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.
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."
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
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.
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
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
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; ...