California Eminent Domain Report

As originally reported by Robert Thomas at inversecondemnation.com, a petition for certiorari was filed asking the U.S. Supreme Court to address "[w]hat category of takings are subject to heightened judicial scrutiny, and when is the risk of undetected favoritism so acute that an exercise of eminent domain can be presumed invalid?"  While Justice Kennedy brought this issue to the national stage when he raised the possibility of such conduct in a recent concurrence, as of today, and likely tomorrow, the question remains unanswered. 

In Kelo v. City of New London, 545 U.S. 469 (2005), while the U.S. Supreme Court rejected the notion that the promotion of economic development must be treated as per se invalid, or even presumptively invalid, the Court reiterated that a public agency will not "be allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit."  Justice Kennedy elaborated on this concept in his concurrence, stating that "[t]here may be private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause." 

Justice Kennedy, however, did not provide any specific guidance as to when such a presumption is appropriate, concluding that since the taking by City of New London "occurred in the context of a comprehensive development plan meant to address a serious city wide depression, and the projected economic benefits of the project cannot be characterized as de minimis," it was not the proper "occasion for conjecture as to what sort of cases might justify a more demanding standard."

The current petition seeks to have the Court fill that gap, using the Hawaii Supreme Court's decision in County of Hawaii v. C&J Coupe Family Ltd. P'ship, 242 P.3d 1136 (Haw. 2010), as the springboard.  Generally, the case goes like this:

• In exchange for a change of zoning necessary to construct a 1500-plus unit gated development, the developer agreed to construct a bypass highway.
• Shortly thereafter, the County of Hawaii and the developer executed a development agreement providing that the County would use its power of eminent domain to acquire any property along the proposed route for the bypass highway if the developer was otherwise unable to purchase the property.
• Except for the property owned by C&J Coupe Family Limited Partnership (Coupe), the developer was able to obtain all of the property along the route.
• Pursuant to the terms of the development agreement, the County of Hawaii adopted a resolution of necessity and filed an eminent domain action to condemn the Coupe property.  The development agreement was expressly referenced in the resolution of necessity.
• During the pendency of the first condemnation action, the County of Hawaii adopted a second resolution of necessity and filed a second eminent domain action to condemn essentially the same Coupe property.  This time, the resolution of necessity did not make any reference to the development agreement.  
• The court held that the first condemnation was invalid, because the County had unlawfully delegated its sovereign power of condemnation to the developer by way of the development agreement.  The court, however, eventually upheld the second condemnation action, concluding that Coupe had failed to demonstrate by clear and palpable evidence that the public use asserted was a pretext.  In reaching this holding, the court declined to adopt a presumption of invalidity or saddle the County with the burden of proving the validity of its stated public use.  

While the case presents compelling facts, particularly in light of Justice Kennedy's concurrence, the chance of U.S. Supreme Court review remains slim.