August 30, 2017

Should a business owner recover economic damages when the government condemns his property?

By Brian T. Hodges Senior Attorney

In a brief filed earlier today, PLF attorneys urge the U.S. Supreme Court to answer this important question concerning the Fifth Amendment’s guarantee that property shall not be taken without payment of just compensation.

In the past, the U.S. Supreme Court instructed that a dispossessed owner must be put in “as good position pecuniarily as he would have occupied if his property had not been taken.” United States v. Miller (1943). So, although business losses are presumed to be non-recoverable due to the fact that they are often collateral to the taking, the Court has awarded economic losses when a government condemnation action directly affects a business.

The Louisiana Supreme Court took this presumption a step further in the case South Lafourche Levee District v. Jarreau, holding that an award of just compensation “is limited to that required by the Fifth Amendment, which is the fair market value of the property at the time of the appropriation, which does not include loss profits and other severance damages.”

PLF’s brief argues that the Louisiana court’s adoption of a categorical rule barring recovery of economic damages frustrates the purpose of the Just Compensation Clause, which is to provide dispossessed owners with “the full monetary equivalent of the property taken.” United States v. Reynolds (1970). The brief highlights several cases where business losses were awarded to show that the guarantee of full and fair compensation can only be achieved if courts award damages based on the unique facts of each case—not by relying on mechanical rules like the Louisiana court adopted.

The Court is expected to conference on the petition this fall.

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Jarreau v. South LaFourche Levee District

A Louisiana levee district condemned land containing an ongoing soil excavation business so it could use the soil for a levee. But the district shortchanged the landowner of his just compensation by paying only for the land, and not its value as a soil excavation and hauling business. Worse, the district demanded that the owner pay the district for soil that the owner had excavated before the taking. The Louisiana Supreme Court agreed that there are circumstances where business losses would be compensable, but declined to award any business losses to Jarreau. Jarreau petitioned the U.S. Supreme Court to review the case.

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