(Kramer v. Community Redevelopment Agency of the City of Los Angeles, et al., Los Angeles Superior Court Case No. BC373904)

After two underlying trials and a flurry of motion work, Meyers Nave is pleased to announce that the Community Redevelopment Agency of the City of Los Angeles (the, "LACRA") has prevailed on its motion for judgment on the pleadings in a novel case involving the creation of a Business Improvement District ("BID") and the interpretation of relevant tax and revenue statutes in the context of eminent domain law. Meyers Nave Principal, David Cunningham, along with JoAnn Victor, led the litigation team representing the LACRA.

The facts: In July 2004, the LACRA filed a condemnation action against Kramer Metals, et al., which twisted and turned through the courts, including the suspension of one trial pending the outcome of Proposition 90. In the meantime, pursuant to court order, the LACRA gained a right of possession to the subject property on May 11, 2006 ("Tax Cut-Off'"). It was the LACRA's position that as of that date, Kramer no longer had any tax liability on that property. (Rev. & Tax Code, §§ 5081, 5082). As such, all taxes assessed against the property, including any purported special assessments were no longer Kramer's responsibility.

Although Kramer was no longer on the hook for taxes, Kramer's name remained on the tax rolls of the Los Angeles County Tax Collector, which sent him bills that he allegedly paid beyond the Tax Cut-Off. On July 25, 2006, a BID election occurred that affected the subject property as well as other of Kramer's parcels within the BID. In that it had a lawful right of possession to the subject property, the LACRA voted in favor of the BID as to that property. Kramer angrily responded that he was still paying taxes on the subject property and that he, not the LACRA, was legally entitled to cast any assessment ballot concerning the subject property.

Almost a year later, on July 9, 2007, Kramer's anger spilled over into a lawsuit when he refused to globally settle the original condemnation actions. In essence, he argued that the LACRA robbed him of the opportunity to vote against the BID with respect to the subject property and that his vote would have blocked creation of the BID. As Kramer posed it to the court, both the California Constitution (Art. XIIID, Sec. 6) and state statute (Gov. Code, § 53753) require notice to the "record owner" of each parcel affected by the BID, which notice must include an assessment ballot and that Kramer received no such notice. Absent notice, Kramer insisted that the BID election was illegally conducted and that the results should be undone.

After the court sustained a demurrer to Kramer's fraud and negligent representation causes of action, Meyers Nave took head on the remaining Constitutional and statutory arguments in a motion for judgment on the pleadings. A hearing was held on this motion on August 6, 2008 and Judge Judith C. Chirlin took the matter under submission before issuing an extensive opinion two months later, on October 9, 2008. In her opinion, Judge Chirlin totally vindicated the LACRA's actions. More particularly, the court held that Kramer's responsibility to pay taxes on the subject property ended no later than May 11, 2006, which predated the BID election. While acknowledging that Kramer may still have been on the tax rolls at the time of the election, the court found it "nonsensical to require notice regarding the imposition of assessments to an individual or entity that does not have responsibility for payment of taxes on the property." In that the City of Los Angeles and the Los Angeles County Tax Collector joined in the LACRA's motion for judgment on the pleadings, they, too, enjoy Meyers Nave's total success on this matter.

As far as we know, there is no case law which directly addresses this BID formation, property tax issue for a condemned property. We are pleased the LACRA was able to break new ground with such a practical and economic result and that, once again, we have been able to squelch a scorched earth approach to litigation.