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Real Estate,
Land Use,
Government

Apr. 27, 2022

Someday your price will come? Really?

The government got its project. In the process, private property was taken. After a trial, that property was valued, and the government was told to write a check with eight figures on it. Yet it refused. But it retains its project. That hardly squares with the old maxim about not eating one’s cake and having it too.

Michael M. Berger

Senior Counsel, Manatt, Phelps & Phillips LLP

2049 Century Park East
Los Angeles , CA 90067

Phone: (310) 312-4185

Fax: (310) 996-6968

Email: mmberger@manatt.com

USC Law School

Michael M. Berger is senior counsel at Manatt, Phelps & Phillips LLP, where he is co-chair of the Appellate Practice Group. He has argued four takings cases in the U.S. Supreme Court.

Suppose that a government agency takes property from you for public use. Suppose further that you have a trial on the just compensation that is due for that taking. All of this is covered by both state and federal constitutions, right? We all learned that in law school. Now (and I know you will find this hard to believe), suppose that the agency decides not to pay the $10.5 million judgment that the court awarded for this constitutional action. In essence, instead of the cash you anticipated taking the place of the condemned property, the agency hands you an IOU saying that your payment will come later. Someday. Maybe. When the agency gets around to it. Or feels like it. In the argot of today’s youth: whatever.

Does anybody who doesn’t work for a government agency think that is a fair or proper way to treat citizens? Might there even be some brave government employees who think there is something a little off-kilter about that? Well, that’s what happened in Ariyan, Inc., et al. v. Sewerage & Water Bd., 29 F.4th 226 (5th Cir. 2022). Is that a just exchange of private property for its compensatory equivalent? That, after all, is what the Supreme Court says that the property owner is entitled to: “. . . the full and perfect equivalent in money of the property taken.” U.S. v. Miller, 317 U.S. 369, 373 (1943). And that payment is expected to be made “without unreasonable delay.” Bragg v. Weaver, 251 U.S. 57, 62 (1919). In other words, because the property owner is compelled to sell, the government’s obligation is to fill the void with compensation. Cash may not heal all wounds, but it is a constitutionally acceptable substitute.

This is another of those cases involving the entanglement of state and federal courts. And it isn’t pretty.

Our story began in 2013 when the U.S. Army Corps of Engineers and the Sewerage and Water Board of New Orleans began a massive flood control project involving the construction of numerous underground box culverts. Seventy landowners (including both businesses and residences) suffered damage during the construction. This had been anticipated, and the government had promised to compensate for any damage. When the government balked at compensating, the property owners sued the Sewerage and Water Board in Louisiana state court under both state and federal constitutions and recovered a judgment for a combined $10.5 million. That was affirmed on appeal. So far, so good.

Here comes the first twist. Unlike an ordinary defendant confronted with an adverse judgment who simply breathes hard and pays, this government agency chose a different tack. It did nothing. Louisiana law allows this. Honest. You might even say it encourages such lawless behavior because its constitution says that judgments against the government are only payable after the legislature expressly appropriates funds for such payment. Otherwise, the plaintiffs are simply out of luck or, as noted by the 5th Circuit, “compelled to rely exclusively upon the generosity of the judgment debtor.” (Shades of Blanche DuBois and her reliance on the kindness of strangers in A Streetcar Named Desire.)

With apologies to those who believe that states have (or should have) substantial (if not total) control of what goes on within their borders without interference from the feds, I start with the United States Constitution, which clearly provides that “This Constitution, and the Laws of the United States which shall be made in pursuance thereof … shall be the supreme law of the land; and the judges in every state shall be bound thereby, any thing in the constitution or laws of any state to the contrary notwithstanding.” U.S. Const., Art. VI, cl. 2; emphasis added. As the Supreme Court emphasized in the founding era of the republic, it is the judiciary that decides what the constitution means, and — fortifying the plain language of Article VI, clause 2 — that actions contrary to the United States Constitution are “repugnant” and “void.” Marbury v. Madison, 5 U.S. 137, 177 (1803). To the extent there is a division of authority between state and federal governments, “the Constitution divides authority between federal and state governments for the protection of individuals.” New York v. United States, 505 U.S. 144, 181 (1992). In other words, federalism protects individuals, not government agencies.

It may be well and good (albeit hardly moral) for the state of Louisiana to shield its governmental agencies from fiscal liability, or at least defer it until the legislature gets around specifically to appropriating money to pay debts, but that cannot rise to the level of allowing any government agency to thumb its corporate nose at a judgment enforcing a constitutional guarantee. As the Supreme Court noted with understatement, deference to government is not appropriate where “the State’s self-interest is at stake. A governmental entity can always find a use for extra money.” United States Trust Co. v. New Jersey, 431 U.S. 1, 26 (1977). Where the protection of constitutional rights is at issue, it would seem that even less deference should be due. Bluntly, “[t]he political ethics reflected in the Fifth Amendment reject confiscation as a measure of justice.” U.S. v. Cors, 337 U.S. 325, 332 (1949). By delaying payment indefinitely, isn’t “confiscation” what the government effectively accomplished here?

Now for the second twist. Finding no recourse under Louisiana law, the plaintiffs made their way across the street to federal court. There, they invoked the Civil Rights Act, 42 U.S.C. §1983, asking the federal court to protect their rights under the federal Constitution. After all, as a matter of federal Constitutional law, the compensation remedy when property is taken for a public project is both “required by the Constitution” and “self-executing.” First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 305 (1987). The Civil Rights Act established what the Supreme Court calls a “constitutional tort,” Monell v. Department of Social Services, 436 U.S. 658, 691 (1978), intended to provide “broad and sweeping protection,” Lynch v. Household Fin. Corp., 405 U.S. 538, 543 (1972), to all citizens — including property owners.

The Supreme Court has often waxed eloquent about protecting the rights of property owners when those rights conflict with governmental desires. For example, the fundamental maxim of eminent domain is that, when the government compels the owner of private property to sell property to the government (either through outright purchase or through destruction), the property owner is to be put “… in as good a position pecuniarily as if the property had not been taken.” Seaboard Air Line R. Co. v. U.S., 261 U.S. 299, 306 (1923). “The Fifth Amendment’s guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which in all fairness and justice should be borne by the public as a whole.” Armstrong v. U.S., 364 U.S. 40, 49 (1960). Moreover, “the constitutional requirement of just compensation derives as much content from the basic equitable principles of fairness, as it does from technical concepts of property law.” U.S. v. Fuller, 409 U.S. 488, 490 (1973). Neither fairness nor justice is evident in the Ariyan decision.

In a case like Ariyan, one is at a loss to understand how the result can be squared with these fundamental precepts. The government got its project. In the process, private property was taken. After a trial, that property was valued, and the government was told to write a check with eight figures on it. Yet it refused. But it retains its project. That hardly squares with the old maxim about not eating one’s cake and having it too. See, e.g., Ferens v. John Deere Co., 494 U.S. 516, 537 (1990) (Scalia, J., dissenting). I understand that a petition for certiorari is likely. Perhaps it is time for the Supreme Court to end this sort of disregard for fundamental federal rights. There is something unseemly, indeed downright outrageous, for the government — which “should be an example to its citizens, and by that is meant a good example and not a bad one,” Cruise v. City & County of San Francisco, 101 Cal. App.2d 558, 565 (1951) — to act as though a constitutional judgment is no more than empty words on paper.

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