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State Pays For Wreaking Havoc
by Ron Davis

The state of Indiana must pay an Evansville shopping center owner $2.3 million for the harm caused in appropriating and reconfiguring the center’s access roads.

The shopping center is Plaza East, and the state’s actions were obviously an attempt to improve traffic flow in the Plaza East area. But the construction adversely affected the shopping center.

For example, shoppers exiting Plaza East could use only one access road to turn right onto a major thoroughfare. A left turn onto the thoroughfare was blocked because the state had constructed a concrete median in the road at that spot. That caused traffic backups at another access road that ran along the front of Plaza East. Moreover, the congestion at that spot made it more difficult for pedestrians to navigate the parking lot.

During and after the road construction, Plaza East’s tenants experienced declining sales. The shopping center went from 94 percent occupied in 2004 to 56 percent occupied in 2006. To prevent one tenant from moving from Plaza East, the center’s owner renegotiated a lease for approximately $90,000 a year less in rent than the previous $150,000 a year.

Also, prior to the state’s actions, one real estate appraiser judged Plaza East “in average condition and functional.” As such, the appraiser considered the property a Class B community shopping center. After the state’s actions, the appraisal found that Plaza East was less convenient to shoppers and “less desirable in the real estate market.” Plaza East found itself reduced to a Class C community shopping center.

Plaza East’s owner sued the state, and a jury decided that the state had inflicted a loss to the center of $2.3 million. The state appealed, arguing that Plaza East’s “alleged” loss is, at most, “simply an inconvenience” and therefore the center’s owner has no right to such “excessive” compensation based on such a claim.

An Indiana appellate court agreed that the state must pay the full amount on which the jury had decided. The court explained, “Given the nature of the shopping center owner’s business and the specific changes in accessibility, especially the safety concerns, the owner’s injury was different from what the driving public experienced [before the road improvements] and amounted to more than mere inconvenience…. Further, the jury’s verdict is not excessive because the loss of access [at the shopping center] was a proper consideration when assessing damages.” (State v. Kimco of Evansville, Inc., 2007 WL 3171772 [Ind.App.])

Decision: November 2007
Published: December 2007



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