November 2014

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Inverse Condemnation: A Closer Look at Physical Takings Claims

By Deputy Attorney General Amanda Kern

© 2014 This article was originally published in the printed magazine COMMUNIQUÉ, the official publication of the Clark County Bar Association. (November 2014, Vol. 35, No. 11). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, Attn: COMMUNIQUÉ Editor-in-Chief, 725 S. 8th St., Las Vegas, NV 89101. Phone: (702) 387-6011.

When the government (or other entity with the power of eminent domain) effectively condemns property without initiating formal eminent domain proceedings, the property owner has a claim for inverse condemnation. State of Nevada, Dep’t. of Transportation v. Cowan, 120 Nev. 851, 103 P.3d 1 (2004). Also known as an unconstitutional “takings” claim, an inverse condemnation claim arises out of the Takings Clause of the Fifth Amendment to the U.S. Constitution, applicable to the states through the Fourteenth Amendment. The Takings Clause and Article I, Section 8(6) of the Nevada Constitution prohibit the taking of private property for public use without just compensation. McCarran Int’l Airport v. Sisolak, 122 Nev. 645, 137 P.3d 1110 (2006).

Background on inverse condemnation
The original takings claim involved a direct appropriation or physical invasion of private property. Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005). For example, in U.S. v. Pewee Coal Co., 341 U.S. 114 (1951), the U.S. Supreme Court found that a compensable taking occurred when the Secretary of the Interior seized and operated a coal mine to prevent a national strike of coal miners.

For many years, a direct appropriation or “functional equivalent of a practical ouster” was the only type of takings claim the courts generally recognized. Lingle, 544 U.S. at 537. In the 1920s, however, the U.S. Supreme Court first held that a state regulation of property could also require just compensation if the regulation is “so onerous that its effect is tantamount to a direct appropriation or ouster.” Id. at 537, citing Pa. Coal Co. v. Mahon, 260 U.S. 393 (1922).

Since Mahon, the U.S. and Nevada Supreme Courts have recognized different types of regulatory takings: (1) a per se regulatory taking, where the regulation completely deprives an owner of all economically beneficial use of its property, Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992), or forces a landowner to suffer a permanent physical occupation of its property, Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), and (2) a Penn Central regulatory taking, where something less than a total loss of a property’s beneficial use occurs, but the character of the governmental action and its economic impact on the claimant still give rise to a taking, Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978).

Other types of takings that neither do not fit nor fit neatly into one of these categories include: (1) unlawful exactions, where the government conditions the granting of a land use application upon the owner making concessions on the use of its property (e.g., leaving a portion undeveloped) that are out of proportion to the burden that the planned development imposes on the public, Dolan v. City of Tigard, 512 U.S. 374 (1994), and (2) access claims, which require a showing that a government action or regulation has substantially impaired a right of access to property, State ex rel. Dep’t of Highways v. Linnecke, 86 Nev. 257, 468 P.2d 8 (1970).

What constitutes a claim for a physical taking?
These days, inverse condemnation cases rarely involve a direct appropriation of property (e.g., the government taking over a coal mine). However, cases may still involve some element of a physical invasion or interference. As the legal framework that governs these cases is not always clear, the question arises: what constitutes a compensable claim for a taking based on a physical invasion, particularly in Nevada, where there are few published opinions on the subject?

Per se regulatory taking based on permanent physical occupation
One way to establish a taking based on a physical invasion is to show that a regulation has caused a permanent physical occupation of property. In Loretto, the U.S. Supreme Court created a narrow category of per se regulatory taking for just this type of situation. There, a New York state law required landlords to permit cable companies to install cable facilities in their apartment buildings. Loretto, 458 U.S. at 419. The court held that when the government authorizes a permanent and exclusive occupation of property, a per se taking has occurred, and no Penn Central evaluation is required. Id. A permanent occupation is one that “destroys the owner’s right to possession, use and disposal of the property.” Mildenberger v. U.S., 91 Fed. Cl. 217, 254-55 (Fed.Cl. 2010).

The primary Nevada Supreme Court case finding a Loretto-type taking is McCarran Int’l Airport v. Sisolak, 122 Nev. 645 (2006). There, the court held that a county ordinance imposing building height restrictions on property adjacent to the airport, to allow aircraft to fly at certain levels, created a per se regulatory taking, as the ordinances authorized a permanent physical invasion of the owner’s airspace. Id. “To constitute a permanent physical invasion, the regulation must actually grant the government physical possession of the property and not simply forbid certain uses of private space.” Hsu v. County of Clark, 123 Nev. 625, 634, 173 P.3d 724, 731 (2007).

Following Sisolak, the court held in Flamingo Paradise Gaming, LLC v. Chanos, 125 Nev. 502, 217 P.3d 546 (2009), that the Nevada Clean Indoor Air Act (NCIAA), which required businesses to place “no smoking” signs on their property, did not constitute a per se regulatory taking. Important to the court’s analysis was that the NCIAA did not give full control over the installation and maintenance of the signs to a third party, unlike the installation of the cable facilities in Loretto. Id. The right to exclude others from the property is “central to establishing a Loretto claim.” Iowa Assur. Corp. v. City of Indianola, 650 F.3d 1094, 1098 (8th Cir. 2011).

Ouster
Another type of physical taking recognized in Nevada is an ouster. In ASAP Storage, Inc. v. City of Sparks, 123 Nev. 639, 173 P.3d 734 (2007), a group of property owners claimed their property had been inversely condemned after the city barricaded the streets surrounding their property due to a storm-induced flood. The owners were unable to enter their businesses for 48 hours, during which time their personal property was damaged. Id. The court explained that the owners could establish a taking if they could demonstrate that the city physically appropriated their property by ouster, which “occurs when the government substantially interferes with an owner’s right of access to his or her property.” Id. at 648, 740. Importantly, “the duration of any such impairment plays a significant role in determining whether the impairment substantially interferes with the owner’s right to access.” Id. at 649, 741. As the impairment in ASAP Storage was “limited to a 48-hour emergency period,” it did not result in a compensable taking. Id. at 650, 741.

ASAP Storage was not the first Nevada case to address impairment of access issues. Since Linnecke, the court has consistently held that if a property owner has a right of access, and the government substantially impairs that right, a compensable taking exists. See Schwartz v. State, 111 Nev. 998, 900 P.2d 939 (1995); Culley v. County of Elko, 101 Nev. 838, 711 P.3d 864 (1985); Lied v. County of Clark, 94 Nev. 275, 579 P.2d 171 (1978). In Linnecke, the court held that an owner of property abutting a public road has a right of easement in the road for access purposes that “cannot be damaged or taken without compensation.” Linnecke, 86 Nev. at 260, 468 P.2d at 9. However, the owner’s right of access is “subject to the public’s primary right of travel on the road. Id. at 261, 9. “These primary rights under the police power fall into the category of reasonable traffic regulations to which the right of access is subject.” Id.
Interestingly, ASAP Storage is the only published Nevada opinion to evaluate a deprivation of access as a potential physical taking by ouster. Generally, access claims in Nevada seem to have occupied their own category of taking, although they can be presented as regulatory takings as well. Because there was neither a regulation at issue in ASAP Storage nor any physical seizure or occupation, the court found the claimants could succeed on their takings claim only if they could show ouster. ASAP Storage, 123 Nev. at 647-48, 173 P.3d at 740.

Regardless of how one characterizes this type of claim, the primary inquiry is the same: does the owner have a right of access, and if so, has the government substantially impaired it? As Linnecke made clear, if the owner still has “free and convenient access” and “his means of egress and ingress are not substantially interfered with, he has no cause for complaint.” Linnecke, 86 Nev. at 260, 468 P.2d at 10. Moreover, even a complete bar to access is not a substantial impairment, and therefore not a taking, when it is brief and limited to a one-time occurrence. ASAP Storage, 124 Nev. at 649, 173 P.3d at 741.

Government-induced flooding
The U.S. Supreme Court has long-held that government-induced flooding can constitute a physical taking. Pumpelly v. Green Bay Co., 80 U.S. 166 (1871). “Where real estate is actually invaded by superinduced additions of water … so as to effectively destroy or impair its usefulness,” a taking occurs, “and the result is no different when property is subjected to intermittent, but inevitable flooding which causes substantial injury.” County of Clark v. Powers, 96 Nev. 497, 501, 611 P.2d 1072, 1075 n.3 (1980), citing Pumpelly, 80 U.S. at 181 and U.S. v. Cress, 243 U.S. 316, 328 (1917). In Powers, the Nevada Supreme Court affirmed a district court’s ruling that the landowners’ property had been taken in its entirety by county drainage and flood control measures that rendered the property with no practical use “other than as a flood channel.” Powers, 96 Nev. at 501, 611 P.2d at 1075.

Recently, in Ark. Game & Fish Comm’n v. U.S., 133 S.Ct. 511, 522 (2012), the Supreme Court held that even temporary government-induced flooding “gains no exception from the Takings Clause.” Moreover, depending on a variety of factors, a single flooding event can be evidence of a taking. Quebedeaux v. U S., 112 Fed.Cl. 317 (Fed.Cl.2013).
It remains to be seen how the Nevada Supreme Court will interpret the holding of Ark. Game & Fish, but a property owner who can show that a government-induced flood caused substantial injury and more than a short-term interference with its property rights probably has a good case for a physical taking.

Takings vs. trespass

Finally, it is worth noting the distinction between physical takings and property-based tort claims. Unauthorized government presence on property or other interference with the use and enjoyment of property can give rise to trespass or nuisance claims. Lied, 94 Nev. at 275. However, without a substantial interference with property rights, these facts will not sustain an inverse condemnation claim. See Stewart v. State of New York, 248 A.D. 2d 761 (1998); Sproul Homes of Nevada v. State ex rel. Dep’t of Highways, 96 Nev. 441, 611 P.2d 620 (1980).

Amanda Kern is a Deputy Attorney General in the Transportation Division of the Nevada Attorney General’s Office. Her work focuses primarily on eminent domain and related litigation.


Eminent Domain’s Catch 22: Should we hold government liable for its mandated transportation planning activities?

By Michael Chapman, Esq. and Agnes Hanley, Esq.

© 2014 This article was originally published in the printed magazine COMMUNIQUÉ, the official publication of the Clark County Bar Association. (November 2014, Vol. 35, No. 11). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, Attn: COMMUNIQUÉ Editor-in-Chief, 725 S. 8th St., Las Vegas, NV 89101. Phone: (702) 387-6011.

State and federal laws require that states and local governments plan future transportation infrastructure. Federal funding is often the primary funding source for major state and local transportation projects. To receive much needed federal assistance, however, state and local agencies are required to plan for future projects 20 years in advance.

Transportation planning plays a fundamental role in a state’s, region’s, and community’s vision of their future. Public participation is not only mandatory by law but is an integral part of the transportation planning process. This ensures that decisions are made in consideration of, and to benefit, public needs. Without meaningful public participation, there is a risk of making poor decisions regarding future roadways.

A possible unintended consequence of long-term public planning is the impact it may have on properties located within the footprint of a future project. Property values, for instance, may increase or decrease in anticipation of future roadways.

This creates a classic “Catch 22” situation for planning agencies. On one hand, both the Nevada Legislature and the United States Congress require government to engage in extensive long-term transportation planning, which necessarily mandates showing the possible routes and locations of future roads on public planning maps and disclosing these plans to the public at open meetings. On the other hand, Nevada’s governmental agencies now have to defend themselves against an increasing number of claims filed by property owners seeking to hold them liable for the alleged loss of market value of their property ostensibly resulting from mandated planning activities.

Federal requirements
Extensive federal involvement in urban transportation systems planning began when The Federal-Aid Highway Act of 1956 and The Urban Mass Transportation Act of 1964, and their accompanying regulations and amendments (collectively “The Acts”), established procedures by which the federal government cooperates with states and political subdivisions to fund transportation improvement projects. The Acts originated the “continuing, cooperative and comprehensive” approach to transportation planning and were codified in Title 23 (Highways) and Title 49 (Transportation) of the U.S. Code. See 23 U.S.C. § 134(c)(3); 23 U.S.C. 135(a)(3); 49 U.S.C. § 5303(c)(3); and 49 U.S.C. § 5304(a)(3). The Acts assign each states’ department of transportation and local agencies with the primary responsibility for transportation planning and set forth the requirements they must meet to receive federal funding for transportation projects.

Specifically, all urban transportation projects funded by the federal government must be selected and proposed by regional planning authorities, referred to as metropolitan planning organizations (“MPO”). These MPOs have the responsibility of developing a long-range plan for the regional transportation system, which includes a list of all transportation projects in the region for the next 20 years. The MPOs provide their long-range plans to the states’ department of transportation, which then incorporate these lists of regional projects into their statewide long-range plan that includes a list of all transportation projects in the state for the next 20 years.

From these state and regional long-range plans, the MPOs and states identify priority projects. The MPOs prepare their own Transportation Improvement Program (“TIP”), which identifies a list of regional transportation projects sought to be carried out over the next four years. These TIPs are then incorporated by the states into the Statewide Transportation Improvement Program (“STIP”), which becomes a complete listing of individual projects in the state for which federal funding will be obligated within each referenced fiscal year. To receive federal funding, transportation projects must come from a TIP or STIP.

Local transportation planning requirements
Nevada recognized the importance of receiving federal funding for its transportation projects, so the legislature enacted NRS 408.245, which accepts all the provisions of The Acts. The legislature also enacted open meeting laws, set forth in NRS Chapter 241, requiring public agencies of Nevada to act and deliberate openly regarding transportation planning, among other matters.

The Regional Transportation Commission of Southern Nevada (“RTC”) is the MPO for the Las Vegas urbanized area. Per NRS 277A.220, the RTC must carry out the duties prescribed by The Acts in order for southern Nevada transportation projects to receive federal funding. The RTC must solicit from its member municipalities – for example, the City of Las Vegas, City of North Las Vegas, and Clark County – a list of all projects for which they seek federal funding. The RTC forwards this list to the State of Nevada’s Department of Transportation (“NDOT”) in the manner described above.

The legislature also requires each political subdivision of Nevada to abide by the planning and zoning provisions of NRS Chapter 278. In particular, they must publically prepare and adopt a comprehensive, long-term general plan for the physical development of the city, county, or region, which is called a master plan. NRS 278.150. Coordination is not only encouraged, but required. Master regional plans must be coordinated with similar plans of adjoining regions and master county and city plans within each region must be coordinated so as to fit properly into the master plan for the region. NRS 278.170.

Government liability for transportation planning
In an era of transparent government, the public has wide access to the government’s long-term transportation plans. In reality, however, involving the public in the transportation planning process is more than merely a means of fulfilling a legal obligation. Meaningful public participation is central to good decision-making and to ensure that the concerns of everyone with a stake in transportation decisions are addressed.

On the flip side, publishing the location of future roadways – even if they are merely lines on map – may impact the marketplace before construction begins. A property, for example, may increase or decrease in value because an anticipated improvement will improve or impair its access.

In balancing the needs of the public for planning with the rights of the landowners for just compensation, courts have historically looked at three discrete periods of time: (1) the planning period, (2) the period post-planning and prior to the government filing an eminent domain action, and (3) the period after the filing of an eminent domain case by the government.

Owners are not entitled to just compensation during the planning period because the owner’s property has not been taken at this time. Plans change or may be abandoned. In any event, the owner remains free to use, occupy, and develop the property. The Nevada Legislature recognized, however, that significant time can pass between the commencement of planning for a transportation improvement project and the acquisition of private property necessary to build the project. A remedy called the project influence rule addresses the possibility that property values may increase or decrease in anticipation of the project. Nevada Revised Statutes Section 37.112 codifies the rule, stating that any decrease or increase in the fair market value of the property that is caused by the project for which the property is acquired must be disregarded when assessing its value for just compensation purposes. This rule is applied in appraising the property for negotiation or trial and evens-out any effect of the planning process.

Despite NRS 37.112, and despite the fact owners remain in title and use of the property during the planning process, some owners believe that once government draws lines on a map identifying future roadways that might affect their property, it should move forward quickly in acquiring the properties necessary for the project. Consequently, property owners are filing an increased number of cases asking the government to be held liable in inverse condemnation and precondemnation damages for their planning activities long before the planning process is even finished and long before government is in a position to secure funding to acquire the property for the project. These claims should fail if the government has not moved beyond mere planning.

The Supreme Court of Nevada addressed this issue in Sproul Homes of Nevada v. State ex rel. Dept. of Highways, 96 Nev. 441, 611 P.2d 620 (1980). In that case, the court held that mere planning is not actionable as a matter of law and Nevada public policy favors an informed public government. Quoting from a California case, the court reasoned as follows: “If a governmental entity and its responsible officials were held subject to a claim for inverse condemnation merely because a parcel of land was designated for potential public use on one of the several authorized plans, the process of community planning would either grind to a halt, or deteriorate to publication of vacuous generalizations regarding the future use of land.”

The second period of time, post-planning and before the government files an eminent domain case, is where the government’s obligation to acquire property with reasonable speed first arises. It has been held that the government leaves the planning process by making an official announcement of intent to condemn. State ex rel. Dep’t of Transp. v. Barsy, 113 Nev. 712, 941 P.2d 971 (1997). This can be the adoption by the agency’s governing body of a resolution of condemnation or taking steps toward acquisition of the property by eminent domain. Buzz Stew, LLC v. City of N. Las Vegas, 124 Nev. 224, 181 P.3d 670 (2008). Once the official announcement is made, the agency may face liability for damages to the property’s market value if it acts oppressively toward that property, or unreasonably delays filing the condemnation case.

In the third period of time, post-filing of an eminent domain case, liability for the acquisition is fixed by the agency’s complaint. Therefore, the issue for trial is the amount of just compensation that must be paid.

As stated earlier, the problem is that the planning process itself is under attack. A growing number of property owners are asking the courts to hold government liable for its planning activities. While the nuances of these claims are beyond the scope of this article, the common thrust of the claims is that property has been economically damaged by a planned project, which results in the effect of pushing the public’s obligation to compensate landowners backwards along the timeline into the pure planning process. This argument creates a conflict between the laws of planning and the laws protecting landowners, which was, until recently, resolved because the law had been settled by Sproul Homes and the federal and state regulations cited herein. These claims are complicated by the fact that many of the cases involve projects that were in the planning phase before and during the Great Recession, when nearly all properties lost value unrelated to the planning process.

The Supreme Court of Nevada is the final arbiter of the question whether government conduct amounts to a taking for which the payment of just compensation is required under the Constitution of Nevada. With regard to the question whether government planning activities that do not rise to the level of a taking should require the payment of damages to affected property owners, however, it seems best to leave it to the Nevada Legislature to decide. It is typically the legislature that has enacted the planning statutes in the first instance and is arguably in the best position to weigh the private and public interests at issue and to determine whether and when government compliance with such enactments ought to form the basis of government liability.

Michael G. Chapman (michael@michaelchapman.com) founded Chapman Law Firm in 1994 and works in the firm’s Reno office. Agnes N. Hanley (ahanley@michaelchapman.com) has been an associate at Chapman Law Firm since 2005 and works in the firm’s Las Vegas office. Mr. Chapman and Ms. Hanley represent public entities and private landowners in all aspects of eminent domain, from precondemnation planning to trial and appeal.


Nevada Brings Landowners’ Rights Into Balance to Prevent Local Kelo v. City of New London Drama

By Paul C. Ray, Esq. and Gerard Dondero

© 2014 This article was originally published in the printed magazine COMMUNIQUÉ, the official publication of the Clark County Bar Association. (November 2014, Vol. 35, No. 11). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, Attn: COMMUNIQUÉ Editor-in-Chief, 725 S. 8th St., Las Vegas, NV 89101. Phone: (702) 387-6011.

Eminent Domain and public takings law hardly seems like the stuff movies are made of. Yet, this past summer, filmmakers Ted and Courtney Balaker announced an upcoming law movie, Little Pink House, about just that. The producers describe the true story of Kelo v. City of New London: “[A] recently divorced nurse was on her own for the first time in her life and fell in love with a rundown little house overlooking a river in New London, Conn. She fixed it up with her own hands and painted it pink. Little did she know that power brokers from city hall to the governor’s mansion were bent on seizing her little pink house and the homes of her neighbors so that . . . a pharmaceutical company could enhance its corporate facilities.” Ilya Somin, “A Forthcoming Film About Kelo v. City of New London.” Washington Post, June 23, 2014. The producers hope that Little Pink House will bring awareness to what they describe as eminent domain abuse and political “cronyism.” While the facts are gripping, the legal reality of Kelo is groundbreaking.

By text, the constitution restricts eminent domain to “public uses.” And for a long time, the idea that a government could take property and then turn it over to private investors seemed far-fetched. But in Kelo v. City of New London, 545 U.S. 469 (2005), the United States Supreme Court held that “economic development” qualifies as a public use. Moreover, “economic development” allows the government to take a citizen’s home and then turn it over to a private corporation. The justices split 5-4 in affirming a similarly close ruling by the Connecticut Supreme Court.

Justice Antonin Scalia discusses Kelo in the same breath as Dred v. Scott and Roe v. Wade—cases where he believes the Court made political mistakes. See Susan Weiss, Justice Scalia Lumps Kelo with Dred Scot and Roe v. Wade, abajounal.com, Oct. 19, 2011. Indeed, even Connecticut Justice Richard Palmer said that, had he known the property would not be developed, he would have voted differently: a single decision which might have kept Ms. Kelo in her house, kept the case out of the Supreme Court, and avoided public outcry from both the left and the right sides of the political spectrum. See Jeff Benedict, “Apology Adds Epilogue to Kelo Case,” The Hartford Courant, September 18, 2011.

The Kelo Court invited states to restrict their own exercise of eminent domain. And the states obliged: nearly every state reacted to Kelo by passing eminent domain reform laws. Callies, Current Critical Issues in Real Estate Law, “Public Use and Public Purpose After Kelo v. City of New London (LexisNexis Matthew Bender 2008). These eminent domain reforms had a tendency to either aim at “public use” or “fair market value.” “Public use” reforms excluded “economic development” from the definition of “public use.” “Fair market value” reforms either required compensation to include economic development value or added a premium based on the nature of the property taken.

For example, in 2006, Michigan amended its Constitution, excluding transfer to a private entity for “economic development” from the definition of “public use.” The Michigan amendment also requires the government, when it takes a private residence, to pay a premium above fair market value. That same year, Indiana enacted provisions that required premium payments for agricultural and residential land condemnation. Indiana also modified “just compensation” to include business losses from eminent domain. Burns Ind. Code Ann. § 32-24-1. Further, Missouri enacted Mo. Rev. Stat. § 523.039, which provides premium valuation methods above fair market value for compensation. Kansas amended its eminent domain statutes to allow taking of property for transfer or lease to a private entity. However, “the legislature shall consider requiring compensation of at least 200% of fair market value to property owners.” K.S.A. § 26-501b. Nevada reacted to Kelo by addressing both public use and fair market value.

NRS 37.009 defines “fair market value.” County of Clark v. Buckwalter, 115 Nev. 58, 59 (Nev.1999). In 2007, Nevada amended NRS 37.009 to provide an alternate valuation method when any entity takes property “primarily for a profit making purpose.” NRS 37.009’s valuation now includes the condemning entity’s use of the property taken, if such inclusion results in a higher value for the property.

Additionally, Nevada amended its Constitution in 2006 and 2008 by adopting Article 1, Section 22. Section 22 includes nine subparts. The first subpart is a “public use” reform; it precludes the use of eminent domain to transfer property from one private party to another private party, either directly or indirectly.
Subpart three mirrors NRS 37.009(6) in its alternate measure of value. However, instead of using NRS 37.009’s “primarily for a profit-making purpose” language, the Constitution of Nevada uses the phrase “for any proprietary governmental purpose.”

The statutory and Constitutional amendments affect other eminent domain rules, such as Nevada’s project influence rule, codified at NRS 37.112. The project influence rule applies to the calculation of just compensation, and it excludes value that a government project adds to or subtracts from the property. Kelo may implicate the purpose of the project influence rule, which is to exclude value solely created by the government’s demand rather than the market’s demand.

Kelo holds that “economic development” is a public use. Therefore, condemnation for “economic development” of a property can be a government project. “Economic development” by the government can also respond to pre-existing market demand. For example, in Kelo, the private investors had already manifested a desire to develop the property.

In its pre-Kelo form, NRS 37.009 only allowed the inclusion of highest and best nongovernmental use when calculating just compensation. So, under Kelo and an unmodified NRS 37.009, the government may act to fulfill pre-existing market demand, i.e. “economic development,” while implying that this demand arises solely from the government, i.e. by asserting the project influence rule. Such an implication would allow the inaccurate and unjust valuation of taken property because, technically, uses arising solely from government demand are not nongovernmental uses.

Accordingly, Nevada’s amendments attempt to avoid a classic “letter of the law versus spirit of the law” dilemma. In this case, it is the letter of the project influence rule—disallowing all value associated with a government project, versus the spirit of the project influence rule—disallowing only value created solely by government demand.

The new NRS 37.009 and the Constitution of Nevada amendments protect landowners. Both reforms recognize that “economic development” government projects may approximate market demand. Thus, when the government takes property primarily for a profit-making purpose, or for any proprietary governmental purpose, the project influence rule may be inapplicable or limited. Just compensation may now include governmentally influenced value when that value approximates the market. The amendments clarify that NRS 37.112 accommodates this policy and balances both governmental and landowner interests.

So, while Kelo may provide good movie material, Nevada has amended its Constitution and statutes to prevent similar drama from unfolding here.

Paul C. Ray practices civil litigation, primarily in the areas of commercial and real estate litigation, including eminent domain, and can be reached at PaulCRayLaw@gmail.com. Gerard Dondero is a graduate of the William S. Boyd School of Law with Paul C. Ray, Chtd. and can be reached at donderog@unlv.nevada.edu.