 13 practically speaking, impossible for a landlord to sever once ac- quired, "* even if the Local Law itself were to expire after five years without renewal. Secondly, in considering the potential life-span of this law, which could be extended every five years upon a find- ing of “necessity,” the New York experience with 46 years of an- nual renewal of “emergency” rent control laws teaches that this so-called “stop-gap” measure must be deemed to be, essentially, of unlimited duration.'s 3. This Court’s _Prior Decisions Fully Support the Determination Below That Local Law 9 is Facially Invalid As A Regulatory Taking Petitioners essentially propose that, under the decisions of this Court, there are never appropriate factual settings for the de- termination of facial regulaiory taking claims. (See City’s Petition at 14-17; Coalition’s Petition at 37-39; Individual Intervenors’ Pe- tition at 21-27.) They are plainly wrong. This Court's concern with “ripeness” in certain takings cases, stemming from the gen- eral rule that “the constitutionality of statutes ought not be de- cided except in an actual factual setting that makes such a decision necessary,” Hodel v. Virginia Surface Mining & Reclama- tion Ass'n, 452 U.S. 264, 294-95 (1981) (citations omitted), is based upon the fact that the federal courts, as courts of limited jurisdic- tion, must, under the “case or controversy” provision of the fed- eral Constitution, decide only “concrete legal issues, presented in actual cases” where there has been “actual interference” with ‘Under rent control and rent stabilization laws, the vacating of dwelling units by their occupants usually occurs only through the slow process of attrition by death, changed circumstances causing a willingness to move, or through a nego- tiated buy-out for significant consideration paid to the tenants ‘® It should be noted that the suggestion by petitioners that there can be no such thing as a temporary physical taking (see City’s Petition at 13-14) 1s, in any event, manifestly incorrect. See, e.g., United Siates v. Pewee Coal, 341 U.S 114(1951): Kimball Laundry Co. v. United States, 338 U.S. } (1949); United States v. Petty Mo- tor Co., 327 U.S. 372 (1946); United States v. General Motors Corp., 323 U.S. 373 (1945) (all dealing with questions of just compensation for temporary physical! takings). 14 someone's rights. Beacon Hill Farm Assocs. v. Loudoun County Bd. of Supervisors, 875 F.2d 1081, 1082 (4th Cir. 1989) (quoting United Public Workers v. Mitchell, 330 U.S. 75, 89-90 (1947)). Such “ripeness” concerns are only relevant in takings cases which are predicated upon an “as-applied” challenge to legislation. See, e.g., Williamson County Regional Planning Comm'n vy. Hamilton Bank, 473 U.S. 172, 186-87 (1985); Agins v. City of Tiburon, 447 U.S. 255, 260 (1980). There is no question that this case, by contrast, pre- sented a facial challenge to Local Law 9.16 Indeed, petitioners concede that the only issue properly be- fore the Court of Appeals on this facial takings challenge was “whether the ‘mere enactment’ of the [regulation] constitute[d] a taking” of respondents’ property. Hodel v. Virginia, 452 U.S. at 295 (quoting Agins, 447 U.S. at 260). (See Coalition’s Petition at 38; Individual Intervenors’ Petition at 22.) As this Court made clear as long ago as Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926) (relied on by petitioners herein) there is no problem of ripeness implicated by a property owner’s failure to seek some al- legedly available administrative exemption from a land-use regu- lation before bringing suit challenging its constitutionality, where the claim asserted is facial—i.e., that “the ordinance of its own force operates greatly to reduce the value of the [plaintiff's] lands and destroy their marketability” or that “the existence and main- tenance of the ordinance in effect constitutes a present invasion of [the plaintiff's] property rights and a threat to continue it.” Jd. at 386 (emphasis added).'? As recently as 1987, this Court has ‘*In any event, Article ITI surely could not be said to have barred, on “ripeness” grounds, the New York State Court of Appeals from determining the facial challenge made to Local Law 9 herein under the state Constitution. ‘7 It is highly significant to note that, in approving the propriety of facial attacks on land-use restrictions as confiscatory in the Euclid case, this Court defined the cause of action in terms of an ordinance’s mere existence effectively consti- tuting a present invasion of the plaintiff's property nghts and operating to greatly reduce the value of the plaintiff's lands. Id. Clearly, such a plaintiff need not, as petitioners urge, prove that the challenged regulation also constitutes a present invasion of the property nghts of each and every other landowner who may be (footnote continued on next page) she nated | _ | 15 reaffirmed that, notwithstanding its reluctance to render opin- ions on the constitutionality of land-use ordinances as applied, prior to their actual application to a specific piece of land, see, e.g., Williamson County, 473 U.S. at 186-87; MacDonald, Sommer & Frates v. County of Yolo, 477 U.S. 340, 348-49 (1986), a land- owner may nevertheless properly “mount a facial attack on a land use regulation without first seeking a final determination of how the applied regulation will effect actual use of the property.” Bea- con Hill Farm Assocs. v. Loudoun County Bd. of Supervisors, 875 F.2d at 1084, (citing to Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 494 (1987)); see also Loretto v. Tele- prompter Manhattan CATV Corp., 53 N.Y.2d 124, 138-39, 423 N.E.2d 320, 326 (1981), rev'd on other grounds, 458 U.S. 417 (1982) (“As has long been recognized, administrative remedies provided by a statute need not be exhausted prior to the bringing of an ac- tion which challenges the enactment ‘in its entirety’ as unconsltu- tional”). (See A-61-63 n.14.) To the extent that petitioners argue that the facial invalida- tion of Local Law 9 as an uncompensated regulatory taking was premature because respondents had not applied for “hardship exemption” pursuant to § 27-198.2(d 4b) of the New York City Administrative Code (see City’s Petition at 27), they also miscon- strue the very essence of Seawall’s claim asserted below: that the so-called “hardship” provision is itself inherently confiscatory on its face, denying Seawall economically viable use of its land by its (footnote continued from previous page) conceivably affected thereby, and petitioners’ reliance for such a proposition on the wholly unrelated case of United States v. Salemo, 481 U.S. 739 (1987) (involv- ing a challenge to the federal Bail Reform Act as violative of Eighth Amend- ment) is misplaced. (See City’s Petition at 14, 16, Individual Intervenors’ Peti- tion at 22-23.) See, e.g, Hodel v. Irving, 481 U.S. 704, 717 n.2 (1987) (statute fa- cially invalid where each of the plaintiff's decedents “lost [a] stick in their bun dies of property nghts upon the enactment” thereof), cf Hodel v Virgina, 452 U.S. at 295-96 (facial takings challenge held mpe, but rejected on the merits where plaintiffs failed to identify any tracts of land which they owned which were alleged to be taken by the enactment at issue, and thus did not show re- quired impact on their own property). 16 very terms.'® The text of the hardship provision may be found in the Appendix at A-275 through A-279. Examination of its terms reveals that the purported “reasonable rate of return” that it al- legedly “ensures” (see City’s Petition at 15; Coalition's Petition at 40-41; Individual Intervenors’ Petition at 13) is neither “reason- able” nor “ensured.” (See A-56-57.) Most critically, it wholly ex- cludes any consideration of the owner’s investment in the property or its fair market value at the time of purchase. (See A-2i1-215.) In Seawall’s case it is clear that its original purchase price is the appropriate measure of the property’s value against which the “reasonableness” or “economic viability” of the return allowed by Local Law 9 must be measured. Seawall purchased its properties in October, 1984. At that time, the properties were zoned for commercial use (and still are), and there was no moratorium on demolition or conversion. Thus, Seawall had a reasonable invest- ment-backed expectation of its ability to redevelop the properties as of right, which Seawall paid for, and which must rightly be con- sidered.'? By relying only on theiz current assessed value as SROs ‘*As noted supra note 11, the existence of the “hardship” provision is irrelevant for purposes of the physical taking analysis herein. Moreover, as to their be- lated assertions of the need for further development of the record and the im- propnety of the trial court’s grant of summary judgment, petitioners are con- veniently overlooking the plain fact that summary judgment was only granted dy Justice Saxe below after the City itself moved therefor in “Action 2” of these consolidated actions (R. 858). It is hornbook law in New York that a motion for summary judgment “searches the record” and invites the court to award sum- mary judgment to a nonmoving party where appropriate. See, e.g., Lansing Re- search Corp. v. Sybron Comp., 142 A.D.2d 816, 819, 530 N.Y.S.2d 698, 701 (3d Dep't 1988) (“By initially seeking summary judgment, defendant exposed itself to a search of the record (see, CPLR 3212{b]; Siegel, NY Prac §282, at 239), and summary judgment could have been granted in favor of plaintiff even in the absence of its cross motion for the same relief.”). '* This Court bas made clear, in Kaiser Aetna , 444 U.S. at 175, that cases in which “distinct investment-backed expectations” are defeated by regulation present an especially sensitive category of takings, akin to that of permanent physical occupation. Particularly where a government's regulatory action sharply re- verses its pnor stance, upon which an owner justifiably relied in investing in some particular advantage that the challenged regulation would eliminate or destroy, this special category of takings analysis is implicated. /d. Recently, (footnote continued on next page) PA rire se 17 as the benchmark against which the “reasonable rate of return” is to be measured, the value of the hardship exemption ts set at a point of absurdity. Thus, under Local Law 9's formulatiqn, as ts explained below, an owner could receive a “reasonable” return on the property valued as an SRO, but this would still not represent anything even remotely resembling a fair return on his initial in- vestment. (See A-35-36, A-56-57 n.13.) This renders the legisla- tive scheme inherently confiscatory. The “hardship” provisions purport to give petitioner Com- missioner of the City’s Department of Housing Preservation and Development (“HPD”) the power to entertain and grant applica- tions to reduce in whole or in part the amount of the payment re- quired under the buy-out provisions, or the number of replacement dwelling units required to be provided under the re- placement exemption, but only if he finds: (i) that the owner can- not make a “reasonable” return unless the property ts altered, converted or demolished as prohibited by the Local Law; (11) that neither the owner nor any pnor owner intentionally managed the property to impair its ability to earn such a return; and (ill) that the requirement that all SRO units be replaced would substan- tially impair the feasibility of developing the property for any other use.2° Under this provision, it is apparent that those who (footnote continued from previous page) in its opinion in Keystone, 480 U.S. at 470, a facial takings challenge, this Court reaffirmed the relevance of this special takings category and made clear that itis not, as petitioners urge, applicable solely where regulation is challenged “as ap- plied.” Jd. at 495 (quoting Kaiser Aetna, 444 US. at 175); see also 1d. at 498, Con nolly v. Pension Benefit Guar Corp., 47S U.S. 211, 226-27 (1986) (engaging in analysis of “interference with reasonable investment-backed expectavions” in considering facial constitutionality of statute) 20°The New York courts properly accepted Seawall’s argument that the “hard- ship” provision is illusory due to the failure of the City to promulgate any regu lations thereunder and the resulting unavailability of defined administrative procedures by which an affected property owner could seek partial or compicte exemption from the Local Law's “buy-out” or “replacement” obligations As an examination of the hardship provision clearly reveals, Loca! Law 9 itself pro vides no standards or guidelines for the exercise of the Commissioners (footnote continued on next page) 18 purchased old buildings in midtown Manhattan for site assem- blage and office building construction are automatically excluded from “hardship” exemption, since almost all of those buildings were, prior to the passage of the law, operated with a view to per- manently vacating the SRO units (in accordance with existing City policy and as the City then encouraged) and thereby “impair- ing” their usefulness as SROs. (See A-3, SR-567-71.) The serious problem posed by the foregoing impediment to any “hardship” treatment, however, is dwarfed by the problem of the Local Law’s definition of a “reasonable rate of return,” which is defined in an inherently confiscatory way. The Court will note that Local Law 9 specifically states that “assessed value” is to be determined without reference to any possibility of conversion or demolition 2’ The Court of Appeals correctly recognized that to calculate a reasonable rate of return on the basis of an assessment that ignores the value of the property based on the as-of-right non-residential use (which the Local Law prohibits), is itself con- fiscatory. And further, lest any owner seek a ray of hope in the assess- ment procedures of the City, in which assessments are systemati- cally revised to reflect the enhanced purchase prices paid by (footnote continued from previous page) discretion thereunder. (See A-53 n.12.) Indeed, there were no regulations at ail under Local Law 9 u..til this case was already on appeal to the Court of Appeals, and the belated regulations that did purport to become effective on Febru- ary 13, 1989, do not contain any procedures or guidelines whatsoever for the award of “hardship” relief. 2" Local Law 9 provides: The term “reasonabie rate of return” is defined to mean a net annual return of eight and one-half percent of the assessed value of the subject property with- out recourse to the alteration, conversion or demolition prohibited by subdivi- sions a and c of this section. If [HPD] determines that the assessed value of the subject property has increased as the result of the sale of such property, [HPD] shall disregard the increase in the assessed value resulting from such sale to the extent that [HPD] determines that the amount paid for the property at such sale was in excess of the fair market value of the property on the date of the sale if the property continued to be used for single room occupancy rental housing of the same type and quality after the sale. (A-277-278) (emphasis added). 19 ~ developers for underlying lots, the law states that HPD should disregard any increase in the assessed value resulting from a sale to the extent that it is determined that such increase !s attribut- able to the potential for redevelopment. In such case, the value ts to be determined instead as if the property would continue to be used as an SRO. Since it is undisputed that, in determining hardship, the City intends to use an assessment irrevocably and unalterably fixed and limited to use of the property as rent-regulated SRO hous- ing,22 there would appear to be little doubt that HPD would have ample latitude under. the Local Law to value the property low enough so that it would easily earn 8.5% of its “value” as an SRO.23 Thus, Seawall would be forever condemned to conduct the SRO business. Conceivably, Seawall could sell the properties to a person content to engage in such activity, but such a sale would necessarily bring a price not too different from the value HPD would impose. Thus, the only way out of the municipal ser- vitude improperly imposed by Local Law 9 might be abandon- ment of ownership or sale at a distressed price representing an insignificant fraction of what Seawall paid for the properties, in expectation of redevelopment, before the law was enacted.2* The 22 For SRO units subject to rent stabilization, the New York City Rent Guidelines Board has awarded average increases for one-year leases of .8% per year over the past five years, while apartment rent increases averaged 5% per year See N.Y.C. Rent Guidelines Bd. Hotel Orders Nos. 14-18; cf N.Y.C Rent Guide- lines Bd. Apt. Orders Nos. 16-20 23The City has conceded and acknowledged that real property in New York City is valued, for assessment purposes, at 45% —, fair market value. Thus, the 8.5% return supposedly offered to owners 1s not 8.5% of their property’s fair market value (as an SRO), but only 8.5% of 45% of fair market value, .e., 3.825% of market value (as an SRO). (See A-5S6 n.13.) 24Moreover, even abandonment would not permit an owner to escape the af- firmative obligations of the Local Law, since an owner would be subject to sub- stantial financial penalties for failure to comply. In the case at bu:, Seawall would be obligated to pay penalties of almost $55,000 upon citation, if it fails to fix-up and rent-up its units within 30 days after the effective date of the law, and commencing ten days later, fines of $27,500 per day could be imposed 20 ability to abandon or sell at such a huge loss provides no “cure” for the Local Law’s constitutional defects.25 Petitioners rely upon inapposite cases to support their argu- ment that the Court of Appeals’ holding that Local Law 9 de- prives respondents of economically viable use of their property confiicts with the decisions of this Court. For example, Hadacheck v. Sebastian, 239 U.S. 394 (1915) and Goldblatt v. Town of Hempstead, 369 U.S. 590 (1962) are both cases which fall within the long-standing “nuisance exception” to the-constitutional just compensation guarantee, and are sharply distinguishable from the case at bar on that basis, since they involved classic and proper exercise of the states’ police power to prevent activities that are tantamount to public nuisances.26 Indeed, the nuisance exception was critical in determining the result in tiie case of Key- stone, 480 U.S. at 470, as well. (See A-50-51.) 2° As to the alleged “buy-out” and “replacement” exemptions, the Court of Ap- peals correctly held that since “the effect of the moratonum and anti-warehous- ing measures is unconstitutionally to depnve owners of their basic rights to pos- sess and to make economically viable use of their properties, merely allowing " them to purchase exemptions from the law cannot alter this conclusion. In ef- fect, the city, in the buy-ovt and replacement exemptions, is saying no more to the owners than that it will not do something unconstitutional if they pay the city not to do it. But if the initial act amounts to an unlawful taking, then per- mitting the owners to avoid the illegal confiscation by paying a ‘ransom’ cannot make it lawful.” (A-54-55.) 2¢It should be noted that petitioners’ reliance on such early cases as these and Village of Euclid vy. Ambler Realty Co., 272 U.S. 365 (1926), is simplistic and inap- propriate in this context, since, before Agins v. City of Tiburon, 447 U.S. 255 (1980), and the rest of the recent line of this Court’s takings cases, the concept of determining whether the uses which remained to a property owner were “eco- nomically viable” did not yet exist—this concept “wasn’t even mentioned by the Court until Penn Central.” Berger, Happy Birthday, Constitution: The Supreme Court Establishes New Ground Rules for Land-Use Planning, 20 Urb. Law. 735, 762 (Summer 1988). Because the constitutional test in use prior to that time contained only the single requirement that land-use regulation be enacted fora proper public purpose, rather than including the alternative of deprivation of economically viable use, such early opinions have littie value in the current con- text. Jd. at 763. See also Nollan, 483 U.S. at 834-35 n.3 (noting that Goldblatt v. Hempstead is “inconsistent with the formulations of our iater cases”). 21 The case most often cited in connection with the nuisance exception is Mugler v. Kansas, 123 U.S. 623 (1887), in which the owner of a brewery alleged an unconstitutional taking of his prop- erty by an amendment to the state constitution prohibiting the manufacture and sale of intoxicating liquors. This Court held tn Mugler that, since the distiller’s use of his property had been val- idly declared by the constitutional amendment to be “injurious to the health, morals or safety of the community,” no compensable taking resulted from the state’s termination of this “noxious use of [his] property, [which] inflict{ed] injury upon the community.” Keystone, 480 U.S. at 489 (quoting Mugler, 123 U.S. at 668-69) .° As this Court explained in Keystone, however, this distinct type of state action to abate a public nuisance has a “special status” in takings jurisprudence, which: . . can [be] understood on the simple theory that since no individual has a right to use his property so as to create a nuisance or otherwise harm others, the state has not “taken” anything when it asserts its power to enjoin the nuisance-like activity. Id. at 491 n.20.27 The Court was careful to underscore the caveat that “ ‘[t]he nuisance exception to the taking guarantee is not co- terminous with the police power itself.’ /d. (quoting Penn Cen- tral Transp. Co. v. New York City, 438 U.S. 104, 145 (Rehnquist, J., dissenting)). Rather, it has long been recognized as a “narrow” exception, allowing the government the necessary latitude to pre- vent “a misuse or illegal use.” Curtin v. Benson, 222 U.S. 78, 86 (1911) (cited in Keystone, 480 U.S. at 512 (Rehnquist, C.J., dissent: 271t must be noted, however, that this Court has never indicated that all use of an entire property could be prohibited without compensation based upon this the- ory, but rather, merely that a particular activity which constitutes 4 danger to others, or a “nuisance,” may be prohibited. 22 ing)).28 “It is not intended to allow ‘the prevention of a legal and essential use, an attribute of its ownership.’ ” Keystone, 480 U.S. at 512. Moreover, in contrast to the present case, the petitioners in Keystone lost on their facial regulatory taking claim because this Court found that they did not suffer any significant diminution in the value of their properties by reason of the challenged statute — there was simply no indication that the law made it impossible for them to profitably engage in their business or that there was any undue interference with their investment-backed expectations. Id. at 492-93. Significantly, this Court emphasized that the Key- stone petitioners never even claimed that their mining operations were rendered unprofitable or commercially impracticable by the challenged law, and that, to the contrary, the record showed that, while the statute required that they leave /ess than 2% of their coal in place, only 75% of their underground coal could be profitably mined in any event. Id. at 495-96. Thus, the Keystone majority found no evidence of any material effect on the petitioners’ invest- ment-backed expectations, and accordingly held that they had not been denied economically viable use of their properties. Jd. at 495-96, 499.29 " Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978), was also a distinctly different case than the one at bar. Under the facts in Penn Central, this Court held that no taking had occurred by the landmarking of Grand Central Terminal un- 2* By way of illustration, the nuisance exception has been applied to deny compen- sation for the diminution or destruction of value of such property as hazardous waste operations, brothels, unsafe buildings, fire and health hazards, gambling facilities, and “bawdyhouses.” See Keystone, 480 U.S. at 492 n.22 (citations omit- ted). So far as Seawall is aware, real estate development has not yet been legis- latively declared an illegal or noxious use. 2*In the words of one commentator, “[i]n Keystone, the companies conceded that they had been operating profitably for twenty years under the regulations and that no individual mine was rendered unprofitable by the regulation. The High Court was thus unmoved by their asserted plight. . . . ” Berger, supra, at 738. 23 der its regulatory taking test, primarily because the owners’ exist- ing use of the property was still economically viable (although less profitable than it would have been under their unsuccessful pro- posal to build a high-rise office building in the air space above the terminal), and the denial of permission by the City to build the office building did not interfere with the owners’ primary expecta- tion of using the land asa railroad terminal. See id. at 136-38. It was highly significant in Penn Central that the owners did not dispute the finding that they could in fact earn a “reasonable return” on their investment in the Terminal based on the land’s existing use dd. at 129 n.26. This distinction is critical to this Court's conclu- sion in Penn Central that the Landmarks Law did not result in a compensable taking, where it “not only permit[{ted] but conteim- plate[d] that appellants [could] continue to use the property pre- cisely as it ha[d] been used for the past 65 years... .” Jd at 136.3° Moreover, unlike Local Law 9, the ordinance in Penn Cen- tral gave the property owners valuable transferable development rights, which they could use on other property or sell to others, in exchange for the development rights it “took” from them. /d. at 129. Finally, the Court of Appeals’ holding that the burdens im- posed on respondents by Local Law 9 do not substantially ad- vance legitimate state interests was not only consistent with, but was required by, this Court’s decision in Nollan, 483 U.S. at 825. In light of the Terminal owners’ concession that they were still able to make a reasonable return on their investment in the property, this Court’s conclusion that the continuation of their present use left them with an economically viable property made sense in the Penn Central context. It does not make sense here, on the other hand, to reason, as petitioners do, that respondents have ipso facto not been deprived of economic viability because they are free to “continue” to use their properties as SROs, a use chosen and carried out in the past (unprofit- ably, see R. 708; SR-590) by others, and not, as in Penn Central, their own chosen and profitable long-standing use of the property. Furthermore, the Blackburn Report itself (the basis for all of Local Law 9's “findings of fact”), found that SROs are not an economically rational use of valuable land in midtown Manhat- tan (R. 732), due to, inter alia, City-wide market forces creating a rapid nse in the value of such real estate and making the only economically rational uses thereof dependent upon conversion or demolition of these buildings 24 Clearly, “Nollan calls into question the legal propriety of shifting the burden of the cost of [a needed] public benefit to the ‘last guy on the block’ with a perceived deep pocket.” Falik & Shimko, The “Takings” Nexus— The Supreme Court Chooses a New Direction in Land-Use Planning: A View From California, 39 Hastings L. J. 359, 393 (1988). This Court’s opinion in Nollan proceeds from a recognition of the constitutional necessity of a substantial cause-and-effect “nexus” between the harmful impacts created by the development project being regulated, and the exactions or burdens being im- posed thereon by the government regulators. See Nollan, 483 U.S. at 836-37.3' After Nol/an, a heightened scrutiny of land use regu- lation is required, and in order to survive a Fifth Amendment tak- ing challenge, an exaction must be directly related to amelioration of the adverse impact of the owner’s proposed project and, more- over, “the adverse impact must be such that the regulator could have denied the permit outright.” Berger, supra, at 751. In the words of the Court of Appeals, under Nollan, “the stark alterna- tives offered [to respondents] by Local Law No. 9—either submit to an uncompensated and, therefore, unconstitutional appropria- tion of your properties or pay the price (in cash or in replacement units)—amount to just the sort of exaction which could be classi- fied, not as a valid regulation of land use but, ‘an out-and-out plan of extortion.’ ” (A-55-56, quoting Nollan, 483 U.S. at 837 (citation omitted).) Although petitioners attempt to say that respondents’ rede- velopment of their SRO properties will “cause” homelessness (see, e.g., City’s Petition at 17, asserting that the law “alleviat[es] the harm [respondents’] development does to the people of New York City”), it is now clear that simply saying so is not enough to pass constitutional muster. As this Court declared in Nollan, 3" This theory is further elaborated upon in an extremely pertinent factual context in Justice Scalia’s subsequent Pennell dissenting opinion. See 108 S. Ct. at 862-64. 25 “[w]e view the Fifth Amendment’s property clause to be more than a pleading requirement, and compliance with it to be more than an exercise in cleverness and imagination.” 483 U.S. at 841. Ii is ,.ain that the requisite causal nexus is lacking in this case, and that respondents have been unfairly forced to bear public burdens, not of their creation, by Local Law 9. The City itself acknowledges that the decline in the number of SRO units in New York “may be attributed to previous City policies which reflected the then wide-spread opinion that such units were ‘substandard’ and resulted in legal restrictions on the development of new SRO units (see Administrative Code § 27-2077)”, (R. 177), as well as encouraging the destruction of ex- isting SROs through tax incentives and other means. (See City’s Petition at 3.) Indeed, it might well be concluded that respon- dents can more fairly be said to be eliminating a “noxious use” of property by their plans to replace the antiquated and largely unin- habitable former SRO buildings on their properties with modern, useful, commercial and residential developments than they are in any way initiating one.*2 Moreover, contrary to petitioners’ assertions, Local Law 9 is not necessary to protect any current SRO tenants from homeless- ness or from harassment. As petitioners are well aware, other New York laws exist to protect tenants against unlawful eviction practices. See Sadowsky v. City of N_Y., 732 F.2d 312 (2d Cir. 1984) (upholding the City’s SRO anti-harassment law). Respondents are obligated by existing rent control and rent stabilization laws, 32 The ultimately detrimental effect of the land use policy of Local Law 9 on City welfare is plain: the benefits to the City’s real estate tax base which would flow from the hundreds of millions of dollars of commercial and residential redeve!- opment which Local Law 9 would prevent would clearly seem to outweigh the benefits of the relatively few SRO units preserved by the law. It is respecifully suggested that an alternative program which would permit the development of City real estate to its highest and best use, while earmarking the increased prop- erty taxes derived from such improvements for housing the homeless, would surely provide the financial underpinnings for a more rational and comprehen- sive City housing policy. (See R. 573.) 26 in the event they seek to vacate their buildings, to negotiate relo- cation agreements with such tenants (which will involve substan- tial and profitable compensation to those individuals). Thus, if the goal of Local Law 9 is, as the City claims, to prevent current tenants from becoming homeless, no adequate nexus can be shown between its means and its ends. In addition, to the extent the City’s goal is to increase the availability of affordable housing stock, the “logic” underlying Local Law 9 is revealed to be insupportable: if the City exacts so large an amount in exchange for allowing owners to redevelop their properties* that the owner cannot afford to pay, new devel- opment (including new residential development) becomes highly unlikely; and if the owner submits and makes the extortionate payment, not only does the City get a windfall, but, if the contem- plated development is residential, the cost of available housing in the City will predictably increase.* On the other hand, to the ex- tent the City’s goal is to “preserve” existing SRO units affordable to the indigent population which has historically inhabited such “bottom-rung” housing, Local Law 9 doesn’t effectively address that problem either—-under the law’s provisions, respondents could “rent-up” their units to anyone*s or they could “replace” * In Seawall’s case for example, the cost of “buying-out” its buildings from under the yoke of Local Law 9 (at $45,000 per unit, see N.Y.C. Admin. Code §§ 27-198.2(dX4XaXi) and 27-198.2(h)) would be approximately $5 million, an ex- orbitant amount by any standard. Itis worth repeating here that, even with this enormous buy-out, Seawall would still not be free to evict its few current ten- ants, who are protected from eviction by other laws. Moreover, the exercise of the “option” to “buy-out” could nevertheless leave it in circumstances where such tenants refuse to negotiate relocation agreements, and Seawall is forced to maintain those units in perpetuity. *It has been estimated that as much as 30% of the current cost of housing is di- rectly attributable to land-use regulation. See Case & Gale, Henry George Wouldn't Be Big On Today's Growth Controls, Wall St. J., Mar. 3, 1988, §1, at 18. * The City itself acknowledges that “these units will not have to be rented to homeless persons or to individuals of any particular social or economic status.” (R. 449; see A-47-48.) 27 their units with non-SRO housing “affordable” to persons of “moderate” income. (N.Y.C. Admin. Code § 27-198.2(d)(4 aii): R. 153-54.) If they pay the $45,000 per unit ransom under the buy- out provisions, the Local Law provides that the City will use these funds “for the preservation . . . of dwelling units for persons of low and moderate income” (N.Y .C. Admin. Code § 27-198.2(1); R. 156-57) (emphasis added). In sum, the Court of Appeals correctly held that Local Law 9 fails to meet Nollan’s requirement of a close nexus between the “means” and “ends” of a challenged land-use regulation. CONCLUSION For all of the foregoing reasons and the reasons set forth in the briefs of co-respondents, the petitions for a writ of certiorari should be denied. Respectfully submitted, STROOCK & STROOCK & LAVAN Seven Hanover Square JOSEPH L. FORSTADT New York, New York 10004-2594 Counsel of Record (212) 806-5400 NANCY HIRSCHMANN Of Counsel -and- DERSHOWITZ & EIGER, P.C. 225 Broadway NATHAN Z. DERSHOWITZ New York, New York 10005 Of Counsel (212) 513-7676 Attorneys for Responde:.t Seawall Associates November 3, 1989 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_0267%3A3. Public record. Not legal advice.