Property company sues Sacramento for failing to police vagrancy

A property company sued Sacramento for losses relating to a building it claims was damaged by the city's refusal to address its homelessness problem. A series of break-ins at the former frozen fish storage facility culminated in a huge fire last summer that destroyed its main structure and was visible for miles.

The complaint by Bugatto Sacramento Properties Inc. claims a cause of action for inverse condemnation. Plaintiffs have invoked California's inverse condemnation law in scores of recent cases, including homeowners suing utilities over fires started by their equipment.

The law states that property owners have the right to be compensated if their property is damaged by public use. Inverse condemnation has its roots in the Takings Clause of the Fifth Amendment, which the plaintiffs also cited in the complaint. In several recent cases, property owners have attempted to invoke inverse condemnation over damage allegedly caused by unhoused people, with limited success.

"The City has allowed a vagrancy problem to persist in the neighborhood, principally along Broadway, W Street and X Street and underneath Highway 50," wrote David A. Diepenbrock, a shareholder with Weintraub Tobin Chediak Coleman Grodin in Sacramento. "Since at least 2016, Plaintiff has experienced ongoing problems with criminal activity and vagrant trespass and occupancy on the Subject Property. The vagrant and trespass activity on the Subject Property has worsened since the City established the 'Safe Ground campsite' in 2020 two blocks away from the Subject Property."

Diepenbrock added, "Plaintiff repeatedly sought the assistance of the City's law enforcement in removing trespassers and vagrants. The City's law enforcement largely ignored these petitions, even going so far as to claim that an officer would not respond unless it was that particular vagrant's third instance of trespassing on the Subject Property."

"Bugatto Sacramento Properties has no comment at this time," read a statement emailed by Weintraub shareholder Louis A. Gonzalez Jr. Bugatto Sacramento Properties, Inc. v. City of Sacramento, 2:24-cv-02051-TLN-AC (E.D. Cal., filed July 29, 2024).

Sacramento City Attorney Susana Alcala Wood did not respond to an email seeking comment.

"The entire complaint is basically an inverse condemnation complaint," said Michael M. Berger, senior counsel with Manatt Phelps & Phillips LLP in Los Angeles. He is not involved in the case.

While the complaint doesn't specifically mention Klopping v. City of Whittier, 8 Cal.3d 39 (1972), Berger said the complaint appears to build on the half-century old California Supreme Court case. In Klopping, the justices overruled lower courts, finding the city was liable under inverse condemnation when it engaged in "unreasonable delay" when it announced an eminent domain action against the plaintiff's property but then didn't follow through.

Berger said he believes the court should give Klopping claims "more play." Their reluctance to do so may be one reason these plaintiffs filed in federal court citing a state law. Berger added that the city was "not blameless" and put the property owners "in the crosshairs" despite their repeated requests for help from the city.

"There have been a few successful Klopping claims, but not many... The California courts have not been particularly friendly towards property owner plaintiffs in this particular type of case," Berger said.

The complaint describes years of battles with the city, which Bugatto claims pressured it to demolish the large facility as a public nuisance but then placed unreasonable conditions on its plans to rebuild at the site. This included a demand that the developer build a "street to nowhere... severing off approximately 25% of the Subject Property to create an island, and substantially devaluing the remainder."

Diepenbrock wrote that these demands failed the Nollan/Dolan test of having an essential and proportional relation to the government's land use interests. He also wrote that the city repeatedly fined Bugatto and filed liens over the condition of the property, despite the barriers it placed in the way of developing it. It was eventually forced to lower the sales price for the property from $5.1 million to $4.1 million.

Sacramento County District Attorney Thien Ho cited inverse condemnation when he sued the city for failing to enforce laws against homeless camps, but he did not cite the law in a second amended complaint filed in June. That case is ongoing. People of the State of California v. City of Sacramento, 23CV008658 (Sac. Super. Ct., filed Sept. 19, 2023).