United States of America v. 131,675 Square Feet of Space, More or Less, et al
Filing
72
MEMORANDUM AND ORDER : #53 IT IS HEREBY ORDERED that defendant's motion to compel [Doc. #53 ] is denied.. Signed by District Judge Carol E. Jackson on 7/20/15. (KKS)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
UNITED STATES OF AMERICA,
)
)
Plaintiff,
)
)
vs.
)
)
131,675 RENTABLE SQUARE FEET OF
)
SPACE (114,500 ANSI BOMA OFFICES
)
AREA (ABOA) USABLE SQUARE FEET OF )
SPACE, MORE OR LESS, TOGETHER
)
WITH SUCH APPURTENANT PARKING AS )
IDENTIFIED IN THE EXISTING LEASE
)
(TO-WIT: THIRTY-FIVE (35) COVERED
)
PARKING SPACES AND ELEVEN (11)
)
SURFACE PARKING SPACES), ALL
)
LOCATED GENERALLY AT 400 SOUTH
)
18TH STREET, ST. LOUIS, MISSOURI,
)
)
and
)
)
GSA-VA ST. LOUIS PROPERTY, LLC,
)
)
Defendants.
)
Case No. 4:14-CV-1077 (CEJ)
MEMORANDUM AND ORDER
This matter is before the Court on defendant’s motion to compel plaintiff to
respond to certain interrogatories and requests for production. See Fed. R. Civ. P.
37(a)(3)(B). Plaintiff has responded in opposition, and the issues are fully briefed.
I.
Background
On June 10, 2014, after the expiration of a long-term lease, plaintiff the
United States filed a declaration of taking for the Veterans Benefits Administration
to occupy the subject building in downtown St. Louis consisting of 131,675 rentable
square feet of office space together with parking spaces.
Defendant GSA-VA St.
Louis Property, LLC is the lessor of the property. Plaintiff condemned a possessory
interest in the property for a fixed term of 33 months, commencing on June 11,
2014 and ending on March 10, 2017, with no option for further occupation. As an
estimate
of
just
compensation
for
the
estate
taken,
plaintiff
deposited
$4,701,185.27 into the Court’s registry on June 11, 2014. Prior to the expiration of
the condemned leasehold in March 2017, the federal occupants of the subject
building plan to move to the federally-owned Charles F. Prevedel Building in
Overland, Missouri when renovations on that building are complete.
In response to the complaint in condemnation, defendant did not challenge
the taking, but demanded a jury trial on the issue of just compensation. See Fed.
R. Civ. P. 71.1(e). On February 6, 2015, defendant served plaintiff with its first set
of interrogatories and first requests for production of documents, seeking
information related to the status of the renovations on the Prevedel Building.
Plaintiff served its responses on March 25, 2015, objecting to certain requests on
grounds of relevance.
In the instant motion to compel, defendant argues that
discovery related to the Prevedel Building is relevant to the issue of a rental
premium for the uncertainty regarding the end of the condemnation period.
II.
Legal Standard
Rule 26(b)(1) of the Federal Rules of Civil Procedure provides that “[p]arties
may obtain discovery regarding any nonprivileged matter that is relevant to any
party’s claim or defense.” “Relevant information need not be admissible at trial if
the discovery appears reasonably calculated to lead to the discovery of admissible
evidence.” Fed. R. Civ. P. 26(b)(1). “A district court is afforded wide discretion in
its handling of discovery matters.”
Cook v. Kartridg Pak Co., 840 F.2d 602, 604
(8th Cir. 1988).
2
Because the rules of discovery are broad, the burden is typically on the party
resisting discovery to explain why discovery should be limited. Jo Ann Howard &
Assocs., P.C. v. Cassity, 303 F.R.D. 539, 542 (E.D. Mo. 2014). That is, after the
proponent of discovery makes a threshold showing of relevance, the party opposing
a motion to compel has the burden of showing its objections are valid by providing
specific explanations or factual support as to how each discovery request is
improper. Hofer v. Mack Trucks, Inc., 981 F.2d 377, 380 (8th Cir. 1993); St. Paul
Reinsurance Co., Ltd. v. Commercial Fin. Corp., 198 F.R.D. 508, 511-12 (N.D. Iowa
2000).
The party resisting discovery “must demonstrate to the court ‘that the
requested documents either do not come within the broad scope of relevance
defined pursuant to Fed. R. Civ. P. 26(b)(1) or else are of such marginal relevance
that the potential harm occasioned by discovery would outweigh the ordinary
presumption in favor of broad disclosure.’”
St. Paul Reinsurance Co., Ltd., 198
F.R.D. at 511-12 (quoting Burke v. New York City Police Dep’t, 115 F.R.D. 220, 224
(S.D.N.Y. 1987)).
III.
Discussion
A.
Discovery Requests and Responses
The contested requests and responses are set forth below.
Each of
defendant’s requests pertains to information or documents related to the Prevedel
Building.
1.
Interrogatories
4. State with specificity the date you expect to be able to vacate the
Subject Property and identify all documents: (i) related to the
selection of 33 months as the duration of the taking; (ii) the
anticipated scope of work involved in the design and/or
construction of the renovations of the Prevedel Federal Building for
occupancy by the VA; and (iii) the schedule for the work involved
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in the design and/or construction of the renovations of the
Prevedel Federal Building.
5.
Identify any individual who has knowledge regarding: (i) the
selection of 33 months as the duration of the taking; (ii) the
anticipated scope of work involved in the design and/or
construction of the renovations of the Prevedel Federal Building for
occupancy by the VA; and (iii) the schedule for the work involved
in the design and/or construction of the renovations of the
Prevedel Federal Building.
2.
1.
Document Requests
All documents describing, referring or relating to the anticipated
scope of work involved in the design and/or construction of the
renovations of the Prevedel Federal Building for occupancy by the
VA, including, without limitation, any preliminary designs or
detailed cost calculations that were the basis for the $27.16 million
estimated cost presented to Congress for funding approval.
2. All documents containing, referring or relating to a schedule for the
work involved in the design and/or construction of the renovations
of the Prevedel Federal Building for occupancy by the VA.
3. All documents referring or relating to the solicitation of bids for the
design and/or construction of the renovations of the Prevedel
Federal Building for occupancy by the VA.
3.
Plaintiff’s Responses
Plaintiff made the same objection to each above-listed discovery request:
Plaintiff objects to this [request] because such information is not
relevant to a determination of fair market value of the subject property
on the date of taking, nor is it likely to lead to the discovery of
admissible evidence. See Fed. R. Civ. P. 26(b)(1). The only issue for
the fact-finder in this case is the amount of just compensation owed
for the subject property on the date of taking. See United States v.
Reynolds, 397 U.S. 14, 20 (1970); Kirby Forest Indus., Inc. v. United
States, 467 U.S. 1, 9-10 (1984).
Where the estate taken is a
leasehold, the measure of just compensation is the market rent of the
occupied premises for the term specified. Kimball Laundry Co. v.
United States, 338 U.S. 1, 7 (1949). The United States’ own need for
property particularly suited for its public purpose cannot be considered
as a measure of value. United States v. Miller, 317 U.S. 369, 375
(1943) (eliminating consideration of value related to “a taker who
needs the land because of its particular fitness for the taker’s
purpose”). Information regarding the Prevedel Federal Building, miles
4
away from the subject property, has absolutely no bearing on the
amount of just compensation owed for the subject property on the
date of taking. Such information would be both inadmissible at trial
and completely irrelevant to the issues to be tried in this action.
B.
The Parties’ Arguments
Defendant asserts that discovery related to the Prevedel Building is relevant
to a rental premium for the uncertainty regarding the end of the condemnation
period, which its valuation expert included in his appraisal of the fair market value
of the
possessory interest.
Defendant argues that a
fair
market
value
determination must take into account all considerations that might reasonably be
given substantial weight in a hypothetical bargaining between a willing buyer and
willing seller. In the case of a temporary taking, defendant contends that an owner
is entitled to be compensated for the uncertainty of the duration of the
government’s occupation. Accordingly, defendant concludes, the discovery of facts
related to the status of funding for the Prevedel Building project, the government’s
plans for the renovation and the government’s ability to vacate the subject building
as of the date of condemnation is relevant to the uncertainty that would be
reflected in the market rental rate.
In opposition, plaintiff contends that where an estate taken is a definedterm, temporary leasehold, the measure of just compensation is the market rent for
the occupied premises for the term specified. Consequential losses, such as injury
to business, lost profits, and frustration of plans, must be excluded from this
computation. Plaintiff asserts that no federal case has ever held that a landowner
is entitled to a premium because the government could condemn again at the end
of the defined condemned leasehold period. In the absence of market data or a
showing of special costs or economic harm directly affecting market value, which
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plaintiff argues defendant has not produced, a claim for a premium would
improperly penalize the government for condemning.
Finally, in contrast to
defendant’s contentions regarding uncertainty relating to the Prevedel Building
project,
plaintiff
provides
as
exhibits
publicly
available
documentation
demonstrating that Congress approved funding for the Prevedel Building in advance
of the taking.
C.
Just Compensation
The United States has the authority to take private property for public use
under the right of eminent domain.
(1875).
Kohl v. United States, 91 U.S. 367, 371
However, the Takings Clause requires the government to provide “just
compensation” to the owner of the property for a taking.
U.S. Const. amend. V
(“[N]or shall private property be taken for public use, without just compensation.”).
The Supreme Court “has repeatedly held that just compensation normally is to be
measured by ‘the market value of the property at the time of the taking.’” United
States v. 50 Acres of Land, 469 U.S. 24, 29 (1984) (quoting Olson v. United States,
292 U.S. 246, 255 (1934)). “Under this standard, the owner is entitled to receive
‘what a willing buyer would pay in cash to a willing seller’ at the time of the taking.”
United States v. 564.54 Acres of Land, 441 U.S. 506, 511 (1979) (quoting United
States v. Miller, 317 U.S. 369, 374 (1943)).
Compensation is required when a
leasehold is taken and the government occupies the property for its own purposes,
even if the taking is temporary.
Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l
Planning Agency, 535 U.S. 302, 322 (2002) (citing United States v. General Motors
Corp., 323 U.S. 373 (1945) and United States v. Petty Motor Co., 327 U.S. 372
(1946)).
In a temporary taking of a leasehold, “the proper measure of
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compensation is the rental that probably could have been obtained.”
Kimball
Laundry Co. v. United States, 338 U.S. 1, 7 (1949) (rejecting the calculation of the
difference between the market value on the date of the taking and on the date of
return as a method to measure just compensation for a temporary taking).
The market value of property for purposes of determining just compensation
“does not include the special value of property to the owner arising from its
adaptability to [the owner’s] particular use.” 564.54 Acres of Land, 441 U.S. at 511
(quoting Miller, 317 U.S. at 374-75).
Because market value “does not fluctuate
with the needs of condemnor or condemnee but with general demand for the
property, evidence of loss of profits, damage to good will, the expense of relocation
and other such consequential losses are refused in federal condemnation
proceedings.”
Petty Motor Co., 327 U.S. at 377-78.
Thus, because just
compensation “is for the property, and not to the owner,” Monongahela Navigation
Co. v. United States, 148 U.S. 312, 326 (1893), “indirect costs to the property
owner caused by the taking of his land are generally not part of the just
compensation to which he is constitutionally entitled.”
United States v. Bodcaw
Co., 440 U.S. 202, 203 (1979); see Olson, 292 U.S. at 255 (stating that the private
owner “must be made whole but is not entitled to more”).
The seminal Supreme Court case to consider the calculation of just
compensation based on market value for a temporary taking under a leasehold was
United States v. General Motors Corporation, 323 U.S. 373 (1945).
In General
Motors, the Supreme Court held that when a taking is only temporary or partial,
other factors that “certainly and directly affect the market price agreed upon”
beyond the long-term rental value of the space may be considered as evidence of
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market value. Id. at 382-83. Such factors, in General Motors, included the costs of
labor, materials, transportation and storage for the leasor to move out of the
property. The Court was clear in stating that these removal costs were not to be
considered “as an independent item of damage, but as bearing on the rental value
such premises would have on a voluntary sublease by a long-term tenant to a
temporary occupier.”
United States v. Westinghouse Elec. & Mfg. Co., 339 U.S.
261, 263-64 (1950) (clarifying General Motors). In holding thus, “the Court was
scrupulously careful not to depart from the settled rule against allowance for
‘consequential losses’ in federal condemnation proceedings.” Id. at 264. The Court
in General Motors described this settled rule as follows:
The rule in such a case is that compensation for that interest does not
include future loss of profits, the expense of moving removable
fixtures and personal property from the premises, the loss of good-will
which inheres in the location of the land, or other like consequential
losses which would ensue the sale of the property to someone other
than the sovereign. No doubt all these elements would be considered
by an owner in determining whether, and at what price, to sell. No
doubt, therefore, if the owner is to be made whole for the loss
consequent on the sovereign's seizure of his property, these elements
should properly be considered. But the courts have generally held that
they are not to be reckoned as part of the compensation for the fee
taken by the Government. We are not to be taken as departing from
the rule they have laid down, which we think sound.
Id. at 379-80.
Thus, in a temporary taking of a leasehold, as in a complete
condemnation, consequential losses “must be excluded from the reckoning.” Id. at
383; see also United States v. 38.60 Acres of Land, 625 F.2d 196, 200 (8th Cir.
1980) (“While the rule may appear unjust, it is well settled that the landowner is
not entitled, at least within the framework of a condemnation suit, to be
compensated for such consequential damages as loss of business, relocation
8
expenses, and the like.”) (quoting United States v. 91.90 Acres of Land, 586 F.2d
79, 87 (8th Cir. 1978)).
Similarly, in Olson v. United States, a case defendant cites, the Supreme
Court stated that in making a determination of just compensation for a
condemnation, “there should be taken into account all considerations that fairly
might be brought forward and reasonably be given substantial weight in such
bargaining.” 292 U.S. at 257. However, the Court also went on to state:
Elements affecting value that depend upon events or combinations of
occurrences which, while within the realm of possibility, are not fairly
shown to be reasonably probable should be excluded from
consideration for that would be to allow mere speculation and
conjecture to become a guide for the ascertainment of value—a thing
to be condemned in business transactions as well as in judicial
ascertainment of truth.
Id.
As such, only direct evidence of market rental value, to the exclusion of
remote, hypothetical conjecture, should be considered in ascertaining just
compensation for a taking.
Defendant contends that the uncertainty premium it seeks does not
constitute consequential damages, but instead is a measure of the rental market’s
reaction as of the date of taking to the perceived risk of consequential damages for
lost opportunities to rent, sell, or develop the property.
In other words, the
premium sought is based on the effect on the market rental rate of the property for
the risk of a future taking. Defendant also argues that the uncertainty premium it
seeks is analogous to the additional rent that a landlord in a private commercial
setting would demand and be able to obtain from a tenant who sought a short-term
lease of an office building in which the landlord waived its contractual and statutory
rights to a holdover penalty or to evict the tenant for holding over. Because the
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government has the power to condemn an additional period at the end of 33
months if the Prevedel Building is not ready, defendant asserts that the risk
underlying the uncertainty premium is the risk that a suitable long-term tenant will
come along during the extended period of taking.
The declaration of taking plaintiff filed contains no option to renew, holdover,
or terminate early. The government’s condemnation power, however, gives plaintiff
the opportunity to take the subject property for a public purpose again after 33
months have elapsed, if it decides it needs to.
At that time, plaintiff would be
required to file another declaration of taking and provide an estimation of just
compensation for the taking, as it did with the present taking.
This hypothetical
future taking of private property for public use, however, is inherent and possible at
all times by the very nature of the government’s power of eminent domain. See
United States v. Jones, 109 U.S. 513, 518 (1883) (“The power to take private
property for public uses, generally termed the right of eminent domain, belongs to
every independent government. It is an incident of sovereignty, and . . . requires
no constitutional recognition.”).
Essentially, defendant seeks a premium solely on the basis of plaintiff’s
status as a government entity. An “uncertainty premium” premised on the fact that
the government is the tenant and could condemn for another period of time is not
permitted in the determination of just compensation for the present taking.
See
General Motors, 323 U.S. at 379-80 (stating that “consequential losses which would
ensue the sale of the property to someone other than the sovereign” are “not to be
reckoned as part of the compensation for the fee taken by the Government”); see
also United States v. 3,218.9 Acres of Land, 619 F.2d 288, 291 (3d Cir. 1980) (“[A]
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possible future taking of property does not give rise to a present cause of action for
damages.”).
The market value of the property taken should be assessed
uninfluenced by plaintiff’s right to exercise its power of eminent domain in the
future. Cf. United States ex rel. Tenn. Valley Auth. v. Powelson, 319 U.S. 266, 276
(1943) (“If the owner’s claim against the sovereign were increased by reason of the
power of eminent domain, then the very existence of the right of condemnation
would confer on the owner a value for which he must be paid when the right is
exercised.”). In the event of a future taking, defendant may be assured that the
law would require plaintiff to provide just compensation again. U.S. Const. amend
V; 40 U.S.C. § 3114.
In a case defendant relies upon where the government’s temporally and
spatially partial taking frustrated the building owner’s plans to renovate and
rendered it difficult or impossible to rent the remainder of the building, the court
found that settled legal principles precluded the owner’s claim for added
compensation for the frustration of its renovation and rental plans. United States v.
1735 N. Lynn St., 676 F. Supp. 693, 701 (E.D. Va. 1987). Citing Justice Douglas,
the court noted:
It is a well settled rule that while it is the owner’s loss, not the taker’s
gain which is the measure for compensation for the property taken,
not all losses suffered by the owner are compensable under the Fifth
Amendment . . . . [T]he sovereign must pay only for what it takes, not
for the opportunities the owner may lose.
Id. (quoting Powelson, 319 U.S. at 281-82). Here, plaintiff’s taking of the subject
building may frustrate defendant’s plans or ability to lease the building to a more
desirable future long-term tenant. This flexibility may be a thing of value and the
frustration of these plans may mean a loss to defendant. However, the law is clear
11
that plaintiff must pay only for what it takes, not for opportunities defendant loses.
Powelson, 319 U.S. at 282.
In another case defendant relies upon, the owners of a building contended
that a determination of the market rental value for the space temporarily taken by
the government “must include consideration of all the costs that a would-be tenant
would have to pay to obtain a voluntary lease for space in an otherwise empty
building ready for conversion, with contractors ready to work.”
United States v.
38,994 Net Usable Square Feet, No. 87-C-8569, 1989 WL 51395, at *2 (N.D. Ill.
May 11, 1989). The court agreed with the owners and found that, pursuant to the
Supreme Court’s decisions in General Motors and Kimball, evidence of the owners’
actual losses1 for the period of the taking could be offered as evidence relevant to
determining just compensation. United States v. 38,994 Net Usable Square Feet,
No. 87-C-8569, 1989 WL 152806, at *1 (N.D. Ill. Nov. 21, 1989) (clarifying the
court’s May 10, 1989 order). However, the court also clearly recognized the settled
principle that the government is not required to pay for consequential losses as
distinct items of damages. Id. The “uncertainty” the court referred to in its jury
instruction pertained to the unknown length of future occupation at the time the
government held over on the prior lease but before it filed a complaint in
condemnation. This uncertainty was in existence for a period of time prior to the
taking, not subsequent to the defined leasehold period condemned.
Thus, the
court’s decision in 38,994 Net Usable Square Feet does not compel an alternative
outcome here where defendant seeks an “uncertainty premium” for the possibility
1
The factors the court stated a jury could consider included “the loss of the right to convert the
property during the term of the taking, the increased construction and financing cost resulting from
waiting six months to convert, and the anticipated costs of carrying and operating the entire property
due to the [g]overnment’s presence.” 38,994 Net Usable Square Feet, 1989 WL 51395, at *3.
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of future consequential damages for lost business opportunities or the possibility of
a future taking after a fixed leasehold ends.
Because the uncertainty premium sought does not constitute a legally
permissible component of market rental value, the Court finds that defendant has
failed to demonstrate the relevance of the discovery it seeks related to the Prevedel
Building for the purpose of determining just compensation for the taking at issue.
As such, plaintiff’s objections are sustained.
*
*
*
*
*
For the reasons set forth above,
IT IS HEREBY ORDERED that defendant’s motion to compel [Doc. #53] is
denied.
_____________________________
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 20th day of July, 2015.
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