The opinion of the court was delivered by: Nicholas G. Garaufis, District Judge
Before the court are all parties' objections to the recommendation of The Honorable Robert M. Levy, United Stated Magistrate Judge, that the court dismiss this consolidated case. For the reasons set forth in this Memorandum and Order, this court accepts and adopts those recommendations in part, rejects those recommendations in part, and dismisses this consolidated case in its entirety.
Because Defendants move to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6), the court must accept all factual allegations in Plaintiffs pleadings and must draw inferences from those allegations in the light most favorable to the Plaintiffs. U.S. v. The Baylor Univ. Med. Ctr., 469 F.3d 263, 267 (2d Cir. 2006) (Rule 12(b)(6)); McGinty v. State, 193 F.3d 64, 68 (2d Cir. 1999) (Rule 12(b)(1)).
Each Plaintiff owns or rents real estate in Brooklyn, New York located on land intended for use in the Atlantic Yards Arena and Development Project, which is described below.
Defendant New York State Urban Development Corporation d/b/a Empire State Development Corporation ("ESDC") is an agency of New York State that was, at all relevant times, controlled by Defendant George E. Pataki, the Governor of New York State from 1995 until December 2006, and Defendant Charles A. Gargano, the Chief Executive Officer of the ESDC during that period. These Defendants are collectively referred to as the "State Defendants."
Defendant Forest City Ratner Companies ("FCRC") is a New York corporation with a principal place of business in New York. Defendant Bruce C. Ratner is the President and Chief Executive Officer of FCRC. Defendant James P. Stuckey is an Executive Vice President of FCRC and the President of FCRC's Atlantic Yards Development Group. Defendant Forest City Enterprises ("FCE") is a Delaware corporation with a principal place of business in Ohio. Defendant Ratner Group, Inc. is a New York corporation with a principal place of business in New York. Defendants BR FCRC, LLC; Brooklyn Arena, LLC; Atlantic Yards Development Co. LLC; BR Land, LLC; and FCR Land, LLC are New York limited-liability companies with principal places of business in New York. These Defendants are collectively referred to as the "FCRC Defendants."
Defendant Michael Bloomberg has been the Mayor of Defendant New York City from 2002 to the present. Defendant Daniel L. Doctoroff has been a Deputy Mayor of New York City from 2002 to the present. Defendant New York City Economic Development Corporation ("EDC") is a New York non-profit corporation with a principal place of business in New York. Defendant Andrew M. Alper was President of the EDC for a portion of the period in which Plaintiffs' claims arose. Defendant Joshua Sirefman was Acting President of the EDC for a portion of the period in which Plaintiffs' claims arose. These Defendants are collectively referred to as the "City Defendants."
B. The Atlantic Yards Arena and Development Project
FCRC intends to build the Atlantic Yards Arena and Development Project (the "Project") on twenty-two acres of land in Brooklyn, New York bounded generally on the north by Atlantic Avenue, the south by Dean Street, the east by Vanderbilt Avenue, and the west by Fourth Avenue (the "Project Area"). The Project is planned to consist of sixteen towers and 8.6 million square feet of floor space, including a sports arena, 6,860 housing units, approximately 600,000 square feet of office space, and a hotel. The Project Area encompasses both land containing property owned and rented by Plaintiffs (the "Takings Area") and land in which Plaintiffs have no interest, which consists primarily of the Vanderbilt Rail Yard site owned by the Metropolitan Transit Authority ("MTA") (the "Non-Takings Area"). The Vanderbilt Rail Yard is part of the Atlantic Terminal Urban Renewal Area ("ATURA"), which New York City has designated as blighted ten times, first in 1968 and most recently in 2004. In all, approximately sixty-three percent of the Project Area is blighted.
FCRC conceived of the Project in or before the summer of 2002 and announced it publicly on December 11, 2003. In the interim, it purchased the New Jersey Nets basketball franchise, which it intends to move into the sports arena that is part of the Project, and solicited and received the support of Governor Pataki, Mayor Bloomberg, and Deputy Mayor Doctoroff. In December 2003, Mayor Bloomberg announced that FCRC would develop the Project with the ESDC. On February 18, 2005, Defendants memorialized their plans for the Project in two memoranda of understanding.
Prior to September 2003, the MTA stated more than once that it had sold to FCRC the right to develop the Vanderbilt Rail Yard. In September 2003, the MTA retracted those statements. On February 24, 2005, the MTA entered an agreement with FCRC indicating that the MTA had not sold to FCRC the right to develop the Vanderbilt Rail Yard. On May 25, 2005, the MTA issued a request for proposals ("RFP") to purchase the right to develop the Vanderbilt Rail Yard. The RFP provided that proposals must include twenty-year profit-and-loss projections. Only two entities submitted proposals. The first, FCRC, offered to pay $50 million and did not submit a twenty-year profit-and-loss projection. The second, the Extell Development Company ("Extell"), offered to pay $150 million and submitted the required profit-and-loss projection. Extell's proposal, unlike FCRC's, did not require the taking of any private property.
On July 27, 2005, the MTA granted FCRC the exclusive right to negotiate, during a forty-five-day period, for the right to develop the Vanderbilt Rail Yard. On September 14, 2005, the MTA announced that it would sell that development right to FCRC for $100 million.
C. New York's Eminent Domain Procedure Law
Article Two of New York's Eminent Domain Procedure Law ("EDPL") sets forth procedures for determining the need for and location of public projects prior to the condemnation of private property. Defendants have availed themselves of those procedures, as described below. Article Four of the EDPL sets forth the procedures governing post-condemnation acquisition of private property for public projects. Defendants have not yet availed themselves of those procedures.
New York law requires a condemnor*fn1 to conduct a pre-acquisition public hearing "in order to inform the public [of the proposed public project] and to review the public use to be served by a proposed public project." EDPL § 201. At the Section 201 hearing, the condemnor must announce the purpose and location of the proposed project, and those in attendance must be given an opportunity to present oral or written statements and to submit other documents concerning the project. EDPL § 203. The hearing must be conducted on the record, and the record must include a transcript of all oral statements made at the hearing and copies of all written statements and other documents submitted at the hearing. Id.; EDPL § 207(A) (indicating that the record includes "a written transcript" of the public hearing).
The ESDC issued a Notice of Public Hearing on July 24, 2006 and held a public hearing on August 23, 2006. In addition, on September 12, 2006, the ESDC held a community forum to discuss the Project.
Within ninety days of a public hearing, a condemnor must publish a synopsis of its determination and findings. EDPL § 204(A). The synopsis must specify (1) the public use, benefit, or purpose to be served by the proposed public project; (2) the location of the project and the reason(s) that location was selected; (3) the general effect of the project on the environment and residents of the locality; and (4) other factors the condemnor considers relevant. EDPL § 204(B). The ESDC issued its determination and findings on December 8, 2006, indicating that ESDC should and would use its power of condemnation to acquire Plaintiffs' properties. (Determination and Findings (12/15/06 Kraus Decl. (Docket No. 51) Ex. E) (available at http://www.empire.state.ny.us/pdf/AtlanticYards/Determination%20and%20Findings.pdf (last visited June 5, 2007)).) The ESDC identified the following as the public purposes to be served by the Project:
(1) The elimination of blight in both the Takings and Non-Takings Areas (Determination and Findings (id. at 1, 4, 5), which is the purported "principal" public purpose of the Project (id. at 4);
(2) An arena to be used by a major-league sports franchise, for athletic contests featuring local academic institutions, and for other entertainment and civic events (id. at 5);
(3) Approximately 2,250 units of "affordable" rental housing and between 3,075 and 4,180 units of "market rate" housing (id.);
(4) Between 336,000 and 1,606,000 square feet of office space (id.);
(5) "Possibly" a hotel (id.);
(6) Eight acres of publicly accessible space (id.);
(7) Ground-level retail space "to activate the street frontages" (id.);
(8) "Community facility spaces, including those offering child care and "youth and senior center service" (id. at 5-6);
(9) A facility for the Long Island Railroad to store, clean, and inspect its trains (id. at 6);
(10) An additional entrance to an already existing subway station (id.);
(11) "[S]ustainability and green design" (id.); and
(12) "[E]nvironmental remediation of the Project Site" (id.).
Plaintiffs expect that their properties will be condemned and seized "in short order" in order to effectuate the Project.
An aggrieved person may seek judicial review of the condemnor's determination and findings within thirty days of their publication. EDPL § 207(A). The EDPL provides that the aggrieved person may sue only in the Appellate Division of New York Supreme Court and only in the Department of the Appellate Division that embraces the county in which the property at issue is located. Id. Judicial review is conducted "on the record," i.e., based on the record of the Section 201 hearing and the Section 204 determination and findings. Id.
The Appellate Division's review is limited to whether (1) the proceeding was in conformity with the federal and state constitutions; (2) the proposed acquisition is within the condemnor's statutory jurisdiction or authority; (3) the condemnor's determination and findings were made in accordance with procedures set forth in Article Two of the EDPL and with Article Eight of the New York Environmental Conservation Law; and (4) a public use, benefit, or purpose will be served by the proposed acquisition. EDPL § 207(C). The decision of the Appellate Division may be appealed to the New York Court of Appeals. EDPL § 207(B).
Plaintiffs have chosen to bring their Section 207 claim before this court, pursuant to the doctrine of supplemental jurisdiction, 28 U.S.C. § 1367, rather than before the Appellate Division.
When, as in this case, the condemnor is an entity other than the State of New York, the condemnor must file a petition in New York State Supreme Court in order to acquire the condemned property. EDPL §§ 402(B), 501. This petition must be filed within three years of the latest among (1) publication of the condemnor's Section 204 determination and findings, (2) the date of the order or completion of the procedure that constitutes the basis of an exemption to Section 204 under EDPL § 206, and (3) entry of the final order or judgment based on Section 207 judicial review. EDPL § 401(A).
The condemnor's petition must set forth (a) the basis for compliance with Article Two of the EDPL, including a copy of its determination and findings; (b) an acquisition map, including the names and places of residence of condemnees; (c) a description of the real property to be acquired and its location; (d) the public use, benefit, or purpose for which the property is required; and (e) a request that the court direct entry of an order authorizing the filing of the acquisition map. EDPL § 402(B)(3). The condemnor must notify the public of the petition at least twenty days before its return date. EDPL § 402(B)(2). Any condemnee may file an answer to the petition. EDPL § 402(B)(4).
Should the court find that the procedural requirements of New York's Eminent Domain Procedure law have been met, it must enter an order granting the petition. EDPL § 402(B)(5). When the condemnor files such an order with the appropriate county clerk or register, "the acquisition of the property . . . shall be complete and title to such property shall then be vested in the condemnor." Id. After title vests in the condemnor, a condemnee may sue for just compensation. See generally EDPL Art. 5.
As of the date the Amended Complaint was filed, the FCRC had not commenced Article Four proceedings to acquire Plaintiffs' property.
Before the court are two cases that have been consolidated.
The first case, 06-CV-5827 (the "Goldstein case"), was filed on October 26, 2006. Plaintiffs to the Goldstein case (collectively, "Goldstein") initially asserted three causes of action, each pursuant to 42 U.S.C. § 1983 and the United States Constitution: (1) a violation of the Takings Clause of the Fifth Amendment, (2) a violation of the Equal Protection clause of the Fourteenth Amendment, and (3) a violation of the Due Process clause of the Fourteenth Amendment. On December 15, 2006, all Defendants moved to dismiss the Goldstein case. On January 5, 2007, Goldstein responded to Defendants' motions to dismiss and filed an Amended Complaint, which added as a fourth cause of action a supplemental claim against the ESDC pursuant to EDPL § 207.
On January 11, 2007, the second case, 07-CV-152 (the "Piller case"), was filed by Aaron Piller and Rockwell Property Management, LLC (together, "Piller"). Piller asserted the same four causes of action as Goldstein and sued the same Defendants.
On January 19, 2007, all Defendants filed reply papers in support of their motions to dismiss the Goldstein case. Also on that date, the ESDC filed a motion to dismiss Goldstein's fourth cause of action. On January 26, 2007, Goldstein responded to the ESDC's motion to dismiss the fourth cause of action. On February 1, 2007, the ESDC filed reply papers in support of its motion to dismiss the fourth cause of action.
On February 7, 2007, Judge Levy, to whom I referred Defendants' motions to dismiss the Goldstein case, heard oral argument regarding those motions. On February 23, 2007, Judge Levy recommended that I dismiss the Goldstein case on the ground of Burford abstention. (Report and Recommendations (Docket No. 83*fn2 ) at 33-42.) Judge Levy also recommended that I decline to dismiss the Goldstein case on the grounds of ripeness and Younger abstention. (Id. at 14-33.) Judge Levy did not consider whether Goldstein stated a claim upon which relief could be granted. (Id. at 42.)
On March 8, 2007, the Goldstein and Piller cases were consolidated. (Stipulation and Order (Docket No. 85).) The parties agreed, and this court so ordered, that "Defendants' pending motions to dismiss in the Goldstein Action, and the Goldstein Plaintiffs' opposition thereto, shall be and hereby are deemed filed in the Piller Action, and the disposition of Defendants' motions in the Goldstein Action shall be deemed to apply to the Piller Action with equal force." (Id. ¶ 2.)
On March 9, 2007, the parties filed objections to Judge Levy's Report and Recommendations. On March 23, 2007, the parties responded to each other's objections. On March 28, 2007, the parties filed reply papers in support of their objections. On March 30, 2007, this court heard oral argument regarding those objections. On May 22, 2007, Governor Pataki filed a supplemental letter. On May 25, 2007, the ESDC filed a supplemental letter. On June 5, 2007, Plaintiffs filed a supplemental letter.
This court has considered all arguments submitted by the parties to this case.
The parties collectively challenge all of Judge Levy's recommendations. I must therefore consider de novo Defendants' motions to dismiss. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b).
I will first address Burford abstention, which Judge Levy recommended I accept as a ground for dismissal. I decline to dismiss on that ground. I will then address ripeness and Younger abstention, which Judge Levy recommended I reject as grounds for dismissal. I accept and adopt those recommendations. I will then consider whether Plaintiffs have stated a claim upon which relief can be granted. I find that they have not. I therefore grant Defendants' motions to dismiss.
Defendants argue, relying on the doctrine established in Burford v. Sun Oil Co., 319 U.S. 315 (1943) and its progeny, that the court must abstain from hearing this case. The Supreme Court has summarized Burford abstention as follows:
Where timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar; or (2) where the exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.
New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 491 U.S. 350, 361 (U.S. 1989) (citation and quotation marks omitted) (hereinafter, "NOPSI"). Defendants believe, and Judge Levy recommends that I find, that this case falls into the second NOPSI category. (ESDC's 12/15/06 Br. (Docket No. 52) at 26-27; ESDC's 3/23/07 Br. (Docket No. 95) at 1, 4; FCRC's 3/23/07 Br. (Docket No. 93) at 5; City Defs.' 3/23/07 Br. (Docket No. 92) at 2; Report and Recommendation (Docket No. 83) at 33-42.)
The court declines to abstain under Burford. Such abstention would be inappropriate because federal-court review of the questions presented in this and similar cases will not disrupt New York's effort to establish a coherent eminent-domain policy. To understand why, it is necessary to consider carefully the facts of Burford,*fn3 the reasons abstention was appropriate in Burford and the one other Supreme Court case approving of such abstention, and the reasons Burford abstention was improper in all other cases in which the Supreme Court considered it.
1. Supreme Court Cases Approving Burford Abstention
a. Burford v. Sun Oil Co.
Although federal courts "are under a virtually unflagging obligation to exercise the jurisdiction given them . . . there are exceptional circumstances where a federal court may decline to decide a dispute properly before it." Cannady v. Valentin, 768 F.2d 501, 503 (2d Cir. 1985); see also West v. Vill. of Morrisville, 728 F.2d 130, 135 (2d Cir. 1984). "Abdication of the obligation to decide cases can be justified under [abstention] doctrine only in the exceptional circumstances where the order to the parties to repair to the state court would clearly serve an important countervailing interest. It was never a doctrine of equity that a federal court should exercise its judicial discretion to dismiss a suit merely because a State court could entertain it." Colo. River, 424 U.S. at 813-14 (citations and quotation marks omitted); see also Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996); County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 189 (1959).
In Burford, the Supreme Court affirmed a district court's decision to abstain from hearing a case involving a question of state law because "[c]onflicts in the interpretation of [the] state law, dangerous to the success of state policies, are almost certain to result from the intervention of the lower federal courts." Burford, 319 U.S. at 334. The state law at issue in Burford was "the general regulatory system devised for the conservation of oil and gas in Texas, an aspect of as thorny a problem as has challenged the ingenuity and wisdom of legislatures." Id. at 318 (citation and quotation marks omitted). The plaintiff, the Sun Oil Company, contested a decision of the Texas Railroad Commission ("Commission") to permit Burford to drill four oil wells on a portion of a large oil field in East Texas. Id. at 316-17. The Supreme Court described that field as follows:
[It] is one of the largest in the United States. It is approximately forty miles long and between five and nine miles wide, and over 26,000 wells have been drilled in it. Oil exists in the pores and crevices of rocks and sand and moves through these channels. A large area of this sort is called a pool or reservoir and the East Texas field is a giant pool. The chief forces causing oil to move are gas and water, and it is essential that the pressures be maintained at a level which will force the oil through wells to the surface. As the gas pressure is dissipated, it becomes necessary to put the well on the pump at great expense; and the sooner the gas from a field is exhausted, the more oil is irretrievably lost. Since the oil moves through the entire field, one operator can not only draw the oil from under his own surface area, but can also, if he is advantageously located, drain oil from the most distant parts of the reservoir. The practice of attempting to drain oil from under the surface holdings of others leads to offset wells and other wasteful practices; and this problem is increased by the fact that the surface rights are split up into many small tracts. There are approximately nine hundred operators in the East Texas field alone.
Id. at 318-19 (citations, quotation marks, and footnotes omitted).
The Court observed that for a variety of "reasons based on geological realities," including those just described, "each oil and gas field must be regulated as a unit for conservation purposes." Id. at 319. The Texas state legislature delegated such regulation to the Texas Railroad Commission ("Commission"):
The Commission, in cooperation with other oil producing states, has accepted State oil production quotas and has undertaken to translate the amount to be produced for the State as a whole into a specific amount for each field and for each well. These judgments are made with due regard for the factors of full utilization of the oil supply, market demand, and protection of the individual operators, as well as protection of the public interest. As an essential aspect of the control program, the State also regulates the spacing of wells. The legislature has disavowed a purpose of requiring that the separately owned properties in any pool should be unitized under one management, control or ownership and the Commission must thus work out the difficult spacing problem with due regard for whatever rights Texas recognizes in the separate owners to a share of the common reservoir. At the same time it must restrain waste, whether by excessive production or by the unwise dissipation of the gas and other geologic factors that cause the oil to flow.
Id. at 320-22 (citations and quotation marks omitted).
In order to achieve the desired level of production, avoid waste, and recognize separate owners' shares of the common reservoir, the Commission adopted Rule 37, which provided for minimum spacing between wells, permitted exceptions where necessary to prevent waste, and aimed to allow each surface owner to recover oil and gas "substantially equivalent in amount to the recoverable oil and gas under his land." Id. at 322. The ostensible simplicity of this goal was "delusive," however, because nobody could be certain just how much oil was present under the land of each surface holder. Id. at 323.
Because the questions of waste and confiscation were interrelated, such that "decision of one of the questions necessarily involve[d] recognition of the other," id., and because "over two-thirds of the wells in the East Texas field exist[ed] as exceptions," id. at 324, the Commission was charged with balancing private rights against each other and, simultaneously, against the public interest:
The standards applied by the Commission in a given case necessarily affect the entire state conservation system. Of far more importance than any other private interest is the fact that the over-all plan of regulation, as well as each of its case by case manifestations, is of vital interest to the general public which must be assured that the speculative interests of individual tract owners will be put aside when necessary to prevent the irretrievable loss of oil in other parts of the field. The Commission in applying the statutory standards of course considers the Rule 37 cases as a part of the entire conservation program with implications to the whole economy of the state.
In order to balance those interests, Texas not only provided for centralized resolution of exception disputes by the Commission, but for centralized judicial review of the Commission's decisions:
The Commission orders may be appealed to a State district court in Travis County, and are reviewed by a branch of the Court of Civil Appeals and by the State Supreme Court. While the constitutional power of the Commission to enforce Rule 37 or to make exceptions to it is seldom seriously challenged, the validity of particular orders from the standpoint of statutory interpretation may present a serious problem, and a substantial number of such cases have been disposed of by the Texas courts which alone have the power to give definite answers to the questions of State law posed in these proceedings.
Id. at 325 (citations omitted). Concentration of challenges to Commission orders in Travis County was intended to prevent the "interminable confusion [that] would result" if the Commission's decisions could be attacked in various courts. Id. at 326. In addition, "[c]oncentration of judicial supervision of Railroad Commission orders permits the state courts, like the Railroad Commission itself, to acquire a specialized knowledge which is useful in shaping the policy of regulation of the ever-changing demands in this field." Id.
Sun Oil sued in federal court rather than Travis County, relying for jurisdiction on the parties' diversity of citizenship and the contention that the Commission's order denied Sun Oil due process. Id. at 317. The Supreme Court framed the question presented to it as, "Assuming that the federal district court had jurisdiction, should it, as a matter of sound equitable discretion, have declined to exercise that jurisdiction here?" Id. at 318. The Court answered that question in the affirmative, concluding that "sound respect for the independence of state action require[d] the federal equity court to stay its hand." Id. at 334.
Although the Court did not reduce its reasoning to a simple formula, it made clear that its conclusion was based on five factors: (1) facts about the East Texas oil field, (2) Texas's centralized approach to regulating oil drilling, (3) Texas's centralized system for reviewing regulatory decisions, (4) the dangers of federal review of regulatory decisions, and (5) the nature of the question presented in the case. I will briefly elaborate upon each.
i. The East Texas Oil Field
The first factor was the East Texas oil field. The Supreme Court observed that the field had to be regulated as a single unit because each operator could, if advantageously located, draw oil from underneath land other than his own, a fact that had led to "offset wells" and other wasteful practices. Id. at 319, 323. In addition, the Court noted that oil was vitally important to Texas, which drew much of its revenue from taxing the oil industry -- a circumstance that would exacerbate the harm from wasted oil. Id. at 320, 324. And wasted oil was not a mere theoretical concern: "the sooner the gas from a field is exhausted, the more oil is irretrievably lost." Id. at 319. For ...