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Under the Wire
by Ron Davis

Construction of a new shopping center in Los Angeles now must include the unforeseen costs of laying cable on center property for a local utility company.

Owners of the land targeted for the multimillion-dollar shopping center had already begun the first stages of the project when they learned that the utility company had claims on the property. Specifically, the utility wanted to use a right-of-way so fiber-optics lines could be laid underground.

By that time, the shopping center developers had spent some $6 million on the project. The city demanded that the developers also spend the necessary amount—perhaps as much as $330,000—to lay the underground lines.

The developers rejected the notion that approval of their project had depended on their agreeing to the laying of the lines. But they determined that it was not economically feasible to stop the project for a legal battle to defend their rights. So they complied with the city’s demands, then sued the city after completion of the project.

In their lawsuit, the developers argued that the city must prove that when it granted the shopping center construction, the utility company maintained existing facilities on their property. Otherwise, they added, they are not obligated to pay for relocating the lines underground.

But a utility company employee told the court that fiber-optics lines were in place on telephone poles prior to the city’s granting construction of the shopping center. On behalf of their argument, however, two of the principals of the shopping center presented photos showing utility poles with no lines attached. But the principals were unable to prove when those photos were taken.

A California court determined that the utility company had completed overhead installation of its fiber-optics facilities on shopping center property before the city had approved the project. The center’s owner appealed, maintaining that even if the lines were in place at the time they gained approval for construction, the lines were not operational.

Countering that argument, the utility company contended that the test is not whether the system was fully operational, but rather whether the existing facilities were there. The express language of the construction agreement, the company added, required the accommodation of all “existing facilities,” not just those operating at a specific point in time.

A California appellate court agreed with utility company, explaining, “There is no evidence that the utility company obtained rights to the right-of-way with knowledge of the center’s construction…. The uncontradicted evidence shows that the center’s owners were required to relocate at its own expense the utility facilities that existed [at the time of approval of the shopping center construction].” (Uniwill, L.P. v. City of Los Angeles, 2008 WL 3916258 [Cal.App. 2 Dist.])

Decision: September 2008
Published: October 2008



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