My So-Called Exaction Case: More on Action Apartment

When a court labels the Nollan/Dolan line of decisions "so-called exaction cases" (and your claim is that an exaction is not related or proportional) you know right away you are in trouble.

First, the dry summary.  In Action Apartment Ass'n v. City of Santa Monica, No. B201176 (Aug. 28, 2008) (slip opinion available here), the California Court of Appeal (Second District) denied a facial challenge to the city of Santa Monica's affordable housing exaction ordinance.  The court relied upon the legislative/adjudicative distinction holding that Nollan/Dolan analysis is only applicable to individual decisions regarding permit applications, and cannot be used to challenge legislative decisions generally applicable.

Second, some background on "facial" challenges as contrasted with "as applied" challenges. A "facial" takings challenge to a statute or ordinance asserts that its mere enactment is unconstitutional.  The U.S. Supreme Court recently explained the nature of facial challenges:

Under United States v. Salerno, 481 U. S. 739 (1987), a plaintiff can only succeed in a facial challenge by “establish[ing] that no set of circumstances exists under which the Act would be valid,” i.e., that the law is unconstitutional in all of its applications. Id., at 745.

Washington State Grange v. Washington State Republican Party, No. 06-713 (Mar. 18, 2008). In other words, a facial challenge is a claim that a statute or ordinance is unconstitutional in all situations, whereas an "as applied" challenge is one where the plaintiff claims that the law may be generally valid, but as applied to the plaintiff, it is unconstitutional. 

Third, a summary of the Nollan/Dolan reasoning.  In Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), the Supreme Court recognized that "a permit condition that serves the same legitimate police-power purpose as a refusal to issue the permit should not be found to be a taking if the refusal to issue the permit would not constitute a taking."  Id. at 836.  But the Court held that government has the burden of establishing an "essential nexus" between a permit condition and the alleged negative burden or impact of the proposed use or development.  Id. at 837.  Absent that logical and factual relationship, the condition is a taking of private property without compensation – "not a valid regulation of land use but 'an out-and-out plan of extortion.'"  Id. (citations omitted).  In other words, there must be some cause-and-effect relationship between the proposed use of land, and the condition imposed on government permissions.  In Nollan, the Court held that a permit condition that required a landowner donate public access across its property was a taking because the landowner's proposed use would not interfere with public access.

In Dolan v. City of Tigard, 512 U.S. 374 (1994), the Court explained how close a fit must exist between a permit condition and a project's negative impacts.  The Court held that even when an essential nexus exists, government must still demonstrate a "degree of connection between the exactions and the projected impact of the proposed development."  Id. at 386.  There must be "rough proportionality" – "some sort of individualized determination that the required [condition] is related both in nature and extent to the impact of the proposed development."  Id. at 391 (emphasis added).  Dolan made clear that this burden is on government – not the property owner – to demonstrate the requisite nexus and rough proportionality demanded by the Takings Clause.  Id.

The Court recently affirmed the continued vitality of the Nollan/Dolan heightened review as Takings Clause tests for conditions on property use.  In Lingle, the Court held that both Nollan and Dolan "involve a special application of the doctrine of 'unconstitutional conditions.'" Lingle, 544 U.S. at 547 (quoting Dolan, 512 U.S. at 385).  Under that doctrine, "the government may not require a person to give up a constitutional right – here the right to receive just compensation when property is taken for a public use – in exchange for a discretionary benefit conferred by the government where the benefit has little or no relationship to the property."  Dolan, 512 U.S. at 385.  Whenever government imposes a condition on the otherwise lawful use or development of property – whether legislatively or administratively, and whether the government demands money or land – courts must apply heightened scrutiny to determine whether the condition is an unconstitutional taking of private property under the Fifth Amendment. 

Back to Action Apartment.  Where the opinion gets interesting is the court's summary of its view of takings law.  It first contrasted what it referred to as "categorical" takings with "regulatory" takings.  Slip op. at 13-15.  "Categorical takings," according to the court, are when "an owner's property is taken in whole or in part, by government for a public purpose."  The court divided "compensable regulatory takings" into two types: those that deprive an owner of all economically beneficial use (aka Lucas wipeouts), and those where a "complex set of factors are considered" (aka Penn Central ad hoc takings).  The court also separated the Nollan/Dolan analysis from the above categories, and treated those cases as a completely separate type of regulatory taking.

These takings classifications are odd. Regulatory takings law defies most attempts to refine a unitary theory, but that is the nature of the enterprise since the government claims it is merely regulating, while the property owner asserts that the regulation has singled it out to bear more than her fair share.  My read of takings law is that claims generally can be put into categories, but not the ones the Action Apartment court recites. 

The first class of takings is straight condemnations, or the affirmative exercise of eminent domain: those cases where the government affirmatively attempts to take property for public use, and acknowledges its obligation to pay just compensation.  You know one of those when you see it.  You get the "dear homeowner" letter, or maybe get served with a complaint for condemnation in which you or your property is the defendant. 

The second type of takings is inverse condemnations, where the government has undertaken some act which has the same effect as if the government exercised eminent domain but the government has not acknowledged that it has affected property or any obligation to pay compensation.  Inverse condemnations are "inverse" because the property owner has to sue the government (not the other way around as in straight condemnations) to stop the taking, or to compel compensation. 

Inverse condemnations can be further broken down into two types: physical takings and regulatory takings.  Physical takings are those where the government invades private property (or invites other to do so under color of right).  Examples of physical takings are flooding caused by government conduct, actual government trespass, and trespass by the public at government invitation.  These actions, like straight condemnations, are considered takings without regard to the impact on the property's value.  Classic Nollan/Dolan cases fall within this category and the last example. 

In a regulatory taking, a regulation does not compel an actual invasion of property, but has some effect on the property's value.  When a regulation deprives the owner of all beneficial use (the Lucas wipeout), the court will not examine anything else since a deprivation of use is the functional equivalent of a physical invasion.  In the last category, if a regulation affects property but does not deprive the owner of all beneficial use, the Penn Central factors are considered, and if, on the whole, the regulation forces an owner to alone bear public burdens which should be shared by all, the regulation is a taking.

Action Apartment's use of the term "compensable regulatory taking" is especially strange.  After all, is there any kind of regulatory taking other than one that is compensable?  If a regulation "goes too far" and takes property, the Fifth Amendment requires compensation, and regulations that do not require compensation aren't regulatory takings at all, are they?  They're just valid regulations.

Having incorrectly categorized Nollan/Dolan claims as a separate branch of regulatory takings, Action Apartment wandered further off course when it stated:

Both the United States and California Supreme Courts have explained the two part Nollan/Dolan test developed for use in land exaction takings applies only in the case of individual adjudicative permit approval decisions; not to generally applicable legislative general zoning decisions.

Slip op. at 15.  While it is true that the California Supreme Court follows this rule, the issue has never been directly addressed, much less settled, by SCOTUS.  If further review of Action Apartment is sought, however, maybe it will.