Right to Take Issues and Dilemmas Anthony F. DellaPelle, Esq., CRE December 12, 2017

Anthony F. Della Pelle, Esq. , CRE® Practice limited to eminent domain, condemnation, redevelopment and real estate tax appeals 30+ years representing property owners and special counsel to condemning authorities in eminent domain matters Author, New Jersey Condemnation Law Blog, www.njcondemnationlaw.com Co-Author, The Law of Eminent Domain, New Jersey Chapter – American Bar Association Anthony F. Della Pelle, Esq. , CRE® adellapelle@mckirdyriskin.com www.mckirdyriskin.com Shareholder, McKirdy, Riskin, Olson & DellaPelle, PC , Morristown, New Jersey Certified Civil Trial Attorney by NJ Supreme Court New Jersey Representative, Owners’ Counsel of America Member, Counselors of Real Estate®

The Power of Eminent Domain Constitutional and Legislative Grant of Authority Western Union Tel. Co. v. Penn. R.R. Co., 195 U.S. 540 (1904) Enabling Legislation – Municipal, County, Special Agency, State and Federal Governments Cincinnati v. Louisville & N.R. Co., 223 U.S. 390 (1912) Public Use Requirement Kohl v. United States, 91 U.S. 367 (1875) Requirement for Just Compensation Bauman v. Ross, 167 U.S. 548 (1897) Redevelopment Law issues Atlantic City - casino issues Wide discretion

Typical ED Process Project planning and property investigations Attempt at amicable resolution through bona fide negotiations Final judgment on authority for and due exercise of power by condemnor Commissioners’ Hearing Trial/jury trial on appeal from Commissioners’ Report on the issue of just compensation

The Right to Condemn The power of eminent domain is not automatic – it must be granted through legislative action Boom Co. v. Patterson, 98 U.S. 403 (1878) The legislature may delegate the power to other agencies Luxton v. North River Bridge Co., 153 U.S. 525 (1894) Acts concerning the power of eminent domain are generally strictly construed (C.J.S., Eminent Domain, Sec. 2) Delaware, L & W.R. Co. v. Morristown, 276 U.S. 182 (1928) The power may only be exercised for the purposes, in the manner and subject to the conditions prescribed by the legislature Berman v. Parker, 348 U.S. 26 (1954) Executive Orders cannot authorize eminent domain Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952)

The Right to Condemn What are the legislative actions that can authorize eminent domain? Statutes Local agency ordinances Resolutions? Federal/State/County/Local/other Specific government agencies usually have specific eminent domain powers How the power is exercised may ordinarily be subject to an omnibus procedural eminent statute (e.g., Eminent Domain Act)

The Right to Condemn Public utilities can exercise eminent domain Statutory Grant Natural Gas Act (15 U.S.C. 717F(h) State statutes Requires Administrative/Regulatory approval Limited Authority Limited to designated area and properties Subject to restrictions imposed by authorization Must compensation precede taking/preliminary entry authorized? Jurisdictional issues for regional, interstate, international projects

The Right to Condemn – Choice of Forum for Utility Takings Federal Law and Court – Penn East Federal Statute authorizing project and condemnation Regulatory process through FERC Federal court and jurisdiction Disclosure requirements Litigation process – no jury trial and different procedures State Law and Court – South Jersey Gas State statutes authorizing project and condemnation Regulatory process through BPU State court and procedures Safeguards to property owners through Eminent Domain Act

The Right to Condemn Public Utilities – Prior Public Use Doctrine: The general rule is that a private company that has been authorized to exercise general eminent domain powers cannot do so on land that has already been devoted to public use. State Highway Commission v. Hoester, 362 S.W. 2d 519 (Mo. 1962) See U.S. v. Carmack, 329 U.S. 230 (1946), which contains dictum suggesting that eminent domain authority delegated to private entities (such as utility companies) is limited and therefore subject to a more stringent standard of review than similar delegations to governmental actors. Examples and exceptions : Will a balancing test be used? See Texas Eastern v. Wildlife Preserves, Inc., 225 A. 2d 130 (N.J. 1966) Water company’s rights not exclusive. City of Raton v. Raton Ice Co. 191 P. 518 (N.M. 1920)

Denial of Right to Condemn Failure to deny the authority to condemn will ordinarily result in waiver of the defense When the authority to condemn is denied, all further steps in the action are typically stayed until the issue of the right to take has been finally determined. Is determination of right to condemn a final judgment? Does “finally determined" mean exhaustion of the appellate process if appellate review is sought? N.J.S.A. 20:3-11 Bridgewater Tp. v. Yarnell, 64 N.J. 211 (1974) County of Sussex v. Merrill Lynch, 351 N.J. Super 1 (App. Div. 2002)

Denial of Right to Condemn Are counterclaims permitted without leave of court? Right to discovery on the issue of the right to condemn? N.J.S.A. 20:3-12(d). When must defenses be raised – Order to Show Cause, other triggering order or rules Who may raise defenses: State v. Cuyahoga Court of Common Pleas, 603 N.E. 2d 1005 (Ohio 1992)(leaseholder may raise defenses even though owner does not) Honolulu v. F.E. Trotter, (757 P.2d 647)(Hawaii 1988)(unrecorded leaseholder has standing to object to taking) City of Shakopee, 295 N.W. 2d 495 (Minn. 1980)(purchase option holder has standing to object)waiver of the defense

Some Defenses to Taking No public purpose – bad faith, pretext Lack of necessity/arbitrary and capricious exercise of power Failure to pass requisite authorizations Indefinite description Failure to identify necessary parties Failure to engage in bona fide negotiations. N.J.S.A. 20:3-6 All issues other than just compensation to be adjudicated Trenton v. Lenzner, 16 N.J. 465 (1954)(parking facility for proprietary use) West Orange v. 769 Associates, 172 N.J. 564 (2002)(roadway primarily serving residential development) Texas Eastern v. Wildlife Preserves, 48 N.J. 261 (1967)(necessity) Hillsborough v. Robertson, 260 N.J.Super. 37 (Law Div. 1992) Essex Fells v. Kessler, 289 N.J. Super 329 (Law Div. 1995)

Litigating the Right to Take Condemnor’s Procedural and Substantive Compliance with Eminent Domain Act and applicable rules Hearing may be required – summary proceeding/evidentiary hearing? * R. 4:67-5; R. 4:73-1 * Bergen County v. Hackensack, 39 N.J. 377 (1963)

Litigating the Right to Take Court will not substitute its judgment for legislative judgment – deference to legislative determination of necessity Hawaii Housing Auth. v. Midkiff, 467 U.S. 229 (1984) National R.R. Passenger Corp. v. Boston & Maine Corp., 503 U.S. 407 (1992) Private use vs. valid public purpose Berman v. Parker, 348 U.S. 26 (1954) Other procedural objections Trenton v. Lenzner, 16 N.J. 465 (1954)(parking facility for proprietary use) West Orange v. 769 Associates, 172 N.J. 564 (2002)(roadway primarily serving residential development) Texas Eastern v. Wildlife Preserves, 48 N.J. 261 (1967)(necessity) Hillsborough v. Robertson, 260 N.J.Super. 37 (Law Div. 1992) Essex Fells v. Kessler, 289 N.J. Super 329 (Law Div. 1995)

Update on N.J. Storm Replenishment Project – 5 Years Later, and Counting --Harvey Cedars v. Karan $$2+MM oceanfront home on Long Beach Island – 18 mile long barrier island Borough condemns a “dune easement” to allow US Army Corps of Engineers to construct a 22-foot high dune on the property Borough offers $300 for easement; contends damages are “de minimus” Owner’s appraiser: loss of views cause $500,000 of damages Owner moves in limine to bar Borough appraisal which contends that taking creates “special benefits” via storm protection provided by dune Evidence excluded by trial court as “general benefit” Jury awards $375,000 in damages Trial court ruling affirmed by Appellate Division

Harvey Cedars v. Karan: Before and After Before After

Harvey Cedars v. Karan: Before and After

Update on N.J. Storm Replenishment Project – 5 Years Later, and Counting Harvey Cedars v. Karan – the setting: Supreme Court grants certification before Superstorm Sandy Superstorm Sandy causes catastrophic property losses Areas with engineered dunes “fare much better” than those without Dune/storm replenishment efforts are renewed in earnest along the Shore – project ALSO converts private beaches to public beaches Public perception and media portrayal paints “holdout” oceanfront property owners as greedy, selfish, obstructionists Amicus curiae status granted to State of New Jersey and other interest groups Politics and policy take over – at the expense of the law?

Update on N.J. Storm Replenishment Project – 5 Years Later, and Counting Harvey Cedars v. Karan – 214 N.J. 384 (July, 2013): general-benefits doctrine is “at odds with contemporary principles of just-compensation jurisprudence” Jury only permitted to hear “one side” of the story Could result in a “windfall” to the property owners at public expense Just compensation in partial taking must be based upon a consideration of “all relevant, reasonably calculable, and non- conjectural factors that either decrease or increase the value of the remaining property” Court recognizes that the loss of view is compensable, but requires rehearing permitting evidence regarding the impact of the storm protection benefits upon the value of the property as an offset to damages

Harvey Cedars v. Karan – the implications: Update on N.J. Storm Replenishment Project – 5 Years Later, and Counting Harvey Cedars v. Karan – the implications: Did Karan cause the “holdouts” to change course and donate their properties? Mr. and Mrs. Karan settle for $1 – WHY? What impacts will or may it have on just compensation determinations, from the condemnor’s offers to the commissioners’ awards and jury awards that result? Does the decision provide guidance on whether the “benefits” can be offset against the value of the part taken, or against severance damages only? Related issues: loss of access, ambiguity in description of rights obtained and scope of rights retained

Update on N.J. Storm Replenishment Project – 5 Years Later, and Counting Continued vilification of “holdouts” – approximately 300 (10%) require takings USACOE to build under Project Partnership Agreements State (NJDEP) control over project as “Non-Federal Sponsor” Municipal role and conflict with State “Emergency” measures under Disaster Control Act taken Declaratory judgment actions instituted Condemnations begin Issues presented on right to condemn: Does proper legislative authorization exist? Easements vs. Fee Simple Interests Lack of necessity in some matters “Bona Fide” Negotiations Other procedural issues The latest from the pending cases and what lies ahead

Anthony F. DellaPelle, Esq., CRE® Final Thoughts Q&A? Thank you! Anthony F. DellaPelle, Esq., CRE® adellapelle@mckirdyriskin.com www.mckirdyriskin.com www.njcondemnationlaw.com