Facts

Plaintiffs 3187 Redhill LLC, ICC LLC, and M2 Freeway LLC held fee title to a 408,593 square foot real property located at 14040-14190 Firestone Blvd. in Santa Fe Springs.

As part of the environmental review process relating to the project, the California Department of Transportation identified the property as possibly necessary for its Interstate 5 widening project if the project were to be constructed. After the conclusion of the environmental review process, but before the Department finalized design plans for the freeway, plaintiffs filed an inverse condemnation action against the state, acting by and through the Department of Transportation.

PLAINTIFFS' CONTENTIONS:
Plaintiffs contended Caltrans repeatedly announced to their tenants, potential tenants and the public, that its I-5 widening project required condemnation of at least a portion of the property. Caltrans, however, never filed an eminent domain action. The property is a multi-tenant buildings consisting of eight buildings and 70 suites, which include retail, industrial, and office spaces.

Plaintiffs claimed that as a result of Caltrans' unreasonable pre-condemnation conduct and unreasonable delay in filing an eminent domain action, they lost tenants and potential tenants, could not sell the property, could not execute their business plan, and suffered a decrease in the income the property produced.

DEFENDANT'S CONTENTIONS:
Caltrans denied its employees ever made such announcements, but instead that Caltrans was participating in the mandatory public environmental review process. Caltrans contended that it had not announced its intent to condemn the property and that it was not liable for any damages as a result of complying with the mandated environmental review process.

Later, after the approval of the final environmental documents and the approval of a "build" alternative, the final design of the freeway project confirmed that the whole property would in fact be required for the project to be constructed. As such, the department proceeded to negotiate with the owners in order to acquire the necessary property.

Result

The parties entered into a settlement agreement relating to the acquisition of the property where they both agreed to be bound by the opinion of a mutually selected, professional real estate appraiser. The appraisal determined the value of the property as being $38 million, which was paid. Caltrans also agreed to compensate plaintiffs for lost rent in a rental agreement while the appraisal was pending and until payment of the appraised amount.

Other Information

FILING DATE: Dec. 22, 2010.