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"The Wizard of Oz Exposed
— A Town is Busted by the U.S. Second Circuit for Repeatedly Changing its Land Use Rules"

By Michael Diederich, Jr., Esq.
Diederich Law Office
Stony Point, New York

Eighteenth Annual National Conference on
Private Property Rights
October 25, 2014
The Century House, Latham, N.Y.

Thank you, Carol. I really appreciate being invited up here to relate one story I have regarding the Steven Sherman case and just to give a little background I guess I'll go way, way back.

I was a history and biology major at college. I couldn't decide which so I was both. And I think both understanding history is crucial to understanding our society and also understanding science is crucial to understanding how the world works. With those things I became a lawyer and also involved in environmental law. Also, I'm a JAG (Judge Advocate General's Corps). I just recently retired from the JAG Corps. That's why the gray hairs. After a bunch of years I served in Iraq and a couple of years ago in Afghanistan for nine months where I was a legal advisor to the military command and also was a foreign claims commissioner. I met a lot of Afghans. So, my experience is such that I'm really interested in American values, the rule of law, and how to make the society better. For full disclosure, I consider myself a moderate Democrat. The reason I say that is my experience in the military was it didn't matter your political affiliation, you needed to get a job done and you'd work together and civilly discuss things if it had to do with politics as an aside, but you'd get the mission done. As a lawyer I feel the rationality of the law is what's important and as soon as you get politics into it, it doesn't work anymore.

Thus, my challenges to corruption. I've had a number of taxpayer suits. By the way, they almost always failed in the courts but for example the one $400,000 police chief contract for my local town of 13,000 people, even though the court found I had no standing as a taxpayer, which I found rather odd, politically the town decided to change the contract because it's too politically embarrassing. So, we won by pursuing the challenge even though we lost in the courts.

Now, the topic of my discussion today is, and as Carol mentioned I do civil rights and civil liberties law. I enjoy helping people who are aggrieved by either their, you know, often their government because government can act arbitrarily and unreasonably too often so I enjoy taking on those challenges. A bunch of years ago, 2008, I got a couple of calls from a guy who wanted to consult with me and it was a land-use case I thought it had a couple of acres of property and, you know, it didn't sound very interesting but he insisted. He finally came in, brings out this map of four hundred acres with golf course, beautiful project and he described his situation. This is Steven Sherman, my client. Actually, let me scroll ahead to last week.

Last week I was at the unveiling of the grave of Steve Sherman because he died a year ago of cancer. So, his wife is now the plaintiff in the action I've been handling.

So, going back to 2008, he came in and he explained to me how the Town of Chester, New York, in Orange County, notwithstanding that the planning board liked, actually loved, his proposal — mixed housing, recreational facilities, golf course, western facility, I mean it was a beautiful project that he had in mind and had the detailed plans and everything—the planning board loved it but the town kept changing the land use rules on him.

I'll give you a little chronological rundown of that. It might be of interest to anybody here that's dealt with developers and developments. He located the property in 1999. Bought it in 2000-2001. Presented the planning board proposal for a subdivision. Within a year, the town was implementing a moratorium to revise its land-use laws. It was a six-month moratorium. After a year and a half of the six-month moratorium he had to sue, finally, to end the moratorium because it looked like it was going to go on forever. So, that was his first, I guess, signal that maybe the town fathers —the Town Board—didn't want the project. Got over the moratorium. The town did not immediately change its land use laws. It did change its master plan but it wasn't really any major change. So, I wondered, looking back, why the master plan change and the moratorium when you really didn't change your land use much. You kept land that was residentially zoned, residentially zoned.

The moratorium was over and he went forward with his project. He ended up getting his draft environmental impact statement deemed complete, which the land-use professionals here you'll know that's, realize that's an important stage in the land-use process. So, he should have had a hearing on his subdivision application within sixty-two days. Well, guess what? No hearing and the town on Christmas Eve, or effective Christmas Eve of 2003 changed the zoning. Didn't let him know in advance it was doing that. A change in zoning so he had a different zoning than he had. It wasn't that different but it was different. It was different enough that he'd had to change all the, rework all the plans. He agreed to do that. Agreed, in that he really had no choice. So, he did. But then the following summer the town changed the land-use laws again. That process continued for the next two years. Specifically, they changed the land use laws. That was 2004. They changed them in 2003, 2004, 2005, 2006, and 2007. Each time bringing him back to the drawing board, if you will. Now, that I found odd and I haven't really found any cases that involve that kind of governmental action of repeated zoning. What the professionals here would realize with that is by constantly changing the zoning, they never gave him anything that he could then get to a final or preliminary approval on. So, he couldn't challenge through an Article 78 proceeding the action. So, they kept him in limbo without the ability to get a final decision on his proposal.

So, he met with me in 2008. That's when I learned about the regulatory abuse and I decided to take the case and basically try to get the town to be reasonable. Let's give him his approval and let him develop his property, reasonably. So, we sued on that and what the town then did was to change its tactic. It realized it got caught regarding, "We can't just keep changing the land use laws. So, now we'll do bureaucratic tactics for dealing with you including changing the planner and then making the new planner review everything again." It's the same thing with the engineer, making him dot every "I," cross every "t." And this went on and on. So, I filed an amended complaint dealing with those actions.

Then it got to around 2011. The litigation's been going on for a number of years and this project is now over a decade old. Then I start really seriously looking at the law — the federal law — dealing with takings. What I found was it was worse than I actually thought it was. The federal laws are extraordinarily hostile to landowners. And I found the courts would bend over backwards to dismiss a takings claim brought in the circuit. And actually they're hostile everywhere but particularly the Second Circuit. And I decided we could not prevail in federal court without first going to the state court because the federal law is, "We don't want you bringing your planning board and zoning board gripes to us in federal court. That's why you have zoning boards of appeal. Go there." So, that's the basic philosophy of the federal court. Deal with it at the state level.

The second thing as to takings, there's this case called Williamson County (Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, (1985)) — U.S. Supreme Court case — that, I think misadvisedly but whatever, requires that you seek compensation, you don't have a takings under the Fifth Amendment. The Takings Clause is, "Government shall not take property without just compensation." So, the federal courts — Supreme Court — say "Well, you have to seek. If they take you property you have to seek just compensation and that should be from the state." And how they interpret that to be is that should be through your state courts. So, go to your state courts first. So, that's a hurdle. That doesn't really make sense, it seems to me, because I would think that the government that takes the property is the government that has the power of eminent domain — the town in this case — so when they take your property and they don't pay you, then you should be able to go to either court because that's normally what you can do regarding federal law. You can go to the state court or the federal court with both state and federal claims. But in any case, the law is what the Supreme Court says it is so you have to deal with that.

What I did was we dismissed the federal case voluntarily and refiled immediately in state court with all the same everything which is permissible. I did that and then the town immediately — this is what they have the right to do — they removed the case back to federal court. It's called "removal" and it means if it's federal claims the town can say, "Well, we really should be in federal court." So, they had been saying all along I should be in state court and then when I dismiss the federal case and go to state court they remove it back to federal court. And then they say sort of the same defense as they had asserted in the federal court, that we should have been in state court. But we were in state court but now they removed it to federal court. So, we're in federal court and they're claiming a defense of we're in federal court, the case should be dismissed. More importantly, they said we didn't get final action from the… Actually both are equally important. They said we didn't get final action from the town.

So, I think this is interesting. I filed the state court complaint in January of 2012, which was as I was being mobilized to go to Afghanistan for basically a year. So, as I'm in Fort Hood on my training for my unit I have a conference call to federal court about the case. I am explaining that I am going off to the sun and sand of Afghanistan and the court was very receptive to [it.] The judge, he heard the facts and he immediately said, "I'm denying the motion to dismiss. I'm allowing the case forward." So, his initial impulse was clearly siding with my client, the landowner, against the town's abuse. I thought that was very interesting because then nine months later when I got the decision on their motion to dismiss he said it's a close case but my client didn't quite do enough. By the way, not enough at the time my client had put a bunch of money initially into the project way back in 2001 and then had been bleeding financially, paying more and more money to more and more consultants and also needing the lenders, getting other people involved to help him to stay afloat financially as the town was draining him through this decade-long obstruction. So, he, my client, basically didn't have much equity left in this project by that time. Nevertheless, he hadn't gone far enough.

With that decision we appealed to the Second Circuit and in the decision that we received in this past May the Second Circuit resoundingly found in our favor in that in this particular case my client had done everything he could have done regarding getting a final action. It was the town's obstruction that prevented him from doing that. We also had the amicus support of the Pacific Legal Foundation on especially the issue of going to state court. They helped me argue the fact that the town removed the case back to federal court and my client shouldn't be bound or prejudiced by that fact. The case should go forward.

So, the Second Circuit found in our favor and the case which I think is a rare but very important win for landowners in situations where there's an obstruction that involves more than just being a little unfair, but being a repetitively abusive process that denies a property owner of his right to use and develop his land. So, what all that does is it brings us back to we survived the motion to dismiss. So, we're at the beginning of the case. I now have Steve Sherman's widow as the plaintiff in a case that is really at the beginning stage of the case even though this is something he tried to do or accomplish. He should have had an approval really back in around 2002, 2003.

So, that's the essential what the case is and the importance of it. Some things that you might find interesting. This is maybe speculation on my part, but it looked like what the town was really trying to do was keep the land undeveloped. It was forest land adjoining a state park. So, keeping it undeveloped by obstructing the landowner essentially created a larger nature preserve. I had argued that as a possible motivation from the town. I don't know what their motivation is. I have suspicions. Another thing is the property was within walking distance of Kiryas Joel. How many people here have heard of Kiryas Joel? A Hasidic community. My client is Jewish Reformed. His wife is Presbyterian. But, nevertheless, it's a large parcel near KJ and there was speculation in a number of places that there was fear that maybe this would, you know, his motives were something else. I don't know what the town board was thinking when it continuously obstructed him but I speculate that that was one of the items of speculation.

He got drained to a certain amount of money by the town's consultant fee ordinance. That was part of my challenge. It's a much smaller issue but, nevertheless, I think it's useful. The town kept demanding money from him but they didn't really say why and they didn't back it with timely or any kind of detail in invoices. We challenged that and I challenged the regulation. Didn't get too far with that but it was still an issue that I thought was relevant to the case. The federal court thought it was relevant in that the draining aspect as an item of obstruction, even if the ordinance itself didn't violate due process. But the ordinance, for example, had a very short fuse. He had to challenge an invoice within fifteen days, I believe, and an appeal procedure that was non-transparent. And then when we tried to pursue it to the town board which looked like the appellate authority, the town board simply ignored us. So, I thought that was an abuse. Another interesting thing I learned from this case is… How many people here are aware that the New York State Constitution is very similar, regarding its Bill of Rights to the federal Constitution including the right of the people not to have their property taken without just compensation? I think most people would agree, "Oh, yeah, we have a Constitution here in New York State, too, with the Bill of Rights." We do. But I learned in this case it doesn't allow for private close of action to recover damages for violation of the Constitutional wrongs such as a takings. So, the town is arguing I don't have the state court takings claim. Where that particularly came out was when the case was first dismissed the court dismissed the federal claims and remanded the whole case back to the state court. So, we started litigating there while the appeal was going on. And I think everybody here, if you're interested in property rights or any civil rights, there's not a statute that implements the State Constitution Bill of Rights. In the federal law we have a federal Bill of Rights and there's a statute 42 USC section 1983 that effectuates it, essentially. There's not a state court statutory parallel. So, what you find is you have your state Bill of Rights, state constitutional rights violated, you don't have the damages remedy. Now, the courts are making some inroads into that. They now allow a remedy for an equal protection type of violation, but not for takings. That might be something worth thinking about.

Where people have won in state court on takings claims, for example, the Magee case, Magee v. Orangetown. It's a big New York State takings case. They asserted in the state court federal claims. And they won on the federal claims, not on the state claims. I thought that was interesting.

And lastly, regarding the legal, this case creates a very good precedent regarding the issue of timeliness because the town was repeatedly saying, "We're too late. We're too late. We're too late. We're just too late suing." There's a three year statute of limitations on Section 1983 claim and therefore "We're too late." I argued that we have in this dismissal there's another statute that allows for tolling — legal technicalities — tolling would allow the statute to run from when I first filed in 2008 back three years to 2005. The Second Circuit, I think, in its wisdom — I don't say that about the Second Circuit that often — in its wisdom it dealt with the takings issue as, "We're just going to look at the overall picture of obstruction and we're not going to hold you to…" They didn't get into what a specific limitations period was they said we did show it here with a pattern of obstruction. It's what's called the continuing violation doctrine which is not normally favored but it exists and they applied it here which was very significant because in a land use context, again anybody that does land use development, you know, things don't happen quickly and if something takes a long time before you realize you're being abused well, as in this case, the town never announced why it was doing what it was doing. It just kept doing it. To this day I don't know why. So, how are you going to pick a date of when they intended to take your property? It's a difficult question but by them allowing this continuing violation doctrine to apply in the land use takings case I think that really gives another very important tool for property owners in this regard.

So, that's my discussion of the Steve Sherman case. I had just maybe one other point. A lot of my challenges to government on behalf of individuals in other contexts, one theme I've been trying to work on is the First Amendment right to petition government. I did include that as a claim in this lawsuit and I've asserted it otherwhere and I have clients where we seek to get government to do the right thing. Both the prior presentations before me there's elements of it that deal with petitioning government or not being able to petition government. So, Mr. Lehr's, the federal government regarded EPA, this is dumb what's going on. Well, how do you… Do the citizens have First Amendment rights? There is in the First Amendment a right to petition. You know, why not figure out how you can do that. The courts have been cutting back with doctrines of standing like I indicated before. In the one taxpayers suit they said you don't have standing as a taxpayer even though it's a taxpayer suit. It's crazy. So, they're denying judicially. The Bill of Rights First Amendment says you have the right to petition government but the judges say, "No, you don't really have the right in this court." And it's a problem. Your right to petition in federal, I mean, the right to petition. The courts have broadly defined it as the right to petition any branch of government. That's the executive, legislative, or the judicial. But it's being cut back. So, I think that's something worth considering.

As I mentioned I consider myself of a certain moderate political persuasion but as a lawyer I know another lawyer who's much more liberal than me that does work up in a different county but he would say to me occasionally, "I have people come to me I know are very conservative but now it's their rights are violated," they come to him. And the thing that struck me with hearing these other talks is I think the facts, normally rationality and the facts speak for themselves. I think if you take a group of what you call liberals, or a group of conservatives, or people in the middle, if you give them the facts, I think most Americans will say, "Yeah, this is wrong." So, I think, I'm not sure how to convey this but I think a big problem is trying to get the recipient of your message to hear the message because too often people are talking past each other. There's a book that Jonathan Haidt wrote called "The Righteous Mind" (The Righteous Mind: Why Good People are Divided by Politics and Religion). It talks about, you know, conservatives, liberals, talking past each other and I found it very interesting because both are smart good people but emphasizing different values which prevents the discussion so the point — and I see this with trying to get to courts — is how I can convince them of the facts and the law should be applied in a way because it's the right thing to do for everybody. And I really believe that. I'm a strong believer in our Founding Fathers, those basic things. And if we apply some of that to today I just think we would get better results in a lot of different areas.

That's all I have to say. Questions?

Audience member: Do you not think that the law is undergirded by policy and preferences of different constituencies that are then informed by politics?

Mr. Diederich: Oh, I'm much more cynical than that, even. In New York it's way too much just result oriented in my opinion. The judge figures out in his gut what he wants for a result and then he'll do whatever to get to that result, which is so wrong, because…

Audience member: It's not just in New York.

Mr. Diederich: Yeah, but we're the worst. I just think we're the worst. Yes?

Audience member: I would agree that we're the worst. But one of my questions here I have and here's one of the problems that people have is we can't afford always to go to court. I mean, I went to court for a very small matter which took a couple of years while a child is growing up and being in harm for about $100,000. How much did this gentleman have to…? I mean, you mentioned in your talk that in the meantime he's dwindling his cash reserve. He's not going to be able to do the project when he gets done because the court system and all of this system has drained him of his funds. Do you know how much they spent? How much it cost in this particular case?

Mr. Diederich: Well, just on that because… The federal law has what's called "fee shifting." So, the statutes provide for that you can get paid from the losing government. There's laws out there. But there's a cost involved because either the client is paying for the attorney…

Audience member: I'm just saying, in this particular case, was there any reimbursement for any of his fees?

Mr. Diederich: We haven't won. We're far from the end of the case

Audience member: So, they have to continue that investment in the hopes of recouping something at the end.

Mr. Diederich: Most of my civil rights cases I don't charge the client. I expect to get paid from the losing party after I win. But I can't do that in every case. Yes?

Audience member: The repeated changes in the zoning ordinance that you refer to, were they preceded by revisions to the municipality's comprehensive land-use plan?

Mr. Diederich: No. And another thing I thought interesting which I asserted is they were essentially making my client pay for SEQRA (State Environmental Quality Review Act) which should have been part of SEQRA dealing with their ordinance. Instead they shifted the burden of that on to him as a landowner.

Audience member: We're getting into this repeated change in the ordinance without them delving into the town's comprehensive plan but they call it "tweaking" the ordinance. We're just tweaking.

Mr. Diederich: We have an expert here with New York land use. I'm not an expert but the basic concept in New York is the master plan is supposed to be your governing document, your theory that you base your zoning on and your zoning should comport with the master plan but everybody here knows you have constant zoning changes and that you're not… In this case they kept changing the rules and they didn't at all change the master plan. No. And the master plan didn't really change from the 1974 master plan to the 2003 master plan. It wasn't really a substantial change anyway. I think it was just designed to delay this project. Lynn?

Audience member: I'm curious to know when they changed the land use all those times what were they changing it to?

Mr. Diederich: There were various varying forms of it. Some of them were… The 2003 change was a big change and then there was other changes that effected my client.

Audience member: What was the use they were changing it to?

Mr. Diederich: No, it was not only… It was a number of different ways, which let's not bother everybody here, it's because his parcel is so large then every change resulted in you need to re-engineer the whole project, basically. Yes?

Audience member: I live right next to KJ. So, I'm very familiar with that situation more specifically but just to clarify, you're saying your client was not a member of KJ. Right?

Mr. Diederich: No.

Audience member: And have no intention of building?

Mr. Diederich: The fear was of some that with a parcel that was four hundred acres that could be residentially zoned, where you could have close to four hundred housing units then that could...

Audience member: Was it going to be zoned for multi-family units?

Mr. Diederich: No. No. But still…

Audience member: Since they have a reputation of obfuscating.

Mr. Diederich: It was just a fear that if you have enough people that then they could incorporate a village and once that happens…

So thank you all.

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