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Tex App: "Property" Includes Right To Rent It Out - City's Short-Term Ban May Be A Taking

Here's a must-read from the Texas Court of Appeals (Second District).

In City of Grapevine v. Muns, No. 02-19-00257 (Dec. 23, 2021), 

Before 2018, the city's 1982 zoning ordinance authorized "single-family detached dwellings" and didn't say anything about short-term renting (short-term being defined as less than 30 days). The ordinance didn't expressly authorize it, but it didn't prohibit it either. The ordinance was one of those that say anything not expressly authorized is prohibited. Bed and breakfast operations were recognized in a 2000 amendment, but these operations require, among other things, that the owner live on-site.

But after the introduction of platforms such as AirBnB and VRBO, the short-term market "exploded" and the usual complaints from neighborhood residents followed. Slip op. at 6 ("criminal mischief, domestic disputes, parking violations, alarm calls, and noise disturbances"). Next came studies, public hearings, and the city's assertion that it didn't really need to amend the ordinance to prohibit short-term renting because it was already prohibited by virtue of it not being expressly allowed.

But despite the city's lawyer's protestations that "the Zoning Ordinance had always prohibited STR's," slip op. at 7, the city council adopted an ordinance that barred renting property for less than 30 days. According to the city, this wasn't so much of a new bar, as an ordinance that "simply clarified and affirmed" that city law never allowed short-term renting. Slip op. at 7.

The city informed STR operators that after the expiry of a 45 day grace period, no more STR-ing upon pain of a NOA, a criminal record, and an up-to $2k fine. Lawsuit followed.

In October 2018, the Homeowners sued the City, seeking declarations that the STR Ordinance is unconstitutional because it (1) is a regulatory taking of their property without compensation; (2) violates their due-course-of-law rights under the Texas Constitution; (3) is impliedly preempted by Chapter 156 of the Texas Tax Code alone or in combination with Chapter 92 of the Texas Property Code; and (4) deprives the Homeowners of their vested rights to continue their STRs, in violation of Chapter 245 of the Texas Local Government Code. The Homeowners also sought to enjoin the City from enforcing the STR Ordinance.

Slip op. at 9 (footnotes omitted). The trial court issued the requested TRO. Later, the property owners amended the complaint to allege unconstitutional retroactivity "and to add a regulatory-takings claim for compensation or for a specific recoupment period."  Slip op. at 10 (footnote omitted). The takings claim was made under the Texas Constitution, and not (also) the U.S. Constitution.

The trial court denied the city's motions for summary judgment and to dismiss, and the city appealed.

The court of appeals first rejected the city's argument that the zoning ordinance always prohibited STR's. Not so: the court concluded that city zoning permitted leasing of "single-family detatched dwellings," and that the ordinance doesn't define family as related by blood or marriage. Nor does the ordinance establish any duration requirement. Slip op. at 25.   

Next, the court addressed the takings claim. Jump to page 28 of the slip opinion for the court's analysis. The threshold question - do the owners possess "property" subject to takings protection? - is often a tripwire for plaintiffs. But not here. Now before we get into this part of the opinion, you'd think that the answer to "does the plaintiff own 'property?'" question would be obvious. Does the plaintiff own a property that she is renting out for less than 30 days? If so, there you go. But the city argued that the property interest was the right to continue to operate STR's, and that "the Homeowners have no vested right to a particular use of their property." Slip op. at 29.

The court rejected the argument, and even though "a property owner generally has no vested right to use his property is a certain way without restriction ... the Homeowners do have a property interest in the properties themselves." Slip op. at 29 (citations omitted). In short, property ownership comes with the vested right to use it, rent it, live in it, and that kind of thing:

Because the Homeowners have a vested property interest in the properties themselves and claim that the City has unreasonably interfered with their rights to use and enjoy their properties by passing the STR Ordinance, we conclude that they have identified a property right sufficient at this stage to allege a regulatory-takings claim. We further note the unremarkable and well-established notion that private-property ownership is a fundamental right, see Hearts Bluff, 381 S.W.3d at 476, that embraces such “essential attributes” as “the right to use, lease[,] and dispose of it for lawful purposes[.]” 

Slip op. at 30-31 (quoting Terrace v. Thompson, 263 U.S. 197, 215 (1923)).

Let's get that again: ownership of the property comes with the "fundamental" right to rent it. No need to show more, such as a "vested" right under state law. That should be an unremarkable proposition. But to many courts, it isn't.

The court also summarily rejected the city's claim that the STR ordinance wasn't the cause of any taking. The city recycled the argument that the STR ordinance didn't really do anything because the city's existing zoning ordinance already banned STR's because it didn't expressly allow them. Slip op. at 32 ("The Homeowners respond that this argument fails because the Zoning Ordinance allowed 'leasing unrestricted by duration.' We agree, having concluded above that the Zoning Ordinance permitted STRs.").

Having established that the plaintiffs possess "property," the court considered the Texas takings claim. Texas takings law incorporates the Penn Central test.

• Economic impact. "[L]ost profits are a relevant factor to consider in assessing the property's value and the severity of the economic impact on a property owner." Slip op. at 33. The fact that owners may rent their properties for more than 30 days and that their properties' value has increased since time of purchase are not controlling. "[T]he Homeowners did not base their economic-impact allegations on decreased market value." Slip op. at 34. Instead, they asserted the ordinance prevents them from participating in the STR market. The owners not only pleaded this sufficiently, in response to the city's motion for summary judgment, they introduced actual evidence of economic impact (an appraiser who testified that over a 10-year period, "the combine potential gross-rental difference between typical market rents for long-term versus short-term leases for the Homeowners' properties exceeded $4.2 million." Slip op. at 34.
• Distinct investment-backed expectations. "[A] property's existing and permitted uses constitute the affected property owner's 'primary expectation.'" Slip op. at 35 (citation omitted). This includes historic uses, "regulations at the time of purchase," as well as knowledge of these existing regulations. 
• Character of the government action. What "character of the government action?" The opinion doesn't address this Penn Central factor at all. To that we say good (take a gander at this (starting at page 1153) if you want to know why we say so).

On the remaining the claims, the court agreed with the city only on one: that state law did not preempt the city's ordinance. See slip op. at 38-41. (If you are a Texas muni law maven, you may want to check out this part of the opinion.)

The entire opinion is worth reading. Especially the part with the court's analysis of the owners' "due course of law" claim:

Nevertheless, although the Homeowners do not have a vested right arising under the Zoning Ordinance to use their properties as STRs, we conclude that they have a fundamental leasing right arising from their property ownership. Private property ownership is a fundamental right. Hearts Bluff, 381 S.W.3d at 476 (citing Severance v. Patterson, 370 S.W.3d 705, 709 (Tex. 2012) (op. on reh’g)); Severance, 370 S.W.3d at 709 (“Private property rights have been described ‘as fundamental, natural, inherent, inalienable, not derived from the legislature[,] and as pre-existing even constitutions.’” (quoting Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 140 (Tex. 1977))). Property ownership includes the right to lease to others. See Calcasieu Lumber Co. v. Harris, 13 S.W. 453, 454 (Tex. 1890) (“The ownership of land, when the estate is a fee, carries with it the right to use the land in any manner not hurtful to others; and the right to lease it to others, and therefore derive profit, is an incident of such ownership.”); see also Terrace, 263 U.S. at 215, 44 S. Ct. at 17–18 (noting that “essential attributes of property” include “the right to use, lease[,] and dispose of it for lawful purposes”). The right to lease is a stick within a property owner’s metaphorical bundle of rights. See Emily M. Speier, Comment, Embracing Airbnb: How Cities Can Champion Private Property Rights Without Compromising the Health and Welfare of the Community, 44 Pepp. L. Rev. 387, 395–97 (2017).

Given the nature of real-property rights, we conclude that the Homeowners have a vested right to lease their properties and that this right is sufficient to support a viable due-course-of law claim. Cf. Zaatari, 615 S.W.3d at 191 (concluding that, in analyzing retroactivity claim, property owners had a “settled interest” in their right to lease their properties short term and that the issue is not about the “property owners’ right to use their property in a certain way,” but about the owners “retaining their well-settled right to lease their property”); Vill. of Tiki Island, 463 S.W.3d at 587 (holding that, in analyzing whether an STR owner had proved an irreparable injury to a vested right necessary to support an order temporarily enjoining an ordinance banning STRs, STR owner had a narrow vested right to continue operating existing STR after city passed ordinance banning STRs but grandfathering in existing STRs).

Slip op. at 47-48.

While it is not a final, definitive ruling concluding the ordinance is a taking, the opinion rejects the city's argument that the claim cannot be presented to the trier of fact. And that's okay, because living to fight another day is a victory in most takings cases, this one included.

City of Grapevine v. Muns, No. 02-19-00257-CV (Tex. App. Dec. 23, 2021)

Join Us For 100 Years Of Pennsylvania Coal (Pace Land Use Conference, Dec. 8, 2023)

22nd annual Alfred B. DelBello Land Use
and Sustainable Development Conference

Come, join us (and others) on Thursday-Friday, December 7-8, 2023, at Pace Law School in White Plains, New York for the Land Use and Sustainable Development Conference (this year’s conference theme is "Balancing Economic Realities with Environmental and Social Concerns").

We're speaking about the 100th anniversary of the modern regulatory takings doctrine, which got its start nearly 101 years ago with the Supreme Court's opinion in Pennsylvania Coal Co. v. Mahon, where the Court held that property may be regulated, but if the regulation "goes too far," it will be deemed a taking.

Here's a description of the program:

The 100th Anniversary of Pennsylvania Coal vs. Mahon: How the Takings Clause Became the Primary Check on Government Power When SCOTUS Abandoned Review Under the Due Process and Contracts Clauses During the New Deal

The Takings Clause and 100 years of the Pennsylvania Coal v. Mahon doctrine have become the primary check on governmental power that the Due Process and Contracts Clause used to serve, before the Supreme Court finally and formally abandoned judicial review under those doctrines during the New Deal. Mahon transcended its primary relevance as to compensation for the taking of private property to become the fundamental means by which the Rule of Law determines of the individual’s relation with the government.

This session will survey the evolution of takings law and assess its impact on federal, state and local government authority, including not only the limits of that power over private property, but how the law as created by Mahon reconciles the essential issue of an individual’s private rights as they relate to the government’s exercise of authority in the public interest. This ambitious session will predict where these trends are taking us and what constitutional, legislative, and executive initiatives should be considered.

Carole N. Brown, Esq. Professor of Law, University of Richmond School of Law
Dwight H. Merriam, Esq., FAICP, Attorney at Law
Robert H. Thomas, Esq., Joseph T. Waldo Visiting Chair in Property Rights Law, William & Mary Law School and Director, Property Rights Litigation, Pacific Legal Foundation
Gregor I. McGregor, Esq., Founding Partner, McGregor Legere & Stevens PC
Moderator: Carolynne C. White, Esq., LEED AP, Brownstein Hyatt Farber Schreck, LLP

Should be a good (and fun) program. The other programs on the agenda are also very worthwhile (we shall be attending the entire day). Registration information and the complete agenda and speaker list here.

Please stop by and say hello if if you are there.

(Un)Happy 97th Birthday, Euclid!

On this day in 1926, the United States Supreme Court issued its landmark opinion in Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (Nov. 22, 1926).

You know this one (shame on you if you don't!) - it is the case in which the Supreme Court first upheld -- against a facial due process challenge -- the validity of this thing we call "zoning." While in the intervening century, zoning has become a catch-all term for regulatory restrictions on the uses of real property, land users know that "zoning" -- ackshually -- refers only to the regulation and separation of uses, and restrictions on density, and height regulation.

While "Euclid" and "Euclidean zoning" have become part of the land use lexicon and landscape, the decision might have been seen at the time as somewhat surprising. After all, the Supreme Court was in the height of the so-called Lochner era, when it might have been expected to get the legal vapors over these type of restrictions on economic liberty and property. In an era when the Court was more aggressively policing the police power, for it to uphold, even generally, the validity of zoning restrictions, might not have been expected. And perhaps even more surprisingly, the opinion was authored by none other than Justice George Sutherland, one of the notorious Four Horsemen who would later regularly vote to invalidate similar New Deal legislation.

But Sutherland and the Court went the other way on this "zoning" thing, applying what later became known as the rational basis standard of review. Fairly debatable? Who are we, mere judges, to say otherwise?

What accounts for that? Some have noted that the "Bettman Brief," a late-filed amicus (submitted after oral argument) on behalf of the National Conference on City Planning and others, held sway. The dots are not that difficult to connect - much of the language and imagery in the Euclid opinion such as the "parasitic" nature of (horrors!) apartments -- comes straight out of the Bettman brief. And it also isn't that hard to connect the dots between a facially-neutral tool of exclusion like zoning, and the Supreme Court's then-recent rejection of express racial discrimination in local land use regulations (we're talking Buchanan v. Warley, 245 U.S. 60 (1917)).

But despite those roots, with a few hiccups along the way -- a mere four year later, pretty much the very same Court held in Nectow v. City of Cambridge, 277 U.S. 183 (1928) that, as applied to a specific parcel, Euclidean zoning was arbitrary and capricious and violated a property owner's rights, with the very same Justice Sutherland authoring the opinion -- zoning has been widely accepted around the nation (except, most notoriously, in Houston), with the courts doing little to stand in the way.

These days, however, there's a renewed focus on Euclid and zoning's troublesome roots. Thus, our title's "un" headline. But even as we reckon with that history, zoning chugs along towards the century mark.

Let's see what the next three years might bring. In the meantime, we're going to recognize Euclid's birthday. Whether it is a happy one is subject to change.

 

It is literally a landmark decision.

Brief on Behalf of the National Conference on City Planning, et al., Vill. of Euclid v. Ambler Realty Co.,...

Here's The Program For The 41st ALI-CLE Eminent Domain And Land Valuation Litigation Conference, Feb 1-3, 2024, New Orleans

Here's the brochure and the full agenda and registration information for the upcoming ALI-CLE Eminent Domain and Land Valuation Litigation Conference at the JW Marriott in New Orleans, February 1-3, 2024.

This is the long-running nationally-focused conference on all things eminent domain, takings, valuation, and related. We have three tracks, from which you can choose a la carte - Practice, Substantive, and Condemnation 101:

For over 40 years, we’ve been bringing eminent domain practitioners together to examine the latest issues, engage in healthy debate, and get the information they need to stay current in their practice. This year – our 41st – is THE perfect time to reunite with your eminent domain colleagues. There will be plentiful opportunities to meet and mingle with the faculty and other registrants – throughout the conference and at evening social events. Attendees come back year after year to make new friendships and renew longstanding ones – in a welcoming environment and amongst others who share the same passion for this area of the law.

Please check it out. Over the next couple of weeks we shall bring you details of the various programs.

If you have joined us in the past, you know what a worthwhile conference this is. If this will be your first time, welcome; we hope that you will become a long-term colleague.

Register now, and reserve your spot. In the past few years, we've sold out the hotel block and the Conference seats. So don't miss out!

2024 ALI-CLE Eminent Domain and Land Valuation Litigation Conference Brochure, Feb. 1-3, 2024, New Orleans,...

Alabama: Banning Short-Term Rentals Is Constitutional (PS - "the Alabama Constitution does not recognize regulatory-takings claims")

A quick one from the Alabama Supreme Court. In Dixon v. City of Auburn, No SC-2022-0741 (Oct. 27, 2023), the court rejected a property owner's claim that the city outlawing short term rentals of residential properties -- when the plaintiff had been renting his basement for a while -- was not a violation of the Alabama Constitution.

The court rejected the argument that Dixon's use was a nonconforming use or vested right, and concluded that his right to do so was not so because he had no legal right to rent out his property before the STR ordinance. The court rejected his claim that in the absence of regulations limiting that right, he could rent short term, because the zoning code prohibits any uses not expressly allowed. Slip op. at 10.

And here's the interesting bit. Although Dixon styled one of his claims as "an 'unlawful taking without just compensation'" under Alabama law, slip op. at 7 n.4, the court noted that the substance of the claim sounded in due process. The court also noted in the same footnote that "in Town of Gurley v. M & N Materials, Inc., 143 S. 3d 1 (Ala. 2013), a  majority of this Court concluded that the Alabama Constitution does not recognize regulatory-takings claims, and the trial court relied upon Gurley in entering summary judgment as to [the "just compensation" claim]." Id.

The footnote goes on: "Dixon has not asked this Court to revisit Gurley, and, therefore, to the extent that Dixon attempted to present a takings claim under the Alabama Constitution, the trial court's summary judgment as to that claim must be affirmed." Id.

This sure sounds like if the court were presented with an argument that Gurley is wrong (we're not scholars of Alabama constitutional law, but we're betting it is wrong and that you can bring a claim under the Alabama Constitution for just compensation for a taking), the court just might entertain overruling or at least revisiting it.

So heads-up Alabama property lawyers, here's your mission if you choose to accept it.

Dixon v. City of Auburn, No. SC-2022-0741 (Ala. Oct. 27, 2023) (per curiam)

CA10: Absence Of Restrictions On Land Uses Isn't A Due Process Property Right

In Van Sant & Co. v. Town of Calhan, No. 22-1190 (Oct. 13, 2023), the U.S. Court of Appeals for the Tenth Circuit considered the claim of the operator of a mobile home park who asserted a due process property right to instead use its property as a RV park. Here's why the court said no.

Van Sant was using its property as a mobile home park. It decided to use its land instead as a RV park. Turns out that the local municipality doesn't much care for RV parks -- or at least the way that Van Sant was going to use its property -- so the Town shifted from a regime that didn't regulate RV parks to a regime that prohibited or tightly controlled RV parks on certain lands (lands that looked an awful lot like Van Sant's). And to cap it off, the Town's new regulations treated the two other existing RV parks as nonconforming uses, allowing them to operate.

Van Sant sued, alleging the usual (takings, due process, and equal protection), and some unusual (Sherman Act) claims. The district court granted the Town summary judgment.

We'll let you review how the Tenth Circuit dealt with the Sherman Act claim yourself (short story: summary judgment affirmed). See slip op. at 26-38. Instead, we'll focus on the due process claim (Van Sant abandoned its takings claim by filing an amended complaint in the district court which removed the previously-alleged claim). Short due process story: summary judgment in the Town's favor affirmed.

The court's analysis focused on the primary question in these kind of cases: does the plaintiff possess a "property" right which it cannot be deprived of without (substantive) due process? The court held no. It rejected the owner's claim that the right to continue to use its property in the way it had been is some kind of fundamental right.

This question turned on whether the Town had discretion to deny the use:

This means Van Sant “must show that under the applicable law,” Calhan and its Board “had limited discretion” to adopt ordinances that placed limitations on, or effectively regulated, Van Sant’s ability to operate its land as an RV park. Id. “Otherwise, the city’s decisionmaking lacks sufficient substantive limitations to invoke due process guarantees.”

Slip op. at 30 (citations omitted).

The Town didn't have any discretion, argued Van Sant, because the Town had no regulations or restrictions on using land for an RV park. See slip op. at 41 (Van Sant argues that “Calhan did not have any discretion over Van Sant’s decision in 2015 to begin renting space to RVs because there simply were no procedures to follow and no restrictions in place.”). But wait, Van Sant wasn't actually using its land as an RV park when the Town adopted the anti-RV park restrictions, it intended to.

It isn't material that it wasn't actually making the use, Van Sant argued in response, what matters is that it could have because the Town "did 'not have formal zone districts' or 'a formal process for reviewing applications to develop property into an RV park.'" Id. It may be one thing to say that an owner doesn't have a fundamental right to use land when there's some discretionary restrictions on that use, and another thing to say that in the absence of regulation that an owner can't use its land in any way that isn't injurious to its neighbors.

The court rejected the argument:

In sum, Van Sant appears to be asserting that because Calhan did not have any RV park regulations in place prior to October 19, 2018, Van Sant had a fundamental right to both convert and operate its property as an RV park and to continue operating its property as an RV park without any future regulations imposed on it by Calhan.

Id.

No deal, the court concluded. There's no Colorado statute that recognizes such a property right, which is also not a product of the Colorado Constitution. Nor did Van Sant have a vested right to use its land as an RV park, because it never sought a building permit and thus could not have reasonably relied on that kind of governmental assurance. "We therefore agree with the district court that Van Sant has failed to establish that a fundamental right is at stake here." Slip op. at 43. 

Having concluded that no fundamental right was at stake, the court dropped the tiers-of-scrutiny analysis: "[t]hat means that we apply only rational basis review to Calhan's passage of Ordinance 2018-13." Slip op. at 43. And we don't have to tell you what that means, do we?

Van Sant & Co. v. Town of Calhan, No. 22-1190 (10th Cir. Oct. 13, 2023)

CA7: When Pleading A Diversity-of-Citizenship State Takings Claim In Federal Court, It Helps To Allege The Plaintiff's Citizenship

A really quick one from the U.S. Court of Appeals for the Seventh Circuit.

In Willow Way, LLC v. Village of Lyons, No. 22-1775 (Oct. 5, 2023), the panel held that the plaintiff/property owner did not sufficiently plead federal diversity of citizenship jurisdiction over his state law takings claim.

After providing notice, the Village demolished Willow's dilapidated house, which the Village deemed a nuisance. Willow instituted a federal court lawsuit, alleging violation of the U.S. Constitution's Due Process Clause, and an Illinois law inverse condemnation claim. Federal subject matter jurisdiction was based on a federal question (due process) and supplemental (Illinois takings claim). The district court dismissed the due process claim, and declined to continue to exercise supplemental jurisdiction over the state law takings claim.

What about diversity of citizenship jurisdiction?, Willow argued at the Seventh Circuit oral argument. Sure, why not, responded the panel. The court "invited Willow Way to propose an amended complaint with the necessary allegations." Slip op. at 3. You know the necessary allegations are the citizenship of the parties, and an amount in controversy.

Willow Way tried: "[i]t tendered such a complaint[.]" Id. But sadly (for it), the amended complaint "is as deficient as the original." Id. 

The sole jurisdictional allegation in the proposed amended complaint reads: “Jurisdiction rests with this Court pursuant to 28 U.S.C. §§1331, 1332(a), 1343 and 1367.” Not one word about Willow Way’s citizenship (or that of the Village) nor any allegation about the amount in controversy. Elsewhere the complaint avers that Willow Way’s sole member is Stonecrest Realty Management, LLC, whose sole member is Jon O. Freeman, a citizen of California. The Village is a citizen of Illinois, see Moor v. Alameda County, 411 U.S. 693 (1973), though the complaint does not allege this. Paragraph 5 of the proposed amended complaint alleges that Willow Way bought the parcel in July 2016 for $111,350, and ¶52 alleges that it was sold at auction on March 23, 2021, for $25,446.90. The difference between these prices is roughly $86,000, which Willow Way believes meets the $75,000 jurisdictional minimum.

The problem with this submission is that a change in price over five years differs from injury caused by demolition of the house. The structure was razed in February 2020, about four years after Willow Way bought the parcel and about a year before it was sold. The Village is not liable for a change in the market price of real estate or a decline in the value of a house while it was standing empty. Cf. Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) (distinguishing transaction causation from loss causation). The question is whether the demolition caused loss exceeding $75,000.

Slip op. at 4.

We even made it clear we wanted you to "pay particular attention to the value of the parcel immediately before and after the demolition," noted the court. Id. But no deal: "[y]et Willow Way's supplemental filing and proposed amended complaint do not pay the slightest attention to the before-and-after valuation. Complaints need not be accompanied by expert reports, but their jurisdictional allegations must at least address the right question." Id. 

You can lead a horse to water Your Honors, but you can't make it plead properly.

Willow Way, LLC v. Village of Lyons, No. 22-1775 (7th Cir. Oct. 5, 2023)

Backing Into Williamson County Again - CA6: We Already Said That State Officials Sued Individually For Compensation Have Qualified Immunity

The Sixth Circuit these days. Lots of property and takings-related stuff being decided in that court. See here, here, here, here, here, and here for some examples.

The latest is O'Connor v. Eubanks, No. 22-1780 (Oct. 6, 2023), in which an unsigned panel opinion (with concurrence of Judge Thapar in the result, but not in the reasoning), held that state officials sued in their individual capacities have qualified immunity from takings claims which seek just compensation. But are not similarly immune from procedural due process claims.

Short story: O'Connor was the payee on two checks that were delivered to his property. Apparently he got neither, so the payors turned the checks over to the State of Michigan, which treated them as unclaimed property.

Michigan's unclaimed property statute moves fast. It requires that the State, after first publishing notice, to sell or liquidate the property within 3 years if there's been no claim by an owner. The monies are deposited into the State's general fund, less admin costs. The owner can't then get the actual property back, but has a claim for the proceeds. The statute accounts for interest, "but only if their property accrued interest before the State took custody of it." Slip op. at 3.

O'Conner filed a claim to obtain the proceeds. The State paid him, but did not include interest. He claimed he is entitled to interest, and for the State to keep the interest is a taking requiring just compensation. O'Connor also claims the State did not provide his proper notice.

The Sixth Circuit summarily affirmed the dismissal of the takings claim because state officials sued in their official capacities have qualified immunity. The panel based its decision on recent circuit precedent (see this post for more on that). Here's the entirety of the opinion on that issue:

The Fifth Amendment’s Takings Clause provides that “private property” shall not “be taken for public use, without just compensation.” U.S. Const. amend. V. In his complaint, O’Connor alleges that the officials violated the Takings Clause. But under circuit precedent, Eubanks and Stanton are entitled to qualified immunity on these claims. See Sterling Hotels, LLC v. McKay, 71 F.4th 463, 468 (6th Cir. 2023). Earlier this year in Sterling Hotels, we held that individual liability for takings claims is not “clearly established.” Id. (“[N]o court in this circuit had yet decided whether an officer could be liable for a taking in his individual capacity . . . and at least one case suggested the contrary.”) (citing Vicory v. Walton, 730 F.2d 466, 467 (6th Cir. 1984)). Thus, we granted qualified immunity to an official sued in his individual capacity. Id. Because Eubanks and Stanton are also being sued in their individual capacities for takings claims, they are entitled to qualified immunity under Sterling Hotels.²

--------

²  O’Connor attempts to distinguish this case from Sterling Hotels, but the latter sets a clear rule: qualified immunity bars individual liability for takings claims under 42 U.S.C. § 1983^.

Slip op. at 4.

O'Connor also raised a takings claim against the State of Michigan itself, but we know where this one headed: that's right, the Eleventh Amendment has been interpreted as prohibiting a state from being sued for money in federal court, unless the state consents or there is no remedy in state court.

Thus, the panel Williamson County-d it, and held that O'Connor could sue Michigan in Michigan's courts under the unclaimed property statute which recognized a claim for unclaimed funds. Thus, "a remedy is available in state court." Slip op. at 7/

By contrast, the Sixth has not previously decided the same issue in a due process claim, so the panel concluded that interest is "property," and that the complaint alleged that O'Connor was provided "no process" at all (an allegation the defendants did not deny (choosing instead to argue O'Connor has no right to process). Thus, the state officials sued in their individual capacities do not have qualified immunity. Slip op. at 6.

On to Judge Thapar's concurring opinion. We suggest you read the entire opinion, which begins on page 8. It's not long. His bottom line: the defendants here "are off the hook for O'Connor's takings claim [because of circuit precedent as noted above]. But in the future, our circuit can and should permit takings claims against officials." Slip op. at 8 (Thapar, concurring).

The concurring opinion focused on the history:

Thus, in the early decades of our republic, lawsuits against officials were a viable remedy for takings. Indeed, because states enjoyed sovereign immunity, suits against officials were among the only takings remedies for most of the nineteenth century.

Slip op. at 11 (Thapar, concurring).

Judge Thapar also recognized that the Catch-22 that property owners who have federal just compensation claims against a state find themselves in does look awfully familiar:

If that doesn’t give us enough reason to reconsider Vicory, its combined impact with DLX should. When a state official takes someone’s property without compensation, two obvious defendants come to mind: the official who committed the taking, and the state. Yet our precedent forecloses suits against either defendant in federal court. Vicory prevents claims against officials. And DLX bars claims against the state in federal court. Skatemore, Inc. v. Whitmer, 40 F.4th 727, 734 (6th Cir. 2022) (citing DLX, 381 F.3d at 526–28). Thus, unless there’s a municipality to sue, plaintiffs must litigate takings claims in state court.

If this rule sounds familiar, that’s because it’s not new. It’s a version of the “state-litigation” rule. More importantly, it’s a rule the Supreme Court deemed “wrong” and “exceptionally ill” just four years ago. See Knick, 139 S. Ct. at 2178. In Knick, the Court rejected the idea that a plaintiff had no remedy in federal court until a state court denied him compensation. Id. at 2179. To hold otherwise, the Court noted, would “relegate[] the Takings Clause to the status of a poor relation among the provisions of the Bill of Rights.” Id. at 2169. Indeed, the Justices have repeatedly recognized that the state-litigation rule is “at odds with the plain text and original meaning of the Takings Clause.” Arrigoni Enterp. v. Town of Durham, 136 S. Ct. 1409, 1409 (2016) (Thomas, J., dissenting from denial of certiorari). So we should stop enforcing it.

To be sure, our precedent doesn’t impose a state-litigation rule in so many words. But together, DLX and Vicory get us pretty close. Unless a municipality is available as a defendant—and as this case shows, that’s not always the case—plaintiffs are stuck litigating in state court. At best, plaintiffs can sue the state in federal court if remedies aren’t available in state court. See Skatemore, 40 F.4th at 734. But Knick expressly rejected that kind of arrangement: “The availability of any particular compensation remedy . . . under state law, cannot infringe or restrict” an owner’s right to pursue a remedy in federal court. 139 S. Ct. at 2171. The Supreme Court shattered the state-litigation rule in Knick. Our circuit shouldn’t piece it back together with Vicory and DLX.

Slip op. at 11-12 (Thapar, concurring).

Stay tuned.

O'Connor v. Eubanks, No. 22-1780 (6th Cir. Oct. 6, 2023) (per curiam)

New Takings Cert Petition: The Right To Exclude Is A Fundamental Right Isn't It?

To us, one of the strangest things in constitutional law is the conclusion that although private property is a fundamental right for purposes of the Just Compensation Clause, it isn't fundamental for purposes of the Due Process Clause. When your private property is taken you must be provided compensation. But when you are deprived of property, all you get is rational basis review. But both "property" and "private property" are right there in the text of the Constitution. How can courts conclude that a property right isn't fundamental?

Doesn't compute for you either?  The lower courts are indeed all over the place on this one. Check out cases like this one, and compare the reasoning to cases like this one.

Last week, our firm filed a cert petition asking the Supreme Court to take up the issue. The case involves property owners' Due Process challenge to the City of Seattle's ordinance that forbids owners from considering a prospective tenant's criminal history when deciding whether to let that person occupy rental property.

This one is one of ours, so we won't be commenting on it in any detail. But here's the Question Presented:

The City of Seattle’s “Fair Chance Housing Ordinance” declares it unlawful for private property owners to consider a prospective tenant’s criminal history when deciding who may occupy their property—even though criminals are substantially more likely to reoffend in and around their residences. The Ordinance bans such consideration regardless of the gravity of an applicant’s crimes, the number of convictions, the time since the last conviction, or other indicators that the applicant poses a risk of harm to an owner’s family or other tenants, and the Ordinance furthermore subjects owners to massive civil penalties for considering that history when selecting tenants. The City exempts itself and other public housing providers from these restrictions.

Chong and MariLyn Yim own a triplex in Seattle. As is often necessary in housing-deprived cities nationwide, the Yims and their three children shared their living and intimate spaces with tenants—they live in one unit and rent the other two. The Ordinance deprived the Yims of their fundamental right to safeguard their home, to keep dangerous convicted criminals out of their property, and of their obligation to protect their children and their tenants.

The question presented is:

Does Seattle’s restriction on private owners’ right to exclude potentially dangerous tenants from their property violate the Fourteenth Amendment’s Due Process Clause?

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

Petition for Writ of Certiorari, Yim v. City of Seattle, No. 23-239 (U.S. Sep. 26, 2023) by RHT on Scribd

New Cert Petition: "It is Time to Recognize the Judicial Takings Doctrine"

Interested in the intriguing question of whether a court ruling can "take" property? If so, check out the latest cert petition on the issue.

Let's start with the Questions Presented:

1. Is a state supreme court able to "side-step" the just compensation requirement of the Fifth and Fourteenth Amendments by simply removing preexisting property rights of owners to real property?

2. Is the North Carolina Supreme Court’s decision in holding that an established right of private property no longer exists a taking in violation of the Fifth and Fourteenth Amendments to the United States Constitution?

3. Is the North Carolina Supreme Court’s grant of title and ouster of property rights without payment of just compensation a violation of the due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution?

You remember the last time that the Supreme Court ventured into this area, it wasn't exactly a satisfying result, although we got a bizarre analogy from Justice Scalia, and we personally got a law review article out of it.

This latest petition argues that the North Carolina Supreme Court altered the state's property law in a case that started off as what appears to be a rather run-of-the-mill ownership and trespass dispute between the Kisers and Duke Energy over a retaining wall on the bed of Lake Norman.

The alleged judicial taking occurred when the North Carolina Supreme Court affirmed a trial court's order that concluding the Kiser property is subject to an easement in favor of Duke Energy:

Under the Trial Court Order, property went not from A to B, but from A to C without compensation and foreclosed any economic benefit in the Kiser Lake Parcel. App.48a. This is a taking on every conceivable level. Sunset Keys cannot build on the Kiser Lake Parcel, it cannot collect rents and it cannot exclude others. The entire bundle of sticks that represents property interests were removed by the Trial Court
Order.

Pet at. 18.

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

Petition for a Writ of Certiorari, Kiser v. Duke Energy Carolinas, LLC, No. (U.S. Sep. 18, 2023)

New Cert Petition: California's Escheat Procedures Cheat Due Process (And Take Property To Boot)

Here's the cert petition, recently filed, which asks the Supreme Court to review the California courts' decision that the state's "unclaimed property" statute  -- by which the State is able to grab billions of dollars of private property on the theory that the owners abandoned it. The statute requires the State to try and locate the owners, but the petition alleges the procedures do not provide adequate notice to the owners, and that the State doesn't really try all that hard to tell them.

Here are the Questions Presented:

1. Whether the Controller’s actions under color of the California Unclaimed Property Law, Cal. Civ. Proc. Code §§ 1300, et seq. (“UPL”), violate the Due Process Clause of the Fourteenth Amendment because they deprive owners of their property without affording constitutionally adequate notice.

2. Whether the Controller’s actions under color of the California UPL violate the Takings Clause of the Fifth Amendment because they take private property without just compensation.

This issue was left open by the Supreme Court's recent decision in Tyler v. Hennepin County, which held that the government keeping excess funds after a tax foreclosure sale was a taking, and rejected the County's argument that the homeowner had abandoned the excess by failing to pay her property taxes. The Court noted that for property to be deemed abandoned, the government must, at the very least, make some kind of process available for the owner to reclaim it that is reasonably designed to let them actually reclaim it:

The County portrays this as just another example in the long tradition of States taking title to abandoned property. We upheld one such statutory scheme in Texaco. There, Indiana law dictated that a mineral interest automatically reverted to the owner of the land if not used for 20 years. 454 U. S., at 518.

...

“It is the owner’s failure to make any use of the property”—and for a lengthy period of time—“that causes the lapse of the property right.” Texaco, 454 U. S., at 530 (emphasis added). In Texaco, the owners lost their property because they made no use of their interest for 20 years and then failed to take the simple step of filing paperwork indicating that they still claimed ownership over the interest.

Tyler, slip op.at 13-14.

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

Petition for Writ of Certiorari, Hashim v. Cohen, No. 23-195 (U.S. Aug. 29, 2023)

Owners' Counsel Toby Prince Brigham Scholarship - Applications Being Accepted

Two years ago, Owners' Counsel of America endowed a scholarship in the name of its founder, property rights advocate and trial lawyer Toby Prince Brigham (1934-2021). The scholarship is for a second- or third- year law student to attend the annual three-day ALI-CLE Eminent Domain and Land Valuation Litigation Conference (the upcoming Conference will be in New Orleans, Louisiana, February 1-3, 2024).

The Conference affords the Scholar an all-expenses-covered opportunity to meet and network with leading property rights and eminent domain lawyers from across the country, while also learning about property law and practice. 

Here's the official description from OCA:  

In honor of Toby’s legacy of professionalism and achievement, in 2021 OCA established the Toby Prince Brigham OCA Scholarship to pay for all expenses of a second or third year law student to attend the ALI-CLE Eminent Domain conference and associated OCA events held annually in January. This unique scholarship affords the student the opportunity to learn about the substantive law of eminent domain and property rights, while also meeting and networking with the leading lawyers in these practice areas from across the country. This is what the very first Toby Prince Brigham OCA scholar, Nina Sawaya, had to say about her experience:

“Thank you Owners’ Counsel of America for the opportunity to meet and learn from the nation’s leading eminent domain and property rights lawyers. While I gained significant knowledge of the substantive law, I also learned about the importance of character as a practitioner. The OCA members taught me that you can be a strong attorney for your client, while still maintaining respect for your opponent. Learning about Mr. Brigham’s commitment to inclusion inspired me to remain true to my core values, while achieving my professional goals. The entire experience was one I will never forget!”

If you are a law student with an interest in applying for this scholarship or know of someone who may be, please contact Leslie Fields, Executive Director of OCA at o[email protected] or 303-806-5155. Applications are due by October 3, 2023. 

More here, from OCA.

Toby Prince Brigham OCA Scholarship Brochure (2023)

CAFED: Just Because The Govt Seized Property As Evidence Doesn't Mean It Can Keep It Without Compensation

Here's the latest in an issue we've been following.

Let's say the government thinks you have committed a crime (or someone else has). To investigate, it seizes property as evidence or potential evidence. But after things wrap up and it no longer needs the property as evidence, the government doesn't return it to its owner. Taking or no taking?

Some courts say it could be a taking. Others say no.

In Jenkins v. United States, No. 22-1378 (June 28, 2023), the U.S. Court of Appeals for the Federal Circuit said maybe. Or at least it isn't not a taking simply because the government was lawfully exercising its police power. And if there may be open questions about the whether the owner sought recovery of the property through available procedures or outright abandoned it, then a court entering summary judgment for the government isn't right.

Most of the facts of the case are clear: the DEA thought Jenkins was "involved in a drug conspiracy." In the course of its investigation, it seized two vehicles registered to Jenkins' mother, but used exclusively by Jenkins. It towed the vehicles to a private impound lot and put a "hold" on them (as the court noted, "[i]t is not entirely clear what a 'hold' is, but the parties appear to agree that it had the effect of giving the government control over the vehicles and preventing the impound lot from doing anything with the vehicles, such as selling the cars without the government's authorization.").

Jenkins eventually pled guilty to a drug charge and got a sentence of 252 months (21 years). "On October 21, 2013, between Mr. Jenkins’ guilty plea and his sentencing, the government contends that the hold on the vehicles was released." Slip op. at 3. The impound lot wrote to the titleholder (mom), telling her that if the accumulated fees were paid, the cars could be reclaimed. Mom said she never got this notice. Jenkins never got any notice at all, and the government didn't do anything to let him know beyond telling him in the underlying criminal case that he could go pick up the vehicles. And finally, the lot sent another (final) notice to mom to come get the cars in 10 days, or we're going to consider them abandoned. Mom "did not receive the letter because she was incarcerated." Slip op. at 4. Yikes. 

Jenkins had actual notice apparently, and tried to get the government to give back the cars under a special procedure available in criminal cases (Fed. R. Crim. P. 41(g) if you are interested). But even though the government told him that the cars were available in the impound lot and the court dismissed as moot Jenkins' separate claim that the government was wrongfully holding his cars (because the government indicated it was going to give back the cars), apparently the cars had been sold and the proceeds kept by the impound lot "apparently at least in part to satisfy towing and storage charges." Id. (

Next up, a Little Tucker Act physical takings claim in the district court. Yes, Little Tucker Act because these were used cars, not Sonny Crockett high-profile drug dealer cars. Jenkins threw in a due process claim for good measure and sought damages as a remedy for that. The district court dismissed the due process claim because there's nothing that allows you to get damages against the federal government for due process violations, and granted the government summary judgment on the takings claim on the basis that the cars were seized and retained by a valid exercise of police power (yes, we know the federal government arguably doesn't have general police powers, but work with us here), and there can be no takings claim in these situations. 

The appeal was transferred from the regional circuit (CA8) to the Federal Circuit (you CFC/CAFED mavens understand that process), which disagreed with the dismissal of the takings claim.

First, it made short work of the district court's rationale. Having a valid reason for the seizure and keeping does not insulate the government from takings liability:

The district court held that there was no takings liability because the government’s action was a lawful exercise of the police power. In this respect we think the district court erred. To be sure, as the government points out, we have consistently held that the government is not liable under the takings clause for property seizure during a criminal investigation or for damage to such property in its custody, even if the decrease in value renders the property essentially worthless. None of these cases, however suggests or even considers whether the police power exception immunizes the government from liability for failing to return property legally seized after the government’s need to retain the property ends.

While the United States’ police power may insulate it from liability for an initial seizure, there is no police power exception that insulates the United States from takings liability for the period after seized property is no longer needed for criminal proceedings. In this respect, we agree with the Third Circuit in Frein v. Pennsylvania State Police that “[t]hough valid warrants immunize officers who stay within their scope, they are not blank checks,” and once criminal proceedings have concluded the government “needs some justification” to retain the property without compensation. 47 F.4th 247, 252–53 (3d Cir. 2022). Even when the initial seizure and retention of property is properly done pursuant to the police power, the police power does not insulate the government from liability for a taking if the property is not returned after the government interest in retaining the property ceases. The district court erred in concluding that the legitimacy of the initial seizure precluded liability for failure to return the property.

Slip op. at 8-10 (footnotes omitted).

A good lesson, and one that many courts have not learned.

But that wasn't enough to send the case back, and the Federal Circuit concluded the factual record was not developed enough for the district court to make a decision, such as did the government retain the cars itself or did it surrender them to the impound lot? See slip op. at 11. Did the government notify Jenkins of his ability to recover the cars in a Rule 41 proceeding? And what about that "hold," and whether Jenkins abandoned the cars. Slip op. at 13. And finally, was the impound lot the agent of the government when it sold the cars? Slip op. at 14.

So this one is not over. And by the way, the Federal Circuit affirmed the due process dismissal, kind of: "The theory is that an illegal exaction occurred when and if the government transferred the cars to the impound lot. Mr. Jenkins’ problem is that while his pro se complaint generally alleged a due process violation, it nowhere asserted an illegal exaction theory. The district court did not err in dismissing this due process claim for lack of jurisdiction. However, on remand Jenkins may seek leave to amend to assert an illegal exaction claim." Slip op. at 16. 

Jenkins v. United States, No. 22-1378 (Fed. Cir. June 28, 2023)

CA6: We Haven't Already Said Individual Govt Officials Can Be Liable For Takings, So They're Immune

In Sterling Hotels,LLC v. McKay, No. 22-1345 (June 22, 2023) the U.S. Court of Appeals for the Sixth Circuit considered whether a hotel could sue a state elevator inspector who barred the hotel from operating its elevators for reasons the state's Elevator Safety Board had not approved. As a result, the hotel couldn't rent rooms on five of its six floors. 

Federal complaint -- including a takings claim against the inspector in his individual capacity -- followed. The district court declined to address whether the inspector had qualified immunity from the takings claim. Next stop, Sixth Circuit.

Did the inspector violate the hotel's "clearly established constitutional rights" and thus not enjoy immunity? Nope:

Sterling next argues that McKay engaged in an unconstitutional regulatory taking when he sealed the elevators. At the time of the alleged taking, however, no court in this circuit had yet decided whether an officer could be liable for a taking in his individual capacity—which is the capacity in which Sterling sued McKay here—and at least one case suggested the contrary. See Viceroy v. Walton, 730 F.2d 466, 467 (6th Cir. 1984) (“Plaintiff cites no case, and we can find none, that suggests that an individual may commit and be liable in damages for a ‘taking’ under the Fifth Amendment”). McKay’s potential individual liability for a regulatory takings claim was not clearly established when he sealed the elevators. That means McKay is entitled to qualified immunity on this claim.

Slip op. at 5.

So can a government official be liable for a taking in his individual capacity? Still don't know. But until the Sixth Circuit or the Supreme Court says yes, then the answer is going to be no. Or at least you can't sue for that. At least not in the Sixth Circuit.

The story isn't over completely, however, because the hotel also asserted a procedural due process claim that it was entitled to notice and a chance to be heard before the inspector tagged the elevators. On this, the Sixth Circuit agreed this right is clearly established, and the inspector enjoys no immunity. See slip op. at 5.

Sterling Hotels, LLC v. McKay, No. 22-1345 (6th Cir. June 22, 2023)

CA5 Makes Short Work Argument That Asserting A Rational Basis For A Short-Term Rental Ban Is Enough To Secure Pleadings Dismissal Of Arbitrary And Capricious Challenge

In this very short (but apparently published) opinion, the U.S. Court of Appeals held that it was not right to dismiss a claim on the pleadings and that factual development is warranted, even where the complaint alleges that a municipal land use ordinance is arbitrary and capricious, and the city claims it has a rational basis for the ordinance.

And when we say "short," we mean it. Here's the entirety of the opinion:

Plaintiffs here appeal the Rule 12(b)(6) dismissal of their complaint alleging that the City of New Braunfels’s zoning regulation banning short-term rentals of residential properties in certain areas of the city is unconstitutional. The district court ordered dismissal by approving a few conclusory paragraphs in the magistrate judge's recommendation. This court’s relevant case law, however, indicates that some factual development may often occur in these cases, and that summary judgment may often follow. See, e.g., Mahone v. Addicks Util. Dist., 836 F.2d 921, 935–37 (5th Cir. 1988). We make no prediction on the future course of this case, but based on the complaint’s well-pled allegations, plaintiffs are entitled to engage in discovery in an attempt to surmount the currently high bar for challenging local zoning ordinances under the Constitution.

VACATED and REMANDED.

One judge dissented, but didn't file an opinion.

[Before we go on, this disclosure: our law firm filed this amici brief in support of the property owners.]

This is a substantive due process challenge (yes, you read that right) to the city's ban on short-term rentals in residential areas. The district court, adopted the recommendation of the magistrate who as noted above, dismissed because "the Court need not use its imagination to conceive of the way zoning ordinances preserve the nature of a city center or understand a community member's concerns; these are scenarios that already exist." Recommendation at 14. Yes, it is arbitrary to draw a line between short and longer term rentals, but "[t]his complaint is irrelevant under rational basis review because municipalities must draw the line somewhere." Id. at 15. 

The Fifth Circuit made short work of that, concluded that some facts may be relevant to the question, and that the plaintiffs are entitled to have their day in court. Or at least engage in some discovery, Texas style.

If only more courts would do this at the pleadings stage. Instead, in land use and constitutional property cases, courts often act as gatekeepers by dismissing cases under Rule 12(b) if they deem pleadings not to have a likelihood of success on the merits, or by applying an overly-deferential standard of review, effectively shielding these type of cases from juries or other finders-of-fact.

Marfil v. City of New Braunfels, No. 22-50908 (5th Cir. June 16, 2023)

New Just Comp Cert Petition: Is Due Process Property Just Compensation Property?

A new cert petition to check out. We don't need to explain it much, because the petition does a good job of it.

Here's the Question Presented:

New York State redevelopment agency seized, via eminent domain, a large tract of real estate occupied by an existing building in downtown Brooklyn for redevelopment. The building, partially used for office space, included a useable basement of over 13,000 square feet, which had a government-issued certificate of occupancy. During eminent domain proceedings, the lower court ignored the certificate of occupancy’s determination of a usable basement as a valued property interest.

The question presented is:

1. Are government-issued attributes of private property (e.g., certificates of occupancy, building permits, business permits) entitled to constitutional protection under the Fifth Amendment when they are seized under the government’s eminent domain power, just as they are presently entitled to constitutional due process protection under the Fourteenth Amendment?

Follow along on the Court's docket here.

Petition for Writ of Certiorari, Pacific Carlton Dev. Corp. v. New York State Urban Dev. Corp., No. 22-1149...

Unanimous SCOTUS: "state law cannot be the only source" Of Property Rights, And "traditional property law principles" As Enforced By The Takings Clause Play A Role

We'll be rendering to unto Caesar, but first we must
decide: classic or creamy?

That was quick: it seems like it was only yesterday -- or maybe more accurately, less than a month ago -- that we were listening in live to the Supreme Court as it heard arguments in Tyler v. Hennepin County, No. 22-166, our law firm's case which argues that Hennepin County's keeping the excess equity in Ms. Tyler's home over what she owed in property taxes and fees is an uncompensated taking of private property and also violates the Excessive Fines Clause.

This morning, the Court issued this unanimous opinion authored by Chief Justice Roberts (again proving he's the Court's "property guy"), in which the Court held that the County's seizing Ms. Tyler's condo to satisfy her tax debt and then "keeping the change" is a taking. It's a relatively short opinion with no dissents and a very short two-Justice concurring opinion laying out some thoughts on the Excessive Fines theory (which the majority avoided, see slip op. at 14 ("Because we find that Tyler has plausibly alleged a taking under the Fifth Amendment, and she agrees that relief under “the Takings Clause would fully remedy [her] harm,” we need not decide whether she has also alleged an excessive fine under the Eighth Amendment.")). 

We're not going to comment too much on this decision, because this is one of our firm's cases. But before we post what others are saying about it, we do have a few highlights to point out.

• As noted in this post's title, perhaps the most significant and interesting part of the opinion is the passage of page 4 and 5, where the Court finally gets to a question that we've been asking for a while: is state law the exclusive source of property law and property rights? True, state law can recognize more interests as property, but it cannot recognize less. Here's what the unanimous Court has to say about the issue:

The Takings Clause does not itself define property. Phillips v. Washington Legal Foundation, 524 U. S. 156, 164  (1998). For that, the Court draws on “existing rules or understandings” about property rights. Ibid. (internal quotation marks omitted). State law is one important source. Ibid.; see also Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection, 560 U. S. 702, 707 (2010). But state law cannot be the only source. Otherwise, a State could “sidestep the Takings Clause by disavowing traditional property interests” in assets it wishes to appropriate. Phillips, 524 U. S., at 167; see also Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U. S. 155, 164 (1980); Hall v. Meisner, 51 F. 4th 185, 190 (CA6 2022) (Kethledge, J., for the Court) (“[T]he Takings Clause would be a dead letter if a state could simply exclude from its definition of property any interest that the state wished to take.”). So we also look to “traditional property law principles,” plus historical practice and this Court’s precedents. Phillips, 524 U. S., at 165–168; see, e.g., United States v. Causby, 328 U. S. 256, 260–267 (1946); Ruckelshaus v. Monsanto Co., 467 U. S. 986, 1001–1004 (1984).

• Thus, although Minnesota law has statutorily ipse dixited its own property law to define the excess equity as not property, the courts are not bound by the state's view of what constitutes compensable (i.e., Fifth Amendment "private") property, if "[h]istory and precedent say otherwise." Slip op. at 5. The government may have the the power to require you to pay property taxes, and the power to sell your home to exact those taxes if you fail to voluntary pony up, "[b]ut it could not use the toehold of the tax debt to confiscate more property than was due." Slip op. at 6
• OK, Chief, we get that before you ascended to the bench, as an advocate you argued Tahoe Sierra, and that you prevailed in that case. And we dig that you cite it for some good language. See, e.g., slip op. at 6 ("By doing so, it effected a “classic taking in which the government directly appropriates private property for its own use.” Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U. S. 302, 324 (2002) (internal quotation marks and alteration omitted). Tyler has stated a claim under the Takings Clause and is entitled to just compensation."). But come on man, you repped the government in that case! Retconning your own work only goes so far and let's just say that Tahoe Sierra isn't the best authority when you need to cite cases for property rights propositions. (But as long as you keep writing good property owner opinions as a judge, we're not going to complain too much.)
• After establishing the principle that state law cannot exclusively define the term "private property" as used in the Fifth Amendment and that history and tradition and what Justice Thurgood Marshall called "core" or "normative" property principles are part of it, the Court took a dive into history "at least as far back as Runnymeade in 1215" and the Magna Carta. Check out pages 6-9, where the opinion concludes that there is a "consensus that a government could not take more property than it was owed[.]"
• Court next rejected the County's argument that the issue was settled in Nelson v. City of New York, 352 U. S. 103 (1956), where the Court rejected a "belated" argument that the city keeping the excess equity was a taking (the owner had, until arguments in the Supreme Court, limited its arguments to due process and equal protection claims). There, unlike the County's procedure here, the taxpayer could have availed himself of a procedure to recover the surplus. But the County has no similar process, and there's "no opportunity for the taxpayer to recover the excess value; once absolute title has transferred to the State, any excess value always remains with the State." Slip op. at 11.
• The Court also rejected the County's "constructive abandonment" argument, which went like this: Ms. Tyler impliedly abandoned her property when she failed to timely pay her property taxes. The Court held no, an owner must do more than neglect to pay her taxes. This isn't akin to situations in which the Court has found abandonment, such as where owners fail to make any use of their property. Here, the "keep the change" statute "gives no weight to the taxpayer's use of the property. Indeed, the delinquent taxpayer can continue to live in her house for years after falling behind in taxes, up until the government sells it." Slip op. at 14.
• Armstrong Batsignal:

The Takings Clause “was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong, 364 U. S., at 49. A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed. The taxpayer must render unto Caesar what is Caesar’s, but no more.

• The Court also made short work of the County's argument that Ms. Tyler lacked standing because "she did not affirmatively 'disclaim the existence of other debts or encumbrances' on her home worth more than the $25,000 surplus." Slip op. at 3. The Court concluded that (a) none of these assertions were in the record, but even if there are such encumbrances, she still plausibly alleges a financial harm because even if the tax sale extinguishes other liens on the property, Ms. Tyler remained personally liable to the other lienor. And "[h]ad Tyler received the surplus from the tax sale, she could have at the very least used it to reduce any such liability." Slip op. at 4.
• We were really wishing for a citation to Barron v. Baltimore, 32 U.S. 243 (1833) as a way of signaling more on the "where does property come from" issue, but were sadly disappointed. Not too much, mind you. Just a bit.

More to come as the analysis and commentary rolls in.

Tyler v. Hennepin County, No. 22-166 (U.S. May 25, 2023)

No Class: CA6 Rejects Class Certification For Home Equity Theft Takings Case

We're not going to dwell too much on the U.S. Court of Appeals' opinion in Fox v. Saginaw County, No. 22-1265 (Apr. 28, 2023), because even though it is a case involving the "home equity theft" takings issue argued at the Supreme Court last week, this one tells us more about civil procedure than takings. 

The Fox case is a class action, and several of the defendant counties may engage in the practice of seizing property and liquidating it to satisfy a tax debt (and then keep any excess), but they didn't do it to the lead plaintiff Mr. Fox.

The district court held that the class action could proceed, but the Sixth Circuit said no: Fox may have standing to assert the one county that kept his equity has taken his property, but has no standing to assert claims against the other governmental defendants because those defendants did not injure him, and he could not bring claims "on behalf of absent parties against a defendant who had not harmed the plaintiff." Slip op. at 2-3.

There's some neat stuff in the opinion worth reviewing, even if you are not all that interested in class action and civil procedure law. Such as a very concise summary of the home equity theft "scheme" (as the court labels it on page 4) and the judicial and legislative responses to arguments that the government keeping the excess equity after satisfaction of a tax debt is a taking.

For you civ pro mavens, the issue was one of standing and the "juridical link" doctrine:

Fox says, he has standing to sue the 26 other Counties as a representative of the class. If 26 landowners with property in each of the 26 other Counties had joined Fox’s suit, each landowner would likely have standing to sue his or her respective County in the same way that Fox has standing to sue Gratiot County. See Daves, 22 F.4th at 542. So whether these 27 plaintiffs could litigate as a group would raise a joinder question under Federal Rule of Civil Procedure 20(a), not a standing question under Article III. In the same way, Fox argues, whether he may sue the other Counties turns on Rule 23, not Article III.

A circuit split exists over this doctrine. The Seventh Circuit has held that named plaintiffs may bring a class action against some defendants who did not injure them if the class members would have standing and if the named plaintiff can meet Rule 23’s requirements. Payton, 308 F.3d at 678–82. The Second Circuit, by contrast, has held that the named plaintiffs must have standing to sue every defendant at the outset, even when they seek to certify a class. See Mahon, 683 F.3d at 63–66; see also Wong v. Wells Fargo Bank, 789 F.3d 889, 896 (8th Cir. 2015).

Slip op. at 10.

Check it out if you're interested.

Fox v. Saginaw County, No. 22-1265 (6th Cir. Apr. 28, 2023)

Tyler SCOTUS Takings Argument Round-Up

Our Pacific Legal Foundation Property Rights Litigation Tyler team,
and Counsel of Record Christina Martin (second from right)

Here are your links to the buzz about Tyler v. Hennepin County, No. 22-166, our law firm's case which argues that Hennepin County's seizure of Ms. Tyler's condo and then keeping the excess equity over what she owed in property taxes and fees, is an uncompensated taking of private property, and also violates the Excessive Fines Clause.

• Transcript and audio recording of the oral arguments.
• Kelsey Reichmann, Grandma who lost her house to debt finds high court sympathy (Courthouse News Service)
• Lawprof Ilya Somin, Unusual Cross-Ideological Agreement in Tyler v. Hennepin County (Volokh Conspiracy)
• Steve Osunsami, Laura Romero, Dr. Mark Abdelmalek, Doug Vollmayer, Supreme Court takes on what critics call predatory tax foreclosure practice (Good Morning America)
• Amy Howe, Justices appear likely to side with homeowner in foreclosure dispute (SCOTUSblog)
• Mark Sherman, Supreme Court seems to favor woman who got $0 in condo sale (Associated Press)

More on the way. Stay tuned.

Today's Takings SCOTUS Oral Argument Transcript And Recording: Tyler v. Hennepin County

Coffee is for closers.
(Yes, we were up and at the desk at 4 a.m. local time
to listen live. We just needed a direct injection of coffee.)

Here is the transcript, and the audio recording of today's U.S. Supreme Court arguments in Tyler v. Hennepin County, No. 22-166, our law firm's case which argues that Hennepin County's keeping the excess equity in Ms. Tyler's home over what she owed in property taxes and fees, is an uncompensated taking of private property, and also violates the Excessive Fines Clause.

We will bring you the analysis of the arguments and the pundits' predictions in a subsequent posts. But for the time being here these are in case you missed out listening live. Stay tuned.

Transcript, Tyler v. Hennepin County, No. 22-166 (U.S. Apr. 26, 2023)

More SCOTUS Takings Previews (Argument Tomorrow, 10am ET)

Tomorrow, Wednesday, April 26, 2023, at 10:00 a.m. Eastern Time, the U.S. Supreme Court will be hearing oral arguments in Tyler v. Hennepin County, No. 22-166, our law firm's case which argues that Hennepin County's keeping the excess equity in Ms. Tyler's home over what she owed in property taxes and fees, is an uncompensated taking of private property, and also violates the Excessive Fines Clause.

Listen to the arguments live, here.

We posted some preview links earlier this week here. But wait, there's more!

• Amy Howe, Court to hear dispute over confiscated condo title and sale (SCOTUSblog).
• George Will, The county seized her condo, sold it and kept all the money. Not nice. (Washington Post).
• Anthony Francois, Nancie Marzulla & John Bursch, Courthouse Steps Preview: Tyler v. Hennepin County (Federalist Society) (video)
• Perry Cooper, Seized Home Sold for Profit Set for Supreme Court Consideration (Bloomberg Law)
• Cases & Controversies Podcast, Supreme Court Abortion Dispute, Ethics Sage Intesify (includes PLF attorney David Deerson on Tyler) (Bloomberg Law)

Stay tuned.

SCOTUS To Weigh In On Due Process In Civil Forfeiture

The Court has already started loading up next Term's property rights docket, with last week's grant of this cert petition.

Before we go further, a disclosure: our law firm colleague Deborah La Fetra filed an amicus brief urging the Court to grant review. Thus, we're not going to be taking a deep dive into the issues, but will leave that to others. Luckily, lawprof Ilya Somin (as is often the case) beat us to the punch, analyzing the issues in "Supreme Court Decides to Hear Important Asset Forfeiture Procedural Property Rights Case" at the Volokh Conspiracy. Check it out.

Here's the Question Presented:

In determining whether the Due Process Clause requires a state or local government to provide a post seizure probable cause hearing prior to a statutory judicial forfeiture proceeding and, if so, when such a hearing must take place, should district courts apply the "speedy trial" test employed in United States v. $8,850, 461 U.S. 555 (1983) and Barker v. Wingo, 407 U.S. 514 (1972), as held by the Eleventh Circuit or the three-part due process analysis set forth in Mathews v. Eldridge, 424 U.S. 319 (1976) as held by at least the Second, Fifth, Seventh, and Ninth Circuits.

Will we be following along as the case progresses? Of course. Or you can follow the Court's docket here.

Petition for a Writ of Certiorari, Culley v. Marshall, No. 22-585 (cert. granted Apr. 17, 2023)

Get Ready For SCOTUS Takings Arguments (Wednesday, April 26, 2023)

Take a deep dive into the arguments and amicus briefs

This Wednesday, April 26, 2023, the U.S. Supreme Court will hear oral arguments in Tyler v. Hennepin County, No. 22-166, our law firm's case which argues that Hennepin County's keeping the excess value in Ms. Tyler's home over what she owed in property taxes and fees, is an uncompensated taking of private property, and also violates the Excessive Fines Clause.

Here are links to programs, summaries, and events to help you understand the arguments and issues, as well as registration for post-argument analysis:

• The Supreme Court Takes Up ‘Home-Equity Theft’ - Wall St. Journal. An op-ed by our Pacific Legal Foundation colleague Christina Martin, Counsel of Record for the property owner and arguing counsel.
• Deep Dive and Amicus Review: Tyler v. Hennepin County - the recording of last week's PLF webinar previewing the arguments, and focusing on the myriad amici briefs which have been filed. Click here, or wat. All briefs are posted on the Court's docket page here.
• The same day as the arguments at 2pm Eastern Time, the Federalist Society will hold a "Courthouse Steps" program, at which Ms. Martin will provide her thoughts on the arguments. Register here.
• For those of you in the Beltway, at 4:30pm Eastern Time on the day of argument, PLF will host "Home Equity Theft at the Supreme Court," an in-person program at the Top of the Hill Banquet & Conference Center, in Washington, D.C. Ms. Martin (busy day!) and other experts will answer questions. Register here.

We'll put up more links and materials over the next few days. But again, because this is one of our firm's cases, we won't be commenting that much (other than Go Christina and Geraldine! (Tyler)).

Tyler v. Hennepin County Previews: Get Yourself Prepared For The Next SCOTUS Takings Arguments

Here at our law firm, we're getting ready as one of our colleagues prepares to argue the Supreme Court's next takings case in a couple of weeks. Yes, this is what we've alternatively called the "home equity theft" or the "keep the change" case where government seizes property to satisfy the owner's tax debt, and after liquidation of the property and satisfaction of the debt, keeps any excess equity instead of returning the balance to the (former) homeowner.

The case is Tyler v. Hennepin County, No. 22-166, and it's set for argument on the last day of this term's argument calendar, Wednesday, April 26, 2023.

In the meantime you should check out the parties' merits briefs and the beaucoup amici briefs (mostly filed in support of the property owner) on the Court's docket.

But you should also see what others have to say, and how they are viewing the issues. Here are several upcoming programs and an article you might want to check out:

• Deep Dive and Amicus Review: Tyler v. Hennepin County (Pacific Legal Foundation [our firm] April 19, 2023, at 2:00 p.m. EDT/11:00 a.m. PDT)
• Courthouse Steps Preview: Tyler v. Hennepin County (Federalist Society, April 17, 2023, 1pm EDT)
• ABA publishes article by True North Law’s Steve Davis on Upcoming Property-Rights Case at the Supreme Court: Tyler v. Hennepin County (April 11, 2023, via True North Law and the ABA)

Again, because this is one of our firm's cases, I won't be commenting much and will simply point you to resources. (You already know what I think about the case.)

Cases And Links From Today's Land Use Institute Session: "The Use of Eminent Domain for Redevelopment & Economic Development Projects"

Here are the opinions that we spoke about this afternoon at the Land Use Institute on "The Use of Eminent Domain for Redevelopment & Economic Development Projects."

• Redevelopment: You Can't Just Say "Redevelopment" - Take Now, Decide Later Isn't A Public Use
• Due Process: Before Taking Property, Condemnor Must Provide Notice Reasonably Calculated To Put The Owner On Actual Notice
• Scope of delegation: A Hospital Parking Lot Isn't An Authorized Reason To Take
• Necessity: No Necessity: Landowner Met Burden - Condemnor Did Not Consider Other Sites
  
• After the taking: First Circuit: "[T]he Fifth Amendment precludes the impairment or discharge of prepetition claims for just compensation in Title III bankruptcy."

Thanks for joining in.

Seattle's Hazard Pay For Food Delivery Gig Workers Might Be A Penn Central Taking

"But we had to eat."

So begins the Washington Supreme Court's opinion in Washington Food Industry Ass'n v. City of Seattle, No. 99771-3 (Feb. 9, 2023), wherein the court held that a takings challenge to Seattle's ordinance requiring Co-19 combat pay for food delivery workers may proceed. 

There's a lot in the opinion about the crisis and the early days of the response. And about the various claims brought by the WFIA challenging the city's ordinance, including a statutory claim under Washington law (this is a prohibited tax or fee on groceries), equal protection, takings, contracts clause, section 1983, a "police power" claim, and a privileges and immunities claim.

The opinion is long (39 pages, plus concurring opinions and dissents, adding up to 67 pages), so here's your scorecard:

I. The chapter 82.84 RCW claim is dismissed; we affirm.
II. The equal protection claim is dismissed; we reverse.
III. The privileges and immunities claim is dismissed; we reverse.
IV. The takings clause claim is not dismissed; we affirm.
V. The contracts clause claim is not dismissed; we affirm.
VI. The 42 U.S.C. § 1983 damages claim is not dismissed; we affirm.
VII. The police powers claim is not dismissed; we affirm.

Slip op. at 3-4 (footnote omitted).

The plaintiffs assert a Penn Central regulatory takings claim. The city sought dismissal of the complaint, but as noted above, the trial court declined to dismiss the takings claim.

The Supreme Court affirmed. Importantly, the opinion first notes that the takings inquiry doesn't challenge the police power validity of the ordinance. "A regulation that is otherwise a valid exercise of police power may go 'too far' in its impact on a property owner as to constitute a taking, requiring compensation." Slip op. at 27-28 (footnote omitted - but read that foonote, number 10 on page 28, since we think it's a pretty good summary of the relationship between the police power and the compensation requirement:

The problem of an excessive regulation may implicate either the question of whether it exceeds the scope of police powers or whether it amounts to a taking, requiring just compensation. See Orion Corp. v. State, 109 Wn.2d 621, 648-49, 747 P.2d 1062 (1987), abrogated on other grounds by Chong Yim v. City of Seattle, 194 Wn.2d 682, 451 P.3d 694 (2019) (Chong Yim II). Though the doctrines have, at times, been blurred, see, e.g., id. at 645-48, the analyses—and, moreover, the remedies—are distinct. The remedy for an excessive police power regulation is invalidation, whereas the remedy for a taking is just compensation. Id. at 649; Chong Yim I, 194 Wn.2d at 660. The takings clause “‘is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking.’” Chevron, 544 U.S. at 537 (quoting First Eng. Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 315, 107 S. Ct. 2378, 96 L. Ed. 2d 250 (1987)).

Slip op. at 28 n.10.

The opinion first affirmed that the plaintiffs possess a property interest, here, Instacart's contracts with independent contractors who shop for other people and then deliver the groceries (the above-mentioned "gig workers"). The plaintiffs asserted the ordinance has taken these contracts "for the private benefit of the food delivery network workers receiving premium pay." Slip op. at 29. This might be intangible property, but these rights, "including valid contracts, are protected by the takings clause." Id.

Turning to whether the plaintiffs have pleaded a Penn Central claim, the opinion noted the "ad hoc, factual" nature of the inquiry, and concluded the "takings claims should not be dismissed. Instacart may be able to prove a set of circumstances that demonstrates the ordinance interferes with its economic interests to a degree that amounts to a taking under the Penn Central test." Slip op. at 32. Noting that "the economic impact, extent of the interference with investment-backed expectations, and character of the regulation are highly factual inquiries[,]" the court held that without factual development, "it is impossible to ascertain the economic impact of the ordinance on Instacart's business model[.]" Slip op. at 33.

That seems about right to us. As we've noted here many times before, whatever you think of the Penn Central test, the Court has labeled it the "default" regulatory takings standard, and reaffirmed that it is a highly factual inquiry. See, e.g., "Penn Central May Be A 'Fuzzy' Test, But What's A Court Doing Weighing The Factors?" Which to us means that these cases should not get tossed out on the pleadings (which many of them are) and if the plaintiff is doing even a modicum of work should survive summary judgment. Yet the courts continue to act as gatekeepers and prevent most of these claims from getting past the pleadings stage.

Is it really that hard to allege a regulatory taking? We don't think so, nor does the Washington Supreme Court.

Washington Food Industry Ass'n v. City of Seattle, No. 99771-3 (Wn. Feb. 9, 2023) (en banc)

Ice Ice Baby: A Report From The 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Feb 1-4, 2023, Austin

We were eagerly anticipating 40th American Law Institute-CLE Eminent Domain and Land Valuation Litigation Conference. The 2022 Conference in Scottsdale was one of the first meetings where everyone was back in-person (and was a smashing success), but that conference was early in the game so not everyone could or would attend. But in the past year most of us got back to some semblance of "normal," and the turnout promised to be good.

We had record registrations: with over 300 attendees, faculty, and staff signed up, things were shaping up.

Plus, we were headed to Austin, Texas. The last time we held the Conference there in 2016, we loved it so much it has been in-demand for a return visit. And this year is the debut Conference for some new planning co-chairs for both the main tracks as well as the "Condemnation 101" tracks, so the buzz for the 2023 Austin Conference was building.

But then the weather reminded us that Mother Nature is often the boss. 

Very Icy Austin on Wednesday (Conference Eve).

On Tuesday, one day before the Conference was to get underway, the 2023 Central Texas Ice Storm blew in and things were gonna get (as they say) "challenging."

Austin Airport effectively shut down with few flights in or out. Planes and cancellations stacked up nationwide. And even for those nearby, slick icy roads, and seemingly everything was closed, from gas stations to hotels to restaurants. Widespread power outages. 

Were we ready with Plan B if people couldn't get on-site? Read on.

Unless you are already here or are driving,
you ain't getting to Austin via AUS any time soon, pard.

Even flying from sunny California was a problem.

Ticket agent: Austin flight cancelled. How about flying to Houston and then driving?

Me: Sure, that'll work. Just get me to Texas and I'll figure it out from there.

Improvise, adapt, overcome: planes, trains, and automobiles (and car rentals, and long-distance rideshares, and four-layovers-from-Boise flights). Jacksonville to Austin via Chicago and Nashville.

Although those of us who made it to Austin were receiving widespread reports of people delayed and rerouted, we had only a handful who said they would not be pressing forward to get here. 

When this is what greets you when you arrive
at your conference site...uh oh.

And yes, Austin was cold and icy. Most things shuttered and widespread loss of power. But the Conference venue was up and running, and throughout the day on Wednesday, faculty, staff, and attendees were showing up. Trickling in, but showing up or on the way.

When this is what you see at the United Airlines
luggage counter, you ask yourself:
Can I make my presentation in a t-shirt and sweats? (Yes!)

We had confidence, and were prepared
for everyone to get to Austin.

So the aforementioned Plan B went into effect. Agenda items shuffled from tomorrow to today because the speaker is here, now. One speaker in the room, one speaker remote. Our audience is full of experts ... say, Billy can you pinch-hit on this panel? Sure. One speaker remoting in from his (unexpected) hotel room in Phoenix and presenting, before he went to the airport in the afternoon to continue on to Austin.

And so forth. Our long-time ALI-CLE Program Attorney, Amy Weinberg (who was delayed out of Philadelphia) was working furiously behind the scenes doing a lot of juggling, updating, texting and calling, and making alternative arrangements. And the tech team from ALI-CLE was preparing for overload if needed.

Plan A: continue to set the room up, assuming everyone is here or on the
way, and we'll have most or all of our people in the room.

Our Planning Chairs were ready, even if not
all of us were actually there (yet).

Plan B: the ALI-CLE technical crew was prepared to livestream
and record the Conference if the weather made travel
to Austin impossible or infeasible.

The tech command center.

Before we go on, a big thank you to our generous sponsors.
Without your support, this Conference would not be as
good as it is, year after year.

We're underway, with a pretty good crowd.

Thursday morning, 9:00 a.m., and we're looking not too bad. A fair number of folks have pressed forward despite the weather and travel disruptions and are in the room. More report they are not tapping out, and are pressing onwards.

We have more viewers remote than we originally anticipated, but the tech is holding up.

Over the next couple of days, our lawyers, judges, legal scholars, appraisers, law students, right-of-way agents, relocation experts, property owners, and other related professionals made their way to Austin.

The fact that folks who were experiencing some rather dramatic travel difficulties and delays (ask Jack about his late night Uber from Houston airport to Austin, or how our west coasters got re-routed all over creation), didn't quit but were determined to get to Austin told us something about why this Conference has been so successful over the decades.

It's more than great programming from the nation's experts. The Conference is also an essential venue to get acquainted with new colleagues and welcome them to the Dirt Law Bar, reconnect with long-time friends, and have a bit of fun together.

Most of the Conference attendees eventually made it, and very few (reasonably) threw in the towel and turned around for home. This was the 40th edition of the Conference, and we really know why it is one of the most-established and successful conferences in the ALI-CLE stable of programs. This year's experience really drove home why we come, and why our attendees and faculty are so dedicated and committed, despite the sacrifices we make to attend or to present. 

Hybrid: Pacific Legal Foundation's John Groen
remoting in while en-route via Phoenix, and
Baylor lawprof Jessica Asbridge on
"Everything Old is New Again: Why Today’s Practitioners
Need to Understand the Original Meaning of the
Takings and Just Compensation Clauses."


The "Condemnation 101" track was wildly popular
both with new members of the Eminent Domain Bar,
as well as old hands. Standing room only throughout the day.

We also had reports from the field that the remote viewing
was going well. Here's how we looked in the
mountains of North Carolina.

Let's not forget the substance of the Conference.
Lots of practical learning. Here's Hawaii's Mark Murakami
and Virginia's Steve Clarke on "Avoiding the Real Jeopardy:  
Structuring Eminent Domain Settlements."
And no, two-time Jeopardy! champion Steve did not
give answers in the form of a question.

Weather throughout Wednesday and Thursday was icy and nasty,
but towards the end of Thursday seemed to be clearing up.

Consequently, the view from the podium looked better and better
with more showing up and more reporting they were nearly there.

The programming at the Conference is traditionally
a mix of practical subjects and the more theoretical.
Here's one of the highlight latter programs,
Alan Ackerman (Michigan), Matthew Ackerman (also Michigan),
and Steve Davis (Missouri) on "What Does the Supreme Court
Mean When it Says Just Compensation is “Self-Executing?"

There's an ethics program, naturally, for those of us in jurisdictions
with mandatory CLE requirements. But we try and not do "typical"
(i.e., boring) ethics programs. Here's Sarah Kellner (Colorado) and
Shane Rayman (Ontario, CN) on "Ethics: Building Your Practice
by Mentoring the Next Generation of Eminent Domain Professionals."

An example of our practice-oriented programming: Tony DellaPelle
(New Jersey), Bernadette Duran-Brown (California), 
and Andrew Lines (Illinois) on "Preparing Your Expert
Witness to Shine in Virtual Proceedings:
Tools and Tips For Trial Lawyers." 

Andrew actually pretended he was far, far away for his "deposition"
when he was in fact one floor up from the Conference room.
Way to go all-in.

Thanks to our generous sponsors, we were able to avoid Austin's
icy roads and have our Mickelthwait barbecue
brought in for lunch. Was it well-received? See for yourself. Line
was through the lobby and nearly out the front door.

Thank you to Texas Supreme Court Justice Jimmy Blacklock
for speaking on "Developing Property Right Issues in Texas,
Questions and Answers with Justice Jimmy Blacklock"
(interviewed by Justin Hodge (Texas)

It was not an echo-chamber either. Here, in a hotly-debated
session, Jeff Redfern (Virginia), Steve Silva (Nevada), and
Lawprof Emilio Longoria (St Mary's Law, Texas)
debate "When the SWAT Team Comes (No) Knocking:
Police Power Takings."

Jeff, Steve, and Prof Longoria's session got everyone's blood pumping.

It wasn't all serious, and we had a bit of fun.
Like this after-hours live edition of the Eminent Domain & Right of Way
Clubhouse with Beth Smith (Wisconsin), Patrick McAllister (Indiana)
and some dude who was having a post-CLE session beer.

Some of our faculty are more formal and like to speak
standing at the lectern. Here, Pacific Legal Foundation's Jon Houghton
(New Jersey) and Ben Stormes (Montana) on
"Avoiding Pitfalls When Trying a Penn Central Case:
Lessons From the Takings Trenches."

Others are less formal, and speak while sitting
(and wildly gesticulating to make sure you are paying attention).
Kristen Renfro (California), and some guy on
"Your Regulatory Takings Case is in Federal Court – Now What?"

By Friday morning, the Austin weather was looking up. Really up.
And we nearly had everyone in the room.
By hook or by crook, most everyone was there.

By Friday were were pretty much back to normal.
Nearly all faculty and all attendees in the room.
And thus we turned it over to our Saturday morning stalwarts,
starting with Jim Burling, here speaking about "The Many Theories of
Property - Do They Matter in Court?" (and Pufendorf)

No one wanted to miss Michael Berger's "Regulatory Takings Update"
on Saturday morning either.

When you can fill this many seats at a CLE conference on a
Saturday morning after two full days of programming,
you know your speakers are the
right ones (thank you Jim and Michael).

After Jim and Michael did their thing, we held our "National Forum,"
a moderated "open-mic" session where Conference attendees
take to the podium and speak about their case or issue,
or crowdsource a question. Here, Pacific Legal
Foundation's Kady Valois, speaking about
our firm's latest takings cert grant.

We were happy to announce that the 41st ALI-CLE Eminent Domain &
Land Valuation Litigation Conference will be held February 1-3, 2024,
at the JW Marriott in New Orleans.
Save the date!

Ivy Cadle (Georgia - Go Dawgs!) is already planning his trip to
#EminentDomain 2024 in New Orleans.
See you there, Ivy.

With the programming wrapped up, it was time for farewells
and thank yous. Here, four of our law students from William and Mary Law,
who took the time out of their schedules to make their way to
Austin for some real-world learning and networking.
Well done, new colleagues!

Even after the proceedings closed, there was more work to be done.
Here, the ALI-CLE Tech Team breaks it down, after successfully
guiding us through the past four days. They are a large part of the
reason why this Conference works so well (plus, they make the
speakers look really good on camera).

To those who joined us - in-person or on-line, thank you. This conference reminded us of why this program is so successful, and why we all return year-after-year.

To those of you who didn't (or couldn't) join us, here's what you missed. You need to remedy that, and come join us next year in New Orleans...

We'll see you in New Orleans for
#EminentDomain2024!
(Want to keep the conversation going in the
interim? Join the ALI-CLE Eminent Domain Conference
page on LinkedIn.)

An Ordinance Isn't A Taking Because It's A Valid Exercise Of Police Power?: What The Heck Is Going On In The Texas Court Of Appeals (First District)?

If your first reaction to the Texas Court of Appeals (First District)'s decision in City of Houston v. The Commons of Lake Houston, Ltd., No. 01-21-00369-DV (Jan. 12, 2023) is scratching your head, then please come join us in bewilderment.

After all, the court held that a takings claim failed because the city is immune from inverse condemnation. Say what? We thought that the self-executing nature of the just compensation requirement of the U.S. Constitution (and the Texas Constitution) means that claims of sovereign immunity don't hold water in inverse cases.

The Commons wants to develop "The Crossing," one of those big master-planned communities. The usual development activities entailed: master plan, subdivision plats, city approvals for infrastructure, and even some actual site work. "By April 2018, The Commons had invested millions of dollars in planning and infrastructure for The Crossing." Slip op. at 2.

But in reaction to Hurricane Harvey, the city adopted an ordinance amending the city's approach to development in floodplains. And "[s]ignificant portions of The Crossing are located within the City's 100-year or 500-year floodplains." Id. The ordinance was based on FEMA maps, which are required to be used as a condition of obtaining flood insurance. The regs changed the way the city was going to regulate development in the predicted 100 and 50 year floodplains. Instead of requiring that residences in the 100-year floodplain build one foot above flood elevation (and having no requirements for the 500-year floodplain), the new ordinance "required that new residential structures
within the 500-year floodplain be built at least two feet above the flood elevation." Slip op. at 6. 

The Commons asserted that applying the new ordinance to its already-underway project "would substantially damage the market value of the property and that the current development plan would be unfeasible." Slip op. at 7. State court inverse condemnation claim (under the Texas Constitution only) followed.

The city responded to the lawsuit by asserting the claims were not ripe because it had not reached a final decision denying the project (the new ordinance contains a variance mechanism), and when the trial court disagreed and held the case ripe, the city appealed and the court of appeals reversed: not ripe.

The Commons then went through the motions it needed to go through to confirm that yes, indeed, the city wasn't going to let The Crossing continue as originally ok'd. There was some of the usual "your application isn't complete" dance, after which The Commons submitted a new plan with a 72% reduction in developable land. "The City granted The Commons' amended plan." Slip op. at 10.

Next up, Round 2 of the lawsuit. Or more accurately, the Second Lawsuit. "The Commons alleged that the City's amended floodplain ordinance 'intentionally and unreasonably restricted The Commons' [] use and enjoyment of its property,'" and took it without compensation (asserting a Lucas-like and a Penn Central-like theory under Texas law). Id. 

The city tried the ripeness gambit again, but its main attack was that the takings claim was "barred by governmental immunity because the 2018 Floodplain Ordinance does not give rise to a takings claim as a matter of law." Slip op. at 11. Jump ahead to page 18 of the slip opinion for the reasons why the Court of Appeals agreed.

The city argued that The Commons could not assert a takings claim because the amended ordinance merely complied with FEMA requirements, and "requiring compliance with local laws consistent with FEMA/NFIP requirements does not constitute a taking." Slip op. at 18. Moreover, the ordinance can't be a taking because it is a police power regulation, "adopted to accomplish legitimate goals, [which] are substantially related to the public's health, safety, or general welfare, and are reasonable." Id.

Hey, we were just "track[ing] the criteria of the NFIP," claimed the city. Id. The court agreed that the U.S. Court of Appeals had already determined that if the government is just following FEMA and NFIP requirements, then, well, it just can't be a taking. See Adolph v. Federal Emergency Management Agency, 854 F.2d 732 (5th
Cir. 1988). But when did compliance with other law constitute some kind of safe harbor from the Just Compensation requirement? The parties argued about the applicability of Adolph and the details (see slip op. at 20-22), but to us, the bigger issue is what does compliance have to do with it at all: either the city's regulations go "too far" and affect The Commons' use of its property, or they don't. Does it matter why the city adopted the new floodplain ordinance?

To us, if the city is required to conform to FEMA requirements that means only that the regulation is likely to pass due process and public use muster, and really has no bearing at all on the impact of the regulation on a property owner's rights.

As if the court concluding that Adolph controlled wasn't enough, starting on page 25 the opinion alternatively held that there could not be a taking because -- get this -- the new floodplain ordinance is a valid exercise of the city's police power.

Yes, healthsafetywelfaremorals. But as we noted above (and have noted here many many times), the validity vel non of a regulation has little to do with whether it works a regulatory taking. You'd think that a valid regulatory purpose was the prerequisite to a takings claim not the stop sign. Some courts get it right.

We ask you: go read pages 25-28 of the Texas court's opinion. Sounds a lot like a due process analysis, doesn't it? All about the purpose of the ordinance. How it is reasonably designed to protect the public. How it survives the rational basis test.

Our response (since this is a case from the South, we feel entitled): bless your heart.

In case we're not being clear: the entire regulatory takings doctrine would make no sense if all the government need do to avoid liability is show that the regulations claimed to effect a taking are valid exercises of the police power. Indeed, the takings doctrine pretty much presumes that the taking is the consequence of an otherwise valid exercise of power. To conclude, as the court did, that the regulation can't be a taking because it is a valid exercise of the power to protect the healthsafetywelfaremorals of the public simply gets you into a self-proving rule.

Come on, Texas! We thought you got this stuff better than that.

City of Houston v. The Commons of Lake Houston, Ltd., No. 01-21-00369-DV (Tex. Ct. App. Jan. 12, 2023)

(Nearly) Last Call: There's Still Time To Join Us For The 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Feb 1-4, Austin

We really want you there...

One (nearly) last reminder that there's still time to register for your space at the 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, February 1-4, 2023, in Austin. In the past several years, we have sold out due to the conference room capacity and the conference hotel block. But there's still space, although we are nearly full. So register now - don't delay any further! 

Here's the brochure with the complete agenda, schedule, and faculty listing. But to tempt you, here are some of the highlights of the program:

• Everything Old is New Again: Why Today’s Practitioners Need to Understand the Original Meaning of the Takings and Just Compensation Clauses
  
• When the SWAT Team Comes (No) Knocking: Police Power Takings

• Private Utility Takeovers – Lessons From a 67 Day Trial

• "Contraband": How Property Rights Helped Pave the Way for Civil Rights

• Valuation Issues When Billboards and Signs are Condemned

• Setting Client Expectations and Identifying Red Flags

• Preparing Your Expert Witness to Shine in Virtual Proceedings: Tools and Tips for Trial Lawyers

• Developing Property Right Issues in Texas - Questions and Answers from the Bench (with Texas Supreme Court Justice Jimmy Blacklock)

• Eminent Domain and Regulatory Takings Updates: Important Decisions You Need to Know

• Ethics: Building Your Practice by Mentoring the Next Generation of Eminent Domain Lawyers

• the Condemnation 101 program (a one-day course for those new to the practice, or for experienced practitioners wanting a refresher)
• ...and much more!

To register, go here.

Looking forward to seeing everyone in Austin for the 40th edition of the Conference.

Program Brochure, 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Austin, Texas, Feb 1-...

Federal Court: Seattle Facilitating Downtown Takeover Takings Claim Is Going To Trial

Saturday in the park...I think it was the Fourth of July

Here's the latest on a case we've been following, about the blocking off of a neighborhood in Seattle and making it a no-go zone for those whom the takeoverers wanted to keep out.

Yes, the CHOP/CHAZ case is still a thing. [And before we go on a disclosure: our law firm is participating as amicus curiae in the case.]

Business owners in the zone sued the City in federal court, alleging that the government actively aided or facilitated the takeover, or at minimum did nothing to end it. Claims asserted include Due Process, Takings, and state and local law claims. The takings claim was based on two theories: first, that the City facilitated a physical invasion by third parties of plaintiffs' properties; second, that the City action or inaction resulted in a loss of access by plaintiffs and their invitees to their properties in the zone.

We posted the federal court complaint and court's earlier denial of the City's motion to dismiss:

• Complaint: City's Abandonment Of CHOP/CHAZ Neighborhood Is A Taking
• Federal Court: If It's True That Seattle Provided Material Support To CHOP/CHAZ, That Could Be A Taking

In this Order, the court granted the City summary judgment on the due process claims and one of the takings claims, but importantly denied summary judgment on the denial-of-access takings claim. 

The court rejected the temporary physical invasion claim, concluding that the City had neither formally invited, nor authorized, the protesters to enter plaintiffs' properties, and "[u]nlike in Cedar Point and Loretto, the City did not adopt a regulation or ordinance granting protesters a 'formal entitlement' to enter Plaintiffs' properties. Order at 24.

But the court didn't see it the same way with the loss-of-access takings claim. First noting that "[a]n owner's right of access to his or her property is recognized in Washington[,]" which cannot be "eliminated or substantially impaired," Order at 24, the court concluded that "the parties do not dispute that some plaintiffs were able to access their properties during CHOP." Order at 25 (footnote omitted). The declarations submitted by plaintiffs in opposition to the City's summary judgment motion alleged "that access to their properties was significantly diminished or impaired during the CHOP period." Order at 26.

This action does not involve the typical exercise of police power to regulate the flow of traffic in the Capitol Hill neighborhood, such as for routine road maintenance or construction. Further, Plaintiffs have presented evidence that the City’s actions actually interfered with or prevented their access to their properties. Drawing all justifiable inferences from the evidence in Plaintiffs’ favor, the Court concludes that genuine disputes of material fact preclude summary judgment on Plaintiffs’ right of access theory of liability. The Court therefore DENIES the City’s motion as it relates to Plaintiffs’ right of access taking claim. Whether Plaintiffs can present sufficient evidence at trial to support the City’s liability for a taking under these circumstances is a factual issue that cannot be resolved on a motion for summary judgment.

Order at 27.

For your next visit to Seattle

So the beat goes on. We'll bring you updates as they occur.

Hunters Capital, LLC v. City of Seattle, No. C-20-0983 (W.D. Wash. Jan 13, 2023)

Lucky Friday The Thirteenth: SCOTUS Grants New Takings And Excessive Fines Case

Here at inversecondemnation.com, we were all set to call it a week and take a break from posting until Monday.

But SCOTUS had other ideas.

In this Order issued today, it agreed to review Tyler v. Hennepin County, No. 22-166, a case and an issue we've been following closely.

The Questions Presented by the petition:

Hennepin County confiscated 93-year-old Geraldine Tyler’s former home as payment for approximately $15,000 in property taxes, penalties, interest, and costs. The County sold the home for $40,000, and, consistent with a Minnesota forfeiture statute, kept all proceeds, including the $25,000 that exceeded Tyler’s debt as a windfall for the public. In all states, municipalities may take real property and sell it to collect payment for property tax debts. Most states allow the government to keep only as much as it is owed; any surplus proceeds after collecting the debt belong to the former owner. But in Minnesota and a dozen other states, local governments take absolute title, extinguishing the owner’s equity in exchange only for cancelling a smaller tax debt, code enforcement fine, or debt to government agencies.

The questions presented are:

1. Whether taking and selling a home to satisfy a debt to the government, and keeping the surplus value as a windfall, violates the Takings Clause?

2. Whether the forfeiture of property worth far more than needed to satisfy a debt plus, interest, penalties, and costs, is a fine within the meaning of the Eighth Amendment?

Disclosure: our law firm, Pacific Legal Foundation, represents the Petitioner property owner, and our law firm colleague Christina Martin is the lead counsel. Consequently, we won't be putting up much analysis here. But of course we shall continue to follow along (or you may follow the Court's docket here). 

This case is the third of our firm's which the Court has granted on property issues this Term (Sackett and Wilkins being the other two).

Montana: Owning The Land Is Enough To Plead A Property Interest: Property Means "Rights Inherent In Ownership," Not Extent Of Govt Discretion

The Supreme Court of Montana's opinion in Tai Tam, LLC v. Missoula County, No. DA21-0660 (Nov. 15, 2022) starts off like a somewhat typical land use dispute turned into a constitutional fight. The property owner sought subdivision approvals for a 28-acre parcel to allow residential development, and the County denied the applications because "the proposal failure to adequately mitigate the loss of agricultural soils." Slip op. at 2.(Oh, and "bird habitat." Slip op. at 3.)

Next, the complaint, alleging some of the usual claims: due process, equal protection, and takings, and a statutory claim under Montana law. The trial court dismissed all claims: the statutory claims for failure to get in before the 30-day limitations period, and the constitutional property claims based on the court's conclusion that the plaintiff lacked a "property" interest.

We'll let you read the part of the opinion in which the court reversed the dismissal of the statutory claim for not filing within 30 days. Short story: the 30-day limitations period doesn't apply to the type of statutory damage claim that the plaintiff brought. See slip op. at 8 ("Ultimately, we find the plain language of [the statute] is not ambiguous and does not contain a 30-day statute of limitations.").

Now on to the good stuff - the property interest. The trial court concluded that the plaintiff did not possess a property interest in a subdivision application. Or maybe more precisely, in subdivision approval. The court also rejected the notion that the plaintiff owned the land, and that was sufficient to plead a property interest.

The Supreme Court had a different view. It started with the notion that on a motion to dismiss, every fact is deemed true and all inferences cut in the plaintiff's favor. Addressing the "threshold" question of whether the plaintiff owns property, the court held that the plaintiff's "ownership of McCauley Meadows [the land] is sufficient to state a protected property interest and bring § 1983 claims against the Board in this case." Slip op. at 13.

Rather than apply this interest to Tai Tam’s § 1983 claims, the District Court took Tai Tam’s concession it did not have a protected property interest in the subdivision application and ended its inquiry there. This was in error, as the District Court was required to address whether Tai Tam’s rights inherent in its ownership of McCauley Meadows were violated by the Board’s actions, and inactions, in this case.

Slip op. at 14.

This is significant because it rejects the usual sleight-of-law way that many courts define the property in these type of challenges. Often, courts will define the property as the thing which the plaintiff claims the government wrongly denied. (Here, that would be a grant of the subdivision.) But if you define the property as the very action being challenged -- then the owner's property is shaped almost exclusively by the extent of the regulator's discretion, and not by the property owner's rights. Where the focus is on the scope of the government's discretion to limit property uses and not on the owner's inherent rights, it shouldn't be too surprising that most of the time the courts conclude "no property."

Not here. 

Having concluded that the complaint adequately pleaded a property interest, the court also held that the due process/1983 claim survived because the complaint alleged the County had not provided adequate notice and an opportunity to be heard by denying subdivision approval due to lack of protection for ecological concerns, despite never having adopted any regulations requiring protection of ecological concerns. Slip op. at 17 ("Specifically, Tai Tam asserts the Board has “implemented policies to protect viewsheds, protect generic ecologic values, and protect adjacent property owners, despite having no such adopted regulations.”). In short, it may violate due process if the government is implementing policies "which are not based on any adopted regulations at all." Id.

And finally, the takings claim. The court concluded that as an "ad hoc" claim, the Penn Central takings claim was adequately pleaded:

Taking the allegations of Tai Tam’s Complaint as true, which we must at this stage in the proceedings, Barthel, ¶ 9, we find Tai Tam has sufficiently pled a takings claim in this case. According to the Complaint, Tai Tam alleges the Board is applying rules and regulations to the development of McCauley Meadows which have not been adopted with proper notice and opportunity to be heard and is unfairly requiring Tai Tam to shoulder the burden of preserving agricultural lands and viewsheds which was not imposed on other landowners. Whether these burdens are so unfair that they require compensation is, again, a question for another day.

Slip op. at 18.

The majority rejected the dissent's view that because the County retained discretion to deny the subdivision (but wait, we thought subdivision approvals were ministerial?), there could never be a takings claim based on a denial of same. The dissent's reasoning is one based on its conclusion that the denial of a discretionary permit "does not sufficiently interfere with reasonable investment-backed expectations or economic value under Penn Central." Slip op. at 18-19. But that, the majority concluded, is a judgment reserved for the trier of fact, not as a matter of law. Penn Central is an ad hoc inquiry. Check out pages 18-20 for more details of the majority's reasoning (it is definitely worth your time to do so).

Tai Tam, LLC v. Missoula County, No. DA 21-0660 (Montana Nov. 15, 2022)

Hawaii 5-80: Land Use Law At The University Of Hawaii

Starting in January, we'll be teaching the venerated, and oh-so-important Land Use course (Law 580) at the University of Hawaii's Law School.

We're at least temporarily stepping into some mighty big slippers (this is Hawaii, so we don't always wear shoes), as this is the course that our mentor Professor David Callies taught for decades. And is there a better venue in which to teach and study land use law and regulation, and its limits? After all, Hawaii may be the most heavily-regulated land on the planet, and is a focal point for every issue you can think of, from zoning to environmental restrictions to takings to public trust to subdivision to admin law to ... well, you get the drift.

We'll cover those topics, as well as the fundamentals. And we have a few surprises up our sleeve - some impressive guest lecturers, explorations of dirt law careers, and maybe a field trip or two. We'll bring you the highlights here, as they happen.

Is there a bit of pressure on us to get it right? You bet. But are we looking forward to it (not just an opportunity to head back to the 808, but because this is a great subject)? You bet.

New Cert Petition: There Must Be A Real Emergency Before Commandeerings Are Exempt From Compensation

Here's the latest in a case we've been following.

In this cert petition, business owners on the losing end of a Co-19 shutdown order assert that the Sixth Circuit got it wrong when it concluded that the "overriding public purpose" of the shutdown orders should be given what amounts to dispositive weight under the "character of the government action" Penn Central factor.

The Sixth Circuit correctly (in our view) rejected the district court's rationale that the takings claim could be rejected simply because "the state acts pursuant to its police powers to protect public health." Slip op. at 15. But the Sixth Circuit didn't stop there, and affirmed the dismissal because the "character" of responding to the Co-19 emergency was so overwhelming that it outweighed the other two factors (which the court had already concluded "weigh in favor of the Plaintiffs").

As we explained in an article on emergency takings last year, ("Evaluating Emergency Takings: Flattening the Economic Curve," 29 Wm & Mary Bill of Rights J. 1145 (2021)), the Penn Central "character" inquiry does not ask about the government's reasons or motive. That is a due process inquiry. No, the character of the government action inquiry asks about the nature of the intrusion on the owner's property rights. [Hat tip to the cert petition, which refers to our article several times.]

Here's the Question Presented:

Is the government required to prove with evidence that its action taken during an emergency which intrudes on private property rights was a necessity in order to be relieved of its duty of compensation for a taking under the Fifth Amendment?

Follow along on the Court's docket here.

Petition for a Writ of Certiorari, Bojicic v. DeWine, No. 22-493 (U.S. Nov. 23, 2022) by RHT on Scribd

Ninth Circuit: Property Owners Don't Have A Fundamental Right To Use And Occupy Their Own Property

Here's a short one you might have overlooked because it's an unpublished memorandum opinion.

In Kagan v. City of Los Angeles, No. 21-55233 (Nov. 10, 2022), a Ninth Circuit panel summarily affirmed the dismissal of property owners' challenge to a city ordinance prohibiting eviction of "protected status" tenants from a duplex in order to regain the unit for family use. 

The takings claim was rejected for the now-familiar Yee rationale: there's no physical invasion or a taking of the right to exclude, because the owner wasn't forced to let the tenant on the premises in the first place. In other words, once you let someone in your property, you lose the right to exclude:

Here, as in Yee, the Owners “voluntarily rented their land,” and were not required to submit to physical occupation by another. Id. at 527. Moreover, the RSO allows at-fault evictions, such as evictions for creating a nuisance, breaking the law, or failing to pay rent, L.A. Mun. Code § 151.09(A), and grants landlords the right to end a protected tenancy by removing the entire property from the rental market with one year’s notice, id. § 151.23(B). Accordingly, the Owners’ claim that the City has compelled them to “refrain in perpetuity from terminating” this tenancy is unavailing, Yee, 503 U.S. at 528, and we affirm the dismissal of their takings claim with prejudice.

Slip op. at 3.

The substantive due process claim fared no better. The panel concluded that the owners do not possess a property interest protected from deprivation by the due process clause. Say what? They do own property, just not the property interest in, you know, actually occupying their property:

As appellants cite no authority for their contention that their right “to use and occupy their own property” is a fundamental right, they can only sustain a substantive due process claim if they can allege that the RSO is “arbitrary, irrational, or lacking any reasonable justification in the service of a legitimate government interest.”

Slip op. at 3-4. Rational basis review? You know what that means: you lose.

Finally, you can guess what the panel did with the procedural due process claim: the owners, the panel concluded, were not deprived of an adequate forum because they could have challenged the tenant's "protected status" in an unlawful detainer proceeding.

Kagan v. City of Los Angeles, No. 21-55233 (9th Cir. Nov. 10, 2022) (unpub.)

SCOTUS Argument Preview: Is The Federal Quiet Title Act's Statute Of Limitations "Jurisdictional?"

The Federal Quiet Title Act isn't exactly on the public radar screens. Especially questions about whether the Act's 12-year statute of limitations is "jurisdictional" or merely a claims processing rule.

Thus, you are not likely to see throngs of protesters on the Supreme Court steps this Wednesday, Nov. 30, 2022 at 10:00 a.m. when the Court hears oral arguments in Wilkins v. United States, No. 21-1164.

Our hands are somewhat tied here from making major comments, since our law firm represents the property owners. But thankfully, our friend and colleague Stephen Davis has written up a summary of the issues in the case, and more importantly, explains why the issues are important to property rights:

The federal government’s litigation strategy in Wilkins attempts to deny landowners their remedy under the Quiet Title Act. The Supreme Court should carefully consider the potential ramifications for private property rights in deciding whether the Quiet Title Act’s statute of limitations is jurisdictional.

Read Steve's entire summary here: "Wilkins v. United States: Is the Quiet Title Act’s Statute of Limitations Jurisdictional, and How Does the Answer Affect Property Rights?"

Here's the Question Presented in the Wilkins case:

Two Montana landowners filed a quiet title action seeking to resolve a dispute over the scope of an easement held by the United States that runs across their land and the federal government's duties under the easement. The District Court held that the Quiet Title Act's statute of limitations is jurisdictional, found that the landowners did not prove that their claims arose within twelve years of the lawsuit being filed, and dismissed the case. The District Court's treatment of the statute of limitations as jurisdictional-rather than a claim-processing rule- subjected the landowners to different standards for resolving the motion to dismiss, allowing the court to dismiss the case without holding a hearing to determine and resolve disputed facts.

In conflict with the Seventh Circuit, the Ninth Circuit affirmed, holding the Quiet Title Act's statute of limitations is jurisdictional.

The question presented is:

Whether the Quiet Title Act's Statute of Limitations is a jurisdictional requirement or a claim--processing rule?

Be sure to listen in on Wednesday.

Shame On You: Govt Exerting "Irresistible Pressure" On (But Not Forcing) You To Buy Worthless Bonds Isn't A Taking

One from the U.S. Court of Appeals for the First Circuit.

In In re Financial Oversight & Management Board for Puerto Rico, No. 22-1048 (Nov. 22, 2022), the court affirmed the district court's 12(b)(6) dismissal of a takings claim because the government didn't actually force the plaintiff credit unions into buying what the complaint alleges are "worthless government-issued securities," even where "the defendants knew - but did not disclose - that these would be losing investments given the precarious state and dire financial situation in which Puerto Rico found itself at the time." Slip op. at 1.

Conned into purchasing junk bonds? That's on you.

This is another Takings Clause claim arising out of the Puerto Rico governmental bankruptcy. [Disclosure: we represent some of the property owners/Respondents in that other matter, now at the cert stage in SCOTUS.] The complaint alleged that in a series of meetings over the course of four years, Puerto Rico officials misled the credit unions into investing in securities that turned out to be worthless because the Commonwealth's finances, contrary to the picture portrayed, was in shambles. This case is an adversary proceeding in the subsequent bankruptcy case.

To understand the court's handling of the takings claim, you might want to read -- or at least skim -- the first part of the opinion in which the court affirms dismissal of the credit unions' fraud claim because (you guessed it) the claim was not pleaded with the right about of specificity. See slip op.at 24 ("specificity is the name of the game when alleging fraud, and the Credit Unions have not filled the bill here"). 

Slide down to page 29 of the slip opinion, where the takings analysis starts. Here's how the court describes the allegations in the complaint:

In the SAC, the Credit Unions allege that the defendants used "regulatory powers" to take "material portions of Plaintiffs' cash and liquid assets," resulting in "illegally appropriat[ing] the moneys of the Cooperatives to finance the government operation" by providing "materially diminished and value impaired government papers that did not constitute just compensation." According to the plaintiffs, the defendants used the circular letters to compel the Credit Unions "to purchase knowingly materially diminished and value impaired government bonds," "depriv[ing] the Cooperatives' property of any significant economic value." The Credit Unions allege the defendants' actions resulted in both a per se physical taking and a categorical regulatory taking.

Slip op. 29-30 (footnote omitted).

The court summed up the takings claim in a footnote:

As best we can tell, based on closely examining the SAC, the Credit Unions' takings claim theory seems to be that they were compelled to spend more on the bonds than the bonds were worth on the date of purchase. Problem is, merely alleging in the SAC an after-purchase decline in the value of the bonds in support of this theory does not, in and of itself, mean the bonds were not worth what the Credit Unions paid at the time of purchase. And relatedly, the allegations in the SAC about what the government and its instrumentalities knew at the time the Credit Unions purchased the bonds are all no-meat-on-the-bones conclusory in nature, e.g., the "instruments lacked true value," and the defendants pushed the bonds "with full knowledge of the government's lack of financial capacity to pay."

Slip op. at 33 n.20.

The credit unions alleged the government put them under "irresistible pressure" to buy the securities, but the court concluded this wasn't enough because they were not "require[d] to purchase." Slip op. at 34. The government "did not instruct the Credit Unions to purchase the bonds." Id. Yeah, the government "authorized and enticed the Credit Unions to purchase the bonds," but the purchase wasn't at the point of a gun, and the credit unions "voluntarily participate[d]" in the deal. Id. ("[W]here a property owner voluntarily participates in a regulated program, there can be no unconstitutional taking.") (quoting Franklin Mem'l Hosp. v. Harvey, 575 F.3d 121, 129 (1st Cir. 2009)).

Apparently, the plaintiffs did not allege a due process claim.

And we close by noting two items: (1) the opinion uses Courier New (very Old School, First Circuit), and (2) the opinion has a somewhat "hip" feel to it - casual, conversational; and instead of "Conclusion," it ends with the "Wrap Up." Solid.

In re Financial Oversight & Management Board for Puerto Rico, No. 22-1048 (1st Cir. Nov. 23, 2022)

Here's The Program For The 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Feb 1-4, 2023, Austin

Here it is, the official agenda and program for the 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, February 2-4, 2023 (with a special event the evening of Wednesday, February 1, 2023 to entice you to arrive early).

Here's the brochure with the complete agenda, schedule, and faculty listing. But to tempt you, here are some of the highlights of the program:

• Everything Old is New Again: Why Today’s Practitioners Need to Understand the Original Meaning of the Takings and Just Compensation Clauses

• Private Utility Takeovers – Lessons From a 67 Day Trial

• Valuation Issues When Billboards and Signs are Condemned

• Setting Client Expectations and Identifying Red Flags

• Developing Property Right Issues in Texas - Questions and Answers from the Bench: A View From the Bench (with Texas Supreme Court Justice Jimmy Blacklock)

• Eminent Domain and Regulatory Takings Updates: Important Decisions You Need to Know

• Ethics: Building Your Practice by Mentoring the Next Generation of Eminent Domain Lawyers

• ...and much more!

To register, go here.

Register now and hold your space. In the past several years, we have sold out due to the conference room capacity, and the conference hotel block. So don't delay. 

Looking forward to seeing everyone in Austin for the 40th edition of the Conference.

Program Brochure, 40th ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Austin, Texas, Feb 1-...

Let's Take A Deeper Look At Takings Ripeness, Ninth Circuit

Well, that was quick. As we noted here, we recently argued a case in the Ninth Circuit (October 20, 2022) about whether a regulatory takings claim is ripe. 

Not long after we posted the argument recording, the Ninth Circuit panel issued a short memorandum opinion rejecting our arguments wholesale (November 1, 2022).

So earlier this week, we asked the entire Ninth Circuit to take a look. Here's our en banc petition.

We'll leave it to you to read it and see why we think this one is ripe.

Appellants' Petition for Rehearing En Banc, Ralston v. San Mateo Cnty., No 21-16489 (9th Cir. Nov. 15, 2022...

It Was A Hundred Years Ago Today ... Happy Argument Birthday, Pennsylvania Coal v. Mahon

Yes, the granddaddy of all SCOTUS regulatory takings cases, from which we got such phrases as these was argued 100 years ago this day.

• "The 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."
• "Government hardly could go on if, to some extent, values incident to property could not be diminished without paying for every such change in the general law."
• "We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change."
• "As long recognized, some values are enjoyed under an implied limitation, and must yield to the police power. But obviously the implied limitation must have its limits, or the contract and due process clauses are gone."
• "When it reaches a certain magnitude, in most if not in all cases, there must be an exercise of eminent domain and compensation to sustain the act."

That's right, Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) was argued today a century ago. November 14, 1922. The case was argued in what is now called the Old Senate Chamber (the Court only later moved across the street to its present digs).

If only they had the arguments recorded!

Exhibits in connection with Brief of the City of Scranton, Intervenor, Pennsylvania Coal Co. v. Mahon, No. 2...

CA9 Takings Ripeness Oral Arguments: Must Property Owners Secure Govt's Agreement That Property Is Subject To Challenged Regulations Before A Court Can Review?

October 20, 2022 was what one advocate noted was "land use day at the Ninth Circuit," because three out of the four cases being argued in Courtroom 3 of the San Francisco courthouse were indeed land use -- or perhaps more accurately, regulatory takings -- cases.

Ours was one of those cases, Ralston v. San Mateo County.

Without going into too much detail, this is an appeal from the district court's 12(b)(6) dismissal of our regulatory takings complaint. The crux of the claim is that Ralston's R-1 zoned property is subject to an "overlay" district called the Montecito Riparian Corridor, a highly-restricted zone that allows only 5 environmental uses of land within the zone (none of which are consistent with the R-1 zoning). (Ralston's property is labeled "076-19" on the County's MRC map.)

Absent some kind of special dispensation -- what the County calls an "override" -- the County cannot grant a Coastal Development Permit for a residential use in accordance with the R-1 zoning, because CDPs must be consistent with both the Residential zoning, and the MRC overlay.

Following the County's instructions that "[a]ny intention to proceed with an application for development that would run counter to any of those policies must first be throughly [sic] reviewed by the Community Development Director and County Counsel[,]" Ralston did ask the Planning (Community Development) Director. He received what he thought was a pretty definite response: no development in the MRC, and no override.

But the County argued the Planning Director's response wasn't an official denial, and the district court agreed, holding that the case was not ripe under the "final decision" rule of Williamson County, because the County might have granted a waiver of the MRC restrictions and issued a CDP for a residence, if only Ralston had asked the right way by applying for a CDP and then exhausted the County's review process.

In addition to that issue, the focus of yesterday's oral arguments was also on a slightly different issue: the panel questioned the advocates (esp. me!) about whether, to ripen the claim, the County must also have confirmed that indeed, Ralston's property is subject to the above-mentioned MRC restrictions. The complaint alleged it is (see, e.g., the County's map, above). The location of the MRC is determined by how much of a property is covered by certain vegetation, and indeed, Ralston's property is covered, stem-to-stern with arroyo willow, one of the species listed in the County ordinance.

"It is like a finger, pointing a way to the subject property,
back there by the big dead pine tree..."

We argue that alleging this -- which as a factual allegation must be taken as true at this stage -- is enough to ripen the claim, but the County and the Coastal Commission assert that Ralston must have obtained the County's final confirmation that his property is subject to the MRC regulations, before his lawsuit was ripe. In other words, whether this property is indeed at least 50% covered in arroyo willow is not a fact question (for pleading), but rather a scientific and technical legal question that the County must first be given a chance to exercise its discretion about, via some kind of application and official response from the County.

Stream the arguments above, or download the mp3 (big file!) here. And along with us, keep your fingers crossed for a favorable result from the panel.

Stay tuned.

CA6: Home Equity Is Property Even If State Law Says Otherwise: Govt Can't Foreclose To Satisfy A Tax Debt, Then Keep The Change

We won't be providing our detailed thoughts on last week's U.S. Court of Appeals for the Sixth Circuit's opinion in Hall v. Meisner, No. 21-1700 (Oct. 13, 2022), because we're obviously biased: our law firm colleagues Christina Martin and Kady Valois represent the prevailing property owners, so we naturally agree with the court. Thus, you should really read the opinion in its entirety yourself. But we shall offer some commentary:

• This is another one of those "home equity theft" cases where, after foreclosing property in order to satisfy a tax or other debt, the government doesn't remit the excess equity to the property owner, but keeps it or allows a private third-party to do so.
• This case is a takings challenge to a Michigan county doing just that under the authority of state law. Hall owed a tax debt of $22k, and her home was worth close to $300k. The County foreclosed, then transferred Hall's home to a local municipality which satisfied the tax debt and in turn conveyed the home for $1 to a nonprofit, which then sold it for $308k.
• The District Court dismissed Hall's section 1983 takings claim for failure to state a claim. The court concluded that the County had not obtained the "excess equity" in Hall's home, because it merely foreclosed and then conveyed the home to a separate municipality, which in return conveyed to the County only the amounts of the tax debt. Thus, the County argued, we took nothing.
• The Sixth Circuit reversed. It framed the issue thusly: "The question, then, is whether Michigan likewise disavowed traditional property interests merely by defining them away in its General Property Tax Act." Slip op. at 6.
• The court concluded that the excess equity in one's home is a private property interest because "Anglo-American legal history" has long-recognized such an interest, and English courts of equity and law considered "irrevocable forfeiture of the debtor's entire interest in the land" if mortgaged, to be "an intolerably harsh sanction for the borrower's default." Slip op. at 7.
• American courts were similarly "uniformly hostile to strict foreclosure ... where the land's value exceeded the amount of debt." Slip op. at 9.
• The court held that the Michigan statute which permitted the County to foreclose without returning the excess equity to the homeowner "contravened all these long-settled principles[.]" Slip op. at 12. The statute was an "ipse dixit" that "sidestepp[ed] the Takings Clause by disavowing traditional property interest long recognized under state law." Id.
• The court also rejected the County's argument that the County wasn't the party doing the taking, because it only foreclosed, while it was the municipality to which the property was transferred that kept the change. Slip op. at 13.
• The court similarly rejected the Michigan Attorney General's argument that the state and local governments would suffer "serious fiscal consequences" if the statute were unconstitutional. The court responded much as we might expect, and gave little stock to this chicken little claim (as most courts do).
• "In sum, the Takings Clause “is addressed to every sort of interest the citizen may possess.” U.S. v. General Motors Corp., 323 U.S. 373, 378 (1945). The plaintiffs’ equitable title to their homes was such an interest. On the facts alleged here, the County took the plaintiffs’ property without just compensation, in violation of the Takings Clause." Slip op. at 15.

So there it is. The court looked at whether the interest claimed was a long-standing and traditional property right. It was and is. Thus, although state law may redefine that right, it can only do so if it provides just compensation. If there's a big-picture takeaway from the opinion, to us it is this:

Where we respectfully disagree with the district court, however, is in its assumption that the question whether the County took the plaintiffs’ property is answered solely by reference to Michigan law. True, the federal “Constitution protects rather than creates property interests,” which means that “the existence of a property interest,” for purposes of whether one was taken, “is determined by reference to existing rules or understandings that stem from an independent source such as state law.” Phillips v. Washington Legal Foundation, 524 U.S. 156, 164 (1998) (quotation marks omitted). But the Takings Clause would be a dead letter if a state could simply exclude from its definition of property any interest that the state wished to take. To the contrary, rather, “a State may not sidestep the Takings Clause by disavowing traditional property interests long recognized under state law.” Id. at 167.

Slip op. at 5 (emphasis added).

For more, check out Christina Martin's recent guest spot on the Eminent Domain Podcast, and John Stossel's report, "Stealing Homes."

Hall v. Meisner, No. 21-1700 (6th Cir. Oct. 13, 2022)

Brigham-Kanner Property Rights Conference Wrap-Up

The William and Mary Law School has posted David Morrill's summary of the recent Brigham-Kanner Property Rights Conference.

In addition to a full day of academic and practicing bar speakers on Friday, and the award banquet on Thursday evening, the Conference included two full days of student-oriented programming earlier in the week, where practicing land use and property rights spoke about their practices, the hot topics in the field, and how they ended up in this practice area. Every session was well attended, as the photos from the events show.

Check it out. And please join us at future Conferences!

Congratulations On Reaching The "Century" Milestone, Eminent Domain Podcast!

That's right: Clint Schumacher's Eminent Domain Podcast has reached its 100th episode. Very impressive, Clint!

And for this "very special episode," Clint was kind enough to ask us to return to celebrate. In a wide-ranging hour-plus chat, Clint and I talked property rights and takings of course, but also hit on several more philosophical subjects. If you could have coffee with any historical figure who would you choose? Pharaoh Khufu? Jack the Ripper? Winston Churchill? What person has influenced your life the most? What's on tap for the 2023 ALI-CLE Eminent Domain and Land Valuation Litigation Conference in Austin? If you had to choose a last meal, what would it be (for me, an easy question)? Clint is a generous host (and person), so I really had a good time.

One note: Clint makes it seem seamless, but I know that the behind-the-scenes process of putting together an episode is a heckuva lot of work, especially if you add it up over 100 episodes and several years, week in and week out. He's too modest to claim kudos, but I am not so reticent: we should all say a big thank you to Clint for putting the podcast out there and keeping us tied together. Please pass on your appreciation! 

We wrapped up by Clint promising me that I could be the guest on his 200th episode. I look forward to it, friend.

CA6: No "Police Power" Exception To Takings (But It's Nonetheless Dispositive As Penn Central's Character)

A short one (unpublished) from the U.S. Court of Appeals for the Sixth Circuit, considering an issue we've been following: what is the effect of the government's claim that it is regulating property for what looks like a valid "police power" purpose?

As noted, that's a road we've been down before. Here's a sampling:

• Wait, I Thought The Police Power and the Public Use Clause Were "Coterminous"
• CA3: Claim That Govt Is Keeping Property Seized (But Not Used) As Evidence "checks all the Fifth Amendment boxes."
• Cert Denied In Police Power Takings Case (Lech v. Greenwood Village)
• Fed Cir Tries To Avoid "Police Power" Takings Exception In Bump Stock Case By (Unsuccessfully) Finessing The Property Interest

In Bojicic v. Dewine, No. 21-4123 (Aug. 22, 2022), the Sixth Circuit was considering a takings and due process challenge to the governor's Co-19 shutdown orders. The court rejected the district court's rationale that the claim could be rejected simply because "the state acts pursuant to its police powers to protect public health." Slip op. at 15.  

In support, the court cited United States v. Droganes, in which we held that seizure and retention of property under the police power is not a public use. 728 F.3d 580, 591 (6th Cir. 2013). But that case involved the government’s failure to return property the plaintiff had agreed to forfeit after being charged criminally. Id. at 585. It did not concern the kind of regulatory taking at issue here.

Defendants cite several other cases purportedly holding that exercises of the police power are not compensable takings. Principally, the Defendants rely on Keystone Bituminous Coal Association v. DeBenedictis, 480 U.S. 470 (1987), decided after Penn Central. That case discussed whether the government must compensate property owners when it prevented them using their property for certain purposes. The Court explained that “‘all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community,’ and the Takings Clause did not transform that principle to one that requires compensation whenever the State asserts its power to enforce it.” 480 U.S. at 491–92 (cleaned up) (quoting Mugler v. Kansas, 123 U.S. 623, 665 (1887)). And it added that “the public interest in preventing activities similar to public nuisances is a substantial one, which in many instances has not required compensation.” Id. at 492.

Slip op. at 15-16.

The appeals court acknowledged that yes, the state has a strong interest in preventing harm, but "no appellate court seems to have applied the police-power language so broadly as to categorically declare that no state response to a public-health emergency could be a taking. True, this police-power exception has been applied in the context of criminal forfeitures and abating nuisances. But to hold that a regulation intended to benefit public health can never be a compensable taking would be an unwarranted extension of existing precedent." Slip op. at 16.

That's something we argued in this article ("Evaluating Emergency Takings: Flattening the Economic Curve," 29 Wm & Mary Bill of Rights J. 1145 (2021)). We view a valid police power reason as the predicate to a takings claim, and not a bar. After all, if the government lacks a valid health, safety, welfare, or morals reason supporting the restriction, that's a due process problem (mostly). It's only after a court makes that call that it can consider whether compensation might be owed.

So score one for the property owner!

But that was not the end of the story. Having rejected the district court's rationale for dismissing, the Sixth Circuit didn't stop there: "[w]e therefore analyze this issue under the Penn Central framework" since no Lucas economic wipeout was alleged by the plaintiff. Id.

And don't miss the way the court analyzes the multi-factor test. First, it concluded that "[t]he first two factors—the economic impact of the regulation on the plaintiff and the extent to which the regulation had interfered with the plaintiff’s distinct investment-backed expectation—weigh in favor of the Plaintiffs." Id. Oh boy, things are really looking up, no?

Not so fast. The court concluded that the final factor--the character of the government action--"weighs even more heavily in the Defendants' favor." Slip op. at 17. Indeed, the character is "dispositive." Id. Why, you ask? It looks like the court went back and cut the police power argument, and paste it here. The character of the government action was that the state imposed the restrictions "to protect public health by reacting quickly in the face of a fast-spreading and novel virus." Id. As we suggested in the article referenced above, the "character" inquiry is not just another way of asking whether the government has a good police power reason for the regulations. Character asks about the nature of the imposition on the plaintiff's rights by asking does it require some surrender of a fundamental aspect of property, or is it more a rearrangement of the benefits and burdens of life? It's not some kind of alternative police power test as the Sixth Circuit concluded. 

Next, the court held that the character of the state's Co-19 restrictions here were temporary ("in effect for only a little over two months"). The court recognized that Tahoe-Sierra "analyzed a per se regulatory taking," but also asserted "the language applies equally here." Slip op. at 17. But again, what does that have to do with character? Aren't temporary takings also compensable (we sure think so)?

The court, of course, expressed it's "sympathy" for the plaintiffs because "they were forced to shut down their businesses, give up income, and endure the uncertain difficulties of the pandemic." Slip op. at 18. But because the government was "facing the unexpected arrival of a virus of unknown destructive capacity," it was "forced to act and to act quickly." Slip op. at 18. Thus, no taking.

Bojicic v. Dewine, No 21-4123 (6th Cir Aug. 22, 2022) (unpub.)

Indiana: Before Taking Property, Condemnor Must Provide Notice Reasonably Calculated To Put The Owner On Actual Notice

Here's the latest in a controversy we've been following.

In 624 Broadway LLC v. Gary Housing Authority, No. 22S-CT-140 (Aug. 29, 2022), the Indiana Supreme Court held that the Authority failed to provide the property owner adequate notice that it would be taking its property as part of a redevelopment project.

The Gary Housing Authority wanted to redevelop 624 Broadway's commercial property in downtown Gary into mixed-use residential. The Authority instituted an "administrative taking" under Indiana law, which is "an alternative to the 'traditional' lawsuit route" that "occurs when an authorized governmental body condemns property and awards damages through resolutions." Slip op. at 2.

The administrative taking statute only requires notice to the property owner by publication. And that's exactly the notice the Authority gave 624 Broadway. "It twice published notice of the resolution and upcoming meeting in two area newspapers of general circulation." Id. Broadway's agent found out about the meeting from a reporter, and he appeared at the meeting and spoke. At the meeting, the Authority confirmed the taking and assessed $75k in damages, and set another meeting to consider objections.

The owner asked to postpone that meeting, but the Authority refused. The owner even sued (unsuccessfully) to get a TRO to stop the meeting so that the owner's appraiser could evaluate the property. With nothing stopping it, the Authority held the meeting, at which it concluded it could take the property, and awarded the $75k in damages. One day after that meeting, the owner's appraiser inspected the property, and a short time later issued a report valuing it at $325k.

624 Broadway raised a constitutional due process argument, asserting that the notice provided by the Authority was insufficient. Hold on, the Authority countered, the statute only requires us to publish notice of the taking and our hearing, and there's no question we did that. Although the lower courts bought that assertion, the Indiana Supreme Court didn't.

Taking property required due process notice, and that process requires some kind of hearing. The notice provided must be reasonably calculated to inform. Yeah, the Authority complied with the statute and published notice, but that alone doesn't mean the notice of the hearing was "constitutionally sound." The court noted that "[c]ertainly, a statute can provide more protection than the Constitution. But when a statute provides less, the government must do more." Slip op. at 5 (footnote omitted).

Not that notice by publication is always bad. You can publish notice where it isn't possible or practicable to give other kinds of notice. But if you know where to find someone, or can easily figure that out, then you have to make an effort.

The Housing Authority admittedly knew the identity and address of 624 Broadway’s registered agent. Indeed, its September 19 damages resolution included his address. 624 Broadway’s articles of organization, filed with the Indiana Secretary of State, listed its registered agent, his address, and an email address for service. Further, the Housing Authority demonstrated its ability to successfully communicate with 624 Broadway during its eminent domain lawsuit. See L.D., 938 N.E.2d at 671 (finding notice by publication insufficient when a party “had successfully given notice” in a previous case but “made no attempt to do so” in the instant case). Yet once it transitioned to an administrative taking, it apparently became incapable of sending a letter or email to 624 Broadway. An administrative taking may be a “streamlined procedure for taking private property,” Util. Ctr., Inc. v. City of Fort Wayne, 985 N.E.2d 731, 736 (Ind. 2013), but it cannot circumvent the Constitution. “[W]hen notice is a person’s due, process which is a mere gesture is not due process.” Mullane, 339 U.S. at 315. Because the Housing Authority knew how to provide personal notice, its notice by publication was a “mere gesture.”

Slip op. at 6.  

But wait, the owner's agent actually knew about the meeting (found out from a reporter) and showed up. That's not enough? No, the court concluded, "we cannot say 624 Broadway was not prejudiced: under our harmless error standard, and error's 'probable impact' is "sufficiently minor' if it did not 'affect the substantial rights of the parties.'" Id. (citation omitted). It is likely that if the Authority provided adequate notice, 624 Broadway could have at least had its appraisal ready to go. 

Having found a problem the next question was remedy. The court concluded that the owner is not entitle to vacate the taking, because the court was not convinced that it was for a bad purpose. "And nothing indicates that the taking was 'subterfuge ... to convey private property to a private individual for private use' or that the Housing Authority acted arbitrarily and capriciously." Slip op. at 7. So the court declined to vacate the taking, and sent the case back for a properly-noticed hearing on damages where the Authority can consider all of the owner's evidence. Yeah, that'll surely change things.

We shall see.

More on the decision here ("Gary Housing Authority violated Constitution in eminent domain case").

624 Broadway LLC v. Gary Housing Authority, No. 22S-CT-140 (Ind. Aug. 29, 2022)

CA3: Claim That Govt Is Keeping Property Seized (But Not Used) As Evidence "checks all the Fifth Amendment boxes."

The facts are pretty straightforward in the U.S. Court of Appeals' opinion in Frein v. Pennsylvania State Police, No. 21-1830 (Aug. 30, 2022):

Eric Matthew Frein is on death row for cold-blooded murder. In 2014, he ambushed two Pennsylvania State Troopers, killing one and injuring the other. For a while, he evaded capture. Police knew he had used a .308-caliber rifle. So they got a warrant to search the home that he shared with his parents and seize that type of rifle and ammunition.

When they executed the warrant, state police did not find a .308-caliber rifle. Instead, they found forty-six guns belonging to the parents: twenty-five rifles, nineteen pistols, and two shotguns. None was a .308. Even so, the officers got a second warrant and seized them all.

Slip op. at 3.

The police eventually got their man, and Frein was tried and convicted. His appeals (including discretionary review) were unsuccessful. And the guns seized from the parents were never used by the government in its prosecution. Indeed, there was not even any allegations that their guns were relevant to their son's crimes.

They gave 'em back, right? No. So the parents asked the Pennsylvania courts to order the police to return the guns, "raising Second Amendment, takings, due-process, excessive-fines, and state-law objections." Slip op. at 3-4. Denied, "[i]n a one-sentence order[.]" Slip op. at 3.

Next stop, federal court and a section 1983 action against the state police, several officers, and other prosecutorial officials:

The parents do not challenge the seizure under the Fourth Amendment. But they say that by keeping the guns after the criminal case ended, the government is violating two other parts of the Constitution: the Fifth Amendment’s Takings Clause and the Second Amendment’s right to “keep … Arms.” Plus, they argue that the state’s procedure for letting them reclaim their property violated procedural due process.

Slip op. at 4. We didn't use the guns as evidence, but we might be keeping them in case Frein seeks habeas relief. And besides, we seized the guns pursuant to a valid search warrant, so what's the problem? The district court agreed and dismissed for failure to state a claim.

The Third Circuit reversed. The parents didn't challenge the initial seizure, but "the state police's continued retention of the guns once the criminal case ended." Slip op. at 5. 

The takings part of the opinion is not all that long. And there's a lot of good stuff there. So rather than summarize it, we're going to reproduce it in full. Or you can just read the opinion:

The Fifth Amendment’s text supports the parents. After all, their guns are “private property.” And they were “taken” by the officials. Plus, the parents have never gotten a dime, let alone “just compensation.” Id.

Finally, the officials pressed the property into “public use.” Id. The parents’ property was seized by public officials (police) to help public prosecutors enforce state law at a public trial. So their claim checks all the Fifth Amendment boxes.

The officials counter that because the parents have tried to get their guns back in state court, they are collaterally estopped from using a takings claim to try again. Not so. The state court’s order would preclude this takings claim only if the state court had decided an “identical” issue. Metro. Edison Co. v. Pa. Pub. Util. Comm’n, 767 F.3d 335, 351 (3d Cir. 2014). But that one-sentence order said nothing about takings or the government’s need to keep the evidence for a possible retrial; it gave no reasoning at all. Nor could claim preclusion have barred this claim, even if the officials had raised it, because Rule 588 motions are the wrong vehicle for seeking just compensation for a taking. Compare Pa. R. Crim. P. 588 (authorizing only “the return of the property”), with Dep’t of Transp. v. A & R Dev. Co., 2020 WL 1130855, at *6 (Pa. Commw. Ct. Mar. 9, 2020) (explaining that Pennsylvania’s “Eminent Domain Code … is the exclusive remedy for a de facto taking”).

Next, the government says Bennis v. Michigan forecloses this claim. Bennis held that the government need not compensate the owner when it has “lawfully acquired” property in reliance on its police powers, rather than “eminent domain.” 516 U.S. 442, 452 (1996). No one doubts that the government seized the guns under its literal police powers. And because it had a valid warrant, it says it lawfully acquired the guns too.
But Bennis applies only when the government gains title to the property. There, formal ownership of the property had been “transferred by virtue of [a forfeiture] proceeding from [the owner] to the State.” Id. Here, by contrast, the government has never “lawfully acquired” title to the guns; they still belong to the parents. See Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2071 (2021) (confirming that a taking happens “when[ever] the government physically takes possession of property without acquiring title to it”). Plus, the guns are not forfeitable as contraband, instrumentalities, or proceeds of a crime. They are, at most, potential evidence, and police do not gain title to “mere evidence.” Warden v. Hayden, 387 U.S. 294, 306 n.11 (1967). So Bennis is no obstacle to the parents’ takings claim.

Slip op. at 5-6.

And what about that warrant ... doesn't that immunize the police from liability? No, the court concluded, the warrants "are not blank checks." Slip op. at 7. Check out pages 7 through 10 for the details. 

There's a lot more to the opinion (concluding, for example, that the keeping of the guns violated the parents' right to "keep" arms under the Second Amendment, and a rejection of the procedural due process claim). If that kind of thing is your thing, please do read the balance of the opinion. 

One more takings piece of interest, right there at the tail end of the opinion. The court concluded that the Eleventh Amendment bars a damages remedy against the state police, and that includes a claim for just compensation. Slip op. at 18 ("That is because the Takings Clause, as incorporated against the states, did not alter the states’ traditional immunity from federal suits, at least if state courts remain open to hear these claims."). And here, Pennsylvania's courts are open to consider compensation claims. Thus, the parents' takings claims can only result in an injunction. Id. ("Unless Pennsylvania decides that it prefers to pay damages to compensate owners for takings, federal plaintiffs like the parents may get only a declaration and injunction requiring the state to return their property.").

Frein v. Pennsylvania State Police, No. 21-1830 (3d Cir. Aug. 30, 2022)

District Court Declines To Back Off Its "SWAT Takings" Verdict

You remember that case we posted recently, from the U.S. District Court for the Eastern District of Texas in which the court granted summary judgment to a property owner after the city police damaged her home in the course of the police's apprehension of a suspect. The court rejected the Tenth Circuit's rationale in a similar case (which concluded that these are "police power" actions, and thus never a taking).

After that ruling, the remaining issues (was the city liable under section 1983, and if so what is the just compensation owed) were tried by a jury.

On June 20, 2022, this case went to trial. Two days later, the jury returned its verdict (Dkt. #74). The jury found the City was liable under § 1983 because it acted under color of state law when it violated Baker’s constitutional rights under the Fifth Amendment of the United States Constitution by depriving her of her property without providing just compensation, and that this violation proximately caused Baker’s damages. The jury awarded Baker $44,555.76 in just compensation for the cost of repairs to her real property, and $15,100.83 in just compensation for the loss in market value to her personal property. Baker elected to recover damages pursuant to § 1983.

Order at 2.

The city wasn't going down without throwing up every obstacle, and its strategy included a motion for judgment as a matter of law (JMOL, or as us old-timers call them, "directed verdicts" or JNOV), and a motion for a new trial. The motion for new trial simply argued that the jury got it wrong, while the JMOL argued that the property owner didn't adequately plead and pursue a section 1983 claim. The district court denied both motions. See Order (denying new trial), and Order (denying JMOL). 

We suggest you read them. Here's a couple of highlights:

First, the City takes issue with the Court’s reliance on Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021) (Dkt. #85 at p. 4). The City correctly points out that Cedar Point did not involve physical damage from law enforcement action. The Court was well aware of this point at the time it rendered its opinion. That said, the Court merely drew general principles from the Supreme Court’s opinion to guide in the Court’s own analysis. Moreover, the City emphasizes the Supreme Court “confirmed that the common law authorizes law enforcement to enter private property to avert public or private harm, arrest a suspect, or enforce criminal law without compensation to the property owner” (Dkt. #85 at p. 3 (citing Cedar Point, 141 S. Ct. at 2079)). Cherry-picking this one quote from Cedar Point, the City makes the leap that “the Fifth Amendment does not apply to property damage caused by law enforcement when reasonably performing law enforcement tasks” (Dkt. #85 at p. 4). However, the Supreme Court in Cedar Creek confirmed law enforcement could lawfully enter property pursuant to the public interest—not destroy it, as law enforcement did to Baker’s property. For these reasons, the Court is not persuaded to re-evaluate its prior reading of Cedar Point or change its holding that the Fifth Amendment applies here.

Order (denying new trial). at 4.

Rejecting the city's argument that while the owner might have adequately pleaded a 1983, she did not pursue it, the court held:

Based on these statements made by counsel at the pretrial conference, it cannot be argued that Baker no longer intended to pursue her claim under § 1983 at trial, or that the City lacked awareness that this claim would be adjudicated at trial. Thus, when the Pretrial Order is read in conjunction with the representations of the parties at the pretrial conference, it is evident that Baker did not waive her claim under § 1983 and that the City was on notice of it. See, e.g., Excel Modular Scaffold & Leasing Co. v. O.S.H.A., 943 F.3d 748, 755 (5th Cir. 2019) (holding defendant waived affirmative defense where defendant omitted defense from the pretrial order and repeatedly failed to mention its desire to pursue the defense at the pretrial conference despite being afforded multiple opportunities); SRSB-IV, Ltd. v. Cont’l Savs. Ass’n, 33 F.3d 1379, 1994 WL 487239, at *3 (5th Cir. 1994) (unpub.) (holding that party waived issues of liability and damages where party did not include the issues in the pretrial order and subsequently failed to raise the issues at the pretrial conference).

Order (denying JMOL) at 10.

A hearty well done to our colleagues at the Institute for Justice for this case.

Memorandum Opinion and Order (JMOL), Baker v. City of McKinney, No. 4:21-CV-00176 (E.D. Tex. Aug 26, 2022)

Memorandum Opinion and Order (New Trial), Baker v. City of McKinney, No. 4:21-CV-00176 (E.D. Tex. Aug 26, 2...

CA5: "But there’s a big difference between saying that something is property for purposes of procedural due process and saying that it is property for purposes of the Takings Clause"

In Hignell-Stark v. City of New Orleans, No. 21-30643 (Aug. 22, 2022), the U.S. Court of Appeals for the Fifth Circuit, like a lot of other courts, reached an unsurprising conclusion: New Orleans' restrictions on short-term rental of residential properties isn't a taking. But there are parts of the opinion that are definitely worth your time to check out. Read on.

The city had gone back-and-forth on whether renting for less than thirty days was a good thing. Originally barring STRs, then in 2016 offering city licenses, and then when the inevitable flood of STRs resulted, retrenching and substantially revising the licensing program:

One year into the initial regime, the City commissioned a study from its Planning Commission to reevaluate the STR policies. The study found that the rapid proliferation of STRs had brought nuisances to the City. Specifically, it discovered that STRs in residential neighborhoods had lowered residents’ quality of life. Many visitors to the City who stayed in STRs were loud and did not clean up after themselves. The study also determined that the expansion of STRs into residential neighborhoods had led to a “loss of neighborhood character.” And it collected “anecdotal evidence” that the booming STR market had made housing less affordable for residents.

Because of the study and other efforts to examine the STR market, the City substantially revised its STR licensing regime in 2019.

Slip op. at 2-3.

Bottom line: some owners who had obtained licenses were not allowed to renew, while others were denied new licenses because they did not live in the dwellings they were renting out. 

Takings claims (and other claims) followed. See slip op. at 4 ("First, they said the City’s failure to renew their STR licenses violated the Takings Clause because they had a property interest in the renewal of their licenses."). The District Court granted the city summary judgment.

The Fifth Circuit affirmed. The owners do not have a property right in renewal of their licenses. Relying on a case in which the Fifth Circuit held that a business license is property for purposes of procedural due process, the owners asserted that this means they possess a private property interest in getting or renewing a STR license. See slip op. at 5 (citing Bowlby v. City of Aberdeen, 681 F.3d 215 (5th Cir. 2012)). The Fifth Circuit was having none of it:

But there’s a big difference between saying that something is property for purposes of procedural due process and saying that it is property for purposes of the Takings Clause. The former merely obligates a governmental entity to provide the “owner” with procedural protections—and only when a cost-benefit analysis shows that those procedures are worth the cost. See generally Mathews v. Eldridge, 424 U.S. 319 (1976). But the latter means that the government must pay damages. And the test for a property interest protected by procedural due process is quite broad: “A person’s interest in a benefit is a ʻproperty’ interest for due process purposes if there are such rules or mutually explicit understandings that support his claim of entitlement to the benefit . . . .” Perry v. Sindermann, 408 U.S. 593, 601 (1972); accord Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577–78 (1972).

Slip op. at 6.

This is ground that has been covered by other courts (see "CA6: There's A Difference Between Due Process 'Property' And Takings Clause 'Property'"), and by us (see "The New New Property - Public Resources and Private Rights"). 

But the above doesn't really address the question: if Due Process "property" isn't the same as Takings "private property," then what's the difference? The Fifth Circuit concluded that "[s]one 'mutually explicit understandings' can create property interests protected by the Takings Clause." Slip op. at 6. Well okay, but that's pretty cryptic no? The next paragraph of the opinion gets a bit more specific. "[S]ome rights recognized by custom alone could qualify as property for purposes of the Takings Clause." Id. That includes "unwritten common law" and "policies and practices."

And here's the court's actual definition:

We thus concluded [in Dennis Melancon, Inc. v. City of New Orleans, 703 F.3d 262 (5th Cir. 2012)] that “the Fifth Amendment protects expectations arising not just from legislation or judicial precedent, but also those springing from custom and practice.”

Slip op. at 6-7. Ah, so it's expectations that qualify as Takings Clause "private property?" Well, sort of. The expectation has to be "so deeply rooted in custom" that compensation is owed for appropriating it (as opposed to some interest that entitles you to notice and an opportunity to be heard before we appropriate it). Slip op. at 7.

But wait you say, isn't that circular definition? Private property for purposes of the Takings Clause includes those interests and expectations that custom tells us we get compensated for if they are taken. How does that definition advance the ball here? Well, it really doesn't, but let's see how the Fifth Circuit applied that test.

The court first concluded that the STR licenses are privileges, not rights. After all, granting these things are totally discretionary. Slip op. at 8 ("Even an applicant who met the statutory requirements for a license was not entitled to one.") (footnote omitted). Thus, no one could expect to be compensated if a STR license wasn't renewed (except the plaintiffs, that is).

Next, the court considered the length of time that STR licenses have been around. "STR licenses did not exist until 2017, when the City adopted its original licensing regime." Slip op. at 8-9. Then a year later, the city changed the policy. This "short lifespan ... shows that the plaintiffs' licenses were not so rooted in custom and practice that they amounted to property." Slip op. at 9. Apparently, the longer a privilege hangs around unmolested, the more it resembles a right. Got it.

"Together," the court concluded, "those two factors yield one conclusion: The plaintiffs didn't have property interests in the renewal of their licenses." Id.

So there you are - the two questions we need to ask to figure out whether the plaintiff owns Takings Clause private property are (1) does the government call this thing a privilege and have discretion to not recognize the owner's use (that's pretty Hobbesian in our view), and (2) how long has this been going on? It may not be the most satisfying test, but it is indeed a test.

We say "unsatisfying" because we think that when a court defines the scope of the private property interest involved narrowly -- as the Fifth Circuit did here -- that will inevitably lead to a "no property" ruling nearly every time. After all, if the court defines the property interest as the right to have the city issue a STR license, then you never really get past that. The King gives so the King can take away.

But isn't the property right at stake here broader than that? In our view, the property interest at stake here the right to use and to rent your property for less than thirty days, with the real question that should be addressed being whether the government has the authority to interfere with or restrict that right. We acknowledge that this approach may get us to the same place in the end (yes, government can regulate an owner's ability to use property in certain ways if doing so is part of the background principles of property law and nuisance). But even if it does get to the same result, to us, this approach is more realistic and puts the burden on the party restricting property rights (the government), and not the other way around. For an example of how some other courts go this way, see "Tex App: "Property" Includes Right To Rent It Out - City's Short-Term Ban May Be A Taking").

Even though the property owners lost their takings claims here due to a lack of a private property interest, they still had something to celebrate: the Fifth Circuit reversed the district court's rejection of their claim that the residency requirement violated the Commerce Clause:

The district court held that the residency requirement discriminated against interstate commerce. That was the right call. But the court then applied the Pike test to uphold the law. That was a mistake; it should have asked whether the City had reasonable nondiscriminatory alternatives to achieve its policy goals. Because there are many such alternatives, the residency requirement is unconstitutional under the dormant Commerce Clause.

Slip op. at 10. If that kind of stuff floats your boat, read the balance of the Fifth Circuit's opinion.

Hignell-Stark v. City of New Orleans, No. 21-30643 (5th Cir. Aug. 22, 2022)

Registration Underway - 19th Annual Brigham-Kanner Property Rights Conference (Sep 29-30, 2022)

There's still space for you to join us -- preferably in-person, but remotely if that is not possible for you -- at the 19th Annual Brigham-Kanner Property Rights Conference, September 29-30, 2022, at the William and Mary Law School in Williamsburg.

The American Law Institute was kind enough to post a notice about the Conference and the ALI members who are on the speaking faculty here.

Registration for the Conference is ongoing, and you can sign up here. Here is the full agenda. (We'll be speaking on Panel #2, "Reshaping the Framework Protecting Property Under the Roberts Court."

In our opinion, the Conference is the best of its kind, and brings together legal scholars and the practicing bar to talk dirt law. So please come join us.

Penn Central May Be A "Fuzzy" Test, But What Is A Court Doing Weighing The Factors?

You'll definitely want to check out the U.S. Court of Appeals for the Third Circuit's opinion in Makrilov v. City of Jersey City, No. 21-1786 (Aug. 16, 2022).

Not because it reaches any earth-shattering conclusions -- the opinion unsurprisingly concluded that the city's restricting (but not eliminating) short-term rentals (less than thirty days) was not a taking -- but primarily because of the interesting concurring opinion.

So here's the story. At one time, the city thought that renting residential property for less than thirty days was a good thing, believing that short-term renting "incentivize[d] investment and development in Jersey City." Slip op. at 3. The city even adopted an ordinance affirmatively legalizing STRs as permitted accessory uses in residential zones. A property owner didn't even need to obtain a permit, as long as the operation was small-scale (the owner did not have more than five units it rented).

But then, something changed. The city went from full-throated support for STRs to, let's say, a more heavily-regulated regime. What happened you ask, to bring about this shift in municipal policy? Check this out:

Mayor Fulop was quoted in the press release and made other public statements in support of the ordinance, describing companies that participate in the “sharing economy” as the “future.” App. 102. He also authored an article in the Huffington Post explaining the purposes and benefits of the ordinance. Mayor Fulop noted that home-sharing platforms allow “middle-class folks [to] earn a bit of extra income by renting out their apartments.” Id. The ordinance had the support of other Jersey City public officials, several of whom made statements in support of the ordinance. The Jersey City Council unanimously approved the ordinance, and on October 30, 2015, Mayor Fulop signed the ordinance into law.

Following the passage of Ordinance 15.137, Mayor Fulop’s relationship with Airbnb purportedly began to deteriorate. In 2016, Mayor Fulop allegedly sought a donation from Airbnb to his reelection campaign. Mayor Fulop attended a fundraiser at Airbnb’s San Francisco headquarters in 2017 but still did not receive a donation. In May 2017, Mayor Fulop allegedly sent a number of emails to Airbnb expressing his frustration, and, in response, Airbnb sent a $10,172 contribution to his reelection campaign. Airbnb represented that, following the delay in the donation, the relationship “fractured,” and Mayor Fulop began receiving donations from the hotel industry. App. 231.

Slip op. at 5-6.

After that turn of municipal policy, the city adopted a new ordinance. "Although it did not ban short-term rentals entirely, it imposed a number of new restrictions." Slip op. at 6. The new ordinance limited non-owner-occupied STRs to sixty nights per year, and most importantly, "only those who owned properties could rent on a short-term basis in Jersey City." Id. Funny how that works, no?

Problem was, the plaintiff (and others) had taken the city at its earlier word. Relying on the ordinance affirmatively legalizing STRs, they "invested in properties in Jersey City to consider short-term rental businesses." Slip op. at 7. And the new regulations resulted in a loss of rental income for these owners. Not a total loss, mind you, because the owners could presumably still rent long term and do other things with their properties. But a fairly severe drop in the amounts of income that the owners were able to derive from their units, with some of them claiming that it put them underwater in terms of things like serving their mortgages.

A federal lawsuit ensued, alleging claims for a taking, Contract Clause, and due process. The city's motion to dismiss for failure to state a claim: granted.

The Third Circuit affirmed. The court first concluded that this doesn't involve a physical taking, but a regulatory taking. Slip op. at 10. Next, the court identified the property interests alleged to be taken:

plaintiffs assert three “uncontroversial” property rights: (1) plaintiffs’ use and enjoyment of their purchased properties; (2) the long-term leases; and (3) the plaintiffs’ short-term rental contracts. But the plaintiffs also assert another property interest: their forward-looking right to pursue their short-term rental businesses. Framed this way, the plaintiffs allege that they have lost “the entire businesses they were expressly invited by Jersey City to open and operate.” Nekrilov Br. 40 (emphasis in original). The District Court rejected the argument that this constituted a legally cognizable property interest for the purposes of a takings claim.

Slip op. at 10-11.

The court concluded there was no Lucas total taking, even though the owners alleged that "as a result of Ordinance 19-077, they have lost all beneficial use of their purchased properties." Slip op. at 13. Apparently, the district court found that allegation implausible (and the Third Circuit agreed), because the "District Court held that because the properties retain numerous beneficial uses, they have not been rendered economically idle." Id.

Exactly how the district court reached this conclusion isn't set out, precisely. The opinion merely states that the owners can live in their own properties, they can rent them for more than thirty days, or they can sell the properties. But we don't know how either the District Court or the Third Circuit reached that conclusion and overcame the allegation of a total wipeout. The opinion doesn't tell us. 

As best we can figure, the court sub silentio has a pleading rule for Lucas claims:  the complaint need say more than "the regulation results in the property having no economically-beneficial uses," and also needs to affirmatively allege that any permissible uses that may be made of the property are not beneficial. In short, you have to plead the negative, or else the court is going to fill in the facts for you. "The comparative disadvantage of long-term rentals does not amount to an allegation that long-term rentals are not an economically beneficial use of the property." Slip op. at 14. Thank you, Twombly/Iqbal.

That may not be right, but it simply is. The courts don't like takings claims generally, much less categorical Lucas claims, so you've been warned, property owners: per se claims are hard to plead, much less prove.

Who knows, maybe this is appropriate for a categorical claim. But what about the supposedly ad hoc Penn Central test? Here, same result: court decides what is supposed to be a multi-factor, case-by-case test as a matter of law. Start on page 16 of the slip opinion to understand how the court analyzed the issue.

Go ahead, read it. It sure sounds like the district court (and the court of appeals in turn) was doing a lot of weighing and balancing. See, e.g., slip op. at 17 ("The District court held that all three Penn Central factors weighed against a taking and dismissed the plaintiffs' partial takings claim."). Let's see how the courts considered each Penn Central factor:

• Economic impact: the court concluded that the owners only alleged a loss of anticipate profits (which, in other cases could be the basis for a claim of economic loss). But not here, because "we agree with the District Court that lost profits are not an appropriate a [sic] measure of economic impact." Slip op. at 18. The alleged lost profits are "entirely speculative." Slip op. at 19. The court also concluded for those properties that were already turning a profit before imposition of the STR restrictions, the owners could still sell their properties (a profitable use, the court concluded).
• Distinct investment-backed expectations: the court said "distinct" but immediately considered only whether any investment by the property owners was reasonable (which to us seems a jury question, but the court treated it as an objective standard, decided by the courts). Zoning is the "classic example" of permissible regulation. Slip op. at 22. But what about the notion that the city here practically invited the owners to STR their properties? Not something a fact-finder can even consider because the government's statements inviting STRs can be interpreted several ways and not unequivocally in the owner's favor. See slip op. at 23-25.
• Character of the government action: as noted earlier, this is a regulation of use, not a regulation that imposes a physical invasion. The ordinance restricting STRs "is a general zoning regulation restricting the permissible uses of residential housing with the goals of protecting the residential housing market in Jersey City and promoting public safety by reducing the nuisance behavior associated with short-term rentals." Slip op. at 28. Which may be true. But isn't that something that needs to be weighed and balanced by the factfinder against the other factors?

And that gets us to our main criticism of the Third Circuit's analysis: what was the district court doing weighing these factors on a motion to dismiss for failure to state a claim? See slip op. at 28 ("We agree with the District Court's conclusion that this factor weighs against a taking."). What this case tells us is that despite being labeled as a three-part ad hoc test in which each factor is weighed and balanced -- with the trier of fact ultimately responsible for evaluating them together and determining, on the whole, whether the challenged regulation looks like an exercise of eminent domain -- the courts treat Penn Central as a legal test -- maybe one strike you are out, or maybe more -- but in the end, the courts are really skeptical of these type of claims despite how Penn Central is supposed to be applied (ad hoc!) and therefore cut them off at the knees without even bothering with summary judgment, much less a trial.

Had the appeal been from a grant of summary judgment, we'd probably have a different view. But here, this is an appeal from a motion to dismiss for failure to state a claim. And we're not alone in that view, as there are some examples of courts treating Penn Central as the Supreme Court seemingly intended it -- as a question determined by the facts of the case, by the factfinder. See here and here, for a couple of examples. And don't forget that the essential teaching of Del Monte Dunes is that takings, like every other legal and constitutional claim, is a question for the factfinder, and not the judge.

Anyhow, we shall step down from our soapbox now and get to what we said was the most interesting part of the opinion, the concurrence by Judge Bibas. He agreed with the result, but had some choice words about the Penn Central test:

We properly reject the investors’ takings claim today, but only after applying a fuzzy test. The Takings Clause’s text and history focus cleanly on whether a state has taken a property right and pressed it into public use. Of course, the Supreme Court’s precedent binds us. But if the Court reconsiders, going back to the Clause’s text and historical understanding will provide not only a surer constitutional footing but also needed clarity.

Concurring op. at 13.

Judge Bibas suggested going "back to the Takings Clause's original public meaning." Id. at 1. He argues "that the Takings Clause, originally understood, would have allowed regulatory-takings claims for regulations that take a state-law property right and press it into public use." Id. at 5. He also recommends jettisoning the economic-impact and the investment-backed expectations factors:

2. Economic impact & investment-backed expectations. Though the first Penn Central factor fits with the original understanding of the Takings Clause, the rest of the test is hard to square with the Constitution’s text and history. The second and third factors look to “[t]he economic impact of the regulation on the claimant and, particularly, the extent to which the regulation had interfered with distinct investment-backed expectations.” Penn Cent., 438 U.S. at 124. These expectations must be more than mere hopes or mental plans. See id. at 130. But Penn Central stopped short of tying those expectations to actual property rights.

Yet it is hard to see how merely diminishing something’s value amounts to taking property. An owner has no right to have his property hold a specific economic value. Its value of-ten fluctuates with the market or the neighborhood. Indeed, current precedent already recognizes as much. See Lucas, 505 U.S. at 1016 n.7 (leaving open whether a 90% diminution in value would suffice).

Similarly, the Penn Central test fails to ground “investment-backed expectations” in an owner’s recognized property rights. This is not to say that property owners do not enjoy any protections. If the expectation arises from a contract with the government, then the owner can pursue contract remedies. See, e.g., 41 U.S.C. §§ 7101–09. Plus, the Contracts Clause prevents states from “impairing the Obligation of Contracts.” U.S. Const. art. I, § 10, cl. 1. That bar applies to contracts with a state as well as those between private parties. Fletcher v. Peck, 10 U.S. (6 Cranch) 87, 137 (1810); Trs. of Dartmouth Coll. v. Woodward, 17 U.S. (4 Wheat.) 518, 652, 664, 712 (1819). Thus, states may not defeat the “reasonable expectations” of a party to a contract. Sveen v. Melin, 138 S. Ct. 1815, 1822 (2018). The investors here never explain how the short-term rental policy harms a “contractual relationship.” United Steel Paper & Forestry Rubber Mfg. Allied Indus. & Serv. Workers Int’l Union v. Virgin Islands, 842 F.3d 201, 210 (3d Cir. 2016) (emphasis added). So they have no contractual claim. But the Contracts Clause, not the Takings Clause, provides a better guide for analysis here.

Id. at 12-13.

In the end, he argues that only the character of the government action Penn Central factor "aligns closely with the original meaning of the Takings Clause, with the definitive factor being whether a regulation "bans" some fundamental attribute of private property. See id. at 11. That's a nice thought, but in the end looks a lot like just another way of backing into a Lucas-type analysis (one not based on total economic wipeouts, but on total regulatory bans -- which are easily avoidable by the regulators). Nonetheless, we recommend you read the entirety of Judge Bibas' intriguing opinion. It may not offer all of the solutions, but it does make you think.

In the end, yes, the Penn Central test is unsatisfying (as we've written before). But just about every takings lawyer we know would be mostly okay with the Penn Central test remaining as-is if we could only get past judges' gatekeeping and running block for the government, and just let these cases go where they belong: to juries. That alone would be a big improvement. 

Nekrilov v. City of Jersey City, No. 21-1786 (3d Cir. Aug. 16, 2022)