"This action represents important public policy concerns and is essentially local in nature," Levy wrote. "The state's interest in adjudicating this case in its own forum outweighs the federal interest in retaining jurisdiction."

The plaintiffs' lawyers now have two weeks to file objections to keep the case in federal court. The case was brought by 13 property owners facing eviction.

"We're disappointed found a basis to recommend dismissal," said Candace Carponter, a member of the opposition group Develop Don't Destroy Brooklyn. The project calls for an arena for the NBA's Nets and 16 towers with residential and commercial space. Construction began Tuesday.

While opponents fear the project will create a traffic nightmare and ruin the neighborhood's character, supporters say the project will be a boon for Brooklyn and the city.