As most of you probably already know, there's a demon lurking out there in takings claims. Not of the Levon Helm-narrated The Right Stuff variety, but maybe just as deadly in litigation.
That's right, the too-early-or-too-late thing (or in some cases, the too-early-and-too-late argument). Getting caught between arguments that a takings claim isn't ripe, and arguments that it is too late (statutes of limitation).
The U.S. Court of Appeals for the Fourth Circuit was dealing with the latter (a statute of limitations) in Epcon Homestead, LLC v. Town of Chapel Hill, No. 21-1713 (Mar. 20, 2023), but there are lessons in the case for the other side of the issue, ripeness.
The facts are pretty straightforward. If you are going to build at least five single-family units, the town's zoning ordinance contains a requirement of "inclusionary zoning" (aka affordable housing; aka below-market units. Or if you don't want to build such housing, you can pony up some cash if the town agrees.
The owner of the property wanted to build 63 units so was subject to this requirement. It didn't want to build affordable units, so opted to pay cash (approximately $800k). The town agreed, and conditioned its issuance of a special use permit which would allow the project to proceed on the developer paying this in-lieu fee: no certificates of occupancy would issue until the fee was paid.
Then Epcon bought the property. It built the 63 homes, and sold them. It made the first installment payment for the in-lieu fee, and two years later paid the final payment. Voila, certificates of occupancy.
Next stop, state court where Epcon asserted the in-lieu fee was illegal under a variety of theories, including a section 1983 claim that the fee was an unconstitutional taking and violated Epcon's due process rights. The town removed the case to federal court and moved to dismiss the federal claims because the lawsuit was filed more than three years after the in-lieu condition was imposed (it had been four years).
As we all know, section 1983 does not have a built-in SOL, so the courts have held that the SOL of the closest state-law analogy applies. In North Carolina, that's three years. The District Court agreed with the town and dismissed. You snoozed, so you lose Epcon.
The Fourth Circuit agreed. We suggest you go read pages 9-11 of the opinion for the reasons why. The bottom line is that "there is no 'distinctive rule' in the Takings Clause context to apply for determining when the limitations period for a § 1983 claim begins to run[,]" and the usual ("standard") rule applies: a 1983 claim is ready when the plaintiffs knows or has reason to know that it is injured. Slip op. at 9. But when did the injury here occur?
Epcon argued it wasn't really injured until it finished paying. Not so, held the Fourth Circuit, it was injured when it learned of the special use permit condition after it purchased the property.
Here, Epcon alleges that it suffered an injury under § 1983 stemming from the application of an unlawful special use permit condition. As the district court concluded, Epcon first had reason to know of this injury no later than 2015, when it began purchasing the land subject to the special use permit. Thus, its claim that the permit condition violated its rights to just compensation and due process accrued at that point and extinguished three years later. By the time Epcon filed suit in October 2019, the sun had set on its federal claims.
Slip op. at 9 (footnote omitted).
The court rejected Epcon's argument that the injury occurred when it was compelled to actually pay the fees, and that happened when it went to the town for the certificates of occupancy. And this isn't a regulatory takings claim, Epson asserted. If it were, the SOL clock might have started earlier. No, this is an unconstitutional conditions claim, and that's different. Slip op. at 10. We didn't lose our property right until we paid, it argued.
We disagree, the court held. "The distinction Epcon attempts to draw between exactions and regulatory takings proves little more than that the government need not physically appropriate property to enact a taking." Slip op. at 10. [Barista's note: "enact" a taking?]
And here's your money quote: "Once the government conditions the grant of a land-use permit on the surrender of a landowner’s right to just compensation, a Takings Clause claim becomes cognizable." Slip op. at 10. In other words, once that happens, the lawsuit window is open and the SOL clock is ticking. In other words, the claim is ripe.
Remember that one the next time the government argues an exaction case isn't ripe because the action being challenged as unconstitutional (the government's demand, and the subsequent owner payment) isn't complete.
Epcon Homestead, LLC v. Town of Chapel Hill, No. 21-1713 (4th Cir. Mar. 20, 2023)
