Riverhead bounds toward victory in EPCAL fight

The Town of Riverhead scored a major legal victory in its long-running battle with Calverton Aviation & Technology (CAT) after a state Supreme Court judge tossed out 16 of the developer’s 17 claims over the canceled sale of land at the Enterprise Park at Calverton.

Justice David Reilly issued the Feb. 27 ruling in Suffolk County Supreme Court, dismissing the breach-of-contract and fraud claims while allowing one tortious interference claim to proceed.

Riverhead Supervisor Jerry Halpin called the judge’s decision a “win for the Riverhead taxpayers.”

“The 1,643-acre EPCAL property belongs to the Riverhead taxpayers and is literally our most valuable real estate asset,” Mr. Halpin said in a statement. “I look forward to exploring all ideas — big and small — and hearing from taxpayers about what they think would be the best fit for the future of EPCAL.”

CAT alleged Riverhead Town was aware that, under the Preliminary Agreement, the Riverhead Industrial Development Agency was required to conduct an assessment of CAT’s financial resources. The developer claimed in the lawsuit that town officials “interfered with RIDA’s assessment, both publicly and privately, which directly contributed to RIDA violating its own required processes and baseless finding that CAT’s financial wherewithal could not be determined based on the information received,” according to court records.

“This Court has previously dismissed plaintiff’s claims against RIDA as to its failure to follow legally prescribed processes for its review of CAT and the project,” Judge Reilly wrote. “Nevertheless, interference can sometimes be a sublime connivance within a proper process to achieve a specific outcome. Here, the Court finds that the plaintiff has adequately pled its claim for tortious interference and the Town’s motion to dismiss is denied.”

CAT, headed by Triple Five Group, sued the town and Riverhead IDA in 2024 after the town canceled its 2018 contract to sell CAT 1,643 acres at EPCAL for $40 million.

The agreement of sale was approved by the outgoing Town Board in December 2017, as then-supervisor Sean Walter and former councilman John Dunleavy, both Republicans, were leaving the board. They were replaced by Democratic supervisor Laura Jens-Smith and Democratic councilwoman Catherine Kent.

The Town Board voted 3-2 in November 2018 to approve the sale, split along party lines. Both CAT and the town agreed to file a joint application before the Riverhead IDA in 2022 to determine whether CAT had the financial ability to carry out the project.

The Riverhead IDA denied CAT’s request for tax incentives in October 2023, citing its failure to adequately demonstrate the financial viability for the project.

Riverhead residents living in neighborhoods surrounding the Enterprise Park at Calverton put pressure on town officials for over a year to abandon their plan to sell the EPCAL land amid fears that the developer planned to build an air cargo hub there. CAT officials had insisted repeatedly and publicly that they never intended, nor had any future intention, of building a cargo jetport. 

Nonetheless, the Town Board voted unanimously to cancel the $40 million contract in 2024.

Mr. Halpin thanked town attorney Erik Howard and his office for successfully navigating town officials through this case. Mr. Howard recognized attorneys Glenn Gruder, Jarrett Behar and Rebecca Sklar from the firm Certilman Balin for their efforts and representation of the town.

“I am very pleased that the Court eliminated CAT’s poorly constructed claims,” Mr. Howard said in a statement. “Although one of CAT’s 17 claims survived the motion to dismiss, dismissal of the other 16 claims substantially limits the path to any of the relief sought by CAT. I look forward to further defending the town on the sole remaining claim and hope to achieve a swift resolution.”

Attorneys for CAT alleged in the lawsuit that Riverhead Town officials engaged with the town’s Community Development and Industrial Development agencies in a “scheme to evade Riverhead’s binding contractual obligation to sell 1,643 acres at the EPCAL property in Calverton to CAT,” the Riverhead News-Review previously reported. The developer also claimed town officials were motivated by campaign politics, and the Town Board pressured the Riverhead IDA to deny its pending application approval.

Judge Reilly stated that Riverhead Town and its Community Development Agency “had a clear right to cancel the contract after RIDA failed to issue an authorizing resolution.”

“Their action cannot be considered either a breach of contract or a breach of implied covenant of good faith,” the judge wrote in his decision. “Such a claim would be inconsistent with the terms of their contractual relationship.”

Councilman Kenneth Rothwell said in a statement shared with the Riverhead News-Review on Monday, March 2, the Supreme Court decision “restores the goal and vision for economic development at EPCAL and the U.S. Navy’s purpose of transfer to the town’s Community Development Agency in 1998.”

He said five years ago the Town Board was unable to move the “inherited” contract forward due to the “inability to legally subdivide the EPCAL property” and because it could not terminate the contract at that time.

At the request of CAT and the Triple Five Group and with their assurances of financial viability, the Town Board had agreed the IDA could assess the developer’s qualified and eligible ability to purchase the land and develop the project. However, if CAT/Triple Five was not deemed qualified and eligible, the town could terminate the contract, Mr. Rothwell said.

“The IDA determined Triple Five was not qualified and eligible. The Town Board, myself included, immediately exercised its right and terminated the contract,” Mr. Rothwell said. “As a lawsuit was then filed by CAT against the town, we took a principled stand and pursued the appropriate legal avenues to protect the town and its taxpayers.”

He added the recent court decision affirms the actions taken by Riverhead Town Board in this case.

“Although additional developments may follow, this ruling represents a significant and positive outcome for the Town of Riverhead,” said Mr. Rothwell, who plans to challenge Mr. Halpin in November for the supervisor seat. “It reinforces the importance of accountability, transparency and standing firm when the interests of our community are at stake.”

Both parties can appeal Judge Reilly’s ruling. Mr. Howard said in an email on Monday, March 2, that with 16 of the 17 claims eliminated, he expects the remaining claim will be subject to discovery, which should be narrowed significantly.

“The tortious interference claim is relatively easy to plead sufficiently in order to survive a motion to dismiss, but is difficult to prove,” Mr. Howard wrote in an email. “CAT will have to establish intentional actions by the Town designed to cause or procure breach of the contract. While their underlying Complaint cites a couple of public comments by town officials, I do not believe that will be considered sufficient to establish what they need to prove in order to be successful.”

The town attorney said he is confident the town’s special counsel will “advocate for expediency, so the Town Board can regain control of disposition of the property.” He said he plans to discuss the possibility of appealing the denial of dismissal of the remaining claim if CAT chooses to appeal the judge’s decision.

Ronald Rossi, one of the attorneys representing CAT from the law firm Kasowitz LLP said in an email on Monday that “substantial relief” remains available to CAT from the sole claim the judge did not dismiss.

“Although the court dismissed most of Calverton Aviation & Technology’s causes of action, it left in place the heart of CAT’s claim, that the town improperly interfered with CAT’s efforts to develop the EPCAL property through its undue political influence and tactics over RIDA’s process,” Mr. Rossi said. “CAT will proceed with discovery and trial on that key claim and appeal the improper dismissal of the breach of contract and other claims.”