World-Class Chutzpa at the Los Angeles Times

According to the Los Angeles Times (Steve Lopez, Will the State Cross that Line in the Sand? Dec. 7, 2016, at p. B1), there is a fellow up north, a cyber-billionaire named Vinod Khosla who, as befits one of his wealth, bought himself an 89-acre piece of waterfront land south of Half Moon Bay, for which he paid $32 million. So far, so good. But when he took possession and fenced off his land, local NIMBY neighbors protested, arguing that they had a right to use it. What their legal contention is, is a puzzle because California law (Civil Code Sec. 654) is quite clear that ownership of property includes the right to exclude others, and no one disputes that Mr. Khosla does indeed own the subject property.

So who you gonna call now if you’re a NIMBY who wants to use Khosla’s  property without his permission and without paying for it? The State Lands Commission, that’s who.

Though it has never done so before, the State Lands Commission leaped into action in an effort to acquire Khosla’s land for the use and pleasure of the aforementioned NIMBYs. To do that the Commission asked to buy the subject property, offering Khosla — are you ready? — $360,000, which he sensibly declined, being as he paid some ten times that amount for that land. So now, the state folks are threatening to take the subject property by eminent domain, although no one has tried to explain how they intend to pay just compensation of $360,000 for a parcel that has a market value of over $3 million, as demonstrated by its recent sale, in light of California law that defines constitutionally required “just compensation” payable in eminent domain cases as fair market value, defined as the highest price the subject property would bring in a voluntary market transaction (Cal. Code. Civ. Proc. Secs. 1263.310 and 1263.320).

There matters stand, thus providing us with the prospect of a coming item for our “Lowball Watch” department, to join such stellar bits of eminent domain litigation as the State’s past attempt to acquire the Los Angeles Union Station for 25 mil or so, only to be confronted with a court award of over $84 million which it could not pay, so it abandoned the taking. Then there was the famous Southern California Edison case, where the State deposited $234,485 into court as its idea of “good faith” just compensation, only to be hit in court with an award of $49,500,000, which was summarily affirmed by the California Supreme Court and which the State had to pay with interest. If you want a longer list of such capers, see the collection of cases in 40 Loyola L.A. L.Rev. at 1146-1148.

But our favorite bit of a condemnor’s overreaching, and most appropriate on these facts, involved none other than the Los Angeles Times itself which sang a very different tune when the city took the parcel on which the Times headquarters sat but which it intended to use as a site of a new city hall. See City of Los Angeles v. Klinker, 219 Cal. 198 (1933) where the Supreme Court of California ordered the city to pay compensation for the Times’ entire shebang, including all its its fixtures like the huge printing presses which had been permanently installed and thereby became a part of the Times building. The city thought they should be moved to another location.

But after that was taken into consideration in the valuation process, the city could not afford to pay the resulting judgment, so it first tried to abandon the taking, but it came a cropper when the courts said “nothing doing” because in the meantime the Times bought another site and another set of printing presses, so if the city had been permitted to abandon the taking, the Times would have wound up with two huge printing plants. So the city was estopped from pursuing that option. See Times-Mirror Co. v. Superior Court, 3 Cal.2d 309 (1935). So, unable to pay the judgment, the city went whining to the state which bailed it out by taking the condemned site off its hands and paying that judgment. Local old timers may still remember that the old state building was built on the taken site, and the city went elsewhere to put up its new City Hall where it still sits. But not that state building; it was so badly damaged in the 1996 earthquake, that it had to be demolished.

So what’s the moral of it all? When the Los Angeles Times was itself the subject of an eminent domain taking of its property, it demanded and got every nickel of a huge verdict that the City of los Angeles literally could not pay. But when it comes to good ol’ Vinod Khosla, the selfsame Times has it (as you will see when you read Mr. Lopez’s indignant prose) that it’s OK to undercompensate him with a fraction (about 10%) of the market value of his land.

How is that for chutzpa?

CORRECTION: A sharp-eyed reader calls our attention to the fact that the NIMBYs in this case do not claim a right to use all of Khosla’s land, but only the public (below mean high tide) part thereof. Which, practically speaking, makes little difference because in order to get to the wet sand they would have to enter upon and traverse the dry, upland portion of the subject property.

FOLLOW-UP: evidently has it right. It reports that the Commission offer is not for the entire property but only for 6.39 acres out of Khosla’s 49-acre parcel. Makes more sense, but the severance damages are still likely to be substantial. Stay tuned.