Here's a case about the denominator in a regulatory takings case from July 2017, just after the U.S. Supreme Court issued its opinion in Murr v. Wisconsin. We somehow missed the opinion when it was issued, but since we think it must be the first case which attempted to apply the Murr majority's multi-factor test, figured we better post it.
In Quinn v. Board of County Commissioners, Queen Anne's County, No. 16-1890 (July 7, 2017), a panel of the U.S. Court of Appeals for the Fourth Circuit upheld the district court's dismissal of a regulatory takings claim that the County's regulations, "designed to limit overdevelopment of the area" on South Kent Island. Slip op. at 3. But not as you might expect (on Williamson County ripeness grounds), but on the merits.
Practice note: when you are the property owner's lawyer and an opinion starts by characterizing your client's use as "speculative land investment," you kind of can predict that the rest isn't going to be good:
Kevin Quinn, a landowner, challenges a comprehensive plan to extend sewer service to South Kent Island and a so-called Grandfather/Merger Provision designed to limit overdevelopment of the area. He asks us to protect a speculative land investment by finding a regulatory taking as well as violations of his due process and equal protection rights. Doing so, however, would invalidate a standard zoning tool whose legitimacy was recently upheld by the Supreme Court. It would also revolutionize zoning law and “frustrate municipalities’ ability” to undertake basic land use planning. Murr v. Wisconsin, No. 15-214, slip op. at 16 (U.S. June 23, 2017).
Slip op. at 3.
The flavor in the first paragraph permeated the rest of the opinion, which focused on how reasonable the court believed that the County's regulations are.
These regulations, adopted in response to the usual septic and sewer hookup issues which are common in more rural areas, permit an owner of what are otherwise undevelopable lots due to the lack of sewage processing to develop them (yay!). But only if those lots were used together (uh oh). In other words, the ordinance allowed development but only for "merged" parcels on a severely less dense basis than were they to be developed separately. The individual lots, standing alone, must be left vacant due to lack of septic or sewer availability. The court expressed a lot of sympathy for the County, which it saw as trying to balance competing interests:
The County recognized that many lots were vacant because they could not support a septic system, but it feared also that a new sewer system might lead to excessive development. In addition, the County needed State funding for any sewer extension, but because South Kent Island was not in a “Priority Funding Area,” the State of Maryland would not provide funding for a sewer extension that would serve new development. However, the County could not just exclude all vacant lots from sewer service because of a Maryland statute that requires providing a sewer connection to all properties that abut a sewer line, including undeveloped lots.
In order to satisfy all these various constraints, the County planned to extend sewer service to all streets with failing septic systems. Both developed and undeveloped lots on those streets would receive sewer service. In an effort to limit further development, there would be no sewer lines constructed on streets with only vacant lots. The vacant lots on those streets would be excluded from service because none would abut a sewer li/ne. The plan also prevents future connections outside the initial service area.
Slip op. at 4-5.
To make a long story short, the court concluded that the County's regulations were run-of-the-mill zoning/land use ordinances, and thus were not a taking, nor violations of the related substantive due process and equal protection claims. Because the County had no obligation to extend sewer services to the plaintiff's parcels, he had no property interest that was taken by the development prohibition.
The court rejected the owner's attempt to distinguish Murr. He pointed out that he purchased his property before the restrictive regulations were adopted, and not afterwards like the Murr children. See Murr, 137 S. Ct. at 1945 (“the “expectations . . . an acquirer of land must acknowledge legitimate restrictions affecting his or her subsequent use and dispensation of the property”). My expectations were different, he argued, because the regulations landed on me, not the other way around. I had a property right, and the regulations took that right away from me. The court disagreed, concluding that the plaintiff was just like the Murr kids: "Quinn is in a similar position here. He cannot point to anything in the land records that would suggest he has a right to obtain sewer service; he bought the land knowing that development would depend on septic systems. Likewise, Maryland law does not create a property right in the access to a sewer system." Slip op. at 8.
The County's failure to extend sewer lines to his property did not prohibit his use, "but merely refuses to enhance the value of real property." Slip op. at 10. The panel didn't base this on the Constitution's Givings Clause, but on the idea that when the plaintiff purchased the properties, they were not separately developable due to lack of sewage processing, whether septic or sewer. Slip op. at 10 ("Viewed another way, Quinn cannot develop some of his lots because the land will not accommodate septic systems, not because the County will extend sewer service to other lots on South Kent Island—including some of Quinn’s property.").
The court rejected both a Lucas claim (obviously, since the denominator was several of the plaintiff's amalgamated parcels, which had some value since they were jointly developable), and his Penn Central arguments.
Again, the central theme in the opinion was how run-of-the-mill these type of regulations are, and how calling their validity into question "would open an incredible Pandora's Box" --
The Grandfather/Merger Provision does not resemble a regulation that is pressing Quinn’s land “into some form of public service.” Id. at 1018. Instead, it resembles standard zoning tools—such as minimum lot sizes, setback requirements, or restrictions on subdividing lots—that local governments use all the time to temper the density of development. See Murr, slip op. at 15–16. Not only are local governments concerned about congestion on roads, overcrowding in schools, overuse of sewer systems, and exhaustion of other public services, they must consider the costs of overdevelopment on the environment and on the fundamental character of the community. Managing the density of development—even if it disappoints a particular developer—is thus a crucial goal of land use planning.
Slip op. at 11-12.
As we predicted in our (draft) article, the Murr majority has shifted the question in regulatory takings case from the impacts on the owner's economically beneficial use, to how reasonable the reviewing courts believe the regulation is. In Quinn, the Fourth Circuit panel concluded that even if the focus was on the owner's remaining uses, he should, in essence, be grateful: "Quinn does not provide evidence of the effect of the Grandfather/Merger Provision on his lots that will receive sewer service, but he has at least twelve lots—subject to merger into four lots—that will. Quinn cannot point to any reason these lots cannot be developed, and it is clear that the Grandfather/Merger Provision does not deprive these lots of all economically beneficial use." Slip op. at 12.
Applying Murr's vague rules vaguely -- the panel really didn't go through each of Murr's factors individually, but merely concluded that "[t]he multifactor standard established by the Supreme Court’s decision in Murr suggests that the lots subject to merger should be viewed as a collective," slip op. at 12 (what about "the surrounding human and ecological environment?") -- the court held that the individual parcels had value as merged, and therefore there was no taking, because "[e]ven if viewed individually, however, each of the twelve lots retains value for assemblage into the four lots on which Quinn can now build." Slip op. at 13.
In sum, these are just zoning regulations, nothing to see here move along:
The Grandfather/Merger Provision is not a per se taking under Lucas or a taking under the Penn Central standard. It is, rather, a standard zoning provision designed to manage the density of development, a crucial part of local land use planning. To find a taking here would revolutionize zoning law and severely constrict local governments’ ability to direct democratically the very nature and character of the community.
Slip op. at 15.
Given that holding, do we really need to tell you how well Quinn's substantive due process and equal protection claims fared? We didn't think so.
One last thing: the opinion did address the Williamson County argument in a footnote, noting that the rule was a prudential one, not jurisdictional, and "we may determine that in some instances, the rule should not apply, and we still have the power to decide the case." Slip op. at 7. n.2.