Monthly Archives: November 2011

Kelo Is Alive and Well and Living in Minnesota

If you are an eminent domain maven, you may recall a recent decision by the Minnesota Supreme Court, Eagan Economic Development Authority v. U-Haul Co., 787 N.W.2d 523 (Minn. 2010). In it, the Minnesota Supreme Court reversed a decision of the Minnesota Court of Appeals (765 N.W.2d 403) holding that a condemnation of U-Haul’s land for redevelopment that would “reawaken the spirit of vitality of [that] part of Eagan” was not permissible because the Authority had no agreement with a redeveloper who would execute the redevelopment plan, and the Authority’s “plan” was indefinite. The state supreme court thought otherwise and permitted the taking.

And here we didn’t know that “awakening the spirit of vitality” falls under the heading “public use” within the meaning of the Constitution.

So far, this is one of those dog-bites-man stories that seems familiar to us mavens, even if the court’s decision was unfortunate. But what was remarkable about that decision was that even as the Minnesota Supreme Court wrote, it knew that there wasn’t going to be any redevelopment. As the court conceded in  its opinion, the “project did not materialize” because developers withdrew their proposals. So you’d think that the case was moot, or at least that the attempted taking was unsupported by any rational plans, thus failing to meet the “public use” standard, even as loosely defined by the Kelo decision.

Now, we thought you would like to see what the site of that redevelopment projects looks like, and here it is.


So the Kelo disaster now has a worthy competitor or at least a runner-up.  Kelo, as you may recall, also turned out to be a disaster like that. The land taken by New London, Connecticut, from Susette Kelo and her neighbors for redevelopment back in 2000, is just sitting vacant, generating no taxes, and doing no one any good. Last we heard from that bailiwick, after wasting way over $100 million in state and local funds, it was being used as a dump for the debris generated by hurricane Irene.

As far as we know, the site of the misbegotten U-Haul condemnation in Minnesota has likewise generated nothing useful — it’s just sitting there.

Alas, as we never tire of reminding our readers, it’s your tax money at work.


Justice Scalia’s Hackles and Second-Class Citizenship for American Property Owners

Don’t read this post unless you are into the bizarre intellectual (and moral) swamp often referred to as the “ripeness mess” in inverse condemnation cases. If you are new to the subject you may well not believe this, and if so who can blame you? It goes something like this.

Suppose that your local government has imposed a regulation on your land that for all practical purposes renders it useless and worthless, leaving you only with the dubious “privilege” of having to pay taxes and suffering all the burdens and liabilities of property ownership (think insurance premiums). So you go see a lawyer who explains that starting with the 1920s, it has been the holding of the U.S. Supreme Court, that a land regulation that goes “too far” will be judicially recognized as a taking, violating the Taking Clause of the Fifth Amendment. Your lawyer points out that much more recently (in 1992 to be exact), in Lucas v. South Carolina Coastal Council, 565 U.S. 1003, the court reiterated that rule and applied it to modern land-use regulations.

So it would appear that your substantive legal prospects are looking up. Since local interests are at issue, and since — as the California Supreme Court once conceded — there can be a close relationship between local government officials and local judges, this seems to be an ideal case for decision by the federal courts since violation of federal constitutional rights is implicated . Federal courts, if the Founding Fathers are to be believed, were set up precisely to provide an impartial forum for resolution of disputes in which local interests, local rivalries, and other parochial tensions are implicated.

So you file a lawsuit in federal court, alleging that the local regulations have de facto effected a taking of your property (leaving it useless and worthless) without paying just compensation, an act forbidden by the Fifth Amendment. But what happens is that even though the facts are clear and undisputed, the federal trial judge dismisses your complaint, or grants summary judgment against you. How is that possible, you ask. Good question.

Back in 1985, in the Williamson County case, the U.S. Supreme Court announced out of the blue (that means without the matter having been briefed and argued) that in takings cases (and no others) you plumb can’t sue in federal court for violation of your federal constitutional rights under the Taking Clause. Your taking claim, according to Williamson County, is not ripe — not ready for decision by the federal courts — unless you first sue in state courts and try to get compensation from them, even though you argue with considerable merit that state courts are hostile to such claims and won’t enforce them. Only then, after the state courts deny you relief for the violation of your rights, says Williamson County, is your federal claim “ripe” for decision by the federal courts.
OK, you say. Lesson learned, and since it so happens that the statute of limitations hasn’t run yet, you refile your action in state court, demanding compensation for the taking of your property. You decide to hurry because you’ve heard advice that says don’t wait too long with construction defects and property litigation since you may be entitled to more compensation. — just as the Federal Lordships require you to do. But guess what, your opponent, the city attorney, now removes the case to federal court on the grounds that a federal issue is involved so he has the right to have it tried in federal court. “Wait a minute,” you say. “I was here two weeks ago, making the exact same argument, and you, Your Honor, threw me out of court on the grounds that this case can only be tried in state courts. So what happened? Why am I barred from federal courts under the Williamson Caounty rule, but my opponent has free access to them? What am I? Chopped liver?”

Believe it or not, no one has yet come up with a satisfactory answer to that question. Williamson County said that the reason for limiting original jurisdiction in these cases to state court is that takings of private property withut due process are legal and only when they occur without just compensation they give rise to a ripe federal claim. Wait a minute, you say. If that is so, what about other constitutional rights? After all, deprivations of life and liberty, the same as deprivations of property, are perfectly legal unless they are unaccompanied by due process of law. So how come plaintiffs in all those cases aren’t sent back to state courts to obtain the missing due process, just as inverse condemnees are sent back to obtain the missing just compensation? Good question. But the courts have not even tried to suggest an answer.

The bottom line thus is, that there is one rule for property owners complaining of unlawful takings of their property, and there is another rule for everybody else complaining of violation of their constitutional righs.

We were reminded of all that while reading today’s New York Times, Adam Liptak, Telemarketer Abuse Statute Confounds Supreme Court, November 29, 2011, in which Mr. Liptak tells us about the kerfuffle that took place on the bench during oral arguments of a case dealing with the availability vel non of federal jurisdiction in cases under a congressional law regulating practices of telemarketers. It seems that their Lordships hasve confessed to being confused and can’t figure out whether these cases can be filed in federal courts, because Congress was unclear whether plaintiffs are limited to state court relief, or whether they can make a federal case out a piddly $500 per-violation civil penalty.

Justice Kagan is quoted as saying that “the default position” is that “federal courts have jurisdiction over federal questions.” Sounds OK to us. But if so, why shouldn’t the court take the same “default” position with regard to violations of Fifth Amendment taking clause?

And get this gem by Justice Scalia: “We are jealous of our jurisdiction. That’s what gets our hackles up, when you are telling us we have been ousted of jurisdiction.” Sounds grand to us, but where were Justice Scalia’s hackles when the Court decided the San Remo Hotel case, and he concurred in an opinion asserting that federal takings claims in particular should be singled out to be confined to state court, in the absence of any congressional directive witholding jurisdiction from federal courts? At least Justices Rehnquit, O’Connor, Thomas and Kennedy mused in a concurring opinion that mayhaps Williamson County had been wrongly decided and should be reconsidered. But in spite of several recent opportunities to do so, none of them ever voted to grant certiorari to do so, thus proving once again that talk is cheap.

Bottom line: It’s scary how the courts have — in spite of occasional rhetorical flourishes to the contrary — declared private property rights to be a “poor relation” of the law. Property rights, and that means property rights protected by a rule of law, are what in the final analysis holds civilized societies together. Take that protection away, and substitute for it the whim of regulators pandering to what they perceive to be the preference of their influential special-interest constituencies (think NIMBY), and you knock over one of the pillars on which this free society rests. For as Professor James Ely, put it in the title to his highly regarded book, property rights are the “guardian of every other right.”

California, There I Go — Revisted

An interesting article in today’s Los Angeles Times: Gale Holland & Sam Quinones, Waving California Goodbye, November 27, 2011, at p. A39. Click here. It elaborates on the out-migration out of California, that has been going on since 2005 when California experienced a net loss of 269,205 people. The numbers have declined (129,193 in 2010) but the trend is unmistakable. See our earlier comment on this problem at  Also noteworthy is the fact that this time the Times article duly takes notice of the fact that though this out-migration is rooted in “a flagging economy,” “. . .exorbitant housing prices — too high for many struggling Californians despite a burst housing bubble — still play a role.” The bursting housing bubble may have brought housing prices down, but not enough.  Our last point is made in spades in another L.A. Times item: a prominent TV actor just put his house on the market for $10.7 million — it sold in 2001 for a mere $5.5 million. Bubble, shmubble. That’s a lot of gain, even if it is as yet unrealized.

The big problem is that young people on whom this state is dependent for its future, simply can’t afford to live here, so they go elsewhere.

What Are the Feds Doing And Why Are They Doing It?

Ever since the U.S. Supreme Court decided Preseault v. I.C.C., 494 U.S. 1 (1990), holding that when a railroad ceases operations and abandons its right of way easement, causing a reversion of the eas ement area to the underlying land owner, that does not justify the invalidation of government action when the feds (or local  government) want to grab it for hiking trails. However, it does give rise to a taking when the federal government takes over the vacated right of way for a hiking and biking trail.

The problem is that under  prevailing state property law, when a railroad ceases to operate and its right of way is abandoned, that means that the area covered by that right of way reverts to the underlying servient owner free and clear of t he easement. So when the feds step in, as they eventually did via the Rails-to-Trails Act that transforms those former railroad rights of way into public recreational uses, like hiking trails, that means that they are taking the former easement areas and are then required to pay just compensation.

But since they haven’t done that (pay, that is) the owners of the servient easement areas have had to sue for their compensation. And where the taking is by the feds, you have to sue them in the U.S. Court of Federal Claims in Washington, under the Tucker Act. And so, the owners did this en masse. Even though the law on point has been crystal-clear, and the owners were clearly in the right, the feds have been fighting tooth and nail to keep from paying. Why? We have no idea because when they lose an inverse condemnation case, the owners are entitled not only to just compensation, but also to attorneys’ fees and interest. So each time the feds dig in their heels and fight a losing case like that, they are only making things more expensive for themselves and the  federal taxpayers.

To give you an idea of what’s going on, allow us to share our experience in writing Just Compensation, our monthly report on eminent domain that has been in print continuously since 1957.  In preparing the latest issue, we came across  four — count ’em, four — such cases. If you don’t believe us, check out  98 Fed.Cl. 797, 99 Fed.Cl. 133, 99 Fed.Cl. 483, and 99 Fed.Cl. 565. The feds lost every one.

So why are they fighting and blowing the taxpayers’ money on these battles they haven’t been able to win and are unlikely to win in the future? We have no idea. But if you do, please let us know.

Lowball Watch – North Carolina

The Jacksonville, North Carolina, Daily News reports a settlement of  a noteworthy condemnation case. In 2008, the Onslow Water & Sewer Authority took the owners’ 200 acres for a new treated wastewater disposal facility and deposited “around $1 million.” Later, the Authority tried to abandon the taking, but North Carolina courts would not permit it because in that state, once title passes to the condemnor, the condemnation may not be abandoned.

The owners’ expert testified to the presence on the subject property of limestone deposits worth $6 million, which the Authority’s valuation evidently disregarded. Now the case has settled for $7.5 million.

For the whole Daily News story, click here.

Bottom line: In spite of all that,  the new wastewater facility has not been built.

Your tax money at work.

A Cautionary Tale in Brooklyn

A tip of our hat to Nicole Gelinas of the City Journal for her article that tells the story of seven people who according to their complaint just filed in court againt the Atlantic Yards management, bought into promises of good jobs in exchange for supporting that redevelopment project. Nicole Gelinas, The Ratner Seven, City Journal, November 18, 2011 — click here. But guess what? They allege that they were duped

“. . . into joining a “training” class last year that consisted of reading Wikipedia printouts and then working—unpaid and unsupervised—for two months on a dangerous Staten Island home-construction site owned by a third party. During their ‘training,’ the seven ‘learned very little that they did not already know,’ they said, because they were ‘already fully capable of performing construction work.’ One man had previously worked as a carpenter; another had ‘extensive experience’ and had once supervised 100 people on a worksite; a third had worked as an electrician’s apprentice. Two others quit jobs to enroll in Ratner’s ‘training,’ while another turned down a maintenance job. The seven plaintiffs toiled unpaid because, they say, Ratner’s surrogates promised them trade-union memberships, a pathway to good jobs building Atlantic Yards. Caldwell, whose BUILD salary was funded by Ratner, told them that they should ‘prepare to be millionaires,’ they say. They got nothing. ‘None of the Plaintiffs has received an offer of employment in a construction job’ at Atlantic Yards, according to their suit.”

Bottom line: when redevelopment promoters promise to bake a bigger economic pie for all to share, it may just be that what they are really promising is pie in the sky. So let’s stay tuned on that one and see how it turns out.

Give Thanks! There is Much to Thank For

Particularly in times like these, when lots of folks are experiencing lots of problems, it is important to pause and reflect on our condition. The fact is that for all the economic problems we face, for all the societal warts and pimples, we live in the very best place on earth. Yes indeed. We do.

So in spite of the idiots who have driven so many good people out of politics and the economy, we are still better off than just about anybody else in the world. So give thanks. But don’t overeat because the annual turkey stuffing is what is symbolic of this country’s biggest problem. It can be captured in two words: Too much. Too much of what? Too much of everything. Remember, people who have it too good for too long a period of time eventually lose their understanding of the inevitability of the downside of life, so that when a real crisis comes along, are unable to deal with it competently and effectively.

So as you reflect on all that — assuming you do — have a Great Thanksgiving!


Lowball Watch — New York

This is a whopper.

The New York Appellate Division just decided Gyrodyne v. State of New York, a partial taking of 245 acres for the Stony Brook State University (SUNY). Opinion affirming the trial court award filed November 22, 2011. Condemnor’s evidence of value was $22,450,000, but according bto the New York Law Journal it deposited $26 million. The owner’s evidence $125,000,000. Trial court award (there are no jury trials in New York eminent domain cases) was $125,000,000, A bull’s eye for the owner, or an increase of $102,550,000 over tyhe condemnor’s testimony. Or,  if you prefer, five-and-a-half times the condemnor’s eight-figure evidence.

For a copy of the Appellate Division opinion, such as it is (it’s a typical, uninformative New York Appellate Division opinion that tells the reader nothing about the evidence or the amount of the award) go to
Follow up. For coverage of this case by Thomson Reuters, click here.

Inverse Condemnation Comes to Wall Street

Today’s New York times (Gretchen Morgenson, Greenberg Sues U.S. Over A.I.G. Takeover, N.Y. Times, November 22, 2011, at p. B2 – click here) reports that Starr International, the firm of Maurice R. Greenberg, formerly a big time honcho at A.I.G., has sued Uncle Sam in the U.S. Court of Federal Claims, contending that Uncle’s takeover of A.I.G in the aftermath of the 2008 financial calamity, amounts to an uncompensated taking of property. Greenberg’s firm is represented by none other than David Boies, the hot-shot New York lawyer who, speaking of inverse condemnation, informs us that

“What these lawsuits say is that in our country, not even the government is above the law. When the government takes action, although it has enormous power, there are legal limits to what they can do. One of those limits is that they cannot take property even for a good purpose if they do it in violation of of legal protection or don’t give just compensation.”

You tell ’em, David!

The alleged taking, says the Times, “contends that the takeover of A.I.G. discriminated against the company and its shareholders by charging onerous interest rates on loans extended by the government — 14.5 percent initially — and by taking an 80 percent interest in the company over objections of shareholders.”

We don’t know the details of these financial machinations, but offhand it strikes us that a complaint that a financial intitution overcharged by collecting only 14.5% interest, smacks of chutzpa. Just ask some of those credit-card-holding poor slobs who are getting hit to the tune of 30% or so on their credit card arrears. They’ll tell you what high interest is.

There is also a companion lawsuit in the U.S. District Court againt the Fed which points out in its defense that without its intervention, A.I.G. would have gone into bankruptcy, and that the Fed helped to restore A.I.G. and thereby prevented a meltdown of the financial system. Which we take to mean that the Fed is raising the defense of ingratitude, which would be novel but interesting. Together, the lawsuits seek a recovery of $25 billion, knock on wood.

The article says nothing about the plaintiffs’ contentions of ripeness, and we can’t wait to see how that one turns out. So stay tuned, folks. This one should be entertaining.

Didn’t Hawaii Housing Authority v. Midkiff Fix Excessive Housing Cost in Hawaii?

The short answer to the question posed by the above headline is, Hell, no!

But in case the 1980s Midkiff controversy (467 U.S. 229) is not uppermost in your mind by now, let’s review the bidding. This was a case in which SCOTUS held that it was just fine for the State of Hawaii to take by eminent domain the titles of land lessors who subdivided their land into building plots and leased them at friendly rents to folks who built (and lived in) single-family homes. By the 1980s those lessees (who had entered into those leases voluntarily) decided that they didn’t want to be lessees any more — land values were rising on Oahu and understandanbly, they wanted to get in on the gravy train. Long story short, the state legislature responded to their demands and passed a law allowing the condemnation of those lessors’ titles for resale the lessees. SCOTUS approved because it found the Hawaiian legislation to be a permissible effort to stabilize or even reduce the cost of housing on Oahu. How that could happen, given that the legislation produced not even one square inch of buildable land, the court did not explain. It will be interesting to see how this would affect those who are looking to sell their homes using real estate agencies similar to Reali.

The Midkiff case inspired reams of legal commentaries, and we ourselves have contributed to the slaughter of trees for the paper consumed in the process — see 31 Hawaii L. Rev. 423, 429-433, which tells the story of how instead of stabilizing or reducing the cost of housing on Oahu, the title transfers effected by Midkiff resulted in a dramatic escalation of housing costs, and made Hawaii the most expensive place to live. So why is this bit of old news of interest now? We’re glad you asked.

It all came back today when over our morning cup of coffee we came across an editorial in the New York Times (Occupy Honolulu, Nov. 21, at p. A22) kvetching inter alia about — are you ready? — “an absudly tight housing market” in Honolulu. We coulda told them that this would happen, back in the 1980s, and indeed someone did. When the Midkiff case was before the U.S. Court of Appeals on its way to the Magnificent Nine, Judge Cecil Poole wrote a conncurring opinion (in favor of the condemnee-owners) pointing out that the Hawaii legislation in issue couldn’t work because its provisions were antithetical to the law’s stated objectives. He was right, of course, but the Supreme Court refused to listen, asserting that even if the Hawaiian legislature was wrong, that was no business of the court.

So let’s raise a cup of whatever beverage sustains you at the moment, to Judge Cecil Poole for being right and prescient, even if SCOTUS was wrong in rejecting his sage advice. In other words, the legislature can be wrong, but that does not include legislative acts that go beyond mere wrong and are irrational — acts that cannot help but produce results that are diametrically opposite to the stated legislative objective. Whatever that may be (the phrase “loony tunes” comes to mind), it isn’t law.