VDOT muscle: An eminently unfair practice

CowanGates | In Any Case

A. Barton Hinkle bhinkle@timesdispatch.com | Posted: Sunday, February 16, 2014 12:00 am

Say you buy a car. Drive it around for five years, get plenty of use out of it. Then one day you decide you paid way too much. You really should have paid half what you did. Or even less. So you go back to the dealership and say the car is worth less now, and you want a refund.

Think you’d get it?

Precisely. Yet this is just the kind of stunt the Virginia Department of Transportation is trying to pull on James and Janet Ramsey.

The Virginian-Pilot told the tale a few days ago. In 2009, VDOT took a chunk of the Ramseys’ property to build an on/off ramp for I-264. Through a process called quick take, VDOT obtained title to part of their yard. The transportation agency brought in an appraiser, who estimated the value of the Ramseys’ land and damages at just under a quarter-million dollars. VDOT put the money in an escrow account and moved forward with the project.

The Ramseys wanted more. The disagreement went to court and, as the trial approached, VDOT brought in another appraiser — who said the Ramseys were entitled to only around $92,000. So VDOT asked for the difference back. By then the Ramseys had withdrawn the original deposit and invested it, as they are legally entitled to do. They couldn’t pay the difference back even if they wanted to, because they don’t have $158,000 in spare cash lying around.

Making matters worse: The rules of evidence prohibited the Ramseys from introducing either the original state appraisal, or the state’s escrow deposit, as evidence at trial. So it was their word against the state’s — instead of the state’s word against the state’s. Late last Tuesday, a jury awarded the Ramseys $234,000 — much more than VDOT’s second appraisal but still short of its first.

Officials with VDOT say this isn’t intentional — the state isn’t deliberately lowballing later estimates as a litigation tactic. Appraisers retire before cases get to trial. Some die. They’re no longer available to give testimony — so the highway department has to bring in a new appraiser. And it’s perfectly natural for two appraisers to value a property differently. That doesn’t mean VDOT is putting the muscle on anyone.

Some lawyers in the field beg to differ. Paul Terpak told the Pilot the state is trying to discourage landowners from going to court — and that the maneuver is unique to VDOT. “I don’t have this problem with any other entity,” he said. He’s currently representing a client who is being asked to repay more than $232,000. WAVY-TV in Virginia Beach found other examples of VDOT coming in with astoundingly lower second appraisals — such as one that went from $210,000 to $17,000 and another that dropped from $214,000 to just $14,0000.

You could say the landowners who withdraw quick-take deposits are taking a risk — that they should leave the money in escrow until all the dust from a case has settled. Prudence might counsel just such a course. On the other hand, that means VDOT gets to take a citizen’s land right away, but the citizen has to wait for years to collect the compensation that’s rightfully his.

There’s another problem, too: Not every property owner gets to keep part of his land. Some are evicted outright. Gideon Kanner, a lawyer with more than four decades in eminent-domain law, points out that in those cases, the property owner has to use the escrow money to find another place to live: “Since the owner is being displaced, the owner has to draw the money out.” He or she can’t afford to let it sit in an account year after year.

When the government seizes private property, it has to meet two conditions spelled out in the Fifth Amendment: The property must be taken for public use, and the government must reimburse the owner with just compensation. Starting around the middle of the last century, the courts began to stray from the Constitution’s plain language. “Public use” became “public purpose” — if, say, the state wanted to condemn property to eradicate blight or break up a real-estate oligopoly.

Then came the 2005 Kelo case, in which the town of New London, Conn., took private property to give it to other private interests it hoped would use the land better. The Supreme Court gave that the green light, ruling that that any ostensible future benefit to the public — such as more government revenue — qualified as a public purpose and therefore justified condemnation.

As Sandra Day O’Connor noted in dissent, this new view did not “realistically exclude any takings,” and therefore did not “exert any constraint on the eminent domain power.” Earlier this month Justice Antonin Scalia, noting that the redevelopment hoped for by New London never materialized, told law students at the University of Hawaii that Kelo eventually will be overturned.

In the meantime, reaction to Kelo was ferocious. Most states — including Virginia — adopted legislation and even constitutional amendments intended to corral the power of eminent domain in the paddock where it belonged. Virginia’s constitutional amendment, for example, forbids using eminent domain for private gain, private benefit, private enterprise, increasing revenue or economic development.

That was a badly needed and welcome reform. But it still addresses only part of the problem. As the Ramsey case shows, government bodies often will take private property for genuinely public uses, such as a road — and then try to stiff the owners, especially if they don’t take the first offer that’s put in front of them. That happened to a beachfront property owner in Virginia Beach a couple of years ago: After a jury awarded him 38 times the amount he had been offered, the city decided it really owned the property all along.

Much the same thing happened to Wanda Beavers, who lost part of her land a few years ago to the widening of German School Road in Richmond. The state offered her less than $7,000. She asked for $30,000. The jury gave her $52,000 — and the state spent $61,000 in attorneys’ fees on top of that.

Alan Ackerman, a Michigan lawyer, tells the Pilot “a lot of the government agencies … across the country” are doing what VDOT has done — “lowering their offers to punish people for fighting them.”

Gideon Kanner agrees — he tells me the practice is “very, very common.” In California, where Kanner fought many such cases, it even goes by a special term: sandbagging. Kanner says it sends a powerful signal to the owner that if he doesn’t settle, he runs the risk of having to cough up cash he hasn’t got. Many owners choose to settle.

The battle to end eminent domain abuse won’t end until this gets fixed.