California Associate Justice Goodwin Liu -- often mentioned on short lists of potential future nominees to the U.S. Supreme Court even after the Republican-led Senate stymied his nomination by President Obama to the Ninth Circuit -- just saw his chances for a promotion go up today, if ever so slightly. No, we're not talking about Donald Trump's Indiana primary victory, even though that might play into it. Rather, we're talking about an eminent domain case that was argued earlier this morning in the California Supreme Court.
Yes, you read that right: an eminent domain case might be instrumental in a future SCOTUS appointment.
Live From San Francisco!
We weren't able to be present in the San Francisco courtroom for today's arguments in Property Reserve v. Superior Court. But for the first time, the court beamed arguments live on the web for all the world to see, so we were able to follow along at a distance in real time. Our viewing leads us to predict that whatever the final tally of the seven-member court, Justice Liu will come down on the correct side (that of the property owners). And if he produces an opinion which supports the property owners as we expect, the opposition to him in the Senate, if there's still a GOP majority after the 2016 election, may weaken.
With that out of the way, let's get to the arguments themselves, and what led us to that conclusion.
Straw Men
In what appeared to be a packed courtroom, what we noticed most was that the court was seemingly filled with straw men. We say this because to property lawyers, some of the things being said by the Justices and the advocates just have to make you scratch your head.
Things like (and we're paraphrasing here, since the recording is not yet available so we can check our notes):
- Justice: Is this an easement? Don't easements have to be permanent?
- Government counsel: We know we admitted below that our activities were a taking, but that is a question of law, so we're no longer admitting that.
- Justice: Isn't the availability of an inverse condemnation action enough to satisfy the constitution's requirements for the payment of just compensation?
- Government counsel: The words "or damaged" in the California Constitution's takings clause "are superfluous."
Because of questions and statements like these and the court's apparent confusion about fundamental eminent domain principles in general, it seemed like an inordinate amount of time was spent discussing what the case wasn't about, and dispensing with red herrings, rather than what the case really was about. The players seemed at times to just be trying to get a grasp on basic principles of California eminent domain law, even though present in the courtroom was the guy who literally wrote the book on this topic, and the justices simply could have asked him. The Chief Justice, for example, asked another arguing lawyer whether in the situation where the deposit to secure immediate possession exceeds the amount eventually awarded as just compensation, whether the property owner can simply keep the extra. (No, Your Honor, decidedly not.)
If nothing else, the court at least was engaged. Very engaged. Because when a court allots one hour for argument but ends up taking 50% more time, you know you have the justices' attention. Whether this is a good thing or not in light of the questions the justices asked, only time will tell.
Before we get into it, a disclosure: we filed an amicus brief with the court in support of the property owners' arguments. So we naturally come at this from a somewhat biased standpoint.
Background: A Big Project Requires Big Efforts
But putting that aside, we don't think the issues presented by the case are all that confusing, nor should there be a lack of clarity at this stage of the proceeding. The parties may differ on the outcome but the facts and the issues set for resolution seem pretty straightforward.
The Department of Water Supply as part of its massive Delta water project to take Northern California's water and transport it to Los Angeles demanded entry to multiple privately-owned parcels in order to study the parcels for their suitability for condemnation. The DWR's activities were grouped into two main categories: geological testing (which involved test borings), and environmental activities (which involved things like trapping fauna and the like to see what enviro issues might get raised).
The DWR sought these entries under California's "entry statute," which allows condemnors to enter upon private property in anticipation of an exercise of eminent domain to undertake tests and the like. These statutes are pretty common across the country, and in 1923, the California Supreme Court held that if the entries to private property under the statute are "innocuous and superficial," there's no problem. However, if the entries go beyond that -- in that case, the test borings were invasive and permanent -- then the entry is a taking, and the government must condemn the property. Simple enough, and it dovetails with the U.S. Supreme Court's takings doctrine nicely; that Court has always nixed permanent physical occupations, and has looked at other invasive physical intrusions with a very jaundiced eye.
Stretching The Entry Statutes
The owners in Property Reserve objected, alleging the DRW's proposed geological and environmental testing went way beyond the "innocuous and superficial" trespasses allowed under the entry statutes. How far beyond, you ask? See here for details. Let's just say these weren't minor. The trial court partially agreed, and held that the geological activities were a per se taking. It also scaled back the DWR's proposed environmental activities and held that they were generally not takings, and for the most part allowed them with some modifications to make them less intrusive. The DWR appealed, arguing its entries were the type of minor inconveniences which the statutes allow (and not takings), while the owners cross-appealed, arguing that the environmental activities were, like the geological activities, also takings.
Court of Appeal
The Court of Appeal saw it much more starkly: it concluded that both the geological and the environmental activities were takings. The test borings resulted in permanent physical occupations of the land, and that's a per se Fifth Amendment taking. The environmental activities may not have been permanent, but they also were invasive and were far from innocuous or superficial. They were more like temporary easements, and the DWR therefore must exercise its eminent domain power and follow condemnation procedures before it can do what it proposed to do. The Court of Appeal based its ruling not only on its view of the DWR's activities, but on the DWR's admission that yes, the activities it was proposing constituted takings.
The Court of Appeal also rejected the DWR's argument that the procedures under the entry statute were constitutionally adequate. The court concluded they are not the functional equivalent of -- and do not provide the same protections as -- an eminent domain proceeding. Under the California Constitution, a property owner is entitled to a have a jury determine just compensation and damages prior to condemnation. The entry statutes do not provide for such things:
Private property may be taken or damaged for a public use and only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner. The Legislature may provide for possession by the condemnor following commencement of eminent domain proceedings upon deposit in court and prompt release to the owner of money determined by the court to be the probable amount of just compensation.
Cal. Const. art. I, § 19. It's all right there: "ascertained by a jury ... has first been paid ..." And, any deposit to secure immediate possession after the commencement of an eminent domain action, must be available to the property owner "promptly."
Supreme Court - Unadmitting The Takings
In the Court of Appeal, the DWR admitted these were takings, and the big issue was whether the entry statutes provided the same process as eminent domain. So imagine our surprise when nearly the first words out of the DWR's counsel at oral arguments in the Supreme Court were an attempt to walk back those admissions. These are not takings, he stated. When the justices questioned that statement in light of the DWR's prior admissions, the only answer counsel could provide was that whether there is a taking is a "question of law," and therefore subject to de novo review. In other words, in-court admissions about the law mean nothing. If that seems like a strange argument to you, at least a few of the justices appeared to agree, forcing DWR's lawyer to quickly jump to his second point, that the entry statutes provide the same protections as eminent domain, and indeed are a special type of eminent domain proceeding to take property.
That argument came under questioning about the role of the jury and the up front payment of just compensation. The thrust of the DWR's answers were that it would all work out in the end, and the owner could always demand a jury down the road. And if it thinks that the amount which the DWR put on deposit wasn't enough to cover the just comp and damages, well the owner can always sue in inverse condemnation.
An Inverse Remedy That Solves All?
That point seemed to really catch the attention of the Chief Justice, who latched onto it and wouldn't let go for the rest of the morning. Indeed, she began a series of questions which seemed to both fundamentally misunderstand the basics of eminent domain law, and which appeared to be throwing the DRW a lifeline: There's no damage yet proven, is there? she asked, seeming to hint at the ripeness argument which the Court of Appeal rejected. (There's no damage proven yet because the lower courts stopped the DWR in its tracks, concluding that as per se takings, the question of damage was pretty much not relevant.) The Chief's thrust throughout the rest of the arguments was that it would be okay as long as the owner had an inverse condemnation remedy at some point down the road. And the requirements of the California Constitution for just compensation (and not merely a damage deposit), ascertained by a jury at the time of the taking? A deposit that is immediately available ... procedural niceties, correct? Indeed, wouldn't it make more sense to hold off on that determination until after the DWR finished? Then, we'd know the extent of the damage, if any. Finally, the CJ seemed to agree with DWR's arguments that the sky will fall if -- gasp! -- California condemning agencies actually have to institute eminent domain proceedings when they take property.
Let's just say that unless the Chief is the best darn Devil's Advocate out there, we think the property owners can safely count on her to vote to reverse.
Timing, Timing, Timing
By contrast, Justice Liu and Justices Werdegar and Corrigan appeared to clearly understand the issues and the principles involved. This isn't a facial challenge to the entry statutes, and thus the remedy that the property owners are seeking isn't invalidation of the statute. This is an as-applied challenge, where the DWR stretched what was allowable under the entry statutes, and thus the owners are only asking that the DWR's activities in this case, if it wants to go forward with them, be declared takings which trigger full-blown eminent domain proceedings. And Justice Liu in particular seemed very concerned with the timing required by the California Constitution, and whether the procedures under the entry statute comply with those requirements. The statute doesn't provide for a jury. It doesn't provide for payment of just compensation (only a "cleaning deposit" which the property owner must chase, according to the owners' counsel), a court can't order payment, only a deposit, and so forth. Absent judicial gymnastics, the two processes won't line up.
So what are the issues and how should the court resolve them? Here's our take:
- In order to affirm the Court of Appeal, the Supreme Court need not declare California's entry statute unconstitutional or strike it down. Straw man.
- The only remedy the court need recognize here in order to uphold the Court of Appeal is to rule that the DWR's proposed entries would be takings were they permitted to go forward as proposed. In that case, the DWR would need to institute eminent domain. No Chicken Little.
- If the DWR were to scale back its proposals so they qualified as "innocuous or superficial" under the 1923 case, no problem. Sky not falling.
- The proposed activities are takings. The DWR admitted so, and it is bound by its admissions. If you or I tried to make the contrary argument, we'd get laughed at.
- Even if not bound by its prior admission, there's no real question that the DWR's proposed activities are takings under the Fifth Amendment, and the California courts are bound by that. If SCOTUS is clear about one thing in takings law, it's this.
- So if the California Supreme Court wants to avoid SCOTUS review and an embarrassing reversal, it would need to find a way to say that the entry statute procedures are the same as eminent domain. They fall short, in our view. Very short.
- In order to do that, it would need to overrule its 1923 decision that is nearly "on all fours" with this one, or find a way to distinguish it or render it de facto overruled. Will they go that far?
Predictions?
So how might this case come out? As usual, it's a fool's errand to predict what a court will do based on the questions at oral argument. But let's say this: we feel that the property owners have at least three votes for affirmance. As for the rest, there were some hopeful signs, but nothing we can feel safe in latching onto for the time being. And we'd be surprised if the Chief Justice really didn't mean what she seemed to say today.
Justice Liu
Finally, back to our opening thoughts about Justice Liu. Based on his questioning -- both in tone and in substance -- we think that he recognizes the above analysis, and will conclude that the entry statutes are not a constitutionally acceptable substitute for eminent domain. Thus, we sense that no matter the outcome of the case, he's going to be writing an opinion. Given our support for the property owner, we hope it's the majority opinion and that he affirms the Court of Appeal.
But even if he is in the minority, we suspect he's still going to pen an opinion because this is an easy case in which to rule for property owners: it won't create any new rules or restrictions on government (in reality, California condemnors have been living under the rule which the property owners advance here for nearly a century without the sky falling), the federal component of the law is about as clear as takings law can get (if nothing else is crystal clear in the U.S. Supreme Court's takings jurisprudence, it's that physical occupations are takings), and the remedy here is for the DWR to simply cut back on its proposals and start over, or if it really wants to press on with the type and scale of entries which it presently asks for, to condemn. Is that a huge burden which will halt the Delta water project -- or any other public works project -- in its tracks? Hardly, and Justice Liu seems to recognize that the arguments which claim that are hyperbole.
To top it off, a nice opinion from California Associate Justice Liu talking about the importance of property rights just might take some of the edge off of those who objected to his Ninth Circuit appointment, if and when it comes time to consider him for SCOTUS. A ruling here for property owners could help seal his deal.
So now we wait.
For another view of what went down today, see "Update: California Supreme Court Oral Arguments" by Bernadette Duran-Brown at the California Eminent Domain Report.
