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F I S C A L I M P A C T R E P O R T

SPONSOR Wirth

ORIGINAL DATE

LAST UPDATED

2/6/07

HB 557

SHORT TITLE

Eminent Domain Litigation Expenses

SB

ANALYST C.Sanchez

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Administrative Office of the Courts (AOC)

Office of the Attorney General (AGO)

Department of Transportation (DOT)

Department of Finance Administration (DFA)

SUMMARY

Synopsis of Bill

HB 557 amends Section 42A-1-25 NMSA 1978 to require a court to award litigation expenses to

a condemnee in an eminent domain litigation when

a.

the court finds that the condemner is liable to the condemnee;

b.

the condemnee is awarded compensation and damages against the condemner in a

condemnation proceeding in an amount greater than the amount offered in the con

demner’s petition; or

c.

the court makes an order permitting entry for suitability studies.

FISCAL IMPLICATIONS

Indeterminate appropriation impact. Costs could be significant for the municipality who loses an

eminent domain case.

House Bill 557 – Page

2

There will be a minimal administrative cost for statewide update, distribution and documentation

of statutory changes. Any additional fiscal impact on the state would be proportional to

challenges to the awarding of litigation expenses. New laws, amendments to existing laws and

new hearings have the potential to increase caseloads in the courts, thus requiring additional

resources to handle the increase.

SIGNIFICANT ISSUES

Current law allows a court to award litigation expenses in a condemnation proceeding if it finds

that the condemner entered the property unlawfully in order to conduct suitability studies or

failed without just cause to substantially comply with or wrongfully exceeded or abused the

authority of an order allowing the conduct of suitability studies; or when the condemner has

abandoned the condemnation proceeding; or when the condemnation proceeding has been

dismissed for any reason except when a bona fide settlement has been reached; or if there is a

final determination that the condemner does not have a right to take the property sought to be

acquired in the condemnation proceeding. This bill would expand the circumstances under which

a condemnee may be awarded litigation expenses from a condemner.

ADMINISTRATIVE IMPLICATIONS

The change in the law may affect all condemnation cases filed, even if an award was made by a

settlement agreement between the parties; this result may be contrary to the intent at Section

42A-1-25 A(2), since settlements usually occur with a judgment entered and an award made by

that judgment and no dismissal of the action. A property owner would have no reason to settle at

the condemner’s offer since their attorney fees would always be paid. Further, a property owner

would be able to contest on any basis, any entry for suitability studies under Section 42A-1-8 and

receive reimbursement of their attorney fees. This aspect could prolong the development of

public projects.

OTHER SUBSTANTIVE ISSUES

House Bill 557 adds three new categories for payment of litigation expenses when one wins an

eminent domain case: 1, if the condemner is liable to the condemnee; 2, the condemnee is

awarded compensation and damages against the condemner in a condemnation proceeding in an

amount greater than the amount offered in the condemner’s petition; or 3, the court makes an

order permitting entry for suitability studies.

Among the bill's implications are if, under the second new category, the jury awards a mere one

cent more than the amount offered by the condemner, the successful litigant will be awarded

litigation expenses. Most states set a fixed percentage, such as 125 percent of the amount of the

award, to avoid such a scenario.

ALTERNATIVES

Set a fixed percentage of the award, such as 125 percent, to the condemnee who is awarded

compensation and damages against the condemner in a condemnation proceeding in an amount

greater than the amount offered in the condemner’s petition.

CS/mt