When LifeChoices sought to expand its rehabilitation center in 2002, the City of San Jose rejected the proposal, citing its plans for a future Berryessa Bay Area Rapid Transit ("BART") station, which would require freeway interchange improvements on the property. According to John Woolfolk's October 23 Mercury News article, "San Jose to pay $2 million to acquire parcel and settle lawsuit," five years later LifeChoices' owner, John Licking, filed suit, challenging the City of San Jose's denial as constituting discrimination against the disabled.
Now, San Jose has agreed to pay LifeChoices $2 million for the property to settle the lawsuit and avoid eventual eminent domain proceedings. LifeChoices will be able to rent the property for $1 a year until it is needed for the freeway improvements. LifeChoices will also be compensated for the value of the business. Sound like a great deal for the owner? According to City Councilman Sam Liccardo, just the opposite might be true. "[I]t's a bargain" for San Jose:
"I would characterize this in technical legal terms as a twofer . . . . We're resolving the suit with the added benefit of getting land that we wanted to buy anyway."
While LifeChoices focused on a discrimination claim based on the City's denial of its plans to expand, the case could have been crafted as a claim for precondemnation damages or unreasonable precondemnation delay. Fortunately, this particular story has a happy ending, as the City purchased property it badly wanted, and the owner received fair compensation. If the City had changed its mind about its need for the property after delaying the owners' plans for years, the outcome might have been much different.
Brad Kuhn serves as Chair of Nossaman's Eminent Domain & Valuation Group. Brad is a real estate and business litigation attorney, with a particular emphasis in the transportation, energy/gas, water, land-use development, and ...
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