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ARCHER GARDENS, LTD. v. BROOKLYN CTR. DEV. CORP.

March 22, 1979

ARCHER GARDENS, LTD. and Podgel Associates, Ltd., Plaintiffs,
v.
BROOKLYN CENTER DEVELOPMENT CORPORATION, George Klein, City of New York and Richard Rosan, Defendants



The opinion of the court was delivered by: TENNEY

Archer Gardens, Ltd. and bPodgel Associates, Ltd. ("plaintiffs") own properties in an area in Brooklyn, New York, which has been designated for urban renewal. Their amended complaint in this action alleges a de facto appropriation of their properties and seeks compensation therefor. Defendants are the City of New York ("the City") and Brooklyn Center Development Corporation ("Development"), a private corporation. *fn1" Jurisdiction is invoked under 28 U.S.C. ยงยง 1331(a) and 1983, and the latter's jurisdictional counterpart, section 1343, and under the doctrine of pendent jurisdiction. *fn2" Defendant Development now moves this Court to dismiss the amended complaint pursuant to Rule 12(b)(1) and (b)(6) of the Federal Rules of Civil Procedure. *fn3" Development contends that plaintiffs fail to state a claim for relief under either the fourteenth amendment or section 1983 as against itself as a private party. For the reasons discussed below, the motion is denied.

On a motion to dismiss for failure to state a claim for which relief can be granted, the factual allegations of the complaint are accepted as admitted, *fn4" and the motion will not be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957) (footnote omitted). In the matter at bar it appears that in 1970 the City designated a section in Brooklyn as the Brooklyn Center Urban Renewal Area. The City then chose Development to be the developer and sponsor of the urban renewal plan. Plaintiffs' properties, located within the urban renewal area, were to be acquired by the City and Development for $ 775,000.00 no later than approximately 1973. *fn5" However, the date of acquisition was postponed. Finally, in July 1977, plaintiffs were informed that their properties would not be acquired and thus that they would not receive the agreed-upon compensation until approximately December 31, 1983. Plaintiffs assert that because of the past and continuing threat of condemnation they have been unable to generate income from their properties by sale, lease or encumbrance and that, as a consequence, they have been unable to meet their tax obligations. Indeed, in January 1978, the City commenced tax foreclosure proceedings against plaintiffs' properties, an act which plaintiffs see as a continuation of the defendants' breach. They charge that the defendants conspired to delay the acquisition date in order to acquire the urban renewal property at tax foreclosure sales at prices far below those which the defendants would otherwise be obligated to pay as condemnation awards. In sum, plaintiffs' claim is that the City and Development, acting in concert and "under color" of state law, have de facto appropriated their properties without just compensation in violation of the fifth and fourteenth amendments of the Constitution of the United States.

 Development, in moving to dismiss, contends that plaintiffs fail to allege a "taking" within the meaning of the fifth and fourteenth amendments, or to allege that Development acted "under color" of state law. In the alternative, Development asks this Court to dismiss the action on the ground that plaintiffs have failed to exhaust available state remedies. The questions before this Court are (1) whether plaintiffs do allege an unconstitutional taking; (2) whether Development, as a private party, can act "under color" of state law so as to be liable for such an alleged taking; and (3) whether, assuming that a taking has properly been alleged and that Development is a proper defendant, this Court should refuse to exercise its jurisdiction because plaintiffs have an available remedy in state court.

 I

 To state a claim for relief under section 1983, a plaintiff must allege, first, that the defendant has deprived him of a right secured by "the Constitution and laws" of the United States; and second, that the defendant deprived him of this constitutional right "under color of any statute, ordinance, regulation, custom or usage of any State or Territory." Adickes v. S. H. Kress & Co., 398 U.S. 144, 150, 90 S. Ct. 1598, 1604, 26 L. Ed. 2d 142 (1970); Fine v. City of New York, 529 F.2d 70, 73 (2d Cir. 1975). *fn6"

 The fifth amendment of the United States Constitution provides, Inter alia, "nor shall private property be taken for public use, without just compensation." The provisions of this amendment are made applicable to the states and their subdivisions through the due process clause of the fourteenth amendment. West v. Chesapeake & Potomac Telephone Co., 295 U.S. 662, 671, 55 S. Ct. 894, 79 L. Ed. 1640 (1935); Chicago, Burlington & Quincy Railroad Co. v. City of Chicago, 166 U.S. 226, 17 S. Ct. 581, 41 L. Ed. 979 (1897). As a general rule, "(t)he mere enactment of legislation which authorizes condemnation of property cannot be a taking." Danforth v. United States, 308 U.S. 271, 286, 60 S. Ct. 231, 237, 84 L. Ed. 240 (1939). However, governmental action in the form of regulation can amount to a de facto taking which requires compensation, United States v. Central Eureka Mining Co., 357 U.S. 155, 168, 78 S. Ct. 1097, 2 L. Ed. 2d 1228 (1957), although "(t)here is no set formula to determine where regulation ends and taking begins." Goldblatt v. Hempstead, 369 U.S. 590, 594, 82 S. Ct. 987, 990, 8 L. Ed. 2d 130 (1961).

 Lower courts have attempted to define the line between legitimate governmental action and unconstitutional taking on a case by case basis. By the strictest rule, governmental regulation will not amount to an unconstitutional taking absent interference so substantial as to deprive the landowner of all reasonable uses of his land. Steel Hill Development, Inc. v. Town of Sanbornton, 469 F.2d 956, 963 (1st Cir. 1972); Kent Island Joint Venture v. Smith, 452 F. Supp. 455 (D.Md.1978). In the instant complaint, plaintiffs allege a substantial interference, charging that as a consequence of the defendants' actions, they have been unable "to use, sell, lease or encumber their properties since 1973 . . . ." Amended Complaint P 24.

 Less stringent standards have also been articulated. In Richmond Elks Hall Ass'n v. Richmond Redevelopment Agency, 561 F.2d 1327, 1330 (9th Cir. 1977), the Ninth Circuit held that "When a public entity acting in furtherance of a public project directly and substantially interferes with property rights and thereby significantly impairs the value of the property, the result is a taking in the constitutional sense . . . ." In the instant complaint, plaintiffs allege that "(n)o persons were willing to use, purchase or lease the properties because the defendants had condemned the properties for all practical purposes and/or actual condemnation was imminent." Amended Complaint P 22.

 The Sixth Circuit has come closest to delineating governmental actions which would constitute unconstitutional takings in the context of urban renewal projects: "(W)e think the true rule is that there is no de facto taking of properties which have decreased in value because of an urban renewal project unless there is a physical invasion, damage or injury, or a restraint of some type, or action by the City to appropriate such properties." Sayre v. City of Cleveland, 493 F.2d 64, 70 (6th Cir.), Cert. denied, 419 U.S. 837, 95 S. Ct. 65, 42 L. Ed. 2d 64 (1974). In the instant complaint, plaintiffs allege that defendants have in fact taken "action . . . to appropriate such properties," not only by contracting to purchase but also by commencing tax foreclosure proceedings pursuant to a scheme whereby Development will "purchase the plaintiffs' properties . . . at well below the agreed-upon price of $ 775,000.00." Amended Complaint PP 25-26.

 In Foster v. Herley, 330 F.2d 87 (6th Cir. 1964), On remand Foster v. City of Detroit, 254 F. Supp. 655 (E.D.Mich.1966), Aff'd, 405 F.2d 138 (6th Cir. 1968), the actions of the city in instituting condemnation proceedings, refusing to allow improvements, and permitting years of delay were found to amount to a taking of plaintiff's property. There the element which carried the economic loss caused by urban renewal to the level of a taking within the meaning of the fifth and fourteenth amendments was the Abuse of eminent domain. Foster v. City of Detroit, supra, 254 F. Supp. at 665. Similar abuse of legitimate condemnation powers is alleged by the plaintiffs in the complaint before this Court, and, employing any of the tests articulated, Supra, the allegations herein must be construed to state a claim of taking without just compensation in violation of the Constitution.

 II

 Development next contends that, even assuming arguendo that a taking is stated, such a taking by Development a private party without legislative authorization to condemn cannot constitute a Constitutional deprivation. Thus, argues Development, this Court lacks subject matter jurisdiction. In raising this objection and relying on Yearsley v. W. A. Ross Construction Co., 309 U.S. 18, 60 S. Ct. 413, 84 L. Ed. 554 (1940), Development ignores the gravamen of plaintiffs' claim. In Yearsley, where the Supreme Court held that a private party could not be held liable for a taking pursuant to validly conferred authority, the contractor was not alleged to have any interest other than performing the work assigned to him by the government. In the complaint before this Court, however, plaintiffs allege that Development participated for its own benefit with the City in this scheme, willfully violating for its own gain rights secured by the fifth and fourteenth amendments. These allegations take the complaint out of the Yearsley ambit for purposes of this motion to dismiss. It is well established that private persons may act "under color" of state law, and hence be held liable under section 1983 when they act in conspiracy with state officials. Adickes v. S. H. Kress & Co., supra, 398 U.S. 144, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970); United States v. Price, 383 U.S. 787, 86 S. Ct. 1152, 16 L. Ed. 2d 267 (1966); Taylor v. Gibson, 529 F.2d 709 (5th Cir. 1976); Birnbaum v. Trussell, 371 F.2d 672 (2d Cir. 1966). The Supreme Court has stated:

 
Private persons jointly engaged with state officials in the prohibited action, are acting "under color" of law for purposes of the statute. To act "under color" of law does not require that the accused be an officer of the State. It is enough that he is a willful participant in joint activity with the State or its agents.

 United States v. Price, supra, 383 U.S. at 794, 86 S. Ct. at 1157 (emphasis added and footnote omitted). *fn7" Thus, the alleged acts of the private defendant Development may be deemed to have been done "under color" of state law ...


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