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First Takings Lawsuit Challenging Business Shut-Down Order

Well, here it is. What looks like the first complaint to be filed challenging a state governor's order to shut down businesses to "flatten the curve." 

The complaint seeks class action status, and raises section 1983, due process, and Fifth and Fourteenth Amendment takings claims. It seeks damages, compensation, a declaratory judgment, and, interestingly, an injunction prohibiting enforcement of the shut down order "unless, and until, a mechanism is established to provide (a) just compensation for affected businesses and (b) appellate review of Governor Wolf's classifications determining whether individual businesses are 'life sustaining.'" Complaint at 39.

We've written about this issue recently here:

• Latest Readings: On Emergency Takings, Compensation For Commandeered Property
• The Royal Origins Of "Police Power" Hawaii-Style: The King v. Tong Lee (1880)
• Emergencies, Police Power, Commandeering, And Compensation: Essential Readings
• #CoronavirusLaw: Is There A Difference Between "Commandeering" Property In An Emergency, And "Taking" It?

More, from law.com: "Pa. Gov. Wolf's Order Closing Businesses During COVID-19 Outbreak Violates Takings Clause, Lawsuit Claims."    

Fasten your seatbelts. It's going to be a bumpy night. 

Complaint, Shulmerich Bells, LLC v. Wolf, Civ. No. 20-01637 (E.D. Pa. Mar. 26, 2020) 

Time For A "Coronavirus Disputes Court?"

The materials we were reading yesterday (particularly Steve Silva's "History: Fire and Blood(worth)," got us to thinking. There, Steve wrote about the  September 2, 1666 London fire which destroyed 80% of the city, the government's emergency powers, and compensation. He also brought up a subject we had not know of before: the subsequent legislation -- the Fire of London Disputes Act  1666 (18 & 19 C. II. c.7)* -- which created the "Fire Court."

That court -- comprised of learned judges from existing courts (K.B., Common Pleas, and Exchequer) -- was created to resolve "Differences touching Houses burned or demolished by reason of the late Fire which happened in London" between landlords and tenants. The court began its seating on January 1, 1668. The legislation charged the court with resolving disputes about the required rebuilding, property boundaries, the "Rents as if the same had not been burned," and the like. The legislation noted the goal of spreading the public loss among the entire public, too:

And for that it is just that every one concerned should bear a proportional share of the loss, according to their several Interests, wherein in respect of the multitude of cases varying in their circumstances no certain general rule can be prescribed.

As noted above, the jurisdiction of the court included not only structures actually burned by the fire, but those "pulled down or otherwise demolished, defaced, or otherwise ruined by reason of the said Fire." The vibe of the statute seems to have been to get these disputes resolved in a single forum, and quickly (appeals had to be made in seven days for example).  

There are analogies in American law. For example, after public authorities declared cordon sanitaire and accidentally burned down a large part of downtown Honolulu in 1900 (officials purposely set fires in Chinatown to root out bubonic plague, but winds carried the fire to other parts of town), the Supreme Court of Hawaii effectively served as a Plague Fire Court, resolving a series of cases involving insurance, landlord/tenant, and other disputes.

We're not formally trained in legal history, so we're just spitballing here on the details of the Act and how the Fire Court actually operated. But given the magnitude of the potential claims arising out the present situation, one way to bring the takings, commandeering, landlord-tenant, insurance, and other closely-related issues to a quick(er) resolution than the usual civil litigation slog might be a similar tribunal designed to resolve uncertainties and establish the rights of those affected.

We're guessing that one of the impediments to economic recovery after we're on the other side of this thing will be the uncertainties of litigation if disputes are resolved by the usual process. A "Coronavirus" court might be one way to push through those.    

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*This was in the days before parliaments and congresses got the "Always Be Closing" fever and simply named laws. Today, the "Fire of London Disputes Act" would probably be labeled the FIRE Act ("Freedom, Indemnity, Relief, and Emergency Act of 1666" or something.  

Latest Readings: On Emergency Takings, Compensation For Commandeered Property

It's tough with all that's swirling around all of us to keep focused on non-virus related things. But because we think that's one way to keep calm and carry on, we shall continue to endeavor to do so. But come on, being takings and dirt lawyers we also can't help viewing current events through that lens, no? Consequently, we shall also continue from time-to-time to post about issues that have cropped up in practice that are related to the thing that is on everyone's mind these days.

In that vein, here's the latest on-topic things we've been reading: 

• History: Fire and Blood(worth) - Steve Silva, Taking Nevada blog ("Many argue, with great merit, that when a person’s property is sacrificed to preserve the public health, that the person is entitled to compensation. But the law has not yet reached that conclusion, ... [and] there is no legal mandate that the sovereign must so compensate.").
• Does the Takings Clause Require Compensation for Coronavirus Shutdowns? - Ilya Somin, The Volokh Conspiracy ("Under current Supreme Court precedent, the answer is almost always going to be "no." But some compensation may be morally imperative, even if not legally required.").
• Eugene Kontorovich, Liability Rules for Constitutional Rights: The Case of Mass Detentions, 55 Stanford L. Rev. 755 (2004) ("Another objection to liability rules for constitutional rights is that forced takings of constitutional entitlements may have particularly high "resentment costs." This term refers to the psychological or dignitary cost of having an entitlement forcibly taken.").
• Brad Kuhn (California Eminent Domain Law Report) is holding a web program on April 1, 2020 about "Navigating COVID-19 for the Right of Way Industry" ("We have received a number of questions and concerns from clients on how the current pandemic affects the way we do business, and what to expect going forward. We will be hosting a webinar on April 1, 2020 from 1:00 to 2:00 p.m. PT to bring our industry together (virtually) and help answer as many questions as we can."). 

Here are our own prior posts on the topic:

• The Royal Origins Of "Police Power" Hawaii-Style: The King v. Tong Lee (1880)
• Emergencies, Police Power, Commandeering, And Compensation: Essential Readings
• #CoronavirusLaw: Is There A Difference Between "Commandeering" Property In An Emergency, And "Taking" It?

Steve Silva's post above also got us to thinking about compensation issues also. So we dusted off what we think is one of the more important decisions in the oeuvre, Kimball Laundry Co. v. United States, 338 U.S. 1 (1949). That case, as you recall, involved the wartime long-term but temporary taking by the feds of a going-concern commercial laundry, for use as a military laundry.

The case has often been used to support arguments that business losses that result from an affirmative taking (or commandeering) of property for public use should be compensable. Most jurisdictions, as you know, do not include such losses in "just compensation." In Kimball Laundry, however, the Supreme Court held: 

But when the Government has taken the temporary use of such property, it would be unfair to deny compensation for a demonstrable loss of going-concern value upon the assumption that an even more remote possibility -- the temporary transfer of going-concern value -- might have been realized.

Id. at 15. There's an ongoing debate about whether business losses should be part of just compensation when the government takes property, but does not necessarily take over the business. Is the loss of business just a "consequential" damage, and therefore not compensable? Or should, as others have argued, these losses be part of compensation because the measure of compensation is supposed to be what the owner lost, and not what the taker gained? 

We're certainly not going to resolve that debate in this modest blog post. We only put the case here to add to your reading list because we think that if the government acknowledges that compensation is required for emergency takings or commandeering, the question of just what is compensable is going to take center stage. And on that question, you better know Kimball Laundry. 

Kimball Laundry Co. v. United States, 338 U.S. 1 (1949) 

Mi Casa Ain't Su Casa: Proof Of Lost Opportunity Is Evidence Of Penn Central's "Economic Impact" Factor

The work of the courts goes on, and as long as there's stuff to report, we'll keep reporting as usual.

Yesterday, the U.S. Court of Appeals for the Federal Circuit issued an important takings decision in a case and issue we've been following for what seems like forever. In Anaheim Gardens, L.P. v. United States, No. 19-1277 (Mar. 25, 2020), the court held that a property owner in a regulatory takings case asserting a Penn Central taking may prove the "economic impact" factor by introducing evidence "by demonstrating their lost opportunity to earn market-rate rental income after prepaying their mortgages." Slip op. at 17. The Court of Federal Claims had precluded such evidence, concluding instead that the before-the-regulation and after-the-regulation method was the only proper way. 

Here's the short story: the feds adopted programs providing incentives to developers to build low-income housing. The programs offered below-market 40-year mortgages guaranteed by HUD, for example. In return, the owner agreed to limit the rent increases for as long as the HUD guarantee remained in place. The programs also allowed an owner to get out early if after 20 years they prepaid the mortgage. If so, the agreed-upon rent restrictions would vanish. 

Perhaps not surprisingly, many owners took that option. Too many owners, in Congress' judgment. And thus (again, perhaps not surprisingly, also), the feds reacted by eliminating the prepayment option. No prepayment, no conversion of below-market units to market-rate. Takings lawsuits followed.

As noted above, the CFC rejected the expert economist testimony offered by the owners. William Wade, Ph.D., (disclosure: Dr. Wade is a colleague of ours, and has guest-blogged before, including posts on Penn Central), testified about the lost opportunity -- lost market-rate rental income -- that the owners suffered because Congress' elimination of the prepayment option forced the owners to keep renting at below-market rates. See slip op. at 11-12 for more details of Dr. Wade's testimony. See also the graphic above. 

Nope, held the CFC:

Despite Dr. Wade’s opinions, the Claims Court found that Dr. Wade’s analysis was nonprobative of economic im-pact under Penn Central. First, the court found that Dr. Wade’s lost income analysis was nonprobative because he was required to analyze and compare fair market values. Decision, 140 Fed. Cl. at 89 (“[FWPs] have not established the fair market value (FMV) of the FWPs’ properties at the time of the taking, for either the scenario where the mortgage prepayment right was unrestricted, or the scenario where the mortgage prepayment right was restricted by LIHPRHA.”). And second, the court found that “Dr. Wade’s methodology is unsound because it is inconsistent with binding precedent,” in particular relating to “the parcel as a whole concept” and “economic loss severity measures.” Id. at 89–91.

Slip op. at 13. 

"[G[uided by the Supreme Court's cautions against rigidity in this area of law," slip op. at 14, the Federal Circuit rejected the CFC's categorical rule, holding instead that "courts must have flexibility to determine in each individual case how to most accurately measure the economic value of what a takings claimant actually lost due to the governmental action." Slip op. at 15. Yes, "before and after" the regulation might serve the purpose of determining the economic impact of the regulation, but it isn't the sole way to approach it. Lost net income, discounted to present value, also could work. "Neither approach appears to be inherently better than the other." Id. 

The difference between temporary takings (as were at issue in prior Federal Circuit cases), and the permanent nature of the takings here did not matter. Yes, permanent vs temporary can affect the analysis. But it isn't determinative of the of the method used. Slip op. at 16 ("Regardless whether a taking is permanent or temporary in nature, there is no one-size-fits-all method for measuring the economic impact of a governmental action.").  

As for our post's title, one of the property owner/plaintiffs in the case was an outfit known as "620 Su Casa Por Cortez," which was in a slightly different position than the other plaintiffs. Su Casa didn't own its property prior to the time Congress changed the early-redemption rules, but bought subject to those rules. So yes, you guessed it, in Su Casa's case, the CFC held that purchasing the property already subject to the allegedly restrictive regulation means it failed the "investment-backed expectations" Penn Central prong also.   

Unlike the Federal Circuit's conclusion that the CFC got it wrong on the "economic impact" Penn Central prong, here the court agreed with the CFC. It rejected Su Casa's argument that Palazzolo rejected the "subsequent transfer" holding:

The governmental action in this case is the enactment of the Preservation Statutes. Su Casa purchased its property in an arms-length transaction after it already knew that the Preservation Statutes had eliminated the prepayment option that previously existed under the 1961 amendments to the National Housing Act. While the HUD regulations had not yet gone into effect at the time of the transaction, the Preservation Statutes themselves were sufficiently detailed to remove any reasonable expectation that Su Casa could have had that it would have the option to prepay its mortgage and convert its property from low-income housing to a market-rate rental property. 

Su Casa’s reliance on Palazzolo v. Rhode Island, 533 U.S. 606 (2001), is inapposite. . . .Here, unlike in Palazzolo, the Claims Court did have occasion to consider whether Su Casa could prove reasonable investment-backed expectations in view of the timing of its purchase and its knowledge about the Preservation Statutes. The Claims Court determined, not as a per se rule but rather as an evidentiary failure, that Su Casa lacked sufficient evidence to prevail at trial.

Slip op. at 8. Hmmm...ok. We'll have to see about that one. After all, the Supreme Court in Murr did say that purchase subject to restrictions is "a factor" in investment-backed expectations analysis. But that has always seemed more like a way to back into a per se rule, than an actual distinction to  us. Maybe this is the case to take back up on that issue? 

Please read the entire opinion. There's a lot there, obviously. And it is a good distraction from the swirl of the 25/7 news cycle that is making everyone just a bit crazy.  

Anaheim Gardens, L.P. v. United States, No. 19-1277 (Fed. Cir. Mar. 25, 2020) 

Talkin' 'Bout My Palazzolo: Takings Claim Not Precluded Because Owner Purchased Land Already Subject To Wetlands Regs

As long-time readers know, we often kvetch about the way many courts ignore the Palazzolo rule that simply because someone obtains property subject to preexisting restrictions on use does not preclude them automatically from raising takings claims. See here, here, here, and here, for example. More about the Palazzolo case here, including video.

But not all courts get it wrong, however. Now you can add to the plus-column the Florida District Court of Appeal (Second District)'s decision in Jamieson v. Town of Fort Myers Beach, No. 2D19-238 (Mar. 25, 2020).

The court held that a property owner who purchased land that earlier had been designated as 100% "wetlands" on the Town's land use map was not prohibited from pursuing takings (and since this is Florida, Bert Harris Act) claims. The case is a two-fer, because the court also concluded that the claims were ripe because the uses which the Town will allow are "clear to a reasonable degree."

The two parcels here total seven acres (subdivided back in 1919 into 40 separate lots), but a wetlands designation means a max density of one home per twenty acres. But the Town's land use plan allows a property owner to apply for a "MUD" (a minimum use determination, which includes a variance process) to see whether each lot qualifies for residential use. After the owner purchased the land, the Town adopted a development code that barred any development in property already designated as wetlands. 

The owner sought a determination from the state water management agency of how much of its property was actually wetlands. The agency concluded that roughly 27% was uplands, 61% was wetlands, and the rest was surface water. The owner showed this determination to the Town, arguing the 100% wetlands designation was wrong. Nope, the Town concluded, there was "no clear factual error."

The owner sought a MUD that all 40 lots qualified for residential development. The local planning agency denied the MUD (no residential development on wetlands). The owner even sought to amend the comprehensive plan to allow transferable development credits to be used. No deal, no legislative amendment. [Barista's note: for a takings claim to be ripe, a property owner does not need to amend the law, but it appears the owner here tried anyway.] 

The owner even sought a variance. Again, no luck: the Town didn't even process the request, concluding that a variance wasn't available as a matter of law.

So the owner sued, raising inverse condemnation and takings claims, as well as claims under the Bert Harris Act. The trial court granted the Town summary judgment, concluding first that because the owner purchased the property already subject to the wetlands designation (and thus it was already ineligible for development), he could not raise a takings claim as a matter of law. Second, the court concluded the claims were not ripe because the owner had not made a "meaningful application" for development, because he had not sought to amend the wetlands designation or the allowable max density requirement. 

The court of appeal reversed. Relying on Palazzolo, the court concluded:

The trial court recognized Palazzolo in its order but distinguished the facts of Palazzolo, noting that "the claim [in Palazzolo] had not yet ripened by the time the property was transferred to a 'new owner' who has been the sole shareholder in the corporation that had owned the property for decades." The trial court went on to say that Palazzolo "holds that an owner who acquires title to property while awaiting a final decision from the government on the property's development rights is not subject to a 'blanket rule' that always strips that owner of a potential taking claim." We do not read Palazzolo so narrowly. The language in Palazzolo makes it clear that notice of a preexisting regulation does not operate as an absolute bar to a takings claim. See also Rukab v. City of Jacksonville Beach, 811 So. 2d 727, 733 (Fla. 1st DCA 2002) ("[W]e find no legal support for the contention that the [property owners] are somehow precluded from asserting their constitutional rights . . . because they bought the property subject to the previous determination of blight." (relying on Palazzolo, 533 U.S. at 627)).

....

Here, Jamieson acquired the full property rights when he bought the property, including the right to challenge the existing wetlands designation. Therefore, the trial court erred in determining that count I was barred as a matter of law because the wetlands designation existed before he acquired the property.

Slip op. at 8-9. 

The court also made short work of the trial court's ripeness conclusion, holding that "the permissible uses of the property were clear to a reasonable degree of certainty when Jamieson filed his complaint." Slip op. at 11. The court went through the efforts the owner undertook, including the variance, and concluded, "it is reasonably certain that the Town will not permit Jamieson to develop ninety-three percent of his property based on its wetlands designation." Id. (footnote omitted). 

It's a short opinion (13 double-spaced pages), and we recommend you read it in its entirety. 

As for why the "My Generation" lede? Whenever we hear "Palazzolo," we think of that song by The Who. Not sure why, exactly. Maybe it's because both have the same number of syllables. No other reason, really. But there it is.

In that vein, we have sought a variance from the actual lyrics:

Town says I can't u-use my land
(Talkin' 'bout my Palazzolo)

Just because it's wetlands planned
(Talkin' 'bout my Palazzolo)

I just want to build a h-house
(Talkin' 'bout my Palazzolo)

And ennn-nforce the Takings Clause
(Talkin' 'bout my Palazzolo)

This is my Palazzolo
This is my Palazzolo, baby.

Jamieson v. Town of Fort Myers Beach, No. 2D19-238 (Fla. Dist. Ct. App. Mar. 25, 2020) 

The Royal Origins Of "Police Power" Hawaii-Style: The King v. Tong Lee (1880)

Here's one for our Hawaii folks, in case you all are curious about the origins of the analytical framework which courts use to review the legality of measures taken by the authorities in the name of "public health" that have an impact on the uses of private property.  

As far as we can tell, The King v Tong Lee, 4 Haw. 335 (Kingdom 1880) (in banco), is the first Hawaii case which uses the term "police power," and which upheld the broad – and nearly unreviewable – authority of the government to limit the uses of property, as long as there’s a colorable argument that the property's use is contrary to the public health.

There, the Kingdom's legislature (one of the joys of practicing law in Hawaii is that you get to deal with cases involving the Kingdom; things like Privy Council, the royal prerogative, and the like) prohibited the laundry business within a small radius of Nuuanu and King Streets in downtown Honolulu, because "the increasing number of laundries and wash-houses within the limits of the City of Honolulu tends to the propagation and dissemination of disease."

We think we can safely conclude that this prohibition was – in whole or at least in large part – more of an anti-Chinese than a true health measure because (1) the statute only barred laundering for money (it didn’t limit large-scale private washing or the dumping of wastewater, which you would think it would do if the activity itself was truly harmful to the public's health), and (2) did not prohibit the laundry business anywhere else on Oahu, or in the kingdom for that matter.

Then, like now, the part of town that the corner of Nuuanu and King Street conjures up in your mind is Chinatown. (We all understand the ethnic and racial geography of our town: there’s a historical reason, for example, why there’s a First Hawaiian Bank on that corner (for Chinese customers), when the main bank was just a couple of blocks down on Bishop Street (Big 5 customers.)

Tong Lee challenged the statute as a violation of the due process clause of the Hawaii Constitution (yes, the Kingdom had a written constitution). He asserted he had the right to use his property (his laundry business and his land), which this statute unreasonably deprived him of without a good reason: if public health was the real reason for this law, it was both too narrow (it didn't prohibit all commercial laundries), and was not tailored (there was no showing that Tong Lee's laundry was unsanitary).

The Supreme Court easily disposed of this argument:

The authority to enact a law of this character is derived from the inherent power which every sovereign State possesses to protect the life, property and health of its citizens. Says Judge Shaw, in Commonwealth vs. Alger, 7 Cushing, 84: “We think it is a well settled principle, growing out of the nature of well-ordered civil society, that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the rights of the community. Rights of property, like all other social and conventional rights, are subject to such reasonable limitations on their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations established by law as the Legislature, under the governing and controlling power vested in them by the Constitution, may think necessary and expedient.”

“This is very different from the right of eminent domain; the right of a Government to take and appropriate private property whenever the public exigency requires it, which can be done only on condition of providing a reasonable compensation therefor. The power we allude to is rather the police power; the power vested in the Legislature by the Constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the Constitution, as they shall judge to be for the good and welfare of the commonwealth, or the subjects of the same.”

Tong Lee, 4 Haw. at 339-40.

It doesn't take much to see how this argument can be stretched beyond its breaking point, because nearly anything these days can be spun as a public health crisis (see, e.g., a state senator's recent proposal that physicians should write prescriptions for housing, to address the public health crisis of homelessness). But even though challenges might come at the margins, on the whole, the courts still defer to the legislative judgment about just what constitutes a health crisis, and what uses of property might be injurious to the public health. And it all started here in Hawaii law:

Chief Justice Shaw also says in Commonwealth vs. Alger, above cited, p. 86: “Nor does the prohibition of such noxious use of property (a prohibition imposed because such use would be injurious to the public), although it may diminish the profits of the owner, make it an appropriation to a public use, so as to entitle the owner to compensation. *** If the owner of a warehouse in a cluster of other buildings could store quantities of gunpowder in it for himself and others, he might be saved the great expense of transportation. If a landlord could let his buildings for a small-pox hospital or a slaughter-house, he might obtain an increased rent. But he is restrained, not because the public have occasion to make the like use or make any use of the property, or to take any benefit or profit to themselves from it, but because it would be a noxious use, contrary to the maxim sic utere tuo ut alienum non laedas.

Id. at 341.

There’s a lot about this case that has not necessarily survived the 140 years since it was issued. The racial overtones, for example. But the police power principle is still a very strong thread, and the court’s holding remains valid today: “[t]he State, by its Legislature, possesses the right to make such laws as it deems to be wholesome, and the exercise of this power is subject to no review except by the body of society itself, except so far as these laws may be inhibited by the Constitution itself, or be repugnant to its provisions.” Id. at 342.

In other words, voting – not suing – is the usual remedy.

The King v Tong Lee, 4 Haw. 335 (Kingdom 1880) (in banco) 

New Cert Petition (Ours): Must An Owner Whose Land Is Flooded Also Prove "Substantial" Loss Of Use?

US 50 in Nevada - the "Loneliest Road"

Here's the cert petition which we and our Nevada colleague Luke Busby filed today, asking the U.S. Supreme Court to review this Question Presented:

Conflicting with Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982), the Supreme Court of Nevada concluded that to prevail on a physical takings claim a property owner must show that a flood “effectually destroy[ed] or impair[ed] [the property’s] usefulness.”

The question presented is:

To constitute a taking under the Fifth and Fourteenth Amendments, must a physical invasion also destroy or substantially impair an owner’s economically beneficial uses of property?

Rather than summarize the case and the issues, here's the Introduction: 

Physical occupations—as distinctly invasive public uses of private property—are treated by this Court differently than regulatory takings. Although the Court has consistently avoided adopting categorical rules in most takings cases, it has also long-recognized that physical invasions are governed by more bright lines. See Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 322 (2002) (“When the government physically takes possession of an interest in property for some public purpose, it has a categorical duty to compensate the former owner.”) (emphasis added) (citing United States v. Pewee Coal Co., 341 U.S. 114, 115 (1951)).

One of the brightest of the bright line rules is that in cases of physical invasion, the loss of use, if any, is not a part of the takings equation, much less the dispositive factor. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) is perhaps the most famous example. In that case, the Court concluded that even a de minimis physical occupation—the installation of a tiny cable television box on the roof of the owner’s apartment building—was a taking, even though the box in no way interfered with the owner’s use of her roof or building (and indeed may actually have enhanced her use by providing cable service).

Here, however, the Nevada Supreme Court adopted a contradictory rule that unnecessarily blurred the well-established distinction between physical and regulatory taking, and takings and torts. It concluded that when private property is intentionally flooded by the government, the physical invasion of water must also be accompanied by “substantial injury” to the owner’s economic use of the land. App. 5 (“For a taking by flood water to occur, there must be a physical invasion of flood waters resulting in substantial injury.”). The Nevada court defined “substantial injury” very broadly, as destruction or impairment of a properties’ usefulness. Id. (“For substantial injury to exist, the physical invasion must ‘effectually destroy or impair [the property’s] then usefulness.’ ”) (quoting Clark County v. Powers, 611 P.2d 1072, 1075 n.3 (Nev. 1980)).

In effect, this ruling authorizes the public to use all or a portion of private property as a drainage and storage easement for storm and surface water as long as the owner may use the flooded property at some other time, or some other part of the property for some other purpose besides the County’s intermittent flowage easement.

The Nevada Supreme Court’s ruling wrongly conflates physical invasion takings with regulatory takings, and conflicts with this Court’s precedents and the decisions of other lower courts. This Court should review the judgment of the Nevada Supreme Court.

--------------

1. Arkansas Game and Fish Comm’n v. United States, 568 U.S. 23, 31 (2012) (“In view of the nearly infinite variety of ways in which government actions or regulations can affect property interests, the Court has recognized few invariable rules.”).

Pet. at 2-3. Stay tuned.

Petition for a Writ of Certiorari, Fritz v. Washoe County, Nevada, No. 19-___ (Mar. 23, 2020) 

NH: Subdivision Of Nonconforming Lot Was Not Reasonably Likely - Availability Of A Variance Is A Factual, Not Legal, Question

Torromeo Industries owned a 12-acre parcel zoned "Industrial." Two buildings -- one a home, the other a 4,000 square foot industrial building -- were on the land. Sole access to the property way by a private driveway along the 149 foot frontage of the parcel. Industrial zoning has a minimum lot size of 80,000 square feet, and frontage of 150 feet. Yes, Torromeo's parcel was one precious foot short of conformity with the frontage requirement.

But land use mavens know what this means: a nonconforming use. So back in 1989, the town's planning board affirmed that status and that it considered the uses a permitted preexisting use. 

Flash forward to 2015, when the State condemned 2 acres of the land for a service road, along with 30k square feet for easements. This had the effect of subdividing Torreomeo's formerly single parcel into three lots: (1) a 1/3 acre lot on which the house sits; (2) 10 acres for the industrial building; and (3) a 1/4 acre "remnant" parcel.  

The State first offered $500 as just compensation, and then upped it to $35,000 after the Board of Tax and Land Appeals ruled it should pay more (what gives, State of New Hampshire, with the lame $500 offer?). Torremeo was not satisfied with this amount, and sought de novo review in court. 

At trial, the State's expert testified that the highest and best use in the before condition was as the property was being used: for a home, the industrial building, with the remainder being held for future development. He also testified that based on his conversation with town officials, it was unlikely that in the before condition, the owner could get a variance from the zoning requirements.The after condition's highest and best use "was to hold the surplus land for future development and to continue to use the 1/3 acre for the home and the 10 acres for the industrial building," and, most importantly, as a "de facto subdivision." He used the income/cap rate approach.  (In other words, the taking was a good thing for the property owner!) 

Torromeo's appraiser had a different view. He had two main points of difference: (1) he believed that in the before condition, the highest and best use was to subdivide the property, and he did not believe it was impossible to get a variance; and (2) he used the cost approach. The delta between the State's and Torromeo's appraisers was $35,000.

The trial court "expressed skepticism" that the land could be subdivided in the before condition. The court mostly accepted the State's appraiser's view, and the only major difference was the judge concluded that the value of the residential lot was not affected by the taking. Thus, the court awarded Torromeo $70k for the fee take, plus an additional $800 for the temporary construction easement. The State appealed. 

In Torromeo Industries v. New Hampshire, No. 2019-0121 (Mar. 13, 2020), the New Hampshire Supreme Court agreed with the State. The court affirmed the before-and-after method is the usual way of determining just compensation in partial takings, but noted that highest and best use "cannot be predicated upon potential uses which are speculative and conjectural." Slip op. at 7. To avoid being speculative and conjectural, evidence of highest and best use "is only relevant if the use is likely to be 'reasonably probable' in the reasonably near future." Id. 

Applying this, the court concluded: 

The State challenges the trial court’s determination that the residential lot could have become a separate, saleable lot before the taking, contending that this determination has no support in the evidentiary record. We agree. In order for the residential lot to have become a separate, saleable lot before the taking, the property would have had to have been subdivided.

. . . .

The only evidence before the trial court regarding whether subdividing the property would have been reasonably probable before the taking came from the State’s expert, who testified that the possibility of obtaining planning board approval to subdivide the land before the taking “was remote at best.”

Slip op. at 8. By contrast, the court concluded that the owner's appraiser "did not discuss whether subdividing the property before the taking was reasonably probable[.]" Slip op. at 9. 

And here's the takeaway: the availability of a variance from zoning regulations is a matter of fact, not a matter of law because the zoning ordinance makes variances only available if the "specific circumstances" of each case allow it:

To the extent that the trial court determined that, before the taking, Torromeo would have been entitled to a waiver from the subdivision regulations, as a matter of law, its determination is similarly without basis in the record. The Town’s subdivision regulations allow the planning board to waive specific regulatory requirements only if “[s]trict conformity would pose an unnecessary hardship to the applicant and waiver would not be contrary to the spirit and intent of the regulations” or “[s]pecific circumstances relative to the subdivision, or conditions of the land . . . , indicate that the waiver will properly carry out the spirit and intent of the regulations.” Plaistow, N.H., Subdivision Regulations art. II, § 235-11(A) (2018). No evidence was admitted with respect to those waiver requirements during the bench trial. 

Slip op. at 9-10. 

Torromeo Industries v. New Hampshire, No. 2019-0121 (N.H. Mar. 13, 2020) 

Cert Denied In Carousel Farms

This morning, in this order, the U.S. Supreme Court declined to review the Colorado Supreme Court's decision in the Carousel Farms case. 

That's it, that's all we've got. 

Emergencies, Police Power, Commandeering, And Compensation: Essential Readings

The current headlines -- and a couple of inquiries from colleagues and clients -- got us to thinking about government power in times of crisis and the tension between that power and property and other individual rights. 

On one hand, court decisions going back over the centuries have told us that courts are reluctant to interfere with government power that the government asserts further the public "health, safety, and welfare" (what we in the U.S. call the "police power"). But at what point do such exercises of government power require compensation to a property owner who as a consequence of the limitation on their rights suffers a loss?

So we dusted off our law books and assembled a primer of what we thought were some of the more interesting and important decisions over the centuries on the question. This is not a comprehensive list, of course, and if you think there should be others, please send them our way, and we'll add them. 

We've included, where possible, links to the original opinions so you can read these unfiltered. 

• The Case of the King's Prerogative in Salt-peter, 12 Coke R. 13 (1606). The King's "saltpetre men" may enter private property to obtain saltpeter to use as an ingredient in gunpowder to be used in the national defence, but they do so with limitations about how and when they do it, and "are bound to leave the Inheritance of the Subject in so good Plight as they found it[.]"
• Gardner v. Village of Newburgh, 2 Johns. Ch. 162 (N.Y. Chancery 1816). When a municipality diverted a stream and deprived a riparian owner of his rights, the payment of compensation "is a necessary qualification accompanying the exercise of legislature power in taking private property for public uses." 
• "Contraband" property and the seizure of enemy property during time of war or insurrection. 
• United States v. Pac. R.R., 120 U.S. 227 (1887). During the "late civil war," the Union Army blew up railroad bridges "to prevent the advance of the enemy." No compensation because the destruction of the bridges was a "military necessity." "The destruction or injury of private property in battle, or in the bombardment of cities and towns, and in many other ways in the war, had to be borne by the sufferers alone as one of its consequences."
• Mugler v. Kansas, 123 U.S. 623 (1887). A law criminalizing the manufacture of liquor, adopted under the state's police power, did not offend due process. It also wasn't a taking requiring compensation because losses in property's value by virtue of its restrictions for the public health, safety, or welfare is merely an "incidental inconvenience[.]" 
• Hadacheck v. Sebastian, 239 U.S. 394 (1915). Prohibiting the operation of existing brickyards in some but not all parts of a city is not a due process violation. In "the absence of a clear showing" of improper purpose, the courts "must accord good faith" to the government's claim it barred brickyards as a police power measure.  
• Attorney-General v. De Keyser's Royal Hotel, Ltd. [1920] AC 508. In series of separate opinions the House of Lords concluded that the Crown may not seize possession of property "in connection with the defence of the realm" (there, a hotel to house RAF officers) without paying compensation for their use and occupation.  
• Miller v. Schoene, 276 U.S. 272 (1929). The state ordering the destruction without compensation of otherwise un-threatened cedar trees because they served as a "host plant" to a disease harmful to nearby apple trees is a valid exercise of the government's police power. Courts should not question too hard the government's assertion that the action was needed.  
• The Steel Seizure Case (Youngstown Sheet and Tube Co. v. Sawyer, 343 U.S. 579 (1952)). The President's order to seize steel mills during the Korean War to prevent a strike is limited by the Constitution. The executive's power even during emergencies is limited by the legislature's authority. 
• Armstrong v. United States, 364 U.S. 40 (1960). The case that gave rise to the famous quote about the cost-distribution purpose of the Just Compensation Clause: "The Fifth Amendment's guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." The feds had rendered invalid state law materielmen's liens on boats being built for the federal government. Held: compensation required. 
• National Bd of YMCA v. United States, 395 U.S. 85 (1969). The government doesn't need to pay compensation when rioters destroyed a building being occupied by soldiers during the riots. The destruction can be blamed on the rioters, and the Army was trying to defend the property, albeit unsuccessfully. Although the government is "ordinarily" liable when it occupies property, in the "unusual circumstances" here, it was the riots and the rioters that deprived the owner of the building's use. 

The overall "vibe" we take away from all of this:

1.  Under "rational basis" review, modern courts are reluctant -- even in the absence of crisis -- to second-guess the government's assertion that even a total restriction on someone's property rights can be halted. 

2.  When faced with an assertion that there are "unusual circumstances" afoot, the courts become even more reluctant. 

3.  Whether compensation (and not an injunction) should be provided for an exercise of the police power is a separate question, and in the absence of an emergency or a claim that someone's use of their property is harmful to others, the courts may enforce the requirement to pay (see Lucas, Penn Central, and Mahon). 

4.  But when there's a claim of an emergency, crisis, that you are using your property in a way harmful to others (a conclusion the courts will generally defer to government's judgment about), or what we might call an extreme need for the police power, courts will not require compensation. 

The bottom line as we view it is that the search for principles often goes out the window in times of calamity. Not just in takings law, but generally. Denial of compensation and the rejection of the Armstrong principle might not be theoretically sound if someone is being forced to suffer for the good of the public. But much of the time it simply is. 

And here's what our fellow property lawyers are thinking about this topic:

• Anthony Della Pelle, "The COVID-19 Pandemic Allow the Government To Seize My Private Property?"
• Katrina Wu, "Governor’s Use of Emergency Power to Commandeer Property Requires Payment of 'Reasonable Value'"
• Steve Silva "O Fortuna - A casualty event is not a taking of private property for public use "
• Lawprof Elizabeth Joh, "Yes, States and Local Government Can Close Private Businesses and Restrict Your Movement"

New Cert Petition: Seattle's "First In Time" Tenant Rule Is A Taking And Due Processey

Here's the cert petition we've been eagerly awaiting in a case we've been following about Seattle's rewriting of the traditional lessor-lessee relationship.

The petition arose out of facial takings and due process challenges to Seattle's "first in time" rule for residential leasing. The city adopted an ordinance requiring owners to rent to the first tenant who applies that meets the owner's screening criteria.

The Washington Supreme Court tossed aside a long line of its own cases which held that the Washington Constitution's takings clause is not interpreted by the same analysis the U.S. Supreme Court employs for the Fifth Amendment. Not so the Washington court held, we might in the future decide that the Washington Takings Clause provides greater protection, but for the time being we conclude that federal takings doctrine is so clear that we simply adopt it wholesale. (The court based this conclusion on Tahoe-Sierra. Really! Of all cases on which to base a conclusion that the U.S. Supreme Court has clarified takings doctrine, Tahoe-Sierra ain't it.)

In a companion case, the court also concluded that the test under the Washington Constitution for substantive due process of law is "rational basis" (the federal test) and not (as previously held) under a slightly heightened standard.

So now we have the owners asking the U.S. Supreme Court to review these Questions Presented:

Based on its interpretation of federal law, the Washington Supreme Court overruled 68 regulatory takings and due process cases—130 years of jurisprudence—that had (1) held that the government lacks authority to destroy a fundamental attribute of property without just compensation; and (2) prohibited laws that are unduly oppressive of individual rights. The court took this drastic action to uphold a uniquely intrusive and novel City of Seattle ordinance that declared it unlawful for a residential landlord to choose among qualified tenant applicants. Instead, the law grants the first qualified person to apply for a vacancy an exclusive right of first refusal. This “first-in-time” rule is vastly broader than civil rights laws, which are not challenged here, because it prohibits any discretion whatsoever, even for entirely legitimate reasons.

The questions presented are:

1. Whether the destruction of a fundamental attribute of property ownership suffices to establish a taking without the need to prove diminished value or interference with reasonable investment-backed expectations, as recognized by cases like Hodel v. Irving, 481 U.S. 704, 716–17 (1987), and Kaiser Aetna v. United States, 444 U.S. 164, 179–80 (1979); and

2. Whether the Due Process Clause of the Fourteenth Amendment protects against an unduly oppressive legislative act that destroys a fundamental attribute of property ownership as established by Goldblatt v. Town of Hempstead, N.Y., 369 U.S. 590, 594 (1962), and Lawton v. Steele, 152 U.S. 133, 137 (1894).

We recommend you read it. Most interesting. We shall be following along, of course. 

Petition for Writ of Certiorari, Yim v. City of Seattle, No. ___ (Mar. 17, 2020) 

Williamson County's "Final Decision" Rule Lives! CA9: You Still Need To Ask The Govt For An Exemption To The Rules

This just in. In Pakdel v. City and County of San Francisco, No. 17-17504 (Mar. 17, 2020), a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of a regulatory takings claim which the District Court threw out for not being ripe under Williamson County's "state procedures" requirement.

Wait, you say, didn't the Supreme Court toss that requirement out in Knick? Yes, but it also did not disturb the separate requirement that the government charged with a taking have made the final decision applying the regulations to the property which is claimed to have been taken.

The panel thus affirmed on other grounds because the plaintiffs had not obtained an exemption from the regulation. Yes, this is the "variance" argument.  

We're reading the opinion in more detail, but wanted to push it out quickly so that others weigh in. We'll have have more after a chance to digest it. Stay tuned. 

Pakdel v. City and County of San Francisco, No. 17-17504 (9th Cir. Mar. 17, 2020) 

Educate And Entertain Your Stay-Home Kids With Takings Law!

For those looking for ways to productively occupy your stay-home-from-school kids the next couple of weeks, We're offering online CLE's on takings. Don't let their time go to waste, have 'em learn property and condemnation law!

We volunteer for the Penn Central module. Who's with us?!

Dusting Off An Old(er) Law Teaching And Tech Article

All the law schools moving from in-person to "remote" instruction got us to remembering that way back in the day, in the early days of the internet and email (1995, so really way back*), we wrote an essay in the Journal of Legal Education about the potential effects -- good and bad -- that might come from teaching-by-technology.

Thinking it would be interesting to see how antiquated it might now appear, we dusted off our copy. 

So here it is. We'll leave it to you to determine for yourself whether it holds up.  

--------------------

*The article is so old, it had to define "e-mail" for the reader. 

"Hey, Did You Get My E-Mail?" Reflections of a Retro-Grouch in the Computer Age of Legal Education, 44 J. L... 

Unboxing The 2021 (Scottsdale) ALI-CLE Eminent Domain Conference Swag: Get Yours Today!

Missed out on the 2021 ALI-CLE Eminent Domain and Land Valuation Litigation Conference swag?

Well fear not: here's your chance to get your high-class reminder -- a kit of road warrior essentials -- to save the Conference date on your calendar. We're already underway with planning the agenda and faculty, so it's never too soon to block it off (January 28-30, 2021, at the 4-Diamond DoubleTree Resort, Scottsdale, Arizona). 

If you were not able to get your swag in Nashville, send us a note (rht@hawaiilawyer.com) and we shall gladly drop one or two in the mail to you.

While supplies last!  

#CoronavirusLaw: Is There A Difference Between "Commandeering" Property In An Emergency, And "Taking" It?

You remember the TV trope where Starsky, Hutch, or some other police officer is in hot pursuit of a dangerous criminal and flags down a motorist and "commandeers" their private vehicle and drives off?

We thought of that when we were reading the news reports about various governments invoking their emergency powers to respond to the coronavirus crisis. 

So while we were on the telephone on hold (bailing out of every conference, event, and travel arrangement in the foreseeable future), we thought we would take a look at the recent Executive Order, issued by California Governor Gavin Newsom, which expressly mentioned the "power to commandeer [private] property" such as hotels and medical facilities and press them into public service, as needed:

The California Health and Human Services Agency and the Office of Emergency Services shall identify, and shall otherwise be prepared to make available-including through the execution of any necessary contracts or other agreements and, if necessary, through the exercise of the State's power to commandeer property - hotels and other places of temporary residence, medical facilities, and other facilities that are suitable for use as places of temporary residence or medical facilities as necessary for quarantining, isolating, or treating individuals who test positive for COYID-19 or who have had a high-risk exposure and are thought to be in the incubation period.

And, as you know, we look for "takings" angles in everything.

So that got us to thinking: is "commandeering" private property the same as "taking" private property for public use? If the state needs to go down that path, does it intend to provide compensation if it takes or damages property under its emergency power? After all, some courts say that when the government is exercising its police or emergency powers, there's no obligation to compensate the owner of private property taken or damaged thereby. The U.S. and California Constitutions would seem to say so.

So we checked out the statute under which the governor issued the EO, California Gov't Code § 8572:

In the exercise of the emergency powers hereby vested in him during a state of war emergency or state of emergency, the Governor is authorized to commandeer or utilize any private property or personnel deemed by him necessary in carrying out the responsibilities hereby vested in him as Chief Executive of the state and the state shall pay the reasonable value thereof.

Notwithstanding the provisions of this section, the Governor is not authorized to commandeer any newspaper, newspaper wire service, or radio or television station, but may, during a state of war emergency or state of emergency, and if no other means of communication are available, utilize any news wire services, and the state shall pay the reasonable value of such use. In so utilizing any such facilities, the Governor shall interfere as little as possible with their use for the transmission of news.

Turns out commandeering includes the (statutory) obligation to pay.

So lighten up, Francis: if they commandeer private property for a public use, the legislature has recognized the obligation to "pay the reasonable value thereof." Not quite "just compensation," but perhaps close enough. We're glad to see recognition that private property rights are not suspended in times of emergency.

Comments open: we are by no means experts in this area, and if you are, please fill us in with more!  

Executive Order N-25-20 (Cal. Mar. 12, 2020) 

Wash Your Hands!

A minimum of twenty seconds, they say.

To help you do it right, here's a mantra / mnemonic for you to say (silently, please) while you accomplish the task.

Keep healthy, everyone! 

Pennsylvania Coal Revisited: Outlawing Silica Mining Isn't A Taking, Even Though Mining Rights Are "Property" Under State Law

Here's the latest in a case we've been following that involves a local government prohibiting, via a zoning ordinance, the mining of silica (used as "frac sand"). Kind of like how Pennsylvania barred certain coal mining in our old friend, Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). 

In Minnesota (where our story takes place) the right to subsurface minerals is separate from the rest of the land. Kind of like how Pennsylvania law recognized subsurface rights as a separate "stick" in Mahon. Here, the plaintiff owned several leases which allow it to mine silica. Sounds like a property interest, no? 

Well, no. At least not to a majority of the Minnesota Supreme Court, which held in Minnesota Sands, LLC v. County of Winona, No. A18-0090 (Mar. 11, 2020) (affirming the court of appeals) that the right to mine silica was a property right, but because it was "inchoate," it was not really a vested property right that covered by either the U.S. or Minnesota takings clause.

We won't go into great detail in this post (you can either read the opinion itself, or our earlier write up on the court of appeals' decision), but the overall vibe of the majority opinion is summarized in footnote 19 on page 34 of the slip opinion:

The dissent’s claim that our decision affords the government immunity to regulate the leases "out of existence" is incorrect. Our decision proceeds on the uncontroversial premise that the government cannot "take" property rights that a party never had. See Murr v. Wisconsin, __ U.S. __, __, 137 S. Ct. 1933, 1951 (2017) (Roberts, C.J., dissenting) (noting that the first question in a Takings Clause claim is “what ‘private property’ the government’s planned course of conduct will affect”). Likewise, the government does not regulate out of existence a leaseholder’s rights that terms of the lease never granted. It bears emphasizing that the rights granted under the terms of the lease agreements were determined by the parties. The decision to limit Minnesota Sands’ rights to a contingency interest that would not become definite unless the government granted a conditional-use permit was the company’s.

Slip op. at 34 n.19. In short, Minnesota Sands had not obtained a Conditional Use Permit.

We're not sure that the majority's reading of the lease terms to make the property rights granted by the lease "conditional" on the mining company obtaining a CUP, but this was the majority's way of trying to insulate the opinion from U.S. Supreme Court review. After all, what a lease means is a matter of state contract law, no? 

As we did with the court of appeals' opinion, we focused on the rationale set out by the two dissenting Justices. The dissenting opinion begins after page 39 of the slip opinion, and the "takings" analysis begins on page D-8. We urge you to read it in depth. The heart of the dissent's arguments is that the court should not have thrown the case out on the threshold property question, but should have reached the merits of whether the ban is a taking:

Because mineral leases, including the leases at issue here, have been “long recognized” as property, Phillips, 524 U.S. at 167, the protected property interest defined by those leases may not be regulated out of existence by the government, see Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922) (explaining that regulation will be recognized as a Fifth Amendment taking if it “goes too far”). Put another way, leasehold interests are protected by the Takings Clause of the United States Constitution. Because Minnesota Sands argues that its mineral leases were taken by the county ordinance, this case should, at a minimum, be remanded to the district court for an inquiry that considers factors “such as the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action.” Horne v. Dep’t of Agric., ___ U.S. ___, ___, 135 S. Ct. 2419, 2427 (2015) (discussing the takings factors to be considered under Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124 (1978)).

Dissent at D-10-D-11 (Anderson, J., dissenting) (footnote omitted).

We think Justice Anderson's dissent teed up a pretty good SCOTUS cert petition on either Penn Central or Palazzolo:

Legally, even if we could accept the court’s abridged take on the leases, I disagree with its abridged take on the Fifth Amendment. Under the court’s view of this constitutional protection, it does not matter how significant the interference of a regulation is with the “reasonable investment-backed expectations” of a property owner. Horne, ___ U.S. at ___, 135 S. Ct. at 2427 (discussing the Penn Central factors). Indeed, according to the court, it does not matter if the government subjected the owner’s private property to a total regulatory taking, see Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1016 (1992), if the owner’s property was not sufficiently “vested” before the regulation became effective. An owner’s regulatory takings claim, partial or total, may proceed only after the owner has a “vested interest to use” the property as expected. Here, according to the court, that means that Minnesota Sands has no constitutionally protected property interest until Winona County approves mining silica sand for hydraulic fracturing, which is the proposed use of Minnesota Sands’ leaseholds. Therefore, under the court’s logic, Minnesota Sands may not bring a Takings Clause challenge to Winona County’s frac sand mining ban until Winona County first permits frac sand mining.

Dissent at D-12-D-13 (Anderson, J., dissenting) (footnote omitted). As we wrote in our post about the court of appeals' decision, the majority's rationale is a classic bootstrap argument:

The majority's rationale was that there's no property interest because Minnesota Sands didn't get a CUP. Which overlooks the fact that under the ban, it cannot get a CUP. So the  very ban being challenged is what eliminated the plaintiffs' claim of owning property. Bootstrapping at its finest, and inconsistent, in our view, with the rule in Palazzolo v. Rhode Island, 533 U.S. 606 (2001), that the enactment of a regulation does not deprive a property owner of the right to challenge the regulation. 

Now, just wait til the cavalry arrives.

Postscript: for you Con Law types, much of the majority and dissenting opinions delve into the question of whether the "dormant" Commerce Clause was offended by the County's ban (was this a backhanded way of discriminating against non-County miners?), but we shall leave that issue to you, if interested.  

Minnesota Sands, LLC v. County of Winona, No. A18-0090 (Minn. Mar. 11, 2020) 

New IJ Cert Petition: Purposely Destroying Your House Could Be A Taking, Even If Govt Was Exercising Its Police Power

Here's the cert petition that we've been eagerly waiting to drop in a case we've been following (and which gathered a lot of public -- and academic -- attention and outrage). 

Yes, this is the case where the Village police pretty much destroyed a family home in the course of their efforts to dislodge a shoplifter who had taken refuge there while fleeing. Homeowner sought compensation for a taking. The Tenth Circuit, however, concluded "no taking" because the police were exercising the police power. And you can't have a taking where the government is exercising the police power.

We were not terribly surprised by the ruling as grossly unfair as it is, because it is pretty typical: customs agents inspect and seize your laptop at the border to check it out but destroy the data on the hard drive? no taking; DEA holds your legal prescription drugs as evidence against a third party but eventually don't use the evidence and return it to you (but by then the drugs have expired)? no taking. But not every jurisdiction goes that way, however.

The Institute for Justice has taken up the case, and the petition poses this Question Presented: 

Using explosives and a battering ram attached to an armored personnel carrier, the Greenwood Village Police Department intentionally destroyed Petitioners’ house. Afterwards, they offered the family $5,000 “to help with temporary living expenses.” The family sued, arguing that they were entitled to Just Compensation under the Fifth Amendment for the intentional destruction of their house. The Tenth Circuit, however, held that no compensation was due because the home was destroyed pursuant to the police power rather than the power of eminent domain.

The question presented is whether there is a categorical exception to the Just Compensation Clause when the government takes property while acting pursuant to its police power.

We've always thought that basing a "no compensation" rule on the distinction between what power the government is exercising doesn't make a lot of sense, especially in an inverse claim such as this where yeah, we all know the government isn't exercising its eminent domain power. Because isn't the basis of the "takings" doctrine that even where government isn't formally taking property by eminent domain, it can still be liable for compensation, when it has in fact done so for public use? We think that there are better ways to look at the question on false distinctions about what power the government is exercising (it's all government power, man). 

This petition squarely presents the question, so we shall continue to follow along. 

Petition for a Writ of Certiorari, Lech v. City of Greenwood Village, No. 19-___ (filed Mar. 11, 2020)

"And although they may be poor, not a man shall be a slave" - A Brief Visit To The Birthplace Of A More Perfect Union

As we noted recently, our spring William and Mary Law course is taking a look at the role of property rights in the debates about the ratification of the U.S. Constitution and the political atmosphere from the founding to the Civil War. Being able to studying these subject in Williamsburg is even better, because we're right in the center of where some of the most important historical events occurred.

But wait, you say, the ratification debates took place in Philadelphia, not peninsular Virginia, so what gives? Our view is that the unsettled question of whether the U.S. Constitution is a pro- or anti- slavery document was not resolved in law until the Civil War, and that the factual debate continues to this day. And the critical events that set the ball in motion took place right down the road from the law school.

First, Point Comfort, the location where, in 1619, the first Africans touched ground in the New World. Second, the spot at Fort Monroe where two-plus centuries later (and merely yards away, by happenstance), the long road to freedom for the enslaved arguably kicked into higher gear. Fort Monroe, you see, is built on Point Comfort, and is the first place where, as far as we can tell, the legal theory of enslaved persons as "contraband property" was created or applied in the early days of the Civil War. Students of history will tell you that there are myriad political, social, and legal reasons why those who escaped bondage and made their way to Union lines were not deemed emancipated, but were stuck in a legal limbo of being neither enslaved or fully free. A half-measure, perhaps, but surely a start on the road to the principle that "not a man shall be a slave." 

Was it coincidence that General Butler, commander of Fort Monroe in those critical days and the implementer if not the creator of the contraband theory, was also a lawyer in civilian life? Was it also coincidence that after the war, Congressman Butler was the author of the first version of the Ku Klux Klan Act, the statute we now know as 42 U.S.C. § 1983? (Read his bio and see if you don't agree that this fellow does seem to pop up at some of the most important times and places during those days.)   

For more on the subject try these informative sources:

• The Forgotten: The Contraband of America and the Road to Freedom (National Trust for Historic Preservation)
• Slave, Contraband, Refugee: The Complicated Story of the End of Slavery in the United States (Dig: A History Podcast)
• How Slavery Really Ended in America (New York Times Magazine)

So last week our class took a short "field trip" (remember those from high school?) to Point Comfort and Fort Monroe. What did being on-site add to our studies? Any dirt lawyer will tell you that it is critical to see the actual places involved in your cases, and we think history is no different. There's just something about breathing the air at the very places where these important events occurred. 

We created a short video chronicling our class visit that touches on some of the legal issues. (We had to re-record the audio because the original had too much background wind, so forgive us if we sound a bit muffled.) We also held short "dramatic readings" of the book we're studying, Sean Wilentz's "No Property in Man - Slavery and Antislavery at the Nation's Founding." 

If you are ever driving through Hampton on Interstate 64, stop by for a visit. Well worth it. 

Complaint: Honolulu Sues Gas Companies (For Nuisance) To Recover The Cost Of Sea-Level Rise

Make what you will of this 205-paragraph, 114 page (including 128 footnotes) Complaint, filed yesterday by the Acting Corporation Counsel for the City and County of Honolulu and a battery of outside lawyers against gasoline producers, alleging that they are responsible to pay the costs of sea-level rise and other symptoms of what the complaint calls the "climate crisis."  

It's a challenging read, but the fun part is in the claims for relief (fast forward to page 99), which include (for you property mavens) nuisance, private nuisance, and trespass (by flooding), as well as affirmative and negligent failure to warn of the dangers of fossil fuel products. 

Will this lawsuit go anywhere? Is a big municipal payday in the cards? Will it get to a local jury? Your guess is as good as ours. But we'll be following along, for sure.  

Complaint, City and County of Honolulu v. Sunoco LP, No. 1CCV-20-0000380 (Haw. 1st Cir. Mar. 9, 2020) 

Maryland Court Of Appeals Considers Statutes Of Limitations In Inverse Condemnation: Do Appeals Toll Time?

Here's the video of the OA held this morning (March 10, 2020) in a case we've been following, about the statute of limitations governing inverse claims. Maryland Reclamation Association filed an regulatory takings claim in 2013, and eventually the jury awarded a whopping $45 million in just compensation and interest. Hartford County asserted the claim was barred by the three-year statute of limitations, and the claim accrued in 2007 when the Board of Appeals administratively denied MRA's variance request. 

The Maryland Court of Special Appeals concluded that "An inverse condemnation claim 'accrues when the affected party knew or should have known of the unlawful action and its probable effect.'" Okay, the County responded, MRA discovered the County's conduct in 2007 when the Board denied the variances. In response, MRA asserted that the taking must become "permanent or stabilized," and that didn't occur until the court of appeals affirmed the denial of the variance. The court of appeals agreed with the County that the "final decision" for purposes of both ripeness and statutes of limitation was the Board's denial of the variance.

"Stabilization" unnecessary. Appeals further up the food chain are just appeals. 

The Maryland Court of Appeals (the highest court in the state) granted discretionary review, and the court's website spells out the issues under consideration:  

No. 52 - Maryland Reclamation Associates, Inc. v. Harford County, Maryland

Issues – Constitutional Law – 1) Does a takings claim under the Maryland Constitution accrue at the time of a stayed administrative decision or at the time of a final judicial decision affirming that result? 2) May a regulatory taking become permanent and stabilized before a court of proper jurisdiction determines the validity of the regulation effecting the taking? 3) Should Petitioner’s takings claim be dismissed based on Petitioner’s failure to raise this constitutional issue in any administrative proceeding? 4) Did the decision of the Harford County Board of Appeals prohibiting a proposed use of Petitioner’s land to protect the public constitute a taking for which compensation is due? 5) Does the jury’s damages award as compensation for an unconstitutional taking contravene Maryland law when the damages are not the fair market value of Petitioner’s land but are, instead, the capitalized profits of a hypothetical business?

Watch and listen. We shall continue to follow this case. 

Final Cert-Stage Briefs In Case Asking: Does The Self-Executing Just Compensation Clause Abrogate A State's 11th Amendment Immunity?

Here are the final cert-stage briefs in a case we've been following for what seems to be a long time.

We say that because we represented the property owner the last time it was up before SCOTUS, when we came tantalizingly close to making the cut. 

After the Court denied review, the property owner sued the Commission in federal court, asserting that being undercompensated in state court was itself a violation of the U.S. Constitution.

The district court dismissed the case, followed by the Fifth Circuit affirming in Bay Point Properties, Inc. v. Mississippi Trans. Comm'n, 937 F.3d 454 (5th Cir. 2019). The Fifth Circuit held that a property owner who asserted that it was not fully compensated in state court inverse condemnation case, could not then sue the state DOT in federal court for the difference. The reason wasn't based on the substance of the allegations, but on Eleventh Amendment immunity. A footnote in the Fifth Circuit's opinion presaged the cert petition, effectively booting the case upstairs to SCOTUS. And here we are now.

The Petition presents this straightforward question:

Whether the “self-executing” Just Compensation Clause abrogates a State’s Eleventh Amendment immunity, allowing a property owner to sue the State for a taking of property.

The Commission filed a Brief in Opposition last month, and the property owners have now replied.

So we're done with the briefing, and all we need do now is wait for the conference, and the results. 

This is a fascinating issue, and a case we all should be following. Stay tuned. 

Reply in Support of Petition for Writ of Certiorari, Bay Point Props., Inc. v. Mississippi Trans. Comm'n, N... 

Brief in Opposition, Bay Point Props., Inc. v. Mississippi Trans. Comm'n, No. 19-798 (Feb. 20, 2020) 

Mark Your Calendars (Friday, Apr 24, 2020): ALI-CLE Webinar - Strategies for Litigating Regulatory Taking Cases

At the recent ALI-CLE Eminent Domain and Land Valuation Litigation Conference in Nashville, our colleagues, New York's Jon Houghton and Hawaii's Dave Day presented a very informative program on litigating regulatory takings cases. Jon is a property owner-side lawyer, while Dave is a Deputy Attorney General who represents the State of Hawaii in such cases. So it was a practical and balanced presentation.

Well, Jon and Dave are taking (pun intended) it to the next level. On Friday, April 24, 2020 at 2-3pm Eastern Time, they will be presenting "Strategies for Litigating Regulatory Taking Cases" in a webinar produced by ALI-CLE. This isn't simply a repeat of their Nashville program, but they will be exploring in more detail the practicalities of building and defending these difficult cases. 

Here's the description of the program:

The U.S. Constitution provides that private property may not be taken for public use without just compensation. When a government regulation substantially reduces or eliminates the value of property, a regulatory taking claim may be present. To successfully litigate one of these cases, it is essential to have a firm understanding of the different tests courts may apply to determine if a taking has occurred, how to compute fair compensation, and what evidence must be presented to support or defend both. If you are or may be involved in a regulatory taking case, set aside one hour to learn strategies from government and landowner attorneys, and benefit from the differing perspectives on litigating these types of claims from both sides of the aisle. 

 

This webcast will present a unique look behind the curtain at how the two opposing sides approach prosecuting and defending a regulatory taking claim. Discussions will address building a case, using experts, potential motions practice, and trial strategy. Specific topics include: 

• Litigating a Lucas claim
• Loss of economically beneficial uses
• Complete elimination of value
• Litigating a Penn Central claim
• Distinct investment-backed expectations and the economic impact of the regulation
• Character of the government action
• Background principles
• Establishing the Murr factors
• Just compensation and appraisals

More details on the program, including registration information here. 

Are we signing up and listening in? You bet. 

New Cert Petition: Are Patents "Property" Protected By The Takings Clause (Is Inter Partes Review A Taking)?

You recall that a short while ago, in Oil States Energy Servs., LLC v. Greene's Energy Group, LLC, 138 S. Ct. 1365 (2018), the Supreme Court held that patents are a form of "public property" (more like a government-created entitlement), and thus Congress can withhold the usual Article III tribunal and a jury when the validity of that property is challenged. The majority held that "inter partes review," under which the Patent and Trademark Office administratively reconsiders (and may cancel) previously-issued patents, does not run afoul of the Constitution because a patent is a "public right," and therefore more like a grant of a franchise than classic common law property.

Although the Court validated inter partes review, it left open the question of whether a patent owner who has her patent (in thousands of cases, these patents were issued before inter partes review was adopted) invalidated via administrative inter partes review would have a claim against the federal government for a taking, noting that patents may be "property for purposes of the Due Process Clause or the Takings Clause" (think rails-to-trails and Preseault). 

Well, here's that claim squarely presented in a case we've been following.

In Celgene Corp. v. Peter, 931 F.3d 1342 (Fed. Cir. 2019), the Federal Circuit concluded that the invalidation of an issued patent was not a taking. The (former) patent owner's cert petition asks this Question Presented:

When Congress passed the America Invents Act (AIA) in 2011, it created a new administrative proceeding called “inter partes review” for reviewing the validity of previously issued patents. See Leahy-Smith America Invents Act, Pub. L. No. 112-29, § 6, 125 Stat. 284, 299-313 (2011). In the same Act, Congress created the Patent Trial and Appeal Board, a new administrative tribunal for conducting inter partes review. Id. § 7. That Board, now numbering 270-plus “administrative patent judges,” was given the retroactive power to cancel patent rights conferred prior to enactment of the AIA, “even though that procedure was not in place when [those patents] issued.” Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365, 1379 (2018). In just its first four years, the Board invalidated more than 16,600 patent claims, most of which were likely issued before inter partes review was enacted.

This case presents a question expressly left open in Oil States:

Whether retroactive application of inter partes review to patents issued before passage of the America Invents Act violates the Takings Clause of the Fifth Amendment.

Lots to absorb here: takings, "vested rights" and reliance, there's even a quasi-Contracts Clause vibe. So we shall be following along. 

Petition for a Writ of Certiorari, Celgene Corp. v. Peter, No. 19-1074 (Feb. 26, 2020) 

Cases And Materials From Today's WM Law ACS Talk: "Pipelines at the Intersection of Environmental, Administrative, and Property Law: How Divergent Interests Joined Forces To Challenge Big Energy"

We just completed a fun hour-long talk with the students in the William and Mary Law School's American Constitution Society, the Native American Law Society, and the Society on Environmental and Animal Law about the various pipeline cases that are ongoing nationwide. (If our tech worked, we shall post the audio recording in a future post.)

The theme of our talk was that these cases are an excellent illustration of the need for lawyers to think outside their usual lanes when it comes to addressing and solving their clients' problems, because they present a smorgasbord of legal issues that range from property and eminent domain law, to administrative law, constitutional law, state and local government law, environmental law, federal courts, and civil procedure. 

The lawyers who are litigating these cases have done a good job of not being bound by convention and thinking creatively. They are thankfully analyzing the cases holistically. We used today's talk to emphasize to our young colleagues that despite taking law school courses segregated into discrete areas of law, practicing law and solving people's problems often requires you to wear multiple hats, as in these pipeline cases, and to think about cases in a more general way. 

Here are the links to the decisions we spoke about, and a couple others we could not fit in the time allotted:

• SCOTUS Transcript, U.S. Forest Svc. v. Cowpasture River Preservation Ass'n, No. 18-1584 (lawyers in an "enviro" case had to put on their Roman and English law property hats) 
• The "quick take by injunction" cases, in which the Supreme Court denied cert three times last Term.  Read about our amicus brief on the issue: "New SCOTUS Amici Brief (OCA, NJ Prop Owners, IJ, Cato): Quick-Take-By-Injunction Scheme Shows Complete Lack Of Respect For The Law"
• The Third Circuit case on the same issue, where one of the property owners (the State of New Jersey) actually won, by dusting off their Federal Courts and Con Law treatises, about the Eleventh Amendment. "What A Difference The Defendant Makes: The Federal Courts Finally Locate A Natural Gas Act Preliminary Injunction They Don't Like."
• FERC's pushback on the Eleventh Amendment issue on Chevron deference grounds (Admin Law alert!) "FERC Invokes Chevron Deference, Rules That Under NGA, Private Condemnors May Take State-Owned Land."
• Civil Procedure and Erie: "In Federal Natural Gas Act Takings By Private Condemnors, Just Compensation Is Determined By State Law (Incorporated Into Federal Common Law)."
• "Is Land Only Partly Owned By A Tribe Immune From Eminent Domain?"
• Admin Law Purgatory: "Waiting For FERC: DC Circuit OK's Pipeline Approval, Over Salty Concurring Opinion."

Thanks to the students for asking me to speak today. I had a great time. 

William & Mary Spring Course: "No Property in Man" - Slavery And Property Rights

This semester, we're teaching a short course at William and Mary Law School (and yes, thanks to a willing administration and student body, we will be back in the fall for the "big" Eminent Domain and Property Rights course). 

The title of the spring class is "No Property in Man: Slavery and Antislavery at the Nation's Founding," and the focus of the course is the book by Princeton historian Sean Wilentz from which we filched our title. Professor Wilentz's book is a recounting of the debates surrounding the ratification of the U.S. Constitution and the political atmosphere from the founding until the Civil War.

When we read it last year, it shed some light on the question that we've always had about the place of “property rights” arguments in current discourse. It is often suggested that property rights lack current legitimacy because—at least until the 13th Amendment—such arguments were advanced to support slavery. The book helped us look at that criticism afresh. Professor Wilentz examines the original Constitutional debates over property rights and slavery, and, ultimately, asks whether the Constitution as drafted was a pro- or anti- slavery document. The answer, it turns out, is much more complex than most modern views account for.

Our class is reading the book—and some supplemental materials, including relevant court opinions—and we're delving into the contemporary meaning of private property, and the meaning of property rights. 

We highly recommend it. It is relatively short, and a quick read. If, however, you don't have time to read the book, you can listen to Professor Wilentz speaking about it at the National Archives on the video below, or listen to an interview with him about the book on a recent podcast.  

Listen to "056 Slavery and Antislavery at the Nation's Founding with Sean Wilentz" on Spreaker.

Latest Ep. Eminent Domain Podcast: Carousel Farms Cert Petition, William & Mary Law

Here's the latest episode of Clint Schumacher's Eminent Domain Podcast. Featuring an interview with the Institute for Justice's Robert McNamara about an eminent domain case we've been following, Woodcrest Homes, Inc. v. Carousel Farms Metro. Dist., No. 19-607 (cert. petition filed  Nov. 7, 2019). Also included, a short talk with Delia Root, a William and Mary Law student who attended the Nashville ALI-CLE Eminent Domain conference. 

Check it out.