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Blinded Me With Science! No Taking For Selective Co-19 Business Shut-Down, But Might Violate North Carolina's Fruits Of Labor Clause

Check out the North Carolina Court of Appeals opinion in North Carolina Bar and Tavern Ass'n v. Cooper, No. COA22-725 (Apr. 16, 2024).

We're not going to go into great detail, mostly because this one tracks the most common judicial approach to takings challenges to business shut-down orders during the Co-19 period. The court concluded that the State's selective shut down of certain bars but not others was neither an "emergency commandeering" under North Carolina's emergency response statute, not a physical, Lucas, or Penn Central taking. Read the opinion for the reasons why.

But there is more than one way to skin that cat. The court held that the trial court should not have rejected the plaintiff's motion for summary judgment on its North Carolina's Fruits of Labor Clause claim.

That provision states:

We hold it to be self-evident that all persons are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty, the enjoyment of the fruits of their own labor, and the pursuit of happiness.

N.C. Const. art. I, § 1.

The court held that the State's invocation that its treatment of the plaintiffs was backed by "data and science" was not enough. A government action violates the Fruits of Labor Clause if it bears "no rational, real, or substantial relation to the public health, morals, order, or safety, or the general welfare." Slip op. at 24.

In other words, "if the restrictions are arbitrary and unreasonable." Id. But unlike those situations where a court is reviewing governmental action under the rational basis test where the mere invocation of "science" is usually enough to satisfy the test, under the Fruits of Labor Clause that science has to be kinda good science. See slip op. at 27 ("Although we view the evidence in the light most favorable to Defendant for purposes of summary judgment, we must also review the scientific evidence that was before the trial court, which acts in its capacity as the gatekeeper of expert testimony, to determine whether it is sufficiently reliable.").

Check it out.

North Carolina Bar and Tavern Ass'n v. Cooper, No. COA22-725 (N.C. App. Apr. 16, 2024)

CA2: If You Want To Be A Land Use Player, You Gotta Play (And That Means Keep On Trying - Without Hitching Rides)!

This is one we've been meaning to post for a while, but something else always seemed to intervene.

In BMG Monroe I, LLC v. Village of Monroe, No. 22-1047 (Feb. 16, 2024), the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a statutory and constitutional challenge to the Village's .

The court did so on the basis of the surviving part of the Williamson County ripeness requirement, that the government has taken a definitive position on whether it will allow some development of the plaintiff's land under the challenged regulations.

BMG wanted to build 181 homes, so it developed plans for a mix of uses across several parcels, and development of related infrastructure like roads and a community center. This "did not conform to the zoning codes of the Village and Town." Slip op. at 4. The Village and Town were ok with the proposal, however, provided BMG "satisfied certain conditions" such as the look and feel of the buildings, and other architectural style points. Slip op. at 6. Conditional use approvals followed. Eventually, all looked good and the Village and Town granted conditional final approvals.

But when BMG submitted applications for the building permits on several of its lots, the building inspector balked, asserting the architecture and design were off and not what the conditions required. Permits denied. BMG chased administrative appeals to the Zoning Board of Appeals for some -- but not all -- of the lots. The ZBA eventually denied the filed appeals, concluding that indeed, the construction plans were not in conformity with the conditions on those lots.

Having exhausted its administrative remedies on some but not all of the lots, BMG sued. There wasn't a takings claim (BMG's claims included section 1983, Fair Housing Act, and equal protection), but the district court nonetheless applied Williamson County to dismiss the complaint as unripe.

The Second Circuit affirmed. BMG had not received the Village's "final decision" denying development. But wait, you say...I thought that you said that BMG lost the ZBA appeal? That's usually enough, isn't it? Yes, it did do that, but it didn't chase an appeal on all of the lots. Thus, "BMG's failure to obtain a decision from the ZBA 'leaves undetermined the permitted use of the property in question[.]'" Slip op. at 12 (citations omitted). 

BMG responded: the reason we didn't chase a ZBA appeal on those other lots was that doing so would have been futile. And we did get final approvals and ZBA denials on the other parcels in the group, so isn't that enough? No, according to the Second Circuit, rejecting the argument that "[i]n essence, BMG argues that its otherwise-unripe claims relating to Lots 1, 2, and 3 can hitch a ride on the ripeness of its claims relating to Lots 45 and 46." Slip op. at 13. 

And it didn't matter anyway because even those lots on which BMG chased and lost its ZBA appeals are not ripe because (you guessed it), BMG didn't also seek a variance. Slip op. at 14. Apparently, the Second Circuit sees a variance as some kind of super appeal after ZBA denial. And didn't BMG already get a "variance" (also known as a conditional  use permit)?

But that wasn't enough:

We conclude that after the ZBA affirmed the Village Planning Board’s finding that BMG’s construction plans did not comply with previously agreed-upon conditions, BMG was then required to “submit[] at least one meaningful application for a variance” to the Village Planning Board or ZBA to see whether it could apply clustering techniques in the multi-family district while using the new rear elevation, roof pitch, and siding materials.5 See id. Put simply, the SEQRA Findings provided the terms BMG had to abide by in order to depart from the normally applicable land-use restrictions in the Town and Village. As a result, if BMG wished to alter those conditions, it first had to seek another variance before proceeding to federal court. Cf. Southview Assocs., Ltd. v. Bongartz, 980 F.2d 84, 98–99 (2d Cir. 1992) (holding that, even where “the Board ha[d] denied[] . . . one application,” developer still faced burden of establishing that “submission of another application would be futile” (emphasis added)).

Slip op. at 17.

And finally, didn't Pakdel change the ripeness/futility standards? Not at all, according to the Second Circuit. See slip op. at 19. The more things change, the more they stay the same, no?

What's that old adage? If at first you don't succeed, try and try again? We know that in land use, that means as long as the government says it is willing to "clarify" or "change" its decision (something it almost always asserts it is able and willing to do), a court will very likely never hold it to task. Planning authorities know this, and as a consequence are hardwired to almost never say no, and only "no, but..." or "maybe." 

Until the Supreme Court wakes up to this dynamic, nothing is likely to change.

BMG Monroe I, LLC v. Village of Monroe, No. 22-1047 (2d Cir. Feb. 16, 2024)

Aloha To Another Semester Of U. Hawaii Land Use

There are some rewards for working late in the 808

Yesterday was the last day of instruction for the Spring 2024 semester at the University of Hawaii Law School. Did these last few months ever go by fast. 

A big thank you to Professor Mark M. Murakami, with whom I guest-lectured at the Old School (both of us earned our JD's at the Law School) over the semester, on such topics as Euclid, vested rights and development agreements, and of course limitations on the police power such as takings.

Although our students have another couple of weeks to finish up with their final papers, we can say with certainty that the future of Hawaii land use law is in good hands. We had some very intriguing and educational discussions over the past few months. 

Law of the Splintered Paddle

      
Old School chalkboards remain in some of the classrooms.
(A plus.)


Speaking of Old School, the original signage from
the Law School's original location is up in the front office.

Flora abounds on the U. Hawaii campus, as you might expect.
Not a bad place to learn the law. Or to teach the law.

We say a fond "aloha" to our new colleagues

New Cert Petition: Tolling Statutes Of Limitations; Are Equitable Remedies Available For Takings?

Here's the latest, a cert petition where the property owners are represented by Michael Berger.  

We're not going to be saying too much here, because a Berger cert petition certainly doesn't need any furter explication by us. And, our firm is going to be filing an amicus brief, urging the Court to take up this case (so this is going to be one of our cases, too).

Here are the Questions Presented:

Petitioners’ predecessors sold an easement to the United States in order to preserve the land’s environmental character and to permit members of the public to use the easement as a trail. The property was unimproved and the grantors expected it to remain that way. When the property owners learned that the government intended to build a paved road instead, they sued. The trial court held that they waited too long and granted summary judgment to the government. That allowed it to construct a raised and paved roadway across the otherwise pristine landscape. The Ninth Circuit affirmed, in an opinion raising these questions:

1. Whether equitable tolling is available for statutes of limitation, highlighting a conflict between Boechler, P.C. v. Commissioner, 142 S. Ct. 1493, 1500 (2022), holding that such relief is “presumptively” available, and the earlier decisions in United States v. Beggerly, 524 U.S. 38, 49 (1998) and Block v. North Dakota, 461 U.S. 273, 287 (1983), holding that the statute of limitations must be “strictly” applied.

2. Whether the only remedy for a regulatory taking is cash payment, a conclusion of the Ninth Circuit that conflicts with recent decisions of this Court, like Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021); Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994); and Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005), holding that takings relief is not limited to compensation but can be declaratory or injunctive, depending on the circumstances.

3. Whether a constitutional right can be eliminated by a statute — in this case, whether the “self-executing” just compensation provision of the Fifth Amendment can be eliminated by a statute purporting to impose an artificial time limit in which to sue to enforce that constitutional guarantee.

Follow along here, or on the Court's docket.

Petition for a Writ of Certiorari, Sawtooth Mountain Ranch, LLC v. U.S. Forest Svc., No. 22-1103 (U.S. Apr....

"Breaking Down the Supreme Court Ruling on Permit Fees" (Thursday, Apr. 25, 2024, 4pm ET/1pm PT)

Be sure to join our Pacific Legal Foundation colleagues Brian Hodges and Larry Salzman, and Paul Beard (arguing counsel) and Chance Weldon (Texas Public Policy Foundation) tomorrow, Thursday, April 25, 2024, at 4pm ET for a free webinar on Sheetz v. El Dorado County, the Supreme Court's recent decision holding that all permit conditions are subject to the nexus and proportionality tests of Nollan and Dolan.

Here's the description:

Pacific Legal Foundation just won its 18th Supreme Court victory! Join us for a virtual discussion to learn more about the case, Sheetz v. County of El Dorado, and how it helps secure property rights (and lower housing costs) for everyone. 

When George Sheetz wanted to build a modest manufactured home on the property he bought in El Dorado Country, California, the government told him he was going to have to pay a “traffic impact fee” of more than $23,000 in exchange for a building permit. Even worse, the fee would go toward projects that were not tied to the actual impact of George’s home.  

George challenged the fee as an unconstitutional abuse of the permitting process. On April 12, the Supreme Court sided with George in a unanimous decision. At this post-victory discussion, attendees will hear from Paul Beard, the former PLF attorney now at Pierson Ferdinand who argued George’s case before the Court. You’ll also hear from PLF attorney Brian Hodges, who worked on George’s case, and Texas Public Policy Foundation’s Chance Weldon as they break down the Sheetz decision and its significance for property rights and housing costs. 

Register here (free)!

 

Our thoughts on the decision here ("Sheetz pt. I - "Radical Agreement" At SCOTUS: "Your Money Or Your Rights" Isn't OK Just Because A Legislature Does It").

We Heard You, Justice Thomas: NY Property Owners File New Takings Cert Petition Challenging Rent Control

As we noted here ("SCOTUS Denies Review To Remaining Rent Control Takings Petitions: "Important and pressing question" (Just Not In This Case)"), a small silver lining in the Court declining review was the statement of Justice Thomas accompanying the denial, where he noted the issue is an "important question," and set out a rough roadmap to future challenges.

Here's a cert petition which asserts this is the case to take up the issue. Here's the Question Presented:

New York’s Housing Stability and Tenant Protection Act of 2019 transforms a temporary rent- regulation system into a permanent expropriation of vast swaths of private real estate, without just compensation, in the name of “affordable housing.” Among other things, the Act prohibits owners—even of small and midsized apartment buildings like Petitioners—from reclaiming rental units for their own personal use, and grants tenants a collective veto right over condo/co-op conversions. As Justice Thomas has observed, the constitutionality of regimes like New York’s is “an important and pressing question” that has divided the courts of appeals and should be addressed in “an appropriate future case.” 74 Pinehurst LLC v. New York, 2024 WL 674658, at *1 (U.S. Feb. 20, 2024) (statement respecting denials of certiorari). Although case-specific vehicle concerns may have dissuaded the Court from granting other recent petitions that sought to challenge the constitutionality of rent-control regimes in general, this case is based on a substantially different record, targeting only a specific set of amendments to New York’s regulatory regime, and thus provides an ideal vehicle for this Court’s review.

The questions presented are:

1. Whether New York’s rent-regulation laws, and in particular its new restrictions on owner reclamation and condo/co-op conversions, effect physical takings.

2. Whether this Court should overrule Penn Central or at least clarify the standards for determining when a regulatory taking occurs.

Here's the unpublished Second Circuit decision.

Follow along this case here or on the Court's docket here.

Petition for Writ of Certiorari, G-Max Mgmt, Inc. v. State of New York, No. 23-1148 (U.S. Apr. 18, 2024)

A Must-Listen Infrastructure Junkies Podcast: "Curtain Call for the Eminent Domain Podcast!"

Our friends Kristen and Dave at the Infrastructure Junkies Podcast are doing what we hoped they would: they've convinced Clint Schumacher to appear as a guest and reflect on his Eminent Domain Podcast, which has produced its final episode:

The popular Eminent Domain Podcast signed off after a successful six year run. The Eminent Domain Podcast's host, Texas attorney Clint Schumacher, joins the Infrastructure Junkies to reflect upon his show, his experiences, and all that he learned from being the pioneer podcast for the eminent domain industry. Listen in while Clint is on the business end of a rough cross examination!

It's great to hear Clint one more time. Be sure to listen!

Sheetz pt. II: The Concurrences - Does Nollan/Dolan Operate Differently When Exaction Affects A Class?

Note: this is the second of our posts on the recent Supreme Court opinions in Sheetz v. County of El Dorado, the case in which the unanimous Court held that exactions imposed by legislation are not exempt from the essential nexus (Nollan) and rough proportionality (Dolan) standards. Here's our first post, which covers the case and the main opinion ("Sheetz pt. I - 'Radical Agreement' At SCOTUS: 'Your Money Or Your Rights' Isn't OK Just Because A Legislature Does It").

[Disclosure: this case is one of ours.]

In this post, we cover the three very short concurring opinions.

* * * *

The Court took no position on whether the County's traffic impact fee has an essential nexus to the Sheetz development, or whether $23 grand is roughly proportional to any traffic his proposal might be responsible for. For this and more, the Court remanded the case. Notably, the Court also did not decide whether "a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development." Slip op. at 9-10.

Now that the Court has expressed unanimity on the Question Presented in Sheetz (does the government have the unfettered ability to demand "the goodies" simply because a property owner needs the government's approval to make use if his or her land? No.), let's take a look at the three concurring opinions. 

Sotomayor & Jackson: Hands Off Taxes!

Justice Sotomayor joined by Justice Jackson, wrote separately to restate their agreement with the narrow holding (answering the Question Presented and only the Question Presented) that legislatively-imposed exactions are subject to Nollan and Dolan.

But they noted that this case assumed the "predicate" inquiry that "government could not have constitutionally ordered the person asserting the claim to do what it attempted to pressure that person into doing." Concurring op. at 1 (citing Koontz). thus, "[t]he question presented in this case did not include that antecedent question: whether the traffic impact fee would be a compensable taking if imposed outside the permitting context[.]" Concurring op. at 2.

What we think they are getting at is that straight-up government requirements that some, or all, persons pay money for something (also known as taxes or sometimes fees), are not subject to nexus or proportionality (or at least not in the same way as property exactions are). Fees and taxes may be subject to other limitations, but they are not, generally speaking, evaluated as "takings." 

It probably shouldn't be surprising that Justice Sotomayor concurred on this basis, since during oral arguments, she seemed particularly concerned with the line between exactions, fees, and taxes.

Gorsuch: Broadly-applicable exactions are no different than parcel-specific exactions

Justice Gorsuch preemptively addressed a question that was bandied about at oral arguments, but that the entire Court determined was not presented by the case (so the majority opinion avoided doing more than mentioning it):

The Court notes but does not address a separate question: whether the Nollan/Dolan test operates differently when an alleged taking affects a "class of properties" rather than "a particular development."

Concurring op. at 1. He answered his own question: "But how could it?"

He goes on to note that "[n]othing about" the Nollan/Dolan test "depends on whether the government imposes the challenged condition on a large class of properties or a single tract or something in between." Concurring op. at 1-2.

Short story: there's no reason to not apply the Nollan/Dolan tests to "class" exactions.

Kavanaugh, Kagan, & Jackson: class exactions subject to different nexus and proportionality tests

Three Justices expressed a slightly different view, noting that "today's decision does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new development through reasonable formulas or scheduled that assess the impact of classes of development rather than the impact of specific parcels of property." Concurring op. at 1. The three wrote to note that these type of exactions may be subject to different standards, and that the Court did not address or decide that issue. Big hint for those of us who are asking "what might be next?"

Tropebusters! 

What to make of Sheetz? It does resolve, fully and finally, the longstanding question of whether legislatively-imposed exactions are just plain old land use regulations subject to only the rational basis test. Answer: no, they aren't. Does Sheetz leave open some follow-on questions? It seems so to some Justices, at least.

We do know that several longstanding tropes of land use law generally -- and exactions  doctrine specifically -- seem to be gone, while a couple of others may have continuing life:

• Land vs. money? Demanding money or demanding land...all the same thing.
• Labels not controlling. Relatedly, labeling a condition as an "exaction" or "in lieu" fee doesn't matter. Or "legislative" vs "administrative." The opinion refers to the County's traffic impact fee as a "permit condition," an "impact fee." What counts is what the condition does, not what someone calls it. 
• Ministerial vs discretionary. This longstanding distinction in land use and administrative law did not seem to carry a lot of analytical weight with the Court. The opinion referred to "permit conditions," here a condition on a presumably ministerial building permit. We always thought that conditions can only be placed on discretionary approvals, not on things like building permits that are "must issue" when the application conforms to the technical requirements of the governing code.
• Judicial Takings. Fans of the doctrine take note: all nine Justices just signed on to the notion that "there is 'no textual justification for saying that the existence or the scope of a State's power to expropriate private property without just compensation varies according to the branch of government effecting the expropriation." Slip op. at 7 (quoting Stop the Beach Renourishment). Yes, the STB plurality opinion just garnered all nine Justices. Justice Scalia lives; how much wood could a woodchuck chuck!

Sheetz v. County of El Dorado, No. 22-2074 (U.S. Apr. 12, 2024)

Devillier v. Texas (Part II): After Rope-a-Dope By Texas, Unanimous SCOTUS Saves The State Immunity Issue For Later

Note: this is the second of our posts on the U.S. Supreme Court's recent decision in Devillier v. Texas. The first -- which tries to put the weird post-opinion controversy over which party "won" at the Supreme Court into its proper perspective -- is here.

In this post we'll cover the case's facts, the odd procedural path that Texas dragged everyone through (only ultimately abandon a key position once at the Supreme Court), and what the Court actually decided, if anything.

The State Flooding Private Property is a Taking Under Everyone's Constitutions

After the Texas DOT flooded his property as part of a freeway project by creating a dam that caused rainwater to collect on his land, Devillier and other landowners sued the State of Texas for a taking, aka inverse condemnation.

The state flooding someone's property is one of those "classic" cases which are considered takings, triggering the obligation to provide compensation to the owner, even where the government has not formally instituted eminent domain. 

But Texas didn't acknowledge its obligation to provide compensation, so Devillier sued Texas for a de facto taking seeking just compensation under both the U.S. and Texas Constitutions.

Devillier Sued Texas For Federal Compensation in Texas's Own Courts

Devillier sued in a Texas court. Importantly, he did not seek redress for his federal compensation rights under a statute, but asserted his right to just compensation directly under the U.S. Constitution. He did not (because he could not) bring this federal constitutional claim pursuant to the commonly-employed procedural vehicle for raising such claims, a post-Civil War civil rights statute 42 U.S.C. § 1983. There, Congress created a cause of action subjecting "any person" who violates someone's federal rights "under color of state law" to liability for legal and equitable remedies.

We often see section 1983 employed in takings cases seeking Fifth Amendment just compensation, but only when the government alleged to be doing the taking is a local (municipal) government. Why? Because the Supreme Court has held that states themselves and their officials are not "persons" covered by the statute.

So if you want to sue a state for just compensation because it has taken your property, you can't use section 1983, and must look elsewhere for the authority to do so.

Devillier: I Don't Need Texas's Preclearance to Sue Texas for Federal Just Compensation (in a Texas Court)

In most cases, before you can sue the government for money it must consent to be subject to lawsuits. Sovereign immunity, grounded in notions that the Crown can do no wrong, seems like both a very un-American concept, and very anachronistic. But in American law, the doctrine is very robust. One question in takings law has plagued the lower courts: does a property owner need the government to waive sovereign immunity before an owner can sue for compensation for a taking?

Devillier thought he didn't need seek permission from either Congress or Texas to sue for just compensation. Government doesn't have the power to take property without providing compensation, and every right has a remedy doesn't it? Or as it is often phrased, a waiver of sovereign immunity isn't necessary to sue for just compensation.

Why so, if a waiver is needed in nearly every other area of law? Because the text of the Fifth Amendment (which is a limitation on the states via the Fourteenth Amendment) lays out the remedy: "nor shall private property be taken for public use, without just compensation." Thus, the U.S. Constitution itself provides him all the authority a property owner needs to bring a claim for compensation if the government has taken property.

He also asserted that the Supreme Court has long described the Just Compensation Clause as "self-executing," which in his view (and the view of many others, us included) means that the Fifth Amendment of its own force and authority allows owners whose property has been taken to sue for just compensation.

That, Devillier argued, means that if Texas had taken private property for public use but hadn't acknowledged its obligation to provide compensation, he could sue for compensation whether or not Texas had consented. Especially in one of Texas's own courts.

Texas's Two-Step: Removal to Federal Court

Before the state trial court got to that question, however, Texas (somewhat unusually) removed the case to federal court. Recall that in certain cases filed in state courts, the defendant has the final choice of forum (state or federal court). If a case could have been brought in federal court in the first instance -- in other words, there is federal jurisdiction over the claim the plaintiff asserts, but the plaintiff has chosen to bring the claim in state court -- the defendant may "remove" it to federal court. Texas did so, alleging federal question jurisdiction.

Check out the Master Complaint filed in federal court. Scroll down to page 25, and Count 2, paragraph 78, for how Devillier pleaded the federal takings claim:

In addition to, and in the alternative to, their claim under the Texas Constitution, Plaintiffs seek recovery for the State’s permanent and/or temporary taking of their real and personal property without paying just compensation in violation of the Takings Clause of the Fifth Amendment of the U.S. Constitution, a self-executing constitutional provision applicable to the State through the Fourteenth Amendment of the U.S. Constitution.

District Court: Just Compensation Clause is Self-Executing

After it removed the case to federal court, Texas asked to dismiss Devillier's case. Here's how the Magistrate Judge described Texas's request:

In its motion to dismiss, the State argues that Plaintiffs’ federal inverse condemnation claim should be dismissed for a number of independent reasons. First, the State contends that Plaintiffs’ federal takings claim cannot be brought directly under the Fifth Amendment, but rather must be brought under 42 U.S.C. § 1983. According to the State, this dooms Plaintiffs’ federal takings claim because § 1983 claims cannot be brought against a state actor. Second, the State argues that Plaintiffs’ federal claims are barred by the applicable statute of limitations. Third, the State insists that Plaintiffs have failed to properly plead a valid federal inverse condemnation claim.

Pet. App. 12a.

The Magistrate recommended denial of Texas's motion. The U.S. District Court agreed, concluding that the Just Compensation Clause is self-executing and thus Devillier had all the permission he needed.

Fifth Circuit: No Cause of Action, No Jurisdiction

But when Texas appealed to the Fifth Circuit, that court held that the federal courts lacked jurisdiction to hear Devillier's federal claim for compensation because property owners like Devillier who claim to have suffered a taking at the hands of a state government do not have a "right of action for takings claims against a state[.]"

Texas, the court concluded, "recognizes takings claims under the federal and state constitutions, with differing remedies and constraints turning on the character and nature of the taking; nothing in this description of Texas law is intended to replace its role as the sole determinant of Texas state law."

The Fifth Circuit concluded that the case belonged in Texas state courts (where Devillier had originally brought it, remember) and sent the case back to the federal trial court with instructions to bounce it out of federal court, and "return this case to the state courts."

Texas To Supreme Court: Devillier Is Required To Vindicate His Federal Constitutional Rights in a Texas Court Under Texas Law

Devillier asked the U.S. Supreme Court to review this Question Presented:

May a person whose property is taken without compensation seek redress under the self-executing Takings Clause even if the legislature has not affirmatively provided them with a cause of action?

Once at the Supreme Court, Texas continued to argue that you may possess a constitutional right -- and a self-executing remedy -- but that's not enough because you also need a cause of action. What that means is you need to have some ability to bring a lawsuit to enforce your rights and obtain a remedy, and for that you must have some sort of government authorization to use the courts.

But Texas seemed to subtly change its tack. It now claimed to be a champion of property rights! It opened its arguments with this astonishing claim (we say astonishing because it was Texas which had removed Devillier's lawsuit from a Texas court to the federal courts and then sought to dismiss it, a very cynical and wasteful tactic and hardly the kind of thing you'd think a property rights champion would do):

MR. NIELSON: Mr. Chief Justice, and may it please the Court.

The Court will be hard-pressed to find any government more committed to property than Texas. The Texas constitution is more protective than the federal Constitution, and Texas courts under a Texas cause of action adjudicate takings claims under both constitutions.

This appeal thus isn't about substantive rights. All Petitioners had to do was use Texas's cause of action.

Tr. at 38-39 (emphasis added).

Rope-a-Dope

Hold on, "all Petitioners had to do was use Texas's cause of action?" Didn't we just say that Devillier filed his lawsuit in a Texas court? Yes, he brought a Texas claim for compensation under the authority of Texas law. And a federal claim for compensation under the authority of federal law (the U.S. Constitution) in a Texas court. Wasn't that enough?

No. Texas claimed that suing for a federal remedy in a Texas court was only a half-measure. Instead, it asserted that Texas law recognized a property owner's ability to sue Texas for federal compensation, so Devillier needed to make clear in his complaint that he was bringing his federal constitutional claim under the authority of Texas law (and Devillier merely bringing his federal claim in a Texas court was not enough to make that clear). If Devillier had only pleaded clearly that he was asserting his federal claim under state procedure, then Texas would have welcomed his federal claim!

Or so it said. It wasn't at all clear that this had been Texas's position all along, and from our perspective it reeked of a late-breaking strategic concession to keep the court from deciding the Question Presented. After all, if Texas had made the position it took in Supreme Court clear when the case was in the lower courts, then everyone could have avoided the sturm und drang for the past several years, and the parties' and the Court's time would not have been wasted.   

There were some encouraging signs during the arguments that the Court was skeptical. Several of the Justices, for example, taking Texas to task for shifting the lawsuit from one where Texas argued it could be sued (state court), to one where it argued it couldn't (federal court) -- and then arguing that Devillier could have brought his claim in a Texas court. But like all SCOTUS oral arguments, the Devillier arguments concluded without a decision. All we could do was wait.

Did the Court Actually Decide Anything Other Than Which Party Won the Appeal? (Hint: No)

Last week, we were rewarded with a decision that didn't really decide much of anything. Make no mistake: Devillier definitively won the Supreme Court phase of the case. The Court vacated the dismissal of his case, and sent it back down for more, including explicit directions to allow Devillier to include in his complaint the magic words that Texas claimed were missing. But did the Court decide the Question Presented (does an owner who seeks just compensation for a taking need the legislature to recognize a cause of action)?

No, the unanimous Court said it accepted Texas's oral argument concession that Devillier has always possessed a cause of action to sue for federal compensation because Texas recognizes inverse condemnation under state law. As a consequence the Court concluded there was nothing for it to decide.

The opinion acknowledged that it continues to be a good question whether a property owner needs the government's permission in order to sue for just compensation for a taking. But because Texas (finally) admitted that Devillier does have a procedural vehicle by which he may seek to vindicate his right to compensation, that issue is a no-go here:

Texas state law provides a cause of action by which property owners may seek just compensation against the State. As Texas explained at oral argument, its state-law inverse condemnation cause of action provides a vehicle for takings claims based on both the Texas Constitution and the Takings Clause. And although Texas asserted that proceeding under the state-law cause of action would require an amendment to the complaint, it also assured this Court that it would not oppose any attempt by DeVillier and the other petitioners to seek one. This case therefore does not present the circumstance in which a property owner has no cause of action to seek just compensation.

Slip op.at 6-7.

Instead, the Court said that it would wait for a case in which it can be satisfied "of the premise that there is no cause of action." Slip op. at 6. The Court vacated the Fifth Circuit's judgment and remanded the case "for further proceedings consistent with this opinion." Slip op. at 7.

The Supreme Court phase of the case thus ended disappointingly: it's satisfying that Devillier has his win and can continue the fight; but we have no answer from the Supreme Court on the still-open question. What if a state doesn't recognize a state cause of action to raise a federal compensation claim, can a property owner still sue for compensation? 

SCOTUS: "[T]he absence of a case relying on the Takings Clause for a cause of action does not by itself prove there is no cause of action."

There are some hints in the decision (dicta), although it is too soon in our thinking to tell what those hints eventually might mean. There are a lot of questions remaining.

        1.  Future cases?

For example, the Court noted that the question of whether the Constitution itself provides a cause of action for compensation "do[es] not arise when property owners have other ways to seek just compensation." Slip op. at 6. And the "other ways" here is a state law cause of action in state court. Does that mean that if a state recognizes an inverse condemnation cause of action like Texas, then there isn't a claim directly under the Takings Clause for compensation?

No, the Fifth Amendment itself may recognize a cause of action, irrespective of state law and section 1983. The opinion recognized that "[t]he absence of a case relying on the Takings Clause for a cause of action does not by itself prove there is no cause of action." Slip op. at 6. It's just that, like here, the issue will never come up in a case where a state recognizes a process under its own law for a property owner to seek federal compensation. That question will only be answerable in a narrow band of cases where a state does not recognize an inverse condemnation cause of action at all, or if it does, limits the remedy to state constitutional law.

Are there states whose law like that? Yes, we can think of a few. (Stay tuned for more on that.)

        2.  Williamson County Revived?

Next, doesn't the Court's rule in Devillier -- that if state law recognizes a cause of action for federal compensation, then a property owner can use the state's procedures to vindicate her rights when a state is the defendant -- revive the "state procedures" requirement from Williamson County?

Sort of looks like the same requirement, but no. Before the Court overruled the state procedures requirement in Knick v. Township of Scott, it required property owners to chase state procedures for compensation before coming to federal court on a takings claim. That rule applied to all takings claims, against both state and municipal defendants. Devillier only applies when a state is the defendant, and says if a state recognizes a way to prosecute a claim for federal compensation, then property owners need to use that process to vindicate their federal rights. That way, the Court can avoid the broader questions these issue present -- such as whether a property owner can sue a State in federal court for compensation -- until the right vehicle is presented.

        3.  So What Does "Self-Executing" Mean? 

The Court didn't really clarify what "self-executing" means. At the very least, it means that property owners must have a cause of action for federal just compensation in some court. If a local or municipal government takes your property, you already have a section 1983 cause of action which can be prosecuted in federal court (federal question jurisdiction) or in state court (concurrent jurisdiction). If a State takes your property and state law, like Texas, recognizes a cause of action that "provides a vehicle for takings claims based on both the [State] Constitution and the Takings Clause[,]" slip op. at 7, then go to state court. But if a State takes property without paying, but does not recognize a federal cause of action to vindicate that right, then the property owner may go to [court to be determined]...

        4.  No More Takings Games?

By declining to consider the Question Presented, and instead holding that Devillier's original claim and his choice of forum are to be respected, the Supreme Court seems to have concluded that the last few years of federal court litigation caused by Texas’s removal and failure to make its position clear were utterly needless, and that Texas should have just let Devillier proceed with his original choice to sue in a Texas court.

The "removal game" (where owners file for compensation in state courts, only to see the government remove the case to federal court and seek dismissal), a tactic the Court has viewed skeptically before, is now quite clearly not at all favored by the Justices. This opinion seems very much like a pushback on the tactics Texas deployed here.

Summing Up

We don’t think that Devillier moved the needle very much at all on the substantive question the Court declined to answer: does the Just Compensation Clause recognize the right of property owners to seek compensation of its own force? That question, and the even larger issue of sovereign immunity, are still very much in play.

As a U.S. Senate report noted once, "'Sovereign immunity or the infallibility of the Crown, so to speak, became embedded in the common law of England and so came into our American law,' but 'this principle is not appropriate where the courts are established … to serve the people.'"

Devillier v. Texas, No. 22-913 (U.S. Apr. 16, 2023)

In Devillier v. Texas, The Winner Takes It All (Part I)

The winner takes it all
The loser's standing small
Beside the victory
That's her destiny

Note: this is the first of a short series of posts on the U.S. Supreme Court's recent decision in Devillier v. Texas.

In Part II, we'll cover the case, the procedural path that Texas dragged everyone through, only to abandon it at the Supreme  Court), and what the Court actually decided, if anything,

Three Common Questions for Lawyers

In the classroom, I often ask students to use their intuition to guess the three most common questions that lawyers almost always get from potential clients. Put yourself in a client's shoes: what would you want to know?

The students mostly get it right. "What's this going to cost?" Check. "How long will this take?" Check. And perhaps most obviously, "What are my chances of winning?"

That last question -- am I going to win? -- is perhaps the most common. And when they ask, I'm thinking that that most clients don't have an overly nuanced approach to what it means to "win" a case: I get what I want; I keep on fighting; I recover just compensation; I get vindication from the justice system; I lose but get my day in court, even.

It doesn't seem all that difficult to figure out what a "win" looks like, does it?

Deviller v. Texas II: the Afterfight

So you might think that after the U.S. Supreme Court issued a unanimous opinion in Devillier v. Texas (that's 9-0 if anyone is counting), a property rights case we've been following, you'd be able to figure out which party "won" in the Court.

Nope. It turns out that like the post-Oscar afterparties, there's a weird post-opinion afterfight going on between Devillier's lawyers and the Texas Attorney General. Before the ink (ok, toner) was seemingly dry on the opinion, a dispute broke out on social media over who "won" the Supreme Court case after the AG issued a press release and tweeted about what he claimed is Texas's big win:

Texas: We're down for the big win!

Devillier: Not so fast, pard. 

So Who "Won?" (Hint: Devillier)

We really don't want to get bogged down in secondary dispute who won a unanimous Supreme Court decision. After all, the more interesting question in many Supreme Court cases is what the decision means to a wider scope of players than just the parties to the case, and not which litigant can legitimately claim to have won a phase of the litigation.

Besides, we don't think it's that hard to figure out who prevailed. Prior to the Supreme Court rendering its decision, Devillier was facing legal oblivion: the Fifth Circuit had dismissed his lawsuit. As in gone. Bye bye. Get outta here. The Supreme Court undid that (vacated the lower court judgment, in technical terms), and sent the case back down the federal court chain for further proceedings. It may even end up eventually back in state court right where Devillier started. In short, Devillier is back from the brink as if the last few years never happened, and gets to continue his legal pursuit of Texas for just compensation. That sure looks like a "win."

And Devillier's lawsuit will continue mostly in the in way he set it up; yes, it is in federal court (at least for the time being), and not a Texas court where Devillier originally brought it, but (a) if it stays in federal court maybe the federal forum will be more favorable so he might be in an even better position than where he started; (b) the case might eventually go back to state court, which is literally Square 1 for this lawsuit; and (c) the Supreme Court ordered the lower federal courts to allow Devillier to amend his complaint to make it clear he is asserting his federal right to just compensation (but, kinda weirdly, pursuant to a Texas cause of action), a procedure Texas belatedly but ultimately conceded in the Supreme Court, something it had not earlier (more on that later). We'd call that a Devillier "win" also. And any time a property owner can convince all nine Supreme Court Justices reject a government's denial of its obligation to provide just compensation when it has taken property, that seems like a good thing.  

Spin City?

If so, then how could Texas with a straight face claim this was a big win?

On one hand, it could be written off as the very cynical product of political spin. Elected AG's are known as "Aspiring Governors" for a reason. On the other, could Texas legitimately claim that it got what it wanted from the Supreme Court, and that's a "win?" For that, you have to start viewing the litigation like a lawyer and not a normal person. Especially as a lawyer for a defendant. In those cases, it often it isn't about the final outcome of the case as much as it is about damage control, minimizing your losses.

Or (as we suspect here) seeing how long you can slow-walk a procedural strategy and hope the other side eventually bleeds out and gives up, broke and exhausted. And if the owner somehow holds on through years of the procedural nonsense you throw at him, you can then offer up a late-breaking concession and ask the reviewing court to avoid the issue. Legal rope-a-dope.

Maybe the Supreme Court being convinced to not decide in this case (but to save it for the future) whether the Fifth Amendment itself allows owners to sue for compensation when a state takes their property, was enough for Texas to claim a "win."

Our bottom line is this: the more important question than which party won the Supreme Court phase of the litigation was did the Court actually decide anything beyond which party won the Supreme Court phase of the litigation? If so, then what? And what does the Devillier case mean for the future, if anything? So let's shuck this "who won" distraction and focus on what is important, if anything, about the Supreme Court's decision.

* * * *

In our next post, we'll cover the case, the weird procedural path that Texas dragged everyone through (only ultimately to say "nevermind" in the Supreme Court), and what the Court actually decided, if anything.

Devillier v. Texas, No. 22-913 (U.S. Apr. 16, 2023)

$48 Million The Hard Zoning Way: Thanks To NIMBYs And NIMTOOs, Las Vegas Must Pony Up A Lucas Takings Judgment

If there's a money quote in yesterday's opinion by the Supreme Court of Nevada which "wholly affirm[ed] a trial court judgment awarding $48 million in just compensation for Las Vegas's regulatory taking in City of Las Vegas v. 180 Land Co., LLC, No. 24-13605 (Apr. 18, 2024), it might just be this sentence:

Although the City rejected 180 Land's development proposals, its representatives had previously recognized the site's ability to be developed residentially.

Slip op. at 8.

That alone should tell you where this one is ultimately headed. But let's break it down and see how this got there.

Residential PUD Zoning

It started off well for the property owner, who owned land it wanted to use as a golf course, part of a (much) larger 2,200 acre ranch. The city preliminarily approved a request to zone the proposed golf course for residential PUD (planned unit development - which should reveal to you land uses when this went down (1980s)). In 1990, the city was satisfied and the golf course area was zoned R-PD7 (Residential Planned Unit Development).

This being Nevada, the zoning approval meant that the golf course was actually built.

General Plan: Open Space

During the construction, the city adopted a new General Plan which designated the parcel as "Parks/Schools/Recreation/Open Space." But despite the change in the GP, the zoning was not altered. Indeed, in 1986, the city confirmed in a letter that the R-PD7 zoning remained for the golf course. And in 2001, the city adopted another ordinance that "formally rezoned it to R-PD7 on the Official Zoning Map Atlas, and repealed any previous conflicting ordinances." Slip op. at 5.

By 2015, however, the golf course was struggling. "[T]he operator of the golf course informed the then-landowners, Fore Stars, Ltd., that it could not longer make a profit operating the golf course and thereafter terminated the lease in 2016." Id.

Residential Zoning, Residential Development

That same year, an outfit known as "180 Land" acquired the assets of Fore Stars, including the golf course area, and later a fellow named Yohan Lowie acquired ownership. It was time to change the use from a golf course to something more in line with the zoning.

180 Land segmented the 9 parcels of the golf course into four development areas. One of these, a 35-acre parcel, became the focus of the dispute. In 2016, 180 Land sought to develop the site, first by seeking to change the GP designation from Open Space to low-density residential, and then by submitting typical development applications such as a Tentative Map, and site review. City staff recommended approval. While these were in-progress, 180 Land also sought approval of a new Master Development Agreement. Staff was on board with that as well.

Successful Opposition to the Residential Project

Then came the opponents, a "homeowner group" which challenged the city's approval of a separate application for another one of the four former golf course parcels. Next up, the discussion of the 35-acre parcel residential development at a City Council public hearing became "contentious," with "strong public opposition to 180 Land's applications." Slip op.at 7.

The walls came tumbling down:

The City ultimately denied the applications despite the City's planning staff having recommended approval. The City's final decision stated that the denials were "due to significant public opposition to the proposed development, concerns over the impact of the proposed development on surrounding residents, and concerns on piecemeal development of the Master Development Plan area rather than a cohesive plan for the entire area." Despite rejecting the 35-acre application, in part because of concerns over "piecemeal development," the City also rejected the comprehensive Master Development application in August 2017, two months after rejecting the 35-acre application. Also in August 2017, the City rejected applications from 180 Land pending since 2016 for three access points to the golf course acreage from neighboring public streets and to install fencing around two water features on the acreage. The City stated it denied the applications because of "the various public hearings and subsequent debates concerning the development on the subject site" and instructed 180 Land to file an application for a "Major Review" under the City's municipal code. 180 Land did not file any Major Review applications. The City also denied 180 Land's application for a technical drainage study, though Las Vegas Municipal Code (LVMC) 19.16.105 requires such a study before residential development is allowed.

Slip op. at 7-8.

City's Representations

But that wasn't the end of the story. "Although the city rejected 180 Land's development proposals, its representatives had previously recognized the site's ability to be developed residentially." Slip op. at 8. Various city employees and officials confirmed that the city had already approved the residential zoning of the property and under Nevada land use law, zoning is king: if the GP is inconsistent with the zoning, the zoning trumps. 

Inverse Condemnation

Next up, an inverse claim in a Nevada state court. The trial court held that the "hard zoning" was indeed R-PD7, meaning that 180 Land had "as a right" a single-family and multiresidential development. Slip op. at 9. You know what that means: the city could either let 'em build, or condemn. It could not use its police power to deny the "as of right" development. The trial court granted 180 Land multiple summary judgments on liability, and considered valuation evidence of just compensation:

[T]he district court ultimately adopted 180 Land's expert's valuation of the land, $34,135,000, noting that the City did not present any contrary valuations or any other rebuttal evidence and did not depose 180 Land's expert. The district court also granted 180 Land's requests for reimbursement of its property taxes, prejudgment interest, and attorney fees. In doing so, the district court rejected 180 Land's request for a 23-percent prejudgment interest rate, calculating its prejudgment interest award using a prime plus 2-percent rate. The final judgment in favor of 180 Land totaled $48,114,039.30.

Slip op. at 9-10. Both sides appealed. The city sought to overturn the takings judgment, while 180 Land challenged the amount of prejudment interest.

Nevada Supreme Court: a Right to Develop

The Supreme Court described the issue as "whether the site's R-PD7 residential zoning or its PR-OS land designation [on the General Plan] governed 180 Land's ability to develop the property and/or conferred certain rights on 180 Land." Slip op. at 10. When the taking issue is framed that way (as a land usey and not a takings issue), then you can kind of see where this one is going. If the zoning defined 180 Land's property rights, game over. Vested, etc. If the city's argument -- that it could deny "any development applications" inconsistent with the GP designation were accepted, then no property and no taking.

In short, the taking issue turned on the question of whether zoning or the General Plan controlled the use of 180 Land's land. You can read pages 11-12 of the opinion for the details, but the short story is that the court concluded that indeed, zoning is law while the GP is "not a legislative mandate from which no leave can be taken." Slip op. at 11.

Plan/Zone Consistency?

What about the rubric in Nevada land use law that zoning must be consistent with a general plan? The court was not convinced because "[t]he problem with applying the consistency requirement in this case is that the substantial evidence demonstrates that the R-PD7 zoning predated the PR-OS land designation." Slip op. at 12. Zoning: 1986. GP: 1992. And the court also noted that the ordinance adopting the PR-OS GP designation expressly noted that the GP designation didn't modify or invalidate the existing zoning.

Murr Denominator Parcel

Having determined that 180 Land had a vested right to develop in accordance with the residential zoning, the court held that the city's denial of its residential development applications was a taking. The court identified the property interest: the 25-acre parcel. It rejected the city's claim that Murr v. Wisconsin required the denominator to be the entire 9-parcel former golf course.

The court applied the multi-factor Murr standard to conclude that no, the property here was only the 35-acre residentially-zoned parcel, not the other of 180 Land's holdings. The court also rejected the city's claim that the case wasn't even ripe because 180 Land submitted "only one development application[.]" Slip op. at 21. To the court, that one denied application was enough, and "any further attempts to apply for development by 180 Land would have been futile[.]" Id.

Lucas Wipeout

On the merits, we urge you to read pages 24-26 of the opinion, where the court analyzes the case to conclude that this worked a "per se regulatory taking." In short, a Lucas economic wipeout. This passage is worth quoting at length:

The City's denials of 180 Land's applications and the discussion of those applications at various city council meetings show no meaningful indication that the City would allow any development on the 35 acres. As noted above, the City's denials stated it was rejecting the applications based on strong public opposition and that 180 Land had not provided a cohesive plan for the entire golf course acreage. But the City provided no regulatory basis for the denials13 that would allow 180 Land to seek a variance or submit an amended application that would resolve any such issues. The City similarly rejected 180 Land's Master Plan application that provided a cohesive plan for the golf course acreage. That these denials occurred despite the City's planning office working with 180 Land on at least one of the proposals and repeatedly recommending that the City approve the applications underscores an unwillingness to allow any development. And the City did not provide 180 Land with any viable alternatives for it to reap economic benefit from the 35 acres when denying its applications. In short, the City's actions demonstrate that it would not approve any development on the 35 acres. Further, we discern no error in the district court adopting 180 Land's expert's opinion that, without the ability to develop the 35 acres, it had no economic value

Slip op. at 25-26.

Just Compensation

The court next considered the city's argument that the trial court got the just compensation wrong. No abuse of discretion, so judgment affirmed. The most interesting part of this part of the opinion in our opinion is on pages 28-29, where the court noted that the landowner met its burden of introducing relevant valuation evidence (an expert who opined on the land's value in its highest and best use). And, stunningly, that the city
"presented no contrary evidence[,]" and didn't even depose 180 Land's expert. Indeed, it made no effort to rebut the expert report.  Slip op. at 29. Whoa.

And what of the landowner's appeal on the amount of prejudment interest? No go because the rate it sought would not merely make up for the delay in payment, but would "reimburse it for the purported profit it lose had it been able to develop the land." Slip op. at 32.

The opinion ended by summing up:

When a governmental agency acts in a manner that removes all the economic value from privately owned land, just compensation must be paid. Here, the City's actions demonstrated a refusal to allow any development on the 35-acre parcel owned by 180 Land such that the parcel no longer had any economic value. The district court therefore did not err in finding that a taking occurred. Nor did the district court err in its just compensation award, as it based that decision on uncontroverted evidence from a duly admitted expert witness.

Slip op. at 32.

There it is.

Congratulations are in order for our Nevada colleague Kermitt Waters and his firm.

City of Las Vegas v. 180 Land Co., LLC, No. 24-13605 (Nev. Apr. 18, 2024)

New Article: 2024 National Eminent Domain Update (Practical Real Estate Lawyer, May 2024)

Thanks to our co-author, the ever-wonderful Amy Boulris, and the good people at ALI-CLE for shepherding us through the process of getting the 2024 National Eminent Domain Update published in The Practical Real Estate Lawyer, and for allowing us to post it here.

This is our summary of what we think were the most interesting -- if not the most important -- eminent domain cases over the past year from state and federal courts.

Amy Brigham Boulris & Robert H. Thomas, 2024 National Eminent Domain Update (ALI-CLE Prac. Real Est. Lawyer...

Sheetz pt. I - "Radical Agreement" At SCOTUS: "Your Money Or Your Rights" Isn't OK Just Because A Legislature Does It

Guess where we stopped for coffee this morning?
(A reminder: this case has nothing to do
with the convenience store.)

Note: this is the first of two posts on the recent Supreme Court opinions in Sheetz v. County of El Dorado, the case in which the unanimous Court held that exactions imposed by legislation are not exempt from the essential nexus (Nollan) and rough proportionality (Dolan) standards. Here's the second post, which covers the concurring opinions.

[Disclosure: this case is one of ours.]

In this post, we cover the background, and the Court's unanimous opinion.

* * * *

Does the government have the unfettered ability to demand "the goodies" (as one municipality's chief land use planner famously called them in the 1980s), simply because a property owner needs the government's approval to make use if his or her land?

That's the issue the Supreme Court agreed to resolve (or more accurately, clarify) in in Sheetz v. County of El Dorado, No. 22-1074 (Apr. 12, 2024).

Confessing Judgment: Game over man, game over!

After oral arguments a bit over three months ago, the Court's unanimous opinion by Justice Barrett issued last week wasn't too hard to predict. Especially because during the arguments the advocate for the County expressly acknowledged that there was "radical agreement" on the Question Presented in the case:

The question presented is whether a permit exaction is exempt from unconstitutional-conditions doctrine as applied in Nollan and Dolan simply because it is authorized by legislation.

The unanimity of the resulting decision reflects that with the County's acknowledgement on the record, it was all over but the shouting: the Court, as predicted, held that a blanket exaction (in this case a traffic impact fee) isn't exempt from the "essential nexus" and "rough proportionality" standards that have long governed exactions imposed ad hoc. See slip op. at 1 ("The Takings Clause does not distinguish between legislative and administrative permit conditions.").

Which leads to an obvious question: if the County was going to confess judgment by agreeing that legislative exactions are not categorically exempt -- a conclusion it contested in the lower courts -- why did it let the case get to decision stage at the Supreme Court? We're not at all sure. [Disclosure: this case is one of ours.]

Anyway, with that question asked (but not answered), let's see what the entire Court thought about this, and why.

Laying the Foundation: Nollan, Dolan, (and Koontz)

In 1987, the Court held that before the government can force a property owner into the choice between giving up something in return for government land use approvals, there must be an "essential nexus" between the demand and the owner's proposed use of land. Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987). And in 1994, the Court refined the requirement by recognizing the need for a "rough proportionality" between the burdens the owner's proposed use is predicted to put on the public, and the magnitude of the government's demand. Dolan v. City of Tigard, 512 U.S. 374 (1994). In Koontz v. St Johns River Water Management Dist., 570 U.S. 595 (2013), the Court further refined the doctrine by holding that demands for money are subject to the nexus and proportionality requirements as much as demands for land.

The close nexus and rough proportionality requirements were designed to check the government's temptation to use the land use approval process as an opportunity to leverage its power to regulate in furtherance of the public health, safety, welfare, or morals to exact land, money, or other property out of the applicant.

These requirements were motivated primarily by two concerns. First, if the government wants land or other property from an owner, it has the means to do so -- eminent domain, which comes with the requirement to provide the property owner just compensation; it should not use the land use regulatory process to get by regulation for free what it is required to pay for by a compensated taking. Second, there is something unseemly about the government demanding that an owner give up one of her constitutional rights (the right to compensation for a taking of property) as a condition of exercising another constitutional right (the right to make reasonable use of land). The government has no business forcing people into these kind of "money or your rights" choices.

But many lower courts refused to understand how broadly the close nexus and rough proportionality requirements applied, and for the longest time, they were split. Some held that Nollan and Dolan's requirements applied any time the government conditioned land use permits on either a surrender of land or money. Others, like California, held that unless the government was demanding the donation of land, and did so on a case-by-case basis as an exercise of discretion and not as a product of a legislative-imposed ministerial requirement, that nexus and proportionality were not required.

With a longstanding lower court split, the stage was set for Supreme Court review.

California Courts: We Don't Ask Whether The County's $23k Traffic Impact Fee Is Related, or Proportional, to Sheetz's Proposed Home

The facts of the Sheetz case are straightforward. George and Mrs. Sheetz, property owners in unincorporated rural El Dorado County, California, sought a building permit to "build a modest prefabricated house on the parcel, with plans to raise their grandson there" on their residental-zoned land. Slip op. at 3. The County was okay with issuing the permit, but only if Sheetz first paid the County's $23,420 traffic impact fee.

The impact fee was determined by the preset fee schedule in the County's General Plan, and not on a determination that the Sheetz home would increase the County's traffic burdens. California law treats the County's General Plan as legislation. In recent years, the area has seen dramatic growth, with related demands on infrastructure, the County uses the traffic fees to fund improvements to county roads. The rates for the traffic impact fees are fixed, and set by the schedule:

The fee amount is determined by a rate schedule, which takes into account the type of development (commercial, residential, and so on) and its location within the County. The amount is not based on "the cost specifically attributable to the particular project on which the fee is imposed."

Slip op. at 2 (citation omitted).

The General Plan prohibited the County from issuing building permits without collecting the fee, so "Sheetz paid the fee under protest and obtained the permit." Slip op. at 3. He filed suit in state court for a refund, arguing inter alia, that the County's conditioning the issuance of a building permit was an unlawful exaction of money, because the County had not demonstrated either a close nexus between the requested building permit for a "modest prefabricated house" and any additional traffic burdens this use of the property created in the County, or a rough proportionality between the scheduled amount of $23k and those same supposed traffic burdens.

The trial court prohibited Sheetz from asserting the claim. Under California law, the Nollan/Dolan requirements apply only "to permit conditions imposed 'on an individual and discretionary basis[,]'" and do not allow for any kind of judicial inquiry into nexus or proportionality when the condition is imposed on every applicant by broadly-applicable legislation. Slip op. at 3 (citation omitted).

The rule in California (and some other other jurisdictions) is that broadly-applicable rules like this, imposed ministerially on everyone and not individually, are just plain-old land use legislation, to be examined by courts (like zoning regulations) only under the rational basis test. And you know what that means: nearly everything passes muster.

As noted above, other courts went a different way. North Carolina, for example. See slip op. at 4 & n.3, where the opinion lays out a part of the lower court split of authority.

A Regulatory Takings Primer: the Right to Just Compensation and the Police Power "seem more like in-laws than soulmates"

The next portion of the opinion is a worthy read if you want to get an overall flavor of what all nine Justices of the Court think about regulatory takings today. Yes, the theory has been recognized as a federal constitutional doctrine for more than a century, but any insights we get into how the current Justices view the doctrine are going to be helpful. And there are a lot of clues embedded in Justice Barrett's opinion:

• Public Use. The opinion starts off with the idea that "[w]hen the government want to take private property to build roads, courthouses, or other public projects, it must compensate the owner at fair market value." Slip op. at 4. Focus on the examples the opinion lays out. All are "classic" public uses, and the opinion conspicuously avoids citing Kelo, its most recent eminent domain decision, where the project involved taking Kelo's property and turning it over to another private owner. So maybe that omission is a hint that Court would be open to revisiting Kelo's very reviled opinion.
• Takings law spreads the cost. The opinion next lays out the Armstrong rationale: the point of the Takings Clause and the requirement that government "pay for what it takes," is to avoid focusing the cost of public burdens on individual property owners. Id. Good to know that all nine Justices understand the big vibe of both eminent domain and de facto takings.
• De facto takings by over-regulation. Next, the opinion highlights the essential tension behind the regulatory takings doctrine and straight up eminent domain (what the Chief Justice calls an "upfront taking;" see PennEast Pipeline Co. v. New Jersey, 594 U.S. ___ (2021)). The essential question is when does an exercise of regulatory power "go too far" such that it has the same effects on the property owner's rights as an exercise of eminent domain?
• Per se regulatory takings. The Sheetz opinion noted the government's "substantial authority to regulate land use" on one hand, and on the other the various rules the Court has established for when that authority goes too far and triggers the obligation to pay compensation. Slip op. at 4-5. Things like when a regulation physically appropriates property, or "otherwise interfere[s]" with the owner's right to exclude others = easy analysis, compensation always required. 
• Euclid and land-use regulations. But "different rules apply" when government "merely restrict[s] how land is used." Slip op. at 5.
• Substantially advance? You takings mavens can be forgiven for a bit of an inside baseball chuckle for how the opinion lays out those different rules. The Court described the regulatory takings test thusly: "'[T]he Fifth Amendment is violated when land-use regulation does not substantially advance legitimate state interests or denies an owner economically viable use of his land[.]"” Id. (quoting Lucas v. South Carolina Coastal Council, 505 U. S. 1003, 1016 (1992)  (internal quotation marks omitted).
• Whoa!  Has Agins been resurrected? (Recall that in Lingle, the unanimous Court rejected Agins's "substantially advance" standard as a regulatory takings test.) No, we doubt that this was intended to bring back Agins. But this also doesn't seem to be merely a (mis)citation to the takings test as set out in Lucas (1994) before the Court clarified it in Lingle (2005).
• Character of the government action. Instead, we're viewing the Court's recitation of the regulatory takings test that "[a] use restriction that is 'reasonably necessary to the effectuation of a substantial government purpose' is not a taking unless it saps too much of the property's value or frustrates the owner's investment-backed expectations[,]" as meaning that Penn Central's "character of the government action" factor requires that regulation be reasonably necessary for the effectuation of a substantial government purpose." That isn't the rational basis test that many courts currently apply when asking about the character of the government action, is it? If so, this is a major clarification that deserves more attention.  
• Double whoa! Justice Barrett also treats Penn Central as a disjunctive test ("or frustrates the owner's investment-backed expectations"). That's a correct view of the Penn Central test we think, but many (many) lower courts have not received the message and treat it as a "one strike and you're out" (conjunctive) rule and not a series of factors to be weighed by a jury -- where a single factor could be dispositive, but also where failing to convince on a single factor is not an automatic loss. See Hodel v. Irving, 481 U.S. 704 (717) (1987) (proof of a single Penn Central factor alone could be sufficient to show a taking; in the case, "the character of the Government regulation ... is extraordinary"). 
• Very cheeky. The money quote in this part of the opinion might just be Justice Barrett's assertion that the relationship between the police power to regulate the use of property, and private property owners' right to just compensation is "more like in-laws than soulmates." Slip op. at 4. Probably not BFFs, but more like frenemies, Your Honor? We recommend lawprof Josh Blackman's take on this turn of the phrase ("Justice Barrett on the Takings Clause and the Police Power").

On To Exactions...Err "Permit Conditions"

The special application of the takings rules to permit conditions is "more complicated."

The opinion starts off with the premise that if the government can deny a building permit for some "'legitimate police-power purpose,' then it can also place conditions on [a grant of] the permit that serve the same ends." Slip op. at 5 (citation omitted).

[Sidebar: no one has adequately explained to us how the County could condition a building permit -- the classic example of a "must issue" ministerial permit -- on anything but the application's failure to comply with the Building Code. An application for a building permit does not involve any exercise of the government's discretion, at least in our experience.]

Here, if Sheetz's home would "substantially increase traffic congestion," then the County could legitimately condition its approval of the building permit on Sheetz's willingness to pony up land or money for road improvements. This, according to the Court is "the hallmark of responsible land-use policy." Id. (citation omitted). When this situation exists, then the government is within its authority if it tells the owner that it must accept the condition or else no government approvals will be forthcoming.

But (and this is a significant "but"), "[t]he bargain takes on a different character when the government withholds or conditions a building permit for reasons unrelated to its [legitimate] land-use interests." Slip op. at 5-6. (Remember, the County's police power interests here are limited in the Court's view to traffic mitigation.) In such a case, the condition isn't being employed to further the health, safety, or welfare of the public (traffic mitigation), but takes on the character of "an out-and-out plan of extortion[,]" an "abuse of the permitting process." Slip op. at 6 (citation omitted). Show us the money!

After reciting the Nollan "essential nexus" and Dolan's "rough proportionality" requirements, the opinion next noted that the "nexus requirement ensures that the government is acting to further its stated purpose, not leveraging its permitting monopoly to exact private property without paying for it." Id. The rough proportionality requirement serves the same function, but from a slightly different angle: "[a] permit condition that requires a landowner to give up more than is necessary to mitigate harms resulting from new development has the same potential for abuse as a condition that is unrelated to that purpose." Id.

Wait, since when can legislation be subject to more exacting judicial review than the oft-applied rational basis test? After all, California law considers the County's General Plan to be legislation, adopted by a legislative body. Why isn't this treated like other legislation? The opinion stated it succinctly:

Nothing in constitutional text, history, or precedent supports exempting legislatures from ordinary takings rules.

Slip op. at 7.

We're going to emphasize the "takings rules" part of that sentence because it highlights what we've always thought was the problem with the analysis applied by those lower courts which focused on the form or source of the condition (legislative/legislature) rather than the effect the condition had. Perhaps applying the tiers-of-scrutiny method is what is called for when the challenge asks whether a regulation arbitrarily and capriciously interferes with a constitutional right. But the entire Court, it seems, views takings as a independent limitation on the power of government, subject to different rules. 

The opinion next laid out seriatim the "text, history, [and] precedent" to support its conclusion that conditions-from-legislation are to be treated on "equal footing" with every other condition, regardless of source.

• Text. After chiding the framers for the syntax of the Takings Clause ("[t]he Clause ... speaks in the passive voice"), the opinion noted that it "does not single out legislative acts for special treatment. Nor does the Fourteenth Amendment, which incorporates the Takings Clause against the States." Id. On one hand, this seems very noncontroversial. Of course legislation and legislatures are subject to the limitations the Fifth and Fourteenth Amendment place on them. Yet we've had several decades of some lower courts concluding otherwise, mainly because (in our view) they can't get past the form (legislation) to the substance (your money or your rights). 
• History. Legislation was how governments exercised their eminent domain power (today and historically), so "[s]pecial deference for legislative takings would have made little sense historically[.]" Slip op. at 7. This analysis tells us that once regulation is deemed a taking requiring compensation, the entire Court views the regulation as having taken on a different character. Instead of merely regulating property's uses, these regulations require compensation as if the legislature had exercised its eminent domain power, and not its police power.
• Precedent. The opinion noted that "[w]e have applied the per se [physical takings] rule requiring just compensation to both legislation and administrative action." Slip op. at 9. And to regulatory takings. Indeed, in the "big one" (Pennsylvania Coal Co. v. Mahon), the Court held that a Pennsylvania statute went "too far" was was a taking.

The Court also put the Nollan/Dolan test into a larger context, the "unconstitutional conditions" doctrine that covers other areas like free speech, the right to travel freely, and other constitutional rights, noting that in these areas, legislative conditions are regularly challenged. See slip op. at 10.

In sum, there is no basis for affording property rights less protection in the hands of legislators than administrators.The Takings Clause applies equally to both—which means that it prohibits legislatures and agencies alike from imposing unconstitutional conditions on land-use permits.

Id.

The majority opinion summed up by noting the "radical agreement" and the County's oral argument acknowledgement that it agreed with Mr. Sheetz (at least on the Question Presented):

The County no longer contends otherwise. In fact, at oral argument, the parties expressed “radical agreement” that conditions on building permits are not exempt from scrutiny under Nollan and Dolan just because a legislature imposed them. Tr. of Oral Arg. 4, 73–74. The County was wise to distance itself from the rule applied by the California Court of Appeal, because, as we have explained, a legislative exception to the ordinary takings rules finds no support in constitutional text, history, or precedent.

Slip op. at 10.

The Court took no position on whether the County's traffic impact fee has an essential nexus to the Sheetz development, or whether $23 grand is roughly proportional to any traffic his proposal might be responsible for. For this and more, the Court remanded the case. Notably, the Court did not decide whether "a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development." Slip op. at 9-10.

In our next post, we'll cover the three concurring opinions, to thoughts about what Sheetz might mean, and what's on the horizon.

Sheetz v. County of El Dorado, No. 22-2074 (U.S. Apr. 12, 2024)

Sheetz Round-Up

Here's what folks are saying about yesterday's unanimous U.S. Supreme Court decision in Sheetz v. County of El Dorado, where the Court held that impact fees and exactions imposed by legislative action are not categorically immune from the close nexus and rough proportionality requirements already applicable to ad hoc/administratively-imposed exactions under Nollan, Dolan, and Koontz.

• Ilya Somin, "Supreme Court Rules There Is No 'Legislative Exception' to the Takings Clause" (Volokh) ("At oral argument, it seemed like the justices might be interested in going beyond the legislative exception issue, possibly addressing the underlying question of whether the fee imposed in this case was a taking or not. However, the Court chose not to deal with that question, which will now be remanded back to the California state courts for their consideration.")
• Editorial Board, "A Bad Day for Greedy Politicians at the Supreme Court" (Wall St. Journal) ("But Justice Neil Gorsuch wrote in a concurrence that the Court’s Nollan and Dolan tests should apply similarly when “an alleged taking affects a ‘class of properties’” as with a particular development. We tend to agree, and the question may return to the Court. The good news for now is that elected officials can’t extort property developers with impunity")
• Amy Howe, "Court rules for property owner in building fee dispute" (SCOTUSblog) ("In her 11-page opinion for a unanimous court, Barrett explained that nothing in the text of the Constitution indicates that the takings clause does not apply to fees imposed by legislatures. The same is true, she continued, for the history of the takings clause. 'In fact,' she wrote, 'special deference for legislative takings would have made little sense historically, because legislation was the conventional way that governments exercised their eminent domain power.' Nor, she added, do the Supreme Court’s cases interpreting the takings clause distinguish in any way 'between legislation and other official acts.'")
• Charles Gardner and Emily Hamilton, "Opinion: This Supreme Court case from California could ease housing shortages everywhere" (Los Angeles Times) ("When 'impact fees' are unmoored from the increased costs a city or county will incur because of a new house or development, the fees can do more than present someone with an unfair bill — they can also reduce housing construction. In a country where a shortage of homes has led to sky-high prices, this matters more than you might think.")
• Amanda Karras, "Supreme Court Decides Impact Fee Case" (IMLA blog) ("The Court’s narrow ruling was not entirely surprising after oral argument as it noted that the parties agreed on this bottom line holding as the County conceded at oral argument that 'building permits are not exempt from scrutiny under Nollan and Dolan just because a legislature imposed them.' The silver lining was that in reaching this narrow holding, the Court declined to address any other arguments 'including whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development.' In other words, the Court did not rule on Mr. Sheetz's arguments that Nollan and Dolan require local governments to make individualized determinations regarding the impact fees.")

We'll have more, including our own thoughts soon.

Unanimous SCOTUS Delivers A YIMBY Blow: "The Takings Clause does not distinguish between legislative and administrative permit conditions."

This just in: the U.S. Supreme Court has issued a unanimous opinion in Sheetz v. County of El Dorado, a case we've been following (not only because it is one of ours).

The Court, as predicted, held that an exaction (in this case a traffic impact fee) isn't immune from the Nollan/Dolan nexus and rough proportionality requirements merely because the exaction is imposed by legislation.

At heart, this is a very pro-YIMBY decision because it gives property owners and housing builders a path to object to barriers to creating housing and the government's use of the land use approval process as a way of exacting "goodies" that increase housing costs.

While we digest the opinion and the multiple concurring opinions -- we shall post more once we do so -- you can either read the opinions themselves, or see what we thought after the oral arguments. Or both.

Stay tuned.

Sheetz v. County of El Dorado, No. 22-2074 (U.S. Apr. 12, 2024)

Pay To Play? Cal SCT Asked If Challenger Must First Pay A Fee To Object To Zero Water Allocation As A Taking

This one takes a bit of sifting through, but if you do so, you will eventually savor the arguments. Try and follow this thread.

In 2014, pistachio growers with what seemed to be established rights to pump groundwater for irrigation of their trees and who never had to pay fees or were subject to other governmental regulation, were subject to the newly-adopted Sustainable Groundwater Management Act. This statute, designed to manage groundwater, empowers local groundwater agencies to create management plans and the typical things that such regulatory agencies do.

In the course of determining the "sustainable yield" of the groundwater basin that supplies the pistachio growers' water, the local agency purported to determine the rights of various users relative to each other. The agency concluded that "public pumpers" have entitlement to 100% of the native groundwater, the pistachio growers' preexisting water rights notwithstanding. If the pistachio farmers wanted to pump any groundwater, they'd have to pay a "replenishment fee" to be used to purchase nonnative water to import to the area. The fee? $8.5 million. The pistachio growers didn't pay that fee nor had they paid it since 2021, meaning that the cumulative fee is in the neighborhood of $25 million.

The agency acknowledged that turning off the native groundwater taps and making replacement water very expensive would likely result in the demise of large-scale agriculture in the area (including the pistachio farms). So perhaps not surprisingly, the next step was a lawsuit by the pistachio growers challenging the zero allocation of native groundwater as a taking, inter alia. Of special note, the pistachio growers did not challenge the replenishment fee itself (mark that one down for later use -- that fact becomes important).

The trial court dismissed the claim, and in this opinion the Court of Appeal affirmed.

The court held that in order to pursue these challenges, the pistachio growers must first pay the replenishment fee. The court relied on California's "pay first, litigate later" rule -- which requires that in order to challenge a tax or a fee, a plaintiff must first pay the challenged tax or fee.

But wait, you say, you said that the pistachio growers didn't challenge the replenishment fee, right? Yes, we did. But the court held that because the allegedly illegal allocation was made under the authority of the same ordinance that imposed the replenishment fee and that the allocation would indirectly impact the fee charged, the pistachio growers must pay the fee before they could challenge their zero allocation:

As for the physical takings claim (the eleventh cause of action), the [trial] court reasoned that Mojave had not alleged it was in fact physically prevented from extracting water, and thus had not stated a claim.

We agree with respondent court’s analysis. If Mojave had paid the Replenishment Fee in compliance with the “pay first” rule, it could perhaps state a takings cause of action on the theory that the Replenishment Fee makes Mojave’s agricultural operations economically unviable because the fees for extracting groundwater are so high. Perhaps because Mojave has not paid the fee, however, it omitted any reference to the Replenishment Fee from the TAC’s takings claims, instead relying on the other Implementing Actions.

As respondent court correctly concluded, this attempt to escape the previous demurrer ruling fails because the only Implementing Action with an economic effect on Mojave is the Replenishment Fee. Since none of the other Implementing Actions physically prevent Mojave from extracting groundwater or interfere economically with Mojave’s ability to extract groundwater, Mojave’s TAC fails to state a cause of action for a taking.

Slip op. at 35-36.

In other words, the pistachio growers have not suffered an injury unless they pay first. They can still pump groundwater, right?

The growers have now asked the California Supreme Court to take up the case. In their petition, they argue "[t]his Court's guidance is necessary to ensure that overlying water rights holders, otherwise entitled to recognition, priority and protection under the holding of this Court in City of Barstow v. Mojave Water Agency (2000) 23 Cal.4th 1233, 1253 (“Barstow”), may challenge an administrative action that (1) allocates them zero groundwater; (2) establishes an extortionate fee designed to bar challenge; and (3) bankrupts their businesses as a condition of litigating their claims." Pet. at 8.

Here are the Issues Presented:

1. Under the 2014 Sustainable Groundwater Management Act (“SGMA”), may a groundwater sustainability agency (“GSA”) determine law and facts to conclude that an overlying landowners’ correlative water rights are “inferior” to others and allocate them no (zero) groundwater?

2. Does the “pay first, litigate later” rule, California Constitution, article XIII, section 32 (“Pay First Rule”) apply to SGMA fees (or extend to non-fee provisions separately included in the local agency fee ordinance)?

3. If so, does the Pay First Rule immunize local agencies from constitutional takings claims where an agency establishes a usurious fee designed to bar challenge?

Pet. at 7.

Now we wait to see if the court agrees to review the case.

Petition for Review, Mojave Pistachios, LLC v. Superior Court, No. S284252 (Cal. Mar. 19, 2024)

Cal SCT: A Court Deciding Who Wins An Easement Dispute Isn't A Judicial Taking

A short one from the California Supreme Court. In Romero v. Shih, No. S275023 (Feb. 1, 2024), the court was presented with the question of whether Property Owner A had an implied easement over the driveway of Property Owner B.

The court held that easements may be created by implication, and "if there is clear evidence that the parties to the 1986 sale intended for the neighboring parcel's preexisting use of the area to continue after separation of title, the law obligates courts to give effect to that intent." Slip op. at 2. The court remanded for evidentiary findings.

Check out the opinion for all the reasons why.

But for a touch of takings, skip forward to page 28 where the court disposed of Owner B's argument that deciding whether the driveway is subject to an easement worked a judicial taking. First, the court noted that the party "did not raise this issue below and therefore [has] forfeited the objection." Slip op. at 28. A bit of a note here: if indeed an appellate court did change the law such that it could be deemed a taking, then the old raise-it-below-or-lose-it requirement doesn't seem to apply. 

Maybe that's why the court took the belt-and-suspenders approach and also concluded that "the argument is without merit in any event." Slip op. at 29.

The trial court’s implied easement finding did not result in the creation of any new property rights; it instead clarified the respective rights of the neighbors as determined by the intentions of the parties at the time the two adjacent parcels were severed and sold to third parties. (See § 1104 [providing that the implied easement passes at the time of the transfer that divides the grantor’s estate].) In other words, the trial court’s finding means the Romeros purchased the 651 Property subject to the implied easement; their bundle of property rights never included the right to make practical use of the easement’s surface area. This is not a taking. (Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection (2010) 560 U.S. 702, 715 (plur. opn. of Scalia, J.); id. at p. 727 [“And insofar as courts merely clarify and elaborate property entitlements that were previously unclear, they cannot be said to have taken an established property right.”].)

Id.

Romero v. Shih, No. S275023 (Cal. Feb. 1, 2024)

Thinking Outside The Box: Happy Birthday To The Guy Who Coined "Eminent Domain," Hugo Grotius

Hugo Grotius, aka Hugo de Groot,
born this day 441 years ago, April 10, 1583.

Author of the treatise "De Jure Belli et Pacis" (1625) -- perhaps fittingly books about war and peace -- which first used the phrase "eminent domain" to describe the sovereign power to forcibly acquire private property for public use and upon provision
of compensation:

Rights strictly taken is again of two Sorts, either private and inferior, which tends to the particular Advantage of each Individual: Or eminent and superior, such as a Community has over the Persons and Estates of all its Members for the common Benefit, and therefore it excells the former. Thus a regal Power is above that of a Father and Master; a King has a greater Right in the Goods of his Subjects for the publick Advantage, than the Proprietors themselves. And when the Exigencies of the State require a Supply, every Man is more obligated to contribute towards it, than to satisfy his Creditors.

We've covered Grotius before, noting that in addition to his legal work he is famous for having done a "Count of Monte Cristo" thing -- escaping from prison, reportedly by hiding in a chest of books. 

The museum in Amesterdam has one of the boxes which lays claim on being the box. More on that story here.

Did we make it a point to visit that box when we were last in town? You know it, brother.

What's in the box? Hugo Grotius!

"long thought" to be the box...

Happy 441st, Hugo!

Commit To Submit: Call For Papers "Imagining the Future of Regulatory Takings"

Have thoughts about where regulatory takings are (or should be) headed? Here's your chance to get in on the conversation, and to shape the future of the law.

Our outfit, the Pacific Legal Foundation, in cooperation with the Antonin Scalia Law School's Journal of Law, Economics, and Policy, are calling for papers on "Imagining the Future of Regulatory Takings." There will be an in-person discussion of these papers at the Law School in October 2024.

Here's the full description:

A century ago, Oliver Wendell Holmes, speaking for the Supreme Court, assured us that “[t]he general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” In the ensuing one hundred years, courts have struggled to draw the line defining “too far.” Some still wonder whether such a line should even exist. As Justice Clarence Thomas recently said, “If there is no such thing as a regulatory taking, we should say so. And if there is, we should make clear when one occurs.”

To date, many jurists and scholars have argued that the “too far” line is anything but clear. The regulatory takings doctrine is a hodgepodge of balancing and categorical tests alongside a scattered throng of exceptions, with little guidance on which tests or exceptions apply when, much less how to apply them in a principled and consistent manner. There are the categorical tests of Lucas (“total” takings) and Loretto (“physical” takings) and the amorphous balancing tests like the Penn Central ad hoc regime and the threshold “relevant parcel” test. Then there are vexing and unanswered questions about whether some restrictions on property are simply exempted from a takings analysis: When is a property restriction a “background principle” baked into the meaning of property itself as opposed to a restraint on a recognized property right? When, if ever, does a valid exercise of the police power operate outside of takings constraints? And, to top it all off, we still aren’t settled on how to define “property.” Pacific Legal Foundation seeks papers that offer fresh ideas on how to make “too far” more just, more concrete, and more principled. We welcome proposals that look at this problem from legal, economic, political, historical, and related angles, including empirical and nonempirical approaches.

For accepted works there is a $2500 honorarium and an opportunity to publish your work in the Journal. Certain travel expenses to the Law School also will be covered.

Download the full brochure for all the details, including timeline, and a list of possible topics.

Please consider submitting, and joining us in this fascinating enterprise. Find out more here.

Call for Papers: "Too Far: Imagining the Future of Regulatory Takings"

Condo Forced-Sale Statute Is Not A Taking Because It Does Not Allow Picking Off Individual Units, But Requires Sale Of Entire Condo

A quick one from the Arizona Supreme Court that isn't so much a true takings case, but more like "takings adjacent." In our view, it well illustrates the way that takings arguments can shape how statutes are interpreted, even if there isn't a taking.

The case -- Cao v. PFP Dorsey Investments, LLC, No. CV-22-0228-PR (Mar. 22, 2024) -- was shaping up to be more in our area of operations because the Arizona Supreme Court granted review to decide this question (and others):

Either on its face or as applied in this case, does A.R.S. § 33-1228 authorize the taking of private property for private use in violation of Article 2, § 17 of the Arizona Constitution?

Seemed promising. The statute says that when property organized as a condominium regime decides to wind up and abandon the condominium format, the condo association shall sell "all the common elements and units of the condominium."

Here, the condo association did not sell every unit in the condominium (which meant including for sale the units the condo association already owned) but under the purported authority of the above-noted statute, forced the holdout owners individual units who declined to voluntarily sell to the condo association to sell. One of the unit owners' claims was that Arizona's condo wind-up statute is unconstitutional if it allows a condo association to forcibly acquire individual units. That, in the owners' view, would authorize a private-benefit taking in violation of the Arizona and the U.S. Constitutions.

The Arizona Supreme Court concluded that the statute does not work a taking, but did so only because it avoided the issue: at the same time the court held the statute wasn't a taking, it also held that the statute requires sale of all units. Since that does not implicate a private-to-private transfer, the taking problem disappeared. That's not a bad result (and in our view is very consistent with the law of partition), because the most pressing problem with the way the condo association interpreted the statue allowed it to claim that it permitted individual units to be sold piecemeal without also selling off every other unit. A sale of the entire condo would seem to avoid the private-benefit vibe.

In the court's view, the case turned more on freedom of contract (the owners of the forcibly-acquired units had voluntarily agreed via their condo docs to be bound by the statute), than on a private-benefit taking:

The Xias contend that the Association could not have involuntarily sold their unit absent § 33-1228(C), which therefore renders the statute unconstitutional on its face or as applied to them.

¶19 We have no cause to resolve the constitutionality of § 33-1228(C) in other instances because the Association’s power to forcibly sell the Dorsey Place units in this case emanated not from that statute but from contract—specifically, the Declaration that all unit owners signed and to which their property interests were subject. “[P]arties are generally free to contract on whatever terms they choose.” Zambrano v. M & RC II LLC, 254 Ariz. 53, 56 ¶ 1 (2022). Among the terms to which they generally may agree is a waiver of constitutional rights. See State ex rel. Polk v. Hancock, 237 Ariz. 125, 128–29 (2015); CSA 13-101 Loop, LLC v. Loop 101, LLC, 236 Ariz. 410, 411 ¶ 6 (2014).

Slip op. at 7-8. In short, because the plaintiffs had agreed to the requirement to sell, they really didn't have standing to assert a constitutional challenge to the statute itself.

The court held that if the individual unit owners didn't want to be subject to the statute or the sale provision, they could have contracted around it. Slip op. at 9 ("In other words, condominium owners were free to contract around most of the Condominium Act’s provisions. The Dorsey Place Declaration emphatically did not.... In short, the Condominium Act did not effect a taking of the Xias’ property."). We're not sure that's a realistic view of the situation -- these are not exactly adhesion contracts, but the opportunity to negotiate different terms do not seem all that present -- but there it is. Read pages 9-14 of the slip opinion for the statutory-construction rationale the court applied. 

We filed this amicus brief which argued that the condo association's reading of the statute did effect an unconstitutional taking, but also that the statute cannot be read in a way to facilitate an unconstitutional taking. Thus, the only way to interpret the term requiring sale of "all the common elements and units" means all of the common elements, and all of the units. In short, the term "all" modifies both the term "common elements," and "units." We argued the statutory construction rule of constitutional avoidance was best applied here, and compelled a reading of the statute to avoid the private-benefit takings problem embedded therein.

How will other courts faced with this growing issue respond? See, e.g, this situation:  "Their Retirement Plan Did Not Include Being Forced to Sell Their Condo" (New York Times, Feb. 24, 2023) (about a similar situation in Florida).

Stay tuned.

Cao v. PFP Dorsey Investments, LLC, No. CV-22-0228-PR (Ariz. Mar. 22, 2024)

CA9: "Traditional common law rule" That Utilities Bear The Cost Of Relocating From Public Right-of-Way Isn't A Taking

Here's one about Lucas "background principles" of property law, or maybe the Supreme Court's current focus on "history and tradition" when it comes to defining private property for purposes of the Takings Clause. 

In So. Cal. Edison Co. v. Orange County Transp. Auth., No. 22-55498 (Mar. 13, 2024), the U.S. Court of Appeals for the Ninth Circuit affirmed a grant of summary judgment denying a takings claim by a public utility which sought compensation after the County ordered it to move its equipment off of a public right-of-way for a streetcar line at its own expense.

The utility raised a physical takings claim, but the court didn't get to that issue, instead focusing on whether it owned property. The court noted that state law "generally" defines property but, citing Tyler, held that there are certain "traditional property law principles" and "historical practices" about property that no state may alter without compensation.

With that understanding in mind, we consider whether the Utilities have a property interest in maintaining their facilities at their specific locations in the face of OCTA’s efforts to construct a streetcar line. We first examine that question under California property law and then consider traditional property-law principles, historical practice, and precedent.

Slip op. at 9.

The court concluded that the utility never owned the "stick" of compensation for relocation. The court held that "California law does not give the Utilities the property interest that they assert." Id. The court noted a 1958 California Supreme Court decision which held that when a utility "accepts franchise right in public streets," it is subject to an implied obligation to relocate at its own expense when the government wants to use the right of way.

Skip to page 14 of the slip opinion for what we think is the more interesting part: does the California rule that the property rights of utilities in public-rights-of-way do not include recovering relocation costs if the government requires them to move consistent with historical and traditional property rights? The Ninth Circuit relied primarily on a U.S. Supreme Court opinion, Norfolk Redev. & Hous. Auth. v. Chesapeake & Potomac Tel. Co., 464 U.S. 30 (1983), for the notion that "utilities have been required to bear the entire cost of relocating from a public right-of-way whenever requested to do so by state or local authorities."

The Ninth Circuit also noted that this was not a new rule but goes as far back as 1905, and that "for more than a hundred years, utilities have been required to relocate to make way for a government that seeks to vindicate its right to use the streets and enact 'proper regulations in the interest of the public health, morals, and safety.'" Slip op. at 15.

The court also rejected the utility's reliance on City of Los Angeles v. Los Angeles Gas & Electric Corp., 251 U.S. 32 (1919), which held that it was a taking for the city to remove or relocate telephone poles "when necessary." That argument crashed on the shoals of the rational basis test:

we do not read Los Angeles Gas & Electric to invite us to make our own assessment of whether a streetcar line is or is not necessary for Orange County—the California Legislature, after all, believes that the project serves valuable public purposes, and the Utilities offer no reason for us to second-guess that judgment.

Slip op. at 17. In the LA Gas case, the project "apparently lacked any public-facing rationale, and it therefore lost its status of 'governmental.'" Id. The streetcar project here suffered from no such omission as the County had said aloud the magic words that its project was for a public purpose. Thus, "[i]t is a governmental project that fits comfortably within a long tradition of relocations for which franchisees must foot the bill." Id.

Finally, the Ninth Circuit rejected the utility's argument that a California statute assigns the costs for these type of relocations on the government. Check out pages 18-21 for the reasons why.

So. Cal. Edison Co. v. Orange County Transp. Auth., No. 22-55498 (9th Cir. Mar. 13, 2024)

Thursday Round Up: Pretextual Takings, Squatting, Unconstitutional Conditions

Here's what we're reading today:

• Michael Berger, "Is a taking based on pretext constitutional?," Daily Journal (a take on the Second Circuit's recent decision holding that a property owner could not assert a pretext claim where the allegedly pretextual use did not confer a private benefit.
• Christian Britschgi, "Are 'Squatters' Rights' Out of Control?" Reason (the "squatting" issue has roared into the public zeitgeist lately; if you haven't been following it closely, here's a good place to start).
• Remember that case, currently pending the North Carolina Supreme Court, about what remedies are available if a court invalidates a taking, but the condemnor just goes ahead and seizes the property anyway? Here are all the briefs in that case, including our amicus in support of the property owner).
• Levine, Nash & Schapiro, "The Unconstitutional Conditions Vacuum in Criminal Procedure," 133 Yale L.J. 1401 (2024) (in which the authors argue that the unconstitutional conditions analysis (aka Nollan/Dolan) should be applied in situations where criminal defendants are subject to government coercion; it is interesting to see how those outside the Dirt Law bubble view the doctrine).
• Bianchi, Brifkani, Halaby, Huang, "Court rules for PhRMA in challenge to Oregon drug price transaparency law" JDSupra (a breakdown and summary of a recent District Court decision concluding that an Oregon statute that requires the disclosure of trade secrets is a Ruckelshaus v. Monsanto taking; includes a link to the court's opinion).

Check 'em out.

CA1: No Taking When State Banned Possession Of Big Scary Gun Magazines

There's a lot going on in the U.S. Court of Appeals for the First Circuit's opinion in Ocean State Tactical, LLC v. Rhode Island, No. 23-1072 (Mar. 7, 2024), involving a challenge to a Rhode Island statute outlawing possession of certain large capacity gun magazines.

But unsurprisingly, we're going to be most interested in how the court disposed of the takings challenge.

In 2022 Rhode Island added detachable "large capacity magazines" (those capable of holding more than 10 rounds of ammunition) to its existing list of can't-own-or-possess items. If you already owned or possessed one of these things, the law gave you four options: (1) modify the mag so it will hold 10 or less rounds; (2) sell the items to a federally-licensed firearms dealer or someone out of state; (3) give 'em to an out-of-stater (Connecticut gun aficionados, you are in luck!); (4) give 'em to Five-O. There's no payment or compensation, in case you were wondering.

That precipitated a legal challenge which included claims under (predictably) the Second Amendment, the Takings Clause, and the Due Process Clause. The district court denied the plaintiffs a preliminary injunction, and that's how the case ended up before the First Circuit.

That court affirmed the district court's conclusion that the plaintiffs were unlikely to succeed on their takings claim. The claim was framed as a physical taking. The court rejected the argument that Horne and Loretto compelled the conclusion that the statute worked a taking, "no matter the justification for the law." Slip op. at 30. But those cases did not control because the magazine owners "have the option to sell, transfer, or modify their magazines." Slip op. at 31. And "Rhode Island offered to assist ... owners with the safe disposal of their soon-to-be-proscribed weapons." Id.

Nor was there a Lucas taking either:

The only thing they may not do is continue to possess them without modification in the state of Rhode Island. We find this regulation to be the very type of use restriction that property owners must "necessarily expect[] ... from time to time" as states legitimately exercise their police powers.

Id. (citation omitted).

The remainder of the opinion is devoted to whether the plaintiffs were likely to prevail on their Second Amendment and Due Process claims (they fared no better on those claims than on their takings claim).

Ocean State Tactical, LLC v. Rhode Island, No. 23-1072 (1st Cir. Mar. 7, 2024)

Vermont: It Doesn't Matter If Property Owner Realizes That Cashing A Check For Estimated Compensation Waives Public Use Challenge

Under many (most?) state eminent domain schemes, if a property owner withdraws the condemnor's deposit prior to the judgment of condemnation, the owner waives -- or, more technically, forfeits -- the ability to challenge public use and necessity. 

Vermont is no different, and under its statute, waiver is triggered by the owner's "acceptance and use" of a payment:

Except in the case of agreed compensation, an owner’s acceptance and use of a payment under this section does not affect his or her right to contest or appeal damages under sections 511-513 of this chapter but shall bar the owner’s right to contest necessity and public purpose.

19 Vt. Stat. Ann. § 506(c).

The Vermont Agency of Transportation was doing one of those interstate interchange reconstruction projects, and needed some nearby property. After some procedural wrangling about which property owners need to be included in the case, it sent the owners checks, which the owners or their agents deposited. The trial court determined that depositing the checks constituted "acceptance and use" of the payments, and the owners thus waived the owners' public use challenge.

In Agency of Transportation v. Timberlake Associates, LLC, No. 23-AP-059 (Mar. 2024), the Vermont Supreme Court affirmed. Most of the opinion centers on the statutory interpretation question about whether the term "acceptance and use" covers what happened here. Short story: the court held yes, depositing the checks is "use" of the payments:

The noun “use” is defined as, among other things, “the fact or state of being used,” and definitions of the verb form include “to put into action or service . . . avail oneself of,” “to expend or consume by putting to use,” and “to carry out a purpose or action by means of.” Use, Merriam-Webster Online Dictionary, https://www.merriam-webster.com/ dictionary/use [https://perma.cc/ZX52-XHDL]. Depositing a check is a means of “avail[ing] oneself of” a payment. The payment is thereby “put into action or service” because control of the amount paid passes from the issuer of the check to the payee, who gains exclusive access to those funds upon deposit. ... Thus, an interpretation of § 506(c) under which depositing a check is one “use” of a payment is consistent with the plain and ordinary meaning of the term.

Slip op. at 8 (footnote omitted).

The more interesting question to us is whether, notwithstanding the owners' waiver under the statute, "they have a constitutional ... right[] to contest necessity and public purpose ... and the Agency was therefore required to show that they knowingly, intelligently, and voluntarily waived those rights[.]" Slip op. at 12. The court held no, the statute is enough, and even if the owners didn't understand that depositing the Agency checks would trigger waiver under the statute, the notion that ignorance of the law isn't an excuse for compliance. The owners here were also represented by counsel, and the court's judgment included express notice of the statute. "Defendants have identified no basis to conclude that the Agency was required to show knowing, intelligent, and voluntary waiver in order to invoke § 506(c) under these circumstances." Slip op. at 13.

Finally, the court declined to rule on the owners' argument that the statute is unconstitutional "because it is designed to cause involuntary waivers of the constitutional and statutory right to challenge necessity and public purpose." Id. Not raising the issue when perfecting the appeal meant that argument (like the public use challenge itself) was waived. 

Agency of Transportation v. Timberlake Associates, LLC, No. 23-AP-059 (Vt. Mar. 2024)

NY App Div: Yes, We Previously Said This Taking Wasn't For A Public Use, But Now The Condemnor Has A Plan

The New York Supreme Court Appellate Division's opinion in HBC Victor LLC v. Town of Victor, No. 23-01347 (Mar. 22, 2024) marks the second time the issue of whether the Town can seize HBC's property by eminent domain.

The first time out the court shot down the taking, concluding that it lacked a valid public use because the Town did not have a present plan for the property and the resolution of taking did not specify the present purpose other than "redevelopment." And that isn't enough.

As you know, that doesn't mean the end of the line when it comes to eminent domain. As we often used to counsel clients when we did this stuff, beating back a taking on public use grounds just educates the condemnor about the shortcomings. Unlike other civil litigation, there's no res judicata (sorry kids, that's what we still call it) in eminent domain, and a condemnor committed to the cause can keep trying and trying until it gets it right. Here's an example of that.

After being rebuffed, the Town gave it another go. Instead of just saying it was taking the property for "redevelopment" and not identifying a future use, the second time around it said it was taking the property for redevelopment and turn over to tenants who claim they will make better use than the present owner:

Inasmuch as one of the Town’s stated public purposes is to facilitate an economic redevelopment project that would permit the vacant and underutilized property to be turned into space appropriate for lease to an international department store and a grocer, both of which have expressed interest in becoming tenants, we conclude that the Town met its burden of establishing a legitimate public purpose for the condemnation (see Penney Prop. Sub Holdings LLC, 220 AD3d at 1171).

Slip op. at 2. That was good enough for the court because it met the very low standards applicable to public use challenges: "any" use which might contribute to the public health, safety, or welfare. Id. 

True, that wasn't what the Town said when it first tried to take the property, but the owner's prior successful challenge made it realize the error of its ways:

Although the Town initially stated at the public hearing that it had not yet determined what it would do with that portion of the property, the Town subsequently narrowed its public use in its determination and findings to a “community and recreation center space to provide for and enhance the Town’s public services” as part of creating a “vibrant, sought-after retail, community and recreation destination” on the property.

Slip op. at 3.

For good measure, the Town threw in its intent to "use a portion of the building for an 11,000-square-foot community and recreation space[.]" Id. That is "a viable public purpose[.]" Id.

The court also made short work of the owner's claim that the private-to-private transfer made the taking suspect. This is New York, and in New York "it is well settled" that the taking from A to transfer the property to B is just fine, as long as the transfer is part of a redevelopment plan. Finally, the court rejected the owner's claim that there was no plan. Recall that in Kelo, the U.S. Supreme Court "Euclid-ized" public use by concluding that the private redistribution of property by eminent domain was ok as long as it was part of an "integrated development plan"

It is further argued that without a bright-line rule nothing would stop a city from transferring citizen A’s property to citizen B for the sole reason that citizen B will put the property to a more productive use and thus pay more taxes. Such a one-to-one transfer of property, executed outside the confines of an integrated development plan, is not presented in this case. While such an unusual exercise of government power would certainly raise a suspicion that a private purpose was afoot, the hypothetical cases posited by petitioners can be confronted if and when they arise. They do not warrant the crafting of an artificial restriction on the concept of public use.

The Town's plan here was its comprehensive plan (you know, the zoning thing). As you land users know, most of these municipal general plans (hat tip Professor Haar) contain generalized statements of long-term goals for land use within the jurisdiction. Pie-in-the-sky sometimes, other times very parcel specific. Which causes us to ask: are any proposed uses incompatible with a general plan?

HBC Victor LLC v. Town of Victor, No. 23-01347 (N.Y. App. Div. Mar. 22, 2024)