We've been meaning to post this interesting and important case, but it got lost in the shuffle. Thanks to a colleague for the reminder.
Try explaining that headline to anyone but a land use lawyer, and they would think you are a little bit crazy. What is so odd about a federal court actually exercising its core jurisdiction to consider whether a local government has violated someone's federal constitutional rights?
As readers of this blog know, the one-two punch of Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), and San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005), renders a federal forum for federal takings and related claims nearly impossible unless the stars align just right. In R&J Holding Co. v. Redev. Auth. of County of Montgomery, No. 10-1047 (Dec. 9, 2011), they apparently did, and the U.S. Court of Appeals for the Third Circuit concluded that a property owner did not litigate its federal takings claims in an earlier state court case, and thus was able to raise them in federal court.
This case arose from the same fact pattern that gave us In re Condemnation of 110 Washington Street, 767 A.2d 1154 (Pa. Commw. Ct. 2001), a case in which the state court invalidated the attempted taking because the Redevelopment Authority had delegated its power of eminent domain to a private land developer. After the Pennsylvania court invalidated the taking and awarded the property owner its attorneys fees and costs, the land owner filed a civil rights action under 42 U.S.C. § 1983 in federal court seeking just compensation, alleging their right to improve and sell the property were taken. The district court dismissed under Williamson County, because the owner should have sought compensation from state courts by way of an inverse condemnation claim.
The owner did so, and brought a state law inverse condemnation claim in a Pennsylvania court. It also expressly reserved its federal takings claim under England v. Louisiana State Bd. of Medical Examiners, 375 U.S. 411 (1964), and split its federal claims from its state claims. The state court agreed that there was a taking under state law, and ordered a calculation of compensation. The Redevelopment Authority appealed, and the court reversed, concluding that Pennsylvania law "does not entitle a prevailing condemnee to compensatory damages," slip op. at 10, because a condemnee's recovery is limited to "the out-of-pocket expenses available" which the owner had already recovered. Id. at 11. "Plaintiffs' brief before the Commonwealth Court repeatedly invoked their rights under the Pennsylvania Constitution, but never directly mentioned their rights under the United States Constitution." Id. The Pennsylvania Supreme Court declined to review the case.
The owner then returned to federal court, raising the federal Fifth Amendment claim it had raised in its first federal action, and it had resereved in the subsequent state case. The district court dismissed both the federal claims and the supplemental state claims.
The Third Circuit reversed. First, it validated the owner's claim splitting, holding that "[p]laintiffs clearly stated their intention to split their state and federal claims," and the Redevelopment Authority "raised no objections." Slip op. at 14. Consequently, Pennsylvania's law of claim preclusion ("res judicata" to you old-timers) did not prevent the owner from raising its federal claim:
Plaintiffs reiterated their intent to reserve their federal claims in their filings before the Pennsylvania Commonwealth Court and the Pennsylvania Supreme Court. Defendants uttered not a word about the reserved federal claims while Plaintiffs prosecuted their state claims all the way to the Pennsylvania Supreme Court. They cannot now benefit from their silence.
Slip op at 16 (footnote omitted). The court pointedly based its rationale on Pennsylvania's preclusion law, and not on the validity of the England reservation, thus likely insulating that part of the opinion from Supreme Court review. Slip op. at 17-18. The Third Circuit also rejected the Redevelopment Authority's arguments that issue preclusion ("collateral estoppel") applied:
The parties agree that the Plaintiffs avoided directly raising their federal claims before the Pennsylvania state courts. And in its opinion holding that the Eminent Domain Code did not provide for "just compensation" under the circumstances of this case, the Pennsylvania Commonwealth Court never directly addressed whether such an interpretation was permitted under the United States Constitution.
Slip op. at 20 (citation omitted). The court rejected the argument that in litigating the state issue, the state court naturally determined the federal claim. Slip op. at 22 ("The parties never actaully litigated the federal constitutionality of the Pennsylvania Eminent Domain Code and the state courts never actually decided it. A past conclusion that the Takings Clause of the Pennsylvania Constitution and the Takings Clause of the United States Constitution are co-extensive does not constitute a present determination that an interpretation of state law accords with the United States Constitution, particularly when the federal constitutionality of that interpretation was never directly presented to the state court.").
The court also rejected the Redevelopment Authority's argument that its action was not a taking because it was merely an attempted transfer of title and it did not attempt to take physical possession. The court held that "this is a per se taking because title to the land actually passed from the Plaintiffs to the Authority when the Authority filed a Declaration of Taking on July 11, 1996." Slip op. at 23 (citing Yee v. City of Escondido, 503 U.S. 519, 522 (1992) (per se taking when government physically occupies or takes title). Finally, the court rejected the Redevelopment Authority's argument that the lawsuit was barred by the statute of limitations.
One judge dissented, arguing that the landowner engaged in "procedural machinations' and that the federal claims were waived because the Pennsylvania Eminent Domain Code requires all objections to be made, and the owner reserved its federal claims, and "the Code does not authorize parties to make such a choice." Dissent at 2.
R&J Holding Co. v. Redevelopment Auth. of County of Montgomery, No. 10-1047 (3d Cir Dec 9, 2011)
