More good takings news, hot off the press.
Before Cedar Point came down last week, we were all set to let you know about the Eleventh Circuit's opinion in South Grande View Dev. Co., Inc. v City of Alabaster, No. 18-14044 (June 21, 2021), in which the court affirmed a jury verdict that the city's reduction in the developable density on residential-zoned parcel (from R-7 and R-4) to R-2) was a Penn Central regulatory taking.
The city appealed on an evidentiary issue, arguing that the jury should not have heard evidence of its reasons for downzoning the property, which were not relevant to the takings question and only went to whether the government acted arbitrarily and capriciously (a due process inquiry). The city also raised a ripeness question: the owner had not sought a variance from application of the new zoning, and indeed had never asked the city to apply the R-2 zoning to the property.
The Eleventh Circuit rejected both arguments.
First, the city had made a final decision applying the R-2 zoning to the property:
- "[O]ur binding precedent holds that a zoning ordinance can itself be a final decision on the merits." Slip op. at 11.
- The rezoning only applied to South Grande's property, and no other. Unlike the rezoning in Williamson County, which applied to a wide swath of properties, this one was specifically targeted at South Grande. Thus, "there was no ambiguity as to how a general plan would be applied to a specific project—the zoning ordinance itself was the City’s final decision on the matter." Slip op. at 14.
Second, the court agreed that evidence of the city's motive for the downzoning was not relevant to the takings issue, but that the jury hearing this irrelevant evidence was harmless error. The owner introduced evidence of the city's motive, arguing it was part of the "character of the government action" Penn Central factor. Slip op. at 21. But Lingle, the court concluded, made that evidence only relevant to a due process inquiry and not to takings. See slip op. at 22-23 ("The Lingle court explicitly rejected the argument that the Penn Central factor of the “character of government action” addressed the purpose of the regulation[.]"). But no harm, no foul, and this was "not reversible error." Id. at 25-26.
Verdict affirmed. The reason the error was harmless (and here's the really important part of the opinion, in our opinion), was because "substantial, permissible evidence produced at trial supports the jury's [Penn Central] verdict." Slip op. at 26.
That evidence:
- Developing the parcels for just residences per acre was not economically feasible.
- The owner spent a "significant sum of money preparing the property for R-4 homes." Slip op. at 24.
- Neither the parties nor the court looked at whether the owner's rights had "vested" under Alabama law. In other words, Penn Central does not turn on a race to vest.
- The owner also testified that it "did not finish" developing the properties because of a market downturn "and they were going to wait until after the recession to continue developing." Slip op. at 8.
- The owner's purchase price and the amount later spent to develop the property counted towards its investment-backed expectations. Slip op. at 8.
- The before value of the property: $3.52 million. The after value: $500k. An 86% decline due to the regulation. Whether this qualified as a substantial loss was left to the jury, and the court did not apply the (wrong) rule that courts often do and conclude that although 86% is significant, it isn't enough.
In closing, the court noted that the city didn't put on contrary evidence of value, and that it only challenged the owner's valuation evidence "for the first time on appeal." Thus, the city had forfeited those arguments and the court did not consider them.
Definitely check out this opinion and the facts. There's some gems there.
South Grande View Dev. Co., Inc. v. City of Alabaster, No. 18-14044 (11th Cir. June 21, 2021)
