Legislative Amendment to California's Loss of Business Goodwill Statute?


California's loss of business goodwill statute, Code of Civil Procedure section 1263.510, provides that before a business can submit its goodwill claim to a jury in an eminent domain case, the business must first demonstrate that:

  1. The loss is caused by the taking;
  2. The loss cannot be prevented by relocation or other reasonable mitigation efforts; and
  3. The loss will not be covered through another form of compensation, such as relocation benefits.

In late-2012, the California Court of Appeal issued a decision in People ex rel. Dept. of Transportation (Caltrans) v. Dry Canyon Enterprises, in which the Court crafted a fourth preliminary goodwill entitlement finding for the judge: a determination of whether the business possessed any business goodwill to lose.  Apparently, the Legislature feels it is appropriate to set the Court's finding in stone, as Assemblyman Wagner recently introduced AB 374 which seeks to amend section 1263.510 to add language requiring the business to "adduce sufficient evidence to permit a jury to find that goodwill existed prior to the taking."

The question is, why?  Was the Dry Canyon opinion not clear enough?  Even stranger, as we noted when we first reported about the opinion, this was already the law -- at least in our view.  Specifically, one of the statutory requirements is that the owner prove that it has lost goodwill as a result of the project; in order to conclude that the owner lost goodwill, it would seem that the court already had to decide that goodwill existed in the first place.

Nevertheless, we'll follow AB 374, and we'll let you know if it becomes law -- in which case some new (and arguably superfluous) language will be added to California's loss of business goodwill statute.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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