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Opening Brief Filed in Ninth Circuit Maui Vacation Rental Appeal

Today we filed the Opening_Brief (250kb pdf) in Maui Vacation Rental Association, Inc. v. County of Maui, No. 08-15251, the Ninth Circuit appeal from the Hawaii district court's dismissal of MVRA's complaint which sought to declare Maui's shut down of vacation rentals illegal. 

I won't go into details of the case since the brief spells out the facts and arguments, but here are some prior posts on the case, and links to media coverage:

• Los Angeles Times: Maui: Vacation rentals and B&Bs shut down and 50 illegal Maui B&Bs & vacation rentals shut down

• San Francisco Chronicle: Maui County closes unlicensed bed and breakfasts and vacation rentals

• The Maui News: Vacation rental suit dismissed in federal court

• Honolulu Star-Bulletin: Maui B&Bs face 'crisis'

• inversecondemnation.com: Federal Court Dismisses Vacation Rental Due Process Claims -- Details (with links to the District Court's opinion, MVRA's complaint, and the briefs in the district court)

Oral Arguments in ICA Appeal on Kuilima EIS (mp3)

The recording of today's oral arguments in Unite Here! Local 5 v. City and County of Honolulu, No. 28603 has been posted here.  (Be prepared -- it's a 93mb file).  The briefs of the parties are posted here.

A report from KHON-TV2, with video of the site and the arguments is posted here.

The appeal involves the question of whether the City should have required the Kuilima Resort to prepare a supplemental Environmental Impact Statement.

Update: Charley Foster has posted a summary of the arguments and analysis. 

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.

Legal Challenge to Sedona, Arizona Short-Term Rental Ban

As reported here, a lawsuit was filed in Arizona state courts seeking to invalidate Sedona, Arizona's prohibition on short-term rentals (less than 30 days):

Approximately 450 short-term rental properties in Sedona have been impacted by the new Ordinance making it illegal to advertise short-term rentals, and the Code prohibiting short-term rentals.

This ordinance was enacted by the city council Jan. 22 to put teeth into the Code, on the books since 1995, which made it illegal to rent properties for less than 30-days

The tail end of the article lists the claims asserted by the plaintiffs, which include vested rights, selective enforcement, and other constitutional and statutory claims.

Land Use Round Up

• Professor Ilya Somin posts "Once Blighted, Always Blighted" about how long-lasting "blight" designations are more likely to impede development, not encourage it."

• Charley Foster at Planet Kauai posts "Monkeypod preliminary injunction motion," his analysis of a pending motion for preliminary injunction, seeking to prevent a property owner from removing trees on its property.

• In  Noghrey v. Town of Brookhaven, No. 2006-05365 (Feb. 13, 2008), the New York Supreme Court Appellate Division held that the downzoning of property was not a regulatory taking under Penn Central.  New York Zoning and Municipal Blog posts on the case here, and Professor Patty Salkin summarizes the opinion on Law of the Land here.

• An Indiana trial court has held that a public utility cannot use eminent domain to take property because it acted in bad faith.  As reported here by the Louisville, Kentucky Courier-Journal:

Wymberly's attempt to use eminent domain was "in bad faith" because it had promised, in asking the state for a territory expansion to include the Lynn developments, that it would serve "as many customers as possible." But Whitis said its plan was to serve a "single customer, Lynn," and the proposed route would allow only two or three other property owners besides Lynn to connect.

The court's Findings of Fact and Conclusions of Law can be downloaded here (6mb pdf).

• An additional hat tip to Professor Salkin for posting a summary of the New Mexico Supreme Court's opinion in Albuquerque Commons Partnership v. City Council, No. 29792 (Feb. 18, 2008), a case about big box rezoning and moratoriums, among other things.

Maui Vacation Rental Ban in the News

The San Francisco Chronicle posts "Maui County closes unlicensed bed and breakfasts and vacation rentals," with background on the issue and the pending Ninth Circuit appeal.

In what is becoming a divisive battle - both in court and in residential neighborhoods - the owners of the B&Bs and rental homes charge that the new leadership of Maui County, which encompasses all three islands, has broken promises made by their predecessors to allow unlicensed properties to remain open, pending an overhaul of the cumbersome licensing process.

County inspectors began their crackdown last July, when about 20 properties were ordered to close, mainly in the Upcountry and North Shore areas of Maui.

Complete story here.  Check out the public comments on the story here. 

Disclosure: I represent the Maui Vacation Rental Association in its Ninth Circuit appeal.

Court of Federal Claims: Commercial Fishing License Not "Property"

In Palmyra Pacific Seafoods, L.L.C. v. United States, No 07-35L (Jan. 22, 2008), the U.S. Court of Federal Claims (the article I court that hears inverse condemnation claims against the federal government) held that federal regulations which prohibited commercial fishing in waters around Palmyra Atoll and Kingman Reef did not take the plaintiffs' licenses for  commercial fish processing facilities on the atoll.

The plaintiffs were exclusively licensed by the owners of Palmyra Atoll (located approximately 1,000 miles south of Hawaii) to commercially fish the nearby waters, and to use the atoll's airstrip, dock, harbor, and base came for their commercial fishing enterprise.  In reliance on the licenses, the plaintiffs invested several millions of dollars in on-island infrastructure, and actually began commercial fishing operations.  Slip op. at 2 & n.1.   

In 2001, however, the Secretary of the Interior designated the waters surrounding Palmyra and Kingman Reef as National Wildlife Refuges. The plaintiffs asserted that its licenses were taken when the federal government, "working in tandem with an influential environmental lobby," enacted regulations that barred commercial fishing, which had the effect of rendering the plaintiff's licenses worthless:

Plaintiffs assert a property interest in “a series of contractual licenses grant[ing] Plaintiffs the right to use Palmyra for commercial fishing and related transport and support operations.” Pls.’ Br. filed Aug. 10, 2007, at 3 (internal quotation marks omitted). Plaintiffs contend that the licenses are private, exclusive, transferrable contract rights that qualify as property interests protected by the Fifth Amendment. In support of the proposition that contract rights are property interests protected by the Fifth Amendment, plaintiffs rely on Lynch v. United States, 292 U.S. 571, 579 (1934) (“Valid contracts are property, whether the obligor be a private individual, a municipality, a state, or the United States.”); United States Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 19 n.16 (1977) (“Contract rights are a form of property and as such may be taken for a public purpose provided that just compensation is paid.”); and Cienega Gardens v. United States, 331 F.3d 1319, 1329 (Fed. Cir. 2003) (“[T]here is also ample precedent for acknowledging a property interest in contract rights under the Fifth Amendment.”).

Slip op. at 5. The court rejected the claim that the licenses were property.  The court held that the private owners of Palmyra Atoll could only license activities on the atoll, and not in the surrounding waters:

Accordingly, the [owners of the Atoll] lacked authority to grant any license in the tidal lands, submerged lands, or surrounding waters, and the government could not have taken any tidal lands, submerged lands, or surrounding waters.”). As plaintiffs admit, the governmental restrictions designating the refuge and closing it off to commercial fishing were imposed upon the “tidal lands, submerged lands, and waters” of Palmyra – the interests to which plaintiffs disavow any claim.

Slip op. at 7.  Since the designation of the water as National Wildlife Refuges did not directly regulate or affect the on-atoll activities of the plaintiffs, the court held that the devastating economic impact they suffered were merely consequential damages, and the regulations were a frustration of business expectations, not a taking of property:

[P]laintiffs’ complaint conflates the licenses with their subject matter. The licenses permit plaintiffs to use the emergent land of Palmyra for the purpose of establishing a commercial fishing operation. The Government’s closure of the waters surrounding Palmyra to commercial fishing frustrated the purpose of the licenses, but did not appropriate a contractual right to commercial fishing granted thereby, as such a right could not have been granted. The Government is not liable to plaintiffs for a taking because the government actions at issue did not address plaintiffs or their licensors or regulate plaintiffs’ operations under their licenses. The designation of the Palmyra National Wildlife Refuge and subsequent closure of the refuge to commercial fishing neither appropriated plaintiffs’ contract rights for public use nor removed plaintiffs’ right to enforce their contractual licenses or to seek a contractual remedy with their licensors.

Slip op. at 9. 

Nonconforming Uses and "Grandfathering" of Land Uses

I promised back in this post to digest the Hawaii Supreme Court's opinion in Colony Surf, Ltd. v. Director of the Dep't of Planning and Permitting, No 26037 (Dec. 26, 2007).  However, because the opinion is so opaque it is difficult to understand, and the issue so narrow, I never quite got around to doing so. 

Professor Patty Salkin saves the day by posting a summary of the decision here on her Law of the Land blog. 

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).