September 29, 2016

PLF argues that business losses are recoverable in eminent domain cases

By Brian T. Hodges Senior Attorney

One of the most basic protections that the U.S. Constitution provides for property owners is the guarantee that the government cannot take private property without paying just compensation. That mandate is intended not only to ensure that owners are made whole, but also to place a real limit of the government’s exercise of eminent domain authority—which is truly an awesome and terrible power.

You see, by requiring compensation, the Constitution forces government—the people— to consider the full and actual costs of its actions. Sometimes, just compensation is just the price of dirt. But at other times, a condemnation action will impact more than just land, it will disrupt a business linked to the property. In that circumstance, you’d expect the Constitution to demand that the government pay for taking the business in addition to the dirt its located on. Shockingly, many states say that business losses are not recoverable as just compensation.

Earlier this week, PLF filed an amicus brief in the Louisiana case, South LaFourche Levee District v. Jarreau, arguing that a rule excluding business losses from compensation awards is contrary to Fifth Amendment. At issue is how much a levee district has to pay for having condemned a strip of land that Jarreau had used for his dirt excavation and hauling business. A jury awarded Jarreau for the value of the land and for his interrupted business. The court of appeal, however, reversed, holding that business losses are never recoverable as compensation for a taking.

PLF’s amicus brief, filed with the Louisiana Supreme Court, argues that the court of appeals got it wrong. There is no per se rule excluding business losses. Quite to the contrary, there’s a long line of U.S. Supreme Court cases recognizing circumstances in which business losses are recoverable. Indeed, the amicus brief argues that Fifth Amendment’s compensation mandate demands so much:

Even where the condemning authority may have only wanted the land and not the business, there is an absolute legal obligation to pay the “full and perfect equivalent” of what has been taken—including direct business losses.

The amicus brief urges the Supreme Court to adopt a rule that would allow recovery of business losses where such losses are the direct result of a government condemnation action.

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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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