Louisiana Supreme Court Upholds Expropriation of Commercial Venture

by Liskow & Lewis
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In a decision announced this week, the Louisiana Supreme Court ruled on the constitutionality and method of compensation for the expropriation by a governmental body of property owned by an ongoing commercial venture.   In St. Bernard Port, Harbor & Terminal District v. Violet Dock Port, Inc., LLC, the St. Bernard Port, Harbor & Terminal District (the “Port”), a government-owned public cargo facility, sought to expand its operations along the Mississippi River. The Port unsuccessfully negotiated the purchase of 75 acres of property owned by Violet Dock Port, Inc., LLC (the “Landowner”) which utilized the property to layberth and service oceangoing ships for the United States Navy.  The Port subsequently expropriated the property under the quick-take expropriation provisions of LA. R.S. 19:141, et seq., for a purported compensation of $16 million. 

The Court examined the Landowner’s argument that the expropriation violated  La. Const. art. I, § 4(B)(6), known as the “business enterprise clause.”  This clause prohibits an expropriation if performed “for the purpose of operating that enterprise or halting competition with a government enterprise.”  The Landowner argued that the Port’s purpose to expropriate the property was to take the Landowner’s revenue stream from its contracts with the U.S. Navy or to halt competition with the Landowner’s cargo operations.  The Court rejected both of these arguments, finding no evidentiary support in the record – notably, the Landowner referred to its existing cargo operations as “negligible.”  The Court relied heavily on the testimony of Port officials that (1) the intention of the Port was to expand its cargo operations, meaning there was no real competition with the Landowner’s current operations;  and (2) the consideration of the existing Navy contract was “an afterthought.”  The Court ultimately deferred to the trial court as the finder of fact in evaluating the testimony of the witnesses, including specifically the Port officials, as to the intent and purpose of the taking.

The Court, however, remanded the matter to the appellate court finding legal error in the trial court’s determination of just compensation.  The trial court erroneously ruled that it had no discretion to determine just compensation for the taking other than choosing either the compensation number offered by the Port or the number offered by the Landowner.  The Court held that a trier of fact is not required to make a binary choice of one litigant’s testimony in its entirety.

Three justices dissented.  The dissenters argued that the majority opinion relied too heavily on the stated testimony of the Port officials and should have scrutinized the actual effect of the taking rather than relying on the stated intent of the taking.  The dissenters noted that the Port, after the taking, continued the layberthing services and continued the Navy contract, and that continuation of the Navy contract was planned to help finance the Port’s move to cargo operations. The dissenters argued that the private operation was attempting to use the same path toward more cargo operations, but that competition with the Port was “nipped in the bud” by the taking.  The dissenters ultimately warned that the majority decision rendered the “business enterprise clause” meaningless as long as the government entity could state a “proper motive” for the taking.

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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