Commentary: On Eminent Domain - Rethinking condemnation's effect on a

Any business in the path of a proposed road, stuck in an urban renewal area, or in an area designated for economic development should be attuned to the work of the recently formed Task Force on Business Owner Compensation in Condemnation Proceedings created by an enactment of the 2004 session of the Maryland General Assembly.

Under the existing provisions of Title 12 of the Real Property Article of the Maryland Code, there are only limited sums available to a business in a location condemned pursuant to the exercise of eminent domain. A business, as lessee, is peculiarly limited, because the theory of condemners is to focus payment on the real estate, not what is done on the realty.

Reestablishment expenses for a displaced firm ... or small business at its new site is limited to a sum not to exceed $10,000.00, by RP Section 12-205 (a)(8). If a business cannot be reestablished, at present it appears limited to at most $20,000 from the condemner, Section 12-205(c).

In this context, SB275 was enacted in the 2004 session. It creates the Task Force on Business Owner Compensation in Condemnation Proceedings and charges the task force to report its final findings to the governor ... on or before December 31, 2005.

The legislation directs the Task Force to study six subject areas including:

... the concept of business good will for the purpose of developing a method for calculating compensation in condemnation proceedings;

... the appropriateness of making a legislative proposal on business owner compensation in condemnation proceedings; and

... the circumstances in which condemnation can be used in the State.

The task force has 16 members including representatives of the legislature, various state and local agencies ranging from the Maryland Department of Transportation to the Department of Planning, several representatives of business and retailers, and two attorneys versed in condemnation matters. Despite the broad and disparate composition, government agencies have at least nine of the 16 members of the task force. The chair is a respected member of the Maryland bar, Kurt J. Fischer of DLA Piper Rudnick Gray Cary.

According to Fischer, a number of states have taken steps to address valuation of business in condemnation proceedings. The efforts of Maryland's sister states will be a focus of the task force. In addition, Fischer said that the task force may be able to propose ways to ameliorate the effect [of condemnation] on a business that may be difficult to relocate.

Task force member Tom Saquella, president of the Maryland Retailers Association, wants the task force to suggest ways to provide some compensation for business good will so that a condemnation of a business location does not just focus on the real estate.

SB 275 was sponsored by Sen. Norman R. Stone Jr., D-Baltimore County. As the sponsor, he hopes the task force makes a serious study of the issues and adds to the statutes, assistance for small businesses, so that businesses, impacted by condemnation, are treated fairly even if the business is merely a tenant on the condemned real estate.

The task force is staffed, by the enacting legislation, by the Maryland Department of Transportation. It has scheduled monthly meetings from February through May, with decisional meetings set for September and October. At the meeting set for Feb. 14, 2005, the staff will present and lead a discussion of condemnation policies of other states.

Also at the Feb. 14 meeting, Del. Samuel I. (Sandy) Rosenberg has accepted an invitation to address the task force. Rosenberg was the lead sponsor of the companion House bill to SB 275. Rosenberg believes existing law on compensation for business caught up in condemnations is outdated; it does not provide adequate compensation for business - good will, in particular. Rosenberg expressed, as his prime concern, fairness for small businesses.

Kelo's coming

Lurking in the background of the task force's obligation to study when condemnation can be used is the argument, on Feb. 22, in the U.S. Supreme Court, of the case of Kelo v. New London, Conn., 94- 108.

In previous columns, I have discussed this case and its challenge to the condemnation of private property for the benefit of a private developer under the rubric of public benefit through economic development.

According to the petitioner's brief in Kelo, the question presented is:

What protection does the Fifth Amendment's public use requirement provide for individuals whose property is being condemned, not to eliminate slums or blight, but for the sole purpose of 'economic development' that will perhaps increase tax revenues and improve the local economy?

In summarizing petitioners' arguments, their counsel points out that New London's economic development bodies seek to take Petitioners' 15 homes to turn them over to other private parties in the hope that [New London] may benefit from whatever trickle down effects those new businesses produce.

Petitioners, of course, urge the Supreme Court to reject use of eminent domain for private business development because that is not public use under the Fifth Amendment.

Before the task force presents its report and any proposed legislation, the Supreme Court will have decided Kelo and probably provided guidance or definition to the constitutional command that takings be limited to public use. Regardless, condemnations will be available to governments. Their scope may be limited but the concept of just compensation will still be at issue. And the task force's work to define properly such compensation when a business loses it location will be heard in the legislative halls.

In this regard, the work of the task force bears scrutiny by the business community. The opportunity for business to make its concerns and wants clear should not be missed.

M. Albert Figinski, former judge of the Circuit Court for Baltimore City, now practices at the Law Office of Peter G. Angelos. The views expressed are his own.

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