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LANDMARK WEST! v. USPS

December 29, 1993

LANDMARK WEST!, Plaintiff,
v.
THE UNITED STATES POSTAL SERVICE, MILLENNIUM PARTNERS, INC., and LINCOLN METROCENTER PARTNERS, L.P., Defendants.


Conboy


The opinion of the court was delivered by: KENNETH CONBOY

KENNETH CONBOY, District Judge

 In this action, a neighborhood group called Landmark West! is seeking to halt the construction of a skyscraper due to an alleged failure to comply with the National Environmental Policy Act of 1969 ("NEPA"), 42 U.S.C. ยงยง 4321-4370d. The defendants in the action are the developers currently building the skyscraper -- Millennium Partners, Inc. and Lincoln Metrocenter Partners, L.P. (collectively, "LMP") -- and one of the prospective tenants -- the United States Postal Service (the "USPS"). On July 19, 1993, this Court held a hearing on whether a preliminary injunction should issue, but reserved decision on the matter. The action is now before the Court on the defendants' respective motions for judgment on the pleadings or, alternatively, summary judgment, and on Landmark West!'s cross-motion for summary judgment. *fn1"

 BACKGROUND

 The following discussion is based upon the administrative record submitted by the USPS, except as noted.

 A. The Project

 LMP is currently constructing a forty-six story *fn2" "mixed use" building (the "Project") on the city block bounded by Broadway, Columbus Avenue, West 67th Street and West 68th Street (the "Site") in the Lincoln Center area of Manhattan. The Project, which is slated to rise approximately 545 feet above street level, was designed to accommodate a post office, a health club, 10 movie theaters and various other commercial establishments on the lower floors, and approximately 368 residential units in the upper tower. It is estimated that the cost of developing the Project will be over $ 250 million. *fn3"

 B. USPS Participation in the Project

 Until mid-summer 1992, the USPS operated the Ansonia Station post office out of a three-story building that formerly stood at 1990 Broadway on the western portion of the Site. The old Ansonia Station occupied two stories and part of the basement of this building, and included seven loading docks on West 68th Street. The USPS leased this space, totalling roughly 57,000 square feet, under a lease that provided the USPS with a very favorable rate of rent: approximately $ 2 per square foot (plus a prescribed share of the applicable property taxes) in an area of the city in which retail space typically was rented out at up to $ 200 per square foot. Under this lease, the USPS had the option to extend the lease, and remain in the old Ansonia Station building, through the year 2006.

 On June 3, 1992, the USPS and LMP executed an agreement (the "Agreement") *fn4" in which the USPS essentially swapped, in conjunction with certain payments, its existing lease for a new postal facility in the Project. More precisely, the USPS agreed to vacate the old Ansonia Station building in exchange for a promissory note carrying an initial principal value of $ 15 million. *fn5" This note is secured by a 12.948% limited partnership interest in Lincoln Metrocenter Partners, L.P. *fn6" In connection with this arrangement, the USPS has negative control over changes in the Lincoln Metrocenter Partners, L.P. partnership agreement, *fn7" and the USPS will directly receive all distributions related to this limited partnership interest. *fn8"

 Further pursuant to the Agreement, the USPS simultaneously purchased a condominium interest in the Project for $ 9.8 million, which was paid mostly in cash. *fn9" This condominium interest gives the USPS ownership of a new 45,000-square-foot postal facility (the "New Facility") to be located on the ground and cellar floors of the Project, with five loading docks on West 68th Street for the USPS's exclusive use. The condominium interest also gives the USPS a percentage undivided interest in certain common elements of the Project, including the land on which it is being built. *fn10" This percentage is the basis for determining, inter alia, the USPS's voting power in the condominium. *fn11"

 Under the Agreement, the USPS has limited power to change the design and construction of the New Facility, and has negative control over other aspects of the Project only to the extent they may affect the use and operation of the New Facility. *fn12"

 C. Evolution of the Agreement and USPS Environmental Assessment of the Proposals

 Some time prior to January 1991, General Atlantic Realty, a developer that was at the time contract vendee of the Site, proposed a transaction in which the USPS would capitalize on its leasehold interest in the old Ansonia Station building and relocate to a condominium space in a proposed new development on the Site. *fn13" The USPS attributed its interest in the proposal to its concern about its ability to relocate, at an economical price, within the Ansonia Station delivery area when its lease expired in 2006. *fn14" In this context, the proposal presented the USPS with an opportunity to exercise to its financial advantage the leverage provided by its existing below-market lease. *fn15" In addition, the USPS recognized that the old Ansonia Station was inaccessible to the handicapped. *fn16"

 Under the initial proposal, the USPS would have purchased the old Ansonia Station building for $ 9.9 million in cash (and $ 500,000 in "support cost"), and the developer would have obtained an option to build a commercial development (including a replacement postal facility) on the eastern portion of the Site. *fn17" In addition, the USPS would have been able to trade the old Ansonia Station building for a condominium interest in the replacement facility. After the relocation of Ansonia Station Post Office from the old building to the replacement facility, the old building would have been demolished and "replaced by a new commercial retail development and [the USPS] would be guaranteed twenty percent of the income generated by the complex." *fn18" In February 1991, the USPS Capital Investment Committee approved funding for this proposal, subject to a finding under NEPA of no significant impact on the human environment. (Such a finding is referred to as a "FONSI," which is short for a "finding of no significant impact.") In July 1991, the USPS published an environmental assessment of the proposed purchase of the old building and relocation of the post office to the Project, *fn19" and issued a FONSI on the basis of this assessment. However, this proposal was not implemented.

 Instead, the USPS and LMP negotiated a modified proposal which was the basis for the eventual Agreement between the USPS and LMP. In late April 1992, the USPS disseminated a Notice of Intent to prepare an amended environmental assessment of the USPS's proposed participation in the Project. *fn20" In May 1992, the USPS finalized the amended environmental assessment, which served as the basis for the FONSI that is being challenged in the present action.

 D. Local Zoning Approval

 Under local zoning regulations, a special permit is required in order to build off-street loading docks in the Lincoln Square zoning district. See Landmark West v. Rinaldi, No. 25201/92, slip op. at 2 (N.Y. Sup. Ct. Feb. 19, 1993). Such a permit may be issued only after public hearings on the impact of the proposed building have been held, and after the proposal has been considered by the Community Board, the Borough President, and the City Planning Commission. See id. The building plans that LMP initially filed with the New York City Department of Buildings indicated that the Project would include the post office, including the USPS's loading docks on West 68th Street. *fn21" For reasons unrelated to the inclusion of the loading docks, these plans were disapproved. *fn22" By May 18, 1992, LMP had submitted amended plans that did not indicate the presence of the post office or the loading docks, *fn23" and thereafter the Department of Buildings issued a building permit allowing for construction of the Project "as of right," *fn24" thereby allowing the Project to proceed without public hearings. See id., slip op. at 3. *fn25"

 On June 3, 1992 and again on June 29, 1992, the USPS notified the Department of Buildings that it intended to operate five loading docks at the New Facility. The USPS asserted that local laws requiring a special permit do not apply to federal entities such as the USPS, but purported to stop short of formally invoking superior sovereignty. *fn26" The Commissioner of the Department of Buildings subsequently took the position that unless the USPS "request[s] that they be exempt from local provisions . . . they will be required to get a special permit for the construction of the loading docks." *fn27"

 DISCUSSION

 A. Justiciability

 LMP argues, as a threshold matter, that this Court may not hear this action because the action is non-justiciable. *fn28" Specifically, LMP argues that the action is moot because this Court lacks jurisdiction to enjoin LMP, and although this Court may enjoin the USPS, the USPS cannot take any action to halt construction of the Project. The argument that this Court may not enjoin LMP begs the question of whether the USPS's participation in the Project -- allegedly as a source of funds and as a partner -- is sufficient to subject the entire Project to NEPA. In the words of Judge J. Skelly Wright, "'federal funding has long been recognized as an appropriate basis to enforce NEPA requirements on non-federal parties." Foundation on Economic Trends v. Heckler, 244 U.S. App. D.C. 122, 756 F.2d 143, 155 (D.C. Cir. 1985); accord Biderman v. Morton, 497 F.2d 1141, 1147 (2d Cir. 1974); Proetta v. Dent, 484 F.2d 1146, 1148 (2d Cir. 1973); cf. Ivanhoe Irrigation Dist. v. McCracken, 357 U.S. 275, 295, 2 L. Ed. 2d 1313, 78 S. Ct. 1174 (1958) ("Also beyond challenge is the power of the Federal Government to impose ...


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