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Relying On Complaint's Allegation That City Issued A Permit As Confirmed By Chief Building Officer Email, Texas App Holds Takings Claim Ripe Even Though City Said Council Must Issue Permits

Check out City of Kemah v. Crow, No. 01-23-00417-CV (July 25, 2024), from the Texas Court of Appeal (First District).

This is yet another takings ripeness case -- here, the so-called "final decision" requirement -- the second recent opinion on this issue from the Texas court. See "Final Decision Takings Ripeness Is Based On All Circumstances, Not Hard-And-Fast Requirements (Read That Again: A Factual Question)" for our write-up of the other case.

In this one, the owner asserted that the city issued her a building permit for her "barndominium" and and two other structures to be used as short-term rentals, but later issued a stop work order. This resulted in a Penn Central taking, she asserted.   

The city sought ripeness dismissal, asserting the owner didn't actually have a permit issued by the city council as its ordinances require. The owner didn't have the actual permit, but her complaint alleged that she did have emails from the City's Planning officer and City Manager saying she had a permit, and her complaint also included allegations that these and other city officials repeatedly confirmed that she had the permit. See pages 2-9 of the slip opinion for the details as recited by the court.

The city argued that emails and other communications with city officials don't count, and only the city council can issue permits. Yes, she applied for a permit, but the city council has never approved one.

The City argued that Crow never obtained a final decision from the City on her permit application. Specifically, it asserted that although Crow claimed to have received an email from Shoaf advising her of the City’s approval of her permit application, she failed to allege facts showing the actual issuance of such a permit or the City’s denial of her application. It further argued that Crow did not allege that she obtained a variance, or that her alleged variance request was denied, and she failed to allege facts showing that re-application for a building permit would be futile. Thus, it argued, Crow failed to present a ripe claim over which the trial court could assert subject matter jurisdiction.

Slip op. at 9-10.

No official final decision from the council = takings claim not ripe.

The court limited itself to the allegations in the complaint: we take those allegations and the attachments to the complaint (including, inter alia, the emails from the planning and city officials saying 'you have a permit') as true, and if proven, this would be enough to show that the city made enough of a final decision to consider the takings claim on the merits, even though the city now claims it didn't make a formal, official permit grant. The city made enough of a final decision to show the case was ripe:

In support of her allegation that the City issued her a building permit, Crow attached copies of the emails and texts above as exhibits to her amended petition. Crow also attached a transcript of the minutes from the February 16, 2022 City Council meeting. At the meeting, Mayor Joiner stated, “[Item] 24. Discussion, consideration, and possible action on a request to lift the stop work order on 1306 Fay Road, Kemah, Texas 77565, Owner Veronica Crow, request for the city to provide a hard copy of the permit for 1306 Fay Road, Kemah, Texas 77565, issued under No. 210603007 . . . .” Also attached to Crow’s amended petition is a December 10, 2021 email from Shoaf to the Mayor and City Council providing an update on 1306 Fay Road. In the email, Shoaf stated, “It has also been brought to the attention of Walter [Gant] and myself that a member of Council has reached out to the permit holder.” (emphasis added)

Crow alleged that she was issued a permit to build on 1306 Fay Road in July 2021, constituting the final determination of her permit application, the City then denied Crow her right to proceed with construction under that permit, and later denied that the permit ever existed. Crow alleged that she sustained the loss of investment-backed expectations as a result of the City’s improper, intentional, and wrongful conduct, which amounts to a taking under the Texas Constitution. Taking her factual allegations as true, as we must, we conclude that Crow’s claim is ripe.

Slip op. at 17-18.

Here's a practical lesson that we take from this case and others: we know that in most jurisdictions, a complaint only need meet the fairly low bar of "notice pleading" tempered (in federal courts) by Twiqbal "plausibility." And that ripeness is generally a defense and not an essential element of a claim. But when pleading regulatory takings, property owners are seemingly held to a higher standard.

That being so, if you have the facts and the documents to anticipatorily plead the case is ripe, you should do what Crow's lawyers did her: plead with specificity like this was a fraud claim, and attach the documents to the complaint. Yes, it might not be required, but there's little harm in it, and doing so might avoid all kinds of mischief wrought by defendants and courts looking to get rid of your claim. 

PS - can we move all of our clients' properties to Texas, please? 

City of Kemah v. Crow, No. 01-23-00417-CV (Tex. App. July 25, 2024)

Aloha To Another Semester Of U. Hawaii Land Use

There are some rewards for working late in the 808

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

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

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

Law of the Splintered Paddle

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


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

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

We say a fond "aloha" to our new colleagues

2023 Year-End Clean Up

As 2023 comes to a close, here are a few of the decisions that we wanted to blog about, but didn't have the time.

• Bruce v. Ogden City Corp., No. 22-4114 (10th Cir. Dec. 1, 2023): city demolishing a building that was damaged by fire was not a Lucas taking because the owner still has use of the land (even though the building is gone). And no Penn Central taking because... Penn Central.
  
• Moriarity v. Indiana, No. 22A-PL-2899 (Ind. Ct. App. Nov. 15, 2023): State ordering removal of illegal dam was not a taking under U.S. or Indiana Constitution. The owners don't have a property right to build an illegal dam. Thus, the "background principles" exception to Lucas rules the day. And no Penn Central taking because the owners never had any investment-backed expectations they could build this dam.
• Lafayette Bollinger Dev., LLC v. Town of Moraga, No. A163636 (Cal. Ct. App. July 19, 2023): No Penn Central taking because city might have allowed a smaller project.
  
• Estancias de Cerro Mar, Inc. v. Puerto Rico Aqueduct and Sewer Auth., No. 20-1644 (D.P.R. Nov. 17, 2023): the complaint plausibly alleged a categorical regulatory taking, and did not need to be pleaded under Penn Central. The complaint alleged that the plaintiff possessed a private property interest, and that the Authority's actions took that interest.
• Moskovic v. City of New Buffalo, No. 23-1165 (6th Cir. Dec. 14, 2023): city's moratorium on short-term vacation rental permits, and eventual permanent ban was not a taking or a deprivation of substantive due process because property owners have no protected interest under Michigan law in renting their properties. 
• First Floor Living LLC v. City of Cleveland, No. 22-3216 (6th Cir. Sep. 28, 2023): even though the plaintiff purchased the property to rehabilitate and redevelop it, the city declared them public nuisances and ordered their destruction. The district court correctly entered summary judgment in the city's favor on the plaintiff's due process claim because the owner received sufficient notice.
• 835 Hinesburg Road, LLC v. City of South Burlington, No. 23-218 (2d Cir. Nov. 8, 2023): takings claim not ripe when city applied restrictions that it intended to adopt and denied owner's preliminary development application [disclosure: this case is one of ours].
• In re City of New York (Coney Island Plan - Stage I), No. 517650/2016 (Kings County, N.Y. Nov. 1, 2023): compensation for city's taking of mostly-vacant land to be measured by the "three unities" test. The zoning in place at the time of the taking was part of "the project," so the pre project zoning is used to measure the value of the taking.

On to 2024!

Hawaii Federal Court: Honolulu Can't Increase Minimum Rental Term To 90 Days Without Accommodating Existing Uses

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

In this Order, the U.S. District Court for the District of Hawaii made permanent its earlier ruling that Honolulu's ordinance which expanded the minimum rental term to 90 days because it did not account for those owners who were already legally renting their properties for 30 days. The state Zoning Enabling Act requires zoning ordinances account for preexisting uses.

We covered the issues and the court's preliminary injunction ruling here, and won't go over those again. About the only difference between that one and this one is that the court rejects the City's "several new legal arguments[,]" including Pullman abstention, and the claim that this isn't a zoning ordinance covered by the ZEA, but rather a "rental regulation." See slip op. at 10.

The City’s attempt to reframe the issue first presented during preliminary injunction proceedings more than a year ago is unavailing. In Yee, the Supreme Court explained that the ordinance at issue “regulate[d] petitioners’ use of their land by regulating the relationship between landlord and tenant.” Yee, 503 U.S. at 528 (emphasis added). It did not create the land use versus landlord-tenant distinction that the City now imagines.

Slip op. at 15.

Check it out. Kudos to our former law partner and land use lawyer extraordinaire Greg Kugle for the compelling win. 

Order Granting in Part and Denying in Part Pltf's Motion for Summary Judgment, Hawaii Legal Short-Term Rent...

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

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

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

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

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

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

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

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

Cal Ct App: Prohibition On Short-Term Rentals Might Have A Commerce Clause Problem

The voters of South Lake Tahoe, California, adopted an ordinance that forbade the city from issuing short-term rental permits for properties in residential zones unless the owner was a permanent resident of the city, and declared that all short-term rental permits would expire three years later. The trial court granted the city summary judgment on all claims raised by an association of property owners who rented short-term. 

In South Lake Tahoe Property Owners Group v. City of South Lake Tahoe, No. C093603 (June 20, 2023), the California Court of Appeal mostly agreed, holding that the owners' vested rights and state law preemption claims did not survive. But the court disagreed with the trial court's dismissal of a (dormant) Commerce Clause challenge to the residency component. As noted in this recent Fifth Circuit decision, local ordinances that discriminate between residents and non-residents are (or at least could be) too burdensome of the right to interstate travel as a durational residency requirement. Here's the resident exception:

Despite its ban on vacation home rentals in residential zones, Measure T allows permanent residents to let their dwellings up to a total of 30 days per year, subject to obtaining a permit. For purposes of the exception, a permanent resident is a person who lives in his or her home a majority of the year and claims a homeowner’s property tax exemption under article XIII, section 3, subdivision (k) of the California Constitution.

Slip op. at 17.

The court concluded that the "resident owner exception discriminates on its face against interstate commerce" because it "unlawfully requires 'an out-of-state firm 'to become a resident in order to compete on equal terms.'" Slip op. at 26 (citations omitted). By foreclosing non-resident owners from participating in the city's short-term rental market, the ordinance benefits residents "based solely" on an owner's residency status:

Because Measure T’s permanent resident exception facially discriminates against interstate commerce, it is per se invalid unless the City can justify the discrimination by showing that the resident exception ‘ “advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.” ’

Slip op. at 33 (citations omitted).

South Lake Tahoe Property Owners Group v. City of South Lake Tahoe, No. C093603 (Cal. Ct. App. June 20, 202...

Texas Supreme Court: We Want To Resolve Whether Short-Term Renting Property A Natural Right, Just Not In This Case

In this order, the Texas Supreme Court declined to review a case we've been following, in which the court of appeals held that Grapevine's total ban on short-term renting of property -- banning even owners who had been doing so for a while -- might be a taking. The court held that even though the owners did not possess a classic vested right to continue using their properties to rent on a short-term basis, they owned their properties and that was enough. Property ownership comes with the "fundamental" right to rent it out and there's no need to show more, such as a vested right under state law. More details on the city's ban and the court's reasoning here.

The city sought discretionary review and somewhat unusually, the property owners agreed that this is an important issue worthy of the Supreme Court's review.

But even with everyone agreeing on that point, the Supreme Court passed. The court didn't offer any reasons for the denial 

Justices Young and Blacklock concurred separately to explain their reasoning. Agreeing that the "questions presented in this petition is of increasing and demonstrable importance[,]" and "this Court needs to weigh in on the heady constitutional issues at stake[,]" and that they both "tend to agree" with the parties and amici that the issue is teed up, they "nevertheless concur in the denial of the petition for review."

Why? Vehicle problems. Some of the usual administrative thicket to navigate. Maybe a future case will be simpler (in this case, the owners are challenging a single city ordinance, but in order to resolve the case, Justice Young noted that the court would be required to interpret a separate ordinance as well). And, somewhat oddly, the concurring opinion seems to invite the city to "adopt new regulatory measures if it deems necessary to do so." 

So let's wait, which might let "other lower courts ... opine on the issue."

Part of the chief appeal of the parties’ joint request that we take this case is that the issue is prevalent and important. I believe them. If that premise is right, then plenty of cases will come. If they do not, then today’s perceived importance and urgency will have turned out to be illusory. Either way, our State will be better served by a measure of patience from this Court, as frustrating as it may be to us and, even more, to the parties to this case. I accordingly concur in the denial of the petition for review.

Concurring op. at 5.

And hint for you advocates: don't forget to include analysis under the Texas Constitution (a thought Justice Young has expressed before).

So stay tuned. This one isn't likely over.

City of Grapevine v. Muns, No. 22-0044 (Tex. Jun 16, 2023) (Young, J., and Blacklock, J., concurring in the...

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

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

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

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

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

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

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


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

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

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

A good, engaged audience.

Mahalo, Nolan, for coming all this way. 

We allocated plenty of time for questions from the audience.

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

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

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

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

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

Very Icy Austin on Wednesday (Conference Eve).

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

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

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

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

Even flying from sunny California was a problem.

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

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

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

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

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

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

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

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

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

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

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

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

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

The tech command center.

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

We're underway, with a pretty good crowd.

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Date: Wednesday, February 15, 2023

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

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

Cost: Free, courtesy of Grassroot Institute of Hawaii

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

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

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

From the registration site:

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

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

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

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

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

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

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

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

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

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

We really want you there...

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

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

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

• Private Utility Takeovers – Lessons From a 67 Day Trial

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

• Valuation Issues When Billboards and Signs are Condemned

• Setting Client Expectations and Identifying Red Flags

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

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

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

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

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

To register, go here.

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

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

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

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

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

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

• Private Utility Takeovers – Lessons From a 67 Day Trial

• Valuation Issues When Billboards and Signs are Condemned

• Setting Client Expectations and Identifying Red Flags

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

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

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

• ...and much more!

To register, go here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Slip op. at 2-3.

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

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

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

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

Slip op. at 6.

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

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

And here's the court's actual definition:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Slip op. at 5-6.

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

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

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

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

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

Slip op. at 10-11.

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

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

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

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

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

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

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

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

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

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

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

Concurring op. at 13.

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

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

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

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

Id. at 12-13.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Slip op. at 47-48.

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

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

Registration Open Now: ALI-CLE Eminent Domain & Land Valuation Litigation Conference, Jan 26-29, 2022, Scottsdale

All the topics you want to know about, presented by top-notch faculty from across the nation. Sessions include:

• Keynote: Do Animals Have Property Rights?
• Did the Supreme Court Signal a New Direction in Property Rights in Cedar Point Nursery?
• Maximizing Relocation Benefits: Understanding the Law and Regulations to Ensure Fairness
• Challenging Public Use: Lessons From a 67-Day Trial
• COVID Takings
• Property Rights as Civil Rights
• Eminent Domain National Update
• Federal Court and the Daubert Challenge: How to Prepare
• How to Position Your Client for the Fallout When Projects Don't Get Built
• Rural Broadband and the Emerging Constitutional Challenges
• Are Precondemnation Entry Statutes Still Valid After Cedar Point Nursery?
• How Condemnor and Property Owners' Counsel Prepare the Battlefield
• How Will the Trillion Dollar Infrastructure Bill Impact Your Practice?
• Ethics
• ...and more, including a full slate of networking and social events!

We've sold out the last few years, so don't miss out. Room block now taking reservations. Registration and agenda information here.

Join us in Scottsdale in January!

Links From Today's ABA RPTE Session

Our thanks to our friends and colleagues at the ABA Section of Real Property, Probate & Trust Section's Land Use and Environmental Group for inviting us to a discussion of the latest and greatest decisions of interest.

We only had an hour together, so naturally could not cover everything of interest (indeed, we reserved a big discussion of the biggest item, the Supreme Court's decision in Cedar Point, assuming that the Group will schedule a full session on that decision alone). So here is our curated list of what we think are the most interesting recent decisions in areas of interest to the Group:

• Land use and short-term rentals: Euclid Lives! Mass SJC: "Short-Term" Rental Is Not A Permissible Primary Use In A Residential Zone Because Not Of "Residential Character"
• Environmental standing: Iowa: No Standing To Ask Court To Rule That Public Trust Doctrine Requires Legislation To Regulate Farmers
• Environmental standing, part 2: Hawaii Supreme Court: Anyone Claiming That An Affordable Housing Project Might Impact Their Property Interests In A "Clean And Healthful Environment" Has Standing To Object
• Exactions (sorry we didn't get to this one in the session, but here it is anyway because it is a good case to review): Ordinance Requiring Developer Pay For "All Necessary Road Capacity Improvements" Violates Nollan/Dolan
• Public use in eminent domain: So Close: SCOTUS Declines To Revisit Kelo (For Now) (a taking to remedy potential future blight is a "public use")
• Public use in eminent domain, part 2: Ill App (unpub, unfortunately) Strikes Down Taking For Road To Be Owned By The Public
• Just compensation in eminent domain: Louisiana SCT: No Statutory Attorneys' Fees For Pipeline Taking - But LA Constitution's Just Comp Clause Requires Owners Recover "The Full Extent" Of Their Loss (Which Includes Fees)
• Regulatory takings, emergencies, and necessity: Fourth Circuit: No Taking When Aerial Pesticide Spray Killed Bees ... But Not Why You Think

Thanks again, colleagues.

Euclid Lives! Mass SJC: "Short-Term" Rental Is Not A Permissible Primary Use In A Residential Zone Because Not Of "Residential Character"

A short, land-usey one today, from the Massachusetts Supreme Judicial Court. In Styller v. Zoning Board of Appeals, No. SJC-12901 (June 7, 2021), the court held that the plaintiff's "occasional" use of a home to rent to others short-term is not a legal primary use of property in a "single residence' zoning district.

The facts were not in dispute:

• 5,000 sf, five bedroom, single-family home, three acres of land
• "single-residence" zoning district
• owner rented premises 13 times, totaling 65 days
• rentals were between 2 and 15 days
• most were 5 days or less
• use during the rentals: reunions, board meetings, business retreats,

The town cited the owner, and the Land Court agreed that these uses were illegal "additional" uses because they constituted unauthorized use either as a boarding house or a tourist home. 

The owner appealed, and the SJC took over the case. The owner argued that these uses were not unauthorized "additional uses," but were instead permissible principal uses as a single-family detached home. In response, the town argued that the zoning code prohibits any uses not expressly permitted, and since short-term rentals are not expressly permitted, the uses are illegal.

Skip all the way down to page 15 of the slip opinion unless you want to get into the reasons why the SJC considered the case despite the landowner having sold the property during the pendency of the case (short story: the issue is really important, so we're going to address it).

The court first agreed with the owner, and held that the owner's use was "was not an unauthorized 'additional' use" (say that three times). The use did not qualify as a "lodging house" (an authorized additional use), because in lodging houses, the renters are given specific rooms, and not, as here, the entire premises. Slip op. at 16-17. And in lodging houses, the owner maintains the home as their own residence. The court also rejected the characterization of the use as a "tourist home." Again, these things rent rooms, not the entire house. Slip op. at 19. Things looking up for the owner.

But the court ultimately made a broader ruling. It held that the uses the owner was making were illegal as a principal use in a residential zone:

The plaintiff's argument is fundamentally flawed because it fails to recognize that short-term rental use of a one family home is inconsistent with the zoning purpose of the single-residence zoning district in which it is situated, i.e., to preserve the residential character of the neighborhood. See, e.g., Rogers v. Norfolk, 432 Mass. 374, 380 (2000) ("preservation of the residential character of neighborhoods is a legitimate municipal purpose to be achieved by local zoning control"). Indeed, courts have long recognized that municipalities may regulate in order to protect communities' "residential character," Euclid v. Ambler Realty Co., 272 U.S. 365, 394 (1926), and to make neighborhoods "a sanctuary for people," Belle Terre v. Boraas, 416 U.S. 1, 9 (1974).

Slip op. at 19-20.

The court didn't focus on the duration of the rentals (see slip op. at 4, n.6; 15 n.15), and instead looked at the character of the use. Short-term occupants don't have that sense of community, the "stability and permanence" in a neighborhood. "Residence," the court concluded "is commonly understood to mean 'the place where one actually lives as distinguished from his domicile or a place of temporary sojourn.'" Slip op. at 21 (quoting Webster's New Collegiate Dictionary 1003 (1985)).

And here's the "buried lede" in the story that, we think, had a lot to do with the outcome:

Most frequently, the rented premises were used for family reunions, but they also were used for a college reunion, a corporate board meeting, business retreats, and "photo shoots." Renters were given exclusive possession of the property during the applicable rental period; the Styller family stayed elsewhere. Although each rental was arranged by a single booking guest, ten of the plaintiff's thirteen rentals had a group of six or more guests (including the booking guest).

In May 2016, a shooting incident during a weekend rental left an individual dead at the plaintiff's property. [Cue "record scratch" sound.]

Slip op. at 4-5 (footnote omitted) ("Styller rented the premises to an individual who was part of a group of six overnight guests, purportedly for the purpose of hosting a college reunion. More than one hundred people came to the premises for the event, and one person was shot and killed.").

Many news stories covering the shooting called the home a "mansion" or a "party house." Not exactly the most sympathetic plaintiff to bring this issue up, we're guessing, and this had a lot to do with the court concluding this wasn't a "residential" use of the property (we know it when we see it).

Check it out.

Styller v. Zoning Board of Appeals, No. SJC-12901 (Mass. June 7, 2021)

Fla App Doubles Down On That Weird Property Isn't "Property" Thing

We're hoping that someone can explain the Florida District Court of Appeal's recent opinion in Bondar v. Town of Jupiter Inlet Colony, No. 4D19-2118 (May 5, 2021) in a way that makes sense other than the old apocryphal tale of "I don't know why we do things this way, except that we've always done things this way."

Before we get to the details, a slight detour. This is another one of those cases about substantive due process. Now don't get us started on that one -- we get that it might seem odd to suggest that the Fourteenth Amendment's Due Process Clause limits the government's power beyond requiring fair procedures. After all, the words are right there in the text: "nor shall any state deprive any person of life, liberty, or property, without due process of law." But work with us here: we've always viewed the phrase much more holistically and within the historical context that the words "due process of law" must be read as a single phrase, and really were the 18th Century way of saying "law of the land." (Edward Coke, we're looking at you, Your Lordship.)

With that background, let's take a look at Bondar.

The Bondars owned or leased three homes in the Town that they used for short-term rentals. The Town has one zoning district, "RS Single-Family Dwelling." That's it. Slip op. at 2 ("There were no commercial, industrial, multi-family or other zoning districts located within the Town."). A neighbor dropped dime and the Town issues notices of violation of the zoning code, and later filed a lawsuit seeking a declaration that the Bondars were violating the code.

The owners shot back: what violations? Where in the zoning code does it say short term rentals are prohibited? The trial court agreed, concluding that the zoning code didn't limit the length or frequency of an owner renting their property, and that the Bondars' use of their properties as short term rentals didn't violate the zoning code. 

Things were looking up for the Bondars' counterclaims for inverse condemnation, substantive due process, equal protection, and intentional interference with business relations. The trial court denied the Town's motion for summary judgment on the due process claim.

But the court of appeal concluded that the Town should have been granted summary judgment on the Bondars' claim that "the Town's actions in issuing notices of violation and filing the declaratory action resulted in substantial interference and substantial deprivation of their 'fundamental or constitutionally protect right to own, possess, use, dispose of, and transfer property.'" Slip op. at 8.

How so, you may ask? The court bought into the line of thinking from the Eleventh Circuit that holds that there's no substantive due process claim when the conduct alleged is the unlawful application of a land-use ordinance. That line goes like this: substantive due process is only to protect fundamental rights against arbitrary legislation. Slip op. at 9. Cf. elsewhere. 

That leads to two questions.

First, isn't property one of those "fundamental" rights? It's right there in the text of the Fourteenth Amendment, after all.

No, you're just not seeing things clearly, dude. The fundamental rights the due process clause might protect include your the right to own, possess, use, dispose of, and transfer property," but the Town here hasn't deprived the plaintiffs of their rights to do those things. It simply precluded third parties from doing so!

Although the Owners asserted below and on appeal that the fundamental right violated was the “right to own, possess, use, dispose of, and transfer property,” a close review of the counterclaim reveals otherwise. Under the plain facts alleged in the counterclaim, it cannot be said that the actions of the Town (issuing notice of violations and filing the Dec Action) impeded upon the Owners’ right to themselves “own, possess, use, dispose of or transfer” a fee ownership interest in any of the three properties. What the Town was seeking to preclude was the ability of the Owners to allow others to use the properties, which is an incidental property right controlled by state law.

Slip op. at 10. The right to let others "own, possess, use, dispose of or transfer" your property is, in the court's thinking, merely a state-granted property right, not a "fundamental" property rights. In short, the owners don't have a fundamental right "in the constitutional sense" to rent their property. Short term, long term, or otherwise.

Sorry, we're just simple country bumpkins so we initially didn't understand how the either the Florida court or the Eleventh Circuit (whose reasoning the Florida court adopted) reached this conclusion. Then we read the stuff starting on the bottom of page 10:

The Owners have not cited any cases that hold that the right to rent property to others is a fundamental right in the constitutional sense, and we have been unable to find any such authority. Instead, the cases cited by the Owners on appeal address principles applicable to the Fifth Amendment and other constitutional rights, rather than fundamental rights in the context of the Fourteenth Amendment. Thus, we conclude the Owners’ counterclaim alleging a violation of substantive due process fails because they cannot demonstrate the Town violated a fundamental right protected by the Fourteenth Amendment.

Slip op. at 10-11.

What the Florida court is saying (between the lines) is that the plaintiffs much choose their remedy (and the only choice is takings). The opinion never actually says so (unlike the Eleventh Circuit's Judge Newsom ("Sounds like a job for the Takings Clause, right?")), but that's how we read that passage.

The forced-choice-of-remedy doesn't get us there. What's to say a property owner can't allege both a taking (you regulated my property so much it sure looks like eminent domain), and a substantive due process violation (you are behaving very badly towards me, government)? To us, eliminating a due process remedy simply because the owner has a takings claim also is bad for a couple of reasons. First, the remedies may be different (compensation vs injunction). And second, that pesky text of the Fourteenth Amendment, which, you know, mentions "property" rather explicitly.

The Florida court wades further into the morass on page 11, which takes us to our second big point. The court accepted the Eleventh Circuit's distinction between "executive" actions and "legislative," and concluded that when a person alleges that the government deprived them of a "non-fundamental" right, only legislative action can trigger substantive due process violations. State government can run pretty wild, as long as its merely the executive that's doing it! That's an even lower standard than the notorious rational basis test.

So there you have it: "As for the substantive due process violation counterclaim, the Owners’ right to rent the properties to others is not a fundamental right for purposes of substantive due process. Additionally, the executive actions by the Town were not arbitrary, irrational or conscience shocking so as to violate the Fourteenth Amendment." Slip op. at 12.

We think the Sixth Circuit has a better approach: if the facts, plausibly alleged, show that a plaintiff might have both a takings and a substantive due process claim, go for it.

We still wish someone could explain Bondar and its predecessors to us in a way we could wrap our minds around.

Bondar v. Town of Jupiter Inlet Colony, No. 4D19-2118 (Fla. Dist. Ct. App. May 5, 2021)

Latest Issue Of The Urban Lawyer: Two Takings Theories, Home Rule, Rideshare Takings, And Vacation Rentals In The Coastal Zone

The latest issue of The Urban Lawyer, the scholarly law journal of the ABA's Section of State and Local Government Law (our Section) has been published. Takings mavens are going to like this one:

• William W. Wade, Love Terminal: A Tale of Two Theories - our friend and colleague Bill's final work.
• Kenneth Stahl, Home Rule & State Preemption of Local Land Use Control - land users and muni lawyers: read this.
• Eric Lynch, Fifth Amendment on Fifth Avenue: New York City Taxicab Medallions App-Dispatch Services & Just Compensation in Regulatory Takings - a former student of ours and now colleague, on sharing economy takings; this article began life as his final paper for our class.
• Robert Freilich, et al., The California Coastal Commission & Beach Access: The Necessity for Overriding City & County Ordinances Banning the Use of Short-Term Vacation Rentals in the Coastal Zone - analysis of an important issue, from one of the masters.
  

Get the entire issue here. To download it, you need to be a subscriber (easiest way to get a subscription: it is included in Section membership).

Federal Court Denies TRO: Hawaii Gov's Coronavirus Travel Quarantine Doesn't Stop Anyone From Coming To Hawaii

As expected, a quick decision and opinion from the U.S. District Court for the District of Hawaii, after yesterday's hearing on the plaintiff's request for extraordinary preliminary relief (a TRO and PI) in the case challenging the Hawaii Governor's imposition of a 14-day self-quarantine on all travelers inbound to Hawaii (and other emergency orders, although the TRO request was limited to the quarantine).

When the opinion starts this way, you know which way it is headed:

Claiming that there is no emergency in Hawai‘i or the United States, Plaintiffs seek temporary injunctive relief enjoining Defendant from enforcing the 14-day quarantine requirements of the Emergency Proclamations and an order to show cause why a preliminary injunction should not issue.

Op. at 1-2 (footnote omitted). I'm not sure that's exactly what the plaintiffs were arguing ("no emergency" anywhere), but you get the drift.

The Governor challenged the plaintiffs' standing (they have not been injured, he claims), but the court avoided ruling on that question after concluding that the Governor's quarantine does not actually prohibit anyone from coming to Hawaii. It's not a ban on travel, just a (very onerous) condition placed on travel. The plaintiffs, the court concluded, "elected not to travel—whether to or from Hawai‘i—because they do not want to be quarantined." Slip op. at 11. This isn't an express ban (feel free to come to Hawaii, as long as you are prepared to stay indoors in a single location for the next two weeks), nor is it pretextual (see slip op. at 21-22).

The court's reasoning was based mostly on Jacobson (the 1905 Massachusetts vaccination case from the U.S. Supreme Court -- what we call the "real liberty" case). Applying rational basis review, the Hawaii court concluded that the plaintiffs have little chance of success on the merits, because the governor's actions "bear a real or substantial relation to the public health." Slip op. at 17.

It doesn't take much for a government act to pass the rational basis test, and there was more than enough in the record for the court to conclude that the governor's actions are in the ballpark. (We have to express a little disappointment that the court didn't throw in a cite or footnote to The King v Tong Lee, 4 Haw. 335 (Kingdom 1880) (in banco), a case that although not binding on this court, certainly supported its conclusion; and it's always fun to cite Kingdom cases).

One thing we didn't care for was this citation to a recent Fifth Circuit case:

Indeed, “Jacobson instructs that all constitutional rights may be reasonably restricted to combat a public health emergency.” In re Abbott, 954 F.3d 772, 786 (5th Cir. 2020).

Slip op. at 14. That to us, is not quite accurate. Indeed, as the Supreme Court has noted, "[e]mergency does not create power. Emergency does not increase granted power or remove or diminish the restrictions imposed upon the power granted or reserved." Home Building & Loan Assoc. v. Blaisdell, 290 U.S. 398 (1934). We think it is more accurate to say that even in non-emergency times, our rights are subject to reasonable regulation without substantial judicial interference (that's the nature of the rational basis test, no?).  

The right to travel plaintiffs assert is a liberty interest under the Fifth and Fourteenth Amendments (not a Privileges and Immunities Clause right to travel claim, which the federal government tried unsuccessfully to raise). The court concluded this wasn't a "ban" on travel, just something that makes travel a really big hassle. It does have a "deterrent effect," but "any deterrent effect the quarantine may have on Plaintiffs’ travel to Hawai‘i does not amount to a violation of their right to travel. We are not here dealing with a quarantine or Emergency Proclamations with a purpose of deterring Plaintiffs (or other out-of-state travelers) from entering Hawai‘i." Slip op. at 22. In other words, the court isn't going to look behind the expressed purpose of the quarantine, and examine the motives of the governor. And the restrictions don't discriminate in favor of Hawaii residents because they have to go through most of the same things (although, as we understand it, residents are subject to slightly less restrictions than nonresidents when it comes to what activities they may engage in while in quarantine).

The court also held that even if the quarantine were subject to a higher level of scrutiny, it survives:

Accordingly, based on the record presently before it, the Court finds that the quarantine survives strict scrutiny and Plaintiffs cannot at this time establish a likelihood of success or raise a serious question going to the merits of their right to travel claim.

Slip op. at 25.

To us, that is a big hint about where the court is headed on this issue eventually, unless there's some kind of revelatory evidence produced.

We listened in to the hearing yesterday, and thought that the issues were well argued by excellent counsel on both sides, and the judge was well-prepared also. But we can't say that this ruling was unexpected.

We're not sure what's next (probably some kind of action on the non-quarantine measures, some move to supplement the evidentiary record, or maybe an amendment to the complaint to allege a P&I right to travel violation, we're guessing), but we shall continue to follow along. This now seems to be a race against time, as the governor has announced that at the end of July, the quarantine is getting modified to allow those travelers who go through a COVID "precheck" and who can show that they are virus-free, to travel inbound without going through the two-week stay inside restriction.

Several items, in the event this case or these issues float your boat:

July 22, 2020: we are moderating a superstar panel of lawprofs and practitioners (including the counsel for the plaintiffs in the Hawaii case, Harmeet Dhillon), for an ABA sponsored program, "Emergency and Police Power: Property Claims in Times of Crisis." Also speaking are Professors Craig Konnoth (Colorado) and John Nolon (Pace), and Professor Sarah Adams-Schoen (Oregon).

For more on the powers of Hawaii's governor during emergencies, see our forthcoming article in the U. Hawaii Law Review, "Hoist the Yellow Flag and Spam® Up: The Separation of Powers Limitation on Hawaii’s Emergency Authority," 43 U. Haw. L. Rev. ___ (forthcoming 2020).

We were a guest on the Eminent Domain Podcast on the takings aspects of these shut down orders (not an issue in the Hawaii case, as the plaintiffs have not raised a takings claim).

If you want a deeper dive into the takings issues, download our draft article, "Evaluating Emergency Takings: Flattening The Economic Curve."

Lots going on, even on this holiday weekend.

Order Denying Plaintiffs' Application for Temp. Restraining Order, Carmichael v. Ige, No. 1:20-cv-00273-JAO...

July 22, 2020: "Emergency and Police Power: Property Claims in Times of Crisis" (ABA Webinar)

Please plan on joining us on Wednesday, July 22, 2020, at 1pm ET (10am PT) for a long-form program on "Emergency and Police Power: Property Claims in Times of Crisis."

Our speakers are Professors Craig Konnoth (Colorado) and John Nolon (Pace), and one of the lawyers on the forefront of the nationwide legal challenges, Harmeet Dhillon (San Francisco). I'll be moderating, along with Professor Sarah Adams-Schoen (Oregon).

Here's the program description:

On the eve of the centennial of Pennsylvania Coal Co. v. Mahon (US 1922), this panel will revisit the question: How far can the police power be stretched to protect the public against dangers? The panel will evaluate the scope of state and local authority to respond to emergencies and the implications for private property rights—asking, how far is too far? What is the scope of implied limitations on private property rights in times of crisis? When does the diminution of existing property rights require compensation? Can local governments respond to a crisis without delegated authority or in defiance of state mandates? What rights do property owners/landlords/tenants have to privately respond in times of crisis.

The panel will delve into the timely and enduring question of how far the police power stretches to protect the public against dangers—asking, how far is too far? Can local governments respond to a crisis without delegated authority or in defiance of state mandates? What rights do people have to privately respond in times of crisis?

Register here. We hope you can join us.

Available Now: 2020 Zoning and Planning Law Handbook (Green Book)

photo: Patricia Salkin

Just published: the 2020 Zoning and Planning Law Handbook (Green Book). The first section of the Summary of Contents is about Takings, and includes as the lead piece Professor Gideon Kanner and Michael Berger's tour-de-force article, "The Nasty, Brutish, and Short Life of Agins v. City of Tiburon." It also includes my articles on Murr, "Restatement (SCOTUS) of Property: What Happened to Use in Murr v. Wisconsin?"

Check it out. The Green Book is a one-stop shop for the best articles on land use in a given year, and this edition includes chapters on housing, agriculture, cell tower placement, RLUIPA, and (of course) zoning.

Our thanks to Dean Patty Salkin who edited the volume for including us.

Summary of Contents, 2020 Zoning and Planing Law Handbook (Green Book)

Upcoming Judiciary History Center Program: "Constitutional Law and States of Emergency: Lessons from the COVID-19 Pandemic" - Wed., June 17, 2020, 5:30pm HST

Next Wednesday, June 17, 2020, at 5:30pm Hawaii Time, we'll be speaking for the King Kamehameha V Judiciary History Center about "Constitutional Law and States of Emergency: Lessons from the COVID-19 Pandemic."

This is a one-hour program, open to the public, where we will take a dive into Hawaii's emergency preparedness and response laws, how Hawaii's courts have treated emergencies, plagues, pandemics, and quarantines in the past (we have a long history there), and respond to (moderated) audience questions.

Space limited to 100 attendees, although it will be recorded and posted on the Center's YouTube channel. Here's the program description:

The King Kamehameha V Judiciary History Center invites you to join our live webinar with attorney Robert H. Thomas as he shares his expertise about constitutional rights and civil liberties during the COVID-19 pandemic. He will share lessons from Hawaiʻi’s history of public health laws during epidemics, as well as explain how courts in other jurisdictions are currently evaluating legal claims related to the Fifth Amendment.

The webinar will conclude with a live Q&A. Space is limited to 100 webinar attendees.

Register to learn about Robert's responses to popular questions that arose during quarantine, including:

• Can government officials require me to wear a mask?
• Can the police keep me from going to the beach?
• Can Hawaiʻi treat residents and tourists differently?

To join the live webinar, please register using the sign-up button below. Or, visit our Youtube channel to view the program's live stream feed on June 17, 2020 at 5:30 pm. The webinar will be recorded and posted to our Youtube and Facebook pages.

Register here.

Hope you can join us.

PS - once the ongoing situation is over, when you have a chance, you really should pay an in-person visit to the Center's facility, which is on the first floor of Aliiolani Hale, directly underneath the Supreme Court's courtroom. There's a historic trial courtroom, and displays on Hawaii's legal history.

Join Us This Week: May 12-14, 2020 For (Virtual) Land Use Institute Webinar Series

Join us starting tomorrow, Tuesday, May 12, 2020 for the 34th Land Use Institute. Originally scheduled for April in Tampa, we obviously couldn't do tha, so we did the next best thing -- moved this venerable course online. The Planning Chairs (Frank Schnidman and Dean Patricia Salkin) have assembled the usual hot topics session and a lineup of expert faculty (we're speaking at the 2:45 ET session on Federal Laws (in our case, NEPA, Water, and Wetlands (including the Maui case from SCOTUS)). 

The program takes place over three days Tuesday, Wednesday, and Thursday, and you can either register for the sessions or all three days, with various discounts if you are a member of the American Bar Association, and even more if you are a member of the Section of State and Local Government Law. 

Here's the three-day agenda. There is a lot here to like, and we hope you can join us:

Tuesday, May 12th: Updates and Current Issues Explored

1:00-2:35pm: Update on Planning, Land Use, and Eminent Domain Decisions

2:45-4:15pm: Federal Laws, Regulations, and Programs Affecting Local Land Use Decision Making

Wednesday, May 13th: Climate Change, Land Use Practice and COVID-19

1:00-2:35 pm: Annual Richard F. Babcock Faculty Address: Overview of National and International Best Practices to Address Climate Change and Sea Level Rise

2:45-4:15 pm: Land Use Practice and COVID-19 (The Future of Zoning: The View from the COVID-19 Lens & Seeking and Dealing with Variance and Rezoning Requests)

Thursday, May 14th: Hot Topics in Land Use

1:00-2:35 pm: Hot Topics, Part 1 (Regulating Personal Transportation, Housing the Homeless, Redevelopment/Opportunity Zones)

2:45-4:15 pm: Hot Topics, Part 2 (Affordable Housing, Sustainability/Resilience, Eminent Domain and Takings)

Details on the faculty and each day's agenda here. Register for the program (all sessions, or ala carte) here. 

See you online! 

(Nearly) Last Chance To Join Us In Nashville For ALI-CLE's Eminent Domain Conference

You can also fly, drive, or bike to the upcoming 37th Annual ALI-CLE Eminent Domain & Land Valuation Litigation Conference. in Nashville. Limited space still available, so don't delay further and register now. We're on track to record attendance, so you don't want to miss the best nationally-focused three-day program on our area of law.

Takings, Knick, compensation, appraisals ... and a bit of fun thrown in. We have many new attendees, and many new speakers, too.  

Tex App: City Ordinance Prohibiting Short-Term Rentals Unconstitutional

We've been meaning to post the Texas Court of Appeals' opinion in Zaatari v. City of  Austin, No. 03-17-00812 (Nov. 27, 2019) for some time.  

The City of Austin adopted an ordinance that, among other things, prohibited short term rental of a residence that is not also owner-occupied, barred certain activities (such as weddings) on other properties, and permitted City officials to enter such properties to ensure compliance with the regulations. Property owners challenged the ordinance, and the State of Texas intervened as a plaintiff. The trial court granted the City summary judgment.

The court of appeals reversed:

The ordinance provision banning non-homestead short-term rentals significantly affects property owners’ substantial interests in well-recognized property rights while, on the record before us, serving a minimal, if any, public interest. Therefore, the provision is unconstitutionally retroactive, and we will reverse the district court’s judgment on this issue and render judgment declaring the provision void. The ordinance provision restricting assembly infringes on Texans’ fundamental right to assemble because it limits peaceable assembly on private property. Therefore, because the City has not demonstrated that the provision is narrowly tailored to serve a compelling state interest, the provision violates the Texas Constitution’s guarantee to due course of law, and we will reverse the district court’s judgment on this issue and render judgment declaring the provision void.

Slip op. at 2. 

The good stuff starts on page 16 of the slip opinion, where the court concluded that the ordinance is unconstitutionally retroactive. The owners have a settled property right to rent their properties, and the ordinance "eliminate[d] well-established property rights that existed before the ordinance's adoption." Slip op. at 17. The City did not show a compelling interest in regulating these properties, but even if it had done so, on balance the settled expectations of property owners would have outweighed the government's interest. 

The right to use property includes the right to rent it, and although it may be regulated to some extent, the City even admitted that "Austinites have long exercised their right to lease their property by housing short-term tenants." Slip op. at 22. The ordinance resulted in a total elimination of that right. 

The owners and the State also raised a takings claim, but "having determined that [the ordinance] is unconstitutionally restrictive, we need not address the State and the Property Owners' remaining constitutional challenges to that same section." Slip op. at 23. 

Check it out. The entire opinion is worth reading.   

Zaatari v. City of Austin, No. 03-17-00812-CV (Tex. Ct. App. Nov. 27, 2019) 

Latest Ep, Eminent Domain Podcast: Short-Term Rentals, Tiki Island, The Castle, Penn Central

Last week, along with Bob Grace, I (Robert (don't-call-me-Bob) Thomas), was a guest on Clint Schumacher's Eminent Domain Podcast. Stream it above, or download it here.

Clint and I had a wide-ranging discussion that centered on the recent trend of limiting short-term rentals, the legal pushback, and (of course) takings. We discussed the memorably-captioned Tiki Island case from Clint's home state of Texas. Penn Central, naturally. Vested rights. Mrs. Murphy exceptions (although those deal with discrimination in rental housing). First Amendment stuff. The upcoming ALI-CLE Eminent Domain and Land Valuation Litigation Conference in Nashville (Jan 23-25, 2020), at which both Clint and Bob are speaking. And The Castle (which might not only be our favorite eminent domain movie, but our favorite movie period). 

Check it out.

Not only is Clint presenting at our Ethics program in Nashville in January, he will -- as he did in Palm Springs -- be bringing the Eminent Domain Podcast mobile unit, and will be doing the podcast from the Conference. Drop by and say hello and be a guest! 

About the only thing that's not perfect about the Eminent Domain Podcast is that it isn't more frequent. But we understand, Clint. As they say, good lawyers are always busy. Just keep 'em coming. 

New Land Use Law Blog To Follow: Merriam's Corner ("Life, Liberty, and the Pursuit of Land Use")

Land users and dirt lawyers know Dwight Merriam. (And if you don't, you are not really a land user, are you?)

He's won landmark cases (has even beaten Yours Truly in one of those cases way back in the day). Written tons of articles and books. Edits Rathkopf. Contributes to Nichols. Mentored multiple generations of land use lawyers (me included). All while serving his country in the U.S. Navy. 

Here's your chance to tap directly into the source. Dwight has (finally) started a blog, Merriam's Corner, about the topics we all love. 

So sign up and follow. Listen in as Dwight thinks out loud for our benefit.

Welcome to the blog world, Mr. Merriam.  

Lawprof: "Does Legalizing Uber and Lyft 'Take' The Property Of Taxi Companies?"

Short answer: no.

But the longer answer which lawprof Ilya Somin discusses in this short podcast is worth listening to. Check it out. 

Here's the summary:

Over the last few years, taxi companies in several cities have brought lawsuits claiming that legalizing ride-share services such as Uber and Lyft violates the Takings Clause of the Fifth Amendment, because it expropriates their supposed property right to a monopoly of the taxi business. Courts have so far rejected these arguments. But they raise broader issues about the nature of property rights, and what kinds of government actions qualify as a taking. Confusion about these matters goes well beyond this specific set of cases. Could treating government-created monopoly privileges as property rights imperil valuable innovations and reforms in many parts of the economy?

We follow the issue, mostly from an academic standpoint (we've yet to take on one of these cases, but find the issues fascinating). We penned an essay on the takings issues in the U. Hawaii Law Review suggesting that the courts' focus on the foundational "property" question should not be the analytical center of these cases. Rather, they should examine the expectations which the owners of taxi medallions possess, instead of isolating a particular "stick" (does an owner have a property rights in a lack of competition," a question which suggests its own negative answer).

This situation may be a case of "nothing new under the sun," because it reminds us of that old war horse of a case, Charles River Bridge v. Warren Bridge, 36 U.S. (11 Pet.) 420 (1837), where the Supreme Court held that a state-granted charter to build and operate a toll bridge did not prohibit the state from allowing another nearby bridge that made the first bridge's charter rights less valuable. 

"Property" Investment-Backed Expectations in Ridesharing Regulatory Takings Cases

Video: HSBA Real Property Section Annual Litigation Update With Kugle And Murakami

As promised, here's the video of our last weeks' presentation by our colleagues Greg Kugle and Mark M. Murakami at the Hawaii State Bar Association's Section of Real Property & Financial Services Section's annual Real Property Litigation Update.

Mark and Greg put on this session every year, and it is a real crash course in the latest and greatest developments in this area of law locally, and nationally. 

We shot it guerrilla-style on an iphone, so no comments about shaky video, please. 

Go here for the handout with links to the cases they discuss. 

HBSA Real Property Section: Annual Litigation Update With Kugle And Murakami

Get ready, be sure to come: tomorrow, Friday, October 19, 2018, our Damon Key partners Greg Kugle and Mark M. Murakami will present their annual tour-de-force session on the past year in real estate and related litigation in Hawaii and elsewhere. 

As the note to Real Property Section members notes:

Gregory Kugle and Mark M. Murakami will discuss recent decisions from the Hawaii Supreme Court and Intermediate Court of Appeals, as well as noteworthy cases from the mainland, relating to real estate matters.

Title:                Real Estate Litigation Update 2018
Presenters:       Gregory Kugle and Mark M. Murakami
Date/Time:      Friday, October 19, 2018 at 12:00 - 1:00 p.m.
Place:               HSBA Conference Room (1100 Alakea Street, 10th Floor, Honolulu, Hawaii 96813)
Cost:                No charge to RPFSS members

Please note that no reservations are needed or will be taken. Seating is limited and will be on a first-come, first served basis, so come early to guarantee yourself a seat!

RPFSS members may participate via teleconferencing by calling 1-808-670-3914 [local] or 1-855-853-0606 [toll free]. No passcode is needed.  As a courtesy to all, please remember to mute your phone after you connect, except when asking questions.

This Brown Bag presentation qualifies for 1 CLE Credit through the HSBA. To register for attending in person, please click HERE.

Sign up. Go. Well worth it. 

Real Estate Litigation Update - 2018 (Kugle and Murakami) 

There's Still Time To Join Us In Detroit: 32d Annual Land Use Institute

Space is filling up, but there's still time to join us later this month in Detroit for the 32nd Annual Land Use Institute (April-19-20). 

We'll let program Planning Chair Frank Schnidman explain all the reasons why, and we'll add only these points: (1) it's a very good program that won't take much of your time (fly in for the Thursday afternoon program, stay a night, fly home on Friday evening); (2) Detroit is the place to be these days; and (3) it's one of the best deals in CLE credits, with tuition as low as $400.

2018 Land Use Institute Brochure Detroit 5 2018

HAWICA: Vacation Rental Home Is "Public Accommodation," And Can't Discriminate Based On Sexual Orientation

Here's one from the Hawaii Intermediate Court of Appeals, Cervelli v. Bufford, No. CAAP-13-896 (Feb. 23, 2018), in which the court considered whether homeowners who rented out rooms in their home to the public, but refused to do so to a lesbian couple, violated Hawaii's public accommodation laws, or were sheltered from the statute by the Free Exercise Clause and other constitutional provisions.

In short, the court held they could be held liable, even though it is their home, first concluding that renting out a room in your home qualifies as offering a public accommodation, even though it is your residence. The owners advertise and offer rooms to the general public on their website and through third-party websites, rent to a large number of people (up to 200 nights per year), and pretty much takes all comers "aside from same-sex couples and smokers." Slip op. at 11.

The potential renters here inquired if a room was available, were told it was, and then informed the property owner that they were a same-sex couple. After which the owner denied accommodation. The only reason provided was the same-sex relationship.

The court first concluded that Hawaii's anti-discrimination statute governed this case even though it involved a home in which the owners resided, because it covers things like hotels, motels, and inns, and also covers establishments "that provide[] lodging to transient guests," which would include a home. Or at least not automatically exclude a home.  

The most interesting portion of the opinion -- the analysis of the property owners' Free Exercise and other constitutional defenses -- begins on page 18 of the slip opinion. The owners asserted that as "strong Christians," they were opposed to renting a room in their home to a couple in a same-sex relationship and had a constitutional right to refuse to do so. The court acknowledged a homeowner's right to be left alone and to privacy and free association and religion, but concluded that the owners "opened up" their home to over 100 customers per year, for money, and thus had effectively forfeited those rights in the rooms. (In more technical terms, the court concluded that even applying strict scrutiny, the State has a compelling interest in prohibiting discrimination on sexual orientation, and that the owners' interest do not outweigh that.) The court disposed of the remainder of the owners' constitutional claims on similar grounds. 

The opinion doesn't discuss the Masterpiece Cakeshop case now pending before the U.S. Supreme Court, which presents a similar, but not identical issue. Unlike that case, the Cervelli case doesn't involve claims that the proprietor is an "artist" and is being required to perform some unique service.

The long and the short of this opinion seems to be that if you use your home like a hotel, you are going to be treated like a hotel: "In other words, the success of Aloha B&B's business requires that [the owners] not be left alone." Slip op. at 20. We think that pretty much sums it up. 

Cervelli v. Bufford, No. CAAP-13-0000806 (Haw. Ct. App. Feb. 23, 2018) 

5th Annual Hawaii Land Use Litigation Update - Hawaii State Bar Association

For those of you who want to listen only,
stream the audio below, or download the mp3 here.  

Every year, our partners (and land use and property law mavens) Greg Kugle and Mark M. Murakami present a one-hour tour-de-force update on litigation essentials in their field of practice to the Hawaii State Bar Association's Real Property and Financial Services Section. 

Links to the cases they discussed today (and more) are in the handout and below. 

Watch, listen, and learn.  

2017 Litigation Update - Hawaii State Bar Association Real Property & Financial Services Section 11-17-2017... 

HAWICA Rejects Planning Department's Formalistic Definition Of "Applicant" In Vacation Rental Case

One for you land users. We're not going to analyze the Hawaii Intermediate Court of Appeals' published opinion in Robert D. Ferris Trust v. Planning Comm'n of the County of Kauai, No. CAAP-15-0000581 (Aug. 9, 2016) in too much detail, because our Damon Key colleagues Greg Kugle and Chris Leong represent the prevailing appellant. But here's a short summary, after which you can read the opinion itself.

The narrow issue in the case involves the definition of the term "applicant" in two different sections in the County's zoning ordinance. The underlying issue is one that's hot right now across Hawaii and elsewhere: short-term or transient vacation rentals, defined in the Kauai zoning ordinance as rental for less than 6 months.  

Here, the homeowner had a parcel in an agricultural district, with a single-family residence on the lot. It began renting the home to vacationers in 2003, prior to the County's adoption of an ordinance prohibiting new TVRs outside of certain specially-designated districts. The ordinance also required existing lawful TVRs to register, after which the owner or operator was required to obtain a nonconforming use certificate within a certain time. The County followed up with another ordinance "targeting the grandfathering provision established by" the earlier ordinance. Slip op. at 2.

The owner registered and filed a nonconforming use application. But the Planning Department repeatedly informed it that the application was not complete, and ultimately focused on the fact that the property was condominiumized and the owner thus needed the consent of at least 75% of the owners of the lot in order to apply. A separate ordinance defined "applicant" as someone who possesses a "controlling interest" in the subject property, and according to the Department, it was not sufficient that the applicant was the "owner, operator, or proprietor" of the TVR as set forth in the registration ordinance.  

Time marched on while this was being sorted out, and eventually "the Planning Department informed the Ferris Trust that the time period for applying for a nonconforming use certificate ended on August 8, 2011, and asked the Ferris Trust's counsel to advise their client to cease and desist from further use of land designated as agricultural from further use as TVRs." Slip op. at 3. The Trust appealed up the administrative chain to the Planning Commission and after a contested case before a hearings officer, the Commission denied the appeal. On to circuit court under the Administrative Procedures Act. That court affirmed the Commission.

The ICA saw it differently. The issue was whether the Trust could apply for a nonconforming use certificate despite it not having a controlling interest in the property, even though as "owner, operator, or proprietor" of the TVR, it was required by the TVR ordinance to apply for the certificate. The ICA began by noting that lawfully existing uses ("grandfathering") are grounded in constitutional and vested rights principles, and subsequently-adopted restrictions cannot limit a property owner's ability to continue with a preexisting use. The court concluded:

[p]ersons with less than a a seventy-five percent ownership interest may be able to establish vested right to prior lawful conforming uses. Therefore, precluding such persons from even applying for a nonconforming use certificate would be inconsistent with the purpose of the ordinance to identify those engaged in the prior lawful use of their property as a transient vacation rental and allow them to apply to continue that use.

Slip op. at 10-11. Limiting the ability of the Trust to apply as the County argued would raise "serious constitutional questions." Slip op. at 11.

The court applied the avoidance principle to read the ordinances to allow the Trust to seek the required permit, because that would allow the court to avoid those tough questions. Thus, because it was an "operator," the Trust qualified as an applicant, notwithstanding that it did not have a "controlling interest" in the property.   

Robert D. Ferris Trust v. Planning Comm'n of the County of Kauai, No. CAAP-15-0000581 (Haw. App. Aug....

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Guess What: Hawaii Housing Is Expensive!

Two stories to read, in tandem:

• In the ultimate dog-bites-man story, yesterday's Honolulu Star-Advertiser headline reads "Home demand outweighs supply." Well no kidding. As one fellow quoted in story said,"This is the most overstudied subject in the history of mankind ... You don't need a study to know what the numbers are. It's time to stop studying housing and start doing housing." The story is partially behind a paywall, but the lede sums it up: "Hawaii needs up to 66,000 homes if it expects to satisfy demand for housing over the next decade." Increasing demand coupled with restrictive supply means, guess what - high prices and shortages. What's responsible for the lack of housing? There's land on which to build, but it's infamously difficult to develop. As Professor David Callies wrote recently, Hawaii has an "increasingly well-known penchant for lengthy, often decade-long land use permitting processes" and a "climate that increasingly discourages both local and foreign investment in land development, because it is widely perceived as too risky for the private sector to undertake." This results in "housing that is affordable at any but the most astronomical levels[.]"
• "Affordable Housing Maui Style" - from newgeography.com via Professor Gideon Kanner. The author reports on a recent visit to the Valley Isle where he discovered that "[t]he cost of even the most modest homes and apartments are off the charts expensive. Property is pegged to what wealthy outsiders from the mainland and abroad are willing and able to pay rather than what the local population can afford." 

Do we still wonder why more and more are casting their futures by looking beyond our fair shores?  

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Tiki Island's Prohibition Of Vacation Rentals A Penn-Central Taking (For Now)

Thankfully, the only "Tiki Island" we have in Hawaii is a miniature golf course. Because the name "tiki" should be reserved for such things, or for kitschy bars, or Trader Vic-knockoffs.

And please, honest-to-goodness real municipalities should never be named Tiki Island. No matter how nice they appear to be. Just no.

(Martin Denny, by the way, gets a pass - rock on, Mr. Denny.)

But there it is, the Village of Tiki Island, Texas, population 968, "a waterfront community in Galveston County consisting of about 960 homes, with approximately 40% full-time occupants, and 60% part-time occupants." 

Something tells us that TI, TX's smallish population and the resident-to-part-timers ratio had something to do with the fact that in 2014, the Village adopted an ordinance prohibiting the short-term rental of residences, an activity that apparently had been ongoing for some time prior. Homes which had been renting before 2011 were "grandfathered," and the ordinance only applied to those who started renting after that date, and as you might expect, this resulted in a lawsuit by homeowners who were subject to the new prohibition who asserted that it was a taking, among other things.

They filed suit in a Texas court to enjoin the ordinance. The trial court agreed, and temporarily enjoined enforcement of the ordinance with respect to the plaintiffs who were actually renting their properties. 

The Village appealed, and in Village of Tiki Island v. Ronquille, No. 01-14-00823-CV (Mar. 12, 2015), the Texas Court of Appeals affirmed. It's a very long opinion (53 pages), and unless you want the details about whether the correct parties were named in the appeal, the timing of the appeal, and the like, you need not read all of it. Short version: the Village missed the deadlines for an accelerated appeal from an interlocutory order with respect to all but one of the plaintiffs, so the court of appeals lacked jurisdiction over those appeals, and considered the takings issue only as to one homeowner.  

The interesting part begins on page 24 of the slip opinion, the court's analysis of the Village's argument that the homeowner didn't properly plead or prove a regulatory taking. The court concluded that her complaint adequately alleged that her prior and current use of the property (and not just future uses):

Hill pleaded that (1) she researched the permissible uses of her house before committing to buy it, ascertaining that short-term rentals were permissible, (2) she relied upon Village officials assurances that short-term rentals were permitted, (3) the ability to rent short term was a major part of her decision to purchase her house, (4) she engaged in short-term rentals before Ordinance No. 05-14-02 was passed, (5) she is contractually obligated for future short-term rentals, (6) the ability to rent short-term enhances the value of her property, and (7) the prohibition on short-term rental decreases the value of her property. In other words, unlike in Mayhew, Hill challenges the Village’s interference with her prior and current existing use of her property, not just proposed future uses.

Slip op. at 28-29. 

The court also concluded (starting on page 30) that the homeowner introduced enough evidence supporting her takings claim to obtain the injunction. The key legal factors were the economic impact of the short-term rental prohibition on the homeowner, and her investment-backed expectations, and the court held that she "presented evidence that the enactment of Ordinance No. 05-14-02 had an economic impact on the value of her property, and that she had a reasonable, investment-backed expectation that she could engage in short-term rentals." Slip op. at 40.

The court rejected the Village's argument that her home was worth more than when she bought it (therefore the ordinance did not impact her adversely), and that her expectations were only that the home could be used for what it can be used for post-ordinance: a residence (and not a rental property). The homeowner introduced evidence that renting was legal when she bought the property, that the demand for short-term rentals is strong, that she made substantial improvements to the home to make it rentable, and that in the first nine months of 2014, she earned $25,000 in rental income. And even though the homeowner did not introduce evidence about the use of the house prior to her purchase, "the record does reflect that short-term rentals have long been done in Tiki Island, and that [the plaintiff] was doing short-term rentals for seven years before Ordinance 05-14-02 was passed." Slip op. at 36. 

Hill has been renting her Tiki Island home short-term since 2007. She bought it as an investment for the purpose of rentals, and made substantial improvements to the property. Tiki Island’s 2014 ordinance banning short-term rentals grandfathered certain identified properties that were already engaged in short-term rentals as of 2011. It is not evident from the record why Hill’s use of her home for short-term rentals was not grandfathered, as she was engaged in short-term rentals before the 2011 grandfathering cut-off. The Village’s excluding Hill from this grandfathered status, however, foreclosed Hill’s existing investment use of her property without an avenue for recoupment. We thus hold that she has identified a vested right for purposes of conferring the trial court with jurisdiction to enter a temporary injunction in her favor.

Slip op. at 52.

Bottom line: no appellate jurisdiction over most of the appellees so the injunction remains in place for them, and injunction affirmed for the other homeowner. Overall a good result for them. We'll see if the court rules the same way when the permanent injunction hearing comes up. 

Village of Tiki Island v. Ronquille, No. 01-14-00823-CV (Tex. App. Mar. 12, 2015)

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Materials From State Bar Association Appellate Section Presentation: Admin Law Appeals

Here are the written materials from today's HSBA Appellate Section presentation on administrative law and appeals in Hawaii courts. 

A video of the presentation is posted above -- it may be a bit dark, but no matter: all you really need is the sound, anyway. Listen to the audio-only session here:

GWK-RHT-HSBA-appellate-admin-appeals-1-13-2014

Administrative Appeals in Hawaii Courts: How Do You Get There, and How Do You Get Out? (Hawaii State Bar As...

Hawaii Federal Court: Kauai Charter Amendment Limiting Vacation Rentals Is A Prohibited "Zoning Initiative"

Late last year, we posted the Complaint in a federal court lawsuit originating on Kauai. In that case, the owner of a property that has been designated for resort development for 35 years asserted that the adoption of a Charter amendment by the County's voters and a follow-on ordinance adopted by the County Council that together created a new land use classification ("transient accommodation unit"), and severely limit the number of TAU's was an attempt to restrict the number of visitors and part-time residents.

The Complaint contains three major allegations: (1) the measures are arbitrary and capricious and violate substantive due process as an attempt to limit visitors, (2) they violate the Hawaii Zoning Enabling Act (Haw. Rev. Stat. § 46-4, the state statute delegating zoning authority to the counties in certain areas for all you land use nerds), which prohibits adopting of zoning ordinances by initiative, and (3) the Charter measure violated the Kauai Charter's requirement that the ballot question contain an objective summary of the measure.

In an order filed two weeks ago, the District Court addressed the parties' cross-motions for summary judgment on the latter two counts (neither the plaintiff nor the defendants sought judgment on the substantive due process claim).

The court concluded that the Charter amendment adopted by the voters was, in reality, a prohibited zoning initiative. The court relied on the rationale of  Kaiser Hawaii Kai Dev. Co. v. City & County of Honolulu, 777 P.2d 244 (Haw. 1989), a case in which we successfully argued that § 46-4 prohibits a municipality from adopting a zoning ordinance via the initiative process. In Kaiser Hawaii Kai, the Hawaii Supreme Court held that section 46-4 delegates comprehensive zoning authority to the counties, and this requires them to exercise that power in a uniform manner, which is jeopardized by piecemeal voter-adopted measures. The District Court held: 

First, although the facts of Kaiser Hawaii Kai are distinguishable from the facts of the instant case, nothing in Kaiser Hawaii Kai indicates that the legal principles which the Hawai`i Supreme Court articulated in that case are limited to initiatives to change the zoning of specific tracts of land. The legal principles in Kaiser Hawaii Kai are clear, and they are equally applicable to other instances in which counties attempt to legislate zoning issues through voter initiative. This Court also rejects Defendants’ argument that Section 3.19 and Ordinance No. 912 merely enacted a permissible shift of internal authority within the County. Section 3.19 and Ordinance No. 912 created a land use classification that did not previously exist, and they established the process developers must follow in order to use their land within that classification. Section 3.19 and Ordinance No. 912 did not merely shift authority over a classification and process that already existed. This Court therefore CONCLUDES that Section 3.19 was an improper zoning initiative and, pursuant to Kaiser Hawaii Kai and Haw. Rev. Stat. § 46-4(a), Section 3.19 is invalid.

Slip op. at 41.

The court also held, however, that the requirement for a not-misleading ballot measure does not apply to Charter amendments. See slip op. at 47 ("Although KBV presents a logical argument that ballot materials describing a proposed Charter amendment should contain an objective summary and should neither mislead nor advocate a position, the courts are not in a position to create such a requirement.").

A couple of unanswered questions:

• The Order doesn't say how the court concluded that a measure adopted as a Charter Amendment can be treated as an ordinance adopted by the initiative power. Under the Kauai Charter, "initiative" is the "power of voters to propose ordinances." That's an entirely diffferent process, with entirely different adoption requirements than initiative ordinances. For example, initiative proposals require the signatures of 20% of the number of eligible voters in the last election, while Charter amendments require 5% of registered voters in the last general election, and initiative proposals undergo an elaborate pre-election process, whereas Charter amendments, once qualified, simply go to the voters for adoption or rejection. Yet, the court treated the Charter amendment as an initiative ordinance. Did the court simply pierce the veil and conclude this was a disguised zoning initiative? Sorry, we just don't know.

• In light of the above, would it have been better for the court to have concluded that Kauai voters were simply without the power to amend their Charter to create a new land use or zoning classification? That would have ended up in the same place (the Charter amendment is improper) -- but not because it's an impermissible zoning ordinance, but rather because state law prohibits the counties from creating new zoning classifications, whatever the method used. While it may be an intellectual exercise at this point, if this decision gets appealed to the Ninth Circuit, this seems like it would be an alternative gounds for affirmance.

• The court also struck down the follow-on TAU ordinance adopted by the County Council, concluding that because the Charter amendment is invalid, the ordinance falls also because "[t]he Council enacted Ordinance No. 912 to implement [the Charter amendment]. See slip op. at 42. The order doesn't provide more analysis and thus we're not sure how independent council action -- while accomplished to implement what turns out to be an invalid Charter amendment -- can deemed illegal. We think that's the right result, mind you, but the conclusion does not seem to flow as an obvious point, so we would have appreciated an analysis, if only to use in our next case. 

There will undoubtedly be more on this case, either in the Ninth Circuit or when the court deals with the remaining substantive due process claim. When that happens, we'll be there.

Order Granting in Part and Denying in Part Plaintiff's Motion for Summary Judgment on Counts II and III of...

New Complaint Challenging Kauai's Limit On Visitor Units

An interesting new complaint filed in U.S. District Court in Hawaii, asserting claims for substantive due process, violation of the zoning enabling act, and the Kauai County Charter.

A owner of property that has been designated for resort development for 35 years is asserting that the adoption by the County's voters of a charter amendment severely limiting the number of visitor accommodation units (no more than one new unit, and other restrictions), was an attempt to restrict the number of visitors and part-time residents. The complaint asserts that the County has no legitimate interest in restricting tourists or part time residents, and that the charter amendment is a zoning regulation that cannot be adopted by the voters (recall that in Hawaii, zoning ordinances may not be adopted by initiative - thanks to a case we argued many years ago - see here and here).

We'll keep track of this one as it progresses.

Complaint, Kauai Beach Villas - Phase II v. County of Kauai, CV 12-00483-LEK (filed Aug. 27, 2012)

HAWICA: Must Pursue Administrative Process To Object To Vacation Rentals

The Hawaii Intermediate Court of Appeals issued an opinion yesterday in Pavsek v. Sandvold, No. 29179 (June 13, 2012), holding that a person complaining about a vacation rental cannot circumvent the City's enforcement procedures and the administrative appeal process by instituting an original jurisdiction lawsuit claiming that a homeowner is renting her property in violation of the City's prohibition on rentals of less than thirty days:

We hold that: (1) HRS § 46-4(a) does create a private right of action in favor of a real estate owner directly affected by an alleged LUO [Land Use Ordinance] zoning violation, but that the owner's action is subject to the doctrine of primary jurisdiction; (2) under the doctrine of primary jurisdiction, the Pavseks are required to seek an administrative determination of their claim that their neighbors have been violating the LUO before proceeding with their suit to obtain judicial enforcement of the LUO; (3) the nuisance claims raised by the Pavseks in their complaint were derived from their claim of the LUO violation and therefore are also subject to the primary jurisdiction doctrine; (4) the Circuit Court properly dismissed the claims alleging breach of fiduciary duty and unjust enrichment for failure to state a claim for relief; and (5) the Circuit's Court's remedy of dismissal with prejudice of the claims subject to the primary jurisdiction doctrine is not consistent with the remedies applicable to the doctrine.

Slip op. at 2-3 (emphasis original).

We won't be analyzing the opinion in detail, since our Damon Key colleague Greg Kugle represents the prevailing property owners, and argued the case. The briefs are posted here.

Pavsek v. Sandvold, No. 29179 (Haw. Ct. App. June 13, 2012)

Wednesday Round-Up

Here's what we're reading today:

• Debating the Constitutinality of New York's Blight Condemnations - lawprof Ilya Somin, via Volokh.

• Our colleagues at the California Eminent Domain Report on "The Anti-SLAPP, Something to Remember"

• House Shelves Hawaii Vacation Rental Bill - a follow up from Honolulu Civil Beat to this story. 

• The good folks at Sheppard Mullin give us their view of the PPL Montana opinion.

• The rent is too damn high! - Reason Foundation on "The Case Against Rent Control"

Also, here's an inverse condemnation case we're watching that the Texas Supreme Court recently agreed to review:

• The Supreme Court of Texas Blog on Kopplow Dev., Inc. v. City of San Antonio, No. 11-0104: "The city built a water project that affected the use of Kopplow’s property, and after being sued for inverse condemnation, the city decided to sue to condemn the land outright. The petition raises a variety of issues, including how to value the portion of the land taken."

• Here are the briefs.

• Here's the docket.

Thursday Round-Up

Here's what we're reading today:

• The Ninety Day Period to Challenge a Land Use Approval is Not Extended by More General Rules Governing Administrative Mandamus - via Abbott & Kindermann's Land Use Blog.

• Supreme Court Revises Test to Establish Common Carrier Status in Condemnation Cases - more on the Edwards Aquifer case, from the Jackson Walker firm in Texas.

• Eminent Domain & Land Use in Hawaii - May 12, 2012 seminar in Honolulu. 

• Res judicata did not bar circuit court’s review of inverse condemnation claim - via the Michigan Township Law Blog. 

• Hawaii Legislature: the gift that keeps on giving. The Senate passed the bill that would require "nonresident" property owners to use a real estate broker to rent their property as a short term (vacation) rental. Yes, really. 

• Civil Beat op-ed: Reality Check Needed On Reapportionment Plan.

"Nonresident" Property Owners Must Employ Property Managers For TVRs?

Check this out: the Hawaii Legislature is considering two bills (HB1707 and SB2089) that will require "nonresident" property owners who rent their property for thirty days or less (transient vacation rentals) to use a licensed real estate broker to rent the property, and to employ a property manager to operate it. "Nonresident owner" is defined as an out-of-state owner or someone who lives "on a different island" from their rental property.

Not surprisingly, much of the testimony in favor of these measures has been submitted by the counties (these bills purportedly would make it easier to collect TVR taxes), and by property managers and real estate agents. 

Putting aside any questions of whether this is good policy or not, think there might be any problems with this?

It's Others' Property, You Just "Own" It*

In Landlord’s Uphill Fight to Ease Rent Restrictions, The New York Times reports on the Harmon cert petition (we posted the petition and the amici briefs in that case here), a challenge to New York City's rent control ordinance.

We won't rehash our thoughts on the case, but wanted to point out what we thought was the most revealing passage from the Times article:

Mr. Harmon said he had appealed to his assemblywoman, Linda B. Rosenthal, a strong supporter of rent regulations. Ms. Rosenthal said Mr. Harmon had asked for an exception to rent regulations for his building, which she found untenable because it would, she said, extend to thousands of other people in "the vanishing middle class."

"I understand he thinks he could make more money, that he is being deprived," she said. "But I have so many constituents who would willingly trade his problems for theirs."

As for luck, she said, Mr. Harmon was "lucky enough to inherit a town house."

She said her views had nothing to do with the fact that she lives in a rent-regulated apartment, though she added, "If I didn’t, I probably wouldn’t be representing tenants in this district because I couldn’t afford to live in the city."

You see, rent control is designed to even out the way that the Fates distribute luck (especially good luck), and to level the playing field for those who would be willing to "trade up" their problems for the problems of others. We think it sounded better in the original German: "Jeder nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen!"

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*with apologies to Dean Martin, who apparently originated the quote about Frank Sinatra: "It's Frank's world, we just live in it."

What's That Definition Of "Insanity" Again?

No less a light than Albert Einstein is reported to have said that the "definition of insanity is doing the same thing over and over again and expecting different results." That quote has always seemed more apocryphal than accurate to us, but it's a good definition regardless of who first uttered it.

Exhibit "A" appended to that definition might be New York City's "emergency" housing Rent Stablization Law, adopted for the first time in 1969 and renewed eleven times since. The RSL controls how much rent the owners of rent-stablized apartments may charge their tenants (you know, to keep poor folk like Faye Dunaway in their apartments). The city's justification for the RSL is to deal with a series of housing "emergencies" (initially, the "effects of war and the aftermath of hostilities," and then any rise in the city's vacancy rate above 5%), and to allow a "transition from regulation to a normal market of free bargaining between landord and tenant" while encouraging the new construction of apartments.

But in the 40-plus years since the RSL's initial adoption (and serial re-adoptions) the vacancy rate has never been north of 5%, and the promised transition to a free market and new construction didn't happen either.

The owner of an apartment building sued in federal court, asserting that the RSL violates due process and is an unconstitutional taking. The District Court predictably dismissed, and the Second Circuit predicatably affirmed. We say "predictably," because as Richard Epstein notes, "[t]he court’s short and uninspired opinion was undeniably correct as a matter of current constitutional law. But for that very reason, it was also hopelessly defective as a matter of constitutional theory."

In October, the property owner filed a cert petition. The respondents declined to file briefs in opposition, and the Court was originally scheduled to consider the petition in Friday's conference. But on December 5, the Court requested responses, due January 4, 2012. The HuffPo report "New York City Landlord Takes Rent Regulation Fight To Supreme Court" wondered why the Court would ask for opposition briefs if the law is as clear as Professor Epstein says it is (it is), and speculated that perhaps the cert pool memo identified an issue that at least one Justice found of interest. Of course we don't know what might have spurrred the Court's request, but in scanning the petition and the three amicus briefs submitted in support (see below for all three), one really stood out by making a very interesting argument.  The amicus brief filed by two property owner organizations argued that the RSL's 40-year history of failing to accomplish its stated goals deprives it of its "rational basis" to which reviewing courts must defer:

This is a "back to the future case." The federal courts below failed to recognize the wisdom of hindsight available to them when considering whether to defer to the judgment of the City. Although transitioning from a regulated market to a free market while encouraging new construction may be a legitimate purpose, nearly half-a-century of history reveals that the RSL did not work, does not work, and will not work. Every three years, when the City again declares a housing emergency, it also acknowledges, as it must, that the RSL has again failed. The City cannot rationally believe that the RSL ever will achieve its goal. It is a sisyphean task doomed to failure and frustration that the RSL has laid on half the City's landlords. Enough is enough. Accordingly, this Court has a unique opportunity in this case to define the limits of judicial deference when there is a compelling history that a governmental program simply does not work.

Brief at 7. The brief highlights the Supreme Court's eminent domain trilogy (Berman, Midkiff, and Kelo), and argues "it is now apparent that the legitimate purposes of government action involved in those cases did not come to fruition in whole or in part. If the courts in Berman, Midkiff, and Kelo had the wisdom of hindsight available to them when considering whether to defer to the judgment of local government, they might have been decided differently." Br. at 10-11. The brief asserts that in those cases, the projected benefits of the takings were "colossal failure[s]." Br. at 13. To that list, the brief could have added the gas station rent control measure in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005), which was ostensibly designed to lower gas prices, but did no such thing.

The brief makes sense, and seems designed to appeal to Justice Kennedy, who asserted in his Lingle concurring opinion that a regulation might be "so arbitrary or irrational as to violate due process. ...The failure of a regulation to accomplish a stated or obvious objective would be relevant to that inquiry."

But it's still a long shot in terms of constitutional law because a court applying the "rational basis" test as currently formulated will not likely care there's proof a government plan won't actually work, or that there's proof it hasn't worked. Because you never know, it might work. Cf. Einstein. As Gideon Kanner pointed out, the rational/conceivable basis test as currently applied by the courts means that judges simply will not examine the government's rationale for adopting a law:

In my post-Midkiff lectures, I have been using as an example of the absurdity inherent in this judicial formulation a hypothetical taking for senior housing for elderly Martians living among us. Would that pass muster as a "public use"? Hyperbole, you say? Be careful. In a prime example of Oscar Wilde’s dictum that life imitates art, I offer for your consideration the pertinent part of the transcript of an oral argument before the U.S. Court of Appeals for the Ninth Circuit. There, the U.S. Justice Department asserted that, if Congress were to enact laws for the benefit of unseen and undetected "space aliens" among us, the courts would have no alternative but to approve it as consistent with the Constitution:

. . . .

JUDGE FLETCHER: . . . Is it conceivable that space aliens are visiting this planet in invisible and undetectable craft?

MR. YELLIN: Is it conceivable?

JUDGE FLETCHER: That’s my question.

MR. YELLIN: Yes, it’s conceivable.

JUDGE FLETCHER: And that would be a basis for sustaining Congressional legislation, if . . . the person sponsoring the bill said, "Space aliens are visiting us in invisible and undetectable craft, and that’s the basis for my legislation," we can’t touch it?

MR. YELLIN: If Congress made a finding of that sort?

JUDGE FLETCHER: That’s my question.

MR. YELLIN: Your Honor, I think if Congress made a finding of that sort, I think, Your Honor, it would not be appropriate for this Court to second guess that.

JUDGE FLETCHER: Okay, in other words, "conceivable" is "any piece of nonsense is enough."

Gideon Kanner, "Unequal Justice Under Law": The Invidiously Disparate Treatment of American Property Owners in Takings Cases, 40 Loyola L.A. L. Rev. 1065, 1080-81 & n.68 (2009).

Oh yeah, the government won that case.

The Harmon case seems like a good vehicle by which to drive home the concept that the courts need not wear blinders in property cases any more than they do in cases involving other fundamental rights, and the RSA's amicus brief makes the point well; but given the state of the law, we're not holding out for a change of heart by the cert pool clerk.

Here are the other two amicus briefs in the case:

• Brief Amicus Curiae of Atlantic Legal Foundation and Center for Constitutional Jurisprudence in Support of Petitioners

• Brief Amicus Curiae of Pacific Legal Foundation, Cato Institute, and Small Property Owners of San Francisco Institute in Support of Petitioners James D. Harmon, Jr., and Jeanne Harmon

We'll post the BIO when it is available.

Brief Amici Curiae Rent Stabilization Assn of New York & Small Property Owners of New York in Support of Pe...

Cal App: City May Enter Rental Property To Make Inspections

The City of Hayward, California, was concerned that residential rentals within its borders were "decent, safe, and sanitary," and by ordinance required the owners or tenants of such units to allow city officials to inspect them. If an owner or tenant refused, the "Enforcement Official" was authorized to procure an "inspection warrant" and levy a monetary fine on the property owner.

An association of rental owners sought a writ of mandate, challenging the ordinance because it violated the Fourth Amendment, among other reasons. The trial court granted the writ and held the ordinance facially invalid because it compels a property owner to provide access to a tenant's residence without tenant consent, and violates the substantive due process rights of the property owners because it levies a monetary penalty on a property owner even when the tenant is the one refusing to allow inspection.The court enjoined enforcement of the ordinance.

The city then amended it to require the owner to make a "good faith effort to obtain the consent of the tenant" for an inspection, and asked to discharge the writ (welcome to California practice) because the amendment addressed the court's problems. Although it overruled most of the property owners' objections, the court agreed that the requirements that a property owner in good faith seek the tenant's permission and be present at the inspection made the property owner an "involuntary agent" of the government, and that the fines made an owner responsible for the inaction of a tenant.

The Court of Appeal reversed. In Rental Housing Owners Ass'n of Southern Alameda County, Inc. v. City of Hayward, No. A128168 (Sep. 30, 2011) (published Oct. 25, 2011), the court concluded that the city's ordinance is not facially invalid. The court held that property owners were not forced to be agents of the government, since under California law an agency relationship is created only with mutual assent, and the "good faith" requirement did not result in any kind of agreement between the owners and the government. Slip op. at 9-10.

Nor did the good faith requirement violate the Fourth Amendment. Property owners do not have standing to assert a tenant's rights against unreasonable searches and seizures, and in any event, the ordinance does not allow the city to enter a residence without either consent or a warrant. The court also rejected the contention that the ordinance conflicted with the landlord-tenant code, a state law establishing the conditions under which a property owner may enter leased premises to inspect and repair. The court concluded that the ordinance only set the terms by which the city inspector could enter a residence, and does not affect a landlord's.Slip op. at 10-11.

Finally, the court rejected the substantive due process argument. The property owners asserted that the fine provision lacked a "conditional nexus between a recalcitrant tenant's non-cooperation and a consequential monetary sanction against the owner." Slip op. at 13.  Because the ordinance does not contemplate fining an owner for a tenant's refusal to allow inspection in every case ("or even in a vast majority of cases"), a facial challenge could not be sustained. Slip op. at 13. In other words, because there may be some circumstances where the owner could not be fined, or there may be situations where the city may not choose to impose it, the ordinance was not facially invalid. The court did not mention the possibility that the fine provisions could be challenged "as applied" to a particular circumstance in a future case, although it did not mention that.

Rental Housing Owners Ass'n of Southern Alameda County, Inc. v. City of Hayward, No. A128168 (Sep. 30, 2011...