If you were looking for deep clarity from the Justices about land use law and whether a legislature imposing monetary conditions on property development always gets the free judicial pass of rational basis review in this morning's oral arguments in Sheetz v. County of El Dorado, you may not discover a lot of predictive insight when you listen to the argument recording or read the transcript.
But it is definitely worth your time to listen or read. Yes, there were some head-scratching moments as several of the Justices struggled with how to differentiate between monetary land use exactions that are subject to the nexus and rough proportionality standards, and other government requirements to pay money such as user fees, tolls, and property taxes that presumably are exempt. But there were also moments of clarity. Important moments.
In other words, there's gold in them thar transcript hills if you look closely. (Sorry, we had to get that out of the way.)
[Disclosure: this is one of ours, so we're not going to get into it too deeply.]
We think the outcome may turn on the Question Presented, and how "tightly" a majority of the Justices want to answer that question, and go no further. As our preview of the case noted, here's the Question Presented:
The question presented is whether a permit exaction is exempt from the unconstitutional-conditions doctrine as applied in Nollan and Dolan simply because it is authorized by legislation
Read that closely. It isn't asking whether the County's traffic impact fee violates the nexus and rough proportionality standards, but whether a property owner can even ask the question. Remember that this case comes up after the trial court sustained the County's demurrer without leave to amend (for you non-Californians, read this as a "granted the County's 12(b)(6) motion to dismiss"). In other words, the trial court held that an exaction is categorically exempt from the Nollan and Dolan standards if the exaction is authorized by legislation (in other words, is not imposed ad hoc via an administrative proceeding on a discretionary permit).
You can never even ask the nexus and proportionality questions, property owner, much less have a court answer it.
In our listen, while there was a lot of noise and confusion in today's argument, there was also a lot of focus on that narrow question. Which augurs well, we think. If the only question the Court needs to resolve is whether legislatively-adopted exactions are 100% outside the reach of Nollan and Dolan 100% of the time, then perhaps such a decision won't be too hard to get to a majority or more. And if you are searching the transcript for today's "money quotes" (or maybe "money colloquies") to back up that thought, we suggest you couldn't do better than these.
First, Justice Thomas laid the foundation. As he put it in the first question out of the gate to Paul Beard, arguing for Mr. Sheetz:
JUSTICE THOMAS: Do we have to decide any more than whether Nollan/Dolan scrutiny applies to -- can apply here to legislative exaction?MR. BEARD: Justice Thomas, the Court is -- is able to just answer the question presented, which is simply whether there's some kind of a legislative generally applicable exception to Nollan and Dolan, yes.JUSTICE THOMAS: If -- if the -- if - if Respondent concedes that, is there anything else we should do?MR. BEARD: There's nothing for the Court to do. That is the question presented.
Tr. at 5.
Later, Justice Kagan "circled back" and seemingly closed the deal during her questioning of the County's advocate. She stated there is "radical agreement" on whether an exaction should "get a pass" just because it is generally-applicable (the Question Presented), concluding that it doesn't. The County's lawyer agreed without reservation:
JUSTICE KAGAN: So, Ms. McGrath, I want to follow up on Justice Gorsuch's idea of radical agreement. And I -- I -- I want to give you -- suggest what it is that there is radical agreement on and what it is that there is not radical agreement on, and see if you agree with me.So what there is radical agreement on is that you don't get a pass from unconstitutional conditions analysis just because you've passed generally applicable legislation. And that's, of course, true in unconstitutional conditions analysis generally, and so too it's true of unconstitutional conditions analysis in the property area. If there has been a taking and that taking is being leveraged in the permitting process by generally applicable legislation, there's no pass just because that's the mechanism that's being used.So first let me ask you if you agree with that?MS. McGRATH: I agree.
Tr. at 73-74.
If that's it, then game over right? Question Presented has been answered, and the follow-up questions are just gravy for remand.
Justice Kagan continued, pointing out that there might be a dispute over whether there could be a taking if the County denied a development permit (because the owner refused to voluntarily pay the exaction):
JUSTICE KAGAN: Okay. Here are two things it seems to me that the parties fundamentally disagree on, which is probably - one of these two things is going to answer this dispute in the end, but there are two things. Is -- number one, was -- is there a taking at all? Because if this is just something like a tax, unconstitutional conditions analysis never comes into play, and you say it never comes into play, and Mr. Beard says it absolutely comes into play. So that's one question that you're very much at odds on. Is that correct?MS. McGRATH: That's correct.JUSTICE KAGAN: The second question that you're very much at odds on is, even if you assume that there has been some kind of taking here and that unconstitutional analysis does come into play -- and by that, I mean what we have in past cases called Nollan/Dolan analysis, right?
Tr. at 74. That dispute doesn't seem to stand in the way of a narrow ruling here because this is up on a demurrer and the complaint adequately and plausibly pleaded that denial of the permit would be a taking. You don't have to figure out whether there's been a taking at this stage, only whether Sheetz has been required to choose between his plausibly-pleaded right to just compensation for the taking of his right to use and develop his land, and his plausibly-pleaded right to keep his money.
Finally, Justice Kagan suggested that there is a dispute over whether legislative exactions might be subject to some sort of different nexus and proportionality standards than applied to parcel-specific conditions:
Even if you assume that that unconstitutional analysis comes into play, it might look very different from what Nollan/Dolan analysis looks like just because Nollan and Dolan were focused on individual parcels, individual property owners, and this is a general scheme, and it would be very difficult to apply Nollan and Dolan analysis literally to a general scheme.So that there might be ways in which Nollan/Dolan analysis becomes something that, you know, really looks different in application. And I think Mr. Beard says no, not really, and you say, yes, really. Is that correct?MS. McGRATH: That's also correct.JUSTICE KAGAN: So that's the agreement. Those are the two big disagreements?MS. McGRATH: I think that is correct, Justice Kagan.JUSTICE KAGAN: Okay. I just wanted to make that clear.
Tr. at 75.
Again, that should not stand in the way of a decision here on the Question Presented (are legislative exactions categorically exempt?). The Court may hold that no, legislative exactions are not 100% exempt, but remand for more on how that test is to be applied here (something on which there's no actual, developed factual record in case -- again, blame the demurrer).
A couple of final observations:
- We didn't hear any of the Justices take issue with calling the County's demand an "exaction." As you know, some lower courts fixate on semantics (is the challenged requirement an "exaction" or is it a "zoning ordinance?"). No SCOTUS Justice today seems similarly hung up on wordplay. They all seemed to look at what the ordinance does, not what the County called it.
- There seemed to be a lot of confusion wrought by the way the Court has framed the question as one of "takings" here and in past decisions. We think the more helpful view is that of "unconstitutional conditions," and not takings. Yes, one of the rights that Sheetz is being required to choose between is his right to compensation, but at heart this seems more like a question of "your money or your rights" than one about whether there's been a taking by overregulation.
Now we wait. What's your prediction?
Transcript, Sheetz v. County of El Dorado, No. 22-1074 (U.S. Jan. 9, 2024)
