Lowball Watch – California

Don’t miss the new California Court of Appeal opinion in Tracy Joint Unified School District v. Pombo, No. C061239, filed October 29, 2010. This was a taking of 6.1 acres of vacant land out of a 231-acre tract, for a school site.

The District’s pretrial offer was $3,181,500 for the taken land with no severance damages to the remainder, while the owner’s demand was $7,995,000, including severance damages. The jury awarded $7,085,150 for the part taken, plus $900,000 in severance damages, for a total of $7,985,150. Or, practically speaking, a bull’s eye for the owner.

The controversy on appeal was over attorney’s fees. The trial court denied the owners their fees, opining that the condemnor’s offer was reasonable. The Court of Appeal disagreed after a lengthy analysis of the facts and the law, and reversed. It’s a good read.

If you want to understand the gist of the court’s reasoning, without wading through pages of judicial prose, we suggest you go to http://www.calattorneysfees.com/2010/10/eminent-domain-trial-courts-denial-of-litigation-expenses-to-winning-condemnees-reversed.html That is a blog on California attorney’s fees.

Meanwhile, Back in New London . . .

The Day, the New London, Connecticut, newspaper brings the dispatch that things are stirring on the site of the failed redevelopment project that gave us the wretched Kelo case. In case you haven’t been following that intellectual, moral and economic disaster, in 2005 New London won its right-to-take case in the U.S. Supreme Court which approved its use of eminent domain to take an unoffending lower middle-class neighborhood in the Fort Trumbull area for “economic redevelopment” whereby the taken land would be given to a redeveloper for $1 per year, in order to build fancy shops, condos and a jazzy five-star hotel for the benefit of the well-paid employees of the nearby Pfizer pharmaceutical company.

But nothing came of it. The redeveloper could not get financing, funds for a proposed Coast Guard museum evaporated when the recession began, and the project failed at a cost of somewhere around $100,000,000 with nothing to show for it. The site has been sitting empty since 2005. And, adding insult to injury, Pfizer announced a few months ago that instead of providing lots of new jobs, it is shutting down its New London facility and moving out, taking some 1400 jobs with it.

Now we are told that the New London redevelopment agency (operating under the nom de guerre of New London Development Corporation), has struck a deal with a New York developer whereby he would be given the land, and build 80 townhouses on it at an estimated cost of $15 million. The developer must begin construction within 26 months. That presupposes that he will be able to obtain financing which his predecessor was not able to do. Rots of ruck on that one, folks.

The Day story is Kathleen Edgecomb, Company Signs on to Build Townhouses at Fort Trumbull, October 29, 2010. For the story go to  http://www.theday.com/article/20101030/NWS01/101029521

With “Good Faith” Like This, Who Needs Bad Faith?

A number of states have laws that require condemnors to make good faith offers to prospective condemnees before filing an eminent domain action, the theory being that this will encourage early settlements, and reduce the numbers of condemnation cases burdening the courts. Alas, human nature being what it is, it’s common that those prelitigation offers turn out to be something less than in good faith. In the olden days, as congressional hearings of the 1960s revealed, it was common that condemning agencies routinely offered prices that were actually below condemnors’ own appraisals. The “good faith offer” requirement was supposed to cure that problem.

As it turned out, however, not necessarily. One such case comes to us from Missouri, which we find remarkable because Missouri courts, by and large, are not overly solicitous of condemnees’ rights. But it appears that there are limits to everything. In Planned Industrial Expansion Authority etc. v. Ivanhoe Neighborhood Council, 316 S.W.3d 418 (Mo.App. 2010), the owners agreed to sell their property to a private party and to accept $650,000 as the price. But the authority stepped in and offered — are you ready? — $180,400. Predictably, the owners refused to sell at that price, so the authority filed a condemnation action. The owners responded by challenging the condemnation on the grounds that the authority’s offer was not in good faith, so the condemnation action was improperly brought. The trial court agreed, dismissed the action and awarded the owners attorneys’ fees.

So far, this would appear to be an unfortunate but not uncommon story. What makes it noteworthy, is the authority’s argument on appeal. According to the court of appeals, the condemnor argued that as long as it used a state licensed or certified appraiser, and he used “generally accepted practices,” his appraisal did not have to be in good faith. No, we are not making this up. Here is what the court said by way of response: “The Expansion Authority has cited no authority for the proposition that that it is a ‘generally accepted practice’ to submit an appraisal in less than good faith, and we would reject the proposition in any case.”

So we sit here wondering what those condemnor’s folks were thinking — or were they thinking at all? — when they decided to march into court and expressly defend bad faith conduct. But if the court opinion is to be believed, they did just that.

So in case you need an example, here is why the process of eminent domain is so widely despised. And while we offer three loud “attaboys” to the court for its performance in this case, it would not hurt for their Lordships to ponder what is it that the courts have been doing in the past to inspire such astonishing thinking on the part of condemnors’ appraisers and lawyers.

Shouldn’t the Government Take Its Own Good Advice?

The title of this post was inspired by George Mason University Professor Steven Eagle’s article, Private Property, Development & Freedom: On Taking Our Own Advice, 59 S.M.U. L. Rev. 345 (2006). In it, Professor Eagle took note of our effort to influence Russia, as it was emerging from the wreckage of the collapsed Soviet Union, to encourage the development of a new regime that would extend legal protection to private property rights, as indispensable to the development of a society respectful of personal liberty. Being the astute fellow that he is, Professor Eagle also took note that even as we were handing out good advice to the Russians, our deeds at home were at variance with it.  

Today’s news brings another illustration of this problem in action. The St. Kitts-Nevis Observer of October 22, 2010, brings the dispatch that the U. S. embassy in Barbados has issued a warning to would-be land purchasers to be cautious when buying land in St. Kitts-Nevis. Why? Because according to the U.S. State Department, that island paradise has been something less than fastidious when expropriating private property. Uh, oh! 

The State Department warning says that though the local law requires the government to compensate owners of expropriated property, in practice “the government has often not paid compensation for private property expropriated under its eminent domain laws” in several cases, with one of them going back to 1987, and still pending. Gee, that sounds terrible, doesn’t it? But before you start denouncing those St. Kittians, you might want to compare what goes on over there with what has been known to happen over here. True, our Constitution requires that when private property is taken for “public use,” its owners are entitled to “just compensation,” and the Uniform Relocation Assistance Act requires that when the government wants to acquire private property it must initiate an eminent domain action so the owners should not have to hire lawyers and appraisers, and have to sue in inverse condemnation to get their constitutionally-mandated just compensation. That’s the theory, anyway. In reality property owners aggrieved by government’s noncompliance with the Act are not allowed to sue to enforce it. No, we are not making this up — see 42 U.S.C. Sec. 4602.

Apart from that, in the United States the exercise of the power of eminent domain is a legislative prerogative, so the legislature can act directly, and bypassing the courts altogether, it can engage in what is called “legislative expropriation.” Which means that Congress can simply pass a bill declaring that as of a specified date your property is no longer yours, that it is now owned by Uncle Sam. That’s how the Redwood National Park was created back in 1968, and more recently, how the Manassas Battlefield National Monument was established. For a concise description of that process, see Jacques B. Gelin and David W. Miller, THE FEDERAL LAW OF EMINENT DOMAIN (1982), at p. 6, footnote 11. When that happens, your “remedy” is to sue in inverse condemnation in search of your “just compensation” in the U.S. Court of Federal Claims. This is a process that can take years. In that court the good news is that your case will be heard by knowledgeable judges whose daily judicial business includes adjudicating inverse condemnation claims against Uncle Sam, as opposed to your run-of-the-mill District judge who rarely sees such a case, and who often thinks that suing the government for just compensation is akin to an act of lese majeste. That’s the good news. The bad news is that in the Claims Court you don’t get a trial by jury, as you would in a proper condemnation action filed in a U.S. District Court under Fed. Rule Civ. Proc. 71A.  

The really bad news is that, even where legislative expropriation is not used, the government does not have to file a condemnation action to take your land. It can simply seize it physically, kick you out, and say “Sue me.” In haec verba. So said the U.S. Court of Appeals in Stringer v. United States, 471 F.2d 381, 384 (5th Cir. 1973). And as the U.S. Supreme Court put it in United States v. Dow, 357 U.S. 17, 21 (1958), “the United States may take property pursuant to its power of eminent domain in one of two ways: it can enter into physical possession of property without authority of a court order; or it can institute condemnation proceedings under various Acts of Congress providing authority for such takings.” (Emphasis added). So much for your procedural due process rights. Note well that in sharp contrast with thus sanctioning government lawlessness directed an unoffending land owners, the court takes the position that when the government wants to seize the private property of a duly convicted drug dealer under forfeiture laws, that worthy is entitled to receive full-bore procedural due process protection before the seizure can take place. United States v. James Daniel Good Real Property, 510 U.S. 43 (1993). 

And as to delay in payment,. . . .Oh, boy. Try this one. In City of Monterey v. Del Monte Dunes, 526 U.S. 687 (1999), starting in 1981, the city rejected the owner’s development application, and subjected it to having to submit and resubmit five different development plans and 19 plot plans, all of which were denied. Finally, in 1986, the city formally denied the owner all use. The owner sued, the U.S. District Court dismissed, and the U.S. Court of Appeal reversed in 1990. The case was tried and a jury awarded damages. In 1996, the Court of Appeals affirmed. On to the Supreme Court which affirmed the award of damages in 1999. So by our calculation it took from 1981 to 1999 (a total of 18 years) to get justice in what would appear to be a slam-dunk taking claim – i.e., denial of all use of the subject land, which made this controversy on all fours with Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1987), holding that denial of all use is a per se taking. And in the infamous Agins v. City of Tiburon case (447 U.S. 255 [1980]), it took Bonnie Agins some 30 years of municipal harassment and litigation before she was permitted to build three houses on her five-acre tract of land.

The all-time champion in such matters is the case in which the TVA took 100,000 acres of land in North Carolina over 40 years ago, reached a settlement with the owner (which happened to be a county) whereby it was to construct a replacement for a county road that it flooded. But alas, the feds failed to built the promised road. See Felicity Barringer, N.Y. Times, Decades Later Simmering Debate on a Road Heats Up, N.Y. Times, Feb. 21, 2006, at A12.

We could go on, but by now you get the idea, don’t you? 

So what’s the moral of it all? It’s nice to hear that the U.S. State Department worries about such things, but maybe it should direct its ire at American land-use regulators first. By which we don’t mean to suggest that what those St. Kittians are doing should be overlooked. No, sir! To the extent the U.S. State Department warns American would-be investors to be cautious in dealing with those Caribbean heirs to the pirates of yore, that’s a good thing. But good governance, like charity, begins at home, and all things considered, the feds would be well advised to clean their own house before lecturing others about such things.

For the entire St.Kitts-Nevis Observer article go to http://www.thestkittsnevisobserver.com/2010/10/22/federation-property.html For the text of the State Department warning go to http://travel.state.gov/travel/cis_pa_tw/cis/cis_1026.html#special_circumstance

The Comrades Discover Private Property. With a Bang.

One of the major stories to come out of China in recent years has been the comrades’ rediscovery of private property as a good thing. The Chinese constitution was amended a few years ago to extend protection to it. But that, of course, still leaves open the problem of eminent domain which inherently pits private property against government needs. Predictably, this has been, well, a problem, particularly in China which is still an autocratic society  where those who mess with the government can find themselves harshly dealt with – a society that historically lacks a tradition of a rule of law that binds the government vis a vis the citizen.

Ah, but it turns out that messing is a two-way street. It turns out that people who get a taste of the advantages of property ownership and all that this implies for personal freedom and wellbeing are not about to have these things taken away without proper compensation. Or without a fight.

The Asian Economic News (Villagers Clash With Police in S. China Over Land Dispute, October 18, 2010, available on LEXIS) reports a violent confrontation between Chinese villagers in the Guangxi Zhuang Autonomous Region and the government that sought to take some 400 hectares of their land for development of a tourist facility, evidently without paying the full measure of compensation required by Chinese law. Sound familiar? It’s a small world, isn’t it folks?

But in this case things turned out to be very different than over here because those Chinese farmers, unlike our folks weren’t about to go along meekly with their government’s confiscatory policy.

“The Southern Metropolis Daily said that on Tuesday, the villagers stopped workers who had been sent to begin construction on the expropriated land. Subsequently, six villagers were injured and six others detained by police,. . .” Which turned out to be a mistake on the part of Chinese authorities. What followed was that

“On Wednesday, hundreds of villagers rallied and their confrontation with police and local officials spiraled out of control after an official allegedly threatened them with police dogs, prompting them to respond with rocks, sticks and Molotov cocktails, …

“The newspaper said numerous police officers were injured, wih one ‘possibly blinded,’ and two police dogs were killed before police managed to control the crowd by firing tear gas, after the crowd had grown to about a thousand including bystanders.”

According to the protesters, the bone of contention was that the authorities had failed to follow the Chinese compensation law providing that “land compensation fee should be six to 10 times the average output value in the three years preceding the requisition of the cultivated land.”

Fortunately, we haven’t had to contend with problems of large-scale violence over land takings over here, although some years ago there was a sizable physical confrontation between the state police and farmers in Minnesota, over the taking of land for a power line. We seem to recall that the Minnesota public radio folks even had videos of that melee, that they posted on line.  And, suggestions have been made that some of the urban riots in the 1960s were partially motivated by urban redevelopment displacing inner city populations.

The moral of it all seems to be that people are territorial creatures, and they take a dim view of others messing with their turf. For a good discussion of that phenomenon; see Michael M. Berger, To Regulate, or Not To Regulate — Is That the Question? 8 Loyola of L.A. Law Review 253, 263-267 (1975).

Our law justifies what would otherwise be lawless, trespassory government conduct by requiring public use and public necessity for takings of private property, as well as payment of just compensation. That’s the theory. Unfortunately the necessity part is pretty much all theory, ecept perhaps in Florida where condemnees can get a decent degree of judicial review of the asserted necessity for eminent domain takings. Otherwise, courts claim that they lack the power to “second guess” condemnors, that the determination of necessity is a do-it-yourself determination by condemnors, and that therefore judicial review of necessity is minimal, or as we like to put it, sub-minimal. This judicial justification, of course, is at best dubious because courts experience no problems “second guessing” the judgment of government scientists, engineers, and planners when it comes to environmental review. So how does it happen that they lose their reviewing powers when it comes to eminent domain?

But, be all that as it may, the U.S. Supreme court held back in 1912, in Bragg v. Weaver that necessity is not a part of federal law of eminent domain. In California, the supreme court held in People v. Chevalier, that the statutory requirement of necessity for eminent domain takings is not subject to any judicial review, that it is altogether nonjusticiable even when the resolution of necessity has been procured through fraud, bad faith or abuse of discretion. Honest. That’s what the court said. Fortunately, in 1976, the California legislature modified that extremist ruling, and now a California condemnor’s determination of necessity is subject to judicial review in cases of “gross abuse of discretion” and bribery.

What concerns us is not only the injustice of it all, but more importantly, the concern that when people come to believe that legitimate legal remedies are  unavailable to redress what they perceive as legal wrongs, they may turn to illegitimate ones, like those Chinese farmers. So we hope that this sort of stuff never comes to pass over here. That would be  a tragedy.

Redevelopment’s Dismal Story

We offer without comment the astute words of Roberta Brandes-Gratz. We do not necessarily endorse her proposed solutions to America’s urban problems. But as far as her skewering of past half-century’s redevelopment blunders goes, it’s hard to find a better, concise summary. This is from Robertta Brandes-Gratz, Shrinking Cities: Urban Renewal Revisited? For the whole article go to http://www.planetizen.com/node/43826

Here we go:

“First came urban renewal, destroying more residential units than replaced by towers in the park.

“Then came the highways through the cities, piggybacking on the massive clearance of urban renewal, demolishing more whole neighborhoods. Thousands of industrial and small businesses and the jobs that came with them were lost, along with countless housing units.

“Then came “planned shrinkage,” the idea that cities should close down failing neighborhoods, shut off the infrastructure built to accommodate density and concentrate investment in neighborhoods still worthy of middle income investment. Places like the South Bronx were left to burn.

“Then came the endless number of parking lots to accommodate all the cars driven by the commuters who fled the urban wreckage for the suburbs and were now driving on the highways that drew them out of the city. Countless recyclable buildings of all periods and architectural styles – not to mention historic structures – were lost.

“Then came Hope VI which has destroyed more low-income public housing units than it has replaced, all in the name of creating economically integrated projects instead of warehouses for the poor. A worthy goal achieved at the expense of the poor, resulting in even fewer affordable housing units. Invariably, a smaller number of low-income units replaced what was demolished. The displaced families not re-housed in the new units were sent with Section 8 vouchers to already marginal neighborhoods guaranteed to create the next “blighted” district worthy of “replacement.”

“Then came urban agriculture which — although a good idea for backyards, empty lots and modest-scale community gardens — suddenly scaled up to whole neighborhoods whose remnants are often old houses which even in their deteriorated condition are built more solidly than any of the flimsy new structures replacing them today.

“Now comes the “theory” that the salvation of distressed cities is to once again “shrink,” as if shrinking had been tried before and succeeded somewhere but who knows where.

“Can anyone point to one city, just one, where any of these “renewal” schemes that dedensify cities have worked to regenerate, rather than further erode, a city? Just one. No theory please; just real on the ground success.”

Google Gibberish

We often refer to the Google service that alerts us daily to news items concerning inverse condemnation. It’s a useful service. But nothing is perfect, and of late some of the items that Google has been alerting us to have nothing to do with inverse condemnation, and only involve expressions that use the word “inverse.”

For example, this morning’s Google alert greeted us with the following bit of gibberish:

‘Symmetric group inverse‘ ‘golub chu inverse eigenvalue’
derivative of inverse trig. cause for inverse condemnation. inverse of y x 2 spot zoning inverse condemnation. black ruffle top. inverse of tan
hellobansko.com/shear-inverse-multiplexer/

Now, eigenvalue may not be gibberish to mathematicians who study linear algebra, but it has nothing to do with government takings of private property; i.e., condemnation, whether direct or inverse.

So here is our wish that the powers that be at Google start paying a little more attention to what they are doing. There is information out there that does involve inverse condemnation that Google should but does not report. So let’s get with the program, guys.

Once More Into the Breach!

A tip of our hat to Reason.com for its summary of the issues presented in the petition for certiorari filed recently by one of the property owners in the Kaur case. That’s the infamous New York eminent domain case in which the city took land in the Manhattanville neighborhood in order to turn it over to Columbia University for an expansion of its campus. The problem was, however, that as explained in the devastating opinion of the New York Appellate Division, the studies and findings underlying the decision to take those properties were a tissue of conflict of interest and other improprieties that the court’s opinion laid bare. In spite of that, on further appeal the New York Court of Appeals (that state’s highest court) reversed, and permitted the condemnation to proceed.

For a summary of the arguments presented to the U.S. Supreme Court in the current petition for certiorari, go to http://reason.com/archives/2010/09/29/holding-justice-kennedy-to-his

Now it’s up to the U.S. Supreme Court to rein in this abuse of government power. On the one hand we hope the court will grant certiorari, and fix this mess. But then again, if it takes the case, it may only make things worse. Whether you ascribe the court’s performance in the eminent domain field to its [mis]interpretation of the Taking Clause of the Fifth Amendment, or to wrongheaded judicial policy, or to a misunderstanding of the realities of eminent domain, or to ideological factors, the court’s intellectual and moral performance has been abysmal both in terms of results and in terms of the reasoning used by the justices to reach those results. Nor has the court ever confronted the moral implications of its handiwork whereby faultless people are forcibly evicted from their homes and businesses, paid less than true market value of their land, paid nothing for their incidental losses, only to see their property turned over to some well-connected fat cat free of charge. Or, after wasting millions in public funds,  left to rot, without being put to any useful purpose.

For one thing, the court never explained why the right to take by eminent domain should receive such dramatically low standards of judicial review — why decisional law is replete with judicial statements to the effect that the exercise of the power of eminent domain is an overarching legislative prerogative of such weight that it leaves little or no room for meaningful judicial review, and that it is sufficient that the condemnor’s purpose be merely “rationally related to the conceivable.” Whatever that means, it is no standard at all. Under it, a taking for low cost housing for invisible Martians lliving among us, for example, would be OK because, such a thing is conceivable. After all, as science fiction writers have demonstrated time and again, anything, anything at all is conceivable. See 40 Loyola of L.A. Law Review at 1080-1081, footnote 68.

Interestingly, in the only case known to us in which the court actually examined the nature of judicial review in eminent domain cases, it reached the opposite conclusion, and explained that the power of eminent domain is no more endowed with “sovereign prerogative” than a host of other government powers; see Allegheny County v. Frank Mashuda Co., 360 U.S. 185, 191-192 (1959). Go figure.

Nor has the Supreme Court ever explained why condemnees, alone among all litigants, are not entitled to due process of law — why their property may be seized without notice, hearing, or prior judicial order — why, as the U.S. Court of Appeals once put it, the government may simply seize their land and then say “Sue me!” See Stringer v. U.S., 471 F.2d 381, 384 (5th Cir. 1973)

Our own, hopefully overly pessimistic, assessment is that for all the brave talk about being the fount of “the supreme law of the land,” the Supreme Court has been so scalded by the public reaction to its inept handiwork in this field that it is reluctant to get into it again in the foreseeable future. Whatever the reason, we will have to stay tuned on that one and see how it all turns out.

We get much talk about judicial independence and judicial courage, but in eminent domain law, there is an evident shortage of these attributes when it comes to standing up to government abuses of faultless American property owners. Too bad.

Lowball Watch – New York

This one’s a doozy. The New York Court of Claims awarded $12,104,006 for the taking of a CSX railroad right of way between the Bronx and Queens. Now get this: the state contended that the value of the taking should be zero. They don’t have jury trials in eminent domain in New York, so this award was by a judge.

The case caption is N.Y. Central Lines v. State of New York,  N.Y. Court of Claims No. 102648, opinion filed September 23, 2010.

We hope to learn more about this one, but for now you can get some details from the Owners Counsel blog. http://ownerscounsel.blogspot.com/

The smiling property owners’ lawyer is Michael Rikon of New York City. Nice going, Mike.

Redevelopment? Hah! More on California Municipal Government Waste

A couple of days ago we posted an item inspired by an L.A. Times expose, that related instances of shocking waste and frittering away of public funds by California redevelopment agencies (see http://gideonstrumpet.info/?p=501 ). Today, the L. A. Times follows up with another front-page story: Jessica Garrison, Kim Christensen and Doug Smith, entitled Affordable Housing Gets Short Shrift, October 3, 2010, at p. A1. The subtitle says it all: Many cities spent millions from 2000 to 2008 without building a single unit, an analysis of state data shows.

What’s worst about this is that in some of the instances the Times describes, properties were acquired or taken by eminent domain, the indigenous inhabitants evicted, and the land left to sit there and rot.

“In Santa Ana and Avalon, officials spent millions on projects that knocked down homes, displaced low-income people and worsened blight without producing anything in its place. Block after block in a 94-acre area east of Santa Ana’s civic center is lined with boarded-up buildings and vacant lots. In the Santa Catalina Island city, where housing is so scarce that workers sometimes sleep in the bushes, a half-block of property where cottages were razed to make way for more homes, has sat, sun-baked and undeveloped, for 15 years.”

This is a long article that is chock-full of facts involving a number of California municipalities, so it does not lend itself to a brief summary. We urge our readers to take a look at the actual article (and the photographs that go with it) and check it out for themselves. See http://www.latimes.com/news/local/me-redevelop-housing-20101003,0,3080263.story 

We do have to mention, however, the Times report that in some cases, homes were acquired by the city with redevelopment dollars and then conveyed to city employees. “Public use,” anyone?

In the meantime, the Times reports, PBS roving reporter, Huell Howser, having accepted a $320,000 subsidy for his program from California redevelopment folks, has been gushing on the tube about the wonders of redevelopment (see http://articles.latimes.com/2009/aug/02/local/me-redevelopment2 ). That was in 2009. We would sure like to hear what Mr. Howser has to say now, after reading the L.A. Times expose. Do you suppose he might apologize? Return the money? Not likely, is it?

And that’s how it goes. No wonder California is going to hell in a handbasket.  On the latter point, see Jennifer Rubin, California, There It Went, Commentary magazine, October 2010. Do read that one.