California Eminent Domain Report : a blog following condemnation, inverse condemnation, and regulatory takings written by attorneys with Nossaman LLP.

We're looking back on 2011's wild ride and looking forward to the twists and turns still in front of us in 2012.  We've summarized all of this into the 2011 version of our annual Eminent Domain Year in Review piece.

For those who don't want to take the time to read the actual article, here are a few of the highlights:

• In January, Governor Brown proposed eliminating redevelopment agencies.  In June, he finally got legislation to accomplish that goal.  In August, the Supreme Court agreed to hear a legal challenge to the new law.  And on December 29, the Supreme Court upheld the law dissolving California's redevelopment agencies, while simultaneously striking down a companion law that would have provided agencies a "pay for play" mechanism to buy back into the system. 
• For the first time, a California court imposed liability for a regulatory taking under the three-part Penn Central test.  The Avenida San Juan Partnership v. City of San Clemente, 201 Cal.App.4th 1256 court held that the city's efforts to down zone a property to preclude its development triggered liability under Penn Central.
• In Galardi Group Franchise & Leasing, LLC v. City of El Cajon, 196 Cal.App.4th 280, the Court reaffirmed the rule that a claim for lost business goodwill must derive from the operation of a business on the property, precluding goodwill claims by a franchisor.  However, the court also held that the franchisee could assign its goodwill claim to the franchisor, allowing the franchisor to make a goodwill claim in the name of its franchisee.
• In Los Angeles County Metropolitan Transportation Authority v. Alameda Produce Market, 2011 Cal. LEXIS 12171, the California Supreme Court held that one party's withdrawal of a condemnation deposit does not result in the waiver of any other party's right-to-take challenge, despite the general rule that withdrawal of a condemnation deposit effects such a waiver pursuant to Code of Civil Procedure section 1255.260.

For 2012, we expect considerable focus on the fallout from the Matosantos decision as the unwinding of California's redevelopment infrastructure is dismantled (subject to the success of the legislative efforts to modify the new law).  We also expect continued development of the regulatory takings law, with a possible renewed focus on Penn Central. 

Finally, we expect an increasing split in the way the public views eminent domain, with Kelo torch bearers coming down swiftly on perceived "bad" uses of eminent domain (and, in particular, any version of redevelopment-based eminent domain that might arise from the ashes of 2011).  But for traditional uses of eminent domain for public infrastructure projects, we expect increasing support for such projects, as the public sees the public benefits - and job opportunities - massive infrastructure projects can generate. 

If you want more, go ahead, click the link and read the entire article (you know you want to). 

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Before a public agency can exercise the power of eminent domain, it must adopt a resolution of necessity making certain findings in support of the taking of property.  The resolution defines the scope of the agency's acquisition, and the agency is typically prevented from contradicting the terms of the resolution in the eminent domain action.

There is a delicate balancing-act in drafting the scope of the taking in the resolution.  If the scope is too narrow, the agency may ultimately need to go back and acquire additional rights or property.  On the other hand, if the scope is too broad, it provides an opportunity for property owners to present a claim for much greater damages.  We've seen numerous eminent domain cases go to trial based on a dispute as to the scope of the take and what actions the resolution of necessity allows the condemning agency to undertake.  

A recent unpublished California Court of Appeal decision, People ex rel. Department of Transportation v. 927 Indio Muerto, provides an example of an eminent domain case going to trial primarily based on a dispute over the interpretation of the terms of a resolution of necessity.  The case involves Caltrans' acquisition of a fee and easement interest in a portion of property in an effort to expand Highway 101 in Santa Barbara County.  The resolution of necessity adopted by the California Transportation Commission provided that the acquisition included the right to enter the owner's remaining property at any time within 120 days after an order for possession or final judgment to complete work related to the project.

The court granted Caltrans' motion for prejudgment possession, the tenants on the property were temporarily relocated, and upon completion of the project, the tenants returned to the property.  The 2,600 square foot easement portion of the acquisition was paved with concrete and Caltrans allowed the tenants to utilize this area for their business operations.

At trial, Caltrans' appraiser testified that as a result of the acquisition, the businesses suffered no loss of goodwill.  The business' appraiser testified they suffered a $710,000 loss of goodwill.  The jury awarded the business $75,000 for loss of goodwill.  The owners and tenants appealed on a number of issues, primarily based on the terms of the resolution of necessity. 

1. Did the Resolution of Necessity Authorize Caltrans to Re-Enter the Property?  The owner contended that the resolution of necessity was vague and could be interpreted to allow Caltrans to re-enter the owner's property for 120 days after final judgment.  The owner sought compensation accordingly.  The trial court refused to give this instruction, instead interpreting the resolution as giving Caltrans the authority to either enter (i) after an order for possession or (ii) after final judgment.  Since Caltrans entered after an order for possession, Caltrans had no right to re-enter after a final judgment, and the owner was not entitled to compensation based on such an interpretation.  The Court of Appeal agreed this was the appropriate reading of the resolution of necessity.
2. Did the Court -- as Opposed to the Jury -- Appropriately Define the Scope of the Easement?  The trial court made a finding that the resolution of necessity allowed the property owner and businesses to continue to utilize the area of the property encumbered by the easement, and it instructed the jury to issue its determination of just compensation based on this instruction.  The owner claimed that the jury -- not the judge -- should have decided this issue.  The Court of Appeal concluded this was an issue appropriately determined by the judge, not the jury, since the jury is solely to determine just compensation.
3. Was the Court's Interpretation of the Scope of the Easement Supported by the Evidence?  The property owner also argued that the trial court's interpretation of the scope of the easement -- that the owner/business could use the area for future business operations -- was simply contrary to the evidence.  The Court of Appeal disagreed, concluding there was substantial evidence that the businesses could continue to use the easement area, and in fact they were doing so at the time of trial. 

In this case, the trial court and the Court of Appeal both interpreted the resolution of necessity in favor of the condemning agency.  The agency likely benefitted from the fact that the project had been completed prior to trial and therefore it was much easier to rely on what had actually happened when interpreting the scope of the resolution.  If the trial took place before construction, the result might not have been as clear.  The case serves as a good reminder to closely review the scope of the proposed resolution of necessity before it is adopted.  

(NOTE to Business Appraisers:  you may want to read the opinion as there is a useful discussion about the exclusion of the business' appraiser's testimony regarding loss profits due to speculation.)

UPDATE:  On December 2, 2011, the Court of Appeal order this previously unpublished opinion publiblished.  The case is now citable precedent, Joffe v. City of Huntington Park (2011) 201 Cal. App. 4th 492.

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It is pretty common, at least in California, for a business being displaced by an eminent domain proceeding to seek compensation for loss of business goodwill.  But what happens when the "business" is a non-profit organization?

In Cathedral City, the city has plans to acquire a property on which a longstanding thrift store sits.  An August 17 article by Colin Atagi in The Desert Sun, Cathedral City plans may push Angel View move, opens:

A Cathedral City thrift store that's older than the community itself may relocate if the city acquires the property through eminent domain.

While the parties do not appear to be too far away on the price of the real estate, the Angel View Thrift Mart that operates on the property is concerned about finding a location that will allow it to maintain the level of sales - and donations - they receive at their current location. 

While it sounds like both parties want to find an amicable resolution, the facts do raise an interesting legal issue.  If the parties cannot reach a deal, and if the city condemns the thrift store property, forcing its relocation (or, if no relocation site can be found, closure), can the store - which, by definition, has no profits - make a claim for lost business goodwill?

Without addressing whether the thrift store involved has a viable claim (I know nothing about the situation other than what I've read in the August 17 article), the short answer is yes.  A non-profit can maintain a claim for loss of business goodwill. 

While profits and goodwill often go hand in hand, California's business goodwill statute, Code of Civil Procedure section 1263.510, actually makes no mention of the word "profit."  Rather, California defines goodwill as:

the benefits that accrue to a business as a result of its location, reputation for dependability, skill or quality, and any other circumstances resulting in probable retention of old or acquisition of new patronage.

Thus, even though a non-profit can never have profit, this does not preclude recovery for lost business goodwill.  This does not mean that all charitable organizations possess goodwill, or that they will lose goodwill if forced to relocate, but it is possible.  In fact, we've handled cases in the past for churches in which we established that the church possessed goodwill. 

CAVEAT:  While I am confident that the above analysis is correct, I am not aware of any reported California eminent domain opinion squarely holding that a non-profit can recover lost business goodwill.  (I'm also not aware of a published opinion holding that they cannot.)  

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We've completed our analysis of the Galardi case and have some additional thoughts about the decision and its potential larger impact.

The real debate we've been having internally is whether Galardi can be read as signaling a change in the law concerning broadly worded waivers in condemnation clauses.  Many commercial leases contain broad waivers, skewed towards landowners.  Provisions such as "in the event of condemnation, tenant waives all rights to compensation" are not uncommon.  

Until now, even the broadest wavier imaginable has not affected the tenant's right to seek lost goodwill.  Though finding any actual law standing for this proposition is a challenge, to say the least, there seems to be no real dispute in the eminent domain community on this point.  (If you really want a case cite, the closest we can come up with is Chhour v. Community Redevelopment Agency (1996) 46 Cal.App.4th 273, in which a tenant was permitted to pursue a goodwill claim despite the existence of a broad, general waiver.) 

Good reason exists for treating goodwill separate from real estate claims subject to a broad waiver.  Goodwill is a statutory claim that is unique to the business, and has nothing to do with the bundle of sticks that make up the real estate claims.  Moreover, only the owner of a business operating on the property can make a goodwill claim, so in theory, the landlord has no standing to seek lost goodwill.  Thus, while a general waiver can fairly be said to encompass all real estate claims (including the tenant's bonus value), the same cannot be said for goodwill.  

Galardi may change that.  At the very least, it creates a vehicle to argue that a general wavier of the right to compensation effects a waiver of tenant's right to goodwill.  And, since only the owner of a business operating on the property can recover for lost goodwill, courts may also construe such a wavier as an assignment of the tenant's goodwill claim to the landlord, allowing the landlord to sue in the tenant's name, rather than its own.  (Not inferring an assignment would potentially result in a huge windfall to the condemning agency, which would otherwise escape all liability for business goodwill.)  

Until we see a case in which a landlord argues - over the tenant's objection - that it has acquired the tenant's goodwill claim pursuant to a general waiver, it's not clear whether courts will read Galardi so broadly, or whether they will restrict it to franchisee-franchisor situations and/or cases where the lease wavier is coupled with a subsequent, express assignment of the claim (as occurred in Galardi).  

For more, see our E-Alert, Whose Business Goodwill is it? 

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When a business subject to a franchise agreement is condemned, questions often arise as to the allocation of proceeds between the franchisor and franchisee.  When the question involves payment for lost business goodwill, the courts have placed strict limits on the franchisor's ability to recover. 

In particular, courts have long held that a franchisor cannot make a claim for lost business goodwill because the franchisor fails one of the key entitlement prongs:  the franchisor does not operate a business on the property.  (See Redevelopment Agency v. International House of Pancakes, Inc. (1992) 9 Cal.App.4th 1343.) 

In an opinion issued this week, Galardi Group Franchise & Leasing, LLC v. City of El Cajon (June 7, 2011, Case No. D056737), the court focused on two purported twists to the longstanding IHOP rule:

1. The Weinershnitzel franchisor structured the franchise agreement to make it appear that the franchisor had an ownership interest in the business, going so far as (a) to include a condemnation provision with a blanket waiver by the franchisee of any right to recover for business goodwill, and (b) to limit the franchisee to a month-to-month rental of the property, while the franchisor retained ownership of everything, down to the fixtures and equipment.
2. After the condemnation commenced and the restaurant was closed, the franchisee expressly assigned its right to recover lost business goodwill to the franchisor.

The court was not swayed by the franchisor's creative structuring, applying the IHOP rule to bar the franchisor from making a business goodwill claim in its own right.  Despite the lengths the franchisor went to, it still failed to meet the test of operating a business on the property.

With respect to the assignment, the trial court rejected that claim as well, concluding that the franchisee's waiver of its right to recover lost goodwill in the franchise agreement meant that the franchisee had no claim left to assign once the inverse condemnation action took place.

The Court of Appeal disagreed, concluding that the parties' intent to assign the goodwill claim to the franchisor appeared both in the franchise agreement and in the specific assignment once the inverse condemnation action was commenced.  The Galardi court found no reason the franchisee could not assign its goodwill claim, and it held that the franchisor could pursue the claim, standing in the franchisee's shoes. 

We'll have more to say about this opinion and the impact it may have on future cases, but for now, we just wanted to get a quick summary out there.  In the meantime, if you must know more about the case immediately, take a look at Robert Thomas' blog post, Who "Owns" the Weinershnitzel?

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It's been a crazy couple weeks with the redevelopment saga continuing to play out in California.  But let's shift gears and take a breather -- at least for a moment -- while hundreds of redevelopment agencies continue to hang on for dear life.

I received a call today from a business owner who faced a potential eminent domain action, and the owner unforntuately did not take the appropriate steps to preserve goodwill and find a suitable relocation site.  The owner's difficult dilemna prompted me to mention an excellent article I came across a while ago from Martyn Daniel LLC, which specializes in eminent domain and business relocation consultation.  

The article, "Top 10 Eminent Domain Business Relocation Mistakes," provides a Letterman-like top ten list of common and costly mistakes business owners make when faced with the possibility of relocation.  Any business owner facing condemnation should become familiar with the article, as it is a great roadmap for what to do -- and more importantly -- what not do when planning a relocation.

One of the most delicate balancing acts for a business owner is planning ahead to deal with the move, while at the same time not spending too much time or money on a planned relocation until the business become eligible for relocation benefits.  This eligibility is usually triggered when the owner receives a "Notice of Eligibility" or a "Notice of Intent to Acquire."  If it acts before receiving that notice, the agency may claim that the owner is out of luck if the agency decides not to pursue the acquisition.

Relocation consultants, right-of-way agents, and most of all, impacted business owners, should spend the time to read the top-ten article.  See what you think.  If you have any additional recommendations, let us know and we'll post them here on the Blog.

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Business goodwill appears to be a hot topic for the California Court of Appeal, as it was the primary issue in the recent LAUSD v. Casasola opinion, and is again the focus of an unpublished decision that came down last week, People Ex Rel. Department of Transportation v. Ahn.

In Ahn, Caltrans condemned a shopping center where Ahn owned and operated a framing store and art gallery.  After Caltrans took possession, the owner transferred to a relocation site.  At trial, Caltrans' goodwill expert determined the business had $26,000 of goodwill in the "before condition," and no goodwill in the "after condition."  The owner's goodwill appraiser calculated the figures at $83,000 and $0; however, he also concluded the owner was entitled to $323,000 in additional compensation for mitigation expenses, consisting of loss of income, loss of inventory, labor, relocation expenses, cost of capital, and lease payments. 

1. A business owner should take great care before expending money on mitigation efforts, ensuring that the expenses do not exceed the amount of goodwill the business possesses, as expenses that exceed the initial goodwill value may not qualify as reasonable.  Of course, from a business owner's perspective, this "cap" may be impossible to ascertain at the time the mitigation is necessary, especially when the efforts take place early in the litigation and prior to having a full appraisal completed.
2. A business owner should take care to establish that items for which they seek to recover as lost goodwill do not fall within the scope of the Relocation Act.  Under Casasola, it is crucial for owners to take steps to ensure that any mitigation claim can be explained as something that does not fall within the Relocation Act.  This is especially problematic for costs to render a site suitable for a business, expenses which qualify as "reestablishment" costs, but which the Relocation Act caps at only $10,000.

The bottom line for any business being displaced by condemnation is that it should hire a qualified eminent domain lawyer early in the process -- and certainly before spending any significant money on a relocation. 

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In Los Angeles Unified School District v. Casasola (Aug. 5, 2010), the Court of Appeal examined the interrelationship between recovery of lost business goodwill pursuant to Code of Civil Procedure section 1263.510 and recovery of relocation expenses pursuant to Government Code section 7267 et seq. 

My colleague, Gale Conner, prepared a good summary of the Casasola case detailing the facts and the Court's reasoning.  The bottom line is that the Court held that items that might be recoverable under the Relocation Act cannot be included in a claim for loss of business goodwill. 

At first glance, this does not seem surprising.  Section 1263.510 contains an express limitation that a goodwill award not be duplicative of relocation benefits.  And nearly 20 years ago, the court in Redevelopment Agency of the City of Emerville v. Arvery Corporation (1992) 3 Cal.App.4th 1357 held that expenses that could be recovered under the Relocation Act must be excluded from an award of business goodwill. 

But the Casasola opinion expands these concepts, holding that even if the expenses cannot be recovered under the Relocation Act, they are nonetheless precluded under the goodwill statute if they are the types of things that might have been recoverable under the Relocation Act. 

In Casasola, for example, the business owner spent over $1 million on business reestablishment costs to prepare the relocation site.  Since the Relocation Act caps such costs at $10,000, the court held that anything above that amount was not compensable -- under either the Relocation Act or as business goodwill.

The Casasola court concluded that it could not second guess the Legislature's decision to place a $10,000 cap on reestablishment costs by allowing the claim to come in under the guise of the goodwill statute. 

In my mind, this conclusion misses the mark.  Yes, the Relocation Act and section 1263.410 both deal, very generally, with the same subject matter.  But the policies behind the two statutory schemes are quite different, and the court's failure to understand this difference led it down the wrong path. 

Relocation benefits are available to every displaced business, whether that business is profitable or not.  The policy is that a government taking should not force someone out of business, even if the business is not economically viable.  However, the Legislature understandably wanted to draw some lines in this respect, and it capped some of what may be recovered as a relocation expenses (including the $10,000 cap on reestablishment costs). 

Loss of business goodwill is a whole different animal.  Not every business possesses goodwill, and not every displacement causes a business to lose goodwill.  But where a business does possess goodwill, and where the owner can prove that a displacement causes a loss of that goodwill, section 1263.510 makes that loss recoverable.  

The Legislature also placed limits on goodwill recovery, including an express requirement that the business owner take reasonable steps to mitigate the loss of goodwill.   And the goodwill statute contains no $10,000 cap on what the owner must spend in an effort to preserve goodwill.   

All one needs to do is flip the numbers from Casasola to see the problem with the Court's conclusion.  Instead of spending $1,300,000 to preserve $126,000 (as happened there), imagine a business that must spend $126,000 in order to preserve $1,300,000 in goodwill.  If the only viable relocation site for this $1,300,000 business requires $126,000 in reestablishment costs, the business must either (1) shut its doors, or (2) spend the $126,000.  Under section 1263.510, the owner clearly cannot opt to close the doors, claiming a total loss of goodwill; the owner would have failed to take reasonable steps to mitigate.

Thus, the owner must spend the money or its goodwill claim will be barred.  But the Relocation Act makes any such reestablishment costs over $10,000 non-compensable as relocation expenses.  And the Casasola opinion now also makes those costs non-compensable as lost business goodwill. 

Yet, the owner had to incur those costs, and they unquestionably lower the business' value.  (A hypothetical buyer facing $126,000 in relocation costs would clearly pay less than a hypothetical buyer not facing such costs.) 

Moreover, such relocations often do not proceed with such bright lines.  If the owner spends $126,000 out of pocket to render the site suitable, it is presumably an ineligible "reestablishment cost" (now barred under Casasola).  But if the landlord pays those costs as a tenant improvement allowance, subsuming the costs within the tenant's new rent, any increased rental expense qualifies as a classic example of something that impacts goodwill.  (Indeed, the obligation to pay higher rent at the replacement site was a fundamental issue in the first California Supreme Court opinion to address business goodwill claims under section 1263.510, People v. Muller.)  

Should recoverability really come down to whether the tenant pays the costs up front or gets them included within its rent?

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For anyone looking to spend more time on eminent domain issues, there are two upcoming events you may want to consider. 

• For those looking for a one-day commitment, I recommend the IRWA, Chapter 1 2010 Fall Education Seminar, which is taking place on October 26 at the Quiet Cannon in Montebello.  I don't have the full list of speakers yet, but it's always a good event, and my partner, David Graeler, is Chair again this year. I'll be talking about the interrelationship between goodwill and the Relocation Act, using the recent Casasola opinion as a jumping off point (look for a post about that later today). 
• For those looking for two full days of eminent domain excitement, CLE International is holding its 12th Annual Eminent Domain Conference October 28 and 29 at the Hotel Nikko in San Francisco.  I'll be speaking the morning of October 28 on a panel discussion of the Guggenheim regulatory takings case, and the entire schedule looks great. 

And don't forget, summer's drawing to a close, so your local IRWA chapter is likely about to start its regular meetings again.  I know that Chapter 67 (Orange County) has its meeting on September 14 and Chapter 57 (Inland Empire) has its meeting on September 1. 

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The California Court of Appeal issued an interesting unpublished decision yesterday addressing a number of eminent domain issues, ranging from right to take challenges, entitlement to goodwill, severance damages, and jury instructions.  The case, City of San Luis Obispo v. Hanson, garnered enough attention that several third parties filed Amicus briefs with the Court.

By way of background, the City of San Luis Obispo decided to realign a road partly in order to accommodate a newly approved Costco development.  The realignment required right-of-way acquisition from a property on which the Rose Garden Inn operated.  After Costco was unable to reach an agreement with the property's owner on the acquisition price, the City adopted an appraisal (which found no severance damages) prepared by an appraiser hired by Costco, made an offer based on that appraisal, and passed a resolution of necessity to acquire the property by eminent domain. 

The property owner's right to take challenge was unsuccessful, and the case proceeded to trial on compensation.  The trial court found the Inn was not entitled to lost business goodwill, and the jury returned a verdict finding only about a quarter of the amount of severance damages claimed by the owner.

On appeal, the following issues were decided:

• The Road Realignment Met the "Public Necessity" Test:  While the road realignment was partly caused by Costco's project, and Costco would clearly benefit from the realignment, the project still met the "public necessity" test in that the road was needed by the public and the City had considered realignment regardless of the Costco development.
• The City's Adoption of Costco's Appraiser's Value Was Appropriate:  The Court held that the City could adopt the opinion of the appraiser retained by Costco (instead of hiring its own appraiser to value the take), as long as the appraiser was independent and impartial, and the City was not required to turn over the full appraisal on which its offer was based (it was only required to provide a copy of the summary basis of appraisal).
• The City was not Precommitted to Taking the Property by Eminent Domain:  Even though the Costco project was already approved (which required the realignment), the City did not abuse its discretion in adopting the resolution of necessity because it was not precommitted to the taking; the City substantially debated the issue and ultimately could have modified the realignment had it chosen to do so.
• The City's Severance Damages Determination Was Appropriate:  The City's appraiser determined the severance damages suffered solely based on the cost to cure method of valuation, and it assumed that the City would build driveways on the remainder of the property.  The Court held that the appraiser was not required to value the remainder of the property before and after the taking, and that a condemning agency may agree to do work on the owner's property to reduce compensable damages (as long as it does not contradict the resolution of necessity).
• The Trial Court Appropriately Declined to Allow Testimony on the Business' Alleged Lost Goodwill:  The business' goodwill appraiser determined that the business possessed goodwill equal to ten percent of total income, and that all the goodwill would be lost because of the uncertainty of the project.  The court appropriately excluded this testimony because it was already part of the appraiser's calculation of severance damages the business would suffer, and because the appraiser's ten percent figure was arbitrary and could not be supported.
• The Jury Instruction Stating the Costs of the Acquisition Would be Borne by the Public Was Appropriate:  The jury was not told that Costco would be paying the ultimate costs of the acquisition, but instead that the public must pay the compensation.  The Court held this instruction was appropriate, as the jury need not be made aware of Costco's role, and ultimately, Costco may be partly reimbursed by the City if Costco paid more than its fair share of the roadway (since other property owners benefiting from the project must pay a portion as well through assessments/development impact fees).

In all, this was an exciting case for an eminent domain attorney, as it dealt with many issues that rarely occur in one case.  Although the case is unpublished, and therefore cannot be cited as law, it is useful to see how at least one Court of Appeal panel views these issues.

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With plans to demolish the old Carriage Square shopping center and rebuild it with a Lowe's, the City of Oxnard was on the verge of passing a resolution of necessity to acquire by eminent domain the leasehold interests of one of the few remaining tenants of the center.  However, according to an article by Scott Hadly, "Oxnard, credit union likely to avoid eminent domain clash," the City's threat of eminent domain appears to have resulted in a deal with that tenant, Pacific Oaks Credit Union.

In order to force the tenant to relocate and give up its rights under its lease, the City would normally be required to institute eminent domain proceedings and thereafter compensate the tenant for relocation expenses, lost business goodwill, and other forms of damages, such as leasehold "bonus value" (the difference between the tenant's contract rent and the market rent the tenant would be required to pay at the new location).  Here, for example, the tenant believed there would be a $500,000 difference between its rent under its lease and current market rents.

The shopping center property is owned by a private developer, and the City is therefore seeking to acquire the leasehold interests of the tenant on behalf of the developer in order to prompt the property's redevelopment.  The developer would typically be on the hook for any expenses the City incurs through the eminent domain process.  However, in order to avoid such expenses, it appears the developer of the new shopping center and the tenant are putting the finishing touches on a new lease agreement that will relocate the tenant at a reasonable rental rate at a satisfactory location.

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We've previously reported on the City of Vista's moving forward with the use of eminent domain to acquire the Riviera Motel and other properties in order to assemble property for an auto mall.  It appears that the eminent domain dispute has now reached a resolution, as the North County Times is reporting that Vista city council approved a settlement with the motel owner and another nearby property owner.

According to the article, "VISTA: City approves $3.2 million in property purchases," the Riviera Motel owner is receiving compensation of $1.65 million for the .71-acre property, plus $345,000 for fixtures and equipment, business goodwill, and relocation (since the owner lived at the motel).  The owner had previously been offered $1.65 million, so it appears he did not receive any additional compensation for the property's value.  He did, however, receive the additional $345,000 for the other items of compensation.  The owner is also being provided an additional $5,000 for the costs of obtaining an independent appraisal, and the redevelopment agency's promise to contribute $155,000 if the owner decides to open up a new hotel in Vista in the future.

Other property appears to still be needed for the redevelopment agency's plans.

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According to a San Diego Union Tribune article,"City ready to acquire land to widen Plaza Boulevard," National City has adopted resolutions of necessity in order to use eminent domain for the widening of a 1.1-mile stretch of Plaza Boulevard.  37 properties are impacted, although the City has reached agreements with a majority of the property owners.

The expansion project will widen Plaza Boulevard from four to six lanes between Highland Avenue and Euclid Avenue, including a section under the 805 freeway.  The City says widening its busiest commercial corridor will improve safety, increase traffic capacity, reduce congestion, and beautify the boulevard.

The impacted property owners are faced with giving up temporary construction easements, along with portions of their property permanently.  According to the article, however, the owners are more concerned with the construction impacts, such as the project's elimination of a left-hand turn lane in front of a business.  When there is an acquisition through eminent domain, these types of impacts are typically compensated through severance damages to the property owner and business goodwill losses to any business operating on the property.

Interestingly, like we've reported in the past, the City's urgency to begin using eminent domain is once again fueled by the need to pursue stimulus dollars this summer, as the federal government is paying for 80 percent of the project's cost.

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2009 has come and gone.  With it, we moved one more year past 2005's Kelo decision -- and a lot closer to what those of us who have worked in eminent domain for many years consider "normal."  Massive eminent domain reform efforts seem -- for now -- to be a thing of the past. 

The California Legislature passed no substantive changes to California's eminent domain law, and the closest we came to a marquee eminent domain case last year was probably the Marina Towers decision, which was much discussed, but does not represent any sweeping changes to California law. 

Still, there were a few notable decisions, and we have summarized them all in a "2009 eminent domain year in review" piece.  We also forecast some probable trends for 2010, which include a likely increase in overall eminent domain activity as the economy recovers and the stimulus dollars percolate down to the ground, along with continuing court attention on regulatory takings issues. 

For those who want a "checklist" of notable reported eminent domain decisions from 2009, here it is:

• Murphy v. Burch (2009) 46 Cal.4th 157 (Easement by Necessity / Right to Take);
• City of Stockton v. Marina Towers LLC, et al. (2009) 171 Cal.App.4th 93 (Right to Take);
• Hauselt v. County of Butte (2009) 172 Cal.App.4th 550 (Inverse Condemnation);
• Los Angeles Unified School District v. Pulgarin (2009) 175 Cal.App.4th 101 (Business Goodwill);
• People ex rel. Dept. of Transportation v. Acosta (2009) 178 Cal.App.4th 762 (Business Goodwill);
• Kearney v. Foley & Lardner (9th Cir. 2009) 566 F.3d 826 (Discovery);
• Guggenheim v. City of Goleta (9th Cir. 2009) 582 F.3d 996 (Inverse Condemnation / Regulatory Takings); and
• Montara Water & San. Dist. v. County of San Mateo (N.D. Cal. 2009) 598 F.Supp.2d 1070 (Right to Take). 

Finally, for a preview of at least one upcoming 2010 case, watch for the U.S. Supreme Court's decision in Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection.  It will almost certainly generate a lot of attention when it comes down.

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According to a January 10 post on the Fox Rothschild Eminent Domain & Real Estate Litigation Blog, the U.S. Supreme Court is scheduled to hold a conference this week on whether to grant a Petition for Writ of Certiorari on an access-impairment claim arising from a condemnation case in Indiana, Kimco of Evansville, Inc. v. State of Indiana. 

Post author David Snyder explains that the need for Supreme Court review arises from a "general rule" in most states that damages arising from access impairments are not compensable as long as the owner is left with reasonable access, and the belief among many that this "general rule" is fundamentally unfair.

California eminent domain law is generally more protective of condemnees than the law that exists in "most states."  (A classic example of this is California's Code of Civil Procedure section 1263.510, which makes California one of only a handful of states that provides business owners with a right to compensation for loss of business goodwill.)

However, even if California does not track exactly what "most states" do, California access-impairment law is quite a morass.  The "general rule" here is that an impairment must be "substantial and unreasonable" in order to justify compensation.  However, jurisprudence involving what constitutes "substantial and unreasonable" is murky at best, and reading the case law, it quickly becomes clear that courts are loathe to draw any bright, easily-followed lines in this area. 

Moreover, "substantial and unreasonable" need not always apply.  Turning back to business goodwill, it is not clear that business owners must meet that threshold where access impairments impact business goodwill, as section 1263.510, on its face, contains no "substantial and unreasonable" requirement.  

Confusion also exists in California about whether any difference exists between an access impairment by itself, as compared with an access impairment created in conjunction with a partial taking of property.  Ample case law exists to suggest that courts impose a higher level of scrutiny on access-impairment claims that do not involve any physical taking than they do on impairments associated with a physical taking, even though the impacts to property owners may be indistinguishable. 

In the end, California's eminent domain law could certainly use some clarity in this area, though I'm not sure the Indiana case -- even if the Supreme Court decides to hear it -- will make any real difference here.   That said, a Supreme Court ruling that all access impairments affecting value are compensable as a matter of constitutional right would certainly have repercussions across the country.   

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San Bernardino currently has over a dozen overpass or underpass projects planned throughout the county.  Last month, officials had planned to move forward with condemnation proceedings for one such project, the $20 million Hunts Lane overpass located at the Colton-San Bernardino city line. 

But according to a Riverside Press-Enterprise article, "Hunts Lane overpass causes some concern," nearby property owners voiced concern over the railroad grade separation project's impacts to their businesses, such as blocking access and destroying visibility.  As a result, officials have delayed a decision to begin acquiring the necessary property by eminent domain, perhaps in an effort to better understand the project's impacts on nearby property owners and businesses.  

Putting off the condemnation proceedings may just be delaying the inevitable, as officials believe that separating cars on Hunts Lane from the Union Pacific Railroad tracks is crucial to relieving traffic congestion in the area south of Interstate 10.  Construction could begin later this year, and is expected to take around 18 months.

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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!

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When LifeChoices sought to expand its rehabilitation center in 2002, the City of San Jose rejected the proposal, citing its plans for a future Berryessa Bay Area Rapid Transit ("BART") station, which would require freeway interchange improvements on the property.  According to John Woolfolk's October 23 Mercury News article, "San Jose to pay $2 million to acquire parcel and settle lawsuit," five years later LifeChoices' owner, John Licking, filed suit, challenging the City of San Jose's denial as constituting discrimination against the disabled.

Now, San Jose has agreed to pay LifeChoices $2 million for the property to settle the lawsuit and avoid eventual eminent domain proceedings.  LifeChoices will be able to rent the property for $1 a year until it is needed for the freeway improvements.  LifeChoices will also be compensated for the value of the business.  Sound like a great deal for the owner?  According to City Councilman Sam Liccardo, just the opposite might be true.  "[I]t's a bargain" for San Jose: 

"I would characterize this in technical legal terms as a twofer . . . . We're resolving the suit with the added benefit of getting land that we wanted to buy anyway."

While LifeChoices focused on a discrimination claim based on the City's denial of its plans to expand, the case could have been crafted as a claim for precondemnation damages or unreasonable precondemnation delay.  Fortunately, this particular story has a happy ending, as the City purchased property it badly wanted, and the owner received fair compensation.  If the City had changed its mind about its need for the property after delaying the owners' plans for years, the outcome might have been much different.   

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According to Visalia Times Delta reporter Valerie Gibbons, in her October 20 article "Tulare County now wants 11 more parcels on Road 80," Tulare County is moving forward with condemnation plans for 11 properties in order to widen Road 80:

The county has been trying to acquire properties — many of which are in 40- to-60-foot-wide strips, and about a mile in length — since the beginning of 2008. Eighty-five other property owners along the route have reached sale-price settlements.

The widening project, designed to ease congestion between Dinuba and Visalia, has been planned for years.  According to Sarah Jimenez of the Fresno Bee, funds for right-of-way acquisitions were secured in 2006.  Regardless of the traffic problems the project is designed to alleviate, the County's decision to use eminent domain to acquire the final few properties along the right-of-way, is generating considerable controversy.      

According to an October 22 article in the Porterville Recorder,"11 more parcels grabbed for Road 80 project," the County is not taking the decision to use eminent domain lightly:

“It’s a difficult decision to make, but the necessity is there,” Supervisor, Dist. 2, Pete Vander Poel said.

County staff argued that without these parcels the Road 80 Project would be incomplete. The undertaking consists of widening Road 80 from two lanes to four lanes and creating a dividing center median from Goshen Avenue in Visalia to Avenue 416 in Dinuba that will improve traffic flow, alleviate flooding and improve access to Dinuba.

Based on the recent articles, it appears the disputes center not on the need for the project, whether the County should acquire it, or what the County is wiling to pay for the land it is acquiring.  Instead, it appears that owners are concerned largely with severance damages and loss of business goodwill that they believe the project will cause.  Of particular concern to some dairy farmers is that the loss of land will purportedly impact the number of cattle they may have on their remaining property, based on restrictions imposed by state waste-water treatment regulations.

It appears from its published Agenda for its October 27 meeting [PDF] that Tulare County may decide then whether it will expand the scope of the takings to include additional parcels (Ms. Gibbons' article indicates that three additional parcels are being considered).   

Notably, even as it moves towards filing condemnation actions, the County intends to continue negotiations to acquire the properties voluntarily.  In fact, the County reports that it recently began negotiating directly with the remaining owners in response to complaints that the relocation consultants the County hired were not adequately reponding to owners' concerns. 

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