The only issue in Caffe Ribs, Inc. v. Texas, No. 14-0193 (Apr. 1, 2016) was whether the jury could hear evidence proffered by the property owner that the delay in cleaning up the land to make it marketable could have been attributable to the government. The trial court said no, and the court of appeals affirmed.
The Texas Supreme Court disagreed: “We hold that the trial court’s exclusion was an abuse of discretion, and further hold that the exclusion was harmful because it allowed the government to use an eight-year holding period to reduce the property’s value without allowing the jury to consider the role the government played in creating that holding period.” slip op. at 2.
The court’s opinion is a quick read and we recommend you digest the entire thing. But here’s the short version. Caffe purchased the property, which was already contaminated, and began its voluntary remediation efforts in cooperation with the prior owner. The state’s environmental agency wasn’t totally satisfied with these efforts, however, and requested they do more testing, which they did. The state DOT also sought to condemn a part of the property for use as a stormwater detention pond, in connection with its project to expand 10. The state environmental agency continued to request that the owners do more to monitor and test, but the owner was prevented from complying, in part, because the DOT had requested that all monitoring sites be plugged and abandoned.
When time came to value the property, the jury heard from the state’s expert that the property wasn’t marketable for eight years because of the contamination. But the jury wasn’t allowed to hear the owner’s evidence that but for the DOT’s change in use (and the resultant delay of the remediation efforts) the length of time to make the property marketable would have been much shorter.
The Texas Supreme Court first analyzed the project influence rule (any change in property value that results from the government manifesting a definite purpose to take property as part of a project must be excluded from compensation), concluding that it should be up to the jury, properly instructed by the court, to determine the impact of this rule:
In this case, the trial court enforced the project-influence rule with a sweeping evidentiary exclusion. As just discussed, an evidentiary exclusion is not an essential component of the project-influence rule. Indeed, in this case, the evidentiary exclusion was antithetical to the rule’s substantive purpose of ensuring that the compensation award did not reflect the deflationary effects of the government’s project. As the United States Supreme Court has observed, “it would be manifestly unjust to permit a public authority to depreciate property values by a threat of the construction of a government project and then to take advantage of this depression in the price which it must pay for the property when eventually condemned.” United States v. Va. Elec. Power Co., 365 U.S. 624, 636 (1961) (citation and internal quotation marks omitted). Yet, the trial court’s evidentiary exclusion allowed the State to do just that. It allowed the State to use an eight-year holding period to devalue the property, without allowing the jury to account for the role the State’s condemnation project played in that holding period. We therefore conclude that the trial court abused its discretion in applying the project-influence rule. The project-influence rule required the trial court to admit the evidence concerning the State’s role in delaying the property’s remediation for the very reason the State sought, and the trial court ordered, its exclusion: the evidence was “an attempt to collect damages for a decrease in market value caused by the public announcement of the future detention pond project.”
Slip op. at 10. The court concluded this was not harmless error because it was crucial to a key issue. Indeed, the key issue. Slip op. at 13-14 (“it allowed the State to use an eight-year holding period to reduce the property’s value with allowing the jury to consider the role the State played in creating that holding period”).
Caffe Ribs, Inc. v. Texas, No. 14-0193 (Tex. Apr. 1, 2016)