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Opinion: Big Victory for Small Homeowners in Atlantic City

Judge stops land grab by Casino Reinvestment Development Authority, calling it a ‘manifest abuse of the eminent domain power’

Credit: Amanda Brown
R. William Potter

As I was packing up to leave the office recently, I was handed Judge Julio Mendez’ 12-page opinion invalidating the condemnation of Charlie and Lucinda Birnbaum’s modest boardinghouse in Atlantic City, calling it “a manifest abuse of the eminent domain power” by the Casino Reinvestment Development Authority (CRDA).

What wonderful news!

I quickly sent a text message to my law partner Peter Dickson, who was co-counsel with lawyers from the Institute for Justice, a Washington D.C.-based public interest law firm dedicated to defending property rights against unlawful government seizures. That includes the CRDA’s taking of Charlie and Lucinda’s home without any idea of what to do with it other than to bulldoze the house so it joined dozens of properties leveled by the CRDA in a process called “land banking” that resembled an urban wasteland.

What made the Birnbaum’s case all the more compelling was the heartbreaking history of the house.  After Charlie moved out, his disabled mother remained along with a live-in health aide.  Some years ago both were brutally murdered by an intruder.  Charlie personally cleaned up the blood-stained walls and floors, converting the house into a sort of shrine that he uses as home base for his piano-tuning business on behalf of the city’s casinos.

When the CRDA came knocking, offering to buy the property, Charlie and Lucinda refused.  So the casino agency responded by issuing "notice of condemnation," the enforced taking of private property “for just compensation and public use.” But where was the public use? As it turned out there was none.    

Judge Mendez gave the CRDA ample opportunity to show it had a viable public-use plan for the property.  The court directed the agency “to provide reasonable assurances to justify the taking of the Birnbaum’s property, particularly in light of Atlantic City’s unprecedented financial crisis.”

A major concern of the court was the unintended impact of  the “Municipal Stabilization Recovery Act” and the “Casino Property Tax Stabilization Act” both signed into law by Gov. Chris Christie on May 27, 2016.

As Judge Mendez observed, the enactment of these two statutes  — which Christie championed as preventing Atlantic City from declaring bankruptcy  — means “there is even more uncertainty surrounding the City’s future and the CRDA’s ability to make any use of the Birnbaum’s property.”  That’s because these reform bills divert funds the CRDA collects from a tax on casino revenues to paying debt service on bonds issued by Atlantic City.

In other words, funds previously dedicated to long-term urban revitalization projects in Atlantic City, key to the city’s future as a tourist hub, would be used instead to pay current debt held by nervous bondholders and thus prevent the city’s pending bankruptcy.

Judge Mendez further explained his reasoning:

“The court finds that based on the current unprecedented financial crisis in Atlantic City, the unique location of the Birnbaum’s property, the history of unsuccessful economic development projects in this area of Atlantic City, the [CRDA’s] lack of any specific and viable plans for making use of this property, for all of these reasons … the CRDA’s condemnation is denied.”

What makes this such an important decision is that the court closely examined the CRDA’s asserted justification for taking the Birnbaum’s property.  Where was the public use, the court wanted to know, in taking and leveling the Birnbaum’s house, evicting elderly tenants in the process?

The judge recognized a painful reality: To allow the CRDA to wipe out an otherwise viable use of land — be it ever so humble — based on nothing more than a hope that someday, someone would come forward and offer to replace current properties with some Really Big Development had already contributed to the city’s spiral of decline.  Enough already.

The court found that the CRDA offered no solid evidence of having a realistic, or indeed any, plan to make productive use of the Birnbaum’s house, which would  be cleared, pay no taxes, and simply add more vacant land that was steadily hollowing out the city.

The CRDA’s claim that it was “land banking” — aggregating smaller tracts of cleared land into large swaths in hopes of someday attracting a major redeveloper to build on the ever-expanding inner-city open space was not a valid “public use” of the Birnbaum’s property.

This case could set a major precedent.  It shows that judges should not blindly defer to the shallow promises of a state agency when it has no concrete plans for making a specific “public use” of a property it seeks to acquire.  As a result, Charlie and Lucinda could remain owners of their treasured property, paying taxes and free to sell if and when they ever choose to do so.

After reading the court’s decision, I left the office, cheerfully unaware that my law partner had already received the court’s opinion,  and pleased that even if he did not catch any trout , he had helped to prevent a powerful state agency from snaring this one property to add to an extensive inventory of vacant land — and providing an important legal precedent in the process that may protect other property owners facing similarly empty “public use” claims.

R. William Potter is a partner in the Princeton-based law firm Potter and Dickson. The views expressed are his own and do not necessarily reflect the views of the firm or any client.

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