As reported by the Washington Post here, a bill that would have increased the annual “tax credit” budget for production companies filming in Maryland (like Netflix’s House of Cards and HBO’s Veep) from $15M to $18.5M failed to pass last week in Maryland’s General Assembly. House of Cards Cast(2) The fate of House of Cards filming in Maryland remains uncertain, but there was no talk of eminent domain this time around (maybe the Legislators figured out that if they took “House of Cards” they would actually have to pay just compensation for what they took.  That might just break the budget). Our prior blog on topic is here.

What skullduggery is this?  Netflix/House of Cards’ star, Frank Underwood (Kevin Spacey) was recently spotted in House_of_Cards_Season_1_PosterAnnapolis lobbying legislators towards a new law that would make available additional tens of millions of dollars in tax breaks from the State of Maryland (reported by Bloomberg here).  A legislative hearing is scheduled for April 2, 2013 before Maryland law-makers.  On the agenda is a bill that would increase available tax breaks from the current $7.5 million to $18.5 million.  If the legislation passes, word on the street is that House of Cards would be the primary beneficiary.  In light of this, House of Cards style leveraging is out in full force, to wit, the show’s producers’ statement: “In the event sufficient incentives do not become available, we will have to break down our stage, sets and offices and set up in another state.”

In response to that ultimatum, State delegate William Frick introduced a law that would permit the State to take the intellectual or real property of a film production company by eminent domain if the company ceased production in-state after receiving more than $10 million in State tax breaks.  House of Cards can be taken/condemned under the proposed law.  Whether the law would pass constitutional muster is another story. (“nor shall private property be taken for public use without just compensation.” U.S. Const. Amendment V).

Who’s going to blink first?

This episode reminds us of the efforts of the City of Oakland more than 30 years ago, which tried to use eminent domain to stop the Oakland Raiders from leaving the bay area to relocate to Los Angeles.  Their efforts were unsuccessful, but the Raiders eventually returned to Oakland and, more importantly to those of us in the eminent domain world, the experience led a group of talented eminent domain attorneys at that time to forge a union which later led to the formation of Owners Counsel of America.

We’ll keep you posted on whether the House of Cards can be taken.

For more background on the issue, see:

Washington Post article.

Fox news article.

A Kentucky court recently stopped a utility company from utilizing eminent domain to build an underground gas pipeline to transport natural gas liquids through the Commonwealth.  The case, Kentuckians United to Restrain Eminent Domain, Inc. v. Bluegrass Pipeline Company, LLC (Civil Action No. 13-CI-1492),  involved the challenge by plaintiff, a non-profit agency formed for the purpose of protecting Kentucky residents from“the threat of and attempts to exercise eminent domain by entities not in public service to Kentuckians,” to the efforts of the Bluegrass Pipeline Company to use eminent domain powers to construct a new 24-inch gas pipeline, which would transport the liquids from shale reserves in Pennsylvania, West Virginia and Ohio to the Gulf Coast.

Plaintiff’s declaratory judgment action sought a ruling on whether Bluegrass in fact had the power of eminent domain under Kentucky law.  Under Chapter 278 of the Kentucky Revised Statutes (“KRS”), a Public Service Commission is dedicated to regulating utilities, and only regulated entities that adhere to the requirements of the statute are “in public service” and authorized to use eminent domain. The statute provides: “Any corporation or partnership organized for the purpose of … operating oil or gas well or pipeline for transporting or delivering oil or gas, including oil and gas products, in public service, may… condemn the lands and material or the use and occupation of the lands.”

The plaintiff argued that Bluegrass was not in public service, was not regulated by the Public Service Commission and did not serve Kentucky customers or producers because it was an interstate operation.  It further contended that the natural gas liquids that would be transported through the pipeline were neither “oil or gas” nor “oil or gas products” as required by KRS 278.502.

Bluegrass opposed the motion, suggesting that there were genuine issues of material facts in play, and that its products were “oil, gas, or oil and gas products” under KRS 278.502.  It also contended that it was acting “in public service” because, as a common carrier, it would “furnish services to the public, potentially including manufacturers and producers in Kentucky.”

The Circuit Court concluded that Bluegrass lacked the power of eminent domain under Kentucky Law. The court noted that Chapter 278 of the Kentucky laws was enacted to protect consumers “against costly and unnecessary capital construction.”  It found that Bluegrass sought to benefit from the rights conferred on regulated utilities without subjecting itself to the responsibilities, duties, and regulatory oversight imposed by the KRS.

While this decision is not surprising, as it merely affirms that the power of eminent domain should only be wielded sparingly and that the statutory authority empowering condemning agencies to use condemnation powers should be scrutinized carefully, it has gotten the attention of many around the country, as utility companies have been undertaking efforts to increase and upgrade service and those efforts have involved the use of eminent domain in increasing frequency.  Bluegrass is said to be likely to appeal, so this one may be one to watch.

A copy of the Circuit Court’s opinion is available here.

See discussion on the case from our Owners Counsel of America colleagues Robert Thomas, in his Inverse Condemnation Blog, and Michael Rikon, in his Bulldozers at Your Doorstep Blog.

Here is a sampling of some of the media reports on the Bluegrass case:

 

 

 

On March 10, 2014, the United States Supreme Court issued its almost unanimous (8-1) decision in Brandt Revocable Trust v United States.  The question presented is detailed in our prior blog here, but simply stated, the government argued that it owned the ground underneath an abandoned railroad right-of-way that permitted it to continue the Medicine Bow Rail-Trail across private property owned by Brandt without payment of just compensation.

The core question was whether the 1875 Railroad Right of Way Act granted easements or limited fee interests to railroad companies to spur America’s growth west-ward.  The answer, disappointing to rails to trails advocates, was that the original grant was only an easement.  Therefore when the railroad right-of-way was abandoned, the underlying land returned to the fee owner, here Brandt.  Thus, in order to reopen that portion of the Medicine Bow Rail-Trail, the government would have to utilize its eminent domain power to acquire the private property along with the constitutional duty to pay just compensation.

It will be interesting to see whether the government actually condemns private property to create new trails and/or legitimize existing trails, or whether property owners will claim that creation of a trail was a temporary taking requiring payment of compensation.

More information about this case is available on the Inverse Condemnation Blog by our Owners’ Counsel of America colleague, Robert Thomas, who submitted an amicus curiae brief in the Brandt matter.

A federal bill H.R. 1944 introduced back in May of 2013, has been passed by the House of Representatives. Reported here.  All the details and text of the bill are set forth in our June 2013 blog.  Simply stated, the bill purportedly will punish States that abuse the eminent domain power by limiting federal dollars for a period of two years following an alleged abuse, e.g. for private redevelopment/economic development.  The legislation is purportedly designed to unhinge the now almost decade old Kelo v. City of New London case.

I can already imagine enforcement/compliance issues, but the bill has a few more hurdles to cross before it becomes law.

Hudson County Assignment Judge Peter Bariso recently rejected a property owner’s argument that the date of value should be a date earlier than the commencement of condemnation action on August 23, 2012.  City of Hoboken v. Ponte Equities, Inc. (Docket No. HUD-L-4095-12).  The property owner argued that the date of value should have been June 11, 2008, the date the City of Hoboken allegedly took action that substantially affected the owners’ use and enjoyment of the property consistent with N.J.S.A. 20:3-30, which requires the court to set the date of value as the “earliest” of four possible dates.  On that date, the City introduced an ordinance(Dr-366), and adopted two resolutions.  That ordinance recommended rezoning certain properties to open and recreational space, including Ponte’s property.  Dr-366 was never adopted.

Resolution 08-206 was a “Resolution Supporting Acquisition of Block 11 for Open Space,” and recommended that the zoning board of adjustment post-pone all pending variance applications for properties within Block 11 or identified in Ordinance Dr-366.

Resolution 08-207 authorized retention of an appraiser to value several properties to be used in support of a future City application to obtain Open Space Trust Funds to acquire the properties appraised, including Ponte’s.  The City’s 2009 appraisal valued the Ponte property at $10,070,000 for residential development.

On March 16, 2011, the City adopted the 2010 Master-Plan Re-Examination Report, which recommended park use for the subject.  The City re-appraised the subject in 2011 at $2,350,000 for continued use as a public parking lot.   The City offered Ponte this amount to acquire the property.  Upon rejection a condemnation complaint was filed on August 23, 2012.

Ultimately a bench trial was held in January of 2014 to determine the appropriate date of value.  The owner presented two expert witnesses; a professional planner and an appraiser.  The court was critical of the planner because he did not provide any factual support for his opinion that a variance application to build residential on the subject property as of the date of complaint (2012) was any less likely than as of the earlier date (2008).  The court also criticized the appraiser for failing to bring any examples of variance denials after the June 2008 municipal actions, and also for failing to offer an opinion on whether the municipal action affected the property value other than to generally agree with the City’s appraisal valuation for residential ($10M) and parking ($2.3M).

Without recounting the entirety of the opinion, the Court found the lack of factual foundation for the experts’ opinions fatal.   Since the planners and the appraisers “testimony lacked any factual basis, they constitute net opinions for failing to meet the threshold requirements of N.J.R.E. 702 and N.J.R.E. 703. Consequently, Hoboken’s motion in limine to exclude Ponte’s experts’ testimony is granted. As a result, Ponte has failed to offer sufficient evidence to find June 11, 2008 as the appropriate valuation date pursuant to N.J.S.A. 20:3-30(c).” [Slip op. at 27].

The apparent lack of factual support for the property owner’s contentions might ultimately assist in determining just compensation because there is an argument that a buyer and seller would take into consideration the probability of a variance to build residential as of the date of the commencement of the action.

A copy of the court’s opinion in this matter is available here.

While not our prototypical condemnation case, a trial judge in Ocean County aptly reversed a local zoning board in Jerman v. Tp. of Manchester (Docket No. OCN-L-1844-13).  If affirmed the zoning board’s denial of a bulk variance that would have zoned the property into inutility; that is, it would have rendered the property valueless and would thereby give rise to a claim for an unconstitutional taking of private property without payment of just compensation.

Jerman applied to the zoning board for a variance to construct a single-family residence on an undersized lot.  Before applying, Jerman unsuccessfully attempted to purchase portions of neighboring lots to cure the bulk deficiency and offered to sell the lot to the neighbors.  Hence, all other criteria having been satisfied, the bulk variance should have been granted.  Had the judge on appeal not reversed the decision, the property owner could have filed suit against the municipality for a taking, i.e. an inverse condemnation action.

The municipality should be thanking the judge for saving it the time and expense of defending the inverse, which it was bound to lose.  And in that event, the municipality would have been on the hook for all of the property owners’ expenses, including attorneys’ fees.

Follow

Get every new post delivered to your Inbox.

Join 519 other followers