Mr. Brinckerhoff argued that Empire State Development failed to properly make an accounting of the projected private benefits of the project to Mr. Ratner and his Forest City Ratner Companies and weigh those against the benefits to the public before allowing the project to go forward in 2006. At that time, the state agency authorized the condemnation and taking of 123 parcels of privately owned land, or about 20 percent of the property in the project zone. Some landowners have since sold out to Forest City Ratner.

Though little or no work has been done on the project for months, Mr. Ratner has recently reached an agreement to have Russian billionaire Mikhail D. Prokhorov invest $200 million in the Nets, the 18,000-seat arena and in Atlantic Yards in exchange for an ownership share in all three. He faces an end-of-the-year deadline to break ground.

There was limited discussion before the Court yesterday about the U.S. Supreme Court's controversial ruling in Kelo v. City of New London, 545 U.S. 469 (2005). Kelo allowed, with what critics called an overly broad definition of "public use" under the Fifth Amendment to the US Constitution, the taking of private land for a private development in Connecticut.

Judge Robert S. Smith did ask Mr. Karmel yesterday how Kelo related to Atlantic Yards. "Are you asking us to follow Kelo and say that any public use is good enough, or do you acknowledge that you have to show blight here to justify the use of the eminent domain power?" the judge asked.

"The result in this case is the same whether you follow Kelo or you don't follow Kelo" based on the state Constitution and case law, Mr. Karmel replied.

State Precedent
Justices Susan Phillips Read and Victoria A. Graffeo both said at several points they wanted to know more about state precedents and how they relate to the use of eminent domain under the state Constitution.

Mr. Brinckerhoff also challenged whether public funding for Atlantic Yards—the state and the city have each pledged $100 million—is legal under Article XVIII, §6 of the state Constitution. It allows public financing for residential housing projects only when low-income units are being replaced by other low-income units. Atlantic Yards calls for construction of about 3,000 market-value housing units and 2,250 low-income units.

Chief Judge Jonathan Lippman asked whether public funding was going to the project in violation of Article XVIII, §6.

"Are public subsidies going to market-rate housing here?" he asked.

"No," Mr. Karmel responded.

"There are no public subsidies going to market-rate housing?" Judge Lippman asked again.

"The only subsidies identified in the record are the $100 million appropriation by the state Legislature, which is for a state-owned arena and a state-owned rail yard," Mr. Karmel said. "The state has had the authority to fund state-run facilities of that kind forever."

Mr. Karmel said city funding for the project was not subject to Article XVIII, §6.

Filing Timeframe
The judges also probed both sides on whether the state court action before the Court yesterday was filed in a timely fashion. The plaintiffs challenging Empire State Development's approval of the project went first to federal court and, Mr. Karmel contended, missed a 30-day filing notice in state court as they were pursuing their federal claims.

"Can that serve to toll for a couple of years the 30-day requirement in the [Eminent Domain Procedure Law]?" Judge Read asked. "That seems to be the implication."

"I think there is no question that it can and it did here," Mr. Brinckerhoff argued.

The judges yesterday heard an appeal of an Appellate Division, Second Department, unanimous ruling rejecting arguments by Atlantic Yards' opponents that the project's environmental impact statement and use of eminent domain are improper (NYLJ, May 18).

The prime organizer, the coalition Develop Don't Destroy Brooklyn, also tried unsuccessfully to challenge the project and the Empire State Development Corp.'s approval of it in another state court action, Develop Don't Destroy Brooklyn v. Urban Development Corp., (NYLJ, Feb. 27), and in a federal court case, Goldstein v. Pataki, in which the U.S. Supreme Court ultimately denied certiorari (NYLJ, June 24, 2008).

J. Kevin Healy of Bryan Cave and Charles S. Webb III and Kenneth J. Applebaum of Berger & Webb are also representing the Empire State Development Corp. Eric Hecker of South Brooklyn Legal Services is aiding Mr. Brinckerhoff's representation of the plaintiffs.

In an amicus brief filed in support of the Atlantic Yards project, New York City's Law Department argued that many privately developed projects have been made possible in the city by the condemnation of private property.

Kelo has prompted the filing of a series of bills in the New York state Legislature concerning the use of eminent domain. In 2009, they included A1568/S1669, which would give citizens more time to contest proposed property takings, and A1570/1670, to create an eminent domain ombudsman to ensure the even-handed application of the condemnation of private property. Again this year, none of the bills gained traction.

The Arlington, Va.-based Institute for Justice, which represented property owners in Kelo, released a report last week in which it named New York as among the most permissive states in the country for the use of eminent domain to aid in the development of private projects. It cited recent projects sponsored by the New York Stock Exchange, Costco and Stop & Shop as among those in which private businesses benefitted from the public taking of private property.

Another Suit Filed
On Tuesday, the Straphangers Campaign of the New York Public Interest Research Group, Develop Don't Destroy Brooklyn and several lawmakers filed another suit related to the Brooklyn Yards project.

The Manhattan Supreme Court suit alleges that the sale by the Metropolitan Transportation Authority of its Vanderbilt Rail Yard to Forest City Ratner vastly undervalued the true worth of the 8.5-acre property. The rail yard, owned by the MTA's Long Island Railroad Co., accounts for about 40 percent of the Atlantic Yards site.

The Court of Appeals is expected to hand down a ruling by the end of November in the case it heard yesterday.

Mr. Prokhorov's investment deal is contingent on Forest City Ratner's securing title to the remaining parcels at the site as well as financing for the project by Jan. 1.

Joel Stashenko can be reached at [email protected].