Posted by: Patricia Salkin | January 12, 2012

Third Circuit Court of Appeals Holds Just Compensation Claim Is Not Precluded

In 1986, RACM and a developer sought to revitalize the waterfront in Conshohocken, Pennsylvania, and came to an agreement that RACM would condemn properties as blighted and transfer the properties to the developer.  Specifically, RACM could only condemn properties upon the direction of the developer.  In 1996, at the developer’s direction, RACM condemned the plaintiff’s property, which transferred titled to RACM.  The Pennsylvania Commonwealth Court found the condemnation to be unlawful on the grounds that RACM had delegated its eminent domain authority to a private party. 

After the plaintiff prevailed, just compensation was sought in federal court, as during the pendency of the litigation, spanning numerous years, RACM held title to the subject property.  The first action in federal court was dismissed because the claim was not ripe, as the plaintiff could seek recovery under state law.  The plaintiff then brought the second state action for just compensation, and in so doing reserved their federal claim for later resolution in federal court.  The Commonwealth Court dismissed the just compensation claim based on the state’s eminent domain law.  The plaintiff followed this defeat with the second federal action.  The district court then dismissed the second federal action as the claim was barred by issue preclusion. 

First addressing claim preclusion, or res judicata, the Third Circuit found no reason to dismiss. The court noted that the plaintiff separated the state and federal compensation issues at the outset of the second state action and the defendants failed to object.  Under Pennsylvania law, where the plaintiff splits a claim and the defendants acquiesce (such as by failing to object), the courts cannot find that claim preclusion should result in dismissal. 

The court then addressed the defendants’ contention that dismissal should still lie as the claim should be barred by issue preclusion.  The court dispensed with this ground, finding the claim should not be barred based on issue preclusion, as the Fifth Amendment just compensation issue had not been litigated in state or federal court, and there was never a determination on the issue.

Next, the defendants alleged the action should be dismissed due to failure to state a claim as there was no taking.  The court rejected this argument, finding that RACM’s acquisition of the subject property’s title resulted in a per se taking.  Further, the court provided that where the government takes the title of a property, the property owner is entitled to compensation.

Likewise, the court addressed and rejected the defendants claim that the just compensation claim should be dismissed as untimely.  The court stated that until just compensation has been denied, the landowner has not yet sustained an injury, and does not have a federal takings claim.  Since the action was brought within months of the state court’s denial of just compensation for the taking, the action was brought in a timely manner, according to any applicable statute of limitations, and should not be dismissed.

Having reversed the district court’s dismissal and rejecting the defendants’ supplemental grounds for dismissal, the Third Circuit also vacated the district court’s order dismissing the plaintiff’s pendent state law claims.  The court vacated this order because there is now a viable federal cause of action, and the district could is to determine whether to dismiss the state law claims based upon a different standard.

R & J Holding Co. v. Redevelopment Auth. of the County of Montgomery, 2011 WL 6117857 (C.A., 3rd Cir. 12/8/2011)

The opinion can be accessed at:

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