Bad-Faith Condemnation

Despite the judgment, the state took no steps to ameliorate the continuing trespass. The Zutts then brought an action in Supreme Court for injunctive relief and damages for inverse condemnation. The Zutts' engineering expert submitted a proposal for the state to run subsurface piping within its own right of way to divert stormwater into a natural stream. As a defense, the state continued to assert a prescriptive easement. Supreme Court, noting that the prescriptive easement claim had already been rejected, ordered the state to implement the stormwater diversion plan recommended by the Zutts' expert.

While the state's appeal from that determination was pending, the Zutts obtained yet another judgment, this time in an action brought in the Court of Claims to recover for damages resulting from a 2009 storm.

Two months later, the state issued a notice of condemnation for a permanent easement over the Zutts' property. The state concluded that no public hearing was necessary because the taking was de minimis (EDPL 206), The state also initially concluded that the condemnation was an exempt action requiring no SEQRA review. The state prepared a design report on the proposed condemnation, evaluating three alternatives, one of which involved the proposed condemnation, and a second of which resembled the proposal submitted by the Zutts' expert. The report concluded that the second alternative would cost $754,699 for construction and acquisition of an easement, and would potentially increase flooding. As a result, DOT concluded that the proposed condemnation was in the public interest. DOT now concluded that for SEQRA purposes, the action was not exempt, but was a “type II” action that did not require preparation of an environmental impact statement.

The Zutts then brought this hybrid proceeding and action seeking review of DOT's condemnation determination, and seeking an injunction against the proposed condemnation. Supreme Court granted the injunction, concluding that the condemnation was not de minimis, and that the state improperly failed to conduct a SEQRA review. Subsequently, the Appellate Division affirmed Supreme Court's earlier determination awarding injunctive relief to the Zutts and ordering the state to implement the diversion plan designed by the Zutts' expert.

When the hybrid proceeding challenging the condemnation determination reached the Second Department, the court agreed with Supreme Court that the state's determination to invoke the “de minimis” exception to the public hearing requirement was an abuse of discretion by the DOT and that the DOT had not complied with its SEQRA obligations. But rather than merely annulling the DOT's determination ' the ordinary remedy when a court finds a SEQRA violation ' the court held that the state's bad faith should altogether preclude the state from condemning the proposed drainage easement. The court held that even if the proposed easement would serve a public purpose, the state's bad faith should preclude its exercise of condemnation power.

Implications

In making its decision, the Second Department candidly acknowledged that it had found no case in which a court had precluded a government entity from exercising its condemnation power based solely on the government's bad faith. But the court also noted that in a number of cases, courts have suggested, in dictum, that a “clear showing” of bad faith would justify a court in interfering with the government's use of its condemnation power. Here, on the record presented, the court concluded that, even though the condemnation would serve a clear public purpose, the state's bad faith in ignoring prior court judgments and in violation SEQRA operated to deprive the state of the usual deference to which it is entitled in eminent domain proceedings.

At first glance, the suggestion that bad faith would preclude a government entity from exercising its eminent domain power is startling. If a condemnation would serve a demonstrated public purpose, and if the interest to be condemned is necessary to serve that purpose, why should the public be deprived of a significant benefit because of the misbehavior of a few public officials? For instance, if condemnation of an easement over the Zutts' land had been the only alternative to alleviate flooding on a major thoroughfare, should drivers and emergency vehicles in the area be deprived of access because local officials tried to save money at the Zutts' expense?

A close examination, however, indicates that the holding in Zutt is not nearly so broad. In Zutt itself, DOT had conceded, in its own study, that flooding could be mitigated with an alternative that would cost $754,699. Moreover, the Zutts challenged that number, and the DOT never substantiated its cost estimate. As a result, the court's holding establishes, at most, that when an alternative to condemnation exists, and where the government entity has not established the financial unfeasibility of the alternative, bad faith by the government entity precludes the government from insisting on condemnation rather than the alternative.

Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter.

Can a government entity's mistreatment of a landowner preclude the entity from subsequently condemning landowner's property ' even when the entity demonstrates an appropriate public purpose for the condemnation? In Matter of Zutt v. State of New York, NYLJ 7/27/12, p. 27., col. 1. The Second Department appeared to answer that question in the affirmative, precluding the state Department of Transportation (DOT) from acquiring a drainage easement by eminent domain. The facts of the case, however, suggest that the court's holding may have limited application to other cases.

The Facts and the Litigation

The Zutts purchased their home in 2000. Later that year, their property was damaged by stormwater discharged from a culvert under a state road. After the Zutts repaired the damage, another flood damaged their property the following year. The Zutts then contacted DOT, which informed them that the state would not take remedial measures. The state asserted a prescriptive easement based on its installation of a drainage system that had been in operation since 1984. When landowners brought an action in the Court of Claims, the court rejected the prescriptive easement argument because, in the years since 1984, the state had taken steps to increase the velocity of water flowing over the Zutts' land, and entered a judgment in favor of the Zutts. The Second Department affirmed.

Despite the judgment, the state took no steps to ameliorate the continuing trespass. The Zutts then brought an action in Supreme Court for injunctive relief and damages for inverse condemnation. The Zutts' engineering expert submitted a proposal for the state to run subsurface piping within its own right of way to divert stormwater into a natural stream. As a defense, the state continued to assert a prescriptive easement. Supreme Court, noting that the prescriptive easement claim had already been rejected, ordered the state to implement the stormwater diversion plan recommended by the Zutts' expert.

While the state's appeal from that determination was pending, the Zutts obtained yet another judgment, this time in an action brought in the Court of Claims to recover for damages resulting from a 2009 storm.

Two months later, the state issued a notice of condemnation for a permanent easement over the Zutts' property. The state concluded that no public hearing was necessary because the taking was de minimis (EDPL 206), The state also initially concluded that the condemnation was an exempt action requiring no SEQRA review. The state prepared a design report on the proposed condemnation, evaluating three alternatives, one of which involved the proposed condemnation, and a second of which resembled the proposal submitted by the Zutts' expert. The report concluded that the second alternative would cost $754,699 for construction and acquisition of an easement, and would potentially increase flooding. As a result, DOT concluded that the proposed condemnation was in the public interest. DOT now concluded that for SEQRA purposes, the action was not exempt, but was a “type II” action that did not require preparation of an environmental impact statement.

The Zutts then brought this hybrid proceeding and action seeking review of DOT's condemnation determination, and seeking an injunction against the proposed condemnation. Supreme Court granted the injunction, concluding that the condemnation was not de minimis, and that the state improperly failed to conduct a SEQRA review. Subsequently, the Appellate Division affirmed Supreme Court's earlier determination awarding injunctive relief to the Zutts and ordering the state to implement the diversion plan designed by the Zutts' expert.

When the hybrid proceeding challenging the condemnation determination reached the Second Department, the court agreed with Supreme Court that the state's determination to invoke the “de minimis” exception to the public hearing requirement was an abuse of discretion by the DOT and that the DOT had not complied with its SEQRA obligations. But rather than merely annulling the DOT's determination ' the ordinary remedy when a court finds a SEQRA violation ' the court held that the state's bad faith should altogether preclude the state from condemning the proposed drainage easement. The court held that even if the proposed easement would serve a public purpose, the state's bad faith should preclude its exercise of condemnation power.

Implications

In making its decision, the Second Department candidly acknowledged that it had found no case in which a court had precluded a government entity from exercising its condemnation power based solely on the government's bad faith. But the court also noted that in a number of cases, courts have suggested, in dictum, that a “clear showing” of bad faith would justify a court in interfering with the government's use of its condemnation power. Here, on the record presented, the court concluded that, even though the condemnation would serve a clear public purpose, the state's bad faith in ignoring prior court judgments and in violation SEQRA operated to deprive the state of the usual deference to which it is entitled in eminent domain proceedings.

At first glance, the suggestion that bad faith would preclude a government entity from exercising its eminent domain power is startling. If a condemnation would serve a demonstrated public purpose, and if the interest to be condemned is necessary to serve that purpose, why should the public be deprived of a significant benefit because of the misbehavior of a few public officials? For instance, if condemnation of an easement over the Zutts' land had been the only alternative to alleviate flooding on a major thoroughfare, should drivers and emergency vehicles in the area be deprived of access because local officials tried to save money at the Zutts' expense?

A close examination, however, indicates that the holding in Zutt is not nearly so broad. In Zutt itself, DOT had conceded, in its own study, that flooding could be mitigated with an alternative that would cost $754,699. Moreover, the Zutts challenged that number, and the DOT never substantiated its cost estimate. As a result, the court's holding establishes, at most, that when an alternative to condemnation exists, and where the government entity has not established the financial unfeasibility of the alternative, bad faith by the government entity precludes the government from insisting on condemnation rather than the alternative.

Stewart E. Sterk, Mack Professor of Law at Benjamin N. Cardozo School of Law, is Editor-in-Chief of this newsletter.