The fate and height of 200 Amsterdam Ave., a $900 million tall and thin "pencil" tower in New York City, is now in an appellate court's hands. The dispute, over a luxury high-rise condo, can be seen as the latest example of increasing clashes across the nation between developers and community activists, with the stakes unusually high in this instance.

Amsterdam Avenue Redevelopment Associates, a joint venture of SJP Properties and Mitsui Fudosan America, is appealing a New York judge's ruling in February that the developers remove 20 stories of their 55-story multifamily skyscraper. The decision apparently follows only one other similar prior take-down ruling related to zoning and permits in New York, the nation's biggest commercial real estate market.

An appellate panel heard oral arguments on the 200 Amsterdam case on Nov. 18, and it will decide if the floors must be docked from the building. Some expect the court won't render a ruling until early next year.

The developers argue the issue is moot because the tower is basically complete, that they acted legally and that the implications of the decision if it stands will negatively ripple through New York's commercial real estate industry. The project's opponents said 200 Amsterdam shouldn't benefit from what they consider a legal loophole in assembling what they call a 39-sided polygon-shaped parcel and that the building shouldn't be allowed to remain intact.

Super-tall skyscrapers have been an increasing concern in some Manhattan neighborhoods. The face-off reflects issues that transcend New York City, illustrating the growing anti-big-development sentiment in some other parts of the nation, including politically progressive cities such as Seattle and San Francisco, and the increasing power of community groups and historical preservationists.

It's also the latest case that some say reflects the waning clout of the New York real estate industry in some matters, where, in June last year, lawmakers approved an overhaul of the state’s rent-regulation rules and complaints by activists and some city officials prompted e-commerce giant Amazon to scrap its plans to open a second headquarters in Long Island City, Queens.

"If the ruling stands, it's another sign of real estate losing its influence in New York, first in the Legislature and now in the courts," said Victor Rodriguez, director of analytics for CoStar.

The developers of 200 Amsterdam, and New York's real estate industry, argue future projects in the five boroughs, areas already economically devastated by the pandemic, will be thwarted and derailed unless state Supreme Court Judge W. Franc Perry's ruling is tossed out. The city has joined in the appeal, and the Real Estate Board of New York, the Association for a Better New York and the New York Building Congress have all filed briefs in support of it.

"If the state Supreme Court's mistaken decision in this case is not reversed, it would set an extremely dangerous precedent threatening as-of-right construction activity throughout New York City," REBNY President James Whelan said in a statement to CoStar News. "As our city continues to confront an unprecedented economic crisis, the last thing we need right now is to see a specious lawsuit reverse a nearly complete project and undermine the development community's long-term faith in the city's regulatory framework."

In legal filings, SJP Properties and Mitsui Fudosan also argue, if the decision isn't overturned, developments now under construction and existing buildings, including the landmark MetLife Building at 200 Park Ave., could be impacted and forced to downsize. The 200 Amsterdam developers also said they would have to pay untold millions of dollars to remove 20 floors of their tower if Perry's ruling is allowed to stand.

The Municipal Art Society of New York and the Committee for Environmentally Sound Development, which successfully sued over 200 Amsterdam, are opposing the appeal. They claim the condominium tower is out of place in its Upper West Side neighborhood, blocks sunlight and is too large for the site. In court filings, the two groups repeated their allegation that the developers engaged in illegal zoning "gerrymandering" in order to secure the rights to develop the high-rise.

When Perry rendered the ruling that's now being appealed, Olive Freud, president of the environmental committee, said, "This decision will be a signal to the development industry that the days of flouting the zoning code in search of greater heights and bigger profits is over."

In documents the Municipal Art Society and committee filed opposing the appeal, they disputed the claim that if Perry's ruling is left standing it will put a "chill" on New York development.

SJP Properties and Mitsui Fudosan have invested a lot of money in 200 Amsterdam. In 2015, the joint venture acquired the project's site for $275 million. The developers in legal papers said they have paid more than $355 million for the land, design, pre-construction and construction costs. And they've executed contracts that commit them to spend $540 million for the building, for a total of $895 million on the development. The 668-foot-tall tower is 55 stories, with 51 of them residential.

The developers took a fairly common strategy that their peers have used in New York to secure permits from the Department of Buildings for their thin, pencil-like tower. The developers assembled a collection of connected parcels on the project's block and secured development rights from some of them to create a single zoning lot. That zoning lot included partial tax lots, which Perry later ruled was illegal.

"On the merits, the trial court rejected the single theory on which the developer's argument depends — that the statute permits it to form a zoning lot by cobbling together irregular pieces of neighboring tax lots, and then exploiting their unused development rights," Richard Emery, the attorney for the Municipal Arts Society and the environmental committee, wrote in an appellate brief. "It does not. And no example better illustrates the hazards of that theory than the zoning lot here — a 39-sided polygon that resembles a child's early experiments with Etch-a-Sketch."

While New York developers have long used assemblages to win city approvals for towering buildings in the past, SJP Properties and Mitsui Fudosan took that strategy to a "new extreme," even "including 10-foot-wide easement strips, and merged them into one building lot, which allowed the tall building," said Barry Hersh, a clinical associate professor at New York University's School of Professional Studies Schack Institute of Real Estate.

"Over the years there have been a number of these super high-rises that evolved with transfer-right assemblages," Hersh said. "This one went a step further."

The city building department issued a permit for 200 Amsterdam in 2017. The permit's approval hinged on the department's 40-year-old interpretation of an ambiguous municipal definition of a zoning lot, with a 1978 memorandum offering guidance on the issue saying developers could incorporate partial tax lots into assemblages for projects, which is what SJP Properties and Mitsu Fudosan did.

The case has pinged back and forth for several years. The Municipal Art Society lodged a challenge to the permit's issuance with the city Board of Standards and Appeals, which upheld the permit. In the midst of that appeal, the building department issued a clarification of its zoning rules that said they couldn't include partial tax lots. The standards board didn't view the clarification as retroactive, and so therefore didn't believe it should be applied to 200 Amsterdam's permit.

The Municipal Art Society immediately went back to Perry's court to appeal that standards board decision, and the judge remanded the case back to the board in for a second review. And once again, last year, the standards board found the building permit to be legal.

The Municipal Art Society filed an appeal regarding that decision to Perry, and won. He issued a ruling highly critical of the standards board, directed the building department to revoke 200 Amsterdam's permit and ordered the developers to remove some floors, estimated at 20, from their tower.

Situations like this have happened but are not common. In New York in 1988, an appellate court ordered a developer to raze the top 12 floors of the constructed 31-story Parkview apartment building at 108 E. 96th St.

Hersh cited another case, less dramatic, involving CitySpire Center at 150 W. 56th St. in Manhattan, where a landlord made changes to a building. After the building was completed in 1987, residents who lived near it complained that it was making a loud whistling noise. The noise was coming from wind blowing through the property's dome, and the owner made adjustments to it. But at that time the city determined that the property exceeded a height limit by 14 feet. So in a kind of settlement relating to this violation, the owner agreed to provide dance studio space for the city Department of Cultural Affairs on an nearby site.

Atlanta had a case years ago where a building was about to exceed the allowed zoning height by two stories, with the structural steel in place for those floors, said Roy Black, a professor of finance at Emory University's Goizueta Business School in Atlanta. But the city obtained an injunction, and the top two stories were never permitted to be built out, he said.

The developers of 200 Amsterdam, as well as the city, in legal documents and oral arguments before the appellate panel maintained that upholding Perry's order to tear down the floors would set a bad legal precedent and create a ripple of unintended consequences on other properties.

"We identified 38 other lots around the city where there are partial tax lots," Caitlin Halligan, the developers' attorney, said at the appellate hearing, raising the issue of whether those buildings would be forced to take down some floors.

Removing floors at 200 Amsterdam would also pose a host of issues, and new costs, to SJP Properties and Mitsui Fudosan, according to attorneys for them and the city.

"The deconstruction process also would take three to five weeks per floor, result in dust, debris, noise and disruption in the surrounding neighborhood for years, and cost Amsterdam millions more," the project's developers said in a filing with the appellate court.

But Perry had the legal right to order stories removed, according to Black.

"As to whether or not the court can force the demolition, they can, they have the power to do so," he said. "I don't know how many times this has been done, but the court has the power to do that."

At the hearing, both Halligan and counsel for the city, Barbara Grace-Poller, told the appellate panel that removing the floors could endanger the safety of those who live and work near the new tower.

"There's a real risk that the surrounding neighborhood faces if a building of this size ... which is next to not just occupied buildings, condominiums, but also a handful of schools," Grace-Poller said. "It's across the street from an urgent care center and a stone's throw from a major transportation hub at 72nd Street. So there are real risks to the community if this was to be taken down."

In its brief, REBNY argued that if Perry's decision isn't vacated it will "send shock waves" through the New York real estate development industry and threaten economic development.

"First, the challenged ruling disrupts the industry's reliance on longstanding agency guidance and destroys the confidence and trust the industry has in the legal framework governing zoning regulations." REBNY said. "Second, if Supreme Court's retroactive application is affirmed, many in the industry stand to lose millions of dollars and the newfound risk of future zoning interpretations retroactively applied will dramatically increase the risks and cost of development."

Emery, the attorney for the Municipal Art Society and Committee for Environmentally Sound Development, challenged the assertions made by the developers and the city at the hearing, including their argument that the case is moot because the tower is basically built. While it's unusual for a court to order part of an existing building to be removed, there is precedent, Emery also told the appellate panel.

"They know perfectly well that the inertia is in favor of not taking down a building," Emery said. "It's a rare thing. It's happened. The Parkview case had it happen. And it's appropriate when there's an illegal permit. This case involved an illegal permit."

In a filing with the appellate court, the community groups claimed 200 Amsterdam is "uniquely out of scale" in its historic Upper West Side neighborhood and threatens its character.

"The parks, playgrounds, and other public spaces that have defined the community are now cast in shadow — not only the Sapolin Playground, only 60 feet from the tower and built specifically for children with disabilities, but also Verdi Park, four blocks away and a favorite for senior citizens," according to the filing.

Now the appellate panel must decide.

Brian Strout, a New York air rights and land-assemblage broker for development at TRIZ Advisory, said he wasn't necessarily surprised by Perry's decision telling SJP Properties and Mitsui Fudosan to take down some stories at 200 Amsterdam. Even so, developers have fared better in litigation before appeals courts than lower ones in New York, according to Strout.

"While each case has very specific and unique considerations, there has been a more recent trend of lower-court decisions, which many would say align with the ideology of the anti-development crowd, that then get overturned on appeal at the appellate level," he said.

Hersh agreed.

"I find it hard to believe that they will make the developer take down that much of the building," he said.

Meanwhile, the parties involved in 200 Amsterdam await a decision.

"We appreciated the opportunity to present our arguments to the court, alongside the city, and look forward to resolving this matter," a spokeswoman for the project's developers said in an email after the appellate hearing.