It’s Like Kelo — In More Ways Than One

The blogosphere is atwitter again on a subject closely related to the exercise of eminent domain. The Texas Court of Appeals is hearing oral arguments in the matter of a fellow named H. Walker Royall, a Texas developer who was the beneficiary of a deal with the city of Freeport, Texas, whereby the city would take by eminent domain waterfront property long owned by the Gore family, and turn it over to Royall for redevelopment into a private marina. So far, so bad — it’s the stuff of so many redevelopment controversies all over the country, that have angered the populace and have given eminent domain a bad name. But this controversy has a special twist to it.

A journalist named Carla Main wrote a book entitled “Bulldozed: Kelo, Eminent Domain and the American Lust for Land.” Ms. Main is a knowledgeable lawyer and former opinion editor for the National Law Journal where (full disclosure) she edited your faithful servant’s columns on property rights and takings. Ms. Main’s book covered the history of eminent domain in America, and it also described the Freeport controversy, expressing the opinion that the taking of the Gores’ land for redevelopment was wrong. So Royall sued for defamation, demanding that Main’s book be banned. Incredible as it may seem to First Amendment mavens, his lawsuit was not tossed by the trial court, although it was dismissed as against Professor Richard Epstein of the University of Chicago, who had been sued by Royall for the sin of writing a complimentary book cover blurb.

Ms. Main, represented by the Intitute for Justice, the public law firm that represented Suzette Kelo, has been defending against Royall’s lawsuit, and has appealed the trial court’s refusal to dismiss the defamation action. So stay tuned for the Texas appellate decision which we will report when it comes down.

We write this post, however, to take note of another aspect of the Freeport controversy. It turns out that the redevelopment project in question has gone nowhere, according to the Wall Street Journal. Just like the one in Kelo. In the Journal’s words:

“As for the [Freeport] project itself, the litigation has now come full circle, with Mr. Royall and Freeport suing each other. Mr Royall is suing Freeport for land he says the city promised to sell him. Freeport is suing Mr. Royall for all the marina spending over $6 million (now reported at $100 million and rising).” William McGurn, The Litigious Legacy of Kelo, Wall St. Jour., Sep. 28, 2010, at p. A19.

So if the Wall Street Journal has it right, and just as in Kelo, millions of dollars in public funds have been blown, an unoffending family has been evicted from its lawfully-held land, with nothing concrete to show for it.

We can’t wait to see how it all turns out. In a First Amendment legal regime in which a leader of a major, national religious movement can be falsely depicted in a skin magazine as having had an incestuous relationship with his mother, with the courts extending First Amedment protection to it, one would think that a serious discussion of a pressing, widely debated national problem, by a highly qualified and fully credentialled journalist, would be a slam-dunk for the defense. But the fact that it has not been such in this case reminds us of our long-held belief that when it comes to eminent domain, nothing is sacred and no seemingly settled rule of law can be depended on.

Over a half-century ago, Lewis Orgel, the author of a highly regarded treatise on eminent domain valuation, characterized eminent domain as the “dark corner of the law.”

That it is.

Follow up. You can find a report on the oral argument in this case, and a copy of Ms. Main’s brief, on the Owners Counsel blog — see http://ownerscounsel.blogspot.com/2010/09/more-on-texas-developers-attempt-to.html

Quotable Quote

“The primary difference between the Israelites’ Biblical wanderings in Sinai for 40 years and the jurisprudential wanderings of landowners during the time following the Supreme Court’s re-entry into land use/takings litigation was that God provided the former with manna for sustenance, while the Court offered only thin intellectual gruel to the latter.”

Michael M. Berger, Inverse Condemnation Head Start, ALI-ABA Land Use Institute on Planning, Regulation, Litigation, Eminent Domain, and Compensation, SS001, August 25-28, 2010, Santa Fe, New Mexico, at p. 5

Loony Tunes!

Readers of our prose know already that we take a dim view of what passes for rules of ripeness in inverse condemnation law. See Michael M. Berger and Gideon Kanner, Shell Game! You Can’t Get There from Here: Supreme Court Ripeness Jurisprudence in Takings Cases at Long Last Reaches the Self-Parody Stage, 36 Urban Lawyer 671 (Fall 2004).

Now it turnes out that this stuff has gone beyond self-parody. Take a look at West Linn Corporate Park v. City of West Linn, ___ P.3d ___, Oregon Supreme Court Docket No. S056322, opinion filed September 23, 2010. It all started with the Coporate Park filing an action to challenge city exaction requirements (for off site improvements) as violative of the rule of the Nollan and Dolan cases, both limiting municipal exaction powers to exactions that have a nexus to the burdens imposed by the private development in question and are proportional to them.

Naturally, the action was filed in an Oregon state court, as required by the U.S. Supreme Court’s ruling in the Williamson County case. However, the town removed the case from state to to federal court. On what basis was this done, we have no idea. All we know is that the U.S. Supreme Court has held that plaintiffs in such cases may not pursue them in federal courts but the defendants can (by removing them from state to federal court) — see City of Chicago v. International College of Surgeons. The U.S. Supreme Court never explained why in the same case, the plaintiff, but not the defendant, is barred from proceeding with his action in federal court, so we won’t go there — we just have to accept it.

But here, once the case got to the U.S. Court of Appeals for the 9th Circuit thigs went loony tunes. It turned out that the federal court was unable to decide the case because to reach the federal issues in question it first had to resolve some state law issues. So you’d think that at this point the 9th Circuit would deem the case premature, abstain, and order the case remanded to state court where it was filed to begin with, so it could proceed there to resolve those state law issues. Right? Wrong.

Instead of doing such a sensible thing, the U.S. Court of Appeals asked the Oregon Supreme Court for an advisory opinion explaining what the pertinent state law is, so their federal Lordships could reach the federal issues they meant to decide.

However, if you read the Oregon Supreme Court’s advisory opinion, it turns out that in order to answer the questions put to it, it had to be guided by federal law because, as it happens, most controlling inverse condemnation law is federal.

So the bottom line is that the federal court that was supposed to decide federal law issues got all tangled up in state law issues, while the state court that was supposed to decide state court issues gave us a lengthy interpretation of federal law issues.

There has got to be a moral here some place, but we have no idea what it could be, except perhaps a reinforcement of the folk proverb that says “Don’t make a federal case out of it.”

Those of our readers who are seriously into inverse condemnation law, should read this case. And as for those who aren’t, we advise that they stay away from it, and have stiff drink instead.

Eminent Domain in Britain

If you are interested in how they do it over there, you may want to take a look at a short article by George Fisher, FRICS, entitled Compulsory Purchase Compensation: A Glimpse of Eminent Domain in the United Kingdom, Right of Way Magazine, Sep./Oct. 2010, at p. 26. FRICS stands for “Fellow of the Royal Institute of Chartered Surveyors.” “Surveyor” is Britspeak for “appraiser.”

As Mr. Fisher describes it, Britain is a country where the use of eminent domain by the government may not be a pleasant experience, but at least those folks over there don’t steal like they do over here. The United Kingdom does not have a “Just Compensation” constitutional provision; actually, it does not have a written constitution at all, but the British compensation scheme appears to be more civilized than ours.

Like here, basic compensation consists of fair market value, but that is calculated as of the time ownership and possession is taken by the condemnor. There is also what the Brits call Compensation for Losses caused by the taking (or by a Compulsory Purchase Order, as they put it), and the displaced owners are also reimbursed for their legal and appraisal fees. There is also what they call Loss Payments — compensation for intangible losses, such as “the upset, discomfort and inconvenience in being dispossessed by compulsory purchase,” typically 10% of the market value for owner-occupants. Also payable are removal costs, costs of acquiring and adapting replacement premises, costs of mortgage transfer, and in the case of businesses, temporary and permanent loss of of profits.

If you have a deeper interest in how they do it in Britain, you should also take a look at a more thorough new British treatise by Eric Shapiro, Keith Davies and Davind Mackmin, MODERN METHODS OF VALUATION (10th ed., 2009  EG Books). Its Chapters 15 (pp. 291-302), 26 (pp. 559-598), and 27 (pp. 618-652) are devoted specifically to valuation and compensability rules in compulsory purchase (eminent domain) cases.

Is that New York Mosque Sacrosanct, or is It Subject to Local Land-Use Decisions?

As you know, the printed pages and the airwaves have been filled to overflowing lately with stories about the adventures and misadventures of that mosque that has been proposed for a site next to “ground zero,” the site of the destroyed Twin Towers in New York City.

What we find fascinating about that caper is that people debating whether the proposed mosque should or should not be built, have largely structured their arguments in terms of the First Amendment freedom or religion provision. Supporters of the would-be mosque builders – and surprisingly, some of its opponents — have asserted that construction of that mosque is permissible as a matter of constitutional law, with the opponents arguing that other considerations should counsel restraint and accommodation on the part of the mosque proponents.  

But all that disregards legal reality. Places of religious worship are regularly denied permission to build, because of local land-use regulations, some of which are transparently contrived to stop the construction on grounds other than the ostensible ones. If you want a concise description of the pertinent law, check out Professor Steven Eagle’s treatise REGULATORY TAKINGS, 2nd ed., Lexis Publishing, 2001, at § 7-3(d) which will tell you more than you want to know about cases in which construction of places of religious worship was interdicted because of covenants running with the land, or local land-use regulations, or neighborhood opposition.   

Things got so bad in that regard that in 1993 Congress enacted the Religious Freedom Restoration Act (RFRA) which limited the ability of local land-use regulators to “substantially burden a person’s exercise of religion.” But the U.S. Supreme Court held that law unconstitutional in City of Boerne v. Flores, 521 U.S. 507 (1997), because the law went beyond legislative powers by purporting to define the scope of the 14th Amendment, which, said the court, is a judicial function.

In 2000, Congress struck back by enacting the Religious Land Use and Institutionalized Persons Act (RLUIPA) prohibiting land use restrictions burdening the exercise of religion, except in furtherance of compelling government interests. So far, no Supreme Court battles over that one.  But all that does not mean that construction of churches and temples cannot be banned by local laws. Thus, the Texas Court of Appeals held that a Sikh temple built near Austin at a cost of $350,000, plus $100,000 for the land, would have to be demolished because it was built in violation of local CC & Rs limiting land uses to residences. Perry Stein, Sikhs Dispute Texas Ruling on Temple, Wall St. Jour., Aug 14, 2010, at p. A5. Sounds to us like an erroneous decision because it’s hard to imagine a worse case of etoppel. But what do we know about the doings of our betters?  

And over in Litchfield, Connecticut, the town has just been taken to court over its denial of permission to allow reconstruction of a historical structure in order to enlarge it and make it into an Orthodox Jewish synagogue. So far, the court denied the town’s motion to dismiss and the case is going to trial. See Rinker Buck, Denial of Synagogue Plan Stokes Battle, Los Angeles Times, Sep. 12, 2010, at p. A38.  

So it’s as if we were operating in two parallel universes. In one, the right to build places of religious worship is deemed sacrosanct (no pun intended), while in the other one they are merely development projects subject to regulation like all others. We could be mistaken, but so far, none of the outspoken mavens who regale us daily with fiery commentary about that “ground zero” mosque, have tried to bridge the two universes. Maybe one of these days someone will.

Folow up. Today’s Los Angeles Times reports that the U.S. Department of Justice has filed a lawsuit against the city of Walnut, California, accusing it of religious discrimination. It seems that in 2008 the city denied permission to Chung Tai Zen Center to build a Buddhist temple on its property. The lawsuit is evidently based on a theory of denial of equal protection — the city later granted permission to build a Catholic church that was evidenly bigger than the proposed Buddhist temple.

See Robert Fatureci, Feds Sue City for Discrimination, L.A. Times, September 14, 2010, at p. AA4.

Eminent Domain in Japan

Eminent domain may be an inherent government power all over the world, but Japan is different. There, the cultural attachment to land is so strong that forcing people off their land is a bad idea because if you do that they are likely to fight back. And when we say “fight,” we mean physical violence. We were reminded of that when we came across this item from a Japanese real estate blog whose pseudonymous author does not identify himself. Still, it’s interesting information.  

The development of Narita Airport is Japan’s most famous example of how an intricately thought out development plan can be run amok by land owners unwilling to sell.

Slated to open in 1971, protests by local land owners, student militants and left wing opposition successfully delayed the opening of the airport until May 28, 1978. Rather than a joyous opening day ceremony that would usually mark the end of a momentous project, the birth of Narita Airport was attended by almost 14,000 police officers and over 6,000 protesters. While taxis carrying passengers where being checked by police one by one, protesters were exploding firebombs and throwing rocks while police responded by firing water cannons to keep the protestors at bay.

The fun didn’t stop there either. Narita Airport quickly grew to capacity in terms of how many flights and passengers it could handle and needed to expand. The process of expansion reignited the protests as more land was forcibly expropriated to increase flight capacity. In fact, the lengthy and violent disputes displayed at Narita Airport during initial construction and later in subsequent expansion efforts were the major factor in building Kansai International Airport in the open water of Osaka Bay rather than on established terra firma. Weak Eminent Domain laws affect private projects just as much as public ones. Roppongi Hills is another example of how long it can take just to acquire the land necessary to break ground on a project. Opened April 23, 2003, Roppongi Hills sits on 27 acres of land amalgamated from over 400 smaller plots of land that took 14 years to acquire. During the land acquisition, Mori Building (Roppongi Hills developer) had to offer unusually high inducements to existing land owners and in some cases offered replacement dwellings in the Roppongi Hills Residences, sacrificing the ability of the donated dwelling to generate any rental income at all. Eminent Domain Laws, by Adam, realestate.co.jp, September 10, 2010, go to http://www.realestate.co.jp/2010/09/10/eminent-domain-laws/

Judging from our own observations, this is an accurate depiction of reality. We were struck during our visit to Tokyo by the heavy presence of the Japanese National Police at Narita. Those weren’t your friendly local beat cops keepng an eye on the neighborhood from their little koban. This was a paramilitary force armed with heavy machine guns and armored cars. Evidently, when you take people’s land in Japan, you buy into some serious problems.

So how do they do it over there? How do they acquire land for public projects without using eminent domain? Mostly by persuasion and negotiation. The Japanese are less individualistic than we and are more community-minded, so that helps in persuading them to go along with government demands. Also, under Japanese law, people whose land is taken for public projects are fully compensated. None of that damnum absque injuria moral crap, or lamenting that if the owners are indemnified for their economic losses the world will surely come to an end. 

What is even more fascinating to us gaijins is how the Japanese go about negotiating with owners of land in the path of public projects. We happen to own one of the very few copies of a book entitled PROCESS OF LAND ACQUISITION AND COMPENSATION, Published by the Hanshin Expressway Compensation Center, and translated into English by Professor Tsuyohi Kotaka of Meijo University. The book is written Japanese style in the form of cartoons – like a comic book. We learn from it that when a Japanese public project is about to impact a community, those folks don’t just send those “sell-or-else” lowball offers to owners whose land is targeted for acquisition. Instead, acquisition teams, each consisting of two right-of-way agents (one senior and one novice) move into the targeted community, and get to know the head of the local council, as well as the people in the path of the project. Then, by a process of patient persuasion the latter’s consent to a sale of their property is secured. The compensation is based on fair market value; the owner may move his building(s) but need not do so if doing so is very expensive. It also covers business losses.

Were Land-Use Regulations A Cause of the Housing “Bubble”?

Guess what? At long last somebody has come along and made the case for the connection between land-use regulation and the rise in housing prices that led to the collapse of the “bubble” in 2008. And not just any ol’ somebody. The author of this new book is Claude Gruen, a well-known planning maven who knows what he is talking about.   

Gruen’s new book is New Urban Development (Rutgers Univ. Press 2010) Here is the publisher’s blurb: 

“The recent recession is one result of how local planning laws and practices have stifled competition, discouraged innovation, and artificially pushed up prices in America’s most economically vibrant regions. Economist and consultant Claude Gruen unravels the story behind how these unintended consequences have resulted from the evolution of local zoning, growth controls, and laws intended to increase housing affordability.”

 Sounds right to us.

Afterthought. All this reminds us that in recent decades two presidential commissions on housing reached the conclusion that NIMBY-inspired land-use regulations have been implicated in the excessive, rapid rise in housing costs, that preceded the bursting of the “bubble.” And it was those high housing prices that made it necessary — at least subjectively so — for improvident home buyers to take on excessive debt in the belief that rapidly rising home prices had become some sort of new economic order, and would bail them out.

Athletic Stadiums: A Rathole for Public Funds

One phony “public use” that courts have been swallowing in eminent domain cases, involves construction of professional sports stadiums on land taken by eminent domain. In California — where else? — the state supreme court went so far as to hold that a California city can do that, and also has the power to condemn the NFL franchise of a professional football team, in that case the Oakland Raiders. See City of Oakland v. Oakland Raiders, 32 Cal.3d 60 (1982).

Now, it appears that the economic chickens are coming home to roost and it turns out that a lot of those stadiums have been failures. Some have had to be demolished, and others have become ratholes for public funds. The problem is dealt with in a front page story in today’s New York Times. Ken Belson, As Teams Abandon Stadiums, The Public Is Left With the Bill, N.Y. Times, Septemebr 8, 2010, at p. 1A, continued at p. B13.

This is a long story, that we urge our readers to read in detail. Suffice it to say here that, unbelievable as it may at first sound, some of these stadiums have had to be demolished, while their sites continue to be burdened with bonded debt that is being paid off by the hapless inhabitants of the cities where they were once located, even though they are long gone, so that the payments, with interest, of course, are being made for nothing.

 For example, in the words of the Times:

“The old Giants Stadium, still carries about $110 million in debt, or nearly $13 for every New Jersey resident, even though it is now a parking lot.”

Then there is the demolished Kingdome in Seattle, still carrying a debt of $83 million, the demolished Hoosier Dome in Indianapolis, carrying a debt of $61 million, and the demolished Veterans Stadium in Philadelphia that carries $300,000 in debt.

Then there are stadiums that are still standing but have no professional teams playing in them: the Astrodome in Houston, with an outstanding debt of $32 million, the Civic Arena in Pittsburgh, with a debt of $10 million, and the Memphis Pyramid, paying off $65 million.

The Times notes that these debt figures are incomplete: they do not include many public costs, such as subsidies for land and infrastructure, ongoing public costs associated with operations, capital improvements and municipal services, as well as foregone taxes. Altogether, these items account for another $70 million, give or take.

Once again, your tax money at work.

To read the entire Times aricle go to http://www.nytimes.com/2010/09/08/sports/08stadium.html?_r=1&ref=todayspaper

The Times also notes that this topic is the subject of a forthcoming book by Harvard Professor Judith Grant Long, entitled “Full Count: The Real Cost of Public Funding for Major League Sports Facilities.” We can’t wait to read it.

Efforts to Undo Eminent Domain “Reforms” in California

We commend to our readers’ attention the column of Dan Walters in the Sacramento Bee. Redevelopment Money – Valuable Tool or Slush Fund?, Sacramento Bee, September 8, 2010, at p.3A. It describes how California cities are chipping away at the pitiful eminent domain “reforms” enacted by the state legislature in wake of Kelo, with proposed legislation that would allow them to expand the use of eminent domain for redevelopment. A good read.

For Walters’ column go to http://www.sacbee.com/2010/09/08/3011889/dan-walters-redevelopment-money.html#mi_rss=Dan%20Walters#ixzz0yxRdW0WK