BILL ANALYSIS Ó
AB 436
Page 1
Date of Hearing: May 7, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 436 (Jones-Sawyer) - As Introduced: February 15, 2013
As Proposed to be Amended
SUBJECT : Inverse condemnation: comparative fault
KEY ISSUes :
1)Should the doctrine of comparative fault be applied to actions
in inverse condemnation?
2)Should the statute restricting the recovery of post-offer
costs expressly apply to inverse condemnation actions?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill would apply the doctrine of comparative fault and a
statute limiting recovery of a plaintiff's post-settlement-offer
costs to inverse condemnation actions. Under this bill,
therefore, the court would treat damage awards in an inverse
condemnation action the same way that it treats a civil action
between private parties. Under the California Constitution, a
government entity must provide a property owner with "just
compensation" whenever it takes or damages private property for
a public use. Most often a government entity initiates a
condemnation action against a private property owner when the
property is needed for a public use. However, where a public
project proximately damages private property, the owner may
bring an action in inverse condemnation against the relevant
government entity. Unlike parallel tort actions, courts do not
generally apply the doctrine of comparative fault in inverse
condemnation actions. Thus, even if the property owner's
negligence either partly, or even mostly, caused the property
damage, the government entity is still required to compensate
the property owner for 100% of the damages. The author and
sponsor argue that exempting inverse condemnation from the
comparative fault doctrine is unfair to financially strapped
cities and counties that must bear full responsibility for
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costs, even if they are only minimally responsible for the
damages. For similar reasons, the author argues that fairness
requires expressly applying "post-offer" cost rules to inverse
condemnation actions. Under Code of Civil Procedure Section 998
a plaintiff who rejects a settlement offer that exceeds the
final judgment cannot recover any post-offer costs and may be
required to pay the defendant's post-offer costs. Although the
California Supreme Court has held that the post-offer statute
applies to inverse condemnation cases, some courts have held
otherwise, at least where the plaintiff prevails. This bill
would clarify that Section 998 applies to inverse condemnation
actions, in the manner provided in the bill. The bill is
sponsored by the Los Angeles City Attorney and supported by
local government entities. It is opposed, on mostly
constitutional grounds, by law firms that typically represent
property owners in claims against public entities. The author
will take a clarifying amendment that is reflected in the
summary and analysis below.
SUMMARY : Applies two existing rules for calculating a
plaintiff's damages to actions brought in inverse condemnation.
Specifically, this bill :
1)Applies the doctrine of comparative fault to actions in
inverse condemnation and would require a court or arbitrator
to reduce compensation paid to a plaintiff in an inverse
condemnation proceeding in direct proportion to his or her
percentage of comparative fault, if any, in the damaging of
property that constitutes a taking. However actions taken by
the plaintiff in applying for and processing a permit shall
not be construed to constitute plaintiff's comparative fault.
2)Provides that if a defendant in an inverse condemnation
action, on or after January 1, 2014, makes an offer that the
plaintiff does not accept, and the plaintiff fails to obtain a
judgment or award, the plaintiff shall not recover his or her
post-offer costs and shall pay the defendant's post-offer
costs, which may include the costs for expert witnesses.
3)Provides that if a defendant in an inverse condemnation
action, on or after January 1, 2014, makes an offer that the
plaintiff does not accept, and the plaintiff fails to obtain a
more favorable judgment or award, the plaintiff shall not
recover his or her post-offer costs, but the plaintiff shall
not be required to pay the defendant's post-offer costs.
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EXISTING LAW :
1)Prohibits the government from taking or damaging private
property for a public use without the payment of just
compensation and permits a person to maintain an action in
inverse condemnation for the purpose of obtaining compensation
for the taking or damage. (California Constitution Article 1,
Section 19.)
2)Provides that for purposes of apportioning liability a
plaintiff's damages may be reduced in direct proportion to his
or her percentage of fault. (Li v. Yellow Cab (1975) 13
Cal.3d 804.)
3)Provides that, in any trial or arbitration, if an offer made
by a defendant is not accepted and the plaintiff fails to
obtain a more favorable judgment or award, the plaintiff shall
not recover his or her post-offer costs and shall pay the
defendant's costs. Provides, in addition, that in any action
or proceeding other than an eminent domain action, the court
or arbitrator may require the plaintiff to pay reasonable
costs for expert witnesses, as specified. (Code of Civil
Procedure Section 998(c).)
4)Holds that the Legislature perceives a difference between
"eminent domain" and "inverse condemnation," and therefore the
Legislature does not intend for its reference to eminent
domain in Code of Civil Procedure Section 998 to encompass
inverse condemnation proceedings. (Regency Outdoor
Advertising, Inc. v. City of Los Angeles (2006) 39 Cal 4th
507, 530.)
5)Permits a prevailing plaintiff (property owner) in an inverse
condemnation action to recover reasonable litigation costs,
including reasonable attorney fees. (Code of Civil Procedure
Section 1036.)
COMMENTS : Article I, Section 19 of the California Constitution
provides that when a public entity takes or damages property, it
must pay the owner just compensation. Unlike the 5th Amendment
to the U.S. Constitution, which only refers to the "taking" of
property for a "public use," the California Constitution
guarantees "just compensation" whether the public entity "takes"
or "damages" property. The "taking" of property by eminent
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domain occurs when the public entity initiates a "condemnation"
proceeding against the property owner. However, when a project
of a public entity unintentionally "damages" property - e.g.
where a publicly maintained flood control project fails and
destroys and thereby virtually takes property - the property
owner may bring an action in "inverse" condemnation against the
public entity. One key difference therefore, in a conventional
eminent domain "condemnation" action the government is the
plaintiff and the property owner is the defendant. Any
questions concern whether the taking is or a "public use" or the
appropriate amount of "just compensation." In an inverse
condemnation action, however, the property owner is the
plaintiff and the government is the defendant. Also, unlike an
eminent domain action, where there is unquestionably a "taking,"
in the inverse condemnation action the plaintiff must establish
that the damage constitutes a taking as a threshold matter
before proceeding to the question of just compensation.
This bill seeks to apply two legal principles commonly applied
in civil suits to actions in inverse condemnation. First, this
bill would apply the doctrine of comparative fault to actions in
inverse condemnation. According to the author, "the
long-standing rationale behind the rule of comparative fault is
to allocate responsibility and liability for damage by the
actual proportion of the fault of the persons whose negligence
caused the injury. To do otherwise results in a situation that
creates unjust enrichment for one side over the other." Second,
the bill would expressly apply the post-settlement-offer cost
rules of Code of Civil Procedure Section 998 to inverse
condemnation actions. Under that section, if a plaintiff
rejects a settlement offer that turns out to be more than the
final judgment awarded, then the plaintiff cannot recover
post-offer costs and may be required to pay the defendant's
post-offer costs. This bill would apply a modified version of
that rule to inverse condemnation actions by drawing a
distinction between a plaintiff that receives a final judgment
award that is less than the settlement offer and a plaintiff
that receives no award at all. Under existing Section 998, a
plaintiff that rejects a settlement offer that exceeds the final
award may not recover post-offer costs and may be liable for the
defendant's post-offer costs. Under this bill, in an inverse
condemnation action, the plaintiff that rejects a settlement
offer that exceeds the final award is not entitled to post-offer
costs, but that plaintiff is not liable for the defendant's
post-offer costs. Only if the plaintiff does not prevail and
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receives no award at all is the plaintiff barred from recovering
his or her own post-offer costs and liable for the defendant's
post-offer costs.
Background : In 1975 California adopted the doctrine of
"comparative fault" in Li v. Yellow Cab (1975) 13 Cal.3d 804.
Under this tort doctrine, a plaintiff's damages may be reduced
in direct proportion to his or her percentage of fault.
Although the principle of comparative fault is well-established
in tort law, it has not generally been applied to other kinds of
actions, including actions in inverse condemnation against a
government entity for damage to private property. Indeed,
California courts developed a general rule that a public entity
is strictly liable for the full injury if a public use project
or improvement was a "substantial cause" of the injury, even if
the plaintiff property owner substantially contributed to the
injury through his or her own fault. (Blau v. City of Los
Angeles (1973) 32 Cal. App. 3d 77.) Significantly, since the
1990s the California Supreme Court has carved out a narrow
exception to the general rule of a strict liability in inverse
condemnation actions where the damages were caused by a public
flood control project. In those cases, the courts have held
that a public entity "is only liable for the proportionate
amount of damages caused by its actions." (Locklin v. City of
Lafayette (1994) 7 Cal 4th 327, 368; See also Bunch v. Coachella
Valley Water District (1997) 15 Cal 4th 432.)
Applying considerations of relative fault to inverse
condemnation actions, therefore, would not be completely
unprecedented, at least insofar as it would reduce the liability
of the public entity to that portion of the damage that it
actually caused. Nonetheless, this bill would go beyond
existing case law in two very significant ways: First, it would
extend the exception to strict liability beyond those cases
involving flood damage to include all inverse condemnation
actions. Second, it would consider the extent to which the
property owner - as opposed to a third party - contributed to
the damage and then reduce the owner's judgment accordingly.
Does the Reference to "Eminent Domain" in CCP Section 998
Include "Inverse Condemnation" Actions? Enacted as an effort to
encourage early settlement, Section 998 of the Code of Civil
Procedure (CCP) governs the manner in which parties may make a
written settlement offer prior to the commencement of trial or
arbitration. However, the precise wording of the statute has
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given rise to some confusion as to its application to eminent
domain and related inverse condemnation proceedings.
Subdivision (c) of Section 998 provides that if a plaintiff
rejects a defendant's offer and then fails to obtain a more
favorable judgment or award, the plaintiff shall not recover his
or her post-offer costs and shall pay the defendant's costs from
the time of the offer. This subdivision then states that, "in
addition," a plaintiff who rejects an offer may be required to
pay expert witness fees "in any action or proceeding other than
an eminent domain action ." [Emphasis added.] Subdivision (f)
then adds that the entire chapter on offers to compromise does
not apply to "an offer that is made by a plaintiff in an eminent
domain action." If inverse condemnation is included within the
meaning of eminent domain, then the post-offer cost restrictions
would not, under existing law, apply to actions in inverse
condemnation. If, on the other hand, inverse condemnation is
not included within the meaning of eminent domain, then
post-offer cost restrictions arguably already apply to actions
in inverse condemnation.
Case Law on Applicability of CCP Section 998 to Inverse
Condemnation Actions : There is no case law that definitively
applies Section 998 to actions in inverse condemnation.
Although at least one appellate court has held that CCP Section
998 treats "eminent domain" and "inverse condemnation"
synonymously (Orpheum v. BART (1978) 80 Cal. App.3d 863, 878), a
more recent decision by the California Supreme Court held that
the references to "eminent domain" actions in Section 998 were
not intended to include actions in inverse condemnation; it
therefore upheld awarding costs and fees to the public entity
where the plaintiff failed to prevail on an inverse condemnation
action. (Regency Outdoor Advertising, Inc. v. City of Los
Angeles (2006) 39 Cal. 4th 5o07, 530; see also Goebel v. City of
Santa Barbara (2001) 92 Cal. App. 4th 558-559.) The Regency and
Goebel cases, however, do not entirely settle the issue, for
they can be distinguished from Orpheum because in that case the
plaintiff prevailed, while in Goebel and Regency the government
entity prevailed. Therefore, one could arguably construe Goebel
and Regency as only applying Section 998 to cases in which the
government entity prevails and is seeking its post-offer costs,
but not to cases in which the plaintiff prevails but wins a
judgment that is less than the settlement offer. Indeed, the
court in Goebel, while acknowledging that Section 998 applied in
an inverse condemnation action, opined in dicta that the public
entity would only be able to recover costs if the plaintiff did
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not prevail; it held, however, that in either an eminent domain
or an inverse condemnation case, a Section 998 award against a
prevailing plaintiff would be prohibited. In Regency, the
California Supreme Court approved the Goebel holding that
Section 998 applied where the plaintiff did not prevail, but did
not comment on the Goebel dicta that costs could not be awarded
against a prevailing plaintiff who received an award that was
less than the offer.
This bill seeks to clarify the potential confusion arising in
existing case law by stating expressly that Section 998 applies
to an action in inverse condemnation, albeit, as noted above, in
modified form: a public entity could recover costs if the public
entity prevailed, but not if the plaintiff prevailed, even if
the plaintiff's final judgment was less than a settlement offer.
This would appear to satisfy both the holding and the dicta in
Goebel, since under this bill a public entity could not recover
its costs against a prevailing plaintiff.
Potential Constitutional Problems: As noted below, this bill is
opposed by several law firms that represent property owners in
actions against public entities. Their letters of opposition -
which are more like legal memoranda than letters of opposition -
raise important constitutional objections. They deserve the
Committee's close scrutiny even if the Committee ultimately
concludes that the opposition arguments are not conclusive on
either the policy merits or the constitutionality of this
proposed legislation. The law firms' well-documented and
thoughtful analyses make two basic claims: First, they contend
that this bill inappropriately confuses common law tort
principles with constitutional analysis. Second, they argue that
because "just compensation" for damages to property is
guaranteed by the state constitution, any legislative reduction
in that compensation - whether by imposing comparative fault or
by applying Section 988 rules to diminish just compensation - is
unconstitutional.
Tort Principles and Constitutional Law : The opponents are
certainly correct that tort principles are analytically distinct
from constitutional principles; and comparative fault is most
certainly a tort principle. Beginning with Albers v. County of
Los Angeles (1965) 62 Cal. 2d 650, the California Supreme Court
made it clear that the "just compensation" that a plaintiff
seeks in an inverse condemnation action is rooted in the Article
1, Section 19 of the California Constitution, and that it does
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"not derive from statutory or common law tort doctrine." The
task of the court, therefore, is not to apportion damage
according to the parties' respective degree of fault, but to
consider "whether the owner of the damaged property if
uncompensated will contribute more than his proper share to the
public undertaking." In other words, in both the government's
eminent domain action, as well as the property owner's inverse
condemnation, the policy consideration is the same: is the
property owner being asked to pay more than his or her fair
share for the project that is to be built, or more than his or
her fair share if the project fails and causes damages?
Thus one question raised by this bill is whether a consideration
of "comparative fault" has any place in what is invariably a
constitutional analysis. On one the hand, one could argue that
the courts have already incorporated tort principles into its
constitutional analysis in the flood cases. In those cases,
unlike other inverse condemnation cases, the court considers a
number of factors, including the reasonableness of the public
entity's actions and whether the property owner took reasonable
steps to mitigate damages. (See e.g. Albers, supra at 269,
recognizing the general rule "that an owner whose property is
damaged by a public entity is under a duty to take all
reasonable steps available to minimize his loss.") Moreover,
the courts, while not adopting the rule of comparative fault by
name, have nonetheless adopted what is effectively a
proportionate liability approach in the flood cases by limiting
the public entity's liability to the portion of the damage that
it actually caused. (Locklin v. City of Lafayette (1994) 7 Cal
4th 327, 368; See also Bunch v. Coachella Valley Water District
(1997) 15 Cal 4th 432.) Whether we call this "comparative
fault" or "constitutional balancing," the net result is the
same: the public entity is not liable for damages that it did
not cause. To be sure, the courts have only taken this position
in the flood cases, and the flood cases may therefore be the
exception that proves the existing judicial rule. But it is
only a judicial rule. If Article 1, Section 19 mandates strict
liability and prohibits considerations of the degree of fault,
as the opponents claim, then that presumably should be true for
all cases, since the plain words of Article 1, Section 19 do not
give any indication that flood damage should be treated
differently than any other damage caused by a public project.
This would suggest that the Court believes that there is nothing
inherent in the words of Article I Section 19 that mandate
strict liability in inverse condemnation cases.
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The Legislature, of course, is not a court; it does not apply
tort principles or make constitutional decisions; instead, it
makes policy decisions within constitutional constraints as it
best understands them. If this bill were enacted, it would mean
that the Legislature has made a policy determination that it is
fair to limit a public entity's liability to the proportion of
harm that it actually caused, and reduce the property owner's
damages to the extent that the property owner was at fault. The
California Supreme Court has said that the "underlying purpose"
of Article I Section 19 is to "distribute the loss inflicted
upon the individual " throughout the community and to "afford
relief to the landowner in cases in which it is unfair to ask
him to bear the burden that should be assumed by society." The
Legislature might reasonably conclude that the extent of the
damage caused by the property owner is not a loss "inflicted
upon" the property owner, and that it is not "unfair to ask him
to bear the burden" of that portion of the damage that the
property owner caused. Whether we call this principle
"comparative fault" or "balancing" or just "fairness," a
reasonable case can be made, notwithstanding the certitude of
the opponents, that it does not breach the constitutional
constraints of Article I Section 19.
Constitutionality of Applying Section 998 : Opponents also argue
that applying the Section 998 provisions on post-offer costs is
unconstitutional, presumably on the assumption that, because
"just compensation" is mandated by the constitution, any
reduction in a plaintiff's award is unconstitutional. While it
is true that Goebel v. City of Santa Barbara, supra, held that
Section 998 costs could not be awarded against a prevailing
party, the bill addresses this by only permitting the public
entity to recover its costs where the plaintiff does not
prevail. Where a plaintiff merely wins a judgment that turns
out to be lower than the settlement offer, the public entity
will not be liable for the post-offer costs of the plaintiff,
but it will not be able to recover its own costs in that case.
ARGUMENTS IN SUPPORT : According to the sponsor, the Los Angeles
City Attorney's Office, both the comparative fault doctrine and
the statute governing post-offer costs serve important public
purposes that should be extended to inverse condemnation cases.
According to the sponsor, the comparative fault doctrine
properly allocates liability according to the degree of fault,
so that "if the plaintiff's negligence contributed to his or her
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own personal injury or property damages, the jury or fact finder
must apportion the damages between the parties based on their
respective fault." Under existing law, the sponsor argues, a
government agency would be liable for 100% of the damages even
if the plaintiff had caused 99% of the damage. Similarly, the
sponsor argues that applying Section 998 to inverse condemnation
actions "is consistent with over 40 years of case law set forth
by the California Supreme Court and is good public policy that
will encourage settlements and alleviate unnecessary burdens
upon our court system." "In this time of economic challenge,"
the sponsor concludes, "it is particularly important for the
Legislature to clarify these two issues so that government
agencies and the taxpayers they represent are only held
responsible for their proportionate share of the costs and
damages awarded in inverse condemnation cases." The bill is
supported by other cities, counties, and local government
associations for substantially the same reasons.
ARGUMENTS IN OPPOSITION : As noted above, a number of law firms
oppose this bill for two fundamental reasons. First, they
contend that this bill inappropriately confuses common law tort
principles with constitutional analysis. Second, they argue
that because "just compensation" for damages to property is
guaranteed by the state constitution, any legislative reduction
in that compensation - whether by imposing comparative fault or
by applying Section 988 rules to diminish just compensation - is
unconstitutional. Opponents contend that while the courts have
reduced public entity liability in a narrow range of flood
cases, this should not be confused with incorporating tort
principles of comparative fault. When the courts speak of
"reasonableness," the opponents contend, they do not mean
"reasonableness" in the same sense that the term is used in tort
law. Instead, they argue that "reasonableness in the flood
control context requires a balancing of public need for the
project against the gravity of harm suffered by the damaged
landowner. It is not an application of traditional tort
concepts of fault." For example, opponents claim the
"constitutional balancing factors" -so-called "Locklin factors"
set forth in Locklin v. City of Lafayette (1994) - are not tort
concepts that determine fault, but a set of factors used for
"weighing public need against the gravity of private harm" in a
very limited set of circumstances.
As for the application of Section 998 to inverse condemnation,
the opposition argues that just compensation for an inverse
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condemnation plaintiff includes cost reimbursement. As such,
they believe that reducing "or eliminating a cost award, or
imposing the burden of payment of a government agency's costs or
other expenses, would violate Article I, Section 19," citing the
Goebel case and, among others, Heimann v. City of Los Angeles
(1947) 30 Cal. 2d 746; City of Los Angeles v. Richards (1973) 10
Cal.3d 385; and San Francisco v. Collins (1893) 98 Cal. 259. In
short, the opposition insists that any reduction of the
plaintiff's award, including any recoverable costs and expenses,
"would impermissibly deny owners the just compensation to which
they are [constitutionally] entitled."
The bill is opposed by other associations and individuals for
substantially the same reasons as those set forth by the law
firms.
ARGUMENTS IN OPPOSITION UNLESS AMENDED: The California Water
Association (CWA), an association representing about 120 water
utilities regulated by the Public Utilities Commission (PUC),
opposes this bill unless it is amended to exempt water
corporations that are regulated by the PUC. The author has not
indicated to the Committee that he is prepared to take such an
amendment at this time.
PROPOSED AUTHOR AMENDMENTS : The California Building Industry
Association expressed some concern that in certain situations a
mere application for a development-related permit could be
construed as damaging or diminishing the value of a property,
and that might later be the subject of an inverse condemnation
or regulatory takings claim. Because the author is concerned
with situations that involve joint contributions to physical
damage to property, he has agreed to take the following
clarifying amendment.
- On page 5 at the end of line 24 insert:
The actions taken by the plaintiff in applying for and
processing a permit shall not be construed to constitute
plaintiff's comparative fault.
REGISTERED SUPPORT / OPPOSITION :
Support
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Los Angeles City Attorney (sponsor)
California Association of Sanitation Agencies
California State Association of Counties
City of Santa Rosa
County of Los Angeles
CSAC Excess Insurance Authority
League of California Cities
Opposition
California Alliance to Protect Property Rights
Desmond, Nolan, Lavaich, & Cunningham
Jenny & Jenny, LLP
Matteoni, O'Laughlin, & Hetchman
Six Individuals
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334