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11th Circuit Affirms Penn Central Jury Verdict For Rezoning Resulting In 86% Loss Of Value

More good takings news, hot off the press.

Before Cedar Point came down last week, we were all set to let you know about the Eleventh Circuit's opinion in South Grande View Dev. Co., Inc. v City of Alabaster, No. 18-14044 (June 21, 2021), in which the court affirmed a jury verdict that the city's reduction in the developable density on residential-zoned parcel (from R-7 and R-4) to R-2) was a Penn Central regulatory taking. 

The city appealed on an evidentiary issue, arguing that the jury should not have heard evidence of its reasons for downzoning the property, which were not relevant to the takings question and only went to whether the government acted arbitrarily and capriciously (a due process inquiry). The city also raised a ripeness question: the owner had not sought a variance from application of the new zoning, and indeed had never asked the city to apply the R-2 zoning to the property. 

The Eleventh Circuit rejected both arguments.

First, the city had made a final decision applying the R-2 zoning to the property:

• "[O]ur binding precedent holds that a zoning ordinance can itself be a final decision on the merits." Slip op. at 11.
• The rezoning only applied to South Grande's property, and no other. Unlike the rezoning in Williamson County, which applied to a wide swath of properties, this one was specifically targeted at South Grande. Thus, "there was no ambiguity as to how a general plan would be applied to a specific project—the zoning ordinance itself was the City’s final decision on the matter." Slip op. at 14.

Second, the court agreed that evidence of the city's motive for the downzoning was not relevant to the takings issue, but that the jury hearing this irrelevant evidence was harmless error. The owner introduced evidence of the city's motive, arguing it was part of the "character of the government action" Penn Central factor. Slip op. at 21. But Lingle, the court concluded, made that evidence only relevant to a due process inquiry and not to takings. See slip op. at 22-23 ("The Lingle court explicitly rejected the argument that the Penn Central factor of the “character of government action” addressed the purpose of the regulation[.]"). But no harm, no foul, and this was "not reversible error." Id. at 25-26.

Verdict affirmed. The reason the error was harmless (and here's the really important part of the opinion, in our opinion), was because "substantial, permissible evidence produced at trial supports the jury's [Penn Central] verdict." Slip op. at 26.

That evidence:

• Developing the parcels for just residences per acre was not economically feasible.
• The owner spent a "significant sum of money preparing the property for R-4 homes." Slip op. at 24.
• Neither the parties nor the court looked at whether the owner's rights had "vested" under Alabama law. In other words, Penn Central does not turn on a race to vest.
• The owner also testified that it "did not finish" developing the properties because of a market downturn "and they were going to wait until after the recession to continue developing." Slip op. at 8.
• The owner's purchase price and the amount later spent to develop the property counted towards its investment-backed expectations. Slip op. at 8.
• The before value of the property: $3.52 million. The after value: $500k. An 86% decline due to the regulation. Whether this qualified as a substantial loss was left to the jury, and the court did not apply the (wrong) rule that courts often do and conclude that although 86% is significant, it isn't enough.

In closing, the court noted that the city didn't put on contrary evidence of value, and that it only challenged the owner's valuation evidence "for the first time on appeal." Thus, the city had forfeited those arguments and the court did not consider them. 

Definitely check out this opinion and the facts. There's some gems there.

South Grande View Dev. Co., Inc. v. City of Alabaster, No. 18-14044 (11th Cir. June 21, 2021)

New Article: "Takings, PASH, and The Changing Coastal Environment" (U. Haw. L. Rev., forthcoming)

Back in February, we were honored to be part of the University of Hawaii Law Review's symposium "25 Years of PASH," a retrospective of one of the Hawaii Supreme Court's most famous (or infamous) decisions, Pub. Access Shoreline Haw. v. Haw. Cnty. Plan. Comm’n, 79 Haw. 425, 903 P.2d 1246 (1993), cert. denied sub nom., Nansay Haw. v. Pub. Access Shoreline Haw., 517 U.S. 1163 (1996) (PASH). 

At the conference, we spoke on the panel about "PASH and the Changing Coastal Environment" (see video here at the 2:02:25 mark if you want to watch our panel's summations).

The speakers also produced short written comments for the Law Review's upcoming issue, and ours is finally in a shape where we think it is OK for public consumption, so we've posted it on SSRN here (or you can download the pdf "Takings, PASH, and the Changing Coastal Environment").

For those of you not totally tuned in, in the PASH case the Hawaii Supreme Court concluded that subject to certain qualifications, the Hawaii Constitution allows native Hawaiians to exercise traditional practices, even on private property, and that "[o]ur examination of the relevant legal developments in Hawaiian history leads us to the conclusion that the western concept of exclusivity is not universally applicable in Hawaii." Yes, the right to exclude is not "universally applicable" in the 808. Let that one sink in. (The U.S. Supreme Court denied the takings cert petition.)

From the Introduction:

The topic of this portion of the Symposium is “Takings and the Changing Coastal Environment” and in this comment I focus on the “takings” part of that title, as well as offer some thoughts on our guiding subject, the Hawai‘i Supreme Court’s decision from a quarter-century ago in PASH, which most famously noted “that the western concept of exclusivity is not universally applicable in Hawaii.” How might this statement be considered today through the lens of property law and property rights, especially if we account for the changes in the U.S. Supreme Court’s approach to takings in the time since PASH was decided? And what implications does PASH have, if any, for property rights in the coastal zone?

This comment is in three parts. Section I summarizes the PASH opinion, and concludes that the jurisdictional questions presented in the case should have resolved the case, and the court should have avoided the takings questions, and the court reached out to resolve an issue it need not have. Next, Sections II, II, and IV offer up my three main criticisms of PASH, the first on the court’s seemingly incomplete view of how Hawai‘i property law treated the right to exclude, the second on whether defining “property” for purposes of federal takings analysis is only a matter of state law, and the third on separation of powers. Finally, Section V concludes with some thoughts about how courts should consider property rights in a changing coastal environment in light of these criticisms of PASH.

The entire symposium issue should be pretty worthwhile reading, if the conference itself is any indication. Good stuff.

CA4: No Facial Penn Central Taking By Development Moratoria

Regulatory takings challenges are no doubt tough. Especially Penn Central regulatory takings challenges. Facial Penn Central regulatory takings claims, moreso.

The U.S. Court of Appeals' opinion in Clayland Farm Ents, LLC v. Talbot County, No. 19-2102 (Feb. 9, 2021) - the latest in this case we've been following - proves the point. The court affirmed the district court's summary judgment on the property owner's takings, due process, and civil conspiracy claims.

The property owner brought its claims in Maryland state court claiming, among other things, that the County's two indefinite moratoria on development and sewer availability -- which prohibited owners from seeking or obtaining County subdivision -- was a facial taking:

Clayland’s appellate briefing asserts that Bill Nos. 1214, 1257, and 1229 constitute a facial regulatory taking under both federal and state law. Bill No. 1214 temporarily reduced the permissible density of VC-zoned properties from four units per acre to one unit per two acres and prohibited new subdivision of any existing VC-zoned parcel into more than one additional lot. Bill No. 1257 extended these restrictions until the adoption of a new comprehensive plan. Bill No. 1229 separately implemented a tier map.

Slip op. at 11. The complaint sought declaratory and injunctive relief (although we're not quite sure from the opinion whether it also included a claim for compensation).

The case didn't present a Lucas economic wipeout situation, and the court of appeals therefore applied the daunting Penn Central analysis:

• Economic impact: even with application of the regulation, the property retained value (which, we assume for purposes of our review here, was a reflection of the remaining uses of the property) of nearly $2 million, a 40% diminution because of the regulations. Not enough, according to the court: "And yet this Court has found that a hypothetical 83 percent diminution in value was insufficient to establish a regulatory taking." Slip op. at 12. And, the regs didn't wipe out all uses (just the most beneficial use: "Further, the Property retained valuable, expressly permitted uses under Bill Nos. 1214 and 1257." Slip op. at 12).
• RIBE: Here, the court's analysis gets into that Inception-like dream-within-a-dream "property" loop that asks "what is the 'property' alleged to be taken?" Here, the owners asserted it was the land itself or at least the right to develop and use the land. The court consequently made short work of the argument, concluding as a matter of law that because "Clayland had not affected preexisting development rights in relation to the Property" (under Maryland law), slip op. at 13, it didn't possess reasonable investment-backed expectations. According to the court, no vested right to develop (a permit, for example), no property right, no RIBE: "But Clayland never obtained a permit, began construction, or took any action on any other development to which it now claims entitlement. Clayland could not reasonably expect that its zoning designation would remain unchanged in perpetuity." Slip op. at 13-14. The owner was simply relying on the existing state of the law, according to the court. And we know where that gets you.
• Character: this was regulation, not an action that resulted in something that reminded the Fourth Circuit of a taking by eminent domain. Slip op. at 14. Moratoria have been "expressly approved" by the Supreme Court. Slip op. at 15 (yes, citing Tahoe-Sierra). These moratoria were long (6 years), but that alone isn't enough.

The opinion also considered and rejected the due process claim because the owner did not possess a property interest. Same analysis under RIBE, above. And even if it did, the regulations are not arbitrary and capricious. The rational basis test strikes again.

Clayland Farm Ents., LLC v. Talbot County, No. 19-2102 (4th Cir. Feb. 9, 2021)

Still Time To Join Us: ALI-CLE Eminent Domain & Land Valuation Litigation Conference (Online!) This Thursday & Friday. Tuition Deals! #EminentDomain2021

Yes, it starts tomorrow, Thursday, January 28, 2021, but we're "remote" this year, so it is not too late to register to join us for the 38th Annual ALI-CLE Eminent Domain & Land Valuation Litigation Conference. This is the "big one" where the nation's best practitioners, scholars, jurists, and other industry professionals gather to talk shop about the subjects we know and love.

Details here (ALI-CLE's page with faculty, agenda, and times), or here (a recent episode of Clint Schumacher's Eminent Domain Podcast, where we preview the Conference). Here's your chance to be a part of what is the best conference on these topics.

We have set it up to take advantage of the remote format, and tuition has been reduced (thank you to ALI-CLE for recognizing this, and for our sponsors for being so generous). We're seeing a lot of first-time registrations, and this is a great opportunity to give us a test drive if you've always thought about attending, but never wanted to spend 4 days away from the office to do so.

A long-timer coming back? Look for the special deal which includes a discount on the 2022 conference.

We're having programs with intriguing subjects such as "Planning to Win: Practical Strategies for a Successful Inverse Condemnation Case," "How Do I Keep My Firm’s Doors Open When the Courthouse Doors Are Closed? Making Your Practice More Efficient When You Can’t Try Cases," "Where Is the Supreme Court Headed on Takings Cases? Regulatory Takings Update and Cedar Point Preview," "No Show and All Tell: Breaking News in Property Rights and Takings," "More Than the Fifth Amendment: Other Tools for Upholding Property Rights," and "Evaluating Lockdown, Moratorium, and Emergency Claims."

PASH Bash: U. Hawaii Law Review Symposium - "25 Years of PASH" (Feb. 5, 2021)

Mention the term "PASH" to any dirt lawyer in the 50th State, and they'll nod in understanding. It's an 808 shibboleth -- a kind of local property password -- that signals that you've been around the block and know your stuff.

On one hand, it is simply an acronym for Public Access Shoreline Hawaii, the plaintiff/petitioner in the (in)famous case Public Access Shoreline Hawaii v. Hawaii Cnty. Planning Comm'n, 903 P.2d 1246 (Haw. 1995). On the other, however, it has evolved into shorthand for a number of things: from the technically accurate - native Hawaiian customary and traditional rights and practices under the Hawaii Constitution ("I was chasing a pua'a on private property, so I cannot be convicted of trespass because I was exercising my PASH rights"); to generically and cheekily - the ability to access the beach and shoreline ("Surf's up today, let's go practice some PASH rights!"); and with irony - judicial activism ("The Supreme Court sure PASH'ed that case!").

For those of you not totally tuned in, in the PASH case the Hawaii Supreme Court concluded that subject to certain qualifications, the Hawaii Constitution allows native Hawaiians to exercise traditional practices, even on private property, and that "[o]ur examination of the relevant legal developments in Hawaiian history leads us to the conclusion that the western concept of exclusivity is not universally applicable in Hawaii." Yes, the right to exclude is not "universally applicable" in the 808. Let that one sink in. (The U.S. Supreme Court denied the takings cert petition.)

Soon after PASH, the Hawaii Supreme Court held that this right only applied on less-than-developed land. Why, the court has never really told us. After all, the right as set out in the text of the Hawaii Constitution doesn't distinguish between developed and undeveloped land, and as far as we can tell, neither did Hawaiian custom and practice. Maybe the court realized that the practical implications of a strict application of PASH in the absence of such a judicially-created limitation were enormous. We're not sure.

Who'd have thought that it has been a quarter century since the decision came out? (Probably not the editors of the University of Hawaii Law Review, many of whom, we'd imagine, were keiki at the time; but we digress.) But it has. But no matter, PASH rights have been a part of the conversation for more than two decades.

In February, the Law Review is putting together a retrospective and is devoting an issue of the upcoming volume to a discussion of the PASH case and how the last 25 years have gone.

We're going to be a part of the (online) Symposium on February 5, 2021, speaking about "Takings and the Changing Coastal Environment" (11am - 1pm Hawaii Time). We'll be joined by Colin Lee (a UH student who has authored an intriguing piece on PASH), Sam Lemmo (Admistrator of the State of Hawaii Office of Conservation and Coastal Lands), and Bill Wynhoff (Supervising Deputy AG, who in our opinion, is the most knowledgeable career public-service lawyer on these issues). Our discussion is sure to be lively, and will be moderated by UH lawprof David Callies.

Register for the entire program here (no cost). Our Damon Key colleague Mark M. Murakami is presenting on "The Proper Role of the Court: Restoring Justice Through the Public Trust Doctrine." The entire program is worth attending.

We hope you sign up, whether you are an old hand at PASH or a newcomer.

U. Haw. L. Rev. Symposium: 25 Years of PASH (Feb. 5, 2021)

 

Your 2021 ALI-CLE Eminent Domain & Land Valuation Litigation Conference (Jan 28-29, Remote) BINGO Card

If you "get" this, you should be registered for the 38th Annual Eminent Domain & Land Valuation Litigation Conference, to be held remotely on Thursday and Friday, January 28-29, 2021.

The list is growing rapidly, and you need to join us!

This is the "big one" where the nation's best practitioners, scholars, jurists, and other industry professionals gather to talk shop about the subjects we know and love. We're having programs with intriguing subjects such as "Planning to Win: Practical Strategies for a Successful Inverse Condemnation Case," "How Do I Keep My Firm’s Doors Open When the Courthouse Doors Are Closed? Making Your Practice More Efficient When You Can’t Try Cases," "Where Is the Supreme Court Headed on Takings Cases? Regulatory Takings Update and Cedar Point Preview," "No Show and All Tell: Breaking News in Property Rights and Takings," "More Than the Fifth Amendment: Other Tools for Upholding Property Rights," and "Evaluating Lockdown, Moratorium, and Emergency Claims."

Details here (ALI-CLE's page with faculty, agenda, and times), or here (the latest episode of Clint Schumacher's Eminent Domain Podcast, where we preview the Conference). Here's your chance to be a part of what is the best conference on these topics.

Always wanted to join in, but didn't like the travel? Here's your chance to try us out with reduced tuition. A long-timer coming back? Look for the special deal which includes a discount on the 2022 conference.

Eminent Domain Podcast's Preview Of The Upcoming ALI-CLE Eminent Domain & Land Valuation Litigation Conference

Our thanks to Clint Schumacher for having us on his program to talk about the upcoming Conference. We're "remote" this year, but that means a different approach to our presentations (and a very modest tuition!).

We're having programs with intriguing subjects such as "Planning to Win: Practical Strategies for a Successful Inverse Condemnation Case," "How Do I Keep My Firm’s Doors Open When the Courthouse Doors Are Closed? Making Your Practice More Efficient When You Can’t Try Cases," "Where Is the Supreme Court Headed on Takings Cases? Regulatory Takings Update and Cedar Point Preview," "No Show and All Tell: Breaking News in Property Rights and Takings," "More Than the Fifth Amendment: Other Tools for Upholding Property Rights," "Evaluating Lockdown, Moratorium, and Emergency Claims," and more (including Ethics for those of you in MCLE jurisdictions). We'll have a post with more details. 

Register now!

Florida: You Can't Unintentionally Abandon A Nonconforming Use

The Town of Fort Myers Beach, Florida, barred the sale of alcohol on beaches in 1995. Turns out that a beachfront business was already (legally) selling alcohol on its property at the time of the ban. And we know what that usually means: a grandfathered nonconforming use.

Today's case from the Florida District Court of Appeal (Second District), Persaud Properties FL Investments, LLC v. Town of Fort Meyers Beach, No. 2D19-1282 (Dec. 11, 2020), is at the intersection of two of our favorite subjects, land use and inverse condemnation.

No one questioned whether Persaud possessed a nonconforming use. The issue was whether it had it abandoned it when it closed the establishment "to begin extensive renovations."

The Town was well aware of the renovations as various construction permits had to be issued and inspections had to occur; additionally, during the renovation period, multiple stop-work orders were issued by the Town. Upon completion of the renovations in October 2015, Persaud sought the necessary approval to reopen and begin selling alcohol on the premises, including in the EC zone. During the one-year period of closure and at the request of Persaud, the property's liquor license had been held in escrow or "inactive status" by the Department of Alcoholic Beverages and Tobacco, a fact which had been known to the Town and which was important to a Town planner for purposes of the abandonment issue.

Slip op. at 2-3.

No-go, said the Town, you abandoned.

Persaud sued for a taking, among other claims, but the trial court granted the Town summary judgment, concluding Persaud had abandoned the nonconforming use by non-use, and that it did not, therefore, possess property that was taken.

The court of appeal reversed. Reading the Town's land development code's definition of abandonment to mean non-use of the location for nine straight months, the court held that an owner must intentionally cease the use:

Strictly construing the Town's ordinance in favor of the property owner, as we must, abandonment of a nonconforming use requires more than the passage of nine months while the property was closed for renovations; it requires voluntary cessation of the nonconforming use with the intent that the cessation of such use be permanent. The trial court erred in failing to apply the common law and in determining, as a matter of law, that Persaud had abandoned the nonconforming use of its property where there was no evidence that Persaud intended to discontinue selling alcohol in the EC zone.

Persaud did not abandon or discontinue the nonconforming use of the
property during the one-year period of closure where renovations and construction were ongoing. Persaud is therefore entitled, under the applicable provisions of the Town's municipal code, to maintain the property's status as a grandfathered nonconforming use.

Slip op. at 9.

Persaud Properties FL Investments, LLC v. Town of Ft Myers Beach, No. 2D19-1282 (Fla. Dist. Ct. App. Dec. 1...

After Telling Owner To Beat It, Condemnor Acts Surprised That It Did. Cal Ct App: "Moving" From Property Does Not Mean "Completely Physically Dispossessed"

Go on, read the facts in the California Court of Appeal's (unpublished) opinion in San Joaquin Regional Transit District v. Superior Court, No. C084755 (Dec. 1, 2020). It's worth your time, believe us.

After chasing from California a long-standing manufacturing and service business (to Illinois) by instituting condemnation proceedings on the property on which its Stockton plant was located and then obtaining immediate possession, the District changed its mind and abandoned the taking. The owner sought damages under a statute (Cal. Code of Civ. P. § 1386.620).

The District argued that it was not liable for all damages proximately caused by the proceeding, because the owner had not "moved from the property."

Wait, you say, I thought you just told me that the condemnor obtained possession of the property? Yes, it did, in two phases. First, the District and the owner stipulated to possession of the property subject to the owner's temporary ability to occupy the front portion of the property (with payment of rent to the District) to allow it to wind down its operations and move to Illinois, and get out by June 2012. The owner had to vacate the unimproved rear portion a year earlier, by May 2011.

Sardee characterizes the back of the property as integral to the company’s operations for storage, truck turnaround, and housing dumpsters. According to Sardee, District’s right of possession destroyed any opportunity for the firm to expand its facilities, undertake larger and more complex jobs, and operate its business normally.

. . . .

After being contacted by District, Sardee reviewed its options and determined that quickly finding a build-to-suit site would not work. To complete the build-to-suit option without a transition facility, Sardee would have to shut down operations for five to six months, which would kill its business. Instead, Sardee decided to expand and upgrade Sardee Lisle to allow for the transition of Sardee Stockton’s work and  product lines to Sardee Lisle [in Illinois]. Sardee was aware of its duty to mitigate and aware of the disruption to its manufacturing business at Sardee Stockton the move would cause. Sardee management explored options for a new facility from 2009 through 2011.2 Ultimately, Sardee planned on moving the company to its Lisle facility on an interim basis.

Slip op. at 5.

In response to the owner's claim for damages, the District asserted that "move from the property" language requires that the owner be completely physically dispossessed of the property, and because the owner remained for a time on part of the property, the statute did not mandate payment of damages. The court of appeal rejected that construction:

We note section 1268.620 does not use the term “physically dispossessed,” it only states the party must “move[ ] from” the property. When interpreting a statute, the plain language of the statute governs. We give the words their usual and ordinary meaning. Absent ambiguity in the language, we presume the Legislature meant what they said. (Heidi S. v. David H. (2016) 1 Cal.App.5th 1150, 1173.) The question becomes, did Sardee move from the property, not was Sardee completely physically dispossessed from the property.

District argues Sardee had not moved within the meaning of the statute “because it had exclusive rights to physically occupy the portion of the Property where it operated its Stockton facility, it did occupy the portion of the Property where it operated its Stockton facility, and it continuously operated its business there. As long as Sardee continued to operate its business on the Property, a fact confirmed by Sarovich’s April 20, 2012 email, there’s no basis for finding that it moved from the Property.”

The trial court disagreed, finding: “Sardee was physically dispossessed because [District] had taken physical possession of the northern portion of the parcel, and Sardee was paying rent to [District]. No taxes were being imposed by the County Tax Assessor. Further, Sardee had physically moved almost everything it needed to move from Stockton to Lisle to perform all of Sardee Stockton’s manufacturing operations in Lisle.

Slip op. at 13-14. The court of appeal agreed with the trial court's analysis.

This is an important case (and should be published) for at least a couple of reasons.

First, it rejects what is, in our view, a ridiculous argument for how "move" should be interpreted. After telling the owner that it better get lost (and the owner did so in a very practical way that mitigated damages), the condemnor abandoned the taking and then wanted to also abandon its obligation to make the owner whole for the trouble it caused. Yes, the owner didn't 100% actually move, but only because it agreed to pay rent to the District. Second, what about reliance? When a condemnor institutes eminent domain proceedings and then obtains possession before final judgment, how is a property owner supposed to react except by doing its best to try and comply?

As the court of appeal approvingly quoted the trial court:

“[District] made repeated declarations that it was not abandoning its action. [District] had its Order of Possession, Sardee had spent several years setting up the interim site in Lisle for Sardee Stockton’s manufacturing work, had located a relocation site in Stockton, and had moved equipment and begun carrying out Sardee Stockton’s manufacturing functions in Lisle. [District] had refused Sardee’s request for extra time to September 30, 2012. Sardee had to be out, and it affirmatively altered its position according to [District’s] representations and actions.”

Slip op. at 12.

The court agreed that "move" doesn't mean merely the thwarting of the owner's plans. Id. But it also concluded that when the owner actually moves, the statute means what it says.

San Joaquin Regional Transit District v. Superior Court, No. C084755 (Cal. Ct. App. Dec. 1, 2020) (unpub.)

Recording Now Available In Virginia Supreme Court Oral Arguments In Takings, Property, And Public Trust Case

We listened live last week, but the court has now made the recording available in Johnson v. City of Suffolk.

This is what we call the "oyster takings" case in which Nansemond River oystermen claim that their property was taken when the City of Suffolk and the Sanitation District dumped sewage into the river and declared a "condemnation zone" (i.e., no oyster harvesting).

This is a case at the intersection of property and takings law, and environmental protection. And the public trust concept of jus publicum. The oystermen own a lease from the State of Virginia for the riverbed, which among other things, allows them to harvest some of the oysters that Virginia is so well known for. But they were forced to bring an inverse condemnation claim in state court, asserting that the City's dumping of wastewater in the river -- and prohibiting the harvesting of oysters during those times -- was a taking under the Virginia Constitution's taking or damaging clause (article I, § 11).

Very interesting arguments that focused in large part on the "stick" question. What is the nature of the property right? Do the oystermen have a property right to useable, unpolluted oysters? Does the City have a duty to not put sewage into the river? Does it matter that the City lacks the power to condemn oysters by using its power of eminent domain. What is the effect of statutes which the Virginia General Assembly adopted after Darling, which limit the ability of municipalities to pollute? Virginia's inverse condemnation doctrine -- set out most recently in Livingston v. VDOT and AGCS Marine Ins. Co. v. Arlington County -- is also a big question.

Stay tuned.

Join Us: Tuesday, Nov. 10, 2020 (3pm ET, 12n PT) For Free (!) Webinar: "Shutdowns, Closures, Moratoria, and Bans"

Join us next Tuesday, November 10, 2020 at 3pm ET (12 noon Pacific) for the free webinar "Shutdowns, Closures, Moratoria, and Bans," produced by Pacific Legal Foundation and Owners' Counsel of America.

Along with my colleagues Leslie Fields (Executive Director, OCA), and Jim Burling (PLF), I'll be talking about the legal foundations for objections, some of the cases that have made their way to decision, and what the future might look like. To register (did I mention it was free?) go here.

Here's the program description:

Governors and state legislatures across the country have implemented an array of policies in an attempt to contain the virus and its socioeconomic impacts. Many of these policies broadened the scope of government power while placing a heavy burden on property owners and businesses already struggling with the pandemic.

Join representatives from Pacific Legal Foundation and Owners’ Counsel of America as they explore COVID-related policies and the legal challenges to them, including:

• The constitutionality of emergency eviction moratoria and lockdown orders restricting property and business owners
• The rights and legal status of property and business owners impacted by emergency orders
• Past, current, and upcoming litigation challenging these orders

We want to hear from you! Come prepared with your questions for our panelists. This is a public event. Please pass along this invitation to any colleagues that may be interested in this program.

As noted, in addition to presentations, we've reserved a lot of time for comments and questions, so bring those with you on Tuesday.

See you then, online!

Your Land Use/Takings Exam Hypo: Tex App Considers Nonconforming Uses, Vested Rights, Zoning, Admin Appeals, And Takings

This semester, we're teaching two courses at the William and Mary Law School: the usual Eminent Domain & Property Rights (our regularly-scheduled fall semester course), and Land Use. If we were to try and create a hypothetical for the final exam in either class, we couldn't do better than the actual fact pattern and arguments presented to the Texas Court of Appeals in City of Dickinson v. Stefan, No. 14-18-00778-CV (Oct. 27, 2020). That case involved a use of property alleged to have been started before the city adopted a zoning code, and claims of vested rights, "grandfathering," and related.

We won't recount the entire fact pattern here (we suggest reviewing the entire opinion yourself; it is a decent read), and only note that it covers a range of land use and takings topics, including the aforementioned nonconforming use arguments, exhaustion of admin remedies, and the like. In all honesty, the court's main holding -- that the property owner didn't exhaust administrative remedies -- isn't as interesting as the facts and allegations, but we still think it is worth a look.

The court's takings analysis starts on page 23 of the slip opinion, if you are interested. It's brief, but also concludes that the owner didn't exhaust his administrative remedies that might have yielded compensation. Apparently in Texas, an owner "must take advantage of statutory remedies that may moot the party’s takings claim, rather than institute a separate proceeding asserting such a claim." Slip op. at 23. Who knew?

City of Dickinson v. Stefan, No. 14-18-00778-CV (Tex. App. Oct. 27, 2020)

NM App: No Property In Impact Fee Gift Card

You know those times you go to the store and try to get a refund on something you've purchased, and instead of cash back, you get a gift card, only useable at the same store? Or when, instead of refunding your plane ticket, the airline gives you some limited-time credit for a future flight? Anyone like those?

Well, a fascinating case from the New Mexico Court of Appeals, Premier Trust of Nevada, Inc. v. City of Albuquerque, No. A-1-CA-34784 (Oct. 1, 2020) reminds us of the risks associated with these things.

Albuquerque has an impact fee ordinance which developers must pay to offset the costs of needed infrastructure such as roads, drainage, parks, and public safety facilities. To satisfy the exaction requirement, the property owner could either pay money, build the improvements, or give the city property. If the value of these exactions was more than the impact fees due, the developer would receive credits which could be used to pay for future impact fees, sold to others, or in some cases, exchanged with the city for cash. These credits have a shelf-life of seven years.

Premier either bought or was otherwise conveyed $2.3 million in these excess credits.

Later, however, the city apparently decided to ease things up: it repealed the ordinance and replaced it with a new law that reduced the impact fees, expanded the areas in town in which the credits could be used, and extended the time in which the credits could be used from seven to fifteen years. While that was good for those who wanted to develop their property, it wasn't so good for those, like the plaintiff, who held these excess credits. "Because fewer impact fees were assessed under the reduced impact fee rates in the 2012 Ordinance, the result of the 2012 Ordinance, according to Premier, has been a diminished demand for excess credits and a substantial reduction in the value of the credits it holds." Slip op. at 6. Takings (under the N.M. Constitution), and breach of contract lawsuit followed. The city's motion to dismiss for failure to state a claim granted.

The N.M. Court of Appeals affirmed. The plaintiff didn't possess "property." The plaintiff still possessed all of the "sticks" associated with owning impact fee credits (use, sell, convey, etc.), they just were not worth as much as under the prior exaction scheme. The court characterized the property interest alleged as "a right to a favorable market for its excess credits." Slip op. at 11. You don't have a vested right to "static market conditions." Slip op. at 12. Especially when it is a government-created market:

Further, upon examination of relevant state and local laws, it is apparent that neither the Act nor the 2005 Ordinance, as Premier seems to suggest, conferred any right to excess credit holders to sell credits at the rates set out in the 2005 impact fee schedules.

Slip op. at 12. The plaintiff's belief that the credit market was stable was a "unilateral expectation that the impact fee rate schedules would not change[.]" Slip op. at 13. 

The court also rejected the owner's argument that it could avoid dismissal by applying Penn Central. The court noted that the case was brought only under the N.M. Constitution's takings clause and not Penn Central, but analyzed the issue anyway. See slip op. at 9 ("Premier fails in any meaningful way to explain if or how the district court erred in its application of New Mexico law."). New Mexico's takings law does not apply Penn Central's ad hoc test, but rather employs a different standard:

[t]he general rule is that a regulation which imposes a reasonable restriction on the use of private property will not constitute a “taking” of that property if the regulation is (1) reasonably related to a proper purpose and (2) does not unreasonably deprive the property owner of all, or substantially all, of the beneficial use of [the] property.

Slip op. at 15-16 (quoting Temple Baptist Church, Inc. v. City of Albuquerque, 646 P.2d 565 (N.M. 1982)). The court seemed to assume that because this is the test for New Mexico takings, the Penn Central test didn't apply. But that should not have been the end of the analysis because Penn Central provides the "floor" below which no state can go, even as a state is free to recognize more protections for property owners. Thus, the court could have compared the Temple Baptist's two-part test with Penn Central's three-part test to see whether one or the other recognizes more (or less) protections. But the court didn't do so, primarily because the plaintiff didn't make the argument. See slip op. at 16 ("Premier provides no argument why our New Mexico regulatory takings test is inadequate, or otherwise inappropriate, in this case, and we decline to develop this argument for Premier."). Consequently, the court did not look at the alleged facts in light of Penn Central, and concluded there was no taking solely under New Mexico's Constitution:

As previously noted, the 2012 Ordinance left intact excess credit holders’ abilities to use excess credits to offset impact fees assessed on new developments and to seek reimbursement from the City for excess credits. See ARO, § 14-19-11 19(J)(6)(a), (c). In this vein, Premier has alleged no restriction on its rights to use its credits or to seek reimbursement. Further, Premier has sold credits since the 2012 Ordinance, albeit under allegedly less favorable market conditions that resulted in a loss in value, according to Premier.9 Premier argues that this loss in market value is synonymous with an invasion of its right to sell credits. Premier, however, fails to cite any authority for this proposition, and we thus may assume none exists. See Curry, 2014-NMCA-031, ¶ 28.

But even assuming a loss in market value under these circumstances invades some protected property right, we cannot say the 2012 Ordinance unreasonably deprives Premier of all or substantially all of the beneficial use of its excess credits, given Premier’s retention, and in certain instances, expansion, of rights as set out above. Such a loss in value, unaccompanied by the deprivation of other strands in the property rights bundle, as in this case, has been held insufficient to make out a regulatory takings claim under controlling New Mexico precedent. See, e.g., Chronis v. State ex rel. Rodriguez, 1983-NMSC-081, ¶ 15, 100 N.M. 342, 670 P.2d 953 11 (holding, in the due process takings context, that, notwithstanding reduction in the market value of liquor licenses due to changes in the statute, licensees retained the rights to transfer, devise, and use licenses, and to engage in the business of selling alcoholic beverages, and, therefore, the statutory change did not “unreasonably deprive[] the owner of all or substantially all of the beneficial use of his license,” and “d[id] not constitute a taking of private property”); id. ¶ 40 (Sosa & Federici, JJ., specially concurring and dissenting) (describing economic impact of statutory change); New Mexicans for Free Enter., 2006-NMCA-007, ¶¶ 52-53 (determining that an increase in the minimum wage rate did not constitute a deprivation of all or substantially all beneficial use of businesses, even though business owners alleged economic destruction of their businesses due to the increase); see also Sanchez, 1995-NMSC-058, ¶ 11 (noting that the Takings Clause “does not entitle an owner to use property for all economically viable purposes, and governmental actions imposing an incidental economic loss will be upheld”). We have been given no reason to depart from this precedent here, and, for the reasons stated, we conclude Premier has failed to allege a regulatory takings claim under New Mexico law.

Slip op. at 16-18.

The court also rejected the breach of contract and "illusory promise" claim, noting that there was no privity of contract between the plaintiff (which purchased the credits from developers), and was not a third-party beneficiary of any agreement between the city and the developers. This, we suppose, could have made a difference because if the credits' worth was "vested" or the city otherwise ensured that they would hold their value, the plaintiff might have avoided the sense that there's really no property right in the continued existence of a statute. See, e.g., American Pelagic Fishing Co. v. United States, 379 F.3d 1363 (Fed. Cir. 2004).

But something about this strikes us as not quite right. It's one thing when the government creates some expectations and encourages investment by adopting laws, and then later changes those laws. That "things change" may be one of those things that someone who plays in that market should expect. But when the government requires that someone who wants to use their property provide these impact fees -- and then, somehow, "overcharges" the developer -- it seems like a stretch to conclude that the developer (or someone to whom they assign their rights) does not have a valid expectation that those "credits" will hold their value. After all, Dolan tells us that the measure of constitutionality of these things is their "rough proportionality," and if the developers or their assigns didn't get some rough measure of value for the credits, this would seem to call into question of the original exaction. Or is the distinguishing feature here the fact that the government didn't directly devalue the exaction credits, but instead eased up on the requirements, resulting in a predictable -- but unintended -- reduction in value of existing credits due to alteration of demand?

Premier Trust of Nevada, Inc. v. City of Albuquerque, No A-1-CA-34784 (N.M. App. Oct. 1, 2020)

Your 2020 Brigham-Kanner Property Rights Conference Bingo Card

No Shortage Of Amicus Support For Takings Cert Petition (Lucas and Penn Central!)

A short while ago, we featured the cert petition in a case from the Big Island that we've been following as various pieces of it went up and down through both the state and federal court systems. See "New (Mike Berger) Cert Petition: 'This case is the proverbial 'Exhibit A' of much that is wrong [with takings law].'"

Now, after the State of Hawaii waived its right to file a BIO, five briefs of amici curiae (including one in which we played a small part) have been filed in support of the petition, urging the Court to review the Ninth Circuit's opinion. We wrote about the case in a recent issue of the American Planning Association's magazine. The short story is that a federal jury concluded that the State of Hawaii Land Use Commission took the owner's property under both a Lucas and a Penn Central theory, but the district court reduced the verdict to $1. That was apparently too much for the Ninth Circuit, which wiped out that award of compensation. 

Here are the amici briefs:

• Brief Amicus Curiae of Pacific Legal Foundation, Cato Institute, New England Legal Foundation, Prof. Frank Schnidman, and David Collins, Esq.
• Brief of Four Takings Scholars (Carol N. Brown, David L. Callies, James W. Ely, Jr., and Dwight Merriam)
• Amici Curiae Brief of National Association of Homebuilders of the United States and California Building Industry Association
• Brief of Amici Curiae Owners' Counsel of America, National Association of Reversionary Property Owners, NFIB Small Business Legal Center, Reason Foundation, and Professor Shelley Ross Saxer (ours)
• Brief of Matteoni, O'Laughlin & Hechtman as Amici Curiae in Support of Petitioner

A lot of amici can be a good sign to the Court that yes, there is a lot of interest in a case, and that it has wide-ranging impacts.

Now we wait. The case up for consideration in a few days at the Court's conference. Let's see if the Court asks for a response or something else.

Brief of Amici Curiae Owners' Counsel of America, Nat'l Ass'n of Reversionary Prop. Owners, et al. in Support of Petitioner, Bridge Aina Lea, LLC v. State...

Mass App: "Grandfathering" Is Term We're Not Going To Use Because "it has racist origins"

Nothing much to see in the Massachusetts Court of Appeals' opinion in Comstock v. Zoning Board of Appeals of Gloucester, No. 19-P-1163 (Aug. 3, 2020), a somewhat typical zoning dispute.

Neighbor vs neighbor, over whether permits issued by a municipality (and approved by the ZBA) to renovate and replace an existing -- but dilapidated -- residential garage, were valid. The replacement garage was to be built on the same footprint as the old garage, even though some elements of the design were different.

Issue: is the separate garage covered as a pre-existing nonconforming use under Massachusetts statutes? 

Short answer: yes, the nonconforming use statute covers separate buildings. The term "single-family residence" includes accessory structures. Nothing too surprising there.

But what caught our eye and makes us post this case here is footnote 11 on page 8 of the slip opinion, about the "certain level of protection to all structures that predate applicable zoning restrictions" -

Providing such protection commonly is known -- in the case law and otherwise -- as "grandfathering." We decline to use that term, however, because we acknowledge that it has racist origins. Specifically, the phrase "grandfather clause" originally referred to provisions adopted by some States after the Civil War in an effort to disenfranchise African-American voters by requiring voters to pass literacy tests or meet other significant qualifications, while exempting from such requirements those who were descendants of men who were eligible to vote prior to 1867. See Webster's Third New International Dictionary 987 (2002) (definition of "grandfather clause"); Benno C. Schmidt, Jr., Principle and Prejudice: The Supreme Court and Race in the Progressive Era, 82 Colum. L. Rev. 835 (1982).

Slip op. at 8 n.11.

In our experience, we haven't seen the term "grandfathering" used all that much in briefs or opinions. If used at all, it is primarily by "lay" persons since the term has worked its way into common parlance, separated from its historical use and meaning. We've always thought it was too vague a term for land users to employ meaningfully (our in-house rationalization for why we didn't see it being used that much.) Those in the land use and zoning business tend to use "vested right," "nonconforming use," "zoning [or equitable] estoppel" or similar terms. 

What's your experience? Have you seen that term used in technical situations in land use law? We always understood the original meaning of the term, but assumed -- rightly or wrongly -- that it had become somewhat generic outside of its meaning in voting rights. Let us know, please - we're curious.

Comstock v. Zoning Bd. of Appeals of Gloucester, No. 19-P-1163 (Mass. App. Aug. 3, 2020)

New Stinky Cert Petition: By Wiping Out Nuisance Claims, Right-To-Farm Act Is A Taking

Here's a cert petition that we've been waiting to drop in a case we've been following. This one asks whether a state legislature's virtual elimination of a cause of action is a taking.

The harsh reality is that farms and ranches can stink. But in Right to Farm Acts, many state legislatures, Indiana's included, have concluded that farming and ranching are so important that the consequences ("negative externalities") that naturally occur have to be accepted. One Indiana court summed up Right to Farm Acts as well as anyone when it noted, "so long as the human race consumes pork, someone must tolerate the smell." Shatto v. McNulty, 509 N.E.2d 897, 900 (Ind. App. 1987). Let's call it a "stink easement."

Indiana's version stands somewhat apart from others, however. Like many other states, it bars lawsuits which assert that a long-standing agricultural operation is a nuisance, as long as the ag operation hasn't "significantly changed." Most RTF acts define "significant change" as, for example, a change in the type of operation, or a farm's operating hours. But the Indiana statute defines "significant change" in a way that excludes these type of changes, thus allowing them.

That's what happened in this case. In 2013, a property owner whose land was zoned for mixed agricultural and residental uses rezoned it to "AGI-Agriculture Intense" and opened up a CAFO (concentrated animal feeding operation). A really big hog raising operation. Two downwind owners whose lands had been in their families for generations, sued for trespass and nuisance, arguing that to bar these claims would be a taking. Trial court dismissed, and the Indiana Court of Appeals affirmed.

The court of appeals concluded this was not a physical invasion, and analyzed ita s Penn Central regulatory takings claim. Because the economic impact was severe (but not total), the plaintiffs lost. The Indiana Supreme Court denied review, leading to the cert petition.

Here's the Question Presented:

Does a state statute violate the Takings Clause of the United States Constitution when it provides complete immunity from nuisance and trespass liability for an industrial-scale hog facility newly sited next to long-standing family homes, even though the facility causes noxious waste substances to continuously invade those homes, making it impossible for the families to use and enjoy their properties where they have lived for decades?

Check it out. There's a lot of layers. Is this a physical invasion? The total wipeout of a fundamental "stick?" There's Roman law. And Blackstone, and a strong federalism thread. There's a prominent "judicial takings" vibe in this, too. But make no mistake: this one doesn't seem as much pro-property as it is anti-CAFO. With a claim that the Indiana Legislature ipse dixet-ed property and nuisance law, the petition surprisingly does not cite cases like Webb's Fabulous Pharmacy, Hughes v. Washington, Miller v. Schoene, Causby, or Hodel v. Irving).

When presented with these type of questions, the Supreme Court has tended to either avoid the issue (PruneYard, Stop the Beach), or issue narrow rulings (Hodel, Lucas, Webb's Fabulous Pharmacy, for example).

To us, the most interesting assertion in the petition is towards the end, where the petitioners make the argument that the Supremacy Clause requires some uniformity on property law: 

These divergent outcomes based on states’ unique property laws are themselves reasons for this Court to review this matter. Under the Supremacy Clause, U.S. Const. art. VI, ¶ 2, whether a government action is a takings does not depend on the peculiarities of each state’s property laws. See, e.g., Lucas, 505 U.S. at 1033 (“If the Takings Clause is to protect against temporary deprivations, as well as permanent ones, its enforcement must not be frustrated by a shifting background of state law.”) (Kennedy, J., concurring). Thus, if barring nuisance or trespass suits against a CAFO violates the Constitution in one state, then it should do so in all states. Indeed, if it were otherwise, Iowa’s state legislature could simply rewrite its state’s property laws such that the same invasion causing the same harm would no longer represent a takings. Surely such end-runs around constitutional requirements should not be countenanced.

Pet. at 35-36.

More on the petition here: "Right to farm: Indiana families ask U.S. Supreme Court to weigh in on case over factory farm."

Stay tuned, or follow along with the case on the Court's electronic docket here.

Petition for a Writ of Certiorari, Himsel v. 4/9 Livestock, LLC, No. 20-72 (July 17, 2020)

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

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

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

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

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

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

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

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

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

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

Slip op. at 12-13.

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

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

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

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

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

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

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

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

...

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

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

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

So what's next?

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

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

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

Fed Ct: Property Owners Not Irreparably Harmed By COVID Rent Orders (Because They Might Be Able To Get Compensation Later)

Check this out. In Willowbrook Apts, LLC v. Mayor & City Council of Baltimore, No. 1:20-cv-01818 (July 6, 2020), the U.S. District Court for the District of Maryland denied the plaintiff/property owner's motion for a temporary restraining order, in a case challenging the COVID orders that pretty dramatically alter the landlord/tenant relationship in Maryland:

Specifically, the Baltimore City Council passed the Rent Increase Protection Act on May 19, 2020 (“Baltimore City Act”). On May 23, 2020, the Howard County Council passed the Rental Protection & Stability Act (“Howard County Act”), and the city of Salisbury followed suit one week later (on June 1, 2020) with Ordinance No. 2599, which amended chapter 15.26 of the city’s Municipal Code (“Salisbury Act”).

These laws (the “Acts”), while enacted in different jurisdictions, have the same three fundamental components, which Plaintiffs contend are constitutionally infirm. First, the Acts prohibit housing providers from increasing a tenant’s rent during the Governor’s declared emergency. See Baltimore City Code, Art. 13, § 8-4 (“Rent increases barred”); Howard County Code, Title 17, § 17.1200(B)(1) (“A landlord or mobile home park owner shall not… increase the rent or mobile home park fee”); Salisbury City Code, Title 15, § 15.26.035 (“A landlord may not increase a tenant’s rental fee”). Second, the prohibitions void rent increases that have already been agreed by contract, but were scheduled to take effect during the declared emergency. See Baltimore City Code, Art. 13, § 8-4; Howard County Code, Title 17, § 17.1200(B)(1); Salisbury City Code, Title 15, § 15.26.35. Finally, each law imposes “notice” restrictions on housing providers. Under the Howard County Act, housing providers may not notify a tenant about an anticipated rent increase during the health emergency, or within a “three-month period” after the emergency declaration expires. Howard County Code, Title 17, § 17.1200(C). The Baltimore City Act and Salisbury Act have similar notice provisions, although each applies for “ninety days” instead of three months. Baltimore City Code, Art. 13, § 8-4; Salisbury City Code, Title 15, § 15.26.35(D). While the Acts’ duration is expressly predicated on the Governor’s emergency declaration related to COVID-19, the Salisbury Act also applies to future health emergencies declared by either the Governor or by the Mayor of Salisbury. Salisbury City Code, Title 15, § 15.26.35(A) (defining “Emergency” as emergencies declared by the Governor or the Mayor).

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

Interestingly, the court avoided the "success on the merits" part of the TRO test. Instead, it focused on the "irreparable injury" that the plaintiff alleged is suffering and will continue to suffer if the regulations are not enjoined, at least temporarily.

Ah, the court replied, you alleged a taking! And we know what the most common remedy is for a taking, don't we? That's right, just compensation. See slip op. at 7. Okay, you TRO mavens, a question: does losing money or being damaged in a way that can be later remedied by money constitute "irreparable injury?" Generally, no:

Accordingly, monetary damages are not only adequate to compensate Plaintiffs for their alleged injuries, but are also the proper remedy in this context. Plaintiffs have not established that monetary damages would be inadequate, nor have they directed this Court to any case in which a court has remedied a Takings violation with a preliminary injunction — let alone with a TRO.

Slip op. at 8-9.

The court applied a similar rationale to the plaintiff's Maryland-law vested rights claims (the regulations apply to existing landlord/tenant contracts, for example), concluding that the movant had not met its burden of showing that post hoc damages would not be an adequate remedy.

One thing missing from the court's analysis (and this might be a function of the claims raised by the plaintiff and the relief emphasized in the complaint and motion for TRO), but what about the declaratory takings relief the plaintiff sought? In our thinking, although just compensation is the most common remedy sought for a regulatory taking, it isn't the sole remedy:

MR. JUSTICE REHNQUIST suggests that appellees' "taking" claim will not support jurisdiction under § 1331(a), but instead that such a claim can be adjudicated only in the Court of Claims under the Tucker Act, 28 U.S.C. § 1491 (1976 ed.). We disagree. Appellees are not seeking compensation for a taking, a claim properly brought in the Court of Claims, but are now requesting a declaratory judgment that, since the Price-Anderson Act does not provide advance assurance of adequate compensation in the event of a taking, it is unconstitutional. As such, appellees' claim tracks quite closely that of the petitioners in the Regional Rail Reorganization Act Cases, 419 U. S. 102 (1974), which were brought under § 1331 as well as the Declaratory Judgment Act. See App. in Regional Rail Reorganization Act Cases, O.T. 1974, Nos. 74-165, 74-166, 74-167, 74-168, p. 161. While the Declaratory Judgment Act does not expand our jurisdiction, it expands the scope of available remedies. Here, it allows individuals threatened with a taking to seek a declaration of the constitutionality of the disputed governmental action before potentially uncompensable damages are sustained.

Duke Power Co v. Carolina Env. Study Group, Inc., 438 U.S. 60, 71 n.15 (1979)

As we see it, there should be some kind of prospective equitable remedy that says "we don't want compensation yet, but prefer that the court stop the deprivation?" Maybe Lingle solves that question by making this a due process inquiry (a claim that the complaint here raised). 

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

Willowbrook Apts, LLC v. Mayor & City Council of Baltimore, No. 1:20-cv-01818 (D. Md. July 6, 2020)

HAWSCT: City's Prohibiting Use Of Property Pending City Acquisition Is Land Banking Taking

Breaking! In H.C. Cornuelle, Inc. v. City and Cnty of Honolulu, No. 14068 (Haw. July 17, 1990), the Hawaii Supreme Court held that the City and County of Honolulu inversely condemned a strip of private property in downtown when it prohibited development and use of that land because the City intended to acquire it in the future for a road-widening project.

Wait, what? "Breaking," you say? This memorandum opinion was issued nearly 30 years ago. What gives? Well, we remember this case from back in the day when we were just starting out, but had long forgotten about it. Plus, the same case resulted in one of the first post-Williamson County Ninth Circuit opinions, because the landowners originally sued for the taking in federal court, but were bounced out for ripeness. So they tried the takings case in a Hawaii state court. The Hawaii Supreme Court's opinion affirmed the Hawaii trial court's takings judgment.

This is an unpublished opinion, so we figured we'd just post it here for posterity to prevent it going down the memory hole. Check it out. An enjoyable read. The court concluded that the City's use of its land use regulatory power to prohibit the owner from using its property because the City planned in the future to expand King Street (see above photo for how it looks today), was "land banking" and a taking:

The trial court was correct in its conclusion that the City's actions constituted an unconstitutional taking of the landowners' property. A governmental restriction on the use of land results in an unconstitutional taking under the Hawaii and United States Constitutions if it: (1) does not substantially advance a legitimate state police power interest such as public health, safety or welfare (including aesthetic values), or (2) denies the owner all economically viable use of the land. See Nollan v. California Coastal Cornm'n, 483 U.S. 825, 834, 107 S. Ct. 3141, 3146, 97 L. Ed. 2d 677, 687 (1987). The City was engaged in a "land banking" operation, prohibiting the use of the property until it eventually acquired ownership. Such land banking is not a legitimate state police power purpose. Gordon v. City of Warren Planning and Urban Renewal Comm'n, 388 Mich. 82, 199 N.W.2d 465, (1972).

Slip op. at 4.

This case applied the then-valid Agins "substantially advance a legitimate state interest" takings test, which the U.S. Supreme Court later repudiated in a different Hawaii case, Lingle. But the rationale is still valid, and the Hawaii Supreme Court's conclusion that land banking (stopping use and development when the government is going to take the property in the future) "is not a legitimate state police power purpose" simply means that such actions violate due process (Lingle), and are not takings (Agins). This situation could also be a taking under the separate Lucas standard, but the Hawaii court of course didn't cite that case because it would be issued by the U.S. Supreme Court two years later.

Check it out, and add to your library.

H.C. Cornuelle, Inc. v. City and Cnty of Honolulu, No. 14068 (Haw. July 17, 1990) (memo. op.)

Cal App Backs Into The Question: Riparian Rights Are Limited To Reasonable Use, So No Property Right In What Agency Deems Unreasonable Use

A long opinion, but a short post. In Stanford Vina Ranch Irrigation Co. v. California, No. C085762 (June 18, 2020), the California Court of Appeal held that water rights are not really property rights.

That's a bit of an overstatement, of course. But not a huge one.

In an inverse condemnation case, the court held that the owner of riparian rights did not have a protectable property interest in any amount of water, because riparian use, by definition, must always be reasonable. And the state gets to define what use is "reasonable." Thus, the logic goes, because the State Water Resources Control Board determined by emergency regulation that any uses which might jeopardize the flow of water into a creek (to protect fish) were unreasonable, there's no takings claim for an owner who claimed a vested right to the water. No property, no taking:

We have already explained the Board’s emergency regulations defining as unreasonable any diversion of water that threatened to drop the flow of Deer Creek below the emergency minimum flow requirements was a valid exercise of the Board’s legislative authority to regulate the reasonable use of water. Thus, Stanford Vina possessed no vested right, fundamental or otherwise, to divert water from Deer Creek in contravention of the emergency regulations.

Slip op. at 32.

Because the agency had substantial evidence to support its emergency fish-protection regulation, end of story. 

However, we address Stanford Vina’s argument that the “curtailment actions” amounted to a taking of vested water rights without just compensation as a challenge to the legality of the curtailment orders because any such taking occurred not when the regulations were adopted, but when those regulations were applied to curtail Stanford Vina’s diversions of water from Deer Creek. This takings claim fails for the same reason we rejected Stanford Vina’s argument regarding application of the independent judgment standard of review: Stanford Vina possessed no vested right to divert water from Deer Creek in contravention of the emergency regulations. As stated by our Supreme Court in Gin S. Chow: “There is a well recognized and established distinction between a ‘taking’ or ‘damaging’ for public use and the regulation of the use and enjoyment of a property right for the public benefit. The former falls within the realm of eminent domain, and the latter within the sphere of the police power. That the constitutional amendment now under consideration is a legitimate exercise of the police power of the state cannot be questioned.” (Gin S. Chow, supra, 217 Cal. at p. 701.) “[S]ince there was and is no property right in an unreasonable use, there has been no taking or damaging of property by the deprivation of such use and, accordingly, the deprivation is not compensable.” (Joslin, supra, 67 Cal.2d at p. 145.)

Slip op. at 33-34.

Given these are water rights -- and you know how most courts treat property interests in water -- can you say you are really surprised? 

Stanford Vina Ranch Irrigation Co. v. California, No. C085762 (Cal. Ct. App. June 18, 2020)

Podcast: COVID-19 & Property Rights: Do Government Actions in Response to the Coronavirus Pandemic Create Compensable Takings?"

Here's the recording of the Federalist Society's Environmental Law & Property Rights Practice Group teleforum we did a couple of weeks ago, "COVID-19 & Property Rights: Do Government Actions in Response to the Coronavirus Pandemic Create Compensable Takings?" Stream above, or download it here.

The issue: how should courts evaluate the claims for compensation arising out of emergency measures? This question is on the front burner at the moment (and will continue to be because the courts will likely be confronted from these type of claims as the fallout continues). For example, here are some of the complaints that have been filed in courts around the nation: see here, here, here, here and here.  

The two featured speakers (Professor Ilya Somin and Professor F.E. Guerra-Pujol), not only debated and answered questions for an hour, but have also been following the issue closely (and writing about it). For example, Professor Guerra-Pujol wrote "The Kelo Case Provides a Strong Legal Argument for Takings Clause Lockdown Compensation," while Professor Somin responded with "No, the Kelo Case Doesn't Require Takings Compensation for Businesses Closed by Coronavirus Shutdown Orders."

We moderated the program and threw a couple of questions out there, too. Our thoughts on the topic are in this draft article: "Evaluating Emergency Takings: Flattening The Economic Curve."

Latest Coronavirus Complaint: NY State's Order Suspending Evictions Is A Taking

Here's the latest complaint that alleges a taking arising out of the coronavirus situation. It joins a long list of similar lawsuits (See here, here, here, here, here, here, here, here, here, here and here, for example.

This one challenges the State of New York's executive order that bars property owners from pursuing residential evictions for nonpayment of rent and requires the owners to apply security deposits towards rent.

Some interesting elements in the case:

• The complaint was filed in federal court against the Governor.
• It avoids the Eleventh Amendment issue by not seeking compensation, only declaratory and injunctive relief.
  
• Does that raise the issue of whether such relief is available for a taking?

Stay tuned, this isn't going to be the last of these things. We wrote up how we think these type of claims should be handled in "Evaluating Emergency Takings: Flattening The Economic Curve."

Complaint, Elmsford Apt. Assoc, LLC v. Cuomo, No. 1:20-cv-04062 (S.D.N.Y. May 27, 2020)

Saturday Readings: Commandeerings, Business Reopenings, #coronalaw Property Rights

Here's what we're reading today as we enter a long weekend (who can tell?):

• "Real Liberty," Vaccination, Plague, Police Power and Takings," from ALI-CLE's blog and The Practical Real Estate Lawyer. ALI-CLE was kind enough to reprint an earlier blog post of ours. Here's a printable pdf.
• "Business re-opening limbo is on Fed's radar as necessity for closures lessens" by Gina Mangieri at KHON. She and I chatted earlier this week about the obligation of government officials to protect the public health, while at the same time preserving, protecting, and promoting the right of property. Even if a court applying current doctrine won't closely scrutinize most of these emergency orders doesn't mean that officials don't have an obligation to draw any measures as narrowly as possible, and reevaluate them frequently.
• "Department of Justice Files Statement of Interest Challenging the Legality of Illinois Governor's Sweeping COVID-19 Orders." A press release from the DOJ. Related to the second item, above. The federal government's role in what is in large part a state issue is becoming more of a question on everyone's mind these days. This sounds more like a "suggestion" and guidelines, than actual rules.
• "Mooney's mistake (Coase &  COVID-19)" from Professor E.J. Guerra-Pujol's blog. Because what would your weekend be without a little law and economics, and a "Coasean approach." Worth reading.
• And finally, "Owners of COVID-19 sites that haven't opened asking the state for millions in rent." Apparently, Illinois commandeered property for alternate care sites for treating coronavirus victims. But renovations on these sites have not yet been completed yet, and might not be needed (let's hope), even though patients were housed there. The state has now filed eminent domain lawsuits. The story quotes our Illinois colleague Michael Ryan.  

Now back to work.

Land Use Also On The Fall Semester Agenda At William And Mary Law

This fall, we'll be back at the William and Mary Law School (hopefully in-person, depending on the circumstances and the yet-to-be-announced approach to be taken by the College of William and Mary), teaching two of our favorite subjects.

Not only will this be the third time leading Eminent Domain and Property Rights (Law 608), but we'll also be undertaking another subject, Land Use Control (Law 425). This semester, we're stepping into the (big, figuratively speaking) shoes of Professor Lynda Butler who recently retired after a stellar and trailblazing career. Thankfully, Lynda is continuing to lead the Brigham-Kanner Property Rights Project and is underway with planning October's Brigham-Kanner Conference, honoring Harvard lawprof Henry Smith.

Land Use is, of course, related to Eminent Domain and Property Rights, but the law school understands that they are each worthy of separate study, and they should not be folded into a single course (or, worse yet, treated only as part of the introductory first-year Property course). We're developing the syllabus now, but we're going to be covering topics such as:

• zoning
• vested rights
• who decides - agencies or courts?
• RLUIPA and other religious land uses
• First Amendment and land use law
• land use as a means of social control
• Acronym Central: TIFs, PUD's, NIMBYs and YIMBYs
• "In accordance with a comprehensive plan..."
• the uneasy relationship between land use and environmental law
• ...and more!

If you are a student, the course is now available on the law school system. It is a full three-credits, and we'll be meeting Mondays and Wednesdays at 10am. We're not sure whether the final will be a paper or an exam, but if you have thoughts about that subject or topics you'd like to cover, please let me know.

Another Federal Takings Complaint For Business Shut-Down Order (California)

Here's the latest complaint asserting that a state governor's business shut-down order (under which certain businesses are deemed "essential," while others not) is a taking, inter alia, that joins a growing list of similar lawsuits (see here, here, here, here, here and here).

This one is by licensed beauty professionals and has a slightly different flavor than other similar complaints, because the plaintiffs are alleging a specific property right in their licenses, raising the question of whether a state-granted or state-recognized license is a property interest that needs to be condemned if the government prohibits the licensee from actually using it. The plaintiffs argue a Lucas taking:

113. The regulatory actions taken by the Defendants have resulted in Plaintiffs being deprived of all economically beneficial or productive use of their property including, without limitation, their licenses, their leased property, and their business property, and further resulted in the involuntary closing of their businesses, ultimately making them worse than worthless, in that they have to pay license fees, rent, property maintenance, and related expenses for property they are barred by law from using. The California Supreme Court has found that “While the police power is very broad in concept, it is not without restrictions in relation to the taking of damaging of property. When it passes beyond proper bounds in its invasion of property rights, it in effect comes within the purview of the law of eminent domain and its exercise requires compensation.” House v. Los Angeles County Flood Control Dist., 25 Cal.2d 384 (1944). (Emphasis added).

Complaint at 33-34. The plaintiffs also allege a Penn Central taking, although the complaint makes a distinction between what it calls a "complete and total regulatory and physical taking," and a "partial" taking under Penn Central. See Complaint at 34. They also assert a taking under the California Constitution. 

For the taking, the plaintiffs also seek an injunction, not an award of just compensation, claiming they "have no adequate remedy at law." Id. 

Will this one fare any better than the other complaints, due to the different property claimed to have been taken? What about Tahoe-Sierra and the purportedly temporary nature of the taking? All those issues and more. We wrote up our thoughts in this piece ("Evaluating Emergency Takings: Flattening The Economic Curve") , identifying what we think are the touchpoints in the takings analysis. 

Complaint for Injunctive and Declaratory Relief, Prof. Beauty Federation of California v. Newsom, No. 2:20-cv-04275 (C.D. Cal. May 12, 2020) 

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! 

Two More Complaints Challenging Shut-Down Orders As Takings (Md, Nev)

"The Cornfield" at Antietam

Two more complaints that challenge state-ordered shut-down orders as takings. The first from Maryland, the second from across the country in Nevada. These join an ever-growing list of such lawsuits. See here, here, here, here and here, for example.

We set out what we think about how these type of claims should be analyzed in this article ("Evaluating Emergency Takings: Flattening The Economic Curve"). And, we'll be moderating a Federalist Society teleforum (open to the public!) next Friday on "COVID-19 & Property Rights: Do Government Actions in Response to the Coronavirus Pandemic Create Compensable Takings?" if you want to get in on the issue.

Of course, we shall keep following along. 

(What's the deal with the photos you ask? Nothing, except the first is from the Antietam Battlefield on our last visit (the Maryland complaint is prosecuted by the Antietam Battlefield KOA), and the second is from a road trip across Nevada (the venue of the second complaint). That's it.)

Along Route 50, "The Loneliest Road"

Complaint, Antietam Battlefield KOA v. Hogan, No. ___ (M. Md. May 2, 2020) 

Civil Rights Class Action Complaint, Capelli Milano, LLC v. Sisolak, No. 2:20-cv-00827 (D. Nev. May 7, 2020) 

New Article - Evaluating Emergency Takings: Flattening The Economic Curve

How should courts evaluate the claims for compensation arising out of emergency measures (many of which we've already seen; see here, here, here, here and here, for example)?

Rather than think about it piecemeal, we decided to write it up in a more comprehensive fashion. Here's the result, so far. Rather than summarize it, let's just cut-and-paste the Introduction. The complete piece is posted on SSRN, if you want to read it. 

Desperate times may breed desperate measures, but when do desperate measures undertaken during emergencies trigger the Fifth Amendment’s requirement that the government provide just compensation when it takes private property for public use?[1] The answer to that question has commonly been posed as a choice between the “police power”—a sovereign government’s power to regulate and restrict property’s use in order to further the public health, safety, and welfare[2]—and the eminent domain power, the authority to seize private property for public use with the corresponding requirement to pay compensation.^[3]

But that should not be the question. An invocation of police power does not answer the compensation question at all, but is merely the predicate issue: all government actions must be for the public health, safety, or welfare, in the same way that an exercise of eminent domain power must be for a public use. In “normal” times, it is very difficult to win a regulatory takings claim for compensation. In the midst of emergencies—real or perceived—the courts are even more reluctant to provide a remedy, even where they should, and emergencies are a good time to make bad law, especially takings law. Emergencies do not increase government power, nor do they necessarily alter constitutional rights.[4] 

This article provides a roadmap for analyzing these questions, hoping that it will result in a more consistent approach to resolving claims for compensation that arise out of claims of emergencies—real or perceived. This article analyzes the potential takings claims stemming from emergency measures, mostly under current takings doctrine. What type of claims are likely to succeed or fail? Can a better case be made analytically for compensation?

Part I summarizes the economic “flattening the curve” principle that motivates takings claims for compensation. Part II sets out the prevailing three-factor Penn Central standard for how courts evaluate claims that a health, safety, or welfare measure “goes too far,” and requires compensation as a taking, examining the character of the government action, the impact of the action on the owner, and the extent of the owner’s property rights.^[5] Deep criticism of Penn Central is beyond the scope of this article, and I will not here do more than accept it as the “default”[6]  takings test. But I do argue that the government’s motivation and reason for its actions—generally reviewed under the “rational basis” standard—should not be a major question in takings claims. Rather, as this article argues in Part III, the government’s emergency justifications should be considered as part of a necessity defense, and not subject to the low bar of rational basis, but a more fact and evidence driven standard of “actual necessity.” Part IV attempts to apply these standards and examines the various ways that emergency actions can take property for public use: commandeerings, occupations of property, and restrictions on use. I do not conclude that the approach will result in more (or less) successful claims for compensation, merely a more straightforward method of evaluating emergency takings claims than the current disjointed analytical methods.

In sum, this article argues there is no blanket immunity from compensation simply because the government claims to be acting in response to an emergency, even though its reasons and actions may satisfy the rational basis test. Instead, claims that the taking is not compensable because of the exigency of an emergency should only win the day if the government successfully shows that the measure was actually needed to avoid imminent danger posed by the property owner’s use, and that the measure was narrowly tailored to further that end.

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

[1] See Robert Higgs and Charlotte Twight, National Emergency and the Erosion of Private Property Rights, 6 Cato J. 747 (1987) (“Much of the reduction [of private property rights] occurred episodically, as governmental officials too control of economic affairs during national emergencies—mainly wars, depressions, and actual or threatened strikes in critical industries.”).

[2] “Police power” describes everything a sovereign government can do. It even might be said to encompass the eminent domain power. See Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 240 (1984) (“The [Fifth Amendment’s] ‘public use’ requirement is thus coterminous with the scope of a sovereign’s police powers.).

[3] See U.S. Const. amend. V. The Fifth Amendment conditions the federal government’s takings power. See Barron v. Baltimore, 32 U.S. (7 Pet.) 243 (1833) (noting a wharf owner’s argument that city’s diversion of water pursuant to its police power could support a Fifth Amendment claim, but holding that the Fifth Amendment only limited the actions of the national government). The Fourteenth Amendment extended the just compensation requirement to the states as part of due process of law. See Chicago, B. & Q. R. Co. v. City of Chicago, 166 U.S. 226, 235 (1897).

[4] See Steven M. Silva, Closed for Business—Open for Litigation?, Nw. L. Rev. of Note (Apr. 29, 2020), https://blog.northwesternlaw.review/?p=1361 (“First, it must be recognized that the Constitution exists even in an emergency. The Constitution expressly permits some alterations to our ordinary system of rights during times of war—for example, the Third Amendment provides differing provisions for the quartering of soldiers in times of peace versus times of war—but those alterations are baked into the system, the Constitution does not disappear in war. And a pandemic is not even a war.”) (citing Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 425 (1934))..

[5] Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124-25 (1978).

[6] The Supreme Court has labeled Penn Central “default” test for regulatory takings. See Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538-39 (2005).

Entire draft here.

A Little Preview Of How Courts Are Going To Misapply Takings Analysis In Shutdown Cases - Federal Court: No Taking For Outlawing Dog Racing

What do you think of when you think of south Florida? Beaches? Jai Alai? Cuba Libre? Crockett and Tubbs and a career in southern law enforcement? 

Well, it better not be dog racing. Because by an amendment to the Florida Constitution (Amendment 13), the people of Florida banned it. Well, wagering on dog racing, technically. You can, apparently, still race dogs just for dog s**t and giggles.

Well, after the ban, the inevitable takings claim arrived, like the tail wagging the dog. In this Order, the U.S. District Court for the Northern District of Florida, dismissed the complaint for failure to state a claim. The court held the plaintiffs had standing, and the case was ripe and wasn't barred by the 11th Amendment for some of the defendants. 

But naturally, we focused on the takings analysis. First, the court agreed with the plaintiffs that they possessed a valid property interest under Florida law. So far so good for the commercial dog racers. But the second step is where, we think, the court went off track so to speak. The court concluded that outlawing dog racing was a valid exercise of the state's police power. "It is well-settled that there is no taking for 'public use' where the government acts pursuant to its police power." Slip op. at 29. And, "enactment of Amendment 13 represents a valid exercise of Florida’s police power and is therefore not a 'taking.'” Id. at 30. 

But wait, a takings claim doesn't challenge the public use or purpose of the government action does it? At least not when the remedy sought is compensation. So a determination that space aliens might have considered this a valid police power action for which the public benefits doesn't really solve the entire takings inquiry, does it? To us, that's more of a due processey argument than a compensation claim. 

Skip to page 35 for what we think is the more correct way to look at these type of claims (at least where there isn't a wipeout or Loretto invasion). The dreaded Penn Central test. Yeah, the test sucks. Yes, it seems that everyone but nine Supreme Court justices hate the test. But for now, it is the test, so we're gonna apply it because lower courts are applying it. 

But never fear, we also have a bit of a beef with the way the dog racing court applied the test, and the opinion illustrates the way lower courts have misunderstood the test, especially the "investment-backed expectations" factor. 

Here, Plaintiffs fail to plausibly allege that Amendment 13 interferes with their reasonable investment-backed expectations in their dog racing-related property. Plaintiffs allege the dog racing industry has been permitted in the state of Florida for nearly a century and they have “invested money in training, transporting, breeding, and racing greyhounds.” But, as Plaintiffs themselves affirm, dog racing in Florida is a highly regulated industry. Under these circumstances, Plaintiffs have not plausibly alleged that they had a reasonable expectation that their dog racing-related property would not be made economically worthless by a new law.

Slip op. at 35-37 (citations omitted). 

Note the court's use of "reasonable" investment-backed expectations, and not "distinct." Bill Wade has written about the change in terminology, and how that has resulted in courts messing up the Penn Central test, and this case is a good example and adds to the growing list of courts that look at the plaintiff's expectations that way. The fact that a use is "highly regulated" doesn't to us seem like it should be dispositive at all. After all, isn't all property (especially land use) highly regulated?

We'd think that 100 years of legality and state regulation and recognition of a use would lead to the conclusion that an owner's expectations that they could continue to make that use is pretty "distinct." See, e.g., Kaiser Aetna v. United States, 444 U.S. 164, 178 (1979) (Fifth Amendment protects more than mere expectancies, but if owner has made investment that "has the law in back of it," those expectancies must be compensated). 

So check out the order. We're not saying it reaches the wrong result. It might have, it might not have. We post it here because unfortunately, we think it illustrates well the way that many courts that are going to be dealing with takings claims arising out the shutdown orders are going to be analyzing these claims.  

Order Granting Defendants' Motion to Dismiss, Support Working Animals, Inc. v. Desantis, No. 4:19cv570 (N.D. Fla. Apr. 27, 2020)

How Property Law Helped To Save Hawaii's Mother's Day

As we understand it, at some of our leading law schools the basic Property course is no longer a required 1L course. It's an elective. Quelle horreur! 

We think that's a bad idea. Our Property I course (a 4-credit one-semester monster) is where we learned about things like treasure trove (finders, keepers - losers, weepers), fee tail, and the dreaded Rule Against Perpetuities from the venerable Allan F. Smith. It's also where we first learned of vested rights and zoning estoppel. Thank you Professor Smith. What a shame it would have been had we not been required to take that course where we learned so much about the vibe of the law (not just property law). 

Hawaii's vested rights and estoppel rules as developed over the years by the courts are based on constitutional and equitable principles: if someone receives "official assurances" from a government official acting "within the ambit of their authority," and actually relies on those assurances to substantially change position, then that person has a property right that "cannot be taken away," and the government is estopped from backing away from those assurances. More about these concepts in property law here (a U. Hawaii Law Review article we wrote up with Ken Kupchak and Greg Kugle).

What's all that got to do with Mother's Day, you ask? 

Well, it turns out that under the Governor's coronavirus orders, Hawaii's florists are not deemed to be "essential," and were ordered to stop doing business. But as this story ("Ige’s reversal halts delivery of Mother’s Day flowers") details, recently, in anticipation of Mother's Day (May 10, don't forget Mom, wherever you are), florists responded to the Governor's invitation to request an exemption. The Governor even has a special email address at which to send such requests. And responding to those requests, florists received a good response from that same email address: if florists comply with three health-related conditions, they could open and take and fulfill orders for Mother's Day.

All seemed well until two days later, when the Governor publicly announced "my bad." Sorry, the exemption notification was an error (NoKo "this is not a drill" nuke texts, anyone?). The sender didn't have authorization or approval. Sorry, florists.

Problem was, in the two days since the official green light to reopen, many florists took orders, ordered flowers from their suppliers, and generally incurred a whole lot of obligations. After all, Mother's Day is, we understand, the biggest single flower event on the yearly calendar. Florists are hurting badly in the shut down, and maybe they could undig that hole a bit and bring a small ray of sunshine to shut-in Hawaii moms. Now they were even more screwed. 

That's where Property I might've played a small part. In addition to an outpouring of public support in petitions to the Governor (we told you the First Amendment doesn't get tossed aside in emergencies) someone told the Gov about things like "official assurances" by an official "acting within the ambit of their authority," and "substantial reliance" leading to a property right that "cannot be taken away" (without condemnation and compensation), and equitable estoppel and restitution. These principles can be enforced even against the government.

Next thing we know, the Governor is holding a press conference announcing reversing the reversal ("Governor Ige reverses his decision and allows flower shops to make deliveries for Mother's Day"). Mother's Day flowers are back on the calendar! 

So here's your lesson, elite law students who may be thinking of not registering for the basic Property course because you don't see a need to learn things with a lot of confusing Norman Law French terms (and it conflicts on the schedule with "Arguing with Judge Judy: Popular Logic on TV Judge Shows"): resist that temptation. You never know when the things you learn there will help out, even if you never practice property law.  

PS - order Mom some flowers!

Shades Of Eastern Enterprise: Applying "Meaningful" Rational Basis Review, NY Court Of Appeals Shields Retroactive Rent Control Law From Takings Analysis

We're certainly not going to delve in detail into the 109 single-spaced pages of the majority and dissenting opinions in the New York Court of Appeals' ruling in Regina Metro. Co., LLC v. N.Y. State Div. of Housing and Community Renewal, Nos. 1-4 (Apr. 3, 2020). New York's rent control law is infamously labyrinthine, and we're by no means learned in its nuances (and have no desire to become so). But there's a lot to digest in the opinion, and it might be worth your time to dig into certain parts. 

For our purposes, here is the short version. While an appeal was pending in these cases, the legislature amended the statute ("sweeping changes") and extended the statute of limitations and "the nature and scope of owner liability in rent overcharge cases." The question before the court was whether the new requirements govern the case. In other words, whether the recent amendments are to be applied retroactively, or whether the cases are governed by the law in effect at the time of the lawsuit (i.e., the old law).

The court concluded the legislature "evinced a sufficiently clear intent to apply [the new statute of limitations and changes in the law] to timely pending claims[.]" Slip op. at 38. Thus, the court had to grapple with the question of whether applying the law retroactively violated due process. 

As you know, due process means rational basis review (especially for so-called "economic" regulations), aka "aliens might have done it." But when the regulations are meant to apply retrospectively, judicial review is with a slightly more skeptical eye. Not that much, but a bit more: "there must be a 'persuasive reason' for the 'potentially harsh' impacts of retroactivity." Slip op. at 39-40 (citations omitted). 

We suggest you read the next few pages, because there, the court walks through all the reasons why applying the new rules retroactively to cases in the pipeline would be unfair and unconstitutional. The new provisions would "more severely impact substantive rights[,]" and the lookback period is "vast" and therefore "upends owners' expectations of repose relating to conduct that may have occurred many years prior to the recovery period." Slip op. at 45.   

Unlike cases where retroactive application rationally furthered a legislative goal, such as closing a state-administered fund benefitting insurers that imposed unsustainable costs on employers (see American Economy, 30 NY3d 136) or preventing legislation from being undermined by those seeking to escape its impact before enactment (see R.A. Gray & Co., 467 US 717) – there is no indication here that the Legislature considered the harsh and destabilizing effect on owners’ settled expectations, much less had a rational justification for that result. While prospective application of Part F to overcharges occurring after the effective date may serve legitimate and laudable policy goals, no explanation has been offered, much less a rational one, for retroactive application of the amendments to increase or create liability for rent overcharges that occurred years – even decades – in the past.

Slip op. at 50.

The court concluded, "[t]here can be no doubt here that ... the amendments represent a clear rejection of prior rent stabilization enforcement policy and effectuate a significant readjustment of substantive rights relating to overcharge recovery[.]" Slip op. at 46. The court applied what it called "meaningful" rational basis review (not quite the "aliens" theory), noting that a court isn't merely a rubber stamp, but is there to protect infringements on "fundamental principles as they have been understood by the traditions of our people and our law" (in other words, our old friend "the law of the land") - 

In this regard, the rational basis test – although extremely deferential – must be meaningfully applied to ensure basic principles of fairness and substantial justice, lest we abdicate our responsibility to the citizens of this State. As Justice Holmes wrote when dissenting in Lochner – espousing a view that later prevailed in the Supreme Court – “the word ‘liberty,’ in the 14th Amendment, is perverted when it is held to prevent the natural outcome of a dominant opinion, unless it can be said that a rational and fair [person] necessarily would admit that the statute proposed would infringe fundamental principles as they have been understood by the traditions of our people and our law” (Lochner, 198 US at 76 [Holmes, J., dissenting] [emphasis added]). The modern rejection of Lochner has never been understood to require courts to abandon “fundamental principles” of fairness – not even when reviewing economic legislation. There are few principles as fundamental or, in the words of the Supreme Court, as “elementary” or “deeply rooted” as the notion that government may not irrationally impose or expand liability for past conduct (Landgraf, 511 US at 265).

Slip op. at 55.

The dissent, as you might expect, raised the usual judicial kryptonite (Lochner), asserting that the majority overstepped its bounds, even though Lochner presented prospective, not retrospective, legislation restricting liberty of contract.

But by taking a slightly harder look at the backwards application of rent control and voiding the statute on due process grounds, however, the New York Court of Appeals avoided the takings question lurking the background. There's a pretty good case that if the majority had upheld the retroactive law, that it would be subject to a serious takings challenge as in Eastern Enterprises v Apfel, 524 U.S. 498 (1998). 

If New York seeks further review, might this case be the one in which the U.S. Supreme Court revisits that fractured decision? Stay tuned. 

Regina Metro. Co., LLC v. N.Y. State Div. of Hous. and Comm. Renewal, Nos. 1-4 (N.Y. Apr. 2, 2020)

Mi Casa Ain't Su Casa: Proof Of Lost Opportunity Is Evidence Of Penn Central's "Economic Impact" Factor

The work of the courts goes on, and as long as there's stuff to report, we'll keep reporting as usual.

Yesterday, the U.S. Court of Appeals for the Federal Circuit issued an important takings decision in a case and issue we've been following for what seems like forever. In Anaheim Gardens, L.P. v. United States, No. 19-1277 (Mar. 25, 2020), the court held that a property owner in a regulatory takings case asserting a Penn Central taking may prove the "economic impact" factor by introducing evidence "by demonstrating their lost opportunity to earn market-rate rental income after prepaying their mortgages." Slip op. at 17. The Court of Federal Claims had precluded such evidence, concluding instead that the before-the-regulation and after-the-regulation method was the only proper way. 

Here's the short story: the feds adopted programs providing incentives to developers to build low-income housing. The programs offered below-market 40-year mortgages guaranteed by HUD, for example. In return, the owner agreed to limit the rent increases for as long as the HUD guarantee remained in place. The programs also allowed an owner to get out early if after 20 years they prepaid the mortgage. If so, the agreed-upon rent restrictions would vanish. 

Perhaps not surprisingly, many owners took that option. Too many owners, in Congress' judgment. And thus (again, perhaps not surprisingly, also), the feds reacted by eliminating the prepayment option. No prepayment, no conversion of below-market units to market-rate. Takings lawsuits followed.

As noted above, the CFC rejected the expert economist testimony offered by the owners. William Wade, Ph.D., (disclosure: Dr. Wade is a colleague of ours, and has guest-blogged before, including posts on Penn Central), testified about the lost opportunity -- lost market-rate rental income -- that the owners suffered because Congress' elimination of the prepayment option forced the owners to keep renting at below-market rates. See slip op. at 11-12 for more details of Dr. Wade's testimony. See also the graphic above. 

Nope, held the CFC:

Despite Dr. Wade’s opinions, the Claims Court found that Dr. Wade’s analysis was nonprobative of economic im-pact under Penn Central. First, the court found that Dr. Wade’s lost income analysis was nonprobative because he was required to analyze and compare fair market values. Decision, 140 Fed. Cl. at 89 (“[FWPs] have not established the fair market value (FMV) of the FWPs’ properties at the time of the taking, for either the scenario where the mortgage prepayment right was unrestricted, or the scenario where the mortgage prepayment right was restricted by LIHPRHA.”). And second, the court found that “Dr. Wade’s methodology is unsound because it is inconsistent with binding precedent,” in particular relating to “the parcel as a whole concept” and “economic loss severity measures.” Id. at 89–91.

Slip op. at 13. 

"[G[uided by the Supreme Court's cautions against rigidity in this area of law," slip op. at 14, the Federal Circuit rejected the CFC's categorical rule, holding instead that "courts must have flexibility to determine in each individual case how to most accurately measure the economic value of what a takings claimant actually lost due to the governmental action." Slip op. at 15. Yes, "before and after" the regulation might serve the purpose of determining the economic impact of the regulation, but it isn't the sole way to approach it. Lost net income, discounted to present value, also could work. "Neither approach appears to be inherently better than the other." Id. 

The difference between temporary takings (as were at issue in prior Federal Circuit cases), and the permanent nature of the takings here did not matter. Yes, permanent vs temporary can affect the analysis. But it isn't determinative of the of the method used. Slip op. at 16 ("Regardless whether a taking is permanent or temporary in nature, there is no one-size-fits-all method for measuring the economic impact of a governmental action.").  

As for our post's title, one of the property owner/plaintiffs in the case was an outfit known as "620 Su Casa Por Cortez," which was in a slightly different position than the other plaintiffs. Su Casa didn't own its property prior to the time Congress changed the early-redemption rules, but bought subject to those rules. So yes, you guessed it, in Su Casa's case, the CFC held that purchasing the property already subject to the allegedly restrictive regulation means it failed the "investment-backed expectations" Penn Central prong also.   

Unlike the Federal Circuit's conclusion that the CFC got it wrong on the "economic impact" Penn Central prong, here the court agreed with the CFC. It rejected Su Casa's argument that Palazzolo rejected the "subsequent transfer" holding:

The governmental action in this case is the enactment of the Preservation Statutes. Su Casa purchased its property in an arms-length transaction after it already knew that the Preservation Statutes had eliminated the prepayment option that previously existed under the 1961 amendments to the National Housing Act. While the HUD regulations had not yet gone into effect at the time of the transaction, the Preservation Statutes themselves were sufficiently detailed to remove any reasonable expectation that Su Casa could have had that it would have the option to prepay its mortgage and convert its property from low-income housing to a market-rate rental property. 

Su Casa’s reliance on Palazzolo v. Rhode Island, 533 U.S. 606 (2001), is inapposite. . . .Here, unlike in Palazzolo, the Claims Court did have occasion to consider whether Su Casa could prove reasonable investment-backed expectations in view of the timing of its purchase and its knowledge about the Preservation Statutes. The Claims Court determined, not as a per se rule but rather as an evidentiary failure, that Su Casa lacked sufficient evidence to prevail at trial.

Slip op. at 8. Hmmm...ok. We'll have to see about that one. After all, the Supreme Court in Murr did say that purchase subject to restrictions is "a factor" in investment-backed expectations analysis. But that has always seemed more like a way to back into a per se rule, than an actual distinction to  us. Maybe this is the case to take back up on that issue? 

Please read the entire opinion. There's a lot there, obviously. And it is a good distraction from the swirl of the 25/7 news cycle that is making everyone just a bit crazy.  

Anaheim Gardens, L.P. v. United States, No. 19-1277 (Fed. Cir. Mar. 25, 2020) 

Unboxing The 2021 (Scottsdale) ALI-CLE Eminent Domain Conference Swag: Get Yours Today!

Missed out on the 2021 ALI-CLE Eminent Domain and Land Valuation Litigation Conference swag?

Well fear not: here's your chance to get your high-class reminder -- a kit of road warrior essentials -- to save the Conference date on your calendar. We're already underway with planning the agenda and faculty, so it's never too soon to block it off (January 28-30, 2021, at the 4-Diamond DoubleTree Resort, Scottsdale, Arizona). 

If you were not able to get your swag in Nashville, send us a note (rht@hawaiilawyer.com) and we shall gladly drop one or two in the mail to you.

While supplies last!  

Pennsylvania Coal Revisited: Outlawing Silica Mining Isn't A Taking, Even Though Mining Rights Are "Property" Under State Law

Here's the latest in a case we've been following that involves a local government prohibiting, via a zoning ordinance, the mining of silica (used as "frac sand"). Kind of like how Pennsylvania barred certain coal mining in our old friend, Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). 

In Minnesota (where our story takes place) the right to subsurface minerals is separate from the rest of the land. Kind of like how Pennsylvania law recognized subsurface rights as a separate "stick" in Mahon. Here, the plaintiff owned several leases which allow it to mine silica. Sounds like a property interest, no? 

Well, no. At least not to a majority of the Minnesota Supreme Court, which held in Minnesota Sands, LLC v. County of Winona, No. A18-0090 (Mar. 11, 2020) (affirming the court of appeals) that the right to mine silica was a property right, but because it was "inchoate," it was not really a vested property right that covered by either the U.S. or Minnesota takings clause.

We won't go into great detail in this post (you can either read the opinion itself, or our earlier write up on the court of appeals' decision), but the overall vibe of the majority opinion is summarized in footnote 19 on page 34 of the slip opinion:

The dissent’s claim that our decision affords the government immunity to regulate the leases "out of existence" is incorrect. Our decision proceeds on the uncontroversial premise that the government cannot "take" property rights that a party never had. See Murr v. Wisconsin, __ U.S. __, __, 137 S. Ct. 1933, 1951 (2017) (Roberts, C.J., dissenting) (noting that the first question in a Takings Clause claim is “what ‘private property’ the government’s planned course of conduct will affect”). Likewise, the government does not regulate out of existence a leaseholder’s rights that terms of the lease never granted. It bears emphasizing that the rights granted under the terms of the lease agreements were determined by the parties. The decision to limit Minnesota Sands’ rights to a contingency interest that would not become definite unless the government granted a conditional-use permit was the company’s.

Slip op. at 34 n.19. In short, Minnesota Sands had not obtained a Conditional Use Permit.

We're not sure that the majority's reading of the lease terms to make the property rights granted by the lease "conditional" on the mining company obtaining a CUP, but this was the majority's way of trying to insulate the opinion from U.S. Supreme Court review. After all, what a lease means is a matter of state contract law, no? 

As we did with the court of appeals' opinion, we focused on the rationale set out by the two dissenting Justices. The dissenting opinion begins after page 39 of the slip opinion, and the "takings" analysis begins on page D-8. We urge you to read it in depth. The heart of the dissent's arguments is that the court should not have thrown the case out on the threshold property question, but should have reached the merits of whether the ban is a taking:

Because mineral leases, including the leases at issue here, have been “long recognized” as property, Phillips, 524 U.S. at 167, the protected property interest defined by those leases may not be regulated out of existence by the government, see Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922) (explaining that regulation will be recognized as a Fifth Amendment taking if it “goes too far”). Put another way, leasehold interests are protected by the Takings Clause of the United States Constitution. Because Minnesota Sands argues that its mineral leases were taken by the county ordinance, this case should, at a minimum, be remanded to the district court for an inquiry that considers factors “such as the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action.” Horne v. Dep’t of Agric., ___ U.S. ___, ___, 135 S. Ct. 2419, 2427 (2015) (discussing the takings factors to be considered under Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124 (1978)).

Dissent at D-10-D-11 (Anderson, J., dissenting) (footnote omitted).

We think Justice Anderson's dissent teed up a pretty good SCOTUS cert petition on either Penn Central or Palazzolo:

Legally, even if we could accept the court’s abridged take on the leases, I disagree with its abridged take on the Fifth Amendment. Under the court’s view of this constitutional protection, it does not matter how significant the interference of a regulation is with the “reasonable investment-backed expectations” of a property owner. Horne, ___ U.S. at ___, 135 S. Ct. at 2427 (discussing the Penn Central factors). Indeed, according to the court, it does not matter if the government subjected the owner’s private property to a total regulatory taking, see Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1016 (1992), if the owner’s property was not sufficiently “vested” before the regulation became effective. An owner’s regulatory takings claim, partial or total, may proceed only after the owner has a “vested interest to use” the property as expected. Here, according to the court, that means that Minnesota Sands has no constitutionally protected property interest until Winona County approves mining silica sand for hydraulic fracturing, which is the proposed use of Minnesota Sands’ leaseholds. Therefore, under the court’s logic, Minnesota Sands may not bring a Takings Clause challenge to Winona County’s frac sand mining ban until Winona County first permits frac sand mining.

Dissent at D-12-D-13 (Anderson, J., dissenting) (footnote omitted). As we wrote in our post about the court of appeals' decision, the majority's rationale is a classic bootstrap argument:

The majority's rationale was that there's no property interest because Minnesota Sands didn't get a CUP. Which overlooks the fact that under the ban, it cannot get a CUP. So the  very ban being challenged is what eliminated the plaintiffs' claim of owning property. Bootstrapping at its finest, and inconsistent, in our view, with the rule in Palazzolo v. Rhode Island, 533 U.S. 606 (2001), that the enactment of a regulation does not deprive a property owner of the right to challenge the regulation. 

Now, just wait til the cavalry arrives.

Postscript: for you Con Law types, much of the majority and dissenting opinions delve into the question of whether the "dormant" Commerce Clause was offended by the County's ban (was this a backhanded way of discriminating against non-County miners?), but we shall leave that issue to you, if interested.  

Minnesota Sands, LLC v. County of Winona, No. A18-0090 (Minn. Mar. 11, 2020) 

New Cert Petition: Are Patents "Property" Protected By The Takings Clause (Is Inter Partes Review A Taking)?

You recall that a short while ago, in Oil States Energy Servs., LLC v. Greene's Energy Group, LLC, 138 S. Ct. 1365 (2018), the Supreme Court held that patents are a form of "public property" (more like a government-created entitlement), and thus Congress can withhold the usual Article III tribunal and a jury when the validity of that property is challenged. The majority held that "inter partes review," under which the Patent and Trademark Office administratively reconsiders (and may cancel) previously-issued patents, does not run afoul of the Constitution because a patent is a "public right," and therefore more like a grant of a franchise than classic common law property.

Although the Court validated inter partes review, it left open the question of whether a patent owner who has her patent (in thousands of cases, these patents were issued before inter partes review was adopted) invalidated via administrative inter partes review would have a claim against the federal government for a taking, noting that patents may be "property for purposes of the Due Process Clause or the Takings Clause" (think rails-to-trails and Preseault). 

Well, here's that claim squarely presented in a case we've been following.

In Celgene Corp. v. Peter, 931 F.3d 1342 (Fed. Cir. 2019), the Federal Circuit concluded that the invalidation of an issued patent was not a taking. The (former) patent owner's cert petition asks this Question Presented:

When Congress passed the America Invents Act (AIA) in 2011, it created a new administrative proceeding called “inter partes review” for reviewing the validity of previously issued patents. See Leahy-Smith America Invents Act, Pub. L. No. 112-29, § 6, 125 Stat. 284, 299-313 (2011). In the same Act, Congress created the Patent Trial and Appeal Board, a new administrative tribunal for conducting inter partes review. Id. § 7. That Board, now numbering 270-plus “administrative patent judges,” was given the retroactive power to cancel patent rights conferred prior to enactment of the AIA, “even though that procedure was not in place when [those patents] issued.” Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC, 138 S. Ct. 1365, 1379 (2018). In just its first four years, the Board invalidated more than 16,600 patent claims, most of which were likely issued before inter partes review was enacted.

This case presents a question expressly left open in Oil States:

Whether retroactive application of inter partes review to patents issued before passage of the America Invents Act violates the Takings Clause of the Fifth Amendment.

Lots to absorb here: takings, "vested rights" and reliance, there's even a quasi-Contracts Clause vibe. So we shall be following along. 

Petition for a Writ of Certiorari, Celgene Corp. v. Peter, No. 19-1074 (Feb. 26, 2020) 

Idaho: Only The Owners At The Time Of The Taking Have Standing To Pursue Inverse Claim (Because It Is A "Personal Claim" & Doesn't Run With The Land)

It's Friday (and Valentine's Day), so we'll make this quick, even thought this is one of those cases with a fact pattern that you just can't digest quickly: In Day v. Idaho DOT, No. 45552 (Feb. 14, 2020), the Supreme Court of Idaho held that only the property owners at the time of the taking may assert an inverse condemnation claim. That, standing alone (pun intended), is not surprising.

But skip forward to page 7 of the slip opinion where the court determined when the taking occurred (at the time the government action alleged to be a taking -- here, an interchange -- was "substantially completed," not on the date the infrastructure project was actually completed):

This begs the following question: When did the taking in this case occur? The district court’s opinion states that “the parties stipulated that the taking occurred on December 5, 1997, when the Isaacs Canyon Interchange project was substantially completed.” In this appeal, the Day family vigorously disputes this statement, contending that they stipulated that valuation of any taking should be measured as of that date, but that accrual of their cause of action occurred subsequently. The Day family contends that their cause of action accrued when they were notified of ACHD’s refusal to permit a public street to be connected from their property to Eisenman Road and that until that time, the Isaac’s Canyon Interchange was merely a temporary interruption of their right of access to a public highway.

In support of this contention, the Day family relies on the Court of Appeals’ decision in Balivi Chemical Corporation v. Industrial Ventilation, Inc., 131 Idaho 449, 958 P.2d 606 (Ct. App. 1998). We are not persuaded by this argument. Without exploring the facts of the Balivi decision in length, we simply note that a case involving breach of a subsequent or substitute contract is inapposite to a claim of inverse condemnation.

We hold that the district court properly concluded that the date of the accrual of the cause of action was December 5, 1997, when the Isaacs Canyon Interchange was substantially completed.

Slip op. at 7.

Keep going to page 8 of the slip opinion, where the court concluded that the inverse condemnation claim in this case wasn't one that "runs with the land," but was a personal "chose in action" that belongs to the person who owned the property at the time of the taking. See slip op. at 8 (citing Palazzolo v. Rhode Island, 533 U.S. 606, 639 (2001) (Stevens, J., concurring in part and dissenting in part)). This bolstered the court's conclusion that future owners did not have standing (although it does avoid the question of whether the owners at the time of the taking could sell or transfer their personal rights to future owners). 

Applying these two rules, the court concluded that the owners of the property in 1997, when the DOT completed the interchange, were the only plaintiffs with standing to pursue an inverse claim. 

1997? What about the statute of limitations? In Idaho, inverse condemnation is subject to a four-year limitations period. Well, four years after 1997 was ... a long time ago. The court concluded, however, that the two plaintiffs with standing did not miss out because DOT's lawyer in 2000 sent the Day family a letter which stated, "I will also represent to you that the Department will not assert any type of statute of limitations defense if an agree on new access cannot be reached." Slip op. at 9. That was enough to induce reasonable reliance by the Day family, a question about which there remained a factual dispute. So no summary judgment on the SOL issue.

Check it out.  

Day v. Idaho Dep't of Transporatation, No. 45552 (Idaho Feb. 14, 2020)

Record Attendance (But There's Still Time For You Last-Minute Filers) At Nashville ALI-CLE Eminent Domain Conference

Picture 1: how normal people see pie.

Picture 2: how you see pie if you're coming to the
ALI-CLE Eminent Domain Conference. 

If you get the above, you probably are already set to join us next week for the 37th Annual ALI-CLE Eminent Domain and Land Valuation Litigation Conference in Nashville. (If not, shame on you!).

And having just reviewed the latest registration list, I can report that we have an all-time record attendance.  But there's still room for those of you still not committed. Register here. Don't miss out. There will be pie. 

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

If there's one downside to the law school experience from the teacher's side of the lectern, it's grading. Especially at a law school like William and Mary that has a pretty strict mandatory curve.

In an upper-division course like "Eminent Domain and Property Rights Law," where we're dealing with some very high-level stuff and the quality of the students is uniformly excellent, that makes for some hard choices at this time of year. But we've wrapped up grading, and have submitted the official scores.

Although I cannot share with you all the papers themselves, I don't think my students would mind if I give you a sampling of the topics and titles, just so you can see how the next generation of lawyers is thinking about this area of law: 

• One Man's Castle is Another Man's Parking Lot: A Homeowner's Theory of Eminent Domain
• Native Title: Concept and Compensation
• May the Forest Be With You: John Does in Trees Fight Pipelines Using the Right to Include
• Apportioning "A Chicken Which Is Really Not Big Enough to Go Around": Why Courts Should Abandon the Undivided Fee Rule for the Aggregate of Interests Approach
• Madisonian Musings on Judicial Takings
• Why Knick v. Township of Scott Returned Takings Jurisprudence to the Values Behind the Fourteenth Amendment
• In the Aftermath of Arkansas Game & Fish Commission and Livingston v. Virginia Department of Transportation: Virginia Localities Need to Plan for Great Liability Risks From Flooding
• The Veterans of Foreign Wars Case and the Undivided Fee Rule: Just Compensation for More Than One Owner
• Up-Zoning: A New American Dream and Shifting Property Paradigm
• I Believe I Can (Maybe) Fly: A Survey of Proper Law Interaction With Drones
• EPA's Takings Liability for Climate Change Inaction
• Are Pipelines Public Uses? 
• In States We Trust: The Limits, and Lack Thereof, on the States' Power to Modify the Public Trust Doctrine
• The Public Use Requirement: Changes Over Time

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

Finally, I can't resist cutting and pasting from one of the paper's footnotes: "For more on 'exclusionary vibes' and the power of eminent domain, see The Castle (Debra Choate 1997)." 

Obi-Wan has taught you well. 

(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.  

Space Still Available For ALI-CLE Eminent Domain Conference, Nashville Jan 23-25, 2020

If you get this, you need to attend the 37th Annual ALI-CLE Eminent Domain & Land Valuation Litigation Conference, January 23-25, 2020, in Nashville.

And if you don't get this, you need to attend more. 

Register here. 

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) 

Update On SCOTUS Property And Takings Cases

Now that the season is underway at 1 First Street NE, we thought we'd update you on some of the cases we've been following. 

Short story: no new grants in cases of interest.

• Stahl York Ave. Co., LLC v. City of New York, No. 18-1429 (cert. denied Oct. 7, 2019) - a good issue and one that is not going away: if an agency action is alleged to have take property, is the record limited to the record developed in the agency? 
• Guerin v. Fowler, No. 18-1545 (cert denied Oct 15, 2019) - a case we've been following closely, dealing with the nature of the takings remedy, and Eleventh Amendment immunity. You are not asking for money damages if all you want is an injunction ordering the State to stop keeping your money. 
• Katzin v. United States, No. 19-258 (cert. denied Oct. 21, 2019) - another case we've been following. The decision below, the 2-1 Federal Circuit (with Judge Newman filing a compelling dissent), held that it was not a taking by the USA when it claimed ownership of the plaintiff's property. 

But we're not all done yet with pending takings petitions. Smyth v. Conservation Comm'n of Falmouth, No. 19-223 (we filed an amicus brief in that one) is still there, with the government's BIO just filed. Penn Central is the issue in that one. 

And Cranston Police Retirees Action Committee v. City of Cranston, No. 19-286 is just getting underway. The Question Presented involves municipal pensions and whether there's a Contract Clause or Takings Clause violation when the city suspended the retirees' vested retirement benefits. 

Stay tuned, folks.

City Engineer's Email Was Not "Official Action" Triggering Vested Rights Even If You Responded With A Smiley Emoji

There's nothing terribly novel in the Texas Court of Appeals' opinion in City of Houston v. The Commons at Lake Houston, Ltd., No. 14-18-00664-CV (Oct. 15, 2019), but we highlight it here for a couple of reasons. 

First, the court's holding that a regulatory takings claim was not ripe because the property owner had not sought a permit -- and as a consequence, the city had not yet reached a "final decision" whether the regulations in question (which require that buildings in an area be built at least two feet above certain floodplains) -- reminds us that the first prong of Williamson County ripeness is alive and well (even though this was a case purely under Texas law, so Williamson County did not govern). The court noted that the owner "had not any permit of plat applications, or requests for variances, denied as a result of the amended ordinance. Indeed, the ordinance did not become effective until after the trial court denied the plea." Slip op. at 9.

Second, we were interested in this case because of the court's holding about what actions by a public employee can trigger vested rights. Or, more accurately, what actions can a property owner's rely on to move forward. Here, the plaintiff asserted that a city engineer's response to an email inquiry about the ordinance which asked general questions, was enough to for the city to have staked out an official position on whether the plaintiff's property was subject to the regulation, thus ripening a vested rights claim. The court disagreed, concluding the email was really general, and not some kind of official opinion about the applicability of the regulation to the property:

In the email, The Commons asked a general question about unspecified tracts of land without providing any details about the prior plan, plat, or permit applications that had been filed for The Crossing. The City’s employee clarified that she was “not an attorney” and gave a general answer. She offered to follow-up and get more information if the answer did not help. But The Commons did not respond with a request for more information or make any specific request to have Chapter 245 applied to The Crossing. We conclude that the email exchange is no evidence that the City has made a final decision to apply the new ordinance to The Commons’ property. See Tiki Island I, 464 S.W.3d at 442; Save Our Springs Alliance, 149 S.W.3d at 683–84. Under these circumstances, the Chapter 245 claim is not ripe.

Slip op. at 12 (footnote omitted). 

As for the title of this post (sorry, yes, it is clickbait), as if to emphasize the casual and general nature of the inquiry, the plaintiff responded to the engineer's email with the highlighted passage, below:

So here's your land use practice protip of the day: when you are trying to create a record of "official action" or "official assurances" for vested rights or zoning estoppel purposes (your term may be different, but the idea is the same), try to avoid emojis.  They don't really help in convincing a court that the conversation you are having with a government official is serious. 

City of Houston v. The Commons at Lake Houston, Ltd., No. 14-18-00664-CV (Tex. App. Oct. 15, 2019) 

ALI-CLE Eminent Domain & Land Valuation Litigation Conference - Jan 23-25, 2020, Nashville

2019 Brigham-Kanner Conference: The New New Property - Public Resources And Private Rights

Here is a transcript of the remarks I delivered today at the 2019 Brigham-Kanner Property Rights Conference. I was honored to join lawprof Henry Smith and Florida Supreme Court Justice (ret.) Ken Bell (who authored the Florida court's opinion in Stop the Beach Renourishment which was challenged in SCOTUS as a "judicial taking") to speak about "Public Resources and Private Rights" (moderated by Professor Katherine Mims Crocker). After paying our respects to 2019 B-K Prize winner Professor Steven Eagle, we each addressed some part of the question.

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

The New New Property

As always, I bring to you tidings of "aloha" from the state where the legislature thought it was a going to reduce the price of residential housing by taking fee simple interests from "A" and giving them to "B," the leaseholders. 

Where now, the median price for a single-family, two bedroom, one bath, single wall house hovers just shy of $800 grand. 

And the state where the legislature thought that limiting the amount of rent gas companies could charge to their franchisees would somehow magically translate into lower gas prices at the pump for consumers. 

Where now, the price of gas is close to the highest in the nation -- although sorry, Californians, you may have us beat -- at or near $4 bucks a gallon. 

And in what may be a case of one-out-of-three-ain't-bad (so you don't write us off completely), our modest little jurisdiction is also responsible for at least one Supreme Court decision that we as property advocates really appreciate -- Kaiser Aetna v. United States, 444 U.S. 164 (1979) -- where the Court both affirmed that the right to exclude is one of those fundamental rights that is immune from interference by regulation unless first compensated, but also in one of the overlooked holdings of that case put in the context not of a fundamental right because it was recognized by state (Hawaii) law, but one sourced in the actions of Corps of Engineers personnel who had confirmed via a Section 10 Rivers and Harbors Act regulatory permit that Kaiser Aetna possessed the right to keep others out of the navigable marina it created:

While the consent of individual officials representing the United States cannot "estop" the United States, it can lead to the fruition of a number of expectancies embodied in the concept of "property" expectancies that, if sufficiently important, the Government must condemn and pay for before it takes over the management of the landowner's property.

I mention Kaiser Aetna because it is a good lead in to my portion of this panel, which is focusing on “Public Resources and Private Rights.” While we mostly speak of “property” as a private right, thanks in large part to our late colleague Charles Reich, whose place in the popular zeitgeist was secured by “The Greening of America,” but whom we lawyers will always remember as the author of the influential article “The New Property.” (And when I say "influential," I mean it is the most-cited article published by the Yale Law Journal. Ever.) 

That article got us to thinking about property in a different way: not exclusively as an instrument of private rights – most exemplified by the right to exclude – but as maybe something that looked a bit more like the commons. Things like government benefits, contracts, licenses, and in what may be the most famous instance, Board of Regents v. Roth, a government job. In that case a poor sap teaching at a state college who lacked tenure. (I feel your pain, brother.)

As we know the Court concluded that Professor Roth, who although he did not possess tenure, if he could show he possessed "new" property, could not be dismissed before the college conducted a hearing. In short, as what we might call Due Process Property. 

In the property rights context, we’ve seen similar rulings from the lower courts – most prominently the Second Circuit in Brody v. Port Chester (ask Dana Berliner about that one), the Tenth Circuit in M.A.K. Investment (before they declare your property blighted, they’ve got to tell you), and from my home court in Kellberg v. Yuen. 

How have government-granted or government-recognized “property” rights translated beyond the scope of individually-owned property? And can these Due Process property rights be translated to the language of takings-and-compensation property?

Two recent decisions highlight the differences. The first is from my home jurisdiction’s Supreme Court.

Now you might think that given the amount I give the business to my home court – Professor David Callies studied the opinions of our court over a 10 year time frame and revealed that it ruled in favor of environmental and similar plaintiffs nearly 90% of the time – that when our court issues a decision recognizing a new breed of “property” that I might rejoice. And it is a right that, as far as we can tell, no other court, state or federal, has ever recognized. 

The court concluded the Sierra Club possesses a constitutional property right in a "clean and healthful environment" entitling the organization to certain procedural protections under the state constitution’s due process of law clause. The ruling allowed the Club to intervene in a Public Utilities Commission petition regarding a power purchase agreement for a now-defunct electric plant on Maui. 

Here’s that again in case it didn't quite sink in: the court recognized a property right in a clean and healthful environment. 

Maui Electric filed an application with the State PUC, seeking the Commission's approval of an agreement between the utility and Hawaiian Commercial and Sugar Company which, if approved, would allow a rate increase to account for the additional production charges associated with the Puunene Plant, a coal-powered facility on former sugar lands in central Maui which transformed bagasse, the byproduct of sugar production, into electric power. We use the past tense because by the time the Supreme Court decided the case, the plant had closed, following the recent closure of the sugar plantation. No sugar plantation, no sugar, no bagasse. 

Sierra Club asked the PUC to intervene in the administrative process under the PUC's rules, asserting its own rights as well as several of its Maui members. The power plant, the petition asserted, would "impact Sierra Club's members' health, aesthetic, and recreational interests. Sierra Club also asserted its organizational interest in reducing Hawaii's dependence on imported fossil fuels and advancing a clean energy grid." 

Pretty vague stuff, and to me, more like policy questions than something best resolved by an adjudicative proceeding, but under existing judicial standing rules in similar cases in original jurisdiction actions brought in Hawaii courts, nothing too far from the norm. We’re not subject to Article III standing requirements, and the Hawaii Supreme Court’s state standing doctrine can best be summarized as “come on in the water’s fine.”  There's little doubt that if this were a case brought in a Hawaii trial court, that Sierra Club adequately alleged judicial standing. Anyone questioning that conclusion need only recall the Superferry case in which the Hawaii Supreme Court held that Sierra Club had standing to raise an environmental challenge to the now-defunct inter-island ferry because the ferry threatened the organization with four types of injury: (1) endangered species could be adversely impacted by a high-speed ferry; (2) the Superferry could increase the introduction of alien species; (3) surfers, divers, and canoe paddlers who used a state operated harbor could conceivably suffer adverse impacts; and (4) the threat of increased traffic on the road next to the harbor entrance. Again, that's a pretty vague butterfly-effect logic to gain standing. But for better or worse, that's the current state of Hawaii's standing law. 

However, the Maui Electric case was not an original jurisdiction action, it was an administrative proceeding in the Commission under the PUC's admin rules, governed by a different standard, one based in the Hawaii Administrative Procedures Act. Under the APA, an outsider may intervene in a "contested case" (an quasi-judicial adjudicative administrative process) when an agency rule or a statute gives the party a seat at the table, or when intervention is required by law because the agency is adjudicating that party's rights (in this case, the law was the Hawaii Constitution's due process clause).

And here, the Sierra Club alleged both that PUC statutes and the Hawaii Constitution's procedural due process of law protections gave it the right to intervene in the agency proceedings: 

Sierra Club argued that its members were concerned that the Puunene Plant relied too heavily on coal in order to meet its power obligations under the existing agreement and also that its members were concerned "about the public health and visibility impacts of burning coal."

Neither the PUC nor the court of appeals bought the Sierra Club's theory. The Commission denied intervention and decided Maui Electric's application without the Club's presence. The Club appealed to the Intermediate Court of Appeals which agreed with Maui Electric and dismissed the appeal for lack of jurisdiction. It concluded that because Sierra Club was not "aggrieved" by the decision by the PUC (because it correctly excluded the Club from the admin case), the appellate court did not have jurisdiction.

So up to the Hawaii Supreme Court they went, on the same two theories: the Club should have been allowed to intervene, either because the PUC's governing statutes gave it the right to do so, or because due process required it because the Club's property was at stake in the PUC proceeding. After rejecting a claim of mootness, three of our five justices got to the constitutional question: does the Hawaii Constitution recognize Sierra Club's environmental concerns as a property interest entitling it to procedural due process?

The majority based its conclusion on Article XI, section 9 of the Hawaii Constitution (a provision added by the 1978 constitutional convention):

Each person has the right to a clean and healthful environment, as defined by laws relating to environmental quality, including control of pollution and conservation, protection and enhancement of natural resources. Any person may enforce this right against any party, public or private, through appropriate legal proceedings, subject to reasonable limitations and regulation as provided by law.

That, the majority held, created a legitimate claim of entitlement to a clean and healthful environment, and thus it is a property right. It "is a substantive right guaranteed to each person." The majority noted that the court had earlier held that Native Hawaiian rights -- a right also found in the Hawaii Constitution -- are "property" rights, and that environmental concerns are no different. As a self-executing right, it is a legitimate entitlement --

We therefore conclude that HRS Chapter 269 is a law relating to environmental quality that defines the right to a clean and healthful environment under article XI, section 9 by providing that express consideration be given to reduction of greenhouse gas emissions in the decision-making of the Commission. Accordingly, we hold that Sierra Club has established a legitimate claim of entitlement to a clean and healthful environment under article XI, section 9 and HRS Chapter 269.

After reaching the conclusion that Sierra Club owns property in a clean and healthful environment, it was all over but the shouting and the majority held by applying the Professor Roth test, that the PUC had a duty to provide a hearing before it deprived the Club of its property:

The risks of an erroneous deprivation are high in this case absent the protections provided by a contested case hearing, particularly in light of the potential long-term impact on the air quality in the area, the denial of Sierra Club’s motion for intervention or participation in the proceeding, and the absence of other proceedings in which Sierra Club could have a meaningful opportunity to be heard concerning HC&S’s performance of the Agreement.

Finally, in a footnote, the majority made it clear that the result is immune from future legislative tinkering. This is a ruling based on the Hawaii Constitution, and thus no mere legislature can mess with it too much. 

Two justices disagreed, arguing this was a stretch, and one of those Pandora’s Box situations:

Respectfully, the Majority’s expansive interpretation of what constitutes a protected property interest in these circumstances may have unintended consequences in other contexts, such as statutes where the legislature has mandated consideration of specific factors by executive agencies when implementing a statute.

The dissent concluded the majority's result was unnecessary, because it was more of a policy choice than a judicial decision, and ultimately, if denied administrative intervention in the PUC, Sierra Club could deploy the loose standing rules which we mentioned earlier in this post, and institute an original jurisdiction action.

So is this property, New Property, or what we might call New New Property? 

The biggest question I have about the majority's conclusion is this: if the most fundamental aspect of owning "property" is the right to exclude others from the res, how in the world do members of the public have the right to exclude other members of the public from a clean and healthful environment? 

As the U.S. Supreme Court held in the aforementioned Kaiser Aetna, and Nollan "[w]e have repeatedly held that, as to property reserved by its owner for private use, 'the right to exclude [others is] 'one of the most essential sticks in the bundle of rights that are commonly characterized as property.'' (Or maybe Stevie Wonder said it better when he sang "this is mine, you can't take it.") 

Either way, the ability to keep others off of what you own -- and have the law back you up -- is one of the defining sticks in the bundle of rights which we call property.

Thus, I don’t think the court adequately grappled with the real foundational question built into the arguments -- should these types of environmental concerns even be shoehorned into the concept of "property" as that term has been used for thousands of years? Doesn't "property" as used in the Hawaii Constitution's due process clause mean private property? After all, as far as we can tell, every other time this court has dealt with property in Hawaii's due process clause, it has either expressly defined, or implicitly assumed, that the property interest at stake was private property, and not a right that looks more like something "owned" collectively by everyone. Essentially what the majority accomplished was a subtle redefinition of property from a private right to a public resource. 

So what’s on the horizon? I’m thinking the second shoe to drop is going to be "public trust" rights. As Professor Callies has written on the Hawaii form of the public trust which goes well beyond the Roman and English concepts, if the notion of public property is extended to the public trust, there’s a danger that this background principle could well eclipse – or indeed swallow up completely – the notion of private property. 

And our court is just one vote shy of concluding that Native Hawaiian rights – a form of cultural property – qualify as constitutional property.  Australia’s High Court has recently concluded that the property rights first recognized in the Mabo v. Queensland decision lead to a requirement for compensation when those rights were expropriated. Real money, even if it is Australian dollars. And since we’re here in the south what does the recognition of cultural property mean for things like those troublesome Confederate monuments that sit there on courthouse lawns (and across the street from certain law schools)? Is there a cultural property right for them to remain, or to be paid compensation to leave? 

As if responding to the Hawaii Supreme Court, the following year, the DC Circuit – applying Pennsylvania’s similar constitutional provision – came to the opposite conclusion. 

The court held that the Pennsylvania Constitution's Environmental Rights Amendment's guarantee of "clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic [sic] values of the environment" was not a liberty or property interest triggering the Fourteenth Amendment's due process protections. 

The case was a challenge by Riverkeeper to the Federal Energy Regulatory Commission's enabling statute, which requires FERC to recover its costs from the industries it regulates. Riverkeeper asserted this makes it more likely that FERC will approve pipelines. 

The court first concluded that Riverkeeper had standing. And it quickly dismissed its claim to possess a liberty interest because the ERA's rights are not "essential to the orderly pursuit of happiness by free men," and "the right to a healthy environment can[not] itself fairly be described as a 'liberty' interest." 

The court subjected Riverkeeper's "property" claim to a bit more analysis. State law defines property, and Pennsylvania's ERA "guarantees" certain things, and even calls them "rights." The court concluded, however, that the ERA's rights are "vague and indeterminate." Slip op. at 8. And the rights it recognizes do not have "some acertainable monetary value."  Most importantly, the question is whether the rights look like "any traditional conception of property."

The court held that because the ERA recognizes the rights as belonging to "the people," it failed this latter test:

Most importantly, the Environmental Rights Amendment creates no right to exclude—or anything like it. To the contrary, its first sentence vests the single “right” at issue collectively in “[t]he people,” its second sentence confirms that “Pennsylvania’s public natural resources are the common property of all the people,” and its third sentence requires the Commonwealth to conserve and maintain environmental resources “for the benefit of all the people.” Moreover, although the Supreme Court of Pennsylvania has held that the Amendment is judicially enforceable by private individuals, it has also confirmed that the right the Amendment creates is shared equally by all Pennsylvanians.

In other words, no Pennsylvanian may exclude any other from the right to clean air, pure water, and a preserved environment. So, the Amendment protects not private property rights, but public goods. In that respect, it is like “the right that we all possess to use the public lands”—which for due-process purposes “is not the ‘property’ right of anyone.”

The court concluded that "[t]he amendment is unlike traditional or even new property in yet other respects. For one thing, the right to a preserved environment cannot be bought or sold—and thus has no 'ascertainable monetary value,' as the Supreme Court’s 'property-as-entitlement cases have implicitly required.'"

So which is it, and maybe more critically what defines “property?” State law, notions of natural law or fundamental rights?

On that, I’d like to touch on one more recent decision, which will naturally lead us into a discussion of one of my favorite metaphysical law cases, Stop the Beach Renourishment (yes, we’re going to dive into judicial takings in a moment).

This is a case from the Ninth Circuit. The plaintiffs filed a class action alleging that state officials failed "to return interest that was allegedly skimmed from their state-managed retirement accounts." The District Court denied class action status and granted the State summary judgment, concluding the case was "potentially unripe" because the State had not finished the process of administrative rulemaking, which might, in the court's view, address the plaintiffs' claims for interest.

The Ninth Circuit – somewhat surprisingly, given its reputation --  reversed. The State argued that because the Washington Court of Appeals held that the statute at issue didn't require the payment of interest, there was no "property" that was taken when the state officials kept the interest. If it ain't property under state law, the state argued, it ain't "property." 

Not quite, held the Ninth Circuit. Interest on principal is one of those "core" and "traditional" property rights that a state simply cannot disavow:  

There we observed that “constitutionally protected property rights can—and often do—exist despite statutes . . . that appear to deny their existence.” Citing the Supreme Court’s opinion in Phillips, we noted that “a State may not sidestep the Takings Clause by disavowing traditional property interests long recognized under state law.” We then held that there is “a ‘core’ notion of constitutionally protected property into which state regulation simply may not intrude without prompting Takings Clause scrutiny.” This “core” is “defined by reference to traditional ‘background principles’ of property law.” In that case, we concluded that interest income earned on an interest-bearing account falls within this class of fundamental property rights. 

In short, while state law usually defines property, there are certain sticks that transcend a state's ability to redefine them out of existence. 

Before we move to Justice Bell and Stop the Beach Renourishment, let me say this. First, thank you to Lynda Butler for again asking me to be here. I’ve said before that being in this room is like being at the Super Bowl for property law. This is Yankee Stadium in October, the Champs Elysees or Wimbledon in July (although with the stellar talent in the room, I kind of feel like the poor sap up matched up with Venus Williams). Second, hearty congratulations to Professor Eagle. His regulatory takings treatise is one of those rare ones that is on what I call my “back” bookshelf. The books within reach when you turn around at your desk. A well-deserved recognition for your wonderful work and scholarship. 

**** 

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. 

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

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

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

Early registration and group rates are available now. 

Here are just some of the programs:

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

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

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

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

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

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

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

Join us - old friends and new colleagues! 

Virginia SCT: Reasonable Probability Of Rezoning Is Something The Jury Should Consider

We sometimes assume that everyone gets that the point of an eminent domain valuation trial is to try to establish the price the real-world market of buyers and sellers would have arrived on for the property being taken had the transaction been voluntary. We know it is all hypothetical because this market didn't actually exist, and the taking itself isn't a market transaction. In fact, a taking is pretty much the opposite of a market transaction. In other words, you're trying to recreate a market that did not in fact exist. 

To do so, you try to step into the shoes of a potential buyer of the property. What would they look at when trying to come up with a price? Would they limit themselves to the property's present use? Maybe. But depending on the circumstances, they also might think its worth paying more than the present use for the property because it is being underused, and there's a good chance that the buyer would buy it to make a more intense use. Why we look at the highest and best use of the property, and not just its current use. That vacant piece of industrially-zoned land would look awfully good with a 40-story building on it, and there's a good chance I could get the zoning changed to apartment. You old hands get what we're saying. 

So it makes us scratch our head when a party tries to exclude evidence about the property's potential for rezoning, on the basis that opinion testimony is "hypothetical," and as a consequence is not admissible. Yeah, man, it's all hypothetical. It bothers us even more when courts go along with that rationale.

Thankfully, in Helmick Family Farm, LLC v. Comm'r of Highways, No. 1180691 (Aug. 29, 2019), the Virginia Supreme Court avoided that. All seven justices agreed that, generally speaking, evidence of a reasonable probability of rezoning may be admissible. Where the court split 4-3 was on whether the situation on the ground (so to speak) merited the jury hearing about it. The majority concluded that the owner of a vacant plot of agriculturally-zoned land was wrongfully denied the ability to present to the jury evidence that there was a reasonable probability the property could be rezoned to a more intense use. 

Quick facts: Helmick Family Farm is 168 acres. The highway department needed about 2 acres for an interchange plus associated easements. Offered $20k. The farm thought that was too little, and declined. Condemnation followed. 

The farm wanted to have a local planner testify. His report opined that the parcels were planned for commercial or industrial development, even though the existing zoning was agricultural. He also was prepared to testify that an application for a zonig change to Light Industry would likely be approved. Indeed, the Board of Supervisors "had approved nearly every application for such rezonings between 2006 and 2015." Slip op. at 2. An appraiser was also prepared to testify that the highest and best use of the land would be to rezone it for commercial or light industrial, as the county's comprehensive plan envisioned.

The trial court, however, agreed with the condemnor, which argued in a motion in limine that evidence about "a hypothetical rezoning of the subject property from Agricultural (A-1) to Light Industrial or Commercial before the take on August 20, 2014" was inadmissible. Slip op. at 3. "The court agreed, reasoning that such evidence is too speculative and remote. The court ruled that 'all testimony and evidence regarding hypothetical rezoning of the subject property is excluded from trial.'" Id. 

We mostly assumed that that the general rule about the admissibility of this type of evidence was a settled matter in Virginia. Apparently not. Maybe that is a good thing, because now it is. The majority held (slip op. at 7) and the dissenters agreed (slip op. at 20) that, as the dissent put it, "the reasonable probability of rezoning of property taken through condemnation may be relevant to the property's fair market value and that nothing in our prior cases forecloses the admissiblity of such evidence." Slip op. at 20. The court held that under Virginia law, "fair market value" is the measure of compensation, that the hypothetical market price is the key element, that "everything which affects the market value is to be taken into consideration" is potentially admissible. "[C]onsideration is given to the property's adaptability and suitability for any legitimate purpose in light of conditions and circumstances that exist at the time of the take or that reasonably may be expected in the near future." Slip op. at 7.

The court noted USPAP, The Appraisal of Real Estate manual and an "avalanche of authority from other jurisdictions" that "make clear that such evidence is widely permitted." Slip op. at 8 (footnote omitted)..

The reason for allowing the factfinder to hear such evidence is obvious: a willing buyer will pay more for property that presents a fair prospect for more favorable zoning than a property that offers no such prospect. In an arms-length transaction, “the parties can be expected to bargain toward a price that can be viewed as the value of the property with the more valuable zoning classification, discounted by some amount.”

Slip op. at 8 (quoting William B. Knipe, Valuing the Probability of Rezoning, 56 Appraisal J. 217, 220 (1988)). "In short," the majority concluded, "the reasonable prospect of a favorable rezoning has an effect on the market value of the property and is, therefore, relevant." Slip op. at 9.

And yes, this is all hypothetical. Id. ("The entire enterprise of assessing the market value of land hinges of proof concerning acts of a hypothetical third party, namely, a person who would purchase the land."). 

The majority then walked through the property owner's evidence, and concluded that it was sufficiently concrete to warrant submission to the jury. The trial court still has a relatively minor gatekeeping role, to ensure that there is "sufficient evidence" of a reasonable probability of rezoning. To do so, the court looks at a bunch of factors (see slip op. at 14 for the list), all of which make sense when you think about it. Things like nearby properties being rezoned, the local plan, use patterns in the area, the physical characteristics of the property. And so on. In other words, things that a potential buyer would look at. 

As noted above the three dissenters agreed with both the general rule (such evidence is not automatically excluded simply because it is, by its nature, hypothetical, and highest and best use is the measure of compensation), and with the factors which the trial court looks at to determine "sufficient evidence." Where the dissenters disagreed was whether the farm's witnesses met that standard. 

See pages 21 and 22 for the dissenters' reasons why they concluded the evidence just wasn't sufficient. In sum, they thought the county's comprehensive plan was "not binding" (oh really? tell that to the County Board of Supervisors next time you try and do a development that isn't in conformity with the plan), the property owner had not actually submitted an amendments to the plan or the zoning (again, why is that dispositive? It's the reasonable probability of rezoning that matters, not whether the owners actually tried it; of course, if the owners had actually done so, maybe the discount would be less, and the property even more). The dissenters also believed that the fact the owners had not vested into a plan or zone change was fatal. Slip op. at 22-23. To us, that is simply another way of saying what they said earlier. Of course, if the owner had vested, it might have received an even higher price in the hypothetical market (because a vested right is a separate property right). But just because it has not actually vested doesn't mean that a hypothetical buyer might not still reasonably believe that an upzone is likely in the near future, and be willing to pay more. To us, that goes to the amount of the discount, if any, to be applied, not to admissibility.

To us, this type of analysis should turn on the old 401/403 rules of relevance vs. undue prejudice. Trial judges shouldn't be in the business of weighing evidence, only determining whether it is relevant under 401, and if so whether it is unduly prejudicial under 403. If not, the jury should consider it, and make the call whether it adds up to a reasonable probability given the circumstances: how the hypothetical buyer would measure the probability of a more intense use, and the risk that it would not come to fruition. That's what juries do. 

Helmick Family Farm, LLC v. Comm'r of Highways, No. 1180691 (Va. Aug. 29, 2019)

Get Ready: The 2020 ALI-CLE Eminent Domain And Land Valuation Litigation Conference Agenda Coming Soon

The final agenda and faculty list will soon be officially published, but we wanted to give you a preview of what is in store at the ALI-CLE Eminent Domain and Land Valuation Litigation Conference, January 23-25, 2020, at the Nashville Hilton (downtown, just a few steps away from everything that Nashville has to offer). 

Don't miss out: in recent years, we've been at-or-near capacity, and the conference hotel has even sold out a couple of times. Visit the ALI-CLE website to register and hold your space. 

Here are some of the things we'll be discussing: 

• Making Sense of the New Rules After Knick v. Township of Scott: Where Do I Go, What Do I Do?
• The Missing Link in Valuing Fixtures
• When a River Runs Through it: Water Rights and Takings
• Responding to Project Changes: Valuation When Government Action is Ongoing
• Property Rights as Civil Rights: Seeking Justice Through The Fifth Amendment
• Special Benefits: The Givings Clause?
• How To Try and Settle Pipeline Cases
• And, of course Ethics. 

Many of our expert faculty are returning, but we're also featuring many new presenters who have never been on our dais before. And a mix of perspectives and backgrounds: property owners' counsel, condemning agency lawyers, public interest, judges, and legal scholars. Plus a chance to meet your colleagues from across the country. Make connections, and see old friends. 

Early bird registration underway here. See you there.