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Appeal granted in downtown Johnson City U-Haul case

Gary B. Gray • Jan 29, 2013 at 9:26 PM

U-Haul is taking its fight for its downtown property to the next level.

Washington County Circuit Court Judge Thomas Seeley has granted U-Haul the right for the Tennessee Court of Appeals in Knoxville to review his November decision which gave Johnson City the go-ahead to possess and demolish the company’s downtown property for a flood mitigation project.

This will be the first case heard by a Tennessee appellate court involving state statutes regarding eminent domain since 34 states modified laws in 2008 in an attempt to ensure a city would not take property purely for the purposes of economic gain — an argument made by the company’s lead counsel, Thomas Peebles during a three-day hearing.

Erick Herrin, the attorney representing Johnson City, said he was confident the review of Seeley’s ruling will be sustained and that his directive from the beginning has been to work with U-Haul as a corporate system and to help them relocate.

Herrin also said it could be two months before the three-judge panel completes its review and issues an opinion.

“I don’t think anyone favors taking one person’s land and giving it to another,” he said. “I think that’s why 34 states modified their status. Judge Seeley’s order does come as a bit of a surprise. He was the first gatekeeper; the appellate court will be the second. It’s a two-step process.”

Though a jury trial would be forthcoming to determine a fair price for the property, that will have to wait on the appeals court. The panel will look closely at two things in particular. First, whether irreparable damage would be done to the company if Seeley’s original ruling is upheld. Second, the appellate court will review the testimony and facts of the case in a search for potential errors in the original trial.

Peebles, with Waller Landsen Dortch & Davis in Nashville, was not available for comment Tuesday.

Johnson City had worked for more than a year to get U-Haul to accept an $820,000 offer for the property, and to undergo negotiations to help the company relocate within Johnson City. But unlike other downtown property owners who accepted appraised amounts and went their way, U-Haul chose not to negotiate but to make a stand.

The city’s long-range flood mitigation plan is estimated to cost about $30 million. So far, land acquisition, environmental studies, design costs and the in-house McClure Street project near U-Haul’s property at 114 W. King St. location to make way for three of eight planned phases have been paid for by taxpayers through stormwater fees.

In June, the city issued about $6 million in debt to help pay for the first three phases, a debt to be repaid by taxpayers. The first three phases include Founder’s Park, the long-awaited $4.5 million project along West State of Franklin; the King Creek retention basin, which includes a swath of land where U-Haul now sits, where Cutshall’s Automotive has been demolished and a site vacated by WW Cab Co.; and a recently demolished area off Market Street on which King Creek will be opened up and a retention basin will be built.

The company’s basic objective since its Nashville attorney jumped in last year to fight the condemnation has been to show that the city was attempting to use eminent domain to generate tax revenue property instead of taking the property to help with downtown flood mitigation.

Peebles chipped away, attempting to show the forethought that went into the project was more about development and tax revenue than flood fixing. He also claimed it was just too easy for the city to claim another person’s or business’s property.

Johnson City was tasked with showing the condemnation and following flood remediation project is intended for “public use.” This is one of several Tennessee legal standards derived from the Fifth and 14th Amendments of the U.S. Constitution.

The statute modifications came in reaction to a U.S. Supreme Court ruling in which it upheld in a 5-4 vote the right of New London, Conn., to invoke eminent domain and then sell the property directly to a developer.

“That’s why you kept hearing Mr. Peebles say that this project was being done to increase tax revenue — which is partly true,” Herrin said. “The Connecticut case was pure economic development. Here, development is only an ancillary (side) benefit to flood control. It’s a public works project and if we don’t affect economic in some way, we’re stupid.”

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