The year: 1978. April 17 to be exact. The US Supreme Court is considering arguments by Penn Central Railroad relating to their contention that New York City landmark preservation laws have inversely condemned one of the country’s most iconic pieces of property, to wit:
Grand Central Station.
As practitioners in property rights know all to well, Penn Central lost their bid to force the City to allow the development of a skyscraper above the building. In the process, the Highest Court fashioned a three part ad-hoc balancing ‘test’ that has been the standard for regulatory takings since that time:
The Character of the Governmental Action
The Economic Impact to the property of that Action
The Reasonable Investment Backed Expectations interfered with by the action. (“we must regard the New York City law as permitting Penn Central not only to profit from the Terminal but also to obtain a “reasonable return” on its investment.” )
In the years since the decision, more than one attorney has had to walk a client through a similar analysis with the caveat that it is an ad-hoc test and there is no black and white test for “yes, a taking” or “nope, you’re just being regulated.”
In Florida, payment of the property owners’ attorney’s fees are part of the full compensation mandated by the statutes, case law, and our state constitution. All condemnations and condemning authorities in Florida state courts know this and expect this.
Enter the Sabal Trail Pipeline Company, formed in 2013 to build a 3′ diameter natural gas pipeline through Alabama, Georgia, and Florida. Sabal Trail elected to file their condemnation actions in Federal Court filing over 250 lawsuits in the Middle and Northern Districts of Florida. It is no secret that this decision was, in large part, to preserve Sabal Trail’s ability to argue that they would not have to pay the property owners’ attorney’s fees or costs as would be required in all cases filed in Florida state courts.
Judge Corrigan of the Middle District asked that the various owners’ attorneys (roughly 10 different law firms representing hundreds of owners) work together to file one unified brief on the issue. Around the same time, Sabal Trail moved for summary judgment in the Northern District asking Judge Walker, the judge assigned all Sabal Trail cases there, to rule Federal law trumps this substantive requirement of Florida law.
Judge Walker, in the Northern District, ruled a week prior to a set hearing that Sabal Trail’s position was untenable and Federal case law made clear Florida substantive law applied to these cases, including the requirement that the condemning authority pay fees and costs. Judge Walker also made clear the cases in his jurisdiction would be decided before a jury, not, as Sabal requested, before a three member ‘commission.’
Judge Walker carefully examined the interplay between Federal law and its requirement that State substantive law govern in a condemnation proceeding absent an express congressional intent to the contrary. Looking to the case of Georgia Power v. Sanders, 617 F.2d 1112 (5th Cir 1980) as binding precedent in the 11th Circuit (the case was decided before the 11th Circuit was created from part of the old 5th Circuit), the Court found it unquestionable that state substantive law applied to the cases at issue, despite Sabal Trail “mak[ing] a boatload of arguments to the contrary, [ ] none of [which] hold water.” This necessarily makes attorney’s fees and costs part of the compensation owed in these cases.
Meanwhile, in the Middle District of Florida, Judge Corrigan held a hearing on Friday, June 9 regarding most of the remaining unresolved parcels in the Middle District.
Today, June 15, 2017, Judge Corrigan issued his ruling and held the same: that attorney’s fees and expert costs are owed by pipeline companies like Sabal Trail when condemning in the state of Florida.
If you have a minute, click here to hop on over to Orlando Weekly to see their in-depth article on the Sabal Trail pipeline and the issues and conflicts that face Alabama, Georgia and Florida property owners and environmentalists as this 3 foot diameter high pressure pipeline makes its way through these states and under and across their farms and homesteads. We appreciate the author reaching out to us to get the perspective of landowners and their counsel, as so much of the Sabal Trail coverage has been focused on environmental issues and concerns while the folks most impacted by the pipeline, anyone who has it actually on their property, are often left out of the story.
Anytime fellow Romanian expatriates make eminent domain news, it’s going to get some coverage here, especially a case as tragic and interesting as Alimanestianu v. U.S. (12/29/2016).
Mr. Alimanestianu was a Romanian-American who invented and operated New York (and the world’s) first automated parking garage in the 1960s, gaining him some fame and fortune in the City. On September 19, 1989 he was murdered by Libyan terrorists , along with all other 171 people aboard, when a bomb was detonated on UTA Flight 772 causing it to crash in the deserts of West Africa.
On August 8, 2008, his family, was awarded nearly $1,300,000,000 (that is billion, with a “b”) judgment by the District Court in Washington D.C. against the Libyan Government and 6 high ranking Libyans, the state sponsors of this act of terrorism. Additional parties joined that suit for a total judgment of $6,903,683,445.
Libya appealed on August 14. Not coincidentally, that same date the United States entered into a “Claims Settlement Agreement” with Libya where Libya agreed to pay $1.5 billion to a fund set up by the U.S. to compensate victims of numerous state sponsored terrorist acts, including UTA 772, Lockerbie, the Berlin disco bombing as well as Libyans killed in US airstrikes. About $681 million was to go to U.S. victims of these attacks (about 200 Americans were killed in these three terrorist acts, of which 187 were Americans on the Lockerbie flight). Congress unanimously passed the Libyan Claims Resolution Act codifying this agreement and restoring sovereign immunity for Libya. In October, with the Libyan appeal of the Alimanestianu Suit pending, G.W. Bush issued an executive order providing any suit within the U.S. against Libya “… shall be terminated.” The U.S. moved to intervene in the Alimanestianu case, asked the court to vacate the judgment and dismiss that suit in early 2009. Their Motion was granted.
The State Department was charged with administering the settlement proceeds. They determined that a $10-million payment per death to the estates (including Mihai Alimanestianu’s estate) was fair compensation.
There were some additional categories of potential compensation, which the Alimanestianu Plaintiffs applied for, arguing that their suit was the entire catalyst of the Libya settlement. The administrators of the settlement fund were unpersuaded and denied the claims in 2013. The Plaintiffs filed suit with the Court of Federal Claims.
So you have a $1.3 billion judgment and government action turns that into something worth 0.75% as much. Sound like a taking? Apparently not.
The Court of Claims first had to analyze whether the judgment was ‘property’ as protected by the 5th Amendment, and whether this should be analyzed under per-se ‘physical taking’ doctrine (any impact is a taking) or ‘regulatory taking’ doctrine (nuanced balancing tests). The Court relied on a similar case by Iranian victims (Abrahim-Yuri v. U.S.) in determining whether to apply the per-se test. Reading between the lines, the CFC inferred the use of the regulatory takings tests, since the Abrahim-Yuri court used the Penn Central regulatory takings balancing test.
The Court of Claims then went on to decide there was no ‘reasonable expectation’ of recovering an amount beyond the $10 million. The Court pointed out that at the time of the terrorist act, Libya had sovereign immunity which was only lifted after the fact by Congress.
Prong 2: Character of the Governmental Action
Frighteningly, in the Court’s analysis of the “Character of the Governmental Action” prong of the analysis, the Court found
The very real potential that the Government might have had to compromise individual nationals’ claims against Libya diminishes any reasonable expectation that Plaintiffs would receive full compensation for their claims.
then quoting Abrahim-Yuri:
Certain sticks in the bundle of rights that are property are subject to constraint by the government, as part of the bargain through which the citizen otherwise has benefit of government enforcement of property rights. As the trial court correctly observed, those who engage in international commerce must be aware that international relations sometimes become strained, and that governments engage in a variety of activities designed to maintain a degree of international amity.
Am I reading this right? Did the Court agree it’s OK for the government to sell its citizens out in favor of international relations?
Prong 3 – Economic Impact
Predictably, the Court calls it ‘speculative’ whether the Plaintiffs could have collected on their judgment without U.S. Government intervention. Thus, they held there was no economic impact to the Plaintiffs.
In his explanation and analysis of why capitalism thrives in some countries but fails in others, Peruvian economist Hernando De Soto in his 2000 book The Mystery of Capital points some of the blame (among other things) on the bureaucratic quagmire created in many developing nations’ land use regulatory schemes. DeSoto examines and gives real world examples of how this over regulation acts as a serious barrier to allowing property owners to fully, quickly and effectively use or maximize their property assets, how it creates antiquated land uses within these areas, how it is a magnet for corruption and inequitable treatment (‘your application can go to the top of the stack if . . .’) and the devastating effect that it can have on the local and national economies, the growth of small business, and safe and affordable housing.
Local policies acting as barriers to housing supply include land use restrictions that make developable land much more costly than it is inherently, zoning restrictions, off-street parking requirements, arbitrary or antiquated preservation regulations, residential conversion restrictions, and unnecessarily slow permitting processes. The accumulation of these barriers has reduced the ability of many housing markets to respond to growing demand.
Since the landmark decision of City of Euclid v. Ambler Realty held that local government could regulate land use and zoning, some local governments have been checked in the perpetual march towards over-regulation only by limited cases of judicial intervention, primarily when ordinances collide with constitutional protections like freedom of speech or race, origin, sex etc. based zoning. In some places in the country, everything from paint colors to permissible plant species in landscaping to number of pets per household are regulated. Some jurisdictions have vague ordinances or ordinances that directly contradict other ordinances leaving a confusing set of rules for a landowner to sort through and exposing landowners to disparate treatment depending on which staff member with whom they meet. On top of this, land use and zoning restrictions sometimes contradict market forces creating ‘dead zones’ where permissible uses do not correlate with demanded uses. Most practitioners in land use, real estate, development or local government have run across absurd ordinances set in place solely to appease a certain constituency but with no real legitimate tie back to the police powers of health, safety and welfare of the community.
Moreover, there is seldom uniformity across jurisdictions. Here in Florida, two houses next to each other, one within the incorporated city and one outside the city (and therefore within the county’s jurisdiction) can have completely different zoning and land use requirements and setbacks even if they have generally the same use. Take a look here at Municode to see just how many different sets of jurisdictional rules there are just in Florida and how much they differ across the invisible jurisdictional lines.
In fact, as the white paper points out, even the process is creating real problems for housing growth:
Most development today goes through a discretionary review process prior to approval, such as public hearings or local legislative actions. These processes predispose development decisions to become centers of controversy, and can add significant costs to the overall development budget due to the delay and uncertainty they engender. The tradeoffs that developers make to account for those additional costs can result in lost affordability, quality, or quantity of units developed. “As-of-right” or “by-right” development allows projects to be approved administratively when proposals meet local zoning requirements.31 Such streamlining allows for greater certainty and more efficient development and, depending on a locality’s regulatory approach, supports lessening of barriers from density limits and other zoning requirements. It can also be targeted to achieve public goals by making “by-right” approval contingent on increased affordable housing, transit-oriented development, or energy efficiency. A 2014 report by the Urban Land Institute concludes that “municipalities can facilitate more efficient development time frames and reduce costs by enabling more by-right development. This can be accomplished by relaxing restrictions related to density, building height, unit size, and parking minimums, thereby freeing developers from the need to seek waivers, variances, or rezoning.”
The focus by both our local leaders and the White House on governmental impediments to affordable housing, redevelopment and growth is a breath of fresh air and hopefully the beginning of a national dialogue on when local zoning and land use restrictions are warranted, and when they are overreaching to the detriment of the community. We are excited to see what steps local governments, and especially our local governments in Central Florida , will take in seriously examining the land development schemes, ordinances and land use restrictions each has on the books and how we can work together for more uniformity across jurisdictions.
Thursdays are throwback Thursdays here on the blog and our day to repost some of our favorite past posts. Enjoy.
“That the power to tax involves the power to destroy … [is] not to be denied” – Supreme Court Justice John Marshall.
Florida’s Constitution is one of only a few that recognizes a landowner should not be put in a worse position after a condemnation than before. Full compensation, as the Constitution requires, includes attorneys fees as calculated under Chapter 73 of the Florida Statutes. This calculus is based on the ‘betterment’ achieved for a client, namely the difference between a first offer and the ultimate settlement or jury award.
But what happens when the condemning authority doesn’t play fair, forcing the property owner’s attorney to spend an exorbitant amount of time combating excessive litigation tactics?
Every case starts with the scales tilted in favor of the condemning authority.
Until this month, that was the risk owners’ attorneys took in accepting any case. However, after years of appeals, one particularly noteworthy case involving Orlando’s own Central Florida Expressway Authority has finally wound its way to the Florida Supreme Court for their review and opinion.
Our team’s newest member, Summer DeGel picks it up from there:
On November 5, 2015, the Supreme Court of Florida decided what will likely be considered a landmark eminent domain case in Florida. In the case, Doerr v. Central Florida Expressway Authority the Court fundamentally changed the playing field between owners and condemning authorities.
The Central Florida Expressway Authority began a condemnation proceeding to take 9.81 acres of land belonging to the Joseph B. Doerr Trust. The jury in that case found that the owner was entitled to $5.74 million for the land taken and damages. After the trial, the Landowner moved for attorneys’ fees under the applicable Florida laws.
Although an award of attorneys’ fees to the landowner is standard in every eminent domain action in Florida, this case was different. Per the Supreme Court, the Central Florida Expressway Authority’s attorneys had engaged in tactics that the courts deemed excessive litigation. The Court also found that the landowner’s attorney would not be compensated for responding to these tactics under the current statutory scheme, known as the benefits achieved formula, found in Section 73.092(1) of the Florida Statutes. Thus, on appeal, the Supreme Court set out to answer the question of whether the benefits achieved formula was unconstitutional when used to calculate attorneys’ fees for the hours incurred in defending against excessive litigation in an eminent domain proceeding.
In the opinion, the Supreme Court reaffirmed that a landowner is entitled to full compensation under the Florida Constitution, which includes an award of attorneys’ fees. In addition, the Supreme Court reiterated the “importance of fair play in eminent domain proceedings because of the inherent disadvantage to the property owner.” The Supreme Court noted that limiting the attorneys’ fees to the benefits achieved formula in this case would deny the landowner his right to full compensation under the Florida Constitution.
Therefore, the Supreme Court concluded that when a private property owner must defend against excessive litigation by the condemning authority, that property owner will be compensated for that defense.
The Supreme Court declined the opportunity to list what would or would not qualify as excessive litigation techniques on the part of the condemning authority, but did state that litigation that differs from what the legal community would expect in a normal or usual condemnation case meets this test.
Many East Orlando residents are familiar with the expansion of State Road 50 from four to six lanes. What many not yet be aware of is the additional construction on the way.
The Central Florida Expressway Authority (“CFX”) has been researching and planning to expand State Road 408 eastward past the Econlockhatchee River in an area adjacent to Colonial in an effort to meet the growing population of East Orange County and the Space Coast.
At a public meeting on March 8, 2016, CFX unveiled three alternatives to building the extension, with many of the alternatives requiring raised portions of the highway. We attended and heard many residents and business owners question why on earth the government would spend all this money widening SR 50 just to turn around and rip some of it back up for the 408 extension. It appears the FDOT was listening. After months of negotiations, FDOT and CFX have tentatively agreed that FDOT will take control of the 408 extension in the current State Road 50 corridor.
This project will impact (again) owners with frontage on SR 50, some severely. If you think you may be impacted by this extension, would like us to investigate whether or to what extent the extension will impact your property, or would like additional images to better determine whether the roadway plans impact your property directly, please use the “contact us” form to the right or on the contact us portion of this site.
Article X, Section 6 of the Florida Constitution states:
(a) No private property shall be taken except for a public purpose and with full compensation therefor paid to each owner or secured by deposit in the registry of the court and available to the owner.
(b) Provision may be made by law for the taking of easements, by like proceedings, for the drainage of the land of one person over or through the land of another.
(c) Private property taken by eminent domain pursuant to a petition to initiate condemnation proceedings filed on or after January 2, 2007, may not be conveyed to a natural person or private entity except as provided by general law passed by a three-fifths vote of the membership of each house of the Legislature.
The power of eminent domain is an inherent attribute of the sovereign. Article X, Section 6 protects the property rights of the Floridian – and it is this provision which marks the starting point for any discussion of eminent domain in Florida.