A quick one from the South Dakota Supreme Court. But it is well worth your time.
In City of Sioux Falls v. Johnson Properties, LLC, No. 30945 (Nov. 19, 2025), the court upheld a trial court’s award of attorney’s fees to a property owner in an eminent domain action. The final amount of compensation exceeded the 20% threshold under South Dakota law that triggers fee shifting, and the Supreme Court concluded that even though the amount of fees awarded exceeding the “lodestar” calculation, the owner was entitled to an enhancement.
Here’s the court’s description of the critical action and numbers in the trial court:
[¶6.] Shortly before trial, the City increased its offer of compensation to
$250,000. Johnson Properties rejected the offer and the case proceeded to a three-day jury trial on the issue of just compensation. At trial, Johnson Properties’
appraiser testified that, in his opinion, the difference between the value of the
property before the taking ($585,000) and after the taking ($180,000) was $405,000. The City’s appraiser testified that the difference between the value of the property before the taking ($241,495) and after the taking ($189,784) was $51,711. The jury returned a verdict awarding Johnson Properties just compensation in the amount of $382,600, which exceeded the City’s final offer to Johnson Properties by more than 20%.
Slip op. at 2.
Under South Dakota law, if the final adjudicated compensation is more than 20% greater than the condemnor’s final offer, the owner is entitled to a “reasonable” attorney fee and the costs of no more than two experts:
If the amount of compensation awarded to the defendant by final judgment in proceedings pursuant to this chapter is twenty percent greater than the plaintiff’s final offer which shall be filed with the court having jurisdiction over the action at the time trial is commenced, and if that total award exceeds seven hundred dollars, the court shall, in addition to such taxable costs as are allowed by law, allow reasonable attorney fees and compensation for not more than two expert witnesses, all as determined by the court.
The trial court awarded the owner fees and costs, and the SD DOT appealed, asserting the court abused its discretion by exceeding the amount calculated under the lodestar method (reasonable fee multiplied by a reasonable number of hours).
The Supreme Court affirmed. It held that the lodestar method is but the “legitimate starting point” to determine a reasonable attorney’s fee. The next step, the court held, is to examine a number of factors (referred to in South Dakota as the Kelly factors), which could enhance or reduce the lodestar amount.
It shouldn’t be too difficult to guess what those factors include: things like novelty and difficulty of the issues, the skill required, the results obtained, the experience of the lawyer, and whether the lawyer was retained hourly or on a contingency fee. And the like. See the full list at page 6 of the slip opinion. These are but “factors” and none of them is dispositive.
Here, Johnson’s lawyer was retained by a 1/3 contingency fee arrangement. The trial court considered that fact, along with the notion that “eminent domain law is a highly specialized area of law that requires skill and experience, even in a valuation case, to select appropriate valuation experts; understand the factors for market valuation of real estate; and recognize the evidence necessary to support the highest market value.” Slip op. at 10-11.
The Supreme Court held that this conclusion (and the trial court’s evaluation of the other Kelly factors set out at page 11 of the slip opinion) was not an abuse of discretion. Slip op. at 12.
Worth reading, if only to understand and confirm that indeed, eminent domain (even for what may seem like a “routine” valuation case) is a matter where the lawyer’s experience and training, ability to delve into the issues, and where the owner and the lawyer stake that experience by employing a contingency fee, is within the trial court’s discretion and should not be open to reevaluation on appeal.
City of Sioux Falls v. Johnson Props, LLC, No. 30947 (S.D. Nov. 19, 2025)