Wednesday, June 17, 2009

Who “pays” for land use lawsuit judgments against a town?

   One of the benefits of a system of litigation that allows for the award of punitive and other open-ended “damages” is that the litigation may force the defendant to “internalize” the full costs of its actions.  A negligent driver not only has to pay for the medical bills of the person that he or she inures, but also for the “pain and suffering” that the negligent act has caused.  In this way, one economic model suggests, people are encouraged to avoid conduct that might cause a large amount of “harm,” as broadly defined.  But a system of open-ended damages can also have powerful effects upon people who are not parties to the litigation.  In the famous nuisance case of Boomer v. Atlantic Cement Co., 257 N.E.2d 870 (N.Y. 1870), a business that clearly was causing a land use nuisance to the plaintiff was not forced to stop its conduct, in large part (the court ruled) because this might have caused the loss of jobs at the business.  And even some liberals are encouraging President Obama to support caps on medical malpractice litigation awards, in order to curb the costs of medical care.
Pike Cty, Pa    An interesting land use example of this phenomenon is playing out in the small town of Westfall, Pa.  There, according to the story, a developer has secured a judgment of about $20 million against the town; the developer argued successfully that local government officials – in the 1980s – conspired unlawfully against him to change zoning and land use laws to stop him from building a condominium development .  Now many years and many litigation steps later, the town government, whose budget is only a fraction of the judgment, has filed for bankruptcy protection.
   It remains to be seen whether the bankruptcy action will proceed, or whether any Westfall jobs will be lost as a result of the judgment.  And skepticism of the judgment in no way excuses the conduct of the town.  But just as open-ended damage awards force a defendant to internalize the full costs of its unlawful conduct (and deter them), court should realize that a judgment involving a government’s land use action is likely to have adverse repercussions that may be “paid” in part by people who are innocent of the town government’s conduct …

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More interesting would be judgments surrounding NIMBY issues where surrounding land owners object and pressure local government boards into rejecting development proposals. When an award against the local government is given, would it not be improper to consider a local NIMBY assessment on those same landowners who opposed the development rather than on the backs of the larger taxpaying population. After all, one of the most prominent arguments I hear is how potential developments will "impact" their property values - in exchange for that benefit should they not pay?

Posted by: Derek | Jun 23, 2009 9:24:57 AM