Kent Acres Development Co., Ltd., v. City of New York, 41 AD3d 542 (2d Dept 2007)

The firm represented Lexington Realty Development Corp. and RFB, LLC in obtaining a judgment directing the Town of Kent to allow the Developers to participate in the Phosphorus Offset Pilot Program (“POPP”), which was established as part of the New York City Watershed (the “Watershed”) 1997 Memorandum of Agreement to facilitate new development in the City’s watershed. In the 1980’s, Kent Acres Development Co. (“Kent Acres”) obtained from the New York City Department of Environmental Protection (“DEP”) the approvals needed to develop a 318-unit condominium project in the Watershed, including authorization to construct a wastewater treatment plant (“WWTP”). After local groups brought suit challenging the approvals, the parties agreed to downsize key aspects of the residential development project, after which DEP again approved plans for the project and WWTP. After commencing substantial construction, Kent Acres’ financing was jeopardized by the savings and loan crisis, and the company sought to sell the project to Lexington Realty Development Corp. (“Lexington”). In response to an inquiry from Lexington, DEP indicated that it had not and would not approve the WWTP, prompting litigation by Kent Acres. Shortly thereafter, the City of New York’s Watershed regulations were amended, and DEP approved an application by Lexington to include the WWTP in the newly-created POPP, contingent on obtaining approval from the Town of Kent or Putnam County. When both the town and county refused to consent, DEP rescinded the conditional approval and Lexington sued to preserve the project. RFB, LLC subsequently purchased Lexington.

After reviewing the history of the litigation, the Appellate Division, Second Department found that the lower court properly directed the Town of Kent to issue its written consent for the project to participate in the POPP. According to the court, the parties to the first litigation agreed to downsize the project in exchange for discontinuance of the litigation; thereafter, the developers commenced construction and incurred significant expenses to further development of the project. Under these circumstances, the appeals court found that the lower court properly annulled the Town’s decision to withhold consent to the WWTP’s inclusion in the POPP, and that the Town was contractually obligated to issue its consent under the prior settlement.