BILL ANALYSIS Ó AB 436 Page 1 ASSEMBLY THIRD READING AB 436 (Jones-Sawyer) As Amended May 13, 2013 Majority vote JUDICIARY 7-1 ----------------------------------------------------------------- |Ayes:|Wieckowski, Alejo, Chau, | | | | |Dickinson, Garcia, | | | | |Muratsuchi, Stone | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Maienschein | | | | | | | | ----------------------------------------------------------------- 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 a land use permit or entitlement shall not be construed to as causing damage to the property. 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. FISCAL EFFECT : None AB 436 Page 2 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 United States (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 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 for 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 (CCP) 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 AB 436 Page 3 award that is less than the settlement offer and a plaintiff that receives no award at all. Under existing CCP 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 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. 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 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 CCP 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. 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 AB 436 Page 4 imposing comparative fault or by applying CCP Section 998 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." As for the application of CCP Section 998 to inverse condemnation, the opposition argues that just compensation for an inverse 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." Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334 FN: 0000512