Judge Holds Bench Trial in Dispute Over Historic Post Office

SAN FRANCISCO (CN) – The city of Berkeley is discriminating against potential buyers of the Postal Service’s historic downtown post office, a lawyer for the Justice Department told a federal judge at a bench trial on Monday.

The trial is meant to settle a four-year dispute over the planned sale of the building.

“If a law has the effect of restricting would-be purchasers of government property, that law is just as unconstitutional as if the city had come right out and said that was what it was doing on the face of the law,” Justice Department attorney Julie Berman said, arguing for the Postal Service.

In September 2014, the Postal Service struck an agreement to sell the downtown post office to urban developer Hudson McDonald. That same month, Berkeley passed an overlay restricting nine parcels of downtown land, including the post office, to civic and nonprofit uses.

According to the Postal Service, Hudson McDonald backed out of the deal because the overlay had so devalued the property that the developer said it was “destroyed and worth very little.”

At a hearing on cross-motions for summary judgment in January, U.S. District Judge William Alsup said the Postal Service had all but conceded it would have to prove that the city’s overlay did more than simply interfere with the sale. He said the agency must show “total frustration” of its ability to dispose of its property and manage its resources to the point it violates the 1970 Postal Reorganization Act, which governs the disposal of unused postal property.

At the time, Alsup seemed unlikely to bring the issue to trial, but he later ordered a brief bench trial giving both sides an hour to present their best cases.

On Monday, Berman argued the city was discriminating not against the Postal Service itself, but against potential buyers of the property.

“It is unlawful for a city or state to regulate against the federal government and discriminate against the federal government and those with whom it deals,” Berman said.

She leaned heavily on Boeing Co. v. Movassaghi, in which the Ninth Circuit found a California law preventing a government contractor from selling the Santa Susana Field Laboratory site until it made the site sufficiently free of contaminants was discriminatory because it singled out the site with more stringent cleanup requirements than elsewhere. The Ninth Circuit ruled the law also violated the intergovernmental immunity doctrine because, as a contractor, Boeing was acting under the auspices of the federal government.

Berman said the Boeing case “really focused on whether the impact of the decision is falling on someone who did business with the federal government.”

Comparing it to the Postal Service, she said, “In both cases if the court examines the reality of where the regulation has its impact, it’s only on those who would do business with the federal government. Here, it’s those who would purchase this parcel.”

Andrew Schwartz, an attorney representing the City of Berkeley, disagreed, saying Boeing was acting as an agent of the government in that case, while potential purchasers of the post office are not.

“I think counsel has really distorted what that case stands for,” he said. “The overlay doesn’t regulate the federal government. It regulates private property after the government sells it, that’s it.”

Schwartz noted that the entire area subject to the overlay – a nine-parcel group of properties – was designated a national historic district in 1998.

He said the city’s ordinance doesn’t single out the post office. “It doesn’t discriminate because it treats all the properties in the Civic Center Historic District equally,” Schwartz said.

Alsup challenged Berman on the Boeing case, specifically regarding how a prospective buyer would be analogous to a government contractor.

“You’re treating a purchaser as a contractor like in Boeing, but I’m not sure a purchaser of real estate stands in the same relationship. I’ll have to think about that,” he said. “Let’s say the federal government wanted to put a porn theater in there. I think people would be up in arms, but your argument would be ‘Hey, Berkeley, you have no business telling the Postal Service how to run their post office.’ That’s what your argument is—that you can do anything you want.”

Alsup took arguments under submission.

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