Monthly Archives: February 2008

The Los Angeles Times Gets Indignant


The February 28, 2008, Los Angeles Times op-ed by Patt Morrison (If a Tree Owner Falls . . .”) takes out after Charles Hurwitz, the CEO of Maxxam, Inc., with a rhetorical meat axe, to put it mildly. Morrison is the funny-looking lady always depicted wearing funny-looking hats, and predictably spouting whatever funny-sounding liberal line captures her fancy.  This one’s a doozy.

Morrison’s op-ed tries inter alia to revive the decades-old calumnies aimed at Charles Hurwitz, CEO of Maxxam, Inc., based on how “[I]n 2001 the feds tried to get back some of the $1.6 billion that taxpayers paid to bail out Hurwitz and his pals when their S & L went belly up in 1988.” What she never tells her readers is what happened when the feds “tried.” If you want to know,  read FDIC v. Hurwitz, 384 F.Supp. 2d 1039 (S.D. Tex. 2005)

Pacific Lumber Company (PALCO) was a small lumber company whose stock was undervalued and it attracted Hurwitz’s attention, inspiring him to acquire it. The problem turned out to be that PALCO owned Headwaters Forest, a 7,500-acre old-growth redwood stand. Upon learning this, the local environmental extremists decided to extort Headwaters, being as Uncle Sam lacked budgeted funds at the moment to acquire it the old fashioned way, i.e. by buying it.

And so, inspired by some environmentalists, the feds cooked up phony charges against Hurwitz. FDIC filed suit against him in a federal court in Texas, charging wrongful conduct in connection with a failed S & L (in which Hurwitz owned a 0.006% share). FDIC also hired (that’s right, hired) the Office of Thrift Supervision to make the same charges against Hurwitz in separate administrative proceedings, thus double-teaming him. They did this though they realized after extensive investigation, that they had no winnable case against Hurwitz, and that in any event, had there been such a case it would have been barred by limitations. But they sued anyway. Why? This is where the environmentalists came in – they concocted a scheme that became known as “debt for nature,” meaning that after Hurwitz was found liable in the Texas litigation (that had nothing to do with redwoods or PALCO) he could be leveraged (read extorted) to surrender the Headwaters Forest to the feds without compensation, in exchange for the feds dropping their S & L related claims against him. The idea was that, if nothing else, the eight-figure cost of the duplicative (or as the federal court later called it, “duplicitous”) Texas litigation would force Hurwitz to come to terms. But it didn’t work out that way. The feds picked on the wrong target. Hurwitz dug in his heels, dug into his deep pockets and took on the feds.

As the Texas litigation proceeded, it became obvious that the feds’ case against Hurwitz was a tissue of unsubstantiated charges, and outright lies. Let the federal court speak for itself. The opinion opens by saying:

“This is a cautionary tale where the emperor has new clothes – a bandit’s mask. The [FDIC] sought to hold Charles Hurwitz individually responsible for all losses at United Savings, even though he had no obligation to the thrift or the government. Unable to focus its claims and unwilling to disclose its records in this suit – one that it brought – the FDIC surreptitiously paid another agency to bring a parallel administrative claim against Hurwitz, several companies and other people. Later – much later – the FDIC dismissed its claims here. Hurwitz and two companies asked that they recover their costs of defending this suit. They will recover their costs because the record reveals corrupt individuals within a corrupt agency with corrupt influences on it, bringing this litigation.”

After a detailed — and we do mean detailed — review of the record, the Court concluded:

“[The plaintiffs] set about using their agency’s authority to compel an illegal result wholly unconnected with their legitimate responsibilities and they lied about it all under oath. Whether getting the redwoods was tied to craven submission to a congressional bully or to personal ideology, they were not content with stealing from Hurwitz. Through this case they sought to ’cause him pain.’ They sought to humiliate him. . . . They heeded every call but that of duty and honor” . . . “The agency became more of a cosa nostra than a res publica.

The court awarded Hurwitz $72,255,147.

So what happened to Headwaters Forest? The feds eventually acquired it in a settlement with PALCO, and paid for it. For the government’s take on that settlement, see David J. Hayes, Saving the Headwaters Forest: A Jewel That Nearly Got Away, 30 ELR 10131 (2000). And what happened to those administrative charges? The same thing; the OTS administrative judge rejected all 13 claims filed by the agency and ruled in Hurwitz’a favor. Dennis Pfaff, Judge Suggests Killing Maxxam Case, L.A. Daily Jour., Sep. 19, 2001, at 1.

 Oh, we almost forgot. On August 25, 2005, at B1, the Los Angeles Times carried an article, by Tim Reiterman and E. Scott Rickard, entitled Government Ordered to Pay in Ploy for Redwoods, airing this whole sorry saga. But even though reported in Morrison’s newspaper, you won’t find any reference to the feds’ misdeeds or their richly earned comeuppance in her column. Why ruin a good diatribe with facts?


Full disclosure: Though not involved in the Texas litigation, the author’s firm, then Berger & Norton, represented PALCO in its inverse condemnation action against the feds who settled for $380 million, including a transfer to PALCO of the 7,700 acre Elk River Timberlands. For the details of the settlement and a review of the incredible, pervasive press misrepresentations that accompanied this controversy, see Gideon Kanner, Redwoods, Junk Bonds, and Tools of Cosa Nostra: A Visit to the Dark Side of the Headwaters Controversy, 30 ELR 10756. Also, for an economist’s view of the Headwaters affair, see,  Harry DeAngelo and Linda DeAngelo, Ancient Redwoods and Politics of Finance: The Hostile Takeover of the Pacific Lumber Company, 41 J. Fin. Econ. J. 3 (1998).


Update. We are informd that the feds’ appeal from this judgment was argued before the U.S. Court of Appeals for the Fifth Circuit, and a decision is expected at any time. Stay tuned.

Latest from Half Moon Bay

On February 26, 2008, the U.S. District Court denied Half Moon Bay’s motion to amend the findings and to alter or amend the judgment that awarded over $36 million in damages for inverse condemnation of the plaintiff’s land. Yamagiwa v. Half Moon Bay.

For our earlier posts describing the case in greater detail, see the posts of November 30, 2007, and December 19, 2007.

 Stay tuned for the appeal.

Defend the Castle!

We are indebted to our colleague on the blog for reminding us about a wonderful Australian movie, “The Castle.” It’s a comedy about a colorful family’s fight to keep their home from being taken for the expansion of a nearby airport. It’s good entertainment as well as good social commentary, that is well worth the time to view it. So next time you set out to rent a movie, get “The Castle.”  It’s fair dinkum, mate. 

And by the way, speaking of things Australian, we might mention that the Aussie term for eminent domain is “resumption.” It is derived from the fact that the original Crown land grants in Australia had a provision reserving to the the Crown the right to resume title upon payment of compensation. 

And speaking of entertaining stuff that’s related to eminent domain — and Lord knows there is precious little of that —  there is also a wonderful old British vaudeville song entitled “They’re movin’ father’s grave to build a sewer.” It was recorded by the Clancy Brothers and should be available on one of their CDs. It too is great fun.

How Big a Deal Can $129 Million Be?

        In keeping with our policy of spotlighting the ongoing waste of funds accumulated by the government, ostensibly for the construction of public works but actually hoarded or squandered, here is another such story. A big, front page headline in this morning’s [Los Angeles] Daily News (“MILLIONS FOR PARKS SIT IDLE”) informs us that the City Controller has gone public with the story that the City of Los Angeles has been collecting park fees from condo developers for, well, parks. But it turns out that none of this money has been spent on parks or anything else for that matter, and the city doesn’t even have a plan for spending it. Ah, but not to worry. The city’s Recreation and Parks General Manager is quoted by the Daily News to the effect that the city is developing a plan that would use technology to map where the money can be spent. Technology, man. We take it that means that city “planners” will be using their desktops to color in the proposed park sites on their maps instead of doing it with crayons. High tech, dude. 

Why is this happening? It seems that the geniuses in City Hall who wrote the ordinance requiring payment of these fees by condo developers, have inserted into it a provision that those fees may be spent only within two miles of the particular condo project, which in fairness doesn’t give the planners a lot of elbow room for doing their thing. We dig their problem as well as that of the draftsmen of the ordinance who evidently didn’t want to see condo fees collected on the West Side but spent on parks in the San Fernando Valley, or vice versa. All that, however, is an explanation, not an excuse for doing nothing and just sitting on all that money. 

More important are the amounts involved. What we are talking about here is $129,000,000, which is probably more than the annual budget of some countries with UN memberships and standing armies. All that money has been exacted from developers (which means that their condos had to be priced higher) in the name of creating parks that aren’t being created. So the hapless denizens of Los Angeles are thus taking it in the chops two ways: more expensive condos (at least they were more expensive until the current real estate crash set in) and no promised parks. The contrroller’s audit also disclosed that the city overcharged the developers and will now have to cough up a $4.5 million refund.

Which brings us to the point of this post. Connecticut may be the nutmeg state, but California is the nutcake state where courts make no bones about their anti-condemnee bias and overtly assert that  fears have been expressed (by whom? they don’t say) that if the people displaced from their homes, businesses and farms for public projects were to receive full indemnity for all their demonstrable economic losses, that would be “too liberal” and an “embargo” on public projects would have to be declared, with the Golden State surely going to Hell in a handbasket as a result. You don’t believe us? Take a look at these cases which repeat that shibboleth ad nauseam, even though no evidence supporting such judicial fears has ever been presented to the courts: People ex rel. Dep’t of Pub. Works v. Symons, 357 P.2d 451, 455 (Cal. 1960).  Bacich v. Bd. of Control of Cal., 144 P.2d 818, 823 (Cal. 1943). Customer Co. v. City of Sacramento, 895 P.2d 900, 909 (Cal. 1995); Varjabedian v. City of Madera, 572 P.2d 43, 51 (Cal. 1977); HFH, Ltd. v. Superior Court, 542 P.2d 237, 248 (Cal. 1975); Holtz v. Superior Court, 475 P.2d 441, 445 (Cal. 1970); Albers v. County of Los Angeles, 398 P.2d 129, 136 (Cal. 1965); Pac. Outdoor Adver. Co. v. City of Burbank, 149 Cal. Rptr. 906, 911-12 (Ct. App. 1978); Orange County Flood Control Dist. v. Sunny Crest Dairy, Inc., 143 Cal. Rptr. 803, 810 (Ct. App. 1978); People ex rel. Dep’t of Pub. Works v. Volunteers of Am., 98 Cal. Rptr. 423, 433 (Ct. App. 1971). 

One final thing that illustrates how those guardians of the public weal, the large metropolitan newspapers are looking out for the public interest. The Daily News which alerted us to this story is a small local newspaper with nowhere near the circulation of the once mighty Los Angeles Times. So well might you ask: what has the Times had to say about this fiasco. Not much. The basic story is briefly reported on page 4 of Section B. And significantly, as of this morning the Times’ on-line edition doesn’t mention this story at all. No editorials and so far, no op-eds. After all, it’s only a lousy $129,000,000 scandal. In contrast, the big, prominently featured L.A. Times story is how upset are the denizens of El Porto, a tiny beachfront area, over the proposal to change the name of their community to North Manhattan Beach. Oh my. Now that’s a real news story, isn’t it?

It’s That Time Again — Yuk!

We should be grateful to Tim Sandefur over at the [linked] PLF on Eminent Domain blog for reminding us about the upcoming battle between two competing eminent domain propositions that will be on the California ballot this fall. The Howard Jarvis tax-cutting folks have qualified Proposition 98 for the November ballot, in an effort to curb the abusive exercise of eminent domain. Concerned about the horrible prospect of not being able to take anything, for any purpose at any time, the City Hall denizens (who thought that condemning the Oakland Raiders football team was just hunky dory) have sponsored a competing, weaselworded Proposition 99 that claims to do the same but actually falls short, and does not really offer any more protection than the current law, with the possible exception of protecting single-family, owner-occupied homes from condemnation for pure economic redevelopment (which in California you ostensibly can’t do anyway). Even that sop is subject to exceptions. Proposition 99 will also appear on the November ballot where it will compete with Proposition 98.

While we welcome any improvement in the law of eminent domain, and any discussion of the subject that has any chance of elevating public understanding, we sure don’t look forward to the upcoming electioneering spectacle provided by TV commercials. Being of the curmudgeonly persuasion, we take it as largely incontestable that when it comes to TV ads supporting or opposing ballot initiatives in general, you can bet the farm that what you are likely to hear isn’t true. How do we know that? It’s obvious: the TV spokespersons’ lips are moving. But hey man, it’s California.

So one of these days we will tug on our bootstraps real hard and elevate ourselves to the extent of saying something on the merits — if that’s what they are — of these propositions. 

In the meantime, read Tim Sandefur’s blog, since he, being a public spirited dude, has posted the text of those Propositions for your edification, assuming that reading them is capable of producing that effect rather than an urgent need to take a nap. As you tackle that task, think good thoughts about Proposition 98 and vote for it when the time comes, for in an imperfect world it’s better than nothing and one hell of a lot better than Proposition 99. As for us, we’ll try not to think about that stuff for now, and (unless driven beyond endurance) will refrain from saying anything on this subject until we get closer to the election.

So write this down: VOTE YES ON 98 and NO ON 99, and then put your note on the refrigerator door so you can be reminded to do right every time you get yourself a cold beer which is optional, but recommended when you try to grapple with what passes for eminent domain law. You can trust us on that.


He Who Lives By the Sword, Dies

            It was said by liberals of yore – meaning real liberals, not the assorted pseudo-Marxist radicals of today who have stolen that label – that constitutional rights must be afforded to all, because when they are denied to some, sooner or later they will be denied to others. Case in point: the latest [mis]adventure of the Pfizer pharmaceutical company. You may recall that (though it denies it) Pfizer was a moving force behind the wretched Kelo case; involving the New London, Connecticut, Fort Trumbull redevelopment project. The project was initiated (at least in large part) to favor Pfizer and its well-paid professional employees working at its new $300 million research facility located just across the River Thames from the redevelopment site. It displaced lower middle class families to make room for a planned fancy hotel, upscale condos and shopping facilities – none of which are so far being constructed, which is another story on which we have commented earlier.  

Now, the tables are being turned in Brooklyn. It appears that a Brooklyn politico has announced his intention to have the city use its eminent domain power to take Pfizer’s Williamsburg plant that is evidently on its last legs, having shed 1000 jobs in the past two years. Pfizer plans to shut it down by the end of the year, and devote its 15-acre site to new housing. See Lee Howard, Eminent Domain Proposal to Grab Pfizer New York Plant. The Day, Feb. 8, 2008. Naturally, Pfizer is huffing and puffing, professing to be puzzled over why the government would want to redevelop Pfizer’s land for housing, something that Pfizer thinks of doing itself. So where does the city get off, says Pfizer, trying to snatch that land and develop it itself (or through its chosen redeveloper)? Good question, but one that has been asked before by other indignant property owners whose protests got them exactly nowhere.  

It’s tempting at this point to get involved in disputations about poetic justice, Schadenfreude, whether two wrongs make a right, and all that other good stuff. But we won’t. Suffice it to say that given the political nature of the redevelopment process, to say nothing of the nature of urban politics, particularly in New York, it is far from certain that Pfizer’s property will be taken, and if so, whether it will be taken on terms that it finds disagreeable. We will do our best to follow up this story and keep you posted on developments – if any. Sometimes, condemnation plans are announced but then not implemented for years, and this could be such a case. So stay tuned.

Was Kelo Novel? The Second Circuit Says “Yes.”

Within hours of the Kelo opinion coming down back in 2005, it became the “party line” of its admirers that the majority opinion approving “economic redevelopment” (i.e., redevelopment for pure financial gain, without the justification of blight removal) was no big deal, even if House Speaker Nancy Pelosi thought it was the handiwork of God.  The Supreme Court, went their argument, had done nothing new; it was the same-old, same-old stuff of earlier decisions like Berman and Midkiff.  But it wasn’t. Those two cases (as well as the later Boston & Maine Railroad case) had made it clear that it was the elimination of blight or other undesirable conditions that justified the exercise of eminent domain in cases of private-to-private transfer of the taken land, and provided the “public purpose” said to justify the taking.


Just how serious is the rule that in private-to-private transfers it is the elimination of blight (or some other undesirable condition) that constitutes the “public use,” may be gleaned from a recent Pennsylvania Supreme Court decision in Condemnation in rem by Redevelopment Authority of Philadelphia, 2007 Pa. LEXIS 2894, holding that even when the avowed plan of the redevelopment agency was to turn over the taken land to a private religious group for the establishment of an avowedly religious school, that fact did not render the taking impermissible under the Establishment Clause of the First Amendment. It was the taking and the elimination of blight that was the “public purpose” of the taking, and that justified the taking. What happens to the condemned property after its taking and its reconveyance to a redeveloper, has no effect on the public use determination. So says the Pennsylvania Supreme Court. For a recent commentary on this topic, see Steven  J. Eagle, Does Blight Really Justify Condemnation? 39 Urban Lawyer 833 (Fall 2007).


Now, the U.S. Court of Appeals for the Second Circuit has weighed in on the subject of whether Kelo was novel, in Goldstein v. Pataki (Docket No. 07-2537-cv, Feb. 1, 2008, affirming 488 F.Supp.2d 254). This is the New York case approving the Atlantic Yards Project, a huge, 22-acre development in Brooklyn, that will include an NBA stadium and that is going to be built by Forest City Enterprises, a development company owned by mega-developer Bruce Ratner.


As the court explained at length in Goldstein, it had no alternative but to follow Kelo, and terefore had to reject the plaintiffs’ challenge to the proposed taking,  Its opinion does a thorough job of doing just that. But in the process, the court provided an insight into its assessment of Kelo’s novelty. As the court put it: “Kelo posed a novel question of law precisely because the city of New London had ‘not [been] confronted with the need to remove blight’.” So there you have it: for whatever it’s worth, the Second Circuit agrees with Kelo’s critics on this point – the decision was novel, just as many of its critics had it from the outset.


The other novel point noted by the court in Goldstein was that “[p]rior to Kelo, no Supreme Court decision had endorsed the notion of a ‘pretext’ claim, …” But don’t get your hopes up on that one. The Goldstein opinion makes it clear that saying so is one thing, being permitted by a court to prove it is another. On that point see Robert Thomas’ discussion  Pleading Kelo Pretext: What About Justice Kennedy? on his blog of February 6th.

Update on the Half Moon Bay Case

For an excellent, detailed summary of the Half Moon Bay case that we discussed earlier, and its assessment by Joe Cotchett, one of California’s leading lawyers who happens to be a resident of Half Moon Bay, but otherise, to the best of our knowledge, has no dog in this fight, read his opinion piece. It’s a good read. Go to Google, then enter, then under Half Moon Bay Review click on editorial & opinions, then click on By Joe Cotchett–Matter of Opinion.

Cotchett makes clear how the city brought the $36-plus million verdict upon itself through its arrogant disregard of the property owner’s rights, and indeed of common decency. But hey man, that’s California for you, more particularly, Northern California whose inhabitants and local officials elected by them, do not consider themselves bound by traditional American concepts of human rights, by the rule of law,  and by the  principles enshrined in the Constitution.