Check out the U.S. Court of Appeals' opinion in Andrews v. Mentor, No. 20-4030 (Aug. 25, 2021).
Property owners sought rezoning of their land from R-4 to "Village Green - RVG," a higher density zone, so that the owners could build single-family homes. Under R-4, the maximum number of homes was 13 and had to leave 9 acres open. The city's comprehensive plan expresses a preference for Village Green zoning.
But the city denied the application,despite having approved 9 other applications since 2004, and the owners' application being "materially identical to a plan the City approved for rezoning and development in 2017." Slip op. at 3.
So off to federal court they went, filing (Lucas and Penn Central) takings, due process, and class-of-one equal protection claims. [Disclosure: the property owners are represented by my law firm colleague Dave Breemer; we didn't have anything to do with this case.] The district court granted the city judgment on the pleadings, mainly because it concluded that the owners did not have a property interest in the land as rezoned. In short, the change to Village Green zoning was merely a discretionary benefit. So takings and due process kaput. Same with the equal protection claim, which failed because the owners could not point to a fundamental right being burdened.
The Sixth Circuit reversed, remanding for more on both the takings and the equal protection claims. It first concluded that the owners own private property, rejecting the district court's employment of due process precedent holding that there's no property interest when the government has discretion to grant or deny some benefit. That's due process property, not takings property:
But the district court failed to cite a single case where a court utilized the “discretionary benefit” theory from the substantive-due-process context to determine whether a takings plaintiff held the requisite property interest to support their claim. The City does no better on appeal, citing exclusively to cases in the due-process context without any explanation for why we should import that caselaw wholesale into the takings context. See Appellee Br. at 10–14. In contrast, the Trust has offered persuasive arguments for why we cannot rely on the “discretionary benefit” theory of property rights here, and cites opinions suggesting that the property rights protected by takings law are broader (or at least not coextensive with) the property rights protected by due process.As the Trust points out, courts routinely consider takings claims like the Trust’s that arise from a local authority’s denial of rezoning, variances, or land-use permits.
Slip op. at 6.
If due process "government benefit" property isn't takings clause property, then what is? The court didn't wholly accept the owners' argument that, well, ownership of the land is all the property interest that need be alleged, instead concluding "the inquiry is slightly more complicated than the Trust lets on." Slip op. at 7. Relying on Lucas and Palazzolo, the court concluded:
The upshot of Lucas, for our purposes, is that the deprivation of the right to use property for a particular purpose is not a “taking” if that right was never a part of the titleholder’s bundle of rights to begin with. 505 U.S. at 1027. And Palazzolo teaches that although a land-use regulation may restrict the titleholder’s use of their property, even land-use regulations that predate the acquisition of title do not automatically remove the right to use the property for a given purpose from the bundle of rights held by the titleholder. 533 U.S. at 627. Together, the cases call for a searching inquiry into “background principles of the State’s law of property and nuisance already place[d] on land ownership,” Lucas, 505 U.S. at 1029, and “objective factors, such as the nature of the land use proscribed,” Palazzolo, 533 U.S. at 630, to determine whether the plaintiff actually held the property interest that they claim to have been taken. See also Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2076, 2079 (2021). The cases make clear that “[a] law does not become a background principle . . . by enactment itself,” but they do not rule out the possibility that legislative enactments such as zoning ordinances can achieve the status of a “background principle of state law” that might deprive the titleholder of their claimed use interest.
Slip op. at 11.
What this means to us is that on remand, the question is whether the ability to use and develop your land is one of those property rights "sticks." We think there's a good chance of that.
Not content with stopping there, the court -- somewhat oddly, in our view -- weighed in with some deep thoughts on the merits, even though it proclaimed that it wasn't putting its thumb on the scale. The opinion noted (twice) that the court is "skeptical" of the merits of the takings claims, an argument not raised by the city. See slip op. at 12. What was that all about?
And let's not forget the equal protection claim. There, the Sixth Circuit concluded that the property owners pleaded a viable class-of-one claim, holding that the complaint alleged that the plaintiffs' property and the compararable property (the one granted a permit in 2017). As we know, class-of-one arguments in these type of cases are governed by the "no rational basis" standard. The court held that the plaintiffs' allegations of disparate treatment don't exist in a vacuum, but that the city has the burden of pointing out the conceivable justifications for approving one application but denying the other. Slip op. at 18 ("While it is true that under City of Detroit the City need not “produce evidence to sustain the rationality” of its decision, 841 F.3d at 701, it does not follow that the City can obtain judgment in its favor without so much as identifying a single rational explanation for its disparate treatment of similarly situated properties.").
The court viewed this through a lens that was as much practical, as legal:
It cannot be that the Trust must concoct and rebut a potentially valid rationale for the City’s action in order to survive the pleadings stage where the City itself has failed to do so; otherwise, the Trust’s complaint would fail to state a claim even if it proves to be one of those few-and-far-between cases where the defendant’s conduct truly lacks a rational basis.
Slip op. at 18.
All-in-all, a good decision. Worth reading and incorporating into your arsenal.
Andrews v. City of Mentor, No. 20-4030 (6th Cir. Aug. 25, 2021)
