Posted by: Patricia Salkin | November 24, 2010

NY Federal District Court Dismisses Takings Claim but Allows Section 1983 Claims to Proceed

Plaintiff, Soundview Associates, owned 144-acre parcel of land on which they intended to build a spa. In 1982, at the request of Soundview’s predecessor-in-interest, Riverhead Flag Corporation, the Town rezoned the site to a Recreational Use in order to enable them to improve the sites and build condominiums while continuing to use and operate the existing golf course, tavern, restaurant, and retail store. They also indicated a desire ‘to utilize the premises for the purposes of a health spa. The Town issued a special use permit to the Riverhead Flag Corporation. Soundview Associates asserts that that special permit “ran with the land, had no expiration date, and, was at no time revoked by the Town of Riverhead.” 

However, in 1983, the Town adopted Resolution No. 161, which approved the proposed condominiums, but not the health spa.  In 1984, another predecessor-in-interest called Baiting Hollow Development Corporation, executed a “Grant of Scenic Easement with the Town of Riverhead,” providing them with a “‘recreational scenic and conservation use easement’” and restricting the site to: a golf club or course, associated facilities such as a restaurant or tavern, jogging or cycling paths, retails stores specializing in golf, swimming, and tennis, and “any other compatible recreational uses.” 

In 1986, the property was acquired by Soundview Associates. Shortly thereafter, the Town passed Resolution No. 184, which allowed the addition of a restaurant to the clubhouse and the creation of a pond within the site. Soundview was also granted permission to alter the boundary of the easement for condominium units. In 1996, Soundview leased the golf course to Rugby Recreational Course, LCC. They continued to reserve seven acres of the land for themselves in order to develop a health spa. In 2002, Soundview applied for the special permit in order begin development on the health spa (which would be situated on approximately 2.5 acres of land). However, the Planning Department of the Town of Riverhead denied the application, as they determined that the health spa was “inconsistent with the easement grant.” This decision was codified under Resolution No. 1261. 

In response, in 2004, Soundview commenced an Article 78 proceeding against the Town, requesting that Resolution 1261 be repealed and that Soundview’s application be granted through a declaratory judgment. The town, in response, filed a motion to dismiss. The trial court denied this request, “except as to the Soundview’s cause of action to compel the Town to process [its] application,” since “the easement grant allowed for ‘other compatible recreational uses,’ and the evidence submitted did not negate the creation of a health spa as part of this definition.” In 2005, the Town moved once again to dismiss Soundview’s claim, as the entire town had been rezoned and the site property was now located in a residential district. The trail court granted the motion to dismiss. 

Soundview brought the present action, alleging that the Town threatened Rugby “that if Soundview did not withdraw its appeal and its applications…for the health spa, Rugby’s applications for the clubhouse would be denied.” Therefore, Soundview claimed that it felt pressured to accede to the demands of the Town. This provided the basis for the plaintiff’s first cause of action—mainly that Soundview’s First Amendment right to “petition the government for the redress of grievances” had been violated, specifically that the defendants interfered with Soundview’s right to file an appeal with the Appellate Division. 

The plaintiff also brought a Section 1983 claim alleging violations of  procedural due process, and a violation of the Fifth Amendment takings clause. The federal District Court found that Soundview failed to state a claim for relief because it had not argued that it had been denied “all economically viable uses” of the property.   

With respect to the substantive due process claim, the Court found that Soundview did demonstrate a legitimate property interest. The Court found that Soundview, “vis a vis its predecessor in interest, became vested with a special permit to, inter alia, construct a health spa on the subject property” which petitioner claimed was not revoked and ran with the land.  It further argues that the Town “deliberately ignored and failed to process plaintiff’s site plan application but recommended that plaintiffs separate special permit application be denied.” This was enough to satisfy the property interest prong.  The second prong of the substantive due process test required Soundview to demonstrate that the Town had infringed on its property interest “in an arbitrary or irrational manner.” Soundview alleged that the Town acted in arbitrarily and incorrectly in reasoning that the health spa was outside the bounds of the original easement grant.  Furthermore, the plaintiff alleged that it was pressured and coerced by the defendants to abandon its application in 2006 by their refusal to grant Rugby’s application. The Court held that Soundview had a legitimate substantive due process claim in that the Town’s actions were “‘arbitrary,’ ‘conscience shocking,’ or ‘oppressive in the constitutional sense’ not merely ‘incorrect or ill-advised.” The Court also found that the Town improperly delayed Soundview’s zoning application, and that their attempts to appeal were denied due to the Town’s coercion and threat. 

Soundview’s First Amendment claim, that the Town interfered with its constitutional right to access to the court to redress grievances, was also properly asserted. In order to establish this claim, the Court noted that Soundview would have to demonstrate that (1) it had a First Amendment protected interest, (2) that the Town was motivated by Soundview’s exercise of that right, and that (3) the actions of the Town effectively denied Soundview of their right. The first prong was established, as the Court found that Soundview had a First Amendment right to petition the government to redress grievances. The second prong was also recognized, as the plaintiff had a “plausible claim of First Amendment retaliation” in that the Town “‘threatened representatives of the plaintiff’s tenant, Rugby, that if Soundview did not withdraw its appeal and its applications for use and construction of the health spa, Rugby’s applications for the clubhouse would be derailed.’” Lastly, the third prong was fulfilled since “the plaintiff adequately alleged that it changed its behavior due to defendants’ alleged retaliation” (that as a result of the Town’s threat against Rugby, Soundview withdrew its appeal and applications). 

Soundview also brought an individual liability claim under Section 1983 against defendants Ehlers and Thomas, two of the officials that allegedly pressured Soundview to withdraw its appeal and applications through the threatening of Rugby.  The Court held that Soundview properly demonstrated that there was personal involvement in the alleged discrimination noting that plaintiff firmly maintained that these two individuals “unequivocally told Rugby’s Manager that the Town would not process Rugby’s application…until Soundview’s appeal with the Appellate Division and its applications…were withdrawn.” Therefore, the individual defendants were personally involved in the matter. The Court further denied that qualified immunity applied here, stating that if all plaintiff’s allegations against these individuals were proven true, they would not be protected “because these were all clearly established rights and it would not be objectively reasonable for an official to believe that such conduct did not violate plaintiffs rights.”  Therefore, the Federal District Court dismissed the Fifth Amendment claim but allowed the Fourteenth Amendment and Section 1983 claims to proceed. 

Soundview Associates v. Town of Riverhead, 2010 WL 2884877 (E.D.N.Y. 7/14/ 2010) 

The opinion can be accessed here

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