Court of Appeal Denies Government Writ Petition Challenging Liability for Damages After Abandonment

No business should be forced to waste years of effort and expense engaging in a relocation process, only to have the government change course and refuse to pay for damages caused by its pursuit and subsequent abandonment of a public project. Thankfully, the Third District Court of Appeal agrees.

On December 1, 2020, the Court of Appeal filed a subsequently published opinion in the case of San Joaquin Regional Transit District v. Superior Court of San Joaquin County (2020) 59 Cal.App.5th 39, denying an attempt by the San Joaquin Regional Transit District (“SJRTD”) to evade liability to DSS-2731 Myrtle LLC and Sardee Industries, Inc. (“Sardee”) for significant damages Sardee suffered as a result of SJRTD’s ultimately abandoned effort to take property in Stockton, California from which Sardee operates a container and end manufacturing and engineering services business.

In 2005, SJRTD determined to acquire property from Sardee. Correspondence regarding appraisal of the property and Sardee’s rights followed in 2008 and efforts to negotiate a purchase were undertaken but failed, leading to SJRTD’s ultimate filing of an eminent domain action against Sardee in 2010. Thereafter, the parties negotiated a stipulated order for possession. The order transferred legal possession to SJRTD as of May 1, 2011, reserving a limited right to Sardee to occupy a portion of the property as it explored options for a new facility, to wind down its operations, and to move elsewhere. Under these circumstances, Sardee undertook to move its Stockton operations to a separate facility it maintained in Lisle, Illinois, which it upgraded to handle ongoing work from its Stockton plant. Under the terms of the stipulated order, Sardee was to be permitted to occupy the Stockton property without charge until March 2012, and then until June 30, 2012, subject to payment of rent. By March 2012 most of Sardee’s equipment and operations had been relocated. However, on April 24, 2012, District adopted a resolution abandoning its condemnation of the improved portion of the property where Sardee operated its business.

Upon SJRTD’s abandonment, Sardee sought damages under California Code Civil Procedure section 1268.620, which statute, codified in the Eminent Domain Law, provides that “if after the defendant moves from property in compliance with an order or agreement for possession or in reasonable contemplation of its taking by the plaintiff, the proceeding is dismissed for any reason . . . the court shall: (a) Order the plaintiff to deliver possession of the property to the persons entitled to it; and (b) Make such provisions as shall be just for the payments of all damages proximately caused by the proceeding and its dismissal as to that property.” Rather than working with Sardee to try to make the business whole, SJRTD took the position that Sardee was barred from any recovery, despite the significant expenses it was forced to incur to close down its Stockton facility, prepare its facility in Illinois, and move nearly all of its equipment and other items of personal property from the Stockton site. SJRTD argue that a “complete physical dispossession” from the property was a prerequisite to an award of damages under section 1268.620, and that Sardee had not been completely physically dispossessed.

Very little case law existed to guide interpretation of the section 1268.620, but DNLC successfully tried the issue on Sardee’s behalf in the San Joaquin Superior Court in December of 2016. After a bench trial before the Honorable Linda L. Lofthus, SJRTD’s argument was rejected. In her Statement of Decision, Judge Loftus concluded Sardee had accepted and acquiesced to SJRTD’s acquisition, proceeded toward relocation, and undertaken activities that did constitute a “move” pursuant to section 1268.620, and so should be permitted to present its damage claim to a jury.

In May of 2017, SJRTD challenged the trial court decision by filing a petition for writ of mandate with the Third District Court of Appeal. The Court of Appeal preliminarily stayed proceedings in the trial court. DNLC filed opposition on Sardee’s behalf. Ultimately, following oral argument, the Court of Appeal vacated the stay order and denied SJRTD’s petition. The Court of Appeal agreed with Sardee that sufficient evidence supported the trial court’s finding that Sardee had moved from the Stockton property.

This result was a major victory for Sardee. But it also presents a significant legal development in the field of eminent domain law. The Court of Appeal’s opinion, which was published upon the request of a number of practitioners in the field, now provides helpful guidance to future businesses owners facing similarly challenging circumstances.

(Please visit our Results page for information regarding other favorable appellate outcomes achieved on behalf of our clients.)