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Grim Toll: A Case Commentary on Kaur v. New York State Urban Development Corp.

Imagine yourself in the position of being an independent small business owner.  Your family worked long hours with minuscule take home pay and no healthcare benefits.  It has taken years of hard work to build your business, and you are finally beginning to reap its benefits.  Now imagine a wealthy private entity has ambitions to buy all the real estate in your neighborhood, including your business.  It is working with the government agency charged with urban development oversight to do so.  You do not want to sell your business, and the entity is unwilling to pay you what you feel the property is worth.

This is the story of Gurnham Singh and Parminder Kaur, who owned a family-run gas station for over 25 years in the Manhattanville section of northern Manhattan. In 2010, Kaur v. New York State Urban Dev. Corp., the New York Court of Appeals allowed the government to condemn the gas station property so that Columbia University could expand its campus.  The dealing between Columbia University, the Empire State Development Corporation (ESDC), and the New York City Economic Development Corporation (EDC) (together, the regulators) led the family, after years of failed negotiations, to sue the ESDC to save their property from being taken.

Traditionally, if a private entity wanted to purchase private property, the property owner always had the right to refuse the sale; this is a basic tenant of property law.  The government, the ultimate granter of property rights, is granted a constitutional exception to this general rule through the doctrine of eminent domain, allowing it to take private property for a public use once it provides the land owner with just compensation.

In the last thirty years, however, traditional government takings for public works projects have been popularly replaced by public/private partnerships.  Typically, state or local governments make a determination that a public/private project would benefit the public, and then contract with private developers or investors to complete the project.  These partnerships allow for civic improvements that can be funded without taxpayer dollars, but they create a greater risk of conflicts of interest and favoritism between the government and private business.

As public/private partnerships have become more common, it had initially been unclear whether the government could condemn private property and transfer it to another private entity in accordance with a public/private development arrangement.  The answer to this difficult constitutional question was, in some part, resolved by the Supreme Court in the landmark Kelo v. City of New London decision in 2005.  The Court, while remaining deferential to state and local governments decision making in eminent domain cases, reiterated and insisted that any such taking be made for a public use.  The city of New London, Connecticut, had suffered from hard financial times through the latter half of the 20th Century.  To improve the economic prospects of the community, the local government worked with private enterprise to purchase and redevelop waterfront property into a commercial center.  With the promise of new jobs from a forthcoming pharmaceutical facility, the City wanted to create a “river walk” shopping and dining destination that would remake New London into a more dynamic city for its citizens.  The Supreme Court narrowly affirmed the City’s taking and reselling to a private developer, but in Justice Kennedy’s decisive 5th vote and accompanying concurring opinion, he warned against unfair dealings, corruption, and favoritism that might arise from public/private takings.

With the Supreme Court’s affirmation of public/private takings, such ventures became more common.  The Kaur case centered on the taking of private properties for the purpose of expanding Columbia University’s campus.  The chief conflict in the case was the appearance of favoritism and preferential treatment by the government towards Columbia University, the very concerns articulated by Justice Kennedy in his concurrence in Kelo.  Columbia University worked very closely with the New York regulatory agencies, including hiring the same consulting firm as was employed by the regulators.

Columbia University sought to justify the takings on the ground that an area is “blighted.”  Columbia University began purchasing land in the neighborhood in 2001, after which time, the University applied little to no maintenance to those properties.  While that act in and of itself is fine, in this context it created significant questions about whether Columbia University was acting in bad faith.  Specifically, by allowing the neighborhood to become blighted through years of willful neglect, it cast a pall over the proceedings when Columbia University’s consultant (who happened to also be under contract with the City) determined the entire area to be “blighted” during the proceedings many years later.  Among other things, tactics like willful neglect and sharing consultants, and their ultimate vindication in the courts, set forth a blueprint of how interested private entities might in the future use similar tactics to obtain land they seek.

The purpose of the upcoming note is twofold.  The first is to highlight the purpose of eminent domain doctrine, specifically how takings should always be related to a public use or good.  While Columbia University satisfied that element by expanding its educational facilities, providing space which will be accessible to the public, and continuing to serve the greater New York City community, the value of its contribution may be outweighed by its methods of obtaining the land.

The second is to articulate a functional judicial test that incorporates Justice Kennedy’s articulated concerns expressed in his concurrence in Kelo.  Because Justice Kennedy did not articulate a judicial test by which to apply his concurrence, it has been an easy trapping for courts, notably the New York State Court of Appeals, to either misinterpret or simply disregard the call of his opinion.

The test would allow courts to scrutinize the process when public/private partnerships are accused of unfair dealings, corruption, favoritism, or bribery.  On a spectrum, bribery, where an individual or corporation simply paid a public official to facilitate a taking, would be the most obvious and odious infraction, and optimally courts would prevent a taking in such cases.  Moving further down the spectrum, if a court found bad faith by the purchasing enterprise or by the government agency, the court would have discretion to prevent the taking.  Examples might include direct conflicts of interest, deliberate denigration of the area, or unreasonably low offers to purchase the land from its owner.  Still further, questions of unfairness or favoritism would weigh against a taking, though a court might still allow the taking if it serves the public interest.  The process would allow private property owners to challenge administrative rulings against them, if they are able to demonstrate any of the above bad acts.  Courts would then be allowed to review the record de novo to determine if there has been, in fact, bad acts, and determine the appropriate sanction (if any) against the developer.

The judicial framework would create a strong incentive for private enterprise to act in good faith when involved in such dealings, if it was widely known that acting in bad faith could undermine the validity of an entire project.  Further, it would disincentivize bad faith actions such as thinly veiled corruption if parties knew that such behavior could lead to a court granting injunctive relief against them.

The Kaur decision was unfortunate for the family involved, but affords a teachable moment in eminent domain doctrine.  By highlighting appearance of bad faith by the pertinent actors, and proposing a workable judicial framework, persons disadvantaged by public/private takings may challenge them and be better protected by courts who could scrutinize such dealings to the level prescribed by Justice Kennedy’s concurrence in Kelo.

Original image used for banner by <a href=”http://www.flickr.com/photos/kevinmgong/”>K. M. Gong</a>. Licensed under <a href=”http://creativecommons.org/licenses/by/2.0/”>Creative Commons – Attribution 2.0 Generic.</a>

Nathaniel Chiaravalloti is the current Senior Articles Editor for the Journal of Civil Rights and Economic Development. He graduated from Iowa State University in 2008 with a degree in political science. He also served with Teach for America. Chiaravalloti has interned with the The New York State Appellate Division.