Penn Central Transportation Co. V. New York City - Supreme Court Case - Penn Central Files Suit

Penn Central Files Suit

After the New York City Landmark Preservation Commission rejected Penn Central's proposals for construction of a high rise building atop the Grand Central Terminal, Penn Central filed suit against the city, arguing that under the New York Historical Preservation Law it was entitled to a reasonable return on the value of its property, whereas in the existing condition Grand Central Terminal could not break even and because (a) Penn Central was a regulated railroad, and (b) it was in bankruptcy, it could not cease the deficit-causing operations, thus suffering a taking of its property, for which it was entitled to compensation. The trial court agreed.

On appeal, the New York Appellate Division reversed, holding that Penn Central did not use proper accounting methods to demonstrate that it was suffering an ongoing deficit, but it afforded Penn Central no opportunity to rectify these evidentiary shortcomings on remand and retrial. On further appeal, the New York Court of Appeals affirmed the decision of the Appellate Division, but on an entirely different legal theory -- it never addressed the decision of the Appellate Division concerning proper accounting methodology. In a novel opinion that revisited some of Henry George's discredited ideas, it ruled that in New York, a property owner was entitled to a return, not on the value of his entire property, but only on that increment of its value that was created by private entrepreneurship. The court then affirmed the Appellate Division, but unaccountaly, also granted Penn Central the opportunity to try the facts that would have to underly the newly-minted Court of Appeals holding. Since this would have been impossible -- the Court of Appeals conceded that such a task presented "impenetrable denities," and would require Penn Central to separate the inseparable -- Penn Central sought review by the U.S. Supreme Court. For a detailed analysis of the New York Court of Appeals decision, see 13 William & Mary Bill of Rights Journal at pp. 722-737.

Instead of attempting that feat, that Chief Judge Breitel later (in an extrajudicial statement), likened to a search for the Holy Grail, Penn Central appealed to the U.S. Supreme Court, but on a different legal theory.