Opposition Brief — City of New York v. Seawall Associates

?

paps Bupreme Court, U.S,

Te ri LED

\ eee

/ 1B PH F. SPANIOL, J

CLERK

Supeme Court of the United 6 .

October Term, 1989

7 THE CITY OF NEW YORK, er al,

Petitioners,

against

SEAWALL ASSOCIATES, et ai.,

Respondents

THE COALITION FOR THE HOMELESS,

Petitioner,

against

SEAWALL ASSOCIATES, et ai.,

Respondents

RICHARD WILKERSON, et al.,

Petitioners,

against

jo SEAWALL ASSOCIATES, er al.,

Respondents

On Petitions for a Writ of Certiorari

to the New York State Court of Appeals

BRIEF IN OPPOSITION OF RESPONDENT

SEAWALL ASSOCIATES

——————————————

Srroockx & Stroock & LAVAN

Seven Hanover Square

New York, New York 10004-2594

(212) 806-5400

and

Densnowlrz & Eicer, P.C.

225 caged

cp yh 10005

) 513-7676

ae

TABLE OF CONTENTS

TABLE OF AUTHIORITIES ......-cccccscsscccecsecs

COUNTERSTATEMENT OF THE CASE ............

REASONS WHY THE lciceieacabie SHOULD BE

EE cbccccdvcecdvatneDeetevnbececscsvissaeree

et rn a a a EL Sirk eae

2. This Court’s Prior Decisions Concerning the Per Se

Physical Taking Doctrine Fully Support the Decision

| RRP Ee Peery rere CRT eT eee Tee

3. This Court’s Prior Decisions Fully Support the De-

termination Below That Local Law 9 is Facially Inva-

lid As A Regulatory Taking ..............--+55.

CRETE Cac ccc rescccscscccercennecereessesws

ii

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) .......... ene,

Beacon Hill Farm Assocs. v. Loudoun County Bd. of i

Supervisors, 875 F.2d 1081 (4th Cir. 1989) ............ 14, 15

Benson v. Beame, 50 N.Y.2d 994, 409 N.E.2d 948

(1980), appeal dismissed, 449 U.S. 1119 (1981) ......... 8

Block ¥. Sirah, 756 UB. 135 CFE) a cceivcivccesconsess: 7

Bowles v. Willingham, 321 U.S. 503 (1944) .............. 5, 6, 7

Callahan v. Fresh Pond Shopping Center, Inc.,

388 Mass. 1051, 446 N.E.2d 1060, appeal disrnissed,

464 UD. Cid CRG) cdéccvesesavseeeraeeeueee 5, 7,8

Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211

(Pe rr rea ee ee 17

Curtin v. Benson, 222 U.S. 78 (1911)............0020005. 27

Edgar A. Levy Leasing Co. v. Siegel, 258 U.S. 242 (1922) .. 7

Flynn v. City of Cambridge, 383 Mass. 152, 418 N.E.2d 335

CISGD) oo nccecdcveevesndaee nee: cee 8

en

Fox Film Corp. v. Muller, 296 U.S. 207 (1935) ........... 3

Goldblatt v. Town of Hempstead, 369 U.S. 590 (1962) ..... 20

Hadacheck ¥. Sebastian, 239 U.S_394 (1915)............. 20

Harms v. Reed, __ U.S. _, 109 S. Ct. 1038 (1989) ......... 3

Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241

2) Pr ee ae ae

Herb v. Pitcairn, 324 U.S. 117 (1945) ...............260. 3

Hodel v. Irving, 481 U.S. 704 (1987) ........0002cc0eeeee 15

es

iil

PAGE

Hodel v. Virginia af sasdiiag & Reclamation Ass'n,

452 U.S. 264 (1981) . at ee A

Joslin Mfg. Co. v. City of Providence, 262 U.S. 668 (1923) . 4

Kaiser Aetna v. United States, 444 U.S. 164 (1979). .5, 8, 10, 16, 17

Keystone Bituminous Coal Ass'n v. DeBenedictis,

480 U.S. 470 (1987) ...........-- eas s so» 35, 87, ZZ

Kimball Laundry Co. v. United States, 338 U.S. 1 (1949) . . 13

Lansing Research Corp. v. Sybron Corp., 142 A.D.2d

816, 530 N.Y.S.2d 698 (3d Dep't 1988)................ 16

Loretto v. Teleprompter Manhattan CATV Corp.,

458 U.S. 419 (1982), rev’g on other grounds, 53 N.Y.2d

Tae es WE 2e See (TSO) ...........----es- 5, 8, 10-12, 15

MacDonald, Sommer & Frates v. County of Yolo,

MF PPE occ cece cece cece eecesnscccess: 15

Marcus Brown Holding Co. v. Feldman, 256 U.S. 170

CEN G WLU ae be steceeccvcecccsceces: 7

Michigan v. Long, 463 U.S. 1032 (1983) ......-..-. act an

Mills v. Rogers, 457 U.S. 291 (1982) .......------ 200005 3

Mugler v. Kansas, 123 U.S. 623 (1887) ........-.-- 21

Nash v. City of Santa Monica, 37 Cal. 3d 97, 688 P.2d 894

(1984), appeal dismissed, 470 U.S. 1046 (1985) ........ 8

Nollan v. —" Coastal Comm'n, 483 U.S. 825

(1987). I

Penn Central Transp. Co. v. New York City, 438 U.S. 104

re ncicnsvccsctvercseees. 21, 22-23

Pennell v. City of San Jose, 485 U.S. 1, 108 S. Ct.

OMI occ ccc eee c eee c er scsccceeee: 5 5, 6, 24

PruneYard Shopping Center v. Robins,

MEE UMIIED, cc ccc ccc ccc cece ccccccccceee 4, 5, 9-10

PAGE

Pumpelly v. Green Bay Co., 80 U.S. 577 (1871) ........... 5

Sadowsky v. City of N.Y., 732 F.2d 312 (2d m—oe .... 2B

Seawall Assocs. v. City of N.Y., 134 Misc. 2d 187

Co Sos Pa A Rs vcs owes tiesasehies sc ecdeys 2

Seawall Ass6cs. v. City of N.Y., 138 Misc. 2d 96

Ge es As es SAG SO pce kh cveuedhncbn kde soso esrs 4

Seawall Assocs. v. City of N.Y., 142 A.D.2d 72

CE ED. Sich v5 k bn Subvbeeeeius ines <teeens 2

Seawall Assocs. v. City of N.Y., No. 127, slip op.

(Fe E> ov oncatabinekeh ar au ee uessase ss passim

United Public Workers v. Mitchell, 330 U.S. 75 (1947) ..... 14

United States v. Causby, 328 U.S. 256 (1946) ............ 5

United States v. Central Eureka Mining Co., 357 U.S. 155

CHD 0 bki'c.0s wa view cc ee ee eae eae bees oh Gants » 5

United States v. General Motors Corp., 323 U.S. 373

GRD. 68.464 s des kc SOR PA Onna ahs b6 0s 3, i

United States v. Lynah, 188 U.S. 445 (1903)... eee 5

United States v. Petty Motor Co., 327 U.S. 372 (1946) ..... 13

United States v. Pewee Coal, 341 U.S. 114 (1951) ......... 13

United States v. Salerno, 481 U.S. 739 (1987)............. 15

Village of Euclid vy. Ambler Realty Co., 272 U.S..365

(ROOT 0's oo 0saees ae enead tad eee as veoh kas 14, 20

Williamson County Regional Planning Comm'n v.

Hamilton Bank, 473 U.S. 172 (1985) ................. 14, 15

Woods v. Cloyd W. Miller Co., 333 U.S. 138 (1948) ....-.. 7

PAGE

CONSTITUTIONS

tf ie | 3) (eee oor cea ed ! a

U.S. Const. amend. V ....... een ars- POT eee er cre 3,4

U.S. Const. amend. XIV..... se cceeeevenerneseeeeeeees 3

N.Y. Const. art. 1,§7..-... : Ss ae mic bude kane e wawe 3

STATUTES AND REGULATIONS

N.Y.C. Admin. Code ch. 2, § 27-198.2(d)4 ai) (1987) .. 26

N.Y.C. Admin. Code ch. 2, § 27-198.2(d)(4aXii) (1987) . . 27

N.Y.C. Admin. Code ch. 2, § 27-198.2(d4\(b) (1987) .... 1S

N.Y.C. Admin. Code ch. 2, § 27-198.2(dX4\bXiii) (1987) . 18

N.Y.C. Admin. Code ch. 2, § 27-198.2(h) (1987) .....-.-- 26

N.Y.C. Admin. Code ch. 2, § 27-198.2(i) (1987) ......---. 27

N.Y.C. Rent Guidelines Bd. Apt. Orders Nos. 16-20... 19

N_Y.C. Rent Guidelines Bd. Hotel Orders Nos. 14-18.... 19

MISCELLANEOUS

Berger, Happy Birthday, Constitution: The Supreme Court Estab-

lishes New Ground Rules for Land-Use Planning, 20 Urb Law

735 (Summer 1988) ........--0+0 020s cree tees 20, 22, 24

Case & Gale, Henry George Wouldn't Be Big on Today's

Growth Controls, Wall St. J., Mar. 3, 1988, § 1, at 18... 26

Falik & Shimko, The “Takings” Nexus—The Supreme Court

Chooses a New Direction in Land-Use Planning: A View From

California, 39 Hastings LJ. . |) ee in 24

Nos. 89-388, 89-403 and 89-552

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

THE CITy OF NEW YORK, et al.,

Petitioners,

-against-

SEAWALL ASSOCIATES, et al.,

Respondents.

THE COALITION FOR THE HOMELESS,

Petitioner,

-against-

SEAWALL ASSOCIATES, et al.,

Respondents.

RICHARD WILKERSON, et al.,

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

Respondent Seawall Asscviates (“Seawall”) respectfully

urges that this Court deny the petitions for a writ of certiorari,

2

seeking review of the opinion of the New York State Court of Ap-

peals.'

COUNTERSTATEMENT OF THE CASE

Seawall will not respond here to the many misstatements and

references to matters dehors the record in the descriptions of the

case contained in the three petitions, except to note that it takes

issue with the petitioners’ argumentative presentations of the

facts herein. Because the relevant provisions of New York City

Local Law 9 of 1987 (“Local Law 9”), which was declared uncon-

stitutional in the judgment sought to be reviewed, as well as the

relevant underlying facts of this case, are adequately stated in the

published opinions of the Supreme Court, New York County, the

Appellate Division and the Court of Appeals, Seawall respect-

fully refers this Court thereto. See Seawall Assocs. v. City of N.Y.,

134 Misc. 2d 187, 189-92 (Sup. Ct. N.Y. Co. 1986) (Saxe, J.) (omit-

ted from the City’s Appendix); Seawall Assocs. v. City of V.Y., 138

Misc. 2d 96 (Sup. Ct. N.Y. Co. 1987) (Saxe, J.) (see A-166-183);

Seawall Assocs. v. City of N.Y., 142 A.D.2d 72 (1st Dep't 1988) (see

A-109-142); Seawall Assocs. v. City of N.Y., No. 127, slip op. (N.Y.

July 6, 1989) (see A-2-10).

REASONS WHY THE PETITIONS

SHOULD BE DENIED

1. This Court is Without Jurisdiction to Hear This Case

This Court has long recognized that it does not possess juris-

diction to review state court decisions rendered on the basis of

independent and adequate state constitutional grounds, even

though federal questions may also be involved in the case. See

’ Opinion reprinted in the Appendix to the Petition of the City of New York, et al.

(the “City’s Petition”) at page A-1. Parenthetical citations preceded by “A”

refer to the Appendix to the City’s Petition; those preceded by “R” refer to the

first and second volume of the Record on Appeal filed in the Court of Appeals;

and those preceded by “SR” refer to the third volume of the Record on Appeal

(which had been denominated “Supplemental Record” in the Appellate Divi-

sion).

: 3

Fox Film Corp. v. Muller, 296 U.S. 207, 210 (1935); see also Harms v.

Reed, _ U.S. _, 109 S. Ct. 1038 (1989). As long as the state court

has made a “plain statement” indicating that there is an inde-

pendent and adequate state law ground for its opinion, this Court

does not have the power to hear the appeal. Thus, in Michigan v.

Long, 463 U.S. 1032 (1983), this Court declared that, “[i]f the state

court decision indicates clearly and expressly that it is alterna-

tively based on bona fide separate, adequate, and independent

grounds, we, of course, will not undertake to review the decision.”

Id. at 1041.

In several specific instances, the opinion of the New York

State Court of Appeals adequately and independently relied on

New York State constitutional requirements, independent of fed-

eral constitutional law, in striking down Local Law 9. (See, e.g..

A-3. A-5, A-9-10, A-12, A-61-63 (particularly at fn. 15) and

A-65-66.) In these circumstances, even if the Court of Appeals’

ruling with respect to the federal questions presented were argu-

ably wrong, it would be superfluous, because the same judgment

would plainly be rendered by the State court in this case even if its

view of federal law were to be “corrected” by this Court, thus re-

ducing any review by this Court to “nothing more than an advi-

sory opinion.” Herb v. Pitcairn, 324 U.S. 117, 125-26 (1945).

Significantly, the Court of Appeals, in footnote 15 of its opin-

ion. underscored the rule that the takings clause of the New York

State Constitution need not be interpreted in the same manner as

this Court has interpreted the federal takings clause—-e., the

protections granted property owners by Article 1, section 7 of the

State Constitution may be broader than those guaranteed by the

Fifth and Fourteenth Amendments of the U.S. Constitution.

2 While states are allowed freedom to adopt and enforce their own constitutions

and statutes, this Court has made clear that the requirements of the US. Con-

stitution establis!. .1.¢ “minimum” protection to which all are entitled. Mills v

Rogers, 457 U.S. 291, 300 (1982). Thus, the freedom which the states enjoy, and

which the New York Court of Appeals could properly have exercised in this

(footnote continued on next page)

4

The Court of Appeals noted, however, that since, in this case, it

had expressly and plainly found Local Law 9 to be facially invalid

under both the federal and the state constitutions, it did “not

[need to] decide the extent of which, if at all, the protections of the

‘takings clause’ of the New York State Constitution differ from

those under the Federal Constitution.” (A-63 fn. 15.) Thus, if this

Court were to find that the Court of Appeals misconstrued the

federal Constitution, that conclusion would be academic in terms

of this case. The Court of Appeals is the final arbiter of the New

York State Constitution and there is no suggestion that its inter-

pretation thereof violates the federal Constitution. Therefore.

Local Law 9 is invalid as an uncompensated taking under the New

York State Constitution, and there is an independent and ade-

quate state ground for the Court of Appeals’ decision. Footnote

15 of its opinion is a “plain statement” by the highest state court

indicating that there is an independent and adequate state law

ground for the decision, thus rendering any differences between

the federal and state takings clauses irrelevant in this case. See

Michigan v. Long, 463 U.S. at 1041 As a result, there is no juris-

dictional basis for Supreme Court review herein, and the peti-

tions should accordingly be denied.

2. This Court’s Prior Decisions Concerning the Per Se Physical

Taking Doctrine Fully Support the Decision Below

The Court of Appeals’ holding that Local Law 9 would result

in an invalid physical taking requiring compensation under the

Fifth Amendment is not contrary to any of the decisions of this

(footnote continued from previous page)

case if it had found such action to be necessary, is to provide more protection

under the state constitution than the federal Constitution requires, not less. See

Joslin Mfg. Co. v. City of Providence, 262 US. 668, 676-77 (1923), see also

PruneYard Shopping Cenier v. Robins, 447 US. 74, 81 (1980)

? The petitioners’ attempts to base their arguments (that there was no adequate

and independent state ground) on this very stalernent i most cunous indeed.

(See City's Petition at 23, Petition of The Coalition for the Homeless (the “Coa-

lition’s Petition”) at 19-20)

ep

—

- 5

Court which are pointed to by petitioners. (See City’s Petition at

10-14; Coalition's Petition at 22-29, joined in on this point by the

Petition of Richard Wilkerson, et al. (“Individual Intervenors’ Pe-

tition”) at 20.) As the carefully reasoned discussion (reproduced

at A-12 through A-29) in the opinion itself demonstrates, the

Court of Appeals properly applied the teachings of this Court's

pertinent decisions in determining that a per se physical taking

existed in this case. See Loretto v. Teleprompter Manhattan CATV

Corp., 458 U.S. 419 (1982); Nollan v. California Coastal Comm'n,

483 U.S. 825 (1987); Kaiser Aetna v. United States, 444 US 164

(1979): see also United States v. Causby, 328 U.S. 256 (1946); United

States v. General Motors Corp., 323 U.S. 373 (1945). United States

v. Lynah, 188 U.S. 445 (1903); Purpelly v. Green Bay Co., 80 US.

577 (1871): of. Bowles v. Willingham, 321 U.S. 503 (1944). The

“conflicts” perceived by petitioners between the above-cited deci-

sions and that of the Court of Appeais in this case are strictly illu-

sory.*

Firstly, the City’s assertion of “conflict” as to the finding of a

physical taking in this case relies primarily on its erroneous belief

that so long as a law somehow affects “the landlord-tenant rela-

tionship,” it is ipso facto immune from constitutional just com-

pensation requirements. As the Court of Appeals correctly

found, this theory is simply incorrect (see A-23-27). The very pur-

pose of the “rent-up” provisions of Local Law 9 (see A-6-7) is to

attempt to create new landlord-tenant relationships where none

exist. Existing landlord-tenant relationships, on the other hand.

are wholly governed by different and independent New York

laws — Local Law 9 is an entirely different category of regulation

* Other cases cited in the petitions are either manifestly inappesite in thes regard

Of ate not controlling as binding precedent in this case Cf, eg. Pennell» Cin

of San Jose, 485 U.S 1 (1988): Callahan v Fresh Pond Shopping Center Inc 88

Mass 1051, 446 N_E 2d 1060, appeal dismissed, 464 US 875 (1963). PruneYard

Shopping Center v Robins, 447 US 74 (1980) Heart of Atlanta Motel Inc

United States, 379 US 241 (1964), United States » Central Eureka Mining Co

357 US 155 (1958)

6

The decisions relied upon by the City are sharply distin-

guishable from the present case. For example, this Court did not

subject the rent control law challenged in Pennell v. City of San

Jose, 485 U.S. 1, 108 S. Ct. 849 (1988), to a takings analysis at all.

Rather, the majority merely held in Pennell that the ordinance at

issue was not facially “irrational” under the “deferential” due

process standard applicable in that case. See id. at 859.5 The tak-

ings claims asserted in Pennell were felt by the majority of this

Court to be premature (and were therefore not addressed at all)

because, absent enforcement, there was no evidence that the chal-

lenged “tenant hardship” clause would ever actually be relied

upon to reduce a rent below the figure it would have been set at on

the basis of the other six (concededly valid) factors specified in

the law.*

Similarly, the emergency wartime rent control statute upheld

in Bowles v. Willingham, 321 U.S. 503 (1944), did not, as the City

claims, “restrict landlords’ ability to determine whether their resi-

dential properties [would] be rented.” (City’s Petition at 11.)

That law merely set maximum rents in certain designated “de-

fense rental” areas, and it explicitly provided that it did not re-

* It us highly significant that, in Pennell, the challenged ordinance did not apply.

by 1s own terms. “to the rental of a unit that has been voluntarily vacated” or

“that is vacant as a result of eviction for certain specified acts.” 108 S. Ct. at 854

n.2. and thus did not, in any event, share one of the most inherently invasive and

confiscatory features of the local law at issue in this case. (See A-13-15, A-26.)

* Such a showing was found necessary in that case since, inter alia, under the San

Jose ordinance, consideration of “tenant hardship” was to result in permussive,

and not mandatory reductions in rent.

It ss worth noting, nevertheless. that the sux Justices joining in the Pennell mayor-

ity opimon explicitly acknowledged the lack of a substantial causal nexus be-

tween the landlord's actions and the tenant's hardship (as required to overcome

a taking claim ander Nollan) in that case. See id at 859. Seawall submits that.

while the lack of any reasonable causal nexus was found by the majonty to be

“beside the pont” in Pennell, for purposes of the deferential “rational relauion-

ship” test of due process analysis. it would be quite relevant, or even determina-

ve. to any takings analysis under the newly applicable stricter test set forth in

Nollan, in which this Court unequivocally heightened the standard of renew

(See infra at pp 24-25)

-

quire “any person. . . tooffer any accommodations for rent.” /d

at 517. This stands in “sharp contrast” to Loca! Law 9. which re-

quires respondents, against their will, to allow new tenants. previ-

ously unknown to them, to enter their property and take physical!

possession of it; thus acquiring possessory interests undét other

existing state rent control laws which are extraordinarily difficult.

if not impossible, to sever and which can protect them indefinitely

from eviction. (See A-26.) Any use of the real estate other than as

an SRO is effectively forbidden by Local Law 9. In explaining why

the law challenged in Bowles did not effect a “taking” of property.

this Court emphasized that “[t}here [was] no requirement that the

apartments in question be used for purposes which {brought}

them under the Act.” Jd.

Respondents do not challenge the constitutionality of emer-

gency rental housihg legislation prohibiting the eviction of ten-

ants-in-possession whose leaseholds have expired. which was first

upheld by this Court in Block v. Hirsh, 256 U.S. 135 (1921). and

which was not questioned by the Court of Appeals in this case

(See A-23-26.) However, the Block case and its progeny, relied

upon by petitioners, have no bearing on the validity of Local Law

9's distinctly more onerous rent-up and fix-up requirements.

which purport to compel Seawall and other owners of buildings

containing (or formerly containing) SRO units to render derelict

vacant units habitable (at considerable expense). and to accept

total strangers as tenants of space which they desire to keep

empty (or demolish and replace with other permitted uses) See

also Marcus Brown Holding Co. v. Feldman, 256 U.S. 170 (1921);

Edgar A. Levy Leasing Co. v. Siegel, 258 U.S. 242 (1922); Woods v.

Cloyd W. Miller Co., 333 U.S. 138 (1948). (Also relied on in the

Coalition's Petition at 31-35.’ The fact is that Local Law 9 is not

” Petitioners also repeatedly cite Callahan v Fresh Pond Shopping Center. Inc

388 Mass. 1051, 446 N E 2d 1060). appeal disrnussed 464 US 87S (1983), as being

binding precedent of this Court which supports their position However, Cal-

lahan % an extremely weak “support” on which Ww rely. as it was “2 case that

(footnote continued on next page)

8

classifiable simply as “landlord-tenant” regulation—indeed, it

“adjusts” neither rents nor evictions, nor does it in any manner

alter the landlord-tenant relationship under existing laws—and it

is also plainly not merely a “restriction on use”®; but, to the con-

trary, deprives respondents of ail use of their property except that

imposed upon them, against their will, by the City. Indeed, even

the City itself concedes that Local Law 9 “gofes] beyond tradi-

tional rent control [reguiation].” (City’s Petition at 21.)

Similarly, an entirely novel and utterly unsupported theory is

posited by the intervenors-petitioners: that by grafting some un-

defined “personal privacy of use” requirement onto the Fifth

Amendment's conception of protected “property,” the “right to

exclude others” may be made inapplicable to all “rental prem-

ises,” and thus, to the case at bar. (See Coalition’s Petition at

22-26, 44.) This proposition cannot withstand even cursory scru-

tiny. The Coalition (joined by the individual intervenors on this

point) tries to “distinguish” such cases as Nollan, 483 U.S. at 825;

Kaiser Aetna, 444 U.S. at 164; and Loretto, 458 U.S. at 419, on the

ground that they involved “property reserved by [their] owners for

personal private use” (Coalition's Petition at 22) while this case

(footnote continued from previous page)

ha[d] produced no prevailing written opinion at any level. The trial court pub-

lished no opinion, the Supreme Court of Massachusetts summarily affirmed the

judgment by a tie vote (446 N_E.2d 1060), and [this] Court summarily dismissed

a purported appeal for want of a substantial federal question. That scenario

creates no persuasive, let alone binding, authority for anything.” Nash v. City of

Santa Monica, 37 Cal. 3d 97, 112-13, 688 P.2d 894, 905 (1984), appeal dismissed,

470 US. 1046 (1985) (Mosk, J., dissenting). In any event, the ordinance chal-

lenged in Callahan, like the other cases relied on by petitioners, only protected

certain tenants-in-possession from eviction and did not mandate that vacant

units be subjected to coerced new tenancies. See Callahan, 464 US. at 875

(Rehnquist, J., dissenting from dismissal and concluding that the ordinance was

a taking without just compensation because it was the equivalent of a “physical

occupation” of the landlord's property). see also Flynn v. City of Cambridge, 383

Mass. 152, 418 N.E.2d 335 (1981) (same ordinance), Benson v. Beare, 50 N.Y .2d

994, 409 N_E.2d 948 (1980), appeal dismissed, 449 U.S. 1119 (1981).

* As 1s argued in the Coalition's Petition at 29.

9

allegedly does not; and it inappropriately analogizes to Congress’

right under its commerce power to enact legislation forbidding

racial discrimination in places of “public accommodation” (1.e.,

~ hotels, restaurants, cheaters). Heart of Atlanta Motel, Inc. y

United States, 379 U.S. 241 (1964).9

In fact, the Coalition’s argument proves too much —it is in-

deed because of the fact that respondents did not intend or desire

to “open their property to the general public” that such cases as

PruneYard Shopping Center v. Robins, 447 U.S. 74 (1980) and

Heart of Atlanta Motel, Inc., 379 U.S. at 241, are utterly inapposite

! herein. See Nollan, 483 U.S. at 832 n.1 (distinguishing Prune Yard

on the ground, inter alia, that “there the owner had already

opened his property to the general public”).1° Since, to the con-

* Hear of Atlanta, in which this Court rejected a takings challenge to the Civil

Rights Act of 1964 by a property owner who volunianly operated a motel on his

premises and actively solicited patronage therefor on a national basis but de-

sired to continue to follow “a practice of refusing to rent rooms to Negroes,” id

at 243, is utterly inapposite in the present context. Among other things, the

taking claim in that case (summarily rejected by this Court in one sentence) was

not treated as a “physical” taking claim at all but rather as a claim that the chal-

lenged law would operate as a regulatory taking by causing the owner economic

loss (which claim was found to be invalid). /d. at 260-61. Obviously, if the owner

“of the Heart of Atlanta Motel had opted to go out of the motel business and

wished to convert his property to other uses rather than give up his policy of

racial discrimination, the Civil Rights Act would not (and could not) have com-

= pelled him tocontinue to rent rooms to anyone (and certainly could not retroac-

— tively have forced someone to whom he sold the property for redevelopment to

continue the former use, as does Local Law 9 in this case)

'°In PruneYard, the owner of a 21-acre shopping center visited by 25,000 patrons

daily (which included 5 acres of parking and 16 acres containing walkways, pla-

zas, sidewalks and buildings occupied by more than 65 shops, 10 restaurants and

a movie theater) sought to prevent the exercise of free speech nghts (protected

under the California Const'tution) to circulate petitions in one of its common

areas. 447 US. at 77-78. This Court correctly noted that the fundamental test

of whether state enforcement of the free speech nghts of others effected a “tak-

ing” of the shopping center owner's core property nght to exclude others “re-

quires an examination of whether the restriction on private property ‘forc{es}

some people alone to bear public burdens which, in all fairness and justice,

should be borne by the public as a whole” Jd. at 82-83 (quoting Armstrong v

United States, 464 U.S. 40, 49 (1960)) Because it was clear in that case that the

(footnote continued on next page)

OO

10

trary, respondents in this case never intended to “open their prop-

erty to the general public” but rather, expressly intended to vacate

the properties and convert them to other uses (see SR-8-9, SR-15),

Local Law 9’s destruction of their right to exclude others consti-

tutes a compensable taking."

Further, this argument ignores the fact that Loretto itself was

a case involving rental premises (an apartment house), not prop-

erty reserved for Mrs. Loretto’s “personal private use” (and also

involved regulation arguably impacting on the “landlord-tenant

relationship”). This Court made ciear in that case that the physi-

cal occupation analysis applies equally to rental property as it

does to any other property—observing that there was no reason

“why a physical occupation of one type of property but not an-

other type is any less of a physical occupation.” Loretto, 458 U.S.

at 439. Moreover, it is difficult to see how the Kaiser Aetna case,

444 U.S. at 164, involving the development by Kaiser Aetna (a

commercial real estate developer, like respondents), as lessee

(footnote continued from previous page)

owner could adopt “time, place, and manner regulations” that would minimize

any interference with its chosen use of the property as a public shopping center,

this Court found “noth:ng to suggest that preventing [the owners] from prohib-

iting th{at] sort of activity [would] unreasonably impair the value or use of their

property as a shopping center.” Jd. at 83. Thus, under the particular circum-

stances presented, it held that there had clearly not been an unconstitutional

taking in that case, and its decision was limited to the type of shopping center

involved in that case. See id at 96(Powell, J., concurring in part and in the judg-

ment).

'' It must be noted that this argument is, in effect, focusing on a “regulatory tak-

ing” analysis of the owners’ “investment-backed expectations” of keeping their

property “private” (as opposed to being “open to the public”). Respondents’

reasonable investment-backed expectations when they bought these former

SRO properties — that they could exclude the general public from their property

and convert it to other private uses —are in fact highly relevant to the regulatory

taking analysis herein. See infra at note 19. However, sucft an analysis is inher-

ently inappropnate in the context of a per se taking determination based on a

physical occupation, where, this Court has long made clear, the Constitution

requires just compensation regardless of the trivial size of the “taking,” the state

interests involved, or the “reasonableness” of the owner’s expectations of a rate

of return on the property. See Nollan, 483 U.S. at 831-32 (quoting Loretto, 458

US. at 434-35).

11

from the owner, of a 6000-acre residential subdivision, housing

approximately 22,000 tenants and including at least 1,500 marina

waterfront lot leases, additional non-waterfront lot leases, accom-

modations for pleasureboat owners who were not residents of the

development but who paid fees for boating rights, and an on-site

shopping center, id. at 167-68, can be construed by petitioners as

involving property “reserved by its owners for personal private

use.”

When Seawall acquired its nearly vacant SRO properties in

1984, at a cost of millions of dollars, it did so with the intention of

demolishing the buildings located thereon and erecting a major

office tower on the site, in midtown Manhattan. (SR-8-9; see

A-208-209.) It was Seawall’s intention (and legal right) at the time

it acquired the properties to reach arrangements with the few re-

maining tenants to vacate those units that were still occupied. '

Instead, Local Law 9 would require that the few currently occu-

pied units, plus the majority of now-vacant rooms, be kept in per-

petual SRO occupancy at controlled rents, thus enlisting Seawal!,

against its will, in a business it had, and still has, no desire to be in.

(SR-15.) Certainly, it never intended nor expected to be in the

business of providing “public accommodations.”

Petitioners further argue that under Loretto, 458 U.S. at 419,

there is no physical taking resulting from Local Law 9 because

“the owners retain the right to choose their tenants.” (City’s Peti-

tion at 12-13.) This is an utterly meaningless “distinction” under

'2The record demonstrates that Seawall’s purpose in acquiring its SRO proper-

ties for demolition and redevelopment was fully consistent with applicable law

and supportive of the City’s then existing housing policy, which sought to en-

courage the elimination of SRO housing (See SR-5S67-71 )

'? The City relies for this proposition on dicta contained in footnote 19 of the

Loreto opinion, in which this Court noted that “the statute might present a dif-

ferent question” if it provided for the landiord’s ownership of the cable installa-

tion, rather than for its ownership and control by the third-party CATV com-

pany. 458 US. 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) ~

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 U.S. at 424. |

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 (.é.,

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 rights, Local Law 9, together with

other laws, deprives the owner of the ability to deal with his property as he

chooses. The significance nlaced by the Loretto Court on burdens placed by

legislation upon a landlord’s core property rights 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 described as a “government benefit”.) (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.'®

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 regulatory 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

‘Tt 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, ¢.g., United States v. Pewee Coal, 341 U.S 114(1951):

Kimball Laundry Co. v. United States, 338 US. 1 (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 physica!

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 v. 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.'6

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 y. 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 III 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.

'*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 nights 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)

|

|

|

!

|

—— —_

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 unconstitu-

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 4 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 rights upon the enactment” thereof), cf, Hodel v. Virginia, 452

US. at 295-96 (facial takings challenge held npe, 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” tat 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-211-215.)

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 musi rightly be con-

sidered.'? By relying only on their current assessed value as SROs

'®As no‘ed 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-

propriety of the tnal court’s grant of summary judgment, petitioners are con-

veniently overlooking the plain fact that summary judgment was only granted

by 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 Corp., 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 has 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 prior 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 ‘ aalysis is implicated. /d. Recently,

(footnote continued on next page)

17

as the benchmark against which the “reasonable rate of return” is

to be measured, the value of the hardship exemption is set at a

poini of absurdity. Thus, under Local Law 9’s formulation, 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 1s altered,

converted or demolished as prohibited by the Local Law; (11) that

neither the owner nor any prior owner intentionally managed the

property to impair its ability to earn such a return; and (ili) 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 Coud

reaffirmed the relevance of this special takings category and made cicar that itis

not, as petitioners urge, applicable solely where regulation is challenged “as ap-

plied.” Id. at 495 (quoting Kaiser Aetna, 444 U.S. at 175); see also id. at 498, Con

nolly v. Pension Benefit Guar Corp., 475 U.S. 211, 226-27 (1986) (engaging in

analysis of “interference with reasonable investment-backed expectations” In

_considering facial constitutional:ty of statute)

2°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 ot 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 Commissioner's

(fooinote continued on next page)

ll

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 until 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 “reasonable 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 ¢ 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 1s attribut-

able to the potential for redevelopment. In such case, the value is

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, 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 properues

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

22 The City_has conceded and acknowledged that real property in New York City

is valued, for assessment purposes, ai 45% of 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, 1e., 3.825% of

market value (as an SRO). (See A-S6 n.13.)

2«Moreover, 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 tc comply. In the case at bar, 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,S00 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 economicaliy viable use of their property

conflicts 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.?& Indeed, the nuisance

exception was critical in determining the result in the case of Key-

stone, 480 U.S. at 470, as well. (See A-50-51.)

25 As to the alleged “buy-out” and “replacement” exemptions, the Court of Ap-

peals correctiy held that since “the effect of the moratorium 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-out 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-54-5S.) --

*it should be-noted that petitioners’ reliance on such early cases as these and

Village of Euciid v. 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 pnor 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 little value in the current con-

text. /d. at 763. See also Nollan, 483 U.S. at 834-35 n.3 (noting that Goldblatt v.

Hempstead 1s “inconsistent with the formulations of our later 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 in

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 Cer-

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 y. Benson, 222 U.S. 78, 86

(1911) (cited in Keystone, 480 U.S. at 512 (Rehnquist, C.J., dissent-

27 It 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 a danger to

others, or a “nuisance,” may be prohibited.

22

ing)).2® “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° Ry 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-

iatively declared an illegal or noxious use.

*°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 unprofitabie 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 Ow:iers’ exist-

ing use of the property was still economically viable (althoug!: 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 as a railroad terminal. See id. at 136-38. [twas

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

Id. at 129 n.26. This distinction is critical to this Court's conciu-

sion in Penn Central that the Landmarks -_Law did not result in a

compensable taking, where it “not only permit[ted] but contem-

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 prope. ty 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. Id. 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 stil! 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, interalia, 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 836-37.5' After Nollan, 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,

>" 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

“fwje 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

It is plain that the requisite causal nexus is lacking 1n this case,

and that respondents have been unfairly forced to bear public

burdens, not of their creation, by Locai 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.*?

Moreover, contrary to petitioners’ assertions, Local Law 9 is

not necessary to protect any current SRO tenants from homeiess-

ness or from harassment. As petitioners are well aware, other

New York laws exist to protect tenants against unlawful evicuion

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 respectfully

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 Seawalt’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(d4XaXi) and 27-198.2(h)) would be approximately $5 million, an ex-

orbitant amount by any standard. It is 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

sucn 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, Wail 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 statis.”

(R. 449; see A-47-48.)

<<

27

their units with non-SRC housing “affordable” to persons of

“moderate” income. (N.Y.C. Admin. Code § 27-198.2(d (4 Xai).

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 !and-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 Respondent

Seawall Associates

November 3, 1989