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Floyd County Court Overturns Utility’s Efforts to Condemn Property

In January, the Floyd County Circuit Court ruled that a local public utility did not meet the requirements to take property through eminent domain because the utility had not demonstrated an “immediate need or present need” for the private property. This ruling appears to be the most restrictive court interpretation of utilities’ condemnation powers in recent years.

In the case, a local developer asked Wymberley Sanitary Works, Inc. to extend sewer service to some proposed subdivisions. The developer and Wymberley entered into an agreement for the developments. The developer, on behalf of Wymberley, tried to acquire easements over neighboring properties for the sewer system. When the developer was unsuccessful, Wymberley tried to use the eminent domain process. In the eminent domain proceeding, the court upheld the objections of the property owners and dismissed Wymberley’s eminent domain complaint.

In addition, the court ruled that the taking was in bad faith because the developer offered to purchase the real estate before the Floyd County Plan Commission had approved the proposed developments. Finally, the court ruled that Wymberley’s selected route was “arbitary and capricious” because Wymberley did not consider alternative routes and failed to inspect the properties from which it proposed to take easements. In other words, the court second guessed the utility’s determinations regarding how and where to install its utility lines. This appears to be inconsistent with the standard used by the Indiana Utility Regulatory Commission when it reviews utilities’ decisions regarding how they install their systems, as well as prior Court of Appeals’ decisions regarding condemnation.

Because this is a trial court decision, it should not set precedent for other condemnation disputes. However, we understand that this decision is being appealed. Therefore, the decision by the Court of Appeals would determine trial courts’ ability to second guess utilities’ condemnation decisions throughout the state. Additionally, there is nothing in the decision that limits is applicability to privately owned, for profit utilities. Therefore, this type of decision could affect all utilities, including municipal utilities and regional districts. Bingham McHale will provide further updates as this case progresses through the appellate process.

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