Happy Anniversary, Indianapolis Colts!

         We’ll have something more to say on this subject pretty soon, but for now, this is to remind our readers that yesterday was the 25th anniversary of the Baltimore Colts leaving town in the dead of night, for Indianapolis, to elude the clutches of the City of Baltimore that tried to condemn their NFL franchise, but was frustrated by the Colts’ deft midnight move that put them and their franchise beyond the reach of Maryland courts. It’s a good story, so stay tuned..

Jacksonville Port Authority Fumbles a Lowball

         Word reaches us from Florida that the Jacksonville Port Authority (also known as JaxPort) has thrown in the towel on its misbegotten attempt to condemn a 60-acre parcel belonging to Keystone Coal Co. JaxPort filed a condemnation action and offered Keystone $15.2 million, but the jury awarded $67.4 million. At this point JaxPort thought it over and decided to abandon the condemnation. But in doing so, it became liable for the condemnees’ ltigation expenses, including their attorneys’ fees. It offered Keystone’s  lawyers $1.5 million. Wrong again. The court awarded $10.5 million, and the parties later settled for $6.6 million. All in all, JaxPort spent $10.6 million on its own and Keystone’s litigation expenses, and got nothing for it.

         The winner of this litigation is Andrew Brigham of the Coral Gables based firm Brigham Moore. His accomplishment would appear to be an inherited trait that runs in his family. He is the son of Toby Prince Brigham a Florida heavy hitter, and a grandson of T.F.P. Brigham who won the famous Florida case Dade County v. Brigham, that established Florida’s unique rule that in condemnation cases property owners are entitled to recover their attoreys’ fees win or lose. And as if that were not enough, Andrew’s sister, Amy Brigham Boulris, is an accomplished appellate lawyer with the Brigham Moore firm.

          So here is our advice to condemnors’ lawyers: when you come up against an opponent named Brigham, be careful. Be very careful.

Whatever Happened to Exactions in New York?

         

           Because the construction of major sports stadiums often involves land acquisition through eminent domain, the subject has been of interest to us. See our earlier posts, The Free Lunch – Literally, November 30, 2008, and Update on the Misadventures of New York Yankees, and the Fate of the Celebrated Not-So-Free Lunch, January 15, 2009.

         We now revisit that subject because we just came across a New York Times article that provides its readers with additional data. Charles V. Bagli, As Stadiums Rise, So Do Costs to Taxpayers, N.Y. Times, November 5, 2008). We know you’ll be shocked — shocked! – as we were, but the cost to the City of New York (for the new Yankee Stadium) “has jumped to about $458 million from $281 million [estimated] in 2005.” Surprise, surprise. In addition, the city will provide the needed infrastructure at its own cost – that’s parks, garages and transportation improvements. On top of that the State of New York is chipping in another $201 million.  “The city is also spending about $35 million for roadwork and sewer connections for the stadium and $30 million more on design and planning, items that were not mentioned when the project was announced in 2005.” Fancy that!

          Then there is the new Mets stadium for which the public fisc is getting hit for $221.8 million in site preparation, pilings and mass transit improvements. “The deal also allowed the Mets to keep revenue generated by garages, money that in the past went the city.”

          As we contemplate all that, a thought comes to mind. Usually, when someone wants to build a new project, even a small one, the municipal regulators demand exactions in the form, of land dedications to the city or the payment of “in lieu” fees. Why? Because they say that when a developer builds a project that imposes burdens on public facilities around it, it would be unfair, don’t you see, that the city should bear the cost of the burdens that the new private project imposes on public resources or on the surrounding community. Never mind that the developer pays higher taxes as the value of his property rises as a result of the improvement.

         In reality, as the U.S. Supreme Court had occasion to observe in the Nollan case, absent a rational nexus between the impact of the project and the demanded exaction, such demands for land can be an out-and-out plan of extortion. In the subsequent Dollan case the Court added the requirement that to be valid, the exaction must be roughly proportional to the burdens imposed on public resources by the private development.

         So summoning all the meager intellectual resource at our command, it seems plain that the construction of these stadiums imposes severe burdens on the surrounding public resources, and would thus justify the imposition of exactions even under the limits of the Nollan-Dolan rule. But strangely enough, none are imposed in this case and instead the governmemt is pumping copious amounts of the taxpayers’ money into those deals, providing all sorts of infrastructure gratis.

         So any way you slice it, it would appear that there is one “law” for the poor schmuck who wants to build a house (Nollan) or improve a family plumbing store (Dolan), and another, much more generous “law” for the high-profile gazillionaires putting up professional sports stadiums.

         What’s wrong with this picture?

Postscript. By coincidence, an issue raising the constitutionality of monetary exactions imposed without an individualized determination of their propriety, is pending on a petition for certiorari before the U.S. Supreme Court. For the opinion below see Joy Builders, Inc. v. Town of Clarkston, 11 N.Y.3d 863 (2008). For commentary on that case, see the post of March 24, 2009, on the blog inversecondemnation.com entitled New Cert Petition – Dolan Proportionality And Individualized Determination Applies to In-Lieu Fees.

An Odd Settlement

          Last year, the California Court of Appeal decided Redevelopment Agency of San Diego v. Mesdaq, 154 Cal.App. 4th  1111, 65 Cal.Rptr.3d 372 (2007). The Agency deposited $3,091,000, as the probable just compensation. At trial, the owner made a claim for loss of business under California Code of Civil Procedure § 1263.510, and the total award was $7,785,131.83, for an increase of 250% over the Agency’s deposit. However, the Court of Appeal reversed and remanded for a new trial.  We now learn that there was no new trial.

         According to a story in the San Diego Union-Tribune, the case settled, (Jeanette Steele, Deal Reached in Year-Long Eminent Domain Case, Jan. 17, 2008, p. A-1). The settlement figure? We’re gland you asked. It was $7,800,000. Which leaves us with two questions. First, why did the Agency deposit only $3,091,000? And if that deposit was in good faith, why did it settle for over twice that amount, an amount that was slightly higher than the amount awarded in the first trial? 

         We comment on cases like this from time to time, because studies going back to the 1960s, indicate that condemnors routinely do or try to undercompensate the people whose land they seek to take. Cases like this one suggest that those studies have merit. One can readily visualize a case in which the condemning agency disagrees with the owner’s claim and puts up a good albeit a losing fight in a valuation trial, and has to pay more than it intended. But why would a condemning agency settle voluntarily for the same amount (actually slightly higher) than the award it claimed to be improper, that it succeeded in overturning on appeal?

With Conservatives Like That, Who Needs Radicals?

The problem with eminent domain is that liberals don’t believe in private property, and conservativrs don’t believe in making the government pay.

       The late Bert Burgoyne of Detroit, who uttered this bit of insightful wisdom was well qualified to do so. He was a libertarian-conservative and an outstanding eminent domain lawyer with ample experience to make that judgment. Our own view is that  when push comes to shove, conservatives will abandon principle and go for the money instead. It all came into focus for us in the Tahoe-Sierra Conservation Council  case. As the then conservative Attorney General Ashcroft was making a speech to the ABA convention proclaiming himself opposed to government conduct that under the guise of regulation stripped property owners of all economically viable use of their land, his Solicitor General, Theodore Olson was arguing the opposite in the Supreme Court, providing weighty amicus curiae support to the Tahoe Regional Planning Agency that had denied all use of land to hundreds of individuals who had bought building sites in the Lake Tahoe area, but were not permitted to build homes. And who was the lawyer who argued that case in the U.S. Supreme Court on behalf of the government? Would you believe John Roberts? Yes, that John Roberts who was then practicing law in Washington.

         Now, another such object lesson comes to us from Mississippi. Inspired by the wretched Kelo case, the Mississippi legislature responded by passing modifications to that state’s eminent domain law, forbidding the use of condemnation for private, “economic development” purposes. The vote was unaninmous. But guess what?

         Along comes Mississippi Governor, Hailey Barbour, a fully credentialled Republican and former Chairman of the Republican National Committee,  and vetoes that bill. Why? His governorship left no doubt of his thinking. He was of the view that expansive eminent domain power was necessary to attract new industry to Mississippi, offering Toyota and Nissan as recent examples of doing so. So here we have an ostensible conservative — one of those folks who are forever demanding “strict construction” of the Constitution, don’t you know – calling for a loosey-goosey construction of that document’s “public use” clause, so as to confer a private economic benefit on private entities in the hope that those entities’ economic success will produce a trickle-down effect on the local economy,  making it — voila! – “public use.” Some strict construction.

          That would be bad enough by any standard, but there is more. What Mississippi has done in the past (and what its legislature was trying to prevent in the future) is the use of the power of eminent domain to wrest land from unwilling owners, in order to convey it to — are you ready? –  Japanese car manufacturers so they can better compete against the sorely beset American car manufacturers and do what they can to drive the latter out of business. We wouldn’t call that patriotic, would you.

        Mind you, we are not unmindful of the assorted sins of American car manufacturers in failing to produce and market reliable and durable cars that are appealing to American buyers and  capable of competing head-to-head with the Japanese. To that extent the Detroit folks deserve their treatment by the market. But it’s a long stretch betwen that and an American government’s active subsidy of Japanese manufacturers who, even as we write, are bringing the American car industry to its knees, and are responsible for six-figure job losses among American workers.

         To say nothing of the fact that American eminent domain law is to a large extent an act of kleptocracy — it takes unoffending property of unoffending citizens under the promise of “just compensation,” when in fact it offers nothing of the sort. The “fair market value” standard used as a measure of compensation is so ingeniously defined by the courts that it fails to consider the full extent of what a willing seller in a voluntary transaction would insist on as the price, and it ignores incidental economic losses suffered by condemnees when they are forcibly diasplaced from their homes and businesses, with the latter usually receiving no compensation whatever for their businesses that are destroyed by the condemnation but cannot relocate.

          Perhas we shouldn’t be surprised. It is a message of biblical lineage that men will sell their birthright for a mess of pottage. But at least in the biblical story the birthright was voluntarily given up by the person receiving the pottage. How much worse when the birthright is forcibly taken by the government that then proceeds to give it to foreigners for their enrichment at the expense of the economic wellbeing of its own citizens.

         The Mississippi House promptly overrode Governor Barbour’s veto, and now it remains to be seen if the Mississippi Senate will do likewise. Stay tuned.

Follow up. We are informed that the Mississippi State Senate failed to override Governor Barbour’s veto. The Governor argued that inasmuch as under Mississippi law the courts decide what is “public use,” the legislation would be unconstitutional. This interpretation makes no sense. Mississippi courts may indeed have the last word on whether a legislative determination of “public use.” But that is a judicial reviewing power of legislative decisions. Thus, for example, the courts have the last word on what is a “reasonable” search and seizure, but that does not prevent the legislature from passing laws determining what goods may be illegal and thus subject to seizure.

No Good Deed Shall Go Unpunished

     

          There have been further developments regarding the AIG bonuses of which we wrote in our post The People Whose Decisions Are “Well Nigh Conclusive,” March 18, 2009. Please re-read that post and the Follow Up to it.

         It turns out that the original inflammatory press reports were wrong, and the people who received those “bonuses” are not the ones who created the mess, but ratherr those who agreed to step in and clean it up. So much for trusting the press.

Condemnor’s $820,000 Offer Settles for $3,200,000

         The New Jersey eminent domain blog of the law firm of McKirdy & Riskin informs us that the Morris County Municipal Utilities Authority agreed to pay $3,200,000 for a 35-acre tract of land in Roxbury, Wharton and Jefferson townships, formerly owned by Farley Waterworks, LLC, which the MUA had condemned in 2003 for the specific purpose of using the property’s groundwater to supply drinking water to its customers.  

          The MUA’s initial offer was $820,000, based upon the land’s potential to be developed with a warehouse, and did not take into consideration the value of the property’s groundwater resources despite the fact that the taking was for water supply, and the property lay on top of an aquifer in which  more than 1.2 million gallons per day of potable water flowed beneath the property’s surface.

           The MUA had applied for a court ruling preventing the property from being valued for its water resource, but Morris County Superior Court Assignment Judge B. Theodore Bozonelis denied that application in late 2008.

Bad News for the Times

Mar. 20, 2009, page 6

FORUM COLUMN

LOS ANGELES DAILY JOURNAL

 

Bad News for the Times

By Gideon Kanner

It seems like only yesterday that, acting in furtherance of its Times Square redevelopment plan, New York condemned a city block in midtown Manhattan, at 43rd Street and 8th Avenue, in order to turn it over to the New York Times and its developer Forest City Ratner, for the construction of a new high rise headquarters building for the Times. It was supposed to be a famous Italian architect’s tour de force (if you doubt it, just ask the gushing Times architecture critics). The block selected as the site for the new Times building was an ordinary midtown commercial block that was free of the porn stores that had lined 42nd Street between Times Square and 8th Avenue, and inspired the Times Square redevelopment project. Though it was no more “blighted” than other nearby Manhattan streets, the particular site chosen for the Times’ new building was included in the ballyhooed Times Square redevelopment effort that in addition to banishing porn, would spruce up the area, making it more inviting to tourists.

To say that this was a sweetheart deal for the Times would be an understatement. The subsidized price the Times paid for the land when it was transferred to it after its condemnation was about half of what comparable local land sales indicated. At the time the Times estimated that “city incentives” to it would come to $29 million. Also, buried in the 99-year land lease to the Times and its developer was an option clause that would permit those two to purchase the building after 30 years for “nominal consideration.” It doesn’t get much better than that, does it?

Of course, to provide the Times with a building site, it was necessary for the city to acquire the targeted block and to displace all the commercial enterprises that had owned and occupied space in it for years. And, under New York eminent domain law, there is no compensation for business losses inflicted on condemnees. So what, said the Times. One of its executives was quoted at the time as saying “It’s our responsibility to all the stakeholders in this company to be as competitive as we can be.” And so, the Times’ posh new digs were built on the economic bones, so to speak, of the displaced indigenous businesses that did no one any harm and that had provided the public with a variety of useful goods and services.

It’s now a half-dozen years later, and it turns out that things haven’t quite worked out as hoped. Faced with an adverse economic climate that now increasingly afflicts the newspaper business, the New York Times is strapped for money and has just sold its interest in that new building, retaining the area it occupies as a tenant with an option to repurchase it.

Likewise, the Times’ partner in the new venture, Forest City Ratner, is having problems of its own and just took out a $640 million mortgage against its portion of that new building.

We also learn that the Times had sold its old building for $175 million, but its “stakeholders” did not make out too well on that one – the buyer resold it for three times that amount. Who knew, says the Times, that a short-lived boom in Manhattan real estate was coming.

The moral of this story is that urban redevelopment, no matter how semantically disguised, is nothing more that a commercial real estate venture that uses strong-arm government tactics in acquiring urban land from unwilling “sellers.”

But like all other business ventures, it also runs the risk of failure when times turn bad, or even when they don’t, when other negative factors are brought to bear on the deal. For an excellent, concise discussion of this aspect of redevelopment, read the conclusion to the opinion of Justice Macklin Fleming in Regus v. City of Baldwin Park, 70 Cal.App.3d 968 (1977), where he observes that those glowing urban redevelopment projections can be risky business and therefore should be funded with the entrepreneurs’ private venture capital rather than the taxpayers’ money, because there is an ever-present risk that the project promoters’ promises of baking a bigger economic pie for all may turn into “pie in the sky.”

Though the New York Times’ misadventures give rise to a classic and well justified case of Schadenfreude, I resist rejoicing over the Times’ misfortune. In spite of its flaws, warts and pimples, it’s a good newspaper and it would be a shame to see it go under or even decline in quality along with so many other, once-renowned American newspapers.

Still, it can’t go entirely without notice that there is poetic justice involved here. When the Supreme Court decided the wretched Kelo case in 2005, the country reacted with shock and outrage. But the Times was one of only two major national newspapers (the other was the Washington Post) that in spite of its clear conflict of interest, cheered the court’s decision on its editorial page, and endorsed the “economic redevelopment” process that forcibly takes one citizen’s land in order to give it to another one, for the latter’s financial gain.

Well guys, turnabout is fair play and eventually chickens do come home to roost. The moral of it all is that he who would live by the redevelopment sword runs the risk that the sword may turn into a wet noodle when the economy tanks.

_____________________________________________________________________

Gideon Kanner is professor of law at Loyola Law School in Los Angeles,and is of counsel to Manatt, Phelps and Phillips.

 

The Real Problem With Extraterritorial Condemnation

         The eminent domain blogs have been kicking a problem around lately. What problem? The problem arising from the New Jersey case in which the Cliffside Park municipality seeks to condemn a parcel located outside its territorial limits in the adjoining town of Fairview. The question that has been occupying our colleagues is: can Cliffside Park do it? Our take: on the basis of conventional wisdom, the answer depends on local legislation. 

         The power of eminent domain resides in the state legislature which may delegate it to such entities and on such terms as it sees fit. So the question is not whether the municipality where the subject land is located can grant the power to take to another municipality.  Subdelegation of the power of eminent domain is generally a no-no. The decision of who may condemn belongs to the legislature. So the real question is whether the legislature has authorized extraterritorial condemnation?

          We don’t know what the law is in New Jersey, so we are following that litigation with interest. But out here in California, extraterritorial condemnation is generally forbidden by statute, Cal. Code Civ. Proc. Sec. 1240.050, subject to statutory exceptions to that rule.  Cal. Code Civ. Proc. Sec. 1240.125 grants limited extraterritorial eminent domain power to municipalities otherwise possesing the power of eminent domasin, where the extraterritorial taking is for water, gas, or electric supply purposes or for airports, drainage or sewer purposes.

          In fact, it is common that cities locate their airports so that the noise etc. of jet aircraft takeoffs impacts on land outside the municipal limits, so the impacted people residing in the path of those takeoffs cannot vote the responsible municipal types out of office, and have to rely on the tender mercies of courts which sometimes do and sometimes don’t provide relief for nuisance or for inverse takings of avigation easements. For a discussion of the problems generated by extraterritorial airports, see Michael M. Berger, You Know I Can’t Hear You When the Planes Are Flying, 4 Urban Lawyer 1, 12-15 (1972).

         However, though almost never raised in eminent domain litigation, there is a dctrinal problem here that the courts have not addressed.  When a condemnee challenges a taking, the usual judicial response is that the municipal decision to take is “well nigh conclusive,” and the aggrieved landowners’ remedy is via the ballot box. But in the case of extraterritorial condemnation, the affected condemnees cannot avail themselves of even that theoretical “corrective” because not being inhabitants of the municipality doing the condemning, they can’t vote there and cannot do anything about the taker-municipality abusing its power of eminent domain. How now, brown cow?

          It would be interesting to see what happens if some enterprising condemnee were to raise that point. Any bets?

Follow up.  For a discussion of pertinent New Jersey law, see Bill Ward’s blog http://www.njeminentdomain.com/ post dated 3/2/09.

Maritime Disaster in Hawaii

            Whatever you do, don’t miss the inversecondemnation.com blog of our colleague Robert Thomas, specifically his post of March 17, 2009, about the Hawaii Supreme Court nixing the new Hawaii Interisland Superferry on environmental grounds. See Sierra Club v. D.O.T., No. 29035, March 16, 2009. The controversy, in Mr. Thomas’ immortal words was

“A certain segment of Hawaii’s population has from the get-go considered the interisland vehicle ferry as nothing less than the Death Star: a whale-killer, a transporter of invasive alien species, and harbinger of a militarized imperialist government. (Others don’t view it so malignantly, just as a much needed and long overdue alternative to interisland transportation, or as a refutation of Hawaii’s reputation as a horrid place to conduct a business…)”

        As far as we are concerned, the 216-page Hawaii Supreme Court opinion, plus the 11-page dissent, amount to a case of never-has-so-much-been-said-by-so-many-in-defense-of-so-little, to paraphrase Winston Churchill, and maybe someone should sue the Hawaii Supreme Court for contributing to global warming certain to increase after laying waste to the forests that had to be chopped down for the paper used thus far in that controversy.

           In case you aren’t keeping this in mind, Hawaii is an island archipelago in the middle of the Pacific Ocean, which means that most of the stuff the Kanakas and their Wahines consume has to be brought in by ship. And, though claiming no seafaring expertise, last time we looked, transpacific freighters were pretty hefty vessels, probably bigger that that ferry. So why they would pose no threat to the environment as they shuttle from the mainland to the islands or among islands to unload their cargo, while the Superferry would do so is beyond our meager intellectual capacity to parse.

          But, hey man, this is 21st century America where nothing of substance can get done without judges’ say so. What the hell, it keeps lawyers gainfully occupied.

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