Check out the U.S. Court of Appeals for the Sixth Circuit's opinion in Harrison v. Montgomery County, No. 20-4-51 (May 11, 2021). It's short, readable. And, most importantly, involves a subject that's near and dear: takings, and the myriad potential traps that await an unsuspecting property owner making such a claim.
If you've ever asserted a takings claim, you know what we mean. The other side may argue you are too late (statute of limitations, for example), or too early (ripeness, in one form or another), or, remarkably, you are both too early and too late (yeah, that happens). Or simply that property questions are not worthy of the court (abstention). And these arguments are often not presented in a clear way -- more like "here's a bunch of reasons to throw this case out Judge, see which one you like" -- and navigating through them is often like dealing with the Gordian knot.
Harrison wasn't much different, but the court -- thankfully -- parsed it out.
There, the takings claim challenged Ohio's scheme that allows municipal boards of revision to foreclose tax delinquent properties then transfer them to a land bank instead of selling the properties. An owner may reclaim the property by squaring up the back taxes owed, or may challenge the process in the board of revision, or may appeal the board's decision in a state court.
The program differs from the usual process (foreclosure followed by sale at auction) by allowing municipalities to retain the entire value of the properties without regard to the amount of the tax delinquency. By contrast, in the usual process the government only has a right to the amount of the sales proceeds to cover the delinquent taxes plus fees, and if the proceeds exceed the amount owed in taxes, the government is required to provide the owner with the difference.
The land bank scheme was a taking the (former) owner argued because he had no way to get the surplus back, and he sued. The district court dismissed, concluding that the owner could have -- and therefore must have -- raised a takings defense in either the board of revision proceedings on on appeal in an Ohio state court. Because the owner did not raise a takings defense, and the board's decision is now final because the owner didn't appeal, he was precluded from raising takings in a subsequent complaint. Could have raised a takings claim in a now-final case but didn't = res judicata.
The Sixth Circuit disagreed, primarily because Harrison was not required to have raised a takings defense in the administrative process. See slip op. at 10 ("But whether Harrison could have raised her takings claim on appeal is a far cry from insisting she had to.").
Harrison conceivably might have raised a takings defense in the board (although as noted below, that would have been anticipatory pleading), or in the course of an appeal to Ohio's courts (presumably under the state's administrative procedures act). But he did neither. Before Knick, that might have been a problem, the Sixth Circuit concluded. But not after Knick:
Harrison had no obligation to invoke the federal takings clause before the Board of Revision to stop title transfer in the first place. In the State’s view, she should have answered the foreclosure complaint by arguing that the takings clause barred transferring title to the property. But, again, this approach shortchanges the reality that Williamson County’s first requirement—that there be a “final decision” effecting a taking—remains in place after Knick. The taking, so far as federal law is concerned, happened when the Board adjudicated the foreclosure of Harrison’s property through the land bank process, not before.Besides, how could Harrison have known to bring a takings-based defense in the first place? The Board did not find that her home’s value outstripped the total delinquent taxes until it decided the foreclosure action. The final decision came a year after the County treasurer brought proceedings and nearly ten months after Harrison answered the complaint. Consider, too, that in the foreclosure complaint, the County Treasurer asked that the property “be sold according to law” or that it be “conveyed to a township.” R.17-2 at 7. As the County concedes, its complaint did not establish that Harrison’s property would be transferred to a land bank. See Appellant’s Br. at 7. Had the County sold the property at a public auction, Ohio law would have permitted Harrison to recover any surplus. See O.R.C. § 5721.20. Until it became clear the State would seize Harrison’s surplus equity by transferring title—a decision reached only when the Board adjudicated the foreclosure—no taking occurred. See Williamson Cnty., 473 U.S. at 186.
Slip op. at 9.
In other words, any attempt by Harrison to assert a takings defense would likely have been challenged as not ripe by the Town for lack of a "final decision."
So yes, if you (1) can raise a ripe takings defense in admin proceedings, and (2) you choose to do so, and (3) you later fail to administratively appeal (administrative res judicata or full faith and credit), you may be precluded from asserting the same argument in a later complaint. See slip op. at 10 ("if a plaintiff chooses to pursue an administrative appeal, claim preclusion may bar a later attempt to seek the same relief"). But you don't have to raise the defense, especially when would have been too early to do so.
Before remanding the case to the district court to allow it to address the merits of Harrison's takings claim, the Sixth Circuit posed this missive, and gave the parties and the court below a hint on how the panel sees it:
That leaves the merits of Harrison’s federal takings claim, which implicates debates going back to the founding. On the one hand, in the words of Justice Chase, Harrison’s argument rests on the venerable proposition that “a law that takes property from A. and gives it to B . . . is against all reason and justice.” Calder v. Bull, 3 U.S. 386, 388 (1798). “If, on the other hand,” in the words of Justice Iredell, “the Legislature . . . shall pass a law, within the general scope of their constitutional power, the Court cannot pronounce it to be void, merely because it is, in their judgment, contrary to the principles of natural justice. The ideas of natural justice are regulated by no fixed standard: the ablest and the purest men have differed upon the subject; and all that the Court could properly say, in such an event, would be, that the Legislature (possessed of an equal right of opinion) had passed an act which, in the opinion of the judges, was inconsistent with the abstract principles of natural justice.” Id. at 399. As a court that specializes in sequels, not premiers, we think it prudent to allow the district court to consider the merits of this claim in the first instance. In doing so, it may wish to solicit historical evidence about the meaning of a taking in 1791 and 1868 with respect to this kind of government action. Should either party appeal the district court’s ruling, this panel stands ready to handle the appeal promptly.
Slip op. at 11-12.
This one isn't over, so we shall keep following along. Disclosure: my law firm colleagues at Pacific Legal Foundation filed an amicus brief in support of the property owner.
Harrison v. Montgomery County, No. 20-4051 (6th Cir. May 11, 2021)
