The Curse of the Courtesy Sandwich Shop

          According to a recent New York Times editorial (Ground Zero Stalls Again, Aug. 10, 2009, at p. A14) the State of New York has had it up to here with the long-delayed reconstruction of the World Trade Center site. It’s all well and good for the state to help out Larry Silverstein, the lessee-developer of that site, with some public money, but after all, says the Times, WTC is a commercial venture and the New York & New Jersey Port Authority (the owner of the WTC site) “should not go deeper into the real estate business.” “Real estate business?” Oh, dear. And here we thought that WTC was not a private but a public building. Why would we entertain such a silly thought? Because that’s what our betters on the New York Court of Appeals told us way back in 1963. And therein lies a tale.

           Back in the early 1960s, the WTC site (some 13 blocks in downtown Manhattan, give or take) was one of those specialized New York commercial neighborhoods, devoted to stores selling electronics and what in those days was known as hi-fi equipment. All these merchants and their employees worked there happily, taking a break every now and grabbing a bite at the Courtesy Sandwich Shop – one of those uniquely New York luncheonettes. But the Port Authority of New York & New Jersey had other things in mind. The Authority chose that particular spot to build TWC – two humongous office towers, the ones that met their demise on 9/11. That meant that all those business blocks would be taken by eminent domain to be razed and consolidated into the WTC building site. All those folks who owned land or leased space and ran businesses there, were now in the way, and would be displaced. Bummer.  

          To add insult to injury – or perhaps more accurately, injury to injury – New York law provided (and as far as we know still does) that when real property housing a business is taken by eminent domain, and the business is irrevocably destroyed in the process, the business owners get no compensation for it. They are paid “fair market value” (which the U.S. Supreme Court conceded does not reflect true value arrived at in voluntary market transactions) but only for the dirt, bricks and mortar that comprise the real estate being taken. They get nothing, nada, zip, bobkes for the business, its goodwill and its stock in trade that is damaged or destroyed in the course of the taking. If you are into that stuff, there are several law review articles dealing with this injustice that – as every legal commentator who has written on the subject notes – is devoid of any defensible doctrinal basis or moral underpinnings, even though judges apply it in the name of “just compensation.” We recommend that you read D. Michael Risinger, Direct Damages: The Lost Key to Constitutional Just Compensation When Business Premises Are Condemned, 15 Seton Hall L. Rev. 483 (1985), and your faithful servant’s views voiced in Gideon Kanner, When Is “Property” Not “Property Itself”: A Critical Examination of the Bases of Denial of Compensation For Loss of Goodwill In Eminent Domain, 6 Cal. Western L. Rev. 57 (1969), which made their way into CCP § 1263.510. 

         As one legal commentator put it at the time, had these New York property owners been hit by a hurricane or some other natural disaster, politicians would have been falling over themselves in an effort to provide government aid. Ah, but this disaster was government-made, so instead of helping, the politicos piled on, singing the praises of the to-be-built Port Authority skyscrapers, and ignoring the plight of the condemnees.

          So the poor owners of the Courtesy Sandwich Shop went to court. Surely, they thought, those wonderful, fair-minded judges, ever ready to do justice, would see through the Port Athority’s charade of calling this huge commercial enterprise a “public” use, wouldn’t they? Actually, no, they wouldn’t and they didn’t.  Though the condemnees secured relief in the New York Appellate Division which couldn’t see how this commercial mega-venture constituted “public use,” the New York Court of Appeals reversed, Judge Van Voorhis dissenting. Courtesy Sandwich Shop v. Port of New York & New Jersey Authority, 190 N.E.2d 402 (N.Y. 1963).

          The way the Port Authority argued and the way the court’s majority saw it, the occupants of WTC would be either government entities, or folks engaged in import-export commerce, and consolidating them in one location would be a “public use.” Judge Van Voorhis didn’t see it that way, and didn’t see how taking a bunch of indisputably private businesses and putting them together in one building, would make it “public.” For another thing, there weren’t that many such enterprises, and it was plain that the Port Authority would have to rent space to the general business public to come close to filling those millions of square feet of commercial office space. As recently noted by a federal court litigating the post-9/11 donnybrook over who owes what to whom, WTC “struggled to fill its space,” relying first on government tenants, but when that didn’t do the trick, “replacing government tenants in the 1980s with a variety of higher paying commercial tenants, among them premier law, accounting and finance services firms.” In re September 11th Litigation, 590 F.Supp.2d 535, 537-538 (S.D.N.Y. 2008).

          If you want to know more about that fight you’ll have to read the opinions – plural – because, dear readers, we aren’t going there; neither you nor we are young enough to take the time to unravel that aspect of this legal saga in our lifetimes – except that we simply have to note in passing that Larry Silverstein – remember him? — became the all-time winner of the “Lucky Pierre” award, when he leased WTC from the Port Authority just two weeks before 9/11. Need we say more? 

          So where were we? Oh, yes, the Courtesy Sandwich Shop, wasn’t it? The New York Court of Appeals noted the no-compensation-for-business-losses rule, but held that pursuing its constitutional vitality was premature in that case, because this litigation dealt only with the character, public or private, of the proposed project, and compensation would be dealt with in the condemnation case that would follow. So these poor folks waited and then claimed their business losses in the condemnation action, only to be told that this issue had already been decided in the first litigation. Slick, eh? 

          So what happened then? WTC rose on the economic bones, so to speak, of the Courtesy Sandwich Shop, and when it was finished, New York’s spiffiest restaurant, Windows on the World, was built on top of it. We ate there once or twice, and have to concede that the view was unbelievable (the food was good too), but we never could understand why the plain-folks Courtesy Sandwich Shop had to be destroyed without compensation, while Windows on the World got to be the ipsy-pipsiest eatery in New York with government aid.

          So is there a moral to this saga? Not really, unless you are into divine retribution as a legal theory, in which case you may consider joining the nuts who contend that we deserved 9/11, or at least wonder if the curse of the Courtesy Sandwich Shop was a factor in the 9/11 disaster.

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