Eminent Domain Report

For the better part of a year, we've been writing about the controversial proposal to use the power of eminent domain to condemn underwater mortgages, allowing homeowners to have a new loan that better reflects the underlying value of the property. 

While the proposal originates from a private company, Mortgage Resolution Partners, much of the media attention focused on a single geographic location:  San Bernardino County, where (at least according to the Wall Street Journal) Mortgage Resolution Partners claims 42,000 of the County's 59,000 privately held mortgages are ...

As we previewed in our recent "year in review" piece, the U.S. Supreme Court has some takings issues before it this term.  One case, Koontz v. St. John's River Water Management District, took center stage yesterday. 

At issue in the case is whether the the "nexus" and "proportionality" tests that we have all come to know in the context of real property dedications also apply to other efforts to impose exactions relative to property-development efforts. 

The case presents a new branch on the tree that arises from cases such as 1987's Nollan v. California Coastal Commission, in which ...

Eminent domain cases are unique in that the roles of the judge and the jury do not match the typical civil jury trial experience where the jury is the arbiter of fact and the judge decides the law.  In eminent domain, the judge still decides the law, but the role is larger, with the judge also deciding many issues of fact.  Drawing the line between the judge's role and the jury's has been a long-standing battle, with condemning agencies typically seeking an expansive role for the judge and condemnees seeking to place everything in the hands of the jury. 

The dispute centers around a deceptively ...

Earlier this week, I spent a day in Los Angeles at a seminar involving regulatory takings issues. It featured a great panel of speakers on a variety of takings, eminent domain, and land use issues. (In fairness, you should view my characterization of the panel's quality with some skepticism; I was Co-Chair of the seminar and therefore played a large role in assembling the panel.)

There were a number of quality take-aways from the day, but a few stood out for me. 

• Mark Alpert of Hart, King & Coldren spoke on a number of regulatory takings issues, focusing in particular on the ...

In my recent post on City of Corona v. Liston Brick Company of Corona, 2012 Cal. App. LEXIS 873, I took a few minutes to discuss the conflict under California law concerning what happens when one side presents a valuation opinion and the other does not.  As I explained there, while I can see a basis for a rule that the jury must accept a single opinion of value OR a rule where the jury remains free to reach its own conclusion even if only one opinion is presented, I have a real problem with the current state of the law -- where sometimes the jury gets to decide and sometimes the judge directs a ...

Eminent domain cases typically revolve around one issue in dispute:  the property's (or business') fair market value.  And when appraisers seek to reach their opinions of value, they typically rely on a standard body of data:  comparable sales; income and expense figures; and reproduction costs. 

But sometimes the evidence does not fit into one of these neat boxes, either because there is a lack of "classic" evidence or because one party is seeking to adduce evidence of value in a more creative way. 

A recent published decision, City of Corona v. Liston Brick Company of Corona, 2012 Cal. App ...

This underwater mortgage / eminent domain issue does not appear to be going away any time soon.  Along with eminent domain attorneys Robert Thomas from Hawaii, Casey Pipes from Alabama, and Tom Olsen from New Jersey, I spoke last Friday at the ABA Annual Meeting in Chicago -- one of the cities apparently considering the plan.  The presentation itself did not focus on the underwater mortgage plan, but many of the questions at the end did.  Indeed, the issue generated more buzz in the room, by far, than any other.

This week, the news is that the Federal Housing Finance Agency ("FHFA") has ...

Over the past few days, I've had several conversations and have received a number of emails concerning the underwater mortgage series I posted recently.

Rick Friess, one of my former colleagues, commented on the series and provided two additional sources of concern.  Because I suspect many people missed his comment, I'm copying it here:

I agree with your analysis, and I see at least two other reasons this plan will not work. First, many, if not most, of the loans are likely refiances, not purchase-money loans, so the lenders will have recourse against the borrower. Thus, if the lender is ...

In two previous posts, I've discussed the proposed plan to condemn underwater mortgages and have analyzed the plan's legality.

Today, I want to talk briefly about whether the plan makes sense -- and whether it would work.  To assist those who don't want to spend much more time on this issue, I'll start with the bottom line:  I think this is a bad idea and that it will not accomplish its intended goal.  I also think the plan carries some potentially harmful baggage.

So why do I think the plan will fail?  Pretty simple, really.  The entire premise behind the plan is to acquire loans at less than their ...

Today I want to focus on whether the plan to seize underwater mortgages through eminent domain is legal. Getting into this topic, in my view the debate should not focus on whether this plan passes constitutional muster at the federal level.  I've seen much written on this subject, but I really think this is a red herring, and that the answer is pretty easy.   While others disagree, I believe the plan passes constitutional muster at the federal level.

The U.S. Supreme Court has issued a long line of cases that all make pretty clear that the government could constitutionally condemn ...

Anyone who follows eminent domain issues no doubt by now has heard about the plan of some government agencies to condemn underwater mortgages -- essentially as a mechanism to refinance those loans to give borrowers loans that better reflect the current fair market value of their homes.

There has been much debate on the issue, and it has included a whole lot of rhetoric that has started to look a bit like an election campaign. I've heard extreme arguments both in favor and against the plan.

My intention here is not to advocate for or against the plan. Rather, I hope to help better -- and more ...

The parade of lawsuits involved in the redevelopment dissolution process continues to grow.   Here are a few quick updates:

• Five San Diego County cities have sued the state over AB 1484.  Chula Vista, National City, Oceanside, San Marcos and Vista have joined forces to attack the law.
• In Northern California, El Cerrito has also sued, claiming the "true up" payment it purportedly owes ($1,756,794.67) is unlawful.  Read more about the El Cerrito lawsuit in the July 17 El Cerrito Patch article, City Sues State, County Over $1.76 Million "Demand for Payment".  Other cities have also reportedly ...

Ever since the Supreme Court issued its decision in the Matosantos case last December, facilitating the dismantling of California's redevelopment agencies, there has been talk of new legislation -- either in the "clean up" variety or in the substantive overhaul variety. 

Today, the Legislature passed AB1484 as a budget trailer bill (the Senate approved the bill at around 1:30 p.m., and the Assembly followed about an hour later).  

AB1484 probably qualifies as too substantive to be characterized as mere "clean up," though it falls short of a major overhaul of the system.  And it ...

One of the trickiest circumstances to deal with in an eminent domain case occurs when the property being condemned suffers from a contamination issue.  This presents a number of thorny issues and, quite frankly, is an area of law which is shockingly undeveloped in most jurisdictions. 

• Should the cost of the remediation be offset from the value of the property? 
• Should the contamination be ignored since the owner is being compelled to "sell" the property, often against his or her will? 
• Should the appraisers treat the contamination as they would any other circumstance affecting the ...

One of the issues that arises with some frequency in eminent domain cases involves a debate over which parties may seek compensation for lost business goodwill.  In many cases, this is an easy discussion:  any business operating on the property at the time it is condemned generally has the right to seek compensation for lost goodwill. 

But sometimes, the situation becomes murky, and a decision this week by the Court of Appeals, Los Angeles Unified School Dist. v. Recovery Resource LLC, presents an interesting, twisted set of facts.  In Recovery Resource, LAUSD filed a condemnation action ...

California continues its process of dismantling its redevelopment infrastructure.  The state's redevelopment agencies disappeared on February 1, 2012, and today marks another key milestone.  May 1 is the deadline for the creation of the Oversight Boards that will watch over the Successor Agencies as they dispose of redevelopment assets. 

What does this mean?  In many cases, nothing particularly significant.  Oversight Boards have been empanelled for many Successor Agencies before today, and even once empanelled, there is no guarantee that anything will happen immediately.  But ...

As an eminent domain attorney, a litigated outcome nearly always comes with the satisfaction (or devastation) of realizing that you have won or lost.  Sure, sometimes the jury splits (in fact, that probably happens most of the time), but the result can be placed in the context of the settlement negotiations that took place leading to the trial.

A verdict much better than the settlement possibility feels like a "win" and a verdict much worse than an offered settlement understandably feels like a "loss."  It's really pretty simple.

But I have not had enough decisions to have empirical ...

My partner Brad Kuhn and I spoke yesterday at the IRWA Chapter 1 Valuation Conference.  Our topic involved large-scale acquisitions, and what makes them different from a typical, single-parcel acquisition.  As always, the Conference was well attend.  And as always, both the panelists and the audience are made up of a great cross-section of the top right of way practitioners in Southern California.  This mix often leads to some great discussions -- and yesterday was no exception.

One of the questions that arose during our presentation involved the fairly recent requirement that agencies ...

About two years ago, I embarked on a path to start blogging about eminent domain issues.  At the time, I didn't read a lot of blogs (OK, I probably didn't ready any blogs).  I also had little idea where the path would lead me, and I certainly had no clue what it might mean for my practice. 

Now, I follow several other blogs and have a much better sense about how it all works.  So much so, apparently, that I've been asked to sit on a panel at an upcoming PLI Conference Lawyers' Guide to Using Social Media for Professional and Client Development 2012.  Truth be told, I'm inclined to think that all the ...

In case you didn't have a chance to attend the event my partner, Gale Connor, spoke at earlier today, there's still time to learn about appraising in a litigation context. 

On Wednesday, March 21, I'll be speaking with three of my colleagues, Brad Kuhn, David Graeler, and Bernadette Duran-Brown at a half-day event sponsored by the American Society of Appraisers.  We're presenting Everything You Need to Know About Appraisals for Litigation at Scott's Restaurant and Bar in Costa Mesa.  The seminar runs from 2:00 to 5:00, with a dinner and networking event to follow. 

There may still be some ...

Shortly before an eminent domain trial, a government agency and a property owner exchange a statutory final offer and final demand. The statute’s sole purpose is to encourage settlement before trial, providing a carrot (to the property owner) and a stick (to the condemning agency). 

If the matter fails to settle before trial, the owner can seek an award of litigation expenses (i.e., attorneys’ fees and expert costs) if the court ultimately determines that, in light of the outcome, the agency’s final offer was unreasonable and the owner’s final demand was reasonable. (See ...

We're looking back on 2011's wild ride and looking forward to the twists and turns still in front of us in 2012.  We've summarized all of this into the 2011 version of our annual Eminent Domain Year in Review piece.

For those who don't want to take the time to read the actual article, here are a few of the highlights:

• In January, Governor Brown proposed eliminating redevelopment agencies.  In June, he finally got legislation to accomplish that goal.  In August, the Supreme Court agreed to hear a legal challenge to the new law.  And on December 29, the Supreme Court upheld the law dissolving ...

We're gearing up for our webinar tomorrow on the Supreme Court's decision last week upholding ABX1 26, but striking down ABX1 27.  I will be moderating a panel that will include my colleagues Gale Connor, Brad Kuhn, Jeff Stava and Jennifer Capitolo.  

We'll also be joined for additional commentary by former California Senate Republican Leader Dick Ackerman and former Los Angeles County Counsel Bill Pellman. 

We're going to spend about an hour talking about the law and how it will be implemented.  We'll also take questions - and even do our best to answer them.  If you already ...

Yesterday, we reported briefly on the Supreme Court’s decision in California Redevelopment Assn. v. Matosantos.  As many of you undoubtedly know by now, the outcome was the nightmare redevelopment agencies feared most, but that many (including us) had forecast after listening to oral argument last month. 

The Court upheld ABX1 26, allowing the dissolution of California’s redevelopment agencies to proceed, but struck down ABX1 27, the voluntary buy back program that would have allowed redevelopment to continue.  In particular:

• The Court had little difficulty upholding ABX1 ...

Today, the California Supreme Court issued its much-anticipated opinion in California Redevelopment Assn. v. Matosantos, the case challenging ABX1 26 and ABX1 27.  In a decision foreshadowed by the tone of last month's oral argument, the Court upheld ABX1 26, but struck down ABX1 27 as a violation of California's Proposition 22:

• "Assembly Bill 1X 26, the dissolution measure, is a proper exercise of the legislative power vested in the Legislature by the state Constitution."
• "A different conclusion is required with respect to Assembly Bill 1X 27, the measure conditioning further ...

It's Christmas Eve Eve here in Southern California.  Our chances for a white Christmas seem small; as I look out my window, I see bright sunshine and know the temperature is in the 70s.  Still, it's easy to see that the holiday season is in full swing.

If you are in need of some last minute shopping ideas and don't know what to get the eminent domain practitioner on your gift list, there are some great choices to be found.

Perhaps the most all-inclusive option comes to us through the Institute for Justice.  Its "Rally in a Box" comes complete with stickers, posters, signs, and six ...

Yesterday, we wrote about the Avenida San Juan Partnership v. City of San Clemente decision.  For more information on the decision, see the following:

• Man Bites Dog! California Property Owner Wins Regulatory Taking Case in the California Court of Appeal, a blog post by Gideon Kanner on Gideon's Trumpet;
• Either Reverse Your Unconstitutional Spot Zoning, Or Pay. Your Choice, by Robert Thomas on his inversecondemnation.com blog; and
• Eminent Domain: Winning Owner In Inverse Condemnation Battle Cannot Recoup Fees By Attorney Owner Or Reap A Fee Multiplier Request, a piece in ...

Last April, we reported on a bizarre case arising out of the City of San Clemente's attempt to down zone a piece of property.  The trial court had concluded that the down zoning constituted a taking and ordered the City to rescind a decision supported by that down zoning.  The City had denied an application to develop the property because the application did not conform to the current general plan and zoning ordinance (the City seems to have sidestepped the fact that the development applications included applications to amend the general plan and zoning). 

In addition to a writ of mandate ...

The debate over the extensions of some of the Bush-era tax cuts have been making national news for some time.  It's splattered all over the newspaper and has its own running commentary on the political talk shows. 

But today, there's a different twist for those of us who deal with eminent domain.  Congress is debating the extension of the payroll taxes yet again, but this time, a major eminent domain issue is wrapped up in the fray.

Specifically, Republicans in Congress had said they planned to couple the extension of the tax cuts with a requirement to fast-track approval of a ...

One of the peculiarities with California's eminent domain law lies with the way it addresses situations in which an agency makes a deposit of probable compensation in a case in which one or more of the defendants raise a right-to-take challenge. 

The issue came to a head yet again, with the California Supreme Court holding that a lender's withdrawal of a condemnation deposit does not result in a waiver of the property owner's right to take challenge.  The decision, Los Angeles County Metropolitan Transpiration Authority v. Alameda Produce Market (November 14, 2011), chronicles the long ...

I wanted to provide a quick update on what is going on in the lawsuits involving ABX1 26 and ABX1 27.  For those trying to keep score on who stands where, the following is a list of the amicus briefs that have been filed. 

In support of the CRA / League of Cities' position, seeking to overturn the laws:

• Association of California Cities - Orange
• City of Irvine
• Long Beach
• Public Interest Law Western Center
• San Bernardino County
• Southern California Coalition
• Southern California Non Profit Housing
• Riverside County

In support of the State's position, seeking to uphold the laws:

• Affordable Housing ...

As probably everyone following this blog already knows, redevelopment is under attack in California.  While some might assume the attack flows from continued outrage over the Supreme Court's Kelo decision, the reality is actually quite different.  Here in California, the driving force is not moral outrage, but budgetary crisis. 

As I learned earlier this week at the IRWA Chapter 67 lunch meeting, Governor Brown's plan to eliminate redevelopment is not part of some long-planned effort.  According to a presentation by one of my partners, Gale Connor, when now Governor Brown was Mayor ...

All eminent domain attorneys know the importance of getting the Final Order of Condemnation right.  After all, it's the document that gets recorded, effecting the transfer of title to the agency.  But sometimes mistakes occur, and when they do, the condemning agency typically has a remedy. 

In DFP, LTD v. Sacramento Regional County Sanitation District, an unpublished opinion issued earlier this week, the agency requested a nunc pro tunc order revising the final order to correct a "scrivener's error."  The error:  the recorded final order stated that the agency acquired an easement, when ...

It is pretty common, at least in California, for a business being displaced by an eminent domain proceeding to seek compensation for loss of business goodwill.  But what happens when the "business" is a non-profit organization?

In Cathedral City, the city has plans to acquire a property on which a longstanding thrift store sits.  An August 17 article by Colin Atagi in The Desert Sun, Cathedral City plans may push Angel View move, opens:

A Cathedral City thrift store that's older than the community itself may relocate if the city acquires the property through eminent domain.

While the ...

We'll have more soon, but I wanted to report quickly that the California Supreme Court announced today that will assert jurisdiction over the CRA's lawsuit involving the constitutionality of AB 26 X1 and AB 27 X1, the bills involving the dismantling of California's redevelopment agencies. 

The Court also announced a partial stay of the legislation while it considers the case.  A news release by the Judicial Council of California describes the scope of the Court's stay as follows:

The court allowed the first statute [the one that eliminates redevelopment agencies] to remain in effect ...

The California redevelopment circus continues today, as California's Secretary of State approved two potential referendums for the 2012 ballot.  One involves rural homeowners and payments for fire services; for our purposes, it's not very exciting (and since I'm pretty sure I don't live in a rural area, I'm not going to join that fray). 

But the other one is more interesting.  It's a proposal promoted by eminent domain opponent Marko Mlikotin to overturn AB X1 27.  For those who have trouble keeping score with all the bill numbers, this is the one that allows California's redevelopment ...

The battle continues over redevelopment in California.  Yesterday, the Attorney General filed an "Informal Opposition to Petition for Writ of Mandate."  The document is 20 pages long, with a 4-page list of Legal Authorities, so it really isn't very "informal"; still, that's what she called it.

Not surprisingly, Attorney General Kamala Harris takes the positions that:

1. AB1X 26 and AB1X 27 are constitutional, and
2. The CRA has not justified a stay in their enforcement. 

The Attorney General does not challenge the CRA's decision to file its lawsuit directly in the California Supreme ...

For months, we've been reporting on the impending death of California's redevelopment agencies.  Even we had started to feel like the "boy who cried wolf" as we reported on iterations of the Governor's budget plan that didn't come to fruition. 

But this time, it's real.  Along with an overall budget package, this week the Governor signed into law ABX1 26 and ABX1 27.  ABX1 26 eliminates redevelopment agencies in California.  ABX1 27 provides a means of survival if the agencies will pay the state, collectively, $1.7 billion next year (the savings the Governor claims ABX1 26 would generate by ...

We're trying to keep on top of the developments over the future of redevelopment in California, but by the time we can get something drafted and posted, the story has already changed.  Here's a quick recap of what we know (and what we don't):

• Back in January, Governor Brown announced plans to eliminate California's redevelopment agencies as part of his plan to fix California's budget woes. 
• After several heated legislative sessions, bills to accomplish the Governor's proposal repeatedly fell a single vote short in the Assembly.
• In the aftermath of the failure to pass the Governor's plan ...

I'm at the IRWA Education Conference in Atlanta, and yesterday I attended a number of interesting sessions.  Since I don't have time to write about all of them, I want to focus on the presentation that discussed local agency practices where their projects receive federal dollars.  And even that one session contained far too much information to reduce to a single blog post, so I'll focus on two of the four speakers, FHWA Realty Specialist Marshall Wainwright and Oklahoma Department of Transportation Assistant Division Manager for Right-of-Way Kevin Stout. 

Mr. Wainwright started the ...

So I'm off to Atlanta for the IRWA's Annual Education Conference.  I'll be there from Saturday night through Wednesday, and along with our outgoing President Michele Folk from OPC, I'll be representing Chapter 67 in Orange County as its nearly-installed President.  (Ironically enough, I'm missing my own installation, which takes place during the Conference.) 

It will also be a bit of a Nossaman Eminent Domain reunion for me.  In addition to my current Partner, David Graeler, who will be there as President Elect of Chapter 1, two of my former Nossaman colleagues, John Murphy and Brad ...

We've completed our analysis of the Galardi case and have some additional thoughts about the decision and its potential larger impact.

The real debate we've been having internally is whether Galardi can be read as signaling a change in the law concerning broadly worded waivers in condemnation clauses.  Many commercial leases contain broad waivers, skewed towards landowners.  Provisions such as "in the event of condemnation, tenant waives all rights to compensation" are not uncommon.  

Until now, even the broadest wavier imaginable has not affected the tenant's right ...

When a business subject to a franchise agreement is condemned, questions often arise as to the allocation of proceeds between the franchisor and franchisee.  When the question involves payment for lost business goodwill, the courts have placed strict limits on the franchisor's ability to recover. 

In particular, courts have long held that a franchisor cannot make a claim for lost business goodwill because the franchisor fails one of the key entitlement prongs:  the franchisor does not operate a business on the property.  (See Redevelopment Agency v. International House of Pancakes ...

We've been following the Ninth Circuit Guggenheim case for more than a year.  That Court's change in its holding between the initial decision by a three-judge panel and the subsequent en banc decision, coupled with the considerable attention the decision received, led many to think the case was ripe for Supreme Court review. 

Today, we learned that the Supreme Court denied the owner's Petition for Writ of Certiorari, meaning the en banc Court's decision will stand.  (As a reminder, that opinion held that the City of Goleta's rent control ordinance did not constitute a taking, despite the ...

When eminent domain attorneys think of just compensation in the context of an eminent domain case, we're typically thinking about the value of what we can see:  the dirt itself; and anything built on that dirt.  But every so often, a property's real value lies not in what is on the surface, but what sits below the surface.

A recent post by the Biersdorf law firm, Mineral Rights in Eminent Domain Cases, reminds us about this often overlooked issue.  The post contains a nice summary of when and how these issues can arise, and I won't repeat all of what they have to say.  The bottom line is that when a ...

I read a really interesting blog post by Robert Thomas, 10th Cir: Landowner Not "Prevailing Party" Even Though They "Won $3.8 Million -- Much More Than The Government Ever Offered Them".  It describes a recent 10th Circuit decision that denied the property owner an attorneys' fees award where (1) the property was valued at trial at $3.8 million and (2) the government's offer was a mere $186,500.  What caught my attention was the mechanism by which the federal courts award fees under the Equal Access to Justice Act (EAJA), as compared to the fee-shifting rules in California. 

Under the EAJA ...

The case involving a small boxing gym in National City, California, has garnered national media attention.  The owner filed suit challenging National City's redevelopment plan for, among other things, failing to follow California's post-Kelo rules on making blight determinations.

We reported on the case last month in A More Personal View of the Redevelopment Fight from National City.  The trial ended a few weeks ago, and the parties have been anxiously waiting for a decision ever since.  Late yesterday, the court issued its decision, ruling in favor of plaintiffs.  According to ...

We've been following the Guggenheim case for more than a year now, and in the last week or so, there have been a number of developments.  As a quick recap, this decision by the Ninth Circuit Court of Appeals held that the City of Goleta's rent control ordinance - which had the effect of transferring the vast majority of a mobile home park's value from the park owner to the tenants - did not constitute a taking.  The decision followed an earlier decision by a different panel of the same court, in which the court held that the ordinance did qualify as a taking. 

Not surprisingly, the owner then sought ...

I wanted to provide a quick update on a couple of cases we've reported on earlier. 

The first case is the dispute between the City of Seal Beach and Bay City Partners over 10.7 acres of waterfront property.  The city wanted the property preserved for the public, while the owner wanted to use it as part of a new oceanfront development.  According to a March 29 article in the Orange County Register by Roxana Kopetman, Seal Beach and developer agree on waterfront property, the parties agreed this week to a settlement that will result in leaving about 70 percent of the property open to the ...

A pretty dull Monday on the redevelopment front.  We're hearing that it's likely that the Assembly will not take up the issue again today or tomorrow, so Wednesday may be the next big day.

In the meantime, the California League of Cities has officially endorsed the CRA's alternative proposal, which is not particularly surprising since one of the "losers" if redevelopment is abolished is likely to be the cities. 

The League's summary of the CRA proposal is as follows:

1. Local redevelopment agencies can voluntarily suspend their housing set-aside for FY 2011-12. An equivalent amount of ...