Sale of Stamford post office on hold: U.S. District Court grants temporary injunction

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Yesterday there were several important developments in the fight over the historic Atlantic Street Station post office in Stamford, Connecticut, which closed on September 20 with only two-days’ notice to customers, just as the building was about to be sold to a Westchester developer.

The U.S. District Court issued a preliminary injunction to stop the sale of the historic building to developer Louis Cappelli, who has plans to raze a 1939 addition to the structure and build two high-rise apartment buildings.  As the Court’s order explains, the Postal Service failed to do a satisfactory environmental review as required by the National Environmental Protection Act (NEPA), and therefore the sale should not go forward at this time.

The effort to block the sale of the Atlantic Street Station began on September 25 with a Complaint filed in the District Court by Stamford resident Kaysay H. Abrha, the Center for Art and Mindfulness (CAM), which wants to buy the building itself and turn it into an arts-and-education center, and the National Post Office Collaborate, which is fighting the sale of historic post offices across the country.  The plaintiffs are represented by attorneys Adam Ford and Harold Hughes of the legal firm Ford & Huff, which is based in Utah.  They’ve been joined in Connecticut by attorney Lawrence Grossman.

Yesterday’s decision could have far-reaching impacts.  It’s not clear at this point if the ruling will become a precedent, but as the case moves forward, it may put more pressure on the Postal Service to conduct environmental impact reviews when it wants to sell a historic post office.  As the Court stated yesterday in its ruling, “There is a strong public interest in ensuring that USPS complies with its NEPA obligations here and in any future sales of its other properties.”

Being held to NEPA obligations would mean more opportunities for public input into decisions over sales, more attention to what will happen to the post office after it’s sold, more transparency in the process, and more obstacles for the Postal Service to overcome before it sells a historic property.

The ruling also addressed the matter of the $1 million bond that the Postal Service was seeking.  The Court determined that in this case, no bond was required at all.  This was a huge victory for the plaintiffs because if such a large bond had been required and they were unable to come up with it, the whole case might have fallen apart.

The Court also issued a second ruling in favor of the Postal Service that removes the lis pendens that the plaintiffs had put on the property.  The ruling on this matter may be significant because it involves the extent of judicial review in cases involving 39 USC 403(c).
In addition to these two rulings by the District Court, there was activity on the Stamford docket at the Postal Regulatory Commission.  The Postal Service filed a motion to dismiss the appeal on the closing on the grounds that it was premature since the post office had closed for an emergency suspension, not a final determination.  The PRC will probably dismiss the appeal, but the case raises important questions about why the post office closed in the first place, and one hopes that they will be addressed before the Commission decides what to do.

Yesterday’s ruling granting the preliminary injunction on the NEPA issue, without requiring a large bond, was a huge victory for CAM, the Collaborate, and their attorneys.  The Collaborate has been fighting the sale of historic post offices across the country, from Berkeley to the Bronx, and its executive director Jacquelyn McCormick has been working tirelessly on the fight, networking impacted communities and fundraising for legal fees.

There’s more background on how the lawsuit came to be, here, and on the curious case of why the Atlantic Street Station was closed, here.  For more about what happened yesterday, read on.

 

The Complaint

The Complaint by CAM and the Collaborate sought a temporary restraining order and a preliminary injunction blocking the sale based on five causes of action:

(1) The Postal Service has failed to follow the requirements of the National Environmental Protection Act (NEPA), which requires the preparation of an environment impact review.

(2) The Postal Service has failed to follow the requirements of the National Historic Preservation Act (NHPA).

(3) The Postal Service has failed to satisfy the requirements of the Public Trust doctrine, which can “prevent the government from alienating the public right to access navigable waters and natural resources.”

(4) The sale unlawfully discriminated against CAM in violation of 39 U.S.C. 403(c), which prohibits the Postal Service from showing “any undue or unreasonable discrimination among users of the mail.”

(5) The post office was closed in violation of 39 U.S.C. §404(d), which governs the closing of post offices, because the Postal Service did not give adequate notification to customers, hold a public meeting, send out surveys, and adequately consider the effect of the closing on the community.

In granting the request for a preliminary injunction yesterday, the Court addressed the first two of these counts.  The fourth cause was addressed in a separate ruling on the lis pendens, as discussed below.  The third and fifth causes are of considerable significance, but the Court did not discuss them in yesterday’s ruling.  We’ll start with NEPA, since it’s the cause that became the grounds for granting the preliminary injunction and it’s the part of the ruling that may have the most far-reaching effects.

 

The NEPA issues

NEPA requires federal agencies to review the environmental impact of major actions that have a significant effect on the quality of the human environment.  The agency is supposed to prepare an Environmental Impact Statement (EIS) that considers all the potential impacts; in some cases, a more limited Environmental Assessment (EA) may be sufficient.

In order to reduce the burden on agencies, there are certain “categorical exclusions” or categories of actions that do not, individually or cumulatively, have a significant environmental impact and therefore do not require an EIS or EA.

The Postal Service has adopted a categorical exclusion that exempts the disposal of its properties from the environmental review process when the disposal doesn’t involve an increase in pollution.  In the Stamford case, the Postal Service argued that the sale of the building was categorically excluded from NEPA review because Mr. Cappelli’s planned use of the property would have the same general environmental impacts as when the property was active as a post office.

The plaintiffs, on the other hand, argued that the categorical exclusion was inapplicable because the Postal Service had not evaluated the impact of a high-rise apartment building.

The Postal Service also argued that it did in fact conduct an environmental review of sorts.  Back in 2010, it hired a consultant (Apex Companies) to do a report “to determine whether conditions are present at the Site, which may pose a risk of potential environmental liability.”  Apex determined that the Postal Service’s categorical exclusion applied in this case.

The plaintiffs, however, argued that the Apex Report was done in 2010 during a different attempt to sell the building, before the  Cappelli sale was contemplated, and it did not encompass his plan to tear down a portion of the building and construct a high-rise.

The Court determined that while the categorical exclusion was subject to a standard “highly deferential” to the federal agency (i.e., the courts should stay out of it), this does not mean the courts must always defer, especially when the agency has failed to consider an important aspect of the action.

In this case, said the Court, “Even under this deferential standard of review, USPS’s application of the categorical exclusion cannot be squared with common sense….  It strains logic to understand how the construction of two high-rise residential apartment buildings would ‘have generally similar environmental impacts’ as the day-to-day use of the property for an already-constructed post-office.”

Moreover, because the 2010 Apex Report did not clarify what the new owner of the post office planned to do with the property, there’s no basis, said the Court, for considering the report to be an adequate review for “the extensive plans for development contemplated by Cappelli.”

The Court did not mince words about the Postal Service’s case: “USPS’s bald and seemingly illogical assertion that ‘the intended use of this Property following disposal will have the same general environmental impacts as the Property has had during the Property’s operations as a USPS facility’ was completely unsupported by any evidence before the agency and implausible, and thus, arbitrary and capricious.”

The Postal Service also argued that it would be “unreasonable” for the Court to require it to consider the specific development plans of the buyer.  The Court wasn’t buying this argument either because it contradicts “the plain language” of the categorical exclusion, which requires the Postal Service to consider “reasonably foreseeable” uses of the property after the sale.

The Court thus concluded that the “Plaintiffs have demonstrated that they are likely to succeed on the merits of their NEPA claim.”

In order to grant a preliminary injunction, however, the Court also needed to consider whether the Plaintiffs would suffer “irreparable harm.”  The Court said, yes, they would, and it explained why: “While the injuries cited by Plaintiffs are not classic environmental harms, undoubtedly NEPA includes the ‘protection of the quality of life for city residents,’ and that could include effects that are ‘aesthetic, historic, cultural, economic, [and] social.’”  Tearing down part of the building and building two high-rise apartments clearly represent “irreparable” harm in that they can’t be undone.

Because the Plaintiffs are likely to succeed on the merits and because they could suffer irreparable harm, the Court decided to grant the request for a preliminary injunction.  That left the issue of the bond.

 

The bond

The Postal Service has argued that it would suffer financially if the sale falls through as a result of the Plaintiffs’ legal actions.  It has even threatened, in not-so-veiled language, that it might counter-sue to regain what it loses.  The Postal Service has cited $20,000 in administrative costs, another $20,000 for what it will need to go through with a new buyer, and the losses it will incur if the new deal is for a sum less than what Mr. Cappelli is paying ($4.3 million).

At first, it seemed as if the Plaintiffs might be required to post a bond as large as $4.5 million.  The Postal Service subsequently sought a bond of “at least $1 million.”  As part of yesterday’s ruling, the Court decided that the Plaintiffs didn’t need to post any bond at all.  As the Court stated, “There is a strong public interest in ensuring that USPS complies with its NEPA obligations here and in any future sales of its other properties.  Moreover, any purported harms that it will suffer as a result of preliminary injunctive relief are of its own making in failing to comply with NEPA.”

That’s not the last word on this issue, but in granting the request for a preliminary injunction, the Court has stopped the immediate sale of the building.  As a “remedy,” the Court said that it is up to the Postal Service to determine what steps it must take to come into compliance with NEPA.

The next chapter of this story will be told in November.  The parties have been directed to submit reports outlining their proposed schedule for producing the administrative record in order to determine whether a permanent injunction should be issued or the temporary injunction removed.  A meeting with the judge is set for November 12

 

The NHPA issues

While the plaintiffs prevailed on the NEPA issue and the matter of the bond, the argument on NHPA grounds did not succeed.  The Court found that while there were issues with the way the Postal Service had dealt with the requirements of the NHPA, “given the deferential standard of reviewed owed to the agency, Plaintiffs are not likely to prevail on the merits of the NHPA claim.”

Section 106 of the NHPA requires federal agencies to “take into account the effect of [any] undertaking on any district, site, building, structure or object that is included or eligible for inclusion in the National Register.”  NHPA regulations require an agency to consult with state historic preservation officers (SHPOs) and to assess the effects of a project on historic properties.

An “adverse effect” exists when “an undertaking may alter, directly or indirectly, any of the characteristics of a historic property … in a manner that would diminish the integrity of the property’s location, design, setting, materials, workmanship, feeling, or association” (36 CFR 800.5(a)(1)).

The Postal Service made several claims in its opposition to this argument.  First, it said that it does not believe Congress intended for NHPA to apply to its disposal of property and it is essentially exempt from the statute and complies only on a “voluntary basis.”  The Postal Service also contended that “the only undertaking” at issue was the transfer of title, which does not alter the historic attributes or architecture of the building.  Hence, the sale is not an undertaking covered by NHPA, so the Postal Service has no obligations under the act.

Even though the Postal Service says it’s not obligated to follow NHPA in this case, it claims to have done so anyway.  It consulted with the SHPO, who agreed to the view that the Preservation Covenant governing the future of the older part of the structure would result in “no adverse impact on this historic nature of the building.”

The Court said that this seemed at odds with the SHPO’s earlier determination (back in 1997) that the proposed development would constitute an adverse effect, but the Court would only say that the resolution of adverse impacts would require additional procedural steps aside from consultation with the SHPO, such as consultation with the National Council on Historic Preservation and the solicitation of public comment, which apparently never happened.

In spite of these concerns about inadequate consultation and adverse impacts, the Court ruled the Postal Service had taken steps to minimize the impact on the structure through the Preservation Covenant, and that was sufficient, given the “deferential standard of review owed to the agency.”

 

Ruling on the lis pendens

When CAM and the Collaborate filed their Complaint on September 25, they also filed a notice of lis pendens.  That means “suit pending,” and it’s a legal notice securing a plaintiff’s claim on a property that’s a matter of litigation.

As discussed above, there were five causes discussed in the Plaintiff’s Complaint, and the parties agreed that only the fourth — that CAM had been discriminated against when the Postal Service made a deal with Mr. Cappelli — was relevant to this issue.  Here’s the background.

CAM was initially the highest bidder when the Postal Service put the post office on the market in 2012, but CAM ran into difficulties coming up with the money.  It tried to negotiate a purchase agreement with the Postal Service that was contingent on arranging the financing and that included a reasonable down payment and a year to raise the money, but the Postal Service said it would accept only a noncontingent agreement, so it declined CAM’s offer and turned to Mr. Cappelli, who had submitted the second-highest bid.

CAM argues that the Postal Service offered Cappelli the opportunity to purchase the building at a lower price and with a contingent offer allowing the purchaser one year to look for tenants and financing.  The Complaint argues, therefore, that the Postal Service discriminated against CAM by giving Cappelli a deal on “much more favorable terms than it was willing to grant CAM.”

In order to make this argument, the Plaintiffs cited 39 U.S.C. 403(c), which provides that the Postal Service shall not “make any undue or unreasonable discrimination among users of the mails, nor shall it grant any undue or unreasonable preferences to any such user” in “providing services and establishing classifications, rates, and fees.”

While the Plaintiffs’ argument probably involved a rather novel interpretation of 403(c), which normally comes up in disputes among mailers about rate issues and the like, the Court’s ruling did not hinge on the meaning of the statute.  Rather, it was about whether or not the Court had jurisdiction over an issue involving Section 403(c).

The Postal Service cited 39 U.S.C. 3662, which states that anyone“who believes the Postal Service is not operating in conformance with the requirements of the provisions” of various sections of Title 39, including 403(c), “may lodge a complaint with the Postal Regulatory Commission in such form and manner as the Commission may prescribe.”

Citing several precedents on the issue, the Court determined that 3662 means not simply that a postal customer may complain to the PRC; it means that such complaints should be filed with the PRC.  The Court determined that it therefore lacks jurisdiction over CAM’s claims regarding discrimination.

 

The Motion to Dismiss the PRC appeal

While the Court’s ruling on the request for a temporary injunction was the big news on Stamford yesterday, there was also an interesting development in the progress of the PRC appeal on the closing of the post office. The Postal Service filed a motion to dismiss the appeal and an opposition to the petitioner’s “application for suspension of the final determination.”  The motion to dismiss contains a couple of exhibits that shed additional light — as well as raising more questions — about what happened in Stamford.

Perhaps the most basic question involved with the closing of the Atlantic Street Station is why the post office closed to begin with.  The Postal Service has now offered three different explanations.

When it first announced the closing on September 18, 2013, in a press release and a notice to customers, the Postal Service cited the sale of the building and problems finding a suitable new location. As documents filed with the Court have revealed, the closing date on the sale was to be September 25 (or 27), so the closing of the post office was announced a week before the sale.  The Postal Service has been searching for a new location at least since December 2012, when it signed the sales agreement with Mr. Cappelli, but to no avail, so Atlantic Street Station customers have been advised to use the West Avenue post office and other postal facilities and authorized providers in the area.

On September 25, the plaintiff filed their complaint in District Court, and in responding, the Postal Service came up with a second explanation for why the Atlantic Street Station had closed — an emergency suspension over safety concerns.

Stamford postmaster Jeffrey Salamon filed an affidavit with the court explaining the post office was closed “to protect the health and safety of the postal employees at the Atlantic Street Station.”  Mr. Salamon states that on August 30 he contacted USPS Safety Specialist Anthony Basso II to request a special safety inspection.  The inspection, which took place on September 4, revealed potential risks to employees posed by lead paint, plaster falling off the wall, no warm water in the break room, and other problems.  On the basis of this report, Mr. Salamon says he consulted with other postal officials and then on September 20 “coordinated the move of all postal operations and employees out of the Atlantic Street Station.”

In the Motion to Dismiss filed yesterday with the PRC, the Postal Service includes District Manager Kimberly Peters’ “Notice of Post Office Emergency Suspension.”  It offers what amounts to a third explanation for the closure of the post office.

The document is dated October 1, 2013, some ten days after the post office was closed.  Here is DM Peters’ explanation for the suspension:

“As the sale advances and the conditions decline on this facility, there are no suitable temporary alternate quarters currently at this time in the community.  By moving to a temporary alternate location by far offsets the cost to the repairs needed on this facility.  We will continue to explore all of our alternatives to find a new location to provide customer with full postal services within the immediate area.”

This notice of suspension does not mention any safety issues, and there’s nothing about a threat to the health of postal workers.  Instead, like the original explanation for the closure, it cites the impending sale, and while it mentions the declining conditions of the building, this seems to more a matter of costs than safety — closing the office and relocating services would be less expensive than making the repairs.

Considering that the building was about to be sold, it makes sense that the Postal Service would not want to put money into repairs.  It has been avoiding these expenses for years, and the condition of the building has been steadily declining as a result.  But avoiding the costs of repairs is a much different explanation than protecting the health and safety of employees.

The Postal Service has thus offered three explanations for the closure — the advancing sale of the building, concerns for the health and safety of employees, and the cost of making repairs.  The Postal Service’s Motion to Dismiss explains that “the September 18, 2013 notice and customer letter incorrectly identified the justification for suspending retail operations.”  But the Postal Service offers no explanation for what it now characterizes as an “inaccuracy,” and it has yet to explain the inconsistencies among these three different rationales for the closure.

 

Questions about the closure

The Postal Service’s Motion to Dismiss states that the agency had made a lease arrangement with Mr. Cappelli allowing it to remain in the building for another 30 months after the building changed hands in September 2013.  According to the leaseback agreement, the Postal Service could stay put until March 24, 2016, for $120,000 a year in rent.  There are also some provisions about finding suitable alternative location for the post office in the sales agreement.  It appears, then, that the post office could have remained open, even though the sale was going forward.

This helps substantiate the Postal Service’s claim that the post office closed over building conditions, not the impending sale.  But if that’s the case, why does the Notice of Suspension begin by referring to the advancing sale of the building?  Why would the impending sale be relevant to the suspension if the Postal Service had a lease allowing it to rent back the space until March 2016?

The chronology of events raises other questions about what happened in Stamford.  Many of these questions are discussed in this previous blog post, but now there are more to consider.

The first press release announcing the closure, the one that cited the sale of the building, was dated September 18. The post office closed on September 20.  On September 25, the Postal Service and Mr. Cappelli signed the lease giving the Postal Service the option of remaining in the building; the agreement mentions the existence of asbestos, lead paint, and mold.  The District Manager’s notice of suspension is dated October 1; it indicates that the postmaster was officially notified of the suspension on September 24.  Included as an exhibit with the Motion to Dismiss is a letter to customers intended “to clarify the status of the Atlantic Street Station.”  This letter, which cites the “severe deterioration of the building” as the true cause of the closure, is dated October 18; the motion to dismiss says it was posted on October 11.

Why was all the paperwork on the suspension done after the post office was closed?  Why was the postmaster who closed the post office notified of the suspension after he closed the facility?  Why did the Postal Service sign a lease to remain in the building on September 25, five days after it had closed the post office for the emergency suspension?  Why was the letter to customers posted a week before the date on the letter?  Why did it take from September 18 to October 11 (or October 18) to tell customers the “real” reason for the closure?

Overall, it’s still unclear why the safety inspection was ordered just a few weeks before the closing date on the sale, why conflicting explanations for the closure have been offered, and why the condition of the building, which was known to be “declining” and “deteriorating” for a long time, should become so serious so quickly as to require an emergency suspension at all.

The CAM-Collaborate coalition may have succeeded in stopping the sale of the Stamford post office, but un-doing the closure of the post office may be even tougher.  The “application for suspension of the final determination” asks the Commission to tell the Postal Service to keep the post office open while the appeal is heard.  Conceivably, the Commission could direct the postal Service to do exactly that.  But with the building closed for safety issues, that’s not likely.  Most likely, the Commission will simply dismiss the appeal as premature.

There may be an innocent explanation for how and why this emergency suspension took place, but the Postal Service has yet to provide one.  Hopefully the PRC will ask some questions of the Postal Service and not simply dismiss the appeal out of hand.  The Postal Service may not have issued a final determination to close the Atlantic Street Station, but it has clearly closed the post office and determined that it will remain closed permanently.  That’s about as final as it gets.

(Photo credits: Atlantic Street Station at top; b&w photos of the Stamford PO from back in the day.)

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