Published on:

by

By Matthew Hinks

In a question of first impression, the California Court of Appeal has held in, People ex rel. Department of Transportation v. Dry Canyon Enters., LLC, that “a business owner is entitled to a jury trial on the amount of goodwill lost by a taking only if he or she first establishes, as a threshold matter, that the business had goodwill to lose.” The court’s analysis seems correct; nevertheless, the result is a troubling one for property owners.

Background Facts

Dry Canyon is a wine maker. As part of its business plan, Dry Canyon planned to develop a flagship wine to be made from grapes grown on property it owns in Paso Robles. In 2009, Caltrans initiated eminent domain proceedings to acquire a strip of Dry Canyon’s Paso Robles property on which was located 21 percent of the vines Dry Canyon was growing for its new flagship wine. By the time the proceedings were initiated, Dry Canyon had blended and sold a few vintages but had yet to turn a profit on the new flagship brand. The parties agreed to a valuation of $203,500 for the real property, which was paid to Dry Canyon, leaving one remaining issue: the amount of lost goodwill.

Dry Canyon’s expert testified that Dry Canyon lost $240,000 in goodwill as a result of the taking, which he calculated using two different methodologies. First, the expert utilized a “cost-to-create” methodology in which he added all expenses incurred in cultivating the new wine and divided by four (being that Caltrans took one-fourth of the vines). The second methodology was defined as a “premium pricing” approach in which the expert calculated that the new vintage would fetch a premium of $10.62 more per bottle than comparable wines, then multiplied that figure by the total number of bottles that would not be sold as a result of the taking. Both methodologies yielded a $240,000 lost goodwill figure.

Unfortunately for Dry Canyon, the trial court disagreed that Dry Canyon had any goodwill at all and granted a motion for judgment. The court of appeal affirmed.
Continue reading

Published on:

by

By Matthew Hinks
The billboard wars rage on. In the latest battle, the court in West Washington Properties, LLC v. California Department of Transportation narrowly interpreted a provision of the Outdoor Advertising Act (“OAA”), which provides a rebuttable presumption of legality to advertising displays erected for more than five years without Caltrans enforcement, rejected equitable defenses and dismissed at the pleading stage plaintiff’s inverse condemnation claims. The opinion should be a wake up call for companies engaged in or considering transactions involving the transfer of sign rights.
Continue reading

Published on:

by

By Matthew Hinks
A new opinion from the Ninth Circuit out of the State of Washington — Laurel Park Community, LLC v. City of Tumwater — offers an interesting application of the Supreme Court’s regulatory taking jurisprudence.
Continue reading

Published on:

by

By Matthew Hinks
The Ninth Circuit has issued a new “chapter in ‘the story of billboards.'” Billboard companies and advertisers should take note of the court’s opinion. Although the opinion refused to extend full First Amendment protection to billboards and advertising related to underlying expressive works, the court — recognizing its central role in defining the contours of Constitutional liberties — rejected the trial court’s reasoning that a municipality should be afforded deference to define the divide between commercial and noncommercial speech.
Continue reading

Published on:

by

By Matthew Hinks
In an opinion containing echoes of the United States Supreme Court’s controversial and much maligned decision in Kelo v. City of New London, 545 U.S. 469 (2005), the California Court of Appeal has limited the reach of California Code of Civil Procedure § 1240.350(a). That section provides that a condemning agency that takes property resulting in the property being “cut off from . . . access to a public road”, may also take property belonging to another party to provide alternative access to the original property. The Court of Appeal in Council of San Benito County Governments v. Hollister Inn, Inc., limited Section 1240.350(a) to situations where the taking leaves the original property completely landlocked.
Continue reading

Published on:

by

By Matthew Hinks
The Takings Clause of the Fifth Amendment to the United States Constitution provides that “private property [shall not] be taken for public use, without just compensation.” The Constitution does not prohibit the taking of private property by the government — so long as the taking is done for a “public purpose”, — but instead places a condition on the exercise of that power: namely, the payment of “just compensation”. As the Supreme Court has recognized, “[t]he paradigmatic taking requiring just compensation is a direct government appropriation or physical invasion of private property.” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537 (2005). In other words, situations where the government obtains title to or physically occupies private property present relatively uncomplicated issues as to whether a taking has occurred. More nuanced issues arise, however, where governmental actions cause less than permanent occupations. This principle was on display in a pair of recent opinions from the United States Court of Federal Claims, a court established by Congress to adjudicate monetary claims against the federal government.
Continue reading

Published on:

by

News Release

LOS ANGELES — On August 23, 2012, a Los Angeles Superior Court judge ruled that the residential project proposed in the Benedict Canyon area by Saudi prince Abdul-Aziz ibn Abdul-Aziz al Saud, the Deputy Foreign Minister of Saudi Arabia, had been illegally subjected by the City of Los Angeles to rules that are not applicable to the project. [Tower Lane Properties, Inc. v. City of Los Angeles, Los Angeles Superior Court case no. BS137339.]

The rule at issue is City Building Code sec. 91.7006.8.2 which requires projects that are subject to subdivision to apply for a tentative tract map prior to grading on sites greater than 60,000 square feet. The city and certain neighbors argued that this provision is applicable to the Saudi prince’s project even though no subdivision was proposed or contemplated. Hence, they argued the project requires a discretionary review and public hearings.

The court found that the code section is not applicable to the project and ordered the city not to apply this provision to the project. The proposed project consists of three single family homes on three separate legal lots on Tower Lane.

Martha and Bruce Karsh, who own a large estate property next door, elected to intervene in the lawsuit. The Karsh’s legal arguments regarding the applicability of this code section were also rejected by the court. In papers filed with the court, Tower Lane Properties submitted evidence of city records showing that Martha and Bruce Karsh had pulled numerous grading and building permits for their own property between 2003 to 2010 in order to construct a recreational building, a guest house, a conservatory with basement, and other improvements, and not once did the City subject them to the very same ordinance they argued Tower Lane Properties must adhere to, even though their property is also greater than 60,000 square feet. Tower Lane Properties produced evidence that the city had never before applied this ordinance to an applicant proposing a single family home on a single legal lot.

Martha and Bruce Karsh have been leading opponents of the project who have waged a campaign-style attack against the project and Prince Abdul-Aziz. The City of Los Angeles Ethics Commission website shows that Martha and Bruce Karsh had also hired a team of lobbyists to influence the city processing of this project. Bruce Karsh is one of the co-founders of Oaktree Capital, an international investment and management firm and, according to the Los Angeles Times, the largest creditor of Tribune Co. which owns the Los Angeles Times.

“Our client designed a project to comply with all the zoning and building code regulations, but in response to outside pressures the city devised new interpretations intended to force our client into a lengthy and unnecessary analysis of non-existent issues. This is a residential project which is completely consistent with neighboring properties and will be constructed in compliance with building and grading regulations. Yesterday’s detailed and well- reasoned court ruling vindicates our client’s position that the City tried to apply its rules in a discriminatory manner,” said Benjamin M. Reznik, land use attorney for the Saudi prince. “It is most unfortunate that our client has been vilified by certain members of the community for doing nothing more than insisting that the laws of our city be applied to him fairly in the same manner as they are applied to other homeowners.”

Click here to review the court’s tentative decision, which became final after the hearing of August 23, 2012.

Contact
Benjamin M. Reznik Jeffer Mangels Butler & Mitchell LLP 1900 Avenue of the Stars, Los Angeles CA 90067 BMR@jmbm.com 310.201.3572

Published on:

by

by Matthew Hinks
Litigating property rights cases in California requires navigating a confusing mélange of sometimes unfamiliar and often times conflicting groups of laws, rules and regulatory agencies.

On October 17, 2012, at the Marriott Los Angeles Downtown Hotel, I will be co-chairing an advanced one-day seminar entitled Litigating Property Rights and leading a distinguished panel of speakers who will help us understand this procedural and substantive thicket.
Continue reading

Published on:

by

By Matthew Hinks
The California Coastal Commission may not unilaterally impose a right of public access over private property. So says the California Court of Appeal in Bay Island Club v. California Coastal Commission.

Bay Island Club (the “Club”) is comprised of 24 shareholders and owners of single-family residences on Bay Island, a private island located in Newport Bay in the City of Newport Beach. It has held title to the island since the early 1900s. Balboa Peninsula lies adjacent to the island and was conveyed to the East Newport Town Company (“East Newport”) by the State of California in 1904. In 1927, East Newport granted to the Club an easement “to construct, maintain, repair and replace a bridge for pedestrian and/or automobile travel”. Subsequently, East Newport deeded fee title, subject to the Club’s easement, to certain real property, including the channel under the easement to the City.

The bridge built over the easement that existed at the time of the decision was constructed in 1958. In 2006, the Club applied to the California Coastal Commission for a permit to replace it with a 10-foot wide and 130-foot long bridge. Sometime prior to filing the application, the Club had erected a gate on the mainland side of the bridge preventing use of the bridge by the public. There was conflicting evidence in the record over when the gate was built, including evidence from members of the public that the gate was constructed after 1976, which, if true, meant that the gate was constructed in violation of the Coastal Act (passed in 1976), because it was built without a Coastal permit.
Continue reading

Published on:

by

By Matthew Hinks
Consider these facts: A married couple owns waterfront property in a picturesque harbor. They devoutly wish to build a pier or a dock on their property; however, the city refuses to even accept an application for a permit. This is because the city had previously passed and repeatedly extended an illegal moratorium preventing construction of new docks and piers in the area in which the couple’s property is located. The initial moratorium was passed on an emergency basis without a prior public hearing and without findings documenting the emergency or justifying expedited treatment. A state trial court declared that the rolling moratorium violated the state constitution. After the state appellate court granted a stay of the trial court’s decision, the city announced that it would continue to refuse permit applications for over-water structures during the pendency of the appeal and continued extending the moratorium until the city adopted a new comprehensive shoreline use plan that permanently banned new over-water construction and forever prevented the couple from building their dock.

Despite the earlier stay, the state court of appeal unanimously affirmed the trial court’s ruling. The state Supreme Court also affirmed holding that, not only is “[t]here is no authority in [applicable state law], express or inherent, [that] justifies the [c]ity’s attempt to impose unilateral moratoria”, state law affirmatively prohibits city-adopted moratorium in these circumstances. The state Supreme Court determined that the city’s actions amounted to a “clear violation of [the] property owners’ rights” and “resulted in a physical degradation of these private owners’ property”. Further, the city’s resort to the illegal moratoria was especially suspect being that, “the [c]ity had years to make any required plan changes but did not do so.”
Continue reading