The legal dispute stemmed from Home Depot's proposal in the mid 1990s to build a store of more than 100,000 sf on Midland Ave. in Port Chester that abuts the Rye/Port Chester border. The plan for the facility, which was eventually built and opened in February 2000, was approved by the Village of Port Chester, but required a permit from Westchester County to allow for the widening of Midland Ave. The county permit needed the approval of the City of Rye.

However, according to court documents, the City of Rye failed to sign off on the permit and Home Depot charged in its suit that "Rye's tactics of refusal to sign off on the permit, delayed the construction and operation of the store for more than two years."

Eventually, Home Depot obtained necessary approvals from the Village of Port Chester in 1999 that no longer required the widening of Midland Ave. Construction on the store began almost immediately and the store was open for business less than a year later.

While a lower court termed the City of Rye's tactics an abuse of governmental authority, the appellate court decided that Home Depot did not adequately establish the fact that it had the legal right to obtain the county road improvement permit as it had charged.

The suit against the City of Rye, former Mayor Edward "Ted" Dunne and six members of the City Council at the time, was initially filed in April 1997.

According to attorneys involved with the litigation, prior to the ruling on the appeal the case was entering the damages phase. Home Depot had charged that the cost of the delays in the construction of the store exceeded $10 million.

Robert Hermann, an attorney with Thacher, Proffitt & Wood, who represented the City of Rye in the case, said, "This is a really important land use decision because for the past year and a half it has created a lot of anxiety for local officials."

He added that ever since the ruling against the City of Rye was rendered, "Home Depot and other developers have used the decision as a means of intimidating local officials."

Hermann related that the appellate court's reversal, "has lifted the yoke off of the necks of local officials" who had feared that a court could hold them personally liable for their decisions.

Philip M. Halpern, a partner in the White Plains law firm Collier, Halpern, Newburgh, Nolletti & Boch, LLP, who represented Home Depot in the case, said that Home Depot is "exploring the legal issues associated with an appeal."