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

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. 

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After a flurry of post-Kelo activity, cries for eminent domain reform seem to have quieted in California in the past couple of years.  Now, public utility companies are seeking to step into the calm in an effort to roll back some of the reforms that did occur. 

One of the recent changes to California eminent domain law involves the procedures for obtaining prejudgment possession.  Before Kelo, agencies could almost guarantee possession quickly.  In fact, they could obtain orders for possession ex parte, meaning they didn't even have to provide owners with notice that they were seeking possession.  Under those rules, by the time an owner learned that an eminent domain case had been filed, the order for possession was often already signed. 

In 2006, the California Legislature passed SB 1210, which changed the prejudgment possession process.  In particular, it

• Extended dramatically the time it takes to get possession (it now takes more than 120 days for occupied property);
• Ensured property owners would receive ample notice before a court considered a motion for possession; and
• Created a new balancing test that required courts to balance hardships in determining whether or not to grant an agency prejudgment possession. 

Public utility companies are now looking for a partial exemption from these new rules.  Assembly Bill 2162, introduced February 18, 2010, by Assemblyman Niello, would allow public utilities to obtain prejudgment possession orders ex parte when “immediate possession will not displace or unreasonably affect any person in lawful possession of the property’s surface estate.” 

AB 2162 had been set for a hearing before the Utilities & Commerce Committee on March 22, but on March 17, the Bill was amended, and yesterday it was referred back to the Committee.  It is not yet clear how much momentum the Bill has, and no hearing date has been set.  We'll let you know what happens.

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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. 

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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. 

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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. 

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The impetus for one of the most infamous eminent domain cases in U.S. history was the City of New London, Connecticut's efforts to utilize a massive Pfizer plant as the basis to revitalize the surrounding area.   (The common myth that Pfizer was itself the intended beneficiary of the Kelo property is not correct.) 

The decision, Kelo v. City of New London, triggered a nationwide backlash against eminent domain when the Supreme Court ruled that economic growth, by itself, qualifies as a public purpose sufficient to satisy the right to take property by eminent domain.

The tale of what followed around the county has been well documented.  Many states passed eminent domain reform in the wake of the Kelo decision.  Less well known is the story of what happend to the "little pink house" at the center of the controversy.  Recently, we reported that the area has not been revitilized as the City of New London imagined. 

Now, another turn of events suggests the revitiliztion may be nothing more than a pipe dream.  Today, Pfizer announced that it is shutting down its 1,400-employee New London facility, creating real doubt that new development is anywhere on the horizon.  In short, leaving aside the debate about the wisdom of the Supreme Court ruling, the Kelo story and its aftermath certainly doesn't seem headed for a happy ending any time soon. 

Photo credit: Historic Buildings of Connecticut

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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

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