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The Brooklyn Paper / Julie Rosenberg

Plaintiff's lawyer Matt Brinckerhoff, seen here last year, will get to make his eminent domain case, now that a state court has denied a state effort to dismiss it.

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Bruce Ratner’s Atlantic Yards mega-development suffered a legal blow on Monday when a state court refused a request by development officials to dismiss a lawsuit challenging the project’s reliance on eminent domain.

The denial of the Empire State Development Corporation’s motion to dismiss the case against the state for improper use of its condemnation power delays for at least another six months Ratner’s ability to start construction of his 16-skyscraper arena, residential and office complex at the corner of Atlantic and Flatbush avenues.

Oral arguments will be early next year.

“While the … decision to hear the case may delay the project for approximately six months, let me be clear that the project will go forward,” Ratner said in a statement.

Though Ratner downplayed the delay, opponents of the development pointed out that he recently told The New York Times that he plans to “break ground” in December, but it is unclear how he will be able to do that given that his $400-million naming-rights deal with Barclays has not been finalized, the Treasury Department is seen as increasingly unlikely to change a key rule in Ratner’s favor, public officials are balking at a recent request by Ratner for $100 million more in taxpayer subsidies, and key financing — already in jeopardy before the credit crisis — has not been lined up.

Most important, Ratner does not yet own all the land he needs.

“Ratner cannot ‘break ground’ unless New York State uses eminent domain to seize the owners’ and tenants’ properties,” said Candace Carponter, a lawyer who advises Develop Don’t Destroy Brooklyn, an opposition group to Atlantic Yards.

“The plan is now in doubt.”

The plaintiff’s case against ESDC, filed in August, argues that state officials agreed to condemn land for Ratner in a “sham” process that touted the project’s supposed public benefits as a “pretext.”

The U.S. Supreme Court declined to hear the case, so it was refiled at the state level — this time, adding in an arcane argument that some legal experts think is a “silver bullet” against Atlantic Yards: a clause in the state Constitution that bars public money from underwriting any urban renewal project unless “the occupancy of any such project shall be restricted to persons of low income.”

In its motion to dismiss the case, ESDC’s lawyers said that the constitutional clause does not apply because it was not part of the earlier federal case.

But thanks to the appellate division’s ruling on Monday, the nine plaintiff’s argument will get to be heard — though not everyone is happy about it.

“I am disappointed [by the court ruling],” said Borough President Markowitz. “I truly believe that in the current economy, Brooklyn needs the kind of investment that Atlantic Yards will bring.”

©2008 The Brooklyn Paper