The City of Santa Clara is fighting back after a jury ordered it to pay the owner of David’s Restaurant and Banquet Hall more than $1.3 million. On May 16, the city filed an appeal contesting a January 2025 civil court verdict.
The verdict was the culmination of several years of court battles between David’s Restaurant, referred to in court documents as D.E. II Restaurants, Inc., and the City of Santa Clara.
In 2019, the city began eminent domain action against D.E. II. Santa Clara offered $5,000 for D.E. II’s lease for the city-owned land at 5131 Stars & Stripes Drive.
Three months after the city filed its eminent domain action, D.E. II filed a cross-complaint asking for damages for “unreasonable precondemnation activities.” According to D.E. II’s lawyers, the city declared its intent to take the land well before beginning eminent domain action.
On March 9, 2013, the city announced plans for a 209-acre development on Stars & Stripes Drive in conjunction with Related Companies. It began holding public meetings soon after and, in 2016, the city council approved a land deal with Related Companies.
Lawyers for D.E. II argued that by announcing this new development, the city “unreasonably made formal and public announcements or other official expressions of a firm intention to acquire and/or condemn D.E. II’s lease that specifically identified D.E. II Restaurants, Inc’s banquet facility as being removed for the project …”
Despite the community meetings in 2013 and forward, the city did not file its eminent domain action until January 2019, around the same time that D.E. II’s lease (signed in 1999) was set to expire.
While a judge determined in 2020 that the city had a right to take the land under eminent domain, the issue of D.E. II’s cross-complaint was left to a jury.
The jury heard the issue in January 2025. In the valuation trial, jurors were asked to determine how much D.E. II was owed because of the city’s inaction between March 9, 2013, when the proposal was announced, and January 19, 2019, a few weeks after the city commenced its eminent domain action.
The jury determined the fair market value of the lease was indeed $5,000 as the city contended. However, the jurors also determined that D.E. II was owed more due to loss of goodwill and profits.
Jurors awarded D.E. II $1,113,000 for loss of goodwill and profits, $173,000 in interest and more than $24,000 in statutory costs. The total verdict in D.E. II’s favor was $1,315,607.56.
The verdict did not preclude D.E. II from asking for legal fees and litigation expenses. In an April 9 filing, D.E. II’s attorneys asked for $649,724.83 in attorneys’ fees and $71,394.58 in non-statutory costs. That issue is expected to be heard on June 13.
The Related project proposed for the site has not yet begun construction. The Planning Commission is expected to review the latest plans for the project in June, and the City Council will hear the proposal in July.
I agree with the attorneys. Cities, towns, states, who use eminent domain SHOULD be held accountable and the resident or business should be paid not only fair value, but compensatory damages for losing their properties. GOOD FOR THEM!
I don’t understand this. The lease ended in 2020 and the tenant had notice back in 2013 that the lease would not be renewed. Where’s the liability?
This smells as bad as the $4MM the City had to pay to the politically-connected law firm. I continue to wonder if our City Attorney at the time received a kickback for creating the situation for that. I have to wonder about the current City Attorney for this fiasco.
These are some big money awards and then attorney fees? What is the SVV not reporting about the way the law works on this?
Thank you for reading GoodShipSantaClara. I believe the issue was the city put the cart before the horse so to say. City officials talked about all the plans for the land and signed a new deal for the land before it actually secured the lease buyout or started eminent domain proceedings. In other words, yes, the lease expired in 2020, but the deal was signed well before the lease was expired and Related could have technically started construction before the lease expired.
Another endless gift from Lisa Gillmor and her coterie of incompetent council members.