Another Startling Win for a California Land Owner

We are getting ready to take off for the Brigham-Kanner program on property rights at William & Mary College in Virginia, so this post will have to be brief. Go to the California Court of Appeal decision in Bowman v. California Coastal Comm’n, No. B243015 (Oct. 23, 2014), holding that the California Coastal Commission’s demand for an exaction was invalid because there was no nexus and no proportionality between the Commission’s demand for an easement, and the owner’s request for a permit to repair an old structure.

Anywhere else such a ruling would be routine, but in la-la land it’s a big deal.

“Man Bites Dog!” – Landlord Wins Lawsuits in San Francisco

If you have any interest in inverse condemnation, particularly in the landlord-tenant context, don’t miss the new U.S. District Court Decision in Levin v. San Francisco, No. 3:14-cv-03352-CRB, opinion filed on October 21, 2014. In it, the court struck down San Francisco’s Tenant Relocation Ordinance, as unconstitutional . It ruled that the ordinance requiring the owner of a duplex to pay the city some $118,000 in order to be permitted to evict a tenant in the second unit (the owner lived in the first one), before being able to go out of the rental business and using the second unit for his family, was unconstitutional.

The court held that this ordinance violated the constitutional rules of Nollan, Dolan and Koontz cases, concluding,

“San Francisco’s housing shortage and the high market rates that result are significant problems of public concern, and the City legislature’s attempts to ameliorate them are

laudable. “[B]ut there are outer limits to how this may be done. A strong public desire to improve the public condition [will not] warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.” Dolan, 512 U.S. at 396 (quotations omitted).

The Constitution prohibits the City from taking the policy shortcut it has taken here, in which the City seeks to “forc[e] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Id. at 384 (quoting Armstrong v. United

States, 364 U.S. 40, 49 (1960)). The Ordinance apparently is unprecedented in requiring a massive lump-sum payout from one private party to another in exchange for regaining possession of property.  But that trail had not been blazed before for good reason. In so doing, the City has crossed the constitutional line between permissible government regulation of land and an impermissible monetary exaction that lacks an essential nexus and rough proportionality to an Ellis Act withdrawal.”

The AIG lawsuit (Cont’d.)

The coverage of the Starr International v. United States trial has sort of dried up with the testimony of Ben Bernanke, but the trial goes on, although not reported.

However, today’s New York Times pitches in with an op-ed by Steven Ratner, Megarich Plaintiffs, Legally Adrift, Oct 19, 2014, takes off after the plaintiffs, as undeserving, ungrateful “megarich.” http://www.nytimes.com/2014/10/20/opinion/megarich-plaintiffs-legally-adrift.html?mabReward=RI%3A11&action=click&pgtype=Homepage&region=CColumn&module=Recommendation&src=rechp&WT.nav=RecEngine

In his op-ed, Ratner makes the familiar argument, that the plaintiffs are ungrateful for Uncle Sam’s bailout of AIG, and have some chutzpa to be making a claim against the generous Uncle who rescued their company. In spite of its title, this op-ed doesn’t say much — anything? — about the legalities of this controversy. Like, for example, it fails to mention the fact that Uncle Sam seized some 80% of AIG’s voting stock, and then, using its power as the biggest shareholder forced AIG into some disadvantageous deals, such as waiving its claims against its insureds for misrepresenting the quality of the bonds they snookered AIG into insuring. At least, that’s their argument.

Ratner doesn’t see it that way, and argues that AIG directors consented to this deal. Their response is that they were coerced to do so.

But keep in mind that this is an opinion piece. The facts, in the form of evidence, are still being presented at trial in the U.S. Court of Federal Claims. Stay tuned.

Follow up. Check out today’s Letter to the Editor, NY Times, 10/24/14, at p. A24, by William M. Isaac (former chairman of the FDIC) who criticizes Ratner’s op-ed for mixing up two disparate items: (a) the AIG bailout mess, and (b) the feds’ handling of Fannie and Freddie problems. Short and to the point.

Guess What? Fish Like Oil Rigs

Check out the Jonah Goldberg column in today’s LA Times, Rigging Habitat for Fish, Oct. 21, 2014, p. A17. It reports that a new study by Occidental College and the University of California at Santa Barbara, has concluded that “the ecosystems that build up around artificial rigs host 1,000% more fish and other sea life than natural habitats such as reefs and estuaries.”

Eminent Domain Program Announced

The annual ALI-CLE (formerly ALI-ABA) Eminent Domain and Land Valuation Litigation program has been set for February 5-7, 2015, in San Francisco, at the Nikko Hotel.

For an on-line preview and list of topics and speakers go to http://www.inversecondemnation.com/inversecondemnation/2014/10/ali-cle-2015-eminent-domain-and-land-valuation-litigation-condemnation-101-agendas-and-faculty-annou.html

This is the best eminent domain program that has been around some 50 years, and is widely recognized as the best CLE offering of its kind. Besides, San Francisco is always a great place  to visit. Hope to see you there.

Does Redevelopment Increase Tax Revenues? No, Says a New Study

A new study by the Mercatus Center of George Mason University brings us the dispatch that the familiar redevelopment projections of higher revenue are not true. See Carrie B. Kerekes and Dean Stansel, Takings and Tax Revenues: Fiscal Impacts of Eminent Domain, Mercatus Center Report, October 2014. See http://mercatus.org/sites/default/files/Kerekes-Eminent-Domain.pdf

Here is the abstract:

“This paper provides the first examination of the relationship between eminent domain activity and the growth (and level) of state and local revenue. We restrict our attention to takings that are for private use, such as the one that led to the landmark Kelo decision in 2005. One of the arguments used by the proponents of such takings is that they will lead to higher levels of tax revenue for state and local governments. Using data on the number of takings for private use, we find virtually no evidence of a positive relationship between eminent domain activity and the level of state and local tax revenue. We find some limited evidence of a negative relationship between eminent domain and future revenue growth. These findings are robust to a variety of model specifications. They have important implications for contemporary public policy debates on this issue.”

This reminds us of the great line of Macklin Fleming, former Justice of the California Court of Appeal, who observed in one of his opinions (Regus v. Baldwin Park) that proponents of redevelopment projects are fond of asserting that their proposed projects will bake a bigger economic pie, with bigger shares for all, but in reality, what they often produce is pie in the sky.

AIG Lawsuit (Cont’d.)

We learn from today’s New York Times Business Section that the taking of evidence in the AIG trial that we have been following here, was suspended yesterday to allow the parties’ lawyers to argue over admissibility of something quaintly called the “Doomsday Book,” which is not really a book but rather [the Fed's] ”collection of legal opinions that describe and delineate the Federal Reserve’s ability to fight financial crises, along with a variety of related documents.” Se Binyamin Applebaum, Fed Is Silent On Blueprint Used to Fight A.I.G. Crisis, N.Y. Times, Oct 15, 2014, at p. B1. Go to:  http://www.nytimes.com/2014/10/15/business/economy/fed-is-silent-on-doomsday-book-its-blueprint-for-fighting-aig-crisis.html

The Fed defendants contend that the contents of the “Doomsday Book” are confidential, proprietary, and generally of the none-of-your-damned-business variety, to put it colloquially. The plaintiffs, on the other hand, contend that the Fed violated some of the policies duly memorialized in the “Doomsday Book,” such as taking a 79.9% stake in AIG as part of its bailout.

Stay tuned for the trial court’s ruling.

Lowball Watch — California

The Los Angeles Daily Journal Verdicts and Settlements supplement, August 22, 2014 reports the settlement of People v. Sani, San Luis Obispo Superior Court No. CV128114. See  http://www.murphyevertz.com/files/news/People%20v.%20Sani.pdf

CalTrans originally offered $1,073,200 for the partial takings of the owners’ two parcels, and later upped its offer to $4,00,200. Using a cross-complaint, the owners also asked for damages to a third parcel which was not made a part of the condemnation action in Caltrans’ eminent domain complaint, but the court eventually denied that claim.

The case eventually settled for $6,440,000, or six times its original offer, with the owners retaining their right to pursue their claim for damages to the third parcel in a separate future action. The report gives no indication what those damages would be for.

AIG Lawsuit (Cont’d.)

As we have tried to make clear, the press coverage of the lawsuit against Uncle Sam for the seizure of AIG stock during the 2008 financial meltdown has not been journalism’s finest hour in terms of displaying an understanding of legal theories underlying this mega-kerfuffle. But it turns out that someone, it turns out, is at least thinking about it. See Tim Cavanaugh, 5 Reasons the Government Might Lose the AIG Lawsuit, National Review on line, Oct 10, 2014. http://www.nationalreview.com/article/389994/5-reasons-govt-might-lose-aig-lawsuit-tim-cavanaugh

Actually, we have trouble understanding how Mr. Cavanaugh’s “5 Reasons” add up to a clear cut victory for the plaintiffs, but we sure dig his Reason No. 6 — evidently thrown in as a bonus-afterthought to the other five reasons. It contains an inverse condemnation claim (taking of property without compensation), although Mr. Cavanaugh does not use that term.

After all the pros and cons of the government’s asserted graciousness or its punitiveness in bailing out AIG, and of the current plaintiffs’ (former shareholders of AIG) asserted ingratitude in trying to bite the hand that bailed them out back in 2008, the stark fact remains that Uncle Sam did seize some 80% of AIG’s voting stock, and with it control of AIG, which he used it to force AIG to grant a sweetheart deal to the big-boy banks that had taken out insurance policies from AIG against default of mortgage-secured bonds, and now wanted full 100% payment of their value as if nothing had happened, rather than a reduced payment that AIG was trying to negotiate with them, until Uncle Sam stepped in, flashed all that AIG stock it had seized, and forced AIG into that sweetheart deal with the insured banks. And by the way, the plaintiffs also complain that Uncle Sam forced AIG to give up their claims against those insureds who, according to AIG, misrepresented the quality of the bonds being insured.

For a summary of last week’s Bernanke testimony, see Bernanke Testifies That He Was Reluctant to Lend Money to A.I.G., NY Times, Oct. 11, 2014, at p. B7.

Anyway, if you wish to keep up with this controversy (which in our opinion at least is the biggest and most unique inverse condemnation claim in history) we recommend you read Mr. Cavanaugh’s article.