Eminent Domain Report

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 Code Civ. Proc., § 1250.410.)

A new published decision makes clear that the opportunity to recover litigation expenses requires an actual trial. On March 1, the Court of Appeal issued its opinion in Dept. of Transportation v. Menigoz (March 1, 2012), holding that if the matter settles at any time before the jury is empanelled, the agency has no liability for litigation expenses, regardless of how unreasonable its pre-settlement conduct may have been. On the other hand, once trial commences, the agency could face liability for litigation expenses – even if the parties reach a settlement before the trial ends. 

The opinion is fairly simple and straight-forward, though it does contain an interesting procedural twist.  The parties exchanged final offers and demands only $30,000 apart.  Five days before trial, Caltrans accepted the owner's demand, and the parties submitted a stipulated judgment.  The trial court thereafter granted the property owner's unexpected (at least to Caltrans) motion for award of litigation expenses, leaving Caltrans in a tough spot. 

As we saw last year in City of Gardena v. Rikuo Corp. (2011) 192 Cal.App.4th 595, post judgment orders are not appealable where the underlying judgment was stipulated (making the judgment itself non-appealable).  So what was Caltrans to do?

It opted for a writ of mandate, rather than a traditional appeal, claiming the trial court had exceeded its jurisdiction.  The Court of Appeal concluded that this was procedurally proper, and it proceeded to rule on the merits. 

The Menigoz Court rejected the owner's invitation to extend an earlier decision in Coachella Valley County Water Dist. v. Dreyfuss (1979) 91 Cal.App.3d 949, in which the Court of Appeal awarded litigation expenses in an eminent domain case where trial commenced, but the parties settled prior to getting to a jury verdict. 

The Menigoz Court explained that the commencement of trial in Dreyfuss made all the difference, establishing what appears to be a bright-line rule: litigation expenses are potentially recoverable pursuant to section 1250.410 once trial commences, but not a second before.

For agencies, the lesson is clear:  make sure that any settlement reached once trial commences contains language that expressly states that the owner cannot seek an award of litigation expenses.  For owners, well, let's just say that there may be sneaky opportunities for owners negotiating with unaware agencies.