When we first read the U.S. Court of Appeals' opinion in PEM Entities, LLC v. County of Franklin, No. 21-1317 (Jan. 5, 2023), our reaction was one of skepticism. After all, at first blush, the court seemed to have concluded that in order to possess a property right protected by the Takings Clause, the owner needs first to prove it is a "vested" under state law.
That struck us as waaaay wrong. Yes, vesting under state law gets you a separate property interest, but failure to vest under state law does not mean you don't otherwise possess Takings Clause "private property." So what gives, Fourth Circuit?
Well, it turns out that despite us being ready to render a hearty j'accuse at the court, the outcome was a product of the claims made by the property owner (as they often are).
The opinion is short enough that it makes more sense for you to read the facts than for us to summarize them, but the real short story is that the case involves 150 acres of undeveloped land, and the owner asserted it was exempt from a county ordinance that severely regulated and restricted water and sewer connections for new developments. We're vested because we received county approvals back in 2005 in our preliminary subdivision plan, so we're not governed by the ordinance. When the county didn't agree, federal lawsuit followed. The complaint included a takings claim, which asserted the county had taken the vested property right of water and sewer service. The district court dismissed for lack of standing.
The Fourth Circuit agreed with the outcome (dismissal) but for a different reason: failure to state a claim. No property right = no taking. See slip op. at 5 ("We agree with the district court's bottom-line conclusion but get there via a somewhat different route."). When the property is framed as a vested right, then the issue is going to turn on state law; in this case North Carolina's law of vested rights. The Fourth Circuit concluded that under N.C. law, the owner here did not possess a vested right. The money it spent wasn't in reliance on a government permit, and the 2005 subdivision approval was preliminary not final. Interestingly, the opinion did not cite the most prominent recent N.C. decision on vesting.
But no matter. No vesting = no property. No property = no taking.
Just remember this: it's good for your takings claim when you have a vested right; if you have a rock-solid vested right under state law, chances are it is the foundation for a pretty robust takings claim. But lacking a vested right doesn't mean you don't own property. It may not mean you win, but at least you get past the preliminary hurdle that tripped up the owner here.
PEM Entities, LLC v. County of Franklin, No. 21-1317 (4th Cir. Jan. 5, 2023)
