Atlantic City’s Eminent Domain Mania

The 2 billion dollar casino hotel Revel closed its doors, unable to find a buyer in Bankruptcy Court. The showboat casino closed. The Wall Street Journal reported on September 9, 2014 that Trump Entertainment Resorts filed for Chapter 11 bankruptcy; this includes Trump Taj Mahal and Trump Plaza casinos.

Charles V. Bagli, writing in the New York Times on September 8, 2014, reported that the highest-grossing casino in America is not in Nevada or in Atlantic City, but in a hardscrabble neighborhood near Kennedy Airport where a Malaysian Conglomerate, the Genting Group, opened Resorts World Casino New York City. Mr. Bagli writes that Resorts World generated $792 million in revenue (and more than half a billion dollars in taxes) last year, all from electronic slot machines.

What’s Atlantic City to do? It’s easy; it wants to condemn more property near the shuttered Revel Casino. The target properties include a one family home long held in family ownership. The project is apparently the creation of a tourism district. The Casino Redevelopment Authority admits there is only a general outline but not detailed plans.

But why press ahead to take private property when there is no reason to do so? Saying that a condemnor has the power to take the property, therefore it can, is bereft of reason. It is time for courts to become a little more proactive in the judicial debate. Unfortunately, courts seem to believe that they lack the ability to review the facts and circumstances of whether a proposed taking is truly a public use. Put another way, can a taking which makes no sense serve a valid public use?

We are not sure how the Atlantic City case will be decided. We do know that had the case been brought in New York, we would not be sanguine of the results.

In Matter of Goldstein v. New York State Urban Development Corp., 13 NY3d 511 (2009), also known as the “Atlantic Yards” case), New York’s highest court, the Court of Appeals, stated (at 526):

It is important to stress that lending precise content to these general terms has not been, and may not be, primarily a judicial exercise. Whether a matter should be the subject of a public undertaking—whether its pursuit will serve a public purpose or use—is ordinarily the province of the Legislature, not the Judiciary, and the actual specification of the uses identified by the Legislature as public has been largely left to quasi-legislative administrative agencies. It is only where there is no room for reasonable difference of opinion as to whether an area is blighted, that judges may substitute their views as to the adequacy with which the public purpose of blight removal has been made out for those of the legislatively designated agencies; where, as here, “those bodies have made their finding, not corruptly or irrationally or baselessly, there is nothing for the courts to do about it, unless every act and decision of other departments of government is subject to revision by the courts”

New York has a dismal record in protecting property rights. Some genius thought it would be a great idea to condemn property to expand the New York Stock Exchange. The problem was that the property to be condemned included a luxury residential apartment building. The New York statute authorizing condemnation required a finding of blight. What to do? Simple: The legislature passed a bill waiving the blight requirement. The determination to condemn was upheld by the Appellate Division. Matter of Fisher v. New York State Urban Development Corp., 287 AD2d 262 (1st Dept 2001). Thereafter, someone figured out that there was really no reason to expand the stock exchange. Indeed, because of the increase in electronic trading, the trading floor was getting smaller. But by the time the project was cancelled, it cost over $100 million in costs and legal fees.

It may be time for courts to become a little more active in their review of the public use (or public purpose) limitation. As Judge Fuchsberg noted in Yonkers Community Development Agency v Morris, 37 NY2d 478 (1975), “Courts are required to be more than rubber stamps in the determination of the existence of substandard conditions in urban renewal condemnation cases. The findings of the agency are not self-executing. A determination of public purpose must be made by the courts themselves and they must have a basis on which to do so.”

So we continue to watch the Atlantic City case. Just maybe, the judge presiding will apply some logic to the issue.

Posted in Eminent Domain Abuse, New York
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