Planning and constructing public infrastructure projects takes significant time – sometimes many years. Property owners and businesses who may be impacted are left in a state of limbo, not knowing for sure whether the project will move forward, when it will move forward and what the ultimate impacts will be. This can make selling or leasing property problematic and it can also become difficult for businesses to plan effectively. Despite these impacts, unless public agencies engage in oppressive or unreasonable conduct or unreasonable delay, there is typically no liability for these project planning activities. A recent case, Eventos v. Cal. Dep't of Water Resources (July 22, 2025 Cal. App. Unpub. LEXIS 4495), highlights how courts grapple with these issues.
Background
In Eventos, a public agency was planning the Perris Dam Modernization Project, which involved construction of new levees and drainage system. The agency was negotiating to acquire property below the dam known as the Lake Perris Fairgrounds and in 2020 retained a business goodwill valuation consultant to determine the financial impacts to the businesses operating at the Fairgrounds. One of the tenants was an outdoor entertainment business and expressed concern about the elimination of parking and construction impacts on its ability to conduct concerts at the Fairgrounds and further indicated that because such concerts require significant advance planning, it was unable to book events and lost millions in revenue because of the public agency's multiple announcements of imminent construction. The business filed a lawsuit for inverse condemnation, claiming that the public agency's actions resulted in precondemnation damages.
The public agency moved for summary judgment, asserting there was no inverse condemnation liability since it had not physically invaded the Fairgrounds or otherwise engaged in unreasonable conduct. The business provided evidence that it had lost revenue as a result of not being able to schedule events and the public agency had secured a goodwill loss appraisal and had even negotiated agreements with other businesses at the Fairgrounds. The trial court found no liability, explaining there was no physical taking and the agency was in the "planning phase," not the "acquisition phase," and there was no evidence of unreasonable delay or oppressive conduct. The business owner appealed.
The Appeal
On Appeal, the court started with explaining the legal principles of inverse condemnation, noting that the property or business owner must demonstrate that a public entity: "(1) physically invades the property; (2) physically damages the property without physically invading it; (3) intangibly intrudes onto the property, without physically damaging it, by putting a direct, substantial and peculiar burden on the property; or (4) regulates the property so as to require a permanent physical invasion, deprive the owner of all economically beneficial use, or unduly restrict the owner's use." The court also explained that one additional form of inverse condemnation liability exists when, "before condemning a property, 'the condemner acts unreasonably in issuing precondemnation statements, either by excessively delayingeminent domainaction or by other oppressive conduct."
The court held that there was no intangible intrusion, as "anticipated" noise, dust and traffic congestion from the project are insufficient since construction had not yet started. Fear that an intrusion may cause future harm is inadequate for inverse condemnation liability.
The court likewise held that there was no precondemnation damages liability, as the public agency had not sought or adopted a resolution of necessity to condemn the businesses' leasehold interest and therefore there was no public expression of a "firm intention" to condemn. Despite the business demonstrating that the agency had negotiated agreements with other businesses operating at the Fairgrounds, the court concluded that the agency still had not gone beyond the planning phase of the project. Here, there was no formal public announcement of an intent to use eminent domain. The court even went a step further and held that precondemnation damages "are recoverable not whenever a public entity acts unreasonably, but only when the entity's misconduct was a precursor to condemnation of the plaintiff's property."
Takeaways
While unpublished, the Eventos case serves as another arrow in the quiver of public agencies to fight inverse condemnation lawsuits involving precondemnation damages claims. Planning public projects, including the environmental review process, defining potential property rights needed and even negotiating for potential acquisition, likely does not trigger liability. Property owners and businesses in the path of future proposed public projects have limited options, although there may be opportunities for early hardship acquisitions or creative negotiations to minimize damages.
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