For the first time, nonprofits have a road map to seek just compensation in California for the loss of goodwill in eminent domain cases, thanks to a long and successful litigation effort by our client, Presidio Performing Arts Foundation.
Represented pro bono by a cross-office team of lawyers at Davis Wright Tremaine LLP, our client won a ruling from the state Court of Appeal that the foundation can seek just compensation for the losses it sustained to its goodwill when, as part of a highway improvement project, the state Department of Transportation (Caltrans) seized and destroyed the building that the foundation had leased since 2003, forcing the nonprofit to move to another part of the Presidio.
Caltrans petitioned the California Supreme Court to review or de-publish the appellate decision. But on January 18, 2017, the Supreme Court justices unanimously denied both requests. A jury trial will occur later this year to determine the amount of goodwill lost as a result of the taking and the damage award to the foundation.
"Prior to this opinion, there was no California case holding that the California goodwill statute could be used by a nonprofit," says James Parker, counsel in Davis Wright Tremaine’s Portland and San Francisco offices, who has been working on the case since he was a summer associate at the firm in 2011. Parker was supervised by San Francisco partner Martin Fineman.
Says Parker: "This opinion frees up future courts to use any accepted method for measuring goodwill and adapt the measurement to the individual circumstances of the case. It also expressly holds that nonprofits can recover under the statute and that methods of measurement that work better for nonprofits are appropriate."
Noting that nonprofits rarely own their own building, Parker observes that "you don’t have to own the building to have a taking—the loss of a leasehold interest is a taking that would make an entity eligible under the statute."
"Goodwill" is defined in California law as "the benefit that a business gains as a result of its location, reputation for dependability, skill or quality, and any other circumstances that cause a business to keep old customers or gain new customers."
Presidio Performing Arts Foundation operates a dance company and dance school that, for almost three decades, has promoted cross-cultural understanding through training and performance. The foundation is a longtime client of Davis Wright Tremaine real estate partner Steve Ledoux.
Said Judy Bretschneider, founder and executive director of the foundation: "Thanks to the work of Davis Wright Tremaine, we are finally in a position to be made whole and continue to offer classical world dance and multicultural education to a diverse student body."