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Materials And Links From Today's Water Law Seminar

To those who attended today's seminar "Integrating Water Law and Land Use Planning," thank you.  The materials from my session on "Water Rights, Property Rights and the Law of Settled Expectations" are below. 

• Kaiser Aetna v. United States, 444 U.S. 164 (1979) - the Hawaii Kai Marina case - physical invasions, regulatory takings, and interference with settled expectations.

• Haw. Const. art. XI, § 7  (the declaration of public trust).

• Hawaii's Takings Clause.

• U.S. Constitution, amend. V (federal takings clause).

• U.S Constitution amend. XIV (federal due process clause).

• 42 U.S.C § 1983 (federal civil rights statute).

• 42 U.S.C § 1988 (prevailing party attorney's fees statute).

• Maui Tomorrow v. State of Hawaii, 110 Haw. 234, 131 P.3d 517 (2006) - Hawaii water law is not a federal case.  Summary of the decision here.
  

• The State zoning law, Haw. Rev. Stat. ch. 205.

• The Hawaii State Planning Act, Haw. Rev. Stat. ch. 226.

• The Hawaii Water Code, Haw. Rev. Stat. ch. 174C.

• Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926), the case in which the U.S. Supreme Court first upheld the segregation of land uses in an Ohio suburban town into districts against a substantive due process challenge. Law students study the case, land use lawyers and planners know it intimately, and "Euclidean" zoning has become the shorthand for district-based single use zoning.

• Hadachek v. Sebastian, 239 U.S. 394 (1915) - the government's police powers can be used to protect against nuisances.

• Joseph L. Sax, The Public Trust Doctrine in Natural Resource Law: Effective Judicial Intervention, 68 Mich. L. Rev. 471 (1970).  Copy available here.  

• In re Water Use Permit Applications (Waiahole), 94 Haw. 97, 9 P.3d 409 (2000) (the mother of all Hawaii water law cases -- the decision so vast it required its own table of contents)

• In re Waiola O Molokai, Inc., 103 Haw. 401, 83 P.2d 664 (2004) (burdens of proof).

• State and local government agencies have public trust duties - Kelly v. 1250 Oceanside Partners, 111 Haw. 205, 140 P.3d 985 (2006).

• A counterpoint to Waihole: David L. Callies & Calvert G. Chipchase, Water Regulation, Land Use and the Environment, 30 U. Haw. L. Rev. 49 (2007).  Copy posted here.

• Hawaii vested rights: Arrow of Time - Vested Rights, Zoning Estoppel, and Development Agreements in Hawaii - 2006 U. Hawaii Law Review article. Drop me an email, and I will email you a pdf, or send you a hard copy (tell me which).

• Upsetting settled expectations in shoreline law - accretion and erosion: Maunalua Bay Beach Ohana 28 v. State of Hawaii, No. 28175 (Haw. ICA) - here's the brief we filed which illustrates the principle that the legislature (or a court) cannot simply change the settled law without raising takings concerns. The issue in that case is whether the state or littoral landowners are entitled to ownership of accreted land. In "Act 73," the legislature declared that shoreline land naturally accreted belongs to the State of Hawaii and is public property.  The act overturned the age-old rule of shoreline accretion and erosion, which held that beachfront owners lose ownership of land when it erodes, but gain it when it accretes.  Instead of these balanced rules, Act 73 made the erosion/accretion equation one-sided: the State wins every time. 

• Compensation for regulatory taking of water rights - Casitas Municipal Water District v. United States, No. 2007-5153 (Mar. 3, 2009).

Federal Circuit: Eggonomic Impact Not Eggregious Enough To Require Feds To Shell Out Compensation

Okay, we've decided to surrender to temptation and let fly with bad (and obvious) egg puns. But at least they're out of our system in the beginning. After that, no more yolks. We promise.

In Rose Acre Farms, Inc. v. United States, No. 2007-5169 (Mar. 12, 2009), the U.S. Court of Appeals for the Federal Circuit held that a regulation restricting the sale of eggs was not a taking under Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978), because the economic impact of the regulation "was not severe" and the character of the government action "strongly favored" the government.

Rose Acre Farms owns egg-laying chickens.  A lot of them: "eight layer-hen farms with millions of hens." The USDA first promulgated temporary, then final regulations that restricted the interstate sale and transportation of eggs determined to be contaminated with salmonella. After illness outbreaks were traced to three of Rose Acre's farms, the company was forced to sell its eggs from these farms as "breaker eggs" (pasteurized eggs used in products such as cake mixes), instead of table eggs. Breaker eggs have about a 10% lower value. Approximately 43% of Rose Acre's table eggs were used as breaker eggs.

After its legal challenge to the validity of the regulations was upheld by the Seventh Circuit, Rose Acre sought just compensation in the Court of Federal Claims. The first trial resulted in an award of $6.1 million for a categorical taking plus $2.5 million in attorneys fees and costs, but the Federal Circuit disagreed with the applicable legal standard, and sent the case back for further consideration of the Penn Central factors.  The Penn Central test applies three factors:

The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. See Goldblatt v. Hempstead, supra, at 594. So, too, is the character of the governmental action.

Penn Central, 438 U.S. at 124.  After a second trial in which the testimony mostly consisted of expert witnesses (or should that be eggsperts? - sorry, couldn't resist), regarding economic impact, the CFC determined that Rose Acre would suffer a diminution in profit of 219%, held the character of the government action favored the USDA, and did not reconsider its earlier decision on Rose Acre's investment-backed expectations.  Weighing these factors anew, the CFC awarded $5.4 million in compensation, plus attorneys fees and costs.

The Federal Circuit held that "there was, and still is, little dispute about the underlying economic data to be used in assessing the economic impact," but that the disagreement arose over how to analyze the data, slip op at. 13, because "the same data appear to provide vastly differing depiction as to the severity of the economic damage incurred by Rose Acre, depending on whether one looks as lost profits or lost values." Id. at 15. After identifying the relevant property as the 135 million dozen eggs Rose Farms produced on the three affected farms overall (and not the value of the farms as going concerns), the court chose diminution in value.  The court explained:

The trial court’s analysis suffers as a result of limited guidance on the profits-based measure, as the court did not compare the 219% diminution in return to anything, such as some benchmark standard. Instead, the court simply viewed the number as indicative of a severe economic impact. This examination is flawed because it does not set any baseline or standard to which to compare an inherently relative number. And, as Dr. Reiff [a testifying expert] explained, comparing diminution in return in one case to diminution in value in another case "doesn't mean much." The dearth of comparable diminution-in-return numbers in the case law may have been the root of the trial court’s cursory analysis, but comparable numbers seem necessary to assess whether the lost profits represent a severe impact.

Slip op. at 15-16. The court continued:

Because the parcel of property is now clearly defined as the diverted eggs themselves, we are convinced that it was clear error to place sole reliance on the diminution in return metric. The eggs are a discrete asset, the market value of which is readily ascertainable. Indeed, as mentioned above, the parties do not materially dispute the average market value of the eggs in the table market versus the breaker during the regulated period. These data provide a clear picture of the decrease in value of the eggs.

Instead, when we consider all three offered metrics of economic impact, with the primary weight given to the diminution in value, we conclude the trial court clearly erred in determining that Rose Acre suffered a severe economic impact due to the SE regulations. Rose Acre points to no case in which a court has found a diminution in value of 10% as being severe or as favoring a taking. Additionally, the infirmities in the diminution in return metric, as discussed above, warrant against placing much, if any, weight on that calculation on the facts of this case. We hold therefore that, although the monetary loss to Rose Acre was not insignificant, it did not even approach the level of severe economic harm and thus does not strongly favor Rose Acre.

Slip op. at 27-28 (footnote omitted).

On the "character of the government action" Penn Central factor, the court held that Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005) "changed the takings landscape" and that a court can "no longer ask whether the means chosen by the government advance the ends or whether the regulation chosen is effective in curing the alleged ill."  Slip op. at 33. Those questions are reserved for a due process inquiry, which Rose Acre had litigated and lost in the Seventh Circuit. The court held that under the character prong, a court may only look at "'the actual burden imposed on property rights, or how that burden is allocated.'" Slip op. at 34 (quoting Lingle, 544 U.S. at 543).  Because the USDA rules applied to most egg producers nationwide and did not single out Rose Acre, and because the purpose of the regulations was to protect food safety, the character factor tipped in the government's favor.

The court concluded no taking occurred:

When we review all the factual findings above, we conclude that they require a holding of no compensable taking. First, Rose Acre’s economic impact is not severe. Second, although the reasonable investment-backed expectations favor Rose Acre, they are not strong enough to be dispositive. Third, the character of the government’s regulations strongly favors a non-taking.

. . . .

Although Rose Acre may feel otherwise, the law of regulatory takings does not generally compensate property owners when a regulation’s economic impact is slight and temporary but the potential for physical harm to the public is significant. Here, infected eggs could have caused serious illness and possibly even death.

Slip op. at 43-44. Rose Farms' litigation with the federal government started in 1990 which resulted today 19 years, two federal trials, and three appeals later, with a finding of no liability. We hope that Rose Farm didn't and spend the millions in compensation and attorneys fees it was awarded by the CFC. That would have been counting its chickens before they were hatched.  One last bad pun to see if you read this long post to the end.

New York Court Of Appeals: No Need For A Comprehensive Taking Plan

In a brief memorandum opinion, the New York Court of Appeals (the state's highest court) today affirmed the Appellate Division's decision in Aspen Creek Estates, Ltd. v. Town of Brookhaven, a case challenging a municipality's ability to take property for farmland preservation. The court held: 

Petitioner contends that the United States Supreme Court's decision in Kelo v City of New London (545 US 469 [2005]), which dealt with takings for purposes of economic development, requires a preexisting farmland preservation plan to justify the taking of its property as a public use within the meaning of the Fifth Amendment (see US Const Amend V ["nor shall private property be taken for public use, without just compensation"]). We need not, and do not, reach the issue whether petitioner's interpretation of Kelo is correct, since the challenged taking was constitutionally proper even assuming that a preexisting farmland preservation plan was necessary. Petitioner's property was taken pursuant to a legislatively declared public policy in favor of farmland preservation and as part of the Town of Brookhaven's master plans endorsing farmland preservation. In furtherance of these plans, Town voters passed three bond acts providing $130 million to acquire development rights or fee interests in undeveloped land in the Town; among the areas specifically designated for preservation was the 500-acre tract of farmland in which petitioner's parcel is located.

In short, the public benefits of the taking in this case were not incidental or pretextual in comparison with benefits to particular, favored private entities; petitioner's remaining arguments likewise lack merit. Finally, the parties have not argued, and we do not decide, whether the New York Constitution (see NY Const, art I, § 7[a]) imposes a more stringent standard for takings than does the Fifth Amendment as interpreted by Kelo.

The Appellate Division's opinion approved a taking of private property to preserve it as farmland.  The court's majority held that the goal of preserving farmland generally qualifies as a public use/purpose, and that there was no evidence of pretext in the record demonstrating that the presumption of public use should be questioned, even though the property owner asserted that the land would eventually be leased or sold to another private owner.

The property owner also asserted that because the taking was not part of a plan, it did not deserve judicial deference.  Recall that in Kelo v. City of New London, 545 U.S. 469 (2005), the majority took great pains to establish that the taking of Mrs. Kelo's house was part of a "'carefully considered' development plan," and was therefore entitled to judicial deference.  Kelo reviewed the decision to take property by eminent domain in much the same fashion that the courts review police power zoning decisions under due process analysis: courts wash their hands for the most part as long as the zoning is enacted "in accordance with a comprehensive plan."  This aspect of the Kelo decision has received some attention, but little traction so far.  See, e.g., MiPro Homes, L.L.C. v. Mount Laurel Township, 878 A.2d 38 (N.J. Super. 2005), aff'd 910 A.2d 617 (N.J.) (per curiam), cert. denied, ___ U.S. ___ (2007); Western Seafood Co. v. United States, No 04-41196 (5th Cir., Oct. 11, 2006). 

Neither the Appellate Division nor the Court of Appeals, however, was bothered at all by the utter lack of a formal (or even an informal) plan, Kelo's "carefully considered" language notwithstanding.  The Appellate Division simply implied one:

In any event, while it does not appear from the record that the precise boundaries of the Manorville Farmland Protection Area [the alleged "plan"] have been carefully considered by the Town, it is clear from the comments made by various speakers at the hearing that the desirability of preserving farmland in Manorville has indeed been recognized by civic associations and public officials.  A plan prepared by the Manorville Taxpayers Association in 1993 set preservation of the remaining farms in the hamlet as a goal. . . .

Slip op. at 6.  So let's see if I get this straight. There was no plan to preserve farmland, but since someone "commented" at a public hearing that preserving farmland is desirable, and because a vague "legislative policy" exists "in favor of farmland preservation," the court is free to imply that a plan not only exists, but that it is "carefully considered" and therefore due judicial deference?  Is is highly doubtful that a plan by civic groups gleaned from comments at a public hearing, or broad aspirational policy statements are the kind of comprehensive action the majority had in mind in Kelo.  The fact that a condemnation takes place within the context of a comprehensive plan is, in theory, designed to give the courts confidence in the result, but if an action takes place without a plan, courts should be more willing to give it a hard look, as in cases of "spot zoning," for example. 

A second point is also spurred by the above quote.  If the implied plan to take property to preserve farmland has been in existence since 1993, then the just compensation awarded to the property owner should take into account the rise in value from that date to the time of the taking, since the so-called "plan" has blighted the property since 1993.

The Court of Appeals' memorandum decision and the Appellate Division's opinion are squarely at odds with a decision by the Pennsylvania Supreme Court in Middletown Township v. The Lands of Josef Seegar Stone, No 64 MAP 2006 (Dec. 28, 2007), a decision we analyzed here. In that case, the court struck down an attempted taking of property for farmland because it was a pretext to hide the "true purpose" of the taking for recreational purposes. Aspen Creek is also at odds with the recent decision from a California Court of Appeal in City of Stockton v. Marina Towers LLC, No. C054495 (Feb. 13, 2008), where the court held that the city's resolution of necessity was so "nondescript [and] amorphous," and "so vague, uncertain and sweeping in scope that it failed to specific the 'public use' for City sought acquisition of the property."

2008 Land Use In Review: Environmental Law

We aren't officially an "environmental law" blog, and when we do cover the issue, it is mostly on the periphery.  However, in 2008, we hit a couple of significant issues that had some relevance to land use law. 

First, in the U.S. Supreme Court's first decision of the Term, Winter v. Natural Resources Defense Council, Inc., No. 07-1239 (Nov. 12, 2008), the Court held that prior to issuing preliminary injunctions preventing the Navy from training with mid-frequency active sonar, the lower courts must balance the equities and the public interest, and that the Navy's interest in training for deployment clearly outweighed the environmental concerns of the plaintiffs.  Why did a land use law blog care about a case involving the Navy's use of sonar in training exercises off the California coast?  First, as we explained here, the case is philosophically interesting because of the arguments regarding when courts should defer to the judgment of the executive branch and the military. Second, we filed an amicus brief in the case on behalf of nine retired Admirals and several service support groups (posted here), supporting the Navy's arguments. My Damon Key colleague Mark Murakami and I even published an op-ed in the Honolulu Advertiser about the decision.

Second, in Nuuanu Valley Ass'n v. City & County of Honolulu, No. 28599 (Oct. 24, 2008), the Supreme Court of Hawaii clarified when a project that is not being built on state or county land meets the definition of "use" of such lands triggering review under the Hawaii Environmental Policy Act, Haw. Rev. Stat. ch. 343. The developer of private residential land in urban Honolulu sought to subdivide the property, which required hooking up new drainage system to existing lines. The court held that the connection of new drainage lines to an existing system did not meet the definition of "use" of state or county land, even though the existing system is public. More here.

Finally, the Hawaii Intermediate Court of Appeals, in Ohana Pale Ke Ao v. Board of Agriculture, State of Hawaii, No. 27855 (May 21, 2008), held that the State Board of Agriculture was required to undertake an Environmental Assessment under Hawaii state law prior to approving a permit for the importation of genetically-modified algae for processing in facility on state-owned land at which non GMO algae was already being processed.  More here.

Hawaii Agriculture at Risk: Water Law and Land Use

In theory, Hawaii reveres agriculture: pre-western contact Hawaii was primarily an agrarian society, many of us trace our family's history to the post-contact "plantation days," and today, even environmental groups proclaim they support farmers and ranchers and want to "keep the country country."  Who among us of a certain age didn't work in the cannery or the fields during summer break, or doesn't miss Arakawa's? The state Constitution even, in article XI, section 3, expressly protects farming and ranching by commanding the State to “conserve and protect agricultural lands, promote diversified agriculture, increase agricultural self-sufficiency and assure the availability of agriculturally suitable lands.”

But often the theory of agriculture runs headlong into the reality. For example, agricultural uses may be prohibited on ag land, an interisland ferry by which farmers can transport their goods to market is shut down by the courts due to environmental worries, and most critically, Hawaii's unique and byzantine maze of water law, which seems to give lesser standing to ag uses than other uses, threatens the water supply. In these and other situations, farmers and ranchers turned to the legislature, which enacted, for example, the Hawaii Right to Farm Act, which prohibits most nuisance lawsuits against "farm operations," and Act 5, which voids new private deed covenants restricting agricultural uses of ag land.

Thanks to Hawaii House Blog (the blog of the majority in the Hawaii House of Representatives) for posting "The Rodney Dangerfield of the Economy" summarizing a recent joint meeting of the House Committees on Agriculture and Water and Land & Ocean Resources where local farmers and ranchers briefed lawmakers on the state of Hawaii agriculture, the troubling times they face, and the need for balance in the law. [Disclosure: I am general counsel for Hawaii Farm Bureau Federation, and represent HFBF in the East Maui water case mentioned in the post].

One place to start: clarify that ag uses of land and water have constitutional status, and should be treated at least on par with other uses, not (as they currently seem to be) as mere commercial uses, undeserving of equal consideration. 

Best Plaintiff Group Name: Association of Irritated Residents

An opinion today from the California Fifth District Court of Appeals: Association of Irritated Residents v. San Joaquin Valley Unified Air Pollution Control Dist., No. F03956 (Nov. 11, 2008). The case involves whether a local air pollution control agency must "actively" assess the impacts of agriculture "volatile organic compounds" (aka cow waste) before adopting air pollution control rules.  The court held that it must.

But what really grabbed me was the plaintiff: "Association of Irritated Residents."  (Oh, I get it: "AIR").  Reminds me of those catchy names plaintiff's groups often use (see, e.g., United States v. SCRAP (Students Challenging Regulatory Agency Procedures), 412 U.S. 669 (1972)), and the cheeky acronyms that float around the land use arena to describe motivation (e.g., NIMBY), which we discussed in this post.

But I think "Association of Irritated Residents" is the best. Pretty much one-size-fits-all.

Kauai Springs Update: Civil Rights Case, Kauai Planning Commission Appeals

The latest on the Kauai Springs cases. In the civil rights case, we've filed a motion for Kauai Springs seeking summary judgment on the substantive due process, permit approval, and 42 U.S.C. § 1983 claims. Download a copy here. The exhibits to the motion (available separately here) include the court's earlier Findings of Fact and Conclusions of Law in the related administrative appeal in which Kauai Springs prevailed in August 2008. Hearing is set for December 10, 2008 in the fifth circuit court.

Also, on October 22, the County of Kauai Planning Commission appealed the final judgment in the administrative appeal to the Hawaii Intermediate Court of Appeals. The circuit court's findings which the Planning Commission is appealing are posted here. More to follow once the briefs are filed.

For more information about these two related cases, here are some links to earlier media coverage:

• "Kauai Springs wins lawsuit against Planning Commission" (The Garden Island, Aug. 20, 2008)

• A May 2006 story about the case from the Honolulu Star-Bulletin

• A story from the Kauai newspaper about the TRO that halted the County's attempt to shut the business down while the appeal was being considered.

• Another story about the preliminary injunction that allowed Kauai Springs to stay open.

• "Kauai Springs: Still Open for Business" from Hawaii Reporter.

HAWICA: No Private Right of Action to Enforce Land Use Laws

In a lengthy opinion, the Hawaii Intermediate Court of Appeals in Pono v. Molokai Ranch, Ltd., No. 28359 (Oct. 21, 2008), held that the State Land Use Law, Haw. Rev. Stat. ch. 205, does not create a private right of action allowing for non-governmental enforcement of the law.  The court also held there is no private right of action to enforce the Molokai Community Plan. 

Judge Foley concurred, and would have held that the plaintiff did not exhaust its administrative remedies because it did not appeal the Public Works Director's decision to the Board of Variances and Appeals.

Disclosure: my Damon Key colleagues Greg Kugle and Ken Kupchak represented Molokai Ranch.

More to follow after a chance to digest the opinion. 

Hawaii Farm Bureau Federation: Materials From Friday's Discussion

Here are the materials from today's discussion:

• a summary of Hawaii's "buffer bill" -- printable 1-page pdf here.

• text of the buffer bill

• a short article summarizing Hawaii's Right to Farm Act from Hawaii Agriculture magazine

• the Hawaii Right to Farm Act

• an article about Act 5, and ag-restrictive deed covenants (CC&R's)

• official text of Act 5

• the "GMO algae" case from the Hawaii Intermediate Court of Appeals

Hawaii's "Buffer Bill"

Farmers and ranchers should be aware of a new law passed by the Legislature last session that adds another layer of protection for Hawaii agriculture.

A new section was added to the Land Use Law (chapter 205) requiring that before the State Land Use Commission approves a petition for a “boundary amendment” (a change in the state’s land use designation for a parcel), for lands “contiguous or adjacent to” land designated agricultural, it must include two conditions.

First, the conditions must prohibit any action that would interfere with or “restrain” farming operations, as long as those farming operations are consistent with generally accepted agricultural and management practices. This requirement mirrors the language in Hawaii’s Right to Farm Act, which prohibits nuisance lawsuits against farmers and ranchers who employ generally accepted practices. In other words, farmers and ranchers determine what are the best agricultural and management practices.

“Farming operation” is also defined by reference to the Right to Farm Act, which defines the term broadly to include agriculture, aquaculture, and ranching operations, among others. Also included are accessory uses such roadside stands, fertilizer application, and labor operations.

Second, all prospective developers or purchasers of the land must be notified about the requirements of the Right to Farm act, and that notice must be included in any real estate disclosures.

The intent behind the new law is to prevent farmers and ranchers from having to absorb all of the impacts when non-agricultural interests move next to or near land designated for agricultural uses. Previously, when non-agricultural interests moved next to a farm, for example, the farmer may have been called upon to establish a buffer on his land to protect his new neighbor from things such as spray drift or other common agricultural practices.

The new law makes it necessary to take the farmer into consideration, and to provide notice to all involved, in order to foster discussion and prevent farmers and ranchers from having to bear the entire burden of encroaching urban uses.

Download this article as a 1-page pdf here.