High-Speed Rail

Lawyers could profit from high-speed rail land battles

Real estate attorneys are seizing a monumental opportunity as California lumbers ahead with its high-speed rail plans in the central San Joaquin Valley.

With 1,100 or more pieces of property in the path of the proposed route between Merced and Bakersfield, lawyers who specialize in eminent domain cases could see business spike over the coming months as the state's High-Speed Rail Authority starts trying to buy land for rights of way.

"I think there's going to be a lot of attorneys who have never handled an eminent domain case who will suddenly be experts," said C. William Brewer, an eminent domain specialist with the Fresno law firm Motschiedler, Michaelides, Wishon, Brewer & Ryan.

Up and down the Valley, the rail authority anticipates spending tens of millions of dollars to buy the land it needs in Merced, Madera, Fresno, Kings, Tulare and Kern counties. The agency hopes to begin construction next year on a stretch of about 30 miles from northeast of Madera to the south end of Fresno -- the first portion of what is ultimately planned as a 520-mile system linking San Francisco and Los Angeles.

But some vocal property owners, including farmers, are loathe to part with their property and have vowed to force the state to use its power of eminent domain -- a potentially costly and time-consuming ordeal.

Eminent domain, or condemnation, is a legal process by which a government agency can declare a public need for property and sue to acquire it if the government cannot reach agreement with the landowner. A judge decides whether the agency is entitled to the property; in a second phase, a jury decides the fair market value and other compensation due the owner.

Brewer, who has practiced eminent domain law since the 1970s, said he recognized early on the potential for the high-speed rail project to create business. In recent months, he's done television ads and postcards aiming directly at "protecting property rights affected by high-speed rail."

"This is the first time in 36 years of practice that I've ever advertised for anything," Brewer said. "This project will do a lot of harm to properties and businesses, and sometimes people don't know where to go or who to call."

Because the state has not yet begun buying property on the Merced-Fresno section of the rail route, "there really hasn't been a lot of business yet," said David Weiland, a real estate attorney and shareholder with Dowling Aaron Inc., a Fresno law firm. "It's difficult to judge whether or not, or to what extent, there is going to be a lot of legal activity generated by land acquisition."

Just compensation?

The U.S. and state constitutions require that any agency taking land through eminent domain must provide "just compensation" to the owner.

But deciding exactly what "just compensation" means is the kind of sticky legal wicket that gets attorneys involved.

Because trains traveling at 220 mph cannot make tight turns, some of the line will slice in an arc through farms rather than skim the squared-off edges of properties or hug existing freight railroad lines.

For farmland, "just compensation" may encompass much more than the per-acre value of the land. Other factors may include the production value of permanent crops on the acreage, the effect that the rail line would have on the remainder of the parcel, whether any structures or irrigation systems have to be moved, and access to acreage that sits on the other side of the tracks and whether those leftover pieces can be farmed economically.

"When farmland is no longer a nice, square field, it's harder to use mechanized equipment, so the farmer has a higher cost to farm," said Andrew Faber, a partner with Berliner-Cohen, a San Jose law firm that has a portion of its website dedicated to high-speed rail.

Faber said the more complicated land takings tend to be in urban areas that are already developed -- including the San Francisco Peninsula, where he expects his firm will receive at least some high-speed rail business.

"It potentially could be a lot of legal business," he said. "When this part of the line comes to fruition, I think there will be substantial property owner impacts and some eminent domain cases."

When it comes to buying occupied business property, factors will include the cost of relocating structures, inventory and equipment as well as "loss of goodwill" -- the impact of moving from a long-established location that is familiar to customers. And there's no rule of thumb for determining what that's worth. It has to be decided case by case.

The authority last week identified four companies that it plans to hire, at a cost of $34 million, to negotiate the rights-of-way purchases in the Valley: Hamner Jewel Associates of Pismo Beach, Continental Field Services Corp. of Virginia, Universal Field Services of Oklahoma, and Golden State Right of Way Team in Sacramento.

Those four companies will be tasked with not only negotiating with property owners to buy their land, but also to survey, appraise and perform environmental assessments on the properties, handle utility relocation, and provide relocation assistance to businesses and homeowners that will be displaced by the line.

Rail authority representatives believe they will be able to successfully negotiate with most of the affected property owners in the Valley and anticipate that relatively few will carry a contest all the way through to an eminent domain trial.

Attorneys say that is the norm nowadays when agencies seek to buy private land for public projects.

Cutting a deal

"More often than not, these acquisitions are concluded through the negotiation process," Weiland said. "There's just a lot of risk, and it's expensive, to go to trial."

Still, Weiland said he expects his firm "to see a fair amount of business" as property owners hire lawyers for talks over selling their land to the state.

After the state appraises a parcel, it can make an initial offer to a landowner. The owner has the right to have his own appraisal done at the state's expense.

If the two sides can reach agreement, "then that's the end of it," Brewer said.

But if there is a chasm between what the state wants to pay and what the owner believes he or she is due, the state can proceed with a public hearing on what's called a resolution of necessity to seize the land. Negotiations, however, can continue all the way through the process, even into a trial.

"These public agencies typically send out a right-of-way agent, and these guys are pretty savvy," Brewer said. "Their job is to try to talk the property owner into accepting the initial offer and discourage them from talking to an attorney."

Attorneys don't come cheap. Some charge based on their billable hours invested in a case. Some charge a contingency fee based on a percentage of the amount ultimately recovered, while others base their contingency percentage only on what they successfully gain for their client above the government's original offer.

In some instances, if a judge determines that the government's offer was unreasonably low, the court can order the state to pay the property owner's legal fees as part of the award.

But the complexity of eminent domain law, and the wide range of considerations that can affect the ultimate sale price, make having an attorney worth the cost, Brewer said. "I've never not recovered more than what the government initially offered."