Eminent Domain Report

In California, we have an admittedly odd way of determining whether the property or business owner in an eminent domain case is entitled to recover attorneys’ fees.  (Note that I’m specifically talking about an owner’s ability to recover; California law does not provide for a condemning agency’s ability to recover fees).  It’s actually fairly simple:  just before trial, the owner and the agency exchange a Final Demand and a Final Offer.  (See Code of Civil Procedure section 1250.410.)   If the case thereafter proceeds to trial, a jury will typically decide the amount of just compensation to be awarded.  Once that is done, the court will then look back at the agency’s final offer and the owner’s final demand.  If the court concludes that in light of the jury’s verdict the final offer was unreasonable and the final demand was reasonable, the owner is entitled to an award of attorneys’ fees and costs.  All California eminent domain attorneys understand this system and the occasional gamesmanship that goes along with it.  For a discussion of these issues, see a recent video on settlement strategies by my partner, Artin Shaverdian.

But what happens when the statute works?  It’s designed to promote settlement and avoid the need for eminent domain trials.  One way this can happen is the owner simply accepts the agency’s final offer, essentially ending the case.  This is exactly what happened in a recent unpublished decision, People ex rel. DOT v. Karimi, 2019 Cal. App. Unpub. LEXIS 6169 (Sept. 16, 2019).  The agency made a final offer of $5,500, the owner made a final demand of $6,000 – and the owner accepted the agency’s $5,500 final offer, ending the litigation.  Or did it?

As the dust was settling, the owner filed a motion for attorneys’ fees, claiming that the agency’s final offer was unreasonable, that it’s final demand was reasonable, and that it was therefore entitled to a fee award under Section 1250.410.  OK, I admit it.  At this point, I was scratching my head.  In fact, I had to go back and read through the decision a few more times to make sure I understood what happened.  Surely the owner didn’t accept the agency’s final offer and then turn around and file a fee motion.  But that is indeed exactly what happened; the owner wanted $136,000 on top of the $5,500.

I probably wouldn’t be telling you this story if the court had laughed the motion right out the door – as I firmly believe it should have.  But no.  The court took the motion seriously and examined whether the facts supported a finding that the agency acted unreasonably and the owner acted reasonably.  Admittedly, in the end, the court concluded that the owner wasn’t entitled to a fee award, but the mere fact that it engaged in a meaningful analysis of the issue disturbed me.  Fortunately, I don’t have to find something clever to say about this because one of the Justices wrote a concurring opinion to make clear that the court never should have considered the motion on its merits.  As the As Presiding Justice Miller explained: “I believe that we should affirm by holding that a settlement offer by a government agency is reasonable as a matter of law under section 1250.410 if it is accepted by the property owner.”

While I probably could have managed a statement like that one all on my own, Justice Miller went on with something a bit more eloquent:

While the instant case is small, the principle is big. By engaging in the analysis appellant seeks, we allow a party to put the trial and appellate courts in a position of performing officially sanctioned second-guessing of a settlement that otherwise is the unchallenged, proper result of the justice system that we safeguard.

In the end, I don’t think the Karimi opinion will lead to a mad dash for owner’s attorneys to accept an agency’s final offer and then file a fee motion, but the mere fact that the court left this open as a possibility is certainly troubling.  Fortunately, the opinion is unpublished and therefore cannot be cited as precedent.   If nothing else, the opinion serves as a good reminder to condemning agencies to include language in their final offers making explicit that the offer is inclusive of attorneys’ and expert fees.