The Legal Beat

The Legal Beat: Appellate Court Says HNA Must Turn Over Palisades Center To SL Green; CUPON Loses Appeal Challenging Chestnut Ridge Zoning; Regeneron Sued For Fraud

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Second Circuit Court of Appeal Affirms District Court Turn-Over Order Requiring HNA To Transfer Palisades Training Center To SL Green

The never-ending saga surrounding the HNA Training Center on Route 9W in Palisades may finally be nearing an end. HNA has been fighting tooth and nail to prevent the “turnover” of the property to an affiliate of the SL Green REIT in partial satisfaction of a $185 million money judgment secured back in 2022.

At that time, the District Court for the Southern District of New York, ordered HNA to provide SL Green with notice of any sale of property that HNA had a direct or indirect ownership interest in, and in February of 2023, HNA reported that it had a signed contract to sell the HNA Palisades property to a REVEIL, a developer working with the Town of Orangetown on a redevelopment plan. That plan proposed an updated hotel and conference center, glamping, event spaces, a working farm, test kitchens, co-working, and 20 to 30 townhouses.

Despite the court order to inform SL Green of the sale of assets, HNA failed to inform SL Green about the contract. The Court put the sale on hold and in May of 2023, the District Court entered a “turnover” order – an order compelling the HNA owners to transfer the ownership of the HNA Training Center to SL Green. HNA appealed.

The Second Circuit Court of Appeals entered an order last week rejecting HNA’s efforts to halt the turnover order. HNA made two substantive arguments. First, that as a Delaware LLC, a Delaware law that disfavors turnover orders should apply. HNA also argued that rather than a turnover order, the Court should have simply ordered a charging lien that would have channeled money to SL Green if and when HNA sold the property.

The Second Circuit disagreed, rejected those arguments, and approved the turnover order – compelling HNA to turnover its entire interest in the HNA Palisades property to SL Green. What SL Green does with the property will be the next chapter in the saga. Will it contract with REVEIL? Will it list the property for sale? Or will it redevelop it on its own and add it to its vast property portfolio? Stay tuned. The story never ends.

CUPON Loses Appeal Challenging Chestnut Ridge Zoning On Houses Of Worship

Since its incorporation in 1986 and until 2019, the Village of Chestnut Ridge’s zoning code required all places of worship to obtain a special permit for religious use and receive site planning approval from the Village’s Planning Board.

In 2017, at the urging of the Orthodox Jewish Coalition of Chestnut Ridge, the Village began the process of amending its zoning laws so that places of worship could more easily be built in Village neighborhoods, accommodating the need of Orthodox Jewish observers “to pray within walking distance of their homes.”

It took more than two years and a series of contentious meetings before the Village amended its zoning code and created three categories of use: residential gathering places, neighborhood places of worship, and community places of worship. Each category had its own use and bulk requirements, with provisions designed to accommodate the needs of the observant community.

A group of citizens and a civic organization, Citizens United To Protect Our Neighborhoods (CUPON), filed a lawsuit in federal court against the Village of Chestnut Ridge, alleging that the village violated the Establishment Clause of the First Amendment by enacting the new zoning law. Plaintiffs claimed that the new law favored religious uses over secular uses, thus violating the constitutional separation of church and state.

The United States District Court for the Southern District of New York dismissed the complaint, finding that none of the plaintiffs had constitutional standing to pursue the claim. The court determined that the individual plaintiffs lacked municipal-taxpayer, direct-harm, or denial-of-benefits standing, and that CUPON lacked associational or organizational standing. Plaintiffs appealed to the Second Circuit Court of Appeals.

The appellate court affirmed and agreed with the lower court’s decision that neither the individual plaintiffs nor CUPON had any form of standing. The case was never heard on the merits of plaintiffs’ claims. Rather, the lack of standing stood as a bar to a decision on the merits.

The appellate court found that the plaintiffs failed to demonstrate a measurable appropriation or loss of revenue attributable to the challenged activities, a personal constraint or control under the challenged law, or a denial of benefits. The court also found that CUPON failed to show that it had suffered an injury in fact that was distinct and palpable. These failures of proof precluded a full hearing on the plaintiffs’ claims.

False Claims Act Complaint Filed Against Regeneron Pharmaceuticals for Fraudulent Drug Price Reporting

The United States filed a complaint under the False Claims Act (FCA) against Regeneron Pharmaceuticals Inc. (Regeneron), the New York-based pharmaceutical company that recently acquired the former Avon Corporate Complex in Suffern for $39 million.

Regeneron manufactures and sells Eylea, an anti-vascular endothelial growth factor inhibitor approved by the Food and Drug Administration to treat Age-Related Macular Degeneration.

The complaint, filed in the U.S. District Court for Massachusetts, alleges that Regeneron fraudulently inflated Medicare reimbursement rates for Eylea by knowingly submitting false average sales price reports to the Centers for Medicare and Medicaid Services that excluded certain price concessions in the form of credit card processing fees that Regeneron paid to specialty drug distributors.

“The government alleges that Regeneron manipulated Medicare’s drug pricing process, by knowingly failing to report its payment of credit card processing fees as price concessions to its customers,” said Acting U.S. Attorney Joshua S. Levy for the District of Massachusetts. “By doing so, Regeneron greatly inflated the costs of its drug to Medicare over many years and enhanced its revenues. Falsely reported average sales prices cost the Medicare system hundreds of millions of dollars and we will make every effort to prevent such practices.”

The suit originated as a whistleblower action where private parties file an action on behalf of the United States and receive a portion of the recovery. The United States intervened and took over the case. If Regeneron is found liable, the United States may recover three times the amount of its losses plus applicable penalties.