JUDGMENT

This matter was tried to a jury on February 27, 28, 29 and March 1, 2012, by the following counsel and parties:

Tommy Anzelmo (#2533)
Lou Anne Gwartney (#23869)
McCranie, Sistrunk, Anzelmo, Hardy, McDaniel & Welch, LLC
3445 N. Causeway Boulevard, Suite 800
Metairie, Louisiana 70002
Attorneys for Plaintiff and Defendant-in-Reconvention, Orleans Levee District
Randall A. Smith (#2117)
Tiffany Hawkins Davis (#20855)
Smith & Fawer, LLC
201 St. Charles Avenue, Suite 3702
New Orleans, Louisiana 70170
Attorneys for Defendant and Plaintiff-in-Reconvention, East New Orleans Michoud Industrial Park, LLC

Pursuant to La.C.C.P. 1916(A), and considering the verdict rendered by the jury in favor of East New Orleans Michoud Industrial Park, LLC (“ENOMIP”) on March 1, 2012 (see attached Exhibit “1″), and the deposit of the Orleans Levee District (“OLD”) pursuant to the Order of Expropriation of December 22, 2008 (see attached Exhibit “2″); and considering the applicable law, particularly La. R.S. 38:389 (providing for legal interest from the date of taking);

IT IS ORDERED, ADJUDGED AND DECREED that Judgment be rendered in favor of East New Orleans Michoud Industrial Park, LLC, and against Orleans Levee District, awarding additional just compensation for the 10.12 acres taken on December 22, 2008 in the amount of FOUR HUNDRED FOURTEEN THOUSAND NINE HUNDRED SEVENTY-SEVEN and No/100 Dollars ($414,977.00), plus additional just compensation for severance damages to the remainder of ENOMIP’s property in the amount of SEVEN HUNDRED TWENTY-THREE THOUSAND ONE HUNDRED THIRTY-SEVEN and Noll 00 Dollars ($723,137.00), for a total of additional just compensation in the amount of ONE MILLION ONE HUNDRED THIRTY-EIGHT THOUSAND ONE HUNDRED FOURTEEN and No/100 Dollars ($1,138,114.00), plus interest on said $1,138,114.00 at the applicable Louisiana legal rates from December 22, 2008, until paid; plus any attorney’s fees, expert fees, and costs found due and proper, pursuant to La. R.S. 38:387(E), La. R.S. 13:5112 and La. C.C.P. art. 1920, to be set after ruling on the post-trial motion filed by ENOMIP today.

JUDGMENT READ, RENDERED AND SIGNED at New Orleans, Louisiana, this 13th day of March, 2012.

RULE 93 CERTIFICATE
The undersigned certifies that the proposed Judgment attached hereto was reviewed by and is acceptable to counsel of record for all parties. New Orleans, Louisiana, this 13th day of March, 2012.

SPECIAL JURY INTERROGATORIES
1. What amount of money do you find is just compensation for the 10.12 acres that the Orleans Levee District expropriated from ENOMIF on December 22, 2008?

$590,000

2. Subtract the $175,023.00 deposited into the Registry of the Court by the Orleans Levee District from your answer to question number 1, and put the difference, if any, on the line below.

$414,977

3. What amount of money, if any, do you award as just compensation for the severance damages to the remainder of ENOMIP’s property as a result of the taking?

$723,137

Please date and sign this form and return to the courtroom.

New Orleans, Louisiana, this 1 day of March, 2012.

After Hurricanes Katrina and Rita, many Louisiana landowners have less property that can be taken, but a recent decision by the United States Supreme Court, Kelo v. City of New London,1 may assist Louisiana governmental agencies in taking property to promote economic development and rebuilding in the aftermath of these devastating hurricanes.

The Fifth Amendment to the Constitution, made applicable to the states by the 14th Amendment, provides that “private property [shall not] be taken for public use, without just compensation.” Article 1, § 4 of the Louisiana Constitution of 1974 provides similarly that “[p]roperty shall not be taken or damaged by the state or its political subdivisions except for public purposes and with just compensation paid to the owner or into court for his benefit.” The terms “public use” and “public purposes” are defined in neither the United States nor Louisiana Constitutions; although these terms have always been interpreted rather broadly, the recent decision by the United States Supreme Court in Kelo v. City of New London2 appears to have broadened them still further.

The dispute in Kelo arose when the City of New London expropriated property for a comprehensive waterfront development following Pfizer’s announcement that it was building a facility near New London’s Fort Trumbull neighborhood. The development plan was prepared by New London’s City Council’s consultant, New London Development Corp. (NLDC), and encompassed 90 acres, including 115 privately owned properties and 32 acres already utilized by the government.3 The development plan included a waterfront conference hotel, restaurants, shopping, marinas, a riverwalk, a museum, office and retail space and parking.4

Most of the private property necessary to implement the plan was acquired by voluntary sale. However, owners of 15 of the 115 necessary parcels refused to sell their property, and the New London City Council authorized the exercise of eminent domain over these 15 parcels. 5 The properties were neither blighted nor in bad condition.6 The home of one of the petitioners had been in her family for more than 100 years.7

After the property owners’ efforts to invalidate the takings failed on the state level, the United States Supreme Court granted certiorari to consider whether economic development was a valid public purpose supporting the exercise of eminent domain. In an opinion authored by Justice Stevens and joined by Justices Kennedy, Souter, Ginsburg and Breyer, the court acknowledged that purely private takings, as well as takings under the mere pretext of a public purpose, are forbidden.8 In this case, however, the court found that there was “no evidence of an illegitimate purpose” and that the taking was in furtherance of a carefully considered development plan.9 The court declined to adopt a test requiring a detailed examination of a particular use, finding that a literal “use by the public” test would be too “impractical” and “difficult to administer.”10 Instead, the court adhered to a broad definition of “public purpose” and a “longstanding policy of deference to legislative judgments in this field,”11 citing its prior decisions in Berman v. Parker12 and Hawaii Housing Authority v. Midkiff.13

In Berman, the court upheld the exercise of eminent domain to redevelop a blighted area of Washington, D.C., even though the expropriation included property not itself blighted and a portion of the property was to be transferred to private parties. In Hawaii Housing, the court found that the elimination of an oligarchy — by expropriating and transferring property from private individuals to other private parties — was a legitimate public purpose, contrary to the 9th Circuit’s conclusion that the taking was “a naked attempt on the part of the state of Hawaii to take the property of A and transfer it to B solely for B’s private use and benefit.”14

In accordance with its history of deference to governmental findings of public purpose, the court deferred to the city’s finding that the Fort Trumbull area was sufficiently distressed to warrant a redevelopment program. Considering the development plan as a whole, the court found that it “unquestionably” served a public purpose.15 Moreover, the court found no basis for distinguishing economic development from other public purposes it had recognized previously, such as agriculture, mining, alleviating blight, breaking up a land oligarchy, or eliminating barriers to entry in the free market.16 The court responded to the concerns expressed by the dissenters, reassuring that nothing in its opinion eliminated the requirement of payment of just compensation. Moreover, it emphasized that states are free to restrict the takings power further if they see fit:

We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power. Indeed, many States already impose “public use” requirements that are stricter than the federal baseline. Some of these requirements have been established as a matter of state constitutional law, while others are expressed in state eminent domain statutes that carefully limit the grounds upon which takings may be exercised.17

Justice Kennedy concurred, but advocated adoption of a rational basis test for examining public purpose.18 He distinguished this case from one that might require a more stringent standard on grounds that: (1) the taking occurred in the context of a comprehensive development plan; (2) the economic benefits of the project were ample; (3) the identity of most private beneficiaries of the plan were unknown at the time of its formulation; and (4) the city complied with elaborate procedural safeguards and requirements. 19

Justice O’Connor authored a lengthy dissent, which was joined by Justices Rehnquist, Scalia and Thomas. The dissent asserted that, as a consequence of the court’s opinion:

[A]ll private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded — i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public — in the process . . . . The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory. 20

The dissenters predicted that “the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms.”21 Justice Thomas, dissenting separately, expressed similar concerns and suggested that the court reconsider prior decisions to the extent they have strayed from the Constitution’s original meaning of “public use.”22

Although the dissent in Kelo was aggressive, its import was lessened in fall 2005 by the death of Chief Justice Rehnquist in September 2005 and the impending retirement of Justice O’Connor. Although neither the newly confirmed Justice John Roberts nor any other Supreme Court nominee has publicly announced a position regarding Kelo, it is unlikely that the court will retreat from its position regarding the government’s expropriation powers in the near future.

Louisiana courts have not had an opportunity to consider the impact of Kelo. The public purpose for expropriations is not often challenged for three reasons. First, Louisiana courts rarely sustain challenges to the public purpose for an expropriation. 23 Second, the Louisiana Legislature has limited the time within which a landowner may challenge the public purpose of a taking to 10 days from the date of formal notice of the taking.24 Finally, the term “public purpose” has always been interpreted broadly in Louisiana. Indeed, economic development was recognized by Louisiana appellate courts as a public purpose years prior to the Kelo decision. In Town of Vidalia v. Unopened Succession of Ruffin,25 the 3rd Circuit held that:

any allocation to a use resulting in advantages to the public at large will suffice to constitute a public purpose. Moreover, a use of the property by a private individual or corporation, when such use is merely incidental to the public use of the property by the state or its political subdivisions, does not destroy an otherwise valid public purpose. 26

Subsequently, in City of Shreveport v. Chanse Gas Corp.,27 the 2nd Circuit confirmed that economic development is a public purpose under Louisiana law. In City of Shreveport, the city expropriated property for the purpose of building a convention center and hotel. The trial court rejected the landowners’ challenge to the public purpose for the taking. On appeal, the landowners argued that the economic development anticipated to be generated by the convention center and hotel was an insufficient public purpose, that the project would be a financial drain on the city, and that the city would have to donate the property to a private developer in order to have the project built. Relying on Town of Vidalia and the cases later cited in Kelo (Berman and Hawaii Housing), the court held that economic development was a sufficient public purpose and adopted a preponderance of the evidence test that the government must meet to demonstrate public need.28 The court held that, once the government meets that burden, a landowner must show abuse of discretion by the expropriating authority in selecting the project site, which requires showing that the government acted “in bad faith, without adequate determining principles, or without reason.”29 The court found that the government met its burden by showing a rational relationship to a public purpose.30

Following the United States Supreme Court’s suggestion that the states are free to limit expropriation powers, the legislatures in 28 states have discussed or proposed legislation to limit the taking of private property for economic development purposes and/or for transfer to other private parties.31 As of Dec. 16, 2005, Alabama, Delaware, Ohio and Texas had passed legislation designed to curb Kelo’s impact.32 Also, in the 109th Congress, First Session, the House of Representatives passed H.R. 4128, which would withhold federal economic development funds from states that expropriate property for economic development purposes. 33

Louisiana has passed no laws specifically designed to curb the impact of Kelo. On the contrary, in Louisiana, Hurricanes Katrina and Rita have provided a strong incentive to the Legislature to utilize Kelo to redevelop New Orleans and the surrounding areas. Nevertheless, the Legislature issued a Concurrent Resolution memorializing Congress to take innovative steps to provide housing for hurricane victims, but specifically stating that “any comprehensive development plan must clearly indicate that no powers of eminent domain shall be granted.” Without mentioning expropriation or Kelo, the Legislature has introduced other legislation that may support future expropriations: HB 2 in the 2005 First Extraordinary Session (returned to the calendar in November 2005) proposes a statute recognizing that the rebuilding of utilities destroyed by the hurricane is “a valid public purpose.”34

As Louisiana recovers from Hurricanes Rita and Katrina, the Legislature may be inclined to utilize economic development to support expropriation of private property to rebuild damaged areas. Various governmental agencies are already drafting and unveiling broad redevelopment plans encompassing economic redevelopment and rebuilding of necessary infrastructure. In view of the urgency of the situation and need for housing and public infrastructure, it is likely that the number of expropriation proceedings will increase in the next several years. In view of Kelo and its broad definition of public purpose, it may be difficult to challenge the public purpose for these takings. However, these landowners will still be entitled to just compensation and their day in court, and they will need assistance in wading through the expropriation laws to ensure that appropriate compensation is paid.

FOOTNOTES

1. Kelo v. City of New London, ____ U.S. ____, 125 S.Ct. 2655, 162 L. Ed. 2d 439 (2005).
2. Id.
3. Id. at 2659.
4. Id.
5. Id. at 2660. After initiating the condemnation proceeding, NLDC announced its intention to lease some parcels to private parties and disclosed its negotiations for a 99-year lease for $1 per year. Id. at 2660, n. 4.
6. Id.
7. Id. at 2671 (O’Connor, J., dissenting).
8. Id. at 2661, citing Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 104 S.Ct. 2321, 2331, 81 L. Ed. 2d 186 (1984), and Missouri Pac. R. Co. v. Nebraska, 164 U.S. 403, 17 S.Ct. 130, 41 L. Ed. 489 (1896).
9. Id.
10. Id. at 2662.
11. Id. at 2663.
12. 348 U.S. 26, 75 S.Ct. 98, 99 L. Ed. 27 (1954).
13. 467 U.S. 229, 104 S.Ct. 2321, 2331, 81 L. Ed. 2d 186 (1984).
14. Id. at 235. The government owned 49 percent of the land, and another 47 percent was owned by only 72 private persons.
15. Kelo, 125 S.Ct. at 2665.
16. Id.
17. Id. at 2668.
18. Id. at 2669 (Kennedy, J., concurring).
19. Id. at 2670 (Kennedy, J., concurring).
20. Id. at 2671, 2676 (O’Connor, J., dissenting).
21. Id. at 2677 (O’Connor, J., dissenting).
22. Id. at 2678 (Thomas, J., dissenting).
23. See, e.g., DOTD v. Estate of Griffin, 95- 1464 (La. App. 1 Cir. 2/23/96), 669 So.2d 566.
24. See, e.g., La. R.S. 19:147; 19:276; 19:296; 19:316; 38:357 (West 2005) (giving landowners 10 days from date of service of notice of expropriation to challenge public purpose of “quick taking” expropriations by various governmental authorities).
25. 95-580 (La. App. 3 Cir. 10/4/95), 663 So.2d 315.
26. Id. at 319.
27. 34,959 (La. App. 2 Cir. 8/22/01), 794 So.2d 962, writ denied, 01-2657 (La. 1/4/02), 805 So.2d 209.
28. Id. at 972.
29. Id. (citations omitted).
30. Id.
31. Tresa Baldas, “States Ride Post-’Kelo’ Wave of Legislation,” Nat’l L.J. (8/2/05), p. 1. The 28 states included Louisiana, which ultimately did not pass legislation expressly limiting Kelo.
32. National Conference of State Legislatures, Post Kelo v. New London State Eminent Domain Legislation (12/16/05) (updated regularly at http://www.ncsl.org/programs/natres/ post-keloleg.htm).
33. The bill was received in the Senate on Nov. 4, 2005 and referred to the Committee on the Judiciary.
34. HCR No. 42, First Extraordinary Session of 2005.

ABOUT THE AUTHOR

Randall A. Smith, a 1982 graduate of Yale Law School, clerked for Judge Charles Schwartz and was an associate and partner at Stone Pigman before founding the law firm of Smith & Fawer. He has tried dozens of expropriation cases in state and federal courts throughout Louisiana. (Ste. 3702, 201 St. Charles Ave., New Orleans, LA 70170)

Many landowners simply accept the amount of money offered by an expropriating authority because they do not know their rights. If your property is taken for a public purpose and without your consent, you may challenge both the asserted public purpose for the taking and the amount of money or just compensation offered or deposited by the expropriating authority. If you successfully obtain at trial more money than the expropriating authority deposited as its estimate of just compensation for the property taken, you may also be awarded your attorneys’ fees, expert fees and court costs.

Expropriation laws are extremely technical and complicated, and the Louisiana Legislature amends them regularly. Both Louisiana and federal expropriation laws contain specific time periods within which you must object to the taking or the amount of compensation or else risk forfeiting your legal rights. If you are notified that your property may or will be taken for a public purpose, you should get proper legal advice as soon as possible.

Smith & Fawer, LLC has handled numerous expropriation cases and represented landowners in numerous Louisiana state and federal courts. If you have any questions regarding your property rights or right to payment for property taken for public projects, please contact us:

Smith & Fawer, LLC
201 St. Charles Avenue
Suite 3702
New Orleans, LA 70170
P: (504) 525-2200
F: (504) 525-2205
E: www.SmithFawer.com/randall-smith.html

The Declaration of the Right to Property in the 1974 Louisiana Constitution provides:

Every person has the right to acquire, own, control, use, enjoy, protect, and dispose of private property. This right is subject to reasonable statutory restrictions and the reasonable exercise of the police power.

Property shall not be taken or damaged by the state or its political subdivision except for public purposes and with just compensation paid to the owner or into court for his benefit …. In every expropriation, a party has the right to trial by jury to determine compensation, and the owner shall be compensated to the full extent of his loss.

La. Const. Article I, § 4.

Eminent domain is the taking of private property for public purpose – roads, levees, schools, parks, public buildings

What is a public purpose? – Fifth Amendment requires taking be for public purpose

September 28, 2004 – Supreme Court agreed to hear a case regarding when the government may take property. Kelo v. New London - Connecticut residents whose property was taken to build a riverfront hotel, health club and offices to be owned by private persons. Connecticut Supreme Court voted 4-3 that the additional tax revenue to be generated constituted a sufficient public purpose .

Can’t challenge taking except based upon challenge to public purpose, which rarely works – can take property against landowners’ wishes. Public purpose is interpreted broadly – doesn’t even have to be open to public

Who may take – government agencies (DOTD, levee district, corps on federal level), utility companies (Entergy), railroads, how far does it go – issue on quasi-public companies and private companies

How compensation is calculated?

Have to pay “just compensation” or to “full extent of loss.” Full extent of loss means the amount of money which will place the owners in as good a position as they would have been in if their property had not been taken. No compensation for those subjective items like inconvenience, mental anguish, worry, anxiety

Just compensation

Fair market value – is the market value of the land determined as of the time of the taking without considering any change in value caused by the proposed improvement for which the property is expropriated. Usually based upon testimony of expert appraisers. Three approaches: (1) comparable sales; (2) income; (3) cost. Usually comparable sales approach is utilized.

Severance damages – the decrease in market value of the remainder of the landowner’s property that has not been taken, that is caused by the taking

Delay damages – “compensable damages for property taken out of commerce for an unreasonable length of time pending expropriation or completion of a project.” State, Dept. Of Transp. and Development v. Stone, 96-672 (La.App. 5 Cir. 3/25/97), 692 So.2d 1241.

Five factors for determining delay damages:

1. Was there a delay in the project?
2. Was there a reasonable expectation that the project would receive a permit?
3. What was the period of the delay?
4. Who is legally responsible for the delay?
5. What is a fair and reasonable calculation of the loss suffered as a result of the delay?

State, Dept. of Transp. and Development v. McMillion Dozer Service, Inc.,
93-590 (La.App. 5 Cir. 5/31/94), 639 So.2d 766.

Quick taking (or early occupancy) versus ordinary taking – in quick taking, title passes immediately

Quick taking litigation steps are similar across the country -

If a government acquisition, such as a taking by the city, parish, levee board, etc., governmental body passes resolution that taking is necessary

appraisal – landowner must permit appraisers to enter property

Land value – generally done by comparable sales analysis – property with same highest and best use – size and use and zoning – adjustments to same. Improvements – sometimes valued with property, some separate – may give landowner right to remove improvements within a certain amount of time. Offsetting value of project may not be considered

Temporary rental – usage fee for storage or other use in aid of construction of project

Severance damages – if part of property is taken, damage to remainder not taken – based on loss of access, location of public work next to property, loss of visibility, changes in highest and best use. Enhancements in value as a result of the project may be considered offer to landowner – negotiations – offer must include the appraisal figures DOTD has offer letter and appraisal and just compensation forms it uses on line at http://www.dotd.louisiana.gov/highways/project_devel/realestate/realestate.asp?page=acquisition rejection of offer leads to lawsuit filed by governmental agency – state court. With lawsuit, agency deposits what it believes to be just compensation for the property – Title passes upon deposit – government will give a brief time to move improvements or relocate if necessary

Landowner must answer suit in order to obtain additional compensation and must request additional damages and fees and costs – time to answer may vary but usually one year from date of notice of substantial completion of project

May request other damages resulting from construction of project

Litigation ensues – either party is entitled to a jury trial

Litigation matters and strategies -

Appraisers – valuation methods – comparable sales, income, construction

Other experts – traffic, architect, relocation, engineers, experts re: lost income

If value deposited by the government is less than the amount awarded by the jury or court, landowner also gets attorneys’ fees, and costs (including expert fees) and interest on all outstanding amounts from the date of the deposit of the funds into the court registry.

Inverse condemnation

May be compensated for governmental taking of land performed without a formal proceeding. La. Const. Art. I, Section 4

What is a taking?

3 part test: 1) the plaintiff’s claim involves a property right; 2) the plaintiff’s property right was “taken or damaged in a constitutional sense;” and 3) the taking or damage was for a “public purpose.”

State, Through Dept. of Transp. and Development v. Chambers Inv. Co. Inc., 595 So.2d 598 (La.1992)

Government liability is limited “to those instances where there is a physical taking or damage to property or a special damage peculiar to the particular property and not general damage sustained by other property similarly located.”

Courts look at “whether that damage is not suffered by those in the general neighborhood–that is, whether the damage is peculiar to the individual who complains.” Reymond v. State, Through the Department of Highways, 255 La. 425, 231 So.2d 375, 383 (1970)

Damages such as the noise of traffic, a less pleasant view, and a circuitous or more inconvenient route to petitioner’s property, even when these factors resulted in an actual diminution of market value of the property, were not in themselves special damages and were not recoverable. Reymond v. State, Through the Department of Highways, 255 La. 425, 231 So.2d 375, 383 (1970)

Damages “which cause discomfort, disturbance, inconvenience, and even sometimes financial loss as an ordinary and general consequence of public improvements are not compensable, and are considered damnum absque injuria [loss without injury in the legal sense].” Reymond v. State, Through the Department of Highways, 255 La. 425, 231 So.2d 375, 383 (1970)

A public body has the right, under its police power, to divert traffic without subjecting itself to liability. Ramelli v. City of New Orleans, 233 La. 291, 96 So.2d 572, 574 (1957).

Landowner’s right of ownership is also limited by Civil Code articles 667 and 668, which require that he tolerate some inconvenience from the lawful use of a neighbor’s land. When the neighboring land is owned by the State, those articles are no less applicable. State, through the Department of Transportation and Development v. Chambers Investment Co., Inc., 595 So.2d 598, 604 (La.1992)