Defining the Rules for Admissibility for Speculative Future Damages
Posted in Court Decisions

Earlier this year in City of Livermore v. Baca, the California Court of Appeal held that as long as an expert can identify damages arising from a taking or public project, those damages likely will not qualify as speculative, and they can be presented to a jury in an eminent domain action.   Did this broad holding turn upside down traditional rules of admissibility and recovery of damages, or did it just affirm existing law?  And how will courts apply Baca in the future?  Two recently issued unpublished appellate decisions may help guide the way.

The Superior Coatings Decision

Last week, the California Court of Appeal, Division 3, issued an opinion in Superior Coatings v. Los Angeles Unified School District, which helps serve as a reminder that not everything goes to a jury; in fact, not everything can even survive a demurrer at the pleading stage. 

In Superior Coatings, LAUSD was constructing a new school adjacent to Superior Coatings' wholesale paint business.  Superior Coatings was concerned that by having a new school adjacent to its business, it would be prohibited from engaging in its typical business activities which involve the release of volatile organic compounds (VOC's).  It feared that once the school opened, it would be put out of business.  Superior Coatings filed an inverse condemnation action against the school district.  

The trial court granted LAUSD's demurrer to Superior Coatings' inverse claim, holding that it was not ripe as "nothing has happened yet.  There's been no taking on the alleged condemnation."  The Court of Appeal agreed, noting that the "allegations are purely speculative — they purport to anticipate damages that Superior may suffer at some point in the future."   Such theoretical speculation does not amount to a taking or damaging under the law of inverse condemnation.  

The Castle & Cooke Decision

Last week, the California Court of Appeal, this time from Division 2, also issued an opinion addressing the admissibility of speculative damages.  The case, Santa Ana Watershed Project Authority v. Castle & Cooke Lake Elsinore West, involves a direct taking wherein the issue presented was whether the property owner's severance damages claim was too speculative or remote to make its way in front of the jury. 

The agency sought to acquire a non-exclusive easement for a waste water pipeline, and before trial, the agency filed motions in limine to exclude the owner's severance damages claims.  In particular, the owner claimed severance damages due to the inability to build on the easement areas, the potential of the pipeline rupturing, the potential impact on grading of the site, the required disclosure to prospective buyers of the waste pipeline in the property, and the pipeline's causing increased difficulty in connecting utilities to the property. 

The trial court rejected the admissibility of the owner's claims, finding them too remote and speculative.  On appeal, the Court reversed, explaining that a willing buyer would take into account the factors of severance identified by the owner, and these factors therefore could affect the remainder's fair market value.  The Court held that the disturbance caused by the agency's pipeline was real; it was not remote, speculative or conjectural, and therefore it should have been presented to the jury to determine the impact, if any.

Conclusion

So this brings us back to the beginning; do Superior Coatings v. LAUSD and Santa Ana Watershed v. Castle & Cooke clarify or limit the broad City of Livermore v. Baca holding?  Possibly.  Two points of clarification:

First, because Superior Coatings' case arose in an inverse condemnation setting, it was first required to clear the hurdle of demonstrating that the agency has, in fact, taken or damaged its property.  This hurdle was not required in Baca (a direct condemnation action where there was a taking), which likely played a role in the different outcomes. 

Second, Superior Coatings' claims involved speculative future damages that may or may not occur, whereas the owner's claims in Baca -- like those in Castle & Cooke -- involved arguably speculative damages, but damages that had occurred, at least in the opinion of the owners' appraisers.  

By the way, congratulations on the win to our colleagues at Murphy & Evertz (John Murphy, Doug Evertz, and Brad Grabske), who represented LAUSD, and Cox, Castle & Nicholson (Ed Dygert, Ken Bley, and James Repking), who represented Castle & Cooke.

 

California Eminent Domain Report is a one-stop resource for everything new and noteworthy in eminent domain in California. We cover all aspects of eminent domain in California, including condemnation, inverse condemnation, and regulatory takings. We also keep track of current cases, project announcements, budget issues, legislative reform efforts, and report on all major California eminent domain conferences and seminars.

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