Eminent Domain: Trial Court’s Denial Of Litigation Expenses To Winning Condemnees Reversed

Third District Finds Condemnor’s Final Settlement Offer Was Not In Good Faith, Not Condoning Unyielding Settlement Stances by Condemnors.

     We do not get that many eminent domain cases to report on. However, in our October 26, 2009 post, we did examine People ex rel. Dept. of Transportation v. Acosta, 178 Cal.App.4th 762 (2009), where the Third District sustained a large litigation expense award in favor of condemnee on the basis that condemnor’s final settlement offer was unreasonable in nature. The Third District obviously is attuned to this litigation expense issue, because it published a recent decision where it reversed a trial court’s refusal to award Code of Civil Procedure section 1250.410 litigation expenses to winning condemnees.

     Tracy Joint Unified School District v. Pombo, Case No. C061239 (3d Dist. Oct. 29, 2010) (certified for publication) involved a classic battle of real estate appraisers. Condemnor’s expert valued the taking at about $3 million, with no severance damages, whereas condemnees’ expert fixed total compensation at around $12.4 million ($3.1 million of which represented severance damages). The jury split the difference, awarding condemnees $7,085,150 plus $900,000 in severance damages. The jury verdict virtually matched condemnees’ pretrial settlement demand of $7,995,000, but was miserably far off from condemnor’s final settlement offer of $3,181,500 (just a notch above its expert’s valuation). The trial court denied condemnees’ request to recover section 1250.410 litigation expenses of $574,000, prompting an appeal. Condemnees obtained a reversal and remand from the Third District.

     The focal issue was the reasonableness of condemnor’s offer, because condemnee’s offer was midway between the two experts’ appraisals and within 1% of the eventual jury verdict. Three factors are considered in assessing the reasonableness of a condemnor’s offer: (1) the amount of the difference between the offer and the compensation awarded; (2) the percentage of the difference between the offer and the award; and (3) the good faith, care and accuracy in how the amount of the offer and amount of demand, respectively, are determined. (Acosta, supra, 178 Cal.App.4th at 773.)

     The first two factors were not good for condemnor. The offer was a striking $4.8 million off of the verdict, translating to only 39.8% of the compensation awarded from a differential calculation standpoint.

     That brought the appellate court to the third factor, which the trial court found persuasive in denying a litigation expense award. The lower court reasoned that both experts had their problems and condemnor reasonably made an offer based on its expert’s valuation. The Third District disagreed with this assessment, finding this case fairly straightforward, not fraught with complex issues, and one where condemnor’s expert made some conspicuous mistakes in his valuation analysis. The real rub for the appellate court was condemnor’s unwillingness to compromise and back off of its lowball perspective, with condemnee showing a different willingness to make a “midway point” demand of a more reasonable nature. The Court of Appeal did send a message to condemnors: arrogant, unyielding, take-it-or-leave it offers will not be looked at kindly when determining whether litigation expenses should be awarded under section 1250.410.

Comments

[Stacy D.]

Many states with attorney fee recovery statutes related to additional damage claims in eminent domain cases have specific threshold amounts that must be beat in order for a property owner to recover their fees and costs. In Washington and Idaho, the final offer has to be 10% greater than the condemnor’s offer. In CA however, there is no threshold amount; instead the statute states that within 30 days of judgment and upon motion by the property owner, the court may award recovery for attorney’s fees if the court finds that the government’s final offer was unreasonable. (CA CIV PRO § 1250.410(b)). Unlike other states, California’s statute is not black and white and therefore largely left open for interpretation by the courts.

Another factor complicating attorney fee recovery in California is the third point addressed when determining if fees are to be paid: “(3) the good faith, care and accuracy in how the amount of the offer and amount of demand, respectively, are determined. (Acosta, supra, 178 Cal.App.4th at 773.)”. In eminent domain cases, there are many ‘gray areas’ in property evaluation. Because of this, an appraiser is going to have a certain degree of latitude with regards to how they look at a particular issue; it’s not that one way is right or one way is wrong. In many assignments there are two possible different ways to evaluate a property and these differences may be grounded in an interpretation of law. With this being said, a condemnor’s and condemnee’s appraisal can, in some cases, both be argued consistently with the third point listed above. Here is a good article on how appraisers contribute to eminent domain cases: http://www.condemnation-law.com/blog/articles/1813/eminent-domain-cases-selecting-an-appraiser/