We know inverse condemnation liability can be triggered by intentional government action. But what about when government doesn't act?
That was the issue before the Court of Appeals of Maryland in Litz v. Maryland Dep't of the Environment, No. 23 (Jan. 22, 2016). And when the opinion starts this way, you just know where this is going to end up:
“The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’”-Ronald Reagan, 40th President of the United States, News Conference (12 August 1986).Petitioner, Gail B. Litz, might have welcomed hearing those nine words spoken to her, but, according to her Third Amended Complaint, they were not forthcoming.Slip op. at 1.
The case involved "human sewage" flooding onto Ms. Litz's once-popular campground from nearby septic fields, which, quite naturally resulted in a dearth of people who wanted to camp there. This loss of business made her lose her property through foreclosure. She sued the local municipality and the State of Maryland, for inverse condemnation, among other claims.
The first time the case visited the Court of Appeals, the court held that her claims were filed within the statute of limitations. On remand, the trial court dismissed for failure to state a claim. Litz asserted only that the government didn't do anything to stop the intrusion, not that it did anything affirmative to cause the sewage dump on her land. The Court of Special Appeals affirmed, concluding that the complaint alleged only "discretionary inaction" by the government, and this is not actionable in inverse condemnation.
"Ms. Litz contends that she alleged sufficiently a cause of action for inverse condemnation by alleging that the failure of Respondents to address the pollution and sewage problems led directly to the substantial devaluing of her property and its ultimate loss[,]" while the government argued "her allegations did not reveal any affirmative act (regulatory or otherwise) by the State which led to a taking." Slip op. at 10.
The Court of Appeals began its analysis with a discussion of what "inverse condemnation" is, and in our view, it is as good a summary as we've seen recently:
An inverse condemnation claim is characterized as “a shorthand description of the manner in which a landowner recovers just compensation for a taking of his property when condemnation proceedings have not been instituted.” Coll. Bowl, Inc. v. Mayor & City Council Of Baltimore, 394 Md. 482, 489, 907 A.2d 153, 157 (2006) (citing United States v. Clarke, 445 U.S. 253, 257, 100 S.Ct. 1127, 1130, 63 L.Ed.2d 373, 377 (1980)). Essentially, a plaintiff may “recover the value of property which has been taken in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been attempted by the taking agency.” Coll. Bowl, Inc., 394 Md. at 489, 907 A.2d at 157 (quoting D. Hagman, Urban Planning and Land Development Control Law 328 (1971)). The Supreme Court explains that a government is liable for inverse condemnation if it “forc[es] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Coll. Bowl, Inc., 394 Md. at 489, 907 A.2d at 157 (citing PruneYard Shopping Center v. Robins, 447 U.S. 74, 83, 100 S.Ct. 2035, 2041, 64 L.Ed.2d 741, 753 (1980)).
Slip op. at 12.
The court acknowledged that "ordinarily," a property owner must show that government action resulted in a taking, whereas here, Litz's "allegations focus predominantly on the inaction of Respondents, rather than any affirmative action by those parties claimed." Slip op. at 13. The court agreed with Minnesota, Florida, and California, and held that "a matter of Maryland law, that an inverse condemnation claim is pleaded adequately where a plaintiff alleges a taking caused by a governmental entity’s or entities’ failure to act, in the face of an affirmative duty to act." Id. The government "since at least 1973" had undertaken the duty of correcting the community sewage system, and by 1985 knew that the thing was failing, and that immediate action was necessary. Even after entering into a consent order in 1996, the government didn't make any corrections other than issuing some warnings. A failure to regulate in such a case may give rise to inverse liability. " Ms. Litz’s property was alleged to have been 'condemned' by the failure of the State and Town in the face of an affirmative duty to abate a known and longstanding public health hazard." Slip op. at 19.
The court also differentiated between an inverse condemnation claim and a tort claim, concluding that neither the Maryland Tort Claims Act, nor the Local Government Tort Claims Act governed an inverse claim, and thus Litz did not need to comply with the notice requirements in those statutes. Only her trespass claim needs to comply.
Three of the court's seven justices dissented, and concluded that affirmative governmental conduct should be required to state a claim for inverse condemnation. Can the government take property without intending to? The legislature didn't intend to create a cause of action when it placed the duty on government to monitor sewage systems. What this analysis overlooks, however, is that the inverse condemnation cause of action does not rely on legislative largess, and that is is a matter of the constitution (the Maryland Constitution, in this case). In other words, the compensation requirement is self-executing (although the majority never says this expressly).
According to this story ("Governmental inaction can constitute a property ‘taking’, Md. high court says"), there may be more, because the Maryland "high court cited the Maryland Constitution’s Takings Clause but noted it mirrors the scope of the federal Constitution’s provision, thus preserving the possibility of an appeal by the state to the U.S. Supreme Court." Despite a lower court divergence of opinion (there are states which agree with the dissent), we kind of doubt this is the type of case that SCOTUS would be interested in, because the differences of opinion are questions of state law, under state constitutions.
But we'll see.
Meanwhile, Maryland property owners, in addition to the Reagan Dictum quoted in the opinion, brush off what we might call Newton's Third Law of Regulation: for every action, there is an excessive and more oppressive reaction. We expect that this case will result in Maryland governments coming down hard on property owners, especially rural owners with more antiquated septic systems, and stepping up enforcement and regulation. And it may not be limited to septic issues, but anything that could lead to inverse condemnation liability.