Here's the opinion of the California Court of Appeal (1st District) in an appeal we've been following, Lockaway Storage v. County of Alameda, No. A30874 (May 9, 2013), affirming that the County of Alameda is liable for a temporary regulatory taking under Penn Central, and awarding the property owners nearly three-quarters of a million in attorney fees.
The entire opinion is worth reviewing, but here's the short story. Lockaway purchased agriculturally-zoned land in the East Bay area for use as a boat and RV storage facility, an alternate conditional use in ag-zoned land. For over a decade, the property had been used as such pursuant to a series of Conditional Use Permits. In 2000, however, the voters of the county approved an initiative which prohibited the development of storage facilties, unless approved by public vote. The ordinance contained a provision allowing "minimum development" if the prohibition would deprive an owner of its statutory or constitutional rights. It also contained a provision exempting existing developments, and parcels that have received "all necessary discretionary County and other approvals and permits" (in other words, those developments that have "vested").
When Lockaway applied for a new CUP, the County denied it because Lockaway had not obtained a building permit and started construction prior to the effective date of the initiative ordinance. After exhausting administrative remedies, Lockaway sued in California state court for a writ of mandate allowing it to proceed with development, and for inverse condemnation and civil rights violations. The Superior Court issued the writ, because the development was "squarely under the protections" of the vested exemption even though a building permit had not issued, because a building permit is ministerial and not "discretionary." Thus, Lockaway was allowed to proceed with development. After a trial on the damages for the temporary taking, the court held that under Penn Central, the Superior Court held "the County's regulatory action had a 'substantial, negative economic impact' on Lockaway's use of the property, had 'materially interfered with Plaintiffs' distinct, investment-backed expectations,' and that its conduct could not be justified as a normal regulatory mistake." Slip op. at 8. The court issued a verdict for $504,175 in lost profits, $324,954 in increased construction costs due to the 30-month delay in construction, and prejudgment interest. It also awarded $703,760 in attorney fees plus a 1.25 multiplier for a total award of $879,700.
The Court of Appeal affirmed the entire judgment. The most interesting part of the opinion begins at page 20. The court reviewed the three-part Penn Central test, rejected the County's argument that the right test is Landgate Inc. v. California Coastal Comm'n, 17 Cal. 4th 1006 (1998), and held that although the initiative did not render Lockaway's property worthless, it did deprive it of a "return on investment that it 'reasonably expected from the intended use.'" Slip op. at 23. The court also affirmed the "investment-backed expectation" prong, because Lockaway "purchased the property only after the County expressly confirmed that Lockaway could rely on the 1999 CUP to develop a storage facility." Slip op. at 24. Finally, the County's "showstopping U-turn" (first working with Lockaway to further its development plans, and then doing an about-face) satisfied the "character of the government action" factor:
On appeal, the County contends there is insufficient evidence to support the trial court's findings regarding the character of its regulatory action. We disagree. The following pertinent facts are supported by substantial evidence. The County did not take any action to shut down the Lockaway project in December 2000 when Measure D went into effect. Instead, it encouraged Lockaway to continue its development efforts for 18 months. Then, in September 2002 the County changed its position and announced that the project had been doomed since December 2000 because Lockaway had not obtained all permits and commenced construction before Measure D‟s effective date. In taking this new stand, the County refused to even consider whether Section 22 exempted the Lockaway project.
Slip op. at 25. The court concluded the County's behavior was "manifestly unreasonable."
Read the entire opinion for the details. Congratulations to colleague Timothy Kassouni on the win.