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.

Eminent Domain In Fiction.

We have just been advised by a colleague that a new Harlan Coben bestselling book, “The Stranger” offers a plot that involves two eminent domain actions. We haven’t read it yet, but we sure intend to do so at the earliest opportunity. Should be worthwhile. Also, we recently came across an episode of the PBS series “Foyle’s War.” It is a British series about a bright, effective police officer, Detective Superintendent Foyle who is forbidden to enlist in the military in WW II so that he can continue to fight crime on the home front, where his prowess as a cop enables him to do his job well. But as the war ends, Foyle gets tired of moral compromises he is called upon to make in order to accommodate the war effort, so he retires from the police force. At this point, Foyle is assigned to British intelligence where by virtue of the work the spooks are called upon to perform, morality goes out the window, much to his displeasure. “Foyle’s War” has been a great, entertaining program, and we recommend it highly. But this blog is primarily about eminent domain and such, so this post is devoted to our recommendation of one of the last Foyle episodes (when he serves with the British intelligence boffins), that is entitled “Sunflower.” It’s main plot has to do with good guy Americans tracking down a nasty Nazi SS type in order to arrest him for the atrocity of ordering (and participating in) the murder of some two dozen American POWs in the ending days of the war. The British intelligence types know all about his misdeeds but shelter him anyway because he is supplying them with useful information about  intelligence matters. Nasty business that pisses Foyle off but never quite gets him to defy his intelligence betters to act. What does that have to do with eminent domain, you ask? The subplot involves a condemnation action in which a British citizen’s land had been taken “for the duration” of the war, but not returned upon its end. Which pisses off the former owner mightily and causes him to demand persistently that the British government live up to its promise made at the time of the taking. The problem is that the government minister in charge of matters that include such land won’t do his duty and live up to the government’s promise to return it after the war, in spite of the former owner’s increasingly strident demand that he do so. Altogether, a good plot with good actors acting out a good story. Apart from the nasty Nazi who gets his in the end, the bad-guy government minister has to resign in the end when one of his associates fingers him for failing to do his duty — he, on the other hand, wants to keep the land in agricultural use to relieve food shortages in post-war Britain, but doesn’t want to pay for it.

So we write to call your attention to Foyle’s War “Sunflower” segment. It’s available on Netflix. Get it, along with the rest of the “Foyle’s War” series for some good entertainment.
Oh, and what about that nasty Nazi sheltered by the Brits? He gets his in the form of being nabbed by intrepid Americans who mean to get even for his murder of all those American POWs.  A good plot (and subplot) and a good surprise ending. Justice triumphs in spite of British spooks and bureaucrats working to defeat it. Foyle may not come off as a self-sacrificing hero defying his betters (that role goes to another British intelligence operative), but he also manages to keep his skirts clean when the chips come down and people need to be counted as good guys or bad guys.
We like ”Foyle’s War,” the whole series,  so we recommend  “Sunflower” in particular on general principles, and for its eminent domain related plot. Enjoy!
Follow-up.  We finally read that Coben book, “The Stranger” and it turns out that we were misinformed. While, true enough, the main character is an eminent domain lawyer, the plot has nothing to do with that subject.

AIG Taking Lawsuit Entering Final Stage

Last September we began coverage of a lawsuit by some AIG shareholders, alleging that Uncle Sam’s treatment of their company was so harsh that it constituted a taking of their property. You can check it out at http://gideonstrumpet.info/?p=6997 and several follow up posts.

AIG is a giant insurance company that faced insolvency during the 2008 crash, but was rescued by Uncle Sam.

The AIG shareholders’ litigation in the US Court of Federal Claims was a whopper of a lawsuit that took some six months to try, arguing that Uncle Sam’s treatment of AIG was harsh, unfair and discriminatory as compared to the treatment of other entities that were bailed out during that crash. Still, during that time, argue the plaintiffs-shareholders,  Uncle Sam seized controlling stock of AIG which amounted to an uncompensated taking of AIG’s property.

The case went to trial before a Court of Federal Claims judge last fall. Yesterday’s New York Times reported that final arguments by counsel were scheduled to begin yesterday, April 20th, 2015. See A.I.G. Suit Nears End, N.Y. Times, at p.B2. So the end of this saga is in sight.

Defendant, Uncle Sam, argues that its ministrations saved AIG from bankruptcy, so its suit is an example of rank ingratitude. The plaintiffs respond by pointing out that the rescue doe not provide the government with justification of harsh, discriminatory treatment that, among other things, involved a temporary seizure of AIG’s stock, thus constituting a taking of property.

Stay tuned.

Follow-up. Don’t miss one of those analysis/opinion pieces in today’s NY Times, Aaron M. Kessler, April 22, 2015, at p. B4, entitled With Top Lawyer on Offensive, Legal Odds in A.I.G. Bailout Case Are Shifting. http://www.nytimes.com/2015/04/22/business/dealbook/the-legal-odds-are-shifting-in-the-aig-case.html?src=me&_r=0 It’s mostly a paean of praise for the plaintiffs’ lead trial lawyer, David Boies, and his “small army of associates accompany[ing] him to Washington.” They ”accompanied him to Washington when the action began in October, taking over an entire floor of the downtown Willard Hotel. The team also set up a ‘war room’ at nearby Skadden Arps, where each day and late into the night dozens of young lawyers crowded around a large table, churning away on computers and picking through boxes of documents on coming witnesses.”

So that’s how the other half litigates. Which is not to detract from Mr. Boies’ litigational prowess. We suppose that with the might of the United States’ unlimited resources aligned against you, you can use all the help you can get. Still, we wonder on what basis the plaintiffs think they’ll carry the day insofar as an award of compensation is concerned. As we noted in our earlier posts, their problem is not so much establishing liability — after all Uncle Sam did take their stock, if only temporarily — but rather establishing damages. After all, when the temporary taking period was over, AIG was not only rescued from bankruptcy by Uncle Sam’s rescue, but also got its stock back, and made a hefty profit in the end when the market value of the seized (and returned) stock soared. So where is the damage to AIG? Would this be a case of injuria absque damno?

So once again, stay tuned. Presumably, all will be explained in the decision of the Court of Federal claims, whose decision is expected  some time this summer.

Virginia Supreme Court Puts an End to Condemnors’ “Sandbagging.”

For many years, condemnors have been using a nasty gimmick as a weapon against condemnees. It goes like this: First, the condemnor deposits its version of just compensation (and usually takes possession of the subject property, even though the valuation phase of the case is yet to be tried and real just comensation is yet to be determined). Then, when the case goes to a valuation trial, the condemnor shows up with a new appraiser and a new appraisal report, that expresses an opinion of value that is much lower than the deposit which by now the owner has withdrawn in order to replace the subject property. The condemnor then takes the position at trial that the “just compensation” payable to the owner is whatever the second appraiser says. If the condemnor is successful, in so persuading the jury, the owner has to pay back that portion of the deposit that exceeds the verdict. But if you have been paying attention, you probably noted that he had to spend that money for replacement property, and no longer has it. But if the owner seeks to demonstrate the insincerity of the second appraisal and put condemnor’s pretrial offer (and deposit) into evidence to rebut  condemnor’s trial evidence, condemnors take the position that the amount of the deposit was ”merely” a settlement offer and as such is inadmissible.

For many years owners have been complaining that this sort of thing is unfair. Condemnor presents the first (higher) offer to a judge to get the court tom act by issuing an order of possession of the subject property before trial, but then argues that the amount of this “offer” which it solemnly presented to the court to get it to act in a manner adverse to the condemnee, is not admissible when the condemnee wants it admitted. Believe it or not, many courts have been going along with such underhanded jiggery-pokery. In California — where else? — there have even been cases where the condemnor used the same appraiser to come up with these two inconsistent opinions of value.

But the Virginia Supreme Court put an end to it in Ramsey v. Commissioner of Transportation, Record No. 140989, April 16, 2015. It held that the condemnor’s first (higher) opinion of value was not a mere “offer of settlement” but rather an appraisal of just compensation required by statute, and as such could be placed into evidence by the condemnee.

Here, the condemnor’s deposit was $248,707 for the part taken, based on its appraiser’s opinion of $500,000 for the total value of the larger parcel. At trial, however, condemnor came up with a new appraiser and a new appraisal. He opined to a value of $92,127 for the part taken and $250,000 for the entire larger parcel. The jury, having been prevented from hearing the first condemnor’s appraiser’s higher figures by the trial court, and unaware of condemnor’s higher appraisal, came in with a verdict of $234,032, leaving the owner in a hole of $14,675 which he was ordered to repay with 3% interest.

When the owner appealed, the Virginia Supreme Court reversed, holding that condemnor’s first appraisal was no mere offer but a statement of valuation required by law.

The case was remanded for retrial.

 

 

 

Kelo — Once More

The Day, the New London, Connecticut, newspaper reports that the mayor has proposed that the site of Susette Kelo’s house that was taken by eminent domain be made into a little park to commemorate the taking that was probably the most unpopular US Supreme Court case in modern history. Colin A. Young, Mayor: Former Kelop Property Should Be Preserved as a Public Park, The Day, March 31, 2015. http://www.theday.com/article/20150331/NWS01/150339850/1047

Kelo’s house and land, and the homes of her neighbors, were taken, razed, and . . . Actually, it was all for nothing. No redevelopment took place and all that land (91 waterfront acres) is still sitting empty, 15 years after the taking and 10 years after the US Supreme Court approved it by a 5 to 4 vote. And let us not forget the $100 million in public funds that were wasted in the process.

Your tax money at work.

Follow-up.  The Day of April 6, 2015, reports that the above development plan isn’t going ahead either. The title says it all: Plan for Kelo Property Park Tabled in New London. And that’s how it goes. It would appear that, to invoke an old Western saying, some things are just plain snakebit and this is one of them..

California Choo-Choo — Cont’d.

We have been out of town recently, so we missed the latest LA Times dispatch on the doings of California’s coming “bullet train” which is supposed to run — when completed, whenever that will be — between LA and San Francisco, but which for now is struggling to create a right of way around Fresno in the central valley. Ralph Vartabedian, Turf Wars, L.A. Times, March 6, 2015, at p. A1 (above the fold). So proceeding on the premise that better late than never, here is our opinion of what has been going on.

It sounds like the same old, familiar story. Owners of land in the path of that right of way, it would appear, have no intention of going along quietly with the state’s offers, and are demanding fair market value that exceeds the state’s opinion of what it ought to be. These farmers, it turns out to be, are not the rustics of yore in overalls and straw hats. They are wealthy owners of valuable ag land and they have been lawyering up, promising the state folks to see ‘em in court. This is a potent threat because historical data make it clear that court awards — whether in California or elsewhere, whether by judges of juries — tend to run significantly higher than condemnors’ offers. So that those condemnees who reject state offers and try their cases tend to win more favorable verdicts more often than not.

Even way back in the bygone days of the 1960s, a State Highway Commissioner wrote an article in which he disclosed that “Actual costs [of right of way acquisition] were an average of 32 percent above estimates, most of the increment coming from additional right-of-way costs.” Joseph C. Houghteling, Confessions of a Highway Commissioner, Cry California, Vol. 1, No. 2 (Spring 1966, at p. 29). Not much has changed in the ensuing half-century, except that as California land values soared, the “spread” between condemnors’ lowball offers and actual recoveries in trials has grown bigger. For a sampling, see 40 Loyola LA L. Rev. at 1146-1148 (2007). Our favorite case like that, though admittedly a rare one, involved a taking of a Southern California Edison power line in which the state deposited $234,485 but the eventual award came to $49,400,000.

Why is that happening?  The best explanation we are aware of was provided by Keith Harper, MAI, whose views may be found quoted in 40 Loyola LA L. Rev. 1106-1107, and are further explained by your faithful servant (id. at p. 1108, note 162). Read it! In a nutshell, condemnor’s appraisers know that most condemnation cases will be settled, and since in large projects they have to appraise hundreds of parcels,  according to Mr. Harper, they tend to do a superficial job and save their serious effort for those cases that don’t settle and go to trial.

Right now, the LA Times informs us that the state is working on the acquisition of an initial 29-mile right-of-way section. It needs 525 parcels, but so far has acquired only 123 by settling with their owners. Some 154 land owners have rejected state offers, and it looks like those will go into litigation. So far, the state is behind schedule some two years.

Quoth the Times: “Valley landowners in the path of the train have a long list of grievances. Grape farmers say the authority plans to put fences so close to their fields they’ll be required to tear out additional vines to make room to turn their tractors. Cherry farmers say the state will disrupt irrigation systems by cutting off their fields from their wells.” And so it goes.

Sure, some of these cases will settle before going to trial, but some won’t. So it should be a high time for local lawyers. We look forward to the event.

 

Is New London an Urban Basket Case or a Thriving Community?

Well folks, here we go again. New London, Connecticut has announced another project in the Fort Trumbull area. Not the same area that was taken by eminent domain in Kelo v. New London, but as best we can figure it out, close by.  So why are we writing about it? Because this bit of news is accompanied by whoop-tee-do cheers about what a great, fiscally sound place New London is. Check it out: Colin A. Young, New London Audit Reveals Nearly $850,000 Surplus, The Day, March 24 (revised 3/25) 2015. That title says it all. Click here, http://www.theday.com/local/20150324/new-london-audit-reveals-nearly-850000-surplus

What else is new in New London? We also learn from the local newspaper, The Day, that the grandly named Renaissance City Development Association (which is the new moniker for the old New London Redevelopment Corporation) has recommended to the city council that it approve an $18.4 million proposed new, nearby development consisting of 104 apartment units, two 12-unit townhouse  structures, a clubhouse, etc.  What is remarkable about it is the developer’s assessment of the situation in New London: “What attracted us was the growth of New London, the direction the whole city is going in. It’s a dynamic city, and we really wanted to be a part of it.” Colin A. Young, RCDA Sends Proposal for Fort Trumbull Development to City Council, The Day, March 24 (updated 3/25) 2015. Click here http://www.theday.com/local/20150324/rcda-sends-proposal-for-fort-trumbull-development-to-city-council

So let’s see now. When talking to the US Supreme Court (and the state courts) New London represented itself to be a down-at-the-heels burg, on its way down economically and socially, well on is way to hell in a handbasket, that could be rescued only by the grandiose Fort Trumbull redevelopment project (that would actually destroy an unoffending lower middle-class community to be replaced by upscale structures that would cater to the well-paid scientific employees at the nearby Pfizer pharmaceuticals research facility).

But as you probably know, that didn’t work out. The city and state blew some $100 million in public funds for the 91-acre site of that redevelopment, but its site where the home of Susette Kelo and her neighbors once stood (after blowing some $100 million in public funds), is a useless wasteland, generating no taxes and doing no one any good. As for Pfizer whose economic wellbeing and job creation was the ostensible purpose of that redevelopment project that was said to be the justification for the destruction of Susette Kelo’s neighborhood, it used up its tax advantages, and then moved out of New London, taking some 1400 jobs with it. But as you can see, New London is doing OK and the tale of imminent collapse it spun for the Supreme Court was just that — a tale.

And that, folks, is how the redevelopment game is played. Your tax money at work.

“Improved” LA Freeway Worse than Before

One could actually skip this long L.A. Weekly story and read just the headline. It says it all. Adam Gropman, 1.1 Billion and Five Years Later, the 405 Congestion Relief Project Is a Fail, LA Times on line, 3/4/15, click on http://www.laweekly.com/news/11-billion-and-five-years-later-the-405-congestion-relief-project-is-a-fail-5415772 But if you have an interest in the misadventures of public projects — or “public improvements” as their creators like to put it,  click away and do read it. The L.A. Times evidently thought it’s important because it reprinted the story on line under its own masthead.

The 405, for you flatlanders, is the San Diego Freeway, and its pertinent part is the one that crosses the Santa Monica Mountains north-south, provides access to the Getty Center museum, connects the San Fernando Valley with the West Side of Los Angeles, and is the primary route to the LAX Airport from the north. It has always been a heavily travelled freeway, but eventually it got pretty bad, so a huge project was undertaken to fix it. Did it? Actually, no. Quoth the L.A. Weekly:

 

$1.1 Billion and Five Years Later, the 405 Congestion Relief Project Is a Fail

Illustration by Jimmy Giegerich

“This past May the project known as the I-405 Sepulveda Pass Improvement Project came to official completion, with resulting new on-ramps and off-ramps, bridges and a northbound 405 carpool lane stretching 10 miles between the 10 and 101 Freeways.

“The four-turned–five-year, $1.1 billion project became a long-running nightmare of sudden ramp closures, poorly advertised by Metro and made all the worse by baffling detours that led drivers into the unfamiliar Bel Air Hills and Sherman Oaks hills, dead ends and unlit canyons.

As Metro’s closures and delays reached their height in 2013, L.A. Weekly encountered stranded motorists merely by following Metro’s official detours — which in many cases were roads to nowhere. And it isn’t over in the Valley or on the Westside. Sudden ramp and lane closures are still hitting motorists at Getty Center, Valley Vista, Skirball Center and elsewhere as work on the officially completed project grinds on.”