The owners of land leased for, or potentially leasable for, billboard purposes may face challenges when their property is taken in eminent domain. This can involve sweetheart deals designed to avoid or minimize payment to the owners.
For example, an owner of several acres of vacant land had six wooden billboards on it adjacent to, and visible from, a major interstate highway. The owner had leased the right to erect and maintain the billboards in sequence to three separate billboard companies over many years, each of whom had in turn paid increasing rent. While these companies each had the right to cancel the lease on short notice, none of them ever exercised that right. McDonald’s paid the billboard companies for the right to advertise on one of the billboards. When the State decided to widen and improve the adjacent freeway (taking a piece of the owner’s land and displacing the billboards), McDonald’s moved its ad to a different board directly across the freeway on land owned by someone else.
Nevertheless, the State and the billboard company argued that the billboards were “dilapidated,” that the leases would not have been renewed by the billboard company, and that the income stream to the owner from the leases had little value. The State offered only $689,044 in total compensation for the income stream and the land taken. Callanan, Rogers & Dzida, LLP (representing the owner) fought the State and the billboard company, establishing that they were working together, hand in glove with the City to “cooperate” on keeping the compensation as low as possible. The State hoped to minimize the compensation paid to the owner. The billboard company wanted to replace the six wooden billboards with a single electronic digital display at a different location. The City hoped to gain increased tax and other revenue from the replacement.
The Firm’s investigation further uncovered that the City and the billboard company had negotiated this trade subject to the approval of the State in light of the State’s eminent domain action to acquire the owner’s property, and that the billboard company had actually drafted the City’s billboard ordinance to accomplish such a trade on this and other land within the City (the ordinance, which otherwise banned new billboards, contained an exception for such a trade where billboards were displaced by eminent domain). After this sweetheart deal came to light, the following testimony under cross-examination of the billboard company’s manager was crucial:
Q All right. Now, I would like to now hone in a little bit on the issue of the value of these billboards, if any. I’m a little confused. As I understand your testimony, you, being (the billboard company), during the entire period you owned these billboards, you were losing money?
A That is correct.
Q Okay. So why did you buy them?
A We didn’t just buy those billboards.
A We bought them because they were associated with 1,000 odd other billboards that were making money.
Q Okay. But you testified earlier today that there were two choices: One, you keep paying rent while you are losing money, or, two, you tear them down. Do you remember that?
A (The witness begins to lose his cool.) Of course I remember that. I was here when I said it.
Q Okay. So you opted for number one? You kept paying money, paying rent, even though you were losing money, right?
A Why did I do that?
Q Well, is that correct?
Q So why did you do that?
A I did that because I became aware of an impending condemnation proceeding (by the State) that would take the property underneath the billboards, and it is a smart business decision, long-term, for (the billboard company) to get the value out of that transaction.
Q All right. Now, was that of value to (the billboard company) that (under the City’s billboard ordinance) it could trade the billboards from the property to get the digital billboard elsewhere?
Q Oh, okay. So it was a long-term value to your company because you could trade it, right?
This testimony, of course, undercut the entire argument that the wooden billboards had little value, and ultimately the State paid the owner a total of $1,218,821 in compensation instead of the amount originally offered. The constitutional right to Just Compensation cannot and should not be evaded through self-serving sweetheart deals! If you need additional information about eminent domain or would like to contact us for a free consultation, call 213 -559-7595.