“I’VE GOT THE HORSE RIGHT HERE” Condemning a Racetrack By Michael Rikon

The City of Baltimore has commenced eminent domain proceedings to condemn the Preakness Stakes horse race and the Pimlico racetrack.  It seems that the owners were intent on moving the Preakness Race out of the City.  The racetrack is in a rundown condition.  The Maryland Stadium Authority issued a report saying the Pimlico track should be torn down and rebuilt at a cost of $424 million. 

          Maryland law requires that the track be in Baltimore except for disaster or emergency.  Among the various charges levied is that the owners have allowed the track to fall into disrepair by diverting funds to other race tracks they own thus creating an emergency situation.

          Can a Condemnor condemn a privately-owned race track?  And, if it can, can it condemn a “race”?  The track is real property, but the Preakness is an intangible property.

          My opinion is that condemning a racetrack is a public purpose.  In New York, we have the recent case dealing with the condemnation of property in Brooklyn for Barclay’s Center, a new stadium for the Nets.  Goldstein v Pataki, 516 F.3d 50 (2008) cert. den. 128 S. Ct. 2964.  So, anything dealing with sports passes muster as a public purpose.

          Intangible property can also be taken by eminent domain.  New York specifically provides for the acquisition of property other than real property.  The procedural requirements are the same.  EDPL Sec. 708.  In one such proceeding in which I represented the Claimants, the County of Nassau condemned historic carousel horses and other items which were to be auctioned by the owners.  It did not condemn the land.  Nunley’s Amusement Corp. v County of Nassau, 266 AD2d 292 (2d Dept. 1999).

          Finally, the power to acquire an intangible is exemplified by Kaufmann’s Carousel v City of Syracuse I.D.A., 301 AD2d 292 (4th Dept. 2002). Kaufmann’s involved a large shopping mall which had two anchor stores.  The leases provided by specific clause that the developer could not add any further anchor or large stores.  Remedy?  Use EDPL Sec. 708 to condemn that specific provision.  The Court held that the Condemnor could condemn and that the anchors would have to file claims for just compensation. 

          Speaking of just compensation, what will be the just compensation that the City of Baltimore will have to pay?  A racetrack should qualify as a specialty and the depreciated value of the improvements will have to be added to the value of the land.  The specific race, the trademarks and related goodwill all have to be compensated for.  Then there is another concern.  Since Baltimore is condemning to continue the present use, it may have to pay compensation for a going concern.  That includes profits as a business, goodwill, customer lists and everything else.  And, it may not matter that the business was not profitable.  Port Authority Trans-Hudson Corp. v Hudson Rapid Tube, 20 NY2d 457 (1967).

Posted in Going Concern, Intangible Property, Racetracks, Uncategorized
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