In response to my earlier post on the Pombo decision, I was asked whether complying with the decision to avoid an award of litigation expenses would expose the agency to an illegal gift of public funds claim.
This is an issue that arises with some frequency with public agencies, where people are understandably -- and appropriately -- sensitive to claims that they have misused taxpayer money. In particular, people worry about making an "illegal gift of public funds." This principle arises from the idea that taxpayer money must be used for public purposes; the government cannot simply give that money to a private individual.
In the context of eminent domain, the concern is that agreeing to pay a huge premium over the agency's appraised value exposes the agency to an "illegal gift" claim. Rest assured, this is only a remote possibility, if that. Indeed, I am not aware of any California court ever concluding that an eminent domain settlement constitutes an illegal gift.
As we discuss in more detail in When (if Ever) Does a Payment Become an Illegal Gift of Public Funds? , the government is free to take into account both defense costs and litigation risk in evaluating a possible settlement. As long as the agency can document a legitimate public purpose behind paying more than its appraised value, no illegal gift occurs.
Agencies have enough things to worry about in evaluating whether a particular settlement makes sense, especially in cases where a large gap exists between the parties appraisals -- but a "gift of public funds" is not one of them.
Rick Rayl is an experienced litigator on a broad range of complex civil litigation issues. His practice is concentrated primarily on eminent domain, inverse condemnation, and other real-estate-valuation disputes. His public ...
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