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TM PARK AVE. ASSOCIATES v. PATAKI

March 25, 1999

TM PARK AVENUE ASSOCIATES, PLAINTIFF, W.E.A. ASSOCIATES, PLAINTIFF-INTERVENOR, JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, PLAINTIFF-INTERVENOR,
v.
GEORGE E. PATAKI, INDIVIDUALLY AND AS GOVERNOR OF THE STATE OF NEW YORK; H. CARL MCCALL, INDIVIDUALLY AND AS THE COMPTROLLER OF NEW YORK STATE; NEW YORK STATE DEPARTMENT OF AUDIT AND CONTROL; STATE UNIVERSITY OF NEW YORK; FREDERICK SALERNO, INDIVIDUALLY AND AS CHAIRMAN OF THE BOARD OF TRUSTEES OF THE STATE UNIVERSITY OF NEW YORK; BOARD OF TRUSTEES OF THE STATE UNIVERSITY OF NEW YORK; THOMAS A. BARTLETT, INDIVIDUALLY AND AS CHANCELLOR OF THE STATE UNIVERSITY OF NEW YORK; LONNIE CLAR, INDIVIDUALLY AND AS ASSOCIATE COUNSEL TO THE STATE UNIVERSITY OF NEW YORK; IRVING FREEDMAN, INDIVIDUALLY AND AS VICE CHANCELLOR OF CAPITAL FACILITIES OF THE STATE UNIVERSITY OF NEW YORK AND GENERAL MANAGER OF THE STATE UNIVERSITY CONSTRUCTION FUND; NEW YORK STATE DORMITORY AUTHORITY; THE STATE OF NEW YORK, DEFENDANTS.



The opinion of the court was delivered by: McAVOY, Chief Judge.

MEMORANDUM-DECISION & ORDER

I. BACKGROUND

A. Facts

In brief, in April 1986, plaintiff TM Park Avenue Associates ("TM Park") leased space at 315 Park Avenue South in New York City to SUNY's College of Optometry. The lease term ran from April 1986 to July 2004.

In 1989, SUNY began exploring options to convert the College of Optometry to public space. In late 1994 and early 1995, SUNY and the City University of New York ("CUNY") drafted and submitted a joint proposal to the Division of Budget ("DOB") for the relocation of both schools. Essentially, the proposal had CUNY consolidating its operations at new property to be purchased, and SUNY relocating to CUNY's present location.

During the 1995 Legislative Session, Chapters 312 and 313 were passed into law, which orchestrated the relocation plans. Section four of Chapter 312 provided, in relevant part, as follows:

  Notwithstanding any other provision of the law, no
  appropriation shall be available on or after July
  1, 1996, or as soon thereafter as the state
  university college of optometry shall complete
  relocation to facilities owned and financed for
  public purposes, for funding support for privately
  or commercially leased building space for the
  state university college of optometry operations
  at 100 East 24th Street/315 Park Avenue South, in
  New York City, to reflect the elimination of such
  funding support due to fiscal deficiencies and
  unavailability of funds.

Chapter 313, in turn, authorized the Dormitory Authority to acquire property into which CUNY would move as part of its consolidation plan.

B. Procedural History

TM Park, joined by plaintiff-intervenors John Hancock Mutual Life Insurance Company and W.E.A. Associates (collectively, the "plaintiffs"), initiated this action seeking, inter alia, a declaratory ruling that Chapter 312 of the Laws of 1995 ("Chapter 312) violates the Contract Clause of the federal Constitution. Thereafter, plaintiffs moved for summary judgment asserting that Chapter 312 of the Laws is violative of the Contract Clause because it substantially impairs TM's unexpired lease with the SUNY. Defendants opposed plaintiffs' motion and cross-moved for summary judgment in their own right. The Court granted in part and denied in part each parties' motion.

Relevant here is that part of the Court's decision which granted plaintiffs' motion for summary judgment declaring section 4 of Chapter 312 void under the Contract Clause. It is based upon that finding that plaintiffs now move for attorneys' fees pursuant to 42 U.S.C. § 1988, asserting that a violation of the Contract Clause is actionable under 42 U.S.C. § 1983. Alternatively, plaintiffs contend that they are entitled to summary judgment on their 42 U.S.C. § 1983 claims for violations of procedural and substantive due process under the Fourteenth Amendment of the federal Constitution. Defendants, in turn, oppose plaintiffs' request for attorneys' fees and cross-move for dismissal of plaintiffs' section 1983 claims based upon either the Contract Clause or the Due Process Clause.

II. DISCUSSION

  A.  Whether a Contract Clause Claim is Actionable Under
      Section 1983

This issue was first addressed in Carter v. Greenhow, 114 U.S. 317, 5 S.Ct. 928, 29 L.Ed. 202 (1885). In Carter, the State of Virginia passed legislation in 1879 "to provide a plan of settlement of the public debt" whereby the state issued bonds and coupons. 5 S.Ct. at 929. Carter owed taxes to the state and, in satisfaction thereof, tendered coupons cut from the bonds. Pursuant to an 1882 state legislative enactment that forbade tax collectors from accepting anything other than "gold, silver, United States treasury notes, and national bank currency," the state refused to accept the coupons. Id. The state thereafter entered upon, seized, and sold Carter's property in satisfaction of the outstanding tax payments. Carter then brought an action for trespass on the case against the treasurer of the City of Richmond, Virginia. In his complaint, Carter alleged that the 1882 statutory enactment was "repugnant to the constitution of the United States, and [is] therefore void." Id. According to Carter, his rights "derive[d] from the contract with the state, contained in the act of March 28, 1879, and the bonds and coupons issued under its authority." Id. The Complaint specifically stated that "in refusing to receive said coupons and money in payment of said taxes, and in levying on and seizing plaintiff's property for said taxes . . . the defendant deprived the plaintiff of a right secured to him by the constitution of the United States, under color [of law] . . . to the damage of the plaintiff two hundred dollars." Id. The question before the Court was whether the federal courts had jurisdiction and, thus, whether "the facts stated in plaintiff's declaration constitute a cause of action within the terms of [section 1983]." Id. at 930; see McGahey v. State of Virginia, 135 U.S. 662, 10 S.Ct. 972, 978, 34 L.Ed. 304 (1890).

In discussing the matter, the Carter Court stated:

  How and in what sense are these rights secured to
  him by the constitution of the United States? The
  answer is, by that provision, article 1, § 10,
  which forbids any state to pass laws impairing the
  obligations of contracts. That constitutional
  provision, so far as it can be said to confer upon
  or secure to any person any individual rights, does
  so indirectly and incidentally. It forbids passage
  by the states of laws such as are described. If any
  such are nevertheless passed by the legislature of
  a state, they are unconstitutional, null, and void.
  In any judicial proceeding necessary to vindicate
  his rights under a contract affected by such
  legislation, the individual has a right to have a
  judicial determination declaring the nullity of the
  attempt to impair its obligation. This is the only
  right secured to him by that clause of the
  constitution. . . . And the only mode in which that
  constitutional security takes effect is by judicial
  process to invalidate the unconstitutional
  legislation of the state, when it is set up against
  the enforcement of his rights under his contract..
   . . Congress has provided no other remedy for the
  enforcement of this right.

5 S.Ct. at 930 (emphasis supplied).

While, upon initial impression, Carter seemingly holds that a claim for the violation of the Contract Clause may not be maintained under § 1983, see Dennis v. Higgins, 498 U.S. 439, 111 S.Ct. 865, 876, 112 L.Ed.2d 969 (1991) ("In our only previous case discussing a § 1983 claim brought for the violation of a supposed right secured by Article I of the Constitution, we held that violation of the Contracts Clause does not give rise to a § 1983 cause of action." (Kennedy and Rehnquist, J.J., dissenting) (citing Carter, 114 U.S. 317, 5 S.Ct. 928, 29 L.Ed. 202); Andrews v. Anne Arundel County, 931 F. Supp. 1255, 1267 (D.Md. 1996), aff'd, 114 F.3d 1175, 1997 WL 321573, cert. denied, ___ U.S. ___, 118 S.Ct. 600, 139 L.Ed.2d 489 (1997), that is not so. The Supreme Court affirmed the dismissal of Carter's action upon the limited ground that Carter failed to state a claim under § 1983 because it only pleaded a breach of contract claim. Carter, 5 S.Ct. at 931; Dennis v. Higgins, 498 U.S. 439, 111 S.Ct. 865, 872 n. 9, 112 L.Ed.2d 969 (1991); Chapman v. Houston Welfare Rights Org., 441 U.S. 600, 99 S.Ct. 1905, 1914 n. 29, 60 L.Ed.2d 508 (1979) (Carter "held as a matter of pleading that the particular cause of action set up in the plaintiff's pleading was in contract and was not to redress deprivation of the `right secured to him by that clause of the Constitution' [the contract clause], to which he had `chosen not to resort.'"); McGahey, 10 S.Ct. at 978. It, thus, could be argued that the Carter Court implicitly recognized that a claim for a violation of the Contract Clause could be brought pursuant to § 1983 assuming a properly pleaded Complaint.

A plaintiff asserting a cause of action pursuant to § 1983 must demonstrate, among other things, that he was deprived of a right, privilege, or immunity secured by the Constitution of the United States. City of Oklahoma City v. Tuttle, 471 U.S. 808, 105 S.Ct. 2427, 2439, 85 L.Ed.2d 791 (1985) (Brennan, concurring); Pitchell v. Callan, 13 F.3d 545, 547 (2d Cir. 1994). This begs the question of what right, if any, is secured by the Contract Clause. Carter answered this stating that "the only right secured [by a violation of the Contract Clause]" is "judicial process to invalidate the unconstitutional legislation of the state." Carter, 5 S.Ct. at 931. Carter was not deprived of any Constitutional right because he did not seek a judicial declaration voiding the legislation; rather he only sought money damages. Thus, Carter's claim sounded in a common law breach of contract; not § 1983. See Dennis, 111 S.Ct. at 872 n. 9. In other words, because Carter failed to plead that he was deprived of a right guaranteed to him by the Contract Clause, he did not state a claim under § 1983. Accordingly, it becomes apparent that the Carter Court did not hold that § 1983 was not a proper avenue to redress a violation of the Contract Clause, but only that the facts in Carter's complaint failed to show a cause of action within § 1983's terms. Carter, 5 S.Ct. at 931.

More recent Supreme Court cases also support the conclusion that a claim alleging a violation of the Contract Clause may be pursued under § 1983. See Dennis, 498 U.S. 439, 111 S.Ct. 865, 112 L.Ed.2d 969 (1991). Dennis presented the question whether a claim under the dormant commerce clause, U.S. Const. Art. I, § 8, is actionable pursuant to § 1983. The Court expressly noted that section 1983's broad language covering "any rights, privileges, or immunities secured by the Constitution" mandates a broad construction. Id. at 868 (quoting Golden State Transit Corp. v. Los Angeles, 493 U.S. 103, 110 S.Ct. 444, 448, 107 L.Ed.2d 420 (1989); Monell v. New York City Dept. of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 2032, 56 L.Ed.2d 611 (1978)) (emphasis in original). The Dennis Court rejected the notion that § 1983 claims be restricted to enforcing the protections of the Fourteenth Amendment and laws enacted pursuant thereto. Id. at 869. The Court then noted § 1983 covers not only personal rights, but also property rights. Dennis, 111 S.Ct. at 870. The Dennis Court also found that the dormant Commerce Clause does more than allocate power between the federal and state governments, but that it confers a right, privilege, or immunity within the meaning of § 1983 because "it is a substantive `restriction on permissible state regulation' of interstate commerce." Dennis, 111 S.Ct. at 870 (quoting Hughes v. Oklahoma, 441 U.S. 322, 99 S.Ct. 1727, 1731, 60 L.Ed.2d 250 (1979)). The Court also noted that, although the Commerce Clause is a self-executing limitation on the states, individuals injured by state action that violate the dormant commerce clause may sue and obtain injunctive and declaratory relief. See Dennis, 111 S.Ct. at 870. Applying these principals and the factors outlined in Golden State, 493 U.S. 103, 110 S.Ct. 444, 107 L.Ed.2d 420 (1989), for determining whether a federal statute confers a right within the meaning of § 1983*fn2, the Dennis Court found that a Commerce Clause claim can be brought under § 1983. Dennis, 111 S.Ct. at 873.

The foregoing analysis equally applies to a Contract Clause claim. Like the Commerce Clause, the Contract Clause confers a right, privilege, or immunity because it is a substantive restriction on permissible state legislation that would impair the obligation of contracts. See Dennis, 111 S.Ct. at 870, see, e.g., Exxon Corp. v. Eagerton, 462 U.S. 176, 103 S.Ct. 2296, 2305, 76 L.Ed.2d 497 (1983); Sanitation and Recycling Ind., Inc. v. City of New York, 107 F.3d 985, 992 (2d Cir. 1997) ("[T]he Contract Clause is viewed as imposing `some limits upon the power of a State to abridge existing contractual relationships.'") (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716, 2721, 57 L.Ed.2d 727 (1978)). Further, while the Contract Clause is a self-executing limitation on the power of the states, a person injured by state action that violates the Contract Clause may sue and obtain injunctive and declaratory relief. See United States Trust Co. of New York v. State of New Jersey, 431 U.S. 1, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977); Association of Surrogates and Supreme Court Reporters within City of New York v. State of New York ("Surrogates"), 940 F.2d 766, 774 (2d Cir. 1991), cert. denied, 502 U.S. 1058, 112 S.Ct. 936, 117 L.Ed.2d 107 (1992).

The Golden State factors also weight in favor of finding a cause of action under § 1983. First, the Contract Clause does not express a mere preference for certain kinds of treatment, but clearly creates a binding obligation on government. That obligation is that states not pass laws impairing the obligations of contracts unless such laws serve a significant public purpose and the means chosen to accomplish this purpose are reasonable and appropriate. See United States Trust Co. of New York v. State of New Jersey, 431 U.S. 1, 97 S.Ct. 1505, 1517-19, 52 L.Ed.2d 92 (1977); Sal Tinnerello & Sons, Inc. v. Town of Stonington, 141 F.3d 46, 52 (2d Cir. 1998), cert. denied, ___ U.S. ___, 119 S.Ct. 278, 142 L.Ed.2d 230 (1998). Second, plaintiffs' asserted interest is not too vague and amorphous to be beyond the competence of the judiciary to enforce. Rather, plaintiffs have a concrete interest in the contract that has been impaired. Courts certainly can grasp the obligations created by contracts (they do it all the time in breach of contract actions) and can enforce those interests by declaring the offensive legislation unconstitutional. Third, the Contract Clause was intended to benefit the plaintiffs herein. Like the Commerce Clause, the Contract Clause "of its own force imposes limitations on state [legislation] and is the source of a right of action in those injured by regulations that exceed such limitations." Dennis, 111 S.Ct. at 872; Carter, 5 S.Ct. at 931 ("[T]he individual has a right to have a judicial determination declaring the nullity of the attempt to impair [the] obligation.") (emphasis supplied); Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716, 2723, 57 L.Ed.2d 727 (1978) ("The severity of an impairment of contractual obligations can be measured by the factors that reflect the high value the Framers placed on the protection of private contracts."); Surrogates, 940 F.2d at 771 ("[The Contract] [C]lause is `one of the few "rights-protecting" provisions in the original Constitution', and has been called by one legal historian `the bulwark of American individualism against democratic impatience and socialistic fantasy.'" (quoting G. Stone, L. Seidman, C. Sunstein & M. Tushnet, CONSTITUTIONAL LAW 1428 (1986) and H. Maine, POPULAR GOVERNMENT 247-48 (1885))).

Finally, the Supreme Court's conclusion in Dennis that the Commerce Clause supports a § 1983 action strongly suggests that the Contract Clause also is redressable under that section. As the dissent in Dennis aptly noted, unlike the Commerce Clause, the language that "[n]o state shall . . . pass any . . . Law impairing the Obligation of Contracts . . . would provide some support for an argument that the Contracts Clause prohibits States from `doing what is inconsistent with civil liberty.'" Dennis, 111 S.Ct. at 876 (quoting U.S. Const. Art. I, § 10; Cong. Globe 333 (Rep.Hoar) (Kennedy and Rehnquist, J.J., dissenting)). Thus, according to the dissent, the Contract Clause provides a more compelling basis for a § 1983 claim than the Commerce Clause.*fn3 Id. By logical extension, then, if the Commerce Clause is actionable under § 1983, then so must the Contract Clause.

The Second Circuit has not directly addressed whether a Contract Clause action may be maintained pursuant to § 1983. See Haley v. Pataki, 106 F.3d 478, 482 (2d Cir. 1997) (declining to decide whether Contract Clause is actionable under § 1983 because parties failed to raise the issue). The only circuit to directly address this issue is the Fourth, which affirmed the district court's decision, inter alia, not to entertain a Contract Clause claim under section 1983. See Andrews, 931 F. Supp. at 1267 ("I decline [ ] for the reasons stated at the hearing, and despite the cogency of plaintiffs' arguments to the contrary, to rule on the basis of a forecast that the Supreme Court will at its first opportunity expressly overrule Carter v. Greenhow."), aff'd, 114 F.3d 1175, 1997 WL 321573. It is unclear, however, from either the district court or Fourth Circuit's opinions in Andrews whether they considered Dennis. Furthermore, based upon the Court's above analysis of Carter, the Court disagrees with the District of Maryland and Fourth Circuit's belief that Carter held that a Contract Clause claim cannot be brought pursuant to § 1983.

Moreover, a number of courts, while not specifically addressing whether a Contract Clause claim is actionable pursuant to § 1983, impliedly accepted the position that it is by allowing Contract Claims to proceed under § 1983. See Smith v. City of Enid, 149 F.3d 1151, 1154 (10th Cir. 1998) (applying § 1983 statute of limitations to Contract Clause action); Heart of America Grain Inspection Serv., Inc. v. Missouri Dept. of Agriculture, 123 F.3d 1098, 1106 (8th Cir. 1997); Edwards v. City of Manchester, 121 F.3d 695, 1997 WL 446785 (1st Cir. 1997).

The Court, therefore, finds that alleged violations of the Contract Clause can be brought pursuant to § 1983.

B.  Whether Plaintiffs Properly Maintained a § 1983 Claim

There is no question that there was action under color of state law. Further, the plaintiffs were deprived of a right guaranteed by the Constitution, namely Art. I, § 10. The Court previously found that Chapter 312(4) violated the Contract Clause because it substantially impaired the lease agreement and the legislation was not reasonable and necessary to serve an important public purpose. TM Park, 986 F. Supp. 96. Plaintiffs specifically sought a judicial declaration nullifying the repugnant legislation and, thus, they properly brought an action pursuant to § 1983 for a violation of the Contract Clause.

In fact, in its prior decision, the Court presumed that the action was brought pursuant to § 1983. See Haley v. Pataki, 901 F. Supp. 85, 87 (N.D.N.Y.) (McAvoy, C.J.) ("[T]his suit can be nothing other than an action pursuant to 42 U.S.C. § 1983, and the court will entertain it as such."), aff'd, 106 F.3d 478 ...


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