California Eminent Domain Report

Stanislaus County Moving Forward with Claribel Road Project

Bernadette Duran-Brown — Thu, 23 May 2013 13:02:28 -0800

After two years of negotiating with residential property owners, the Stanislaus County Board of Supervisors approved acquisition of the property by eminent domain. The Modesto Bee reports that the board approved the acquisition of a single-family residence at its meeting on Tuesday in order to construct its Claribel Road project, which will cost the county $15.2 million. The project will widen Claribel Road from two lanes to a four-lane separated highway relieving congestion and reducing the safety concerns of the current configuration, which causes an estimated 16 accidents per year.

The wrinkle in this situation, and something we see in our practice from time to time, is that the property owners purchased the property in 2004 and it is very underwater. The county's offer of $85,000 does not come close to the $258,000 loan amount. If the owners cannot negotiate a higher value or be awarded that amount by a jury, they could be in trouble if the lender has the right to seek the full loan amount from them.

While this situation may fuel the debate about the amount a property owner should receive - the fair market value or the outstanding loan amount - the law only requires that the owner receive the property's fair market value. When faced with this situation, I have seen owners simply walk away from an underwater property being condemned, leaving the lender to its own devices to battle with the public agency over just compensation. But so far, the brave owners in Stanislaus County are hanging in there...

Temporary Regulatory Takings Do Exist in California!

Brad Kuhn — Thu, 16 May 2013 14:54:43 -0800

Given the maze of procedural and substantive hurdles involved, property owners rarely succeed with regulatory takings claims. Even when owners do win, it is yet more uncommon for courts to award damages, instead allowing the public agency to repeal the regulation. But securing a victory on liability and a damages award for a temporary regulatory taking, well, that is nearly uncharted territory (going into the realm of unicorns, the Loch Ness Monster, and other mythical creatures); we've heard stories of such events, but it is rare to find reliable documentation.

That all changed last week when the California Court of Appeal issued its decision in Lockaway Storage v. County of Alameda (May 9, 2013), holding that the County's application of a voter-approved growth control initiative resulted in a compensable temporary regulatory taking entitling the owner to nearly one million in damages and over $725,000 in attorneys' fees.

Background

In May 2000, Lockaway purchased 8.45 acres of land in Alameda County for $800,000 with the intent to build a boat and RV self-storage facility. Prior to the close of escrow, Lockaway confirmed with the County that the property could be used for this purpose. The prior owner had secured a Conditional Use Permit (CUP) in 1999 which permitted the development of a storage facility that would expire in September 2002 if not implemented before its expiration. Escrow closed in August 2000 and Lockaway assumed the rights and obligations of the seller under the 1999 CUP.

In November 2000, the Alameda County voters passed Measure D, a growth control initiative which generally prohibited the development of storage facilities in the area of Lockaway's property. Measure D included two exceptions: (i) the ordinance could not be applied in a way that would deprive anyone of their "constitutional or statutory rights or privileges;" and (ii) the ordinance would not affect "existing parcels, developments, structures, and uses," nor apply to development or proposed development which had received all discretionary permits and approvals.

Despite Measure D's adoption, Lockaway pursued its plan to develop the property and was assured by County staff that it had implemented the CUP, as required. However, one month before the CUP was set to expire, the County informed Lockaway that it would not renew the CUP and the project could not go forward without a new CUP. By then, Lockaway had spent approximately $400,000 on the project and only needed a building permit from the County to proceed with construction, which the County did not issue prior to the CUP's expiration. The County considered the new CUP Lockaway filed under protest and determined the project was prohibited under Measure D because Lockaway had not secured its building permit and commenced construction prior to Measure D taking effect. Lockaway subsequently filed a lawsuit against the County for inverse condemnation, along with a writ of mandate to force the County to allow Lockaway's project to proceed.

The Trial Court

The trial court determined that Measure D did not apply to Lockaway's project and commanded the County to issue permits so the project could proceed. Lockaway continued to pursue its inverse condemnation claim, seeking damages for a temporary regulatory taking for the 30 month delay during which the County applied Measure D and prohibited the property's development.

At trial, the court determined that the County's application of Measure D resulted in a temporary regulatory taking of Lockaway's property. Using the three-factor test provided in Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104, 115-116 -- i.e., (1) the economic impact of the regulation on the owner, (2) the extent to which the regulation interfered with distinct investment-backed expectations, and (3) the character of the governmental action, the court held that the County's conduct had a "substantial, negative economic impact on Lockaway's use of the property, had materially interfered with [its] distinct, investment-backed expectations and that its conduct could not be justified as a normal regulatory mistake." The trial court awarded damages totaling $989,640.96, comprised of lost profits, increased construction costs and interest. Lockaway was also awarded attorneys' fees amounting to $728,015.50. The County appealed.

The Court of Appeal

The Court of Appeal confirmed that Lockaway's project was not subject to the growth control initiative but instead fell within one of the Measure D exceptions since the project had secured the discretionary CUP permit, and any remaining permits were ministerial actions.

The Court also agreed that the County's actions went "too far" when considering the three-pronged Penn Central test. While the County's actions did not render the property completely worthless, the County did "unreasonably impair the value or use of the property" during the time it was enforcing Measure D. Expecting Lockaway to develop another project consistent with Measure D would have caused a substantial decrease in the value of the property; moreover, the funds devoted towards the property's development would have been wasted, and Lockaway would have been deprived of a reasonably expected return on its investment since it had always intended to develop the property for storage facilities. As such, the County had affected a temporary taking of Lockaway's property and compensation for that time period was appropriate.

The County argued that under Landgate Inc. v. California Coastal Comm. (1998) 17 Cal.4th 1006, there could be no liability for a temporary regulatory taking where a legally erroneous decision of a government agency results in a delay in the permitting process. But given more recent, conflicting authority from the U.S. Supreme Court in Lingle v. Chevron (2005) 544 U.S. 528, the Court questioned Landgate's validity, and at a minimum narrowly interpreted its application, holding that at most it could factor into consideration of a "normal delay in the permit process." That was not the case with Lockaway, as the County's "doctrinal shift" in interpreting Measure D took "the case out of the ‘normal-if-mistaken-regulatory-activity' paradigm and turns it into a taking."

Conclusion

While successful regulatory takings claims are still infrequent, there does appear to be a judicial shift towards reigning-in overreaching government regulations. The Lockaway decision is important not only because it documents the reality of liability and damages for temporary regulatory takings, but also because it highlights the court's focus on the government's conduct and whether a property owner was treated fairly during the regulatory process. Lockaway also signals the narrow applicability of the "normal delay in the permitting process" defense public agencies could turn to under the prior Landgate decision.

CTC Approves Nearly $1 Billion in Funding Local Transportation Projects

Brad Kuhn — Thu, 09 May 2013 15:38:47 -0800

The California Transportation Commission (CTC) recently announced the award of $878 million to fund 114 transportation projects. Brian Kelly, the acting Secretary of Business, Transportation & Housing Agency, stated:

This billion-dollar investment helps preserve California’s great infrastructure of the past and put thousands of Californian’s to work building something new. These investments in preservation and innovation are absolutely critical to California’s economy: In 2010, traffic congestion caused 95 million hours of delay, wasting fuel and squandering productive, economic activity.

Highlights of the funding allocations include:

City of Riverside/Riverside County Transportation Commission (RCTC) – construction of a four lane grade separation for railroad lines at Riverside Avenue ($12.1 million – Prop 1B/TCIF funds).
City of Highland/San Bernardino Associated Governments (SANBAG) – construction of a new bridge across the Santa Ana River, and re-alignment of half-a-mile of Greenspot Road with bike lanes and turn lanes ($1 million – Prop 1B/local funds).
City of Moreno Valley/Riverside County Transportation Commission (RCTC) – construction of a third lane widening in Moreno Valley from Interstate 215 near Veterans Way ($560,000 – Prop 1B/local funds).
City of Montclair/San Bernardino Associated Governments (SANBAG) –
widening of Monte Vista Avenue in Montclair, including utility relocations and sidewalk, curb and gutter installation ($180,000 – Prop 1B/local funds).
City of Palm Desert/Riverside County Transportation Commission (RCTC) –
modify the I-10/Monterey Avenue interchange ramp in Palm Desert ($2.8 million – Prop 1B/local funds).

You can find a list of all the projects receiving funding allocations here.

City of Imperial at an Impasse Over Transit Center

Bernadette Duran-Brown — Mon, 06 May 2013 09:16:20 -0800

The City of Imperial has taken the first step in pursuing an eminent domain proceeding by adopting a resolution of necessity to acquire a vacant property for its Transit Center Project. As reported by the Imperial Valley Press, the City and the property owner have been negotiating the City's purchase of the property but have reached an impasse.

While the owner concedes the project is needed in the city, he believes his property is "very valuable" and that other locations would be better suited for the Project. The City disagreed and is moving forward with acquiring the property through eminent domain. The City has been working with the Imperial County Transportation Commission on the Project for some time and has secured the Project's $1.2 million price tag in state and federal funding.

Ninth Circuit Holds Takings Case Must Proceed Through Tribal Court

Ben Rubin — Fri, 03 May 2013 07:56:32 -0800

An eminent decision out of the Ninth Circuit United States Court of Appeals is not a common occurrence. A Ninth Circuit eminent domain decision dealing with intangible property is even less common. Yet, on April 26, 2013, the Ninth Circuit took it even one step further, issuing an eminent domain decision dealing with intangible property in which the condemning authority is an Indian Tribe.

Having explained just how rare it is to see this type of decision, I now need to make a confession. While the Ninth Circuit decision arises out of an eminent domain action in which an Indian Tribe is condemning intangible property, the decision itself is actually about exhaustion. I know, big let down. Specifically, the Ninth Circuit addressed whether a non-Indian must exhaust tribal court remedies before proceeding in federal court. In this case, the Ninth Circuit answered yes. See Grand Canyon Skywalk Development v. Sa Nyu Wa, No. 12-15634 (9th Cir. 2013).

Grand Canyon Skywalk Development ("GCSD"), a Nevada corporation, and Sa Nyu Wa, a tribally chartered corporation of the Hualapai Indian Tribe, entered into a revenue sharing agreement with respect to the management and operation of The Skywalk, a glass-bottomed viewing platform suspended 70 feet over the rim of the Grand Canyon. After a dispute arose between the parties, GCSD filed a complaint in Hualapai Tribal Court to compel arbitration. While Sa Nyu Wa eventually agreed to participate in the arbitration, shortly thereafter the Hualapai Tribal Council passed a resolution codifying their right to condemn property for public use, and a second resolution authorization the acquisition of GCSD's contractual interest in the revenue sharing agreement.

GCSD responded by filing a complaint in federal court and a request for temporary restraining order enjoining the tribal court eminent domain proceedings. The district court denied GCSD's request and dismissed the action, holding that GCSD was required to exhaust tribal court remedies before seeking relief in federal court. The Ninth Circuit affirmed, explaining that because the principles of comity require federal courts to generally defer to "the tribal court as the appropriate court of first impression," a party should be required to exhaust tribal court remedies except when:

(1) an assertion of tribal jurisdiction is motivated by a desire to harass or is conducted in bad faith; (2) the action is patently violative of express jurisdictional prohibitions; (3) exhaustion would be futile because of the lack of adequate opportunity to challenge the court's jurisdiction; or (4) it is plain that no federal grant provides for tribal governance of nonmembers' conduct on land covered by Montana's main rule.

The Ninth Circuit held that GCSD failed to adequately demonstrate that any of these exceptions applied, and therefore affirmed the district court's dismissal.

Thus, it appears that the exceedingly rare takings decision, the one I built up so much in my introduction, isn't quite ripe yet. That said, since this is the closest instance of such a decision that I can recall, can you really blame me for leading with that hook?

BLM Issues Right-of-Way Application Rule In An Effort To Spark Renewable Energy Development

Ben Rubin — Tue, 30 Apr 2013 07:33:48 -0800

As reported earlier today by a number of news outlets (see for example this KCET article by Chris Clarke), the Bureau of Land Management ("BLM") will be issuing a Final Rule to facilitate right-of-way applications for lands with wind and solar energy development potential. As explained in the press release issued by the BLM, in the past

"lands included in a proposed right-of-way [would] remain open to the location and entry of mining claims while the BLM" considered the application.

However, the Final Rule, which will be published in the Federal Register, permits the BLM to temporarily segregate -- and therefore preserve lands in a pending renewable energy right-of-way application -- from mining claims. This segregation, which could be effective for up to four years depending on certain circumstances, terminates automatically if the BLM

issues a decision on the right-of-way application;
publishes in the Federal Register a notice of termination of the segregation; or
fails to take any further administrative action after the end of the segregation period.

The BLM anticipates that the application of this Final Rule will help spark the development of "environmentally responsible renewable energy on public lands."

Another Failed Regulatory Takings Claim Under Penn Central

Rick E. Rayl — Thu, 25 Apr 2013 16:45:21 -0800

We've talked in the past about just how hard it is to state a regulatory takings claim under the Supreme Court's decision in Penn Central Transportation Co. v. New York City, 438 U.S. 104. I'd go through the test and how hard it is again, but it's complicated, a lot of work and, quite frankly, I'm a bit tired today. So here's my lazy approach. Read one of our earlier posts on the subject:

The bottom line is that the courts have found myriad ways to find fault in property owners' Penn Central claims, both procedurally and substantively, with the end result being that few such claims are ever successful.

A decision last week by the Ninth Circuit continued that trend. In MHC Financing Ltd P'ship v. City of San Rafael, No. 07-15983 (Apr. 17, 2013), the Ninth Circuit reversed an earlier District Court ruling that a rent control ordinance involving a mobile home park qualified as a taking under Penn Central.

Now, I've already confessed that I'm feeling lazy today, so it may come as no real surprise that I'm not even going to tell you about the case. For that, you'll again have to turn elsewhere: The Ninth Circuit Botches Regulatory Takings Again, by Robert Thomas of the inversecondemnation.com blog. (In my defense, Robert's write up is detailed, entertaining, and informative -- far more than I would likely achieve even if I weren't lazy).

I should offer one disclaimer. Robert is decidedly slanted on the property owner's side, and does not profess to offer a balanced view of things. The title of his post may give him away in that respect. Still, when he writes

Read that again, to make sure you got it: a transfer of $97 million is not enough [to qualify as a taking under Penn Central]. Wow. Maybe this is just Marin County, and you know, a dollar doesn't go as far here as elsewhere.

it's hard not to nod your head. And yes, so we're clear in case you didn't click over to read Robert's post, the Court held that an ordinance which transferred over 80% of the property's value away from the owner -- to the tune of $97 million -- wasn't enough to qualify under the "economic impact" prong of the three-part Penn Central test.

There's a lot more to the case, and if you still haven't clicked over to read Robert's summary . . . well, clearly you aren't that interested in the case.

Project Benefits: the "Transit Premium"

Brad Kuhn — Thu, 25 Apr 2013 05:31:21 -0800

Light rail and rapid transit appear to be the hot ticket in California. Most of our right-of-way acquisition and eminent domain work over the last few years has centered on such projects. One interesting dispute that regularly pops up between the land owner's appraiser and the public agency's appraiser is whether or not there are "project benefits". In analyzing the property's "before-condition" value, such benefits need to be excluded (whether positive or negative). (See Code Civ. Proc., sec. 1263.330.) But when assessing the property's "after-condition" value in the case of a partial acquisition, such project benefits should be included and can offset severance damages. (See Code Civ. Proc., secs. 1263.410 and 1263.430.) So in the case of rapid transit, are there any benefits from being located near transit stations? According to a recent study, the answer is yes.

The American Public Transportation Association, the Center for Neighborhood Technology and the National Association of Realtors recently studied the beneficial impacts of transit-oriented development by analyzing home values in San Francisco, Phoenix, Boston, Chicago, and Minneapolis-St Paul between 2006 and 2011. What they found was that homes closer to public transit performed 42 percent better (in terms of resilience of property values) than those further away.

Price resilience was highest for properties near transit stations with the most connections and most frequent service. Interestingly, housing type (apartment, single-family, townhouse etc.) had no impact on the study, with the results holding true across all property types. Residents in a “transit shed” (within a half a mile of selected transit) also had “better access to jobs and lower average transportation costs” than the study area as a whole.

The full text of the report is available on the American Public Transportation Association website, and it is probably something that can be considered by appraisers when analyzing potential project benefits.

Legislative Amendment to California's Loss of Business Goodwill Statute?

Brad Kuhn — Sat, 20 Apr 2013 13:46:18 -0800

California's loss of business goodwill statute, Code of Civil Procedure section 1263.510, provides that before a business can submit its goodwill claim to a jury in an eminent domain case, the business must first demonstrate that:

The loss is caused by the taking;
The loss cannot be prevented by relocation or other reasonable mitigation efforts; and
The loss will not be covered through another form of compensation, such as relocation benefits.

In late-2012, the California Court of Appeal issued a decision in People ex rel. Dept. of Transportation (Caltrans) v. Dry Canyon Enterprises, in which the Court crafted a fourth preliminary goodwill entitlement finding for the judge: a determination of whether the business possessed any business goodwill to lose. Apparently, the Legislature feels it is appropriate to set the Court's finding in stone, as Assemblyman Wagner recently introduced AB 374 which seeks to amend section 1263.510 to add language requiring the business to "adduce sufficient evidence to permit a jury to find that goodwill existed prior to the taking."

The question is, why? Was the Dry Canyon opinion not clear enough? Even stranger, as we noted when we first reported about the opinion, this was already the law -- at least in our view. Specifically, one of the statutory requirements is that the owner prove that it has lost goodwill as a result of the project; in order to conclude that the owner lost goodwill, it would seem that the court already had to decide that goodwill existed in the first place.

Nevertheless, we'll follow AB 374, and we'll let you know if it becomes law -- in which case some new (and arguably superfluous) language will be added to California's loss of business goodwill statute.

Disclaiming Eminent Domain Defendants: To Dismiss or not to Dismiss?

Rick E. Rayl — Fri, 19 Apr 2013 09:32:00 -0800

Recently, we came across an interesting request from an attorney for a condemnee. The condemnee had filed a Disclaimer in the eminent domain action, stating that they had no interest in the property being condemned. This, from our experience, is typically where things end.

But the attorney asked that we proceed to dismiss the disclaiming party. I had not heard of this before, and it seemed an odd request. The attorney assured us, however, that this is common practice in that attorney's work. More importantly, the attorney almost always represents public agencies; in other words, the attorney's statement that they do this as a matter of course when on the agency side warranted some consideration.

We thought about it for a while, but couldn't get past one fundamental problem. If the disclaiming party is dismissed, they will not appear in the Final Judgment and will not appear in the Final Order of Condemnation that gets recorded -- and that effects the actual transfer of title.

To me, that is a big problem. While we certainly do not want to burden a defendant who has filed a Disclaimer, we also want to make sure that we obtain clear title on behalf of our agency clients. A dismissal could theoretically call that into question, especially if it turns out that the dismissed party really did have an interest in the property.

It actually is not all that uncommon that a defendant with an actual interest disclaims. It may be a decades-old, unused easement interest. It really exists, but likely has little to no value and the defendant has no interest in participating in the litigation. But at the end, the agency certainly wants its Final Order to wipe out that easement.

The bottom line is that after discussing it internally, we concluded that a dismissal is not warranted, even where a defendant disclaims.

Our advice in such situations: the agency and defendant should reach an agreement to remove the defendant from the service list. On the one hand, the defendant will have no further participation in the lawsuit, and will not be bothered by the barrage of filings that will occur, especially if the matter proceeds to trial. On the other hand, the agency will still be able to include the disclaiming defendant in its judgment and Final Order, ensuring clean title.

Condemn Now, CEQA-Compliance Later? OK. Maybe....

Brad Kuhn — Thu, 18 Apr 2013 20:06:45 -0800

Acquiring property for public projects typically does not occur until after the project has received environmental approval. While this is the generally accepted rule – and it makes sense for a number of reasons – must a project receive environmental clearance before an agency may begin the property acquisition process? In a recent published decision, Golden Gate Land Holdings, LLC v. East Bay Regional Park District, the California Court of Appeal answered no, and permitted an agency to proceed in reverse order: filing an eminent domain action prior to its complying with the California Environmental Quality Act ("CEQA").

Will this method work in most circumstances? Probably not; the Court's holding appears limited given the unique circumstances involved. Should public agencies adopt this strategy moving forward? Not without fully understanding the risks. Should property owners give up on challenging right-to-take in an eminent domain action when an agency fails to follow environmental laws? Not if there is a real advantage to be gained if such an opposition is successful.

Background

As part of developing the San Francisco Bay Trail Project, a 400+ mile recreational corridor intended to encircle the San Francisco and San Pablo bays, the East Bay Regional Park District sought to acquire about 7.5 acres from Golden Gate Land Holdings. The District offered $1.686 million for the property, and after no agreement could be reached, the District held a hearing to consider the adoption of a resolution of necessity to authorize eminent domain proceedings.

At the hearing, Golden Gate objected to the adoption of the resolution of necessity due to the District's failure to prepare an Environmental Impact Report ("EIR") to analyze the project and its environmental effects in compliance with CEQA. The District, over Golden Gate's objections, determined the project was exempt from CEQA pursuant to CEQA Guidelines, section 15325, which provides an exemption for transfers of property in order to preserve open space, habitat, or historical resources. The Board concluded it was sufficient to rely on a feasibility study commissioned to determine the best alignment for the Bay Trail segment.

Golden Gate's Petition

Shortly after the District's adoption of the resolution of necessity, Golden Gate filed a petition for writ of mandate and complaint for injunctive relief, asserting the District had violated CEQA and the eminent domain law. In response, the District asserted the notice of exemption under CEQA only applied to the acquisition of the property -- not the construction of the Bay Trail, and that as such there was no basis to halt the District's acquisition of the property. The District also proceeded with filing its eminent domain action.

The Trial Court's Decision

The trial court partially granted Golden Gate's petition for writ of mandate, concluding (1) the District had approved a project that included both the proposed property acquisition and the proposed trail improvements, (2) the District's resolution erroneously concluded the project was exempt from CEQA compliance, and (3) while some authority suggests CEQA review must be completed before an eminent domain case is initiated, that approach was unpersuasive in this case.

The court allowed the District to move forward with its eminent domain action, but required it to vacate the resolution's conclusion that the project is exempt from CEQA and instead prepare an EIR. The court also held that the District "must not actually acquire the property without first completing compliance with CEQA."

The Appeal

Golden Gate appealed, arguing that the entire resolution of necessity should be set aside due to the improper CEQA exemption and because the District committed a gross abuse of discretion in making its necessity/least private injury findings without first complying with CEQA.

The Court of Appeal held that the CEQA regulations provide trial courts with flexibility in tailoring a remedy to fit a specific CEQA violation, and in this case the trial court did not abuse its discretion in concluding that the equities favored allowing the District to proceed with its eminent domain action but not "actually acquire" the property until it complied with CEQA.

The Court rejected Golden Gate's argument that the environmental review process would be tainted by allowing the District to proceed with the eminent domain action. Nonetheless, the Court stated that the CEQA analysis must be considered on the merits and without regard for the pending eminent domain action or the consequences of abandoning that course of action.

Conclusion

From an environmental-compliance standpoint, the Court's decision makes sense. CEQA Guidelines section 21168.9 clearly provides discretion to the trial court to leave certain approvals in place if the court finds that the public agency violated CEQA. In other words, failure to fully comply with CEQA should not entirely halt a major public works project.

From an eminent domain-standpoint, the Court's decision raises a number of issues, at least if it is read broadly. For instance:

In adopting a resolution of necessity, a public agency is required to find that the property is necessary for the project and that the project is designed in a manner that is compatible with the greatest public good and the least private injury. How does an agency make these findings when it still needs to conduct its environmental review and the final project has not been fully identified?
What if the environmental review process concludes that more or less property is needed for the project; in the case of more property being needed, the agency would have to go back and get a new appraisal, make a new offer, and adopt a new resolution of necessity; and in the case of less property being needed, the agency would have to partially abandon the eminent domain action, thereby becoming exposed to an award of attorneys' fees. This does not seem like the best use of public funds.
Under the court's analysis, the agency can commence eminent domain proceedings, but it cannot "acquire" the property until it completes its environmental review. How does this work? What if the property owner wants to sell the property to the agency – is it prohibited from doing so? What happens if the environmental review process takes years – does the eminent domain action sit on hold in the meantime? Can the agency take prejudgment possession – and if so, how does the court conduct a balancing of the hardships when the project isn't fully defined and the owner does not know what the full impacts will entail?

Many of these questions likely were not an issue in this particular case. While the case was on appeal, the District secured environmental approvals, vacated its original resolution of necessity, and adopted a substitute resolution of necessity in conformance with the certified EIR. Therefore, when the Court of Appeal addressed the adequacy of the remedy, it did so knowing that an EIR had already been certified for the project and a proper resolution adopted, and as a result the Court may not have considered all the potential ramifications of its holding.

Public agencies should not rely heavily on this decision for a "condemn then comply" approach. The CEQA Guidelines provide that "CEQA compliance should be completed prior to acquisition of a site for a public project." (CEQA Guidelines, section 15004, subd. (b)(1).) There is good reason for this; agencies should understand a project's environmental effects – and the public should have an opportunity to weigh in – prior to irretrievably committing funds to property acquisitions. Moreover, the analysis of project alternatives during the environmental review process should not be influenced by prior property acquisitions.

With that said, funding for public projects has become a complex – and highly competitive – process, in which too many agencies are seeking too much funding for too many projects. The result is that funding agencies wield considerable power, and they demand the funds be put to good use in a timely manner. Funding commitments are therefore often tied to agencies quickly "certifying" the right-of-way – meaning securing possession of the needed properties. When these timelines become unmanageable (especially under California's drawn-out prejudgment possession process), it incentivizes agencies to look for opportunities to expedite the acquisition process, which could include commencing acquisition activities prior to final environmental clearance.

Acquiring Right-of-Way Teleconference Tuesday, April 16

Brad Kuhn — Fri, 12 Apr 2013 15:01:28 -0800

Next Tuesday, April 16, Rick Rayl and I will be hosting a teleconference for the National Business Institute titled "Acquiring Right-of-Way". It's a 90 minute conference geared towards a national audience of attorneys, real estate professionals, government agencies, appraisers, energy companies, and right-of-way consultants. You can find a link to the conference here. For those of you who may be interested, here's the agenda:

Acquiring Right of Way for Public & Private Projects (environmental review process & funding constraints, acquisition process & timing, and negotiation strategies & alternatives to eminent domain)
Relocation Rights & Assistance (purpose & applicability of relocation laws, obligations of government agencies, and rights of property & business owners)
Eminent Domain Litigation & Valuation Issues (pleadings & litigation procedures, securing possession of property, and real estate & business valuation)

Sorry for the late notice, and we hope you can join us. It's scheduled for 11 a.m. PST.

Jury Sides With Property Owner in Solano County Eminent Domain Trial

Brad Kuhn — Mon, 08 Apr 2013 08:05:38 -0800

According to an article in the Daily Republic, Jury: County owes $1.24M in eminent domain dispute, Solano County and a local land owner recently completed an eminent domain trial, and the jury sided with the owner. The case, Solano County v. Valine, involved the County's partial acquisition of about 10 acres through the middle of the owner's 82-acre farmland in order to develop the Suisun Valley Parkway.

Our esteemed colleague, professor Gideon Kanner, reports that the government agency initially offered $575,000 for the partial acquisition. After no agreement could be reached, the agency commenced a condemnation action. As is typical, shortly before trial the parties exchanged appraisal reports. This time, the agency offered two appraisals, one at $450,000, and one at $350,000. The owner's appraised value was over $1.5 million.

While some may wonder why the agency's appraisal at the time of the expert exchange was significantly less than its initial appraisal and offer, this is actually becoming more and more common, especially over the last few years in a declining real estate market. The reason is usually due to the parties' using a date of value for the eminent domain action that is months (and sometimes over a year) after the completion of the initial appraisal, so as the market continued to dive, so did the impacted property's value. Also, agencies rarely use the same appraiser for trial that they use for the initial appraisal/offer, so with a new appraiser typically comes a difference in opinion.

After the expert exchange, the agency and the owner exchanged a final offer and a final demand. (See Code of Civil Procedure section 1250.410.) The County's final offer was $750,000, and the owner's final demand was $877,000. The parties still could not bridge the gap, and trial commenced. The jury returned a verdict of $1.25 million -- over twice the agency's deposit (and over three times the value put forth by the agency at trial). Given that the property owner recovered a significant amount above its final offer, it is likely the owner will be entitled to recover its attorneys' fees and expert fees. (See our article on the good faith test for determining the award of litigation expenses.)

Court Addresses California's Changed Eminent Domain Prejudgment Possession Rules

Rick E. Rayl — Wed, 03 Apr 2013 13:37:18 -0800

Following the 2005 Kelo decision, California enacted a number of modest eminent domain reforms. For eminent domain attorneys, the most significant changes arguably came in the procedures for obtaining prejudgment possession. This can be a major issue on large public improvement projects, as construction schedules and funding commitments are often tied to the date on which the condemning agency secures possession of the property needed for the project.

The new laws both (1) shift the balance of power somewhat away from the agency and towards the property owner, and (2) extend the amount of time it takes to secure prejudgment possession.

Since these rules were adopted, there have been few, if any, published decisions on how the new rules should be implemented. On March 29, 2013, the Court in Lake County Sanitation Dist. v. Choy addressed at least one key possession issue: whether the trial court's decision to grant the agency prejudgment possession is appealable.

First, it is important to note that this is NOT a published decision. This means that it is generally not citable as precedent in other cases. Thus, while it tells us a bit about how at least one three-judge panel views this issue, it does not necessarily tell us where the law will eventually settle.

Turning to the decision, the actual issue before the Court was whether the trial court's order granting the agency prejudgment possession qualified as an appealable order, or whether a property owner seeking to challenge such an order had to follow the much-less-likely-to-succeed writ procedure.

The Court walked through the law on appealable orders, and quickly concluded that the appeal was neither (1) from a final judgment, (2) from a post-judgment order, nor (3) from one of a few specifically enumerated other appealable orders set forth in Code of Civil Procedure section 904.1. The bottom line: the owner's appeal was improper and should be dismissed.

There were a few other interesting issues raised by the Choy case, though they were not issues in the Court of Appeal.

The case involved a part take of a driveway and parking area. One question that often arises in such situations is whether the part taken is considered "occupied." In Choy, the larger parcel was clearly occupied, but did that mean that the driveway and parking areas -- which contained no physical structures -- also qualified as "occupied"?

The difference is one of timing and service. A possession motion for unoccupied property can be set for hearing on 60 days' notice after serving the record owner, while a motion for occupied property must be made on at least 90 days' notice after serving the record owner and all occupants. In addition, the possession order for unoccupied property takes effect 10 days after service of the order, while an order for occupied property takes effect 30 days after service. The net result is that an agency can obtain possession of unoccupied property 50 days quicker than it can for occupied property.

In Choy, the agency took the position that the part taken was unoccupied, setting the hearing on the motion for just over 60 days after service. While the Court of Appeal decision does not discuss the propriety of this position, the trial court apparently had no difficulty with it, since it granted the motion. (Of course, the fact that the owner did not argue that the notice was insufficient may have played a role here as well.)

Second, the law states that an owner has 30 days to oppose a motion for possession. The question then becomes what happens when an owner files no such opposition? Can the agency get its possession order signed early, following the expiration of the 30 days, or must it wait for the formal hearing date, which is likely another 30 to 60 days out?

In Choy, the owner did not file an opposition within 30 days. The agency then filed an "application" to get its order signed once the 30 days lapsed, and the trial court signed the order two days later -- more than a month before the date initially set for the hearing.

Again, the Court of Appeal did not analyze this issue or condone the agency's approach, but the trial court obviously approved and had no trouble signing the order well before the formal hearing date.

In the end, the case provides some clues as to how these issues may play out in the future, but until we have a published decision, it remains too early to tell whether these methods will always be successful or unsuccessful. My guess is that the Choy court got its actual holding right: a trial court's decision on a motion for prejudgment possession does not qualify as an appealable order.

As for treating an arguably unoccupied portion of an occupied larger parcel as unoccupied for purposes of setting the hearing, I think this remains an open question. Similarly, I think it remains an open question whether an owner's failure to file an opposition within 30 days entitles the agency to obtain its order early.

My advice to agencies? If the timing is crucial and you will likely lose funding or face increased construction costs, take a shot at either or both of the time-saving strategies employed in Choy. But if timing is not so crucial, it's safer to take the conservative route, treating even arguably unoccupied part takes as occupied, and waiting until the actual hearing date to seek your order. That extra time could well mean an unopposed motion that takes a bit longer but costs a lot less (and has much less risk).

My advice to owners? Don't take the agency's word for it if it claims a part take warrants using the unoccupied timing, and don't assume that you will have all the time provided for in the notice if you don't object. This is particularly true where the reason for not objecting is because the time before the order is projected to become effective is enough to make any arrangements to accommodate the taking. In such cases, an objection just to note that the order should not be granted early would be a wise move.

La Mirada Resolves Last Eminent Domain Action for Valley View Underpass Project

Brad Kuhn — Wed, 03 Apr 2013 05:06:02 -0800

According to an article in the Whittier Daily News, La Mirada agrees to pay $1.8 million to settle eminent domain case for new railroad underpass, the City of La Mirada has agreed to pay $1.8 million to settle the last eminent domain case involving acquisition of easements and property for the Valley View Avenue underpass at the BNSF Railroad crossing. The parties were likely close to trial as they had recently exchanged final offers and final demands (see Code of Civil Procedure section 1250.410).

The $1.8 million settlement sounds like a good deal for the City, as the owner's final demand was $3 million and the agency's final offer was $1.5 million. However, we don't know the amount of the City's appraisal or the property owner's appraisal. It sounds like the owner's appraisal could have been as high as $5 million, as the City manager was quoted as saying there was a "possibility of going into court and having the jury award $3 million to $5 million . . . ."

The City was acquiring easements for Southern California Edison lines and a storm drain, along with temporary easements allowing the construction of the roadway and walls. The owner was concerned about impacts to the property, but also impacts to the business, including interruption of electrical power and access.

With the resolution of the last needed property, the underpass project is expected to open in October 2014.

Regulatory Takings: Monks v. Rancho Palos Verdes Revisited (Again)

Brad Kuhn — Tue, 02 Apr 2013 03:04:49 -0800

For those of you who have followed Nossaman's blog since the very early days, you'll recall our coverage of a significant regulatory takings case, Monks v. City of Rancho Palos Verdes. The 2008 California decision received much press coverage in that it was one of the very few instances where property owners overcame the myriad substantive and procedural obstacles and succeeded under a regulatory takings theory. While the Court found a taking occurred, the case was remanded back to the trial court to determine the appropriate remedy. Now, nearly five years later, the dispute has now made its way up to the Court of Appeal for the third time, with the Court holding the property owners cannot recover damages for a permanent taking because the City has permitted the owners to develop their property.

For those unfamiliar with the Monks case, you can find a more detailed background of the dispute and its prior holdings in an article we wrote for the California Real Estate Journal. Generally, the case involved an inverse condemnation action filed by a number of property owners against the City of Rancho Palos Verdes, alleging that the City had exacted a regulatory taking by enacting a resolution that precluded the owners from building homes on their vacant lots. Here's what transpired:

In 2005, the Court held that the owners were entitled to a trial on their takings claim and were not limited to seeking a writ of administrative mandate to overturn the City's resolution. The parties settled the owners' temporary takings claim for $4.25 million, leaving only the permanent takings claim for trial. The trial court found that the City's resolution did not constitute a permanent regulatory taking.
In 2008, the Court of Appeal reversed, concluding that the City's resolution effected a permanent regulatory taking. The case was remanded so the trial court could determine an appropriate remedy.
After the 2008 decision, the City allowed the owners to build homes on their lots. However, the owners also sought compensation for the decline in the fair market value of their properties. The trial court found that no such compensation was allowed because the City had remedied the permanent taking by repealing the offending resolution and enacting a new resolution allowing the owners to develop their properties. Once again displeased with the trial court's decision, the owners appealed. (You can't blame them, as they were successful with the two previous appeals.)

Ah, finally, we're now up to speed. So what did the Court of Appeal do this time? You can find the decision here, wherein the Court held that the City did not have to pay compensation to the owners for a permanent taking because it provided a constitutionally acceptable alternative remedy: it allowed the owners to build homes on their lots. The Court explained that in the case of a permanent regulatory taking, the public entity has the option of compensating the property owner or repealing the offending regulation. Here, the City allowed the owners to develop their properties, and the owners therefore could not be compensated for a permanent taking.

The owners attempted to argue that they were entitled to compensation for the decline in market value of their properties under a theory of Klopping -- or precondemnation -- damages. (See Klopping v. City of Whittier (1972) 8 Cal.3d 39.) Such damages are awarded where a public entity makes precondemnation statements and thereafter acts unreasonably in acquiring or attempting to acquire property through eminent domain. The Court disposed of this theory of liability, holding that it simply did not apply to a regulatory takings situation.

At long last, the Monks case may finally reach its conclusion. While the owners will walk away with a bitter taste in their mouths having lost the last battle, they ultimately did win the war. They recovered damages for a temporary taking and they were ultimately permitted to build their homes.

After 15 Years, Not Even A Thank You.

Ben Rubin — Mon, 01 Apr 2013 16:01:18 -0800

What happens when a property owner unknowingly pays the electricity bill on a city-owned parking lot for over 15 years? If you said nothing, then you get a gold star.

In Murphy v. City of Sierra Madre (pdf), a recent decision out of the Second Appellate District, the plaintiffs-appellants were the subsequent owners of a piece of property originally purchased from the City through a Disposition Development Agreement. When the City originally transferred the property, it also mistakenly transferred an adjacent electrical meter for a City-owned parking lot. As a result, from 1985 to 2010, plaintiffs paid for the City parking lot's electricity. Shortly after discovering this shocking situation (I'm sorry, I could not resist), plaintiffs filed suit alleging seven causes of action against the City, including one for inverse condemnation. The plaintiffs' inverse claim alleged that the City "appropriated their money for the benefit of the City and the citizens of the community." Thus, plaintiffs contended that the "private property" that was taken for public use was their money. The City demurrer to the entire complaint, and the lower court sustained the demurrer without leave to amend.

In an unpublished opinion, the Second Appellate District made short work of the plaintiffs-appellants' arguments, pointing out that according to plaintiffs' own allegations, the City did not take anything. Rather, the plaintiffs paid Edison, a third party. Thus, there was no "taking" by the City. The Court of Appeal also noted that plaintiffs were attempting to "extend the inverse condemnation doctrine far beyond its historical application," as they could not identify a single case "presenting even vaguely similar facts in which an inverse condemnation claim was upheld." Accordingly, the trial court's decision was affirmed.

Thus, after footing the bill for approximately 15 years, it now seems unlikely that plaintiffs will receive even as much as a thank you from the City.

Supreme Court Hears Oral Argument in Horne v. USDA

Brad Kuhn — Fri, 22 Mar 2013 03:17:17 -0800

Over the past several months, we've been following some of the recent takings cases that have made their way up to the United States Supreme Court. So where do things currently stand? As you've likely heard, the Court issued its decision in Arkansas Game & Fish Commission v. United States (see our summary here); we're waiting for a decision after oral argument in Koontz v. St. John's River Management District (see our summary here); and just this week, the Court heard oral argument in Horne v. U.S. Dept. of Agriculture.

If you're looking for an excellent summary of the Horne oral argument and the issues the Court is grappling with (including what the heck is a raisin handler), our colleague Robert Thomas has an excellent summary on his blog, www.inversecondemnation.com. Be sure to check it out here. He's provided a much better synopsis than I could ever write up, so I'll just leave it at that.

Follow Up on IRWA / Appraisal Institute "2012 Eminent Domain Year in Review" Presentation

Rick E. Rayl — Tue, 19 Mar 2013 03:09:10 -0800

For those of you who attended the joint meeting today between Chapter 1 of the International Right of Way Association and the Appraisal Institute, we promised to post a cheat sheet that reminds you about the cases associated with our cleverly crafted slides. (For those of you who did not attend, you missed a great event, and will be punished by likely having no idea what we're talking about below.)

As promised, here is the recap of our case slides, each of which started with:

Where We Learned . . .

"That the Court can’t exclude appraisers simply because the judge thinks they are full of crap": This refers to County of Glenn v. Foley (2012) 212 Cal.App.4th 393, in which the Court reversed a trial court decision granting the agency's motion in limine to exclude the owner's appraiser, concluding the appraiser should have been allowed to testify.
"That the Court can exclude an appraisal simply because the judge thinks it is full of crap": This refers to City of Corona v. Liston Brick Company of Corona (2012) 208 Cal.App.4th 536, in which the Court excluded three types of appraisal evidence under Evidence Code section 822.
"That if you can dream up damages, then they must be real": This refers to City of Livermore v. Baca (2012) 205 Cal.App.4th 1460, in which the Court reversed the trial court's decision to exclude as speculative evidence concerning certain damages, including temporary severance damages.
“That Nothing from Nothing Leaves Nothing”: This refers to People ex rel. Department of Transportation v. Dry Canyon Enterprises (2012) 211 Cal.App.4th 486, in which the Court made explicit a requirement that a business owner prove the business possessed goodwill in the before condition in order to recover for lost business goodwill.
"That in some cases access to the courts is just as bad as the access left for remainder parcels": This refers to Council of San Benito County Governments v. Hollister Inn (2012) 209 Cal.App.4th 473, in which the Court denied a right to take challenge premised on the agency's refusal to consider condemning substitute access for a hotel property.
"That agencies can be unreasonable as long as they don’t allow the court to empanel a jury": This refers to California Department of Transportation v. Menigoz (2012) 203 Cal.App.4th 1505, in which the Court held that an owner cannot recover litigation expenses, regardless of the reasonableness of the agency's conduct, so long as the case settles before the jury is empanelled.
"That the government’s taking away of a multi-million dollar revenue stream doesn’t mean that a taking took place": This refers to West Washington Properties v. California Department of Transportation (2012) 210 Cal.App.4th 1136, in which the Court rejected an inverse condemnation claim arising from Caltrans' requiring the removal of an 8,000 square foot "wallscape" advertising space on a property owner's building.
"That you’re not protected from an inverse condemnation claim just because you aren’t the government": This refers to Pacific Bell Telephone Company v. Southern California Edison Company (2012) 208 Cal.App.4th 1400, in which the Court held that a privately-owned public utility company can be liable for inverse condemnation under the same strict liability standard that applies to government agencies.
"That just because you sold under threat of eminent domain doesn’t mean you get to keep your tax basis": This refers to Duea v. County of San Diego (2012) 204 Cal.App.4th 691, in which the Court upheld the County Assessor's decision to reject an owner's effort to transfer his Proposition 13 property tax basis after selling his property under threat of eminent domain because the actual sale was to a private developer, not the government agency that was threatening to condemn if the owner did not voluntarily sell to that developer.
"That temporarily taking someone’s property might qualify as a taking": This refers to Arkansas Game and Fish Commission v. United States (2012) 133 S.Ct. 511, in which the Supreme Court rejected an argument that temporarily flooding someone's property cannot qualify as a taking, as a matter of law. Instead, the Court held that such temporary flooding can qualify as a taking, remanding the case for a determination of whether a temporary taking had in fact occurred in that case.
"Whether the 'nexus' and 'proportionality' tests apply beyond physical takings": This refers to Koontz v. St. John's River Water Management District, recently argued before the U.S. Supreme Court, in which the Court is looking at a potential expansion of the Nollan and Dolan lines of cases.
"What 'raisin handlers' do and why we should care": This refers to Horne v. U.S. Department of Agriculture (2012) 133 S.Ct. 638, also pending before the U.S. Supreme Court. Oral argument is set to be heard on this case tomorrow, March 20.

We had a great time at the event, and think combining the IRWA and Appraisal Institute for a joint meeting is a great tradition practiced in Los Angeles. I've suggested to Chapter 67 in Orange County that we explore a similar joint meeting, and I hope it happens.

Join Us at the IRWA Chapter 1 / Appraisal Institute Lunch This Tuesday

Brad Kuhn — Sun, 17 Mar 2013 14:36:50 -0800

Rick Rayl and I will be speaking this Tuesday, March 19, at the International Right of Way Association (IRWA) Chapter 1 (Los Angeles) annual co-luncheon with the Appraisal Institute. We'll provide an eminent domain "Year in Review," covering all the important court decisions from the past year. To make it a bit interesting, we'll be coming up with some funny phrases, and we're hoping some of you will be able to guess what case we're talking about. Rick promises there will be prizes....

The annual lunch between the IRWA and the Appraisal Institute is always a good one, so we hope you'll join us. The event will take place at Steven's Steakhouse in Commerce. To RSVP, get in touch with Aaron Aftergut with Integra Realty Resources Los Angeles.