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A Quick Review of Takings Law in Nevada

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A QUiCK ReVieW oF tAKinGs LAW in neVADA in tHe WAKe oF KeLO, PaPPaS AnD tHe PeoPLe’s initiAtiVe to stoP tHe tAKinG oF oUR LAnD
in the past 10 years, eminent domain law in nevada has undergone significant change. two cases, Kelo v. City of New London, 545 U.s. 469 (2005) and City of Las vegas downtown redevelopment agency v. Pappas, 119 nev. 429 (2003), along with the People’s initiative to stop the taking of our Land (PistoL), have radically changed the way the public views, and state and local governments use, the power of eminent domain in nevada. the purpose of this article is to outline and discuss some of the more significant changes brought about by the change in law. Kelo v. City of New London
In 2005, the United States Supreme Court decided Kelo v. City of New London. Susette Kelo owned a little pink house in New London, Connecticut. She spent her life improving the house and making it her home. In the ’90s, Pfizer Corporation began planning a mixed-use research facility project. The City of New London, viewing the project as a means by which to redevelop a blighted neighborhood and promote economic revitalization, approved Pfizer’s development plan. Unfortunately for Kelo, Pfizer needed her property for the project. When Kelo refused to sell, the city exercised the power of eminent domain.1 In doing so, the city acquired the property to benefit a private entity. The city justified its conduct on the grounds that the acquisition of Kelo’s property served the broader public purpose of economic development and revitalization. It is often said that bad facts make for bad law. In Kelo, this saying took on a whole new meaning. In a controversial 5-4 decision, the Supreme Court held that Pfizer and the City of New London had the right to acquire Kelo’s property for the public purpose of economic development. The ruling outraged the general public and galvanized widespread support for advocates of private property rights. Many states, including Nevada, promptly passed laws virtually ending condemnation for redevelopment and economic development purposes.
City of Las Vegas Downtown Redevelopment Agency v. Pappas
In Nevada, the seminal case equivalent to Kelo was City of Las Vegas Downtown Redevelopment Agency v. Pappas. In Pappas, the agency sought to create a pedestrian plaza – the Fremont Street Experience – by closing Fremont Street to vehicular traffic from Main Street to Las Vegas Boulevard. Plans included a five-story public parking structure with retail and office space. The agency lacked adequate financial resources, so it entered into an agreement with a consortium of downtown casinos. The consortium agreed to finance and cover any operating losses of the project, as well as the construction of the parking garage. After construction, the consortium would control the operation and revenues of the garage as well as the operation of the feature attraction. The chosen block was composed of 32 individual parcels in multiple ownerships. The Pappases owned three of these parcels. The agency sent the Pappases an offer to purchase their property, but the Pappases refused to sell. The agency sued and lost at the district court level. The Nevada Supreme Court, however, reversed the district court’s ruling, concluding the agency’s use of eminent domain was constitutionally permissible. The court reasoned that although the attraction benefitted the casino consortium, its focus was to provide a safe, clean and friendly environment for visitors and businesses and an anchor for revitalization of the entire downtown area. The court emphasized that when substantial evidence supports an agency’s determination that a specific project furthers economic redevelopment under NRS Chapter 279, the project is for a public purpose.
PISTOL Amendment
Kelo and Pappas prompted the adoption of the PISTOL Amendment. Originally proposed in 2006, the PISTOL Amendment did not seek statutory change. Instead, it sought constitutional change. Nevada voters overwhelming supported the PISTOL Amendment. Its eventual passage, however, was not without controversy. In Nevadans for the Protection of Property Rights, Inc. v. Heller, 122 Nev. 894 (2006), the court held that the initiative violated state statute because it embraced more than one subject.
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Rather than removing the entire initiative from the ballot, the court severed and struck sections it deemed did not pertain to eminent domain. The PISTOL Amendment proposed to place several new limitations on state and local government appropriations in Nevada; specifically: 1. Public use shall not include the direct or indirect transfer of any interest in property taken in an eminent domain proceeding from one private party to another private party. 2. Landowners are not liable to the government for attorneys’ fees in defending an eminent domain case. 3. Property owners are entitled to a jury trial to determine whether the project requires the use of their land for a public purpose. 4. Prior to occupancy of the owner’s property, the government must provide copies of all appraisals. 5. Market value is defined as the highest price the property would bring on the open market, not the most probable price. 6. Property taken shall revert to the original owner upon repayment of the purchase price if not used by the government within five years for the originally stated purpose. In 2007, with Heller raging in the background, the Nevada Legislature offered to calm the public outcry flowing from Kelo and Pappas with AB 102, which addressed condemnation issues from a statutory perspective. AB 102 initially had a companion measure known as AJR 3. While Assembly Bill 102 became statutory law on May 23, 2007, AJR 3 required a longer adoption process, including a statewide vote in 2010. If the voters had approved AJR 3 in 2010, it would have replaced the PISTOL Amendment, but AJR was rejected and the PISTOL Amendment survived. Thus, the plan for AB 102 and AJR 3 to coexist ultimately failed, leaving only PISTOL and AB 102 standing. Other than Heller, there has not been a Nevada Supreme Court case interpreting the PISTOL Amendment or analyzing how the current condemnation landscape differs from AB 102 or other pre-existing law. Since no other jurisdiction has adopted the PISTOL Amendment, it is not possible to find answers in sister-state decisions to help interpret this new constitutional creature. However, the PISTOL Amendment raises some very interesting legal questions.
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Impact of PISTOL
Practitioners should be aware of three important aspects of the PISTOL Amendment. First, Subsection 1 prohibits the taking of property from one private property owner for purposes of transferring it to another, directly or indirectly. This provision has had an immediate impact on redevelopment agencies. Anchored by the breadth of the phrase “directly or indirectly,” Subsection 1 makes it difficult for a redevelopment agency to acquire enough contiguous property in urban areas to support a meaningful project. Frequently, property owners like Kelo or the Pappases refuse to sell. As a result of Subsection 1, a redevelopment agency’s ability to condemn for purposes of large, urban, public/private development projects is essentially gone. Second, perhaps the most commonly disputed provision of the PISTOL Amendment is Subsection 4, i.e., whether the amendment authorizes recovery of attorneys’ fees. Subsection 4 provides that “just compensation shall be defined as that sum of money, necessary to place the property owner back in the same position, monetarily, without any governmental offsets, as if the property had never been taken” (emphasis added). A person whose property is condemned can reasonably argue that the government must pay his or her attorneys’ fees to put the property owner “back in the same position, monetarily.” Clearly, if the property had never been taken, the property owner would not have incurred attorneys’ fees. On the other hand, the PISTOL Amendment provides that “[j]ust compensation shall include, but is not limited to, compounded interest and all reasonable costs and expenses actually incurred.” This language is silent with regard to attorneys’ fees. Nevada and other states generally follow the American Rule as opposed to the English Rule: unless there is an express statute, court rule or applicable contract term providing an exception, attorneys’ fees are not available. NRS 18.005 makes it clear attorneys’ fees
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are not costs. Why would the PISTOL Amendment protect against a property owner’s obligation for attorneys’ fees without stating the entitlement if it was intended? Perhaps it is because it is already covered by the “back in the same position, monetarily” language and to include it would be redundant. While we do not know how the Nevada Supreme Court will rule on this issue, it will have a significant impact on how eminent domain cases will be litigated in the future. Until then, Subsection 4 stands out as a nice settlement tool for the property owner. A third PISTOL Amendment provision which will have a significant impact on future litigation is Subsection 5. The government must now pay the highest price for the land, rather than the most probable price. This change gives the landowners a decisive advantage over the government in resolving what usually proves to be the only contested issue in a condemnation matter – just compensation. Previously, the government could argue for a lower just compensation amount based on the probability that the highest price would not be achieved under the facts and circumstances of a case. Today, there is no way around the highest price standard, which conveniently comes with a jury instruction.
Pappas, Kelo and the PISTOL Amendment have collectively changed the way many local governments in Nevada do business, especially with respect to redevelopment agencies. Significant questions remain as to what the new law means and how it will be interpreted. The most important consideration is that recent changes in Nevada takings law are worthy of close examination, and may substantially change the way condemnation cases are litigated in the future.
Mark F. Bruce is the principal of Bruce Law Group, P.C., practicing business law, gaming law, government law and real property law, including condemnation law. He represents private parties and government agencies. He is AV Rated. Jonathan d. ShipMan is a Deputy City Attorney with the City of Reno. Admitted in Nevada in 1995, he holds a J.D. from California Western School of Law.
1 A short but interesting summary of the Kelo story can be viewed on YouTube at watch?v=4N1svadJQ40.
For further please contact Brett Kandt, Section Chair, at (775) 688-1966; fax (775) 688-1822 or e-mail
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