Eminent Domain Report

Last week, the Court of Appeal issued a decision that may be one of the ones we look back on as among the most significant of 2014 (at least in the world of eminent domain).  For years (and certainly for the entire 20 years I've been doing this), public agencies have utilized a statutory "right of entry" procedure to gain access to private property to conduct investigations and testing before deciding whether to move forward with a condemnation action.  (See Code of Civil Procedure section 1245.010 et seq.)  Often, this happens during the CEQA process, as agencies try to assess the environmental impact a proposed project may have.  Sometimes, the "entry" involves little more than someone wandering around a property for a few hours.  But in other cases, the investigation is more far-reaching, including things such as soil borings and animal traps. 

Rarely does anyone question these activities.  So long as the government acts reasonably and provides for compensation to the owner if the investigation causes any damage, these entries go off without a hitch.  But that may all change.

On March 13, 2014, the Court of Appeal issued its decision in Property Reserve, Inc. v. Superior Court.  There, the Court struck down an agency’s efforts to conduct precondemnation investigation and testing pursuant to the right of entry statutes. The key to the decision was that the Court held that any significant physical intrusion onto private property constituted a taking for which just compensation must be paid.

This meant that the agency was required to proceed with an eminent domain proceeding, which, in turn requires that the property owner be provided with certain protections, including the right to a jury trial – something the right of entry statutes do not provide.

While not striking down all efforts to enter onto property for precondemnation investigation and testing, the decision calls into doubt the viability of California’s right of entry statutes, which could have significant implications for agencies.  The holding indicates that there is no "bright-line rules for determining whether a temporary physical invasion constitutes a taking."  Rather, entries must be evaluated based on four criteria:

• The degree to which the invasions are intended.  The court noted that as to this factor, a right of entry always qualifies as an "intended" invasion.
• The character of the invasions.  Here, the court contrasted regulatory "invasions" (which are less likely to qualify as a taking) from true physical invasions.  Again, as to a right of entry, the character of the invasion is a physical invasion (i.e., suggesting they qualify as takings).
• The amount of time the invasions will last.  This is where the court left an opening to allow routine entries, since the "takings" at issue in that case involved the potential for 66 days of physical invasion spread over an entire year -- a far cry from a typical inspection that might last a few hours.
• The invasions' economic impact on the landowners and interference with their distinct investment-backed expectations.  This factor derives from the famous Penn Central test for evaluating regulatory takings claims.   The court acknowledged that no evidence existed that the investigations at issue would cause any economic impact.  Still, the court downplayed this factor, explaining that it played little role in situations of an actual physical invasion.  "This is because if the government intentionally and physically invades private property to the extent it requires a permanent or temporary interest in that property to accomplish its public purposes, it must pay for that interest, no matter how small the interest may be."

Reading between the lines, the real inquiry in future cases may revolve around the "time" factor, since the other three factors will almost always weigh in favor of a taking finding for a right of entry. 

The decisions following Property Reserve will garner significant attention.  Moreover, we have heard that an effort is already underway to get the opinion depublished (meaning it would not be citable in the future), and it would not be surprising if the agency seeks Supreme Court review given the stakes involved in the decision.

Note that the case also included a long, 46-page dissent (two pages longer than the 44-page majority decision).  The length of the opinions alone suggests the significance of the issue, and I expect we will hear more on this issue in the near future. 

Note also that the court suggested some legislative changes that could solve the constitutional problems the court identified.  Thus, if efforts to depublish and obtain Supreme Court review are unsuccessful, the next battle over this issue may take place in the legislature. 

Finally, a really important caveat.  The case impacts only those situations in which the government seeks a court order allowing a right of entry.  It has no impact on voluntary agreements reached between agencies and owners.  Thus, for the immediate future, expect to see a lot more effort by agencies to reach negotiated rights of entry to allow precondemnation work.  

As for the rest of it, stay tuned.  In the meantime, if you want to read another take on the case, take a look at Robert Thomas' post, Cal App States The Inconvenient Truth: There's No Substitute For Eminent Domain - Gov't Must Condemn First If It Wants To Enter Land.