inversecondemnation.com

Cert Petition in Ninth Circuit Case on Reserved Powers, Contracts Clause in Repeal of Eminent Domain Ordinance (Matsuda)

The City and County of Honolulu has filed a petition for writ of certiorari in Matsuda v. City and County of Honolulu, No. 06-15337 (9th Cir. Jan. 14, 2008), asking the U.S. Supreme Court to review the case.  We don't have a copy of the cert petition yet, but when we do, we'll post it.  The Supreme Court docket report is here (No. 07-1305).

Matsuda involved th repeal of "chapter 38," Honolulu's version of the Hawaii Land Reform Act at issue in Hawaii Housing Auth. v. Midkiff, 467 U.S. 229 (1984).  Chapter 38 allowed for conversion of condominium interests to fee simple, via a condemnation process. 

In Matsuda, apartment owners applied to the city to "convert" (condemn) their apartment leases, and entered into written contracts with the city, in which the apartment owners each agreed to pay the city $1,000, in return for which the city promised that after its acquisition of the lease, it would convey it to the apartment owner.  The owners subsequently received the city's approvals, but final approval by the City Council was withheld because the council was already considering repealing chapter 38, which it did in 2005. 

The ordinance repealing chapter 38 eventually contained a provision allowing any conversion proceeding which has been approved by the City Council to be completed, but because Matsuda's had not received final council approval, the taking was denied.  Matsuda and others filed suit against the city in federal court, alleging that the repeal of chapter 38 was a violation of the U.S. Constitution's Contracts Clause.  The Ninth Circuit held that the district court should have viewed the repeal of Chapter 38 with "heightened scrutiny" because the repeal of Chapter 38 was the city voiding its own contracts.  A complete summary of the Ninth Circuit's opinion is posted here.

Tim Sandefur added his thoughts about Matsuda here, and Professor Gideon Kanner's are posted here.  More to follow when we receive a copy of the cert petition.

Book Review: Bulldozed - "Kelo," Eminent Domain, and the American Lust for Land

"If you can fight blight, why not create beauty?  If not beauty, why not bounty?"

With that phrase, author Carla T. Main, in Bulldozed: "Kelo," Eminent Domain, and the American Lust for Land, accurately and succinctly sums up the devolution of the Supreme Court's view of the role of judicial review in eminent domain from Berman, to Midkiff, to Kelo.

Bulldozed is accessible to both lawyers and non-lawyers, and is no dull scholarly summation of the current state of Public Use Clause law.  Rather, it places the issues in an understandable context by framing the legal details with the story of the Gore family of Freeport, Texas, and their straight-out-of-Forrest Gump shrimp processing business.  The taking of the Gore's property and business for Freeport's "economic development" resulted in the case Western Seafood Co. v. United States, No. 04-41196 (5th Cir. Oct. 11, 2006) (a case I blogged about here). Main provides more details and background than the court's dry recitation of the facts ever could, and in between recounting the Gore family's story, provides the reader with an understanding of how we ended up with a case like Kelo, a decision that seemed to baffle a majority of the public. 

Main begins at the birth of the Fifth Amendment and James Madison's concern that private property rights would not be respected by the newly formed United States, and tells the stories behind many of the seminal cases on eminent domain:

• West River Bridge Co. v. Dix, 47 U.S. 507 (1848), Daniel Webster's case in which the Court held that the Contracts Clause was no impediment to a state condemning an exclusive bridge franchise. 

• Berman v. Parker, 348 U.S. 26 (1954), the case in which the U.S. Supreme Court first equated the condemnation power with the police power, and held, in sweeping language by Justice Douglas, that "public use" under the Fifth Amendment includes takings for 

• Poletown Neighborhood Council v. City of Detroit, 304 N.W.2d 455 (Mich. 1981), overruled, County of Wayne v. Hathcock, 684 N.W.2d 765 (Mich. 2004), the case which opened the door to economic development takings, where an entire neighborhood was cleared to make way for a General Motors plant, based only on Detroit's hope that what was good for GM was good for Detroit.

The only case really missing from the lineup is Hawaii Housing Auth. v. Midkiff, 467 U.S. 229 (1984), the opinion authored by Justice O'Connor that set up her dramatic turnabout in her dissenting opinion in Kelo.  Midkiff is a fascinating story and could be the subject of another book, so on the whole, it's a minor omission from Bulldozed.

Main also details how beginning in 2001, the courts began to take public use objections seriously, especially in the context of economic development takings, where one person's private property is transferred to another because the new owner promises to make more intense use of it.  This awakening by the courts culminates in the Supreme Court litigation in Kelo v. City of New London, 545 U.S. 469 (2005).

Of course, given the title of the book, an entire chapter is devoted to the arguments in Kelo, the case which brought eminent domain squarely to the American public's consciousness.  The Kelo backlash is the subject of another entire chapter.  These sections are among the more enjoyable and accessible in the book.  They detail the high drama of legal cases that make their way to the Supreme Court, and highlight the depth of emotion and passion aroused when people's homes, businesses, and neighborhoods are threatened.

Anyone who may wonder why property owners fight the taking of their property and businesses, despite the often overwhelming array of government power leveled at them need to read Bulldozed.  Bulldozed is available from Amazon.

Opening Brief in Kona Eminent Domain Appeals: Damages for Failed Condemnations, Abatement, and Pretext

Today, we filed the Opening Brief in County of Hawaii v. Richards, No. 28882, the consolidated appeal from two eminent domain lawsuits filed by the County in 2000 and 2005.  I won't go into detail about the case and will let the brief speak for itself since I am part of the legal team representing the appellant/property owner. 

The issues in the case include:

• application of Haw. Rev. Stat. § 101-27 (1993), the statute that provides that the government must make a property owner whole and pay damages when an attempt to take property by eminent domain is discontinued or dismissed

• whether the government may concurrently prosecute more than one condemnation lawsuit at the same time

• the standards for demonstrating that the government's claim of public use is pretext to hide private benefit

The brief, minus Appendices, is posted here (1.8mb pdf)

A link to the trial court's findings, along with a summary of the case is posted here.

Cases and Links From Today's Seminar

To all those who attended today's seminar, thank you.  Here are the links to the cases I mentioned.  From the morning session on Case Law Update:

• Wilkie - Government Gone Wild! - no comprehensive federal remedy for federal interference with property
• My Advertiser op-ed on Wilkie
• Crown Point - Ninth Circuit abandons Armendariz doctrine
• Cine SK8 - one way to prove a substantive due process case
• Post-Kelo claims of pretext:

• Franco - District of Columbia Court of Appeals - allegations of pretext cannot be summarily dismissed

• Goldstein v. Pataki - Second Circuit - government's claim of public use trump claims of pretext - cert. petition filed March 31, 2008

• Brescia - shoreline setback and equitable estoppel - HAWSCT holds you gotta get your "official assurances" from the right party
• Private agreements and public process - development and settlement agreements not a substitute for zoning process

From the afternoon session on Appealing an Administrative Zoning Decision:

• Hawaii Home Infusion - venue in administrative declaratory actions under § 91-7
• CARD - can a § 91-8 declaratory action substitute for an appeal?
• Colony Surf - nonconforming uses and reliance on administrative procedures
  
• E & J Lounge - what is a "contested case?"  See also Aha Hui Malama v. Kaniakapupu v. Land Use Comm'n (July 24, 2006)
• Rees v. Carlisle - private rights of action
• Silva v. City and County of Honolulu - the basis for rational basis equal protection arguments must be in the record

Questions?  Want a copy of the vested rights/zoning estoppel law review article? Drop me an email.

Epstein on the Didden Case

In Forbes, law prof Richard Epstein writes "The Taking of Port Chester" about the Didden v. Village of Port Chester case.  The facts of Didden are particularly egregious -- in return for a private developer's promise to withhold an exercise of eminent domain, a landowner was offered a choice: give the developer $800,000, or a one-half interest in the owner's planned use of the property.  The owner had plans to put in a CVS Pharmacy, but the developer convinced the Village that his plan to put in a Walgreen's was better, and the Village agreed to use eminent domain to stop Mr. Didden.  Professor Epstein writes:

It takes no financial wizardry to see that the expenses on both sides of this high-priced battle are a social waste if all they do is replace a CVS pharmacy with a Walgreens. The Port Chester saga reveals the institutional flaw of modern takings law. Undue judicial deference creates large amounts of government discretion that in turn invites self-interested actors to game the system.

Complete article here.

Eminent Domain and Land Use Round-up

• Professor Gideon Kanner comments on the Ninth Circuit's recent Matsuda case in "When is an Unenforceable Contract to Condemn, Enforceable?."  I commented on the decision here and here.

• Today's oral arguments in Missouri Supreme Court in the Tourkakis appeal, a case of an attempted taking for economic development, have been posted here (9mb mp3).

• Background on the case is posted here by PLF on Eminent Domain, and the briefs are posted here.

• Charley Foster at Planet Kauai has an interesting post on Hawaii's automatic permit approval statute here. 

Deal Or No Deal: Ninth Circuit Says Honolulu May Have to Live Up to Its Eminent Domain Promises

I've had a chance to review Matsuda v. City and County of Honolulu, No. 06-15337 (Jan 14, 2008), a decision by the Ninth Circuit on the Contracts and Due Process clauses, but which also involves how local governments exercise the power of eminent domain.  The case revolves around Chapter 38 of the Honolulu Revised Ordinances, which was the local version of the "land reform act" at issue in Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229 (1984) before it was repealed in 2005.

Background

Finding that the economic ills purportedly caused by the concentrated ownership of private single-family residential property in Hawaii, Haw. Rev. Stat. ch. 516 allowed homeowner/lessees to petition the Hawaii Housing Authority to exercise eminent domain on the homeowner's behalf and condemn the fee simple interest underneath their homes from the lessor, and transfer it to the lessee upon payment of just compensation.

After that statute was upheld by the U.S. Supreme Court against a Fifth Amendment public use challenge in Midkiff, and under the Hawaii Constitution's public use clause by the Hawaii Supreme Court in Hawaii Hous. Auth. v. Lyman, 68 Haw. 55, 704 P.2d 88 (1985), efforts were made to pass similar legislation affording condominium owners the same ability to force condemnation of their leasehold interests. 

Chapter 38

At the state level, those efforts were ultimately unsuccessful, but the City and County of Honolulu eventually enacted a local version, codified as Hon. Rev. Ord. ch. 38.  The ordinance relied on the same "anti-oligopoly" rationale as the Land Reform Act, and when it was challenged under the public use clauses of the U.S. and Hawaii Constitutions, the courts predictably, as in Midkiff and Lyman, rejected both federal (Richardson v. City and County of Honolulu, 124 F.3d 1150 (9th Cir. 1995)) and state (Richardson v. City and County of Honolulu, 76 Haw. 46, 868 P.2d 1193 (1994)) challenges. 

Under chapter 38, the owners of many Honolulu condominium projects were permitted to condemn and take the leasehold interests from their lessors.  By 2005, however, public sentiment regarding eminent domain had turned (as noted in this report), and the City Council surprisingly repealed chapter 38.

Matsuda

The story does not end there, however, because at the time of repeal, several condominium apartment owners had begun the process to condemn their leaseholds, and claimed they were entitled to continue the process through to completion. 

In Matsuda, the condo owners applied to the city to "convert" (condemn) their leases, and entered into written contracts with the city, in which the condo owners each agreed to pay the city $1,000, in return for which the city promised that after its acquisition of the lease, it would convey it to the condo owners.  The owners subsequently received the city's approvals, but final approval by the City Council was withheld because the council was already considering repealing Chapter 38.  The ordinance repealing Chapter 38 eventually contained a provision allowing any conversion proceeding which has been approved by the City Council to be completed, but because Matsuda's had not received council approval, the taking was denied.

Matsuda and others filed suit against the city in federal court, alleging that the repeal of Chapter 38 was a violation of the U.S. Constitution's Contracts Clause:

No State shall . . . pass any Bill of Attainder, expost facto Law, or Law impairing the Obligation of Contracts. . .

U.S. Const. art. I, § 10.  This provision was designed to prevent states and their political subdivisions from passing laws relieving politically favored persons (and the government itself) of their contractual obligations. The condo owners also alleged violation of the Due Process Clause.  The District Court granted summary judgment to the city and threw the case out.

Reserved Powers / Contracts Clause

The court held that the repeal of Chapter 38 was not a local government impairing its own contracts -- and the Contracts Clause was inapplicable -- because the contracts were not enforceable under the "reserved powers" doctrine, which states that any contract whereby the government purports to contract away its discretion to exercise an essential attribute of sovereignty is void.  Thus, there was no contract to be impaired.  The seminal cases applying this doctrine to the exercise of eminent domain are West River Bridge Co. v. Dix, 47 U.S. 507 (1848) and Contributors to Pennsylvania Hospital v. City of Philadelphia, 245 U.S. 20 (1917).  In those cases, the Court held that contracts whereby the government implicitly and indirectly agreed to not take property were not enforceable.

Best Efforts

The Ninth Circuit reversed, holding that the district court applied the wrong legal test.  The district court should have viewed the repeal of Chapter 38 with "heightened scrutiny" because the repeal of Chapter 38 was the city voiding its own contracts.  The Ninth Circuit held that the reserved powers doctrine was not applicable because West River Bridge and Contributors to Pennsylvania Hospital cases were contracts limiting the exercise of the power of eminent domain, while the contracts at issue in Matsuda required the exercise of the power.  The Ninth Circuit held:

As an initial matter, the City's contracts with the Lessees did not expressly require the City to condemn the property at Discovery Bay.  As discussed above, Chapter 38 imposed several requirements for a successful condemnation which were beyond the City's power to control, and the City only agreed to use its best efforts to achieve those results.  Thus, if an insufficient number of condominium owners applied to the City or if the public hearing held by the Department failed to produce a finding that condemnation would serve a valid public purpose, the City would not have been obligated under the contracts to proceed with the condemnation.

Slip op. at 408.  Presumably, the Ninth Circuit would reach a different result if the contract did require the city to condemn the property, as that would be a clear delegation of sovereign powers also. The court held that the district court should have found that a contract existed, and gone forward to determine whether the repeal of Chapter 38 "impaired" those contracts.

Due Process

The district court, applying the same reserved powers analysis noted above, also held that there were no enforceable contracts, and therefore no property was at stake, and it did not need to address the condo owners' Due Process claims.  The Ninth Circuit reversed and sent the case back for a determination of whether the city/owner contracts were "property." 

Sidebar:  The oral argument recordings are posted here.  KITV's report is here. The Hawaii Supreme Court dealt with another condominium project in City and County of Honolulu v. Sherman,110 Haw. 39, 129 P.3d 542 (Feb. 28, 2006).

More on Matsuda (Ninth Circuit)

Tim Sandefur at PLF on Eminent Domain adds his thoughts about Matsuda v. City and County of Honolulu, No. 06-15337 (Jan 14, 2008).

2007 in Review: Post-Kelo Claims of Pretext

In 2007, the courts started to apply the U.S. Supreme Court's decision in Kelo v. City of New London, 545 U.S. 469 (2005), especially how to mesh the Court's deferential standard of review with property owner claims of pretext. 

Kelo left intact the standard that a determination that a taking will be for public use is measured by whether the legislature "conceivably" could have believed it would result in economic benefit, while leaving open the possibility that certain takings would not pass judicial review.  Justice Kennedy elaborated on that issue, and provided the roadmap for how a court should deal with a claim of pretext:

A court applying rational-basis review under the Public Use Clause should strike down a taking that, by a clear showing, is intended to favor a particular private party, with only incidental or pretextual public benefits, just as a court applying rational-basis review under the Equal Protection Clause must strike down a government classification that is clearly intended to injure a particular class of private parties, with only incidental or pretextual public justifications.

Kelo, 545 U.S. at 491 (Kennedy, J., concurring).  Justice Kennedy added:

A court confronted with a plausible accusation of impermissible favoritism to private parties should treat the objection as a serious one and review the record to see if it has merit, though with the presumption that the government’s actions were reasonable and intended to serve a public purpose.

Id. After Kelo, property owners and property takers were left with the question of what would qualify as a "pretext" sufficient to overcome a claim by government that a condemnation was supported by a public purpose.  Several post-Kelo cases addressed the pretext issue, with varying results, and methods of analysis. 

• In 49 Wb, LLC v. Village of Haverstraw, 2007 NY Slip Op 05506 (Jun. 19, 2007), a New York state court invalidated a taking because the evidentiary record in the case demonstrated the government was attempting to take property for the sole purpose of benefiting private, not public, interests. 

• In Goldstein v. Pataki, however, a New York federal court dismissed a property owner challenge to a taking because the property owner's complaint did not allege enough facts to show a private benefit (Goldstein was appealed to the Second Circuit where it awaits a ruling). 

• Didden v. Village of Port Chester, 173 Fed. Appx. 931, 2006 WL 898093 (2d Cir. Apr. 5, 2006) held the property owner's claim that a private developer demanded cash in return for not exercising eminent domain was not actionable under the Public Use Clause.

• In Franco v. National Capital Revitalization Corp., No. 06-CV-645 (July 12, 2007), the District of Columbia Court of Appeals reinstated a pretext claim that had been dismissed by the trial court, holding that the trial court should have undertaken a factual inquiry "to determine that the legislation had 'an overriding public purpose' and 'will provide substantial benefits to the public'" as claimed by the condemnor.  The court held that the trial court's "discussion suggests that, once the legislature has declared that there is a public purpose for a condemnation, an owner is foreclosed as a matter of law from demonstrating that the stated reason is a pretext.  We do not interpret Kelo so broadly."

• In MiPro Homes, LLC 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), the New Jersey state courts held that evidence the government was taking property to stop development and preserve open space was a public use and not pretextual. 

• In Western Seafood Co. v. United States, No 04-41196 (5th Cir., Oct. 11, 2006), the court held that a private-to-private transfer for economic development that was accomplished as part of a "carefully considered development plan" passed muster. 

2007 in Review: Private Agreements and Public Process

These seemingly unrelated court decisions were tied together with a common thread: private agreements for the most part are not substitutes for public processes, whether it is eminent domain, rezoning, or the granting of permits.   

Several courts determined that agreements in which government agreed with private parties to exercise eminent domain were invalid: 

• One case (in which I am involved as counsel for the property owners so won't comment in detail) involved a development agreement between the County of Hawaii and a developer to take property for a road.  The trial court struck down the attempt -- here is the court's Findings of Fact and Conclusions of Law.  More on the case here.

• In a similar vein, a Washington state court of appeals in HTK Mgm't, L.L.C. v. Rokan Partners, No. 58113-9-I (Wash. Ct. App., July 23, 2007) held that eminent domain "is an inherent power of the state and redelegations of that power to private parties are invalid."  The court struck down an assignment of rights allowing a private party to, in effect, exercise eminent domain, holding that by agreeing to do so, the government abandoned the attempt to take the property. 

• In Wheat Ridge Urban Renewal Auth. v. Cornerstone Group XXII, LLC, No. 06SC591 (Dec. 3, 2007), the Colorado Supreme Court refused to order a redevelopment agency to condemn private property and turn it over to a developer to build a Walgreen's store.  The court held that judges have no authority to compel an agency to take property even if the agency had entered into a contract with the developer in which it agreed to do so.  The court denied the developer's attempt to enforce specific performance of the contract.

This wasn't limited to eminent domain, and other courts applied a similar rationale to other land use areas: 

• In Neighbors in Support of Appropriate Land Use v. County of Tuolumne, No. F051690 (Dec. 7, 2007), a California District Court of Appeals held that a development agreement cannot be used to avoid zoning restrictions, and can't substitute for the rezoning process.  Development agreements are vested rights agreements only.

• In The League of Residential Neighborhood Advocates v. City of Los Angeles, No. 06-56211 (Aug. 21, 2007), the Ninth Circuit held that an agreement settling a RLUIPA claim can't override state law.  Details and analysis here and here.  The petition for rehearing/en banc review is posted here.