WASHINGTON -- The Supreme Court yesterday bolstered the ability of municipalities to seize property for public use by refusing to hear challenges in two cases that questioned the breadth of municipal eminent domain powers.
In one case, Golden Gate Heights Investments v. City of San Francisco, the plaintiff sought review of a California appeals court ruling that allowed the city to avoid paying the full value of land it took. In the other case, the justices declined to review a Texas Court of Appeals ruling in which the court upheld a decision by a city to condemn property for use by the U.S. Postal Service.
The San Francisco dispute arose shortly after Golden Gate Heights Investments, a developer, in 1986 purchased a half-acre parcel of land in the city that included distinctive scenic rock formations. The developer then sought approval from the city to subdivide the parcel into 14 standard-size single-family lots.
But the city informed the developer that it had begun eminent domain proceedings to acquire the land for use as a public open space, and that the subdivision application was therefore "deemed denied."
During the eminent domain trial, Golden Gate sought compensation based on the 14 lots it had wanted to develop. The city countered that Golden Gate was entitled to compensation only for five lots, because city law allows the San Francisco Planning Commission to require developers to set aside up to two-thirds of scenic land for public use.
In the city's view, permission to build on even five lots would have been predicated upon use of the remaining property for public benefit.
The developer argued that the city's approach flew in the face of the U.S. Constitution's Fifth Amendment, under which governments are not allowed to take private property for public use "without just compensation."
The trial court and the California Court of Appeal ruled in favor of the city. In seeking review by the U.S. Supreme Court, Golden Gate claimed that the value of the parcel for which it received no compensation was about $1 million.
In the Texas case, Texas Fruit Palace Inc. v. City of Palestine, the court refused to hear arguments that the city unlawfully condemned property for the postal service's use.
Texas Fruit, a nonprofit organization that hosts public fairs and live-stock exhibits, had a long-term lease with Palestine for use of 13.034 acres of land owned by the city. The lease extended through 2007.
In March 1987, the city council passed a resolution condemning the land so that it could be used for a new post office. Texas Fruit claimed that municipal governments have no authority to condemn property for a purpose that is exclusively federal, but the lower courts disagreed.
In other action yesterday, the court declined to review a federal appeals court ruling that stuck sellers of a private placement of securities with enormous legal fees.
The case, Frank L. Bryant v. Calvin Klein, arose from the August 1983 private placement of stock in Spendthrift Farm Inc., once considered the "IBM" of horse breeding farms. Among the investors was jeans and perfume magnate Calvin Klein. After a downturn in the thoroughbred horse market three years later, purchasers of the stock brought suit for a variety of alleged violations.
The sellers of the stock were vindicated in the lower courts, but not before incurring millions of dollars in legal fees. They sought reimbursement for the fees from the investors, charging that they had made untrue allegations.
But the lower courts would not grant the reimbursement, prompting Judge Alex Kozinski of the U.S. Court of Appeals for the Ninth Circuit to dissent. He noted the case of Frank Bryant, who began consulting Spendthrift after the stock sale and therefore had no hand in drafting the private placement memorandum upon which the sale was based.
Bryant was absolved of any wrong-doing, but incurred $900,000 in legal fees. "If this is the face of victory, how much uglier could defeat be?" Kozinski wrote in dissent.
