Takings Claim Not Ripe Until Process For Obtaining Compensation Complete, Even If Taking Already Has Occurred

On July 16, 2014, the Second Circuit issued a decision in Kurtz v. Verizon New York, Inc., 13-3900-CV, affirming a decision by the EDNY that the plaintiffs had not stated a takings claim because, even though the takings already had occurred, they had not yet exhausted all of their state remedies to obtain compensation for the taking.

In Kurtz, a putative class alleged that “Verizon installed multi-unit terminal boxes on their property without just compensation,” and, because it did so using New York’s power of eminent domain, this constituted a taking. The EDNY dismissed the complaint, holding that the claim was not ripe because the plaintiffs had not yet exhausted their state law remedies to obtain compensation from Verizon. The Second Circuit affirmed, explaining:

To test the ripeness of a constitutional takings claim in federal court, we consult Williamson County. In that case, a plaintiff owner of a tract of land sued a Tennessee regional planning commission alleging that the commission’s application of various zoning laws and regulations to the plaintiff’s property amounted to an unconstitutional taking under the Fifth Amendment. Williamson County held that the claim was unripe: a plaintiff alleging a Fifth Amendment taking of a property interest must show that (1) the state regulatory entity has rendered a final decision on the matter, and (2) the plaintiff has sought just compensation by means of an available state procedure. As to finality, a claim that the application of government regulations effects a taking of a property interest is not ripe until the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue. . . .

The Fifth Amendment’s proscription of a taking without just compensation underlies Williamson County‘s exhaustion requirement: the Fifth Amendment does not require that just compensation be paid in advance of, or contemporaneously with, the taking; all that is required is that a reasonable, certain and adequate provision for obtaining compensation exist at the time of the taking. Therefore, if a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just compensation. . . .

Plaintiffs argue that Williamson County was a case about regulatory takings, and that it does not govern claims in which, as in theirs, the taking is physical. We disagree. The finality and exhaustion requirements are both derived from elements that must be shown in any takings claim: [i] a taking [ ii] without just compensation. So Williamson County applies to all takings claims.

(Internal quotations and citations omitted).

Court Erred In Considering Only The Cost Of Incarceration During The Government Shutdown In Sentencing Defendant To Probation

On July 9, 2014, the Second Circuit issued a decision in United States v. Park, 13-4142-CR, reversing an EDNY decision sentencing a defendant to probation rather than imprisonment “based solely on its belief that the government could not afford the cost of incarceration during a so-called “government shut-down.”

In Park, the defendant pled guilty to one count of tax evasion. The defendant had prior convictions, but the EDNY sentenced the defendant to probation rather than imprisonment, explaining:

I would probably give a period of incarceration if not for the financial pressures that the Court has, the court system and the government has. Especially low-level federal employees at the present time. And we really can’t afford the luxury of paying another $28,000 to keep this person in jail under the circumstances . . . .

The Second Circuit reversed, explaining:

[W]e conclude that the District Court committed procedural error in imposing a term of probation in lieu of imprisonment for two reasons. First, the only sentencing factor the District Court deemed relevant was the cost of incarceration to the government and the economic problems allegedly caused by the government shut-down.  . . .  The Court therefore committed procedural error by refusing to consider the § 3553(a) factors in deciding what is an appropriate sentence.

Second, and equally problematic, is that the cost of incarceration to the government—the Court’s sole justification for imposing a term of probation rather than incarceration—is not a relevant sentencing factor under the applicable statutes. [B]ased on the plain language of § 3553(a), no sentencing factor can reasonably be read to encompass the cost of incarceration. Nor does the statute permit the sentencing court to balance the cost of incarceration against the sentencing goals enumerated in § 3553(a).

(Internal quotations and citations omitted) (emphasis added). The Second Circuit went on to hold that not only was the sentence procedurally unreasonable, it also was–based on the record as it stood–substantively unreasonable, given the defendant’s conduct and prior convictions.

Notice Of Breach And Opportunity To Cure Not Required When Breach Not Curable

On June 25, 2014, the Second Circuit issued a decision in Giuffre Hyundai v. Hyundai Motor America, Docket No. 13–1886, holding that contractual obligations to provide notice and an opportunity to cure a breach of contract can be excused.

In Giuffre Hyundai, the defendant “terminated its contract with” the plaintiff car dealer “after a New York State court concluded that the dealer had engaged in fraudulent, illegal, and deceptive business practices—a clear breach of the contract terms.” The plaintiff brought suit in the EDNY, alleging that the termination violated “section 463 of the New York Vehicle and Traffic Law, which provides protections to motor vehicle franchisees in their dealings with automobile manufacturers” because it was not provided notice and an opportunity to cure. The EDNY granted the defendant summary judgment, which the Second Circuit affirmed. One issue addressed by the Second Circuit was whether New York contract law excused a party from an obligation to provide notice of a breach and an opportunity to cure it when the breach could not be cured. Holding that it did, the Second Circuit affirmed the EDNY’s decision, explaining:

New York common law will not require strict compliance with a contractual notice-and-cure provision if providing an opportunity to cure would be useless, or if the breach undermines the entire contractual relationship such that it cannot be cured. In particular, New York law permits a party to terminate a contract immediately, without affording the breaching party notice and opportunity to cure when the breaching party’s misfeasance is incurable and when the cure is unfeasible. When contracting parties agree to a notice-and-cure provision, it is reasonable to assume that they do so with the assumption that the breaches which would be used to terminate the contract would be curable breaches. It is no less reasonable to presume that the legislature operated under the same expectation in drafting section 463.

(Internal quotations and citations omitted) (emphasis added).

Probate Exception Does Not Bar RICO Claims

On June 27, 2014, the Second Circuit issued a decision in Leskinen v. Halsey, 13-1157-CV, limiting the application of the probate exception to federal jurisdiction.

In Leskinen, the EDNY dismissed a plaintiff’s RICO and related state-law claims against “various relatives and other participants in the sale of real property once owned by her late grandmother,” holding “that the probate exception to federal jurisdiction precluded its adjudication of [the plaintiff’s] claims because they directly target the administration of her grandmother’s estate, including the allegedly improper disposition of real property.” While the Second Circuit ultimately found alternate grounds to uphold the EDNY’s dismissal, it held that the probate exception did not apply, explaining:

This court . . . has narrowly construed the probate exception to apply only if a plaintiff seeks either to (1) administer an estate, probate a will, or do any other purely probate matter, or (2) to reach a res in the custody of a state court. Nothing in the record demonstrates that [the plaintiff] seeks to reach a res in the custody of a state court. Insofar as she sues for racketeering, common law fraud, willful negligence, and negligent misrepresentation, the relief sought may be at odds with concluded state probate proceedings, but the claims do not themselves ask the district court to administer an estate, probate a will, or perform another purely probate matter. In such circumstances, we cannot conclude that federal jurisdiction is lacking.

(Internal quotations and citations omitted) (emphasis added).