Texas Supreme Court Holds that Displaced Landowners are Allowed to Recover

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Art Courtesy of GetDrawings.com.

Morale v. State is a condemnation case recently decided by the Texas Supreme Court on June 2, 2018. The landowners, Stephen and Kimberly Morale, owned and operated a vehicle collision repair business. The shop was located on a 33,000 square-foot parcel in the town of Little Elm, Texas, and was being partially condemned for the sake of expanding FM 720. Specifically, the State through TxDOT sought to obtain a 3,200 square-foot strip of land and would demolish a portion of the landowners’ property improvements as part of the taking.

The Court held:

  1. The State’s previous, but revoked, designation of the Morales’ property as “displaced” was relevant to the determination of the property’s highest and best value.
  2. Input from the landowner’s theories and evidence regarding the State’s motive for withdrawing the displacement classification were relevant.
  3. The testimonies of the city engineer and city attorney regarding the potential granting of a zoning variance for the subject property were speculative and therefore irrelevant to a determination of value.

On the first point, as part of their theory of valuation, the landowners presented evidence that the State had previously classified the landowners as being “displaced.” Displacement, according to the Texas Administrative Code, section 21.116, is a status assigned to a landowner when the construction of a State highway project forces them to relocate. Under the Code, the landowner’s relocation fees are to be paid by the State. This evidence was favorable to the landowners, who used it to support one of their valuation theories, resulting in higher compensation.

The State’s attempt to exclude the evidence was denied by the trial court. The jury awarded the landowners the amount of $1,064,335.00, an amount significantly higher than the State’s appraisal of $122,953.00. The State appealed, and the appellate court reversed the trial court’s ruling on the grounds that the displacement evidence was both irrelevant and speculative. The Morales petitioned the Texas Supreme Court for review, and the Court granted their petition.

The Texas Supreme Court took issue with the appellate court’s reasoning regarding its treatment of the displacement evidence. Firstly, the Court pointed out that the decision to admit or exclude evidence is largely within the trial court’s discretion. Further, it found fault with the appellate court’s conclusion that the displacement classification was wholly irrelevant. Rather, the Court concluded that the displaced status contributed to the ability of the Morales to prove their theory of the case.

Regarding the second relevancy ruling, the landowners, as part of their case, presented evidence to suggest that the State’s motives for withdrawal of the displacement designation were suspect. As with the displacement evidence itself, the trial court allowed the arguments, but the court of appeals disapproved. It reasoned that the landowners’ questioning of the State’s motives for revoking the displacement classification did not add new information to the case, let alone its value. The Texas Supreme Court thought otherwise. It held that the Morales’ inquiries into the State’s reasons for applying, then revoking the classification, were relevant because the application, and subsequent removal of the classification, was a piece of probative evidence for an adversarial trial.

Finally, the Texas Supreme Court held that the testimonies of the city attorney and city engineer regarding the possibility of a zoning variance were irrelevant. The Court made clear that zoning variances granted to other property owners have no relevance if they do not apply to the specific property being condemned. Because Little Elm did not commit to a variance for the landowners’ property, the testimonies of the city attorney and city engineer were impermissibly speculative. Therefore, the trial court was within its discretion to exclude the evidence, and the appellate court erred when it disagreed.

This case is important for condemned landowners as they attempt to seek just compensation for their land when displaced. Allowing landowners access to the full range of relevant facts will help them give the jury a more precise picture of exactly what their land is worth. Ultimately, the Supreme Court reversed the appellate court’s decision and reinstated the trial court’s award.

All Aboard! – Bullet Train Makes Progress as Texas Central Partners Teams Up With Amtrak, Engineering, and Construction Firms

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Image of Japanese Shinkansen Bullet Train. Image courtesy of InsideJapanTours.com.

Construction of the much anticipated 200 mile-an-hour Houston to Dallas Bullet Train may begin as early as next year. Despite strong support from the State Government, the $15 billion project is not entirely free from controversy. Proponents of the train argue that the train’s constructor, Texas Central Partners, will take no public money for the project, and that taxes on fares could net $3 billion into the State’s budget annually. They also point out that the construction would mean direct spending of as much as $36 billion, a capital deployment that would create tens of thousands of construction jobs. Based on proposed plans, the train will likely bridge stations located near Houston’s Northwest Mall and the Kay Bailey Hutchinson Convention Center in Dallas.

Though route finalization has yet to occur, there are other signs of project progress. Texas Central Partners has joined forces with the Amtrak Corporation, which already has an established interstate network within the Texas. Additionally, the Federal Railroad Administration (“FRA”) has approved the draft environmental impact statement. The FRA has also proposed a route it believes to be optimal for its perceived minimum impact on landowners. Additionally, multiple engineering and construction firms have joined Texas Central Partners to lay the groundwork for construction.

But the project isn’t in the clear yet. Despite the assurance of private funding, the cost of a high-speed rail still remains incredibly expensive, and concerns exist regarding the ability of the project to complete within costs. Indeed, there is some evidence to support these reservations. For example, the costs for the bullet train project in California have currently risen to a staggering $77 billion, with projections that the cost could rise to $100 billion. In 2008, project costs were only projected to be $40 billion. Texas Central Partners asserts that its use of private funds and its high level of government support, will allow them to avoid the issues that have impeded previous projects.

Much of the opposition to the train comes from landowners located along the project’s proposed route. Justifiably, they are concerned with the possibility that Texas Central Partners will use the power of eminent domain to forcibly take the property necessary for the train. Texas Central Partners has responded to these concerns by announcing that they will offer the landowners fair market value for the land they acquire, as well as generally trying to keep landowner impact to a minimum. Landowner interests remain unconvinced however, and have proposed twenty pieces of legislation, all operating in some way to inhibit the project’s development. Of these twenty, only two, which prohibit the use of public funds for construction, have passed.

Whatever the project’s eventual construction date, landowners along the train’s route should be aware of the definite progress the project is making.

Written by Jack Brasher, Christopher Chan, and Justin Hodge.

Permian Basin Production Growth for Oil, Natural Gas, Motivates Construction of New Pipelines – Condemnation to Follow?

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Permian to Katy, “P2K,” Pipeline. Photo Courtesy of Sempra LNG & Midstream, Boardwalk Pipeline Partners.

According to industry experts, the Permian Basin located in West Texas will soon produce enough crude to surpass all OPEC nations except Saudi Arabia. Despite limitations in labor and pipeline transport capacity, it is estimated that production will nearly double from the current 3.3 million barrels per day, to 5.4 million barrels per day by 2023. This trend of growth in the Permian mirrors the increase in oil production experienced by the nation as a whole. Indeed, total United States production has recently surpassed the Saudis, making America the world’s second largest oil producer, with the Russians retaining the top spot.

In addition to oil, the Permian Basin is also an abundant source of natural gas, a fuel type important for electrical generation. Texas’ consumption of natural gas is seasonal, and local demand for it fluctuates correspondingly. However, the manufacturing boom in Mexico has caused the construction of many new factories, most of which rely on natural gas for power generation. The Permian’s proximity to the south of Texas, and the ease of delivery this facilitates, makes it optimally placed to serve the Mexican market.

This massive increase in production, along with optimistic production projections, has inspired a whole slew of new pipeline projects to transport crude oil and natural gas from the Permian. However, the enthusiasm for new pipeline construction may not merely be due to the generally accepted future growth estimates. Some experts have suggested that the current “takeaway” capacity of existing pipelines, the volume of product that can be piped away from the Permian daily, may have already been surpassed by raw production, or is nearing that point. As previously mentioned, the Permian’s present day, total production capacity, is thought to be around 3.3 million barrels per day. According to one expert however, the current daily capacity of takeaway pipe serving the Permian may be less than 3 million barrels per day. This means that the Permian’s full capacity may already be underutilized.

Liquid products produced out of the Permian often head to processing facilities to be converted into a variety of formulas and distributed to consumers. One such destination is the so-called “Gulf Coast Market,” an expanding collection of processing, storage, and shipping facilities that includes the Houston area. This region is a highly desirable pipeline termination point because it provides access, not only to the domestic market, but also to international markets, such as Mexico. Upcoming Texas Condemnation projects such as the Permian-Katy, or “P2K” project being developed by Boardwalk Pipeline Houston and Sempra LNG, and the recently announced Permian to Beaumont line being planned by ExxonMobil and Plains All American Pipeline L.P., are examples of the kinds of projects expected in the next few years. Landowners in the path of these pipelines should keep an eye out for construction announcements that could affect them, because many of these pipeline companies may use eminent domain to take the pipeline easements.

Written by Christopher Chan and Justin Hodge.

Luke Ellis and Justin Hodge (Program Co-Chair) – Faculty at Houston Eminent Domain Conference

Luke Ellis and Justin Hodge (Program Co-Chair), Marrs Ellis & Hodge LLP, are both faculty at the upcoming Houston, Texas Eminent Domain: CLE International Conference on Thursday, May 10, 2018 and Friday, May 11, 2018.  Luke will be speaking on Thursday at 10:00 am on Texas Eminent Domain Legislative Reform Efforts and Justin will be speaking as part of a panel on Friday at 10:15 am on the Legal Impacts of Hurricane Harvey.   The full conference schedule can be found here.  We hope you can join us at the conference.

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Houston Chronicle Quotes Justin Hodge – Inverse Condemnation Lawsuits Filed Over Homes Flooded by Barker Addicks Dams

The Houston Chronicle quotes Justin Hodge, Johns Marrs Ellis & Hodge, LLP partner, this morning over the federal inverse condemnation lawsuits filed because of the United States Army Corps of Engineers’ decision to release dam waters from Barker and Addicks dam and resulting in flooding of thousands of Houston homes and properties. The articles states, “It’s the largest flood event resulting from a direct decision of a government arguably in our lifetime” said Justin Hodge, who teaches eminent domain at University of Houston Law Center and is representing clients in two of the federal cases. You can read the full articles below.

Houston Post-Flood Inverse Condemnation Information: Neighborhood Q&A on Sunday, September 10, at 5:00 pm.

We are honored to team up with Mark Lanier, The Lanier Law Firm, to host a Q&A on Houston Post-Flood Inverse Condemnation.  The purpose of the meeting is to bring healing to our community and answer questions concerning the flooding.  More information is below.

Neighborhood Q&A on Sunday, September 10, at 5:00pm.

Memorial Drive United Methodist Church
Inside Wesley Hall
12955 Memorial Drive
Houston, Texas, 77079
Directions

What happened?

Hurricane Harvey brought as much as 30 inches of rain to some areas of Southeast Texas. On Monday, August 28th, the U.S. Army Corp of Engineers began releasing water from the Barker and Addicks reservoirs in Houston. With reports showing water levels rising more than six inches per hour, officials worried the added pressure could cause both dams to fail, leading to catastrophic flooding in downtown Houston.

While the water release prevented the dams from being breached, it caused severe flooding in several neighborhoods that otherwise may not have been affected. Homeowners in the area are now left with a lot of questions and some very serious concerns.

Attorneys Mark Lanier of The Lanier Law Firm, and Justin Hodge of Johns Marrs Ellis & Hodge, LLP will be available to answer these questions at a neighborhood Q&A session at 5:00 pm on Sunday, September 10. This gathering is meant to provide important information to local residents, as well as clear up a lot of the misinformation that’s been circulating in the community. Please join us at:

Memorial Drive United Methodist Church
Inside Wesley Hall
12955 Memorial Drive
Houston, Texas 77079

Mark Lanier was named the 2016 Trial Lawyer of the Year by The National Trial Lawyers, and in 2017 was inducted in to the National Trial Lawyers’ Trial Lawyer Hall of Fame.

In addition to national recognition, Mark has earned multiple accolades from his legal peers in Texas. In a statewide attorney survey published in Texas Monthly magazine, he has earned selection to the annual Texas Super Lawyers list since it debuted in 2003, including being named one of the Top 10 Attorneys in Texas.

 

Justin Hodge focuses much of his practice on eminent domain. An area in which he was recognized as a “Rising Star” from 2008-2010, in 2013, and 2017, by both Super Lawyers Magazine and Texas Monthly Magazine.

He represents landowners in condemnation proceedings, not the governmental authorities or private companies taking property. Mr. Hodge has won cases for landowners at every level: administrative hearings, jury trials, and appeals in state and federal courts.

Justin was recently quoted in the Houston Chronicle on this very issue:

“Justin Hodge, a [lawyer that focuses] in eminent domain at Johns Marrs Ellis & Hodge LLP, said such cases boil down to knowledge and intent — whether the government knew what it was doing and intended to cause flooding that essentially amounted to ‘taking’ of people’s properties.

‘The government can’t accidentally take your property,’ Hodge said. “If they accidentally opened the lever to the dam or the gates, that would not be a taking — that would be negligence.

‘But if the government intentionally floods someone’s property there would be real merit,’ he said.
Individuals can’t sue the government for an accident. But if the flooding was intentional and knowing, a person can file a claim.”

“‘A lot of folks may be directly damaged by the dam releases but an investigation has to be made into each person’s claim,’ he said. ‘I would caution property owners … not to try to jump in and file something without doing an appropriate investigation.’

He added, ‘I’d caution them to hire a lawyer that’s knowledgeable in this area of the law.’”

Who’s affected?

The following is a list of neighborhoods that may have been affected by the flooding caused by the opening of the dams. Please keep in mind that this list may not be complete.

  • Briar Forest
  • Frostwood Elementary
  • Notingham
  • Piney Point
  • Rummell Creek
  • West Houston/Outside Beltway/Energy Cooridor
  • Wilchester

What is inverse condemnation?

Inverse condemnation is very similar to eminent domain in that both involve the government using your property for its own purposes, such as installing power lines or laying railroad tracks. But while eminent domain involves the government contacting you ahead of time, explaining why it needed your property, and how much you would be compensated for it, inverse condemnation works backwards. In these cases, your property is used with no prior warning, and you are left to request compensation after the fact.

Inverse condemnation vs. flood insurance

Inverse condemnation matters can involve a wide variety of issues. Because Hurricane Harvey and the release of the Addicks and Barker dams involve the flooding of nearby property, many are asking if they need flood insurance in order to bring an inverse condemnation claim. The answer is no. Whether or not an individual has flood insurance doesn’t matter. If you believe you have an inverse condemnation claim, don’t let a lack of insurance prevent you from pursuing it.

What can I do?

Above all else, your primary concern should be the safety and wellbeing of your family. The floodwaters are still receding, and it’s easy to feel overwhelmed. Remember that those filing an inverse condemnation claim have two years from the time the accident happened to do so.

Houston Post-Flood Inverse Condemnation Information

Johns Marrs Ellis & Hodge LLP

 

Houston Chronicle Reaches Out To Johns Marrs Ellis & Hodge LLP on Inverse Condemnation Claims

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Government faces suit over Addicks and Barker dam releases

Class action lawsuit in Washington, D.C. says Army Corps of Engineers flooded after Harvey passed

By Gabrielle Banks

A ‘taking’ claim

“Justin Hodge, a [lawyer who focuses] in eminent domain at Johns Marrs Ellis & Hodge LLP, said such cases boil down to knowledge and intent — whether the government know[s] what it was doing and intended to cause flooding that essentially amounted to “taking” of people’s properties.

“The government can’t accidentally take your property,” Hodge said. “If they accidentally opened the lever to the dam or the gates, that would not be a taking — that would be negligence.”

“But if the government intentionally floods someone’s property there would be real merit,” he said.

“Individuals can’t sue the government for an accident. But if the flooding was intentional and knowing, a person can file a claim. He said historically class actions have occurred in condemnation lawsuits but they’re very difficult to pull off.”

“A lot of folks may be directly damaged by the dam releases but an investigation has to be made into each person’s claim,” he said. “I would caution property owners … not to try to jump in and file something without doing an appropriate investigation.”

He added, “I’d caution them to hire a lawyer that’s knowledgable in this area of the law.”

“Hodge said in the press conferences in the wake of Hurricane Harvey the Army Corps of Engineers was straightforward about the fact that they knew homes were going to flood from the releases from the reservoirs. He saw statements on the Corps website indicating federal officials had knowledge that flooding would happen.”

“The government could make such a decision if it was acting in the public interest, he said.”

“It’s a public use decision,” Hodge said.

“They decided to use your property for public use. They decided the general public needs to use your property.”

He said the “takings” law stems from the Fifth Amendment, which says that private property cannot be taken without just compensation.”

“The Texas Constitution guarantees the same right. State and federal law would similarly protect people with homes or businesses upstream of the reservoirs, Hodge said.”

Flooded by the Government: Does Intentional Flooding Amount to a Compensable Taking?

IMG_0060The destruction left in the wake of Hurricane Harvey will take Texas years to recover from. Members of Johns Marrs Ellis & Hodge LLP, along with many of our friends and families, have been directly impacted by the storm’s effects. Our thoughts and prayers continue to go out to all those affected and also to the first responders and volunteers assisting with the recovery efforts.

As gray skies return to summer blue, our lawyers keep getting the following questions: did Houston’s system of reservoirs and dams designed to protect against flooding actually make it worse for some people, and do some property owners have a takings claim against the government for releasing water into their neighborhoods?

The Addicks and Barker Reservoirs on Houston’s west side were designed to store and gently release accumulated water into Buffalo Bayou to help prevent catastrophic flooding to downstream neighborhoods, Houston’s downtown, and the Houston ship channel. But during Hurricane Harvey, as both reservoirs reached their capacities, the Army Corps of Engineers intentionally decided to open the flood gates, intentionally flooding homes and businesses downstream from the dams in the Buffalo Bayou watershed in order to prevent destruction in other areas.

Col. Lars Zetterstrom, the Corps’ Galveston district commander, explained the purposes of the Corps’ intentional release of water: “If we don’t begin releasing now, the volume of uncontrolled water around the dams will be higher and have a greater impact on the surrounding communities.” This was done in an attempt to keep the waters from overtopping the earthen-levee system, which would risk a complete failure of the dam.  The tragic, unenviable choice was to flood some to protect other people and other property. The results of that choice were predictable: flooded homes and cars, lives upended, dreams destroyed. For many, everything changed in an instant.

The question remains: Do the property owners directly affected deserve to be compensated for bearing the burden of the larger community? According to the U.S. Supreme Court in a flooding case, the Constitution’s Fifth Amendment is “designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Arkansas Fish & Game Commission v. United States, 568 U.S. 23, 31 (2012).

We at Johns Marrs Ellis & Hodge LLP will continue to investigate the flooding from the dam releases and will work to serve our friends, families, and neighbors and to protect the rights of those impacted by these tragic events in Texas and throughout the country.  If you or a family member were impacted by the flooding caused by the release of water from the dam, then we would ask that you complete the survey at the below link so that we can further investigate the potential takings claims.

Complete the survey here.  (Sample survey below).

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