Judge throws out part of ground rent suit

March 01, 2009|By James Drew | James Drew,james.drew@baltsun.com

A judge has thrown out part of a lawsuit filed by ground rent owners challenging a 2007 state law intended to halt abuses in the system, but allowed their constitutional challenge to move forward.

Judge Paul F. Harris Jr. of Anne Arundel County Circuit Court also denied the state's motion to transfer the case to Baltimore.

In a 21-page ruling released last week, Harris rejected the argument from ground rent owners Stanley Goldberg and PFGR LLC that a state law abolishing ejectment - the seizure of a property for nonpayment of ground rent - is a "physical taking."

Harris wrote that the plaintiffs needed to show that the new law "has caused or will necessarily cause each and every ground rent tenant to violate his or her lease and permanently remain on Plaintiffs' property."

"But such is not the case because the Act allows property owners to foreclose on non-paying ground rent tenants," he wrote.

Harris, however, denied the state's motion to dismiss the entire case, which alleges that the legislature violated parts of the state and federal constitutions that bar "private property from being taken for public use, without just compensation."

He ruled that the plaintiffs' argument that state law amounts to a "regulatory taking," by eliminating or reducing the value of their ground leases, should move forward.

The lawsuit alleges that the market value of the plaintiffs' ground rents has "plummeted and the properties have become unmarketable" since the state law took effect. "Drawing the inferences in favor of Plaintiffs, these factual allegations are sufficient to state a claim that the Act effected an uncompensated regulatory taking," Harris wrote.

The General Assembly overhauled the state's ground rent system in the wake of an investigative series published by The Sun in December 2006 that detailed abuses in the system.

The state had argued that the case should be heard in Baltimore because more than 90 percent of the plaintiffs' ground rent properties are in the city, and it would be more convenient for tenants to testify there than in Annapolis. The plaintiffs argued for Anne Arundel County, in part, because "sensationalized news coverage has inflamed passions in Baltimore, making Anne Arundel County a more neutral forum."

Raquel Guillory, a spokeswoman in the attorney general's office, said the state was "pleased that half of the plaintiffs' case was thrown out in its entirety."

Edward J. Meehan, a Washington attorney representing the ground rent owners, said he will ask the court to certify a class action that could include thousands of ground rent owners potentially seeking "several hundred million dollars" from the state.

"If we cannot otherwise resolve it, then we would proceed to a trial by jury," Meehan said.

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