New New York Court of Appeals Update (May 2019)

The Court of Appeals recently released three decisions—relating to carefully and narrowly framed issues under the New City Landmarks Preservation Law; New York State Department of Labor's Minimum Wage Order; and Article 7 of the New York Real Property Tax Law—that are of particular interest to practitioners in those fields of law. Of more interest to the Bar generally are the pointed, strident and unusually caustic dissents of Judge Rivera (joined by Judge Wilson) in the Landmarks case; Judge Garcia (joined by Judge Fahey) in the Labor Law action; and Judge Wilson (joined by Judge Rivera) in the Tax Law proceeding.

Matter of Save America's Clocks, Inc. v City of New York

219 NY Slip Op 02385

Decided on March 28, 2019

Was the City's Landmarks Preservation Commission's decision to allow the clock tower at 346 Broadway—previously designated an interior landmark—to be converted to private space and to be altered irrational and affected by errors of law? Answer: The decision was proper (4 Judges to 2).

The Landmarks Preservation Law was passed in 1965 as a response "to the loss of a number of [New York City's] significant buildings". The law was "not" designed for public "acquisitions of historic properties"; rather it "provid[ed] services, standards, controls and incentives that will encourage preservation by private owners and users."

In 1973, the law was amended to allow the LPC to designate an interior landmark, defined as "[a]n interior, or part thereof, any part of which is thirty years old or older, and which is customarily open or accessible to the public, or to which the public is customarily invited, and which has a special historical or aesthetic interest or value."

346 Broadway is the old New York Life Insurance Company headquarters. The fifteen-story structure, completed in the late 1890s, was designed in part by the historically significant architectural firm of McKim, Mead & White. The City acquired the building in 1968, and it was during this period of City ownership, in 1987, that the LPC designated the building and parts of its interior as landmarks; including the clock tower.

In its initial designation report, the LPC noted several of the building's unique features. The exterior of the "palazzo-like tower," constructed in "the neo-Italian Renaissance style," was largely built with "white Tuckahoe marble." The "interiors" were also "designed using the finest craftsmanship and lavish materials" including "marble, bronze, [and] mahogany." Among the interior spaces designated were the former "Banking Hall," a "grand and boldly scaled neo-Classical room" with "monumental freestanding Corinthian columns, and "[t]he clock tower" which housed a "No. 4 Striking Tower Clock"—a mechanical clock driven "by a thousand pound weight" which "strikes the hours" with a hammer and a "5000 pound bell." The clock was manufactured by E. Howard Watch & Clock Company and "was specially equipped with a double three-legged gravity escapement"—a feature, shared by only one other tower clock: the clock housed by Elizabeth Tower (also home to the bell known as Big Ben) in London. In total, the LPC landmarked 20,000 square feet out of the building's total interior space of 420,000 square feet.

In December 2013, the City sold the building to Civic Center Community Group Broadway LLC, a private developer. After purchasing the building, the developer sought approval from the New York City Department of Buildings to convert the building into private residences. The developer's plan was approved by DOB in June 2014. The developer next sought a certificate of appropriateness from the LPC.

The developer's initial proposal, presented to the LPC at a public hearing in November 2014, included new windows, removal of an outdated fire escape, restoration of building entrances, addition of a new entrance, removal of a deteriorating parapet and addition of a fence and gate inspired by similar structures designed for other sites by the original architectural firm. With respect to the interior, the owner proposed to, among other things, restore the main lobby and the banking hall and restore and relocate the president's office. The clocktower mechanism would be kept in its original location and the building and area around it restored and weatherproofed. Under the proposal, the banking hall and lobby would remain publicly accessible. Questions were raised, however, about access to the clocktower, which was to be part of a private residence, as well as about the continued operation of the clock. During the hearing, LPC's General Counsel stated that "there's no power under the Landmarks Law to require interior-designated spaces to remain public." Counsel also opined that the Commission was powerless to require that the clock mechanism remain "operable," but noted that the developer intended to keep the clock running electrically.

After the public hearing, certain Commissioners and LPC staff members conducted a site visit. Shortly after that, at a second public meeting in December 2014, the Commission approved the proposal by a vote of 7-1. The dissenting commissioner voted against the proposal because she "[could] not approve the changes to the [clock] mechanism itself and to the interior of the clock tower gallery, as well as mechanical room."

A proceeding challenging the COA ensued. Petitioners—a coalition of entities and individuals—agreed to limit the scope of litigation to the decisions to limit public access to the clock tower and to run the clock electrically. Supreme Court annulled the COA concluding that the decision to "eliminate public access to the clock tower" was "irrational and arbitrary," but that there was a rational basis for the conversion of the clock from mechanical to electrical operation. Nevertheless, the court determined that the decision to electrify the clock was affected by an error of law because LPC Counsel's advice that the LPC could not regulate the functioning of the clock was incorrect. Similarly, LPC Counsel's advice on public access was wrong, according to the court, because "the general provisions of the Landmarks Law vest the Commission with the power to regulate an interior landmark."

A divided Appellate Division affirmed. The majority agreed with Supreme Court that the decision to discontinue public access to the clock tower was irrational because "it [was] inconsistent with the statutory definition" of interior landmark, and also found the decision to electrify the clock irrational. The majority also agreed with Supreme Court that LPC's General Counsel gave incorrect advice during the public hearings about the LPC's authority to require public access and dictate how the clock functioned. That advice, the majority found, affected the Commission's vote on the COA—a determination the majority based on portions of the hearing transcript. The dissent concluded that, based on the record, the LPC's decisions were rational, and that no error of law infected the proceedings because: (1) counsel's advice was correct; and (2) the LPC vote would not have been affected even if the advice was incorrect.

Judicial review of the Commission's findings by the Court of Appeals was limited to whether "the determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion". "This review was deferential for it is not the role of the courts to weigh the desirability of any action or choose among alternatives". "[T]he courts cannot interfere unless there is no rational basis for the exercise of discretion" or "the action is without sound basis in reason . . . and taken without regard to the facts". It follows that "[i]f the court finds that the determination is supported by a rational basis, it must sustain the determination even if the court concludes that it would have reached a different result than the one reached by the agency."

Petitioners argued that the LPC's decision to close off the clocktower was inconsistent with the statutory definition of interior landmark and is therefore facially irrational. It was the LPC's position that "public access was a threshold condition, not an ongoing one," and "public access at designation is no more than the foothold that allows the Commission to exercise the police power to regulate private property." The majority agreed that consistent with our [prior] holding that public access is a "jurisdictional predicate" for an initial LPC designation. A designation, did not foreclose the possibility of "private use in the future". Underscoring this, the law contemplated that the LPC may issue a COA for "demol[ition] of any improvement"—which is defined to include "building"—"containing an interior landmark". As the LPC noted, the COA "process presumes change, sometimes dramatic change." The court held that the Landmarks Law makes plain that the LPC's decision with respect to the clock tower was well within the ambit of its discretion.

Contrary to petitioners' claims, the LPC's decision to allow the clock to be electrified was similarly rational. "[T]he operation of the clock would be modernized by electrification, thereby assuring its continued maintenance for the foreseeable future, and the visibility of exterior clock faces to the public would be enhanced by LED or some other form of modernized lighting, while the clock faces would remain in their original, pristine condition". The COA also made plain the LPC's finding that the developer's plan would ensure that "the clock mechanism...