Court of Appeals Affirms Norfolk Decision in Long-Standing Inverse Condemnation Case

The recent Morgan v. City of Norfolk decision provides a detailed look at how Virginia courts approach inverse condemnation claims tied to multi-phase construction projects. The Court’s analysis offers practical lessons on proof of causation, the limitations of the stabilization doctrine, valuation of temporary takings, and fee recovery. These insights are valuable for localities and practitioners navigating similar issues in ongoing or future public projects.

Background

“This case initially held out the promise of righting a great wrong the City of Norfolk had apparently done to Sharon Morgan. It ended in a most Pyrrhic victory.” So begins the Final Order from the Norfolk Circuit Court from January 2025, affirmed by the Court of Appeals January 2026 (Sharon Morgan v. The City of Norfolk, 0350251.pdf).*

Sharon Morgan brought an inverse condemnation action against the City of Norfolk, alleging that the construction for a pump station project had damaged her home. Importantly, the “project” was multiple phases of work that were legally and factually distinctive. The first two phases had concluded by 2017, four years prior to Morgan’s petition for declaratory judgment.

The trial court struck evidence of damage from the earlier phases, finding they were barred by the statute of limitations. The only claim that was permitted to move forward was a finding that the City had entered onto Morgan’s property during a later phase (Phase 3A) by constructing an asphalt pathway of 15 square feet, which existed for approximately six months, and was valued at $6.10.

Morgan preserved her objection to the ruling striking evidence, stipulated the value, and appealed.

*On February 3, 2026, Morgan petitioned for rehearing en banc.

Issues on Appeal

Statute of Limitations for Inverse Condemnation Claims and the Stabilization Rule

The trial court excluded evidence of damages prior to February 2, 2018, applying the statute of limitations period calculated based off the filing date of Morgan’s initial, nonsuited petition, which was subsequently refiled. On appeal, Morgan argued that the stabilization doctrine extended the accrual date of her cause of action to completion of the entirety of the project. The stabilization doctrine essentially means that the statute of limitation does not begin to run at the first instance of a property impact, but rather, when the situation has stabilized. The Court of Appeals did not decide whether the stabilization doctrine should be adopted by Virginia Courts because the doctrine was inapplicable. Since 1947, the stabilization doctrine has been narrowed; once the government has effected a permanent taking, the statute of limitations begins to run, and the trial court had concluded the timing.

Speculative Evidence

The record showed that before the third phase began, Morgan had significant structural issues in her home. There was evidence that the house was off its foundation, the kitchen counter was not level, and there were cracks throughout the house. Morgan did not present any expert testimony or evidence regarding vibration levels during construction, or what levels would have been necessary to cause structural damage. The crux of her argument had been that City road work to lay pipe in the street in front of her house vibrated her house off its foundation and caused other damage. However, she did not present expert testimony or other evidence about the severity or extent of vibrations, and she could not give lay testimony to connect specific construction activities to particular damage or changes to her house. Rather, her claims were based on the fact that she observed cracks around the same time the construction work was taking place. The Court of Appeals found that the trial court was left to speculate that it was the City that caused the cracks, and that such speculative assumptions were properly excluded.

Expert Opinion, Temporary Takings, and the Project Influence Rule

Morgan sought to introduce testimony from appraiser Dennis Gruelle (Gruelle) that just compensation should be premised on the entirety of the property rather than the limited 15- square-foot asphalt area. Gruelle opined a value based on the rental value of the entirety of the property, claiming that the entirety was unrentable for the duration of the project. The Court of Appeals affirmed the trial court’s exclusion, finding that testimony beyond the scope of the taking would have been inconsistent with the fair rental value for the temporary possession and use of the 15-square-foot area.

One interesting facet of Gruelle’s opinion involved how the project influence rule applied, although his testimony was ultimately excluded. Gruelle valued the property as of the date of take (determined by the Court to be late 2020) as though the house was in great condition, based on a theory that the poor condition of the house was attributable to earlier phases of the same project. Thus, he disregarded any damage that he assumed was attributable to the City. However, the different phases of the pump station were discrete: different locations and scope of work, different contractors, different times, and different contracts. The City argued that the project influence rule did not apply to exclude damage Morgan claimed was caused by Phases 1 and 2, because the only taking found by the Court occurred in Phase 3A and the rule would only apply to that compensable taking.

Attorney Fees

The trial court significantly reduced Morgan’s attorneys’ claim of fees and costs, primarily due to the duplication of effort from Morgan’s attorneys and the limited degree of success of the claim. Notably, the trial court also excluded Gruelle’s fees, finding them unreasonable for the posture of the case, and reduced other expenses, such as copying costs. The Court of Appeals affirmed.

Big Picture Takeaways:

• Speculative evidence should be examined early, and it is especially important to do so in inverse condemnation when there are claims of damage premised on temporal connectivity rather than hard evidence, data, or expert opinions.
• The case underscores the value of pre-construction documentation to rebut allegations of damages.
• The case also illustrates a positive effect of phased construction because it is easier to ascertain the work associated with each phase. However, this benefit should be weighed against the possibility of having multiple takes to properties over the course of a multi-phase project.
• The stabilization doctrine recognized by federal courts has not been extended to Virginia courts and if an argument is made to adopt it, attorneys should recognize the limitations on the doctrine since it was first implemented.
• The opinion indicates that the valuation for a temporary taking is tied to the duration of use (as opposed to, for example, the duration of the entirety of a project).
• Attorney fees should be challenged in inverse takings with careful evaluation of the results, duplication of effort, and expenses such as copy costs. Additionally, if work has unreasonably continued after adverse rulings, that could be an additional basis to argue reduction for both attorney fees and experts.

If you have any questions, please contact a member of our Eminent Domain Team.

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