NC Court of Appeal: Denial of Present Use in Anticipation of Future Condemnation Is a Present Taking

A tip of our hat to the North Carolina Court of Appeals (Kirby v. North Carolina DOT, Filed 2/17/15, holding that the state’s imposition of a future highway “corridor” on privately owned land and in the meantime denying the owner reasonable use of it is a present taking of private property.

This is a subject close to our heart because way back, close to a half century ago, your faithful servant persuaded the California Supreme Court to hold likewise in Klopping v. City of Whittier, 8 Cal.3d 39 (1972) – announcing a city intent to condemn specific property, coupled with the city’s unreasonable delay or other unreasonable conduct, entitled the owner to sue for just compensation on an inverse condemnation theory. Also see People ex rel. Dept. Pub. Wks. v. Peninsula Enterprises, 91 Cal.App.3d 332 (1979).

This government business of announcing the intent to take a property, but then not doing it for a lengthy period of time, thus denying the owner any reasonable use and depressing values is nasty stuff, so we are always glad to see a court disapprove of such tactics. Good show, Your Honors.

 

Dr. Seuss Goes to the Supreme Court; Is Cited as “Authority” by Justice Kagan.

When a fisherman catches undersize fish and then, when nailed, dumps them surreptitiously overboard, is that a violation of federal securities laws like the Sarbanes-Oxley Act? No, says SCOTUS 5 to 4?

While you weren’t looking, the Supreme Court decided the weighty question of whether a fish is a “tangible object” whose destruction violates the Sarbanes-Oxley Act. You can rest easy now; five SCOTUS Justices say “No.” To them, a fish is a fish, not the sort of evidentiary document contemplated by the Act. Justice Kagan and three colleagues dissented on the grounds that whatever the authors of the Act may have intended, the Act says what it says, however stupid its application to this case.

But in so doing, her Lordship cited Dr. Seuss’ as authority — so says the New York Times — for her conclusion. See http://www.nytimes.com/2015/02/26/us/justices-overturn-a-fishermans-conviction-for-tossing-undersize-catch.html?ref=us&_r=0

Naturally, Justice Kagan’s opinion reference to something as frivolous as Dr. Seuss has inspired all sorts of foo-foo by the legal commentariat. As for us, we don’t think much of that frivolity, if nothing else, because the Justices, the same as everybody  else, are entitled to take a shot at producing a humorous line, even if the effort fails at times and the intended joke falls flat, as it did in this case. Moreover, there have been more serious transgressions along these lines. Back in 1980, the Los Angeles Daily Journal (the state’s largest legal newspaper) reported on page one that the environmental warriors in the office of the California Attorney General took the position that for environmental law purposes butterflies are fish. You read that right — fish. See Too Intrusive? Administrative Law Office Tangles with California Agencies, Oct. 27, 1980, p. 1.

California Choo-Choo vs. The Dreaded Sprawl

This is a good one folks. Another conflict over the California high-speed railroad seems to be developing. Proponents of the railroad argue that future development in the Central Valley will occur near railroad stations, and thus will inhibit sprawl and slow consumption of farm land. Opponents, on the other hand, argue that the railroad will stimulate development, but not necessarily near stations, and therefore will encourage sprawl and consumption of farmland. They point to the experience in France (which has an extensive network of operating high-speed trains) where this has happened.

We don’t take either position, since we lack the gift of prophecy, and your faithful  servant is a follower of Yogi Berra who famously said that prediction is very difficult, especially about the future.

In the meantime, a development of 2,432 homes is going up just north of Bakersfield, with projected home prices starting at $250,000, which in Southern California borders on giveaway.

To get the whole story read Ralph Vartabedian, Railing Against Urban Sprawl, L.A. Times, Feb. 24, 2015, at p. A1 (above the fold).

Lowball Watch — Texas

News reaches us that a property owner in Wichita Falls, Texas, won a $445,365 judgment against a power company, as opposed to an initial offer of $55,000, later raised to nearly $140,000. The award was a $393,165 jury verdict, plus interest and costs, which came to a total of about $445,000.

The case is Oncor Electric Delivery Co. v. Edward Clack, Case No. C-330-E. The news item does not indicate what factual or legal issue(s) divided the parties, to make the jury verdict eight times the amount of the initial offer. See http://www.prnewswire.com/news-releases/texas-landowner-wins-445000-judgment-against-power-company-for-lost-property-value-300036697.html

Guess What? Talk About Lawyers’ Misconduct Is Back In Vogue.

Once more into the breach, friends! Yesterday’s Los Angeles Times and today’s New York Times have devoted real editorials complaining about federal persecutors lying to juries and thereby railroading innocent criminal defendants into prison. This is a terrible thing, but these editorials concentrate exclusively on criminal cases and stay mum about government lawyer misconduct in civil ones, particularly in eminent domain. We hold to the view that taking one’s property can be traumatic, and deliberately underpaying for it, ostensibly in the name of “just” compensation, is pretty bad too. It deserves condemnation (no pun intended) just as well.

Back in the 1990s it was all the rage for lawyers and judges to go on about “Rambo Litigation” — a nasty way of litigating, whereby unethical lawyers would abuse the system by unethical behavior, ranging from tampering with the evidence to after-hour service of documents by fax. Much was said about it at the time but not much was done to curb it. We contributed to the pertitinent talk by writing about it; see Gideon Kanner, Welcome Home Rambo: High-Minded Ethics and Low-Down Tactics in the Courts, 25 Loyola L.A. L.Rev. 81 (1991). But for all the talk, little was accomplished. We can explain the problem by quoting a part of our blog on this subject, dated June 6, 2014:

“[T]he problems with what is known as “Rambo litigation” recently became a hot topic among lawyers, but truth to tell, nothing was done about it by judges. We have written about it at length, and we recommend that you dig out our article and read it — Gideon Kanner, Welcome Home Rambo: High-Minded Ethics and Low-Down Tactics in the Courts, 25 Loyola L.A. Law Rev. 81 (1991). It will tell you the whole story, and explain why lawyers’ misconduct — like misconduct of people in all walks of life — has little to do with their innate lack of goodness vel non. No, it has to do with what determines the conduct of all people at all times: the actors’ assessment of the balance between incentives and disincentives that face them as they contemplate a course of conduct. And in dealing with human                  [mis]behavior the disincentives play an important role. That is why we have criminal laws and why misconduct in civil matters carries sanctions in the form of damages, fines, or in the case of a regulated profession like law, professional sanctions that can range from public reprimands all the way to disbarment.

 

“But as all lawyers who have spent some time in courtrooms know, judges are not much interested in enforcing rules of professional conduct, much less standards of behavioral decency and basic civility. Often, they fail to admonish the bad guys, or prattle on about expecting both sides — gotta be impartial you know — to toe the line even when only one has transgressed. In a way, it is easy to refrain from blaming them. Judges are busy folks, and they understand how easy it is to have an admonition directed at a lawyer’s conduct degenerate into a time-consuming foofaraw that takes up scarce judicial time and tends to delay adjudication. So the sumbitch of an opponent of yours who is in the habit of serving motions by fax, after hours, at the last minute, so you can’t prepare properly for an upcoming trial or hearing, feels safe in doing so. Or, like a certain late but unnamed well-known lawyer around here, who had the habit of just not showing up for duly noticed depositions. What should the judge do about such stuff? Oh sure, there is the draconian sanction of striking the offending document. But that can affect or determine the outcome of the litigation, and if His Honor does that, he must face the wrath of the innocent client of the misbehaving lawyer who neither knows nor cares whether his moving papers were served on his opponent’s lawyer by mail,  fax or carrier pigeon?

 

“Still, difficult as it may be, judges must rise above these difficulties. Nobody forced them to become judges, so they have to take the bitter with the sweet because the problem of endemic lawyer misconduct erodes popular respect for the courts as places where justice is administered, and it gives rise to widespread understanding among lawyers that misconduct is OK when the stakes justify it and where the prospects of meaningful sanctions are slim. Each judge is like a captain of a ship with regard to his or her courtroom, and as such responsible for what goes on in it.

“Bottom line: Any way you slice it, the solution to the lawyer misconduct problem lies in the hands of judges. Either they enforce the rules and standards of conduct, or they don’t. And if they don’t, it doesn’t much matter what language they place in the court rules. A law that is not enforced is no law at all.

 

“Our 40+ years’ experience as a litigator has taught us that misconduct of counsel can be de facto favored by judges, no matter what platitudes they utter. How? Check out the law governing misconduct of trial counsel and you will see. The way the decisional law is structured, the misbehaving lawyer has all the litigational advantages; he need not do anything to rectify the litigational mess he creates by his misconduct. It is his opponent (who is not guilty of anything), who has to “make a record” by objecting, requesting judicial admonitions to the jury, and pursuing useless  procedural ceremonies. And if he misses a step in this rigmarole, the misconduct is deemed nonprejudicial, and as such OK.

 

“While this goes on, his “bad guy” opponent just gets to sit there enjoying the fruits of his misconduct. See e.g.,  Horn v. Atchison, Topeka & Santa Fe Rwy. Co., 61 Cal.2d 602 (1964), and  Sabella v. Southern Pac. Co., 70 Cal.2d 311 (1969).

 

“And if the judge gives the admonition requested by the aggrieved lawyer, the misconduct is deemed cured and non-prejudicial even if the admonition is something less than effective. So experienced lawyers often don’t bother with going through the time-consuming and distracting ceremony, and take their chances before juries, hoping that the merits of their case will be persuasive. The professional behavioral standards are thus lowered and as such institutionalized.”

So with the rhythmic regularity of the tides, here we go again. The few good guys on the US Court of Appeals for the 9th Circuit have just publicly chewed out some federal prosecutors for being — shall we say? — careless with the truth in a pending criminal case. Will that do the trick? We don’t think so. We don’t think for a moment that those prosecutors were naughty because no one told them they shouldn’t lie in court. No sir. They did it because they though they could get away with it.

What we need is for judges to enforce the rules. Consistently. If they do, the problem will either go away or be greatly diminished. But they won’t. Not reliably.

Another Taking Lawsuit vs. Uncle Sam, Arisisng From the Bailout

Gretchen Morgenson is our favorite financial reporter, so we turned with interest to her piece in the NY Times, entitled After Crisis, A Cash Flood And Silence, Feb. 15, 2015, p. 1 of the Business Section, bringing the dispatch that there is another taking lawsuit pending in the U.S. Cort of Federal Claims. In it, shareholders of Fannie Mae and Freddie Mac are suing Uncle Sam to recover large profits made by those entities after the 2008 crash, Uncle Sam’s bailout and Uncle’s expropriation of all their earnings which with time have grown enormous. Click on  http://www.nytimes.com/2015/02/15/business/after-the-housing-crisis-a-cash-flood-and-silence.html?ref=business&_r=0

The article does not go into the details of the taking, other than informing its readers that as of 2012 the Treasury unilaterally amended its contract with Fannie and Freddie and has been sweeping profits into the Treasury. Some $$225.4 billion so far, with another $153.3 billion anticipated.

The article dwells instead on the details of Uncle Sam’s take-no-prisoners resistance to plaintiffs’ discovery, that seems to be reaching the level of the absurd (including, believe it or not, press releases). Why? The answer to that question is unclear, but the Times article suggests that it may have something to do with the surmise that the documents in question “directly implicate[] some of the president’s most senior advisers in the White House.” If true, this would tend to compromise Fannie and Freddie’s status as independent federal agencies.

But be all that as it may, here is another case — by our count the third one — in which a claim is being litigated on the merits in the Court of Claims, charging that Uncle Sam’s bailout activities following the crash of 2008, were takings of property in violation of the Taking Clause of the Fifth Amendment. So stay tuned, and see how this one turns out.

Are You Feeling Thirsty Yet, Californians?

We offer for your edification a recent City Journal article by Victor Davis Hanson who, apart from being a classics professor and an astute commentator on the California scene, is a farmer himself. Take a look at http://www.city-journal.org/2015/25_1_california-drought.html A good read that, that will tell you more about California’s current and future water problems than you really want to know. Still, you should read it — particularly if you are a Californian and mean to consume all the agricultural goodies produced here.

We have touched on this subject earlier. Take a look – http://gideonstrumpet.info/wp-admin/post.php?post=1618&action=edit

The 32nd Annual ALI-CLE Program on Eminent Domain

Last week we participated in the 2015 ALI-CLE Eminent Domain program in San Francisco, and a good program it was. It was the 32nd annual ALI-CLE (formerly ALI-ABA) program on the topic of eminent domain and land valuation. The attendance ran to some 150 attendees, which these days is pretty good for a national CLE program. Actually, your faithful servant started doing this program (among others) back in 1970 when it was run by PLI, which for us makes it a total of 44 years.

What we talked about was “100 Years in 60 Minutes,” a summary of our experience — “our” being your faithful servant who spoke about his adventures and misadventures in practicing and helping to shape eminent domain law, and Michael Berger who is widely acknowledged as the foremost inverse condemnation lawyer, who did the same thing, only he spoke on his life in fighting the takings battle, starting with the early days of airport litigation, to the current state of regulatory taking law. Each of us put in some 50 years doing this stuff so together we made the 100 years. As the British would say, it was a jolly good show, and we hope that those of our readers interested in the subject of eminent domain will get their DVDs from ALI-CLE and take it all in.

If you are interested in getting an immediate overview of what transpired there, check out the blog www.inversecondemnation.com which is run by our fellow blogger Robert Thomas. He was there as planning co-chairman of the whole shebang and one of the speakers. A good read, that. Also if you want that DVD, it’s available from ALI-CLE, 4025 Chestnut St., Philadelphia PA 19104-3099; or you can call (800) CLE-NEWS. If eminent domain is your thing, you should take it in on the tube.

 

Detroit May Be Out of Bankruptcy, But Is It Out of the Woods?

Detroit may have emerged from bankruptcy, but predictably, it now must face the factors that got it into trouble to begin with, and that haven’t just vanished by judicial decree. The intractable facts are many, but two stand out. First, the population of Detroit has largely left and fewer and fewer people are paying local taxes. Those Detroiters who are still around are largely poor and unable or unwilling to pay taxes, for which it is hard to blame them, being that Detroit provides exceedingly poor public services to its inhabitants. Second, Detroit remains a mess most of whose population has left, leaving few employment opportunities.

For our earlier insight into the problems that post-bankruptcy Detroit is facing, click on http://gideonstrumpet.info/?p=7221

But life must go on, so the Detroit City Mothers have now turned to the desperate strategy of trying to squeeze blood from a turnip, and are stepping up foreclosures of homes with delinquent tax bills. To give you an idea of the vastness of this task, this year alone 62,000 properties located in the city are subject to foreclosure — which means that their owners are at least three years behind on their tax payments. According to the New York Times, only half of these are occupied and nearly 13,000 are probably vacant lots. “Probably?” That’s what it says in the Times. Monica Davey, A Hearing on Housing in Detroit Draws a Reluctant Crowd, N.Y. Times, Jan. 29, 2015, p. A13 (New York edition).

The problem now faced by Detroit is, who is going to buy all these wrecks in foreclosure sales, and what is to be done with them afterwards? No answers to these questions appear to be forthcoming. In the meantime, interest is running on all those delinquent taxes at the current rate of 6% which is a big deal being as it was 18% until the Michigan legislature  enacted legislation reducing the rate of interest for those folks who still live in the houses with delinquent taxes.

Being a pessimist by nature, we don’t see much of anything on the horizon that bids fair to turn things around. Remember, it isn’t just Detroit; it’s a whole bunch of older American cities, some of which (Camden, NJ, for example) are in worse shape than Detroit. But if you have an interest in the depressing subject of the decline of American cities, stay tuned. You may even want to take a look at our article on this subject, Detroit and the Decline of Urban America, 2013 Mich. State L. Rev. 1548. It will give you an idea of how things got to their present sad condition, and why revitalizing American cities is in the nature of “Mission Impossible.” Suffice it to say here that it wasn’t a case of Americans “falling in love with the automobile” — as some planners are fond of putting it — and on a whim moving to the suburbs. No, it wasn’t that. It was the lengthy interaction of government policies that for all practical purposes bribed your Mom and Dad to leave the city and move to the suburbs, to say nothing of the fact that city crime rates soared, city living grew dangerous, particularly in the 1970s, and urban schools became not only ineffective but also hazardous for the kids.

So we wish all those Detroiters luck. They will need it.

Follow-up: For another pessimistic look at Detroit’s future, this one having to do with local xenophobia that views newcomer-investors with disdain, see Aaron M. Renn, Is Detroit Open for Business? City Journal, Winter 2015, go to http://www.city-journal.org/2015/25_1_snd-detroit-recovery.html

Is It Now Atlantic City’s Turn to Go Down the Tubes?

It would so appear. We noted not too long ago that Atlantic City was on its way down, what with casino/hotels closing and things nowhere like the rosy predictions of yore, when we were assured by our betters that its redevelopment — using the tired old condemn-and-bulldoze method — would turn things around and as the glittering casinos went up prosperity would rise with them. But it didn’t. See http://gideonstrumpet.info/?p=6829

Oh sure, for a while it glittered but as the proverb teaches, all that glitters isn’t  gold. It appeared good as long as long as Atlantic city enjoyed Las Vegas style gambling as a municipal monopoly. But it didn’t last. The gambling biz eventually became a government supported oligopoly, and then it had to face reality as other places on the East Coast also went into the gaming business and gambling-minded members of the hoi polloi discovered that it wasn’t necessary for them to travel to a far-off place like Atlantic City for a spot of blackjack, or whatever visions of getting rich quick floated their boat, because casinos started sprouting all over the place — Indian casinos in particular.

So here is the Times dispatch (Patrick McGeehan, Christie Uses Executive Order to Appoint an Emergency Manager in Atlantic City, Jan. 23, 2015, at p. A20); http://www.nytimes.com/2015/01/23/nyregion/christie-uses-executive-order-to-appoint-an-emergency-manager-in-atlantic-city.html?ref=nyregion. It brings the news that “Moving to take greater control over Atlantic City, which is struggling financially as its casino industry shrinks, Gov. Chris Christie on Thursday appointed a corporate finance lawyer to be the city’s emergency manager.”

And to make things really interesting, “along with the lawyer, Kevin Lavin, Mr. Christie brought in Kevyn Orr — the lawyer who led Detroit through the bankruptcy it emerged from last month — as a consultant.”

That, it seems to us, does not bode well for Atlantic City’s future. When in addition to a municipal finance maven you also retain a municipal bankruptcy maven, things are not looking good, and you won’t catch us rushing out to buy a fistful of Atlantic City municipal bonds, their tax-free interest status notwithstanding.

So stay tuned. We are convinced that we haven’t heard the last of this, and that more misadventures of redevelopment projects are in store for us.

Our own observation is mostly moral: if indeed gambling is considered a vice by the new Jersey Legislature, as evidenced by the state’s enactments of statutes that criminalize it, then how come gambling becomes a municipal virtue when it is sponsored by the state and conducted for private profit on land forcibly taken from faultless individuals who are undercompensated in the process?

Follow up. If the fate of Atlantic City is of interest to you, also read Stephen Eide, Debts No Honest Man Can Pay, City Journal, Feb. 12, 2015; go to http://www.city-journal.org/2015/eon0212se.html for a detailed description of Atlantic City’s financial predicament.