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New Article: "Toward Principled Background Principles in Takings Law" (Strahilevitz & Hansen)

Check this out, a new article co-authored by a federal judge's law clerk and lawprof Lior Strahilevitz (Chicago). With the title, "Toward Principled Background Principles in Takings Law" are we going to read it? You bet. (Unlike a lot of new scholarship that we post here, we read this one immediately.)

Here's the Abstract:

Blunders made by lawyers, judges, and scholars have caused the Supreme Court’s recent opinion in Cedar Point Nursery v. Hassid to be deeply misunderstood. In Cedar Point, the Court re-wrote takings law by treating temporary and part-time entries onto private property as per se takings. Prior to Cedar Point these sorts of government-authorized physical entries would have been evaluated under a balancing framework that almost invariably enabled the government to prevail. As it happens, there were two well-established rules of black letter law that California’s lawyers and amici mistakenly failed to invoke in defending the Cedar Point union organizer access regulation. First, a physical takings claim accrues when a regulation authorizing third parties to enter private property is promulgated, not when the third party actually enters the land. Second, only the party that owned the land at the time the physical taking cause of action accrued can prevail. Under these doctrines, Cedar Point Nursery’s lawsuit was filed decades too late. By the wrong plaintiff. California’s oversights were probably outcome determinative.

Moving beyond Monday-morning quarterbacking, we argue that the statute of limitations arguments available to governments in future cases help provide the essential limiting principles that went unmentioned in Cedar Point. In the aftermath of Cedar Point prominent scholars denounced the opinion as a vehicle for gutting antidiscrimination law, labor law, environmental law, rent control, and other parts of the regulatory state. Our analysis reveals that these concerns are likely exaggerated because defenders of those long-standing limits on the right to exclude can invoke the statute of limitations arguments that California’s lawyers failed to raise. On the other hand, new restrictions on owners’ rights to exclude are vulnerable to legal challenge. Properly understood, contemporary takings law grandfathers in many longstanding limits on the right to exclude while constraining governments that wish to tackle collective action problems by restricting property rights in new ways. Moreover, statutes of limitations and related doctrines can provide courts with something that has been elusive since the Supreme Court’s 1992 takings decision in Lucas v. South Carolina Coastal Council: a principled and coherent account of what restrictions on owners’ rights are impervious to takings claims because they qualify as background principles of state property law.

Read it at SSRN.

[Before we go on, Disclosure 1: my law firm represented the property owner in Cedar Point Nursery, so yes, I have a dog in the hunt.]

What do you think of the article's premise and conclusion that a regulation alleged to allow a physical invasion must be brought when the regulation is adopted, and not when property is actually invaded?

Government lawyers need not and should not repeat the mistake that California’s lawyers made, a goof that evidently went unnoticed by all three dissenting justices, all thirteen amici, and every scholar who has written about Cedar Point. By correcting Cedar Point’s litigation strategy blunder, governments may avoid having to compensate landlords who want to refuse to rent to members of a protected class, landlords whose ability to evict is constrained by rent control laws, employers who wish to fire workers involved in unionization efforts, and business owners who want to bill governments for the inconvenience of having to endure entry by health and safety inspectors. Most of these claims brought by property owners should fail if defended by competent government counsel who can learn from California’s error.

Id. at 5 (footnote omitted).

In other words, the allegedly unconstitutional act is the enactment of the regulation, and not also the failure to provide compensation when an invitee subsequently exercises the rights granted by the regulation to enter the plaintiff's property against the owner's wishes.

And what of the article's other premise, that regulations allowing physical invasions and occupations of property over time become "background principles of the State's law of property and nuisance" and disappear upon conveyance of the property?

Understandably, many observers were unnerved by Chief Justice Roberts’ decision to brush aside the notion that the California regulation – just seven years younger than the Fair Housing Act – was a background principle of state property law, unnerved many observers. If the 1975 California statute and regulation do not count by 2021 as background principles that inhere in title why shouldn’t the 1968 Fair Housing Act suffer the same fate? The response to Cedar Point from the least alarmed property scholars fell back on the idea that the Court would nonetheless treat the Fair Housing Act as a background principle. But no one has a good theory – other than a realist reading of the justices’ relative hostility to the goals of labor law – for why something magical happened between 1968 and 1975. After Cedar Point it is quite challenging to conclude that there are any principles at all underlying the Supreme Court’s conception of background principles. Our goals in this article include articulating coherent principles that are grounded in existing law and consistent with what the Court decided in Cedar Point.

Id. at 17 (footnotes omitted). 

Some preliminary impressions:

Are all physical invasion challenges facial claims? The article's premise seems to eviscerate the longstanding distinction in constitutional law generally -- and takings law specifically -- between a facial challenge and an as-applied challenge. The window opens on a facial challenge on behalf of everyone when a regulation is adopted, but we thought it was settled that individual property owners had to wait -- upon pain of being tossed out on ripeness grounds --  for the challenged regulation to actually be applied to their facts and circumstances. But the article does not mention the facial vs as-applied distinction.

Standing before incurring a concrete injury? The argument also seems a variation of the Federal Circuit's rationale in Campbell v. United States, 932 F.3d 1331 (Fed. Cir. 2019), where the court held "[i]n the case of a regulatory taking, however, the taking may occur before the effect of the regulatory action is felt and the actual damage to the property interest is entirely determinable." Disclosure 2: we thought the Federal Circuit's reasoning in that case was faulty (that a property owner has an obligation to sue even before she is actually injured seems very strange), and petitioned for certiorari (denied). But it does seem like a weird rule, and very much at odds with injury-in-fact and Article III standing requirements.

Whither Kirby Forest? The rule also seems at odds with Kirby Forest Indus. v. United States, 467 U.S. 1 (1984), where the Court upheld all sorts of government actions that muck around with an owner's property rights prior to an actual judgment and tender of compensation in eminent domain cases. No, the Court concluded, the "taking" takes place in straight takings when there's been an adjudication of compensation and a tender of actual payment. And all those things which happened before that interfere with the owner's use -- like instituting an eminent domain action, filing a lis pendens and clouding title, drying up the market for the property, and similar -- do not interfere sufficiently with property interests because "petitioner was free to make whatever use it pleased of its property." Id. at 15-16. The California provision seems similar: until the union organizers actually entered Cedar Point property under color of the statute, the owner could exclude whom it wanted.

Too early and too late: You just know that if property owners had challenged the California statute as a taking upon enactment, but before anyone had actually attempted to enter under the authority of the statute, that the claim would not have been that they filed too late, but rather too early. Property owners are used to these type of inconsistent arguments and being whipsawed between being accused of filing too early, or too late (or, in many cases, both too early and too late at the same time). We don't think that the line the courts are going to enforce between ripeness and staleness is as clear as the authors make it out to be.

Get ready for more takings claims, federal courts. Unless the article is arguing for abandoning the remaining takings ripeness requirement (something we're down for, but so far the courts are not), we're not sure that a rule that will force prudent property owners to sue upon adoption of new regulations is one that the courts will enthusiastically embrace (even if they should).

Zombie takings, or zombie statutes? The article describes Cedar Point as a "zombie takings claim" (p. 33) because it challenged a statute originally adopted decades ago. It argues that after about 40 years, regulation ossifies into a background principle, immune from challenge. Even though we'd use the "zombie" label to describe the California statute and others like it that are there on the books but are pretty obscure, let's go with the zombie takings label. That brings up an intriguing tradeoff: would we surrender Cedar Point and the ability to challenge 40 year old regulations in return for eliminating the ripeness hurdle and opening up courts to immediate challenges of newly-adopted regulations as we think the piece is advocating for? Hmmmmm... we gotta think about that one.

Cringe. No matter what, we think that calling the Cedar Point outcome the result of "blunders" by lawyers, judges, and scholars (p. 1), the government's strategy a "goof" (p. 5) and "bad lawyering" (p. 48), its lawyers "bone-headed" (id. at 49 & n.314), and accusing government counsel of committing "a colossal strategic blunder" (id. at 2), and saying that the government's lawyers in Cedar Point and Lucas committed "legal malpractice" (id.), is unnecessary and uncharitable in the extreme. We get that the authors don't care for the outcome in Cedar Point and wish their "Monday-morning quarterbacking" strategy (their words not ours, see p.1) would have been raised and tested. But in our view, these type of accusations should not be thrown about lightly, especially by those who didn't enter the amici arena themselves, and by those who don't appear to have been there, done that because their collective time actually practicing law and making strategic litigation decisions in real time in real cases appears to be, let's say, very limited. We hope there can be even vehement disagreement about the issues without slinging accusations of malfeasance, incompetence, and especially malpractice -- claims the practicing bar takes very, very seriously. We respectfully urge the authors and the law journal editors to reconsider these characterizations prior to print publication. 

We're going to meditate on the article and its arguments more. But whatever you may think of the authors' analysis and conclusions, this piece is well worth reading.

Join Us On Wed March 8 at 4:30pm For 2023 Distinguished Gifford Lecture In Real Property - Prof Thomas Mitchell On "Heirs' Property & the Uniform Partition of Heirs' Property Act: Challenges, Solutions, & Historic Reform"

If you are in Honolulu, please join us on Wednesday, March 8, 2023, 4:30-5:30 p.m. at the University of Hawaii Law School for Professor Thomas Mitchell on "Heirs’ Property and the Uniform Partition of Heirs Property Act: Challenges, Solutions, and Historic Reform."

Our U.H. Land Use class is attending to learn more about "heirs' property" (described as "the biggest problem you've never heard of"), and so should you. Yes, Hawaii has adopted the Uniform Partition of Heirs' Property Act and we have followed this issue for some time, but if you didn't know about this, now is your chance to catch up.

Here are the details from the U.H. newsletter:

Carlsmith Ball presents the 2023 Distinguished Gifford Lecturer in Real Property, Thomas W. Mitchell. Mitchell is a professor at Boston College Law School, where he holds the Robert F. Drinan, S.J. Endowed Chair and serves as the Director of the Initiative on Land, Housing & Property Rights. He is a national expert on property issues facing disadvantaged families and communities and has published leading scholarly works addressing these matters.

In 2020, Professor Mitchell was named one of 21 recipients of the MacArthur Fellowship in recognition of the substantial impact his professional work has had in assisting disadvantaged farmers and property owners, people who are disproportionately but not exclusively African American and other people of color. He is the only lawyer in his MacArthur Fellowship class. Please join us for this Distinguished Gifford Lecture; a light reception is to follow from 5:30 - 6:30 p.m.

Come, join us for this compelling session.

IRWA's Summary Of Major Eminent Domain Cases & Legislation (June-Dec 2022)

The International Right of Way Association's Real Estate Law Committee produces twice-a-year reports "which contain summaries of eminent domain decisions and legislation within the United States."

And what is really nice is that they make the report available.

Here's the latest.

We're posting it here because we're one of the co-authors. Hat tip to our co-authors Brad Kuhn, Jillian Friess Leivas, and Ajay Gajaria.

The report is short, and doesn't contain a lot of fluff. Just what you wanted.

Video: "Are Zoning Laws the Cause of Hawaii's Housing Crisis?" With Nolan Gray

As we wrote up here, national zoning and planning expert Nolan Gray joined our U. Hawaii Land Use class (and the public) last week for a talk about whether zoning is an impediment to affordable housing in Hawaii.

Thank you to Grassroot Institute of Hawaii for recording the talk, as well as making Mr. Gray's appearance in our classroom possible. See Grassroot's summary of his presentation here.

If you'd prefer to just listen, try this.

A National Zoning Expert Pays A Visit To The L580 Land Use Class At U. Hawaii

The session was recorded.
Here's the video and audio.

Earlier this week, planner M. Nolan Gray, author of the new book, "Arbitrary Lines: How Zoning Broke the American City and How to Fix It" (Island Press 2022) joined our Land Use class at the University of Hawaii Law School to talk about zoning and housing.

The title of his talk was "Are zoning laws the cause of Hawaii's housing crisis?" The subject matter is important, and the public was invited to join us. As you can see, there was a lot of interest in this critical topic and turnout was excellent. 

Thank you to the Grassroot Institute of Hawaii for their sponsorship of the event, and for generously getting Mr. Gray to Honolulu for his in-person appearance. It was also nice to have refreshments following class, and a chance to "talk story" (as we say) with our speaker, the students, and our guests.

Grassroot recorded the session on video, and we shall post a link to it once it is published and available. If you could not join us for his talk, be sure to watch and listen to the recording. Some very compelling stuff.

The public was also invited.
(We let them know they arrived at the right place.)


All set up and ready for our guest speaker.
Recording posted here. 

What is Zoning? A good question (the impression is that "zoning"
means all regulation of land uses). Not quite. Generally speaking, the term 
only covers regulation of use, density, and height. Getting the terms correct
is important. Mr. Gray does not advocate for tossing all regulation,
only zoning. He advocates for a more planning-centric
approach. Read his book for the details.

The heart of the matter: how and why overly restrictive zoning
(see above) inevitably restricts the supply of housing by focusing
mostly on single-family residential. Leave zoning the way it is,
and you are effectively planning for an affordability crisis.

A good, engaged audience.

Mahalo, Nolan, for coming all this way. 

We allocated plenty of time for questions from the audience.

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.)

CA2, Pellucidly:* You Let 'Em In, Property Owners, So New York Can Tell You To Keep 'Em (Part I)

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

The U.S. Court of Appeals for the Second Circuit has affirmed the Eastern District of New York's 12(b)(6) dismissal of a complaint alleging that New York (state)'s sweeping amendments to its Rent Stabilization (rent control) statute effected physical and regulatory takings.

First, this can't be a surprise to anyone who has been paying attention to how courts treat rent control. Putting aside for a moment the legal theories and the various challenges, rent control has become so ossified -- such a political third-rail and sacred cow -- that courts are very reluctant to do anything to upset the system, and will approve most any ratcheting-up of the restrictions. Any challenger, whatever the logic of their legal theory, has to recognize that they start off in a very deep hole.

That said, let's take a look at the Second Circuit's opinion because this case is, by all accounts, headed to the Supreme Court (and always has been aimed in that direction).  

Physical Occupation?

The plaintiffs, owners of apartments subject to the amended rent control statute, asserted the law effected facial and as-applied takings. The first claim was for a physical occupation. The statute deprived them of the right to exclude, they argued,  because they have to house tenants at below-market rates. The panel opinion didn't beat around the bush, but got right to the heart of the reasons why it affirmed the dismissal - the owners have no right to exclude, relying on Yee v. City of Escondido because you let the tenants in:

However, where—as here—property owners voluntarily invite third parties to use their properties, regulations of those properties are “readily distinguishable” from those that compel invasions of properties closed to the public. Cedar Point, 141 S. Ct. at 2077. As the Supreme Court made pellucid in Yee v. City of Escondido, when “a landowner decides to rent his land to tenants” the States “have broad power to regulate housing conditions in general and the landlord-tenant relationship in particular without paying compensation for all economic injuries that such regulation entails.” 503 U.S. 519, 528–29; see also Loretto, 458 U.S. at 440 (“This Court has consistently affirmed that States have broad power to regulate housing conditions in general and the landlord-tenant relationship in particular without paying compensation for all economic injuries that such regulation entails.”); Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398 (1934); Edgar A. Levy Leasing Co. v. Siegel, 258 U.S. 242 (1922). The numerous cases that affirm the validity of rent control statutes are the necessary result of this long line of consistent authority. See, e.g., Bowles v. Willingham, 321 U.S. 503 (1944); Block v. Hirsh, 256 U.S. 135 (1921).

Slip op. at 7.

We've never quite wrapped our head around this rationale (assuming that Yee says that pellucidly, which we don't think it does at all). What is the difference between an owner saying "keep out" and barring the door and having the law force the door open, versus the law restraining an owner from saying to someone who is no longer invited to "get out?" Yeah, the owners here voluntarily invited tenants to occupy their properties, but occupancy was subject to whatever terms the owners and the tenants agreed to.

But the court was having none of that. You property owners willingly put your units into the rental market -- oops, sorry, the "regulated housing market," slip op. at 9 -- so this is on you for not simply keeping your gates closed. Shame on owners for offering your properties for rent!

To begin, no plaintiff alleges that the RSL forces them to place their properties into the regulated housing market, and it is well-settled that once an owner “decides to rent his land to tenants, the government . . . may require the landowner to accept tenants he does not like.” Yee, 503 U.S. at 526–28. See also Heart of Atlanta Motel Inc. v. United States, 379 U.S. 241, 259–60 (1964).

Slip op. at 9.

Next, the court concluded that the statute doesn't deprive the owners permanently of the right to exclude, "[b]ecause, as pled, landlords may yet succeed in evicting current tenants, we cannot say that the RSL “compel[s] a landlord over objection to rent his property or to refrain in perpetuity from terminating a tenancy.” Yee, 503 U.S. at 528." Slip op. at 9.

Ripeness (Exhaustion)

Same story with the regulatory takings claim and pleading Penn Central. Before whacking the claim for a failure to plead, however, the court noted the claim was not ripe because the owners have not sought an exemption from the statute's effects under the "hardship" provision. Slip op. at 12. "[T]he as-applied challengers have not sought exemptions. Instead, they speculate that the hardship provisions offer economic relief 'in theory' but practically 'result in few applications . . . being granted.' Speculation of this sort is insufficient under Pakdel." Slip op. at 13.

Yes, such "hardship exemptions" or "variances" are seemingly built into every land regulation scheme out there, and are increasingly becoming the tail that wags the dog: they rarely if ever get granted (and when they do, they are the product of behind-the-scenes decisionmaking that virtually overrule the legislatively-adopted regulation, and operate mostly as a ripeness pressure valve allowing government to avoid having to face the takings music that is the natural consequence of the blanket regulatory ban or restriction).

But who knows, the State just might grant some relief, right Second Circuit?

Penn Central

Back to the Penn Central claim. Slip op. at 13 ("That said, even if the as-applied challengers’ regulatory takings claims were ripe, these claims would nevertheless fail on the merits."). The court seems to analyze the merits of the claims, rather than just stick to whether the Penn Central factors were adequately pleaded. For example, check out this sleight-of-word: "Furthermore, the as-applied challengers have not plausibly alleged that the economic impact factor tilts in their favor." Slip op. at 15.

But isn't all that is required is an allegation that the regulations have had an economic impact on the owners (with it being up to the jury or fact-finder to determine whether this impact, when measured against the other factors, "goes too far" and looks like it is having an effect similar to an eminent domain seizure? Here, the plaintiffs alleged a decrease in value between 20 and 40 percent, and that seems like it should have been enough. But here we have the court determining as a matter of law that this can never be enough, which to us is an usurpation of the right to have a jury make this determination.

Next, the investment-backed expectations factor (which, in itself, invites the kind of bizarre analysis the court engaged in, focusing on whether the property owners here could and should have predicted future restrictions). One answer might be that of course, having their properties in New York, they should have expected to get nailed. And strangely, that is just what the court concluded:

We agree with the district court and hold that any investor could reasonably expect limits on the use of rental properties, such as those as provided by the RSL.

Slip op. at 17. Go ahead, read the rest of pages 17 and 18, where the court bootstraps the very existence of the RSL to conclude that owners should just know that more is coming. You frogs in the slowly boiling water: it's your own damn fault for not getting out of the pot. 

The opinion ends on a low note, the inevitable butchering of Penn Central's character inquiry. The RSL is a valid police power regulation, the court concludes, and therefore the character factor is in the government's favor. That analysis properly belongs in the following section (pages 21-23) where the court concludes that the rent control statute is a valid exercise of police power.

More on the opinion:

• Federal Appeals Court Rejects Rent Control Challenge, Says Government Has Wide Powers To Regulate Land Use (Reason)
• NYC Rent Stabilization Rules Beat Challenges by Landlords (Bloomberg Law)

Stay tuned there will be more.

------------------------------------
*We know the rule in legal writing is never to use "clear" or "clearly," but if you substitute "pellucid," you are just making it worse, not better.

74 Pinehurst LLC v. New York, No. 21-467(L) (2d Cir. Feb 6, 2023)

We're Remote, So It's Easy To Join Us For The 36th Annual Land Use Institute

Land users: come join us online for the 36th Annual Land Use Institute. Yes, the venerable program is back again, with the usual line up of dirt law experts covering all you need to know and bringing you up to speed on the latest. Here's the description of the program:

This Annual Land Use Institute program is designed for attorneys, professional planners, and government officials involved in land use planning, zoning, permitting, property development, conservation and environmental protection, and related litigation. It not only addresses and analyzes the state-of-the-art efforts by government to manage land use and development, but also presents the key issues faced by property owners and developers in obtaining necessary governmental approvals.

This outstanding program features:

• Preeminent faculty of practitioners and academics who provide nationwide perspective without losing sight of state-specific issues.
• Critical review and analysis of the most important new cases;
• Practice-oriented discussion of basics and “hot” topics;
• Guidance on routine and complex procedural issues; and
• Substantial high-quality and well-researched course materials.

Topic and speaker details in the brochure. A very modest registration (law students are free!).

Find out more here. And come join us. We'll be speaking next week Tuesday (Feb. 14, 2023) on "The Use of Eminent Domain for Redevelopment & Economic Development Projects."

LAND USE INSTITUTE - 36th Annual Land Use Conference Program

CA4: Being Blocked From Accessing Your Beach House For 45 Days Isn't A Physical Taking (Or Any Kind Of Taking)

You remember, don't you? In the early days of the Co-19 epidemic, government and public health authorities were scrambling to do something ... sometimes anything! ... to respond.

Dare County, North Carolina might have been one of those local governments that went maybe just a bit too far in the precaution vs effectiveness departments: it banned nonresident property owners from entering the county (and apparently didn't ban anyone else from coming and going, only outsiders).

Dare County announced the restrictions on March 16 and implemented them over three phases. Phase one, which took effect immediately, declared a state of emergency and prohibited mass gatherings. Phase two, which took effect one day later, prohibited non-resident visitors from entering the county. Phase three, which took effect four days after the restrictions were announced, prohibited non-resident property owners from entering the county. In effect, Dare County told non-resident property owners: “If you want to quarantine at your beach house, get there by March 20.” This gave non-resident property owners four days to travel to the county.

Seems a bit over-the-top and not really a measure that had much effect, especially in retrospect. 

But no matter, we know that courts are generally very hesitant to seriously entertain challenges to these type of police power actions as arbitrary or capricious, and won't do much if anything to say "hang on, this doesn't seem like an approach that's really going to work, or even do much."

But there are other ways to challenge these, such as state law, Contracts Clause, Equal Protection, or maybe takings, right? 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)), takings claims are not a sure-fire winner (even where the cost-spreading rationale of takings is accounted for). 

The U.S. Court of Appeals' recent opinion in Blackburn v. Dare County, No. 20-2056 (Jan. 25, 2023), confirms. There, the court held that Dare County's extreme reaction to Co-19, which prohibited the plaintiffs from "reach[ing] their beach house for forty-five days[,]" was not any kind of taking. Slip op. at 3.

The court first rejected the physical takings claim. The stay-out order "did not physically appropriate anything from them." Slip op. at 7. The County didn't authorize government agents or third parties to come onto the plaintiffs' property. The court rejected the argument that the County keeping an owner from accessing his or her own property is a physical appropriation. "This, they say, makes the order a physical appropriation, because the Supreme Court has repeatedly held that an appropriation occurs when the government eliminates a property owner’s right to exclude. But temporarily excluding an owner from their own property differs from eliminating the owner’s right to exclude." Id.

Next, the court made short work of the Lucas wipeout claim:

But Lucas’s per se rule does not apply here. Accepting the allegations in the complaint as true, Dare County’s order did not deprive the Blackburns’ property of all economic value. The restriction was enacted under the County’s State of Emergency declaration and so would only be operative while that state of emergency persisted. And it lasted only forty-five days. This “temporary prohibition” could not have rendered the Blackburns’ property valueless. See Tahoe-Sierra, 535 U.S. at 332. Moreover, the Blackburns could have lived in their house so long as they arrived before the ban took effect. And even during the forty-five days that the ban lasted, they were still able to rent their property to someone within the County or certain adjoining counties. So the order was not a per se taking under the Lucas framework.

Slip op. at 8.

Finally, the court did not address the merits of the Penn Central claim, but affirmed the dismissal of that theory for failure to plead it correctly. The complaint did not allege facts which show a "substantial" diminution of value caused by the restriction. See slip op. at 9. All the complaint alleged was that the plaintiffs "suffered damage" and lost the "fair market rental value and value of use of said property by governmental regulations for 45 days." Id. The court held this is a legal conclusion. We're not sure what the court suggests the plaintiffs could have alleged to make it more clear. The before-and-after? A specific amount of rent allegedly lost? Use the magic word "substantial?" To us, this seems like a too-technical and crabbed reading of the pleading requirements.

On the "expectations" Penn Central factor, the court seemed to be evaluating it on the merits when it concluded that "the non-resident property order did not deny the Blackburns the use of their vacation home. It simply requied them to be at their home by March 20, 2020, if they wanted to use it personally. And the Blackburns remained free to rent the house to those within the county, or to sell it." Slip op. at 10-11.

And finally, "[t]he third Penn Central factor favors Dare County." Slip op. at 11. The court's analysis starts off with this intriguing note: "This factor requires courts to examine 'the character' of the use restriction. Penn Cent., 438 U.S. at 124. Exactly what this factor refers to is, admittedly, a little fuzzy." Id. The court settled on this requiring an inquiry into whether the regulation results in the "functional equivalent" of a classic taking. Slip op. at 12.

Applying this principle suggests that the order is not a taking. Based on the allegations in the Blackburns’ complaint, the order is not “functionally equivalent” to a government appropriation of private property. See Clayland Farms, 987 F.3d at 355. The Blackburns controlled their home during the entire time the order was in effect, and could have personally used it had they arrived in Dare County by March 20, 2020. Cf. Horne, 576 U.S. at 361–62 (holding that a physical appropriation occurred when a regulation physically transferred raisins from farmers to the government).

Nor is the order “functionally equivalent” to an ouster. See Clayland Farms, 978 F.3d at 355. The Blackburns were not dispossessed of their vacation home. And they were never forced to leave Dare County. In fact, just the opposite. Despite promulgating the order on March 16 and implementing the non-resident visitor ban a day later, Dare County delayed implementing this order until March 20 to give homeowners like the Blackburns a chance to travel to the County. This is a far cry from an ouster. See Ouster, Black’s Law Dictionary (11th ed. 2019) (“The wrongful dispossession or exclusion of someone (esp. a cotenant) from property.”).

Slip op. at 12-13.

Dismissal affirmed.

Blackburn v. Dare County, No. 20-2056 (4th Cir. Jan. 25, 2023)

Hey Honolulu, RSVP To Join Us: Nolan Gray, "Are zoning laws the cause of Hawaii's housing crisis?" Feb 15 @5:30, U.H. Law School

Here's your chance to spend some time with the author of one of the hottest land use and public policy books out there, Nolan Gray.

RSVP now (admission free, but space is limited) to join our Land Use class when we welcome Mr. Gray to respond to the question in the title of this post. Details:

Date: Wednesday, February 15, 2023

Time: 5:30pm - 7:00 pm, Hawaii Time

Location: University of Hawaii Law School (2515 Dole Street, Honolulu), Classroom #3.

Cost: Free, courtesy of Grassroot Institute of Hawaii

RSVP: You must register here to reserve your place in the room.

Parking: modest fee, available at the adjacent UH parking structure.

As we noted when we featured his book "Arbitrary Lines: How Zoning Broke the American City and How to Fix It" (Island Press 2022) at the top of our dirt lawyer holiday gift guide recently, his work is an accessible summary of what zoning is and what it isn't and isn't simply a polemic, but a thoughtful laying out of why the author (a former planner for New York City) believes that zoning's time is up. The book also offers solutions for what might replace zoning (Houston, we're looking at you).

From the registration site:

Housing prices in Hawaii are through the roof. Demand outpaces supply, and many local families are saying “Aloha” to Hawaii simply because they cannot afford to live here.

So what can state and county lawmakers do to address this crisis?

Nolan Gray, a former city planner in New York City who now leads a “Yes In My Backyard” advocacy group in California, thinks a good first step would be to abolish zoning laws. In February, he will talk in depth about that provocative proposal at two events sponsored by the Grassroot Institute of Hawaii.

Gray's presentation will be on Wednesday, Feb. 15, at the University of Hawaii at Manoa William S. Richardson School of Law, Classroom 3, from 5:30 to 7 p.m. Admission is free and paid parking is available in the law school lot or the main UH parking structure.

Keli‘i Akina, Grassroot Institute president and CEO, will moderate the event, including a Q&A session.

Gray, who also is a Ph.D. candidate in urban planning at the University of California, Los Angeles, wrote about zoning codes and housing shortages in his new book, “Arbitrary Lines: How Zoning Broke the American City and How to Fix It.”

He said zoning codes go beyond general city planning, and that by micromanaging real estate usage and density have served to limit housing supply and make America’s metropolitan areas unaffordable for most residents. In addition, he said, zoning laws have contributed to greater urban sprawl and pollution.

Seating is limited, so please register early. For more information, contact Sean Mitsui at 808-864-1776 or [email protected].

Come, join us and open your mind to his intriguing proposals.

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).

CA4: Property Owner Isn't "Vested" So No Takings Property

When we first read the U.S. Court of Appeals' opinion in PEM Entities, LLC v. County of Franklin, No. 21-1317 (Jan. 5, 2023), our reaction was one of skepticism. After all, at first blush, the court seemed to have concluded that in order to possess a property right protected by the Takings Clause, the owner needs first to prove it is a "vested" under state law.

That struck us as waaaay wrong. Yes, vesting under state law gets you a separate property interest, but failure to vest under state law does not mean you don't otherwise possess Takings Clause "private property." So what gives, Fourth Circuit?

Well, it turns out that despite us being ready to render a hearty j'accuse at the court, the outcome was a product of the claims made by the property owner (as they often are).

The opinion is short enough that it makes more sense for you to read the facts than for us to summarize them, but the real short story is that the case involves 150 acres of undeveloped land, and the owner asserted it was exempt from a county ordinance that severely regulated and restricted water and sewer connections for new developments. We're vested because we received county approvals back in 2005 in our preliminary subdivision plan, so we're not governed by the ordinance. When the county didn't agree, federal lawsuit followed. The complaint included a takings claim, which asserted the county had taken the vested property right of water and sewer service. The district court dismissed for lack of standing.

The Fourth Circuit agreed with the outcome (dismissal) but for a different reason: failure to state a claim. No property right = no taking. See slip op. at 5 ("We agree with the district court's bottom-line conclusion but get there via a somewhat different route."). When the property is framed as a vested right, then the issue is going to turn on state law; in this case North Carolina's law of vested rights. The Fourth Circuit concluded that under N.C. law, the owner here did not possess a vested right. The money it spent wasn't in reliance on a government permit, and the 2005 subdivision approval was preliminary not final. Interestingly, the opinion did not cite the most prominent recent N.C. decision on vesting.

But no matter. No vesting = no property. No property = no taking.

Just remember this: it's good for your takings claim when you have a vested right; if you have a rock-solid vested right under state law, chances are it is the foundation for a pretty robust takings claim. But lacking a vested right doesn't mean you don't own property. It may not mean you win, but at least you get past the preliminary hurdle that tripped up the owner here.

PEM Entities, LLC v. County of Franklin, No. 21-1317 (4th Cir. Jan. 5, 2023)

Md App: If You Want To Overturn The Amortization Doctrine, Take It Upstairs

You know the "amortization" doctrine: when an existing legal use is declared illegal, the government can avoid a takings claim by slowly phasing out the use, supposedly to allow the owner to recoup investment. The doctrine is established in Maryland by Grant v. Mayor and City Council of Baltimore, 129 A.2d 363 (Md. 1957), where the court held that amortization works if the time and uses allowed are reasonable.

Not all jurisdictions take that approach, however. For example, in Pennsylvania Northwest Distributors, Inc. v. Zoning Hearing Bd., 583 A.2d 1372 (Pa. 1991), the Pennsylvania court held "[a] lawful nonconforming use establishes in the property owner a vested property right which cannot be abrogated or destroyed, unless it is a nuisance, it is abandoned, or it is extinguished by eminent domain."

In In re Mangisteab, No. 2022-93 (Dec. 20, 2022) (unpub.), the Appellate Court of Maryland (fka the Court of Special Appeals, that state's intermediate court of appeals), recognized that the property owners asked to overturn Grant and adopt Pennsylvania's approach, but concluded that this was above the pay grade of lower court judges.

The case involves Baltimore's removal of liquor stores in residential zones as nonconforming uses under the city's zoning ordinance. Liquor stores have been illegal in residential zones since 1971, but have been allowed to continue to operate as long as they didn't cease operation for more than 18 months. But recently, the city said "no more," and gave the liquor stores two (or three) years to wind up. The owners challenged the change as a taking of their vested rights, and expressly asked the courts to abandon the Grant rule. 

Not too surprisingly, the trial court (and now the court of appeals) said no, that's a job for the Maryland Supreme Court:

Owners believe, however, that Grant and its progeny should be overturned. As counsel for appellant acknowledged at oral argument, however, if that were to occur, it must be done by the Supreme Court of Maryland, not this Court. Foster v. State, 247 Md. App. 642, 651 (2020) (“It is not up to this Court . . . to overrule a decision of the [Supreme Court] that is directly on point . . . . The rulings of the [Supreme Court] remain the law of this State . . . unless those decisions are either explained away or overruled by the [Supreme Court] itself.”), cert. denied, 475 Md. 687, 257 A.3d 1156 (2021) (cleaned up). Johns Hopkins Hosp. v. Correia, 174 Md. App. 359, 382 (2007) (“[T]his Court does not have the option of disregarding [Supreme Court] decisions that have not been overruled, no matter how old the precedent may be.”), aff’d, 405 Md. 509 (2008). Accord Livesay v. Baltimore County, 384 Md. 1, 14 (2004) (quoting Payne v. Tennessee, 501 U.S. 808, 827 (1991)) (Stare decisis “is the preferred course because it promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.”). We will not, therefore, overrule Grant and hold that termination of a nonconforming use after a reasonable amortization is unconstitutional.

Slip op. at 16-17.

So stay tuned, we suspect this isn't over just yet.

In re Mangisteab, No. 2022-93 (Md. App. Ct. Dec. 20, 2022) (unpub.)

No Necessity: Landowner Met Burden - Condemnor Did Not Consider Other Sites

Check this out, a decision upholding a necessity challenge to a taking.

Necessity, you say? What's this? Aren't necessity challenges subject to an even more deferential judicial standard of review than the rational basis test applied to declarations of public use? Didn't the U.S. Supreme Court in Adirondack Ry. Co. v. New York, 176 U.S. 335, 349 (1900) say that "[t]he general rule is that the necessity or expediency of appropriating particular property for public use is not a matter of judicial cognizance but one for the determination of the legislative branch of the government...."? What gives?

In Lafayette City-Parish Consolidated Gov't v. Bendel, No. 22-0432 (Dec. 23, 2022), the local government brought an expropriation action (that's eminent domain or condemnation to you non-Louisiana chappies), seeking to take property to construct four detention pods to improve drainage. The owner objected, challenging the public use and necessity of the taking (the government was taking more property than it needed). The trial court agreed with the owner and dismissed. The Louisiana Court of Appeal affirmed.

How so, you may ask, given the low bar for necessity where the courts for the most part wash their hands of the issue?

This challenge, as you might have guessed, was made under Louisiana law. And there, the standards are a bit more realistic. Although Louisiana law also recognizes that the extent and location of the taking are within the discretion of the condemning agency and its decision is entitled to a presumption the taking satisfies a public need or interest, it also recognizes that if the owner carries its burden of showing the location was selected in bad faith or so capriciously or arbitrarily that the selection "was without an adequate determining principle," then a reviewing court may conclude the condemnor abused that discretion.

That's what happened here. Although the mere availability of alternative sites to place the drainage project "is not, by itself, an indication that the expropriator has acted arbitrarily or capriciously," slip op. at 7, the appeal court reviewed the trial court's findings that looked at things like "alternate route[s], costs, environmental factors, long-range area planning, and safety considerations." Id.

In the end, the court of appeal reviewed the evidence submitted by the parties -- which included testimony by one witness that "he had never seen a case where a property that has never been flooded was converted to purposely make it flood because usually lower elevated property would be used so that so much excavation would not be necessary," slip op. at 16 -- and agreed that the owner carried its burden:

In this case, the testimony and evidence make clear that no alternate routes were considered. The total cost of the project is unknown. Environmental factors and long range area planning were not considered. None of the witnesses testifying on behalf of LCG indicated that safety considerations were made regarding the gas line that runs through the property. Based on all of these factors, we cannot say that the trial court was manifestly erroneous in finding that LCG acted arbitrarily and capriciously.

Slip op. at 19.

Now if only other courts would look at necessity the same way.

Lafayette City-Parish Consolidated Gov't v. Bendel P'ship, No. 22-0432 (La. Ct. App. Dec. 23, 2022)

Fireside Podcasts: Eminent Domain Podcast's Holiday Special 2022, And APA's Talk With Nolan Gray

This week is light for many of you, so instead of the deep and insightful analysis of recent decisions that we're known for (ha), we instead recommend to you two podcasts to warm the chilly nights.

So fire up the hearth, strap on those earbuds, and listen away.

First up, what is quickly becoming a December tradition: Clint Schumacher's Holiday Special, in which he asks past guests for their holiday traditions and memories.

Next, the American Planning Association's talk with Nolan Gray, whose book, "Arbitrary Lines:How Zoning Broke the American City and How to Fix It" is on our Dirt Lawyer Holiday Gift List this year. Find out more by listening in.

CA9: Land Use Is A "Sensitive Area Of Social Policy" So We're Gonna Let A Local Govt Bleed The Property Owner Out

Here's another one from the Ninth Circuit, argued on what one advocate called "land use day at the Ninth Circuit" (except, unlike the other two cases argued that day, the decision in this one gets published). 

In Gearing v. City of Half Moon Bay, No. 21-16688 (Dec. 8, 2022), the panel upheld the dismissal of a takings case, holding that federal courts should abstain from considering regulatory takings cases in favor of pending state court eminent domain actions, even when the condemnor instituted the state court action in response to the federal takings claim (and even though, unlike the other two cases argued that day, the federal takings claim is ripe).

This one started in federal court, where the property owner asserted the city's rejection of its development application worked a taking. In response, the city ran to state court and filed an eminent domain action to take the owner's fee simple interest in the land (we presume that's the property the city is condemning, because the opinion doesn't specify). Next, the city ran back to federal court with its state court complaint in hand and asked the federal court to exercise Pullman abstention to let the state court condemnation action play out first. The district court agreed ... federal case gone (for now).

Rejecting the owner's argument that abstention here was just a backdoor state-procedures exhaustion requirement -- both of which were rejected by the Supreme Court in Knick and Pakdel -- the Ninth Circuit affirmed. The panel first concluded that there's nothing in either of those cases that make federal takings claims immune from Pullman abstention. Those cases involved ripeness and exhaustion, and didn't say anything that prohibit federal courts from ducking federal civil rights issues. See slip op. at 7 ("As an initial matter, neither Knick nor Pakdel explicitly limit abstention in takings litigation. Neither case even addresses abstention."). Abstention is to avoid "friction" between federal and state courts, and to prevent federal courts from unduly interfering with the delicate balance between the states and the federal courts. Id.

Addressing the owner's argument that Pullman abstention results in a de facto return to the state court exhaustion requirement rejected by Knick, the panel concluded that "[t]he state court can adjudicate the eminent domain action without reaching the regulatory taking issue because eminent domain and regulatory takings suits compensate property owners for different injuries." Slip op. at 9.

Eminent domain compensates property owners for the forced sale of their properties to the government; the property is transferred to the government, and the owner is paid the property’s fair market value as of the date the government made a deposit on the property. Cal. Code Civ. Proc. § 1263.310. A regulatory taking action, on the other hand, compensates a property owner for “[t]he economic impact of [a] regulation . . . and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations.” See Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538–39 (2005) (quoting Penn Central Transp. Co v. New York City, 438 U.S. 104, 124 (1978)); Steven J. Eagle, Regulatory Takings § 8-9(a) (2021) (surveying methods of calculating compensation proportional to harm and level of interference).

Id.

In our view, the actual differences between a regulatory takings/inverse claim and an exercise of eminent domain are not those identified by the court, because it isn't so much about different injuries (eminent domain isn't at all about "injury" at all), but more like different property being taken and valued. Here, the owner's regulatory takings claim asserts that by engaging in some otherwise legitimate function (denial of permission to develop), the government has, from the owner's perspective, effectively condemned the right to use the property (the development rights), or even the fee simple interest if this is framed as a Lucas taking, but has not provided just compensation for the interest(s) taken. On the other hand, the owner's argument in the state court eminent domain case isn't that the government action is unconstitutional because it has not provided compensation, but that it has not paid (or offered) enough compensation for whatever interests it is taking. Those differences have nothing to do with the owner's "injury."

And wait, you say, in the eminent domain action, doesn't the property owner have to raise the issues he's raising in the regulatory takings action as part of his defense or as part of the highest and best use of the property? We'd think yes, that the owner has some sort of argument, or defense, or counterclaim that the eminent domain action isn't fully compensating him for the interests actually taken, and either should (or more likely must) raise these issues in the state court. Or would be taking a pretty big risk by not raising the issue. 

But the Ninth Circuit panel saw no downside, and concluded that the owner could somehow reserve the federal claim, even with an England reservation!

The Gearings could defend the eminent domain action without challenging the constitutionality of the City’s enforcement of LUP Section 9.3.5 or other regulations, and simply recover the fair market value of the property as restricted by those regulations.¹ When the eminent domain action concludes, they could then litigate their regulatory taking claim in federal court and recover damages for the economic impact of the regulation and interference with their investment-backed expectations. See Lingle, 544 U.S. at 538–39. The Gearings have not cited, and we are not aware of, any support for their assertion that the constitutionality of the City’s restrictions on their properties must be adjudicated before compensation can be determined for purposes of eminent domain.

----------------------------------

¹ To the extent the Gearings argue that this would result in issue preclusion that would bar their federal claims, they are incorrect, because issue preclusion only applies to issues that were “actually litigated and decided in the prior proceedings.” Snoqualmie Indian Tribe v. Washington, 8 F.4th 853, 864 (9th Cir. 2021) (emphasis added). As noted, the Gearings would not be required to litigate their takings claim in the eminent domain action. Thus, this case is distinct from San Remo Hotel II, in which the property owners were required to litigate their takings claim in state-court proceedings in order for those claims to ripen for federal review. See 545 U.S. at 347.

Slip op. at 9-10.

Having determined that Pullman abstention was not categorically precluded, the panel found it simple to conclude that the doctrine should be invoked here because land use is a "sensitive area of social policy." But if Pakdel and Knick, stand for anything, they to reflect the Supreme Court’s thorough rejection of the longstanding trope that takings claims challenging land use regulations are “local” matters outside the competency of federal judges, and that federal courts need to give local governments a lot of leeway and right-of-first-action when it comes to restricting property owners' uses.

The Court made clear that land use and takings claims are civil rights matters and are to be treated like every other civil rights claim. If federal courts can resolve cases about monkey selfies, nude dancing, creating Valentine’s Day artwork out of naked bodies, and whether pet pigeons are diseased (all examples taken from cases in which a federal court resolved the issues) then it doesn't seem like a straightforward land use question is uniquely sensitive or so inherently local as to be beyond the ken of federal judges expressly tasked by Constitution (amend XIV) and statute (section 1983) with dealing with the issue.

More on the decision here ("Does Pullman Abstention Apply to Federal Takings Claims Post-Knick?") and here ("This Week at the Ninth: Abstention and the Golden Globes").

Will there be more on this one? Stay tuned.

Gearing v. City of Half Moon Bay, No. 21-16688 (9th Cir. Dec. 8, 2022)

Happy Birthday, Regulatory Takings - Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (Dec. 11,1922)

This story might be said to have had its roots millions of years ago.

It is about coal, after all. Anthracite coal, to be exact.

But that -- and today's date -- should give you a clue that, as we teased in this post a mere 28 days ago (the Supreme Court worked hard and fast in those days), today, Sunday, December 11, 2022, is the 100th birthday of the U.S. Supreme Court's opinion in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (Dec. 11, 1922).

True, what became known as the "regulatory takings" doctrine did not spring from whole cloth on December 11, 1922, but had been bouncing around in the common law for quite a while (see here and here for example).

But if you want to mark and official birthday for regulatory takings, you could not do better than Pennsylvania Coal (aka Mahon).

The case that launched a thousand academic tenure quests! The case that asks the oh-so-Holmesian question "how far is too far?" (and "too far" into what or from what- the owner's rights, the government's powers?). The case responsible for instructional videos. For law student cheat sheets. For wikis. For beaucoup online PowerPoint slide shows. For flashcards, for heaven's sake. 

A case cited nearly 10,000 times (thanks Westlaw):

And still kicking, despite calls for its overruling, and claims it has been sub silentio abrogated ("Abrogated?" I don't think so):

Eight-to-one, with only Justice Brandeis (predictably) in dissent.

We spent today -- a wet and snowy one -- with a colleague (and now friend) at the actual property that gave rise to the litigation in Pittston, Pennsylvania, visiting the site, talking to the present and former owners of the Mahon home, and learning more about the case, the people involved, the arguments, and the history and process of anthracite coal mining that led to the dispute.

You know the short story as set out in the Supreme Court's opinion. But you may not know the details. So in a series of upcoming posts, we'll bring you some of the more interesting aspects of the case.

Today, as we discussed the decision in what was, a century ago, Harold John Mahon, Esq.'s office (he was a lawyer you know, and along with co-counsel repped himself in the Supreme Court), we imagined that this might have been what he saw when he received the telegraph from Washington, D.C. on December 11, 1922, notifying him that the Court had ruled against him:

Before the day was through, we paid a visit to Mr. Mahon at the nearby cemetery, just to let him know that there are no hard feelings, and that the regulatory takings doctrine his case spawned is alive if not entirely well.

Here, at the Craig-Mahon family plot, he lies in repose with Mrs. Mahon.

Her story takes a most interesting twist (more on that in future posts).

So stay tuned. This post is just a teaser because we just had to post something today, in recognition of the 100th anniversary of the opinion.

But more will come on the Pennsylvania Coal Co. v. Mahon story. 

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (Dec. 11, 1922)

Ohio: Property Got Nominated Real Good - Saying You Want To Put Up Site For UNESCO Designation Is Enough To Support Taking

Check out the Ohio Supreme Court's 6-1 opinion in State ex rel. Ohio History Connection v. Moundbuilders Country Club Co., No. 2020-0191 (Dec. 7, 2022), in which the court held held that the taking of the Country Club's lease for the property served a public use.

Court News Ohio beat us to the punch is summarizing the case and the dissent, so instead of us repeating, we suggest you go check it out:

The Ohio History Connection can proceed with its efforts to transform the Octagon Earthworks of Newark into a public park by extinguishing the Moundbuilders Country Club lease on the land, the Supreme Court of Ohio ruled today.

A Supreme Court majority affirmed a Fifth District Court of Appeals decision allowing the History Connection to take the land through eminent domain. The state agency wants to convert the Octagon Earthworks into a public park so that it can nominate the structures to the World Heritage list as part of the interconnected Hopewell Ceremonial Earthworks.

Writing for the Court majority, Justice Michael P. Donnelly stated that establishing the earthworks as a public park will “help preserve and ensure perpetual public access to one of the most significant landmarks in the state of Ohio.”

Chief Justice Maureen O’Connor and Justices R. Patrick DeWine, Melody Stewart, and Jennifer Brunner joined Justice Donnelly’s opinion. Justice Patrick F. Fischer concurred in judgment only.

In a dissenting opinion, Justice Sharon L. Kennedy wrote that under Court precedent, if the public use of the land is “contingent and prospective” and the private use is “actual and present,” then taking the land by eminent domain is not lawful. She wrote the History Connection presented that its ownership of the land would only allow for the federal government to nominate the earthworks to the World Heritage list, and there are no assurances it will be named a heritage site.

Please do read the entire story: "State Can Acquire Octagon Earthworks From Country Club."

That, and the opinion. And the dissent which argued that Norwood v. Horney, 853 N.E.2d 1115 (Ohio 2006) (a case most readers of this blog will be familiar with) required that the Country Club's allegations needed to be resolved by the trial court, and not disposed of by law-and-motion.

The ultimate reason for the appropriation, however, is more than a nomination. The History Connection stated in its resolution, “The Ohio History Connection strongly desires the Hopewell Ceremonial Earthworks, including the Newark Earthworks, be approved for inclusion on the World Heritage List. Such an inclusion would provide historical and educational benefits to all Ohioans, as well as future generations.”

Op. at 19.

More here ("Ohio Supreme Court rules against Moundbuilders Country Club in Newark Earthworks case") from the Columbus Dispatch.

State ex rel. Ohio History Connection v. Moundbuilders Country Club Co., No. 2020-0191 (Ohio Dec. 7, 2022)

New Article: "Theft, Extortion, and the Constitution: Land Use Practice Needs an Ethical Infusion" (Michael Berger)

Here's your must-read for today, the latest journal article from Michael Berger, "Theft, Extortion, and the Constitution: Land Use Practice Needs an Ethical Infusion," 38 Touro L. Rev. 755 (2022).

Here's the Abstract:

There are many ways in which property owners/developers interact with regulators. To the extent that texts and articles deal with the ethical duties of the regulators, they tend to focus on things like conflicts of interest. But there is more. This article will examine numerous other ways in which regulators may run afoul of ethical practice in dealing with those whom they regulate.

And if that isn't enough to grab you, there's this:

There may be more to the issue than how to act in narrow circumstances. For one thing, there is the idea that government and the governed need to deal with each other on a level playing field. As one court put it:

It has been aptly said: “If we say with Mr. Justice Holmes, ‘Men must turn square corners when they deal with the Government,’ it is hard to see why the government should not be held to a like standard of rectangular rectitude when dealing with its citizens.”

Moreover, there are some peculiarly land use related questions that have a core of ethical content and that receive too little attention as ethical issues. For example, as the U.S. Supreme Court once put it, in explaining the need for just compensation when private property is taken for public use:

[t]he political ethics reflected in the Fifth Amendment reject confiscation as a measure of justice.

So, there is at least one parameter: ethics is a part of the Fifth Amendment, and it prohibits “confiscation” of private property. That seems a good place to start. This article will highlight a few of the larger ethical issues stemming from that beginning.

Id. at 756-757 (footnotes omitted).

Be sure to check it out.

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

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...

Tanning Beds v. Liquor Stores - No Equal Protection, No Physical Take, No Lucas Take For Co-19 Biz Shutdown Order

To "slow the spread" in the early days of the Co-19 thing, the City ordered businesses to shut down. But not Wal-Mart, liquor stores, or churches. Golden Glow, a tanning salon objected, and told anyone who would listen that it could operate without person-to-person contact. Sorry, no exceptions.

Federal lawsuit followed, alleging the claims you might expect: equal protection and takings claims. Predictably, the district court granted summary judgment to the City.

And just as predictably, in Golden Glow Tanning Salon, Inc. v. City of Columbus, No. 21-60898 (Nov. 8, 2022), the U.S. Court of Appeals for the Fifth Circuit affirmed. The opinion, as you might expect is short.

Was Golden Glow treated differently from other businesses similarly situated without a rational reason? No. First, Golden Glow is similar to other shut down businesses: "[e]ach class of shut-down business provides recreational, social, or, as some would say, 'nonessential' services; the clientele typically spend more than a few minutes at the location; and the likelihood of close person-to-person contact may pose risks." Slip op. at 4. Second, the distinction between which businesses got shut down and which didn't isn't subject to any meaningful judicial scrutiny because of rational basis review.

The right to work isn't a "fundamental" right so you get whatever the City wants to give:

Golden Glow contends that the City Ordinance created an arbitrary distinction between tanning salons and liquor stores that bore no rational relationship to public health given the salon’s ability to operate safely and without customer contact. The City responds that tanning salons, when compared to liquor stores, were not “so important to society that the benefits of continued operations . . . outweigh[ed] the risks of spreading the virus.” The City rationalizes that the length of time spent in a tanning bed as compared to a liquor store raised the probability that the virus was more likely to spread in a tanning salon.

Slip op. at 7-8. The ordinance's reach might have been too over or underinclusive, but so what? Invisible aliens might be walking among us.

The takings claim fared no better. The court rejected the physical invasion claim because there was not a physical invasion "because the City Ordinance did not authorize physical intrusions onto Golden Glow's property." Slip op. at 9 (footnote omitted). Of course, this was not like other physical-invasion-by-regulation cases in which the government invites third-parties to come on your property. But that conclusion dodges the real question of whether a business owner has a right to include patrons. Yeah, maybe Golden Glow would have lost that argument as well, but it would be nice to at least see the proper question being answered.

The court just as easily rejected the Lucas takings claim, concluding that the shutdown order did not render "the entire property 'valueless.'" Slip op. at 10. Apparently, Golden Glow did not assert a Penn Central taking in the district court, so the Fifth Circuit declined to rule on that issue on appeal. See slip op. at 10 n.8.

Judge Ho issued an interesting concurring opinion, arguing that "[i]f we're going to recognize unenumerated rights as fundamental, why not the right to earn a living?" Slip op. at 11, 12 ("Under the Court’s approach to unenumerated rights, we privilege a broad swath of non-economic human activities, while leaving economic activities out in the cold."). Check it out.

Golden Glow Tanning Salon, Inc. v. City of Columbus, No. 21-60898 (5th Cir. Nov. 8, 2022)

County: We're Short Of Housing, So Let's Do Rent Control! Court: Not So Fast.

Florida law makes it really difficult for municipalities to adopt rent controls. State statutes and the Florida Constitution erect all sorts of substantive and procedural hurdles that must be crossed. For example, a statute requires findings that any such measures are responding to an emergency, a "grave ... menace to the general public," and places the burden on the municipality to not just make findings, but back up those findings with facts, and show that rent control will actually "eliminate" the emergency. Single-family properties cannot be rent controlled. And any ordinance adopted by a municipality must be approved by the voters.

Facing what it concluded was a problem -- a shortage of 26,500 housing units and a population increase of 25% in the last decade - Orange County's County Commission voted, 3-2, to control rents. The measure limited the frequency and amount of rent increases.

After the measure was placed on the ballot for [today's] general election, the Realtors Association sued to declare the ordinance unconstitutional and to prevent the measure from being placed on the ballot. It sought an injunction, and even though the trial court concluded the Association had a substantial likelihood of winning on the merits, it declined to remove the measure from the ballot because even if invalid, a vote would allow the public to offer its opinion on rent control. Both parties appealed.

In Florida Ass'n of Realtors v. Orange County, No. 5D22-2277 (Oct. 27, 2022), the Florida District Court of Appeal agreed that the measure was likely to be illegal, but reversed the trial court's allowing it on the ballot. The court concluded that Orange County could not meet its burden to show that there is a housing emergency, nor its burden to prove that rent control would alleviate any such emergency. "Emergency" means a "sudden or unexpected" and temporary condition, and here, the housing shortage is the result of "historical structural issues" and not a surprise. Things like population growth, and longstanding housing shortages are not sudden. Moreover, the "County Attorney warned the County that these factors would be legally insufficient before it enacted the Ordinance." Slip op. at 18.

Even if the housing shortage qualified as an emergency, the County didn't prove that that it was "so grave as to constitute a serious menace to the general public." Slip op. at 19. To be a "menace," the threat must be a "grave threat or danger to the Orange County citizens as a whole." Slip op. at 20. "At most, the County cites to a low rental vacancy rate and low availability of affordable housing." Slip op. at 21. Yes, this affects renters in Orange County, but that isn't enough. It has to affect everyone.

Next, the court concluded that even if such conditions exist, the rent control measure would not address or remedy the problems. Not only would the measure not "eliminate" the problem as the statute requires, testimony at trial showed that it would have little effect, and even the County's consultant report conclude that rent control "may actually hurt rental conditions by 'imped[ing] the objective of speeding overall housing deliveries as well as creat[ing] a number of unintended consequences.'" Slip op. at 23.

"In sum, for this third and independent reason, the trial court correctly concluded that the Association satisfied its burden to demonstrate a substantial likelihood of success on the merits of its challenge to the Ordinance's validity." Slip op. at 24.

The court of appeal also concluded the ballot summary was misleading: "[t]he summary is misleading not because of what it says, but because of what it does not say." Slip op. at 27. The summary stated:

Rent Stabilization Ordinance to
Limit Rent Increase for Certain
Residential Rental Units

Shall the Orange County Rent Stabilization Ordinance, which limits rent increases for certain residential rental unites in multifamily structures to the average annual increase in the Consumer Price Index, and requires the County to create a process for landlords to request an exception to the limitation on the rent increase based on an opportunity to receive a fair and reasonable return on investment, be approved for a period of one year?

The summary "only advises the voter about the amount of rent control, but not its frequency," even though the actual ordinance limits increases to once in a twelve-month period. Slip op. at 27. The summary thus makes the measure appear less extensive than it actually is.

Finally, the court of appeal disagreed with the trial court's refusal to enjoin the election and keep the issue from the voters:

No public interest can be served by allowing the potential enforcement of a rent control ordinance that fails to meet the facial requirements of section 125.0103, and Article 8, section 1 of the Florida Constitution. We recognize that a local government's aim to enact legislation to address a complex, multifaceted issue is noble, and citizens might believe that rent control is a harmless was to accomplish that aim. But as we stated at the outset of this opinion, the power of local government is limited, and a critical limitation on this power is the Florida Constitution.

Similarly, no public interest can be served by having the electorate vote on a misleading ballot measure.

Slip op. at 32-33.

Fla. Ass'n of Realtors v. Orange County, No. 5D22-2277 (Fla. Dist. Ct. App. Oct. 27, 2022)

Whether $23K Traffic Fee Is Proportional To One Single-Family Home Is Beyond The Ken Of Judges

The County of El Dorado requires everyone seeking a building permit for new development to pay a fee to mitigate the additional traffic that the proposed development is predicted to cause. But the County doesn't calculate the fee by actually looking at a proposed development and predicting what traffic impacts in may be responsible for. Rather, it has a generic fee schedule that applies to all proposed developments broken down by location and type (residential, commercial, etc.). We don't care whether your development actually causes more traffic (or if it does, the extent of the increase), we're hitting you all up.

Or as the California Court of Appeal put it in Sheetz v. County of El Dorado, No. C093682 (Oct. 19, 2022), "[i]n assessing the fee, the County does not make any 'individualized determinations' as to the nature and extent of the traffic impacts caused by a particular project on state and local roads." Slip op. at 3.

Thus, when Sheetz asked for a building permit for a 1,854 square foot "manufactured home" (i.e., a mobile home), the County said "sure ... just pay the scheduled traffic mitigation fee." Hitting up the schedule, the fee worked out to a whopping $23,420. It appears El Dorado County is appropriately named.

Sheetz paid up, and then protested that this fee had not been calculated legally. The County had not shown that his modest proposal would create additional traffic that only $23 Grand would mitigate. When the County didn't respond, he sued, asserting claims for an unconstitutional condition under Nollan/Dolan, and for violation of the California Mitigation Fee Act. The trial court sustained the County's demurrer and denied the petition for writ of mandate.

None of this bothered the court of appeal, and you can skip to page 12 of the opinion to understand why. As you might predict, the court concluded that the Nollan/Dolan nexus and rough proportionality requirements apply only to these things we call "exactions," and the County here is not imposing an "exaction." As the opinion put it, "while the Nollan/Dolan test applies to monetary land-use exactions which are imposed ad hoc on an individual and discretionary basis, it does not apply to generally applicable development impact fees imposed through legislative action." Slip op. at 12.

Yeah, there's "some danger" of "improper leveraging" of the power to approve or disapprove development and use of private property (ya think?), "such generally applicable legislation is subject to the ordinary restraints of the democratic political process."

Ah yes, the "leave justice to politics" rationale:

A city council that charged extortionate fees for all property development, unjustifiable by mitigation needs, would likely face widespread and well-financed opposition at the next election. Ad hoc individual monetary exactions deserve special judicial scrutiny mainly because, affecting fewer citizens and evading systematic assessment, they are more likely to escape such political controls.”

Slip op. at 13 (quoting San Remo Hotel L.P. v. City and County of San Francisco, 27 Cal.4th 643, 671 (Cal. Ct. App. 2002)).

What saved the traffic fee demand from judicial scrutiny was that it was not discretionary, and applied to everyone. Thus, the unconstitutional condition claim was subject only to rational basis review, and the Mitigation Fee Act claim was subject only to a reasonable relationship test. And we know what those mean: this stuff is just too complex for judges to figure out. Mess around with one guy and you might get a stern judicial talking to. But mess around with everyone? Sorry, we can't figure it out because your world frightens and confuses us!

This isn't a new issue, and not only is there a long-standing lower court divergence, the Supreme Court has declined offers in the past to review the legislative vs adjudicative distinction (vel non) when the government demands your money or your rights.

Will the Court staying on the sidelines continue? Stay tuned.

Sheetz v. El Dorado County, No. C093682 (Cal. Ct. App. Oct. 19, 2022)

More On Federal Court Invalidating Honolulu's 3-Month Minimum Rental Term

Earlier this month, the U.S. District Court invalidated Honolulu's stretching of the minimum term for a residential rental from 30 days to three months, concluding that the ordinance likely violates the state Zoning Enabling Act, and also would be a taking if implemented. The court issued a preliminary injunction.

The lawyers repping the plaintiffs in that case -- our former law partner Greg Kugle -- appeared on Kelii Akina's Hawaii Together (Think Tech) program to talk about it more. Check it out.

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.

Oh, Canada! SCOCAN: Constructive Appropriation (Regulatory Takings) Claim Need Not Be Based On Land Acquisition; Taking Of Beneficial Interest Suffices

Here's one we've been waiting to drop, in a case we've been following.

Today, in Annapolis Group Inc. v. Halifax Regional Municipality, No. 39594 (Oct. 21, 2022), the Supreme Court of Canada held (and we're translating into United States here), that to state a claim for a regulatory taking based on the government's refusal to approve a development application consistent with the residential zoning, requires only that the plaintiff allege a taking of a beneficial interest, and does not require that the government have seized land.

Our northern friends do not label this claim a "taking" or "regulatory taking," but use different terms: de facto expropriation or constructive appropriation, or constructive taking, or even "disguised expropriation." You get the drift. (For the record, we really like "disguised expropriation.")

One major difference between Canadian takings law and the U.S. approach is that Canada does not consider property rights to be constitutional rights. Property rights are either common law or statutory. But that being said, in some ways Canada does it better, so you should not presume that simply because Canada law doesn't constitutionalize property that owners' rights are somehow lesser.

Here, instead of approving the plaintiff's development application, Halifax "promoted the Annapolis Lands as a park by inviting the public to use them as such and permitting its logo to be placed on trail signs directing the public onto them." Not very polite, Halifax! The landowner brought a de facto expropriation claim, asserting that the government's exercise of zoning power deprived the owner of the reasonable uses of land and instead created a public park, and seeking compensation under the common law test established in Canadian Pacific Railway v. Vancouver (City), 1 S.C.R. 227, 2006 SCC 5 (2006).

The trial court denied Halifax summary judgment. On appeal, the Nova Scotia court of appeal concluded that a claim for constructive appropriation must be based on an actual seizure of land, and Annapolis had not made that allegation. Thus, property owner had no chance for success. Reversed.

The owner sought further review. A divided Supreme Court rejected the court of appeal's analysis and affirmed the existing CPR two-part test for a regulatory taking: "the common law rule in the form of a two-part test for showing a constructive taking: '. . . (1) an acquisition of a beneficial interest in the property or flowing from it, and (2) removal of all reasonable uses of the property . . .'" Slip op. at ¶ 25. The Court also considered whether the government's motive played any part in the analysis.

There's no need for physical taking, the Court held, just deprivation of uses of a beneficial interest. "A “beneficial interest” is to be broadly understood as an “advantage”; as such, the interest acquired by the state can fall short of an actual acquisition by the state."

The issues present in this appeal require us to consider the meaning of a “beneficial interest in the property or flowing from it” under the first part of that test. In bringing greater clarity to this aspect of the CPR test, we do not change the doctrine of constructive takings, but simply apply it to the facts of the present dispute. As we will explain, the Court in CPR did not use “beneficial interest” in the technical sense that it carries in the domain of equity. Rather, a “beneficial interest” is to be more broadly understood as an “advantage” — hence the Court’s coupling of “beneficial interest” with the phrase “or flowing from [the property]”. Clearly, if the interest acquired by the state can be one which flows from the property, what must be shown by the property owner can fall short of an actual acquisition by the state.

Slip op. ¶ 25.

The majority held that beneficial interest referred to was some economic or other advantage -- even one conferred by the government -- some "benefit" that has an advantage behind it (shades of Kaiser Aetna: " But not all economic interests are 'property rights;' only those economic advantages are 'rights' which have the law back of them, and only when they are so recognized may courts compel others to forbear from interfering with them or to compensate for their invasion.").

The majority walked through each of the Court's prior constructive appropriations decisions to show that when it referred to "beneficial interest" it wasn't limited to a physical interest in land. In short, we're reading this opinion to affirm a very expansive view of property rights.

The Court also considered the government's motives, and rejected the different rationales advanced by both of the lower courts. The disguised expropriation claim is not absolutely dependent on the motive of government, good or bad -- but rather on the effect the regulation has on the owner's property rights. But evidence of motive might be evidence of the government's intent to deprive the owner of reasonable uses:

[52] Respectfully said, neither position is correct. The public authority’s intention is not an element of the test for constructive takings at common law. Again, the mischief addressed by the doctrine is one of advantage and effects, not that a public authority acted in bad faith or with an otherwise ulterior motive. Indeed, this Court held in CPR that, even if the City’s purpose were to “enable the inhabitants to use the corridor for walking and cycling,” its bylaw, in effect, neither encouraged trespassing nor prevented the historical and current use of the land (para. 33) and therefore could not be said to have deprived the landowner of all reasonable uses.

[53] This does not mean, however, that intention is irrelevant to the inquiry. Indeed, the case law we discuss below suggests that the objectives pursued by the state may be some evidence of constructive taking. Stated differently, the intention to take constructively, if proven by the claimant, may support a finding that the landowner has lost all reasonable uses of their land (inasmuch as a finding of this effect can be supported by evidence that such an effect was intended). But the absence of evidence of the state’s intention does not preclude a property holder’s claim. It follows that intent may constitute a “material fact” in the context of a constructive taking claim. We stress, however, that the focus of the inquiry must remain on the effects of state action.

Slip op. ¶ 52-53.

The Supreme Court publishes "plain language" summaries of their opinions so the public can understand the Court's rulings (how polite!). Here's how the Court described this decision:

Writing for a majority of the judges of the Supreme Court, Justices Suzanne Côté and Russell Brown found that Annapolis’ claim of constructive taking raises disputed issues of fact that must be decided at trial, based on the constructive taking test set out in the Canadian Pacific Railway Co. case.

There are two parts to the test for establishing a constructive taking. First, the test must show the government has acquired a beneficial interest in the property or flowing from the property. A beneficial interest is an advantage, such as when private property is enjoyed as a public resource. Second, the test requires showing the proposed regulatory measures would remove all reasonable uses of the private property.

The Nova Scotia Court of Appeal had interpreted the first part of the test as requiring Annapolis to show that Halifax had actually taken possession of the lands. However, Justices Côté and Brown wrote, “what must be shown by the property owner can fall short of an actual acquisition by the state.” The majority said the Court of Appeal was also wrong in holding that Halifax’s intention is irrelevant to applying the second part of the test.

The majority of the Supreme Court noted, “Annapolis is entitled to adduce evidence at trial to show that, by holding Annapolis’ land out as a public park, Halifax has acquired a beneficial interest therein; and that, because Halifax is unlikely to ever lift zoning restrictions constraining the development of Annapolis’ land, Annapolis has lost all reasonable uses of its property”. Annapolis may also adduce evidence of Halifax’s intention in not doing so, the majority said.

Read the entire summary here.

As noted above, we've been following this one for a while, even watching live as the Court heard arguments back in February.

Annapolis Group Inc. v. Halifax Regional Municipality, No. 39594 (Can. Oct. 21, 2022)

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)

Federal Court: Honolulu's 3-Month Minimum Rental Term Preempted By State Law (And Would Be A Taking Of Vested Rights)

Many Honolulu residents don't like short-term (less than 30 day) rentals. Whether fueled by NIMBY-ism, a genuine belief that tourists should stay out of residents' neighborhoods and be limited to accommodations built for transients, or the belief that long-term rentals to locals somehow promote more affordable housing, the anti-transient renter vibe is most definitely there.

The no-less-than-thirty-days restriction wasn't enough, however, and recently the City and County of Honolulu made it illegal to rent for less than three months (90 days). The ordinance stated the reasons:

Short-term rentals are disruptive to the character and fabric of our residential neighborhoods; they are inconsistent with the land uses that are intended for our residential zoned areas and increase the price of housing for O‘ahu’s resident population by removing housing stock from the for-sale and long-term rental markets. The City Council finds that any economic benefits of opening up our residential areas to The city's ordinance brought a challenge from property owners tourism are far outweighed by the negative impacts to our neighborhoods and local residents. . . .

The purpose of this ordinance is to better protect the City’s residential neighborhoods and housing stock from the negative impacts of short-term rentals by providing a more comprehensive approach to the regulation of transient accommodations within the City.

Hon., Haw., Rev. Ord. 22-7. Violating the ordinance meant massive daily fines ($10k), plus disgorgement of the rent. Thus, not surprisingly the ordinance drew a federal court challenge from property owners who assert a variety of claims:

Plaintiff asserts violations of HRS § 46-4(a) (Count 1), the state law doctrines of vested rights and/or zoning estoppel (Count 2), substantive due process principles under the U.S. and Hawai‘i Constitutions (Counts 3 and 4), the Takings Clauses of the U.S. and Hawai‘i Constitutions (Counts 5 and 6), the Contracts Clause of the U.S. Constitution (Count 7), and the Excessive Fines Clauses of the U.S. and Hawai‘i Constitutions (Count 8 and 9).

The plaintiffs sought a preliminary injunction, and in this Order, the U.S. District Court for the District of Hawaii granted it, enjoining the city from "enforcing or implementing" the ordinance "insofar as it prohibits 30–89-day home rentals, or the advertisement of such rentals" in any zoning district.

The court focused on the state-law zoning enabling act, the statute by which the state delegates limited zoning authority to Hawaii municipalities. The key provision is section § 46-4(a), which limits authority to prohibit "the lawful use of any building or premises for ... any purpose for which the building or premises is used at the time this section or the ordinance takes effect." In other words, a municipal zoning ordinance cannot outlaw existing uses. The ordinance also recognizes an exception, and permits municipalities to eliminate existing uses if they phase out the use over a reasonable amortization period. But this exception only applies in industrial, resort, and apartment zoned areas, not residential zones: "[i]n no event shall such amortization or phasing out of nonconforming uses apply to any existing building or premises used for residential (single-family or duplex) or agricultural uses."

That convinced the district court that Honolulu's ordinance was ultra vires, because "[]t is currently legal to rent O‘ahu homes to tenants for 30–89 day periods in any zoning district." Order at 13. With a "direct conflict" with state law, the city's ordinance is likely void. Like many similar statutes, the Hawaii zoning enabling act does not define "residential" use. So the court looked for the "common meaning" of the term, concluding that it means a use for "ordinary living activities and benefits--e.g., eating, washing, sleeping, storing their belongings and vehicles, and enjoying the surrounding scenery and community." Order at 17.

The court also concluded that "residential" does have a time component, but "the Court has not found any cases, nor have the Defendants cited any, holding that rentals of 30 days or longer were not residential." Id. The court rejected the city's argument that the frequent turnover of a residence is not traditionally associated with family living, and that rentals of less than 90 days are commercial uses, more akin to a resort or a hotel. The court noted that it is more important what is being done with the home rather than how long. People rent property for 30-89 days for all sorts of reasons:

(1) O‘ahu residents who have sold and bought [homes]; (2) off-island families traveling to O‘ahu for medical care; (3) traveling healthcare workers temporarily assigned to O‘ahu; (4) military families in transition; (5) employees performing work on O‘ahu; (6) temporarily displaced families; [and/]or (7) others who prefer to temporarily reside closer to work or schools than the resort districts.

Order at 19. The court noted the city can still regulate the duration of vacation rentals, but it must do it within the constraints of state law. Order at 20 ("The City may, and indeed must, execute its long-range planning goals, while respecting and accommodating prior lawful uses already in place, as HRS § 46-4(a) requires it to do.").

The court additionally concluded the ordinance likely works a taking. It first asked whether the owners have vested rights to rent their property for more than 30 days and less than 90. They do: "[i]n the present case, 30-89-day rentals in non-Resort districts are a vested property right protected by takings principles." Order at 23. Equitable reliance principles, backed by law (the above-noted zoning enabling act), means that there's "nothing 'contingent,' 'uncertain,' 'speculative,' or 'discretionary' in the long-standing use of private property for the rental purposes identified[.]" Id. 

Having established the owners have a private property right, the court also concluded that the city's ordinance would take that right without compensation because it outlaws the use entirely, "without providing any process to compensate or accommodate nonconforming uses." Order at 24. 

We suggest you check out the entire order. Kudos to our former law partner and land use lawyer extraordinaire Greg Kugle for the compelling win.

Order Granting Pltf's Motion for Preliminary Injunction, Hawaii Legal Short-Term Rental Alliance v. City &...

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!

Mich App: Supreme Court's Takings Ruling Is Retroactive Because It Is Not A New Rule, But Returned To Common Law

We already know that in Rafaeli, LLC v. Oakland County, 952 N.W.2d 434 (2020), the Michigan Supreme Court held that a homeowner has a property interest in the equity in her home, and that if she fails to pay the full amount of her property taxes and the government forecloses, the government can't keep the proceeds in excess of the amount of the tax delinquency.

But did this ruling apply retroactively to cases where the foreclosure and sale (and the government keeping the change) occurred before the Rafaeli opinion was issued? That was the issue the Michigan Court of Appeals considered in Schafer v. Kent County, No. 356908 (Sep. 22, 2022).

Long story short: yes, the Rafaeli ruling is one upholding the Michigan Constitution, and did not so much establish a new principle of law as "returned the law to that which was recognized at common law and by the ratifiers of the Michigan Constitution of 1963 ... and should be given full retroactive effect." Slip op. at 5.

That retroactive effect is not limited:

We conclude that Rafaeli should be given full retroactive effect. We further conclude that Rafaeli applies to the instant case even if not given full retroactive effect because the instant case was filed after Rafaeli was decided. The parties are under the misconception that Rafaeli would need retroactive effect in order to apply to the instant case, apparently because the foreclosure sale at issue in the instant case occurred before our Supreme Court’s Rafaeli decision. But for the purposes of this analysis, the relevant date is when plaintiffs filed their complaint commencing the case, not when the underlying conduct at issue in the complaint occurred. See Stein, 432 Mich at 201. Therefore, because plaintiffs filed the instant case after Rafaeli was issued, Rafaeli applies regardless of whether that judicial decision is applied retroactively or prospectively.

Slip op. at 5-6 (footnote omitted).

Schafer v. Kent County, No. 356908 (Mich. Ct. App. Sep. 22, 2022)

Brigham-Kanner Property Rights Conference 2022 Report: It's Chief Justice Roberts' Property World, We Just Live In It

We spoke on the second panel of the day at the 2022 Brigham-Kanner Property Rights Conference at the William and Mary Law School. The subject of our panel -- which included Professors David Callies, Tim Mulvaney, and Dave Owen -- was "Reshaping the Framework Protecting Property Under the Roberts Court."

Here's a rough transcript of my remarks.

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President Reveley, Professor Butler, distinguished Brigham-Kanner Prizewinners (present and future), mentors, colleagues, family and friends: thank you for the opportunity to speak today.

The story goes that when asked what it was like to be a part of the "Rat Pack,*" that Dean Martin responded "It's Frank's world, we just live in it."

When I first heard the title of this portion of the program and the discussion of how and if the Roberts Court is reshaping property, my first reaction was a paraphrase of Dean Martin's quip, with a legal twist:

It's the Chief Justice's property world; we just live in it.

Now let me explain. Our session asks if the Roberts Court is reshaping the framework of property protections, and if so how.

I can answer the first part with a definitive yes. The Roberts Court is reshaping the way we look at property, and specifically the term “private property” as employed in the Fifth Amendment.

Summed up, this is property’s “moment” at the Supreme Court.

And to me, there's no question that it is the Chief who is, in Reggie Jackson’s immortal words, “the straw that stirs the drink.”

The “how” takes us to a series of decisions by the Court, most of which have seen the Chief take the lead in producing the opinion. Or at least providing the intellectual steam and the vision of how the Court views this thing called “private property” and its role in the pantheon of civil and human rights. In addition to Cedar Point, how many of the Court's property or property-related opinions has he authored? Knick. Penn East. Horne II. Murr dissent. Winter. This recent per curiam sure reads a lot like he wrote it, too. Those opinions he didn't author he played a big part in: the fifth vote in Koontz; presumably employing his role as Chief to organize unanimous or nearly unanimous decisions in Arkansas Game, Horne I, Brandt, Hawkes, and Sackett; and joining in very pro-property rights pluralities when there wasn't a majority. (Did we miss any?)

So let’s take a look at the vibe of these decisions, starting with the most recent, Cedar Point Nursery v. California. And before we go further, let me proudly disclose my bias, as my own law firm – the same law firm as our Brigham-Kanner honoree, Pacific Legal Foundation – represented the property owner in Cedar Point.

There, the narrowest framing of the issue would ask whether there’s any difference between a temporary and permanent physical invasion. The Court has already told us that a permanent physical occupation is considered a taking, which shifts the burden to the government to either pay up, or back off.

And on that, let another hat tip to my former law partners Diane Hastert and Charlie Bocken who bucked more than a century of seemingly contrary law and started us down this path with 1979’s Kaiser Aetna v United States in a decision authored by then-Associate Justice Rehnquist (who, the following Term, would be the boss of a young Harvard Law grad named John Roberts).

In Kaiser Aetna, the majority concluded that just because a navigable waterway might be subject to federal regulatory authority didn’t mean that along with the regulatory authority came the public. If those regulations invited the public to “come on in, the water’s fine,” that’s such a dramatically different nature than mere regulation, and triggered the obligation to pay compensation. Or, in that case, decide whether the price of regulation was worth the cost. It was not, and the federal government chose to back off instead of pay, leaving the owner to bar the public if it chose.

Kaiser Aetna re-introduced us to the centrality of the “right to exclude” (another hat tip to Prizewinner Tom Merrill) and the notion that permanent invasions triggered the Fifth Amendment calculus. Leaving open the natural question: what if the invasion isn’t “permanent?”

Let’s set that aside for a moment, and get to the issue the Kaiser Aetna Court was able to avoid dealing with: what might be the more difficult question of the source of the right to exclude and other property rights deemed to be within the scope of how private property is defined in the Fifth Amendment (and Kaiser Aetna was a pure Fifth Amendment case, as the federal government was the party pushing the closed gates open).

I say this was an easier question in Kaiser Aetna because there, the Court noted that under Hawaii law – all the way back to the Kingdom days – these type of waterways were not considered “navigable” in the sense we do (even though many of them were, in fact, navigable. Thus, the majority reasoned, if state law recognizes an admittedly unusual right to exclude, who are we as mere federal judges to say otherwise? On that, they were on firm footing, going at least as far back as Justice Holmes in another case out of Hawaii, Damon v. Hawaii, in which he noted in the most Holmesian language that if local law recognizes portions of the ocean as private property, then so does the Fifth Amendment.

So let’s flash forward to Cedar Point which resolved that permanent vs temporary question, holding that permanence is not the sine qua non of takings. But the Court did have to grapple with the issue of where the property interest the owner asserted was taken actually came from. (Or maybe “who” defines property.) We all know that state law is the touchstone of private property and states have a lot of latitude about how to define and redefine it. As the Court noted in Cedar Point, "[a]s a general matter, it is true that the property rights protected by the Takings Clause are creatures of state law."

But, as we all know, a state’s notion of property cannot go below the floor of the Fifth Amendment, and the Court has never countenanced state law defining property in a way that eliminates “fundamental elements” of “central importance to property ownership.” Indeed, the Cedar Point majority rejected California’s argument that state regulations limited the fundamental right to exclude). The Court held that core property right such as the right to exclude are not “empty formalities, subject to modification at the government’s pleasure.”

For that notion, I think there’s no better statement of the issue than Justice Thurgood Marshall in PruneYard Shopping Center v. Robins, where he emphasized that property includes a “normative dimension” insulated by the Fifth Amendment from state tampering. These fundamental rights protect individual autonomy:

I do not understand the Court to suggest that rights of property are to be defined solely by state law, or that there is no federal constitutional barrier to the abrogation of common law rights by Congress or a state government. The constitutional terms “life, liberty, and property” do not derive their meaning solely from the provisions of positive law. They have a normative dimension as well, establishing a sphere of private autonomy which government is bound to respect.

Justice Marshall continued:

Quite serious constitutional questions might be raised if a legislature attempted to abolish certain categories of common-law rights in some general way. Indeed, our cases demonstrate that there are limits on governmental authority to abolish “core” common-law rights, including rights against trespass, at least without a compelling showing of necessity or a provision for a reasonable alternative remedy.

For more, see the Chief’s dissenting opinion in Murr v Wisconsin, where he argued that Justice Kennedy’s multifactor test (surprise!) for defining the denominator property in takings isn’t so much defined by state law as the baseline, but turns on a multiplicity of factors (what one advocate in that case called Penn Central squared).

The Chief argued that the question of property should always start with state law and traditional understandings (this is my property line) but doesn't always end there. And that gets me to my point here: when trying to predict what the Court might do about property and how it might analyze it, the best place to start isn't with "new property," but with old property. So dirt lawyers and scholars, dust off your Lord Coke, your Blackstone, and your Grotius. State law goes only so far, and cannot dominate the conversation and shape an owner's expectations (if expectations are even part of the calculus).

Let me suggest what some of those "normative" dimensions of property might qualify as "core" would look like. What, in addition of the right to exclude, are fundamental to the notion of property?

• The right of reverter. This is where Yee v. Escondido may come into play. If I invite you on my property subject to certain terms (you can only stay for a year or a month, or can only stay if you continue to pay rent), can the government alter that deal?
• The right to timely compensation when your property is taken.
• The right to be indemnified when property is taken. Can "other law" interfere with the natural operation of compensation? Or, what does it mean when the Court says the Just Compensation Clause is "self-executing?"

Before I sign off, let me wrap up by recognizing the people who attend this Conference. The William and Mary law students who take advantage of this great event and spend the day (or more!) with us, seeing how the things they are leaning in class are applied in the world.The alums of our Land Use course, and our Eminent Domain and Property Rights course. It was heartening to see that many lawyers who first attended this Conference as students continue to come as lawyers. And I am thrilled to see several emerging property law scholars in attendance, because among them may be the next generation of B-K Prizewinners.

And finally, to Jim Burling for his hard earned, well-deserved recognition. This Conference is the Cooperstown of Dirt Law, and I'm thrilled to be here sharing in the celebration. And if it isn't out of place, this student (and yes, I continue to consider myself a law student -- a 38L at this point) would like to honor one of his teachers. I do consider Jim Burling to be one of those legal mentors who shaped my own views of property and law.

I anticipate many years of continued studying at your side, Jim. And I might have to modify slightly my opening thoughts; I should say that it isn't the Chief Justice's property world we live in: it's Jim Burling's Property World.

Congratulations, Jim.

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*We refer to the Rat Pack in its Vegas iteration, not the original RP formed by Humphrey Bogart.

Viewing Social Media Content Censorship Through The Takings Lens

We were all set to write a deep and insightful takings analysis of the U.S. Court of Appeals' recent opinion in Net Choice, LLC v. Paxton, No. 21-51178 (Sep. 16, 2022), a challenge by the major social media platforms to a Texas statute that limits the platforms' ability to censor speech or "de-platform" (kick out) speakers they don't like.

In NetChoice, the Fifth Circuit sustained the statute against a Free Speech challenge. There's been a lot of commentary on the court's reasoning, as well as the conflicting result reached by the Eleventh Circuit in a similar case. See here and here, for example.

But the arguments in both of those cases focused on the First Amendment speech issues. Naturally, we don't limit our view of the issues, and see lurking property rights questions. But in the Fifth Circuit case, the plaintiffs purposely avoided raising takings claims:

This and other frequent invocations of private property rights suggest the Platforms’ real complaint is with the Texas legislature meddling in their right to control their own business. But the Platforms have not brought a regulatory takings claim. Cf. Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). Instead, they’ve asked for the more drastic remedy of invalidation of an economic regulation—a remedy the federal courts have not been in the business of providing since the Lochner era. Given the courts’ deference to state economic regulations for the last eight decades, “it would be freakish to single out” this historically grounded nondiscrimination requirement “for special treatment.” Cf. Gundy v. United States, 139 S. Ct. 2116, 2131 (2019) (Alito, J., concurring).

Slip op. at 63 n.33.

Our old "friend" PruneYard makes appearances in both opinions -- but again, only on the speech issues and not the property rights issue.

What we're getting at is that the property rights lens may be another way of looking at this issue - do these private platforms have property rights, and if so are the state statutes forcing them to open up that property to intruders, thus violating their right to exclude? And as we noted above, we were all set to go down that analytical path when lawprof Ilya Somin beat us to it, with "Why the Florida and Texas Social Media Laws Violate the Takings Clause" at Volokh.

We suggest you read his analysis, but here's a highlight:

The Florida and Texas social media laws are also blatant attacks on the right to exclude. No one doubts that the Twitter site and its various features are Twitter's private property. And the whole point of the Florida and Texas law is force Twitter and other social media firms to grant access to users and content the firms would prefer to exclude, particularly various right-wing users. Just as the plaintiffs in Cedar Point wanted to bar union organizers from their land, so Twitter wishes to bar some content it finds abhorrent (or that might offend or annoy other users).

To be sure, there are obvious differences between virtual property, such as a website, and more conventional physical property, like that involved in the Cedar Point case. But the Taking Clause nonetheless applies to both. If Texas decided to seize the Twitter site, bar current users, and instead fill it with content praising the state government's policies, that would pretty obviously be a taking, much like if California decided to seize the Cedar Point tree nursery's land.  In the same way, requiring Twitter to host unwanted content qualifies as an occupation of its property, no less than requiring a landowner to give access to unwanted entrants. The Supreme Court has previously ruled that intellectual property is protected by the Takings Clause. Websites present similar issues.

Professor Somin also considers PruneYard, concluding that it is "a bad decision and should be overruled." Unlike the shopping center in that case, social media platforms are not generally open to the public (you have to first agree to the terms of service, which includes acknowledgement of the platforms' power to censor your speech, or kick you off based on what you are saying).

This issue is not going away. With different outcomes from the Fifth and Eleventh Circuits on the speech issues, we, like others, suspect this one is going further up the food chain. But what of the property issues? For now, with no case to discuss, it remains a mostly academic issue. Let's see what the future might bring.

NetChoice, LLC v. Paxton, No. 21-51178 (5th Cir. Sep. 16, 2022)

Still Time To Join Us (In-Person Or Remote) For The 19th Annual Brigham-Kanner Property Rights Conference

One last reminder that there' still time to register for the upcoming Brigham-Kanner Property Rights Conference at the William and Mary Law School in Williamsburg, Virginia, September 29-30, 2022. If you can't make it to the historic campus, there's an option to attend remotely.

In our opinion, the Conference is the best of its kind because it brings together legal scholars and the practicing bar to talk dirt law theory and practice. We also a have a full supplemental program for law students, that covers property law and careers in eminent domain law, a recruiting session, a program on international property rights, and a program on land use law.

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.")

Come on, join us!

 

New Must-Read Article: "Cedar Point Nursery and the End of the New Deal Settlement" - Property Rights Are Civil And Human Rights

Here's your must-read for today, a new article from U. Va. lawprof Julia D. Mahoney, "Cedar Point Nursery and the End of the New Deal Settlement."

Disclosure: we show up in footnote * along with others for offering "comments and conversations" about the piece. 

Here's the Abstract:

In Cedar Point Nursery v. Hassid, the United States Supreme Court ruled that a California state regulation granting labor organizations a limited “right to take access” to agricultural employers’ property constitutes a per se physical taking. Cedar Point has sparked intense criticism, with critics arguing that the decision threatens to transform the law of property rights so as to “hobble” government land use regulation and even undermine democracy. This Article explains why the objections of Cedar Point’s detractors are misplaced. Far from disabling government regulation or fomenting stasis by favoring the “already haves,” Cedar Point is best understood as another step in the normalization of property rights. In this, Cedar Point is in accord with other recent Court decisions, including Horne v. Department of Agriculture, and Knick v Township of Scott. These cases illustrate how constitutional recognition of property interests, duly enforced by the judiciary, protect the interests of the working and middle classes. That is no small thing, particularly at a time of well-justified concerns about the outsize influence of elites on the legislative and executive branches of government, with its attendant worries that those who lack power to defend themselves in the political and administrative arenas are vulnerable to “redistribution up.”

It is true that this normalization of property rights amounts to a retreat from the “New Deal Settlement,” under which courts declined to subject legislative and administrative actions affecting property rights to significant oversight. But for anyone who cares about the economically vulnerable, the passing of the New Deal Settlement should be cause for celebration rather than alarm. Eighty years on, it is evident that the costs to many poor communities of judicial abdication in the area of property rights were very high. The careful readjustment now underway does nothing more than recognize property’s status as a civil and human right, one that needs serious constitutional protection if people are to flourish as citizens, family members, and workers.

Check it out. Get the pdf here.

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)

NC: Generally-Applicable Impact Fee Is Subject To Nollan/Dolan/Koontz

We recommend you review the North Carolina Supreme Court's opinion in Anderson Creek Partners, L.P. v. County of Harnett, No. 63PA21-1 (Aug. 19, 2022). It's long (70 page majority, plus 19 pages of concurring and dissenting opinions), but worth your time because the majority concludes that legislatively-imposed fees, applicable to all, are "exactions" that are subject to the nexus/rough proportionality requirements of Nollan/Dolan/Koontz.

The county adopted a requirement that residential property developers pay a per-lot, one-time water and sewer capacity use fee as a condition of the county accepting applications for a water or sewer permit. The details:

Section 28(h) of the ordinance provides for the collection of “capacity use” fees for the purpose of “partially recover[ing] directly from new customers the costs of capacity of the utility system to serve them.” More specifically, the ordinance provides that, for each new residential connection to a water or sewer system owned or operated by the County, the landowner must pay a one-time, non-negotiable fee of $1,000 for water service and $1,200 for sewer service, with the landowner being required to make the required payment prior to the County’s concurrence in the landowner’s application to the North Carolina Department of Environment and Natural Resources1 for the issuance of the required water and/or sewer permits. According to the ordinance, “such charges are reasonable and necessary and result in a more equitable and economically efficient method of recovery of such costs to handle new growth and to serve new customers without placing an additional financial burden on existing customers solely through inordinate enhancement of water and sewer rates.”

Slip op. at 5.

Anderson Creek had paid more than $25,000 in fees, and sought a state court declaration that the fee violated its due process and equal protection rights under the N.C. Constitution (recall that the state constitution does not contain a formal "takings" clause). The trial court entered judgment on the pleadings for the county, and the court of appeals affirmed because these are generally-applicable user fees, not subject to the N/D/K unconstitutional conditions analysis. "Exactions" are reserved for ad hoc fees, not fees imposed by legislative action. See slip op. at 14-16.

The Supreme Court disagreed. Viewing this as a due process problem, the majority noted that the point of the N/D/K doctrine is to prevent governmental coercion, and forcing people to choose which of their constitutional rights they'd like to exercise.

The heart of the court's analysis starts at page 25, where the opinion concludes that the county's "capacity use fee" is properly classified as a fee to cover new infrastructure, "a description that falls squarely within the definition of an 'impact fee' as discussed above. Slip op. at 27 (footnote omitted). 

The fees at issue in this case are not water and sewer service fees, paid by customers at a fixed rate in accordance with their monthly metered water and sewer usage for the purpose of paying for the service that they used. In addition, the challenged fees are not “tap-on fees” paid at the time that individual lots are connected to the County’s water and sewer system. Instead, the fees at issue in this case are intended to provide the County with a contribution toward the cost of expanding its water and sewer infrastructure to account for the additional customers that will be added as a result of the developer’s development. Thus, the “capacity use” fees at issue in this case, which are not intended to cover the cost of any service that is currently being provided to the person paying them “at the time of actual use,” Quality Built Homes, I, 369 N.C. at 21, are clearly different from those at issue in Homebuilders Association of Charlotte, which were specifically intended to “cover the costs of regulatory services provided by the city,” including the labor costs associated with reviewing permit applications, 336 N.C. at 45. As a result, for all of these reasons, we hold that the challenged “capacity use fees” are properly categorized as impact fees rather than “user fees,” a determination that renders much of the authority upon which the County relies inapplicable.

Slip op. at 27-28 (footnote omitted)

Next, the court determined that as "exactions," the fees are subject to N/D/K requirements, even though they were not imposed ad hoc, but applied to everyone equally. The court rejected other courts' conclusions that legislatively-imposed fees are not subject to the nexus and proportionality requirement. See slip op. at 25-26.

The court was having none of it:

A careful review of the record and the applicable law convinces us that the County’s capacity use fees are subject to scrutiny under the “essential nexus” and “rough proportionality” tests articulated in Nollan and Dolan. In Koontz, the Supreme Court specifically held that “the government’s demand for property from a land-use permit application must satisfy the requirements of Nollan and Dolan even when the government denies the permit and even when its demand is for money,” 570 U.S. at 619 (emphasis added), with the Supreme Court’s reference to “in lieu of” fees, rather than limiting the reach of the Supreme Court’s decision, simply being a response to the Florida Supreme Court’s conclusion that a governmental demand for money rather than an interference in tangible property rights did not constitute a taking.

Slip op. at 43. "As a result, we conclude that the 'monetary exactions' with which Koontz was concerned were not limited to 'in lieu of' fees and, instead, encompassed a broader range of governmental demands for the payment of money as a precondition for the approval of a land-use permit." Slip op. at 45 (footnote omitted). The county's fees were imposed upon an identified property interest, even though those fees applied to everyone with a similar interest. Slip op. at 46 ("In other words, the fee at issue in this case is, in fact, linked to a specific piece of property, in each case the specific parcel of land that has been proposed for development.").

The court also concluded that neither Nollan nor Dolan turned on whether the condition being challenged was imposed administratively or legislatively:

In addition, we are not persuaded that the applicability of the test enunciated in Nollan and Dolan depends upon whether the challenged condition was imposed administratively or legislatively. As at least one member of the Supreme Court has recognized, the lower courts have reached differing conclusions with respect to this issue, which the Supreme Court has yet to address. See Cal. Bldg. Indus. Ass’n v. City of San Jose, 577 U.S. 1179 (2016) (Thomas, J., concurring in the denial of certiorari).13 After carefully reviewing the relevant decisions, we agree with plaintiffs that nothing in Nollan, Dolan, or Koontz supports a view that those decisions only apply in the context of “administrative” decisions, with the Supreme Court having consistently described the “unconstitutional conditions” doctrine as “preventing the government from coercing people into giving up” a constitutional right rather than preventing a particular branch of government from acting in a particular manner. Koontz, 570 U.S. at 604 (emphasis added); see also Dolan, 512 U.S. at 385 (noting that “the government may not require a person to give up a constitutional right—here the right to receive just compensation when property is taken for a public use—in exchange for a discretionary benefit conferred by the government where the benefit sought has little or no relationship to the property”) (emphasis added).

Slip op. at 52-52 (footnote omitted).

So there it is. Worth your time checking out. 

Disclosure: our Pacific Legal Foundation colleagues filed an amicus brief in support of the property owners here.

Anderson Creek Partners, L.P. v. County of Harnett, No. 63PA21-1 (N.C. Aug. 19, 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)

CA2: Land Use Challenge (Not Takings) Is Ripe - Govt Gave Its Final "No"

Check out the U.S. Court of Appeals for the Second Circuit's opinion in Village Green of Sayville, LLC v. Town of Islip, No. 19-3353 (Aug. 5, 2022), a case in which the court held the Town reached a final decision denying Village Green's request to develop a 64-unit apartment complex on Long Island.

Final decision ripeness under the surviving part of Williamson County, you say? So this is a takings case, right? No, not quite. The claims asserted by the developer  included a takings claim (although it seems to have played a more minor role) and the claims were mostly about the Town allegedly discriminating against affordable housing and the people who build and live in affordable housing. See slip op. at 11.

But as you know, many courts -- including the Second Circuit -- apply Williamson County's final decision ripeness requirements to anything vaguely land usey. Even RLUIPA and ADA claims (yes, ADA claims). Why there needs to be a special ripeness requirement applicable only to "land use" cases, and why the courts cannot simply apply the usual federal court ripeness rules applicable to, you know, every other type of challenge, isn't really clear to us, except that federal courts just don't like to deal with land use cases.

But let's put that aside here, because as the title of this post notes, the Second Circuit actually allowed this land use claim to move forward. Since the ripeness issues turned on what the Town did or didn't do, it's worth a walk-through of what the developer wanted to do, what it asked the Town to do, and how the Town reacted.

As we noted above, the case involved the developer wanting to build affordable housing. It obtained a rezoning of the property from Business to Residence, but the rezone was subject to two conditions, one involving the ability to rent the units and the other about the property's sewer lines. Those conditions became a sticking point, and eventually the developer asked the Town to allow it to develop the 64 units without the conditions. "Local opposition was strong." Slip op. at 6.

Town officials seemed to have reacted to that opposition by doing what they could to avoid saying yes to the proposal, while also avoiding saying no. Eighteen months elapsed, and the Planning Board finally considered approving: "Put to a vote, though, the seven-member Planning Board failed to pass the motion: After the vice chairman recused himself, the vote was 3-3 and deemed a 'non-action.'" Slip op. at 7. The usual pattern ensued - the developer submitted a more modest application with more public goodies included. That did not assuage the opposition. "Members of the public again made hostile comments, discussing 'Section 8' and 'transients,' and pledging that townspeople 'will not forget if this project is approved.'" Slop op. at 7-8.

Four months later, the developer's application was back on the Planning Board's agenda. But no deal, and consideration it was again continued. Two weeks later, the same. This time, the motion to approve the application was at least made. But since no Board member seconded the motion, no vote was held. The Town's lawyer let the developer know that the failed motion to approve was being treated as a denial and that "no further proceedings before the Town Board, Planning Board, or any other Town Agency would be held." Slip op. at 9.

Next stop, U.S. District Court. Despite its lawyer's earlier statement that the application process was done, in court the Town argued otherwise, claiming that it had not been given the opportunity to commit to a position. Slip op. at 24. Having never voted on the application, the Town argued, it can't be said to have made a final decision denying the development, no?

The Second Circuit held no:

The parties seem to agree a no-vote on November 17, 2016, would have ripened the dispute. But because the Town Board declined to give its position this way, we must assess the more unusual route it did take: first, noting in an official resolution that the “motion to approve fails for lack of second,” App’x at 317; then apparently choosing to “treat[] the failed motion to approve as a denial of the application” and promising that no town agency would hear anything further on the matter; App’x at 32-33 ¶ 67; and finally, true to that promise, scheduling no further proceedings on the application in the almost six years since.

We conclude that, through this sequence of events, the Town Board demonstrated its “arriv[al] at a definitive position on the issue that inflict[ed] an actual, concrete injury” on Village Green.

Slip op. at 25-26.

The fact that it took the court 30 pages of opinion, and that it was even a close call, tells you what you need to know about the ruling. Sure, it's the proper result. But at the same time, the case highlights how reluctant courts are to hold the government's feet to the fire not only where the government plainly is trying to avoid making a decision, but as here, where the Town's lawyer actually told the developer "no mas."

It shouldn't be that hard. 

Village Green at Sayville, LLC v. Town of Islip, No. 19-3353 (2d Cir. Aug. 5, 2022)