Lowball Watch — North Carolina

The Triangle Business Journal reports that in a taking case in Raleigh, the State DOT offered the owner $263,007, but eventually a jury awarded $1.2 million. The issue that divided the parties was access in the after condition. The taking partially eliminated the subject property’s driveway and eliminated 50 of 99 parking spaces for five years during the construction. See Jeff Jeffrey, Jury Awards N.C. Property Ownr $1.3M Verdicts Against NCDOT, Triangle Business Journal, June 17, 2015.

Click on http://www.bizjournals.com/triangle/news/2015/06/17/jury-awards-wilmington-property-owner-1-2m-verdict.html


When Is Forcing a Landowner/Developer to Provide Below Market Housing As a Condition of Permit Issuance Not an Exaction

Today, on June 15, 2015, the California Supreme Court — the court that never met a harsh land-use regulation it didn’t like — issued its opinion in California Building Industry Association v. San Jose, Docket No. S212072, which upheld a city regulation requiring developers of 20-plus unit apartment projects in San Jose to set aside 15% of the units built by them as “low cost” housing for impecunious folk who can’t afford the rents and prices in general housing, which — practically speaking means just about everybody, given the fact that housing in the San Francisco Bay area has gone through the roof.

Legally speaking, the court held that a regulation so requiring does not give rise to an exaction (because that might be a constitutional no-no under the US Supreme Court’s decisions in the Nollan and Dolan cases) but is rather a vanilla-flavored land-use regulation reviewable as any other land-use regulation; i.e., under the deferential due process standard of review, under which anything goes. To get the long, 60-plus page opinion, compleat with two concurrences (by Werdegar and Chin, J.J.) click on http://www.courts.ca.gov/opinions/documents/S212072.PDF

But if you are a maven of such stuff, you ask: what about the 2013 Koonts v. St. Johns River Water Mgmnt. Dist, case in which the US Supreme Court broadened the applicability of the unconstitutional conditions doctrine and held it improper for government to grant permits on condition that the owners pay money or do things that are unrelated to the negative impact of the private project? You can read the California court’s evasion of that holding for yourself at pp. 27 et seq. of this opinion; it’s a masterpiece of parsimonious reading of the import of Koonts.

Anyway, when it comes to inverse condemnation, nothing has changed “up there” at the state supreme court level. No property owner has ever won a case there on a regulatory taking claim, and given the court’s composition none is likely to do so.

We assume that the owners will petition the US Supreme Court for certiorari, and we hope they prevail.

One last thing. Back in 1980 (that’s over 30 years ago) California Supreme Court Justice William P. Clark, Jr., dissented in the Agins case, pointing out that the court’s extreme deference to local land-use regulations would inevitably lead to a cleavage between the wealthy housing haves and their counterpart housing have-nots. Which is exactly what happened. Particularly so in the San Francisco Bay area where San Jose is located. So the bottom line here in California is that the Legislature passes statutes ostensibly requiring that affordable housing be provided, while local government entities that issue the actual building permits, do what they can to limit availability of reasonably-priced housing and increase its cost. They don’t come anywhere near to meeting the statutory goals, as the court conceded in this case. So the predictable result is a housing shortage (at least in areas where people want to live) and a consequent upsurge in housing prices and rents.

You don’t believe us? In recent years there have been two or three Presidential Commissions studying the problem, and they concluded that the high cost of housing is brought about by the effect of government regulations, and the fact that local land regulatory entities tend to pander to the NIMBY crowd.

For today’s front page story about this case, that praises the San Jose case, see Maura Dolan, Affordable Housing Gets Court Boost, LA Times, June 16, 2015, at p. A1 (above the fold).

In the meantime, another housing bubble is being pumped up in California, and it’s only a question of time when it will pop.

The AIG Decision Is Here: Just What We Predicted, A Taking of Worthless Assets, Does Not Entitle their Owner to Compensation

We haven’t yet read the Court of Federal Claims decision in its entirety, but word reaches us that the court ruled pretty much as we predicted. It held that AIG was badly treated by the feds when they seized its stock, but it also ruled that inasmuch as AIG was then on the verge of bankruptcy, its stock was then worthless. So Uncle Sam took nothing of value and the plaintiffs are not entitled to compensation. It thus boils down to a court conclusion of no harm – no foul. Just as we predicted; see http://gideonstrumpet.info/?p=7164

The essence of the court’s ruling is captured by the following two passages:

“In the end, the Achilles’ heel of Starr’s case is that, if not for the Government’s intervention, AIG would have filed for bankruptcy. In a bankruptcy proceeding, AIG’s

shareholders would most likely have lost 100 percent of their stock value.” Slip Opinion, p. 9

*    *    *

“Particularly in the case of a corporate conglomerate largely composed of insurance subsidiaries, the assets of such subsidiaries would have been seized by state or

national governmental authorities to preserve value for insurance policyholders.” Id., p. 10


The Conclusion to the court’s opinion

“Based upon the foregoing, the Court concludes that the Credit Agreement Shareholder Class shall prevail on liability due to the Government’s illegal exaction, but

shall recover zero damages, and that the Reverse Stock Split Shareholder Class shall not prevail on liability or damages. The Clerk is directed to issue final judgment consistent with this opinion.”

You can get the opinion by clicking on https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2011cv0779-443-0

In other words, whatever Uncle Sam took was worthless in terms of its fair market value at the time of the taking, and therefore nothing is what the plaintiffs got.

More to come after we get a chance to read the entire opinion.

A random thought: if you want to see how the other half really litigates, go to the very end of the opinion and check out the interminable list of interested parties. Wow!

Follow-up: If you want to see how the Establishment sees this litigation, see Andrew Ross Sorkin, Surprise Ruling[*] Finds Bailout Shorted A.I.G., N.Y. Times, June 16, 2015, at p. A1. Also see Aaron M. Kessler, A.I.G. Boss Wins Suit But Loses the War, N.Y. Times,  June 16, 2015, at p. B1 (Business Section).


*    This ruling may have been a “surprise” to the self-proclaimed mavens at the NY Times, but it was no surprise to us, as you can see from our earlier posts on this subject.

Those California Raisins Again, But It’s Still Not Quite the End

We recently made a record of our conviction that the government position in the Horne case is absurd, and that using any reasonable mode of legal analysis it ought to get tossed out of court (http://gideonstrumpet.info/?p=7401) because what is before the court is a case of physical seizure of private property (tons of raisins which the government claims a right to seize without compensation) and as such a categorical compensable taking. The owners who are defendants in a suit brought by the government, defend on the grounds that the law in question should be declared illegal as a violation of the Fifth Amendment.

We said we would await the event, i.e., the Supreme Court’s decision and see what’s what instead of speculating by reading tea leaves in the wake of the oral argument. We are sticking to our decision. But others see it differently and think a bit of speculation is warranted given the unusual history of this case (which is now before the Supreme Court for the second time). Our friend and fellow blogger Robert Thomas at www.inversecondemnation.com has just posted a very good, lengthy analysis of what things look like to him on this eve of the opinion’s release.* A good job that, and we recommend it highly.

So while we stick to our guns and choose to continue waiting as time creeps by and the end of the court’s 2014 term is nigh, we have developed some concerns. The cases that are held by the court until the very end of the term are usually that most difficult ones, on which a court consensus is difficult to obtain. But how can that be the case in the Horne case, a categorical, classic physical taking case?

As Mr. Roberts points out in his analysis, the government is not even defending the lower court’s absurd ruling (that personal property is not protected by the Takings Clause), and has suggested instead that there is no taking because the Hornes are not required to be in the raisin business, and can do something else. If this sounds idiotic to you — though some courts have actually said it — it is indeed absurd on its face. Can you imagine someone arguing in an analogous case that, say, a newspaper is not entitled to First Amendment protection because nobody forces it to be in the newspaper business so maybe it should make wheelbarrows instead.

Anyway, we resist the temptation to get into the “merits” of the government’s idiotic arguments, and will stick it out to the end when the Horne opinion comes down. Still, the fact that it’s taking their Lordships all that time, and they are taking it down to the wire, does not bode well. So we’ll just have to stick it out because, for the record, we are a member of the pessimist tribe who believe that blessed are the pessimists for they shall not be disappointed.

So stand by. It won’t be long now.



*     If you are not a Supreme Court junkie, be advised that opinions in cases argued during the court’s term (October through June) are filed by the end of June when the court takes its summer recess. So being as today is June 13th, the end is near and all opinions in argued cases (which include Horne) are about to be sprung on us any day.

Lowball Watch — Georgia

We are informed that the Georgia City of Sandy Spring has settled a condemnation action it brought, for twice the original offer. The case is City of Sandy Springs v. 2.97 Acres, Superior Court, Case No. 2015CV255755, Fulton County.

The city first offered $3.5 million, but eventually settled for $7 million.

California Choo-Choo (Cont’d.)

This one, you’ll have to read to believe, folks. And to get an idea of what the current route controversy in the San Fernando Valley is about, do read Ralph Vartabedian, Backlash Over Bullet Train Route, Los Angeles Times, June 9, 2015, at p. B1. It will tell you in some detail who the contending parties are and what their fight is about. Suffice it to say here that, as is the usual case, the proposed route of the planned “Bullet train” would go through the downscale Valley communities, like San Fernando, Sylmar and Pacoima, whose inhabitants are taking a dim view of being put in the path of the new high-speed rail line with its 200 mph trains. Even after you read what follows here, there will be more to come within a week or so when the railroad planners address the route planned to cut across the Valley on its way to Burbank.

It seems that the California “Bullet Train” honchos decided to hold an initial public hearing on the route segment running through the North San Fernando Valley, a suburban Los Angeles bedroom area. Of course, as is usually the case, the proposed route(s) would run through the more downscale Valley communities, notably the city of San Fernando which is up in arms over the prospect. But in a noteworthy instance of the “rabbits shooting at the hunters,” as a French politician once put it, San Fernando isn’t about to be rolled over without a fight.

To the surprise of the would-be railroad builders, the San Fernando types showed up at the hearing represented by its Mayor and other officials, compleat with its own public address system and if we read this stuff correctly, with its own police force. Hoo boy!

Long story short, these folks gave the railroad types an earful, along the line of not wanting to tolerate the new railroad line bisecting their community by sound walls built along the railroad right-of-way, and the consequent loss of some $1.3 million to the community. “[Y]ou are not really welcome,” said the San Fernando Mayor pro tem.

At this point, three alternate routes are being considered, some of which would require tunneling 20 miles under the San Gabriel Mountains, at a depth of  60 feet under the 5 Freeway, and — are you ready? — would cross the San Andreas fault below ground, and near Palmdale  above ground.

And so it goes. We can’t wait to see how it all turns out, and we await with anticipation the next “hearing” scheduled for June  9th, where — so it has been announced — those who wish to address the railroad folks will be given the generous amount of time of 90 seconds. Each.

Read all about it, in Ralph Vartabedian, Feeling Railroaded: San Fernando Leaders Say Planned Route Would Destroy Community, L.A. Times, May 30, 2015, at p. B1, and stand by for the next public meeting. It should be quite a show.

Treat Property Owners Ethically? What’ll They Think of Next?

We were amazed to learn from the Pacific Legal Foundation Liberty Blog that there is an organization out there named — are you ready? — People for the Ethical Treatment of Property Owners.

Being a Californian and thus an inhabitant of a place where property ownership, notably in the form of undeveloped land, is disfavored even if not yet a crime, we sure recognize the need for such an outfit and  think that its emergence as a litigant is a good thing. But the fact that there is a need for such an outfit — and there sure is — is depressing.

Lowball Watch — California

When San Francisco decided to acquire the owners’ land, negotiations ensued and at the end it offered $3,800,000. The owners asked for $10,875,000. Unable to agree, the parties went to trial, where the city formally offered $5,000,000, subject to a contingency: the settlement would have to be approved by three other government entities.

After trial, the jury came back with a net award of $7,319,000 ($7,400,000 value award minus $81,000 cleanup costs). The owners requested attorneys fees and other litigation expenses under a California statute that awards litigation expenses to owners when their demand is reasonable but the condemnor’s offer isn’t. But the trial judge refused to award any litigation expenses because he thought the city’s offer was reasonable.

The owners appealed, and the California Court of Appeal reversed, holding that such a contingent “offer” was no offer at all because its acceptance by the owner would not produce agreement on compensation, but only an invitation to further negotiations with the three government agencies who at that point had not committed themselves to any figure. Thus, the city’s “offer” was not reasonable.

Held: Reversed and remanded. San Francisco v. PCFA Acquisitionco, Docket No. A 139836, filed May 26, 2015. You can see the opinion at  http://www.courts.ca.gov/opinions/documents/A139836.PDF

California Choo-Choo (Cont’d.)

We were on the road for a few days and as a result missed an interesting news item. While the California high-speed “bullet train” line between San Diego and San Francisco is being planned, and a segment of it has actually begun to be constructed out in the boondocks in the Central Valley — well, actually, a batch of condemnation resolutions have been passed to acquire the right of way — it turns out that what seems to us to be a rather significant aspect of the planned high-speed train is in a state of chaos.

According to a Los Angeles Times front-page story, nobody has a handle on the operational costs of the proposed train, and nobody knows what to charge its passengers. See Ralph Vartabedian and Dan Weikel, Tracking the Bullet Train Numbers, LA Times, May 10, 2015, at p. A1. Nobody, it seems, has penciled out the fares necessary to be charged in order for that train to make it financially. A while back, when California voters were snookered into approving the “bullet train,” they were told that the fare would be “about $50 a person.” But since then projected fares have been projected as “$83, $105 and most recently, $86.”  Add to that the fact that no one seems to know how many people travel between San Francisco and Los Angeles by car, and that current fuel costs for such a trip run about $65, and you can see that deciding what to charge would-be passengers can get pretty difficult. Oh sure, if you take all car owning expenses the cost of such a trip would be $222, but as the Times notes — accurately, we believe — people don’t figure that way; they look at the cash outlay for gas when they contemplate a car trip. Besides, once they own a car, they pay the cost of depreciation and insurance even if the car mostly stays in its owner’s garage. So while considering such costs may be good cost accounting, it isn’t how people decide what the trip will cost them.

Bottom line, like we said, nobody knows what the cost of a train trip between LA and San Francisco will or should be. We like the line of a USC transportation professor who is quoted by the LA Times as observing that “Any time you are trying to project more than five years out, you are just spitballing.” And it will take a lot longer than five years for that train to become operational. So stay tuned and see how it all turns out.


The California Dancing Raisins Case — An Exercise in Absurdity Goes to Court

If you are interested in eminent domain, you must have noted the activities of our fellow bloggers concerning the Horne case — the one where the federal government took some 40% of Mr. Horne’s raisin crop (tons of ‘em), but refused to pay on the grounds that it was only “regulating” the raisin market by removing some of them from private ownership, reducing supply and thereby keeping  prices up, thereby assuring raisin growers of a proper income. This was one of those Depression-era laws that, as Justice Kagan put it during the first argument, had to be the most outdated statute. What the feds were really trying to say was: We are stealing your raisins, Mr. Horne, but it’s for your own good.

In an outstanding display of chutzpa, the feds took the position that by seizing tons of Mr. Horne’s raisins they were conferring a favor on him because his leftover raisins would bring a higher price in the government-distorted market. How could they tell? Beats us because to the best of our knowledge there has not yet been a valuation trial of either the taken or the leftover raisins. Still, the feds fined Horne over $400,000 when he refused to comply. The case has already been in the Supreme Court once before. SCOTUS reversed the 9th Circuit’s ruling in favor of the government, and held that Horne was within his rights when he sought to raise a taking defense in the US District Court when the government sought to enforce its demand. On remand, undeterred, the 9th Circuit reached the same result again on the second go-round: no taking. The Supreme Court took the case again.

Naturally, this was catnip for the eminent domain bar and pertinent blogging community. It made much of the second oral argument that took place a week ago. One argument-inspiring aspect of this controversy was the government’s contention that this outright theft of Mr. Horne’s raisins was not a taking.

So there was much to say about last week’s oral argument. You can check out the usual suspects, like for example our friend Robert Thomas’ blog on www.inversecondemnation.com . We, however, haven’t had much to say about that because (a) we were out of town, and (b) in our opinion this is the sort of case that should be entertained by a court (much less the Supreme Court) for, oh, about five minutes. The fact that it has taken up such an enormous amount of judicial time and effort, arguing over whether an uncompensated physical seizure of tons of privately owned raisins is a taking, tells us that at least some of the Justices are struggling with result-orientation — they are overwhelmed by the sheer absurdity of the government’s position, but on the other hand are in the throes of result orientation — they want the government to win but can’t think of any way of reaching such a result without making themselves look bad.

With some 40 years of eminent domain experience under our belt, we decline to speculate about the outcome. So we will take it easy until the opinion comes down — probably by the end of June, and see what’s what.

Unfortunately, that opinion will not to say to the government what we believe it should, namely, ”You guys have got to be kidding.”

So stay tuned.