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

A May 14 decision by the Ninth Circuit Court of Appeals clarifies the rules regarding when a plaintiff may sue for inverse condemnation in federal court.  In Adams Bros. Farming v. County of Santa Barbara No. 09-55315 (May 14, 2010), the Court rejected an inverse condemnation claim brought against the County, where the County allegedly effected a taking by improperly designating part of the owner's property as wetlands. 

The case involves a long, fairly tortured history that dates back to the late 1990's, when the County (apparently erroneously) designated about 95 acres of "Rancho Meadows" as a wetland.  In 2000, the owner sued the County in state court, claiming that the designation (1) constituted a taking, (2) violated the owner's due process rights, and (3) violated the Equal Protection Clause.  The court dismissed as unripe the takings claims, and after a trip up to the Court of Appeal, the case went to trial in 2004 on the due process and equal protection claims. 

The jury awarded the property owner $5.4 million, but the Court of Appeal reversed, holding that the owner lacked standing to pursue the due process and equal projection claims because it did not own the property at the time the wetlands designation occurred. 

Having lost on appeal in state court, the owner sued in federal court, claiming, again, that the designation qualified as a taking.  The Ninth Circuit rejected the trial court's conclusion that the takings claim was not ripe, but went on to conclude that the claim was barred under principles of res judicata, notwithstanding the fact that the state court never reached the merits of the takings claim. 

The holding arose from the fact that res judicata applies whenever the issue litigated in the prior action involves the same "primary right."  In other words, it did not matter that the state court found the takings claim unripe; what mattered was that the due process and equal projection claims (which were fully litigated) arose from the same fundamental claim as the County's designation of the property as a wetland:

The damages that Adam Bros. now seeks to obtain in federal court are identical to those it sought in state court.  For purposes of res judicata, it is irrelevant that Adam Bros. attempts to recover under different legal theories.

The silver lining for the owner:  though the state court reversed the $5.4 million damages award, it upheld injunctive and declaratory relief, invalidating the County's wetlands determination.  

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A decision this week by the California Court of Appeal holds that a purchaser of property suffering damages through government conduct may not sue for inverse condemnation where:

1. The buyer knowingly purchases property impacted by a government taking, and
2. The purchase price reflects the property’s condition in light of the government impacts.

In Ridgewater Associates, Inc. v. Dublin San Ramon Services District (May 11, 2010) __ Cal.App.4th __, it was largely undisputed that the District's waste water treatment facility caused water intrusion damage on a neighboring warehouse property.  Unfortunately for the property's owners, they failed to account for the inverse condemnation claim when the property sold.  The buyer discovered the problem during due diligence, and the seller agreed to a price reduction to account for the damages. 

However, the seller did not clearly assign its inverse condemnation claim to the buyer as part of the transaction.  Thus, when the buyer closed escrow and proceeded to sue the District in inverse condemnation, the Court of Appeal upheld a summary judgment in the District's favor.  The court held that the buyer lacked standing to seek compensation for damages accruing before close of escrow but, more importantly, also held that the buyer could not recover for damages accruing after close of escrow because the buyer was not damaged.   The court concluded that the reduction in the purchase price qualified as "compensation" for the "loss." 

Had the parties cleanly assigned the seller's rights to the buyer, this should not have been a problem.  In Ridgewater, however, the parties’ failure to address these issues provided the government agency with a “free pass” for what amounts to an ongoing taking of the property.  

For more information about the case and its implications, take a look at our E-Alert, Buyer Beware: Improper Sale Documentation Results in Waiver of Inverse Condemnation Claim.

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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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