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Los Angeles County Metropolitan Transportation Authority v. Alameda Produce Market LLC (2011)

November 15, 2011

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Horvitz & Levy successfully represented Alameda Produce Market LLC in the California Supreme Court in this eminent domain dispute.

The Los Angeles County Metropolitan Transportation Authority (MTA) filed an eminent domain complaint seeking to take property owned by the Alameda Produce Market. The MTA deposited $6.3 million with the court as the probable amount of compensation owed. Alameda Produce opposed the taking, arguing that the MTA had not complied with statutory requirements. Three of Alameda Produce’s lenders applied to withdraw part of the deposit, to satisfy debts secured by liens on the property. The superior court approved the withdrawals and distributed a total of $6.1 million to the lenders.

During trial of the eminent domain case, MTA argued that Alameda Produce waived its right to challenge the proposed taking by failing to object to the lenders’ withdrawal applications. MTA relied on Code of Civil Procedure Section 1255.260, which states that if any portion of the deposit for a property is withdrawn, the receipt of such money shall constitute a waiver of all claims in defenses in favor of “the persons receiving such payment.” The trial court rejected this argument, finding that section 1255.260 did not apply because Alameda Produce was not the party who “receiv[ed]” the payments within the meaning of the statute. On the merits of the eminent domain proceeding, the trial court ruled that the MTA’s eminent domain action was invalid because MTA staff had not complied with the terms of the MTA board’s resolution of necessity.

The California Court of Appeal (Second Appellate District, Division Four) reversed, finding that, under section 1255.260, Alameda Produce had waived its right to contest the eminent domain action. The Court of Appeal reasoned that Alameda Produce benefitted from the lenders’ withdrawals (because the withdrawals were used to satisfy Alameda Produce’s debt). The court further reasoned that, by failing to object, Alameda Produce voluntarily accepted the benefits of those withdrawals, which the Court of Appeal viewed as equivalent to “receipt” of the payment within the meaning of section 1255.260.

The California Supreme Court granted review. Horvitz & Levy LLP was retained to represent Alameda Produce in the Supreme Court and present oral argument. The Supreme Court issued a unanimous opinion, reversing the Court of Appeal and holding that section 1255.260 did not bar Alameda Produce from contesting the eminent domain action. The court held that applying the statute to the circumstances of this case would be inconsistent both with the plain language of the statute and the overall statutory scheme.

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