You may remember the opinion of the New York Appellate Division in 49 Wb, LLC v. Village of Haverstraw, 839 N.Y.S.2d 127 (N.Y. App. Div. 2007), in which the court held that a taking of private property for affordable housing was an improper use of eminent domain because "the Village invoked its power of condemnation for the sole purpose of benefitting private, and not public, interests," and the "Village's sole purpose [was] assisting private entities by means of condemnation." In other words, the taking was irrational. The court concluded "[t]he Village's justification for the condemnation, that it serves a public use, benefit, or purpose, is merely pretextual, and hence, improper."
Based in part on that finding, the property owner went to federal court on a substantive due process claim (the government treated me irrationally). The District Court denied the owner's motion for summary judgment and granted the Village's cross motion. Case dismissed.
The Second Circuit, in this unpublished order, affirmed. The court rejected the property owner's claim that the state court's finding of "irrationality" collaterally estopped (that's "issue preclusion" to you young 'uns) the issue of "irrationality" in substantive due process. The issues, the court held, are not identical:
Plaintiff asserts that the Appellate Division’s finding of an "irrational" public purpose in its annulment of Defendants’ condemnation attempt is the same finding required for Plaintiff to prove its substantive due process rights were violated. This is simply incorrect. To show that Defendants’ condemnation of the property at issue rises to the level of a substantive due process violation, Plaintiff must show that (1) it had "a valid property interest" (which is not challenged here), and that (2) the "defendants infringed on the property right in an arbitrary or irrational manner." Cine SK8, Inc. v. Town of Henrietta, 507 F.3d 778, 784 (2d Cir. 2007). "For state action to be taken in violation of the requirements of substantive due process, the denial must have occurred under circumstances warranting the labels 'arbitrary and outrageous.'" Natale v. Town of Ridgefield, 170 F.3d 258, 262 (2d Cir. 1999). These labels are associated with "racial animus" or "fundamental procedural irregularity," for example. Id. (internal quotation marks omitted) Our de novo review of the record demonstrates no genuine issue of fact as to whether the Defendants' actions, viewed as a whole, were arbitrary or irrational. Indeed, notwithstanding its finding that the Village’s public purpose for the condemnation was irrational, the Appellate Division concluded that there was no evidence of bad faith, noting that "mere allegations of bad faith and suspicious timing, such as those alleged by 49 WB here, do not suffice." Indeed, the Appellate Division also found that Village’s procedures "honored the parties’ rights to notice and due process, were within the Village’s eminent domain jurisdiction, and followed the statutory procedures of EDPL article 2."
Order at 3-4 (citation omitted). The court held that the Appellate Division did not conclude that the taking was in bad faith, only that it lacked "a rational factual basis."
Thus, contrary to Plaintiff’s argument, a mere determination that there is no rational relationship between the condemnation and a valid public purpose is simply not the equivalent of a showing that the condemnation is arbitrary, capricious, or in bad faith such that it rises to a substantive due process violation under the U.S. Constitution.
Order at 4.
So there you have it: a municipality's attempt to condemn property for private benefit, while cloaking the private benefit under a veil of public use in violation of New York's eminent domain law (that's how we read "pretext") is not outrageous. We guess it should be expected that a condemnor would try to sneak one by.
Given the track record of the Second Circuit, maybe the fact that the court's conscience wasn't shocked should not be shocking.