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HAMPTON BAYS CONNECTIONS, INC. v. DUFFY

January 26, 2001

HAMPTON BAYS CONNECTIONS, INC., AND PHOENIX GROUP OF HAMPTON BAYS, INC., PLAINTIFFS,
v.
ROBERT DUFFY, INDIVIDUALLY, NANCY GRABOSKI,, INDIVIDUALLY, JOHN BLANEY, INDIVIDUALLY, PEG CARAHER, INDIVIDUALLY, VINCENT MARTORELLO, INDIVIDUALLY, PAUL J. HOULIHAN, INDIVIDUALLY, "JOHN DOE" AND "JANE DOE", #'S 1-5, 6-10, AND 11-15, INDIVIDUALLY AND PERSONALLY, REPRESENTING THE FICTITIOUS NAMES OF INDIVIDUALS, WHOSE FULL NAMES ARE UNKNOWN TO PLAINTIFF, WERE AT ALL RELEVANT TIMES HEREIN EMPLOYEES OF THE TOWN OF SOUTHAMPTON DEPARTMENT OF LAND MANAGEMENT PLANNING DIVISION, THE TOWN OF SOUTHAMPTON DEPARTMENT OF LAND MANAGEMENT AND ZONING DIVISION, AND THE TOWN BOARD MEMBERS OF THE TOWN OF SOUTHAMPTON, AND THE TOWN OF SOUTHAMPTON, DEFENDANTS.



The opinion of the court was delivered by: Spatt, District Judge.

MEMORANDUM OF DECISION AND ORDER

This lawsuit arises from the allegations by the plaintiffs, Hampton Bays Connections, Inc. ("HBC") and the Phoenix Group of Hampton Bays, Inc. ("Phoenix," collectively the "plaintiffs") that the defendants, consisting of the Town of Southampton and various of its agencies, employees, and officials, violated the plaintiffs' constitutional rights to free speech, equal protection, and substantive and procedural due process under 42 U.S.C. § 1983. Presently before the Court are (1) the defendants' motion to dismiss the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Fed.R.Civ.P."); (2) the defendants' motion for sanctions pursuant to Fed.11.Civ.P. 11 and 28 U.S.C. § 1927; and (3) the plaintiffs' motion for sanctions pursuant to 28 U.S.C. § 1927.

I. BACKGROUND

A. The HBC Property

The following facts are derived from the plaintiffs' amended complaint. In April 1995, HBC purchased a 9.77 acre parcel of real property located at 240 West Montauk Highway, in Hampton Bays. In early fall 1997, HBC leased the front 1.5 acres of its property, which was zoned for "Highway Business," to McDonald's Corporation for the construction of a 3,000 square-foot McDonald's restaurant. At the time of the lease, HBC intended to construct an ambulatory surgery center, which would be used by Stony Brook Hospital ("Stony Brook"), on the rear portion of its property, which was zoned for residential use.

On October 23, 1997, the Southampton Planning Board ("Planning Board") issued a pre-application report regarding the McDonald's proposal. The Planning Board set forth several recommendations but was otherwise favorable to the construction of the restaurant. At about the same time the pre-application report was issued, a member of the Planning Board informed HBC that in order to build the restaurant, HBC would have to purchase four Pine Barrens Credits, which are transferrable development rights that permit increased development in certain portions of Long Island. HBC bought four Pine Barrens Credits for the sum of $50,000.

On March 23, 1998, McDonald's submitted a formal application to the Planning Board for a special exception use permit and for site approval to build a McDonald's Restaurant on HBC's property. According to the plaintiffs, the Planning Board is required, by law, to issue a "determination of significance" within 20 days of receipt of an application. The Planning Board failed to take any action on the McDonald's application for three months.

Meanwhile, HBC and Stony Brook were pursuing the necessary permits for the construction of the ambulatory surgery center. On April 24, 1998, the New York State Department of Health ("DOH") issued a Certificate of Need to Stony Brook authorizing the construction of the center. The Certificate of Need was conditioned on construction commencing on or before December 31, 1998, and if construction did not begin by that date, the approval would be deemed cancelled.

Between March and July 1998, Edmund Bodkin ("Bodkin"), an officer and a member of the Board of Directors of HBC as well as the President and member of the Board of Directors of Phoenix, met with defendant Robert Duffy ("Duffy"), who was Planning and Development Administrator for the Town of Southampton, to discuss the possibility of constructing an ambulatory surgery hospital on the rear portion of HBC's property. The plaintiffs allege that Duffy told HBC representatives that he would defeat the application for the ambulatory surgery center in retaliation for HBC's pursuit of the McDonald's application. The plaintiffs claim that Duffy said, "The McDonald's application will hurt the surgical center's application. If this application was not here, you would have no problem getting the surgical center. I do not want a McDonald's in Hampton Bays." When the HBC representatives told Duffy that approval for the ambulatory surgery center was not a decision for him alone to make, he responded, "If McDonald's does get approval, I'll make sure that [the] trees remain in front of McDonald's blocking the view from Montauk Highway." According to the plaintiffs, Duffy continued by stating, "If you attempt to cut the trees down, I'll have you arrested."

On August 13, 1998, the Planning Board held a public hearing on McDonald's application for a special exception use permit and the site plan approval. Defendants Nancy Graboski ("Graboski"), John Blaney ("Blaney"), and Peg Caraher ("Caraher"), all members of the Planning Board, continued the hearing to September 10, 1998, a move that the plaintiffs claim was a violation of the local ordinance. The amended complaint alleges that a local ordinance required the Planning Board to render a decision on the McDonald's application within 62 days of the hearing, but the Planning Board failed to do so.

In August 1998, HBC continued to pursue construction of the ambulatory surgery center. As noted above, the rear portion of HBC's property was zoned for residential use. Thus, in order to erect the center, HBC had to petition the Planning Board to change the zoning designation to Planned Development District ("PDD"), which it did by filing an application to that effect on August 27, 1998. The Town returned the application to HBC on September 14, 1998, because it was incomplete. The amended complaint alleges that defendant Duffy issued a memo on August 31, 1998, in which he set forth additional requirements that must be met before HBC's application would be accepted.

On September 28, 1998, before HBC could resubmit its application for a change of zone, and before the Planning Board decided McDonald's application for its site plan approval and special exception use permit, the Southampton Town Board imposed a six-month moratorium on the issuance of any zoning approvals in the Hampton Bays. In a press release, issued on September 8, 1998, the Town Board stated that the main purpose for the moratorium was to stop the McDonald's construction.

In December 1998, HBC applied for an exemption from the moratorium so that the Planning Board could consider its application for a change of zone. At roughly the same time, Cat Cove, a real estate developer who is not a party to this action, also submitted an application for an exemption from the moratorium so that it could obtain approval for construction of a 90,000-foot shopping center approximately one and one-half miles from the HBC property. On or about December 15, 1998, the Town Board granted Cat Cove's application for an exemption. On December 22, 1998, the Town Board held a hearing regarding HBC's application for an exemption to the moratorium, and in January 1999, it denied that application. The plaintiffs contend that as a result of the Town Board's denial of HBC's application, the DOH's Certificate of Necessity expired, Stony Brook looked at other property for construction of its ambulatory surgery center, and HBC lost a 25-year, $17,000,000 lease with the hospital.

On June 10, 1999, the Planning Board granted McDonald's special exception use permit and site plan approval. On June 17, 1999, McDonald's applied for a building permit from the Town of Southampton Department of Land Management and Zoning ("Building Department"). The Building Department returned the application on the ground that it was not submitted with a wasteWater management approval. The plaintiffs contend that McDonald's decision to submit its application without a wastewater management approval was based on the Planning Board's advice that McDonald's was not required to obtain the approval prior to submitting its application for the permit. The plaintiffs allege that the Planning Board intentionally misrepresented the requirements for a building permit in an attempt to delay construction of the McDonald's.

On, June 22, 1999, the Town Board Members held a hearing in regard to the enactment of a Zoning Ordinance. The plaintiffs contend that the hearing was improperly held, because the Planning Board, which is required to provide the Town Board with a written report prior to the hearing, did not submit that report until after the hearing had opened. On July 13, 1999, the Town Board adopted an amended local zoning law, and the plaintiffs allege that the amended law was significantly different from the one discussed at the public hearing. On the same date, McDonald's resubmitted its application for a building permit, and on August 17, 1999, the Building Department denied McDonald's application based on the newly enacted amended toning law.

The Court takes judicial notice of a decision of the Supreme Court of the State of New York, Suffolk County (Cohalan, J.), dated August 3, 2000, reversing the Building Department's denial of McDonald's application for a building permit. The Suffolk County Supreme Court found that held that the Town of Southampton had violated the dictates of its own Town Code and the Municipal Home Rule law "in its haste to adopt the zoning regulations." The court further held that because the new zoning law had been adopted improperly, it was invalid. Finally, the Suffolk County Court concluded that "the building permit application must proceed to immediate review, unencumbered by the voided legislation." At oral argument, both parties informed this Court there has been activity regarding both the zoning amendment and the building permit application. However, because those factual allegations are not contained in the amended complaint, the Court cannot consider them in deciding the motion to dismiss. Accordingly, they are not mentioned here.

B. The Phoenix Property

In regard to the relationship between the plaintiffs, the amended complaint alleges that Edmund Bodkin is the President and member of the Board of Directors of Phoenix as well as a member of HBC's Board of Directors. The amended complaint also states, "most of the officers and board members that comprise HBC also comprise [Phoenix]" (Amended Complaint ¶ 318).

In 1993, Phoenix purchased a 3.2 acre parcel of real property in the Hampton Bays. The property was zoned as permitted use, and Phoenix bought it with the intent to construct two medical arts buildings: 223 West Montauk Highway, and 225 West Montauk Highway.

On May 5, 1995, the Town Planning Board approved Phoenix's site plan application for construction of a medical office building located at 225 West Montauk Highway. On October 24, 1996, the Board approved Phoenix's site plan application for construction of a medical office building at 223 West Montauk Highway. On the same date, the Board granted Phoenix a special permission exception for renovation of the building located at 225 West Montauk Highway.

Phoenix failed to build the structure at 223 West Montauk Highway within the two years allotted by the Board's site plan approval. Thus, when the approval expired on October 24, 1998, Phoenix was required to re-apply for approval of its site plan at 223 West Montauk Highway. Phoenix submitted its reapplication after McDonald's had formally applied for a special exception use permit and for site approval to build the restaurant on HBC's property. The plaintiffs allege that the Planning Board returned Phoenix's reapplication as incomplete in retaliation for HBC's McDonald's application.

C. The Claims Raised in the Amended Complaint

The amended complaint asserts three sets of claims for relief. In their first umbrella claim for relief, which is brought pursuant to 42 U.S.C. § 1983, the plaintiffs allege that the defendants deprived them of their First Amendment right to freedom of speech and their Fourteenth Amendment Rights to equal protection, substantive due process, and procedural due process.

In particular, HBC claims that the defendants collectively deprived it of its free speech right to apply for various approvals and permits in regard to the construction of a McDonald's by defeating HBC's attempts to construct an ambulatory surgery center in retaliation for HBC's pursuit of the McDonald's project. Phoenix claims that defendant Graboski and the Planning Board Members deprived Phoenix of its right to freedom of speech by denying Phoenix's applications to build a medical office building in retaliation for HBC's lawful exercise of its free speech right to apply for approvals and permits in regard to the construction of a McDonald's.

HBC also contends that the defendants deprived it of its right to equal protection of the laws when the Town Planning Board Cat Cove's application for an exemption from the six-month moratorium zoning approvals but denied HBC's application for an exemption from the same The amended complaint alleges that the Planning Board granted Cat Cove's application but denied HBC's in retaliation for HBC's lawful applications to develop a McDonald's restaurant on its land. HBC further asserts that Cat Cove and HBC are similarly situated because Cat Cove was seeking to build a 90,000 square foot shopping center one and one-half miles away from the site HBC intended to use for the construction of an 18,000 square foot ambulatory surgery center. Phoenix does not raise an equal protection claim in the amended complaint.

HBC alleges that it had substantive due process rights to own and develop its property; to enter into contracts with third parties concerning the use of their property; and to lawfully acquired pine barren credits. HBC contends that the defendants deprived it of its substantive due process rights by arbitrarily denying land use permits in retaliation for HBC's lawful attempt to build a McDonald's. HBC further asserts that absent the defendants' due process violations, there is a substantial certainty that HBC's applications would have been granted.

Similarly, Phoenix claims that the defendants deprived its of its substantive due process rights to develop its property located at 223 West Montauk Highway and to enter into contracts with third parties regarding the development of that property when it denied Phoenix's application for the land use permits for 223 West Montauk Highway in retaliation for HBC's application for the construction of a McDonald's. Phoenix also asserts that absent the defendants' due process violations, there is a strong likelihood that its application for the land use permits would have been granted.

Both HBC and Phoenix claim that they were denied their rights to procedural due process in that the defendants degranted prived the, plaintiffs of their property rights without providing them with a reasonable opportunity to contest the government's actions. According to the amendmoratorium. complaint, the New York courts do not provide a judicial mechanism for challenging abuses of governmental power, such as the ones alleged by the plaintiffs.

In the second claim for relief, HBC alleges prima facie tort by defendants Daffy, Graboski, Blaney, Caraher, Martorello, Houlihan, Planning Staff Members, Building Staff Members, and Town Board Members, individually and in their official capacities. In particular, HBC claims that the defendants intentionally performed acts without justification and in furtherance of their self-interest and for the sole purpose of harming HBC. HBC further contends that the defendants' conduct caused it to suffer financial losses including but not limited to the $17,000,000 lease with Stony Brook and the deprivation of $50,000 worth of Pine Barrens Credits.

In the third claim for relief, HBC alleges that defendants Daffy, Graboski, Blaney, Caraher, Martorello, Houlihan, Planning Staff Members, Building Staff Members, and Town Board Members, individually and in their official capacities, tortiously interfered with the lease HBC was attempting to negotiate with Stony Brook. According to HBC, absent the defendants' intentional conduct, the lease agreement between Stony Brook and HBC would have been executed because it had already been drafted and was simply awaiting the parties' signatures.

As noted above, the Court must resolve three separately-fired motions: (1) the defendants' motion to dismiss the amended complaint; (2) the defendants' motion for sanctions; ...


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