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Court rules that Aqua Indiana entitled to a jury deciding its value, not city of Fort Wayne

Friday, April 12, 2013 - 9:25 am

In what could only be construed as a rebuke to municipalities – and, in particular, Fort Wayne in a specific case – that are seeking to be aggressive through the use of eminent domain in order to acquire private property, the Indiana Supreme Court on Thursday affirmed that an Aqua America subsidiary condemned by the city has the right to have the value of its holdings determined by a jury.

The decision in Utility Center and Aqua Indiana vs. the City of Fort Wayne is rooted in an action that the city took in 2002, when it condemned the north portion of Aqua Indiana’s two local holdings – the other is in southwest Fort Wayne, and condemnation has also been threatened for that utility.

At issue is the attempt by the city, through the Board of Public Works, to assess the amount of damages to be paid to Aqua Indiana for taking its property. In 2003, the board assessed a value of more than $17.2 million for the holdings, then in 2004 issued another assessment in the amount of nearly $14.76 million.

Utility Center challenged the condemnation proceedings on the grounds that Fort Wayne did not follow proper eminent domain or condemnation statutes, but a summary judgment was rendered on behalf of the city at the trial court level.

However, the Indiana Court of Appeals reversed that decision in 2005, but the Indiana Supreme Court in 2007 upheld the original trial court summary judgment, holding that the city did have the ability to acquire the north system.

As a result, the Board of Public Works in 2007 assessed damages for the north system at $16.91 million, but the Utility Center challenged that amount, appealed to the trial court, and requested a trial by jury – and was denied not only at the trial court level but also by the Court of Appeals.

Thursday’s decision, however, serves to vacate the opinion of the Court of Appeals and reverse the judgment of the trial court, meaning that a trial by jury could determine the value of the utility – a result that predictably pleased the privately held utility.

In a release, Aqua America Chairman and CEO Nicholas DeBenedictis said the company is considering its options. “Although we don’t normally sell assets, when we do, we will fight to get fair value,” DeBenedictis said, while Aqua’s corporate counsel Christopher Luning said in the release that, “the highest court in Indiana has rendered a national victory for private property rights. It assures citizens have a voice in such a powerful use of government authority.”

The city also issued a statement after the ruling, with Kumar Menon, the director of Fort Wayne City Utilities, saying, “The decision made by the Supreme Court is about the procedure of review, not the value of the Aqua North Utility. While the Supreme Court decision brings some finality to this issue, CU and Aqua Indiana are continuing negotiations for a fair settlement for the purchase of the North and the Southwest systems that allows us to partner in Allen County and provide high quality services to residents.

“We are evaluating the Supreme Court decision, but we, along with the residents of the northern system, stand by our decision to provide high quality, reliable water at an affordable price for the past four years and we look forward to serving them in the future.”

But what does this all mean, legally?

The judgment from the state Supreme Court explains that when a municipality moves to use eminent domain and attempts to assess damages, the person or entity having property taken not only has the right to remonstrate, it also has the right to appeal the final determination of value by the board – and that appeal would not have to be heard by the Board of Public Works that initiated the condemnation proceedings in the first place.

From the ruling: “We find it inconsistent that the Legislature would on the one hand provide a municipality the option of short circuiting the detailed procedure for condemnation under Chapter 1, attendant with a full “trial and judgment as in civil actions,” but on the other hand provide for judicial review only of the record before the public works board when the municipality exercises that option.”