California Eminent Domain Report

In California eminent domain cases (this is an area in which the law varies dramatically from state to state), the property / business owner is entitled to an award of litigation expenses (including attorneys' fees) if (1) it makes a reasonable final demand for compensation and (2) the agency makes an unreasonable final offer of compensation.  (See Code Civ. Proc. § 1250.410.)

How one analyzes "reasonableness" once the jury issues its verdict has been the subject of a number of court opinions.  Tracy Joint Unified School Distract v. Pombo (Oct. 29, 2010) adds to that body of law. 

In Pombo, the appraisers were wildly apart in their opinions of value.  The agency's appraiser opined to a value of around $3 million, while the owner's appraiser opined to a value of around $12 million. 

When it came time to exchange the final offer and demand, the agency stuck to its guns, making an offer only $100,000 above its appraiser's conclusion.  The owner split the difference, making a demand of around $8 million. 

At trial, the jury also split the difference, coming in at almost exactly the number in the owner's final demand.  The owner sought an award of litigation expenses.  The trial court denied the motion, focusing on the standard, three-factor test:

• The amount of the difference between the offer and the compensation awarded,

• The percentage of the difference between the offer and the award, and

• The good faith, care and accuracy in how the amount of the offer and amount of demand, respectively, were determined.

The first two factors were obvious:  no matter how one looked at it, the agency blew it and the owner nailed it.  The decision turned on the third factor, and there, the trial court sided with the agency.  It concluded that the appraisers' opinions were so disparate that it was impossible to know how the jury would view the case.  The court concluded that the agency had exercised sufficient "good faith, care and accuracy" to avoid a fee award.

The Court of Appeal reversed.  It distinguished the cases that had found against the agency on the first two factors but still rejected a fee motion on the grounds that those cases had in common something absent in Pombo:

[Here, t]here was no tricky legal issue or unusual circumstance that made the offer difficult to formulate. The jury was confronted with a straightforward conflict between two appraisers who advocated vastly different approaches to the appraisal process.

In the absence of a "tricky legal issue or unusual circumstance," the Court of Appeal had no difficulty concluding that a fee award was warranted:

[T]he monetary difference between the offer and the award was enormous, the property owners’ offer was extremely reasonable and the District made no effort to show good faith by tendering an offer that gave serious consideration to an adverse appraisal that was several times larger than that of its expert.

Hard to argue with the Court's analysis.