Friedman Decision Attorney Fees, Atlantic Yards, 9/20/13

7/29/2019 Friedman Decision Attorney Fees, Atlantic Yards, 9/20/13

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91?512013

SUPREME COU RT OF THE STATE OF NEW YORK - NEW YORK COUNTYPRESENT: MARCY S. RIEDMAN PART 57/60

-against- MOTION DATEEMPIRE STATE DEVELOPMENT CORP ET AL. MOTION SEQ. NO. 008

The following papers, numbered 1 t o were read on this motio n to/fo r attorney's fees.... No (SI.

No (SI.I o (SI.Notice of Motion/ Order to Sh ow Cause - Affidavits - ExhibitsAnswering Affidavits - ExhibitsReplying AffidavitsCross-Mot ion: c? Yes NoUpo n the foregoing papers, it is ordered that this motion

It is ordered that this motio n is decided in accordance with the accompanying decisiodorderdated September 20 , 20 13.

Dated: SeDtember 20, 2013

FILED

I . Check one: ................................ F c A s E ISPOSED2. Check as appropriate: .....Motion is: 0 RANTED 0 ENIED 0 RANTED IN PART 0 THER

o NON-FiNAL DiSPOSiTiON

3. Check if appropriate:.................... 0 ETTLE ORDER SUBMIT ORDER0 O NOT POST 0 IDUCIARY APPOINTMENT 0 EFERENCE


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SUPREME COU RT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK - PART 57/60PRESENT: HON. MARC Y S. FRIEDM AN, J.S.C.

-#! b , i 6 3 3 & ~ ~ 4DEVELOP DON'T D ESTROY (BROOKLYN), .pA&!"-5..t, OD8INC., et al.Petitioners, Index No.: 114631/2009Motion Seq. 008

DECISION/ORDER-against -

EMPIRE STATE DEVELOPMEN TCOW ORATION , FOREST CITY RATNERCOMPAN IES, LLC,Respondents. FILED

X SEP 25 2013COUNTY CLERK'S OFFIC

Petitioners Dev elop Do n't Destroy (Brooklyn), Inc. (DDD B) and Prospect W YORKNeighb orhood Dev elopm ent Council, Inc. (PHN DC ) mov e, under the New York State EqualAccess to Justice Act (E AJA ) (CPLR 8601), for paym ent by respondent Em pire StateDevelop ment Corp oration (ESD C) of attorney's fees and expen ses incurred by petitioners inprosecuting these Article 78 proceedings. ' The D DD B petitioners see k $169,626.00 in fees (notincluding the fees associated with the instant motion). The PH ND C petitioners seek $146,000.00in fees and $7,900 .00 in expenses.

Petitioners com me nced these Article 78 proceedings to challenge the ESDC 's affirmance,in September 2009, o f a Modified General Project.Plan (M GP P) for the A tlantic Y ards Project inBrooklyn. They argued that the ESDC failed to comp ly with the State Environmental QualityReview Act (SEQ RA ) by affirming the MG PP without requiring a Supplemental Environmental

Petitioners brought separate Article 7 8 proceedings which were heard together.1


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Impact Statement (SEIS). Petition ers claim s in this proceeding are discussed at Iength in threeprior decisions to wh ich the co urt refers. (See 26 Misc 3d 1236 [A] [2010], 2010 NY Misc Lexis5 18 [denying petition], 30 M isc 3d 616 [2010] [granting reargument and remanding for furtherfindings]; 33 Misc 3d 330 [201 I ] [granting petition and requiring SEIS], affd 94 AD3d 508 [ l s tDep t 20121.)

Petitioners claim that they are prevailing parties in this proceeding, an d are thereforeentitled to attorneys fees and expenses under the EAJA . (Baker Aff. In Sup port 7 2; Butzel Aff.In Support 7 IO.) Resp ond ent argue s that petitioners are not entitled to attorney fees under theEA JA because the proceeding was no t a civil action brought against the state. In addition,respondent argues that petitioners are not prevailing parties within the meaning of the EAJA, andthat the ESD Cs position in the A rticle 78 proceeding was substantially justified. (Resp.sMem o. Of Law In Opp. at 1 )

Applicabilitv o f the EA JAThe EAJA provides, in pertinent part, that a court shall award to a prevailing party,

other than the state, fees and other expenses incurred by such party in any civil action broughtagain st the state, unless the court fin ds that the position of the state was substantially justified orthat special circumstances make an award unjust. (CPLR 8601 [a].) Under the EA JA, [s]tatemeans the state or any of its agen cies or any o f its officials acting in his or her official capacity.(CPLR 8 602 [g].)

The EAJA wa s enacted to improv[e] access to justice for individuals and businesseswho m ay not have the resources to sustain a long legal battle ag ainst an agency that is actingwithout justification. (Matter of N ew York State Clinical Lab. Assn. v Kaladiian, 85 NY2d

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346, 351 [1995], quoting Go vernors Approval Mem, L 1989, ch 770, 1989 N Y Legis Ann, at336.) The State EAJA is modeled after the Federal Equal Access to Justice Act (28 USC 9 2412[d] [ I ] [A]). Like its Federal cou nterpart, the EAJA , with excep tions not here relevant, applies to

7)any civil action or proceeding brought to seek judicial review of an action of the state . . . .(CPLR 8602 [a].)

The first inquiry, then, is whether respondent ESD C is the state or a state agency forpurposes of the EA JA. The parties have not cited, and the courts own research has not located,any case that has d etermined w hether the ESDC , a public benefit corporation, qualifies as a stateagency within the m eaning of the EA JA wh ere, as here, it has served as lead agent for SEQRAreview of a developm ent project. How ever, substantial authority holds that the determination ofwhether a public benefit corporation is a state agency must be made on a case-by-case basis,taking into accou nt the nature an d purpose o f the entity, the function s it performs, and the statuteat issue.

As the Court o f Appeals explained in John Grace & Co., Inc. v State Univ . Constr. Fund(44 NY2d 84, 88 [1978]):

The mere fact that [a public b enefit corporation] is an instrumen tality of theState, and as such, engages in operations which are fundamentally governmentalin nature does not inflexibly man date a conclusion that it is the S tate or one of itsagencies for purposes of [the particular law at issue]. Instead, a particularizedinquiry into the nature of the instrumentality and the statute claimed to beapplicable to it is required.In John Grace & Co ., the Court w as called upon to determine whether the State UniversityConstruction Fund was the state or an agency for purposes of a law authorizing adjustments topublic constru ction contrac ts to reflect increased costs of certain materials. Th e Court concluded

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that it was not, because the Fun d w as created to receive and administer mon ies for theconstruction of facilities for the S tate University of Ne w York, and the legislature explicitlycho se to impose different requireme nts for construction contracts made by the Fund than forcontracts made by the State and other public entities.

In Matter of Apo llon v Giuliani (246 AD2d 13 0 [1st Dept 1998]), an Article 78proceeding challenging a City University of New York (CU NY) tuition increase for communitycolleges, the issue before the Court was whether CUN Y was the state or a state agency for EAJApurposes. Citing John Grace & Co., the C ourt noted that [tlhe Co urt of Appeals has required acase-by-case determination of w hether an entity like CUN Y, which is independent of the Statebut is an instrumentality of the S tate and performs a fundamentally gove rnmen tal functio n, willbe treated as the State for a particular purpo se. The Court held that CUN Y was not subject tothe EAJA because the case exclusively involves community colleges, and the challengedfunding decisions all related to the Citys obligation to fund those colleges. (Id. at 135.)How ever, the Co urt contrasted senior colleges, with respect to which CUN Ys role was moreclosely analogous to a state agency. (

In Matter of Levy v City Comm ission on Human Rights (85 NY2d 740, 745 [1995]), theCourt of Appeals further clarified:

The general theme of [the Courts] prior decisions is that public authoritiesand other public benefit corporations are created to accomplish a specific purposeor mission and are endowed with the freedom and flexibility necessary to achievethat mission. They are independent and autonom ous to the extent that theyshould be free from requirements imposed on other State agencies that w ouldinterfere with the accomplishment of the public corporations purpose.

There, the Court held that the New York City Transit Authority, a public benefit corporation, was

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subject to the New York City Human Righ ts Law, While its holding was based in part onstatutory construction,2 h e C ourt reasoned in the alternative: The purpose of the New York CityTransit Autho rity is to acqu ire and operate transit facilities. It cannot be seriously contended . . .that compliance with the prohibitions against employment discrimination would interfere with itsfunction and purpose. . . . (Id. [internal citation omitted].)

Applying these precepts, the court holds that the ESDC, in its role as lead agent forSEQRA in the Atlantic Yards Project, is an agency of the state for purposes of the EAJA. Thelegislative history of the establishmen t of the Urban Development Corp. (UDC ), which is apublic b enefit corporation that does business as the ESD C, leaves no do ubt that the purpose forwhich the UD C wa s established was to make grants and loans to promote economicdevelopment.

The Court of App eals has sum marized the circumstances leading to the creation of publicbenefit corporations as follows:

Shortly after the turn of the century, the Legislature devised a n ew vehicle forfunding public w orks projects that appeared to insulate the State from the bu rdenof long-term deb t: legislative creation of legally separate pub lic benefitcorporations, known as public authorities, to discharge particular functions. . . . Intheory, a public authority would be self-supporting, able to meet debt obligationsthrough revenues obtained from its ow n valuable assets, such as fares and userfees. Such public benefit corporations w ould separate their administrative andfiscal functions from those of the State (1929 Opn s Atty Gen 22 3,2 24 ), to protectthe State from liability and enable public projects to be carried on free fromrestrictions otherwise applicable.

21n construing th e statute, the Court held: [Tlhe A dministrative Codes definition of the termperson[s] includes corporations and the term privatecannot be read to modify the separate referenceto corporations without making that separate reference redundant. We therefore determine thatAdministrat ive Code 3 8- 10 5 . . . includes public corporations. ( M ,5 NY2d at 743-744 [internalcitation om itted].)


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(Schulz v State of New York, 84 NY2d 23 1 , 244 [19941 [internal quotation marks & citationsomitted] .)

The UDC , in particular, w as created in 1968 by the New Yo rk State Urban Developm entCorporation Act (UD CA). (& McK inneys Uncons Laws of NY 9 6254.) As noted by theCourt of Appeals,[t]he legislative findings emp hasized that i]t is hereby declared to be thepolicy of the state to promote a vigorous and grow ing econom y, to prevent econ omic stagnationand to en courage the creation o f new job op portunities in order to protect against the hazards ofunem ploym ent, reduce the level o f public assistance to now indigent individuals an d families,increase revenues to the state and to its municipalities and to achieve stable and diversified localeconomies. (McKinneys Uncons Laws of NY 4 6252). (Bordeleau v State of New Y ork, 18NY3d 305, 312 n 1 [2011], rearg; denied 18 NY3d 918 [2012].) The Act created the EmpireState Economic Development Fund and the JOBS Now Program, w hich authorize the UDC tomake grants and loans for e conom ic development purposes (E McK inneys Uncons Laws of

NY $5 6266-h, 6266-i). (The ES DC app ears at times to argue that it is not the state based on the me re fact that it is

a public benefit corporation. (Resp.s M emo. Of Law In Opp. at 9- 10.) Th is argumen t whollyignores the case law, dis cus sed abov e, which analyzes whether an en tity that is a public benefitcorporation qualifies as the state or its agency within the meaning of the particular statuteclaimed to be applicable to the acts o f the entity. The ESD C correctly argues, however, thatwhere the ESDC acts in furtherance of the purpose for which it was fo rmed - he financing andpromotion of econom ic development - t will not be held to be the state or its agency.

Thus, in Bordeleau, on w hich the ESD C relies, the Court o f Appe als rejected a claim by

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taxpayers that grants and loans made by the ESDC to various private companies violated the banimpo sed by Article VII, 8 8 (1 ) of New York State Constitution against loaning money of thestate to any private corporation. The Court reasoned that a prime purpose for creating suchcorporations was to separate their administrative and fiscal functions from the State and itssubdivisions, and to enable the corporations to function with the freedom and flexibility notpermitted to the State. (1 8 NY 3d at 3 15-316 [internal quotation m arks and citations omitted].)

Similarly, in Matter of Smith v Levitt (3 0 NY2d 934 [1972]), also cited by the ESDC, theCourt of Appeals rejected a claim that the UD C was the state for purposes of State Finance Law5 111, prohibiting paym ent of money of the State without an audit. The Court noted thatpaym ents from the UDC s bond proceeds are not money of the state, and that the UD C is not aState agency within the intend ment of the constitutional and statutory provisions cited. (Id. at935.)

Here, in contrast, the ESDC was not performing fiscal functions to promote economicdevelopment, as to which it required freedom and flexibility from requirements imposed onother state agencies that would interfere with the accomp lishment of those functions. (E&generallv Levy, 85 NY 2d a t 745.) Rather, it was acting as lead agent for SEQRA review of theAtlantic Yards Project, and thus performing a fundamentally governmental function as adecision-maker. (& penerallv John Grace & Co., 44 NY2d at 88.)

The heart of SEQ RA is the Environmental Impact Statement (EIS) process. (Matter ofJackson v New Y ork State Urban Dev. Corn., 67 NY2d 40 0, 4 15 [19861.) As lead agent, theESDC was charged with the discretionary decision-making power of assessing whetherpreparation of an SEIS was required. (Matter of Riverkeeper, Inc. v Planning Bd. Of Town of

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Southeast, 9 NY3d 219, 23 1 [2007]; 6 NYCRR 6179[a][7][i][a]-[~.)~ Moreover, althoughSE QR A does not contain a provision addressing the standard for judic ial review, it is well settledthat the deferential standard ap plicable to review of decisions of other governm ental agencies isalso applicable to SE QR A determ inations. (Roosevelt Islanders for Responsible Sou thtown Dev.v Roosevelt Is. Operating Corp., 291 AD2d 40 , 54 [ l s tDept 2001 , Iv denied 97 NY2d 61 3,denied 2002 NY App D iv LEXIS 3663, Iv denied 98 NY2d 608.)4

In sum, as lead agent for SEQRA, the ESDC was charged with discretionary decision-mak ing power, was acting to enforce and ensure comp liance with State law, and was sub ject tojudicial review according to the standards applicable to governmental agencies generally. Whilethe ESD C has been held not to be th e state or a state agency where it functions as a public benefitcorporation financing and promoting economic development, this core function will not beimpeded by application of the EA JA to the ESD C w here it acts in its separate capacity as agovernmental decision-m aker. Th e court accordingly holds that the ESD C is the state or itsagency within the m eaning of the E AJA for purposes of review o f its determinations underSEQRA.

Finally, the co urt notes that this holding is consistent with the d ecisions of cou rts which

3ThisRule provides that [tlhe lead agency may require a supplemental EIS, limited to th especific significant adverse envi ronmenta l impacts not addressed or inadequately addressed in th e EISthat arise from changes proposed for the project, newly discovered information, a change incircumstances related to the project, e t al.].)4Asheld in Matter of Riverkeeper (9 NY3d at 23 1-232), judicial review of an agencydetermination under SEQRA is limited to whether the agency identified the relevant areas ofenvironmental concern, took a hard look at them, and made a reasoned elaboration of th e basis for itsdetermination. A court may set aside a lead agencys determination as to the necessity for an SEISonly if it is arbitrary, capricious or unsupported by th e evidence. [internal quotation marks & citationomitted]

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have reviewed findings that the ESD C was required to make, under statutes other than SEQRA,in order for the Atlantic Yards Project to proceed. (SeeGoldstein v Pataki ( 516 F3d 50 [2d CirZOOS] [deem ing the E SD Cs statu s as a pub lic benefit corporation irrelevant, and holding that theES DC was a state agency deputized by the legislature for purposes o f making blight findingsnecessary to the exercise of the ESD Cs eminent domain power under the UDCA]; M atter ofDevelop D ont Destroy (Brooklyn) v Urban Dev. Corp., 59 AD3d 3 12, 322 [ ls tDept 20091, I vdenied 13 NY 3d 71 3, reara den ied 14 NY 3d 7 48 [2010] [holding that [i]t makes no differencethat the agency through which th e government ha s here acted, the ES DC , is organized as a publicbenefit corporation, and that the E SDC acted as a state agency in making findings designatingthe project as a land use imp rovement project under the UDCA].)

Prevailing PartyHaving concluded that the EAJA is applicable to these A rticle 78 proceedings for review

of the ESDCs findings under SEQRA, the court turns to the issue of whether petitioners areprevailing parties within the meaning of the EA JA. The EA JA defines a prevailing party as aplaintiff or petitioner in th e civil action aga inst the state who preva ils in whole or in substantialpart where such party an d the state prevail upon separate issues. (CPLR 8602 [ f l . ) Interpretingthis provision, the Court of Appeals held:

[A] party has p revailed within the meaning of the S tate EAJ A if it hassucceeded in acqu iring a substantial part of the relief sough t in the lawsuit. Thus,a prevailing party is not one w ho has succeeded on merely any significant issuein the litigation wh ich achieved only some of the benefit sough t in bringing thelawsuit-which is the Federal stand ard. Rather, it is a plaintiff who can show thatit succeeded in large or substantial part by identifying the original goa ls of thelitigation and by d emonstrating the comparative substan tiality of the relief actuallyobtained.

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(Matter of Ne w Y ork State Clinical Lab, 85 NY 2d at 355 [internal citation omitted].)The ESD C contends that a substan tial question exists as to whe ther petitioners are

prevailing parties because this court rejected many of petitioners claims. (R es p. ~Memo. OfLaw In Opp. at 15.) Petitioners counter that they are prevailing parties because they weresuccessful in obtaining recon sideration of the environmental impacts o f Phase I1 of the AtlanticYards Project. (Pets. Reply Mem o. Of Law at 11-12.)

Petitioners success must be ev aluated in light of the claims they asserted in theseproceedings, the sco pe of the Project, a nd the extent to which the Project had progressed as of thetime the proceedings were heard. As noted in this courts prior decisions , the Atlantic YardsProject, which has been described as the largest single-developer Project in New York Cityhistory, extends over 22 acres and is to be built in two phases. Phase I includes the BarclaysCen ter sports arena, a new Metropolitan T ransportation Authority (M TA ) rail yard, and four tofive buildings. Phase I1 includes construc tion of 1 1 of the Projects 16 hi-rise b uildings, whichwill contain 5000 to 6000 residential units including affordable housing , and development ofopen space. (33 Misc 3d at 333.)

The petitions challenged the 2009 MG PP primarily on the ground that the ESDC lacked arational basis for its continued use of a 10-year build-out in assessing the environmental impactsof the Project, and for its refusal to order an SE IS for the Project. This claim , in turn, was based

CPLR 8600 provides that the EAJA was intended to create a mechanism authorizing therecovery of counsel fees and other reasonable expenses in certain actions against the state of New York,similar to the provisions of federal law contained in 28 USC 8 2412 (d) and the significant body of caselaw that has evolved thereunder. Howev er, based on the definition of prevailing party in the StateEAJA (CPLR 8602 [fl),which does not appear in the Federal EAJA, the Court of Appeals has held thatthe State EAJA impose[s] a stricter standard for demonstrating prevailing party status than does theFederal EAJA. (Ma tter of New York S tate Clinical Lab, 85 NY2d at 354.)

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on the fact that construction of 6 of the 11 Phase I1 buildings required acquisition by thedeveloper, Forest City Ratner Com panies (FCRC), of air rights owned by the M TA. However, arenegotiated agreem ent between the M TA and FCRC eliminated FCRCs obligation to acquirethe air rights at the inception of the Project, and afforded F CRC until 2030 to complete theacquisition. In argu ing that the 10 year build-out was reasonable, the ESD C emphasized that itwas negotiating a D evelopment Agreement that would require FCRC to use commerciallyreasonable efforts to complete the Project within 10 years, and that failure to commenceconstruction of each building w ould result in . . . monetary penalties being imposed on [FCRC].(2 6 Misc 3d 1236[A], 2010 N Y Misc Lexis at * * * 15.)

In initially denying the petitions, this co urt conclud ed that the ESDC had articulatedreasons for its continued use of the 10 year build-out that were marginally sufficient to survivejudicial scrutiny under th e deferential standard for judic ial review of an agencys SEQRAdeterminations. (Id. at *** 25.)

Petitioners subsequently m oved for reargument based on the term s of the DevelopmentAgreem ent that was negotiated. In granting reargument, the court reasoned:

As close reading o f the Development Agreement show s, the Agreementplainly contemplates an outside build date of 25 years for completion of the 11Phase I1buildings which constitute the substantial majority o f the residentialbuildings at the Project. It provides detailed timetab les, firm commencem entdates for the arena and Phase I work, no comm encemen t dates (other than for theplatform) for the Ph ase I1 residential construction,6and apparently far stricterpenalties for failure to meet the deadlines for the arena and Phase I work than forfailure to meet the 2035 outside deadline for substantial completion of the Phase I1buildings or for failure to use commercially reasonable efforts to complete the

6The decision granting reargument should have stated that the Development Agreement providedno commencement dates fo r Phase I1 construction other than dates for commencement of the platformand one Phase I1 building. (& 33 M isc 3d at 337, n 3.)


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Project by 20 19.In its papers in opposition to the article 78 petitions, ESD C repeatedly cited,as the basis for its con tinuing u se o f the IO-year build-out, the MG PP provisionstating ESDC s intent to require FCRC to use commercially reasonable efforts tocomplete the Project by 201 9, and the summary of the Developm ent Agreement[citation omitted]. Neither of these docum ents gave any indication that theDevelopment Agreement would include a 25-year substantial completion date forthe Phase I1 construction. W hile ESDC s papers acknowledged that there weremandatory comm encement d ates for construction of the first few buildings on thearena block, the papers did not discuss the absence of any deadlines forcommencement of the Phase I1 buildings, w ere completely silent as to the 2035outside date, and contained no discussion of the disparate penalties provided forfailure to meet the deadlines for Phase I an d I1 construction. ESDCs papers leftthe inaccurate impression that the commercially reasonable efforts provision wasthe focus of the Deve lopment A greement, whereas the Agreemen t in factcontained num erous far mo re detailed construction deadlines for the Project whichcannot be ignored in addressing the rationality of the build date.(30 Misc 3d at 626.) The court also found that the ESDC had an obligation, wh ich it failed tomeet, to bring the actual terms of the Develop ment Agreement to the co urts attention in orderto correct the totally incom plete representations, made in the summ ary of the DevelopmentAgreem ent and in ESD Cs papers in opp osition to the article 78 petition s, a s to the terms thatwere included in the Dev elopmen t Agreement regarding the impo sition and enforcement ofdeadlines for completion of the Project. (Id. at 627.) Noting that the Dev elopment Agreementcast a completely different light o n the Project build date(5t 63l) , the co urt remanded thematter for further findings by the ES DC on the impact of the Developm ent Agreement and therenegotiated M TA agreement on the continued use of a 10 year build-ou t for the Project and theneed for an SEIS.

On the reman d, the ESDC concluded that the 10 year build-out remained reasonable andthat an SEIS was not required. W ithin one mon th of the issuance of the remand order, theESDCs environm ental consultant prepared a Technical Analysis. Approx imately two months

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after the order, the ES DC passed a resolution which concluded that the Development and MTAAgreeme nts did not ha ve a material effect on th e 10year date, although the resolutionacknowledged that it was unlikely that the Project will be constructed on a 10-year schedule.The resolution further stated that the delay would not result in any new significant adverseimpacts not previously considered in the original EIS which had used a 10 year build-out. (33Misc 3d at 332-333.)

In its final decision holding that an SEIS was required, this cou rt reasoned that theTechnical Analysis w as hastily prepared and perfunctory (i d. at 346), and that the ESDCfailed, in the numerous respects discussed in the decision, to undertake a meaningful assessmentof the im pacts of the potentially vastly extended period of construction on the various areas ofenvironmental concern. (Id.at 343.) As to petitioners request for a stay, the court noted, withrespect to Phase I, that although the 2009 MG PP mad e a m ajor change to the constructionschedule of Phase 11, it did not effect a material change in Pha se I construction. Moreover,extensive construction of Phase I work had already occurred - n particular, excavation andfoundation w ork for th e arena had been performed and com pletion of the arena was expected in2012; infrastructure for the Project had been comm enced in 2007 and was nearly complete; workon a new sub way entrance w as in progress; and a temporary rail yard for the MT A had beencompleted. (33 Misc 3d at 348.) The court held that a stay of Phase I work would not beappropriate, given the extent of this work and the fact that it had been performed under theoriginal Plan, which had been subjected to and withstood a prior SEQR A challenge. (Matter ofDevelop Dont D estroy (Brooklvn) v Urban Dev. Corn., 5 9 AD3 d 312, supra; 33 M isc 3d at 348-349.) The court denied the requested stay of Phase I1 construction, as premature. More

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particularly, the court held that it was und isputed that Phase I1 work would not commence forma ny years, and petitioners could re new their request for a stay in the unlikely ev ent that FCRCwas ready to proceed with Ph ase I1 before the SEIS was completed. (Id. at 349.)

This courts determ ination that an SEIS was required was affirmed by the AppellateDivision which agreerd] . . . that ESD Cs use of a 10 -year build date . . . lacks a rational basisand is arbitrary and ca pricio us. (94 AD 3d at 510.) The Court reasoned:

When it appro ved the MG PP, ESDC was aware that, under a new agreementwith the MTA , FC RC h ad until 2 030 to acquire the air rights n ecessary for thephase I1 construction. ESD C knew that the then forthcoming developm entagreement would provide for a significantly extended substantial completion dateof 2035. . . . Mo reover, ESD C has acknowledged that it is unlikely that the Projectwill be constru cted on a IO-year schedule. . . ,Nevertheless, E SD C relied on a provision in the MG PP an d, later, in theDevelopm ent Agree ment that required FCRC to use commercially reasonableefforts to meet the 10-year dead line. . . . ESDC also maintained that FCRC had afinancial incentive to com plete the Project by 2019. How ever, the termcommercially reasona ble efforts is not defined in either the M GP P or thedevelopment agreem ent. While the development agreement provides specificdates for the con struction of the arena and phase I buildings, it does not providespecific commen ceme nt dates for phase I1 construction, other than those notedabove, and while it provides for dam ages for delays in phase I construction, itdoes not provid e for significa nt financial penalties for delays in phase I1construction. . . .

(Id.at 5 10.) The App ellate Division also noted that the ESDC repeate dly informed the courtthat it relied on the terms of the developmen t agreement in approving the MG PP. (Id.) TheCourt specifically approved this courts finding that the Development Agreement was necessaryto make m eaningful review of the ESDCs determination possible by correcting the ESDCsincomplete representations regarding the terms of the Development Agreement. (I d. at 5 11 )

As review of the cla ims and de cisions in these proceedings sho ws , petitioners prevailedon their SEQRA claim for further environmental review of Phase I1of the P roject, involving the

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substantial m ajority of residential buildings to be constructed. (30 M isc 3d at 626 .) The SEISwill result in reconsideration of the environmental impacts of Phase 11, based on a 25-year build-out compared with a 10-year build out. As petitioners persuasively argue, the review processshou ld lead to consideration of alternatives that may more effectively meet the ostensible goalof th e project to alleviate blights an d create affordable and market-rate housing with less adverseenvironm ental impac ts. (Pets. Reply M emo. Of Law at 11-12.) Given the m agnitude of PhaseI1 construction, and petitioners goal o f obtaining further review of the environmental impacts ofsuch construction, the court holds that they have succeeded in achieving a substantial part of therelief sought in this litigation. (See enerally Matter of New York State Clinical Lab. Assn., 85NY 2d at 355.)

The court further holds that petitioners assertion of other claims in this p roceeding doesnot a lter their status as prevailing parties. The DD DB petitioners also asserted claims that theMG PP was not a plan within the mean ing of the UDCA , and that the Deve lopmen t Agreementillegally conditioned the developm ent of affordable housing on the availability of publicsubsidies. The PH ND C petitioners asserted a claim that the ESDC illegally delegated control toFCR C over the schedule for the Project. The initial decision of the proceedings treated theseclaims as secondary to the primary SEQ RA claim , and dismissed them with limited discussion.(26 Misc 3d 1236 [A], 2010 NY Misc Lexis at * * * 7.)

Petitioners also sought further environmental review and a stay of construction of Phase Iof the Project. However, as discussed in the prior decisions, extensive infrastructure work forPhase I was in progress at the time of the hearing of the initial proceedings (26 Misc 3d 1236[A], 20 10 N Y M isc Lexis at * * * 27), and extensive excavation and found ation w ork on the arena

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and other Phase I w ork was underway when petitioners supplemental petitions challenging theESD Cs refusal to order an SEIS were heard after the remand. (33 Misc 3d at 348.) The extentof work that had already been performed o n Phase I was a significant factor in this cou rtsdetermination denying a stay of Phase I construction. (a)ad the ESDC disclosed the terms ofthe Develop ment A greement that were being negotiated when the petitions were initially heard,or brought the Agreem ent to the courts attention promptly after it was executed, constructionwould not have b een as advanced on the arena at the time of the courts determination requiringan SEIS, and the balance of the equities may have favored a stay pending preparation of th eSEIS. Under these circumstances in which the ESDC s own cond uct delayed resolution of theSEQ RA claim w hile con struction proceeded, the co urt does not find that petitioners failure toobtain injunctive relief precludes a finding that they are prevailing parties.

Substantial Ju stificationCPLR 860 1 (a) requires an aw ard of attorneys fees to a prevailing party un less the court

finds that the position of the state was substantially justified or that special circumstances makean aw ard ~ n j u s t . ~Positio n o f the state is defined as the act, acts or failure to act from w hichjudicial review is sought. (CPL R 8602 [e].)

Substantially justified means justified to a degree that could satisfy a reasonableperson, or having a reasonable basis both in law and fact. (Matter of New York State ClinicalLab. Assn., 85 N Y2d at 35 6 [internal quotation marks & citation omitted].) Further, [tlhe focuswhen determining wh ether a petitioner is a prevailing party is aimed at the degree of successobtained by the petition er. Whether the governm ents positio n in the litigation is substantially

7N o claim is made here that special circumstances make an award unjust.16


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jus t i f ied. . . focuses, not on the governmen ts success or failure, but o n the reasonableness of itsposition in bringing about or continuing the litigation. (Id. at 35 7 [internal quotation marks &quotation & citation omitted].) Th e determination of whether the States position wassubstantially justifi ed is comm itted to the sound discretion of the court o f first instance and isreviewable as an exercise of jud icial discretion. (Matter of Grav es v Doar, 87 AD3d 744, 747[2d Dept 20 1 I] . ) Th e burden of establish ing substantial justification rests with the State, whichmust m ake a strong showin g to support its position. (Id)

The ESDC claims that it had a reasonable basis for, althou gh it did not prevail on, itsposition that its use of a 10 year build-out in assessing environmental impacts o f the 2009 MGPPwas reasonable, and that an SEIS was not required in connection with the MGPP. (Resp.sMe mo. Of Law In Opp . at 17 .) Th is claim reflects no small audacity , in light of the courts priorfindings as to the ESD Cs review p rocess. These findings included w hat the court characterizedas the ESDCs deplorable lack of transparency in failing even to mention the MTArenegotiated agreement by nam e in discussing changes the agreem ent mad e in the deadlines forcompletion of the Project (26 M isc 3d 1236 [A], 2010 NY Misc Lexis 518 at ***25) ; heESDCs continuing lack of transparency and failure to meet its obligation to bring theDevelopment Agreement to the courts attention in order to correct totally incompleterepresentations made in o pposition to the Article 78 petitions regarding such deadlines (30 Misc3d at 63 1, 627); and, upon rem and, the ESDCs performance of a wholly perfunctory analysisof the environmental impacts of a build-out of the Project that was po tentially more than doubledunder the MTA and Development Agreements. (33 Misc 3d at 346-347 .) This is not a case in

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which the ESDCs determinations w ere substantially justified.*Attorneys FeesPursuant to the State EAJA [ge es shall be determined pursuant to prevailing market

rates fo r the kind an d quality of the servic es furnished, except that fees and expe nses may not beawarded to a party for any portion of the litigation in w hich the party has unreasonably protractedthe proceedings. (CPLR 8601 [a].) For the reasons stated above, petition ers are entitled to theirfees an d expenses for prosecuting these proceedings. However, further briefing is required onthe standards specifically applicable to the EA JA for calculating fees - e.g., whether the lodestaror other method should be used; w hether petitioners are entitled to fees for the appeal and for theinstant motion; and whether fees are recoverable under the EAJA at prevailing m arket rates,notwithstanding that petitioners counsel charged petitioners reduced rates based on their not-for-profit status. (cf. lum v Stenson, 465 US 886, 893 [I9841 [whether prevailin g m arket ratesmay be used to calcu late attorneys fees, regardle ss of whether plaintiff is represented by privateor non-profit counsel, is issue o f interpretation of statute under which fees are sought - here, 42USC 5 19881.) Th e matter will be referred to a Special Referee for hearing o n these issues.

It is accordingly hereby ORDERED that petitioners motion for attorne ys fees pursuantto the State EA JA is granted; and it is further

ORDERED that the Special Referee shall hear and report with a recommend ation on theamount of attorneys fees to be awarded to petitioners, and specific recommendations on the

Contrary to th e ESDCs contention, this courts denial of sanctions (and therefore implicitfinding that th e ESDCs conduct was not frivolous within the meaning of 22 NYCRR Part 130) (Eorder dated July 13,201 ) , hardly supports th e ESDCs claim that its position in these proceedings wassubstantially ustified.18


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following issues: 1) the standards for calculating fees under the EAJA; 2) whether petitioners areentitled to fees for the app eal and for the instant motion ; and 3) whether fees are recoverableund er the EAJA at prevailing market rates where, as here, petitioners' counsel chargedpetitioners at reduced rates. Th e parties shall serve supplemental briefs setting forthcomprehensive legal authority under the EAJA on these issues. The briefs shall be filed with theSpecial Referee to w hom the hearing is assigned.

Provided that: In the eve nt of and upon the filing of a stipulation of the parties, aspermitted by CPLR 43 17 , the Special Referee, or another person designated by the parties toserve as referee, shall determine the aforesaid issues; and it is further

OR DE RED tha t a motion to confirm or reject the report of the Special Referee shall bemade within 15 days o f the filing o f the report; and it is further

ORD ERE D that, within 15 days of the date of entry of this order, m ovants shall serve acopy of this order with n otice of entry on the Clerk of the Special Referee's Office (Room 119)to arrange a date f or the reference to a S pecial Referee.

This constitutes the decision an d order of the court.Dated: New York, N ew YorkSeptember 20,2013

rc--

M A R C ~ ~ R I E D M A N ,.s c

FILEDSEP 25 2013

COUNTY CLERK 'S OFFICENEW YORK

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Friedman Decision Attorney Fees, Atlantic Yards, 9/20/13

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Transcript of Friedman Decision Attorney Fees, Atlantic Yards, 9/20/13