Fourth District, Division One Reverses $80,971.78 Award Against City of El Centro and Imperial County
We have yet to talk about litigation expenses (including attorney’s fees) awardable under California’s eminent domain statutory scheme. This next case gives us an introduction to wet everyone’s appetite in this area.
Landowners can be awarded litigation expenses in eminent domain cases under Code of Civil Procedure sections 1250.410 and 1235.140. Usually, the critical focus bears down upon the status of the parties’ pretrial settlement offers under section 1250.410. Generally speaking, both the government and landowners must serve pretrial settlement offers (on the amount of compensation) within 20 days of trial, with the court awarding “litigation expenses” (including attorney’s, appraisal, and expert fees) to the landowner if the government’s pretrial offer was unreasonable and the owner’s offer reasonable “in light of the evidence admitted and the compensation awarded in the proceeding ….” Code Civ. Proc. secs. 1250.410(b), (e). Both parties must act reasonably in their attempts to settle. Santa Clara Valley Water Dist. v. Gross, 200 Cal.App.3d 1363, 1372 (1988). In determining if pretrial settlement offers are reasonable, courts focus on these factors: (1) the amount of difference between the offer and the actual compensation awarded by the trier of fact; (2) the percentage of the difference between the offer and the actual award; and (3) the good faith, accuracy, and care in which the respective offer and demand were determined. Los Angeles County Metro. Transp. Auth. v. Continental Develop. Corp., 16 Cal.4th 694, 720 (1997).
These principles—especially the reasonableness of landowners’ pretrial settlement offer—came squarely into play in City of El Centro v. Menvielle, Case No. D050595 (4th Dist., Div. 1 July 24, 2008) (unpublished).
There, El Centro and Imperial County sought to condemn adjacent portions of landowners’ property for a street widening project that was connected with the Imperial Valley Mall development. Eminent domain cases were filed and consolidated together. In 2004, City deposited $25,500 in compensation for taking 4,221 square feet and Imperial County deposited $133,500 for taking 22,200 square feet, a grand total of $159,000 based on their appraisal reports. Landowners hired appraisals that said the City parcel was worth $48,542 and the County parcel worth $255,300, for a total of $303,842. Landowners obtained the pretrial deposits, and the parties hired a third appraiser to opine on valuation. The third appraiser decided the government appraisals were closer, pegging values of $26,500 on the City parcel and $140,500 on the County parcel. In line with the statutory requirement of section 1250.410, owner made a final pretrial offer of $44,455 for the City parcel and $233,825 for the County parcel, for a grand total of $278,280 (inclusive of fees/costs, but excluding interest and credit for the deposit). Government made no final pretrial offer, but relied on the initial deposits as the offer (but only, they said, in an informal telephone call with landowners’ counsel). Government declined landowners’ final offer, with the matter proceeding to trial.
A jury returned a verdict in favor of landowners, but not much beyond the initial deposits offered by the government. Specifically, the jury awarded landowners $26,500 for the City parcel and $140,500 for the County parcel—the exact values pegged by the third appraiser—plus some additional interest of about $3,000. By comparison to the initial deposits, landowners received $1,000 more on the City parcel and $7,000 more on the County deposit.
Landowners then moved for litigation expenses of $80,971.78, which were awarded by the trial court. Government appealed and obtained a reversal as a matter of law.
The Court of Appeal did not buy government’s argument that section 1250.410 was complied with by simply informally telling landowners that the initial deposit was government’s final pretrial offer. Because there were constant negotiations between the parties during the protracted litigation, the appellate panel agreed that the original 2004 deposits could not be construed as pretrial final offers in 2006. This meant that government had a zero pretrial offer.
Just when it looked like landowners were in the catbird’s seat, the appellate court began the next paragraph with potential words of doom—“However, that is not the end of the inquiry ….”
Because the reasonableness of the landowners’ pretrial offer had to be considered, the Court of Appeal went on to examine the three factors set forth in Continental Develop., supra, 16 Cal.4th at 720. It found that all three factors were unfavorable to landowners, because (1) owners sought $111,000 more than the net judgment; (2) there was not much difference between the initial deposits and the compensation actually awarded by the jury; and (3) the independent third appraiser was much more critical of the assumptions and conclusions of landowners’ appraiser, as reflected in his view that the government appraisals were much more accurate. Focusing primarily on the small differential between the initial deposits and actual compensation awards, the Fourth District, Division One panel found that only one conclusion could be reached (even under an abuse of discretion review standard)—landowners’ pretrial demands were too high as a matter of law. So, at the end of the day, everyone went their way and landowners ate up any compensation recovery in bearing the $80,000 in attorney’s fees and costs necessary to challenge the government’s valuations before a jury.