May 26, 2022
Utah Supreme Court
2022 UT 19 (Click for text of opinion)
The Utah Supreme Court reversed the court of appeals’ ruling that in order for an acquisition of property to be made under a “threat of eminent domain” for purposes of right of first refusal, the government entity must have specifically authorized the use of eminent domain by approving an eminent domain lawsuit in an open meeting.
Washington County School District expressed its interest in acquiring property owned by Cardiff Wales in order to build a high school. The parties negotiated a purchase of the property, which Cardiff Wales alleges was done to avoid an eminent domain lawsuit, as the district repeatedly reminded Cardiff Wales during the process that if voluntary negotiation was unsuccessful, a condemnation action was “imminent.” The district never built a school, and approximately a decade after acquiring the property, sold it to a third party. Cardiff Wales filed a lawsuit claiming the district had violated its right to first refusal to repurchase the property under Utah statute.
Utah Code requires the government to grant a right of first refusal to the property’s seller if that property was acquired under threat of eminent domain. The Court of Appeals held that a “threat of eminent domain” arose only when the government has “specifically authorized” using eminent domain, and equated the statutory term “specifically authorized” with the requirement to “approve the filing of an eminent domain action” in another section of Utah Code regarding pre-condenmation requirements. While the Utah Supreme Court agreed that a threat of eminent domain arose only when the government had “specifically authorized” its use, it disagreed that the only way this occurs is by formal action to approve the filing of an eminent domain lawsuit. As the legislature had employed different terminology in the two sections, it held that it was unlikely that the legislature had intended the right of first refusal to come into play only if the landowner resisted any negotiated resolution during mediation and/or arbitration and waited to sell until after the government entity had taken a vote to approve the filing of a lawsuit.