Sad But Dependable News for the Bald — The New London Fiasco Continues

         The end of May is upon us, and the news from New London is that Corcoran-Jamison, the city-selected redeveloper of the property that was the focal point of the Kelo v. City of New London controversy, has not been able to obtain financing for the construction of the upscale condos and commercial facilities it was hoping to build on the land taken from Suzette Kelo and her neighbors. As things stand, NLDC, the city’s nonprofit corporation estabnlished to manage the Fort Trumbull redevelopment project, is free to declare Corcoran-Jamison in default, and seek another redeveloper. However, given the currently prevailaing grim situation in the land devlopment business, it is unlikely that another redeveloper will rush in to take Corcoran-Jamison’s place.

And so, as we have noted earlier, some $70 to $80 million in public funds has been squandered on this misbegotten project, the Supreme Court mangled the pertinent law and has brought a firestorm of angry protest upon its head, that has damaged the standing of the judicialry with the people to an incalculable extent. Now it turns out that it was all for nothing. Your tax money at work.

For the a  dispatch from New London as reported by The Day, the local newspaper, go to  http://www.theday.com/re.aspx?re=d167416c-887c-42de-b7c9-6da1a67d5a6f

Update. For a full story on the misadventures of the Fort Trumbull project see BizzyBlog.com, the post dated June 3, 2008.

California Proposition 99 Is As Phony as a Three-Dollar Bill

 A while back we wrote a post (It’s That Time Again – Yuck!, Feb. 11, 2008) addressing the ongoing California mess that has taken the form of two competing propositions that are on the ballot in the upcoming election — Propositions 98 and 99, both purporting to amend the state Constitution to restrict the use of eminent domain. The problem is that only one — Proposition 98 — does that. The other one — Proposition 99 — is a red herring, designed to confuse the voters and to keep them from voting YES on Proposition 98 that provides real reform to this field of law. How can we say that with such assurance? Easy. Proposition 99 pretty much ‘fesses up that it changes nothing. You don’t believe us? Then get this. Section 3 of Proposition 99 unblushingly states:  

“By enacting this measure, the voters do not intend to change the  meaning of  of the terms in subdivision (a) of Section 19, Article I of the California Constitution, including without limitation, ‘taken,’ ‘damaged,’ ‘public use,’ and ‘just compensation,’ and deliberately do not impose any restrictions of the exercise of power pursuant to Section 19, Article I, other than as expressly provided in this measure.”

And what, pray tell, is expressly provided in this measure that is new? We’re glad you asked. The new stuff is a purported “prohibition” on takings of owner-occupied, detached, single family homes occupied by their owners for at least one year, for the purpose of conveying them to other private persons. But the problem with this weasel-wording is that under present law, no property may be taken “for the purpose of conveying it to a private person.” The purpose must be public. Taking for a private purpose, as the U.S. Supreme Court admonished even in the notorious Kelo case, would be constitutionally impermissible. The problem with the present law is that condemnors always offer some professed “public” purpose, like elimination of blight, or redistribution of titles, or improving the condition of the community, etc., so that any conveyance of the taken property to a private person or entity miraculously becomes not “the purpose” of the taking, but merely something “incidental” to the public purpose. See County of Los Angeles v. Anthony (1964) 224 Cal.App.2d 103 (benefit to private, proft-making promoters of a motion picture museum that was never built, deemed to be “incidental” in a case of taking of a single-family home for their proposed museum site).

And remember, the condemnor’s professed plans are not subject to judicial review, so the condemnors can promise anything but can later devote the taken property to other uses, or just sell it or give it to another private party. Recall that Chavez Ravine was originally taken by the City of Los Angeles for public housing, but was later given to the Dodgers to induce them to move from Brooklyn to Los Angeles. See Thomas S. Hines, Field of Dreams; History: The Battle of Chavez Ravine, L.A. Times, Apr. 20, 1997, at M1. For additional instances of such municipal shenanigans see Gideon Kanner, We Don’t Have to Follow Any Stinkin’ Planning — Sorry About that Justice Stevens, 39 Urban Lawyer 529, 545-49 (2007).

Moreover, Proposition 99 contains an “exception” that swallows the rule: by its terms it doesn’t apply at all when the taking and reconveyance to a private party is for the purpose of protecting public health and safety, preventing criminal activity, responding to [an unspecified] emergency, or remedying environmental contamination — all public purposes for which takings are allowable under existing law. So what does Proposition 99 change? Nothing, Nada. Zip. By its terms  it would apply only to attempted takings that are already prohibited by the Public Use Clause of the Fifth Amendment – i.e., naked takings of property of A for the purpose of transfering it to B.

So ask yourself: why go to the trouble of collecting signatures and getting a constitutional amendment on the ballot, if it changes nothing — or even if you accept the proponents’ take on the matter, next to nothing? Good question. The short answer is that Proposition 99 is as phony as the proverbial three-dollar bill. Its transparent purpose (at least transparent to anyone with even rudimentary knowledge of eminent domain law) is to confuse the voters and divert their attention from the competing Proposition 98 which does make substantive changes in eminent domain law. Proposition 98  prohibits (a) the transfer of taken property to any person or entity other than a public agency or a regulated utility, (b) it prohibits takings for the consumption of  natural resources or for substantially the same use as that of the current owner, and (c) contrary to false commercials of Proposition 99 proponents, it does not abolish rent control, but only phases it out.

In addition Proposition 98 requires reimbursement of condemnees’ litigation expenses when they recover greater compensation than offered by the condemnor, and it requires reimbursement of displaced businesses for temporary losses and for relocation expenses. Moreover, Proposition 98 makes municipal decisions to condemn subject to judicial review without deference to the findings of the condemnor. Finally, if the taken property is not devoted to the purported public use for which it was taken,  the condemnor must offer to reconvey it to the persons from which it was taken, or their heirs.

All these reforms are no more than rectification of historical injustices that have been plaguing the field of eminent domain, that have been the subject of much criticism from legal commentators, and that are ripe for reform.

Bottom line: you may like or dislike Proposition 98, but it’s straightforward reform of the harsh law of eminent domain that has historically winked at takings of private property for non-public purposes, to enrich municipally favored redevelopers, and adding insult to injury, has provided only partial compensation that until this day falls short of providing recompense to condemnees for all their demonstrable economic losses. The U.S. Supreme Court once characterized eminent domain as an exercise in political ethics – and so it should be.

A vote for Proposition 98 will provide support for the Fifth Amendment and the Eighth Commandment – not a bad combination.

What’s the Matter, Senator Obama? Cat Got Your Tongue?

In today’s Los Angeles Times, David G. Savage, the Times’ Washington correspondent, regales us with a lengthy piece on Two Visions of the Supreme Court (May 19, 2008, p. A8), as presented to the electorate by presidential candidates Barack Obama and John McCain.

As befits an old Navy man, McCain minces no words – he has made it crystal-clear that he despises the Supreme Court’s handiwork in the Kelo case. You may agree or disagree with him, but you can tell where he stands. He is opposed to the abuse of the eminent domain power in ways that transmogrify the constitutional term “public use” into a tool of private enrichment of today’s robber barons. But where does Obama stand?

That turns out to be a good question because, after a Lexis search we have not been able to find any forthright disclosure of his position on that subject, and the clues he has left in his public expressions, at best amount to talking out of both sides of his mouth.

On the one hand, Obama professes to empathize with the poor, the downtrodden and the powerless. Savage quotes him as saying that he is “most concerned about a conservative [supreme] court that tilted to the side of ‘the powerful against the powerless,’ and to corporations and the government against individuals. ‘What is truly elitist is to appoint judges who will protect the powerful and leave ordinary Americans to fend for themselves,’ he said in response to McCain.”

Golly. This sure sounds like Obama should be harshly critical of the Supreme Court’s Kelo decision where a 5 to 4 majority took the side of Pfizer Pharmaceuticals, a large corporation, and of  “the government,” namely, the City of New London that  –  in a prime example of what the Wall Street Journal has likened to  “kleptocratic” practices — has kicked out lower middle class folks out of their modest homes, razed them to the ground, and leased their cleared sites for 99-years for a dollar a year, to a Boston redeveloper who, when last heard from, was scrounging for federal funds with which to build top of the market condos, for its private economic benefit. That sure sounds like the kind of outrage that should get Obama’s pulse racing — if he is to be believed.

But guess what? Instead of criticizing the Justices who are guilty of perpetrating this outrage, it turns out that Obama likes them, and holds them out as exemplary. He says he is particularly fond of the views of Justice Stephen Breyer who not only joined the Kelo majority, but has also been providing lame excuses for the court’s handiwork, in the face of an outraged public. According to Savage, Obama has “praised current Justices Stephen G. Breyer, Ruth Bader Ginsburg, and David H. Souter, [saying] ‘I want people on the bench who have enough empathy, enough feeling, for what ordinary people are going through.” So how come Obama voices no sympathy for Suzette Kelo and her displaced neighbors, and favors the judicial Troika that is at the forefront of giving the back of its hand to “ordinary people” being kicked out of their modest homes in order to fatten the purse of big, bad corporations out to make a buck on the backs of ordinary folks?

Remember that use of eminent domain in recent times has often been an engine of enrichment of the real biggies. Who have been the beneficiaries of the most high-profile eminent domain cases? We’re glad you asked. How about General Motors, Daimler-Chrysler, Nissan, the New York Stock Exchange, The New York Times, the Bank of America, and Otis Elevators, as well as retailing giants like Costco, Target and Best Buy, to name a few, to say nothing of  countless major shopping center developers, large car dealers, race track operators, and even gambling casino operators. All these worthies (and others) have been the beneficiaries of municipal sweetheart deals whereby cities seize properties of lesser folk and turn them over at huge discounts (known in the redevelopment business as “land write-downs”) or even gratis to these corporate giants for their avowed financial gain.

So how come we don’t hear from Senator Obama about this ongoing scandal where not only private but also public resources are being squandered for the benefit of outfits that, whatever else you may say about them, do not deserve or need any public subsidies? If Obama is so worried about “ordinary people” being driven from their homes for the benefit of corporate giants — as he claims to be in the context of the mass foreclosures of homes, that are sweeping the country — shouldn’t we hear something from him on that score in the context of eminent domain abuse? We should indeed, but our advice is that you not hold your breath waiting for such a statement.

What is actually at work here has nothing to do with fairness to “ordinary people” or anyone else for that matter — it’s pure ideology. We deal here with people who have become so alienated from the benign society that has nurtured them and conferred upon them a degree of freedom and prosperity unprecedented in the history of the world, that they are unable to appreciate the bounty that is theirs, and strike out reflexively at anything and everything that even smacks of traditional American values, including — as it now turns out — individual home ownership that is supposed to be a highly favored government policy. It is they, not the displaced condemnees, who deserve the back of the hand of enlightened Americans mindful of the freedom that is theirs.

And as for Senator Obama, it’s now up to him to demonstrate which side he is really on: “ordinary people” to whose welfare he pays lip service, or the latter day corporate robber barons.

The Empire Strikes Back — Sort of

Right of Way magazine is a specialized publication of the International Right of Way Association, that caters to eminent domain professionals — right of way agents, appraisers, relocation consultants and condemnation lawyers. That being the case, it shouldn’t be surprising for it to favor condemnors’ positions. But the latest May/June 2008 issue has gone over the top.

A Right of Way  cover article entitled Perception v. Reality: Media Bias in Reporting Kelo, presents the readers with a whole new conspiracy theory. Why are Americans overwhelmingly teed off at the Supreme Court for deciding Kelo the way it did? Is it because of the absurdity of forcibly acquiring private, middle-class homes in order to kick out their inhabitants, turn their razed sites over gratis to redevelopers, and then adding insult to injury, call all that a “public benefit”? That’s what you might think, but the authors of this article, James Brooks and William Busch don’t (Busch, by the way, happens to be a manager of the Fort Trumbull redevelopment project, so it’s easy to understand why he would feel all bent out of shape by the fierce public reaction to the Kelo case).

According to Busch and Brooks (B & B) the Kelo project was just a Jim-dandy civic-minded municipal effort to revive New London. So how come the overwhelming majority of right-thinking Americans thinks otherwise? Because by and large, the people understand the difference between ends and means, while B & B don’t. According to B & B it’s the fault of the media — the journalists done it. It’s those media nabobs who misled Americans into believing that kicking people out of their lower middle-class homes for the sake of enriching redevelopers and their upscale customers wasn’t a ”public” use. And how come the media did this dastardly deed after decades of favorable coverrage of urban redevelopment? We’re glad you asked. It was all the doing of those evil libertarians  at the Institute of Justice, the public interest law firm that represented Suzette Kelo and her neighbors in the U.S. Supreme Court. Without their ministrations, argue B & B, everything would have been hunky dory and peachy keen – the press wouldn’t have covered this outrage as it did, and it would have been business as usual in New London.

There is much more that could be said here, but in a tour de force of self-restraint, we won’t. Let’s just say that B & B ought to reflect on the wisdom of the old proverb that if enough people tell you you’re drunk, it may be a good idea to lie down and sleep it off instead of arguing about it. Whatever may be said of the Kelo decision, it seems incontestable to us that it was, if nothing else, a case of legal reductio ad absurdum even on its own legal premise — the Court simply lost its sense of proportion and went too far. Its unabashed extremism  reminds us of the line of California’s late, great Supreme Court Justice Otto M. Kaus, who once criticized his colleagues for going to far, by observing that “we have learned how to spell ‘banana,’ but not when to stop.”

In the end, Kelo did not so much raise a question of law as it did one of meaning of the English language. It shouldn’t take a legal education to realize that “public use” does not mean private enrichment. Period. B & B can quarrel with that proposition all they want, but it won’t wash and it won’t change the justified public perception one bit. As Honest Abe Lincoln put it, you can fool some of the people all of the time, and all of the people some of the time, but you can’t fool all of the people all of the time. There comes a point beyond which the absurdity of a particular governmet position becomes obvious to the people on a large scale and no amount of self-serving quibbling can change that.

Update. For an insight into what is really going on in New London, see Plans Stall in Fort Trumbull: Land Remains Barren After Homes Torn Down, Eyewitness News 3. The title says it all. To read the full story go to: www.wfsb.com/news/16279677/detail.html

Absurd Application of a Stupid Rule is Unconstitutional, Says the Wisconsin Court of Appeals

As Justice Stevens observed recently, the Constitution does not prohibit stupid laws (N.Y. State Board of Elections v. Lopez Torres, 128 S.Ct. 791, 801 (2008)). And Lord knows, there are plenty of those embedded in eminent domain  law. As California’s late Chief Justice Roger Traynor once put it, there are things in the law that have never been cleaned and pressed and might disintegrate if they were. Here is one of them — the so-called “undivided fee” rule.

When a property in which several people have different interests (e.g., fee title, easements, leaseholds, etc.) is valued in eminent domain, conventional judicial wisdom has it that it is to be valued as if owned by one person, with the resulting single lump-sum award divided among the owners of the different interests in a second, apportionmenmt trial. Why that should be so has never been rationally explained. You could say that this rule exemplifies the old saying that “there ain’t no reason for it — it’s just our policy.” But it is a rule of convenience: in most cases it produces pretty much the same result no matter which valuation approach — “undivided fee” rule or the aggregate-of-interests approach — you use. When that occurs, the use of the “undivided fee” rule simplifies trials — at least for the condemnor, not the condemnees who still have to slog through two trials: one to determine value and another one to apportion the lump-sum award.

But this rule can be absurd when the value of a partial interest affects the value of the whole. Moreover, why assume a state of title that is contrary to fact? The absurdity becomes obvious when a leasehold is involved. On the one hand, leased property is usually valued by capitalizing the net cash flow under the lease and adding to it the present value of the landlord’s reversion at the end of the lease. But on the other hand, under the “undivided fee” rule we have to assume that there is no tenant and that the ladlord owns all interests in the building. But if we do that, what are we supposed to capitalize? Are we then supposed to assume that the landlord pays rent to himself?! And if so, how do we determine what that rent would be? And if we somehow conjure up rent other than the contract rent under the lease, wouldn’t we then be valuing, not the subject property, but rather some other, hypothetical building charging fictitious rents conjured up by the appraisers rather than actually charged by the landlord?

The Wisconsin Court of Appeals recently dealt with the “undivided fee” rule in City of Milwaukee Post No. 2874 Veterans iof Foreign Wars v. Redevelopment Authority of the City of Milwaukee (2008) 746 N.W.2d 536, and confronted its absurdity squarely. The property being taken (and valued) was an 11-story hotel building in which the VFW had a rent-prepaid headquarters under a 99-year lease with 60 years remaining, that called for a rent of $1 per year, making the leasehold quite valuable. For reasons that do not appear in the opinion, the jury returned a verdict of zero for the building, and because of the “undivided fee” rule, VFW was not permitted to offer evidence of value of its leasehold interest, and was awarded no compensation whatever for its valuable lease. VFW appealed, protesting the uncompensated confiscation of its leasehold that the court in an earlier opinion noted to be worth $8 million. (671 N.W.2d 717). Held: reversed.

The appellate opinion wended its way through much decisional law, but in the end concluded that the result was so inequitable that an exception in the “undivided fee” rule had to be carved out, and the VFW would have to be permitted on remand to try its case to determine the value of its leasehold.

What makes the “undivided fee” rule really bizarre is that the U.S. Supreme Court has held that this rule cannot trump the principle that, in Justice Holmes’ words, the Constitution deals with people, not with tracts of land, and that “[T]he question is, What has the owner lost?” Boston Chamber of Commerce v. Boston (1910) 217 U.S. 189, 196. Sounds logical to us. If a tenant (like the VFW here) loses its leasehold by eminent domain, why shouldn’t it be paid just compensation for it merely because it is a tenant? So why is Justice Holmes’ wisdom ignored on a large scale in the lower courts which continue to cling to the “undivided fee” rule in eminent domain cases?

Record Verdict in Florida

Yesterday, May 2, 2008, a jury in Jacksonville, Florida, soundly rejected a condemnor’s valuation evidence in the case of Jacksonville Port Authority v. JAX Maritime Partners, Fla. Cir. Ct., 4th Judicial Dist., Duval County, Case No. 2006-CA-007802.

Condemnor’s offer of judgment was $15 million. Its appraisals presented at trial were $18.995 million and $17 million, indicating that the offer was $2 to $3.995 milion short of the condemnor’s own appraisal. The owner’s trial appraisal was $59.676 million. The owner testified to $80 million. The jury awarded $67.410  million.

We are informed that this is the largest jury verdict ever rendered in the Florida state courts in a condemnation case.

Andrew Brigham of the Jacksonville office of Brigham Moore, headquartered in Coral Gables, was lead trial counsel for the owner. He is a third-generation Florida condemnation lawyer.

Update. For a detailed summary of this case go to www.ownerscounsel.org, and read the post entitled Brigham Moore Attains Highest Jury Award for Eminent Domain Valuation in Florida Circuit Court. Wed May 07 00:55:00 EDT 2008.

Half Moon Bay — Once More With Feeling

For the latest lengthy, detailed description of the Half Moon Bay controversy See David P. Hamilton, Treading Water, California Lawyer, May 2008, at p. 25.

Update. The news from the California Legislature is that a State Assembly committee has approved the legislation facilitating the Half Moon Bay settlement, by deleting provisions in California law that stand in the way of implementation of that settlement under which the owner would be permitted to build 128 homes on the subject property, and failing that receive $18 million in damages from the city. See Committee OKs Half Moon Bay Rescue, Los Angeles Daily Journal, May 1, 2008, at p. 2.