Amicus Curiae Brief — City of Milwaukee Post No. 2874 Veterans of Foreign Wars v. Redevelopment Authority of Milwaukee

(2 mpnene WI) U.S.

No. 09-1204 MAY 5- 2010

OFFICE OF THE CLERK

Sn The

Supreme Court of the Anited States

¢

CITY OF MILWAUKEE POST NO. 2874 VETERANS

OF FOREIGN WARS OF THE UNITED STATES,

Petitioner,

Vv.

REDEVELOPMENT AUTHORITY OF

THE CITY OF MILWAUKEE,

Respondent

¢

On Petition For Writ Of Certiorari

To The Supreme Court Of Wisconsin

*

BRIEF OF AMICI CURIAE NATIONAL

ASSOCIATION OF HOME BUILDERS

AATES WTS. IS AT DT + F rm at ACIS ASNT AMIEL RY

Bway WATDVLVI 4% wb 15 OH 4S) AHIOIOVULAAIVUIN

IN SUPPORT OF ‘ PETITION FOR

AWRIT OF CERTIORARI

e

ROBERT H. THOMAS

Counsel of Record

DAMON KEY LEONG KUPCHAK HASTER1

1003 Bishop Street

1600 Pauahi Tower

Honolulu, Hawaii 96813

rht@hawaiilawyer.com

wiww.inversecondemnation.com

Telephone: (808) 531-8031

THOMAS J. WARD

CHRISTOPHER M. WHITCOMB

NATIONAL ASSOCIATION OF HOME BUILDERS

1201 15th Street NW

Washington, D.C. 20005

Telephone: (202) 266-8146

Counsel for Amici Curiae

COCKLE LA \W BRIEF PRINTIE YG CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

When the Milwaukee Redevelopment Authority

took by eminent domain the 11-story downtown build-

ing that housed the offices of Post 2874 of the

Veterans of Foreign Wars (VFW) as a long-term

lessee, the Wisconsin Supreme Court held 4 to 3 that

— as a matter of law — the VFW was not entitled to

present any evidence of value, nor entitled to recover

any compensation whatever for its concededly valu-

able long-term leasehold.

The questions presented are:

1. Does it violate the 5th and 14th Amendments

for Wisconsin — like some jurisdictions, but in conflict

with others and with this Court’s repeated insistence

that the appropriate question in an eminent domain

proceeding is “what has the owner lost, not what has

the taker gained” — to apply its “undivided fee rule” in

such circumstances?

2. Did the court below violate VFW’s constitu-

tional right to due process of law by preciuding it, as

the owner of a valuable interest in property being

taken through eminent domain, from introducing any

evidence of the value of its leasehold property?

ll

TABLE OF CONTENTS

Page

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I vs bbikensccn sce cduccasedcnsessenvesdarainns ll

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IDENTITY AND INTEREST OF AMICI CURIAE..... 1

SUMMARY OF ARGUMENT ..................0.0.... 2. eee 4

pA? ee eee aan ee eee ge 5

I. LACKING THIS COURT’S GUIDANCE,

JUST COMPENSATION JURISPRU-

DENCE HAS FRACTURED........................ 5

It. UNBENDING APPLICATION OF THE

UNDIVIDED FEE RULE FAILS TO

RESPECT LEASEHOLD INTERESTS AS

FIFTH AMENDMENT PROPERTY ........... 8

Pe Ri CTT esis nari oicnahena sae vaneensid eaimsdzeciseaniinness 13

it]

TABLE OF AUTHORITIES

Page

CASES

Agins v. City of Tiburon, 447 U.S. 255 (1980) ............. 2

Babbitt v. Sweet Home Chapter of Cmtys. for a

Greater Ore., 515 U.S. 687 (1998)................. Srna PR 2

Babbitt v. Youpee, 519 U.S. 234 (1977) ................-c.ce02- 5

Berman v. Parker, 348 U.S. 26 (1954) ......ccseccccovsccesecss 6

Borden Ranch P’ship v. U.S. Army Corps of

BE, eT Tas Be CE oon kn nconnscdesiisccnceanssacvncesics 2

Boston Chamber of Commerce v. City of Boston,

Be i eC Mins viavinccecincacisnnseacetavsessudiaenesscess 12

Brown v. Legal Foundation of Washington, 538

oS Sb fT: | Sc en enn Aa |

City of Cuyahoga Falls v. Buckeye Cmty. Hope

Poured... FG6 U.S. TGS (OOS) oocccssccecccacccoscccestcsecccccsces 2

City of Milwaukee Post No. 2874 Veterans of

Fore‘gn Wars of the United States v. Rede-

velopment Auth. of the City of Milwaukee,

768 N.W.2d 749 (Wis. 2009)...............0.0022. 6,9, 10, 11

City of Monterey v. Del Monte Dunes at Mon-

terey, Lid. , G26 US. GST CIGBD) ....cccsscsccccsissecsscsesasnss 2

Coeur Alaska, Inc. v. Southeast Alaska Cons.

Ceara, FA Be. WG. FA CI aavnvccccccecocsvevesccecscccecend

Dolan v. City of Tigard, 512 U.S. 374 (1994)............... 2

Entergy Corp. v. Envtl. Protection Agency, 129

My... ean nO pee REN Tek Sew 3

lV

TABLE OF AUTHORITIES — Continued

Page

First English Evangelical Lutheran Church v.

Los Angeles County, 482 U.S. 304 (1987).........0.0..... 2

Franconia Assocs. v. United States, 536 U.S.

ee ARERR ER NPE Hen ae On ae ae

Hawai Hous. Auth. v. Midkiff, 467 U.S. 229

oh |S hale NESTE TER Co tae nn ORR PO iP RY ESR Oe A 6

John R. Sand and Gravel Co. v. United States,

se OE oo ca seesaw sc knvawcanccde ilavsabatesasccsencsaial

Kaiser Aetna v. United States, 444 U.S. 164

ST chaaay oc .e eeu cuduciae vitor fatudiaiea catieneddiceeedauibeoens 8

Kelo v. City of New London, 545 U.S. 469

ER eect 2,5

Lingle v. Chevren U.S.A., Inc., 544 U.S. 528

ee LT TD RA OAR MA SER OPO ARE NS OR 2

Lucas v. South Carolina Coastal Council, 505

ee a occ agp ci cubuseedavaweeiaieesavcuweatnss 2

MacDonald, Sommer & Frates v. Yolo County,

ee goo) saunas cou dasacenicdncunadcsnsusnes 2

Maxey v. Redevelopment Authority of Racine,

Be Ee TA CTI, BOO ccs nenscccsecscscsccsensesecesevases 8

NAHB v. Defenders of Wildlife, 55 U.S. 644

| SERRE van ee ee ea eT Me ESTE 2,38

Nollan v. Cal. Coastal Comm’n, 483 U.S. 825

sR eRe ROI PR oc bes eS eae Pani 2

Palazzolo v. Rhode Island, 533 U.S. 606 (2001).......... 2

Pennell v. C. y of San Jose, 485 U.S. 1 (1988)............. 2

TABLE OF AUTHORITIES — Continued

Page

Rapanos v. United States, 547 U.S. 715 (2006)........... 2

San Diego Gas and Elec. Co. v. City of San

EPO, GO Toe: EE CR Rain cs tice kee ssccsacexescetsncenssvecaves 2

San Remo Hotel, L.P. v. City and County of San

Franciaco, 545 U.S. S23 (ZOOS) ........ccccocccccossoccccscces: 2

S.D. Warren Co. v. Me. Bd. of Envtl. Prot., 547

RR) 2). SERN Re nnn rt <n ERP E Se eS cat ae RE 2

S. Fla. Water Mgmt. Dist. v. Miccosukee Tribe

OF TIRGERE, BEE TTS. BE CGD cic nen sca acavciceccavessiscccancvs 2

Solid Waste Agency of N. Cook County v. U.S.

Army Corps of Eng’rs, 531 U.S. 159 (2001).............. 2

Suitum v. Tahoe Reg’l Planning Agency, 520

RB By Ty 5 IRAN ORE AET, UOT Naa Rte eet ant aE 2

Summers v. Earth Island Inst., 129 S. Ct. 1142

Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l

Planning Agency, 535 U.S. 302 (2002)............00000.... 2

United States v. General Motors Corp., 323 U.S.

BFS CHG) oesissscssncsnceassescssnscsansvessacssevsnravasvtsaveces 4,5,9

United States v. Petty Motor Co., 327 U.S. 372

I are te ea a ee ee re at a ad 7,9

Webb’s Fabulous Pharmacies, Inc. v. Beckwith,

ar es ee Cvs nisecd ce pnvabo renatanccaninidasavarnsasadeoete

Williamson County Reg’l Planning Comm’n v.

Hamilton Bank, 473 U.S. 172 (1985) ....00 eee. 2

vl

TABLE OF AUTHORITIES — Continued

Page

Winter v. Natural Res. Def. Council, 129 S. Ct.

I er Deaaee eaoay ek dug sks deeaseeceenedeett

Yee v. City of Escondido, 503 U.S. 519 (1992).............. 2

CONSTITUTIONAL PROVISIONS

te a, MN, Wb gcsincagvacactscedcuxdsvsesexciurcesctin passim

Bootes SE: PII: EY Sa cidevovinvecincssascectexeccanasnssdeisenss 12

OTHER AUTHORITIES

Gideon Kanner, And Now, For a Word From the

Sponsor: People v. Lynbar, Inc. Fevisited, 5

BF ee Gs Oe CFE BD ceniccnssnsncsnnehncncivessestnnsiccsins 6

Transcript, Kelo v. City of New London, No. 04-

eee en re D> 5 2 a ccan au phawersanbedenereacbaciuns 7,8

Transcript, Stop the Beach Renourishment, Inc.

uv. Florida Dep’t of Envt’l Protection, No. 08-

11 (Dec. 2, 2009).......... peedddpdeN Niue eu oaaRAelacoMae en akeeapiedsens 8

IDENTITY AND INTEREST OF AMICI CURIAE

National Association of Home Builders (NAHB) is

a Washington, D.C.-based trade association whose

mission is to enhance the climate for housing and the

shelter industry.’ As the voice of America’s housing

industry, NAHB helps promote policies that will keep

housing a national priority. Founded in 1942, NAHB

is a federation of more than 800 state and local asso-

ciations, of which the Wisconsin Builders Association

(WBA) is one. About one-third of NAHB’s 175,000

members are home builders and/or remodelers, and

its members construct about 80 percent of the new

homes built each year in the United States.

The organizational policies of NAHB have long

advocated that a property owner must be compen-

sated when government acquires their land or re-

duces its value by regulation. NAHB’s members

frequently facc state auction that climinates the

economically viable use of their property, and it

supports the application of the Fifth Amendment’s

Takings Clause to legislative, executive, and judicial

action.

NAHB is a vigilant advocate in the Nation’s

courts, and it frequently participates as a party

All counsel of record consented to the filing of this brief,

and received notice of the intention to file this brief at least ten

days before it was due. This brief was not authored in any part

by counsel for either party, and no person or entity other than

amict made a monetary contribution toward the preparation or

submission of this brief.

nN

litigant and amicus curiae to safeguard the property

rights and interests of its members. For example,

NAHB was a petitioner in NAHB v. Defenders of

Wildlife, 551 U.S. 644 (2007), and also participated in

many other cases before this Court as amicus curiae

or of counsel. A large number of those cases involved

property rights and eminent domain issues, including

regulatory takings, due process, and the Fifth

Amendment’s Public Use Clause.’ Determining that a

' Cases in which NAHB has appeared as an amicus curiae

or of counsel before this Court include: Agins v. City of Tiburon,

447 U.S. 255 (1980); San Diego Gas and Elec. Co. v. City of San

Diego, 450 U.S. 621 (1981); Williamson County Reg’l Planning

Comm'n v. Hamilton Bank, 473 U.S. 172 (1985); MacDonald,

Sommer & Frates v. Yolo County, 477 U.S. 340 (1986); First

English Evangelical Lutheran Church v. Los Angeles County,

482 U.S. 304 (1987); Nollan v. Cal. Coastal Comm’n, 483 U.S

825 (1987); Pennell v. City of San Jose, 485 U.S. 1 (1988); Yee v.

City of Escondido, 503 U.S. 519 (1992); Lucas v. South Carolina

Coastal Council, 505 U.S. 1003 (1992); Dolan v. City of Tigard,

512 U.S. 374 (1994); Babbitt v. Sweet Home Chapter of Cmtys

for a Greater Ore., 515 U.S. 687 (1995); Suitum v. Tahoe Reg'l

Planning Agency, 520 U.S. 725 (1997); City of Monterey v. Del

Monte Dunes at Monterey, Ltd., 526 U.S. 687 (1999); Solid Waste

Agency of N. Cook County v. U.S. Army Corps of Eng’rs, 531 U.S

159 (2001); Palazzolo v. Rhode Island, 533 U.S. 606 (2001):

Franconia Assocs. v. United States, 536 U.S. 129 (2002): Tahoe-

Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535

U.S. 302 (2002); Borden Ranch P’ship v. U.S. Army Corps of

Eng’rs, 587 U.S. 99 (2002); City of Cuyahoga Falls v. Buckeye

Cmty. Hope Found., 538 U.S. 188 (2003); S. Fla. Water Mgmt

Dist. v. Miccosukee Tribe of Indians, 541 U.S. 95 (2004); San

Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S

323 (2005); Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005);

Kelo v. City of New London, 545 U.S. 469 (2005); S.D. Warren

Co. v. Me. Bd. of Envtl. Prot., 547 U.S. 370 (2006); Rapanos v

(Continued on following page)

Ne

leasehold interest does not constitute a property

interest sends the wrong signal to property owners

and holders of such interests. For example, the owner

of a retail shopping center would be unable to assert

that her tenants hold a valuable property interest in

any condemnation that utilizes the undivided fee rule.

WBA is a statewide organization of builders,

developers, and remodelers dedicated to the business

of constructing residential housing, remodeling, light

commercial construction, and related services. A

significant part of the WBA’s mission is to provide

Wisconsin residents access to the housing of their

choice and the opportunity to realize the American

dream of home ownership. Its members conduct their

business affairs with professionalism and skill. The

WBA consists of 25 local homebuilder associations

and approximately 6,500 members. On behalf of its

members, the WBA regularly expresses its position on

issues of signilicance, including questions of property

rights and protections. The WBA believes that

protecting the rights of Wisconsin residents and

businesses to just compensation if their property is

taken by eminent domain is crucial.

$$ &

United States, 547 U.S. 715 (2006); NAHB uv. Defenders of

Wildlife, 55 U.S. 644 (2007); John R. Sand and Gravel Co. |

United States, 5 U.S. 180 (2008): Summers v. Earth Island

1

Inst., 129 S. Ct. 1142 (2009); Entergy Corp. v. Envtl. Protection

Agency, 129 S. Ct. 1498 (2009); Winter v. Natural Res. Def.

Council, 129 S. Ct. 3865 (2008): Coeur Alaska, Inc. v. Southeast

Alaska Cons. Council, 129 S. ©t. 2458 (2009).

SUMMARY OF ARGUMENT

The “undivided fee” rule — a rule of convenience

under which a court will not value a leasehold

interest separately if it is condemned along with the

fee simple estate — cannot override the Fifth Amend-

ment’s guarantee of just compensation when property

is taken.

A uniform standard is sorely lacking and the

Wisconsin Supreme Court’s rigid application of the

undivided fee rule resulted in the literal evaporation

of what was acknowledged by all parties to be a

valuable property interest. The Private Property and

Just Compensation Clauses require more.

Leaseholds are “property” protected from uncom-

pensated takings by the Fifth Amendment, and if the

VFW’s lease alone had been condemned, there would

be no question it would be entitled to compensation

and to have a jury determine the lease’s value. See,

e.g., United States v. General Motors Corp., 323 U.S.

373, 380 (1945) (“The right to occupy, for a day, a

month, a year, or a series of years, in and of itself and

without reference to the actual use, needs, or collateral

arrangements of the occupier, has a value.”).

The Wisconsin court’s application of the un-

divided fee rule to value that lease at zero as a matter

of law simply because the fee simple interest was also

being acquired — and to prohibit the VFW from

presenting evidence of the lease’s actual value to the

jury — ignored its status as Fifth Amendment

property, entitled to recognition independent of the

fee simple interest, and separate valuation.

This Court should grant the writ of certiorari to

review the Wisconsin Supreme Court's conclusion

that in eminent domain law, somehow the whole can

be lesser than the sum of its parts.

¢

ARGUMENT

I. LACKING THIS COURT'S GUIDANCE, JUST

COMPENSATION JURISPRUDENCE HAS

FRACTURED

The Takings Clause provides that “nor shall

private property be taken for public uve without just

compensation.” U.S. CONST. AMEND. V. “The critica!

terms are ‘property,’ ‘taken’ and Just compensation.

General Motors Corp., 323 U.S. at 377.

In the past half-century, this Court has clarified

in what circumstances a valuable interest gualifies as

“property” for purposes of the Takings Clause. See,

e.g., Brown v. Legal Foundation of Washington, 538

U.S. 216 (2003) (interest generated by money de-

posited in lawyers’ trust accounts is property); Webb's

Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155

(1980) (interest on monies deposited in court is

property); Babbitt v. Youpee, 519 U.S. 234 (1977) (the

ability to transfer and receive property by descent or

devise is property).

This Court has also clarified the standards for

when a taking by the eminent domain power is “for

public use.” See, e.g., Kelo v. City of New London, 545

U.S. 469 (2005) (takings supported only by claims of

6

economic development are not always violative of the

Public Use Clause); Hawaii Hous. Auth. v. Midkiff,

467 U.S. 229 (1984) (“public use” is coterminous with

the police power); Berman v. Parker, 348 U.S. 26

(1954) (taking of non-blighted property as part of a

larger redevelopment project is not inconsistent with

the Public Use Clause).

Guidance regarding the third part of the eminent

domain equation, however, has been largely absent.

The lack of attention is not the consequence of the

law governing compensation in condemnation cases

being well-settled, uniformly applied, and truly “just”

(as the decision by the Wisconsin Supreme Court

makes painfully clear). To the contrary, the long ab-

sence of guidance has permitted the majority of the

lower courts to wander in the jurisprudential wilder-

ness, and apply dramatically different rules that vary

by locale with no discernible criteria or consistency;

sometimes, as in the case at bar, with bizarre and

inequitable results.’ See, e.g., Gideon Kanner, And

’ Two Wisconsin justices concurred with the result reached

by the majority below, while at the same time decrying its

injustice. See City of Milwaukee Post No. 2874 Veterans of

Foreign Wars of the United States v. Redevelopment Auth. of the

City of Milwaukee, 768 N.W.2d 749, 770 (Wis. 2009) (Ziegler, J.,

concurring) (“While it is often said that bad facts make bad law,

this court has not succumbed to that legal axiom in this case

despite the absolutely dreadful situation the VFW finds itself

in.... The VFW claimed its interest in the property was $1.8

million, but pursuant to the unit rule, the VFW was un-

fortunately left with no money for its interest in the property. As

a result, the VFW was left not only with no place to conduct its

(Continued on following page)

Now, For a Word From the Sponsor: People v. Lynbar,

Inc. Revisited, 5 U.S.F.L. Rev. 39 (1970-71). As the

petition correctly notes, the lower courts treat sim-

ilarly situated cases differently, with some jurisdic-

tions rigidly applying the undivided fee rule to always

prohibit the separate valuation of lesser property

interests, others never applying the rule, with still

others utilizing the rule in most circumstances but

refusing to apply it when it would result in a denial of

compensation. See Pet. 13-17.

Whether the owners of leaseholds are entitled

for their interests to be recognized as a matter of

baseline Fifth Amendment law, and to be compen-

sated when those interests are confiscated for public

use “presents an important phase of the law of

eminent domain.” United States v. Petty Motor Co.,

327 U.S. 372, 373 (1946). The VF W’s petition presents

an excellent vehicle to revisit an area long deprived of

this Court’s direction.’

business, but it was left with no money to find a new place to

call home.”).

“ More recently, the compensation issue has appeared to be

of interest in eminent domain and regulatory takings cases,

even when the issue was not presented in the petition. See, e.g.,

Transcript, Kelo v. City of New London, No. 04-108, at 21-22

(Feb. 23, 2005) (“JUSTICE KENNEDY: Let me ask you this, and

it’s a little opposite of the particular question presented. Are

there any writings or scholarship that indicates that when you

have property being taken from one private person ultimately to

go to another private person that what we ought to do is to

adjust the measure of compensation, so that the owner — the

(Continued on following page)

38

Il. UNBENDING APPLICATION OF THE UN-

DIVIDED FEE RULE FAILS TO RESPECT

LEASEHOLD INTERESTS AS FIFTH AMEND-

MENT PROPERTY

State law generally is determinative of whether a

cc

particular interest is “property,” Kaiser Aetna ov.

United States, 444 U.S. 16 , 179 (1979), and Wiscon-

sin law recognizes leaseholds as such. See Maxey v.

Redevelopment Authority of Racine, 288 N.W.2d 794,

3806 (Wis. 1980) (“lilt is well settled that a lessee has

a property interest; and, when that interest is

completely taken by a condemning authority, the

condemnee -— can receive some sort of premium for the

development?”); id. at 48 (“JUSTICE BREYER: So going back to

Justice Kennedy’s point, is there some way of assuring that the

just compensation actually puts the person in the position he

would be in if he didn’t have to sell his house? Or is he

inevitably worse off?”); Transcript, Stop the Beach Renourish-

ment, Inc. v. Florida Dep't of Enut’l Protection, No. 08-11, at 18

(Dee. 2, 2009) (“JUSTICE KENNEDY: Let me ask you this

question on Florida valuation. Assume you prevail, there’s a

cause of action for a taking. You have a beachfront area,

beachfront home, in which there’s a hurricane and there’s a loss

of the beach and a sudden drop, so that it’s now a 60-foot, a 60-

foot drop. The State comes in and says the only way they can fix

this 1s to extend the beach and make it a larger beach on what

was tormerly our submerged land, anu it does that, and it has

the same rule. Under your view, is the State required to pay you

for the loss of your right of contact to the beach, your littoral

right, because there’s Ict’s say another 100 foot of new beach?

Are they entitled to offset that against the enhanced value to

your property by reason of the fact that they've saved it from

further crosion and have given you a beach where there was

none before?”).

9

lessee is entitled to compensation.”). Thus, as a mat-

ter of federal constitutional law which establishes the

baseline under which no state may go, see Kelo, 545

U.S. at 489, state law may not deny compensation by

a legal fiction if a leaschold is taken. If condemned, a

lease must be recognized and valued:

Even where state constitutions command

that compensation be made for property

“taken or damaged” for public use, as many

do, it has generally been held that that

which is taken or damaged is the group of

rights which the so-called owner exercises in

his dominion of the physical thing.... The

right to occupy, for a day, a month, a year, or

a series of years, in and of itself and without

reference to the actual use, needs, or col-

lateral arrangements of the occupier, has a

value.

United States v. General Motors Cerp., 323 U.S. 375,

377-78 (1945). In United States v. Petty Motor Co.,

327 U.S. 372 (1946), this Court held that when

property subject to a leasehold is condemned, the

lessee’s possessory interest is extinguished, but the

interest is entitled to be compensated at its fair

market value. /d. at 378-79. Thus, there is no doubt

that if Respondent were to have condemned only the

VFW’s leasehold interest, and not the fee simple

interest, it would be obligated to pay compensation

since the courts below could not assume the VFW’s

lease had no market value. Veterans of Foreign Wars,

768 N.W.2d at 752 (the VFW made an offer of proof of

the value of its lease).

10

Yet, the majority below determined that the

VF'W’s lease had no existence as a matter of law,

simply because the fee simple interest was also being

condemned:

As we have stated, under the unit rule there

is no separate valuation of improvements or

natural attributes of the Jand, and the

manner in which the land is owned or the

number of owners does not affect the value of

the property. When property that is held in

partial estates by multiple owners is con-

demned, the condemnor provides compen-

sation by paying the value of an undivided

interest in the property rather than by

paying the value of each owner’s partial

interest. Simply stated, the unit rule de-

termines the fair market value as if only one

person owned the property. When the value

of the property is determined, the condemnor

makes a single payment for the property

taken and the payment is then apportioned

among the various owners.

Id. at 758 (footnotes and citations omitted). This is

not what would happen in a market sale, and it

should not happen in eminent domain. The majority

below attempted to support its conclusion by refer-

ence to Brown v. Legal Foundation of Washington,

538 U.S. 216 (2003). See Veterans of Foreign Wars,

768 N.W.2d at 767-68. In Brown, this Court held that

although the interest generated by Washington’s

Interest on Lawyers’ Trust Accounts (IOLTA) program

was property, that property was valueless as a matter

11

of fact. Brown, 538 U.S. at 240. It is one thing for a

court to conclude that if property is in fact worthless,

that no compensation is “just compensation.” How-

ever, it is of an altogether different dimension for a

court to impose a rule of law prohibiting compen-

sation for a valuable interest, simply because the

form in which the property is held makes it less

convenient for the court (or more expensive for the

condemnor) to value each interest separately.

Veterans of Foreign Wars, 768 N.W.2d at 758.

The Brown rule respected the nature of interest-

on-principal as Fifth Amendment property, while rec-

ognizing that as a matter of fact its value was zero as

a consequence of the way the Washington IOLTA

program was structured. Brown, 538 U.S. at 239 (the

individual deposits made to the IOLTA accounts could

not have generated interest). By contrast, the

undivided fee rule as applied by the court below

assumes the VFW’s lease was legally valueless

(contrary to reality), and in place of this reality,

imposed a legal fiction. Veterans of Foreign Wars, 768

N.W.2d at 758 (“Simply stated, the unit rule

determines the fair market value as if only one

person owned the property.”) (emphasis added). The

application of the undivided fee rule did not merely

conclude the VIFW’s lease was property (but

valueless), it determined it was not even property at

all. Veterans of Foreign Wars, 768 N.W.2d at 772

(Prosser, J., dissenting) (“In short, may the Rede-

velopment Authority extinguish the leaseholder’s

rights without any compensation and still comply

12

with all the constitutional requirements designed to

protect private property rights?”). The undivided

fee rule is not a constitutional mandate. In Boston

Chamber of Commerce v. City of Boston, 217 U.S. 189,

195 (1910), this Court deprived the undivided fee rule

of any constitutional pedigree when it held “[t]he

Constitution does not require... a parcel of land to

be valued as an unencumbered whole when it is not

”

held as an unencumbered whole.

The converse is equally correct: when property

is held as an encumbered whole, the Fifth and

Fourteenth Amendments require it — as “property”

to be valued as an encumbered whole.

——— -—@—-

13

CONCLUSION

The petition for writ of certiorari should be

granted.

DATED: May 2010.

Respectfully submitted,

ROBERT H. THOMAS

Counsel of Record

DAMON KEY LEONG KUPCHAK HASTERT

1003 Bishop Street

1600 Pauahi Tower

Honolulu, Hawaii 96813

rht@hawaulawyer.com

www.inversecondemnation.com

Telephone: (808) 531-8031

THOMAS J. WARD

CHRISTOPHER M. WHITCOMB

NATIONAL ASSOCIATION OF HOME BUILDERS

1201 15th Street NW

Washington, D.C. 20005

Telephone: (202) 266-8146

Counsel for Amici Curtae