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NRP Holdings LLC v. City of Buffalo

United States District Court, W.D. New York

February 27, 2017



          WILLIAM M. SKRETNY United States District Judge


         On June 6, 2011, Plaintiffs NRP Holdings LLC and NRP Properties LLC commenced this action against Defendants the City of Buffalo (the “City”), Mayor Byron W. Brown, and Common Council Member Demone A. Smith (together, the “City Defendants”), Former Deputy Mayor Steven M. Casey, and the City of Buffalo Urban Renewal Agency (“BURA”). Currently pending before this Court are motions for summary judgment by the City Defendants and BURA seeking dismissal of the claims against them. (Docket Nos. 152, 165.) Also pending are motions by Plaintiffs seeking additional discovery and leave to file a sur-reply. For the following reasons, the motions for summary judgment are granted and all pending claims are dismissed; Plaintiffs' motions are denied.


         A. Factual Background[1]

         East Side Housing II

         Plaintiffs NRP Holdings LLC and NRP Properties LLC (collectively, “NRP”) are affiliates of the NRP Group LLC, an Ohio limited liability company that develops, builds and manages apartments and housing across the United States. In November 2007, NRP, together with developer Belmont Shelter Corporation (“Belmont”), [2] began working with the City of Buffalo and BURA[3] on a project to build and manage 50 affordable single-family homes in the Masten and Cold Springs neighborhoods on the East Side of the City of Buffalo (“East Side Housing II”). The City had previously worked on a similar project (“East Side Housing I”) with Belmont in which NRP was not involved. East Side Housing II was intended to revitalize the Masten Park and Cold Springs neighborhoods and bring revenue into the local community through the use of local subcontractors and locally sourced materials.

         East Side Housing II was a complex real estate development project, which required, among other things: (1) the transfer of 51 City-owned lots to the developers; (2) a payment in lieu of taxes (“PILOT”) agreement between the developers, the City, and the County of Erie; (3) a release of federal HOME Investment Partnerships Program (“HOME”) funds; (4) a Low-Income Housing Tax Credits Regulatory Agreement; and (5) a final HOME funds agreement. These agreements and transfers required approvals from the federal Department of Housing and Urban Development (“HUD”), the City Planning Board, the County of Erie, the Buffalo Fiscal Stability Authority, BURA, and the Buffalo Common Council.

         The project involved an investment by the City, as the cost to the City to build the 50 units would be an average of $32, 000 per house in HOME funds. (See Docket No. 177-1, Lane Decl. Exh. D.) This cost, though not insignificant, was substantially less than similar projects, which had averaged over $220, 000 per unit in HOME funds. (Id.) Part of the City's investment came in the form of a tax forfeiture on the property involved in the development through the PILOT agreement. The PILOT agreement was effectively a tax incentive program, to be negotiated between the City, the County, and the developers, to defer or limit taxes paid on the properties associated with the project. Typically, the City and County enter into an agreement to forfeit tax revenue so as to encourage development in their jurisdiction. Here, it would have allowed NRP to receive a property tax exemption on the land to be developed and, in exchange, submit payments to the City and the County according to an agreed-upon schedule.[4] Because the PILOT agreement was a municipal contract that impacted the City and County budgets, their legislative bodies were required to individually and separately approve the agreement before it came into effect. The City was also required to approve any transfer of City-owned property. Pursuant to the City Charter, the approval of any sale, lease, or transfer of City-owned real property must be made by formally adopted resolution by the Common Council. (See City Charter, § 27-13 Sale or Lease of Property for Development or Redevelopment (“Real property or any interest therein and appurtenances thereto belonging to or in the control of the city, necessary for . . . development or redevelopment, . . . or for urban renewal, may be sold . . . to any person, firm or corporation . . . when authorized by resolution of the council . . . .”).) Accordingly, the sale of the 51 City-owned lots also required Common Council approval.

         Between November 2007 and February 2008, the City, BURA, and the developers had multiple meetings regarding East Side Housing II. NRP alleges that, during these meetings, the City and BURA unconditionally and repeatedly promised to enter into a PILOT agreement, provide $1, 600, 000 of HOME funds to assist in construction, and transfer 51 buildable City-owned vacant lots, among other things that would be needed to complete the project. On February 25, 2008, these promises were communicated by a letter from Timothy Wanamaker, the Executive Director of Buffalo's Office of Strategic Planning and Vice President of BURA, who wrote to Belmont:

This letter is to confirm that the Buffalo Urban Renewal Agency has earmarked $1, 600, 000 of the City's HOME funds for the [ ] project that consists of construction of fifty (50) units of single-family homes in the Masten Park and Cold Springs neighborhoods of the City of Buffalo.

(Docket No. 152-9, Battle Decl. Exh. 12 (the “Wanamaker Letter”).) After describing the details of the plan-including the “lease-to-own” component, the City's promise to offer its “usual Low-Income Housing Pilot Agreement, ” and the City's commitment to provide 51 City-owned vacant lots at a price of $2, 000 per lot-Wanamaker noted, “This commitment letter is only valid if the developer is successful in securing a 2008 Low-Income Housing Tax Credit allocation to complete the project.” (Id.) He concluded, “Of course, BURA is required to meet all applicable Federal, State, and local rules and regulations before issuance of HOME funds to eligible recipients.” (Id.) On August 20, 2008, NRP obtained the requisite low-income-housing tax credits from the New York Division of Housing and Community Renewal (“NY DHCR”). This Court has previously found that, because issuance of HOME funds was explicitly conditional on meeting applicable rules and regulations, only the promises regarding the PILOT agreement and the transfer of City-owned property were unambiguous. (See Docket No. 132 at 11-12.)

         On February 26, 2008, Mr. Wanamaker sent another letter to Belmont stating that the City had received Belmont's application and that the Project could be “eligible” for a PILOT Agreement. Mr. Wanamaker explained that a PILOT Agreement was contingent on certain future events, including Common Council approval:

The PILOT will be granted to the project upon submittal of satisfactory evidence of funding and evidence that the project will proceed as proposed, and is contingent upon the approval of the County of Erie, the Buffalo Common Council and the Buffalo Fiscal Stability Authority.

Docket No. 152-9, Battle Decl. Exh. 13.) The transfer of City-owned property was also subject to Common Council approval under the City Charter, as noted above. NRP alleges that, to the extent that any promises were made contingent on such approvals, it understood, from prior experience, that those approvals were pro forma.

         During his deposition in this case, Mayor Brown testified that the Wanamaker Letter created affirmative obligations on the part of both NRP and the City. (See Docket No. 177-1, Lane Decl. Exh. B at 228-29 (stating that the developers “could definitely feel that they were receiving support from the city, that it made sense for them to continue to move toward a project, that it made sense for them to do everything that they were supposed to do to try to complete a project”).) Mayor Brown further demonstrated support for the project in communications to Governor David Patterson's Office and to the Commissioner of the NY DHCR.

         NRP alleges that, in reliance on the promises made by Defendants, it took numerous steps toward completion of the project. In addition to obtaining low-income-housing tax credits from the NY DHCR, NRP also incurred costs for appraisals, flood zone determinations, title searches, pre-construction loans including interest, architecture designs, landscape architecture designs, surveys and other engineering activities, environmental reports, market studies, legal services, development consulting, building permits, site plans, Planning Board compliance, BURA compliance, the federal HOME funding process, the New York State funding process, SEQR, insurance retention, tax credit consultations, request for proposal for professional outreach, project financing, and personnel hours. NRP estimates that its expenses and costs related to East Side Housing II exceed $489, 000.

         The City also took substantial preliminary steps. It selected location sites for the planned homes and executed a HUD Request for Release of Funds and Certification. The Buffalo Planning Board approved NRP's site plan, design, and elevations for the project. BURA passed a resolution authorizing allocation of the HOME funds on March 12, 2009. The City of Buffalo Department of Economic Development, Permit & Inspection Services approved all necessary building permits, subject only to the payment of required fees. The project was also formally approved by the Buffalo Fiscal Stability Authority, which included Mayor Brown as its director.

         The Alleged Conspiracy

         The East Side Housing II project came to a halt in 2009 when Mayor Brown declined to submit resolutions on the PILOT agreement and the transfer of City-owned property to the Common Council. The reasons behind Mayor Brown's actions are strongly disputed. According to the City Defendants, Mayor Brown began to have doubts about the project, in part because the housing would be rent-to-own and the site would be scattered. NRP argues that Mayor Brown was aware of these aspects previously and had never expressed reluctance before. Instead, NRP contends that East Side Housing II was derailed because Mayor Brown, Deputy Mayor Casey, and Council Member Smith began conspiring with a political ally of Mayor Brown's, Reverend Richard Stenhouse, to demand a paid role for Reverend Stenhouse and his organization, the Jeremiah Partnership, in the project.[5]

         Reverend Stenhouse stated in his deposition testimony that he wanted a role in the project for the Jeremiah Partnership to ensure that local subcontractors would be hired and that the minority hiring guidelines would be met. Specifically, he was worried that women and “other people that met the guidelines that historically have been used to circumvent hiring minorities” would be hired rather than “African Americans.” (See Docket No. 177-1, Lane Decl. Exh. V at 272-75.) On March 12, 2008, Carla Kosmerl, BURA's former director of administration and finance, sent an email to NRP and Belmont stating that she would be meeting with the mayor and wanted “to get something signed” wherein the developers agreed to six requests concerning minority-owned and women-owned business participation, a drug policy, local hiring, and to “[w]ork with the locally-based, not-for-profit Jeremiah Partnership” who “would like to assist in recruiting local minority sub-contractors” and “could shadow the NRP [general contractor] to learn some of the requirements for such a project.” (See Docket No. 177-1, Lane Decl. Exh. X.)[6]

         Shortly thereafter, on March 30, 2009, NRP was “put on the spot” during a call with the City when the City's representative stated that the developers needed to “make [S]tenhouse happy” and should inform the City in the “next 1.5 hours” whether they intended to hire the Jeremiah Partnership. (Docket No. 177-2, Lane Decl. Exhs. AA, BB.) Later that day, Reverend Stenhouse emailed Council Member Smith, Kosmerl, and Belmont, offering a contract whereby he would assist with “mwbe and section 3[sic][7] subcontractors for the fifty houses” at a cost of $30, 000 as well as “an agreement with Belmont to do management training for a year for the Jeremiah Partnership.” (Id., Lane Decl. Exh. BB.) Reverend Stenhouse noted that the contract and agreement “would need to be formally signed before we will sign off.” (Id.) On April 15, 2009, Ken Peterson (who appears to be affiliated with Reverend Stenhouse, but is not otherwise identified) emailed a proposal to NRP for both the management program and the workforce and business diversity assistance, the cost of which had risen to $60, 000. (Id., Lane Decl. Exh. CC.) Peterson stated that “Stenhouse is ready to place his call to the Mayor . . . provided I can show him an executed agreement with [NRP].” (Id.)

         NRP did not execute the agreements. It alleges that, after evaluating the possibility of hiring Reverend Stenhouse, it chose not to do so because it believed that Reverend Stenhouse would add little value to East Side Housing II and was seeking a no-show role. Instead, NRP issued a “Request for Proposals for Professional Outreach Services to African-American, Minority, Local and Women-Owned Firms.” (Id., Lane Decl. Exh. GG.) NRP received three proposals, one of which came from the Jeremiah Partnership. The Jeremiah Partnership set out a total budget of $80, 000, which included what NRP alleges to be “numerous and suspect budget items, ” such as a $3, 600 allotment for refreshments at twelve planned meetings, a rental cost of $12, 000 for those meetings (though they were to take place at locations owned by Jeremiah Partnership), and $35, 000 in administrative fees for postage, telephone, and “Jeremiah involvement.” (Id., Lane Decl. Exh. HH.) NRP rejected the proposal in favor of a bid prepared by the University at Buffalo, which proposed a $40, 524 total budget- approximately half the amount sought by the Jeremiah Partnership. (Id.)

         NRP has submitted an affidavit from former Deputy Mayor Casey, stating that Mayor Brown told him Reverend Stenhouse “had to be involved as the face of the Project in the Black community” and that Mayor Brown “was tired with the out of town white developers handling all of these projects.” (Docket No. 177-5, Casey Aff. at ¶ 5.) Steven Weiss, who acted as NRP's outside legal counsel on the project, also submitted a declaration stating that when he explained to Mayor Brown that NRP regularly engaged local entities such as Reverend Stenhouse's to perform community outreach services, but intended to select such an entity by competitive bid, Mayor Brown indicated that he did not care as long as NRP “hired ‘the right company, '” which Weiss understood to be Reverend Stenhouse or his affiliates. (Docket No. 184, Weiss Decl. at ¶ 6.) Weiss stated that, in another conversation, “Mayor Brown made a statement to the effect that NRP needed to ‘Make Stenhouse happy or the deal will not go through'” and that he was “‘Sick of seeing those fucking white developers on the East Side with no black faces represented.'” (Id. at ¶ 7.) When Weiss informed Mayor Brown that NRP would not be retaining Reverend Stenhouse for community outreach, Mayor Brown stated “‘I told you what you had to do and you hired the wrong company.'” (Id. at ¶ 8.) Aaron Pechota, Vice President of Development for NRP Investments Corporation, an affiliate of NRP, stated in a declaration that he believed “the Mayor was simply seeking a payoff of a political ally-a pay-to-play demand that required NRP . . . to retain Rev. Stenhouse.” (Docket No. 177-6, Pechota Decl. at ¶ 15.)

         Indeed, NRP alleges that, but for their initial refusal to sign the agreements with Reverend Stenhouse, the resolutions for the PILOT agreement and transfer of the City lots would have been introduced at a Common Council meeting as early as April 28, 2009. (See Docket No. 177-2, Lane Decl. Exh. EE (April 28, 2009 email stating that NRP “knows what to do, will do it and Rev. Stenhouse will call Mayor should that contract be signed this AM. IF [sic] that happens, presumably the file could be introduced for passage today at Council. If not today, the tax credits will be lost by month's end”).

         The Mayor generally has discretion as to which proposed resolutions are sent to the Common Council for a vote, and additional discretion to veto resolutions approved by the Council. The Mayor never introduced the resolution for a PILOT agreement on East Side Housing II to the Common Council, and the Common Council therefore never voted to approve or disapprove the agreement. The Mayor also never introduced the resolution for sale of the 51 City-owned lots, and the Common Council therefore never voted to approve or disapprove the transfer. Mayor Brown stated during his depositions that he was “not aware” of any instances where similar resolutions were not approved by the Common Council. (Docket No. 177-1, Lane Decl. Exh. B at 131.) NRP contends that, had the resolutions been introduced, Common Council approval was not in doubt.

         B. Procedural Background

         Defendants have previously challenged the sufficiency of Plaintiffs' pleadings, and familiarity with this Court's prior orders is assumed. In July of 2012, this Court dismissed several of NRP's claims but found that, based on the arguments raised, the claims under the doctrine of promissory estoppel and under the Racketeer Influenced and Corrupt Organizations Act (commonly known as “RICO”) survived Defendants' motion to dismiss. (See Docket No. 43.) This Court also granted NRP leave to file its Second Amended Complaint, adding BURA as a defendant. (Id.) BURA moved to dismiss the claims against it and, in September 2013, this Court denied the motion with respect to NRP's promissory estoppel claim, but otherwise granted the motion with respect to Counts I, III, and V, which are the same claims that this Court previously dismissed as against the ...

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