The “Price of Progress” — It Was Piffle Then, and It’s Piffle Now

          For a moment, as we beheld the headline in the April 20, 2009, issue of the Wisconsin Law Journal – The Price of Progress: WisDOT Proposes Changes in Eminent Domain Laws – we were transported back in time to the bad old days. Back in the 1960s, when we started practicing condemnation law, when California condemnees had even fewer rights than they do now, it was a familiar condemnors’ mantra, intoned whenever a property owner complained about procedural mistreatment, or the prevailing unfair compensability rules, that this was “The price of progress.” We thought that slogan was bullshit. It still is. Why? Doesn’t progress, like everything else, have a price? It sure does, but the way these folks raise the issue tries to fob off the price on the victims, not the beneficiaries of that progress.

          Progress does exact a price, but that price should be paid by those who benefit from progress as a quid pro quo for benefits received. That’s not only basic morality and common sense, but also the law. It was in 1926, in Pennsylvania Coal Co. v. Mahon, that Justice Holmes observed that the public is entitled only to what it pays for. Sounds reasonable to us. But in the case of condemnation of private property, even for genuine public uses, the benefits of public projects inure to society at large, or to the population of the area served by a particular project. If property owners are displaced from their land when it is taken, they cannot enjoy the benefit of the projects. In the case of redevelopment, the “progress” goes primarily to private redevelopers, their vendees and tenants. As Justice Kennedy observed during the Kelo oral argument, condemnees do not participate in any benefits that derive from putting their condemned property to a higher and better use – the redevelopers reap those benefits. 

          So what this linguistic caper boils down to is a not-so-thinly-disguised plea by condemnors that they be permitted to feast on the “free lunch,” by acquiring private property but not paying the full price of the acquisition process. And it’s no answer to say, as these folks so often do, that they are only trying to lower the cost of public works. Not so. The cost is the same whether the condemnees are fully compensated, partially compensated, or not compensated at all. The only question is who pays that cost, i.e., on whom does the true cost of public works fall? Should it fall on the public that benefits from a public project, or disproportionately on the condemnees who fortuitously find themselves in the path of that project and are thus called upon to surrender their property for less than the full amount necessary to indemnify them, and thus have to contribute more than their proper share to the cost of public works? Remember that those condemnees do pay their proper share for public works when they pay their taxes, fees, assessments and exactions, the same as all others. 

          So what are the Wisconsin DOT folks trying to pull by reviving that old chestnut? They are bent out of shape because the present Wisconsin law interferes with their efforts to lowball condemnees. That law provides that when condemnees recover compensation that is 15% or more than the condemnor’s offer, they become entitled to recovery of their reasonable attorneys’ fees. That law was enacted to discourage condemnors from trying to lowball unsophisticated condemnees by offering them less than fair market value. What WisDOT wants to accomplish now is to have that law amended so the attorneys’ fees would be limited to ⅓ of the spread between condemnor’s offer and the court award.

          Such a rule, if adopted, would impact most severely and most unfairly on those who own smaller or less expensive parcels of property, where the spread is modest. This would enable the condemnor to make these owners “offers they can’t refuse,” because the cost of litigation necessary to demonstrate the inadequacy of the condemnor’s offer would consume all or most of the overage, leaving the condemnees as badly off as they were in the first place when the condemnor made them its lowball offer. 

          We can see why condemnors are unhappy with the present Wisconsin statutory scheme and want to change things. But unless Wisconsin is different than other places (which we doubt) it’s likely, if not certain, that local condemnors  make lowball offers. If they weren’t, they would not be called upon to pay the condemnees’ attorneys’ fees, and there would be no problem even by their own lights. While we cannot put our finger on pertinent studies of this matter made in Wisconsin, studies performed over the years in New York, Minnesota, Utah, Georgia and California, all paint the same picture. Property owners who decline condemnors’ offers and insist on a proper valuation trial in court, consistently recover significantly more than the condemnors’ offers, regardless of whether these cases are tried before judges or juries. That is why condemnors like WisDOT  are trying to limit condemnees’ attorneys’ fees to such an extent that it won’t be worth their while to fight for just compensation in court, because the expense of litigation would consume the gain. Oh sure, in large cases, where the stakes are high and the fight worthwhile, the well-off condemnees will pay their lawyers what they have to and recover large verdicts as compensation. It’s the small fry who will get screwed. And there are a lot more of those folks than of the big boys, so the condemnors can make up for the few large verdicts that they have to pay, with a multitude of small land acquisitions they can accomplish through the many lowball offers that small condemnees have to accept.

Update. After we went to the trouble of reportng this donnybrook, word has come from Wisconsin that WisDOT has withdrawn this proposed legislation. It was originally proposed as a part of another legislative package, but after opposition to it developed, it was dropped and reintroduced now as a stand-alone bill. It would be nice if that were the end of it, but life being what it is, we wouldn’t be surprised if this particular legislative critter raises its ugly head again.

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