inversecondemnation.com

Comity Of Errors: CA11 Chooses Nondisruption Of State's Administrative Process Over Constitutional Right To Compensation

In Turner v. Jordan, No. 22-13159 (Sep. 17, 2024), the U.S. Court of Appeals for the Eleventh Circuit held that even though the federal courts have jurisdiction over Turner's takings claim, the court nonetheless has the discretion to choose to wash its hands of the case in order to protect a state's administrative procedures.

This is one of those home equity takings cases, with the twist here being that Turner claims that because Florida officials failed to account for his homestead exemption, his property sold for half of what it should have at a property tax foreclosure sale. He alleged that with the exemption, the sale would have netted him some equity to which he was entitled. The district court dismissed for comity reasons, and the Eleventh Circuit affirmed.

Of course, the opinion pays lip service to the more-often-in-the-breach-than-in-the-observance principle that "federal courts have a 'virtually unflagging obligation ... to exercise the jurisdiction given them.'" Slip op. at 18 (quoting Ankenbrandt v. Richards, 504 U.S. 689, 705 (1992)). That duty may be "unflagging," but not really: federal courts should take a "hands-off" approach to cases that may implicate a state's tax administration. We wouldn't want to disrupt state tax administration now, would we?

Yes, Turner raised a federal civil rights claim, which is "entitled to be adjudicated in the federal courts." Slip op. at 18. And you don't need to exhaust section 1983 claims, or takings claims, as we recall. But that rule mostly doesn't apply when state remedies are "plain, adequate, and complete." Slip op. at 19. Although the court concluded this case presents a "close call," it nonetheless held that Florida's administrative tax scheme qualifies. See pages 19-20 of the opinion for the details of the three factors that go into this calculus. The first two factors were a wash: one cutting in Turner's favor, the other in favor of comity.

The first factor is whether the issue involves "commercial matters" or "fundamental rights." The court correctly (in our view) concludes that this is a case involving fundamental civil rights. Slip op. at 20. The second factor was "trickier" according to the court, but cut in favor of comity: the court concluded that Turner was objecting to his own tax situation, because he is objecting to the way his taxes were collected. Slip op. at 22.

The factor that cut strongly in favor of comity according to the court, was the third: are Florida courts better positioned than the federal courts to correct the violation?

For Turner to prevail on his due process claims it would re-quire a conclusion that the County failed to provide sufficient notice of the sale process under Florida Statutes sections 197.502(4)(a), 197.522, and potentially 197.512(1). For Turner to prevail on his claims under the Takings Clause, a federal court must determine, at least, that the County impermissibly applied the opening bid requirement under Florida Statutes § 197.502(6).

Turner’s requested remedies, and their implicated interpretations of those state-law provisions, “may be far from what the [Florida] Legislature would have willed.” Id. at 429. And state courts “have greater leeway to avoid constitutional holdings by adopting ‘narrowing constructions that might obviate the constitutional problem and intelligently mediate federal constitutional concerns and state interests.’” Id. at 428 n.7 (quoting Moore v. Sims, 442 U.S. 415, 429–30 (1979)). That is what would happen if the Florida courts side with the County’s interpretation of the state statutes.

Slip op. at 23-24.

And then there's the Tax Injunction Act, which "precludes relief that would diminish state revenues[.]" Slip op. at 24. And here, "Turner's interpretation of [the Florida tax statute] could diminish state revenues. After all, his property didn’t sell until it was listed for a second time with a lower opening bid amount." Id.

In the end, the court concluded that granting Turner the relief he seeks "would risk disrupting Florida's tax administration." Slip op. at 25.

Of course, Turner challenges the County’s application of Florida statutes as to his property, rather than the facial validity of the statutes. Still, “a judicial determination of official liability for the acts complained of, even though necessarily based upon a finding of bad faith, would have an undeniable chilling effect upon the actions of all County officers governed by the same practicalities . . . .” Fair Assessment, 454 U.S. at 115. If the County’s administration of tax deed sales in situations like Turner’s “is indeed unconstitutional, surely the [Florida] courts are better positioned to determine—unless and until the [Florida] Legislature weighs in—how to comply with the mandate of” procedural due process, the First Amendment, and the Takings Clause.

Slip op. at 26.

Hold on. "Surely the Florida courts are better positioned" how to comply with the U.S. Constitution's requirements? Really?

One Judge -- Judge Newsom -- wasn't having it. He dissented, respectfully, "but I'm not going to make a big stink about it." Dissent at 1. He agreed that this was a close call, but would have come out the other way, and "would allow Turner's suit to proceed." Id.

As an initial matter, I’m suspicious of court-concocted abstention rules that, in substance if not form,1 deprive federal courts of jurisdiction that the Constitution expressly authorizes and that Congress has expressly vested. I agree with Chief Justice Marshall, who explained more than two centuries ago that federal courts “have no more right to decline to exercise the jurisdiction which is given, than to usurp that which is not given”—both, he said, are “treason to the [C]onstitution.” Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404 (1821). At the very least, I agree with the Supreme Court’s more recent (if slightly less uncompromising) admonition that “‘[a]bstention rarely should be invoked, because federal courts have a virtually unflagging obligation . . . to exercise the jurisdiction given them.” Maj. Op. at 18 (quoting Ankenbrandt v. Richards, 504 U.S. 689, 705 (1992)). In any event, all here seem to agree that abstention—pursuant to the “comity doctrine” or other-wise—“is the exception, not the rule.” Colorado River Conservation Dist. v. United States, 424 U.S. 800, 813 (1976).

Dissent at 1-2. Check out the entirety of his dissent for Judge Newsom's analysis. Dissent at 7 ("Bottom line: It’s reasonably clear to me that the local authorities misapplied Florida law when they sold Turner’s property for pennies on the dollar. Deciding Turner’s case—which alleges that they did so for unconstitutional reasons and in an unconstitutional manner—wouldn’t call into question Florida’s property-tax scheme or his individual tax liability, nor would it require any real guesswork about the meaning or application of state law.").

We think you know which way we come out on this one, no?

Turner v. Jordan, No. 2022-13159 (11th Cir. Sep. 17, 2024)

NC App: "Map Act" Takings Are Temporary, Valued Not By Rent But "by taking into account all pertinent factors"

A fairly short one from the North Carolina Court of Appeals, but well worth your time to read.

Mata v. N.C. Dep't of Transportation, No. COA23-1140-1 (July 16, 2024) is the latest in the "Map Act" takings cases that we have long covered. There, N.C. legislature adopted a statute that identified future highway corridors and then "restricted [owners'] fundamental rights to improve, develop, and subdivide their property for an unlimited period of time." Kirby v. N.C. Dep’t of Transp., 239 N.C. App. 345, 769 S.E.2d 218 (2015), aff’d, 368 N.C. 847, 786 S.E.2d 919 (2016). The Map Act also classified these properties as eligible for a 20% to 50% reduction of the appraised value for property tax purposes.

In Kirby, the North Carolina Supreme Court held that the restrictions the Act imposed amounted to a taking. In response, the N.C. legislature rescinded the Map Act.

The Matas own property that was burdened by the Map Act restrictions from the time of the adoption of the Act until it was repealed (August 1996 to July 2016). The question in the case is calculation of the amount of just compensation that NCDOT must provide.

First, the court rejected NCDOT's argument that the taking here was permanent and not temporary. True, Kirby held that the Map Act restricted owners' uses "for an unlimited period of time," but that was before the lege repealed the statute. Slip op. at 9-10. As the court noted:

The Map Act restrictions dates in effect were properly defined from DOT’s recording the highway corridors on 6 August 1996 until the corridors were rescinded as of 11 July 2016. The taking was no longer “indefinite.” The trial court correctly defined and concluded the dates above are the operative dates of Plaintiffs’ alleged temporary taking.

Slip op. at 10.

The court next rejected the trial court's conclusion that rental value was the proper way to determine just compensation for the temporary taking. But wait, you say, isn't rental value the time-tested method of determining just compensation for temporary takings? Yes, for sure.

But here, the court of appeals concluded that in an earlier case, Chappell v. N.C. Dep’t of Transp., 374 N.C. 273, 841 S.E.2d 513 (2020) (which we summed up here), the court held the "before and after" method was the right way. Consequently, the court of appeals held:

The damages are calculated based upon the diminution in value of Plaintiffs’ property during said period. Id. The trial court erred in ordering a calculation based on “rental value,” as the proper measure is any proven diminution in value during the relevant period “taking into account all pertinent factors” to include the reduction in accessed [sic] ad valorem taxes Plaintiffs benefited from during the relevant temporary taking. Id.

Slip op. at 10-11.

This strike us as odd. It's one thing to say that as a general proposition compensation for a temporary taking is calculated as the "diminution of value during the relevant period 'taking into account all pertinent factors'[,]" and another entirely to reject the trial court's conclusion that rental value is a way to make the determination apparently because it didn't "show its work" and invoke the magic words. On remand, would it pass muster for the trial court to conclude, "After taking into account all pertinent factors, the court concludes that rental value to be the proper measure of damages in this temporary taking"? We'd think so.

We suspect the court of appeals isn't reading Chappell properly. To us, that case did not hold that "all pertinent factors" are words that must be expressly invoked, but instead concluded that there are multiple ways to value temporary takings, as long as those methods take into account all pertinent factors (as all valuations must do, no?). It hardly seems like error here for the trial court to have reached the conclusion (after, we assume, assessing all pertinent factors that go into an expert's valuation opinion) that indeed, rental value is the most accurate way to ensure the owner has been put in a position he would have been had his property not been taken.

Will there be more? Stay tuned.

Mata v. N.C. Dep't of Transportation, No. COA23-1140-1 (N.C. App. July 16, 2024)

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

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

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

Slip op. at 8.

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

Residential PUD Zoning

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

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

General Plan: Open Space

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

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

Residential Zoning, Residential Development

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

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

Successful Opposition to the Residential Project

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

The walls came tumbling down:

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

Slip op. at 7-8.

City's Representations

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

Inverse Condemnation

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

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

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

Nevada Supreme Court: a Right to Develop

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

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

Plan/Zone Consistency?

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

Murr Denominator Parcel

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

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

Lucas Wipeout

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

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

Slip op. at 25-26.

Just Compensation

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

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

The opinion ended by summing up:

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

Slip op. at 32.

There it is.

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

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

What We're Reading Today, Property Rights Edition

Bismarck in January is looking pretty good.

Here's what we're reading today:

• Christian Britschgi, Court's Wild Zoning Decision Blocks 'Montana Miracle', Reason (Jan. 2, 2024) ("In an eyebrow-raising decision, a Montana judge has halted the implementation of two laws legalizing duplexes and accessory dwelling units on residential land across the state, writing that they'd likely do 'irreparable' damage to residents of single-family neighborhoods.").
• Richard Frank, The U.S. Supreme Court & Environmental Law in 2024, LegalPlanet (Jan. 3, 2024) ("First up before the Court in 2024 is this “regulatory takings” case from California.... Over the past four decades, U.S. Supreme Court decisions have developed the so-called 'unconstitutional conditions' sub-doctrine of regulatory takings law, but to date have only applied it to individually-negotiated land use permit conditions and fees. California state courts–including in the Sheetz case–have consistently refused to extend the doctrine to broadly-applicable fees and conditions imposed on landowners in exchange for their obtaining development approvals–so-called “quasi-legislative” fees and conditions.... So El Dorado County appears to be facing an uphill battle in the Sheetz case. The justices will hear oral arguments on January 8th.")
• Editorial Board, The Supreme Court's Road to El Dorado, Wall St. J. (Jan. 5, 2024) ("The Supreme Court on Tuesday will hear what could be a landmark property-rights case (Sheetz v. County of El Dorado) with major economic implications. The question is simple: Can governments use building permits to extort property owners?"). 
• James Burling, Property Rights in Jamestown: Bowling and starving in the New World, Pac. Legal. Found. (Nov. 30, 2023) ("All the crops would be the collective property of the colony, with a good portion of the proceeds returned to the financiers in England to pay off the debts incurred in setting up the colony in the first place. Now, the proprietors weren’t proto-socialists; they just figured they could maximize their profits if their charges over in America didn’t try to grab too much for themselves.").
• Greg Henderson, Texas Rancher's Property Rights Case to be Heard by U.S. Supreme Court, Drovers (Jan. 4, 2024) ("Attorney’s representing a Texas rancher are preparing to test the 'pottery barn rule' – you break it you buy it – before the U.S. Supreme Court.").
• History of Building Regulations, Researching Historic Buildings in the British Isles ("The British Isles has a long history of legal controls on building construction, which have generated records of interest for building historians. This outline aims to explain the types of building control record and where to find them.").
• Conference on the Constitution. A conference produced by the Northwest Landowners Association is open to the public "to learn more about landowner issues related to our constitutional rights." Featuring two of our Pacific Legal Foundation colleagues, Mark Miller and Kady Valois.

New Article: "Keeping the Surplus? Examining Colorado's Real Property Tax Lien System in Light of Tyler v. Hennepin County" (Makenna Johnson)

How thrilled are we that an alum of our William and Mary Law School courses, up-and-coming Colorado property lawyer Makenna X. Johnson, has published an article in the area of law we all love (dirt law)?

Let's just say that we're thrilled. Makenna writes:

Colorado’s real property tax system resembles Minnesota’s principally in that it provides no mechanism for a property owner to recover any surplus or equity in excess of the taxes and fees owed. Although in Colorado a surplus may be retained by either a private party or a municipality, the result is the same: the owner’s property interest in the surplus is forfeited. Applying the logic of Tyler, a court might deem unconstitutional any system that requires property owners to forfeit the surplus without allowing them an opportunity to request a refund.

Check it out in the Colorado Lawyer (Jan-Feb 2024): Keeping the Surplus? Examining Colorado's Real Property Tax Lien System in Light of Tyler v. Hennepin County.

Harvard Law Review On Tyler v. Hennepin County: Reflecting The "Diminishing" Role Of State Property Law In Takings

Check this one out, the Harvard Law Review's summary of Tyler v. Hennepin County, the "home equity theft" takings case decided unanimously by the Supreme Court.

Some highlights:

Beginning with traditional principles, Chief Justice Roberts suggested that a property interest in surplus equity had English origins — King John proclaimed in the Magna Carta that when collecting debts owed to him by a deceased person, any surplus “shall be left to the executors.” Parliament endorsed this principle, giving the Crown the power to seize and sell a taxpayer’s property to satisfy a tax debt but requiring the surplus to be returned to the original owner.And according to Blackstone, the English common law required the same.

So too did historic and contemporary American laws.

...

While the Tyler Court continued the trend of a robust Takings Clause, it introduced novel evidence of a taking: a lack of internal consistency in Minnesota’s statutory regime. The majority’s discussion of analogous statutory contexts (where a property owner has an interest in surplus equity) exemplifies the longstanding concern justifying the Court’s diminishing of the role of state law in takings jurisprudence — state legislatures manipulating property interests to insulate themselves from takings liability. It also suggests that ordinary judicial review of positive state law may better identify and correct legislative gamesmanship than an evaluation of history and tradition can. Indeed, courts searching state property law for contradictory treatment will make it harder for a state to manipulate property interests. Tyler’s internal-consistency requirement permits the Court to restore state property law’s primacy and avoids the complications associated with the Court’s current approach of a “jurisdictionless” property law.

As early as Board of Regents of State Colleges v. Roth in 1972, the Court has recognized state law’s crucial role in articulating the “rules or understandings” defining property interests. Yet, throughout the Court’s case law, a theme persists: a fear of gamesmanship and the possibility that affirming the importance of state law incentivizes states to insulate themselves from takings liability. The worry is that, left to its own devices, a state might “transform private property into public property” via legislative enactment or define a property interest so broadly as to render regulations paltry in their interference.

Pre-Tyler, this concern appeared overstated. In one of its more prominent opinions concerned with gamesmanship, the Court failed to cite any prior examples of a state “improperly . . . fortify[ing]” itself against takings claims by passing legislation that defined land parcels strategically. In fact, Chief Justice Roberts had once emphatically argued that in most circumstances, state law should define the relevant parcel to be considered in a takings claim, and that worries surrounding state gamesmanship were unfounded.

(Footnotes omitted.)

Check it out.

Illinois: In Straight Takings, Title Transfers Only After Compensation Is Paid, So Property Owner Is Responsible For Property Taxes During The Litigation

In MB Financial Bank N.A. v. Brophy, No. 128252 (Sep. 21, 2023), the Illinois Supreme Court clarified that in non-quick take actions (aka straight takings), the date on which title transfers -- which is the date on which the owner actually is deprived of the property -- is when the owner is relieved of the obligation to pay property taxes. Until then, the owner is on the hook, even though the owner is under the cloud of condemnation. .

In 2005, the City of Joliet filed a condemnation action to take an apartment building owned by MB Financial Bank. This was not a quick take action, but rather a straight taking. Which meant that neither title nor possession transferred from the owner to the condemnor. These would have to wait until ascertainment of the amount of compensation, the agreement of the City that it wanted to pay that amount, and the actual payment of the adjudicated compensation. Only then would title transfer from MB to the City. Even though that took 12 years.

During the pendency of the litigation -- during which the apartment building continued to operate under MB's management -- MB continued to pay property taxes.

It was 2017 before the City acquired title to the property.

After the transfer, MB sought a refund of the taxes it paid after the condemnation complaint was filed. The rule in Illinois was that although title may pass in straight takings at some later date, the date of the transfer of title "relates back" to the date of the complaint. That rule was based on City of Chircago v. McCausland, 379 Ill. 602, 41 N.E.2d 745 (1942), which held that a condemnor becomes the owner of property retroactive to the date of the complaint. Accordingly, the court of appeals held that MB was entitled to a refund.

The Illinois Supreme Court reversed, concluding that the McCausland rule has been "repealed" by subsequent decisions, including the U.S. Supreme Court's opinion in Kirby Forest Indus., Inc. v. United States, 467 U.S. 1 (1984), and the rule was not one of retroactivity, but "that a taking in Illinois occurs on the date the government deposits the compensation award to the property owner and acquires the title and right to possess the property." Slip op. at 7. The value of the property isn't fixed at the date the complaint is filed:

McCausland also based its holding on the premise that the value of the condemned property was fixed as of the date the condemnation action was filed. See id. at 604. This point was important because it meant that the property owner was not entitled to any increase in value after the date the condemnation action was filed. And, having been divested of that aspect of ownership, it followed that the owner should not have to pay taxes during that time. However, in light of Kirby and First National Bank of Franklin Park, this reasoning also is no longer accurate. Property owners now have a constitutional right to have their property valued at the time compensation is paid. Further, the General Assembly has provided a statutory mechanism for determining the value of the property in compliance with Kirby. See 735 ILCS 30/10-5-60 (West 2018).

Slip op. at 8.

The court rejected the property owner's argument that McCausland remains good law, and concluded:

[O]verruling precedent is appropriate “when the intervening development of the law has ‘removed or weakened the conceptual underpinnings from the prior decision, or where the later law has rendered the decision irreconcilable with competing legal doctrines or policies.’ ” Neal v. United States, 516 U.S. 284, 295 (1996) (quoting Patterson v. McLean Credit Union, 491 U.S. 164, 173 (1989)); People v. Castleberry, 2015 IL 116916. That is the case here. The legal premises on which McCausland rested—that a taking occurs at the time a condemnation action is filed and that the valuation of the property is fixed at that point—no longer exist. Accordingly, McCausland is overruled.

Slip op. at 10.

Finally, the court also rejected the argument that the filing of the complaint cast a cloud over the property, and the cloud lasted 12 years. Thus, it would be unfair to require the owner to pay property taxes when operating under the gun of eminent domain. The court held this argument was "unpersuasive," because the mere filing of an eminent domain complaint is not a taking. Slip op. at 10-11. In straight takings, the condemnee remains the owner until the adjudicated compensation is paid.

Thus even though living under the eminent domain cloud, the owner continued to use the property, "retaining the right to any profits generated by the apartment complex and the right to receive the same governmental services provided to all property owners in the City." Slip op. at 11.

Barista's note: don't forget that in straight takings, until the condemnor actually pays the adjudicated compensation, it remains free to walk away. If it does so, it may be on the hook for damages and just compensation for the (temporary) cloud. But that is a different issue than the one resolved here.

MB Financial Bank, N.A. v. Brophy, No. 128252 (Ill. Sep. 21, 2023)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Join Us August 9, 2023: ALI-CLE's "How Did Property Rights Fare at the Supreme Court? What Happened in the 2022 Term and What's Next"

On Wednesday, August 9, 2023 at 1:00 - 2:00 p.m. (Eastern Time), please join us for ALI-CLE's web program, "How Did Property Rights Fare at the Supreme Court? What Happened in the 2022 Term and What's Next."

Here's the course description:

This has been a blockbuster U.S. Supreme Court term for property law, with the Court deciding three major property cases: Tyler v. Hennepin County (government’s keeping the excess value when seizing and selling a home to satisfy a property tax debt is a taking), Wilkins v. United States (is the federal Quiet Title Act’s statute of limitations a jurisdictional bar?), and Sackett v. EPA (the scope of Clean Water Act wetlands jurisdiction). To gain a better understanding these opinions, the current state of takings and property law, and what these cases mean for your practice, join a distinguished panel of experts for this one-hour webcast. The faculty will also explore what these decisions mean for the future and what steps lawyers can take to incorporate these decisions into their practices.

Among the things we'll be analyzing and discussing:

• What happened in each case and how the Court ruled
• The practical consequences of the decisions
• What new rules practitioners must understand
• What Sackett means for the efforts to define “Waters of the United States”
• How courts will treat the question of “what is the property” in takings and eminent domain litigation
• How you can avoid statute of limitations problems
• Where the Supreme Court might be going next and what issues remain open

I'll be moderating, and joining me will be takings and property experts lawprof Emilio Longoria, and Sophia Holley (Keating Muething & Klekamp).

We will also have a preview of the 2024 Eminent Domain and Land Valuation Litigation Conference, February 1-3, 2024, New Orleans.

Come, join us. The format allows for a lot of questions, interaction, and open discussion. As usual, there are group discounts.

Tuesday Round-Up: Sackett, Tyler, Defending Zoning, Canada Property Rights ... And More

Here's what we're reading this Tuesday:

• Tiffany Lashmet's Ag Law in the Field podcast: "Episode #155: Jesse Richardson and Anthony Schutz (Sackett v. EPA)"
• Lawprof Ilya Somin, Brennan Center for Justice: "Supreme Court Strengthens Federal Protection for Property Rights"
• Also from Prof Somin, Volokh Conspiracy: "A Flawed Attempt at a Libertarian Defense of Exclusionary Zoning"
• Here's the piece Prof Somin is responding to - Robert Poole, "A Brief History of Single-Family Zoning"
• Professor Malcolm Lavoie, SSRN, "Property Rights, Takings, and the Rule of Law: Assessing Annapolis Group v. Halifax Regional Municipality" (assessing the Supreme Court of Canada's latest ruling on property rights)
• Note, "The Contract Clause: Reawakened in the Age of COVID-19," 136 Harv. L. Rev. 2130 (2023)
• Lawprof Ilan Wurman, "Reconstructing Reconstruction-Era Rights," 109 Va. L. Rev. 885 (2023)

Worth checking out.

ICYMI: "Property Rights Hat-Trick: Breaking Down PLF's Supreme Court Victories" (vid)

Missed our law firm colleagues Jeff McCoy, Damien Schiff, and Christina Martin when they were live, talking about their SCOTUS wins in Wilkins v. United States (is the statute of limitations in federal Quiet Title Act cases a jurisdictional bar?), Sackett v. E.P.A. (scope of Clean Water Act wetlands jurisdiction), and Tyler v. Hennepin County (government’s keeping the excess value when seizing and selling a home to satisfy a property tax debt is a taking)?

We recorded it, so you can watch and listen at your leisure.

This is more than just a victory lap, the advocates offer their thoughts on the implications of the wins, and what might be next.

Bon appétit.

Tyler Takings Round-Up

Here are what others are saying about Supreme Court's recent ruling in Tyler v. Hennepin County, No. 22-166 (U.S. May 25, 2023), the case in which the Court unanimously held that the county's keeping the excess equity in Ms. Tyler's home over what she owed in property taxes and fees is an uncompensated taking of private property.

• As usual, lawprof Ilya Somin was first out of the gate with "Major Unanimous Supreme Court Victory for Property Rights in Tyler v. Hennepin County" ("While the Supreme Court decision left some notable issues unresolved, it nonetheless sets a significant precedent. Most obviously, the jurisdictions that currently authorize home equity theft—some twelve states and the District of Columbia—will no longer be allowed to do so. In addition, the holding that states cannot just redefine property rights at will has important implications for other property rights issues. It makes it harder for states to avoid takings liability.")
• Amanda Karras has this casenote at the International Municipal Lawyers Association's blog, "Supreme Court Rules Against County in Important Takings Case" ("States and local governments may also look to Nelson as guidance and provide a mechanism for the return of the surplus equity after the sale of the property.  That said, while Nelson remains good law, the question of overruling Nelson was not on the table, and it may be that such a scheme (which would allow a local government to keep surplus equity after the sale of the property if there is a mechanism for the return of the equity to the homeowner) may not be viewed favorably by the current Court and may also conflict with subsequent precedents from the Court.")
• Amy Howe, SCOTUSblog "Justices rule Minnesota county violated takings clause" ("The county pointed to a 1935 state law that strips an owner who falls behind on her property taxes of her interest in the property. Therefore, the county argued, there was no property for the government to take. The court disagreed, stressing that 'property rights cannot be so easily manipulated.' Indeed, Roberts observed, even Minnesota itself 'recognizes that in other contexts a property owner is entitled to the surplus in excess of her debt.' Although the county can sell Tyler’s condo to recover the $15,000 that she owes it, Roberts wrote, it cannot 'use the toehold of the tax debt to confiscate more property than was due.' By keeping the $25,000, Roberts concluded, the county 'effected a ‘classic taking in which the government directly appropriates private property for its own use.''
• Federalist Society webinar with Tony Francois, "Courthouse Steps Decision: Tyler v. Hennepin County, Minnesota" ("Join us as Tony Francois provides a detailed analysis of the decision and discusses the potential implications from this landmark ruling.").

We'll update as merited.

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

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

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

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

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

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

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

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

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

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

More to come as the analysis and commentary rolls in.

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

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

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

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

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

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

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

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

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

Slip op. at 10.

Check it out if you're interested.

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

Tyler SCOTUS Takings Argument Round-Up

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

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

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

More on the way. Stay tuned.

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

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

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

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

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

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

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

Listen to the arguments live, here.

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

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

Stay tuned.

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

Take a deep dive into the arguments and amicus briefs

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

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

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

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

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

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

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

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

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

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

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

Property Owner's SCOTUS Merits Brief: "Under no circumstances can government have an unbounded ability to confiscate entire properties of any size for even the most minimal tax debts."

Here's the merits brief, filed yesterday in the above-depicted Court by our law firm colleagues, headed by Counsel of Record Christina Martin in Tyler v. Hennepin County, No. 22-166, a case and an issue we've been following closely. This is the one, where, as recounted in the petition:

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

Because this is one of ours, we won't go into it in detail, and leave it to you to read and review. The Questions Presented:

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

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

We shall continue to follow along with the case and the to-be-filed amicus and merits briefs (or you may follow the Court's docket here). 

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

Brief for Petitioner, Tyler v. Hennepin County, No. 22-166 (U.S. Feb. 27, 2023)

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

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

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

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

That retroactive effect is not limited:

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

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

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

Sixth Circuit Says No To Res Judicata As The Latest Williamson County Workaround

Check out the U.S. Court of Appeals for the Sixth Circuit's opinion in Harrison v. Montgomery County, No. 20-4-51 (May 11, 2021). It's short, readable. And, most importantly, involves a subject that's near and dear: takings, and the myriad potential traps that await an unsuspecting property owner making such a claim.

If you've ever asserted a takings claim, you know what we mean. The other side may argue you are too late (statute of limitations, for example), or too early (ripeness, in one form or another), or, remarkably, you are both too early and too late (yeah, that happens). Or simply that property questions are not worthy of the court (abstention). And these arguments are often not presented in a clear way -- more like "here's a bunch of reasons to throw this case out Judge, see which one you like" -- and navigating through them is often like dealing with the Gordian knot.

Harrison wasn't much different, but the court -- thankfully -- parsed it out.

There, the takings claim challenged Ohio's scheme that allows municipal boards of revision to foreclose tax delinquent properties then transfer them to a land bank instead of selling the properties. An owner may reclaim the property by squaring up the back taxes owed, or may challenge the process in the board of revision, or may appeal the board's decision in a state court.

The program differs from the usual process (foreclosure followed by sale at auction) by allowing municipalities to retain the entire value of the properties without regard to the amount of the tax delinquency. By contrast, in the usual process the government only has a right to the amount of the sales proceeds to cover the delinquent taxes plus fees, and if the proceeds exceed the amount owed in taxes, the government is required to provide the owner with the difference.

The land bank scheme was a taking the (former) owner argued because he had no way to get the surplus back, and he sued. The district court dismissed, concluding that the owner could have -- and therefore must have -- raised a takings defense in either the board of revision proceedings on on appeal in an Ohio state court. Because the owner did not raise a takings defense, and the board's decision is now final because the owner didn't appeal, he was precluded from raising takings in a subsequent complaint. Could have raised a takings claim in a now-final case but didn't = res judicata. 

The Sixth Circuit disagreed, primarily because Harrison was not required to have raised a takings defense in the administrative process. See slip op. at 10 ("But whether Harrison could have raised her takings claim on appeal is a far cry from insisting she had to.").

Harrison conceivably might have raised a takings defense in the board (although as noted below, that would have been anticipatory pleading), or in the course of an appeal to Ohio's courts (presumably under the state's administrative procedures act). But he did neither. Before Knick, that might have been a problem, the Sixth Circuit concluded. But not after Knick:

Harrison had no obligation to invoke the federal takings clause before the Board of Revision to stop title transfer in the first place. In the State’s view, she should have answered the foreclosure complaint by arguing that the takings clause barred transferring title to the property. But, again, this approach shortchanges the reality that Williamson County’s first requirement—that there be a “final decision” effecting a taking—remains in place after Knick. The taking, so far as federal law is concerned, happened when the Board adjudicated the foreclosure of Harrison’s property through the land bank process, not before.

Besides, how could Harrison have known to bring a takings-based defense in the first place? The Board did not find that her home’s value outstripped the total delinquent taxes until it decided the foreclosure action. The final decision came a year after the County treasurer brought proceedings and nearly ten months after Harrison answered the complaint. Consider, too, that in the foreclosure complaint, the County Treasurer asked that the property “be sold according to law” or that it be “conveyed to a township.” R.17-2 at 7. As the County concedes, its complaint did not establish that Harrison’s property would be transferred to a land bank. See Appellant’s Br. at 7. Had the County sold the property at a public auction, Ohio law would have permitted Harrison to recover any surplus. See O.R.C. § 5721.20. Until it became clear the State would seize Harrison’s surplus equity by transferring title—a decision reached only when the Board adjudicated the foreclosure—no taking occurred. See Williamson Cnty., 473 U.S. at 186.

Slip op. at 9.

In other words, any attempt by Harrison to assert a takings defense would likely have been challenged as not ripe by the Town for lack of a "final decision." 

So yes, if you (1) can raise a ripe takings defense in admin proceedings, and (2) you choose to do so, and (3) you later fail to administratively appeal (administrative res judicata or full faith and credit), you may be precluded from asserting the same argument in a later complaint. See slip op. at 10 ("if a plaintiff chooses to pursue an administrative appeal, claim preclusion may bar a later attempt to seek the same relief"). But you don't have to raise the defense, especially when would have been too early to do so.

Before remanding the case to the district court to allow it to address the merits of Harrison's takings claim, the Sixth Circuit posed this missive, and gave the parties and the court below a hint on how the panel sees it:

That leaves the merits of Harrison’s federal takings claim, which implicates debates going back to the founding. On the one hand, in the words of Justice Chase, Harrison’s argument rests on the venerable proposition that “a law that takes property from A. and gives it to B . . . is against all reason and justice.” Calder v. Bull, 3 U.S. 386, 388 (1798). “If, on the other hand,” in the words of Justice Iredell, “the Legislature . . . shall pass a law, within the general scope of their constitutional power, the Court cannot pronounce it to be void, merely because it is, in their judgment, contrary to the principles of natural justice. The ideas of natural justice are regulated by no fixed standard: the ablest and the purest men have differed upon the subject; and all that the Court could properly say, in such an event, would be, that the Legislature (possessed of an equal right of opinion) had passed an act which, in the opinion of the judges, was inconsistent with the abstract principles of natural justice.” Id. at 399. As a court that specializes in sequels, not premiers, we think it prudent to allow the district court to consider the merits of this claim in the first instance. In doing so, it may wish to solicit historical evidence about the meaning of a taking in 1791 and 1868 with respect to this kind of government action. Should either party appeal the district court’s ruling, this panel stands ready to handle the appeal promptly.

Slip op. at 11-12.

This one isn't over, so we shall keep following along. Disclosure: my law firm colleagues at Pacific Legal Foundation filed an amicus brief in support of the property owner.

Harrison v. Montgomery County, No. 20-4051 (6th Cir. May 11, 2021)

Michigan: Gov't Keeping The Change From Tax Delinquency Sale Is A Taking

Our Louisiana friends have a great word -- lagniappe -- that we're not sure we understand precisely, but to us has always meant that little something extra. As Mark Twain wrote, "[i]t is the equivalent of the thirteenth roll in a 'baker's dozen.' It is something thrown in, gratis, for good measure." As far as we can tell, however, it's meant to be something you give to others, not a little something extra you keep for yourself.

Maybe that message didn't make its way up to Michigan, because until the Michigan Supreme Court's ruling in Rafaelli, LLC v. Oakland, County, No. 156849 (July 17, 2020), local governments apparently were free to treat themselves to a little something extra when they foreclosed on property for the owner's failure to keep up with their property tax payments. They would sell the property, pay themselves the taxes owed, and then pocket anything left over.

There a lot to digest in the court's opinion (even the syllabus is nearly 5 single-spaced pages), but if you've been following this case, you know that the facts are pretty straightforward. It started after an owner was short on his property tax payment by a whopping $8.41. For whatever reason, he didn't pay up and was hit with additional interest, penalties, and fees for a grand total of $285.81. When he didn't pay that, the County foreclosed, sold the home for $24,500, paid itself the taxes and penalties due, and kept the change. You know, for lagniappe.

The owner sued the County for (among other things) a taking under the Michigan and U.S. Constitutions. Both the trial court and the court of appeals rejected the claim. But the Michigan Supreme Court -- after hearing oral argument back in November (video here) -- unanimously concluded that it was a taking. We suggest you read the entirety of the majority and concurring opinions, all 92 pages, because there's a lot there to soak in. Magna Carta. Blackstone. Justice Cooley (naturally, this is Michigan, after all, so there's lots of Cooley). About the only thing missing from the case is a citation to United States v. Lee, 106 U.S. 196 (1882), another case involving a failure to pay taxes (for what is now Arlington National Cemetery) and whether forfeiture results in a taking. But we won't quibble with that.

The big question in Rafaelli was whether a homeowner possesses any "property" interest in the proceeds of a tax foreclosure sale. The owner may have forfeited its fee simple property interest in the home, but did it also forfeit its equity, or the specific right to return of the surplus after a tax sale? The court held no, "[t]his right continued to exist even after fee simple title to plaintiffs' properties vested with defendants[.]" Slip op. at 49. 

But what about the U.S. Supreme Court's decision in Nelson v. City of New York, 352 U.S. 103 (1956), in which the Court, in an opinion by Chief Justice Warren, held that New York's self-lagniappe from a tax foreclosure sale was not a taking? The Michigan court distinguished that case, concluding that the critical feature of Nelson was New York's statute, which provided a means (albeit a "harsh" one, in the words of Chief Justice Warren's opinion) for the property owner to recover the surplus. The statute both recognized a property interest in the surplus, and set up a way for the owner to get it back. This is like your waitperson asking you after you hand them payment for your meal, "do you need change?" If your meal was $12, and you hand them a $100 bill, dang right you need change! New York asked, but the the owner in Nelson did not avail himself of this process, so the Court concluded the government could keep the surplus without running afoul of the Takings Clause.

Michigan's statute, by contrast, contains no such process. Once sold by the authorities, there's no procedure available for the owner to try and get the surplus back. The County didn't ask "need change?" And Michigan's statute does not expressly recognize the owner's right to the surplus, either.

The court rejected the County's argument that there was no property interest at all here, because the owner had forfeited it. Relying primarily on the U.S. Supreme Court's opinion in Bennis v. Michigan, 516 U.S. 442 (1996), the County argued there's no taking under the Fifth Amendment when an owner is forced to surrender property for "civil asset forfeiture." The court concluded that Michigan's tax process was not civil asset forfeiture, which has a punishment function. The tax process, by contrast, "is to encourage the timely payment of property taxes and to return tax-delinquent properties to their tax-generating status, not necessarily to punish property owners for failure to pay their property taxes." Slip op. at 14 (footnote omitted). And forfeiture does not affect title: 

Forfeiture does not affect title, nor does it give the county treasurer (or the state if the state is the foreclosing governmental unit) any rights, titles, or interests to the forfeited property. Therefore, we reject the premise that plaintiffs “forfeited” all rights, titles, and interests they had in their properties by failing to pay their real-property taxes.

Slip op. at 12-13.

The Michigan court was thus faced with the question of if there's a property interest in the surplus, what's the source of that property interest? For the majority's answer to that, jump to page 26 of the slip opinion. English common law, the court concluded, recognized the owner's right to any surplus after a tax debt sale. Michigan law too (cue, Justice Cooley). The government's tax power only extended to the power to take property to satisfy the debt. The court's ruling is worth quoting at length:

We conclude that our state’s common law recognizes a former property owner’s property right to collect the surplus proceeds that are realized from the tax-foreclosure sale of property. Having originated as far back as the Magna Carta, having ingratiated itself into English common law, and having been recognized both early in our state’s jurisprudence and as late as our decision in Dean in 1976, a property owner’s right to collect the surplus proceeds from the tax-foreclosure sale of his or her property has deep roots in Michigan common law. We also recognize this right to be “vested” such that the right is to remain free from unlawful governmental interference. “To constitute a vested right, the interest must be something more than such a mere expectation as may be based upon an anticipated continuance of the present general laws; it must have become a title, legal or equitable, to the present or future enjoyment of property . . . .” As demonstrated by the discussion earlier, the right to collect these proceeds was beyond a mere expectancy or claim of entitlement. It is as much an interest in property as our kitchen tables; television sets; and, as this Court observed in Seaman, our cattle and farming utensils. Further, the prohibitions against collecting excess taxes, selling more land than needed to collect such taxes, and taking more property than necessary to serve the public all underlie a property owner’s right to collect the surplus proceeds and were well-established legal principles before 1963. Therefore, we hold that the ratifiers would have commonly understood this common-law property right to be protected under Michigan’s Takings Clause at the time of the ratification of the Michigan Constitution in 1963.

Slip op. at 35-36 (footnotes omitted).

It was that last sentence that prompted a lengthy concurring opinion from Justice David Viviano on two main grounds. First, he viewed the property interest more broadly (a right to the equity in the home, not merely the surplus proceeds from the tax sale). Second, he thought the question should have been answered with original public meaning analysis, not whether the founders or ratifiers of the constitution(s) might have believed that this was within the definition of property.

By contrast, the majority here focuses on what res the ratifiers would have believed were encompassed by the term “property.” This treats the ratifiers’ expectations about the application of the constitutional text as binding. Such an approach has been rejected by those who, like myself, consider courts to be bound by the Constitution’s original textual meaning—it is the publicly accessible meaning of the text, rather than its intended or expected applications, that binds the courts.

Concurring op. at 4 (footnotes omitted). But although he disagreed with the analysis, he agreed with the result.

Finally, this: eight bucks seems more like a rounding error than a significant underpayment, but we get that you do owe every cent. And that when you don't pay on time, they can hit you up for the taxes owed, the interest, and penalties. But the lawyers who got this case surely must have quietly rejoiced when the County dug in its heels and teed up for the court the glaring inequities. As lawprof Ilya Somin wrote here ("Michigan Supreme Court Rules Government Can't Seize Entire Value of Home Over Property Tax Delinquency Worth $8.41"), there should not have been a fight over what is truly a "trifle."

The figure in the previous paragraph is not a typo. Oakland County really did seize an entire rental house, sell it, and kept all the money for itself, over a mere $8.41 in unpaid taxes. That's $8.41, not $841 or $8410.

...

People who are not experts in takings law can be forgiven for thinking that all of the above should be obvious. Of course it is unconstitutional for the government to seize the entire value of a $24,000 home to pay off $8.41 in delinquent taxes. Seizing the entire value of an $82,000 house to pay off a $6000 delinquency is only slightly less awful.

Reaching these obvious conclusions shouldn't require a state supreme court decision with almost 100 pages of majority and concurring opinions! Moreover, a reasonable local government should never  have tried to seize a house over a mere $8.41 in the first place—even if its lawyers advised them they might be able to get away with it. It's the kind of case that gives lawyers —and taxes—a bad name.

We suppose the County believed it had to do this -- that it couldn't overlook small matters while also enforcing more significant shortfalls. But whatever the reason, the County picked a fight over a piddly amount, and ended up with nothing (nothing!) even for big matters.

So what's next?

In the short run, there's not much of a need for a valuation trial. This involves money and we know the exact fair market value of the property on the date of the taking (plus the time value of that money for any delay in payment, and maybe attorneys' fees?). 

In the long run, we're guessing there's an amendment to the statute coming, to make it more like New York's in which there's a process in place for the property owner to get the surplus back.

Rafaeli, LLC v. Oakland Cnty., No. 156849 (Mich. July 17, 2020)

Kentucky App Ct: Even Though We Don't Agree, Tax Assessment Is Admissible In Eminent Domain Only By Condemnor Against Property Owner

Today's case is a short one, but worth the short bit of your time it takes to read it.

In Borders-Self Storage & Rentals, LLC v. Ky. Transp. Cabinet, No. 2019-CA-000217 (July 2, 2020), the Kentucky Court of Appeals held that the assessed value of property for property tax purposes is admissible if the value was fixed by the property owner, and the condemnor offers it as an admission against interest. But if the landowner offers the same property tax assessed value, it is not admissible.

The Court of Appeals didn't make up this uneven rule, but was merely applying a long-standing rule in Kentucky, first adopted by the Kentucky Supreme Court in Culver v. Commonwealth, Department of Highways, 459 S.W.2d 595, 597-98 (Ky. 1970). And the Court of Appeals has to follow Supreme Court precedent.

After Borders upgraded the property, it commissioned an appraisal which, in accordance with the law, it submitted to the property tax assessor. That resulted in a higher tax assessed value. The DOT condemned, and Borders wanted the jury to hear the higher tax value, as evidence the property being condemned was worth more in its "before" condition. Borders pointed to the rule that a condemnor can introduce evidence of the tax assessed value if (as here) the value was "fixed by the owner." It is an admission against interest.

That same rule should be a two-way street, Borders argued. The Court of Appeals agreed with the logic but held that "we are compelled to conclude that the circuit court properly excluded evidence of assessed tax value sought to be introduced by Borders." Slip op. at 5. That darn Culver case!

Not content to go gentle into that good night, the Court of Appeals teed the issue up for further review:

While bound by Supreme Court precedent, we may, nonetheless, express our disagreement therewith. SCR 1:030(8)(a); Special Fund v. Francis, 708 S.W.2d 641, 642 (Ky. 1986). The exclusion of the assessed tax value of real property when offered into evidence by the landowner, as opposed to the Commonwealth, strikes us as fundamentally unfair and legally unsound. Herein, Borders submitted the appraised value of the real property to the PVA who reviewed and accepted the valuation. This appraised value became the tax assessment for the real property. The assessed tax value offered by Borders is directly relevant to the fair market value of its real property and should have been admitted into evidence. At minimum, it is evidence that a jury should be allowed to consider. Any challenge to the assessed tax value as not representing the fair market value of the real property should properly go to the weight of the evidence and not the admissibility thereof. We encourage the Supreme Court to reconsider its precedents holding otherwise.

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

Borders Self-Storage & Rentals, LLC v. Ky. Transp. Cabinet, No. 2019-CA-000217 (Ky. App. July 2, 2020)

NH: Govt Keeping Excess Proceeds Of Tax Sale Is A Taking

The town grabs, then sells property for failure to pay property taxes. The sales price is more than the tax lien. Does the town have an obligation to give the owner the difference, or can it keep it unless the owner sues?

Thanks to a colleague who sent us the case, we know that was the issue facing the New Hampshire Supreme Court in Polonsky v. Town of Bedford, No. 2019-0339 (Apr. 24, 2020). Short story: yes, the town needs to affirmatively give the extra money back, and no, the town can't keep it unless and until the owner sues to get it. To read the statutory scheme otherwise would result in an unconstitutional taking.

Check it out (quick read, only 13 pages). 

A couple of notes:

• The owner asserted his rights under part I, article 12 of the New Hampshire Constitution ("no part of a man’s property shall be taken from him, or applied to public uses, without his own consent, or that of the representative body of the people").
• This is a case interpreting a statute, not a "pure" constitutional claim for just compensation.
• The court recognized that the takings clause isn't so much an owner's right to go get compensation, as it is about the government's obligation "to provide compensation[.]" Slip op. at 11 ("The takings clause, however, does not require a former owner to take any action to receive that compensation, and the Town points to no other constitutional provision that imposes such a requirement. Thus, there is no constitutional mandate for the remedy the Town seeks."). A critical difference. 

The court affirmed the trial court's equitable order compelling the town to give the former owner the excess, rejecting the town's argument that the owner had "unclean hands" because of his delay in seeking to redeem the tax lien. 

More on the decision here ("Supreme Court rules that towns can't profit off sales of tax-deeded properties").

Polonsky v. Town of Bedford, No. 2019-0339 (N.H. Apr. 24, 2020)

Here's The Agenda And Faculty For The 2020 ALI-CLE Eminent Domain And Land Valuation Litigation Conference, Nashville, Jan 23-25, 2020

You overwhelmingly asked for Nashville, and we're bringing it to you!

Get ready, and hold your place now: here's the list of programs and speakers for the 36th Annual ALI-CLE Eminent Domain and Land Valuation Litigation Conference, to be held at the Downtown Nashville Hilton, January 23,- 25, 2020. Two-and-a-half days with top-notch national faculty (lawyers from both sides, judges, legal scholars, appraisers, relocation experts, and others).  

Early registration and group rates are available now. 

Here are just some of the programs:

• Featured Presentation: Property Rights as Civil Rights: Seeking Justice Though the Fourth and Fifth Amendments. Hon. Jonathan Apgar, Jamila Johnson, Alan Ackerman. Moderator: Leslie Fields.
• Making Sense of the New Rules After Knick v. Township of Scott: Where Do I Go, What Do I Do? David Breemer, Smitha Chintamaneni, Professor Bethany Berger. Moderator: Professor Steven Eagle.
• When A River Runs Thought It: Water Rights and Takings. Nancie Marzulla, Hertha Lund, and Charles McFarland. 
• Passive Takings by Government Inaction. Professor Christopher Serkin.
• Show, Don't Tell: The Dos and Don'ts of Demonstrative Evidence. John Murphy, Jeffrey Hamill.
• Is Close Enough Good Enough? Establishing the Date of Valuation in Direct and Inverse Cases. Neil Olson, Bill Ryan.
• Creative Approaches to Solving Difficult Appraisal Problems, Edward Burg, Bob Grace, MAI, Michael Rikon. Moderator: Joseph Waldo. 
• All You Need is Love: New Frontiers in Alternative Dispute Resolution in Eminent Domain. Cortney Young, Dwight Merriam.
• Road Warriors: Building and Trying an Eminent Domain Case From Your Laptop. Paul Henry, Jody McSpadden.
• Special Benefits: The Givings Clause? Heather Cunningham, Randy Smith.
• How To Try and Settle Pipeline Cases. Thomas Peebles, Melissa Glassman.
• Going Where No Court Has Gone Before: The Tension Between the Courts and Appraisal Methodology. Kevin Walsh, Kannon Conway. 
• Responding to Project Changes: Valuing a Taking When Government Action Changes or is Ongoing. Meghan Largent, W. Andrew Gowder. 
• Responding to the Abuse of Motions in Limine. Anthony Della Pelle, Williams James (invited)

There's also an Ethics program. For that, we are doing something a little different this year, with a special don't-miss presentation, "Surviving the Daily Fistfight: Finding Your Resilience When Every Day is a Battle" with Clint Schumacher, Christian Torgrimson, and Michael Ryan. 

And for those new to the field, or old hands who would like a refresher course, there's the "101" track on Thursday, going through an eminent domain case from A to Z. 

And this isn't the complete list, and there's more on relocation, regulatory takings from both sides of the case, effective strategies to determine unity of lands, fixtures, national updates for eminent domain and regulatory takings, and the "open mike" National Forum (where practitioners from around the nation share their issues and cases).

Look for the complete brochure shortly on the Conference web page on the ALI-CLE site.

And of course, there's Nashville. We're right around the corner from all that the town has to offer. Music City, USA. Hot chicken. The Grand Ole Opry. Country Music Hall of Fame. The Hermitage. 

So make your flight and hotel reservations now. Don't miss out. The attendance at the last several conferences has been record-setting, and the conference block at the hotel has sold out.

Join us - old friends and new colleagues! 

HAWSCT Removes Property Tax ... Oops, "Surcharge on Investment Real Property" - Measure From The Ballot

What, you may ask, does the challenge by Hawaii's counties to the proposed constitutional amendment which was on the ballot (until just a few minutes ago) have to do with the usual topics of this blog?

Not a whole lot (although we do cover property tax and election law issues occasionally), but as always, there's a takings hook. Read to the end. 

The ballot measure proposed to amend the Hawaii Constitution's property tax provision (article VIII) which currently delegates to the counties the exclusive power to levy property taxes. The measure, proposed by the legislature read:

Shall the legislature be authorized to establish, as provided by law, a surcharge on investment real property to be used to support public education? 

The counties, offended that the State would horn in on their property tax monopoly, challenged the ballot question as misleading. This would be a dilution of the counties' property taxation power, not merely authority for a "surcharge" whatever that might be. And what does "investment property" mean? 

 

Oral arguments held earlier this week, order removing the question from the ballot issued today. 

 

Two thoughts:

• First, when the Attorney General responds to a question from a justice that if the ballot was unclear, then the voter should vote "no" on the measure, it's game over, man, game over. As the Star-Advertiser wrote: "Associate Justice Paula Nakayama asked if she bought a home for her daughter to live in, whether that would be considered investment property. Suzuki said that it would be left up to the Legislature to define that term. 'So how is a person supposed to vote on this?' asked Nakayama. 'How do I know as a voter that that’s not going to be taxed?' 'Then I think you should probably vote ‘no,’' Suzuki responded, surprising some in the courtroom and prompting laughter." Listen here to that exchange. They say it's hard to win a case in oral argument, but easy to lose it. This proves the maxim. 

• Second, we're not completely on board with some members of the court who professed to not understand what "investment property" means. After all, this is the same court that just a few months ago unanimously concluded that a Maui property owner who was denied all use of his land by conflicting County regulations and could not build his home on a parcel zoned "residential," did not suffer a taking because he retained "investment use," which the court defined as a property having some present value because the owner may have hope that in the future, the County might change its regulations to allow development. The court seemed to have no problem at all in that case understanding what "investment real property" looked like. (There's your takings hook, folks.) What is "investment property," in the court's view? All property that has any value is investment property, man. 

This case was a fight between two wolves over what's for dinner. The lambs (the voters and taxpayers) didn't have much of a say as usual, and portions of the arguments revealed what these folks think about the intelligence of the average Hawaii voter: 

"The average voter would not even know what a surcharge is. Some voters don’t even know what real property is,” Honolulu Corporation Counsel Donna Leong told the court.

Seriously? How many people don't know what "real property" is? 

 

The court merely issued an order today, and we'll have more understanding of the rationale when it issues its full opinion. 

Links And Materials From Today's Transportation Research Board Session

Here are the cases and other items I either spoke about or mentioned at today's Transportation Research Board's 57th Annual Workshop on Transportation Law in Cambridge, Massachusetts:

• The Colorado public use cases: public use vs. public purpose: Lafayette and Carousel Farms
• On the Supreme Court docket: Violet Dock Port (SCOTUS, Louisiana)
• The Louisiana Supreme Court's ruling on valuation of a unique property (replacement cost vs fair market value)
• "New" property vs. "old" property - environmental rights as "property" (CADC, Hawaii)
• Tribal immunity from eminent domain (CA10, cert denied)
• Public can use the electricity produced, not the land taken (but that's good       enough) (SD)
• Utility takings: Claremont (Cal), Missoula (Montana)
• Post-Kelo statutes: how effective? (Georgia)
• The relationship between condemnation and inverse: Stimson (NC)
• Inverse vs. tort, part II: MR/GO and Katrina flooding (CAFED)
• Maryland: government inaction could result in inverse liability (Maryland)
• Objecting to eminent domain is a political opinion (CA9)
• Highest and Best Use could include "conceptual plans" (Florida)
• Causing a nonprofit to lose even more money is considered compensable "goodwill" under California law (California)
• Billboard valuation - loss of income isn't compensable, but there is more that one way to still get it (NC)
• Larger parcel, quick take deposit (Hawaii)
• Here's the amicus brief we filed in the above case, which cites Baetjer v. United States, 143 F.2d 391, 395 (1st Cir.) (condemnation on island of Vieques caused severance damages to parcels on Puerto Rico), cert. denied, 323 U.S. 772 (1944).
• Federal Relocation Act, inverse condemnation, and attorney fees  (West Virginia)
• The larger parcel in inverse cases (aka the "denominator" issue) (SCOTUS)
• Bye bye, Williamson County? (SCOTUS)
• Palazzolo applied (NY)
• Judicial Takings Redux - Martin's Beach (SCOTUS)

Thanks to my fellow speakers -- Bernadette Duran-Brown and Laura Curry -- and to the organizers of the Conference for asking me to be here. 

New Cert Petition: Overrule Williamson County!

Here's a newly-filed cert petition which asks the Supreme Court to review a Sixth Circuit decision in which the county auctioned the Church's property to satisfy a tax lien, then kept the difference between the owed taxes plus costs, and the proceeds from the sale. The court dismissed the claim under Williamson County because it concluded that the Church could have pursued compensation from the county under state procedures.  

Here are the Questions Presented:

When Wayside Church fell behind on the property taxes for its youth camp, Van Buren County foreclosed and sold the youth camp for $206,000. After satisfying the church’s $16,750 in penalties, taxes, and fees with the proceeds from the sale, the County pocketed the remaining 91% of the property’s value as a windfall required by Michigan’s property tax law. Likewise, the County kept the surplus when it seized and sold Myron Stahl’s land and Henderson Hodgens’s home to pay their small tax debts. Because there is no clear state court remedy for dispossessed property owners to recover the surplus proceeds from tax sales, the church, Stahl, and Hodgens filed a Fifth Amendment takings claims in federal court. But a divided Sixth Circuit panel held that Williamson County Reg’l Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172, 194 (1985), the Tax Injunction Act, and comity barred federal jurisdiction.

The questions presented are:

1. Does a local government violate the Takings Clause when it takes and sells tax delinquent property and keeps the surplus profit as a windfall?

2. Should the Court overrule or limit the portion of Williamson County that requires a property owner to sue in state court to “ripen” a federal takings claim, as suggested by many Justices of this Court? See Arrigoni Enterprises, LLC v. Town of Durham, 136 S. Ct. 1409 (2016) (Thomas, J., joined by Kennedy, J., dissenting from denial of certiorari); San Remo Hotel, L.P. v. San Francisco, 545 U.S. 323, 349 (2005) (Rehnquist, C.J., concurring in judgment).

3. Do the Tax Injunction Act and comity bar a federal court from hearing a claim that challenges the uncompensated retention of funds that exceed a tax debt but does not challenge the taxes or debt itself?

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

Petition for a Writ of Certiorari, Wayside Church v. Van Buren County, No. 17-88 (July 13, 2017) 

6th Circuit: Michigan Statute Allows Recovery Of Money, So Takings Claim Not Ripe For Federal Court

The Sixth Circuit's majority opinion in Wayside Church v. Van Buren County, No. 15-2463 (Feb. 10, 2017) isn't all that exciting -- after all, it was a takings case brought in federal court, and you know what that means: Williamson County -- but do give it a read. The facts are somewhat unusual, even if the court's ultimate conclusion is not.

It involved the intricacies of Michigan's General Property Tax Act, a statute which allows municipalities to the foreclose on properties that are delinquent in paying property taxes. The municipalities are allowed to auction off the properties and keep the money, even if the auction proceeds exceed the delinquent taxes. That's what happened here.

Wayside didn't pay its property taxes, the County foreclosed, obtained fee simple title, and auctioned the property. The sales price of $206,000 exceeded the minimum bid price, which had been calculated by adding up the back taxes, fees, and admin costs which Wayside owed. When the County kept the $189,250 difference, Wayside sued alleging a taking of its property without just compensation. In federal court.

As we noted above, you know what that means -- dismissal. The district court, however, didn't dismiss under Williamson County. Instead, it concluded that the complaint didn't state a claim.  

On appeal, the Sixth Circuit affirmed, although for different reasons. It flipped the analysis, and held that the jurisdictional ripeness argument should have been dealt with first. The court concluded that Williamson County's "state procedures" requirement compelled Wayside to seek compensation from the County in Michigan state courts before running into federal court.

But wait, Wayside argued, we can't get just compensation in Michigan courts because the previously mentioned GPTA has a provision forbidding the former property owner from "bring[ing] an action for possession of the property against any subsequent owner, but may only bring an action to recover monetary damages as provided in this section." This action may only be instituted in Michigan's Court of Claims. Scratching your head yet because that provision seems to permit a claim for just compensation?

The rub was that another provision of the GPTA barred the Court of Claims from hearing cases "if the claimant 'has an adequate remedy upon his claim in the federal courts.'" That, argued Wayside, meant that it could not go to state court. Federal court, here we come. 

The Sixth Circuit rejected that argument, holding that the plain language of yet another provision in the GPTA revealed that the limitation only applied to claims under certain sections of the statute, and not under the entire statute. Takings claims were not one of the excluded claims, and thus held the court, Wayside could have -- and thus should have -- brought its takings claim in Michigan's Court of Claims.  

Like we said, nothing terribly exciting in the majority opinion unless statutory interpretation floats your boat.

But don't quit, because the dissenting opinion is well worth your time. You know we are going to like it when it begins like this:

In this case the defendant Van Buren County took property worth $206,000 to satisfy a $16,750 debt, and then refused to refund any of the difference. In some legal precincts that sort of behavior is called theft. But under the Michigan General Property Tax Act, apparently, that behavior is called tax collection.

Dissent at 14. The dissenting judge would have held that the federal courts have an obligation to hear federal claims -- "Williamson County singles out takings claims for disfavored treatment so far as the availability of a federal forum is concerned" -- and since the doctrine is prudential, he would have dispensed with it in the circumstances here.

We won't trouble you with further details, but urge you to read the entire dissent. It's not long (four pages), and a fun read.    

Wayside Church v. Van Buren County, No. 15-2463 (6th Cir. Feb. 10, 2017) 

Links And Notes From Today's Las Vegas Eminent Domain Seminar

 
During. Good crowd.

Before. Note the power strips on the tables.
Well played, Caesar's, well played.

To supplement your written materials, here are the decisions and other materials which we spoke about this morning at the CLE International Eminent Domain seminar:

• Entry statutes: the California Supreme Court decision in Property Reserve: the court rewrites the statute in order to save it.
• Virginia federal court rejects facial challenge to Virginia's entry statute.
• North Dakota Supreme Court finds that small entries are "examinations" and not takings.
• Pipeline takings: Pennsylvania appellate court agrees that the polar vortex made them do it.
• North Carolina's Map Act case (Kirby). Land banking to keep the eventual acquisition price low, is a taking.
• California's City of Indio case: temporary "no build" area while city gets around to taking the property is a taking.
• Virginia: an unacceptably low appraisal = "bona fide" offer.
• Colorado Supreme Court reads its eminent domain statute narrowly: when it says Commission must approve taking, DOT can't do it.
• Georgia appellate court: appraisal "before" negotiations means just that.
• Who decides, Part I: California Supreme Court in City of Perris -- judge decides Nollan/Dolan issues (but they may be project influences, so property owners do the happy dance).
• Who decides, Part II: West Virginia Supreme Court concludes that condemnor (not the courts) is sole determiner of sufficiency of quick take deposit.
• Municipal takings of public utilities: Montana Supreme Court writes "more" out of the "more necessary" clause.
• Creative Thinking Prize: Texas Supreme Court sides with property owner who formed conservation district to beat back a taking. Don't tell me no, tell me how.
• Pending issues at SCOTUS: (1) attorneys' fees under the URA; (2) Murr v. Wisconsin - the "larger parcel' in regulatory takings.
• Speaking of attorneys' fees: property owner's claim that trial date (and not date of complaint) was date of valuation was not reasonable.
• Law review articles of note:
• Bill Wade's article on damages and just comp when you are dealing in income-producing properties
• Virginia Law Review article on state constitutional property.
• Mike Berger's lookback on "Property, Democracy & The Constitution."
• Arizona Law Review: do animals have property rights? 

Also, here are links to the cases which our Toronto colleague Shane Rayman referred to in his afternoon presentation on lessons for U.S. lawyers from Canada's law of injurious affection:

• Antrim Trucking - the Supreme Court of Canada case (won by Shane) in which the court upheld injurious affection for the business damages resulting from a highway project, even for an owner whose property was not physically expropriated.
• Another of Shane's cases, this one involving rural property and multiple parcels. 
• The Texas Court of Appeals case in which a business whose property was not physically taken for a rail project was nonetheless (perhaps) entitled to inverse condemnation damages for business losses.

Our thanks to Darius Dynkowski, Autumn Waters, and Kermitt Waters for planning this seminar, and for inviting us to kick it off this morning.

Related articles

State Appeals NC "Map Act" Takings Case

Who Knew? The North Carolina Constitution Doesn't Have A "Takings" Clause

Amici Brief: Didn't Lingle Tell Us That Due Process And Takings Are Distinct Claims?

Hawaii's Reapportionment Commission Breathes A Sigh Of Relief: SCOTUS Upholds Arizona Redistricting Commission

There's a category of cases in which it isn't difficult, with reasonable accuracy, to predict the ultimate outcome without knowing much about the substantive law. The recent ACA and marriage cases, for example. You kind of just know how they're going to come out. Bush v. Gore, 531 U.S. 98 (2000), was another one of those. Because the practical and political forces at play in those and similar cases overwhelm the legal objections no matter how technically and logically correct they appear, and the justices in the majority probably end up making their decisions based on pragmatic as well as their (perceived) policy inclinations. The opinions and dissents get dressed up with citations to precedent and the like, but what really seems to drive these cases is their practicalities. 

It seems to us that today's 5-4 decision in Arizona State Legislature v. Arizona Independent Redistricting Comm'n, No. 13-1314 (June 29, 2015), is one of those. Not because it was what non-lawyers might say is a "result-oriented" decision that was compelled by the justices' politics, but rather because there's no obvious solution to the case that merges the obvious law with the practicalities. On one hand, it would seem obvious that the the term "legislature" in the Elections Clause really does mean The Arizona Legislature, and not generically "the legislative process." At least as a starting point that acknowledges the plain language of the constitutional text, and very likely the intent of the framers. On the other, not only does Arizona have a redistricting/reapportionment commission that has been around for a while, so do several other states, Hawaii included, and a ruling declaring those commissions unconstitutional when they undertake congressional redistricting would cause a lot of humbug in those states, and throw the issue of how to divide up a state's population for electing the House of Representatives into politically-charged state legislatures. These commissions seem to work reasonably well, and many have been in existence for a while without objection. So the question arose: what was the Court going to do in a challenge brought by the Arizona Legislature which objected to the people of Arizona taking away the Legislature's power and delegating it to a commission?

Well, we have our answer today in that case -- which we previewed here ("Is the Hawaii Reapportionment Commission About To Go The Way Of The O'o Bird?") -- with the Court's majority concluding that "Legislature" doesn't really mean "the legislature," and the people of Arizona constitutionally delegated the power assigned to "the legislature" in the Elections Clause to the Arizona redistricting commission. Read the majority opinion of Justice Ginsburg and the lead dissent of Chief Justice Roberts for the reasons why. Reasonable minds differ, and at least in this case we're okay with that, even if we guessed there was no way the Court would force commission states to throw the process back to their legislatures, even if the constitution required it. A challenge brought earlier -- like way earlier, when these commissions were originally created -- may have had a better go. 

A sidebar: the opinions in this case reminded us of a somewhat similar case we litigated (and eventually lost, 3-2, at the Hawaii Supreme Court). In that case, the people of the County of Kauai adopted an amendment to their county charter by popular vote that would have limited the ability of the county to increase property taxes. When the measure was adopted by an overwhelming vote, it was challenged in state court by the County of Kauai, which sued the Mayor of the county to enjoin enforcement, arguing that the delegation in the Hawaii Constitution of the property tax power "to the counties" really meant "only to county councils." We represented the ballot proponents, who intervened to object on standing grounds: the County, we argued, could not be the plaintiff as it wasn't injured, and the defendant could not be the Mayor, as he wasn't the party who allegedly did anything wrong. It was the county council members who should have been the plaintiffs, and the County itself should have been the defendant. But the council members were too scared politically to be the actual plaintiffs, so they spent public funds and hired outside private counsel to represent the County.

Long story short, we lost the case, with three Hawaii Supreme Court justices agreeing that the County did not have standing as a plaintiff. Instead of dismissing the case, however, the majority dropped the County as plaintiff, made it the defendant, and essentially allowed an advisory opinion to be rendered. On the merits, the majority concluded that the term "to the counties" is really a delegation of exclusive power "to county councils." 

Compare that to the Arizona case, in which the majority concluded that the Arizona legislature had standing because it had its power to redistrict taken away ostensibly unconstitutionally, and on the merits that "legislature" means the people exercising legislative functions. In other words, the Elections Clause only requires the legislature redistrict, but doesn't require any particular form of state government, so delegation of the power by initiative is okay. A "committee of the whole" argument.

See why it reminds of the Arizona case? 

As we noted in our earlier post on that case, it could have had a big impact on Hawaii, which, like Arizona, accomplishes both Congressional and state redistricting and reapportionment via a commission. We didn't adopt ours by initiative like Arizona, at least directly. Ours was created by the 1978 constitutional convention, which was ultimately ratified by popular vote. No substantive difference, however. If today's ruling had gone the other way, Hawaii's reapportionment commission would likewise been at least partially unconstitutional.

So the Commission can breathe easy, at least for now.

We say "for now" because the bigger challenge is on the calendar for the next Supreme Court term, the Texas "one person, one vote" case which we wrote about here. However that case goes, it won't impact the Hawaii Reapportionment Commission directly like the Arizona case might have, but rather could prohibit the Commission from counting population the way it currently does, and overturn 50 years of Hawaii practice which excludes active duty military from being represented in the state legislature. 

Like the Arizona case, we think we know which way this one is going to turn out, and why. But we're not going to say, just yet. 

Arizona State Legislature v. Arizona Independent Redistricting Comm'n, No. 13-1314 (U.S. June 29, 2015...

Related articles

Good Day For Election Reformists; Bad Day For Environmentalists

Star-Advertiser: Hawaii "Is Exception To Constitutional Law" In State Reapportionment

Worth Reading: An "Economic Liberty" Decision From The Texas Supreme Court, With Lessons For Eminent Domain

Leviathan Shrugged: Oral Arguments In Horne Reveals The Taking, But Remedy Still Open

How Are They (I Mean *We*) Going To Pay For Honolulu's Rail?

The short answer: taxes.

[Update #1: a report from last night's community meeting, "Railing Against Honolulu's $6 Billion Rail Project" ("Honolulu Mayor Kirk Caldwell and his top transit official took their licks from a decidedly anti-rail crowd during a boisterous town hall meeting at Washington Middle School on Wednesday."

Update #2: "A Hawaii Senate committee passes a bill to extend the GET rail surcharge another give years, but makes clear the money should only be used to build the rail line" (4/8/2015, via Civil Beat).]

There's been a lot of breathless reporting over the past couple of weeks about the skyrocketing cost of the 20-mile, 21-station Honolulu rail project. Cost estimates to build the line from Ewa to Ala Moana Center started off in the range of $3.5 billion, but anyone who was paying attention knew this wasn't anywhere in the ballpark. Sure enough, over time, the figure kept moving upwards. Now we're at, what, $6.5 billion, more or less? And there's nothing to indicate this is the upper limit except more promises that this figure is the light at the end of the proverbial tunnel. 

Several state legislators are even holding a community meeting tonight (Monday, March 30, 2015) to let the people vent, and HART and the Mayor are going to dutifully show up and take any public lumps that may be coming their way.

But will anything come of this and the other (and we're paraphrasing here) "we're shocked, we tell you, shocked!" reactions to the revelations that the rail is going to cost more to build and perhaps operate than originally promised?

We predict no, that this is mostly political theater designed to assuage the public, when there's virtually no chance the project will get derailed or even scaled back, whatever it eventually costs. So despite all of the present posturing and prostrating before the public by officials, make no mistake: it's now too late to do anything but pay for the thing. New York City Mayor Bloomberg accurately projected the attitude of public officials when it comes to marquee projects such as Brooklyn's Barclay Center, "Nobody's gonna remember how long it took. They're only gonna look and see that it was done."

Besides, construction of the rail is already underway, and we know what that means. 

So is HART (I mean "we") going to pay whatever this thing costs to build, maintain, and operate?  Short answer: yes --  

• The Hawaii Legislature is reviewing whether to extend the "sunset" period for the extra General Excise Tax that we pay in the City and County of Honolulu. Our prediction: the Legislature will extend the tax. It has to. Maybe not as long as the city administration would like, but extend the GET increase it will, despite the noise being made. And the Legislature will keep on doing so until the project is paid for. Update: see Update #2 above.
• And how about the cost of running the thing, once built? A recent public meeting of HART's Transit-Oriented Development Committee revealed the preferred method to finance operation and maintenance (and it's no big secret): Tax Increment Financing. According to Wikipedia (which is, in this case, accurate), "TIF is a method to use future gains in taxes to subsidize current improvements, which are projected to create the conditions for gains above the routine yearly increases which often occur without the improvements." In other words, you pay for a project now by predicting that the project itself will raise property values in the future. HART is predicting -- mostly accurately, we think -- that property values along the rail corridor will rise as a result of rail being nearby. Whether they are within the City's contemplated "TOD" zone which will allow for more intensive and creative development than traditional zoning, or even outside of the TOD zones, where property values may increase due to the general gentrification that is predicted as a result of the rail. Bottom line: property taxes are likely going up. And the difference between what Honolulu property taxpayers pay now and what they will pay with the increased value -- the "tax increment" in "TIF" -- is what will pay for the rail.    

This is what voters voted for, after all, when they, like Sgt. Deux Deux said "si" to the creation of HART (and the rail). From here forward, we all must say "oui." 

Related articles

Tommorrow's Public Rail Project Forum: Eminent Domain, Just Compensation, And Protecting Property Rights

Honolulu Rail FAQ's (And Answers) From Last Week's Community Meeting

inversecondemnation.com: Property Owners Invited: Honolulu Rail Project Public Informational Meeting, Thursday, March 5, 2015, Farrington High School

Pacific Business News Report On Eminent Domain And The Honolulu Rail

Video: Report On Community Meeting On Property Rights And The Honolulu Rail

Weird headline from KITV. No, owners whose property is taken for the rail aren't "profiting" if they are able to get more for their land than what the condemning agency offered; "just compensation and damages" are required by the constitution, and if they are able to obtain more, in many cases that still leaves them undercompensated and simply means the condemnor's offer was inadequate.

But besides the headline, KITV does a good report on last night's community forum on property owners' rights in eminent domain which we sponsored. 

Related articles

Tommorrow's Public Rail Project Forum: Eminent Domain, Just Compensation, And Protecting Property Rights

hawaiioceanlaw.com: Knowing Your Rights: Honolulu Rail Project and Right of Way Acquisitions

inversecondemnation.com: Property Owners Invited: Honolulu Rail Project Public Informational Meeting, Thursday, March 5, 2015, Farrington High School

NJ Court: There's No Substitute For The Eminent Domain Process, Even On The Shore, Even In An "Emergency"

Federal Court: DC's Tax Sale Statute May Be A Taking

Here's one for the regulatory takings mavens, because it has just about every conceivable issue: ripeness, res judicata (yes, arugment was that the complaint was filed both too early and too late), Rooker-Feldman, the Tax Injunction Act, and an analysis of whether the property owner's complaint stated a claim for relief under the Takings Clause. 

At issue in Coleman v, District of Columbia, No. 13-1456 (D. D.C. Sep. 30, 2014) was the District's statutory provision which allowed it to place a lien on properties whose owners do not pay their full property tax bill, and then sell the property at auction if the lien is not satisfied. So far so good - this scheme isn't that much different from similar provisions in virtually every state. The problem with DC's system is that "the law permits the taking of not only the amount of delinquent taxes, plus any costs, fees, and interest, but also the entirety of the original owner's equity in the property." Slip op. at 6 (footnote omitted).

So the guardian of Benjamin Coleman, a 76-year old veteran who suffered from severe dementia and therefore did not pay a $133 property tax bill for his home, was not too pleased when the District auctioned off the home to satisfy the lien, and then kept the difference between the amounts owed ($133 plus penalties, interest, and fees, a total of about $5,500) and the home's fair market value of $200,000. After a DC court foreclosure suit, Coleman's home was auctioned to a third party who eventually sold it for $71,000. 

Coleman's complaint alleged that the District's tax-sale statute violates the Takings Clause by "taking a homeowner's surplus equity and transferring it to a private party without just compensation or public purpose." Slip op. at 9. The District sought dismissal for the panoply of reasons referenced above. The court rejected each of the District's procedural arguments:

• The Tax Injunction Act only prohibits courts from enjoining or restraining an assessment of taxes, and the complaint was not seeking to do so, only impose liability for the taking of Coleman's surplus equity. 

• The District also asserted the takings claim was not ripe under Williamson County because Coleman had not sought compensation via the DC courts. The court held, however, that the DC courts have not expressly recognized inverse condemnation as a cause of action. See slip op. at 24 ("The possibility that a court could fashion such an action is not sufficient to render Mr. Coleman's claim unripe.").

• As for Rooker-Feldman (the doctrine which prohibits federal district courts from hearing cases which in effect seek appellate review of a state court judgment) the court held it did not apply. Yes, by attacking the foreclosure judgment, Coleman was, in some sense, seeking federal court review of the DC court's decision. But his federal complaint wasn't seeking to overturn the DC court's foreclosure judgment, and only asserted that the DC statute which prohibited a homeowner from recovering the excess equity is a taking.

• As we noted above, the District also asserted the claim was brought too late, in that Coleman could have raised and litigated the takings claim in the foreclosure suit in DC court. The federal court rejected the argument because Coleman's takings claim was only a "permissible" claim in DC court, and since he wasn't required to bring it there, he was not precluded from doing so in a subsequent lawsuit.

Finally, the court rejected the District's motion to dismiss for failure to state a claim. The issue boiled down to whether the U.S. Supreme Court had foreclosed the takings argument in earlier cases which may or may not have raised the same issue as Coleman presented. The district court concluded that the Supreme Court had not and thus concluded "if the tax-sale statute does not provide a right to the surplus and the statute provides no avenue for recovery of any surplus ... [and a] property interest in equity could conceivably be created by some other legal source," then "failure to provide an avenue for recovery of the surplus would appear" to be a taking. Slip op. at 46.

The court held that Coleman had a property interest in the surplus equity because the District had failed to rebut Coleman's claims in its briefs, which failed to argue the issue at all. "Accordingly, the Court must assume that Mr. Coleman established the existence of an independent property interest in the equity in his home, as well as the remaining elements of a Fifth Amendment Takings Clause claim." Slip op. at 48.

Coleman v. District of Columbia, No. 13-1456 (D. D.C. Sep. 30, 2014)

NY App Div: Town Needs A Warrant For Inspection Related To Property Valuation

Check this out, an opinion from the Appellate Division of the New York Supreme Court in a tax assessment case, Jacobowitz v. Bd of Assessors, Town of Cornwall, No. D39807 (July 30, 2014. The court held that the Fourth Amendment's prohibition on warrantless searches and seizures means that a property owner did not have to let the Town's appraiser into her home to "conduct an interior appraisal inspection" related to her property tax assessment. Slip op. at 1.

It's a quick read, so we won't spell it all out in detail, just focus on a couple of the best points. The court held that it is the government's burden to show entitlement to entry of a home, and not the property owner's burden to show why it should not. And the property owner's challenge to the tax assessment did not waive her rights:

Contrary to the Town respondents’ contention, the petitioner did not, by challenging the Town respondents’ assessments, “open the door” to inspection of the interior of her property against her will, in effect, waiving her Fourth Amendment rights (see Matter of Yee v Town of Orangetown, 76 AD3d at 111-112). “A waiver of constitutional rights must be knowing and intelligent” (id. at 111; see Fiore v Oakwood Plaza Shopping Ctr., 78 NY2d 572, 581, cert denied 506 US 823). On this record, there is no such waiver. The petitioner has, in a sense, placed the assessed value of her property in issue, and her act of challenging the assessments of her property is a relevant factor to consider in balancing the reasonableness of the Town respondents’ interest in seeking entry into the petitioner’s home for inspection against the petitioner’s privacy interests. However, the petitioner’s actions do not amount to a waiver of her Fourth Amendment right to privacy.

Slip op. at 8. It also didn't matter that the purpose of the entry was not for a police investigation, the usual subject of Fourth Amendment issues.

Finally, in order to get the warrant, the Town must show probable cause, meaning that it must demonstrate that the inspection it seeks is reasonable, "in the context of their need for the inspection -- to conduct an interior appraisal in order to arrive at an estimate of the fair market value of the petitioner's home and to defend themselves against claims of selective assessment[.]" Slip op. at 8. The court noted that part of that is an explanation of why it was necessary to enter the home at all, especially when the Town did not need to enter the home for its earlier assessments, and the challenged assessment is for tax year 2006 (and a view if the interior of the home in 2012 might no longer be relevant). 

Thanks to our New York colleagues at Bulldozers at Your Doorstep for sending this one our way. 

Jacobowitz v. Board of Assessors, Town of Cornwall, No. D39807 (N.Y. App. Div. July 30, 2014)

Nichols On Eminent Domain: Oklahoma Appeals Court Upholds Jury Rights In Condemnation

Here's one that we meant to post earlier, but slipped through the cracks.

In Oklahoma eminent domain actions, the issue of valuation is first presented to a board of three commissioners ("disinterested landowners") from the county in which the condemned property is located. The commissioners report to the court, and if one party doesn't care for the recommended compensation, the party may demand a jury trial. 

In Independent School District v Taylor, No.110,709 (Nov. 27, 2013), the Oklahoma Court of Appeals held that a jury in such a case is entitled to hear evidence regarding value, even if the commissioners did not consider it. In that case, the commissioners recommended a value, but after a trial, the jury came back in with a higher award after the owner introduced evidence about the value of a billboard lease which had not been presented to the commissioners. The trial court granted the condemnor's request for a new trial because the commissioners had not considered the billboard lease evidence. 

Thus, as the court of appeals put it, "[t]he fundamental issue presented is whether, in this condemnation proceeding, the trial court erred by admitting evidence at the jury trial that was neither presented to, nor considered by, the commissioners." Slip op. at 9. The court held it did not:

There is nothing in the statutory procedure preventing evidence relevant to the determination of just compensation from being presented at the jury trial just because it was neither presented to nor considered by the commissioners. The statutory procedure does not require the parties or, in particular, the landowner, to provide the conmmissioners with information, nor does it limit the jury trial to a review of the information provide to an/or considered by the commissioners.

Slip op. at 12. It's the commissioners' duty to assess compensation, not a property owner's. The court applied the maxim that eminent domain statutes -- because it is a "forced sale" into which the owner is compelled -- "must be strictly construed in the landowner's favor and against the condemnior." Slip op. at 13. 

The court rejected the argument that landowners would use this to sandbag the commissioners in order to get an award of attorneys' fees. In Oklahoma, a court has the discretion to award fees if the jury's award exceeds by 10% the commissioners' valuation. The court noted that where a property owner "strategically withholds inconspicuous damage elements form the commissioners but presents those damage elements at a subsequent jury trial," the trial court "may determine an award of such fees to be inappropriate." Slip op. at 16.

This decision is a good reminder of the place of the jury in determining just compensation, even in those states that use commissioner or similar procedures. This raises a couple of questions. First, what about states like New York, where you cannot get a jury trial in eminent domain? Second, a question that's not quite about juries, but the nature of the court. We're talking about whether the Court of Federal Claims -- an Article I court that sits without a jury -- can be delegated the exclusive power to hear inverse cases against the federal government seeking just compensation. We don't know the answers to those questions, but this case got us to thinking.   

Our Owners' Counsel colleague Robert Nichols (isn't that the best name ever for an eminent domain lawyer?) represented the property owner. 

Independent School Dist. No. 5 v. Taylor, No. 110,709 (Ok. App. Nov. 27, 2013)

Aloha, Justice Acoba

Yesterday, according to the coconut wireless, was the official last day on the Hawaii Supreme Court for Associate Justice Simeon Acoba. State court justices and judges face mandatory retirement at age 70, and Justice Acoba's birthday is coming up in March.

While time marched on, so did the process for selecting his successor on the court. Governor Abercrombie has nominated a circuit court (trial) judge, and the Senate Judiciary has scheduled a hearing on the confirmation for next week. Le roi est mort, vive le roi.

While his body of work is large, we didn't want to let this moment pass without singling out three opinions authored by Justice Acoba: the first a 3-2 majority opinion in favor of property owners, the other a 2-justice dissent in a case involving a municipality's power to sue itself, and a final stand-alone dissent. The first two, as you may already suspect, are in cases in which we were counsel. 

• County of Hawaii v. C & J Coupe Family Ltd. P’ship, 119 Haw. 352, 198 P.3d 615 (2008). A case in which Justice Acoba, writing for a 3-justice majority over vociferous dissent, upheld the right of private property owners who are on the business end of an abuse of the eminent domain power, concluding that "although our courts afford substantial deference to the government's asserted public purpose for a taking in a condemnation proceeding, where there is evidence that the asserted purpose is pretextual, courts should consider a landowner's defense of pretext." One of the rare cases in which the Hawaii Supreme Court came down on the side of property owners. 
• County of Kauai ex rel. Nakazawa v. Baptiste, 115 Haw. 15, 165 P.3d 916 (2007) (Acoba, J. dissenting). Justice Acoba, joined by now-also-retired Justice Duffy, entered a magnificent dissent in a case about whether the people of Kauai had the right to control their property taxes by amending their County Charter. The issue in the case was one of procedure, with the primary question being whether Kauai officials (who had opposed the charter amendment) could bring a county-funded lawsuit against the county to invalidate it. While we lost that case, the opening paragraph of Justice Acoba's dissenting opinion was a salve which lessened the sting: "With all due respect, our role is to protect the judicial process, not to subvert it. In sua sponte deleting Defendant-Appellee Kauai County Council (County Council) as a defendant in this case and adding it back as the putative plaintiff in order to create a supposed controversy between the County Council and Defendant-Appellee Mayor of Kauai (Mayor) and Defendant-Appellee Finance Director of Kauai (Finance Director), the majority does exactly that, manipulating the lawsuit so as to create a controversy that did not in fact exist when the suit was filed, when it was decided by the Circuit Court of the Fifth Circuit (the court), when it was appealed to this court, and when it was argued by the parties before us." He called them out, and rightly so. 
• Rivera v. Dep't of Labor & Indus. Relations, 100 Haw. 348, 60 P.3d 298 (2006) (Acoba, J., dissenting). In this dissent, Justice Acoba reaffirmed the need for appellate oral argument and explained why it is important, even if it may not change the outcome ("Justice must be seen to be done."). This was a time when the Hawaii Supreme Court conducted orals in only the most rare of cases. We can now say that not having oral arguments was a huge disservice to the public, to the litigants -- and, we think, to the court itself -- and the court, thankfully, has since reversed course and regularly holds orals, we believe in no small part due to Justice Acoba's influence and pressure to do so. 

We first appeared before Justice Acoba when he was Judge Acoba on the circuit court bench, and was assigned as the motions judge for the First Circuit. This was back in the days before the managerial system, where you pretty much drew whatever judge was available on your day, and all major motions in civil cases were assigned to a single judge. He was stern, but tolerant of young lawyers flailing about in his courtroom, and would sometimes offer practical advice from the bench. In our last argument before the Supreme Court that was still true, and Justice Acoba was always an active questioner who could be counted on to get to the heart of the issue in your case and press you hard on it. And his on-bench demeanor and questioning was no indication of where he'd end up -- he'd press both sides equally. 

We never felt it right during Justice Acoba's active tenure to thank him for these rulings. It just felt inappropriate to "thank" a sitting judge or justice for doing the thing you believe is legally required. But we're going to take this opportunity of his retirement, and despite the painful parting shot which he joined in Kauai Springs, to do so now.

Mahalo, Justice Acoba. You will be missed. 

J.R. (Or Major Nelson) Adversely Possesses Neighbor's Land

Here's one of those owner-puts-up-a-fence-that-is-actually-on-his-neighbor's-property situations, this time with a very Hollywood twist.

The owner, you see, was Larry Hagman, of Dallas and I Dream of Jeannie fame. Seems the fence between his Ojai, California property and that of his neighbors, a religous group, was .44 acres into their land, and Hagman claimed it by adverse possession. In Hagman's quiet title action, the trial court granted him summary judgment.

In Hagman v. Meher Mount Corp., No. B239014 (Apr. 3, 2013), the Court of Appeal affirmed. The court held that Meher Mount's property is not immune from adverse possession by virtue of it being owned by a "public benefit corporation," because that is not the same as a "public entity." The latter are "vested with some degree of sovereignty." Slip op. at 4. Even though public benefit corporations like Meher Mount require government approval, "[t]hey are not owned or operated by the government. They do not possess any of the traditional incidents of soverign authority such as the power to tax or to condemn property." Id. at 5.

As for Meher Mount's argument that J.R. had not shown that he paid the property taxes and mosquito assessments on the land during the prescription period, the court held that Meher Mount did not pay property taxes, so Hagman was not required to either. And the mosquito assessment? Not a "tax" according to the court. See id. at 9-10.

Hagman v. Meher Mount Corp., No. B239014 (Cal. App. Apr. 3, 2013)

Supreme Court Declines To Review Challenge To Native Hawaiian Property Tax Exemptions

The Courrt has denied certiorari in Corboy v. Louie, No. 11-336, the case asking the Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptions conferred on lessees of Hawaiian Homesteads. The petitioners claim this is an unconstitutional race-based classification, but the Hawaii Supreme Court dismissed for lack of standing (the petitioners had not applied for Hawaiian Homestead leases because they are ineligible to receive them).

Here's the order, in the event you want to see it for yourself.

This case had been kicking around on the docket since December 2011, and it was only on the Term's last day that the Court finally said no.

SCOTUS Delays Consideration Of Challenge To Hawaiian Homes Property Tax Exemption (Yet Again)

Lost in all the excitement over today's ruling in the the Obamacare case that turned out not to be today, is this little tidbit for those from Hawaii. The Court yet again did not make a decision whether to grant cert in Corboy v. Louie, No. 11-336, which had been scheduled for last Thursday's conference. This is the case asking the Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptions conferred on lessees of Hawaiian Homesteads. The petitioners claim this is an unconstitutional race-based classification, but the Hawaii Supreme Court dismissed for lack of standing (the petitioners had not applied for Hawaiian Homestead leases because they are ineligible to receive them).

This case was originally scheduled for the Court's December 9, 2011 conference, but that was put off when the Court asked the Obama Administration to file an amicus brief, which it eventually did. The petitioners responded to that brief, and the case was put back on the conference calendar for June 21, 2012. Thus, we expected today's order list to tell us whether cert had been granted or denied, but it contained no reference to the case. Mystery solved when the Court's docket entry was updated to reflect consideration of the petition at the Thursday, June 28, 2012 conference. Whether this additional delay reveals anything about whether the Court will grant the petition is anyone's guess.

Given that the last day of the current Term is Monday, June 25, we're not quite sure when the order list from the June 28 conference will be released. But whenever that is, we will bring it to you, so stay tuned.

Final Brief In Case Challenging Hawaiian Homes Property Tax Exemption As Racial Discrimination: SG's Assertion That HAWSCT Decision Was One Of State Law "Dead Wrong."

Here is the final brief (Petitioner's response to the SG's inviation amicus) in Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011), the case asking the U.S. Supreme Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptions conferred on lessees of Hawaiian Homesteads. The petitioners claim this is an unconstitutional race-based classification, but the Hawaii Supreme Court dismissed for lack of standing (the petitioners had not applied for a Hawaiian Homestead lease).

The case was originally scheduled for the Court's conference on December 12, 2011, but the Court postponed consideration of the case and invited the Obama Administration to weigh in with a brief, because the petition draws into question the constitutionality of the Hawaiian Homes Commission Act and the constitutionality of a part of the Hawaii Admission Act. The SG's brief asserted that the Hawaii Supreme Court decided the standing issue as a matter of state law, and thus was grounded in "independent and adquate" state law, meaning that it is immune from Supreme Court review under Michigan v. Long, 463 U.S. 1032 (1983). The petitioners' brief responds:

A. The Solicitor General’s assertion that the decision below rests on an independent and adequate state ground is dead wrong. Although he repeats the Hawaii Supreme Court’s claim that its decision rested on state law (U.S. Br. 9-11), saying it is so does not make it so.

1. As we have explained (Pet. 20-22), this Court routinely reviews decisions in which a purported state-law reason for declaring a case nonjusticiable is intertwined with the merits of the underlying federal question. The Solicitor General does not dispute that fact. Indeed, he never really grapples with the fact that the ostensible state-law basis of the decision below is inextricably bound up in whether the native Hawaiian classification is permissible.

The Hawaii Supreme Court ruled that petitioners could not challenge the racially discriminatory taxation scheme because they did not also seek to participate in the racially discriminatory leasehold program. But that is just an indirect way of saying that use of a transparent proxy for race (lessee status) is permissible and that the only potentially cognizable constitutional injury is the additional and separate leasehold benefit that is explicitly conditioned on an applicant’s race.

Br. at 1-2 (emphasis original).

Here is the Court's docket entry. The case is now scheduled for the Court's June 21, 2012 conference. Stay tuned.

Supplemental Brief for Petitioners, Corboy v. Louie, No. 11-336

More On SCOTUS's Property Tax (In)equality Case

Here's more on Armour v. City of Indianapolis, No. 11-161 (June 4, 2012), the case in which a 6-3 majority of the Supreme Court held that the City's decision to forgive the balance owing for homeowners who had not fully paid the sewer assessement, while not issuing refunds to their neighbors who had already paid in full.

• How Convenient (from Library of Law and Liberty)

• SCOTUS Likes "Moral Hazard" - Conscientious Property Onwers Get Screwed Again (from Gideon's Trumpet)

• Opinion Recap: Not so equal tax equality (from SCOTUSblog)

• Armour v. Indianapolis: "Money Down the Sewer" (from The Foundry)

The last article got us to thinking: if the primary reason that the Court held that the refusal to provide refunds was not irrational was that it was too much administrative hassle to cut the checks, doesn't that mean the tail is wagging the dog? Aren't the mechanics of returning the money secondary -- or even irrelevant -- to the question of whether the City can legally keep it? If the Court can conclude that it is not irrational to keep money because it is too much humbug to return it, doesn't that just take you in a big logical circle?

SCOTUS: Property Owners Who Paid Sewer Assessements In Full Are Fools

That's the essence of today's opinion in Armour v. City of Indianapolis, No. 11-161 (June 4, 2012), in which a 6-3 majority upheld the City's decision to forgive the balance owing for homeowners who had not fully paid the assessement, while not issuing refunds to their neighbors who had already paid in full.

The majority held that the City had a "rational basis" in effect to charge Homeowner A nearly 30 times as much for the same service as Homeowner B because it would be too much "administrative hassle" (to quote CJ Roberts' dissent) to process refunds to those who had fully paid the assessment. Since no suspect classification was involved, the City's actions are reviewed only for minimum rationality. Which, as we know, means "any excuse."

For many years, an Indiana statute, the "Barrett Law," authorized Indiana’s cities to impose upon benefited lot owners the cost of sewer improvement projects. The Law also permitted those lot owners to pay either immediately in the form of a lump sum or over time in installments. In 2005, the city of Indianapolis (City) adopted a new assessment and payment method, the "STEP" plan, and it forgave any Barrett Law installments that lot owners had not yet paid.

A group of lot owners who had already paid their entire Barrett Law assessment in a lump sum believe that the City should have provided them with equivalent refunds. And we must decide whether the City’s refusal to do so unconstitutionally discriminates against them in violation of the Equal Protection Clause, Amdt. 14, §1. We hold that the City had a rational basis for distinguishing between those lot owners who had already paid their share of project costs and those who had not. And we conclude that there is no equal protection violation.

Slip op. at 1. And the reward for the approximately 25% of the homeowners who did the right thing and paid in full? The City's thanks, and a big "SUCKER" stamp for their foreheads from the Court.

Obama Administration's Amicus Brief: Deny Cert To Case Challenging Property Tax Exemptions For Hawaiian Homestead Lessees

The federal government has filed its invitation brief in Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011), the cert petition asking the U.S. Supreme Court to review the Hawaii Supreme Court's dismissal of a challenge to the property tax exemptons conferred on lessees of Hawaiian Homesteads.

Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the tax exemptions. The petitioners are not "native Hawaiians" and thus are not lessees, and paid their property taxes under protest. When they sought refunds in the Hawaii Tax Appeals Court and argued that they should also be exempt, that court concluded that "native Hawaiian" was not a racial classification and did not review the tax exemption with strict scrutiny. Instead, the court upheld the exemption under rational basis review. The Hawaii Supreme Court vacated the Tax Court decision and dismissed for lack of jurisdiction, holding the petitioners lacked standing to challenge the exemption since they had not sought homestead leases (leases for which they were ineligible because they are not native Hawaiians). Even though they are not eligible as a matter of law, the court held that in order to bring a lawsuit challenging their ineligibility, they needed to have applied for a lease (and been denied).

The cert petition argues that the refund claimants have standing, and that the Equal Protection Clause prohibits state and local tax exemptions that are "available only to members of a certain race." The State of Hawaii's Brief in Opposition argues that the these are questions of state law, and that the Court should not grant cert.

The case was scheduled for the Court's conference on December 12, 2011, but the Court postponed consideration of the case and invited the Obama Administration to weigh in with a brief, because the petition draws into question the constitutionality of the Hawaiian Homes Commission Act and the constitutionality of a part of the Hawaii Admission Act. When federal laws are so questioned, the federal government is required to be notified, and it may file a brief in the case. The petitioners did, but the Solicitor General's office did not weigh.

As a result of the Supreme Court's invitation (such "invitations" are never declined!), it now has, and the feds have strongly supported the State in arguing that the standing questions are matters purely of Hawaii law, and the Hawaii Supreme Court's dismissal is grounded in "independent and adquate" state law, meaning that it is immune from Supreme Court review under Michigan v. Long, 463 U.S. 1032 (1983). The SG's brief also argues alternatively that if federal standing law is applied, the petitioners are alleging only "taxpayer standing" and not an individualized injury. Finally, the brief argues that whether the rule of Rice v. Cayetano, 528 US. 495 (2000) is applicable should be left for a future case. Perhaps the most interesting parts of the SG's brief are its recitation of Hawaii history (pages 1 - 3), and its noting of "recent and ongoing legal developments" (the State's recent legislation instituting a "process for the indigenous native people of Hawaii to reorganize as a sovereign government"). 

Here is the Court's docket entry. We will bring you more if additional briefs are filed, and when the case is put back on the Court's conference calendar.

Brief for the United States as Amicus Curiae, Corboy v. Louie, No. 11-336 (filed May 25, 2012)

Cal App: Sale To Private Redeveloper Under Threat Of Condemnation Is A "Change Of Ownership" Under Prop 13

Here's one for your California readers. You know Proposition 13, the provision in the California Constitution that limits property tax increases, and allows reassessment of value only upon a change of ownership, and you either love it or hate it: to some it insulates property owners from being forced out of their homes by uncontrolled property taxes, to others it is responsible for the downfall of California as the Golden State.

A property owner's acquisition of replacement property for property taken in "eminent domain proceedings" in which the taken property is acquired by a "public entity," is not a "change of ownership." But what about when new property is purchased to replace property sold under threat of condemnation to a private developer who is teamed up with a government redevelopment agency -- is that a "change of ownership" such that the property is assessed at current market rates?

In Duea v. County of San Diego, No. D058333 (Cal. Ct. App. Feb. 29, 2012, published Mar. 27, 2012), the California Court of Appeal (4th District) concluded that it was. But the court's conclusion was not the result of an analysis of Prop 13, but was based on a procedural point of administrative law: the property owner did not exhaust his remedies, and the evidence before the agency supported its findings.

Duea owned San Diego property that was part of a "ballpark district" in which his property was slated for condemnation in order to build a new stadium and related development (a boutique hotel). The commercial redevelopment portion of the project would be carried out by a private developer. Adjacent properties were acquired after the City's redevelopment agency instituted condemnation proceedings, but "acquisition of [Duea's] original property by formal condemnation proceedings was either stopped or delayed as a result of a series of third-party lawsuits filed against the ballpark project." Slip op. at 4.

Duea eventually sold his property to the private developer. He then purchased replacement property, and sought to invoke Proposition 13's protection and have the base year value of his old property transferred to the new property. The parties agreed that "'the transfer of ownership of the [original] property to [the developer] was for use in connection with the Ballpark and Ancillary Projects, and that it would have condemned the property under its power of eminent domain if [Duea] had failed to execute the sale.'" Slip op. at 5. After an unsuccessful visit to the county board of euqalization, the trial court concluded the sale was a "private sale."

The court's conclusion is based entirely on its analysis that Duea did not exhaust his administrative remedies, had in effect waived his argument that the private developer was acting as an agent for the"public entity," and that he could not supplement the administrative record. Nonetheless, the opinion is worth reading. Check it out, especially if you are in California. More about the case here.

Duea v. County of San Diego, No. D058333 (Feb. 29, 2012)

SCOTUS Asks For Fed Input In Case Asking Whether Hawaiian Homes Property Tax Exemption Is Racial Discrimination

Today was the day we were to have found out whether the Supreme Court would review Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011). That's the case seeking review of the Hawaii Supreme Court's opinion which concluded that challengers to the property tax exemptions conferred on lessees of Hawaiian Homesteads lacked standing to bring suit. More from today's Star-Advertiser report Court might hear case testing state benefits for Hawaiians.

Today, however, the Court released an order inviting the U.S. Solicitor General to express the views of the federal government, usually a sign that the Court has some interest in a case. No doubt the Court asked for the SG's views because the cert petition draws into question the constitutionality of the Hawaiian Homes Commission Act and the constitutionality of a part of the Hawaii Admission Act. When federal laws are so questioned, the federal government is required to be notified. The petitioners did, but the SG did not weigh in with a brief. Now he will (yes, it is an "invitation" but it's one of those inviations that is never turned down).

Although the SG is often referred to as "the tenth Justice" because the Court pays close attention to his or her arguments, it is by no means certain that the Court will accept those arguments, nor is it certain on which "side" the SG will weigh in on. For a recent example, see the PPL Montana case in which the Court invited the SG to file an amicus brief. He filed a brief urging the Court to deny the Petitioner's requrest for certiorari. The Court rejected that argument and agreed to review the case. The SG then filed a merits brief in support of the Petitioner, and presented oral argument supporting the Petitioner.

Some background in the Corboy case. Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the property tax exemptions. The Hawaii court dismissed the case for lack of jurisdiction, holding the petitioners lacked standing to challenge the exemption since they had not sought homestead leases (leases for which they were ineligible because they are not native Hawaiians).

The cert petition asked the Court to review this Question Presented:

In Rice v. Cayetano, 528 U.S. 495 (2000), this Court held that a state classification of voters according to whether they are "any descendant of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778" was an impermissible racial classification under the Fifteenth Amendment. Respondents have employed the same classification to determine whether a taxpayer is eligible for certain long-term leases that entitle lessees to significant tax exemptions. No equivalent exemption is available to petitioners because they do not fall within that racial classification.

Petitioners paid their taxes under protest and then sought refunds from their respective counties on the ground that their tax bills resulted from a racial classification inconsistent with the Constitution. The Hawaii courts declined to apply Rice or subject the classification to strict scrutiny. The question presented here is:

Whether the Hawaii courts erred in failing to recognize that petitioners have standing to seek a refund of their own taxes and that the Equal Protection Clause precludes a State or municipality from creating tax exemptions that are available only to members of a certain race

Here are all of the briefs filed in the case:

• The cert petition

• State of Hawaii's Brief in Opposition

• Petitioners' Reply Brief

• Amicus Brief of Pacific Legal Foundation, CATO Institute, Prof. Paul M. Sullivan, The Grassroot Institute of Hawaii, and the Goldwater Institute

• Motion for Leave to File Amicus Curiae Brief and Brief of the Center for Equal Opportunity as Amicus Curiae in Support of the Petitioners

We'll keep following this case and post the SG's brief when filed.

Final Briefs In Hawaii SCOTUS Case: Is The Hawaiian Homes Property Tax Exemption Racial Discrimination?

Update: The Court has invited the Solicitor General to provide the views of the federal government, so we're still on hold.

At its December 9, 2011 conference, the U.S. Supreme Court will consider whether to review Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011). That's the case seeking review of the Hawaii Supreme Court's opinion which concluded that challengers to the property tax exemptions conferred on lessees of Hawaiian Homesteads lacked standing to bring suit.

Some background. Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the property tax exemptions. The Hawaii court dismissed the case for lack of jurisdiction, holding the petitioners lacked standing to challenge the exemption since they had not sought homestead leases (leases for which they were ineligible because they are not native Hawaiians).

The challengers filed a cert petition (posted here), asking the Court to review this Question Presented:

In Rice v. Cayetano, 528 U.S. 495 (2000), this Court held that a state classification of voters according to whether they are "any descendant of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778" was an impermissible racial classification under the Fifteenth Amendment. Respondents have employed the same classification to determine whether a taxpayer is eligible for certain long-term leases that entitle lessees to significant tax exemptions. No equivalent exemption is available to petitioners because they do not fall within that racial classification.

Petitioners paid their taxes under protest and then sought refunds from their respective counties on the ground that their tax bills resulted from a racial classification inconsistent with the Constitution. The Hawaii courts declined to apply Rice or subject the classification to strict scrutiny. The question presented here is:

Whether the Hawaii courts erred in failing to recognize that petitioners have standing to seek a refund of their own taxes and that the Equal Protection Clause precludes a State or municipality from creating tax exemptions that are available only to members of a certain race

Because the petition draws into question the constitutionality of the Hawaiian Homes Commission Act and the constitutionality of a part of the Hawaii Admission Act, the U.S. Solicitor General was served a copy, but the SG has not weighed in.

Here are all of the briefs filed in the case:

• The cert petition

• State of Hawaii's Brief in Opposition

• Petitioners' Reply Brief

• Amicus Brief of Pacific Legal Foundation, CATO Institute, Prof. Paul M. Sullivan, The Grassroot Institute of Hawaii, and the Goldwater Institute

• Motion for Leave to File Amicus Curiae Brief and Brief of the Center for Equal Opportunity as Amicus Curiae in Support of the Petitioners

We'll keep following this case. Look for the results of the Court's conference on December 12, 2011.

Friday Round Up

We've been kind of busy in the last few days with a couple of appellate briefs, so haven't had a lot of time to post up the latest cases and articles of interest. But here's what we are reading today, in between brief writing:

• Hawaii Supreme Court Nominees Will Be Public - Courthouse News Services writes about the case in which we represent the Star-Advertiser in its case to compel the governor to publicly disclose the lists of judicial nominees he receives from the Judicial Selection Commission. More on the case here. The Reporters Committee for Freedom of the Press also reported on the story here. 

• Beyond "NIMBY" - a post on Legal Planet, a blog produced by enviro lawprofs, advocates that we abandon the term NIMBY. I like "I GOT MINE."

• Reason hit & run posts John Paul Stevens: Kelo Was No Big Deal. Then why you keep bringing it up, Your Honor?  Gideon Kanner responds. Come on, you know you want to click that link. 

• From Patty Salkin's Law of the Land Blog, the latest in the vested rights issue: Oregon Supreme Court Examines Vested Rights and Holds Bad Faith Cannot be Considered in Measure 49 Calculation.

• Via Julie Tappendorf's Municipal Minute blog: Sewer Tax Discrimination Case to be Decided by Supreme Court. This is a case to follow, and we will be posting the cert petition in that case shortly.

Amicus Brief In Hawaii SCOTUS Case: Is Hawaiian Homes Property Tax Exemption Racial Discrimination?

The Pacific Legal Foundation, the Cato Institute, Professor Paul M. Sullivan, The Grassroot Institute of Hawaii, and the Goldwater Institute have filed this amicus brief, supporting the cert petition filed last month in Corboy v. Louie, No. 11-336 (cert. petition filed Sep. 15, 2011).

That's the case seeking SCOTUS review of the Hawaii Supreme Court's opinion concluding that challengers to the property tax exemptions conferred on lessees of Hawaiian Homesteads lacked standing. Only "native Hawaiians" are eligible to lease homestead land, and thus only those possessing the appropriate blood quantum are entitled to the tax exemptions, and the Hawaii court dismissed the case for lack of jurisdiction, holding the petitioners lacked standing to challenge the exemption since they had not sought homestead leases (leases for which they were ineligible because they are not native Hawaiians).

The petition asks this question:

Whether the Hawaii courts erred in failing to recognize that petitioners have standing to seek a refund of their own taxes and that the Equal Protection Clause precludes a State or municipality from creating tax exemptions that are available only to members of a certain race.

The core issue of this case is whether a state and its municipalities may enforce property tax schemes that require some citizens to pay higher taxes because of their race. The State of Hawaii and its four counties allow leaseholders of certain public lands—the Hawaiian ceded lands—to pay little or no property taxes. By definition, only "native Hawaiians," a term held by this Court to be a racial classification, may lease the ceded lands. Thus, the state and county tax structures that afford benefits only to the leaseholders of the ceded lands grant preferences to, and discriminate against, Hawaiian citizens on the basis of their race. The authority for this discriminatory treatment comes from both federal and state laws.

. . . .

The state and county tax exemptions are "inextricably tied to an ancestral requirement." Appendix A (Opinion of the Supreme Court of Hawaii (Apr. 27, 2011) (Acoba, J., concurring)) to Petition at 62a. The Homestead Act, as incorporated by the Hawaii Constitution, relies upon the same ancestral definition of native Hawaiian that was found to be a racial classification in Rice. 528 U.S. at 515. All racial or ethnic classifications imposed by any level of government "are constitutional only if they are narrowly tailored measures that further compelling governmental interests." Adarand, 515 U.S. at 227. The state’s race-based tax exemptions cannot survive this strict scrutiny level of review.

Stay tuned.

Brief Amicus Curiae of Pacific Legal Foundation, CATO Institute, Prof. Paul M. Sullivan, The Grassroot Inst...