Hawaii Supreme Court Sides With NFIB Legal Center on Eminent Domain Valuation

Date: June 08, 2017

As we’ve discussed in the past, NFIB Small Business Legal Center is committed to fighting against all forms of eminent domain abuse. To be sure, we’ve led the charge in calling for the U.S. Supreme Court to overturn the infamous Kelo v. New London decision—which (wrongly) said that it is legal to take private property to hand over to private developers as part of an economic revitalization plan. For example, we recently helped prompt the Louisiana Supreme Court to grant review of a case where a public authority sought to use eminent domain to co-opt a small business’ facilities for blatantly anti-competitive purposes.

But even when the government seeks to condemn private property for a truly legitimate public use, eminent domain abuse occurs where the authorities fail to comply with the Constitution’s categorical requirement to pay just compensation for anything taken. And since in most cases there is little an owner can do to stop an eminent domain condemnation from moving forward, the NFIB Legal Center has made a special priority of urging courts to enforce this constitutional principle, to ensure that small business owners are compensated fairly.

As we’ve argued time and again, landowners are entitled to the “full and perfect equivalent” of what has been taken from them. But that doesn’t mean that the authorities won’t try cutting corners where they think they can get away with it. Case in point, in County of Kauai v. Hanalei River Holding, Ltd., we joined with the Owners Counsel of America in urging the Hawaii Supreme Court to grant review of a decision that we thought troubling. In Hanalei River Holding, Ltd. the lower court had ruled that the government need not fully compensate an owner for the devaluation of his remaining property when taking a strip of land for a public works project.

This flatly contravenes the cardinal rule that—in addition for compensating for the land actually taken—the government must pay “severance damages” for the resulting devaluation of the portion of land not taken in the condemnation. But in Hanalei River Holding, Ltd., the County sought to get around the constitutional obligation to pay full severance damages on the view it was only required to pay severance damages for parcels physically adjoining the portion of land taken for its eminent domain project. On that theory, the County maintained that it had no obligation to pay severance damages for the devaluation of a separate parcel of land that was in the near proximity to the project, but which was separated by a waterway.

As NFIB Legal Center and OCA argued in our joint-amicus brief to the Hawaii Supreme Court—this rule artificially limits the owner’s right to just compensation. To be sure, the Constitution requires that owners must receive full compensation so as to place them in the same pecuniary position as they would be had the taking never occurred. In other words, its fundamentally wrong to deny compensation for part of the owner’s loss.

The good news is that the Hawaii Supreme Court agreed with us. In a recently issued decision, the Court held that government must pay severance damages, even if the devalued property is not immediately adjoining the condemned parcel. Not only is this good news for small business landowners in Hawaii, but its good news for small business landowners throughout the country. This decision, brings Hawaii in line with the rest of the country on this issue. And that is important because, had the court ruled otherwise, it might well have opened the door for other jurisdictions to begin chipping away at the right to full severance damages.

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