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July 7, 1993


The opinion of the court was delivered by: GERALD L. GOETTEL


 This action involves a dispute between Plaintiff Orange Lake Associates, a residential development corporation, and Defendants who were members of the Town Board of the Town of Newburgh between 1987 and 1991. Plaintiff complains that the Board's treatment of its housing development proposal--the delays, the adoption of a new Master Plan for the Town and the eventual rezoning by the town obstructed the development of "affordable" housing in the Town and violated its rights under the Fourteenth Amendment of the United States Constitution. Plaintiff has brought this action for damages.


 Plaintiff Orange Lake Associates, Inc., a New York Corporation formed in May 1990, acquired the right to develop several parcels of property (totalling some 150 acres) located within the Town of Newburgh, New York, adjacent to Orange Lake, a Lake sometimes used for recreational purposes located within the Town. *fn1" All this land was zoned "R3" at the time the contracts were first signed, meaning that it could support 12 residential units per acre. Down payments totalling $ 232,500 were made in connection with the acquisition of these development rights. Title was never closed on the contracts and Plaintiff has forfeited all rights to develop any of the properties for failure to make payments under the respective contracts. In addition, plaintiff secured a right of way on another parcel permitting access to Route 52, a state road intersecting its property.

 Defendants, all present or former Town officials and/or members of the Town Board, who have been sued only in their individual capacities, maintain that from 1987 through 1990, the Town Board had under consideration several proposals to handle the Town's rapid population growth, including expansion of municipal water and sewer services, adoption of a Master Plan and amendments to the Town zoning ordinances. The Town Board is the governing body for the Town of Newburgh. In March 1988, the Town Board began a study of a proposal to increase its sewage treatment capacity by entering into a contract with the City of Newburgh to expand the City's existing sewage treatment plant. The Town Board considered a Draft Environmental Impact Statement (EIS) prepared in connection with the sewage expansion proposal and approved the contract between the Town and City for expansion of the plant in October 1988. In 1988, the Town Board also retained a planning consultant to help prepare a new Master Plan for the Town of Newburgh.

 In May 1989, Orange Lake Partners, a partnership between Cunningham and Fred Straub, presented an application to the Town's Planning Board for a residential condominium development to be called "The Commons at Orange Lake." The proposal called for the construction of over 500 townhouse and condominium units, representing an average of approximately 5 units per acre. Plaintiff alleges that in November 1987, at a meeting between Straub and then Town Supervisor Kirkpatrick wherein the idea for the Commons project was initially raised, defendant Kirkpatrick told Straub that if Plaintiff attempted to present to the Planning Board its proposal for the Commons Project at that time (including its own water and sewer systems in lieu of Town facilities) Kirkpatrick would personally make sure that the process was delayed "until hell freezes over." Defendant Kirkpatrick denies making this statement. In a letter accompanying the submission of the Environmental Assessment Form for the project, Cunningham stated that a "fair proportion of the proposed subdivision is directed toward moderately priced housing, which is expected to provide a first home for many of the young people entering the work force in our growing economy."

 Plaintiff alleges that the passage of a Sewer Bond Draft EIS in July and August of 1988, which alluded to substantial expected growth in the area of the Commons Project, led it to believe that the Town Board would no longer obstruct its project. It submitted an application to the Planning Board on May 2, 1989. In July 1989, Orange Lake Partners made the first public presentation of its proposal for The Commons to the Planning Board. Defendants allege that at the meeting, the Board's attorney advised the developers that the rezoning under consideration by the Town might impact their development plans. Board members also indicated their belief that the proper way to service a project of such size was by municipal sewers, not private, on-site treatment plants. The Board suggested that Orange Lake Partners inquire of the Town Board concerning extension of municipal services to the site. Plaintiff viewed this suggestion as an exercise in futility given that the Town Board had recently rejected the proposal to extend municipal services made by another proposed Town housing development, High Ridge, which was designed to include 300 single-family and two-family residences. Plaintiff alleges that it reaffirmed its commitment to dedicate a portion of The Commons to affordable housing.

 One week later, on July 19, 1989, Master Plan Report No. 1 was presented to the Town Board by Garling Associates, the planning consultants retained by the Town. In the report, Garling recommended that the Town restrict sewer extensions to control development in more fragile environments such as the Orange Lake area. On July 24, 1989, the sponsors of The Commons formally requested an extension of municipal services to the lands forming the site of the proposed development. Defendants point out that no petitions from property owners who would be affected by such an extension were submitted in support of the request as required under New York Town Law § 191.

 In September 1989, the Full Environmental Assessment Form of The Commons was accepted and the Planning Board referred Orange Lake Partners' application to Garling Associates for a review and report. At this point, plaintiff claims it was informed that the Town was contemplating rezoning the area proposed as the site for The Commons.

 Toward the end of September 1989, Garling Associates issued its report identifying several deficiencies in the application including the lack of room for sewage treatment on-site and the present non-existence of adequate facilities off-site. The Garling report also reported that the proposal was inconsistent with current zoning ordinances which required multiple dwellings to be serviced by Town water facilities.

 Events accelerated in mid-1990. A February 1990 report from Garling Associates allegedly recommended extending municipal water and sewer to the west side of Orange Lake where The Commons would be located. The Town Board proposed an interim zoning plan which would have required minimum two-acre lots. Plaintiff considered this a stalling tactic to enable the zoning amendments to be completed. That same month, the Planning Board objected to the Town Board's proposed zoning plan, noting that this interim plan departed from the Master Plan Reports Nos. 1 and 2.

 On June 18, 1990, the Town Board declared itself the "lead agency" for conducting an environmental review of the Town's proposed Master Plan. The Planning Board and the New York State Department of Environmental Conservation ("DEC") were advised to serve notice of any objections to the Town Board's resolution declaring itself lead agency. No objections were received from any of the interested agencies.

 In July 1990, the Town Board rejected a motion to permit an extension of municipal water and sewer services to the High Ridge property. Also in July, the Planning Board declared itself the lead agency for an environmental review of The Commons project. At the end of December, the DEC commented on the proposal for The Commons. It pointed out that the project would require at least five permits and alerted the Planning Board of its concerns regarding the project's impact on wetlands, surface waters, and other properties.

 Also in December 1990, the Town Board held a public meeting on the proposed Master Plan. Comments were made regarding various aspects of the Plan including the extension of municipal sewer services, more stringent environmental regulation of the lands adjacent to Orange Lake, affordable housing, and the effects on property values of reduced densities.

 Plaintiff submitted to the Town Board in February 1991 an analysis of the Master Plan on affordable housing which concluded that the Town's capacity for affordable housing would be reduced by 6000 units under the plan. In March, the Town adopted the Master Plan prepared by Garling. As plaintiff notes, the Planning Board commented at various times on the Master Plan and on the zoning ordinances themselves. The only suggestions made by the Planning Board on the Master Plan were an objection to soil-based zoning and general support for the extension of municipal sewer and water services to the west side of Orange Lake. Although the record is not clear as to whether or not the Town Board actually adopted the suggestions of the Planning Board, we note that the Town Board can comply with these suggestions even while rezoning the area which included Plaintiff's property for reduced density residential development. In April, the Town Board rejected the interim rezoning proposal, which covered the lands proposed for The Commons. After receiving a draft EIS from plaintiff in June 1991, the Planning Board voted unanimously to reject the draft on August 15, 1991 as incomplete. After the vote, Cunningham complained to the Planning Board that its planning consultant, Garling Associates, had conflicts of interest in reviewing plaintiff's submissions because they also rendered advice to the Town Board in connection with the Master Plan. Defendants allege that in November of 1991, Cunningham delivered to the individual defendants copies of a draft pleading he had prepared including many of the allegations set forth in the Second Amended Complaint. In December 1991, the Planning Board advised Cunningham that a new consultant had been retained to complete the environmental review of The Commons proposal. That same month, the Town Board adopted amendments to the Town's zoning ordinances which reduced maximum densities for a number of properties within the Town, including the proposed site for The Commons.

 The day following the adoption of the zoning amendments, but before their enactment, plaintiff commenced suit against defendants in their individual capacities in the New York State Supreme Court, Dutchess County. Plaintiff seeks damages including $ 255,000 in acquisition costs, $ 66,333 in professional fees, and $ 13 million in lost profits. Defendants removed the case to federal court based upon the federal claims raised by the plaintiff. Defendants presently move for summary judgment.



 To prevail on a motion for summary judgment, the moving party must demonstrate "that there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

 The court's function is not to resolve disputed issues of facts but solely to determine if such genuine issues of fact exist. All ambiguities must be resolved and all inferences drawn in favor of the party defending against the ...

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