Where Does Obama Stand on the Misuse of Eminent Domain?

In response to our recent blog on Senator Obama’s confusing position on the subject of eminent domain abuses (What’s the Matter, Senator Obama? Cat Got Your Tongue? May 19, 2008), we received a comment from a fellow who identfied himself only as Stephen. He quarrels with an earlier reader comment, and presents us with what he says is a copy of a letter he got from the Obama campaign, explaining where Obama stands on the eminent domain issue. Here it is:

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Dear Stephen,

Thank you for contacting us about eminent domain. We appreciate hearing from you on this important topic.

Barack Obama is a strong supporter of property rights and recognizes that low-income and elderly people are often the ones most affected when government takes private property. As president, Obama will support legislation that balances the rights of property owners and the interests of local communities in economic development. He will press state and local governments to clear a high hurdle when taking property from private owners.

Obama believes the taking of property should be restricted to those instances in which there is a clear benefit to the general public, and the reimbursement to property owners should not be limited simply to the market value of the property.

In the Illinois State Senate, Obama sponsored a bill requiring reimbursements for eminent domain to be in excess of market value and to account for relocation costs. In the U.S. Senate, Obama expressed serious concerns about the Supreme Court’s decision in Kelo v. City of New London, which made it easier to take property for private development. Obama believes the decision is flawed because it could lead to houses and farms being taken on behalf of more powerful and influential businesses and corporations.

Thank you again for contacting us.

Sincerely,

Obama for America

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Paid for by Obama for America

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The problem with this statement is that if it is indeed genuine (and we have no reason to say that it isn’t, though we are trying to check it out) is that here again Obama is talking out of both sides of his mouth. Consider this statememnt: “Obama will support legislation that balances the rights of property owners and the interests of local communities in economic development.” Say what?! What does that mean? How is it posssible to support Kelo-style  ”economic development” and at the same time say that it is “flawed” and talk about balancing the rights of property owners who are victimized by it? And what about the fact that Obama professes his admiration for the Justices who made the Kelo decision? How can that be reconciled with his professed concern for “low-income and elderly people [who] are often the ones most affected when government takes private property”?

And what’s a “high hurdle”? 

Note also that the letter talks in terms of a “clear benefit to the general public,” and doesn’t even mention the constitutional term “public use.” But that’s just the problem. In Kelo, the Supreme Court majority took the position that “public benefit” is a more accurate meaning, no less, of “public use.” We don’t think so. We are sure that if Senator Obama or Justice Stevens (the author of the Kelo majority opinion) were to drop in on a neighbor to borrow a lawnmower, neither of them would say. “Hi neghbor. Can I purpose your lawnmower?” No way.

It looks to us like it’s the same old story that motivated us to comment on Obama’s will o’ the wisp position on this subject. So our advice is, whether you do or don’t like the man as a candidate, be careful.  Be very careful. At least on this subject, he may be trying to sell you the Brooklyn Bridge. Or something.

Update. Actually, it’s a non-update. The fellow who sent us the purported Obama campaign letter is not responding, so we can’t vouch for its authenticity. So take it for what it’s worth — and the way it looks to us, it isn’t worth much.

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Higher Mathematics Department, Or How Can a $1,655,280 Parcel of Land Suffer $2,000,000 in Severance Damages?

In connection with our duties as editor of Just Compensation, it’s our sometimes enlightening and sometimes depressing task to read every reported eminent domain and inverse condemnation opinion handed down by the courts. And to paraphrase the title of that famous old song, folks, nobody knows the drivel we have seen doing that. But interspersed with the familiar judicial dross there are some items that are quite worthwhile — some expound and illuminate law, others discuss interesting factual situations, or appraisal practices. And then there are those rare bits and pieces that just cause you to chuckle. Here is one of them.

In School District No. 12 v. Security Life of Denver Ins. Co., 179 P.3d 1 (Colo.App. 2007) the school district set out to condemn two parcels, A and B. Prudently, the District was not sure whether it could afford both, so it prevailed on the trial ourt to instruct te jury to value parcel A as well as parcel B, and also determine severance damages to parcel B in case the District could only acquire parcel A. So far, so good.

The jury came back with $5,619,240 for parcl A, $1,655, 280 for parcel B, and $2,000,000 in severance damages to parcel B. Say what?! How could the severance damages to parcel B exceed its value? But wait, there’s more. The owners’ lawyers managed to persuade the trial judge that not only was this severance damages verdict OK, but also — are you ready? — that the jury intended to award the owner both the value of parcel B and the severance damages to it.

It probably won’t come as a surprise to you that on appeal the Colorado Court of Appeals, said “nice try but no cigar,” and reversed. It held that the jury’s verdict was mathematically impossible. The jury had been instructed to find severance damages to parcel B only if the taking was of parcel A alone. But valuing parcel B in its entirety meant that there could be no severance damages to it — it had to be one or the other (a total taking or a partial taking), not both. So the awarding both the value of the entire parcel B as well as severance damages to it was a logical no-no. And so, valuation of parcel B had to be remanded for retrial.

Funny as all this may be, we can’t help but admire the sheer audacity of the owner’s silver-tongued lawyer who persuaded the trial ourt to enter a judgment for $3,655,280 as compensation for a parcel the jury found to be worth only $1,655,280.  As the late, lamented California Supreme Court Justice Otto M. Kaus once put it to a respondent’s lawyer defending clear error of a trial ourt, “Counsel, you won a trick case below, and I hope you enjoyed it while it lasted.” 

UPDATE.  Whoops. We may have been a bit hasty. A divided Colorado Supreme Court reversed the Court of Appeals, three judges dissenting. The reason for the reversal was that the court saw this not as one case, but two. First, a trial to take parcel A as of 2004 and find its value plus severance damages to parcel B. Second, to find the value of parcel B as of 2005. Thus, although the parties tried it as one case, by the time the valuation of Parcel B took place it had already suffered severance damages from the taking of parcel A, and its value was diminished accordingly. So contrary to the way the Clolorado Court of Appeals saw this case, it was actually two condemnations with two different dates of value. See School Dist. No. 12 v. Security Life of Denver, 185 P.3d 781 (Colo. 2008).

The Biased Decision Makers

In some states the law provides that before you can try your eminent domain case in court you have to go through a proceeding before a non-judicial body of commissioners who determine just compensation for the taking. Then if either party is displeased with that decision, it can appeal to a trial court, demanding a real trial before a judge and jury. In Georgia, this preliminary round takes place in the form of an arbitration before a Special Master appointed by the court.

We often wondered if this procedure was doing much good, or whether it only prolonged and complicated the condemnation proceeding. We now have a partial answer from Georgia in the form of an article bluntly entitled Special Master Bias in Eminent Domain Cases, by S. Alan Aycock and Roy T. Black, respectively a real estate consultant and a professor of business at Emory University. It appears in Volume 33, No. 2, 2008, of the journal Real Estate Isues, at p. 53.

Aycock and Black conclude that on the average, the condemnor’s appraisal comes in at $32,722, the Special Master’s award at $51,304, and the final judicial award to the owner at $177,758. By our calculator, that means that on the average the final award is over five times the condemnor’s appraisal on which the offer is presumably based, and over three times the Special Masterr’s award. Wow!

The cause of it? Aycok and Black think it has to do with what they call the “moral hazard” of special masters being influenced unduly by the fact that they are appointed by Georgia condemnors, or at least with great influence by the condemnor in the selection process.

Aycock and Black thus join other investigators in Utah, Minnesota and California, who have reached similar conclusions with regard to the difference between condemnors’ pre-litigation offers and the outcomes after trial. The locales may vary, but the story appears to be the same: undercompensation is rampant.

The Return of the Jedi

     On May 13, 2008, we reported how the defenders of the wretched Kelo decision took to the pages of Right of Way magazine in an ostensible refutation of the facts underlying the Kelo controversy, claiming that the adverse publiity that Kelo received was unwarranted, and was drummed up by a biased press.  See Perception v. Reality: Media Bias in the Reporting of Kelo, by John Brooks and William Busch, Right of Way, May/June 2008. We covered it in our blog The Empire Strikes Back — Sort Of. We are now   pleased to follow up with the report that Scott Bullock, the lawyer who argued Suzette Kelo’s case before the U.S. Supreme ourt has provided a response in the July/August 2008 issue of Right of Way, p. 12, in an article entitled The Truth About Kelo.

Bullock provides a point-by-point refutation of the original article. It’s well worth reading if you have access to Right of Way magazine. According to Bullock, the original article contained a number of inaccuracies, the most telling of which, in our book at least, was that Brooks and Busch attempted to defend the Kelo taking as being for road widening. Not so, says Bullock — it was for economic redevelopment, just as it appears in the U.S. Supreme ourt opinion.

Man Bites Dog!

       All comes to him who waits. Here is an oddity for you. The Sacramento Bee reports that the Sacramento redevelopment agency which had acquired a market is now going to demolish it to make room for — are you ready? — one, count ‘em, one, single family home. The Bee dispatch lacks any details, but that must either be one tiny market, or one hell of a big house. And to make this news item even more tantalizing, the Bee says that the agency plans to build an affordable home. Affordable to whom? The Bee sayeth not. See Niesha Lofing, Market razed so home can be built, Sacramento Bee, July 10, 2008. 

The Free Lunch — Revisited

     One of the famous lines in eminent domain law is the Supreme Court’s observation in United States ex rel. TVA v. Powelson, 319 U.S. 266, 280 (1943), that “The law of eminent domain is fashioned out of the conflict between the people’s interest in public projects and the principle of indemnity to the landowner.” That has a  superficial ring of fairness to it, but it actually presented the country with a false choice — there was no such conflict. The government did what it wanted and paid for the land it wanted for its projects.  Even in the Great Depression  that preceded Powelson, the federal government engaged in a huge program of dam construction and had no difficulty paying for their sites. Indeed, the problem was that it built too many dams (see Marc Reisner, “Cadillac Desert” (1993)), and is now facing the problem of having to tear down some of them.

We recently gained an additional insight into the situation upon reading a passage in Jane Jacobs’ book  “Cities and the Wealth of Nations” (1984), 116-117. It turns out that, in fact, the TVA dam construction program generated huge economic benefits and, far from consuming public funds, was immensely profitable to the TVA and also supplied cheap electricity to industry at half the price charged for electricity generated elsewhere. After demand for electricity outstripped supplies of power generated by TVA’s hydroelectric dams, it built additional coal-fired generating plants, and after doing so it could offer power to its consumers at a 30% advantage. This attracted industry to the area, and though it did little to improve the lot of rural Tennesseans, it sure was good for industry.

So the moral of it all appears to be that “the people’s interest in public works” was in no peril, that TVA got a huge bargain, and made so much money that it became a leading power-generation giant. All this on  land taken from the local folks whose homes were either razed or inundated by the waters rising behind the newly built TVA dams, and who under prevailing judicial construction of “just compensation” were left undercompensated . TVA’s success also stimulated increased coal strip-mining in the area, that produced the familiar environmental degradation, plus air pollution from those coal-burning power plamts. “The people’s interest”? Perhaps. But it appears that it was the TVA’s economic interest that predominated. But TVA’s great success came at a huge price, and that price was not paid by the government.

2008 ALI-ABA Land Use Institute

      The 24th annual American Law Institute–American Bar Association (ALI-ABA) Land Use Institute will take place this year on August 13-16, 2008, at the Fairmont Copley Plaza Hotel in Boston. The program will cover a variety of topics dealing with substantive as well as procedural and practice aspects of land use issues and problems. It will include updates on the law of eminent domain and inverse condemnation. This has been a consistently successful program that has attracted stellar speakers and has been highly rated by the attendees.

      For detailed information on the speakers and topics, and a copy of the program, contact ALI-ABA, 4025 Chestnut St., Philadelphia, PA 19104, telephone 1-800-CLE-NEWS. On line information is available at www.ALI-ABA.ORG/CP011/

     This program will also be available as a video webcast. For those who cannot attend, audio recordings of the program will be available, as well as the printed program handouts.