Surf And Turf (Our Beef With The Virginia Oyster Takings Case): Although Leases Are "Property," They Don't Confer A Right To Exclude Government Sewage

Often, the dispositive question in many takings cases tuns on whether the plaintiff owns "property," and if so, what rights does that recognize. If you define the property in such a way that ipse dixit excludes the "stick" the owner claims was taken, then the answer is always going to be no property, no taking. To us, this is largely a question of definitions and policy: is this interest, in a judge's view, worthy of constitutional protection?

And that's the wrong approach, because this analysis often seems more like a semantic exercise, undertaken by the wrong party. Instead of concluding, for example, that the property in a case is a lease (a recognized property interest) and then going on to ask whether there's been a sufficient interference with an owner's distinct investment-backed expectations, the question shifts from what we think is the proper focus (a fact question of the impact on an owner's use and actual expectations decided by a jury) to a policy question where the court decides what does and what does not merit protection as a matter of law. Not entirely satisfactory in our view, and leads to some analytical needles being threaded that just are not clear at all. 

Here's the latest example, in which the Virginia Supreme Court opinion has just dropped in a case we've been following since its inception, Johnson v. City of Suffolk. This is what we call the "oyster takings" case in which Nansemond River oystermen claim that their property was taken when the City of Suffolk and the Sanitation District dumped sewage into the river and declared a "condemnation zone" (i.e., no oyster harvesting).

Short story: the court concluded that the leases of Commonwealth-owned bottomlands in the Nansemond River did not confer a property interest. Or at least not a property interest worthy of constitutional protection. Thus, no takings claim when Suffolk and the Sanitation District dumped sewage into the river and pretty plainly interfered with some kind of right the plaintiffs owned in the lease. Just not enough of a right to require compensation.  

This is a case at the intersection of property and takings law, and environmental protection. And the public trust concept of jus publicum. The oystermen own a lease from the State of Virginia for the riverbed, which among other things, allows them to harvest some of the oysters that Virginia is so well known for. But they were forced to bring an inverse condemnation claim in state court, asserting that the City's dumping of wastewater in the river -- and prohibiting the harvesting of oysters during those times -- was a taking under the Virginia Constitution's taking or damaging clause (article I, § 11).

The trial court sustained the City's demurrer, accepting the City's argument that it has the right to pollute the river, based in part on the U.S. Supreme Court's decision in Darling v. City of Newport News, 249 U.S. 540 (1919). Put another way, the oystermen's bundle of property rights do not include the "stick" of either a clean environment, or harvestable oysters. The trial court acknowledged that the oystermen's lease is property, but concluded that the city and sanitation district possess a superior right to pollute the river with sewage. So the oystermen asked the Virginia Supreme Court for discretionary review (as did the municipalities, which cross-appealed).

The court heard arguments only a few weeks ago, and even though the Justices acknowledged that "[e]nvironmental protections certainly have changed a great deal in the years since we decided Darling[,] the court concluded that enlarging the scope of environmental protection did not expand the scope of the property rights the oystermen obtained. Slip op. at 8. We're not quite sure what to make of this, except to note that the court in essence concluded that all of the environmental protections and regulations are only limitations on government power and private rights, but don't create any rights that can be enforced outside of the regulatory context. In the words of Kaiser Aetna, these governmental actions did not "lead to the fruition of a number of expectancies embodied in the concept of 'property' expectancies that, if sufficiently important, the Government must condemn and pay for before it takes over the management of the landowner's property."

The Virginia court examined what rights the leases recognized:

The statutes and case law governing oyster leases lead to several conclusions. First, the petitioners’ leases confer on them the right to physically occupy state-owned bottomland and to exclude others. Code § 28.2-618; Power, 66 Va. (25 Gratt.) at 789. The respondents did not interfere with the petitioners’ rights to be on the leased lands. Second, the leases confer on the The statutes and case law governing oyster leases lead to several conclusions. First, the petitioners’ leases confer on them the right to physically occupy state-owned bottomland and to exclude others. Code § 28.2-618; Power, 66 Va. (25 Gratt.) at 789. The respondents did not interfere with the petitioners’ rights to be on the leased lands. Second, the leases confer on the petitioners the right to physical possession and harvesting of the oysters raised on the leased grounds, to the exclusion of other possible claimants. See Town of Cape Charles v. Ballard Bros. Fish Co., Inc., 200 Va. 667, 673 (1959). The respondents did not remove or physically destroy the oysters themselves. Third, there is a distinction between the water bottoms and the water itself. The petitioners do not own or control the waters that pass over the leased oyster grounds. Fourth, nothing under the governing statutes and case law or the leases themselves confers or presupposes a right to grow oysters in conditions free of pollution or guarantee a lessee a commercially viable oyster lease. To the contrary, the governing statutes contemplate the condemnation of polluted growing areas and oysters when sanitary conditions render the oysters unhealthy for human consumption. See Code §§ 28.2-804 through -807. The statutes further contemplate an abatement of rent if oyster grounds become polluted, Code § 28.2-627, and allow for the possibility of harvesting and “relaying” of oysters to cleaner grounds, see Code §§ 28.2-800, -811.

Slip op. at 8-9. And there's the problem: to us, these are questions that juries should be reviewing as factual matters, not policy questions by judges (or Justices). The takings inquiry, we've been repeatedly told, is a factual inquiry that looks at the character of the government action (physical invasion or not), and the extent of the interference with "distinct" (i.e., subjective) investment-backed expectations. But like the Virginia court here, many courts routinely treat these as questions of law, to be decided on the predicate "property or not" question.

And thus, we get analysis like this: the court also distinguished the cases on which the oystermen relied for their takings arguments, noting that while these cases concluded that a taking had occurred, the nature of the property right at stake was different:

The petitioners rely on a number of cases in support of their position: AGCS Marine Ins. Co. v. Arlington Cty., 293 Va. 469 (2017); Livingston, 284 Va. 140; and Hampton Rds. Sanitation Dist. v. McDonnell, 234 Va. 235 (1987). In AGCS, the insurer for a grocery store sought to recoup insurance payments made when sewage overflows damaged the inventory of the grocery store. 293 Va. at 473-74. We concluded that such overflows constituted a public use, the personal property that was damaged as a result was recoverable, and the trial court erred in declining to grant the insurer leave to amend. Id. at 486-96. In Livingston, the Virginia Department of Transportation failed to maintain a relocated stream and instead “elected to use” nearby residential developments as “makeshift storage sites for excess stormwater.” 284 Va. at 159. We concluded that the improvements at issue constituted a public use, and that the damage to the plaintiff’s personal property was compensable. Id. at 160. Finally, in McDonnell, we rebuffed a number of challenges to an award for damage to private property when a bypass valve, operating as designed, poured excess sewage onto an adjacent landowner’s property. 234 Va. at 241-42. Arguments advanced by the Commonwealth included a claim that sovereign immunity barred recovery, that the statute of limitations applied, and that the plaintiff had failed to prove his damages with sufficient particularity. Id. at 238-42. None of those cases involved an oyster lease under Code § 28.2-603 and the limited rights conferred by such a lease. In addition, the landowners in those cases had a right to exclude floodwaters or sewage from their property. The lessees here have no right to control the water that flows over their oysters. The nature of the property right at stake here differs from the property right at issue in Livingston, AGCS, and McDonnell, and it compels a different outcome.

Slip op. at 10. In other words, if you are a Harris Teeter grocery store and your oysters get ruined because government floodwaters (AGCS), you may pursue a takings claim, but if your oysters are in a river and are ruined by government sewage, tough s**t.

We'll conclude by circling back to our original thought that the property analysis often gets us to analytical needles we can't mentally thread. Here's an example. The court concluded by noting that "[t]he petitioners also rely on Ballard Bros. Fish Co., 200 Va. 667. In that case, we held that the physical destruction or physical removal of the oysters due to a dredging operation did invade a property right conferred by a state lease, and was, therefore, compensable. Id. at 673. Lessees have a right to prevent others from physically taking or destroying their oysters or oyster beds. The right to avoid physical confiscation or destruction of the oysters, however, differs from an asserted right to raise them in favorable environmental conditions." Slip op. at 11.

We ask: were not the oysters here physically destroyed no less than the food destroyed in AGCS's grocery store? Yes, in both cases, the product still existed after the inundation, but they were economically and otherwise useless. 

We're not suggesting that the oystermen here should have been able to obtain compensation, merely that a jury -- not a judge or a panel of Justices -- should have made the call.

Johnson v. City of Suffolk, No. 191563 (Va. Dec. 10, 2020)