As we surmised when the Supreme Court in Knick reopened the door to the federal courthouse for federal takings claims, those of us who do this stuff would be wise to dust off the Federal Courts treatises that we'd put on the high shelf on the bookshelf since Williamson County.
The Sixth Circuit's opinion in CHKRS, LLC v. City of Dublin, No. 20-3435 (Jan. 4, 2021) focused on the difference between whether the plaintiff alleged Article III standing, and whether it alleged a property interest protected by the Takings Clause. CHKRS's federal complaint claimed the city violated the Takings Clause "when it tore out a property’s driveway and replaced it with a defective driveway without paying compensation." Slip op. at 2. At the time of the city's conduct, CHKRS possessed a lease in the land, and by the time of the federal lawsuit, it had exercised its option and owned the fee.
Earlier, the city had exercised its quick-take authority, and started construction. An Ohio state court concluded in the eminent domain case that the the prior owner, not CHKRS, was entitled to compensation because at the time of the taking, CHKRS had not fully closed on an option to purchase.
CHKRS's federal complaint alleged that after the Ohio trial court's final judgment, the city reentered the property and tore out a driveway and constructed a new one. The district court dismissed the complaint for lack of Article III standing, concluding that "the state courts had already held that CHKRS lacked a protectable interest in the property and that the doctrine of issue preclusion barred CHKRS from relitigating this issue." Slip op. at 5. No property interest, no standing.
The Sixth Circuit rejected this reasoning:
The district court made two mistakes in concluding that CHKRS lacked Article III standing to assert its takings claim. It mistook the substantive requirements of the Fifth Amendment’s Takings Clause for the jurisdictional requirements of Article III. And it mistook the state courts’ holding on one issue (that CHKRS, as lessee, could not seek already-disbursed funds) as resolving the different issue in this case (whether CHKRS, as owner, may seek yet-to-be-disbursed funds).
Slip op. at 5.
Was it plausible that CHKRS was injured if the allegations in the complaint were true? Yes, "CHKRS alleges that Dublin’s agents trespassed onto property that it was then leasing and now owns, that these agents destroyed this property’s driveway, and that they replaced it with a defective driveway months later." Slip op. at 6. If true, this is a personal and concrete injury.
And here's the good stuff: the Sixth Circuit concluded that where the district court went wrong was "conflating the merits of CHKRS's takings claim with CHKRS's standing to bring it." Slip op. at 7. There's a difference between failing to allege that you have an interest that has been injured, and a ruling on the merits that this interest isn't good:
The district court nevertheless held that CHKRS did not adequately allege the last element: the invasion of a legally protected interest....But that is not the test. Instead, once the plaintiff has alleged a “colorable” or “arguable” claim that the defendant has invaded a legally protected interest, the plaintiff has met this element of an Article III injury.
Slip op. at 7. Bottom line: plaintiff's standing upheld.
But what about the "property" question ... wasn't that barred by res judicata or full faith and credit? No, the Sixth Circuit concluded, the issue was not actually litigated in the state eminent domain case, because the two litigations involved separate questions, and the prior suit did not address, much less resolve, whether compensation was owed for the actions alleged in CHKRS's federal complaint to be a taking: the removal and replacement of the driveway. "The district court," the Sixth Circuit concluded,"reached a contrary result by defining the 'issue' at too high a level of generality: 'Whether [CHKRS] has a compensable property interest in the Lease.' This framing overlooks the changed facts across the two cases." Slip op. at 10.
Back down to the district court for more.
This decision aptly highlights the oft-confused distinction between Article III case-and-controversy standing, and the need to allege and prove a compensable property right in takings cases. You really should read this one (even if it means dusting off your Federal Courts hornbook).
CHKRS, LLC v. City of Dublin, No. 20-3435 (6th Cir. Jan. 4, 2021)