In California eminent domain actions, absent special circumstances (such as an abandonment, successful right to take challenge, or inverse condemnation finding), a property or business owner is typically only entitled to recover litigation expenses (attorneys’ fees and expert costs) in one circumstance:  where the public agency’s final offer of compensation is unreasonable and the property owner’s final demand is reasonable.  In making this determination, the judge is only to consider the final offer and demand that were made at least 20 days before trial.  (See Code Civ. Proc., sec. 1250.410.)

But the law has been somewhat unclear on how this rule works where a trial date is continued, or where there are separate trials on (i) whether certain items of damages are allowed and (ii) the ultimate jury trial on the amount of compensation.  This week, in People ex rel.  Dept. of Transportation v. Hansen’s Truck Stop (April 24, 2015), the California Court of Appeal addressed these questions and provided guidance for public agencies and property owners in making their final offers and demands.

The Court set forth the following rules for final offers and demands when dealing with trial continuances and bifurcated trials:

  • Trial Continuances:  when the trial date is continued, the judge is to consider the final offer and demand made at least 20 days before the date trial actually commences — regardless of whether offers and demands were timely filed in connection with previously scheduled trial dates.
  • Bifurcated Trials:  where there is a separate trial on issues relating to compensation (such as entitlement to certain aspects of damages, like access impairment), this early trial does not trigger the obligation to exchange final offers and demands; instead, the operative date for purposes of the final offer and demand is the date trial actually commences on the determination of compensation (i.e., the jury trial).

When reaching these conclusions, the Court was troubled with the statute’s mandate that allows only a single offer and demand to be considered on the issue of reasonableness.  The Court provides an example where a condemning agency could make a pre-litigation offer for “an artificially low sum, insist upon a bifurcated trial on preliminary issues of dubious merit, then avoid paying the property owner’s expenses for that trial by making a section 1250.410 offer that is reasonable prior to the compensation trial.”

While this example could theoretically occur (although it seems somewhat unlikely), the Court’s ruling also potentially causes a different problem:  if one party timely exchanges a final offer or demand 20 days before trial, and the other party does not exchange, the non-complying party will do everything possible to seek a trial continuance; the continuance would then reset the date of exchange, allowing the non-complying party to now make an exchange while having the benefit of seeing the other party’s number.  I’ve seen a number of instances where one party fails to timely exchange a final offer or demand, and to me, this circumstance seems more likely than the Court’s concern about a public agency making an unreasonable initial pre-litigation offer, then proceeding all the way through a bifurcated trial on a dubious legal issue, and then only after losing making a reasonable offer before the valuation trial.

The bottom line is that the best practice is to agree in advance with opposing counsel on how and when the final offer and demand will be exchanged.  If you have questions about this process or how it works, let us know.  And be on the lookout for a more detailed discussion of the case through an e-alert that will be following shortly.