If your first reaction to the Texas Court of Appeals (First District)'s decision in City of Houston v. The Commons of Lake Houston, Ltd., No. 01-21-00369-DV (Jan. 12, 2023) is scratching your head, then please come join us in bewilderment.
After all, the court held that a takings claim failed because the city is immune from inverse condemnation. Say what? We thought that the self-executing nature of the just compensation requirement of the U.S. Constitution (and the Texas Constitution) means that claims of sovereign immunity don't hold water in inverse cases.
The Commons wants to develop "The Crossing," one of those big master-planned communities. The usual development activities entailed: master plan, subdivision plats, city approvals for infrastructure, and even some actual site work. "By April 2018, The Commons had invested millions of dollars in planning and infrastructure for The Crossing." Slip op. at 2.
But in reaction to Hurricane Harvey, the city adopted an ordinance amending the city's approach to development in floodplains. And "[s]ignificant portions of The Crossing are located within the City's 100-year or 500-year floodplains." Id. The ordinance was based on FEMA maps, which are required to be used as a condition of obtaining flood insurance. The regs changed the way the city was going to regulate development in the predicted 100 and 50 year floodplains. Instead of requiring that residences in the 100-year floodplain build one foot above flood elevation (and having no requirements for the 500-year floodplain), the new ordinance "required that new residential structures
within the 500-year floodplain be built at least two feet above the flood elevation." Slip op. at 6.
The Commons asserted that applying the new ordinance to its already-underway project "would substantially damage the market value of the property and that the current development plan would be unfeasible." Slip op. at 7. State court inverse condemnation claim (under the Texas Constitution only) followed.
The city responded to the lawsuit by asserting the claims were not ripe because it had not reached a final decision denying the project (the new ordinance contains a variance mechanism), and when the trial court disagreed and held the case ripe, the city appealed and the court of appeals reversed: not ripe.
The Commons then went through the motions it needed to go through to confirm that yes, indeed, the city wasn't going to let The Crossing continue as originally ok'd. There was some of the usual "your application isn't complete" dance, after which The Commons submitted a new plan with a 72% reduction in developable land. "The City granted The Commons' amended plan." Slip op. at 10.
Next up, Round 2 of the lawsuit. Or more accurately, the Second Lawsuit. "The Commons alleged that the City's amended floodplain ordinance 'intentionally and unreasonably restricted The Commons' [] use and enjoyment of its property,'" and took it without compensation (asserting a Lucas-like and a Penn Central-like theory under Texas law). Id.
The city tried the ripeness gambit again, but its main attack was that the takings claim was "barred by governmental immunity because the 2018 Floodplain Ordinance does not give rise to a takings claim as a matter of law." Slip op. at 11. Jump ahead to page 18 of the slip opinion for the reasons why the Court of Appeals agreed.
The city argued that The Commons could not assert a takings claim because the amended ordinance merely complied with FEMA requirements, and "requiring compliance with local laws consistent with FEMA/NFIP requirements does not constitute a taking." Slip op. at 18. Moreover, the ordinance can't be a taking because it is a police power regulation, "adopted to accomplish legitimate goals, [which] are substantially related to the public's health, safety, or general welfare, and are reasonable." Id.
Hey, we were just "track[ing] the criteria of the NFIP," claimed the city. Id. The court agreed that the U.S. Court of Appeals had already determined that if the government is just following FEMA and NFIP requirements, then, well, it just can't be a taking. See Adolph v. Federal Emergency Management Agency, 854 F.2d 732 (5th
Cir. 1988). But when did compliance with other law constitute some kind of safe harbor from the Just Compensation requirement? The parties argued about the applicability of Adolph and the details (see slip op. at 20-22), but to us, the bigger issue is what does compliance have to do with it at all: either the city's regulations go "too far" and affect The Commons' use of its property, or they don't. Does it matter why the city adopted the new floodplain ordinance?
To us, if the city is required to conform to FEMA requirements that means only that the regulation is likely to pass due process and public use muster, and really has no bearing at all on the impact of the regulation on a property owner's rights.
As if the court concluding that Adolph controlled wasn't enough, starting on page 25 the opinion alternatively held that there could not be a taking because -- get this -- the new floodplain ordinance is a valid exercise of the city's police power.
Yes, healthsafetywelfaremorals. But as we noted above (and have noted here many many times), the validity vel non of a regulation has little to do with whether it works a regulatory taking. You'd think that a valid regulatory purpose was the prerequisite to a takings claim not the stop sign. Some courts get it right.
We ask you: go read pages 25-28 of the Texas court's opinion. Sounds a lot like a due process analysis, doesn't it? All about the purpose of the ordinance. How it is reasonably designed to protect the public. How it survives the rational basis test.
Our response (since this is a case from the South, we feel entitled): bless your heart.
In case we're not being clear: the entire regulatory takings doctrine would make no sense if all the government need do to avoid liability is show that the regulations claimed to effect a taking are valid exercises of the police power. Indeed, the takings doctrine pretty much presumes that the taking is the consequence of an otherwise valid exercise of power. To conclude, as the court did, that the regulation can't be a taking because it is a valid exercise of the power to protect the healthsafetywelfaremorals of the public simply gets you into a self-proving rule.
Come on, Texas! We thought you got this stuff better than that.
City of Houston v. The Commons of Lake Houston, Ltd., No. 01-21-00369-DV (Tex. Ct. App. Jan. 12, 2023)
