It's been more than two years since California voters passed Proposition 99 in an attempt to prevent local governments from abusing their eminent domain powers, but some municipalities are still wielding the law in controversial ways, as evidenced by a recent superior court judgment.
The Southern California city of Laguna Woods has been embroiled in eminent domain proceedings for the past five years. The controversy began when the city offered Raintree Realty $3.65 million in exchange for a parking lot and a city hall building that the company had leased to the city for several years.
Raintree argued that the sum wasn't a fair market price, which under California law must be offered before the property can be appropriated. The city countered with an additional $1 million, which Raintree also considered to be below the fair market price. Raintree won the case last August, and the city was ordered to pay $6.43 million for the property.
Then last week, in a move that Raintree's law firm called "rare for a condemnation case," the Orange County Superior Court told the city to pay the company an additional $851,000 in attorney and expert fees for not acting in good faith:
The city's amended offer, which was $1 million higher than its initial offer, does not reflect 'good faith, care and accuracy' required of a reasonable condemnor ($1 million is a 'round number' which has not been shown to bear any relation to the facts as known to the city).
Significantly, from the inception of the litigation through closing arguments at trial, the city took the position that defendants were not entitled to severance damages. The court finds that the city's position was simply unreasonable in light of the evidence presented at trial, evidence of which the city was aware all along.
The Raintree case highlights the limitations of Proposition 99, which was touted during the June 2008 election as legislation that would prevent eminent domain abuses. It passed easily with 62 percent of the vote.
Since then, the California Eminent Domain Law Group, a Glendale firm that defends landowners and businesses, has tracked numerous cases: Imperial Beach buying a drug store for an expanded shopping center, the city of Fontana condemning property near Interstate 10 for an interchange project, and Fresno planning to purchase more than two dozen homes for a middle school.
Many have said that Prop. 99 is far too narrow to have its intended effect. The measure prohibits California municipalities from appropriating private land and giving it to a private party like a developer, which some analysts say represent only a small fraction of eminent domain abuses.
The following argument, authored by the California Farm Bureau among other organizations and individuals, appeared on the ballot in opposition to Prop. 99:
The State of California's nonpartisan Legislative Analyst's Office, says that Proposition 99 'is not likely to significantly alter current government land acquisition practices.' In everyday language: 'Proposition 99 does nothing.' ...
In 99 they took out every protection for farmers, small businesses, second homes, and rented homes. Read Prop. 99 carefully in this Voter Guide. Small businesses? Family Farmers? Renters? Places of Worship? All gone. No protection whatsoever.
It remains to be seen as to whether other California municipalities are undervaluing the properties they wish to appropriate, but a 2008 study in the journal Real Estate Issues [PDF] suggests that those who arbitrate eminent domain proceedings may be biased toward protecting the interests of the government.
The City of Laguna Woods is appealing the judgment. The city manager did not respond to requests for comment.
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