Lawyers for opponents of the Atlantic Yards development in Brooklyn and the Empire State Development Corporation headed back to court yesterday in a case that casts new doubts on how the state uses its eminent domain powers. A lower-court judge has already issued a ruling that implies the state and the developer, Forest City Ratner, were a little too close for comfort. Now an appeals court has taken up the cause.

Develop Don’t Destroy Brooklyn, a group opposed to Forest City Ratner’s plan to build a sports arena, commercial center, and residential complex atop an MTA rail yard and adjacent properties, cried foul when one of the lawyers the ESDC, itself a state agency, hired to guide the proposal through the environmental review process turned out to have been on the developer’s payroll before, working on other aspects of the same project. It certainly seemed on the incestuous side, and Judge Carol Edmead, agreed, ruling that the lawyer, David Paget, could not continue representing the ESDC. That ruling was on appeal yesterday.

The debate hinges on Mr. Paget’s involvement in aspects of the environmental review process on the project, but it has broader implications than that. During arguments before Judge Edmead, lawyers for both the ESDC and Forest City Ratner argued that Mr. Paget could not have a conflict of interest in working for both because the two had a “collaborative” relationship. In other words, the state and the developer were starting from the premise that they are on the same “side” of this issue.

The ESDC also happens to be the agency responsible for invoking eminent domain when developers want to oust property owners for the sake of building shopping malls or factories or, in this case, a sports arena, commercial center, and residential complex. The environmental review process on which ESDC and Forest City Ratner purport to be “collaborating” will affect future eminent domain proceedings on the project site because the people conducting such a review have broad scope under New York law to find the kind of vaguely defined “blight” that would allow the state to seize property from a group of owners who have vowed to fight the project.

The law envisions an arm’s length relationship between the ESDC and private developers. The ESDC is always in a bind. Its mission is to foster economic development, but as an arm of government it also has a responsibility to look out for the interests of all citizens. So it must always work with developers, sometimes going so far as to seize private property on their behalf, but not work too closely with them.

Judge Edmead ruled that the agency crossed that line in this case, becoming too chummy with the developer at the expense of the people of New York. Time, and an appeals court ruling, will tell whether her legal reasoning passes muster under the state’s laws and constitution. It’s not too soon to observe that the case is important more for what it says about the process than for any of the particulars. Mr. Paget is a respected lawyer who has practiced environmental law for three decades, and the ESDC believed it was within bounds to retain him even after he had worked for Forest City Ratner. But that is the problem. The ESDC thought so because it thinks it is collaborating with a private developer. If that is true, no one’s property is safe. Regardless of the outcome of this appeal, New Yorkers have good reason to look at this case and ask, who’s looking out for us?