Idaho Supreme Court orders developer to pay part of state’s legal fees in condemnation fight

BOISE – The Idaho Supreme Court has ruled in favor of the state in a long-running eminent domain dispute with a developer who was trying to build a shopping center on Highway 95 north of Coeur d’Alene – and has even ordered the developer to pay some of the state’s legal fees in the battle. Justice Jim Jones wrote that in his view, the developer was “shooting for the moon” and seeking much more for 16 acres of its property that the state took for a new interchange than the land was worth. He and the rest of the court’s justices ruled that the appeal was “completely unreasonable and frivolous,” and therefore was one of the rare cases when a private party could be ordered to pay the state’s attorney fees in a condemnation case. H.J. Grathol Co. had been trying to build a travel center, grocery store and hotel at the northeast corner of U.S. Highway 95 and Highway 54, when the Idaho Transportation Department took a chunk of its property for a new interchange through condemnation in 2010, as part of the Garwood to Sagle project to widen and improve Highway 95 from a surface road into a freeway. The state hired a private law firm, Holland and Hart, to represent it in the condemnation case, and ran up legal fees and costs of more than $1 million before the appeal to the state Supreme Court. Grathol lost at the District Court level, and the court declined to charge the firm for the state’s attorney fees, saying the firm’s arguments were “reasonably based in law and fact” and the case was not brought “frivolously.” The district court did, however, order Grathol to pay more than $25,000 of the state’s court costs. Now, on appeal, the Idaho Supreme Court has determined that this is one of those “extreme and unlikely” cases where a private party should be ordered to pay the state’s legal fees, at least for the appeal portion of the case. The irony there: The state only paid H.J. Grathol $675,000 for the 16 acres it took. Depending on how much Holland and Hart charges the state for the appeal, the fee award could eat up some or all of that, and leave the developer actually out both money and land to the state. Alan Johnson, head of H.J. Grathol and vice president of Hughes Investments, the firm’s parent company, couldn’t immediately be reached for comment Friday. He argued earlier that it was “completely unconstitutional” for a state to try to make a private company pay a big legal bill the state ran up trying to seize the company’s land. “I’ve never encountered anything like this,” Johnson said in 2013. His company has developed more than two dozen shopping centers in 30 years in business, most in California, but also including the Winco center at the corner of Ramsey Road and Appleway Avenue in Coeur d’Alene, and other projects in Idaho, Washington and Utah. Jones’ concurring opinion in the case called it “lamentable,” and said the company chose to “pursue litigation based on flawed facts and legal theories.” “While the (state’s) costs of defending would likely have been substantially less, had the Attorney General’s office been properly funded and not obliged to seek the assistance of outside counsel, even a much lesser expenditure would have been unnecessary if Grathol had not been shooting for the moon,” he wrote. The company paid $1.45 million for the 56.8-acre undeveloped property in 2008, got it rezoned from rural to commercial, and began moving forward with plans for the development. It maintained the 16.3 acres sliced off by ITD was worth much more than the $571,000 the state originally offered, and charged that ITD didn’t address questions about access to the property after the condemnation. But the Supreme Court found that the $675,000 the district court ordered ITD to pay Grathol was “eminently reasonable.” It also ordered the district court to reconsider its ruling against ordering attorney fees at that level, while acknowledging that the lower court likely would stick by its decision that Grathol’s case there wasn’t frivolous. If the lower court reversed its stand on that, the company could be ordered to pay the state another $725,000 in legal fees.