The process of eminent domain or condemnation, under which the government can take private property for public use, is usually frustrating and often unfair. Whether the property owner likes it or not, the only safeguard and check on this awesome power is the constitutional obligation to pay just and adequate compensation under the Fifth Amendment for the acquired property, such as land, a home, or an office building. But, when the private property acquired in a condemnation case is a billboard, as often happens to accommodate highway improvements, the frustration and unfairness of the process is greatly magnified. For example, since the Texas Supreme Court’s 2015 decision in State vs Clear Channel Outdoor, Inc, the owner of a condemned billboard is limited to its cost of construction less depreciation, instead of any realization of the advertising revenue enjoyed from the billboard.
The limitations on the compensation available for condemned of billboards, in several States and certainly in Texas after the Clear Channel case, lead most owners to seek settlement in lieu of litigating expensive and challenging eminent domain cases. And, in Texas at least, an added benefit to settling instead of litigating a billboard condemnation case is the right to relocate the billboard under criteria that is more lenient than that imposed for new construction. However, the August 13, 2024 decision of the Dallas Fifth Court of Appeals in Texas Department of Transportation vs Primary Media Group, Inc. demonstrates how the billboard owner can be deprived of those relocation rights through the Doctrine of Sovereign Immunity when settling a billboard condemnation case with TxDOT.
In this case, Primary Media owned four billboards in North Texas, which had to be removed to accommodate highway improvements undertaken by TxDOT. TxDOT and Primary Media agreed to settlement amounts for each of the billboards, along with the right to relocate them under the relaxed relocation regulations of TxDOT’s administrative rules, in lieu of proceeding through condemnation cases on them. In doing so, Primary Media executed the forms of quitclaim deeds required by TxDOT, under which the billboards would be conveyed to the State, with the caveat that Primary Media would be eligible for the issuance of the relocation permits upon compliance with TxDOT’s rules. When Primary Media applied for the relocation permits, however, the State denied them. In doing so, the State argued Primary Media failed to follow the requirements for the relocation permits imposed in its administrative rules. Primary Media vehemently disagreed, contending it strictly followed the rules, and filed a lawsuit alleging breach of the settlement agreements by TxDOT.
TxDOT moved to dismiss Primary Media’s case under the Doctrine of Sovereign Immunity, arguing there is not a statutory right or waiver to sue the State for alleged mistakes in the denial of permits. Primary Media responded that one of the few exceptions to the sovereign immunity otherwise enjoyed by the State is in the breach of settlements entered in lieu of condemnation cases. As the Court noted, “Primary Media asserted that, if it had not settled with TxDOT and executed the quitclaim deeds and other agreements, it would have been entitled to adequate compensation in eminent domain, [and that] when a governmental entity is exposed to suit-such as through a claim seeking compensation for a governmental taking-because of a waiver or lack of immunity, it cannot nullify that waiver of lack or immunity by settling the claim with an agreement on which it can’t be sued.”
While the Court acknowledged the general exception for sovereign immunity, it concluded it was not available to Primary Media in this instance. Instead, the Court explained “here the quitclaim deeds did not mention relocation or relocation permits, and the other documents associated with the State’s acquisition of the four parcels acknowledged the possibility of Primary Media obtaining relocation permits but either expressly stated TxDOT did not guarantee that Primary Media would get a relocation permit or merely indicated that Primary Media would be eligible for a relocation permit under certain circumstances. Because none of the deeds other documents indicate that TxDOT was contractually obligated to issue Primary Media relocation permits,” the Court ruled the State was immune and that dismissal was proper.
Primary Media intends to seek rehearing before the full panel of the Court of Appeals, and perhaps petition for review by the Texas Supreme Court if necessary. In the meantime, Primary Media’s good intentions of settling in lieu of litigating its billboard condemnation cases are frustrated by the Court’s opinion, rendering it even more challenging for all billboard companies to contract with TxDOT in the future.
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