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Clint Schumacher's Eminent Domain Podcast: "Jon Houghton and his Penn Central Quest"

Here's a don't miss episode of friend and colleague Clint Schumacher's Eminent Domain Podcast, featuring our Pacific Legal Foundation colleague Jon Houghton. With a title like "Jon Houghton and his Penn Central Quest," how can we resist listening?

In this episode, Jon Houghton with Pacific Legal Foundation joins to discuss the Penn Central test, why he wants to change it, and what he is doing about it. We also discuss NY Jets football and the big Aaron Rodgers trade.

Listen in!

Rethinking Penn Central: A Call For Symposium Papers

If you know, you know.

Pacific Legal Foundation (that's us) has put out a call for papers about "Rethinking Penn Central." Here's the details (pdf).

Here's some of the suggested topics:

• Can Penn Central be salvaged or does it need to be fully replaced?
• If it is to be replaced, what should the new test be?
• Alternatively, what improvements can be made to Penn Central that would address problems raised by critics without uprooting the test entirely?
• Is economic loss primarily relevant to compensation owed rather than the threshold question of whether a taking has occurred?
• Can a more categorical approach, like those taken in cases including Cedar Point Nursery v. Hassid, Hodel v. Irving, or Lucas v. South Carolina Coastal Council, adequately address regulatory takings?
• What insights does the original meaning of the Takings Clause offer regarding how to fix or replace Penn Central?
• Do colonial or English practices or precedents offer insights into a better approach to regulatory takings?
• How did courts during the ratification and reconstruction periods address regulatory takings prior to Oliver Wendell Holmes’s infamous "too far" statement, and what lessons do those precedents hold for how to fix or replace Penn Central?
• What are the pitfalls that a new test must be careful to avoid?

More details here.

July 1, 2023 deadline to submit proposals. Accepted papers even get a $2,500 honorarium, and travel to the October research roundtable.

Check it out, and submit!

Rethinking Penn Central Symposium Call for Papers

Iowa Trial Court: Pipeline Precondemnation Entry Statute Is Facially Unconstitutional

When a court's opinion (even a trial court's opinion) starts out with the epigram, "'Freedom and property rights are inseparable, you cannot have one without the other.'- George Washington," you know you are in for a ride.

So begins the opinion of the Clay County, Iowa District Court in Navigator Heartland, LLC v. Koenig, No. EQCV034863 (May 3, 2023). The issue was the validity under the Iowa Constitution of Iowa's precondemnation entry statute, which allows pipeline condemnors to enter property for land surveys:

After the informational meeting or after the filing of a petition if no informational meeting is required, a pipeline company may enter upon private land for the purpose of surveying and examining the land to determine direction or depth of pipelines by giving ten days’ written notice by restricted certified mail to the landowner as defined in section 479B.4 and to any person residing on or in possession of the land. The entry for land surveys shall not be deemed a trespass and may be aided by injunction. The pipeline company shall pay the actual damages caused by the entry, survey, and examination.

Navigator wanted to enter Koenig's land to conduct surveys in anticipation of condemnation. Koenig objected, and the court held a trial at which it heard testimony about the scope of the proposed entries. One witness:

identified the four types of surveys typically performed on each affected property; these include a civil survey, a biological/environmental survey, a cultural survey, and a geotechnical survey. Each of the four surveys are completed at separate times, thus at a minimum, surveyors would expect to enter onto the private land on at least four separate occasions. She additionally testified that Navigator typically hires third parties to perform each of the surveys. She conceded that her lay understanding of the Iowa Code §479B.15 does not limit the duration or number of times surveys may occur so long as they are confined to surveying purpose for the proposed pipeline path.

Opn. at 3.

The property owner argued that the statute effects a facial taking by requiring owners to open their properties to third parties without compensation: "Koenig asserts that Iowa Code §479B.15 strips landowners of their right to exclude by statutorily allowing pipeline companies to come onto private land to perform certain surveying operations, which amounts to a per se taking. Additionally, Koenig argues that the statute does not provide for just compensation in accordance with Article I section 18 of the Iowa Constitution." Opn. at 6-7.

The court noted that until recently, Penn Central "had been the leading approach to determine whether a regulatory use restriction amounts to a taking." Opn. at 8. But Cedar Point changed that, according to the court: if there's a physical invasion, that's a taking, after which the question becomes whether the government has provided compensation. 

But, the court also noted, "Cedar Point did not open the door for all government-authorized physical invasions to amount to takings[,]" if those invasions are "consistent with longstanding background restrictions on property rights." Opn. at 9.

Thus, the critical question is: are these private pipeline precondemnation invasions consistent with those background principles? The court held no, they are not. "The Court observes important similarities between the facts of this case and Cedar Point."

Like the private labor organizations in Cedar Point, Navigator presently seeks to repeatedly enter onto privately owned land despite a lack of consent from the landowner. While true the California statute in Cedar Point allowed labor organizations to enter on the property for up to 120 days per year three hours per day whereas Navigator is seeking to enter for no more than four days (ranging from thirty minutes to eight hours at a time); the Court is leery to enter into too much detailed comparison of the intrusive nature of the invasion because, as Cedar Point makes clear, the frequency and duration of the invasion is no longer relevant. Id. at 2074 (“the fact that a right to take access is exercised only from time to time does not make it any less a physical taking” and “the duration of an appropriation—just like the size of an appropriation—bears only on the amount of compensation.”)

Opn. at 10.

The court concluded that although survey access may be a "traditional privilege," the Supreme Court's lack of reference to such access or utility easements "leads to a conclusion." Opn. at 11. And that conclusion? Survey access is more like the union easement in Cedar Point than the background access exceptions also noted in the opinion.

In looking to the language in Iowa Code §479B.15, the Court concludes that the standards established in Cedar Point are applicable. The statute is not a use restriction which can be analyzed under the Penn Central “Takings Test”. Rather, because the statute grants pipeline companies right to physically enter and occupy privately owned land, the statute appropriates a right to invade the landowner’s property. When such appropriation occurs, the Court follows the traditional rule “Because the government appropriated a right to invade, compensation is due.” Cedar Point, 141 S. Ct. at 2076.

The Court finds that Iowa Code section 479B.15 appropriates Koenig’s right to exclude others from his privately owned land. Without Iowa Code §479B.15, Koenig would have had the right under Iowa law to exclude the pipeline company and any third-party surveyors from hi property. Because the statute amounts to a government authorized physical invasion, and additionally appropriates Koenig’s right to exclude, the Court is convinced Iowa Code §479B.15 effects a per se taking for which just compensation is required. 

Opn. at 12.

The court also concluded that the statute does not provide just compensation. Yes, the statute requires the pipeline company entering private property to pay "actual damages" caused by the invasion or occupation, but does not, on its face, require just compensation for the invasion if there's no physical damage resulting:

However, if no physical damage is done to the private property, does Iowa Code §479B.15 still require compensation to the landowner for the government-authorized taking? §479B.15 says no and any other interpretation of such is unreasonable. At the end of trial Navigator argued that the distinction between “actual damages” and per se damage is a distinction without a difference. Navigator’s counsel argued that Koenig’s “actual damage” is any damage that he may claim. The Court does not find such interpretation to be reasonable because the damage has to be “actual” and cannot be subjective. It has to be reasonably ascertainable. The statute requires such.

Opn. at 16 (footnote omitted).

A property owner may not be able to easily ascertain the extent of the economic damages caused by a precondemnation survey entry. The damages caused may be pretty subjective, and similar to pain and suffering in tort law. "Therefore, a clear and common sense reading of Iowa Code §479B.15 is that, if by going onto private property to survey, a pipeline company causes actual damage to the property, compensation is required to cover the damages. However, because non actual damages resulting from the government authorized taking are subjective and not readily ascertainable, the Court cannot interpret the meaning of 'actual damages' within the statute to cover a per se taking in and of itself. To find otherwise would deprive 'actual damages' of all its ordinary meaning." Opn. at 17.

Finally, the court concluded that the usual presumption of constitutionality does not save the statute, because there's no reasonable alternative construction the court might give it.

All we can say is wow.

Trial Ruling on Defendant's Counterclaim re: Constitutionality of Iowa Code § 479B.15, Navigator Heartland...

New Cert Petition: Forcing Owners To Rent To Tenants Indefinitely Is A Categorical Taking

Here's the latest in a case we've been following since its inception, this cert petition seeking Supreme Court review of the U.S. Court of Appeals for the Second Circuit's affirming the district court's dismissal of a complaint alleging that New York (state)'s sweeping amendments to its Rent Stabilization (rent control) statute effected categorical and Penn Central takings:

Petitioners’ physical-takings claims would have been allowed to proceed if they were brought in the Eighth Circuit. That is because the Eighth Circuit has correctly held that property owners plead a physical taking under Cedar Point where a law prohibits them from terminating a tenancy at the end of a lease term. See Heights Apartments, LLC v. Walz, 30 F.4th 720, 733 (8th Cir. 2022), reh’g en banc denied, 30 F.4th 720. But the Second Circuit held here—as has the Ninth Circuit—that the physical-takings principles articulated in Cedar Point are not implicated when an owner voluntarily offered housing for rent in the first instance. These courts instead read Yee v. City of Escondido, 503 U.S. 519 (1992), as precluding physical-takings claims so long as the property owner may evict tenants in the event they breach the lease or engage in other forms of malfeasance—thus carving out a special and particularly deferential landlord-tenant exception to the general principles articulated in Cedar Point. Those courts misread Yee, which reserved the question whether a taking would occur if a law forced “a landowner over objection to rent his property or to refrain in perpetuity from terminating a tenancy.” Id. at 528.

In affirming the dismissal of Petitioners’ regulatory-takings claims, the Second Circuit also split from other circuits on every Penn Central factor. The court deemed irrelevant the impact that the law would have on Petitioners’ property rights, explaining that it was “of no moment” that they are forced to bear burdens that others are not. App. 16a. The court also viewed the character of the governmental action—which forces Petitioners to house tenants against their will—as counting against Petitioners’ claims because the law serves important public purposes and “courts are not in the business of second-guessing legislative determinations such as this one.” Id. The Second Circuit’s ruling confirms that this Court’s “current regulatory takings jurisprudence leaves much to be desired.” Bridge Aina Le’a, LLC v. Haw. Land Use Comm’n, 141 S. Ct. 731, 731 (2021) (Thomas, J., dissenting from denial of certiorari).

Pet. at 2-3.

Here are the Questions Presented:

Petitioners own small apartment buildings in New York City that are subject to New York’s Rent Stabilization Law (“RSL”). Once an owner leases a unit for a fixed term, the RSL grants the tenant and the ten-ant’s successors a perpetual right to renew the lease, regardless of whether the owner consents. That renewal right strips owners of their right to exclude others from their property and prevents them from living in their own apartments. The Second Circuit held that these facts failed to state a physical-takings claim because Petitioners voluntarily entered the rental market in the first instance and could, in some circumstances, evict tenants who breach their leases. Petitioners’ regulatory-takings claims likewise failed because, among other reasons, the RSL serves an important purpose and does not deprive petitioners’ property of all value. In so holding, the Second Circuit deepened or created circuit splits at each step of its analysis. The questions presented are:

1. Whether a law that prohibits owners from terminating a tenancy at the end of a fixed lease term, except on grounds outside the owner’s control, constitutes a physical taking.

2. Whether allegations that such a law conscripts private property for use as public housing stock, and thereby substantially reduces its value, state a regulatory takings claim.

Stay tuned.

Petition for a Writ of Ceritorari, 74 Pinehurst LLC v. New York, No. ____ (U.S. May 17, 2023)

CA6: Legislative Conditions Are Subject To Nexus-And-Proportionality Requirements

A good opinion from the U.S. Court of Appeals for the Sixth Circuit in Knight v. Metro. Gov't of Nashville, No. 21-6179 (May 10, 2023), holding that conditions imposed on every development -- and not just ad hoc administratively-imposed conditions -- must conform to the Nollan-Dolan-Koontz close nexus and rough proportionality standards.

You takings and land use mavens can stop right there, because you know what this means: the Sixth Circuit has added to the growing split in the lower courts about whether legislatively-imposed conditions on development which cover everyone are, as some courts characterize them, mere land use regulations subject only to Euclid's rational basis review, or are constrained by N-D-K 's requirements (see here, and here for examples). The Supreme Court has been presented with the lower court disagreement, but so far has not stepped in and resolved the issue.

The Sixth Circuit experienced no such qualms when considering a Nashville ordinance that conditions the grant of building permits on the owners agreeing to either grant an easement across their land and build a sidewalk on that easement, or give the city cash instead:

In particular, the parties here disagree over the “test” that we should use to judge whether the sidewalk ordinance commits a taking. The landowner plaintiffs ask us to apply the “unconstitutional-conditions” test that the Supreme Court adopted to assess conditions on building permits in Nollan v. California Coastal Commission, 483 U.S. 825 (1987). Nashville responds that the Court has applied Nollan’s test only to ad hoc administrative conditions that zoning officials impose on specific permit applicants—not generally applicable legislative conditions that city councils impose on all permit applicants. For legislative conditions, Nashville says, we should turn to the deferential “balancing” test that the Court adopted to assess zoning restrictions in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).

We side with the landowner plaintiffs. Nothing in the relevant constitutional text, history, or precedent supports Nashville’s distinction between administrative and legislative conditions. Nollan’s test thus should apply to both types, including those imposed by the sidewalk ordinance. Because the district court reached a contrary conclusion, we reverse its grant of summary judgment to Nashville and remand for proceedings consistent with this opinion.

Slip op. at 2.

We suggest you read the entire opinion -- it isn't long (29 pages) and it has pictures! -- because it really sets out the arguments, and there's even some takings history for you history buffs. The court concluded that the Takings Clause is a limit on legislative authority, not just executive power. See slip op. at 20.

And there's a whole lot of takings and property rights goodness in the opinion, including these:

• "The government does not always directly interfere with constitutional rights. It sometimes indirectly interferes with them by offering a benefit that it has no duty to provide on the condition that a party waive a right." Slip op. at 10.
• "But what rules divide constitutional from unconstitutional conditions on these otherwise discretionary benefits? One generic rule is clear: If the Constitution allows the government to directly compel a private party to undertake conduct on threat of criminal punishment, the government may indirectly compel that conduct as a condition on a benefit." Id.
• "Courts instead must look to a specific constitutional right to identify the specific rules. Id. at 913. This fact brings Nollan to the fore. It created a 'special unconstitutional-conditions framework for an “exaction” in the takings context. Slip op. at 10-11.
• "At first blush, Nashville’s enforcement of its sidewalk ordinance looks like a clear case for Nollan’s unconstitutional-conditions test." Slip op. at 14.
• "Does it matter that the sidewalk ordinance allowed Knight and Mayes to pay fees rather than build sidewalks? No again. Because these “commonplace” in-lieu fees resemble “other types of land use exactions,” Koontz held that they trigger Nollan’s test all the same." Slip op. at 16.
• See page 17 for the opinion's run-down of the different ways different courts go on this issue.
• "This case requires us to answer that question. We now hold that Nollan’s unconstitutional-conditions test applies just as much to legislatively compelled permit conditions as it does to administratively imposed ones. Nothing in the text or original understanding of the Takings Clause justifies Nashville’s requested distinction. Its requested distinction also conflicts both with the Supreme Court’s unconstitutional-conditions precedent and with its takings precedent." Slip op. at 18.

The court held that the "text and history" of the takings clause compelled the outcome, slip op. at 18- 22, as does "Supreme Court precedent." Slip op. at 22-72.

Having determined that Nashville's ordinance is subject to the nexus and proportionality requirements, the court concluded that the city waived the argument that the ordinance met the test: "Nashville has waived any argument that it can satisfy this unconstitutional-conditions test. Knight and Mayes spent pages of their brief arguing that the city could not meet Nollan’s and Dolan’s elements. ... But Nashville did not even try to respond, opting to rely exclusively on its claim that Penn Central’s test applied." Slip op. at 28.

Finally, the court thought about the remedy, and whether it is just compensation (here's your in-lieu fee back, property owner), or equitable relief in the form of a declaratory judgment or an injunction? See slip op. at 28. But the court didn't resolve that question and left it for the district court on remand.

Here are the briefs, including the amicus brief our own firm filed:

• Property Owners' Opening Brief
• Nashville's Answering Brief
• Owners' Reply Brief
• Pacific Legal Foundation's amicus brief in support of property owners

Is this decision the last word on the issue? Most certainly not, and this question won't be definitively resolved until the Supreme Court decides to decide. But in the interim, this one is good in the Sixth Circuit. 

Knight v. Metro. Gov't of Nashville, No. 21-6179 (6th Cir. May 10, 2023)

This Just In - Florida Appeals Court: TDRs, Beekeeping, And Camping Are Not Economically-Beneficial Uses, So Downzoning Is A Lucas Taking

Shands Key, with the City of Marathon in the background

This just in: in Shands v. City of Marathon, No. 3D21-1987 (May 3, 2023), Florida's Third District Court of Appeals held that the city's downzoning the property (Shands Key, shown above in an exhibit from the Key West trial we participated in in June 2021) from General Use (density: one home per acre) to Conservation Offshore Island (one home per 10 acres; Shands Key is just under 8 acres) effected a Lucas taking.

We're not going to go into too much detail, because this case is one of ours. Our Pacific Legal Foundation colleague Jeremy Talcott was the lead trial and appellate counsel, backed by Kady Valois.

Trial (and appeal) team after closing arguments in Key West:
Valois, inversecondemnation.com, Talcott

But we're not going to let you go without noting a few highlights from the Court of Appeal opinion:

• "This inverse condemnation appeal presents a novel issue regarding the role that transferred development rights (“TDRs”) occupy in adjudicating a per se as-applied regulatory taking claim advanced under the landmark case of Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)." Slip op. at 1.
• "Finding that an award of TDRs and Building Permit Allocation System (“BPAS”) points, considered in tandem with the residual land value derived from personal recreation and beekeeping, precluded a per se as-applied claim, the trial court denied the motion. The primary issue on appeal is the propriety of that ruling." Slip op. at 1-2.
• "In the aftermath of Penn Central, Lucas, and their progeny, TDRs have emerged as a popular and effective tool for local governments to promote conservation efforts and urban growth management. Such rights typically benefit the landowner by allowing for expanded “development beyond the restricted level on [another] piece of land.” Ralph A. DeMeo, Transfer Development Rights, in II Florida Environmental and Land Use Law ch. 23 (1996)." Slip op. at 10.
• "The significance of TDRs in the regulatory takings matrix has been sharply debated. Some legal experts have opined that TDRs are irrelevant to the takings side of the equation because they do nothing to impact the nature and extent of the property interest taken by the government. Others have espoused the belief that TDRs necessarily mitigate the economic impact of regulation by infusing the property with value; therefore, they should be considered before determining whether the government has effectuated a taking." Slip op. at 10-11 (footnotes omitted).
• "Appellants established that regulation deprived them of any use of the property, other than for beekeeping or personal camping. These do not constitute economically beneficial uses, as 'a State may not evade the duty to compensate on the premise that the landowner is left with a token interest.' Palazzolo v. Rhode Island, 533 U.S. 606, 631 (2001). As Justice Scalia observed in his Suitum concurrence, any income associated with TDRs does not flow from the cultivation or development of the property in the traditional framework of ownership. Instead, the potential revenue is generated from the non-use of the property." Slip op. at 13-14.
• "Consistent with this logic, while “[p]utting TDRs on the taking rather than the just compensation side of the equation . . . is a clever, albeit transparent, device that seeks to take advantage of a peculiarity of our Takings Clause jurisprudence,” doing so allows the government to provide some compensation without the constitutional stricture of just compensation. Suitum, 520 U.S. at 748–49 (Scalia, J., concurring in part and concurring in judgment)." Slip op. at 14.
• "To reason otherwise would render Lucas nugatory." Id.
• "In accord with the foregoing analysis, we conclude that appellants established overly burdensome government regulation deprived them of “all economically beneficial uses” of their property. Lucas, 505 U.S. at 1019. Consequently, they were entitled to an award of partial summary judgment on their per se as-applied Lucas claim. We therefore reverse and remand for the trial court to vacate the final judgment, enter partial summary judgment in favor of appellants, and conduct further proceedings consistent with this opinion." Slip op. at 17.

Here are the briefs of the parties, so you can see the arguments:

• Initial Brief On Merits (property owners)
• Appellee's Answer Brief (City)
• Appellant's Reply Brief (property owners)

Watch the court of appeal oral arguments (YouTube) here.

A hearty well done to our PLF team for this big win.

Shands v. City of Marathon, No. 3D21-1987 (Fla. Dist. Ct. App. May 3, 2023)

CA9 (unpub.): You Can Never Adequately Plead A Facial Penn Central Taking For City Zoning Restrictions

If everything the Ninth Circuit says in its unpublished memorandum opinion in Craneveyor Corp. v. City of Rancho Cucamonga, No. 22-55435 (Apr. 20, 2023) is accurate, there's no way to ever draft a complaint alleging a facial Penn Central regulatory taking that will survive a 12(b)(6) motion to dismiss for failure to state a claim.

From what we can gather (this is an unpublished memorandum opinion, after all), the property owner asserted a facial takings challenge to some sort of zoning regulations that restrict its use of two parcels it owns. We're not sure what restrictions. See slip op. at 2 ("The complaint asserts a facial takings challenge under 42 U.S.C. § 1983 to a city zoning plan that allegedly restricts development on two parcels of land owned by CraneVeyor.").

Two theories: Lucas and Penn Central.

The court made short work on the facial Lucas claim, concluding that because the owner "acknowledges that the [zoning], on its face, does not prohibit all development in fault zones[, that] ... CraneVeyor has not stated a claim for a facial Lucas taking." Slip op. at 3.

The facial Penn Central claim fared no better. The court assumed without deciding that a property owner may assert a facial Penn Central claim, and proceeded to analyze the three Penn Central factors:

• Economic impact. "[I]nsufficient." Slip op. at 3. Why? Because "[v]aluable uses remain on CraneVeyor's land. According to the city, CraneVeyor could build up to two residential units on its first parcel. And the [zoning] ppermits livestock and poultry keeping on the second parcel." First, what does the (alleged) existence of "valuable uses" vel non remaining on the property have to do with whether the complaint is properly pleaded? This isn't a Lucas theory, which requires some kind of near-wipeout of economically beneficial uses; this this is Penn Central where there's no minimum threshold of economic loss, and even having a lot of "valuable uses" remaining in the after condition might be overcome by significant proof of the other two factors. Second, this was an appeal from a 12(b)(6) dismissal, yet (a) the court takes the city's word that there are other valuable uses remaining, and (b) the court apparently makes some kind of conclusion that the complaint didn't adequately allege the remaining uses are insufficient. So, Ninth Circuit, what percentage is sufficient that we have to plead? Your guess is as good as ours.
• Distinct investment-backed expectations. Nope. No landowner can reasonably expect to be free of zoning. And the owner didn't chase vesting, so there's that.
• Character. This is a regulatory taking, not a physical invasion. And zoning laws ain't facially takings.

Can all this be explained by the fact that the court was dealing with a facial Penn Central claim? Your guess is as good as ours. But if that's the case, wouldn't it just be easier to simply say there's no way to plead a facial claim for an "ad hoc" test, rather than potentially screw up the doctrine when down the road, someone inevitably tries to apply the court's analysis to a complaint asserting an as-applied Penn Central claim?

Craneveyor Corp. v. City of Rancho Cucamonga, No. 22-55435 (9th Cir. Apr. 20, 2023) (mem.)

Links And Materials From The 22d Annual Texas Eminent Domain Conference

Good crowd.

Here are the cases and other materials we spoke about on Friday at the 22d Annual Texas Eminent Domain Conference, in Austin. A big thank you to the Planning Chairs and to our friends at CLE International for the speaking invite.

• Sackett v. EPA (SCOTUS and WOTUS)
• Wilkins v. United States (Federal Quiet Title statute of limitations)
• Tyler v. Hennepin County (Takings, Excessive Fines - Home Equity Theft)
• Eychaner - the near-miss on revisiting Kelo
• Louisiana's successful (!) necessity challenge
• Self-executing Just Compensation: First Circuit (it is self-executing) vs Ninth Circuit (it isn't); see also Devillier v. Texas (pending)
• Property in the non-takings context: K-9 putting his paws on car is a "search" because...trespass to chattels

The other cases discussed are in your materials!

The nearby Caldwell County Courthouse. A classic.

Why did no one tell me that Jabba's Palace is in Austin?

April 27, 2023, 5-7pm, Honolulu: Join Us To Celebrate The Work And Career Of Professor David Callies

Come join us on Thursday, April 27, 2023, from 5-7pm, downtown Honolulu, to celebrate the retirement of Professor David L. Callies from the University of Hawaii Law School.

Join U.H. Law School Dean Camille Nelson, Professor Callies' colleagues, his students (present and former), the Hawaii legal community, and family and friends as we honor 43 years of scholarship, teaching, service, and practice.

Professor Callies is a prolific scholar and author, and has mentored generations of lawyers. Known especially for his work in property, land use, takings, administrative law, and state and local government law, he has also been presented with numerous awards including William and Mary's Brigham-Kanner Property Rights Prize, and the Owner's Counsel of America's Crystal Eagle. 

Invitation and how to RSVP (or click below). Space is limited, so please let us know you are attending as soon as you can.

Details:

Thursday, April 27, 2023
5:00-7:00 p.m.

Second Floor Gallery
Pauahi Tower
1003 Bishop Street
Honolulu, Hawaii 96813

Validated parking: Bishop Square garage (entrance on Alakea Street)

RSVP: [email protected]

See you there!

Professor David Callies - Retirement Celebration Invitation Apr. 27, 2023

Instead Of Being The First Case To Take Advantage Of Knick, This One Was The Last Victim Of Williamson County

There's a lot going on in the U.S. Court of Appeals for the Fifth Circuit's opinion in Tejas Motel, L.L.C. v. City of Mesquite, No. 22-10321 (Mar. 22, 2023), but that's mostly because it's a procedural decision resolving a question of whether a Texas court's federal takings judgment was res judicata, and therefore prohibited a federal takings complaint filed later in federal court .

As you might surmise from the above summary, the Fifth Circuit indeed concluded that the second (federal) takings lawsuit was precluded by the judgment in the first (Texas), because the Texas court issued a final judgment on the merits of Tejas Motel's federal takings claim.

Short story: the city doesn't really care for operations like the Tejas Motel. Back in 1997, the city amended its zoning code to effectively outlaw these types of motels, rendering Tejas a nonconforming use. Later, after "local residents allegedly complained about the poor conditions and criminal activity" at such places, the city cracked down ever harder, and told Tejas to shape up or ship out: the motel could either fix the problems that were affecting its neighbors, or it would be shut down, nonconforming use or not. Slip op. at 3.

"Facing pressure from the City and the Board, Tejas agreed to cease operations or bring the motel into conformity with the zoning ordinance by May 1, 2019." Id. But "[t]hree months later," Tejas claimed it executed the agreement under duress and sued the city in state court. By our calculations, the state court lawsuit -- which made claims under both Texas and federal law (including takings) -- was filed in either August or September 2019.

The Fifth Circuit noted that Tejas Motel "was forced into state court by Williamson County," and that case's now-overruled-by-Knick state litigation ripeness requirement. Slip op. at 18. But wait, you note. Wasn't Knick v. Township of Scott decided on June 21, 2019, one to two months before Tejas filed in state court in August or September 2019? How was it "forced" to bring its federal takings claims in state court?

We're not sure at all. Maybe we're not understanding the timeline properly. Or maybe one of the dates on which we're relying is a typo. But in our view, this doesn't quite line up as Tejas being required by Williamson County to file its federal takings claim in state court, when, by our read, when it filed its state court federal takings claim the Supreme Court had already decided Knick.

Yes, it was a freshly-minted decision, but these days word travels fast (those of you of a certain vintage will remember back in the day when it took one week or more for those of us outside of the Beltway to get our hands on the actual text of Supreme Court opinions, when our copy of U.S. Law Week would arrive in the mail). So we can't quite figure out why, if the Fifth Circuit's opinion's timeline is accurate, that the court notes the property owners were forced to file in state court.

Well, in any event that's what Tejas did. Maybe it was a strategic choice to file in state court, and not, as the Fifth Circuit noted, a matter of being forced to do so by Williamson County. And filing in state court had consequences, as the Fifth Circuit noted. As we wrote at the top of this post, the opinion is somewhat challenging to follow, because you've got to keep track of the two parallel actions, and the status of each in its respective court.

In the end, the Fifth Circuit held that Tejas Motel had asserted federal takings claims in state court, that the state court had determined the merits of that claim even though the state court dismissed the complaint for lack of a "constitutionally protected interest in continuing to use the property in violation of the City's zoning ordinances when it acquired the property knowing it was in violation of those ordinances," slip op. at 6, and had entered a judgment that is now final:

One can sympathize with Tejas’s procedural plight. It was forced into state court by Williamson County, and now cannot avoid the consequences of the adverse judgment it received. But nothing in Knick nullifies long-settled principles of res judicata. State courts are competent to adjudicate federal claims, and their judgments are entitled to full faith and credit in federal court. See 28 U.S.C. § 1738. Because the Texas Court of Appeals issued a final judgment on the merits of Tejas’s constitutional claim, the motel does not get a second bite at the apple.

The judgment of dismissal is AFFIRMED.

Slip op. at 18. 

Tejas Motel, L.L.C. v. City of Mesquite, No. 22-10321 (5th Cir. Mar. 22, 2023)

One Guess What The Second Circuit Did With A Takings Challenge To Rent Control

Let's say you know nothing else about an appeal except it is being decided by the U.S. Court of Appeals for the Second Circuit, and the case is a constitutional challenge to rent control. What's your best guess about the outcome (the district court dismissed for failure to state a claim)?

When the Second Circuit issued its summary order in just such a case last week -- a challenge to the "Housing Stability and Tenant Protection Act of 2019" -- we decided to undertake a little unscientific poll to see whether others out in the Twitterverse predicted as we did.

Looks like so. Yes, the sampling size was small, and the respondents were only those who voluntarily offered their thoughts. But 95% accurately predicted that the property owners would lose, as the Second Circuit indeed held in an appellate court's version of "laughing heartily" at an appellant's arguments: an unpublished summary order.

We could spend the rest of this post going through all of the reasons why the Second Circuit didn't find a scintilla of reversal in the property owners' arguments. But the Order is so short, you might as well read it yourself.

Short story: facial claim? Nope, no physical taking because you fool landlords let tenants in your properties. No facial reg take either, because "different landlords have greatly varying expectations." Order at 4. Rather than serve as an apt illustration of why the "expectations" part of the Penn Central test focuses on an irrelevant inquiry, the Second Circuit effectively concludes that reg takings claims can never be raised as facial claims. 

Same outcome for the as-applied claims: no plausible allegation of a physical taking because there's still the possibility of getting tenants out, and owners are not prohibited from exit the rent-controlled market by getting out of the rental market; the law merely "restricts a landlord's ability to profit by converting a rent stabilized unit to a market-rate unit[.]" Order at 6. And, for good measure, these claims are not ripe because the owners didn't plead that they tried to get anyone out. As for the as-applied regulatory takings claim, the claim is not ripe because the complaint does not allege that the owners tried to take advantage of any of the non-futile procedures to obtain a hardship exemption. And even if ripe, the owners lose "on the merits." (Remember this is an appeal from at 12(b)(6) dismissal, so what "the merits" has to do with anything is beyond us.)

So what might the 95% response indicate? People have very good predictive powers? Our colleagues are as cynical and jaded as we are? Constitutional challenges to rent control are so lacking in merit and plead-worthiness that courts rightly laugh them out of court? The Second Circuit is predictable but in other circuits you might get a more balanced view?

Or maybe -- just maybe -- something else is at play here, and, like a lot of other courts have done before it, the Second Circuit isn't about to upset the apple cart and do anything to undermine what started off, like a lot of these things do, as an "emergency" measure now fossilized into an untouchable entitlement (but an entitlement that is not paid for by the taxpayers, but by private property owners)? In these cases, the lower courts aren't likely to do doodly-squat, and rent control cases will be pushed up to the Supreme Court until that Court does something more than repeatedly decline to review the issue.  

Summary Order, 335-7 LLC v. City of New York, No. 21-823 (2d Cir. Mar. 1, 2023)

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.

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.)

"Emerging Issues In Property Rights" - Wednesday, February 8, 2023, 3-4pm ET (Free!)

Join our Pacific Legal Foundation colleagues Jon Houghton, Daniel Woislaw, Kady Valois, and Sam Spiegelman (moderating) tomorrow, Wednesday, February 8, 2023, at 3:00 - 4:00 p.m. ET for a free webinar, "Emerging Issues in Property Rights."

Here's the agenda:

Protecting private property rights has been at the heart of PLF’s work since our founding in 1973. Our view, and that of the American Founders, is that property rights are foundational to all other constitutional rights.

Our relentless defense of property rights has secured many precedented victories, including 12 property rights wins at the U.S. Supreme Court—and counting.

Unfortunately, even today, the need for property rights champions remains critical.

Government officials too often relegate property rights to second-class status among Americans’ constitutional rights—cloaking their assaults in erroneous assertions of environmental protection or cleverly constructed land use restrictions.

To learn more about property rights’ legal landscape in 2023, join us for part two of our four-part webinar series, Emerging Issues in Property Rights. Our panel of PLF attorneys will preview the road ahead for property rights and strategies to restore these fundamental rights to their rightful constitutional status.

Join us, and register here (free!).

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)

(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-...

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)

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

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

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

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

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

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

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

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

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

Slip op. 29-30 (footnote omitted).

The court summed up the takings claim in a footnote:

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

Slip op. at 33 n.20.

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

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

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

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

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

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

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

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

• Private Utility Takeovers – Lessons From a 67 Day Trial

• Valuation Issues When Billboards and Signs are Condemned

• Setting Client Expectations and Identifying Red Flags

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

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

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

• ...and much more!

To register, go here.

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

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

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

Video: "The Future of Private Property Regulation in America"

Check it out: our Pacific Legal Foundation colleagues Jim Burling, Jon Houghton, and Jeff McCoy, along with Jeremy Hopkins (Cranfill & Sumner, North Carolina), share with us the latest on property rights, Sackett, takings, the future of Penn Central, and the upcoming SCOTUS arguments in Wilkins v. United States (is the Federal Quiet Title's statute of limitations jurisdictional?).

Don't miss it.

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)

CAFED Hears Arguments In Two Takings Cases

Ideker Farms, Inc. v. United States, No. 21-1849

As written up in the FedCircuitBlog (a must-follow for all you federal takings mavens):

It concerns the federal government’s liability for taking private property. Specifically, in this case, the Federal Circuit will review the conclusion of the Court of Federal Claims that the government’s action was the cause-in-fact of flooding damage and that, as a result, a taking-by-flooding occurred. The government appeals the CFC’s judgment, while Ideker Farms cross-appeals.

Behrens v. United States, No. 22-1277

Also from the FedCircuitBlog:

Behrens v. United States, which concerns a claim the federal government was liable for taking land for public use through the National Trails System Act. Specifically, in this case, the Federal Circuit will review the determination by the Court of Federal Claims that the plaintiffs were not entitled to compensation because the scope of the easement in question was broad enough to encompass railbanking and the construction of a hiking and biking trail.

What's "The State of Takings Law: 100 Years After Pennsylvania Coal Co. v. Mahon and One Year After Cedar Point Nursery v. Hassid"? Incoherent (But Getting Better)

For the last week, the blog has been a bit idle. That hasn't been because we're slowing down, but was mostly the result of our blog platform being worked on behind-the-scenes, which knocked a lot of the hosted blogs offline, this one included. But things look good now, so here we are.

We were also on the road, traveling to New York for the Seventeenth Meeting of the American College of Business Court Judges, where we were able to join an august panel of takings mavens (pictured above, L-to-R: Judge Paul Wallace, Professor Julia Mahoney, some guy, Nancie Marzulla, and Professor Richard Epstein) to talk about the state of takings law.

The title of our program was "The State of Takings Law: 100 Years After Pennsylvania Coal Co. v. Mahon and One Year After Cedar Point Nursery v. Hassid," and we spent our time discussing and debating the state of takings law and theory.

When it came our turn at the mic, we started by answering the call of the question: the current state of takings law is "incoherent...but with the footnote that it appears to be getting better." We won't go into the details of why we so concluded, but you can guess: the default test for a regulatory taking, Penn Central, is hardly a model of coherence and when you add in the various procedural traps that remain, you get ... a lot of fodder for panels like these.

Our appreciation goes out to George Mason U. Law School and Professor Donald Kochan, who were kind enough to include us among these august speakers.

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!

Jon Houghton On Regulatory Takings - Eminent Domain Podcast

Clint Schumacher's Eminent Domain podcast is one of those things that we almost shouldn't post about. After all, every episode is worth your time. But this one is especially good. After all, it features our law firm colleague and friend Jon Houghton, discussing what you all know is one of our fave topics, regulatory takings.

As Clint describes it:

Jon Houghton of Pacific Legal Foundation joins the podcast today to talk about regulatory takings. This is a complex area of the law, but Jon is a true expert and breaks it down into understandable pieces. He discusses how practitioners can assess when a regulation has risen to the level of a taking. He also discusses regulatory taking issues and cases that are current.

So even though we always say "check out the Eminent Domain Podcast," we're saying it again. Check it out.

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!

 

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

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

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

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

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

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

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

Slip op. at 15-16.

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

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

So score one for the property owner!

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

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

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

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

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

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

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)

Tex App: Property Owner's Penn Central Verdict For Drilling Permit Denial Is OK By Us

Today's a busy day, so we can't lay out the details of the Texas Court of Appeals' opinion in City of Dallas v. Trinity East Energy, LLC, No. 05-20-00550-DV (Aug. 1, 2022). But we want to post up the decision and urge you to read it because it is a rare bird: not only did the property owner win a takings claim at trial - the verdict survived appellate review.

The takings claims (Lucas and Penn Central) were based on the city's denial of a Special Use Permit. The city argued that its denial of the SUP for the desired drilling locations did not cut off completely the owner's ability to access the minerals, since there were other ways to get at them. Here's what happened at trial:

The trial court found that other than the drill sites proposed in Trinity’s three SUP requests, “Trinity did not have reasonable access to other surface locations from which it could have economically accessed the minerals under lands covered by [the] Group I Lease or under Trinity’s private leases in the area of the property covered by the Group I Lease.” The jury found that the fair market value of Trinity’s property immediately after the City’s non-approval of the SUPs was zero.

Slip op. at 11.

The court of appeals affirmed, applying the standard of review:

We conclude the evidence is legally and factually sufficient to support the trial court’s finding that other than the three sites proposed in the SUPs, Trinity did not have reasonable access to other locations from which it could economically develop its mineral interests. Based on the evidence and the trial court’s findings we agree with the trial court that the City’s denial of the SUPs resulted in a regulatory taking of Trinity’s property.

Slip op. at 15.

The court also concluded that the owner's valuation evidence -- the testimony of "a petroleum engineer specializing in reservoir engineering" -- that the "before" value was either $40 million or $26 million, and that the "after" condition of the property was "zero," was within the standards for expert testimony. Thus, although "the jury was presented with conflicting evidence," slip op. at 24, the "jury is the sole judge of the weight and credibility of the evidence[.]' Slip op. at 25. The court concluded "there is more than a scintilla of evidence supporting the jury's finding that the fair market value of Trinity's property before and after the denial of the SUPs ... [and] the evidence is legally and factually sufficient to support the trial court's award of damages for inverse condemnation to Trinity." Slip op. at 26.  

City of Dallas v. Trinity East Energy, LLC, No. 05-20-00550-CV (Tex. App. Aug. 1, 2022)

IRWA's Summary Of Major Eminent Domain Cases & Legislation (Jan-May 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. 

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.

Here's The Full Speaker And Topic List For The Brigham-Kanner Property Rights Conference (Sep 29-30, 2022)

By now, you know that the 19th Brigham-Kanner Property Rights Conference is set for September 29-30, 2022, at the William and Mary Law School in Williamsburg, Virginia (register here - space is limited - fee ranges from free to $195 - a bargain!). And you know that our colleague Jim Burling is this year's B-K Prize winner.

But now you know who is speaking at the Conference, and the topics: here's the full agenda. The list of speakers is too long to list here but check out these topics:

• Panel 1: The Importance of Property Rights: A Tribute to James S. Burling
• Panel 2: Reshaping the Framework Protecting Property Under the Roberts Court (that's the panel we're speaking on)
  
• Roundtable: Emerging Issues in Takings and Property Rights Litigation
• Panel 3: Choosing A Property Regime
• Panel 4: Property Rights in Times of Scarcity and Crisis

Who can resist these subjects? Plan on joining join us in September.

2022 Brigham-Kanner Property Rights Conference Speaker Panels

Monday Round Up: Aina Lea Out With A Whimper, 30 Years Of Mabo, Seneca Village

Here's what we're reading today:

• Aina Lea regulatory takings case dismissed for lack of standing. State of Hawaii's press release here.
• It's the constitution...it's Mabo. It's justice. It's law. It's the vibe. "How the Mabo decision changed Australia 30 years on" "On June 3, 1992, after years of legal struggle, the High Court of Australia handed down its decision, overturning the centuries-old legal fiction of 'terra nullius'."
• "Indiana Supreme Court hears arguments in Gary restaurant eminent domain case" (referring to this case).
• A celebration at New York's (former) Seneca Village. NYT: "New Yorkers Honor a Thriving Black Village Displaced by Central Park" (we visited the site a few years ago)
• Speaking of New York City, here's "This Is Why Your Holiday Travel Is Awful" from Politico, about the "sordid history of New York's Penn Station." Any mention of the takings case about the other big NYC transit hub, Grand Central (owned by Penn Central)? Nope.

CA7: Co-19 Shutdown Complaint Does Not Meet "Demanding test for alleging a regulatory taking"

The U.S. Court of Appeals for the Seventh Circuit's decision in Nowlin v. Pritzker, No. 21-1279 (May 20, 2022), adds to a long line of rulings denying takings claims for coronavirus-related business shutdowns. 

This one challenged the Illinois governor's executive orders which required "non-essential" businesses to shut down or reduce operations, and limited the size of gatherings. The plaintiffs brought the usual host of constitutional claims (a total of six), which included (naturally) a takings claim. The district court, after granting leave to allow the filing of an amended complaint, dismissed all six claims, concluding either that the plaintiffs had not alleged particularized injuries (and thus lacked standing, and thus the court lacked jurisdiction), or that the complaint failed to state claims.

The Seventh Circuit affirmed that all claims, with the exception of the takings claims, lacked jurisdiction because the plaintiffs had not alleged specific injuries. The court subject the takings claim, however, to a separate analysis, because it saw a "glimmer of concreteness" in that claim (don't worry, it still affirmed the dismissal). Jump up to page 7 of the slip opinion if you don't want to hear about the nuances of federal court standing.

The opinion first noted that "[t]he Businesses do not allege any physical invasion or direct appropriation of their property." Slip op. at 7. So Cedar Point is out. So the only thing left is regulatory takings. On that, the court didn't need to ask whether the plaintiffs were alleging a Lucas wipeout or a Penn Central ad hoc taking, because it concluded that the complaint was too vague to figure out what the plaintiffs were claiming:

“While legal conclusions can provide the complaint’s framework, they must be supported by factual allegations.” Iqbal, 556 U.S. at 679. The Businesses have asserted legal conclusions, but they have not supported those conclusions with factual allegations that plausibly suggest that the Governor’s orders constituted regulatory takings. How much money did they lose? How long was each Business closed? Did one or more of them use its property in other, albeit less lucrative, ways? We don’t know. Allegations such as “Plaintiff Businesses were unable to open for business[]” and “Plaintiffs stand on the precipice of economic collapse” express conclusion, not facts that would permit an inference of the total or near-total deprivation of use or value required by Lucas and Penn Central.

Slip op. at 8.

The court called the pleading requirements in takings cases "demanding." See id. ("Our examination of the amended complaint convinces us that Plaintiffs have not met the demanding test for alleging a regulatory taking."). But we're not sure what's so "demanding" about making allegations that answer the questions the court posed. After all, Twiqbal's plausibility requirement has not overruled Rule 8's notice pleading standards, and as long as the defendant is on notice of the claims being made against it, we thought that was enough. Takings cases are not fraud cases, and you don't have to plead with particularly (or do you, Seventh Circuit?).

So here's your tip of the day: plead more, not less, in takings cases. We know you don't have to. But it will save time if you do.

And the court's final words about the takings claim seem to go out of the way to rub a bit of salt in the plaintiffs' wounds:

As we recently noted in a different but related context, while the preferred or intended use of many business properties was limited or even prohibited by the Governor’s COVID orders, those orders did not deprive property owners of all uses to which their premises might be put. See Sandy Point Dental, P.C., et al. v. Cincinnati Ins. Co., 20 F.4th 327, 335 (7th Cir. 2021). Like the plaintiffs in Sandy Point, the Businesses were free to make other uses of their properties consistent with the closure orders. See id. That such uses would not have been their preferred or most profitable uses does not mean that the closure orders effected a regulatory taking. This complaint fails to move the needle from the possible to the plausible with respect to the alleged Takings claim. It thus fails to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6).

Slip op. at 9. Hear that restaurant and bar owners? ... Shame on you for not retooling and opening up as an auto repair shop.

We understand that yes, the court's statement may be theoretically and legally accurate, but it is at the very least very tone-deaf, and blind to the everyday realities of the physical and regulatory milieu that most businesses operate under. 

For our general thoughts on emergency takings, see our article, Evaluating Emergency Takings: Flattening the Economic Curve, 29 Wm. & Mary Bill of Rights J. 1145 (2021).

Nowlin v. Pritzker, No. 21-1479 (7th Cir. May 20, 2022)

Mass SJC Revives Penn Central Takings Claim Because Casino Comm'n Might Have Altered The Deal

In FTB Everett Realty, LLC v. Mass. Gaming Comm'n, No. SJC-13196 (May 23, 2022), the Massachusetts Supreme Judicial Court revived a property owner's Penn Central takings claim, reversing the trial court grant of summary judgment to the Commission.

This one deals with the intricacies of gambling law and the process necessary to approve the operation of a casino -- subjects that we can't claim to fully understand -- so bear with us if there are any inaccuracies.

FBT purchased vacant land which was contaminated and required extensive cleanup. It looked into a variety of possible uses, including a storage facility or big box retain. But two years later, Massachusetts legalized casino gambling and created the Commission. Its duties include issuing gambling licenses.

A branch of the Wynn casino operation wanted the property. It entered into an option agreement with FBT under which it would buy the land if Wynn were able to secure the necessary gambling license from the Commission. Wynn sought a license, and the Commission began the usual investigation of the applicant.

Difficulties ensued. Investigators "uncovered evidence leading them to suspect that Charles Lightbody, a convicted felon with apparent connections to organized crime, had a hidden ownership interest in FBT." Slip op. at 5. Despite FBT's entreaties that everything was cool, the Commission "continued to suspect, however, that Lightbody retained an ownership interest," and FBT was concealing this fact.

The commission was troubled by what it believed to be a lack of candor by FBT's principals and their failure to fully cooperate with the IEB's investigation. It was also anxious that individuals with a criminal background and associations with organized crime should not profit from the award of a casino license to Wynn for the Everett parcel.

Slip op. at 6. If the allegations about Mr. Lightbody were true, then Wynn's casino license application was in jeopardy: the Commission would not approve a license if FTB had connections to the Outfit and stood to financially gain from selling the land to Wynn for a casino.

That's where the versions of the story branch off. FBT asserted the Commission wanted to punish FBT for its perceived lack of candor. The Commission for its part denied the allegation, but the SJC opinion noted that "[t]he record, which is based on limited discovery that has occurred so far, reveals some evidence supporting FBT's allegation." Slip op. at 6.

When the deal looked at risk, the players came up with plan. The property could still be sold -- and Wynn might get its casino license from the Commission -- if the deal could be structured so that any "taint" (our words, not the opinion's) of FBT potentially gaining from a sale as a casino could be removed.

So Wynn appraised the property based on its highest and best non-casino use (big box retail) at $35 million. "Fearing that the commission would otherwise find Wynn unsuitable, dooming Wynn's license application and FBT's sale of the Everett parcel to Wynn, FBT agreed in November 2013 to amend the option agreement to reduce the price from $75 million to $35 million, thus eliminating FBT's casino-use premium[.]" Slip op. at 8. Wynn bought the property for $35 million, and because the proceeds which FBT received were free of the casino-taint, the Commission granted Wynn its gambling license.

FBT wasn't satisfied with $35 million, and brought a state-court lawsuit against the Commission, asserting tortious interference with contract and a regulatory takings claim under Penn Central for the $40 million before-and-after delta allegedly brought about by the Commission's actions. After discovery, the trial court entered summary judgment in favor of the Commission on both claims, concluding that FBT purchased the property before gambling was legal, "it could not have reasonably expected to later sell the property for purposes of casino development." Slip op. at 10. Inability to prove one factor was enough, and the whole claim fell.

The SJC reversed. The Penn Central requires "balancing" of the three factors, none of which alone is dispositive. Slip op. at 12 ("All three factors in the multifactor Penn Central test 'should be taken into account' when determining whether a challenged regulation amounts to a taking.").

Rather than considering all three factors in the multifactor Penn Central test, however, the motion judge relied on just a single factor. The judge reasoned that because FBT could not demonstrate that the commission had interfered with FBT's reasonable investment-backed expectations, FBT had "no reasonable expectation of proving an essential element" of its regulatory takings claim, Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991), and summary judgment was proper. He thus granted summary judgment for the commission without considering the other two factors identified in Penn Central, namely the economic impact and the character of the government action. This was error, particularly given the significant diminution in value here -- lowering the amount paid from $75 million to $35 million -- and the unusual and disputed character of the government action, which we discuss in more detail infra.

Slip op. at 13-14.

And what of FBT's investment-backed expectations? The SJC acknowledged that FBT had purchased the property when gambling was not legal in Massachusetts. Slip op. at 18 ("At the time it purchased the property, therefore, it could not reasonably have expected to sell the property as a site for the development of a casino."). This "weighs heavily" against FBT having reasonable expectations of selling the property for casino use. But that wasn't the end of the analysis, because while FBT owned the property, gambling did become legal. After it was legal, "FBT made net investments of about $900,000 in the property[.]" Slip op. at 19. In the end, the SJC agreed with the trial court that FBT's investment-backed expectations were pretty weak, mainly because of the long-shot nature of Wynn obtaining a gambling license (the Commission has "full discretion" to decide whether to issue a license).

But as the court had already noted, weak-sauce expectations was not the end of the analysis. The economic impact here was pretty severe, and the before-government-action use and value of the highest-and-best-use of the property (casino, $75m) and the after-government-action use and value highest-and-best use (big box retail, $35m) was pretty massive. But add in the factual twist (was it Wynn's actions in renegotiating the deal, or was it the Commission's actions influencing Wynn to change the deal that caused the loss in value?), and the court was left with a bit of a knot to untie. But this was an appeal from summary judgment, so the court looked at the facts in the light most favorable to FBT, meaning that the actions of the Commission influencing Wynn means that "the government is responsible, for regulatory takings purposes, for the economic impact of the third party's action if the economic harm to the plaintiff was 'direct and intended' and 'the government's influence over the third party was coercive rather than merely persuasive." Slip op. at 21. On the economic impact factor, scales tip in favor of FBT.

On to the final factor, "character of the government action." This one really tipped in favor of FBT: "[t]he character of the regulatory action here is highly unusual." Slip op. at 23. The Commission didn't keep on investigating to determine whether Mr. Lightbody had an interest in FBT, it "made favorable consideration of the application subject to lowering the amount of money the owners of FBT would receive for the property, thereby giving one private party, Wynn, a multimillion-dollar windfall at the expense of another private party, FBT." Id.

Government-compelled transfers of economic benefits from one private party to another in this context raise significant regularly taking concerns. This is true even when done to punish one party for its lack of candor or to ensure such persons do not reap a financial windfall from the award of a gaming license or to address the public perception that this was even a possibility.

Conditioning the grant of a governmental license on the renegotiation of a transaction between private parties in this way, so as to effectively transfer $40 million dollars from one to another, is "extraordinary."

Slip op. at 25.

And this wasn't some general regulation or action, broadly applicable, but a singling-out of the owner, and thus looks more like eminent domain. See slip op. at 26-27. 

Adding all these factors to the judicial blender and hitting "frappe," compelled the court to conclude that this one needs to be tried:

Viewing the evidence in the summary judgment record in the light most favorable to FBT, we conclude that while FBT did not have a reasonable investment-backed expectation in reaping a casino-use premium when selling the Everett parcel, the commission's actions had a substantial, $40 million economic impact on FBT. The highly unusual character of the commission's actions, effectively compelling the transfer of $40 million from one private party to another in order to secure a government license, weighs in favor of finding a taking. When all three Penn Central factors are considered and balanced, therefore, we cannot say that the commission is entitled to judgment as a matter of law on the available record. The entry of summary judgment for the commission on FBT's regulatory taking claim was therefore error. Accordingly, we reverse the motion judge's summary judgment order and remand FBT's regulatory taking claim to the Superior Court to allow the completion of discovery and further proceedings consistent with this opinion. Only when the disputed facts surrounding the commission's actions are fully developed and resolved will it be possible to properly decide FBT's regulatory taking claim.

Slip op. at 27-28.

More on the decision:

• High court revives $40M dispute over Wynn’s Everett land
• 'Highly unusual': Courts investigate Encore casino license to Wynn Resorts in attempt to avoid ties to organized crime

On the whole, the SJC's treatment of Penn Central (for all the faults of that test) seems about right.

FBT Everett Realty, LLC v. Mass. Gaming Comm'n, No. SJC-13196 (Mass. May 23, 2022)

Texas: City Illegally Cutting Off Utilities Isn't A Taking - It Needs To Be Regulating "Land Use"

In City of Baytown v. Schrock, No. 20-0309 (May 13, 2022), the Texas Supreme Court held that it isn't a taking when a city, in violation of state law, cuts off utility services to property.

The issue, as the court restated it, was "whether a claim of economic harm to property resulting from the improper enforcement of a municipal collection ordinance alleges a regulatory taking." Slip op. at 6. Schrock owned property in Baytown on which he had a mobile home he planned to rent. The water bill wasn't paid, and Baytown has an ordinance that requires property owners to guarantee utility payments, or file a statement that the owner would not guarantee these payments. Schrock didn't file a disavowal statement until after had already assessed him nearly two grand for unpaid water bills. Slip op. at 3. 

He didn't pay, so when one one of Schrock's prospective tenants asked for a water connection, the city refused (Texas law prohibits governments from doing this kind of thing). The prospective tenant walked, and the property "fell into disrepair and was vandalized." Slip op. at 3.

Inverse condemnation lawsuit followed, "alleging that the City’s refusal to reconnect his utility service violated section 552.0025 [the state statute that prohibits municipalities from conditioning utility hook ups on the satisfaction of outstanding bills from other customers] and caused damage to his property." Slip op. at 3. The court tried the Penn Central claim, but when Schrock rested, the court issued a directed verdict in favor of the city, because Schrock had failed to adduce evidence of a taking." Slip op. at 5. The court of appeals reversed, concluding that there was a dispute about the effects of the city's acts on Schrock's investment-backed expectations.

The Texas Supreme Court disagreed. It acknowledged that the right to own, use, and enjoy property is a fundamental right, slip op. at 7, but held that the city's ordinance didn't "directly" regulate land use. Slip op at 8-9. "The City's provision of utilities to the property was a service; its regulation of that service was not a regulation of the property itself." Slip op. at 9. The court noted that "courts historically have limited regulatory takings claims to those arising directly from land-use restrictions." Slip op. at 8.

Oh really? That might be news to the U.S. Supreme Court, which has not so limited the reach of the regulatory takings doctrine. We can think of a few cases off the top of our head, that didn't involve the regulation of land uses, such as Horne (USDA regulation of raisins), the IOLTA cases (taking of interest), that one about eagle feathers (regulation of ownership of feathers), Webb's Fabulous Pharmacies (again with the interest), and a few more. Yes, many regulatory takings cases are land use cases, but no, the takings doctrine is about "private property," and asking whether a case is about a land-use regulation doesn't answer the question of whether the regulation or govt action being challenged might result in a taking.

But maybe the Texas court was merely getting at this: the "true nature of Schrock's claim lies in the City's wrongful enforcement of its ordinance, not in an intentional taking or damage of his property for public use." Slip op. at 9. In other words a tort and not a taking (and the city is generally immune from torts).

While we do not foreclose the possibility that enforcement of an ordinance that does not directly regulate land use could amount to a taking, this one does not. A regulation with “a condition of use ‘so onerous that its effect is tantamount to a direct appropriation or ouster’” may impair a property “so restrictively, or intrude on property rights so extensively, that it effectively ‘takes’ the property.” However, “nearly every civil-enforcement action results in a property loss of some kind.” Property damage due to civil enforcement of an ordinance unrelated to land use, standing on its own, is not enough to sustain a regulatory takings claim.

Slip op. at 10 (footnote omitted).

Even if Penn Central were applied, "Schrock did not show that the economic impact of the City's ordinance so interfered with his property rights that its actions appropriated the property from him." Slip op. at 12 (footnote omitted).

One Justice concurred to re-emphasize that the Texas Constitution's property protections are not the same as under the Fifth Amendment:

Parties frequently litigate takings cases as if the two Takings Clauses were the same. For that reason (and maybe others), judicial opinions also sometimes have described the two clauses as if they were the same. I write separately today to emphasize one key point: They are not the same.

Conc. Op. at 2. The concurring opinion exhorted property owners to emphasize the distinction, and present their Texas Constitutional claims "as an alternative rather than duplicative source of law." Had Schrock done so, "today's case may have turned out differently. Or maybe not. We cannot know for sure until we have a case like this one that includes arguments tailored to our state constitutional law." Id. at 5.

Come on litigants and friends, help us help you:

We cannot meaningfully answer those questions unless litigants undertake substantial additional work beyond invoking federal takings doctrines. To analyze a Texas constitutional claim, we would need comprehensive briefing from the parties (and, I would hope, from amici) on the precise scope of the right to compensation that the Texas Constitution affords. Antecedent questions concerning the nature of the property interests at issue, and whether they can support a claim under our Constitution, also would likely require careful attention.

Id. Have at it, property owners, you now have your Texas roadmap.

City of Baytown v. Schrock, No. 20-0309 (Tex. May 13, 2022)

Cal: A "mandated-but-temporary" Business Closure Isn't A Penn Central Taking

Yet another case rejecting a takings claim for a Co-19 related business shut down.

In 640 Tenth, LP v. Newsom, No. D070339 (May 13, 2022) the California Court of Appeal expressed sympathy for the property owners who have been required to shoulder more than their share of the burdens of these shutdowns. See slip op. at 2 ("We fully appreciate that the adverse effects of the present pandemic have not fallen equally on all segments of society, and that some small business owners are among those who have borne an especially heavy burden.").

But sympathy is all they get.

This case is another challenge to California's emergency order prohibiting both indoor and outdoor dining at restaurants. The state adopted a plan for staged reopening, depending on the assessed risk for viral transmissions in each county, and these total-to-partial shut down orders stayed in place until June 2021, when the enabling executive order was rescinded.

The plaintiffs sued for (among other things) a taking. Skip to page 17 of the Court of Appeal's slip opinion for the takings analysis. "The owners have not alleged a physical taking," slip op. at 17, and therefore the court focused on the Penn Central factors. It concluded that the owners "have not alleged a legally sufficient regulatory taking claim." Slip op. at 19. As we have noted, these type of claims have resulted in "a virtual torrent of California federal district court decisions rejecting similar challenges[.]" Id.

Here's how the court evaluated the factors:

• Economic impact: the plaintiffs' allegation that they suffered "significant" loss is not enough. And their allegation that they were "threatened" with these losses also isn't enough, "[a] regulatory taking requires actual severe economic loss, not merely threatened harm." Slip op. at 21.
• Investment-backed expectations: this factor favored the plaintiffs because although they were already subject to health regulations, "it is fair to say that almost everyone was expecting to conduct business as usual when 2019 transitioned to 2020," and "the public health orders at issue here are different from the type of health restrictions typically imposed on restaurants." Slip op. at 21.
• Character of the government action: the character prong focuses on whether the government action involves a temporary physical occupation. But the plaintiffs here did not allege a physical invasion. The court noted that "there are other ways courts have approached the 'character' issue," pointing out that some courts have balanced the advantages to the plaintiff resulting from the regulation, while others have asked whether the regulation is designed to prevent serious public harm. Slip op. at 22-23. The court concluded that this factor cut against the plaintiffs: "The character of these actions is akin to that of other historical examples of governmental actions undertaken to counter serious threats to the public that were subsequently found not to be takings." Slip op. at 24.

In short, no taking.

640 Tenth, LP v. Newsom, No. D079339 (Cal. Ct. App. May 13, 2022)

Hawaii Land Use Law Conference, May 25-26, 2022, Honolulu - Join Us!

It's back! After a hiatus on the in-person program, the bi-annual Hawaii Land Use Conference is back in-person (see here for a sample of one of our prior presentations at this conference).

May 25 and 26, 2022, downtown Honolulu.

The full agenda and speaker list has not yet been published, but here's a summary of the program:

Sponsored by the Hawaii State Bar Association and the Real Property and Financial Services Section. Coordinated by David Callies and Benjamin Kudo, his 2-day conference is a must attend for any attorney or professional whose practice involves land use and development. Distinguished land-use practitioners, scholars, planners, and regulators from Hawaii and the Mainland will discuss timely and relevant issues, including:

• Takings 

• Transit Oriented Development (TOD) 

• Seawalls and Shoreline Access 

• Climate Change 

• Affordable/Workforce Housing 

• Ethical Considerations for Real Property Practitioners and Other Professionals

We'll be speaking during the session on Takings, along with our colleagues Greg Kugle, Brad Saito, and Ellen Ashford.

Register here (limited to 70 registrants, no walk-ins, so be sure to get your spot now). Travel to and from Hawaii is back open and no more Co-19 hassles at the airport, so take advantage of the opportunity for a little R&R and CLE. 

As Jack Lord would say, "be there, aloha!"

Links From Last Week's Georgia Bar Association Eminent Domain Conference

Here are the links to the cases and other materials that we talked about last Friday at the Georgia Bar Association's annual Eminent Domain Conference. Our talk was entitled "It's the Chief Justice's Property World, We Just Live In It: National Trends in Takings, Property, & Eminent Domain," and was part of the Eminent Domain Section's (yes, the Georgia Bar has a Section entirely devoted to eminent domain!) annual conference on the topic. I was honored to have been asked to chat with this august and expert group of lawyers.

• Knick (opening back up federal courts to takings claims).
• Penn East (eminent domain and the 11th Amendment)
• Horne II (California raisins and physical invasions)
• Murr (the larger parcel issue, applied in regulatory takings cases).
• Winter (preliminary injunctions, diesel-electric submarines, and Pearl Harbor).
• The per curiam CDC eviction moratorium opinion.
• Koontz (money as property ... and exactions).
• Arkansas Game (physical invasions, again).
• Horne I (compensation isn't the only remedy for "takings").
• Brandt (easements, vel non)
• Help me help you!
• What to do when the condemnor doesn't promptly pay up.
• Abstention as the new Williamson County?
• The undivided fee rule ... constitutional?
• Whither Yee and the future of the physical occupation rule.

I look forward to future collaborations with our Georgia colleagues!

Fla App: No Taking, Because COVID Is A Really Good Reason To Shut Bars Down

Another takings challenge to a Co-19 shutdown, another "no taking" result.

This time, it is from the Florida District Court of Appeal (Fifth District). In Orlando Bar Group, LLC v. Desantis, No.5D21-1248 (Apr. 8, 2022), the court affirmed dismissal of takings challenges to the governor's emergency order that barred certain alcohol sales, and limited the service in bars. Orlando-area bar owners sued for inverse condemnation.

The Fifth District concluded that this did not result in a taking. First, the court held that it would not apply a categorical physical rule, because Cedar Point Nursery is not applicable. In that case, the owners were asserting their right to exclude the public, but here the bar owners claimed that the restrictions abrogated their right to include patrons and others. Slip op. at 7 ("The COVID orders at issue here did not permit third parties to access Appellants’ property; they did the opposite by preventing Appellants from having patrons on their premises and temporarily prohibiting Appellants from selling alcohol for on-premises consumption. As such, the COVID orders did not result in a physical appropriation and per se taking of Appellants’ property; rather, the COVID orders regulated Appellants’ use of their property."

Next, the court rejected the categorical Lucas claim, because even though "significant," the "impact of the orders amounted to a complete prohibition on the sale of alcoholic beverages for only seventeen days, following which Appellants’ businesses were incrementally permitted to return to limited sales and operation before being allowed to return to their pre-pandemic mode in approximately six months." Slip op. at 9. No loss of beneficial and productive use, it seems.

Finally, the court considered a Penn Central ad hoc takings claim (what the court unfortunately labeled "as-applied regulatory taking" even though we all know that an "as-applied" challenge is a description of a claim's procedural posture, and not of its substance). Here's how the court evaluated the three ad hoc factors:

Applying the Penn Central factors to the case at hand, it is clear that the COVID orders did not constitute a taking. For the first factor, it is undisputed that Appellants, along with numerous other businesses, were financially impacted by the COVID orders. For the second factor, just like firework sellers, sellers of alcohol are also in a highly regulated business. See generally Ch. 561-568, Fla. Stat. (2021). For example, one of the emergency powers granted to the Governor by statute is the ability to halt the sale of alcohol during an emergency. See § 252.36(6)(h), Fla. Stat. (2021) (granting governor ability to suspend or limit the “sale, dispensing, or transportation of alcoholic beverages”). Thus, Appellants should have also been on notice that further regulations could be enacted. Lastly, in consideration of the third factor, the COVID orders represented a valid use of the state’s police power to protect the general welfare, as noted by the trial court with citations to several other contemporary COVID decisions. If the state can use its police power to temporarily prohibit the sale of fireworks to prevent wildfires during an exceptionally dry period in Florida, it stands to reason that the state can also use its police powers in an effort to limit the spread of a highly infectious and deadly virus.

Slip op. at 11-12.

In short, the "economic impact" factor cut in favor of the bar owners. "Significant" impact. But the "investment-backed expectations" cut against them because the bar industry is highly regulated because the governor's emergency powers include the power to "halt the sale of alcohol." Now hold on a minute -- that seems like a bit of bootstrap logic: the governor's power to stop alcohol sales during an emergency isn't a taking because the governor has the power to stop alcohol sales during an emergency and thus owners don't have any expectations of selling alcohol during an emergency. Call us skeptical that this is the right way to analyze this. Finally, the court seems to have equated the character inquiry with the due process test (does the government have a really good reason for doing what it did?). As we wrote here, and as the Fourth Circuit got right in this case, the character of the government action question is about the nature of the restriction, and its impact on the owner’s property rights, and does not mean the government’s reasons. It merely asks the nature of the action: Is it a regulation of property use? Does it result in a transfer of title to private property? Does the owner retain title, but is nevertheless being required to open up their property to others? Does it require the owner to destroy their property for the public good? Are the owner’s rights being interfered with temporarily, permanently, or indefinitely? So invoking the police power as the reason this isn't a taking doesn't get you anywhere.

But there it is. Will this go further up the chain? If so, will this meet with more success than other similar challenges?

Orlando Bar Group, LLC v. Desantis, No. 5D21-1248 (Fla. Dist. Ct. App. Apr. 8, 2022)

CA8: Yee v. Escondido Doesn't Save Eviction Moratorium From Takings Review

Here's the latest case challenging a pandemic-related eviction moratorium, this one from Minnesota and the U.S. Court of Appeals for the Eighth Circuit.

In Heights Apts, LLC v. Walz, No. 21-1278 (Apr. 5, 2022), the court reversed the district court's dismissal of a property owner's takings claims. The owner challenged the Minnesota governor's residential eviction moratorium and later extensions. Like a lot of these things, the Minnesota version was not a rent "holiday" (tenants were still, technically speaking, on the hook for the rent, and there were several limited exceptions under which the property owner could evict). But for the most part, the Minnesota measure, like a lot of these things, effectively left property owners holding the economic bag (good luck collecting thousands in back rent), and turned their units into public pandemic housing. 

The owner's complaint raised Contract Clause, Petition Clause, and Takings claims.

Before we get to the good stuff (takings), a short word about the Contracts and Petition claims. The Eighth Circuit reversed the district court's dismissal of the Contracts claim, concluding that "[a] cognizable Contract Clause claim requires a showing of a substantial impairment in a contractual relationship that is not reasonably tailored to advance a significant and legitimate public purpose." Slip op. at 15. "Given the breadth and impact of the EOs on landlords’ rights, as alleged by Heights, the complaint contains sufficient facts to meet the plausibility requirement for the second prong of its Contract Clause claim[.]" Id. But the Petition claim did not similarly survive because the property owner didn't plead that the damage remedy it sought was "somehow unique to its Petition Clause claim[.]" Slip op. at 16. 

With those out of the way, we get to the takings claims. The complaint alleged a physical taking, because the moratorium "forced landlords to accept the physical occupation of their property regardless of whether tenants provided compensation." Slip op. at 17. As in many other of these moratorium cases, relying on Yee v. City of Escondido, 503 U.S. 519 (1992), the state argued that the moratorium only restricted an owner's ability to evict (you let 'em in, property owner; we're only telling you that you can't get 'em out).

The Eighth Circuit instead focused on Cedar Point Nursery, concluding that that case "controls here and Yee, which the Walz Defendants rely on, is distinguishable."

The rent controls in Yee limited the amount of rent that could be charged and neither deprived landlords of their right to evict nor compelled landlords to continue leasing the property past the leases’ termination. 503 U.S. at 527–28. The landlords in Yee sought to exclude future or incoming tenants rather than existing tenants. Id. at 530–31. Here, the EOs forbade the nonrenewal and termination of ongoing leases, even after they had been materially violated, unless the tenants seriously endangered the safety of others or damaged property significantly. See 307, 712, 2103 & 3151 LLC v. City of Minneapolis, 27 F.4th 1377, No. 20-3493, slip op. at *3 (8th Cir. Mar. 14, 2022) (noting “an ordinance that would require landlords to rent to individuals they would otherwise reject might be a physical-invasion taking”).

Slip op. at 17-18. The complaint here alleged that the moratoria had made each lease "indefinite," and that was enough for the court to conclude that the complaint sufficiently alleged a physical taking.

The complaint also alleged a non-physical (regulatory) takings claim. The court first rejected the government's "notice" defense (the property owners "closed on the properties shortly after the first EO was signed"). Nope, the court concluded, the timing of the acquisition was "immaterial to our analysis," because this was too narrow a view of the property allegedly taken. Here, the complaint alleged that the moratoria "deprived it of the economic and beneficial use and decision-making related to its property and investments." Slip op. at 18. It wasn't just the value of the property, or the lost income that was alleged to have been taken. "here, since the EO's affected the least terms of every residential unit (paying or non-paying), the allegedly taken property consists of all of Heights' residential rental property." Slip op. at 18-19.

Looking at Penn Central, the court concluded that the complaint adequately pleaded the three factors. The most interesting was the court's treatment of the "character" factor, which the opinion calls "the nature of the regulation." Slip op. at 19. This perked up our ears, because it looked like the court was going to go down the valid-police-power-cannot-be-a-taking path, an analysis we've harshly criticized.

We're not quite sure whether the court went down that road (because it cited to a case in which the Supreme Court held that if a "regulation's effects are so publicly beneficial," then it cannot be a taking), but eventually distinguished that case and concluded that the complaint pleaded that the moratoria was a benefit only to a narrow class of the public. Slip op. at 19 ("Heights asserts the EOs are not in this category because, in comparison to the legislation discussed in Connolly, the EOs were not as broadly beneficial, and they improperly imposed the public cost of fighting homelessness on a subset of the population: rental property owners."). The court concluded that the complaint therefore adequately pleaded the "character" prong.

While we remain skittish of this approach, all's well that ends well, we suppose, because the court concluded, that "[c]onsidering the Supreme Court’s recent pronouncement regarding the now-defunct CDC eviction moratorium, we are unconvinced that as a matter of law the EOs are permissible non-compensable takings." Slip op. at 20.

Now that an overbroad application of Yee is off the table, but an overbroad view of Penn Central's "character" factor is in play, let's see what the district court does with this on remand.

Heights Apartments, LLC v. Walz, No. 21-1278 (8th Cir. Apr. 5, 2022)

CA8: Ordinance Making It Really Really Hard To Reject Tenants Isn't A Physical Taking

Check out the U.S. Court of Appeals for the Eighth Circuit's opinion in 301, 712, 2103 and 3141 LLC v. City of Minneapolis, No. 20-3493 (Mar. 14, 2022), in which the court held that a Minneapolis ordinance prohibiting property owners from rejecting a prospective tenant because of the applicant's criminal, credit, or rental history isn't a taking.

The challenged ordinance "requires landlords to evaluate applicants for rental housing by either (1) 'inclusive screening criteria' or (2) 'individualized assessment.'" Slip op. at 2. That's a roundabout way of saying that a property owner cannot reject an applicant for their criminal or credit background, unless the owner first considers other "supplemental evidence" to justify why the applicant should become a tenant in spite of these problems, and notifies the tenant why this evidence isn't enough to outweigh the problems. 

The court first rejected the owners' claim that the ordinance allows third parties whom the owners don't want in their properties to physically occupy their spaces. Relying on Yee, the court concluded that the ordinance doesn't require owners to allow people to occupy their property whom the owner doesn't want there. Wait, you say, doesn't the ordinance prohibit the owner from making that call? Well, not quite according to the Eighth Circuit: yes, the owner cannot use the applicant's sketchy credentials alone as a reason to deny a tenancy, but may still deny an applicant if, after reviewing the "supplemental [mitigating] evidence" submitted by the applicant, the owner still thinks s/he doesn't want the person as their tenant. Thus, the court concluded, this isn't some kind of compelled occupation:

True, an ordinance that would require landlords to rent to individuals they would otherwise reject might be a physical-invasion taking. Regardless, the Ordinance here has an “individualized assessment” option that allows landlords to reject individuals due to undesirable criminal, credit, rental, and other history so long as they comply with the Ordinance’s procedural requirements (including considering supplemental evidence and providing a written explanation of rejection). Due to the individualized assessment option, the Ordinance is a restriction on the landlords’ ability to use their property, not a physical-invasion taking.

Slip op. at 7.

Come on, man, argued the landlords, that "individualized assessment" option isn't really an option at all, because it is really difficult, time-consuming, and expensive to go through that process. The court considered that option under Penn Central, concluding that there was no taking because the property owners didn't introduce sufficient evidence to support any of the three factors. Slip op. at 9 ("None of the Penn Central factors support a taking in this case.").

And finally, the court also rejected a substantive due process claim, concluding that that the owners here do not have a fundamental property right. Say what? Didn't the owners assert a right to exclude, and didn't Cedar Point say that was about as fundamental a property right as you can assert? Here, the Eighth Circuit reached back to its takings analysis, and concluded that the ordinance here does not infringe any right to exclude, it merely adds layers of process that a property owner must work through before s/he excludes:

This court need not address whether the right to exclude is a fundamental right under substantive due process. As discussed, the Ordinance does not infringe any right to exclude others from entering and using landlords’ property. Rather, it requires them to follow tenant-screening procedures before excluding others, including considering supplemental materials and later providing a written explanation.

Slip op. at 10. And here, it isn't really a plain-old right to exclude that is the "property." Rather, the court defined the property as "the right to exclude others from property without following tenant-screening procedures like considering supplemental materials and providing a written explanation." Slip op. at 10 (emphasis added). Having narrowly defined the property right as the right to be free of regulation, the court concluded, "[t]he landlords have not shown that such a right is 'objectively, deeply rooted in this Nation's history and tradition.'" Slip op. at 10 (citations omitted).

That very nearly seems like a sleight-of-law to us, because if you always define the property right being asserted as the right to be free of the challenged regulation, well, you are almost never going to find that the right is "deeply-rooted" and "traditional."

Having defined the right narrowly and thus not fundamental, the court applied rational basis review. Do we need to tell you what that meant here for the due process claim?

301, 712, 2103 and 3141 LLC v. City of Minneapolis, No. 20-3493 (8th Cir. Mar. 14, 2022)

2022 ALI-CLE Eminent Domain And Land Valuation Litigation Conference, Scottsdale: You Should Have Been There!

After a two-year absence in which we went remote, in the last week of last month (our usual spot on the calendar, between the playoffs and Super Bowl), we once again met in-person for the American Law Institute-CLE Eminent Domain and Land Valuation Litigation Conference.

Approximately 200 lawyers, judges, legal scholars, appraisers, law students, right-of-way agents, relocation experts, property owners, and other related professionals gathered in-person--yes, in-person--at the Scottsdale (Arizona) Resort at McCormick Ranch, to get reacquainted, learn stuff, and renew ties last made in-person in Nashville in 2020. In addition to the live attendance, we also welcomed about 50 remote colleagues, who joined the live webstream.

This was the 39th edition of the Conference, one of the most-established and successful conferences in the ALI-CLE stable of programs.

To those who joined us - 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...

Our 2022 Proof of Life Photo.

Every year, as we open the program, I take to the lectern for what I call my "proof of life" photo. Our Conference ends up in some really fun, exciting places. Nashville. Palm Springs. San Diego. Austin. San Francisco. Charleston. And I want to prove to the folks back in the office that yes, we really are in the room, learning stuff. And not out enjoying all that our venues have to offer (we save that for after-hours).

In this photo, we're in the room, spread out (the Resort put us in its massive ballroom, so we had room to spare).

Thank you to our sponsors. Without your generosity, the Conference would not be as good as it is.

Lawprof Karen Bradshaw presented our keynote address on Friday, "Do Animals Have Property Rights?" with more from her recent book "Wildlife as Property Owners." Her talk was followed by a book signing, too. Interesting stuff for sure.

Our main room was nicely filled for every program. A real testament to the subjects discussed, and the quality of the faculty.

The program includes a mix of practice and substantive topics. Here, Virginia's Steve Clarke in one of the breakout rooms (also nicely filled), presenting on "Federal Court and the Daubert Challenge – How To Prepare."

But it wasn't all eminent domain, property, and CLE credits. Naturally, with the beautiful Arizona winter weather, we found time to get out-of-doors and do things. Like this intra-firm golf tournament.

Which firm prevailed? You'll have to ask them who has the bragging rights.

What was especially nice was that our sponsor tables and the ALI-CLE registration table could be outside of the presentation rooms. Love that AZ weather.

New Jersey's Tony Della Pelle and Connecticut's Dwight Merriam on "COVID-19 Takings."

Our faculty includes not only lawyers and law professors. We also have other industry professionals come and present. Here, Washington's Martyn Daniel, Texas' Kristen Bennett, and (lawyer) Alan Ackerman from Michigan speaking about "Maximizing Relocation Benefits: Understanding the Law and Regulations to Ensure Fairness."

Ah, ethics. A tough subject to cover. Especially at 8am. But Georgia's Ivy Cadle (with the obligatory "go dawgs!"), Michigan's Darius Dynkowski, and (off-screen) Virginia's Kelly Sheeran and Texas' Justin Hodge filled the room with "Ethics Jeopardy! Live."

Yeah, Justin really did go for the end zone for his role as Ethics Jeopardy! host.

We understood the situation. Our faculty, staff, and attendees came to Arizona from around the nation. Some places have opened up, others are still getting there. We minimized any risks. Spread out in a huge room, and everyone was pretty cool with the modest requirements from ALI-CLE. What was especially good was that nearly every event but the actual programming were outside. 

Another featured panel was on the Supreme Court's big decision in Cedar Point Nursery. We brought together three expert perspectives on the case and what it means for the future. "Did the Supreme Court Signal a New Direction for Property Rights in Cedar Point Nursery?" featured California's Joshua Thompson (prevailing counsel in the case), U. Virginia lawprof Julia Mahoney, and (off-camera, since he remoted in) Maryland's Matthew Littleton, who filed a government-side amicus brief in the case.

Also pictured: the moderator, some guy who writes a blog.

Colorado's Katie Gray and Nebraska's Bill Blake on "Project Abandonment: How to Position Your Client for the Fallout When Projects Don't Get Built." Really useful.

Tag swag (aka badge flair) courtesy of our Platinum sponsor.

Our two fave tags.

Outdoors at night - really nice under the lights by the fire, after a long day of CLE programming.

Hawaii's Mark Murakami teamed with Wisconsin's Smitha Chintamaneni for "Why Jurisdictional Offers Must Include an Assessment of Severance Damages."

Even our final programs each day attracted a substantial crowd, often tough to do after long days of sitting in class. A testament to the strength of the faculty and the topics. Here's the audience for "Defending the Appraisal in the Courtroom - The Insider's View."

We put speakers with competing views on these panels, to get the blood pumping and keep everyone's attention.

Saturday morning, after two full days of (great) programming, is still a tough spot for a speaker, because they have to keep us focused, and interested.

That's why we always reserve these spots for two old hands, who will keep us zeroed in. Above is California's Jim Burling, with a tour-de-force solo hour on "What Are the Top 20 Ways to Increase the Cost of Housing? The Answer May Surprise You!"

Below, Michael Berger (looking a bit like Big Brother, admittedly), who remoted in from California with his annual "Regulatory Takings Update."

Feral cats and property rights had us smiling (ask Michael about what this refers to).

Michael Berger is Watching You.

A group photo of the William and Mary Law School contingent at the Conference (minus two other WM Law colleagues who could not be there for the photo). Recent and long-time alumni, current law students, a law prof, and (fourth from left) Jim Burling who later this year will be awarded WM Law's Brigham-Kanner Property Rights Prize at the B-K Conference in September 2022.

A pretty good showing for the alma mater.

There was a whole lot of podcasting going on. Thanks, Infrastructure Junkies and Eminent Domain Podcast. Can't wait for the episodes you recorded.

Again, thank you sponsors!

What about next year? Usually, on the last day of a Conference, we announce the dates and the venue for the following year. This year, due to some slowdowns, ALI-CLE couldn't quite get all the requirements in place to make a formal, official announcement. As soon as we know the venue, we'll go loud here.

As for the date: same date as usual - last week of January or first week of February, depending on the football schedule (which we're trying to avoid).

Stay tuned.

 

The Circle Is Now Complete: A Sampling Of Final Paper Topics From William and Mary Law's Eminent Domain & Property Rights, And Land Use Courses

If you ever get the opportunity to teach in a law school -- either as a full-time legal scholar, or part-time as an expert adjunct practitioner -- take it if you can. You might think you know a lot about a particular subject, but there's nothing like spending time at the lectern in a law classroom in front of sharp and eager lawyers-in-training to sharpen your thoughts, and get you to truly understand a subject.

And folks calling you "professor" can evoke a smile.

But if there's one downside to the law school experience from the teacher's side of the lectern, it's grading. Especially at a law school like William and Mary that has a pretty strict mandatory curve. In upper-division courses that we handle like Eminent Domain and Property Rights Law and Land Use -- where we're dealing with some very high-level stuff and the quality of the students is uniformly high -- that makes for some hard choices at this time of year. Despite these challenges, we've wrapped up grading for the Fall 2021 Semester, and have submitted the official scores.

Although I cannot share with you the students' final papers in these classes, I don't think they would mind if I give you a sampling of the topics and titles, just so you can see how the next generation of lawyers is thinking about property, property rights, takings, land use, and environmental law (inter alia). 

Check out these titles:

• The Many Saints of Land Use Law
• The Past, Present, and Future of Richmond Affordable Housing
• What's on the Menu? - The Future of Outdoor Dining and the Tension Between Land Use and Public Health
• Could Monetary Compensation Fully Indemnify Property Owners for Idiosyncratic Values in Takings Cases?
• The Lingering Effects of the Dawes Act on Tribal Land Use
• The Dawn of Debt and Everything Else: An Examination of the Works of Michael Graeber and the Role of Eminent Domain and Property Rights
• Inflation for Land Use Control
• Agritourism in Wine Country: Analysis of Accessory Uses in Napa Valley
• Judicial Exaction of Euclidean Deference Under Koontz
• A Review of Richard Rothstein’s The Color of Law: A Forgotten History of How Our Government Segregated America
• What’s on the Inside Counts: Why Historical Preservation Regulations Should be Allowed to Regulate Interior Landmarks and the Issue of Public Access
• Through the Buchanan Lens: Reframing Virginia Land Use Laws
• The Case for Equal Application of RLUIPA’s Equal Terms Provision
• The Government Giveth, and the Government Taketh Away: Retroactive Application of Inter Partes Review Under the Takings Clause
• The Right to Share: Is Virginia Beach’s Regulation of Short Term Rentals a Taking under the Takings Clause of the Fifth Amendment?
• The laws of nature do not recognize property rights, complicating the Commonwealth of Virginia’s adaptation to climate change
• Looking at Viniculture Through the Glass of Historic Preservation Law, or
  A Brief Wine Advocate
• Is the New York State Canal Corporation the Onceler of Upstate New York?: An Analysis of Town of Pittsford v. Power Authority of New York
• Law and Ownership as Evolving Stories: A Review of Mine!
• Incentive Zoning in New York
• The Tide is High but Norfolk's Holding on: An Analysis of Norfolk's Climate Change Adaptation Strategies and a Review of the Potential Claims in Response
• Flipping the Play: How Localities Can Use the Power of Eminent Domain to Seize Sports Franchises and Finally Stick it to Bob Irsay
• Land Use Control – Is it Important to the Average Joe?
• Re-Evaluating Bennis and Civil Forfeitures Under the Takings Clause
• The Guardian of Every Other Right - A Constitutional History of Property Rights and a Discussion on Tariffs, Redistributionism, and Capitalist Liberty
• Pipelines and Eminent Domain: A Constitutional and Environmental Analysis of Energy Takings
• Paradise Stolen: An Ethical Reexamination of Property Deprivation and the Plight of the Atakapa-Ishak Peoples of Louisiana’s Grand Bayou Indian Village
• A Flood of Pollutants: The Promises and Perils of a Regulatory-Takings Approach to the Right to a Clean Environment

And this is only a sampling.

I don't know about you, but I feel pretty good about this. I will be encouraging several of them to consider beefing up their papers and submitting them for publication.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Slip op. at 47-48.

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

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

CA9: Once You Open The Door For One, You've Opened It For Everyone

It takes a bit of work to work your way through the Arizona statute being challenged in the U.S. Court of Appeals' opinion in CDK Globall LLC v. Brnovich, No. 20-16469 (Oct. 25, 2021). But we recommend you read the opinion and do the work nonetheless, because it tells us something about the way the Ninth Circuit views the right to exclude.

The statute, known as the "Dealer Law," deals with the way car dealers treat the data they obtain from their customers. Data like the cars themselves, parts, services and the like, but also things like credit history and social security numbers. Like pretty much every other thing these days, that data is managed by proprietary software. Not surprisingly, there are specialized vendors who license the industry-specific, proprietary software. According to the opinion, those vendors in the past allowed dealers to extract the data from the proprietary platform in order to share it with third parties who would reformat the data so it could be used on other platforms employed in other parts of the dealers' operations such as customer relations and marketing.  

But "a few years ago, [the proprietary vendors] began to prohibit that practice [of reformatting data]." Slip op. at 6. Protection of their IP rights was the reason. In response, Arizona adopted the Dealer Law, which, according to the proprietary software vendors, has two main problems.

First, it limits their ability to get in the way of a dealer using the data stored on the vendors' software platforms. Third parties may therefore integrate that data into their own data-management systems. Second, the statute requires vendors to adopt and make available a standardized way of sharing the data. Lawsuit by the vendors challenging the statute for violating the Copyright Act, and the Contracts, Due Process, and Takings Clauses followed. The district court allowed only the copyright, Contracts, and Takings claims to go forward, and later denied the plaintiffs' request for a preliminary injunction prohibiting enforcement of the Act.

Next stop, Ninth Circuit (and keep in mind here this is a not a final disposition on the merits, but an appeal of the district court's refusal to enter the PI).

You can skip all the copyright stuff and fast forward to page 23 of the slip opinion for the takings analysis. The court rejected the vendors' Loretto physical takings claim, which argued that the statute requires "provides to allow authorized integrators 'to enter, use, and occupy" their software. Slip op. at 24. "But," the court concluded, "the analogy between Loretto and this case is misplaced for two reasons." Id. 

First, there was no physical invasion at all because the requirement to disclose information -- although it might be described as "access" -- isn't really the type of thing we think about when we think "physical" invasion or access. "To be sure, there can be property interests in information, and those interests are protected by the Takings Clause. But [the plaintiffs do] not argue that such property interests -- trade secrets, for example -- are subject to a taking here." Slip op. at 24-25.

Second, the government hasn't required the plaintiffs to submit to a physical occupation even if there was one. While the statute may permit integrators "to write data to a [software] on a dealer's behalf, [the plaintiffs] voluntarily license[d] its software to dealers, and nothing in the Dealer Law compels it to continue doing so." Slip op. at 25. Get out of the kitchen if you can't stand the Dealer Law heat.

And no, you do not have a choice about who to let in or keep out: "[o]nce property owners 'voluntarily open their property to occupation by others,' they 'cannot assert a per se right to compensation based on their inability to exclude particular individuals." Slip op. at 25. Yes, the Yee v. Escondido rationale. That approach always has seemed odd to us. I can't say A can enter my property alone, and if I invite A in I can't keep B, C, D, and E out? Or at least I cannot require a categorical treatment, and as a consequence I have to suffer some kind of actual and substantial loss of use or value, and I have to show the "reasonableness" of my expectation of privacy (and the "character of the government action," maybe)? That doesn't seem right. Or at least the everyone rationale doesn't seem like the correct place to draw that line between categorical and ad hoc analysis. 

Having dispensed with the physical takings argument, the court also made short work of the Penn Central claim. Minimal economic impact, you don't have any reasonable expectation of being free of the state's "high degree" of control over commercial dealings, and the character of the government action was a regulation designed to adjust the benefits and burdens of economic life and not, as noted above, a requirement to allow third party invasion.

So keep out, EVERYONE!

CDK Global LLC v. Brnovich, No. 20-16469 (9th Cir. Oct. 25, 2021)

The Buried Takings Lede In NYT Op-Ed That SCOTUS "Has Gone Off the Rails"

We don't read the New York Times all that much these days, but we couldn't resist commenting on the recent op-ed authored by a former federal government lawyer that takes issue with recent decisions by the U.S. Supreme Court, "The Supreme Court Has Gone Off the Rails" (Oct. 4, 2021).

On one hand, the op-ed might not be anything new because the NYT doesn't try hard to hide where it stands on the Supreme Court (see here and here, for example), and yet another opinion piece questioning the Court's legitimacy might be just piling on. But this one is authored by a fellow who was "was a U.S. attorney and principal deputy solicitor general in the Reagan administration and deputy attorney general in the George H.W. Bush administration" as well as a law clerk for William Rehnquist. Which means, we suppose, that he's not yet another "usual suspect," but is going against type so maybe his argument is more worthy of attention.

As we read it, the gist of his argument is that the Supreme Court majority has abandoned the notion of judicial restraint and that judges should not be "activists," and has instead become the very opposite of the thing that what he calls the "Reagan revolution in the law" stood for. The piece provides several examples where the current Justices have become, in the author's view, judicial activists.

Among those examples the author cites is a takings case, Cedar Point Nursery v. Hassid, in which the 6-3 majority concluded that all physical invasions -- not only permanent occupations -- presumptively require compensation under the Fifth and Fourteenth Amendments. (For our more detailed thoughts on that case, start here; and before we go further, I'll disclose for those of you who don't already know that I am now a lawyer in the firm that represented the property owners in Cedar Point, so yes, I have a distinct view on the case and what it means that readers should take into account.)

The author writes:

Another decision that received less attention but was still shocking involved the Takings Clause of the Fifth Amendment, which says private property may not be taken for public use without just compensation. The decision struck down a California agriculture labor regulation that gave union organizers the right to come to specific areas of a grower’s property at limited times to speak with workers.

Whatever Cedar Point is, we would not characterize it as "shocking." After all, can one say that any decision about regulatory takings is shocking in light of the mostly-muddled doctrine? To say something is "shocking" implies that there's some level of predictability, clarity, and uniformity in the doctrine, doesn't it?

But that's not the buried lede we mentioned in the title of this post.

The author also notes:

As Justice Stephen Breyer’s dissent made clear, rather than apply the court’s longstanding regulatory takings test — which balances several factors and would clearly have indicated that the law did not violate the Takings Clause — the court simply applied a different test previously reserved for a very narrow set of obvious takings. In doing so it raised major new questions about the constitutionality of some government business regulation and oversight that require access to private property.

The op-ed asserts that application of the Penn Central balancing test "would clearly have indicated" that the regulation did not work a taking. Inherent in that assertion are two assumptions.

First, that the result here under Penn Central would have clearly been "no taking." That's not obvious, at least in theory. We're not at all certain that should naturally be the result had a Penn Central claim been raised (the nursery owners pointedly did not assert a Penn Central taking, and limited their takings claim to a categorical/per se taking):

• The character of the government action here looks a lot like regulating for free something that the government usually takes by eminent domain and pays for (temporary construction easements, anyone?).
• Property owners, even those in the agricultural business almost certainly have reasonable or distinct expectations of keeping third parties out.
• And a reasonable jury could conclude that being opened to unannounced early-morning entries by disruptive third parties could result in a significant loss of use or value of the property.

No, an application of Penn Central should not automatically make one assume that the result would have been "clearly" no take. At least in theory.

But we know that isn't the reality of Penn Central. And that leads to what we see as the author's second assumption (here's your buried lede). The assertion that the outcome of applying Penn Central here is "clear" only if one also assumes that Penn Central is a paper tiger. The op-ed makes a distinction between Cedar Point (which "clearly" was not a taking), and cases in which takings are "obvious." It seems plain to us that the author assumes that the Court's "longstanding regulatory takings test" means that the owner loses in all but a "narrow" set of cases. In other words, for Cedar Point to be viewed as a case where the Court went "off the rails," one must assume that the rails are stacked against property owners under the default regulatory takings test. To us, that describes Penn Central to a tee (the reality, not the theory of Penn Central). 

Thus, we see Cedar Point not as a sign that the Court has gone activist on us, but instead as indicating that it is back on track and that the judiciary is not merely a rubber stamp for legislatures, at least in property rights. That Justice Holmes' formulation nearly 100 years ago that if a regulation "goes too far" it will be recognized as a taking reinforced an even more longstanding principle than Penn Central's three-factor test that in theory is supposed to confirm the "too far" principle, but in reality does not. A principle that Justice Holmes did not invent, but has a long pedigree in the common law. For example, as Chancellor Kent noted in Gardiner v. Village of Newbergh, the right to compensation when property is taken by expropriation or regulation, "is admitted by the soundest authorities, and is adopted by all temperate and civilized governments, from a deep and universal sense of its justice."

We see Cedar Point as part of that tradition, which "intuitively" (as the Court described it) saw California's invitation to third parties to come onto the nursery's land and proselytize as intruding too far into the owner's fundamental right to say "keep out." That hardly seems like being activist judges and going "off the rails." Indeed, we think that one of the reasons that the majority seems comfortable in property cases is that property is one of those areas in which lawyers and judges are trained (as opposed to the more "political" and policy issues that are often brought to the Court).

But maybe there's another part of the op-ed that gives away the author's viewpoint. It notes that the reason for his objections is that the Court is allowing individuals to raise their claims "in a way that can stop government in its tracks." Forgive us, but we thought that "stopping government in its tracks" was the main point of the constitutional exercise. That one of the reasons we have a constitution is to remind the government who's the boss (us), and that the reason that governments exist is to secure our rights. And one of those rights is Just Compensation. 

Or as Chancellor Kent put it:

The last of those jurists insists, that private property cannot be taken, on any terms, without consent of the owner, *for purposes of public ornament or pleasure; and he mentions an instance in which the Roman senate refused to allow the praetors to carry an aqueduct through the farm of an individual against his consent, when intended merely for ornament. The sense and practice of the English government are equally explicit on this point. Private property cannot be violated in any case, or by any set of men, or for any public purpose, without the interposition of the legislature. And how does the legislature interpose and compel? "Not," says Blackstone, (Com. vol. 1. p. 139.) "by absolutely stripping the subject of his property, in an arbitrary manner, but by giving him a full indemnification and equivalent for the injury thereby sustained.

Could not have said it better ourselves.

2021 Brigham-Kanner Property Rights Conference (Sep. 30 - Oct. 1, 2021) - Still Time To Join Us

There's still plenty of time to register and join us for the 18th Annual Brigham-Kanner Property Rights Conference at the William and Mary Law School, Thursday and Friday, September 30 and October 1, 2021.

Yes, you may attend in-person, or remotely. The registration fees are very reasonable, ranging from $0 (yes, free!) to $200 (go here, and click "Tickets" for the details).

This year's Brigham-Kanner Property Rights Prize winner is Professor Vicki Been (NYU Law). The Conference includes presentations on:

• Remembering Toby Brigham
• The Role of Empirical Research in Defining the Scope of Constitutionally Protected Property Rights: A Tribute to Been
• The Relationship between Eminent Domain and Social and Racial Injustice (this is the panel on which we'll be presenting)
• Just Compensation Issues, Changing Public Uses, and Other Recent Developments
• The Interdependence of Property and First Amendment Rights
• The Distributional Implications of Land Use Regulation

Details on the agenda and the stellar faculty here.

In our opinion, this is the best one-day academy/bench/practicing bar conference on this topic. Really good stuff.

Register here. We'd love to see you in Williamsburg later this month. Or if that's not possible, join us for all or part of the day remotely.

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