Comment on Peyton v. NYC BSA

Part of Park West Village. Image Credit: Google Maps

On December 17, 2020, by a 4-3 decision and over a strong dissent, the Court of Appeals reversed the decision of the Appellate Division in Peyton v. NYC Board of Standards and Appeals, 2020 N.Y. Slip Op. 07662.  The decision is an unseemly show of deference to the Board of Standards and Appeals, a body that is widely viewed as captive to the real estate industry, on a pure question of law as to which no deference is owed.  The City Council should follow the lead of the U.S. Congress, which, in the Dodd-Frank Act, legislated a less deferential standard of review for certain actions of an agency widely deemed captive to the industry it is supposed to regulate.

Peyton involved application of the Zoning Resolution’s open space requirement to a proposed infill building in an urban renewal superblock in Manhattan’s Park West Village at West 97th Street.  The Court of Appeals deferred to the Board of Standards and Appeals and held that the rooftop garden of a recent luxury building that is accessible only to the occupants of that building, and not to the occupants of the three 1960s middle-income rental buildings on the same zoning lot, counts as “open space” within the meaning of the Zoning Resolution, notwithstanding the Zoning Resolution’s definition of “open space” as “accessible to and usable by all persons occupying a dwelling unit or a rooming unit on the zoning lot.”

The Court’s majority opinion deferred to the BSA’s decision even though the BSA conceded that its decision was a “practical,” not a literal, interpretation of the Zoning Resolution.  In so doing, the Court cited the “complex set of cross-references and interlocking provisions in the Zoning Resolution’s definition of open space” and the BSA’s “technical knowledge,” and concluded that “the agency charged with administering the Zoning Resolution in all its complexity is well placed to understand how the various parts of the statute fit together.”

The dissent responded that no deference is owed where the case turns on a “purely legal question” and that the BSA’s interpretation was contrary to the statutory language.  The dissent argued that the majority’s conclusion that “we must defer to the BSA’s interpretation, regardless of the disconnect between that interpretation and the clear language of the statute, because the Zoning Resolution uses words that refer to other words and because land use law is complicated … contravenes basic principles of statutory interpretation.”

The majority decision retreats from the courts’ proper role of deciding questions of law de novo, as required by Raritan Dev. Corp. v. Silva, 91 N.Y.2d 98 (1997), and toward an unwarranted deference to administrative agencies generally, and particularly to the BSA, which has shown itself to be captive to the real estate industry.

This retreat goes in the opposite direction from what has been happening at the federal level.  Under the highly deferential standard of Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984), if a statute is ambiguous, “a reviewing court … is obliged to accept the agency’s position if … the agency’s interpretation is reasonable.”  United States v. Mead, 533 U.S. 218, 229 (2001).  In recent years the U.S. Supreme Court has limited or even ignored the Chevron doctrine and may be poised to discard it.  The criticism of Chevron is that it requires the courts to abdicate their judicial role and “creates a ‘systematic judicial bias in favor of the … government, the most powerful of parties, and against everyone else.’”  Kisor v. Wilkie, 139 S. Ct. 2400, 2425 (2019) (Gorsuch, J., concurring) (citation omitted); see also Pereira v. Sessions, 138 S. Ct. 2105, 2129 (2018) (Alito, J., dissenting).

These criticisms of judicial deference are accentuated when considered in the light of the large body of writing on “regulatory capture.”  Regulatory capture is the takeover of a regulatory agency by the industry that it ostensibly regulates.  Developed by Nobel Prize-winning economist George Stigler, the theory holds that agencies are captured because industry players with enormous interests in the outcome of regulatory decisions focus large resources on influencing the agencies that are supposed to regulate them, while members of the public, who have few resources and often only small or passing interests in the outcomes, cannot exert countervailing pressure.

Civic and community activists widely regard the BSA as captive to the real estate industry.  BSA decisions seem to confirm this view.  In a recent decision vacating a BSA decision upholding implausible interpretations of the Zoning Resolution as applied to a proposed supertall building at 36 West 66th Street, Supreme Court Justice Arthur Engoron compared the BSA’s actions to those of another captive agency, the F.A.A., in approving Boeing’s 737 Max. Judge Engoron wrote that with the BSA, as with the F.A.A., “a business has gotten an administrative agency to approve a faulty, flawed plan, constituting a ‘severe lack of oversight’ (albeit, nobody has or will die).”  2020 NY Slip Op 33139(U), at **8 (S. Ct. N.Y. Co. 2019) (quoting N. Chokshi, “House Report Condemns Boeing and F.A.A. in 737 Max Disasters,” N.Y. Times, Sept. 16, 2020).  In another recent case, the BSA “wholly ignored” the Supreme Court’s directive in an earlier decision and, stretching the words of the Zoning Resolution beyond all recognition, approved a gerrymandered zoning lot to allow construction of a supertall building at 200 Amsterdam Avenue that the Supreme Court held to be illegal.  The Committee for Environmentally Sound Development v. Amsterdam Ave. Redevelopment Assocs. LLC, Index No. 157273/2019 (S. Ct. N.Y. Co. Feb. 27, 2020).

Disheartening as Peyton is, there are things that might be done to counteract the drift toward more deference to the BSA.  The City Council might legislate a less deferential standard of review of BSA decisions on appeals challenging Department of Buildings interpretations of the Zoning Resolution.  In so doing, it would be following what the Congress did in the Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. § 25b(b)(5)(A).  Because Congress deemed the Office of the Comptroller of the Currency a captured agency that had advanced its own interests at the expense of the public, it specified that certain OCC actions be reviewed under the less deferential standard of Skidmore v. Swift & Co., 323 U.S. 134 (1944), rather than under Chevron.  Skidmore generally applies when Congress has not delegated to an agency the power to “speak with the force of law when it addresses ambiguity in [a] statute.”  Mead, 533 U.S. at 229.  Under Skidmore, the reviewing court is not “obliged to accept the agency’s position” unless unreasonable; rather, “[t]he weight of [an agency decision] … will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade.”  Id. at 140.  See K. Barnett, “Codifying Chevmore,” 90 N.Y.U. L. Rev. 1 (2015).

In the meanwhile, litigators can educate and maybe even persuade the courts through the submission of Brandeis briefs documenting regulatory capture and pointing to the changed course of the U.S. Supreme Court.  And petitioners can litigate the next case in the hope that the Court of Appeals will see that extreme deference is not consistent with the judicial role.

By: John R. Low-Beer (John R. Low-Beer represented the petitioners-respondents in this matter.)