Property Reserve case — Precondemnation Activities

On Wednesday the California Supreme Court agreed to hear an interesting case addressing the types of surveys and investigations of private property the government can undertake without triggering takings liability before deciding whether the property is suitable for a planned public infrastructure project and should be taken by eminent domain for that purpose.

The case arises from California’s proposal to construct a tunnel or canal to divert fresh water from northern California around the Sacramento–San Joaquin River Delta to central and southern California.  The project has enormous significance for meeting the water supply needs of many millions of Californians, and also raises a host of environmental concerns.  The tunnel or canal would cross tens of thousands of acres of land held by several hundred different owners.  To determine whether the project can be built as planned, the State proposes to do a series of geological explorations and environmental surveys of the proposed right on way.  The question is whether these precondemnation activities themselves amount to takings.

In a 2 to 1 ruling handed down on March 14, 2014, in Property Reserve Inc. v. the Superior Court the California Court of Appeals threw a wrench in the state’s plans to move forward with the survey work pursuant to the state precondemnation entry statutes.   The Court ruled that the geological explorations involved a Loretto-type permanent physical taking because they would leave behind grout-filled bore holes.  The Court also ruled that the environmental surveys would constitute a taking based on a Penn Central-type multi-factor analysis.  Finally, given these conclusions, the Court of Appeals concluded that the precondemnation entry statutes did not provide a constitutionally adequate eminent domain proceeding, in particular because they do not provide for jury-determined just compensation awards for the takings of private property.

The Supreme Court has agreed to review the case in order to address three questions: “(1) Do the geological testing activities proposed by the Department of Water Resources constitute a taking?  (2) Do the environmental testing activities set forth in the February 22, 2011 entry order constitute a taking?  (3) If so, do the precondemnation entry statutes (Code Civ. Proc., §§ 1245.010-1245.060) provide a constitutionally valid eminent domain proceeding for the taking?”

Naturally, the Property Reserve case will receive a good deal of attention at the 17^th Annual Conference on Litigating Regulatory Takings Claims at UC Davis on September 19.  Information about the conference is available here.