AIG Taking Lawsuit Entering Final Stage

Last September we began coverage of a lawsuit by some AIG shareholders, alleging that Uncle Sam’s treatment of their company was so harsh that it constituted a taking of their property. You can check it out at http://gideonstrumpet.info/?p=6997 and several follow up posts.

AIG is a giant insurance company that faced insolvency during the 2008 crash, but was rescued by Uncle Sam.

The AIG shareholders’ litigation in the US Court of Federal Claims was a whopper of a lawsuit that took some six months to try, arguing that Uncle Sam’s treatment of AIG was harsh, unfair and discriminatory as compared to the treatment of other entities that were bailed out during that crash. Still, during that time, argue the plaintiffs-shareholders,  Uncle Sam seized controlling stock of AIG which amounted to an uncompensated taking of AIG’s property.

The case went to trial before a Court of Federal Claims judge last fall. Yesterday’s New York Times reported that final arguments by counsel were scheduled to begin yesterday, April 20th, 2015. See A.I.G. Suit Nears End, N.Y. Times, at p.B2. So the end of this saga is in sight.

Defendant, Uncle Sam, argues that its ministrations saved AIG from bankruptcy, so its suit is an example of rank ingratitude. The plaintiffs respond by pointing out that the rescue doe not provide the government with justification of harsh, discriminatory treatment that, among other things, involved a temporary seizure of AIG’s stock, thus constituting a taking of property.

Stay tuned.

Follow-up. Don’t miss one of those analysis/opinion pieces in today’s NY Times, Aaron M. Kessler, April 22, 2015, at p. B4, entitled With Top Lawyer on Offensive, Legal Odds in A.I.G. Bailout Case Are Shifting. http://www.nytimes.com/2015/04/22/business/dealbook/the-legal-odds-are-shifting-in-the-aig-case.html?src=me&_r=0 It’s mostly a paean of praise for the plaintiffs’ lead trial lawyer, David Boies, and his “small army of associates accompany[ing] him to Washington.” They ”accompanied him to Washington when the action began in October, taking over an entire floor of the downtown Willard Hotel. The team also set up a ‘war room’ at nearby Skadden Arps, where each day and late into the night dozens of young lawyers crowded around a large table, churning away on computers and picking through boxes of documents on coming witnesses.”

So that’s how the other half litigates. Which is not to detract from Mr. Boies’ litigational prowess. We suppose that with the might of the United States’ unlimited resources aligned against you, you can use all the help you can get. Still, we wonder on what basis the plaintiffs think they’ll carry the day insofar as an award of compensation is concerned. As we noted in our earlier posts, their problem is not so much establishing liability — after all Uncle Sam did take their stock, if only temporarily — but rather establishing damages. After all, when the temporary taking period was over, AIG was not only rescued from bankruptcy by Uncle Sam’s rescue, but also got its stock back, and made a hefty profit in the end when the market value of the seized (and returned) stock soared. So where is the damage to AIG? Would this be a case of injuria absque damno?

So once again, stay tuned. Presumably, all will be explained in the decision of the Court of Federal claims, whose decision is expected  some time this summer.

Virginia Supreme Court Puts an End to Condemnors’ “Sandbagging.”

For many years, condemnors have been using a nasty gimmick as a weapon against condemnees. It goes like this: First, the condemnor deposits its version of just compensation (and usually takes possession of the subject property, even though the valuation phase of the case is yet to be tried and real just comensation is yet to be determined). Then, when the case goes to a valuation trial, the condemnor shows up with a new appraiser and a new appraisal report, that expresses an opinion of value that is much lower than the deposit which by now the owner has withdrawn in order to replace the subject property. The condemnor then takes the position at trial that the “just compensation” payable to the owner is whatever the second appraiser says. If the condemnor is successful, in so persuading the jury, the owner has to pay back that portion of the deposit that exceeds the verdict. But if you have been paying attention, you probably noted that he had to spend that money for replacement property, and no longer has it. But if the owner seeks to demonstrate the insincerity of the second appraisal and put condemnor’s pretrial offer (and deposit) into evidence to rebut  condemnor’s trial evidence, condemnors take the position that the amount of the deposit was ”merely” a settlement offer and as such is inadmissible.

For many years owners have been complaining that this sort of thing is unfair. Condemnor presents the first (higher) offer to a judge to get the court tom act by issuing an order of possession of the subject property before trial, but then argues that the amount of this “offer” which it solemnly presented to the court to get it to act in a manner adverse to the condemnee, is not admissible when the condemnee wants it admitted. Believe it or not, many courts have been going along with such underhanded jiggery-pokery. In California — where else? — there have even been cases where the condemnor used the same appraiser to come up with these two inconsistent opinions of value.

But the Virginia Supreme Court put an end to it in Ramsey v. Commissioner of Transportation, Record No. 140989, April 16, 2015. It held that the condemnor’s first (higher) opinion of value was not a mere “offer of settlement” but rather an appraisal of just compensation required by statute, and as such could be placed into evidence by the condemnee.

Here, the condemnor’s deposit was $248,707 for the part taken, based on its appraiser’s opinion of $500,000 for the total value of the larger parcel. At trial, however, condemnor came up with a new appraiser and a new appraisal. He opined to a value of $92,127 for the part taken and $250,000 for the entire larger parcel. The jury, having been prevented from hearing the first condemnor’s appraiser’s higher figures by the trial court, and unaware of condemnor’s higher appraisal, came in with a verdict of $234,032, leaving the owner in a hole of $14,675 which he was ordered to repay with 3% interest.

When the owner appealed, the Virginia Supreme Court reversed, holding that condemnor’s first appraisal was no mere offer but a statement of valuation required by law.

The case was remanded for retrial.

 

 

 

Kelo — Once More

The Day, the New London, Connecticut, newspaper reports that the mayor has proposed that the site of Susette Kelo’s house that was taken by eminent domain be made into a little park to commemorate the taking that was probably the most unpopular US Supreme Court case in modern history. Colin A. Young, Mayor: Former Kelop Property Should Be Preserved as a Public Park, The Day, March 31, 2015. http://www.theday.com/article/20150331/NWS01/150339850/1047

Kelo’s house and land, and the homes of her neighbors, were taken, razed, and . . . Actually, it was all for nothing. No redevelopment took place and all that land (91 waterfront acres) is still sitting empty, 15 years after the taking and 10 years after the US Supreme Court approved it by a 5 to 4 vote. And let us not forget the $100 million in public funds that were wasted in the process.

Your tax money at work.

Follow-up.  The Day of April 6, 2015, reports that the above development plan isn’t going ahead either. The title says it all: Plan for Kelo Property Park Tabled in New London. And that’s how it goes. It would appear that, to invoke an old Western saying, some things are just plain snakebit and this is one of them..

California Choo-Choo — Cont’d.

We have been out of town recently, so we missed the latest LA Times dispatch on the doings of California’s coming “bullet train” which is supposed to run — when completed, whenever that will be — between LA and San Francisco, but which for now is struggling to create a right of way around Fresno in the central valley. Ralph Vartabedian, Turf Wars, L.A. Times, March 6, 2015, at p. A1 (above the fold). So proceeding on the premise that better late than never, here is our opinion of what has been going on.

It sounds like the same old, familiar story. Owners of land in the path of that right of way, it would appear, have no intention of going along quietly with the state’s offers, and are demanding fair market value that exceeds the state’s opinion of what it ought to be. These farmers, it turns out to be, are not the rustics of yore in overalls and straw hats. They are wealthy owners of valuable ag land and they have been lawyering up, promising the state folks to see ‘em in court. This is a potent threat because historical data make it clear that court awards — whether in California or elsewhere, whether by judges of juries — tend to run significantly higher than condemnors’ offers. So that those condemnees who reject state offers and try their cases tend to win more favorable verdicts more often than not.

Even way back in the bygone days of the 1960s, a State Highway Commissioner wrote an article in which he disclosed that “Actual costs [of right of way acquisition] were an average of 32 percent above estimates, most of the increment coming from additional right-of-way costs.” Joseph C. Houghteling, Confessions of a Highway Commissioner, Cry California, Vol. 1, No. 2 (Spring 1966, at p. 29). Not much has changed in the ensuing half-century, except that as California land values soared, the “spread” between condemnors’ lowball offers and actual recoveries in trials has grown bigger. For a sampling, see 40 Loyola LA L. Rev. at 1146-1148 (2007). Our favorite case like that, though admittedly a rare one, involved a taking of a Southern California Edison power line in which the state deposited $234,485 but the eventual award came to $49,400,000.

Why is that happening?  The best explanation we are aware of was provided by Keith Harper, MAI, whose views may be found quoted in 40 Loyola LA L. Rev. 1106-1107, and are further explained by your faithful servant (id. at p. 1108, note 162). Read it! In a nutshell, condemnor’s appraisers know that most condemnation cases will be settled, and since in large projects they have to appraise hundreds of parcels,  according to Mr. Harper, they tend to do a superficial job and save their serious effort for those cases that don’t settle and go to trial.

Right now, the LA Times informs us that the state is working on the acquisition of an initial 29-mile right-of-way section. It needs 525 parcels, but so far has acquired only 123 by settling with their owners. Some 154 land owners have rejected state offers, and it looks like those will go into litigation. So far, the state is behind schedule some two years.

Quoth the Times: “Valley landowners in the path of the train have a long list of grievances. Grape farmers say the authority plans to put fences so close to their fields they’ll be required to tear out additional vines to make room to turn their tractors. Cherry farmers say the state will disrupt irrigation systems by cutting off their fields from their wells.” And so it goes.

Sure, some of these cases will settle before going to trial, but some won’t. So it should be a high time for local lawyers. We look forward to the event.

 

Is New London an Urban Basket Case or a Thriving Community?

Well folks, here we go again. New London, Connecticut has announced another project in the Fort Trumbull area. Not the same area that was taken by eminent domain in Kelo v. New London, but as best we can figure it out, close by.  So why are we writing about it? Because this bit of news is accompanied by whoop-tee-do cheers about what a great, fiscally sound place New London is. Check it out: Colin A. Young, New London Audit Reveals Nearly $850,000 Surplus, The Day, March 24 (revised 3/25) 2015. That title says it all. Click here, http://www.theday.com/local/20150324/new-london-audit-reveals-nearly-850000-surplus

What else is new in New London? We also learn from the local newspaper, The Day, that the grandly named Renaissance City Development Association (which is the new moniker for the old New London Redevelopment Corporation) has recommended to the city council that it approve an $18.4 million proposed new, nearby development consisting of 104 apartment units, two 12-unit townhouse  structures, a clubhouse, etc.  What is remarkable about it is the developer’s assessment of the situation in New London: “What attracted us was the growth of New London, the direction the whole city is going in. It’s a dynamic city, and we really wanted to be a part of it.” Colin A. Young, RCDA Sends Proposal for Fort Trumbull Development to City Council, The Day, March 24 (updated 3/25) 2015. Click here http://www.theday.com/local/20150324/rcda-sends-proposal-for-fort-trumbull-development-to-city-council

So let’s see now. When talking to the US Supreme Court (and the state courts) New London represented itself to be a down-at-the-heels burg, on its way down economically and socially, well on is way to hell in a handbasket, that could be rescued only by the grandiose Fort Trumbull redevelopment project (that would actually destroy an unoffending lower middle-class community to be replaced by upscale structures that would cater to the well-paid scientific employees at the nearby Pfizer pharmaceuticals research facility).

But as you probably know, that didn’t work out. The city and state blew some $100 million in public funds for the 91-acre site of that redevelopment, but its site where the home of Susette Kelo and her neighbors once stood (after blowing some $100 million in public funds), is a useless wasteland, generating no taxes and doing no one any good. As for Pfizer whose economic wellbeing and job creation was the ostensible purpose of that redevelopment project that was said to be the justification for the destruction of Susette Kelo’s neighborhood, it used up its tax advantages, and then moved out of New London, taking some 1400 jobs with it. But as you can see, New London is doing OK and the tale of imminent collapse it spun for the Supreme Court was just that — a tale.

And that, folks, is how the redevelopment game is played. Your tax money at work.

“Improved” LA Freeway Worse than Before

One could actually skip this long L.A. Weekly story and read just the headline. It says it all. Adam Gropman, 1.1 Billion and Five Years Later, the 405 Congestion Relief Project Is a Fail, LA Times on line, 3/4/15, click on http://www.laweekly.com/news/11-billion-and-five-years-later-the-405-congestion-relief-project-is-a-fail-5415772 But if you have an interest in the misadventures of public projects — or “public improvements” as their creators like to put it,  click away and do read it. The L.A. Times evidently thought it’s important because it reprinted the story on line under its own masthead.

The 405, for you flatlanders, is the San Diego Freeway, and its pertinent part is the one that crosses the Santa Monica Mountains north-south, provides access to the Getty Center museum, connects the San Fernando Valley with the West Side of Los Angeles, and is the primary route to the LAX Airport from the north. It has always been a heavily travelled freeway, but eventually it got pretty bad, so a huge project was undertaken to fix it. Did it? Actually, no. Quoth the L.A. Weekly:

 

$1.1 Billion and Five Years Later, the 405 Congestion Relief Project Is a Fail

Illustration by Jimmy Giegerich

“This past May the project known as the I-405 Sepulveda Pass Improvement Project came to official completion, with resulting new on-ramps and off-ramps, bridges and a northbound 405 carpool lane stretching 10 miles between the 10 and 101 Freeways.

“The four-turned–five-year, $1.1 billion project became a long-running nightmare of sudden ramp closures, poorly advertised by Metro and made all the worse by baffling detours that led drivers into the unfamiliar Bel Air Hills and Sherman Oaks hills, dead ends and unlit canyons.

As Metro’s closures and delays reached their height in 2013, L.A. Weekly encountered stranded motorists merely by following Metro’s official detours — which in many cases were roads to nowhere. And it isn’t over in the Valley or on the Westside. Sudden ramp and lane closures are still hitting motorists at Getty Center, Valley Vista, Skirball Center and elsewhere as work on the officially completed project grinds on.”

Democracy. Ain’t It Great?

Quote without comment.

This morning’s Los Angeles Times informs us that “preliminary numbers show that voter turnout in Tuesday’s Los Angeles city election was 8.6%”

Follow up. Today’s L.A. Times (front page, above the fold) makes it official: the voter turnout was indeed 8.6%. One of the council persons who ran successfully received 4.6% of the votes in his district. See Emily Alpert Reyes, Alica Walton and Peter Jamison, The Power of the Few, L.A. Times, March 5, 2015, p. A1.

NC Court of Appeal: Denial of Present Use in Anticipation of Future Condemnation Is a Present Taking

A tip of our hat to the North Carolina Court of Appeals (Kirby v. North Carolina DOT, Filed 2/17/15, holding that the state’s imposition of a future highway “corridor” on privately owned land and in the meantime denying the owner reasonable use of it is a present taking of private property.

This is a subject close to our heart because way back, close to a half century ago, your faithful servant persuaded the California Supreme Court to hold likewise in Klopping v. City of Whittier, 8 Cal.3d 39 (1972) – announcing a city intent to condemn specific property, coupled with the city’s unreasonable delay or other unreasonable conduct, entitled the owner to sue for just compensation on an inverse condemnation theory. Also see People ex rel. Dept. Pub. Wks. v. Peninsula Enterprises, 91 Cal.App.3d 332 (1979).

This government business of announcing the intent to take a property, but then not doing it for a lengthy period of time, thus denying the owner any reasonable use and depressing values is nasty stuff, so we are always glad to see a court disapprove of such tactics. Good show, Your Honors.

 

Dr. Seuss Goes to the Supreme Court; Is Cited as “Authority” by Justice Kagan.

When a fisherman catches undersize fish and then, when nailed, dumps them surreptitiously overboard, is that a violation of federal securities laws like the Sarbanes-Oxley Act? No, says SCOTUS 5 to 4?

While you weren’t looking, the Supreme Court decided the weighty question of whether a fish is a “tangible object” whose destruction violates the Sarbanes-Oxley Act. You can rest easy now; five SCOTUS Justices say “No.” To them, a fish is a fish, not the sort of evidentiary document contemplated by the Act. Justice Kagan and three colleagues dissented on the grounds that whatever the authors of the Act may have intended, the Act says what it says, however stupid its application to this case.

But in so doing, her Lordship cited Dr. Seuss’ as authority — so says the New York Times — for her conclusion. See http://www.nytimes.com/2015/02/26/us/justices-overturn-a-fishermans-conviction-for-tossing-undersize-catch.html?ref=us&_r=0

Naturally, Justice Kagan’s opinion reference to something as frivolous as Dr. Seuss has inspired all sorts of foo-foo by the legal commentariat. As for us, we don’t think much of that frivolity, if nothing else, because the Justices, the same as everybody  else, are entitled to take a shot at producing a humorous line, even if the effort fails at times and the intended joke falls flat, as it did in this case. Moreover, there have been more serious transgressions along these lines. Back in 1980, the Los Angeles Daily Journal (the state’s largest legal newspaper) reported on page one that the environmental warriors in the office of the California Attorney General took the position that for environmental law purposes butterflies are fish. You read that right — fish. See Too Intrusive? Administrative Law Office Tangles with California Agencies, Oct. 27, 1980, p. 1.

Guess What? Talk About Lawyers’ Misconduct Is Back In Vogue.

Once more into the breach, friends! Yesterday’s Los Angeles Times and today’s New York Times have devoted real editorials complaining about federal persecutors lying to juries and thereby railroading innocent criminal defendants into prison. This is a terrible thing, but these editorials concentrate exclusively on criminal cases and stay mum about government lawyer misconduct in civil ones, particularly in eminent domain. We hold to the view that taking one’s property can be traumatic, and deliberately underpaying for it, ostensibly in the name of “just” compensation, is pretty bad too. It deserves condemnation (no pun intended) just as well.

Back in the 1990s it was all the rage for lawyers and judges to go on about “Rambo Litigation” — a nasty way of litigating, whereby unethical lawyers would abuse the system by unethical behavior, ranging from tampering with the evidence to after-hour service of documents by fax. Much was said about it at the time but not much was done to curb it. We contributed to the pertitinent talk by writing about it; see Gideon Kanner, Welcome Home Rambo: High-Minded Ethics and Low-Down Tactics in the Courts, 25 Loyola L.A. L.Rev. 81 (1991). But for all the talk, little was accomplished. We can explain the problem by quoting a part of our blog on this subject, dated June 6, 2014:

“[T]he problems with what is known as “Rambo litigation” recently became a hot topic among lawyers, but truth to tell, nothing was done about it by judges. We have written about it at length, and we recommend that you dig out our article and read it — Gideon Kanner, Welcome Home Rambo: High-Minded Ethics and Low-Down Tactics in the Courts, 25 Loyola L.A. Law Rev. 81 (1991). It will tell you the whole story, and explain why lawyers’ misconduct — like misconduct of people in all walks of life — has little to do with their innate lack of goodness vel non. No, it has to do with what determines the conduct of all people at all times: the actors’ assessment of the balance between incentives and disincentives that face them as they contemplate a course of conduct. And in dealing with human                  [mis]behavior the disincentives play an important role. That is why we have criminal laws and why misconduct in civil matters carries sanctions in the form of damages, fines, or in the case of a regulated profession like law, professional sanctions that can range from public reprimands all the way to disbarment.

 

“But as all lawyers who have spent some time in courtrooms know, judges are not much interested in enforcing rules of professional conduct, much less standards of behavioral decency and basic civility. Often, they fail to admonish the bad guys, or prattle on about expecting both sides — gotta be impartial you know — to toe the line even when only one has transgressed. In a way, it is easy to refrain from blaming them. Judges are busy folks, and they understand how easy it is to have an admonition directed at a lawyer’s conduct degenerate into a time-consuming foofaraw that takes up scarce judicial time and tends to delay adjudication. So the sumbitch of an opponent of yours who is in the habit of serving motions by fax, after hours, at the last minute, so you can’t prepare properly for an upcoming trial or hearing, feels safe in doing so. Or, like a certain late but unnamed well-known lawyer around here, who had the habit of just not showing up for duly noticed depositions. What should the judge do about such stuff? Oh sure, there is the draconian sanction of striking the offending document. But that can affect or determine the outcome of the litigation, and if His Honor does that, he must face the wrath of the innocent client of the misbehaving lawyer who neither knows nor cares whether his moving papers were served on his opponent’s lawyer by mail,  fax or carrier pigeon?

 

“Still, difficult as it may be, judges must rise above these difficulties. Nobody forced them to become judges, so they have to take the bitter with the sweet because the problem of endemic lawyer misconduct erodes popular respect for the courts as places where justice is administered, and it gives rise to widespread understanding among lawyers that misconduct is OK when the stakes justify it and where the prospects of meaningful sanctions are slim. Each judge is like a captain of a ship with regard to his or her courtroom, and as such responsible for what goes on in it.

“Bottom line: Any way you slice it, the solution to the lawyer misconduct problem lies in the hands of judges. Either they enforce the rules and standards of conduct, or they don’t. And if they don’t, it doesn’t much matter what language they place in the court rules. A law that is not enforced is no law at all.

 

“Our 40+ years’ experience as a litigator has taught us that misconduct of counsel can be de facto favored by judges, no matter what platitudes they utter. How? Check out the law governing misconduct of trial counsel and you will see. The way the decisional law is structured, the misbehaving lawyer has all the litigational advantages; he need not do anything to rectify the litigational mess he creates by his misconduct. It is his opponent (who is not guilty of anything), who has to “make a record” by objecting, requesting judicial admonitions to the jury, and pursuing useless  procedural ceremonies. And if he misses a step in this rigmarole, the misconduct is deemed nonprejudicial, and as such OK.

 

“While this goes on, his “bad guy” opponent just gets to sit there enjoying the fruits of his misconduct. See e.g.,  Horn v. Atchison, Topeka & Santa Fe Rwy. Co., 61 Cal.2d 602 (1964), and  Sabella v. Southern Pac. Co., 70 Cal.2d 311 (1969).

 

“And if the judge gives the admonition requested by the aggrieved lawyer, the misconduct is deemed cured and non-prejudicial even if the admonition is something less than effective. So experienced lawyers often don’t bother with going through the time-consuming and distracting ceremony, and take their chances before juries, hoping that the merits of their case will be persuasive. The professional behavioral standards are thus lowered and as such institutionalized.”

So with the rhythmic regularity of the tides, here we go again. The few good guys on the US Court of Appeals for the 9th Circuit have just publicly chewed out some federal prosecutors for being — shall we say? — careless with the truth in a pending criminal case. Will that do the trick? We don’t think so. We don’t think for a moment that those prosecutors were naughty because no one told them they shouldn’t lie in court. No sir. They did it because they though they could get away with it.

What we need is for judges to enforce the rules. Consistently. If they do, the problem will either go away or be greatly diminished. But they won’t. Not reliably.