Eminent Domain Procedure Law 701 — Continued

By M. Robert Goldstein and Michael J. Goldstein

May 15, 1991

In August 1987, the Eminent Domain Procedure Law (EDPL), §701, was amended to provide that when an award in a condemnation proceeding was “substantially” in excess of the condemnor’s proof on the trial, the trial court, in its discretion, if required to afford a claimant “just compensation,” could award a claimant an additional allowance of his litigation expenses, including attorneys’, engineering and appraisers’ fees.

The statute had a rocky start. The first lower court decision held that the statute did not apply to then pending cases. It was, however, followed by a number of Court of Claims and other cases holding differently. (L.I. Pines Barrens Water Corp v. State of New York., 144 Misc2d 665, 669, 544 NYS2d 939 (Ct. of Claims, Silverman, J., 1989); Spear v. State of N.Y., (Ct of Claims, Claim No. 73272, Margolis, J., 1989); In re Transit Authority (Gun Hill Bus Garage), 142 Misc2d 629, 538 NYS2d 161 (Sup. Ct., Bx. Co., Shapiro J., 1989); Frisbro Enterprises Ltd. v. State of N.Y., 145 Misc2d 397, 546 NYS2d 789 (Ct of Claims, Silverman, J.); Town of Esopus v. Gordon, 143 Misc2d 193, 539 NYS2d 841 (Sup. Ct. Ulster Co., Connor, J., 1989), aff’d __ AD2d __ 557 NYS2d 732 (3d Dept., Sept. 1990.) This disparity was subsequently clarified by the Appellate Division, Second Department, which held the statute to be remedial in nature and gave retroactive effect to cases that were not finally determined as of the date of its enactment (Matter of N.Y.C. Trans. Auth. (Superior Reed & Rattan Furniture Co.), 160 AD2d 705, 553 NYS2d 785 (2d Dept., 1990); Matter of the City of New York (Long Island Sound Realty) 160 AD2d 696, 553 NYS2d 789 (2d Dept., 1990).

In Excess of Condemnor’s Proof

Over that hurdle, the courts began to address the question of at what point was the award substantially in excess of the condemnor’s proof to qualify for an additional allowance. The courts early appreciated that the drafters of the statute made an incorrect assumption that the initial offer to the condemnee mandated by EDPL would necessarily be the amount of the condemnor’s proof at the trial. The amount of that offer, when turned down, was then made as an advance payment. What soon became apparent is that, quite often, the condemnor would make an offer based on an existing appraisal that was considerably lower than the amount of its appraisal made later and subsequently submitted at the trial.

Thus we find in Frisbro, supra, that the initial offer was $19,000 but that the appraisal submitted on the trial was $30,000 with an award of $56,390. The court in granting an additional allowance made the comparison, not to the proof on the trial, but to the initial offer, citing Long Island Pine Barrens Water Corp., supra, and the lower Court decision in Done Holding Co. v. State of N.Y., (Ct. of Claims, Claim No. 68231, filed Aug. 18, 1989), aff’d. 144 AD2d 528, 565 NYS2d 178 (2d Sept. 1991). In Done, supra, the initial offer was $53,200, the State’s proof at the trial was $204,000 with an award of $344,000 and an increase by the Appellate Division to $377,000. In Long Island Pine Barrens, supra, the initial offer was $1,350 the trail appraisal was $27,000 and the award was $29,650. In both cases the comparison was to the initial offer, and an additional allowance was granted. In Karas v. State of N.Y., __ AD2d __, 565, NYS2d 185 (2d Dept., 1991) the court did not even mention the amount of the trial appraisal but just compared the award of $257,000 directly to the pre-litigation offer of $182,500. At this point, it is a given that the award will be compared to the initial offer that brought the claimant into court.

The reasoning for this approach was made quite clear in the decision of Judge Silverman in Long Island Pine Barrens, supra, where the court stated that “clearly the intent of the statute was to correct inequities relative to the initial offer.” The court made specific reference for this statement not only to the bill jacket, but to the Report of the Law Revision Commission (McKinney’s Session Laws — 7/87 No. 4, Page A-455), which drafted the original bill. As the court stated: “The purpose of the amendment would be defeated were we to use amounts for comparison which were not available until after the condemnee has retained an attorney and an expert and filed his own appraisal. We must base our determination on the amount that was offered at a time when the litigation expenses could be saved.” The reasoning and approach was adopted by the Appellate Division.

Of course, all of this is based on another assumption, that the policy of EDPL is being followed by the condemnor and that an initial offer is made that a condemnee could accept in order to spare himself the expense of litigation. But what happens when no such offer is made? We have a recent decision just on that point where the court stated: “Here the condemnor failed to make any initial offer to the claimant. In comparing the initial offer of $0.00 to the final award of $252,000, there is no question that the statutory requisite has been satisfied (Cf. Done Holding Co. v State of N.Y. , supra; Karas v. State of N.Y., supra; Long Island Pine Barrens Water Corp. v. State of N.Y. 144 Misc2d 665).”

Parenthetically, the court notes that the same result would be reached even if the court were to consider the condemnor’s $81,500 advance payment as the “Condemnor’s proof.” (Matter of City of NY (Alley Pond Park Addition (Second Taking), Index No. 9879/81 Sup. Ct. Queens Co., Kassoff, J. decision dated Feb. 25, 1991). Earlier in his decision the court had noted that while title vested in the condemnor on Aug. 5, 1981, it was not until June 2, 1982, that claimant was notified that an advance payment would be made, after he had retained counsel and hired an appraiser. This decision appears to be a logical extension of the earlier cases. Condemnors, however, in response to this decision are arguing that if no pre-vesting offer was made and an advance payment is made, say a year later, the offer should not be treated as “0” but rather as the later advance payment — that the same result would have been reached if the comparison had only been made to the advance payment.

Reasonable Reimbursement

The last question answered in the cases concerns what the courts have found as reasonable amounts for reimbursement. Here we find some common elements and some points of difference. First, the courts have been almost unanimous in finding, as did the court in Alley Pond Park, “With respect to the contingent fee agreement, the Court notes that such an agreement is an accepted practice in the field . . . .” This appears to be generally accepted and except for one very early upstate case none of the courts are looking at time sheets. In Lee-Hi Fuel Corp. v. State of NY; (Ct of Claims, Claim No. 69267, Orlando, J., decision filed Aug. 13, 1990) the court approved a fee of one-third more than the initial offer/advance payment as reasonable. In Long Island Pine Barrens, supra, the court there also approved one-third more than the initial offer as a “reasonable contingent fee agreement.” In Pomerantz and Bedrick v. State of NY (Ct. of Claims Nos. 69712, 69713, decision filed Nov. 9, 1989, Blinder, J.) the court found reasonable a fee of 40 percent in excess of the State’s offer. Also approved have been fees at 6 percent of the total recovery as to real estate and as similar fee structures based on total awards depending on the type and size of the case. Fixture cases would no doubt command higher percentages. The fact of the matter is that in this age of consumerism, of lawyer solicitation and advertising, the problem of unreasonable fees is not that they are too high, but that they are not compensatory.

Reluctance to Award

However, a few courts have also expressed a reluctance to award the full amount requested, not only for experts’ fees but, in some cases, attorneys’ fees where the fees and expenses were tied to unsuccessful attempts to recover items of damage that were disallowed or for unsuccessful appeals (See Frisbro Enterprises Ltd., supra, Matter of City of NY (Douglaston — Little Neck Branch Library) (Sup. Ct. Qns. Co., Kassoff, March 7, 1991); Matter of NY City Transit Authority/Gun Hill Bus Depot) (Bronx Co. Index No. 1236/83, March 15, 1991, Shapiro, J.). Some of the decisions seem to be more in the spirit of a punishment for making such a claim than an attempt to reimburse claimants for expenses to restore them to the just compensation awarded by the court that is the clear intent of the statute. The attorneys’ fees in such cases were contingent on success (such fees are almost universally contingent). Since they were not successful in those claims, no part of the fee sought to be reimbursed was for the work involved in the unsuccessful effort. To refuse to reimburse the claimant for the fee paid for the successful part of his claim does not follow the reasons for enactment of the statute as enunciated by the Law Revision Commission.

The reason for the statute is that a condemnee cannot be made whole when the award he receives is just compensation if he must deduct from that just compensation the expenses of litigation. By definition he must receive less than just compensation. The statute solely related to that and, as long as the award was substantially in excess of the initial offer that brought him into court, this enactment has nothing to do with what and how much he thereafter claimed. If the expenses he seeks reimbursement for have a logical connection to the recovery, then we fail to perceive what purpose is served, in line with the statutory intent, in providing for a punishment in making a claim exorbitant or not. This statue was not intended as a punishment for condemnors, nor should it be reversed to be a punishment for condemnees. Its purpose is to make a condemnee whole, nor more, no less.

Reprinted with permission from the May 15, 1991 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.