Encinitas Contemplates Eminent Domain for School District Property

It's not too often you see one government agency threaten another agency with eminent domain.  But it does happen.  A recent article by Barbara Henry in the U-T San Diego, Encinitas has few options on Pacific View site, highlights on such dispute taking place right now.

According to the article, the City of Encinitas very much wants to acquire the Encinitas Union School District's 2.8-acre property that formerly housed the Pacific View Elementary School.  But the School District has rejected the City's overtures, turning down a $4.3 million offer to purchase.  Instead, the School District intends to put the property up for auction, with a minimum bid price of $9.5 million.

Since no progress has been made on acquiring the property, the City is apparently contemplating using its power of eminent domain.  But the School District fired back, protesting that the use of eminent domain would (1) be premature, since the CIty has yet to identify a public use for the site, and (2) put the City in a financial quandry, since it would be forced to pay the "highest price" for the site based on its "highest and best use." 

  • Right to Take:  The first issue raised by the School District is essentially a right-to-take challenge, as a public agency cannot adopt a resolution of necessity to acquire property by eminent domain without first identifying a public purpose.  This concept was highlighted in a 2009 case, City of Stockton v. Marina Towers, where the court rejected a local agency's adoption of a resolution of necessity to condemn property without identifying a public use for the site.  While the City here could easily come up with a public use for the property, the issue is one of timing, as it will be difficult to accomplish anything before the site is put up for auction.
  • Highest Price Valuation:  The second issue raised by the School District is well-known eminent domain valuation law.  Not only is property to be valued based on the "highest price" it could acheive in the open market between a willing buyer and willing seller, it is also based on the "highest and best use" for the property -- which may not necessarily be the property's current use. 

This will be an interesting story to follow, but the City should make sure it knows what its getting into before going much further down the path of contemplating eminent domain. 

House Subcommittee Approves Bill to Limit Power of Eminent Domain

The House of Representatives has once again resurrected the "Private Property Rights Protection Act" (HR 1944), a bill that would limit the power of eminent domain on a nationwide scale.  I say once again, because as we reported in 2012 (see January 26, 2012 post by Brad Kuhn), the House Judiciary Committee approved a nearly identical bill by an overwhelming 23-5 vote, only to have the bill languish on the House floor.  The vote this time around, however, was nowhere near as emphatic, as the bill barely passed out of the Subcommittee on the Constitution and Civil Justice with a skimpy 5-3 vote.  In a press release issued shortly after the vote, both House Judiciary Chairman Bob Goodlatte (R-Va.) and Congressman Jim Sensenbrenner (R. Wisc.) praised the result, stating that private property rights need to be protected from improper government seizure, citing the case of Kelo v. City of New London as the prime example of government overreach.  The bill will now move to the House Judiciary Committee for review.  

Two Steps Forward and Two Steps Back

Before you get your hopes up, this is not a reference to "Opposites Attract" by Paula Abdul, and I will not be singing.  Rather, I am referring to the Montana Legislature's recent decision to repeal a two-year-old law that gave private power-line developers the authority to condemn private property.  The 2011 law was passed in order to override a state court decision prohibiting the use of eminent domain for private power-line development.  As reported in the Independent Record, supporters of the repeal effort believe "that the law gave unprecedented power to private companies to run over landowners".  (Article by Mike Dennison of the IR State Bureau.)  

 

Want the Government as Your Tenant? Be Careful What You Wish For

Here's a new one.  Imagine you have a government agency as your tenant, paying above-market rent, and the lease is set to expire.  The government tells you they're going to move to a new site, but they need to hold over for a while until the new site is built.  You figure, fine, the parties will just continue with the same rental rate until the government tenant moves.  Hey, what other option does the government have?  It would be incredibly expensive to find a temporary site and do a temporary move until the permanent relocation site is finalized.

This logic may work with any typical private-market tenant.  But this is the government.  What power does the government have that others do not?  You got it:  the power to condemn.  But could the government condemn a temporary leasehold interest in a building just because it can't negotiate a rental rate with the landlord?  This exact story is unfolding as I type in Sacramento.  

According to a News 10 story, "Feds use rare tool in Sacramento landlord dispute," the General Services Administration has been embroiled in a bitter dispute with its landlord in attempting to negotiate an eight month extension of its lease that just expired for its Military Entrance Processing Station.  The government had been paying $32 per square foot pursuant to its lease, but it doesn't want to pay more than $19 for its short-term extension as it prepares for a move.  Unable to negotiate an extension, the government has filed a federal condemnation action to acquire the needed 8 month lease.  It's made a deposit of $342,000, which it claims is the fair market value of the leasehold interest it seeks to acquire.  

You rarely see a story like this, but it appears there's a bit more behind the story.  The landlord recently sued the government, claiming its search for a relocation site had been "subversive, noncompetitive and secretive," which prevented the landlord from bidding to retain the government as a tenant.  So, perhaps the government's condemnation action is a trump card, or if nothing else, some sort of leverage to get the overall dispute resolved.

We'll see how this all shakes out.

Oceanside Hospital to Use Eminent Domain, but is it Proper?

Eminent domain is typically used in the context of a freeway widening, a grade separation project, a utility corridor, or perhaps a new school.  It's not often you hear about the use of eminent domain in the healthcare industry.  But it does happen. 

Take a recent example in Oceanside:  the Tri-City Medical Center, a public hospital, is looking to expand its facility.  It apparently has the power of eminent domain, and according to a North County Times article, OCEANSIDE:  Tri-City seeks to take land through eminent domain, it's ready to use that power this week by adopting a resolution of necessity and proceeding with the condemnation of a .83-acre parcel.

Like any government agency, Tri-City has obtained an appraisal and attempted to voluntarily purchase the property; however, it's $1.5 million offer is too low for the property's owner, who believes the property is worth $2.5-$3 million.  Tri-City has also followed the necessary steps of offering to pay up to $5,000 for the owner to obtain an independent appraisal.

However, there may be other issues.  At the resolution of necessity hearing, the owner intends to raise right to take challenges, particularly based on the fact that Tri-City apparently does not have an identified use for the property.  (Property owners are typically required to raise any challenges at the resolution hearing or those challenges may be waived.)

Tri-City has apparently stated that its acquisition of the property will provide flexibility for future development; this "purpose" could be a bit troubling.  (See City of Stockton v. Marina Towers [denying agency's right to take where there were no real plans for the acquired property at the time of the adoption of the resolution of necessity].)  However, Tri-City also claims the property will provide better access to the emergency room and that there is a chronic need for parking.  If Tri-City can show that it is acquiring the property in order to serve the hospital's dire parking needs, then the owner's challenge may be more of an uphill battle.

If no deal is reached in the near future, we'll follow this one and see whether the owner is successful in court challenging Tri-City's right to take.

10/5/11 UPDATE:  Tri-City's Board of Directors declined to adopt the resolution of necessity, so condemnation proceedings will not be moving forward, at least not at this time.

Azusa Property Owner Loses Right to Take Challenge, Settles Eminent Domain Action

Roy Fowler's Furniture Station has been a well-known staple within the City of Azusa.  The 39-year-old store has witnessed much change in the area known as Corky's Corner.  However, the store is now officially shutting down after the City of Azusa acquired the property through eminent domain.

According to an article in the San Gabriel Valley Tribune, "Long-time Azusa furniture store to close after losing battle against city, eminent domain," the Furniture Station finally reached a settlement with the City after a contentious eminent domain battle.  The City sought to redevelop the area and adopted a resolution of necessity to acquire the property in January 2010.  The owner challenged the City's right to take the property, but that challenge was unsuccessful.  The parties thereafter reached a settlement for $1.45 million -- not dramatically higher than the City's original $1.1 million offer - and substantially lower than the owner's earlier $3.3 million demand. 

Interestingly, at first the City apparently was not interested in the owner's $1.45 million offer, but decided to accept the proposal given Governor Brown's efforts to eliminate redevelopment agencies

The City Manager, Fran Delach was not "happy" with the settlement, but he noted the deal paves the way to allow immediate development of the property.  Delach indicated that the City is negotiating with a "very exciting" potential suitor.  The property owner, on the other hand, was disappointed with the City's negotiation tactics and attitude towards the eminent domain process.  While Fowler will no longer be able to operate the Furniture Station in Azusa, he does have another location in Covina on Arrow Highway and Citrus Avenue.

Article Evidences Continued Confusion Over Eminent Domain, Proposition 99

A January 27 article in California Watch, "Eminent domain battles rage on despite Prop. 99," reflects the ongoing confusion that surrounds the efforts to reform eminent domain in the aftermath of the Supreme Court's 2005 Kelo decision

The article's premise is that Proposition 99, approved by California's voters in 2008, did not stop what the author describes as "eminent domain abuse."  But the case example that underlies the article reflects a fundamental misunderstanding about what Proposition 99 does (or does not do), and what people typically mean when they talk of "eminent domain abuse." 

Proposition 99 was one of many responses to the Kelo decision, which involved a redevelopment effort by the City of New London, Connecticut, in which the city sought to condemn some single-family homes in order to redevelop them into a commercial use that would generate more tax revenue. 

What really outraged people was that the city did not even pretend that it was acting to eliminate blight (a traditional justification for condemning property for redevelopment purposes).  Instead, the city simply felt like it could generate more taxes by tearing down the houses for a more profitable use - a plan the Supreme Court said qualified as a public purpose sufficient to justify the condemnation.

Proposition 99 targeted this specific type of "abuse," limiting eminent domain authority involving (1) redevelopment, and (2) residential properties.  I've written in the past about Proposition 99's narrow scope, but the fact is that it was intended to address a Kelo-type situation - not to stop all eminent domain. 

The "abuse" example in the California Watch article misses both of the Kelo/Proposition 99 prongs:  it is not an eminent domain use involving redevelopment; and it is not a condemnation of residential property.  Instead, the City of Laguna Woods condemned a commercial property to use for its own government offices (a space the city had already been leasing for that use for years). 

Sure, the parties had a substantial dispute over the property's value, and in that case, the jury's conclusion of value was much higher than the city thought it would be.  But I have trouble seeing valuation disputes like this as "eminent domain abuse," and nobody should be surprised that Proposition 99 fails to protect against such things.   

Short Primer on Eminent Domain Right to Take Challenges

One of the most vexing aspects of eminent domain for many property and business owners is the fundamental fact that the owner does not get to decide whether to sell the property.  I cannot recall the number of initial client meetings I've had over the years that began with the client asking "How do I stop this from happening?"

In most cases, my clients are disappointed to hear my answer:  "You can't."  But this answer is overly simplified, because there are actually several grounds for preventing the government from condemning property. 

A recent post on the Biersdorf & Associates eminent domain blog, "The Right to Take in the Eminent Domain Process: A Brief Overview," walks through, in a fairly straight forward way, some of the ways in which an owner can challenge right to take.  I think the piece represents a good starting point for someone asking the "how do I stop them" question.   The post explains that right to take challenges typically revolve around the government's "public use and necessity" findings, which often these days turns on claims that the property being condemned is blighted.

Owners thinking of challenging right to take should review the Biersdorf piece, but should do so with some additional background in mind with respect to California eminent domain procedures. 

In particular, owners should always think about the reasons for challenging right to take.  Often, even a successful right to take challenge accomplishes little more than delay.  This is because the government can often correct whatever irregularities caused the successful right to take challenge and then simply file the eminent domain action again.  It is crucial to keep that in mind before embarking down an expensive right to take fight. 

Does the fact that the government may fix the problem mean that challenging right to take is a fool's game?  Not necessarily.  Consider these possibilities:

  • In some cases, the mere fact of delay can defeat an entire project, meaning even a temporary victory may for practical purposes be permanent. 
  • In some cases, the costs of a delay may be so massive that the government will offer a substantial settlement in order to avoid the risk of fighting right to take, making this a good tactic if the ultimate goal is to obtain the highest compensation, not necessarily to prevent the taking from occurring. 
  • In a rapidly rising real estate market, delay can result in a much more favorable date of value (of course, in a falling market, "winning" the delay associated with a right to take challenge may ultimately prove costly for the owner).
  • And, of course, in some cases, the flaw in the government's right to take simply cannot be cured, meaning a victory really does prevent the taking.

Thus while, I rarely recommend them to my clients, with the right combination of facts and circumstances, right to take challenges can be pivotal to an overall litigation strategy, and no property owner should waive its ability to challenge a taking without having a discussion with a qualified eminent domain attorney.  

(Note that in California, many right to take challenges are waived by the owner's failure to object at the hearing on the government's precondemnation Resolution of Necessity, and all right to take challenges are waived if the owner withdraws the funds the government typically places on deposit at the outset of an eminent domain case.)

Canadian Company Seeking to Condemn Property in Nevada?

Last week was a fairly slow week for California eminent domain news, but I came across an article about a case that seems interesting enough to warrant a brief discussion, even if it has no direct application in California. 

Fronteer Gold, apparently a Canadian-owned company with a division formed under Delaware law, is seeking to condemn property in Nevada to help implement its plans for the Long Canyon gold mine

You might wonder how a private company, under Canadian ownership, can condemn property from private owners in Nevada.  Apparently, Nevada law contains a provision that grants eminent domain authority to private companies for purposes of protecting mining operations, and Nevada eminent domain law describes mining as "the paramount interest of this State" (see Nev. Rev. Stat. Ann. § 37.010(f)(1)).  

According to a June 3 article in the Elko Daily Free Press, "Fronteer seeks eminent domain: Company wants ranch land for gold mine," that is want Fronteer is trying to accomplish:

Fronteer requested use of eminent domain to obtain surface rights for land it has mineral rights for, to obtain access easements, to obtain additional lands and for use of roads.

On the other hand, in 2008, Nevada voters passed the People's Initiative To Stop The Taking of Our Land (PISTOL)  in response to Kelo, seeking to prohibit private companies from condemning property from other private owners.  But it didn't stop there, as proponents and opponents of PISTOL have apparently agreed on a potential compromise measure, which will now appear on the November 2010 ballot, and which, if passed, will replace PISTOL.  

Quickly scanning both the text of the new eminent domain proposal and the current eminent domain law under PISTOL, I do not see any exception that would allow a private company to condemn property for mining purposes, despite mining being Nevada's "paramount interest." 

What does all of this mean?  I'm guessing the parties will either find a way to reach an agreement on the property's value, or there will be a significant right-to-take battle on the horizon, regardless of whether the 2010 amendment passes.  

Wyoming Considering Changes to Eminent Domain Laws to Deal with Push for Renewable Energy

Next week, I'm speaking at the IRWA Chapter 67 Spring Seminar, which is focused on renewable energy issues.   So it was pretty timely when I came across an article this week involving efforts in Wyoming to curtail eminent domain power to address that state's push for increased renewable energy. 

According to a Casper Star-Tribune article by Dustin Bleizeffer, Wind boom inspires another look at state's eminent domain laws: Crossing private property, Wyoming has seen a wave of efforts to use eminent domain to acquire right of way for "collector lines," used to connect wind turbines to the electrical grid.  And, these efforts have not been limited to connecting built turbines to the grid:

[T]he recent realization that this power can be used to acquire easements for "collector lines" to connect yet-to-be-installed wind turbines to the electrical grid has raised concern among Wyoming politicians.

Wyoming's governor signed a one-year moratorium on the use of eminent domain to acquire collector-line easements, but the state is considering a more permanent ban.  According Governor Dave Freudenthal, "because the potential scope and impact of the collector line build-out affects so many Wyoming citizens, the issue deserves to be at the top of the state's legislative agenda."

One problem legislators face is that they appear willing to consider restricting the use of eminent domain for the collector lines, but fear that openly discussing the issue will lead to a push for restrictions on other uses of eminent domain.  This is not surprising, given broader attitudes about eminent domain since 2005's Kelo decision.

Aside from discussing the basic right to take property for collector lines, Wyoming is also confronting how one establishes fair market value if such condemnation is allowed.  Mr. Bleizeffer's article mentions concerns about valuation. 

He addresses problems involving highest and best use, as the property condemned for collector lines is typically valued at an agricultural highest and best use, even though it is being acquired for an industrial use.  He also raises an issue that has appeared in various states over the past few years:  whether it is fair for owners who have collector lines through their properties to receive only a single payment, even though neighboring owners who have actual wind turbines on their property typically receive annual payments in perpetuity. 

It's a complicated issue, and one that will undoubtedly play out across the country as we push to meet increasing renewable energy targets. 

Riverside Property Owner Loses Right-to-Take Challenge in Eminent Domain Case

Several years ago, the Elsinore Valley Municipal Water District filed a "friendly" eminent domain action to acquire a portion of an unimproved "paper" street from the City of Lake Elsinore.  The property was to be used to construct a water pumping station to serve a nearby development, and the City had no objection.  The water district took possession, and began construction of the pumping station.  So far, this seems like a non-story, right?

Well, to the water district's surprise, a nearby property owner appeared in the action and challenged the water district's right-to-take the property; the owner claimed to have an interest in a portion of the unimproved street, and also asserted that the project limited access to his neighboring property, thereby diminishing its value.  The neighboring owner asserted that if he was unsuccessful in challenging the water district's right to take the property, he sought over $750,000 in damages. 

This was not what the water district had planned for when it filed the condemnation, which involved a minimal payment to which the City had already agreed.  And given that construction had already commenced on the project, I'm sure concerns arose about what would happen if the owner won the right to take challenge (for example, see our e-alert on the Marina Towers decision and our subsequent update).  So what happened here?

According to a Press-Enterprise article, "Judge rules in favor of Elsinore Valley water district in eminent domain case," after years of litigation, a Riverside County Superior Court judge denied the neighboring owner's right-to-take challenge, and ultimately found that the owner had no interest in the property being acquired.  Thus, despite the long and unplanned journey through the court system, the water district came out victorious.

Utah Seeks Supreme Court Battle Over Eminent Domain Power

I'm a California eminent domain attorney.  I work in Orange County, Los Angeles County, Riverside County, San Bernardino County, etc.  I don't work in Utah.  I'm not even licensed in Utah.  Why, then, would I bother to blog about what is going on with eminent domain in Utah?

Quite frankly, because it amuses me.  The Utah Senate has now approved a law that authorizes the state to condemn property from the federal government.  You may wonder how can a state give itself the power to condemn property from the federal government.  The answer:  it probably can't --and Utah knows it.  

According to a March 10 article by Brock Vergakis in Business Week, "Utah plans to take US land through eminent domain," Utah's lawmakers are using the new law to create a legal battle:

The goal is to spark a U.S. Supreme Court battle that legislators' own attorneys acknowledge has little chance of success.

So why bother?  Probably a couple of reasons.  First, even if unlikely to succeed, the scheme could be incredibly lucrative if it works.  People bet on long shots all the time, and Utah apparently believes that the cost of this long shot is justified by the potential rewards. 

Second, I'm guessing Utah is trying to make a political statement in a very visible way (Supreme Court battles tend to do that).  They do not think the federal government is properly managing federal land, and they want to generate revenue off of land that, at present, does little to benefit the public.  And, this is not a minor issue, as the federal government apparently owns more than 60 percent of the state. 

I think the fight will be a fun one to watch.  Of course, I'm sitting here in California, and I'm not going to foot the legal bill of up to $3 million (that's how much the legislature authorized in spending to defend the new law). 

If the scheme works, I wonder if I could get someone to grant me the power to condemn land from the federal government . . . .

An Interesting Argument Concerning Whether Eminent Domain for Economic Development Makes Economic Sense

Marc Scribner of the Competitive Enterprise Institute published this week an article about the economics of eminent domain for economic development (i.e., for redevelopment purposes) entitled "This Land Ain’t your Land; this Land Is my Land."  I found the piece interesting, despite the fact that it seemed the author started from the conclusion "eminent domain is bad" and worked backwards crafting an analysis to get there. 

Ultimately, however, Mr. Scribner does provide some interesting insight.  He does not simply come out and say eminent domain for economic development is unconstitutional or that it qualifies as eminent domain abuse (though it seems clear that is how he really feels about it).  Instead, his article purports to analyze whether using eminent domain for economic development makes economic sense in the long run.  And this is where the piece creates some interest. 

Mr. Scribner claims that the mere fact that eminent domain for economic development is possible has a chilling effect on entrepreneurship, especially in lower income areas where an entrepreneurial spirit may be most needed.  The reasoning behind this is somewhat complicated, but relies in large part on the idea that the government is simply incapable in most cases of accurately assessing the various economic forces at play:

An increase in the discretionary use of eminent domain for economic development would lead to a decrease in entrepreneurship. As local officials lack the knowledge and expertise to effectively promote private development, their political missteps can keep their localities in poverty by undermining entrepreneurship, and forgo the wealth it would have created.

In the end, Mr. Scribner and I part ways on his conclusion that eminent domain should never be used for redevelopment purposes.  I think that in some cases, the open market simply cannot adequately address truly blighted situations, and having the government step in -- even when eminent domain is required -- can trigger revitalization and economic growth. 

That said, the forces Mr. Scribner identifies no doubt exist, and suggest the government should go down such a path only after careful thought and analysis.  Had local officials in New London, Connecticut, viewed the issue as Mr. Scribner views it, the string of events leading to the infamous Kelo decision might have played out differently.  

Sierra Madre Eminent Domain Measure Stirs Debate

In December, we reported on Sierra Madre's decision to allow voters to decide whether the City should possess the power to condemn property for redevelopment purposes.  On April 13, 2010, voters will decide the issue by ratifying or rejecting City Ordinance 1304, but for now, the measure has triggered some colorful debate. 

On February 27, Susan Henderson offered a Mountain View News article "Eminent Domain Measure -- Yes or No?"  She purports to analyze the measure in the broader context of recent eminent-domain-reform efforts, including California's Proposition 99, passed in 2008 in the wake of the U.S. Supreme Court's much-maligned 2005 Kelo decision.  She ultimately concludes that the measure is irrelevant, and amounts to mere political "grandstanding" by Sierra Madre's Mayor MaryAnn MacGillivray.

On March 1, "Eric Maundry," aka City Council candidate John Crawford, responded in a Sierra Madre Tattler piece entitled "Has The Mountain Views News Come Down On The Side Of Eminent Domain?"  In addition to several somewhat silly attacks on Ms. Henderson and her analysis, Mr. "Maundry" contends that the measure has real teeth, prohibiting the City from all eminent domain for redevelopment purposes -- i.e., eminent domain where the goal is to turn the condemned property over to another private owner for redevelopment. 

The dispute appears to be part of a larger political controversy in Sierra Madre, where an ongoing debate over growth issues has apparently become the cornerstone of the upcoming election.  I'm smart enough to stay out of that larger debate, but I do want to comment on the eminent domain issue.

As to eminent domain and the impact of Ordinance 1304, I have to side with Mr. "Maundry."  The ordinance goes well beyond the limited restrictions Proposition 99 offers state-wide, and should, if approved, create a real barrier against eminent domain for redevelopment purposes.  Especially with respect to businesses, no current federal or state prohibition exists on condemning property for redevelopment purposes, as long as the condemning agency makes proper blight findings.  Ordinance 1304 would change that, at least in Sierra Madre.   

Is prohibiting all eminent domain for redevelopment purposes a good thing?  I'll leave that to Sierra Madre residents to decide on April 13. 

Response to Professor Kanner About Avatar

Yesterday, Professor Gideon Kanner, a well-known eminent domain scholar, wrote a critique of my post about Avatar on his "Gideon's Trumpet" blog.  It is an interesting response, in that it spans two full pages of printed text, and his fundamental point seems to be that he agrees with my premise that Avatar is not a film about eminent domain.  

How, then, does he spend two pages responding to my January 26 post, "Is Avatar Really a Political Commentary on Eminent Domain Abuse?"  Well, he begins by "trumpeting" the fact that he writes from an "unabashedly property-owner oriented" perspective, and proceeds to explain that I apparently write from a "condemnor-oriented" perspective -- which he is kind enough to concede is my right. 

Unfortunately, his "unabashedly property-owner oriented" perspective -- coupled with his years in academia, rather than as a full-time eminent domain attorney -- may be clouding his vision a bit. 

First, let me say that I do not view eminent domain from a "condemnor's" perspective.  Yes, a large part of my practice over the years has been representing condemning agencies.  And I am admittedly proud of the work I have done to help build desperately needed roads, schools, and other infrastructure projects.  However, the majority of my eminent domain practice has been on the property owner's (and business owner's) side, and this continues to be a key focus of my practice. 

Second, while Professor Kanner takes issue with each of my four premises, he does so in a way that can only be described as, well, academic.  To summarize the issues:

  1. Professor Kanner disputes my claim that eminent domain is conducted by the government, not by private companies (as happens in Avatar).   He even cites a 55-year old case that apparently says anyone can condemn property.  Is he right?  As a technical matter, yes.  In the real world, however, eminent domain is almost always conducted by a governmental entity, and Professor's Kanner's need to resort to a 55-year old case to prove otherwise demonstrates that.  And, tellingly, Professor Kanner apparently missed the part of my post in which I stated that private companies sometimes do have the right to condemn.  (This is odd, as I thought my reference to Disney's eminent domain power in Florida was a colorful, interesting example -- yet he somehow missed it.) 
  2. Next, Professor Kanner takes issue with my supposed claim that mineral extraction is not a public use.   Again, he cites some cases showing this is wrong -- this time, stretching all the way back to a 1606 case from jolly old England.  Oddly, however, when I read my post, it doesn't appear to say that mineral extraction cannot qualify as a public use; it says that the mineral extraction in the movie was not portrayed as a public use.  Rather, the company in Avatar was unequivocal in its position that it was seeking the "unobtanium" purely for private profit.  I'll concede that Professor Kanner may have missed this point simply because he has admittedly not seen the film, but I'm still having trouble equating a 1606 case with what took place in the movie.
  3. Professor Kanner then moves on to question my premise that eminent domain cases in California are initiated with the adoption of a resolution of necessity.   This time, he's pretty sure he has me, explaining that the government always has the option simply to seize property, forcing the property owner to sue in inverse condemnation.  I'm pretty sure he's right about this one, since he uses a fancy Latin phrase, "In haec verba," to prove his point (someday, I'll have to look that one up).  Again, however, Professor Kanner reveals his academic perspective.  This simply isn't the way things happen in the ordinary course.  Government agencies do not routinely seize property without offering compensation.   If they did, they would always be charged with paying attorneys' fees to the other side and, more importantly, the public outrage over such behavior would make the response to Kelo seem like a celebration of the right to condemn.   
  4. Finally, Professor Kanner takes issue with my claim that in eminent domain, the condemnor must pay just compensation, explaining that the concept is "slippery as an eel," which presumably means that he does not think property owners receive enough money.  This time, he must be right, since he even has a recent 2009 case to back him up.  Of course, ensuring that property owners are fairly compensated is what most eminent domain cases are all about, and it is what I have spent much of my career trying to accomplish.  And, even when the condemning agency "wins," it still doesn't seem quite the same as sending in massive gunships to blow up the property with the owners still in it.  

In the end, I suspect Professor Kanner is poking fun at me a bit, much like this response pokes fun at him.  Ultimately, our true positions likely are not too far apart, though I imagine his one-sided perspective does cause him to come down at a more extreme place than my more moderate perspective allows.  Still, we can agree that (1) Avatar is not an eminent domain film, and (2) that when eminent domain does occur, our legal system should take care to ensure that property owners are fairly compensated -- and that they do not bear an unfair share of the cost of an infrastructure project designed to benefit the public as a whole. 

And, just to ensure there are no hard feelings, I have sent Professor Kanner passes to see Avatar for himself (in 3-D, on the IMAX, no less), and I hope he enjoys the film for what it is -- not what it is not.  

Is Avatar Really a Political Commentary on Eminent Domain Abuse?

A few weeks ago, my wife and I went to see Avatar.  With two young kids, we rarely see movies in the theaters, and we picked this one based on its advertised special effects, not any belief that it was the "best" movie among our choices.  

As I watched, I never really thought of it as an expression of outrage over eminent domain abuse.  Looking around the Internet, however, the movie seems to have been picked up by eminent domain reformists as a big budget example of eminent domain gone bad.  But is it, really?  Let's look at some facts:

  1. The "acquisition" was being handled by a private company, not any government agency.  Yes, sometimes eminent domain is pursued on behalf of private companies (typically, in the redevelopment context), but rarely does a private company itself have such power -- though there are a few notable exceptions (for a big one, explore the chain of events that sent Walt Disney to Florida for his "new" theme park decades ago);
  2. There was no pretense of "public use."  The fundamental premise was that the "unobtanium" being sought was worth $20 million per kilogram, meaning the company would pursue it at virtually any cost -- including decimation of the Na'vi village. 
  3. There was no established right to take.   Fundamentally, the movie did not involve a government's adoption of a resolution of necessity establishing a right to take the property.  Instead, it represented blatant imperialism:  we will take what we want because we can.
  4. There was no payment of just compensation.  Maybe I missed something (it was a really long movie), but I don't remember the company appraising the property and paying for it at fair market value. 

In the end, the movie may resonate with eminent domain critics, and it certainly contains the themes found in modern-day "eminent domain abuse" cases.  But it does not reflect how eminent domain really occurs. 

This hasn't stopped it from being used with increasing frequency in the campaign against eminent domain.  In early January, New York eminent domain attorney Michael Rikon, speaking at a New York Senate Committee hearing on eminent domain abuse, directly compared Avatar to current New York eminent domain practices:  "this is how eminent domain works in New York."   

An article by David Boaz in today's Los Angeles Times, "The right has 'Avatar' wrong," takes the position that conservatives -- who have typically derided Avatar's "liberal" themes -- miss the movie's main point:  "what they have missed is that the essential conflict in the story is a battle over property rights."  Mr. Boaz sums it up as follows;

"Avatar" is like a space opera of the Kelo case, which went to the Supreme Court in 2005. Peaceful people defend their property against outsiders who want it and who have vastly more power. 

I'm still not convinced the movie speaks to me as an eminent domain lawyer.  But I will say this:  if eminent domain opponents can convince the public that real world eminent domain mirrors James Cameron's fantasy world, the reform movement may continue its post-Kelo momentum for longer than I have otherwise predicted.   And, in places like New York -- where, unlike California, eminent domain reform efforts continue to move forward -- this may well be the case. 

As for the movie itself:  the effects were indeed spectacular, though the plot was predictably predictable. 

Private-Property Rights Issues Involving Water Continue to Make News

One of the big eminent domain stories of the last few weeks involved the oral argument at the U.S. Supreme Court in the Florida beach case.  That case involves whether a government program to add sand to parts of the Florida coastline, creating new public beaches in front of private property that had been beach front constitutes a taking.  For more information about that case, see my December 15 article, "Erosion Control, or Coney Island South?" published in the Los Angeles Daily Journal. 

Now, two other water-related takings issues are making news.  The first, as reported December 14 by Fox News in "Not So Private Property?: Clean Water Restoration Act Raises Fears of Land Grab," involves a proposed amendment to the federal Clean Water Act that would, if adopted, remove the word "navigable" from the definition of the water bodies falling within the Act's scope.  What makes the elimination of one word so controversial?

As currently written, the Clean Water Act regulates discharges into certain bodies of water, including any "navigable waters."  (What constitutes "navigable waters" is a whole different can of worms, especially since the Act has been interpreted to encompass not only navigable waters, but also waters with a "significant nexus" to a navigable waterway -- and because the definition of "navigable waters" has been the subject of recent litigation.)  

Some claim that eliminating "navigable" from the Clean Water Act's scope will create major problems:

The Clean Water Restoration Act currently pending in the U.S. Senate could reach to control even a "seasonal puddle" on private property. . . .

This bill is described by opponents as a sweeping overhaul of the Clean Water Act that could threaten both physical land and jobs by wiping out some farmers entirely.

Not surprisingly, the Act's proponents feel differently, claiming the amendment contains sweeping exemptions to ensure that it does not unduly impact existing agricultural uses.  

The second issue comes from a December 15 Fox News story, "Not So Private Property?: Florida Man Takes Eminent Domain Case to High Court."  It involves a case my colleague Brad Kuhn reported on last month in In Determining Just Compensation, Should Zoning Regulations Enacted to Depress a Property's Market Value for Future Acquisition be Ignored?   The question there is whether an effort to down-zone a property, deflating its value in anticipation of a future government acquisition qualifies as compensable.  The case arises from efforts to expand the Florida Everglades National Park and has a factual history dating back to the 1960s. 

One of the homeowners impacted by those efforts has fought his case through the Eleventh Circuit Court of Appeals, which sided with the government and found the down-zoning is not compensable.   However, the owner has petitioned the U.S. Supreme Court to take the case.  As reported by Fox News,

The high court hasn't decided yet whether it will hear the appeal in the potentially landmark property rights case -- 480 Acres of Land and Gilbert Fornatora v. U.S.

So is there a thread that ties together beach protection, navigable waters, and an expanded everglades park?  Maybe this:  if the global warming scientists are correct, the world is facing rising sea levels and changing weather patterns.  If this is the case, the importance of clear jurisprudence concerning the interrelationship among property lines, property rights, and the location of water bodies will similarly rise.  Whether these cases ultimately create that clarity or simply add to the existing confusion remains to be seen.  

Sierra Madre Lets Voters Decide Breadth of Eminent Domain Power

Sierra Madre will allow its citizens to decide whether the city can use the power of eminent domain for private purposes.  According to a Pasadena Star-News article, "Sierra Madre resident[s] will vote on eminent domain," the city council agreed to put a proposed measure on the April 2010 ballot which would prevent the city from (1) condemning property and turning it over to a private developer, and (2) funding or cooperating with any other city agency using eminent domain (such as the Redevelopment Agency).

According to the article, City councilman John Buchanan is quoted as saying:

Taking one person's private property to hand it to another is morally questionable, to say the least.

Wondering why the city does not simply pass an ordinance prohibiting the use of eminent domain for private purposes if the board members are against such use?  The answer, apparently, is that the board considered doing so in reaction to Kelo, but ultimately determined such an ordinance could be overturned by future city councils.  If the measure is passed by the voters, it would be much harder to overturn.

Sierra Madre is not the first city to consider prohibiting the use of eminent domain for private purposes.  In fact, its proposed measure is modelled after the City of Yorba Linda's 2008 Measure BB, which was passed with nearly 80 percent approval.  And in 2007, Arcadia voters banned the use of eminent domain in the city's downtown redevelopment area.

What a California Eminent Domain Lawyer is Thankful For

So it's the Wednesday before Thanksgiving, and I thought I should spend some time thinking about what I'm thankful for (apart from Cal's victory at Stanford last Saturday).  Here's a list of three things an eminent domain attorney can be thankful for:

1.   I Live in a Country With Eminent Domain.  I know, who spends time being thankful for eminent domain?  But think about it.  In many places, the government just takes property, paying nothing.  Even in this country, before it was this country, when the Pilgrims took land from existing Native American tribes just after inviting them over for a Thanksgiving feast.   I'm sure the Native Americans did not feel a turkey dinner qualified as just compensation.  OK, so this may not be quite how the story of the first Thanksgiving played out, but you get my point -- and I am thankful that I live in a country where the government is required to pay just compensation for private property.  (If you really want to get lost in the internet debate about Thanksgiving, you can spend hours.)

2.  I Live in a State With Business-Goodwill Recovery.  In California, we now take for granted that business owners displaced by eminent domain may seek compensation for lost business goodwill.  But the courts have routinely held that this is not a constitutional requirement, and until California adopted Code of Civil Procedure section 1263.510 in 1975, business owners devastated by eminent domain were largely out of luck.  Even today, most states do not provide a mechanism for businesses to recover lost goodwill. 

3.  I Live in a County That Has Used Eminent Domain in Creative, and Helpful, Ways.  I live in South Orange County, and I work in Irvine.  I take the San Joaquin Hills Toll Road to work.  Yes, it costs me money, and I'd prefer that it were free, but without the creativity of the toll road system, the road simply would not exist.  And, since it used to take me as much as an hour (or more) to get to work -- and it now takes 18 minutes -- I am thankful Orange County has been at the forefront of such creative financing vehicles, and that it has used eminent domain where necessary to make these ambitious projects a reality. 

And, finally, I guess I'm back where I started:  I'm thankful for eminent domain.  After all, without eminent domain, I (and all the other eminent domain attorneys out there) would have a really tough time making a living. 

     Happy Thanksgiving!

Contrary to What Most Partisans Believe, the Use of Eminent Domain for Redevelopment Purposes is not a "Black and White" Issue

It seems most commentators on eminent domain generally, and on the use of eminent domain for redevelopment purposes in particular, adopt an extreme stance.  The loudest voices, especially in the "post-Kelo" world, tend to be property-rights advocates who denounce virtually any use of eminent domain, especially for redevelopment purposes. 

A good example of this appears in a recent San Diego News Network article by Brian Peterson, president of the Grantville Action Group:  "What we Learned at a Redevelopment Conference:  Don't do E-mail."  The article summarizes two "redevelopment conferences" hosted by the Municipal Officials for Redevelopment Reform, an organization described as a "state-wide, anti-redevelopment abuse organization[]."   The article contains some very good advice regarding making a record of potential abuses and, specifically, advises owners facing condemnation to present their arguments to the condemning agency in writing. 

The article correctly notes that detailed written comments will typically have greater impact than oral comments, made under the constraints of a public hearing -- which may allow a speaker only about three minutes to state his or her case. 

Though the article does not expressly state it, I would strongly advise any landowner facing eminent domain who wants to challenge the project to make sure he or she has an experienced eminent domain attorney participate in preparing the written submission.  It is far too easy to make a procedural error even at this early stage that could impact the likely success of a subsequent right-to-take challenge

The article also warns that emails are suspect, citing anecdotal evidence that emails may routinely go unread:

For a while now, there has been the suspicion, and some evidence, that City Council offices are not opening all constituent e-mails.

It is the article's "big picture," however, that causes me concern.  The article claims "there have been 346 abuses of eminent domain in California" since the Kelo decision, and it implies that a primary reason for this is because "California is one of the few states to not reform eminent domain in any meaningful way following Kelo." 

I don't know what the 346 examples of "abuse" are, though I am confident that many of them would qualify as abuse under any reasonable definition.  I am equally confident, however, that many examples of eminent domain -- including eminent domain for redevelopment purposes -- yield massive benefits for the public, and should be applauded, not condemned.  

In the end, we would all be better off if those with extreme viewpoints on this issue (on both sides of the debate) would step back and analyze each individual situation on its own merits: 

  • Redevelopment agencies would be well served to examine more closely whether eminent domain is really necessary, and whether the public benefit to be gained really is substantial enough to warrant throwing someone out of their home or business; AND
  • Property rights advocates should pause to examine the benefits a redevelopment project will generate and decide whether those benefits could be obtained without the use of eminent domain (often, they cannot) before claiming another "abuse" has occurred. 

Ultimately, if redevelopment agencies choose their projects wisely, and use eminent domain only when truly necessary, the real debate should focus on ensuring owners receive proper compensation for their properties and businesses, not on trying to stop the projects.  And, to the extent California requires more eminent domain reform, the place to look may well be in the rules regarding how compensation is derived, not in the circumstances in which the government can condemn. 

For Anyone Who Hasn't Had Enough of Kelo Yet

Why would this (or any other) blog need another post about Kelo v. City of New London.  It probably doesn't, which is why this will be short. 

But, for anyone who still wants more of the story behind Kelo, the soon-to-be-closed Pfizer facility, or the heated arguments they engender, the New YorK Times ran an extended piece, A Turning Point for Eminent Domain? on November 12 that contains a number of different, high-level views on the subject.  (It also contains plenty of less than high-level views, as the story had generated 55 comments within just a few hours of its posting.) 

And, for anyone who still wants more, New York Times reporter Patrick McGeehan wrote another November 12 article, "Pfizer to Leave City That Won Supreme Court Land-Use Case," which focuses, oddly enough, on the Pfizer part of the tale. 

A Train Ride in a World Without Eminent Domain

There are any number of property rights advocates who believe eminent domain is always wrong, and should never be allowed.  As an eminent domain lawyer who sees how eminent domain works both from a landowner and from an agency perspective, I find it hard to understand that extreme viewpoint.   Does eminent domain abuse occur?  Of course.  Are there situations where agencies condemn things they should not condemn?  Absolutely.  Would the infrastructure needed for modern society exist without eminent domain?  Maybe not.  And thus, the story of a world without eminent domain:

Nancy was excited as she headed to the new train station. For years, she had awaited the much-anticipated rail line linking her town of Dullsville to Excitementown, 100 miles away. She arrived at the station and asked for a ticket to Excitementown. The ticket agent began printing a stack of paper, and when he handed it to her, he explained the 100-mile trip:

You will get on Train A here in Dullsville at 8:00 a.m. and travel 20 miles. Then, you will get off the train and walk ¾ of a mile to the next station, where you will board Train B. Train B will cover the next 35 miles of the trip, but it will take four hours due to a pair of 50 miles detours. When you arrive at the station, you will have a 12-hour wait, after which you will continue on to Excitementown, where you will arrive at 4:00 tomorrow morning.

 

Nancy could not believe what she heard. “Twenty hours to cover 100 miles. How is that possible?” The polite agent then explained that at the 20-mile mark, there was a landowner who refused to sell the right-of-way at any price, and surrounding mountains made it impossible to go around his property. He did agree to allow people to walk across his property to the next station, ¾ mile away, for which he charged $5 per person (that fee was included in the ticket price). The next segment was routed around two other owners who refused to sell, creating the long detours. And, finally, there was another owner who agreed to allow trains through his property, but only from 2:00 to 3:00 a.m.

Obviously, this is a fictional, exaggerated account, but the problem is real, especially for large infrastructure projects such as railways, roads, and highways, where providing a means to deal with owners who refuse to sell is crucial, or the projects, regardless of how badly needed, might never get built. Obviously, the Dullsville-Excitementown line described above would never have been built as described, but if even one of those “unwilling owner” situations existed in a world without eminent domain, the outcome would have been no rail line at all
 

Power Struggle Developing Over Who Can Sell Power

One of the oddities of California's public utility system is that private companies own and operate many of them, yet they behave very much like governmental entities, especially when it comes to eminent domain.  Major examples include Southern California Edison and Pacific Gas & Electric ("PG&E"); both are private companies functioning as public utilities, delivering electricity to their constituents, and both are overseen by the Public Utilities Commission

Occasionally, an actual governmental entity will seek to replace the private utility company.  Such is the case with the South San Joaquin Irrigation District ("SSJID"), which is exploring the option of acquiring some PG&E facilities in an effort to reduce the cost of providing electricity to customers in Manteca, Ripon, and Escalon.  According to Manteca Bulletin Managing Editor Dennis Wyatt, in his October 26 article "LAFCO legal study key to SSJID:  May decide who powers South County economy," SSJID is seeking to acquire PG&E's power infrastructure in the area for $79.5 million, though PG&E claims its facilities are worth more than $300 million. 

One of the key issues in the dispute is whether SSJID can -- or should -- exercise the power of eminent domain to condemn PG&E's facilities if the parties cannot reach an amicable agreement.  Mr. Wyatt's article also notes that SSJID has focused some attention on the irony of PG&E objecting to the use of eminent domain:

The SSJID has said if eminent domain does become an issue it will only be between the district and PG&E. The SSJID also notes PG&E uses eminent domain to take property it wants for everything from power lines to substations when people do not want to sell.

The matter is likely to go before the San Joaquin County Local Agency Formation Commission sometime in Spring 2010.  If the Commission decides that SSJID has the authority to enter the retail power business, the real battle between SSJID and PG&E may ensue, and eminent domain attorneys may find themselves at the heart of the battle.   

Kelo Revisited: What Has Changed Since June 2005?

In June 2005, the United States Supreme Court issued its now infamous decision in Kelo v. City of New London.  That decision made eminent domain and condemnation household terms (imagine my shock at hearing my previously unknown, niche area of practice discussed in normal, day-to-day conversations).  The decision sparked tremendous controversy, as the Court ruled that the City of New London, Connecticut could condemn properties for redevelopment purposes for purely economic reasons. 

In other words, the City did not even pretend that it was acting to eliminate blight (the typical justification for condemnation for redevelopment purposes).  Instead, the City proclaimed that the new development would generate more tax revenues than the existing development (largely, single-family homes), and that the increased tax revenue was, in and of itself, a "public use" justifying the takings.  The Supreme Court agreed. 

What followed around the country was a wave of eminent domain reform, designed to protect against the "evil" that Kelo allowed.  Most reformers never bothered to realize that what happened in Kelo was already illegal in most states, including California.  Specifically, even before Kelo, California law prohibited the condemnation of property for redevelopment purposes unless the property was blighted

Now, four years later, many states have enacted at least some form of Eminent Domain reform; California has passed several moderate reforms that have narrowed somewhat condemnation for redevelopment, and that have added some procedural protections for property owners.  In 2008, California voters approved Proposition 99, the more moderate of two proposed eminent domain initiatives

And as for Susette Kelo and her famous pink house?  She moved across the Thames River to Groton, and her house was moved about two miles for preservation. 

And the economic boom the massive redevelopment project would create?  It hasn't happened.  Though some of the redevelopment area has been re-built, much of it lies as an abandoned wasteland, with no immediate plans to build anything. 

Associated Press writer Katie Nelson describes the area in her October 4 article "EMINENT DOMAIN: Poetic justice, or sour economy?":

Weeds, glass, bricks, pieces of pipe and shingle splinters have replaced the knot of aging homes at the site of the nation's most notorious eminent domain project.

There are a few signs of life: Feral cats glare at visitors from a miniature jungle of Queen Anne's lace, thistle and goldenrod. Gulls swoop between the lot's towering trees and the adjacent sewage treatment plant.

Who knows whether New London will ever reap the financial rewards promised.  In the meantime, Eminent Domain reform seems to have died down (especially in California) and the Eminent Domain lawyers of the world are once again fading into relative obscurity.

Photo credit: Historic Buildings of Connecticut

San Ysidro Contemplates Extension of its Eminent Domain Powers

The City of San Ysidro, a community on the border of San Diego, is currently contemplating whether it should extend its eminent domain powers, which expired last year.  The backlash from the Supreme Court's decision in Kelo v. City of New London appears to still be taking its toll, as the City's advisory committee, the San Ysidro Project Area Committee, is currently deadlocked on the topic.

Liam Dillon covers the story in a Voice of San Diego article, Masters of Their Domain, which provides some great examples of the positives and negatives of the City's use of eminent domain.

For example, community members touted some San Diego projects that likely could not have been accomplished without the power of eminent domain:

Proponents also touted that the power may be necessary in order to:

  1. Build a new football stadium for the San Diego Chargers, and
  2. Redevelop some commercial corridors where there is a high concentration of crime

On the other hand, community members voiced concerns about broken promises and perhaps misguided projects, such as the non-construction of a needed library and mixed-use projects, which were planned in the City of Villages concept.