WisDOT pushes for new law to cap legal fees for eminent domain takings

The following article appeared in the Wisconsin Law Journal online (www.wislawjournal.com). Only excerpts have been reprinted; for the full online story click here.)

DOT wants to cap legal fees for takings

by Dustin Block
Dolan Media Newswire
January 14, 2009

The Wisconsin Department of Transportation wants to make it more difficult for property owners to contest the price the state agency offers when it acquires their land for public construction projects.

WisDOT wants to shut down a tactic used by lawyers to ensure the state, and not their clients, pays legal bills. But lawyers who represent property owners say the new law would give people few options to fight lowball offers for their land.
Now, property owners can hire attorneys because, if a court awards owners 15 percent more than the state offered for the land, the state will cover the entire legal bill.

Under the new law, the state would cap legal fees at one-third of the increased compensation awarded by the court. For example, if WisDOT offers $100,000 for a piece of land, and a court deems the land worth $160,000, the state would only pay $20,000 in legal fees.

The proposed changes are included in the department’s 2009-11 budget proposal and would affect all eminent domain cases in the state. In the proposal, WisDOT defends the new law because payouts in eminent domain cases increased from $5 million in fiscal year 2004 to $11 million in 2007.

A majority of the increase appears to be going to property owners’ legal fees, according the department, which restricted comment to the written justification for the new law included in WisDOT’s budget proposal.

Capping legal fees would be “devastating” to property owners’ rights in Wisconsin, said Dan Biersdorf, a Minneapolis-based attorney with Biersdorf & Associates who handles eminent domain cases around the country. Wisconsin property owners now have the right to take on WisDOT and have a court decide the fair value of a property, he said.

If fees are capped, Biersdorf said, attorneys won’t challenge WisDOT’s appraisals because they won’t get paid enough for their work. In many cases, it would cost property owners more to pay their attorneys than they would win in additional compensation, he said.

. . .

The proposed state law is designed to counter a strategy used by eminent domain lawyers to ensure their legal fees are paid by the state, said Tim Pruitt, a municipal attorney for Hostak, Henzl & Bichler SC, Racine. Now, attorneys advise clients to accept a government’s initial offer and then challenge the amount in court. Accepting the offer locks in the bottom line and makes it easier for attorneys to win the 15 percent increase in compensation needed to have their legal fees covered.

The new law would force property owners to negotiate up front with governments, and it limits owners’ appeal options. Both changes tip legal battles in WisDOT’s favor, said Gretchen Schuldt, of the advocacy group Citizens Aligned for Sane Highways.

“It’s the worst public policy even WisDOT has come up with in a long time,” Schuldt said. “If WisDOT really, really screws up (an appraisal), it’s WisDOT who should pay.”

. . .

“If you make an appraisal in good faith,” Pruitt said, “you don’t have to worry about games being played.”

. . .

“Property owners have a right for a jury, not DOT, to determine their property’s worth.”

WisDOT defends this new law based on an increase in attorneys’ fees payments made by WisDOT between 2004 and 2007 to the attorneys defending property owners. Does an increase in these payments alone tell the whole story? Is it possible that WisDOT filed an increased number of eminent domain actions in 2005, 2006 and 2007? Or perhaps, that post-Kelo property owners have become increasingly aware of the right to just compensation, due process, and quality legal representation and, therefore, less likely to roll over when the government knocks on the front door with an initial offer.

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