Opinion
01 Civ. 1345 (SHS).
June 12, 2001
OPINION AND ORDER
West 95 Housing Corp., West Side 95 Manor Associates, and Mid State Management Corp. (collectively, "West 95"), owners of property developed pursuant to Article II of New York's Private Housing Financing Law — commonly known as the Mitchell-Lama Law — brought this action against city and state regulatory agencies alleging various violations of their constitutional rights in connection with their plan to withdraw their property from the Mitchell-Lama program. West 95 moved for a preliminary injunction, and defendants have cross-moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted.
At a hearing on March 7, 2001, the Court denied West 95's motion for a preliminary injunction without prejudice to its renewal at a later date. Now, for the reasons set forth below, the Court grants in part and denies in part defendants' motion to dismiss the complaint.
I. BACKGROUND
A. The Mitchell-Lama Law
The Mitchell-Lama Law was originally enacted in 1955 for the purpose of encouraging and inducing private real estate investors to build and operate low and middle income housing in the state of New York. See N.Y. Priv. Hous. Fin. Law § 11 (McKinney's 1987). Pursuant to the law, developers are offered long-term government-funded mortgage loans, real estate tax abatements, and other financial incentives to purchase property in blighted areas and build and maintain housing projects. In exchange, the developers agree to abide by regulations on profits, rent increases, the tenant selection process, and their ability to transfer the property for so long as the property continues to receive the benefits of the Mitchell-Lama program. See generally id. §§ 11-37. In particular, corporations organized for the purpose of building and managing Mitchell-Lama projects must include, in their bylaws, a provision stating that "the company has been organized to serve a public purpose" and that all land acquired by the corporation "shall be deemed to be acquired, rehabilitated, or created for the proper effectuation of the purposes of [the Mitchell-Lama Law]." Id. § 13 (13).
In its original form, the Mitchell-Lama law provided that the corporations organized to build and manage Mitchell-Lama projects — i.e., limited profit housing companies — were prohibited from voluntarily dissolving and withdrawing the property from the program for a period of thirty-five years. See id. § 35(1). Moreover, even after the thirty-five year waiting period, the prior consent of the New York State Commissioner of Housing or other supervising agency was required before limited profit housing companies could dissolve. See id. By 1960, however, the law had been amended to permit limited profit housing companies to voluntarily withdraw from the Mitchell-Lama program twenty years from the project's "occupancy date" without first seeking the consent of regulatory officials. See id. § 35(2). According to Senator MacNeil Mitchell, one of the principal sponsors of the law, the amendment was motivated by a legislative finding that "the prohibition of voluntary dissolution for 35 years, and then only with the consent of the housing commissioner, was the primary disincentive to private sector development." Aff. of MacNeil Mitchell, In re Application of Winthrop Gardens, Inc., No. 9381/87, N.Y. Sup. Ct. Albany Co., dated Feb. 22, 1988 (Compl. Ex. 2), at ¶ 9.
B. The Rent Stabilization Laws
New York's Rent Stabilization Law ("RSL"), N.Y.C. Admin. Code § 26-501 et seq. (McKinney's 1987), was enacted in 1969. Pursuant to that law, limits were placed on the percentage by which rents could be raised each time an apartment is vacated or a new lease is signed. By its terms, the law excepted buildings for which a certificate of occupancy is obtained after March 10, 1969, from its limits on rent increases. See N.Y.C. Admin. Code § 26 -504(a)(1)(d). The Emergency Tenant Protection Act of 1974 ("ETPA"), N.Y. Unconsol. Law § 8621 et seq. (McKinney's 1987), however, amended the RSL and, among other things, extended application of the RSL to buildings constructed before January 1, 1974. See N.Y. Unconsol. Law § 8625(a)(5); N.Y.C. Admin. Code § 26-504(b); Central Park Assocs. v. Haynes, 171 Misc.2d 463, 465-66, 654 N.Y.S.2d 967, 968 (N.Y. Civ. Ct. Dec. 23, 1996).
Mitchell-Lama projects are exempted from the RSL and the ETPA. See N.Y. Unconsol. Law § 8625(a)(3); N.Y.C. Admin. Code § 26-504 (a)(1)(a). When a project withdraws from the program, however, its exemption expires. Because those laws set the "initial legal regulated rent" as that rent charged pursuant to the last effective lease or rental agreement, see N.Y. Unconsol. Law § 8626(b)(2); N.Y.C. Admin. Code § 26-512(b)(3), their application to former Mitchell-Lama projects results in an "initial legal regulated rent" based on the below-market Mitchell-Lama rents.
C. West Side Manor and the Dispute that Led to this Case
West 95 owns West Side Manor, a middle-income rental housing development located at 70 West 95th Street, New York, NY. Compl. ¶¶ 7-10. West Side Manor was constructed as a Mitchell-Lama project in 1969 and has been in the Mitchell-Lama program since that time. Id. ¶¶ 15, 40-45. The New York City Department of Buildings issued a certificate of occupancy for the building on August 7, 1969; accordingly, West 95's right to withdraw the project from Mitchell-Lama pursuant to section 35(2) of the Private Housing Finance Law vested twenty years later, i.e., in August 1989. Id. ¶ 46.
In the summer of 2000, a dispute arose between the New York City Department of Housing Preservation and Development ("HPD") and West 95 over vacancies at West Side Manor. According to HPD, West 95's failure to timely rent apartments upon vacancy to prospective tenants who had earlier been placed on waiting lists is violative of section 3-16 of the Mitchell-Lama rules. According to West 95, however, neither section 3-16 nor any other rule requires it to rent vacant apartments. Rather, says West 95, the rules merely dictate to whom it must rent if it does elect to fill a vacancy.
In September 2000, this dispute came to a head when HPD wrote to West 95 threatening to remove and replace the Board of Directors of West 95 Housing Corp. pursuant to section 3-13 of the Mitchell-Lama rules unless West 95 provided a schedule for renting vacant apartments by October 6, 2000. Compl. Ex. 12. Rather than provide that schedule, West 95 informed HPD on October 6, 2000, that it would "immediately proceed to exercise the statutory and contractual rights granted to privatize the project."Id. Ex. 7. West 95 claims that since giving that notice, it has complied or has prepared to comply with every regulatory requirement for dissolution. Compl. ¶¶ 62-68.
According to West 95, HPD has taken a series of action designed to delay or thwart the withdrawal of West Side Manor from Mitchell-Lama. First, HPD has pressed its position with respect to vacancies at West Side Manor and has scheduled a hearing with the intent of replacing the Board of Directors. See Compl. Ex. 13. Second, HPD has taken the position that certain provisions of a Land Disposition Agreement dated October 5, 1966 ("LDA") and the Deed to the land upon which West Side Manor was built preclude dissolution until June 25, 2002. See id. ¶ 85; Ex. 15. According to the complaint, however, HPD has thus far refused to identify any provision in either the LDA or the Deed that restrict the right to dissolve, and the LDA explicitly states that "Nothing expressed in or to be implied from this agreement is intended or shall be construed to prevent, foreclose or prohibit the housing company . . . [from] voluntarily dissolving the housing company pursuant to . . . [the Mitchell-Lama Law]." Id. ¶¶ 42, 86, Ex. 3 (LDA Article IV, § 408(B), at 7083). Third, HPD's Inspector General commenced an investigation into West 95's financial affairs, which investigation, says West 95, is "selectively directed" and "patently intended to chill West 95's privatization plans and implicitly threaten sanctions against West 95" for proceeding with privatization. Id. ¶¶ 87-90, Ex. 16.
In response, West 95 filed this action pursuant to 42 U.S.C. § 1983 against HPD, the New York City Housing Development Corporation, and the City of New York, alleging that their actions violated or threatened to violate its rights pursuant to the Contracts Clause in Article I, section 10 of the United States Constitution, the Takings Clause of the Fifth Amendment, and the Equal Protection and Due Process Clauses of the Fourteenth Amendment. West 95 also named the New York State Division of Housing and Community Renewal ("DHCR") and the State of New York as defendants, contending that the RSL, as modified by the ETPA, violates the Contracts Clause, the Takings Clause, and the Equal Protection Clause. West 95 subsequently amended its complaint to name Joseph B. Lynch as a defendant in his official capacity of Commissioner of DHCR.
West 95 sought a preliminary injunction prohibiting HPD from conducting the hearing scheduled for the purpose of removing the board and from otherwise removing the board of directors, and defendants cross-moved to dismiss the complaint pursuant to Fed R. Civ. P. 12(b)(1) on the grounds that West 95's claims are not ripe for review and that the state defendants are immune from suit pursuant to the Eleventh Amendment and pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. The city defendants also requested that the Court abstain from exercising jurisdiction over this case. At a hearing on March 7, 2001, the Court denied West 95's motion for a preliminary injunction without prejudice to its renewal at a later date. This opinion resolves defendants' motions to dismiss.
II. DISCUSSION
A. Subject Matter Jurisdiction
Because a motion to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) concerns a court's "very power to hear the case," that issue should be decided first. United States ex rel. Kreindler Kreindler v. United Tech. Corp., 985 F.2d 1148, 1155-56 (2d Cir. 1993); Greenberg v. Trace Int'l Holdings, Inc., No. 99 Civ. 0306, 1999 WL 587935, at *1 n. 1 (S.D.N.Y. Aug. 4, 1999). In resolving such a motion, a court may consider evidence outside the pleadings. See Marakova v. United States, 201 F.3d 110, 113 (2d Cir. 2000); Kamen v. American Tel. Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986). A plaintiff bears the burden of proving the existence of subject matter jurisdiction by a preponderance of the evidence. Marakova, 201 F.3d at 113. In this case, defendants contend principally that none of plaintiffs' claims are ripe for review.
Ripeness is a "constitutional prerequisite to exercise of jurisdiction by federal courts." Marchi v. Board of Coop. Educ. Servs., 173 F.3d 469, 478 (2d Cir. 1999) (quoting Federal Election Comm'n v. Central Long Island Tax Reform Immediately Comm., 616 F.2d 45, 51 (2d Cir. 1980)). "Where a party seeks to challenge a statute or policy prior to its enforcement, the ripeness doctrine requires that the challenge grow out of a 'real, substantial controversy between parties' involving a 'dispute definite and concrete.'" Id. (quoting Babbitt v. United Farm Workers Nat'l Union, 442 U.S. 289, 298 (1979)). In other words, federal courts must avoid "entangling themselves in abstract disagreements." Abbott Labs. v. Gardner, 387 U.S. 136, 148-49 (1967), overruled on other grounds, Califano v. Sanders, 430 U.S. 99 (1977). In evaluating whether a claim is ripe, a court must consider: (1) the fitness of the issues for judicial review, and (2) the injury or hardship to the parties of withholding judicial consideration. Nutritional Health Alliance v. Shalala, 144 F.3d 220, 225 (2d Cir. 1998); see also Abbott Labs., 387 U.S. at 149. West 95's claims against the city defendants and the state defendants will be examined in turn.
1. West 95's claims against the city defendants are ripe with the exception of its takings claim.
As against the city defendants, West 95 claims that (1) HPD's alleged efforts to prevent West 95 from withdrawing from the Mitchell-Lama program constitutes an impermissible interference with West 95's vested contract rights, in violation of the Contracts Clause; (2) any requirement that West 95 rent apartments that it would prefer to keep vacant constitutes an physical taking of its property without compensation in violation of the Takings Clause; (3) HPD is selectively enforcing Mitchell-Lama regulations against West 95 for no legitimate governmental purpose, in violation of the Equal Protection Clause; and (4) HPD has predetermined the outcome of the hearing regarding vacancies, in violation of the Due Process Clause. The city defendants contend that none of these claims are ripe for review because, according to them, they arise out of actions West 95 predicts they will take, and not actions they have already taken. Specifically, the city defendants note that the board has not yet been removed, none of the vacant apartments have, as yet, been leased against the wishes of West 95, and HPD has not "formally" refused to issue of Letter of No Objection to West 95's withdrawal from Mitchell-Lama.
Ordinarily, a plaintiff need not "await the consummation of threatened injury to obtain preventative relief." Valmonte v. Bane, 18 F.3d 992, 999 (2d Cir. 1994); accord Lipsman ex rel. Lipsman v. New York City Bd. of Educ., No. 98 Civ. 2008, 1999 WL 498230, at *3 (S.D.N Y Jul. 14, 1999). Rather, a "claim is ripe if the perceived threat due to the putatively illegal conduct . . . is sufficiently real and immediate to constitute an existing controversy." Valmonte, 18 F.3d at 999; Lipsman, 1999 WL 498230, at *3. As further explained below, however, a takings claim, by its nature, has additional ripeness requirements. Accordingly, the ripeness of West 95's takings claim will be analyzed separately.
a. West 95's non-takings claims against the city defendants are ripe.
The crux of West 95's non-takings claims is that HPD is unlawfully attempting to interfere with its right to privatize by (1) unlawfully withholding the Letter of No Objection; and (2) undertaking to remove the Board of Directors at a "hearing" whose outcome is predetermined in violation of its right to due process; and (3) selectively investigating West 95 in violation of its right to equal protection of the laws. In support of these claims, West 95 has produced letters from HPD which flatly state that "HPD has concluded that the Housing Company is in violation of the Mitchell-Lama Rules and that such violation justifies removal of the Housing Company's Board of Directors" and "HPD cannot issue the letter of no objection . . . [because] the LDA and Deed prohibit such dissolution at this time." Compl. Exs. 13, 15. These letters demonstrate that the threat perceived by West 95 due to the allegedly illegal conduct is "sufficiently real and immediate to constitute an existing controversy."
The city defendants attempt to blunt the effect of these letters by contending that they do not constitute sufficiently "final" decisions of HPD because there are unspecified "administrative remedies" as well as state court procedures pursuant to Article 78 of New York's Civil Practice Law and Rules available to West 95. The city defendants have not, however, identified any administrative procedures available with respect to HPD's refusal to issue the Letter of No Objection, and there is no indication that the HPD official presiding over the hearing regarding the vacancies — an official who ultimately reports to HPD's commissioner — is empowered to reverse HPD's longstanding interpretation of the Mitchell-Lama Rules, rather than to merely resolve any factual disputes between the agency and West 95. Moreover, even if the positions taken by HPD were not final, West 95 has demonstrated, "by more than mere allegations," that resort to additional procedures before the agency would be futile. See Honess 52 Corp. v. Town of Fishkill, 1 F. Supp.2d 294, 301 (S.D.N.Y. 1998). Thus, the possibility that West 95 might convince HPD to reverse its position through an administrative process does not render its non-takings claims unripe.
The city defendants' reference to Article 78 is similarly unavailing. Pursuant to New York law, an Article 78 proceeding is not a continuation of an administrative review process, but rather is a new proceeding challenging a decision by an administrative body or officer. See N.Y. C.P.L.R. § 7804; Meachem v. Wing, 77 F. Supp.2d 431, 442 (S.D.N.Y. 1999). Thus, whether a party pursues an Article 78 action is immaterial to the determination of whether an administrative action is sufficiently final so as to be ripe for review.
West 95's non-takings claims against the city defendants are ripe not only because they are fit for review, as discussed above, but also because withholding review would work a hardship against it. In particular, the city defendants' suggestion that the Court require West 95 to complete every single step in the dissolution process — presumably including paying off West Side Manor's subsidized mortgages — and await the pro forma issuance of a "formal" rejection of its request for a Letter of No Objection would place West 95 in the position of having given up the benefits of the Mitchell-Lama program while still being subject to all lawful Mitchell-Lama regulations. The doctrine of ripeness does not require that parties engage in self-destructive behavior in order to ripen their claims.
b. West 95's takings claims against the city defendants are not ripe.
Because the Fifth Amendment prohibits only uncompensated takings, a takings claim is not ripe for federal court review "until the owner has unsuccessfully attempted to obtain just compensation through the procedures provided by the State." Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 379 (2d Cir. 1995) (quoting Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 195 (1985)). An attempt to obtain relief pursuant to a state compensation procedure must be attempted even if that procedure is "unsure and undeveloped," so long as there is a colorable basis in state law for the owner to seek compensation.Southview Assocs. v. Bongartz, 980 F.2d 84, 99-100 (2d Cir. 1992); see also Villager Pond, 56 F.3d at 380.
New York law permits property owners to seek compensation for municipal takings in its courts. See Goldfine v. Kelly, 80 F. Supp.2d 153, 161 (S.D.N.Y. 2000); see also, e.g., Ward v. Bennett (In re Ward), 214 A.D.2d 741, 743-44, 625 N.Y.S.2d 609, 612-13 (2d Dep't 1995). Accordingly, because West 95 has not attempted to obtain compensation in state court, its takings claim against the city defendants is not ripe for review here. See Rivervale Realty Co. v. Town of Orangetown, 816 F. Supp. 937, 943 (S.D.N.Y. 1993).
2. West 95's claims against the state defendants are ripe.
As against the state defendants, West 95 claims that (1) the RSL impairs its right to voluntarily withdraw from Mitchell-Lama in violation of the Contracts Clause; (2) the RSL constitutes a regulatory taking of its property without compensation in violation of the Takings Clause; and (3) the RSL distinguishes between Mitchell-Lama projects built before 1974 and those built after 1974 without a rational basis in violation of the Equal Protection Clause. The state defendants contend that none of these claims are ripe for review because the RSL does not yet apply to West Side Manor and they have not yet determined whether they will enforce the RSL against West Side Manor when it withdraws from the Mitchell-Lama program.
Although the state defendants' argument might have merit if West 95 was mounting an "as applied" challenge to the RSL, West 95 has chosen to mount a facial challenge. See Pl.'s Mem. at 10. Facial challenges to regulation "are generally ripe the moment the challenged regulation or ordinance is passed." Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725, 736 n. 10 (1997); see also Kittay v. Guiliani, 112 F. Supp.2d 342, 350 (S.D.N.Y. 2000). Accordingly, West 95's facial challenges to the RSL are ripe for review.
3. The State of New York and the Division of Housing and Community Renewal must be dismissed from this action pursuant to the Eleventh Amendment.
The state defendants contend that they are immune from suit in federal court pursuant to the Eleventh Amendment, even where, as here, the suit seeks only injunctive relief. See Seminole Tribe v. Florida, 517 U.S. 44, 54-55 (1996); Pennhurst State Sch. Hosp. v. Halderman, 465 U.S. 89, 99-101 (1974). West 95 responds that its claims fall under the exception to Eleventh Amendment immunity first recognized in Ex parte Young, 209 U.S. 123 (1908). See Pennhurst, 465 U.S. at 104-05.
In general, the Young exception applies to "suits seeking declaratory and injunctive relief against state officers" whose ongoing action or threat of action would violate federal law. Idaho v. Coeur d'Alene Tribe, 521 U.S. 261, 267-77 (1997). The exception does not apply, however, to suits against states or state agencies. See, e.g., Santiago v. New York State Dep't of Corr. Servs., 945 F.2d 25, 31 (2d Cir. 1991). Accordingly, West 95's claims challenging the RSL must be dismissed as against the State of New York and Division of Housing and Community Renewal pursuant to the Eleventh Amendment. West 95 may proceed against Commissioner Lynch in his individual capacity pursuant to the Young exception.
B. Failure to State a Claim
Having resolved defendants' challenges to the Court's subject matter jurisdiction, the Court now turns to their motions to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. In deciding these motions, the Court accepts, as it must, all of the well-pleaded facts as true and draws all reasonable inferences from those allegations in favor of the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). A complaint will survive a motion to dismiss unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Each of West 95's claims will be examined in turn.
1. The Contracts Clause claims
Article I, Section 10, Cl. 1 of the U.S. Constitution provides that "[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts." By its terms, the clause "is aimed at the legislative power of the State, and not at . . . the acts of administrative or executive boards or officers." New Orleans Waterworks v. Louisiana Sugar Refining Co., 125 U.S. 18, 30 (1888). In other words, whether a statute violates the contracts clause "must be determined by examining the statute itself and asking whether it breached or substantially impaired a contract or whether it required state officials to do so." Association of Surrogate's Supreme Court Reporters v. New York, No. 92 Civ. 4004, 1995 WL 555777, at *2 (S.D.N.Y. Sept. 19, 1995). *** To state a claim for violation of the Contracts Clause, a plaintiff must allege facts sufficient to demonstrate that a state law has "operated as a substantial impairment of a contractual relationship." General Motors Corp. v. Romein, 503 U.S. 181, 186 (1992) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 (1978)). There are three components to this inquiry: (1) "whether there is a contractual relationship"; (2) "whether a change in law impairs that contractual relationship"; and (3) "whether the impairment is substantial." Id. Even if a state law constitutes a substantial impairment, however, it will survive a Contracts Clause challenge if it serves "a significant and legitimate public purpose" and "the adjustment of "the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation's] adoption." Energy Reserves Group, Inc. v. Kansas Power Light Co., 459 U.S. 400, 411-12 (1983) (quoting United States Trust Co. v. New Jersey, 431 U.S. 1, 22 (1977)).
With respect to the city defendants, West 95 claims that HPD's efforts to delay or prevent West Side Manor's withdrawal from the Mitchell-Lama program impair its "contractual" rights to do so. The acts complained of, however — enforcement of broadly (and allegedly unlawfully) interpreted Mitchell-Lama regulations, refusal to issue a Letter of No Objection, commencement of an audit for the purpose of harassment — are executive "acts of administrative . . . officers," and not acts of legislation. Accordingly, they cannot form the basis of a claim pursuant to the Contracts Clause. See New Orleans Waterworks, 125 U.S. at 30.
The gravamen of West 95's Contracts Clause claim against the state defendants, in contrast, is that the RSL — a legislative act — unconstitutionally impairs its contractual rights to withdraw from the Mitchell-Lama program. Assuming without deciding, however, that West 95 has pled facts sufficient to establish the existence of a contractual relationship and an impairment of that relationship, its Contracts Clause against the state defendants nevertheless fails because it has not established that any impairment is substantial.
When considering the severity of an impairment, the Court must consider "whether the industry the complaining party has entered has been regulated in the past." Energy Reserves Group, 459 U.S. at 411; accord Kraebel v. New York City Dep't of Housing Preservation and Dev., 959 F.2d 395, 403 (2d Cir. 1992). West 95's industry — rental of residential property in New York City — has been called "heavily regulated" by the United States Court of Appeals for the Second Circuit.See Kraebel, 959 F.2d at 403. Thus, West 95 "cannot claim surprise that [its contractual] relationships . . . are affected by governmental action." Id.
Moreover, the RSL, as amended by the ETPA, contains provisions pursuant to which property owners may apply for an adjustment of the initial legal regulated rent where there are "unique or peculiar circumstances materially affecting the initial legal regulated rent [that have] resulted in a rent which is substantially different from the rents generally prevailing in the same area for substantially similar housing accommodations." N.Y.C. Admin. Code § 26-513. Because these provisions provide a mechanism by which property owners may seek adjustments of the regulated rent to reflect market conditions, the impairment "cannot be described as substantial or severe for purposes of the contract clause" even if resort to that mechanism imposes some burden and delay. Cf. Kraebel, 959 F.2d at 403.
Even if the RSL were to substantially impair West 95's contractual expectations, it would nevertheless survive scrutiny pursuant to the Contracts Clause because it was enacted for a legitimate state purpose — "to prevent exactions of unjust, unreasonable and oppressive rents" during a housing "emergency," see N.Y.C. Admin. Code § 26-501 — and the mechanism cited above that ensures that initial regulated rents reflect market conditions satisfies the requirement that any adjustment of the rights of property owners be based upon "reasonable conditions." See Energy Reserves, 459 U.S. at 411-12; Kreabel, 959 F.2d at 403. Accordingly, West 95's Contracts Clause claims are dismissed.
2. The remaining Takings Clause claims
The Takings Clause of the Fifth Amendment prohibits the taking of "private property . . . for public use, without just compensation." U.S. Const. amend. V. In general, to state a claim pursuant to 42 U.S.C. § 1983 for violation of the Takings Clause, a plaintiff must allege facts sufficient to establish: "(1) a property interest (2) that has been taken under color of state law (3) without just compensation." Frooks v. Town of Cortlandt, 997 F. Supp. 438, 452 (S.D.N Y 1998). A claim that a statute works a taking on its face — such as West 95's takings claim against the state defendants — however, requires more: a plaintiff "must establish that no set of circumstances exists under which the [challenged a]ct would be valid." Rent Stabilization Ass'n v. Dinkins, 5 F.3d 591, 595 (2d Cir. 1993) (quotingGeneral Elec. Co. v. New York State Dep't of Labor, 936 F.2d 1448, 1456 (2d Cir. 1991)) (emphasis and alteration in original). The fact that a statute might work an uncompensated taking under some conceivable set of circumstances is insufficient to render it unconstitutional on its face.Id. (quoting United States v. Salerno, 481 U.S. 739, 745 (1987)).
It is beyond peradventure that application of the RSL is constitutional in at least some circumstances. See, e.g., Federal Home Loan Mortgage Corp. v. New York State Div. of Housing Cmty. Renewal, 83 F.3d 45, 47-48 (2d Cir. 1996). Thus, West 95's facial challenge — in essence, a claim that the law is overbroad, see Rent Stabilization Ass'n, 5 F.3d at 595 — must fail. See id.
3. The Equal Protection Clause claims
West 95 asserts two distinct types of equal protections claims: (1) a claim that the RSL violates the equal protection clause on its face by distinguishing between Mitchell-Lama units built before 1974 and those built after 1974 "without a rational basis"; and (2) a claim that the city defendants are selectively enforcing Mitchell-Lama regulations against it. Each will be examined in turn.
a. The RSL does not violate the Equal Protection Clause on its face.
Although West 95 characterizes the RSL as distinguishing between classes of Mitchell-Lama buildings, on its face it does no such thing. Rather, the statute distinguishes between all buildings built before 1974 and those built thereafter. See N.Y. Unconsol. Law § 8625(a)(5); N.Y.C. Admin. Code § 26-504(b). The former are subject to the law; the latter are not. N.Y. Unconsol. Law § 8625(a)(5); N.Y.C. Admin. Code § 26-504(b).
Where, as here, a challenged statute implicates neither a fundamental right nor a suspect class, its treatment of different classes enjoys "a heavy presumption of constitutionality." Kittay v. Giuliani, 112 F. Supp.2d 342, 353 (S.D.N.Y. 2000). Such a statute will survive an equal protection challenge so long as "the classification scheme embodied in the [statute] is rationally related to a legitimate state interest."Pennell v. City of San Jose, 485 U.S. 1, 14 (1988). Moreover, the Court need not — and should not — decide whether the legislature's decision was correct; "[r]ather, "those challenging the legislative judgment must convince the court that the legislative facts on which the classification is apparently based could not reasonably be conceived to be true by the governmental decisionmaker.'" Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 464 (1981) (quoting Vance v. Bradley, 440 U.S. 93, 111 (1979)).
The RSL and EPTA were enacted to combat the ill effects of a perceived housing shortage — clearly a valid governmental concern. See N.Y. Unconsol. Law § 8622; N.Y.C. Admin. Code § 26-501. The legislature could reasonably have concluded that the statutes' exemption from regulation of buildings built or rehabilitated after January 1, 1974, furthers that purpose because the promise of freedom from regulation encourages construction of new housing stock. Accordingly, the RSL does not violate the equal protection clause on its face.
b. West 95 has stated a claim for selective enforcement.
In order to state a claim for selective enforcement, a plaintiff must plead facts sufficient to show: (1) that it was "selectively treated" compared with others similarly situated; and (2) that the selective treatment was carried out with malicious or bad faith intent to injure.See LaTrieste Rest. Cabaret v. Village of Port Chester, 40 F.3d 587, 590 (2d Cir. 1994). A plaintiff may satisfy the first prong by alleging that the government suddenly began enforcement against it after a lengthy period of non-enforcement. See id.
West 95 has alleged that HPD had knowledge of the vacant apartments at West Side Manor for some time, and took no action to compel West 95 to rent those units. Compl. ¶ 80. However, after West 95 sought to withdraw from the Mitchell-Lama program, HPD allegedly: (1) scheduled a hearing for the purpose of removing the Board of Directors; (2) launched an audit of West Side Manor's financial records; and (3) stated that it would refuse to provide a Letter of No Objection based on purported restrictions in the LDA and Deed without identifying those restrictions or addressing express language in the LDA preserving West 95's right to withdraw. West 95 has also alleged that by these actions, the city defendants are treating it differently than other Mitchell-Lama projects, and that these actions were taken with the bad faith intent to interfere with West 95's right to withdraw from the Mitchell-Lama program. These allegations are sufficient to state a claim for selective enforcement in violation of the Equal Protection clause.
4. The Due Process Clause claim
The essence of West 95's procedural due process claim is that HPD has predetermined the result of the hearing scheduled for the purpose of removing the Board of Directors, thus depriving it of a meaningful opportunity to be heard. Thus, West 95 is claiming not that the statutory procedures for removal of Mitchell-Lama boards are constitutionally infirm in and of themselves, but instead that HPD is acting in a manner unauthorized by the relevant statutes, rendering their protection ineffective.
Where the random, unauthorized acts of government employees deprive an individual of property or liberty, "the Due Process Clause of the Fourteenth Amendment is not violated . . ., so long as the State provides a meaningful postdeprivation remedy." Hellenic Am. Neighborhood Action Comm. v. City of New York, 101 F.3d 877, 880 (2d Cir. 1996). With respect to the unauthorized acts of employees or agencies of the City of New York, the United States Court of Appeals for the Second Circuit has explicitly held that New York's Article 78 proceeding is "a perfectly adequate postdeprivation remedy" that suffices to satisfy the Due Process Clause. Id. at 881. Accordingly, West 95's due process claim is dismissed.
C. Abstention
The city defendants contend that the Court should abstain from exercising its jurisdiction in this case pursuant to the doctrines first set forth in Younger v. Harris, 401 U.S. 37 (1971), Railroad Comm'n v. Pullman Co., 312 U.S. 496 (1941), and Buford v. Sun Oil Co., 319 U.S. 315 (1943). As the city defendants concede, however, because the Court denied West 95's motion for a preliminary injunction prohibiting HPD from conducting the hearing regarding vacancies, and that hearing has now taken place, its application for Younger abstention is now moot.
The city defendants' applications for Pullman and Buford abstention were directed at West 95's constitutional challenges to the RSL. All of West 95's claims related to the RSL, however, are being dismissed. Accordingly, the city defendants' applications for Pullman and Buford abstention are also moot.
III. CONCLUSION
For the reasons set forth above, the city defendants' motion to dismiss the complaint is denied with respect to West 95's equal protection claim, and is in all other respects granted, and the state defendants' motion to dismiss the complaint is granted.
SO ORDERED.