Claims Against Zoning Board Over Halted Project Upheld

This story, in slightly different form, originally appeared in the New York Law Journal.

LONG BEACH, NY-A developer may proceed with a lawsuit challenging a Long Beach zoning board's decision to withdraw approval for a new condominium building on the grounds that the chairman of the zoning board lived next door to the proposed building and did not recuse himself, an Appellate Division, Second Department, panel has ruled.

The unanimous panel in Haberman v. Zoning Board of Appeals, 1138/04, ruled that Supreme Court Justice Randy Marber in Nassau County erred in dismissing several claims brought by developer Sinclair Haberman against the board.

The panel consisted of Justices Reinaldo Rivera, Cheryl Chambers, Leonard Austin and Sheri Roman.

The eight-year-old case, in which Haberman is seeking more than $50 million in lost profits and other damages stemming from the withdrawal of approval for a 10-story, waterfront tower, has already reached the Court of Appeals on a procedural issue.

The most recent appeal involved the zoning board's motion to dismiss several claims in the third, most recent, amended complaint, including claims for due process and breach of contract.

Justice Marber dismissed those claims in September 2010. But the Second Department ruled that the claims should not have been dismissed because they were substantially the same as claims in an earlier version of the complaint that the appeals court had allowed to go forward on a prior appeal.

"Contrary to the contention of the City defendants, in the decision and order on remittitur on the prior appeal…this Court did consider, and reject, their arguments challenging the viability of the plaintiffs' due process and breach of contract causes of action," the panel wrote. "Since this Court's decision and order on the prior appeal…constituted the law of the case, and there has been no 'showing of subsequent evidence or change of law,' reexamination of the viability of those same causes of action…is foreclosed."

The panel also reversed Justice Marber's dismissal of a claim introduced in the third amended complaint for the first time. That claim alleged that the zoning board's decision must be reversed because its chairman, Rocco Morelli, lived in a building next door to the proposed development. Although Morelli abstained from the board's final vote, he did not recuse himself from discussion.

"If Morelli was, as alleged, a tenant of Xander and, therefore, had a personal interest in the fate of the building permit to the extent that he would benefit from its revocation, the second cause of action sufficiently alleged that he should have disclosed this interest…and therefore stated a cause of action," the panel wrote.

"Whether the plaintiffs can ultimately establish the conflict of interest allegations should not have been 'part of the calculus in determining [the] motion to dismiss,'" the panel wrote, quoting EBC I v. Goldman Sachs.

Scott Mollen of Herrick, Feinstein, lead counsel for the plaintiff, said he was pleased with the decision.

"There was a failure to adhere to strict ethical principles," Mollen said of Morelli's failure to recuse himself. "On occasion, courts have said that a board member's conduct was inappropriate and frowned upon. However, this case makes it clear that the failure to disclose a personal interest does in fact provide a basis for a claim of lack of due process."

He added, "There's an important distinction between abstaining from a vote and recusing oneself. When you abstain, you are still permitted to participate in the deliberation. Not until after he expressed himself did he abstain from the vote."

In addition to Mollen, Haberman has hired a team of lawyers to handle different aspects of the case, including Victor Kovner, a partner with Davis Wright Tremaine; Thomas Newman, of counsel at Duane Morris; Manhasset solo attorney James Pelzer; Stephen Limmer, a partner with Ackerman, Levine, Cullen, Brickman & Limmer; Steven Schlesinger, a partner with Jaspan Schlesinger; and his own father, solo attorney Javob Haberman.

Mollen said Haberman had found it "necessary to marshal a formidable legal team" for the "legal war" being waged by the city.

Long Beach Corporation Counsel Corey Klein said the city had not decided its next step, but might seek leave to appeal.

"It's just another decision in the ongoing Haberman saga," he said.

@|Brendan Pierson can be contacted at bpierson@alm.com.