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CA1: Rooker-Feldman Defeats Federal Court Takings Claim By "State Court Losers"

If you understand the headline of this post, congratulations: you are officially so deep in the weeds that you deserve both a Federal Courts and a Takings merit badge. 

For those of you not in so deep, here's the short story behind the U.S. Court of Appeals for the First Circuit's short opinion in Efreom v. McKee, No. 21-1382 (Aug. 18, 2022).

This is one of those pension cases, where the state (here, Rhode Island) shored up its tottering pension system with a new statute that "altered in various ways the retirement benefits to which public employees were entitled, including by reducing the amount and availability of cost-of-living adjustment ("COLA") payments to retirees." Slip op. at 4.

As the court noted, "[l]itigation promptly ensured in state court." Slip op. at 5. Takings claims were included in the lineup. All of the cases were consolidated for trial. Most of the plaintiffs settled. Part of the deal was that the legislature would adopt a new statute that modified some of the cutbacks the challenged statute had put into place.

The court formed a class action to effectuate the settlement, and the plaintiffs in the subsequent federal case were all members of one of the subclasses in that action. They may have had objections to the settlement, but under the local R.I. rules of civil procedure they could not opt out of the class.

After the legislature adopted the statutory modifications, the court approved the settlement over "vigorous" objections, and entered judgment in the class action lawsuit. Appeals to the Rhode Island Supreme Court followed, challenging the procedural aspects (the class action), and the substance of the settlement. The Supreme Court affirmed the judgment on both counts. 

Next up, a federal 1983 lawsuit, alleging that the newly-adopted statute (the one adopted in accordance with the settlement agreement) was a taking, and violated the due process and Contracts clauses of the U.S. Constitution. The district court dismissed for failure to state a claim because of res judicata, a lack of standing, and ... Rooker-Feldman.

You remember the Rooker-Feldman doctrine (which we've dealt with here mostly in the context of judicial takings). Named after the two U.S. Supreme Court decisions which defined its contours, the R-F doctrine says is that U.S. District Courts do not have appellate jurisdiction to review final judgments of state supreme courts.

The First Circuit affirmed that the federal lawsuit was subject to R-F, because the "substance" of the plaintiff's complaint was a challenge to the R.I Supreme Court ruling:

It is just this type of impermissible appellate review that appellants seek in federal court. Dissatisfied with the outcome of the state-court litigation, appellants ask us to set aside the Rhode Island state courts' approval of the RIPERC class-action settlement, in an action commenced over two years after the Rhode Island Supreme Court rendered its final decision on the matter. It is undisputed that appellants (and defendants) were all parties to the original Clifford action, the RIPERC class, and the final appeal to the Rhode Island Supreme Court in Clifford v. Raimondo. As such, appellants are "state-court losers" seeking, in effect, to review and reverse "state-court judgments rendered before the district court proceedings commenced."

Slip op. at 14-15 (footnote and citation omitted).

Hold on, the plaintiffs argued, we're not challenging the Rhode Island decision and asking the federal courts to overturn it, but only the effects of that ruling. See slip op.at 15 ("Appellants nonetheless attempt to escape the vise of Rooker-Feldman by disputing, essentially, that their alleged injuries were actually 'caused by' the state-court judgments."). We're challenging the statute adopted in accordance with the settlement judgment, not the judgment itself, the plaintiffs asserted. This law, they argued, caused a new injury separate from the injuries caused by the state court judgments.

The Fifth Circuit didn't buy it. The statute, after all, was a direct by-product of the judgment, and "[p]assage of the 2015 Amendments was a condition precedent for the settlement agreement that resolved the state-court litigation." Slip op. at 16. The statute's text was "contained verbatim in the settlement agreement," and the plaintiff's "attempt to undo the state-court rulings approving the settlement is precisely the sort of 'end-run around a final state-court judgment' that the Rooker-Feldman doctrine proscribes." Id. (footnote omitted).

The court concluded that the plaintiffs are "state-court losers" who sought federal review, albeit indirectly, of the state court's judgment (even though that judgment was the result of a settlement).

We're not quite sure what to make of this one. On one hand, the courts have reminded us that the Rooker-Feldman doctrine isn't a broad rule. It isn't a general rule against judicial takings claims as the Sixth Circuit concluded. It might cover interlocutory rulings as the same Sixth Circuit concluded (whether it covers settlements is an issue the First Circuit assumed but didn't really decide here). And it isn't some catch-all get-out-of-takings-free card, as the Eighth Circuit noted. Yet on the other hand R-F still lives, even if a limited doctrine, as the U.S. Supreme Court reminded in Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005), and maybe this is one of those cases where indeed, the "losers" in state court were merely asking a federal court to overturn the state court loss.

This one seems like a close call, and not one where it is obvious that the case doesn't belong in federal court. After all, why is this case different than, say, any case that challenging the 2015 statute? Does it matter that the plaintiffs here were involuntary members of the class action the state courts authorized in order to settle the case? (The First Circuit concluded no, it doesn't matter, but we have to say that our jury is still out on that one.)

Efreom v. McKee, No. 21-1382 (1st Cir. Aug. 18, 2022)

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

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

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

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

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

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

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

Slip op. at 5-6.

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

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

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

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

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

Slip op. at 10-11.

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

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

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

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

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

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

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

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

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

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

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

Concurring op. at 13.

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

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

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

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

Id. at 12-13.

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

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

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

Ye Olde Law 608: Eminent Domain & Property Rights, S5E1 @ William & Mary Law

Is there a more appropriate place at which to study property rights and dirt law than William and Mary Law School? After all, it is a stone's throw from Jamestown, the place where there's a good argument the concept of property law and property rights first took hold in the New World. As noted by author David Price in "Love and Hate in Jamestown - John Smith, Pocahontas, and the Start of a New Nation" -

The introduction of private property for the common citizen had a salubrious effect on the owners' sense of initiative, as John Rolfe would observe. By the end of 1619, he reported, the "ancient" (or longtime) colonists had chosen their allotments, "which giveth all great content, for now knowing their owne lande, they strive and are prepared to build houses and to cleare their grounds ready to plant, which giveth ... greate incouragement, and the greatest hope to make the colony florrish that ever yet happened to them."

Was it a coincidence that at the same time as property rights took hold, that the seeds of representative and republican government were also planted? As Price writes:

The other major liberalization of 1619 sprang from the company's desire for "a forme of government there as may bee to the greatest benifitt and comfort of the people, and wherby all injustice grevance and oppression may be prevented." That form of government would be English America's first representative legislature. Sir Thomas Dale's authoritarian "Lawes Divine, Morall and Martiall" would be superseded by enactments of a locally elected body, to be known as the General Assembly.

And also just down the road from the Law School, coincidentally, is where the "new birth of freedom" took hold, again by way of a property-centric argument. So yes, William and Mary Law is a very appropriate venue for the study of property rights and property law.  

With that background in mind, in just over three weeks, we're about to get underway with the fall semester at the Law School, where we're again teaching two upper-division courses: Eminent Domain and Property Rights (Law 608), and Land Use Controls (Law 425). For a sampling of what we cover, check out some of the final papers our students produced last year - pretty compelling stuff.

The enrollment in the courses has really grown over the five years we've done them, which might be a reflection that the word is getting out. in the Eminent Domain and Property Rights class we cover not only eminent domain and just compensation, but takings, civil forfeiture, property theory, the cultural view of what it means to "own" something, and international approaches to property law and property rights. And, importantly, how to lawyer up these cases (this is a professional school after all). Of course, we take advantage of the opportunity to have some of the nation's best property law scholars "guest lecture" during the Brigham-Kanner Property Rights Conference. Here's the official description of the course:

Property rights and the sovereign's power of eminent domain have been essential components of Anglo-American law for centuries, and the protection of the right of private property ownership is one of the foundations on which the U.S. Constitution, the Bill of Rights, and the post-Civil War Amendments are built. This course will introduce students to the practical lawyering and analysis necessary for eminent domain practice, including the nuts and bolts of takings practice as well as the study of recent (and ongoing) U.S. Supreme Court cases. In addition, this course will focus on the history, policy, and, to some extent, the politics of property rights, eminent domain law, and related legal topics. We will examine how the right of private property was developed in common and constitutional law, the relationship of property rights to other civil rights and the sovereign's power to take land, the role of federal and state courts in protection of property rights, how private property squares with environmental law, and the proper 'place' of property rights in the modern administrative state. Course materials will be cases and selected portions of books and journal articles, and other materials which will be made available. Grading will be based on a take home paper and class participation.

The Land Use Controls class is your class land use regulation class that focuses on things like zoning and planning, the administrative process, vested rights, nonconforming uses, due process, Euclid, private land use controls, nuisance, and other dirt law topics.   

Students: it's not too late to join (add/drop will commence soon after the first day of classes). We can't promise that you will gain instant knowledge of the subjects, but can guarantee a rewarding semester taking a deeper dive, coming out of it in December with a greater appreciation of these areas of law, and a working understanding of what it takes to actually practice. Come, join us!

New Cert Petition (Ours): Can Condemnor Delay Actually Paying Compensation Indefinitely?

Last week, along with my colleagues Deborah La Fetra and Kady Valois, we filed this cert petition in a case we've been following (even before we joined as counsel).

The petition seeks review of the Fifth Circuit's opinion holding that there's nothing a federal court can do if a local government does not pay a state-court just compensation judgment for an unreasonably long time. Because we are counsel in the case we won't go into further detail, but will leave it to you.

Here's the Question Presented:

A fundamental element of just compensation is "certain payment of the compensation without unreasonable delay.” Bragg v. Weaver, 251 U.S. 57, 62 (1919). In 2013, the Sewerage & Water Board of New Orleans inversely condemned the properties of 70 home and business owners for a flood control project. The property owners obtained state court judgments starting in 2018. Louisiana law prohibits enforcement of judgments against state and local governments—even just compensation judgments—which go unpaid unless government voluntarily appropriates the funds. The Sewerage Board has refused to do so, in some cases for years. The question presented is:

May the government, consistent with the Fifth and Fourteenth Amendments’ self-executing command of Just Compensation for takings of private property, indefinitely delay paying just compensation?

Follow along here, or on the Court's docket.

Petition for Writ of Certiorari, Ariyan, Inc. v. Sewerage & Water Board of New Orleans, No. 22-52 (July 20,...

Alabama: Government Can't Keep The Change After A Tax Sale

A long-ish opinion from the Alabama Supreme Court in Douglas v. Roper, No. 1200503 (June 24, 2022). But a short post because the good stuff is relatively brief.

Bottom line: property owners have a vested interest in excess money generated from a tax sale of their property, and the Alabama legislature cannot prohibit the owners from claiming that excess equity.

Quick background: the legislature enacted a statute that required property owners who had their properties sold to satisfy tax debts first have redeemed the property before they could claim the excess funds, if any, from the sale. This had the effect of permitting the government in many cases to keep that excess (i.e., the property's equity), as a little something extra -- what our New Orleans friends might call lagniappe. Property owners objected, arguing that retroactively applying the statute would be a taking.

There's a lot to like in the opinion, but here's a few choice items:

• "Alabama also places a strong emphasis on an individual's fundamental right to property." Slip op. at 31.
• "Alabama's strong commitment to an individual's right to property is confirmed by this state's constitution, which states that 'the sole object and only legitimate end of government is to protect the citizen in the enjoyment of life, liberty, and property.'" Slip op. at 32.
• "This state has long recognized a property owner's right to the excess funds generated from a tax sale of his or her property." Id.
• "This Court has also recognized that the excess funds that result from a tax sale are representative of the property itself." Slip op. at 33.
• "Based on the foregoing, we conclude that the right of a property owner to recover excess funds that are generated from a tax sale is a vested right that existed at common law. Property rights are vested rights. The excess funds stand in the place of the property and are representative of the owner's vested ownership interest in the property." Slip op. at 35 (citations omitted).
• "Accordingly, an owner has a vested interest in the excess funds that result from a tax sale. Because an owner has a vested interest in the excess funds resulting from a tax sale, the amendments to § 40-10-28 -- which burden the owner's vested right to the excess funds by imposing upon the owner the often expensive and uncertain requirement of redeeming the property before claiming the excess funds -- cannot be applied retroactively to prevent an owner from claiming the excess funds." Slip op. at 36.

For more on this issue, check out our law firm colleague's recent appearance on Clint Schumacher's Eminent Domain Podcast, "Christina Martin on Home Equity Theft." Christina argued and won the first big case on this issue, Rafaeli, LLC v. Oakland County (from the Michigan Supreme Court, and cited by the Alabama Supreme Court), and is responsible from bringing this issue to light. 

Douglas v. Roper, No 1200503 (Ala. June 24, 2022)

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

Here's what we're reading today:

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

New Article: Serkin, "What Property Does," 75 Vand. L. Rev. 891 (2022)

Worth checking out: Christopher Serkin, What Property Does, 75 Vand. L. Rev. 891 (2022).

Covering (inter alia) property, rule against perpetuities, adverse possession, Lucas background principles, judicial and regulatory takings, Mahon v. Keystone Bituminous, and vested rights and amortization of preexisting uses.

Here's the abstract:

For centuries, scholars have wrestled with seemingly intractable problems about the nature of property. This Article offers a different approach. Instead of asking what property is, it asks what property does. And it argues that property protects people’s reliance on resources by moderating the pace of change. Modern scholarly accounts emphasize voluntary transactions as the source and purpose of reliance in property. Such “transactional reliance” implies strong, stable, and enduring rights. This Article argues that property law also reflects a very different source of reliance on resources, one that rises and falls simply with the passage of time. This new category of “evolutionary reliance” is at the heart of core property doctrines like adverse possession, waste, and the rule against perpetuities. Focusing on evolutionary reliance reveals a new vision of property, not as a bundle of sticks or a bare right to exclude, but instead as a nexus of competing and dynamic reliance interests that can change over time. This new vision has important conceptual and doctrinal consequences for common law doctrines and the Takings Clause, and it highlights the surprising dynamism and change in property.

Get the article here, and add it to your reading list.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Slip op. at 47-48.

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

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

New Article: "Takings, PASH, and the Changing Coastal Environment," 43 U. Haw. L. Rev. 525 (2021)

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 Law Review has now published the symposium, and here's our contribution, Takings PASH and the Changing Coastal Environment, 43 U. Haw. L. Rev. 525 (2021).

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.)

Here's our piece's 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.

Check out the symposium issue, which has similar articles from a variety of perspectives.

Takings, PASH, and the Changing Coastal Environment, 43 U Haw L Rev 525 (2021)

Fed Cir Tries To Avoid "Police Power" Takings Exception In Bump Stock Case By (Unsuccessfully) Finessing The Property Interest

As we've said before, you don't need to know much about takings doctrine to understand that a challenge wherein the property alleged to have been taken are "bump stocks" -- devices that allow rapid activation of a semi-automatic rifle such that it roughly imitates a fully-automatic weapon -- to understand that courts may be inherently reluctant to limit the government's authority to regulate their use and ownership even to the point of outlawing it. There's a long judicial history of courts not getting in the way when it comes to the other branches' response to the problem du jour. The judicial reluctance many not be rational, it may not be doctrinally consistent. But, in our view, it just is, and that's something that owners of such property and those of us who seek doctrinal clarity have to take into account.  

Here's the latest in a case we've been following, that in our opinion could be Exhibit "A" proving the notion that courts are unwilling to limit the power of government in these type of situations (where something has become toxic) -- either directly, by curbing its regulatory power or indirectly through the just compensation requirement -- that they put themselves through a lot of analytic twists and turns to avoid doing so. 

In McCutchen v United States, No. 20-1188 (Oct. 1, 2021), the Federal Circuit did what you might expect: it affirmed the Court of Federal Claims' dismissal of the plaintiffs' complaint which seeks just compensation for the taking of their (now-outlawed) bump stocks. We criticized the CFC's rationale that the reason the bump stock ban was not a taking was because it was a valid "police power" safety measure (putting aside for the moment that the feds don't have what you'd call a "police power" of course): the CFC "simply repeated the trope that the ban was a valid exercise of the government's regulatory power (which, we think was not really a question), and thus no taking." As we've noted before, this analysis is very unsatisfying. A takings claim like this doesn't challenge the validity of the ban (Lingle, anyone?), but instead says "if you are going to ban these things, the pubic needs to provide compensation."

The Federal Circuit avoided the CFC's erroneous analysis, claiming to go a different way: "[w]e affirm, but we do so on a threshold ground different from, though related to, the Claims Court’s grounds." Slip op. at 4. That's a good thing, because unlike many courts, some are beginning to get the idea that just because a regulation is imposed for an arguably valid police power reason (or other proper regulatory justification in the case of federal restrictions), does not insulate it from takings review. Indeed it is the first step in the takings analysis not the last. See this Fourth Circuit decision, for example, where the court concluded "[t]hat Government actions taken pursuant to the police power are not per se exempt from the Takings Clause is axiomatic in the Supreme Court’s jurisprudence." Good for the Federal and Fourth Circuits.

So how did the Federal Circuit get to the no-takings result, without going down the same (wrong) path the CFC traveled? It looked at the property interest alleged, and concluded that the owners of bump stocks were already subject to existing federal regulations that prohibit machineguns, and that the new prohibition on bump stocks is simply a new agency interpretation of the long-standing rule.

Congress has banned "machineguns" since 1934, in a statute that also defined what a machinegun is. That definition remained the same until 1986, when Congress amended it to include "any part ... for use in converting a weapon" into a device that shoots more than a single round with a single pull of the trigger. The AG has the authority to promulgate rules and regulations enforcing this provision. And that's what happened here, the Federal Circuit concluded.

The regulations being challenged define a bump stocks as a device or part that allows someone to shoot multiple rounds with a single trigger pull. The court also noted that the AG's interpretation changed over time, and in the past -- between 2008 and 2017 -- had excluded bump stocks from the machinegun definition. See slip op. at 9. But after the Las Vegas massacre in which the shooter used a bump stock, the AG "clarified" that bump stocks are, in the government's view, machineguns. The Federal Circuit focused on this as the key. Thus, this wasn't some new rule outlawing bump stocks, but a "pre-existing law circumstance" (slip op. at 15) -- merely an enforcement of the longstanding prohibition of machineguns.

The court first pointed out it was avoiding the hard question:

We do not reach the grounds on which the Claims Court relied. In particular, we do not decide under what circumstances a measure that newly bars possession of personal property (as opposed to restricting a use of property) and that serves a “police power” purpose (and is constitutionally authorized for the federal government) is not a “taking,” and thus requires no compensation. Nor do we decide whether mandating permanent dispossession by ordering destruction of personal property cannot be a “physical taking,” even if the government-specified alternative to destruction is surrender to the government and the mandate is backed by government remedies of seizure and forfeiture for a willful violation as well as criminal remedies for a knowing violation.

Slip op. at 13-14 (footnote omitted).

To do so, the court engaged in what we see as a clever sleight-of-hand, something that occurs frequently in takings cases by determining the property interest involved never included the right to make the now-barred use: courts frequently avoid addressing the Armstrong principle by narrowing the scope of the property interest claimed to be taken. Here, the Federal Circuit concluded that although the bump stock owners unquestionably possessed property as defined by state law, the longstanding federal regulation of that property was a background principle that inhered in the title to these things. See slip op. at 17 ("And valid preexisting federal-law limitations on what otherwise would be state-law property rights are among the limitations that may inhere in title so as to limit compensable property rights.").

In short, the owners of the bump stocks never had the right to keep and transfer them:

In this case, the federal-law prohibition on possession and transfer, together with a congressional grant of implementation authority, predated the existence, let alone plaintiffs’ possession, of the bump-stock-type devices that plaintiffs were compelled to destroy or surrender. That prohibition is a very specific one, defined in terms of the physical operation of particular devices, not in terms simply of a broadly stated goal. The latter situation raises issues not presented here.

Slip op. at 18 (footnote omitted).

But wait...weren't these things ok before the AG reimagined the regulations to include them in the definition of machinegun? That's where the court got creative. The sleight-of-hand we referred to above starts on pages 18 and 19, where the court rejected what at first glance might have been the property owners' most compelling argument -- that the AG's latest interpretation was a "new" prohibition because in the past it had a differing view of whether bump stocks qualifed as machineguns.

The Federal Circuit was able to avoid that argument by concluding the owners conceded the point when they acknowledged the AG's new interpretation is a "legally valid interpretation of the statutory prohibition[.]" Slip op. at 18. But we're guessing that isn't quite what the owners conceded, as it seems more likely that they merely acknowledged that they were not challenging the validity of the current prohibition, something that Federal Circuit doctrine requires them do in order to bring a takings claim in the CFC. A challenge to the validity of the prohibition is either an APA or a due process challenge, and those belong in a district court not the CFC (where jurisdiction is limited by the Tucker Act to money claims). In short, because of the split jurisdiction between the CFC and the district courts, you cannot raise both a challenge to the validity of the action and a takings claim.

But the court took that concession as also acknowledging the limitation of the challenged regulation on the owner's property rights, which to us seems like bootstrap logic. If the Federal Circuit's approach to the owner's "concession" is universally applied, it would result in a property owner acknowledging the validity of the regulation challenged as a taking as a ticket to the takings claim, but at the same time conceding that the challenged regulation is a background principle, wiping out the claimed property right.

We think the heart of the Federal Circuit's rationale that starts of page 20 of the slip opinion for why the AG was not truly switching gears and implementing a "new" prohibition, but rather was merely returning interpretation of the machinegun prohibition to where it had always been is a real exercise in the metaphysics of Chevron deference. The AG's most recent take on the definition of machinegun might or might not be the "best interpretation" of the statute's meaning, but the statute itself has always been clear, according to the court. See slip op. at 20 ("In either event, the preexisting statute itself, properly understood, barred the possession or transfer at issue. In these circumstances, the bar always limited plaintiffs’ title, and plaintiffs never had a property right against government assertion of the duty to destroy the devices at issue or surrender them.").

Or, the court alternatively concluded, even if the statute was not clear, the owners' property rights were always subject to the government changing its mind on including bump stocks in the definition of machinegun:

For plaintiffs here, the preexisting limitation on their title included subjection to future valid agency interpretations of the possession-and-transfer prohibition (as assumed here) adopted in the exercise of that authority. In these circumstances, plaintiffs had no property interest protected by the compensation requirement of the Takings Clause against such a valid interpretation when adopted.

Slip op. at 21. In short, where a statutory term might be ambiguous (and what statute isn't, we ask?), the owner's property rights must account for the ambiguity by applying Chevron deference. Slip op. at 21 ("By 1986, the Supreme Court’s 1984 decision in Chevron already made clear that the law, for a statute like 18 U.S.C. § 922(o), included the possibility of reasonable resolutions of ambiguities").

Property rights are shaped by Chevron? Holy cow, that's a new one; or perhaps just way of backing into the old claim that property rights are limited by "highly regulated" markets.

Having concluded that the bump stock owners' property interests did not include the right to be free of regulation that might outlaw the property, the court easily concluded that there was no taking. No "property," no need to even evaluate the physical deprivation or even a Penn Central claim.

To us, despite the court's claim to have avoided the CFC's rationale that a valid-police-power-regulation-is-not-a-taking, it pretty much undertakes the same analytical approach. But the Federal Circuit dresses it up better. After all, if the prohibition being challenged is part of the property's "background principles," what is left of the property itself other than the very Hobbesian notion that the state defines an owner's expectations at will? Here, the Federal Circuit endorses that idea when it concluded that despite the AG expressly excluding bump stocks from the definition of machinegun between 2008 and 2017, the AG had also put the owners on notice in the ATF Handbook where it reserved the right to change its mind. See slip op. at 23 ("Nevertheless, classifications are subject to change if later determined to be erroneous or impacted by subsequent changes in the law or regulations"). Here, the law or regulations didn't change, but the circumstances did.

In short, the official word of the the government is good...until it isn't. Proceed at your own risk.

Are we surprised by the result in the Federal Circuit? No. Are we just a little bit disappointed that the court went about it this way? Yeah, just a little.

McCutchen v. United States, No. 20-1188 (Fed. Cir. Oct. 1, 2021)

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

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

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

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

Join us in Scottsdale in January!

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.