Tuesday, July 9, 2013

NJ Supreme Court Decides Key "Just Compensation" Issue in Harvey Cedars v. Karan

Yesterday, the New Jersey Supreme Court issued its long-awaited decision in the important “just compensation” case of Borough of Harvey Cedars v. Karan, a case previously discussed on this blog here and here.  In a victory for governmental entities, the Court broadly construed the range of benefits resulting from a government project that must be considered to offset the compensation due to a landowner whose property is partially condemned to facilitate that project.

New Jersey statutory law states that where the government condemns part of a landowner’s property for a public project, the landowner is entitled to compensation not only for the property taken but also for any damages to the remaining property.  Here, the Borough of Harvey Cedars condemned an easement on a strip of Karan’s oceanfront property to enhance and maintain a larger sand dune than the one in existence.  Karan sought compensation for an alleged reduction in the value of the remainder in light of the new dune’s blockage of some of Karan’s ocean view.  A jury awarded Karan $375,000 in damages to the remainder, and an appellate panel upheld that award. 

The New Jersey Supreme Court reversed.  The unanimous decision overturns the appellate ruling that had upheld a trial court judge’s decision to exclude evidence of any benefits to Karan’s home resulting from the dune project when those benefits are akin to the benefits conferred on the public as a whole. 

The Court’s opinion is available here.  What the decision means moving forward is not entirely clear on my initial reading.

Practically, it would appear that coastal towns considering significant dune building and beach replenishment projects post-Sandy will be quite relieved.  The ruling below posed the distinct possibility that many shore protection projects simply would be far too expensive to execute, given the hundreds and hundreds of easements necessary for such projects to proceed. 

Doctrinally, the Court left some stones unturned in remanding the case for a new trial.  The Court swept into the dustbin of history what it called the at times “obscure,” “confusi[ing],” and “bedevil[ing]” distinction between “special benefits” (appropriate to offset a reduction in value) and “general benefits” (inappropriate to offset a reduction in value).  However, the Court replaced an approach reliant on that distinction with a market valuation approach that may not prove as easy to apply as the Court’s opinion suggests.  The new approach excludes consideration of “uncertain” or “indefinite” benefits when determining compensation due for damage to the remainder, but includes consideration of benefits that are “not speculative” and “reasonably calculable” at the time of the taking “regardless of whether those benefits are enjoyed to some lesser or greater degree by others in the community.” 

Theoretically, the decision is sure to frustrate proponents of strong individual property rights.  Yet it seems the decision also could be criticized on at least two levels by those amenable to the ultimate result.  For one, the Court arguably if implicitly perpetuates the idea that a landowner’s “right to exclude” is normatively superior to other “rights.”  Moreover, regularly citing the work of economist Bill Fischel, the Court assumes that whether takings compensation is due when property rules change is dependent solely on an economic calculus of the costs and benefits of the change as it pertains to the claimant’s lot.

All in all, there is much to unpack in the Court’s 48-page decision. 

-Tim Mulvaney (tmulvaney@law.txwes.edu)


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