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NY Court of Appeals Considering Whether A Pipeline Can Take Property For A Project That Can't Legally Be Built

Here's a case that's pending in the New York Court of Appeals that has been briefed and is awaiting argument. 

In Natural Fuel Gas Supply Corp. v. Schueckler, No. 17-02021 (Nov. 9, 2018), the Appellate Division answered this question:

This appeal therefore presents a novel question of condemnation law: can a corporation involuntarily expropriate privately-owned land when the underlying public project cannot be lawfully constructed?

Slip op. at 1. 

The court stated it clearly: "We answer that question firmly in the negative."

Like many projects, in order to be built this natural gas pipeline had a long and complex checklist. It needed approvals of FERC -- a certificate of public convenience -- under the Natural Gas Act. And certain approvals under the federal Clean Water Act. Which in turn meant it needed state enviro checkoffs, here a water quality certificate from a New York agency. It also needed to acquire the needed property, either by negotiation or by eminent domain (in this case, condemnation under state law). Under New York's eminent domain law, if a condemnor obtains a certificate of public convenience, it is exempt from the usual process of proving public use and purpose. 

FERC ok'd the pipeline and granted the certificate of public convenience. But it wasn't an unconditional certificate. It was, by law, subject to all those other things we mentioned above. It was the water quality certificate from the State of New York that proved to be the hangup. After it applied for -- but before it actually obtained -- that certificate, the pipeline began condemnation proceedings in a New York court to take the property.

But "[s]hortly after petitioner commenced the vesting proceeding, however, the New York State Department of  Environmental Conservation (DEC) denied petitioner's application for a WQC. Slip op. at 5. Oops. "The WQC application, held the DEC, 'fails to demonstrate compliance with New York State water quality standards.'" Id. The pipeline objected, naturally. It sought judicial review of the denial. That challenge remains pending. But if the denial of the enviro certificate is "ultimately upheld, the pipeline cannot be built." Id. 

Back in the eminent domain case, the property owners objected to the taking. The pipeline doesn't have a valid certificate of public convenience, they asserted. The New York Supreme Court (the trial division - yeah, we watch Law and Order (dun-dun) so we know that the "supreme" court is that state's general jurisdiction trial court) disagreed, and "authorized the acquisition of the easements necessary for the construction and operation of the pipeline." Slip op. at 7. As we wrote about a separate pipeline case, many courts view eminent domain as inevitable, and are not bothered terribly by the details.

The Appellate Division (4-2) reversed ("firmly" as the majority noted above). As long as FERC's certificate of public convenience was subject to conditions, and those conditions are not met, the attempted taking lacks proof of a public use or purpose because the pipeline is not exempt from the usual requirement to establish a public use. 

Although it is true that a federal commission issued a certificate of public necessity approving petitioner’s pipeline project, the certificate nevertheless authorized construction of the pipeline “subject to” various conditions, including, as discussed above, the State’s issuance of a WQC. “ ‘[S]ubject to’ . . . language means what is says: no vested rights are created . . . prior to” the occurrence of the condition to which the instrument is subject (Moran v Erk, 11 NY3d 452, 456 [2008]). Thus, when the State denied the very permit upon which petitioner’s authority to construct the pipeline was conditioned, petitioner – by definition – lost its contingent right to construct the public project[.]

Slip op. at 8.  

Conditions unsatisfied means no valid FERC certificate. No FERC certificate means no exemption from the usual showing of public use or purpose. The majority rejected the pipeline's argument that a valid and fully realized FERC certificate was not a condition precedent to taking property, and was only needed to start actual construction. That "entire line of argument is a non sequitur." Slip op. at 8. Nor did the court accept the pipeline's argument that a fully vested FERC certificate wasn't needed to start taking the property:

Rather, the lodestar of petitioner’s eminent domain power is the public project authorized by the certificate (see Transportation Corporations Law § 83). The certificate, in other words, simply authorizes the public project, and the power of eminent domain stands or falls with that project as a necessary ancillary to its implementation (see generally NY Const, art 1, § 7 [a]). Thus, when the public project cannot be legally completed, any eminent domain power in connection with that project is necessarily extinguished.3 To say otherwise would effectively give a condemnor the power to condemn land in the absence of a public project, and that would violate the plain text of the State Constitution.

Slip op. at 9. 

The court also rejected the old "well, they're going to be compensated for it so what's the problem" argument as "entirely besides the point." Id. "in a constitutional order such as ours, jealous as it is of the right to own property and do with it as one pleases, only a viable public project can force respondents to surrender their rights in their land." Id. If only the federal courts of appeals understood that!

The dissenters pointed out that a later-filed order seemed to moot the objections (appellate procedure mavens, take compare page 10 of the dissent with the second paragraph of footnote 2 of the majority opinion on page 6): "in an order issued August 6, 2018 ... the DEC waived its WQC certification authority under section 401 of the Clean Water Act. Thus, as things now stand, the DEC's denial of the WQC is no longer an impediment to construction of the pipeline." Dissent at 10. Amazing things happen when you have the agency in your hand, no? The court should take judicial notice of that bit of administrative sleight of hand, according to the dissent.   

 After all that, the New York Court of Appeals agreed to review the issue. The briefs have been filed, and we're awaiting oral argument. 

• Pipeline's opening brief
• Schueckler's answering brief
• Pipeline's reply
• the Record on Appeal, if you want to take a deep dive

So stay tuned, everyone. We'll keep following along (even if the pipeline asks to dismiss for appellate mootness, a motion we would not be surprised to see). 

National Fuel Gas Supply Corp. v. Schueckler, No. 17-02021 (N.Y.A.D. Nov. 9, 2018)

RI: Ten-Year Suspension Of Pension's COLA Adjustment Not A Penn Central Taking

In Cranston Police Retirees Action Committee v. City of Cranston, No. 2017-36 (June 3, 2019), the Rhode Island Supreme Court concluded that a municipal ordinance "the promulgated a ten-year suspension of the cost-of-living-adjustment (COLA) benefit for retirees of the Cranston Police Department and Cranston Fire Department who were enrolled in the City of Cranston's pension plan" was not a taking of the pension plans' members property.

Takings mavens should skip to page 27 of the opinion for the good stuff. First, the court assumed that the plan members possessed "property." A COLA benefit, once vested, is property, and the parties did not challenge the trial court's conclusion on that issue. Second, the court rejected the contention that the suspension of COLA benefits was a physical invasion or a Lucas economic wipeout. Slip op. at 30-31. This was a regulatory taking, analyzed under Penn Central's three-part ad hoc test. Slip op. at 31.

• Economic impact: "the cumulative impact of the COLA suspension on CPRAC's members was significant." Slip op. at 32. But (and there's always a "but") the impact was temporary. (Ten years is "temporary?" Many retirees we know would disagree.) And it's not like the suspension included the base payment, just the COLA adjustment.
• Character of the government action: "The City did not 'physically invade or permanently appropriate any of the [retirees'] assets for its own use." Slip op. at 32. And its motivation was to "improve the health of the City's pension system." Id.
• Interference with investment-backed expectations: The opinion doesn't expressly deal with this factor, and assumes that the retirees had valid expectations, which they backed by investing their time and careers. 

In short, the court viewed the ordinances as one of those "adjustments of rights for the public good," which the city didn't have to pay for.

Cranston Police Retirees Action Committee v. City of Cranston, No. 2017-36 (R.I. June 3, 2019)

Links And Materials From Today's Transportation Research Board Session

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

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

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

New York City Allowing Ridesharing Isn't A Taking Of Taxi Medallions

Surge pricing applies!

You really have to feel for taxi operators who invested what could be huge amounts of money to obtain a taxi medallion getting whacked by the competition from ridesharing outfits like Lyft and Uber. These services look and feel an awful lot like taxis, don't they? As we wrote in a recent article:

These services—at least from the consumer’s standpoint—operate a heck of a lot like taxis do. You hail a ride (not with your arm and a sharp whistle, but with your fingers and your smartphone), you get in, you go, you get where you are going, you pay the driver (again, with the app, not by handing the driver cash or your credit card). Is that enough of a difference to say that ridesharing isn’t taxicabbing? On that, I am mostly with the taxicab operators. Having used Uber and Lyft more than a few times, they sure do seem like taxis with some very inconsequential differences.

But they, unlike yellow cabs, don't need a city-issued medallion.

But like other courts before it, in Glyka Trans, LLC v. City of New York, No. D55245 (May 2, 2018), the Second Department of New York's Appellate Division concluded the differences between ridesharing and taxicabbing were enough that a city would not be held liable for a taking of taxi medallions after it adopted rules regulating ridesharing services, not subjecting them to the same rules which apply to New York's existing three types of vehicles for hire (yellow medallion cabs, street hail liveries, and for-hire vehicles):

The fourth and fifth causes of action sought a judgment declaring that “the City’s decision to allow black cars to pick up e-hails constitutes an unconstitutional taking of the Petitioners’ property without just compensation” under the Takings Clause of the Fifth Amendment of the United States Constitution and article I, § 7 of the New York Constitution. 

The petitioners alleged in the amended petition/complaint that medallion yellow taxicabs have the exclusive right to pick up passengers via “hail,” which includes both a “request, either through a verbal (audio) action ... and/or a visible physical action” and “an electronic method such as an E-Hail App” (35 RCNY 51-03). The petitioners alleged that “[t]he TLC’s decision to allow companies like Uber to pick up e-hails—even though Uber is not required to shoulder the enormous financial burden of purchasing medallions and is not bound by the fare limitations and other significant restrictions that apply to yellow taxis in consideration for their hail exclusivity—enables Uber to compete unfairly with yellow taxis.”

Slip op. at 2-3.

The trial court agreed with the city, and the Appellate Division affirmed. The court first concluded that the city was not acting unreasonably when it determined that using an app to call a rideshare was not the same as a street hail: "We also agree with the Supreme Court’s determination that the TLC did not act arbitrarily or capriciously in deciding that the use of a smartphone application to request a ride from an FHV was a form of prearrangement and not synonymous with a street hail." Slip op. at 5.

On the takings issue, the court held that a taxi medallion isn't a property right to be free from competition:

The crux of the petitioners’ claim is that the TLC’s decision to “allow black cars to pick up e-hails” has diminished the value of their medallions, decreased the number of taxicab trips per day, and reduced their medallion income. However, “‘[p]roperty’ does not include a right to be free from competition” (Illinois Transp. Trade Assn. v City of Chicago, 839 F3d at 596). Accordingly, the TLC’s decision to allow companies such as Uber to pick up passengers via a smartphone application does not interfere with a taxicab’s use of its medallion or exclusive right to pick up passengers via street hail.

Slip op. at 5.

This is consistent with every other court which has addressed the issue, so this result should not come as much of a surprise. But medallions are often very expensive, and many of the owners have invested their lives' work into acquiring one and have built up expectations that it gave them certain rights. So to have the courts simply conclude that these expectations are not reasonable doesn't feel quite "right." We're not sure there's much that takings doctrine can do, but there it is.

Glyka Trans, LLC v. City of New York, No. D55245 (N.Y.A.D. May 2, 2018)

Property Lawyers, Read The Supreme Court's Latest Patent Case

Here's one we've been waiting to drop, but when it did, we were tied up so couldn't get to it quickly. 

Yes, it's a patent case. But as we explained here, a case that property mavens should be following because it deals with what is "property," and where an owner goes to resolve disputes about that property. 

In Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-713 (Apr. 24, 2018), the Court's majority 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. In an opinion by Justice Thomas (joined by everyone but the Chief Justice and Justice Gorsuch), the Court 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:

Inter partes review falls squarely within the public-rights doctrine. This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly re-served the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.

Slip op. at 6-7. Thus, inter partes review isn't really like a challenge to the patent, but more like a "second look at an earlier administrative grant of a patent." Slip op. at 8. This is like the situation in which Congress grants a franchise for a private operator to collect a toll on a bridge and reserves the right to revoke or amend that franchise. When it does so, according to the majority, Congress need not use an Article III court. A patent holder's rights are derived from statute, and thus can be limited. 

What the King gives, the King can take away on the King's terms. 

Yes, patents are "private property," but that property is "only a specific form of property right -- a public franchise." Slip op. at 10. These are a different kind of property right than takings mavens are used to dealing with (property rights expressly recognized in the Fifth and Fourteenth Amendments), a distinction which the majority recognized:

Finally, our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause. See, e.g., Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U. S. 627, 642 (1999); James v. Campbell, 104 U. S. 356, 358 (1882).

Slip op. at 17.

This means that the question presented in a parallel case in which the Court recently denied cert, is still open. In Brott v. United States, No. 17-712, the property owner challenged the constitutionality of requiring property owners with big takings claims against the federal government to pursue compensation in the non-Article III, non-jury Court of Federal Claims. The court denied review in Brott and a companion case raising the same issue, but as we know, a denial of cert isn't conclusive of the issue presented. 

Three Justices (Breyer, Ginsburg, and Sotomayor) filed a short concurring opinion to note that "the Court’s opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies." Concurring op. at 1. In short, "we three think that even takings claims involving private rights can be relegated by Congress to non-Article III tribunals."

Justice Gorsuch, joined by Chief Justice Roberts dissented in a very readable opinion arguing that under English common law, patents were dealt with by the courts, not the Privy Council, and that the Founders understood this. Judges, not the executive's own officers, should resolve these type of claims:

No doubt this efficient scheme is well intended. But can there be any doubt that it also represents a retreat from the promise of judicial independence? Or that when an independent Judiciary gives ground to bureaucrats in the adjudication of cases, the losers will often prove the unpopular and vulnerable? Powerful interests are capable of amassing armies of lobbyists and lawyers to influence (and even capture) politically accountable bureaucracies. But what about everyone else?

Of course, all this invites the question: how do we know which cases independent judges must hear? The Constitution’s original public meaning supplies the key, for the Constitution cannot secure the people’s liberty any less today than it did the day it was ratified.

Dissent at 3. 

Thus, Oil States tells us that there are at least six Justices who might be open to a Brott claim down the road, because public rights like patents and franchises are different in history and in kind from private rights (classic property like land and stuff). 

Our final thought: the petitioners must have understood -- as did the Brott petitioners -- that this was a very uphill fight. Asking the courts to overturn an elaborate (and in the case of the Tucker Act, an entrenched and well-oiled) scheme by tribunals that look a lot like "courts," is going to be daunting. Knowing nothing else, it cannot be much of a surprise when the courts uphold the status quo. 

But that doesn't mean the status quo is right, or conforms to the Constitution. Thus, we think that the issue in Brott -- whether takings claims against the federal government can be assigned to the Article I CFC, without a jury -- is still up for grabs. So, as always, stay tuned. The next few years are going to be interesting.  

Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712 (Apr. 24, 2018) 

Cases And Materials From The Takings And Eminent Domain Session At The Land Use Institute

Some of the Land Use Institute faculty, including (front row left), Planning Chair Frank Schnidman and Planning Co-Chair Patty Salkin

Last Friday at the 32nd Annual Land Use Institute in Detroit, I was honored to moderate a freewheeling discussion by a panel of takings experts, Professor Steven Eagle, Minnesota lawyer Howard Roston, and Michigan's own Alan Ackerman on "Takings, Eminent Domain, and Vested Rights."

Here are the cases and other materials we discussed, as well as a few others which we did not have time to cover (but wish we could have):

• Murr v. Wisconsin (SCOTUS): should unified use be the most critical determining factor?
• The first post-Murr case? Here's the cert petition in that case.
• Knick v. Township of Scott (SCOTUS): Williamson County ripeness on the chopping block?
• Colony Cove: rent control takings claim back in the Ninth Circuit. Any guesses on the outcome?
• Martin's Beach v. Surfrider Foundation: judicial takings cert petition.
• Leone v. County of Maui - loss of all "use" or of all "value" as the measure of a Lucas taking?
• Song v. Sessions: eminent domain protests as the basis for political asylum.
• Gunderson v. Indiana: public trust and the equal footing doctrine.
• MR-GO: Katrina flooding as a taking.
• North Carolina's Map Act cases: project announcement and condemnation blight.
• St Bernard Port Authority v. Violet Dock Port - taking for private benefit, replacement cost as measure of just compensation.
• City of Marietta v. Summerour - pre-taking requirements in Georgia’s property owners bill of rights.

To those who attended: thank you for joining us for a lively and informative session on our favorite topics.

Land Use Institute - Detroit

We're in Detroit the rest of the week at the Mercy Law School for the venerable Land Use Institute, now in its 32nd iteration.

Planning Chair Frank Schnidman has assembled a great faculty including out Detroit colleague Alan Ackerman (above, talking about takings liability for flooding), and we'll be spending the time talking inverse condemnation, public trust, planning law, homelessness, autonomous vehicles, affordable housing, RULIPA, and similar topics. We'll be presenting on "Eminent Domain, Vested Rights, and Regulatory Takings," "Client Representation: Developer, Government, and Citizens Groups," and "Federal Laws Affecting Local Land Use Decision Making." 

If you are here with us in Detroit, stop by and say hello. If you aren't here, shame on you! This is one of the best and most affordable tuition deals in CLE.

But all kidding aside, if you are not in Detroit now, be sure to calendar these two dates:

• 2018 Land Use Institute: April 11-12, 2019, Baltimore, MD (Royal Sonesta Harbor Court Hotel)
• 2020 Land Use Institute: April 23-24, 2020, Tampa, FL (Le Meridien Tampa)

Reserve the dates!

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

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

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

2018 Land Use Institute Brochure Detroit 5 2018

New Article: Murr And Other "Blurred Lines"

Here's an article ("Murr v. Wisconsin: The Supreme Court Rewrites Property Rules in Multiple-Parcel Regulatory Takings Cases"), which we authored along with a colleague, published in February 2018's Zoning and Planning Law Report, about the U.S. Supreme Court's decision in Murr v. Wisconsin, the case about the "larger parcel" in regulatory takings.

As you might predict, we concluded that the Murr majority's analysis was vague, unsatisfying, and generally not helpful. Strong letter to follow!

Here's a passage from the Introduction:

The U.S. Supreme Court’s 5-3 long-anticipated ruling in Murr v. Wisconsin, expected to resolve the “larger parcel” or “denominator” issue in regulatory takings cases, has instead created a test that neither property owners, lawyers, nor government officials can understand or rely on.

The majority opinion, authored by Justice Anthony Kennedy, addressed a long-standing question in regulatory takings law: when a claimant who owns more than a single parcel alleges a regulation works a taking of one of them, how much of the claimant’s total holdings will the economic impact of the regulation measured against? The question in Murr arose as a choice between which regulatory takings rule would apply in the case, the categorical “deprivation of economically beneficial use” rule from Lucas, or the ad hoc Penn Central balancing test. This threshold question governed the outcome because the narrower the Murrs’ property interest was defined by the courts, the more likely it would be they would be able to prove the regulation was a taking. In other words, how would the “property” which was claimed to have been taken defined?

Thanks to ZPLR Editor Patricia Salkin and the editorial team at West Thompson Retuters, and to our coauthor Erica Levine Powers.

32nd Annual Land Use Institute: Detroit, April 19-20, 2018

Mark your calendars, plan to come: Detroit, April 19-20, 2018. For what is perhaps the best deal in CLE (tuition as low as $400), the 32d Annual Land Use Institute, sponsored by our section of the ABA, the Section of State and Local Government Law.

The venue is the Detroit Mercy School of Law, and the conference hotel is the historic Westin Book Cadillac in downtown Detroit. The Land Use Institute is being held in conjunction with the Section's Spring State and Local Law Conference. Register for one conference, and you are free to move between sessions (no additional registration fees).

Planning Chairs Frank Schnidman and Dean Patrica Salkin have assembled an excellent faculty and program for the two days. Topics include: "Nuts and Bolts of Land Use Practice: Vested Rights and Regulatory Takings," "Public-Private Partnerships," "Climate Change and Resilient Development," "Client Representation: Developer, Government and Citizen Groups," "Housing Supply and Affordability: Planning Alternatives and Legal Consequences," and "Community Benefits Agreements, Environmental Justice and Access to Housing." The Annual Richard Babcock Keynote Address will be by Wendie Kellington, "The Role of Planning and Law in Solving Homelessness." Complete agenda is posted here.

Other featured speakers: Dennis Archer, former Detroit Mayor (and Past President of the American Bar Association); Neisen Kasdin, former Mayor of the City of Miami Beach; Jared Fleischer, Quicken Loans; and Maurice D. Cox, Director, Planning & Development, City of Detroit. And, as always, a renown national faculty of land use law practitioners, scholars, jurists, and public officials. 

Come and join us in the reborn City of Detroit, where there's a lot to do and see.

Indiana: Equal Footing Doctrine Means Public Owns Up To The Ordinary High Water Mark

Update: thanks to Daniel Lehmann for keying us in to this case, now being reviewed by the Supreme Court, involving the foundational question of whether title to Equal Footing Doctrine submerged lands is a question of state or federal law. Scheduled for the Court's 2/16/2018 conference.

* * * *

In our experience, rationality often takes a second chair when delving into the question of who may own various parts of beaches. It's certainly true in our home jurisdiction, where any claims to private rights anywhere near a beach can be met with howls of protest, regardless of what the law might actually provide in any given circumstance. Trying to unwrap these cases can be an exercise in frustration, and if you don't understand the background and politics -- the "real story" -- you can't really say you understand a decision.

That is what we're wondering about the Indiana Supreme Court's long-awaited opinion in Gunderson v. Indiana, No. 46S03-17060PL-423 (Feb. 14, 2018), in which the court concluded that the public, and not the Gundersons, owned the area below Lake Michigan's ordinary mean high water mark. We have read the opinion, and the court frames the issue the same we see it: "What is the precise boundary at which the State’s ownership interest ends and private property interests begin?" Slip op. at 1. But what, if anything, in the real story here and what other forces are at play other than those we read in the opinion and briefs? We wish we knew.

The case is a property lawyer's delight, full of things like the Equal Footing Doctrine, the Northwest Ordinance, public trust, Shively v. Bowlby, 152 U.S. 1 (1894), and Martin v. Waddell’s Lessee, 41 U.S. (16 Pet.) 367 (1842). (If you don't need to look up any of these terms, congratulations - you are officially a property law geek.) We recommend you read the opinion yourself; it isn't that long (29 pages) you will be entertained for sure. 

Here's the short version: everyone actually agreed that the ordinary mean high water mark -- or, as the case cryptically shortens it "OHWM" -- is the boundary between public land and the Gunderson's private property. The big question was where was that line? The plat map of the owners' lots, which they can trace back to an 1837 federal land patent, say they own up to the "Lake Edge." In 2010, however, the Town of Long Beach adopted what the court refers to as an "administrative boundary" which set the public-private boundary landward of where the the Gundersons thought it was. The court framed the issue this way:  

The basic controversy here is whether the State holds exclusive title to the exposed shore of Lake Michigan up to the OHWM, or whether the Gundersons, as riparian property owners, hold title to the water’s edge, thus excluding public use of the beach. All parties agree that land below Lake Michigan’s OHWM is held in trust for public use. The legal dispute relates to the precise location of that OHWM: whereas the Gundersons argue that it lies wherever the water meets the land at any given moment, the State and Intervenors locate the boundary further landward to include the exposed shore.

Resolution of this case entails a two-part analysis: First, we must determine the boundary of the bed of Lake Michigan that originally passed to Indiana at statehood in 1816. Second, we must decide whether the State has since relinquished title to land within that boundary. The former question is a matter of federal law; the latter inquiry, a matter of state law. Oregon ex rel. State Land Bd. v. Corvallis Sand & Gravel Co., 429 U.S. 363, 376-77 (1977) (“[D]etermination of the initial boundary between [the beds of navigable waters] acquired under the equal-footing doctrine, and riparian fast lands [is] a matter of federal law . . . [whereas] subsequent changes in the contour of the land, as well as subsequent transfers of the land, are governed by the state law.”).

Slip op. at 6-7 (footnote omitted). 

The court concluded that at statehood, the Equal Footing Doctrine gave the State title to submerged lands. The Gundersons argued this means just what their documents say: right up to the lake edge, where ever that is at the moment. The State, by contrast, argued this means the OHWM. The court held that the Northwest Ordinance did not shift the line or alter the State's title, and that the Gundersons' deed and other documents did not either, because although the federal government had the power in 1827 to convey Equal Footing submerged lands to private interests, such a conveyance must have been explicit, which it was not here. 

The heart of the opinion starts on page 13 of the slip opinion, where the court concludes that the public-private boundary is the OHWM, and not the water's edge. The court acknowledged that the U.S. Supreme Court cases on this issue are not 100% clear or consistent (some, for example, merely mention "submerged" land, or those "bounded by navigable waters"), but concluded that those terms really mean OHWM. The court relied on the Corvallis Sand & Gavel case, which noted that the states own riparian land "between the high and low water mark, as well as the bed of the river[.]" Slip op. at 14. 

After siding with the State that the public cannot give up its public trust ownership except in unusual circumstances, the court agreed with the property owners that the state agency's attempt to alter the public-private line established by the Equal Footing and related doctrines by defining where the OHWM is located was ineffective. These regulations defined OHWM is a more clear fashion, which the government asserted was better because they provided more certainty than the common law doctrines. Perhaps so, but the court concluded that a state agency cannot amend the law, only the legislature can. Besides, there's a natural symmetry to a legally-defined (but moving) boundary:

The common-law OHWM is a moveable boundary subject to the natural variability of the shoreline. Bureau of Land Mgmt., Manual of Surveying Instructions at 81 (“When by action of water the bed of the body of water changes, the OHWM changes, and the ownership of adjoining land progresses with it.”). Riparian boundary law relies on the adaptive doctrines of accretion and erosion to account for these shoreline dynamics. Under the accretion doctrine, the riparian landowner gains property as the OHWM shifts lakeward due to the gradual deposit of sand or other material. Bath v. Courts, 459 N.E.2d 72, 74 (Ind. Ct. App. 1984). The doctrine of erosion, by contrast, has the opposite effect: the riparian landowner loses property as the boundary shifts landward due to the gradual loss of shoreline. 93 C.J.S. Waters § 187 (2017). These doctrines operate to maintain the status quo of relative rights to the shores of navigable waters. While the physical boundary shifts (e.g., shelving or terrestrial vegetation) the legal relationships—private riparian ownership and public trust title—remain the same. In other words, while accretion or erosion may change the actual location of the OHWM, the legal boundary remains the OHWM.

Slip op. at 25 (footnotes omitted). What we refer to as the "bitter and sweet" approach to accretion and erosion. Thus, the court concluded the natural OHWM is the public-private boundary, not the the line in the rules promulgated by the agency.

Finally, the court rejected the argument that any public trust uses other than those previously recognized by common-law tradition would be a taking: fishing, commerce, and navigation. The court held that it would not be a taking for either the legislature or the courts to expand the scope of the public's use of public trust property, and since the legislature hasn't acted, the court would. Slip op. at 23 ("Absent a statutory framework of public trust rights in the shores of Lake Michigan, this Court retains its common law powers to articulate—and even expand—the scope of protected uses."). Thus, the public may "at minimum" walk on land below the OHWM without infringing on the littoral owner's property rights.  

But the court declined to expand it further, deferring to the Indiana Legislature on that one. 

The local paper covered the story: "Indiana Supreme Court rules Lake Michigan shoreline belongs to all Hoosiers." 

Will this be the last stop for this case, or will there be a cert petition? Stay tuned, as always. 

Gunderson v. Indiana, No. 46S03-17060PL-423 (Ind. Feb. 14, 2018) 

New York City Uncompensated Takings Pilgrimage, High Line Edition

At first, you might not pay much attention to it. After all, it doesn't really stick out -- elevated rail lines aren't that unusual in a big city. Street-level trains and pedestrians don't mix well, and in the early 20th Century, New York State adopted a law which moved some of the lines above the street. Indeed, some portions of New York's subway are still above grade, especially once you are out in the boroughs.

These elevated routes, like many rail lines, were not constructed on land the railroad owned in fee. Instead, the owners of the land granted an easement to the rail lines to use the land "for railroad purposes." Which meant that the grant of easement remained only as long as the easement holder used the land for a railroad or related purposes. Again, nothing out of the ordinary there.

But then you remember that Manhattan's last el ran decades ago. The elevated trains eventually were discontinued because they were "loud, dirty, messy, and slow." But even after the railroads ceased operating, some of the structures were not dismantled and removed. The High Line, on Manhattan's west side, is one of those. It was not an elevated passenger line, but carried freight, and opened for service in the 1930's with the last train running some time in the 1980's. Upon discontinuation of the railroad use, the easement should have been extinguished and the land revert to the fee owner.

But this is a rails-to-trails story, so you know what happened next. Eventually, the city converted the former rail line into a unique public park, full of green spaces, Manhattan views, performance venues, and a pedestrian walkway. All right there, in the middle of the big city.

But despite the abandonment of railroad uses and the public taking over the property, the family which owned the reversionary interest was not offered compensation for their property. So they brought suit in the Court of Federal Claims for a taking.

Those of you who follow the blog should be familiar with this tale, because it resulted in a Federal Circuit decision as well as a cert petition to the U.S. Supreme Court. We filed amicus briefs in both venues. 

Unfortunately, unsuccessfully, we might add. The Federal Circuit concluded that the Romanoffs' predecessor-in-interest had granted a "general" easement to the railroad, which permitted it to use the land for virtually any purpose it desired, not just a railroad purpose. Thus, the Romanoffs could not complain when the High Line freight line ceased operations and the railroad abandoned the track, and the Romanoffs did not own property that had been taken. The court rejected the argument that New York law had never recognized such an animal as a "general" easement, and indeed, if an easement was interpreted to have granted unlimited use, it really wasn't an "easement" at all, but was a transfer of fee simple title, something which plainly was not intended here.

But that's the story.

So last time we were in New York City, we planned on paying a visit to the High Line to see for ourselves.

We did, and so should you. It's a pleasant place, for sure. Gardens, flowers, nice places to sit and contemplate, just above the busy street.

But we ask this: are the below scenes really a "railway purpose," Federal Circuit?

There's a rail line under there, somewhere.

Only thing missing from this sanitized story is the fact that the Romanoffs were forced to donate their property to the enterprise. Hey, free money!

Green spaces, and a garden-in-the-sky.

 

The performance stage. Sure looks like a "railroad purpose" to us. As we wrote in our amicus brief, the High Line is used more for "tai chi, 'gender bending performances from the club and theater stage,' and 'stargazing,'" than anything that could conceivably be considered a railroad purpose. 

The train schedule. By that we mean the performance calendar.

You know you are in New York by the views.

No mistaking that building. 

Watch out for the trains!

Even local businesses play up the rail angle. This seems more of a railroad purpose than the use being made of the former rail line.

 

Supremes Consider Unconstitutional Conditions, Vested Rights, And Property ... In A Patent Case

If case you were thinking you might have missed a big property case that made its way to the Supreme Court, fear not. All of the above issues were raised in the course of yesterday's arguments in a patent case.

As the transcript in Oil States Energy Services, LLC v. Greene's Energy Group, LLC, reveals, the issue in that case is whether the Patent and Trademark Office's Patent Trial and Appeal Board is unconstitutional because it can deprive a patent holder of its rights without the benefit of adjudication in an Article III court. A patent is property (yes, it is a creature of statute, and not a common law right, but it is property), and the owners of patents can't be deprived of their property except in an Article III court. Or so the Petitioner's argument goes.

If that issue sounds familiar, it is. In Brott v. United States, No. 17-712 (cert petition filed Nov. 6, 2017), the Court is being asked to consider whether inverse condemnation cases against the federal government must be considered by an Article III court, and a jury. Brott is a rails-to-trails case, and as followers of this blog know, these claims, when they exceed $10,000, must be raised in the Article I Court of Federal Claims, where you get the case tried by a judge, and not a jury. The jurisdiction of the CFC was conferred by Congress in the Tucker Act. Brott challenged that setup (complaint here), arguing that the self-executing nature of the Fifth Amendment's Just Compensation Clause requires both an Article III court, and a jury.

Both the District Court and the Sixth Circuit disagreed. (We filed an amicus brief in the Sixth Circuit supporting the property owner.) The Supreme Court now has the case, where it is being asked to resolve this Question Presented:

Can the federal government take private property and deny the owner the ability to vindicate his constitutional right to be justly compensated in an Article III Court with trial by jury?

Sounds a lot like the issue in Oil States, no?

Indeed, Brott's counsel (our colleague Thor Hearne and his team), along with Pacific Legal Foundation, filed an amicus brief in Oil States, arguing that Congress cannot confer judicial power on non-Article III tribunals (like the PTAB), especially when someone's property is at stake. And while patents are a form of property, surely real property interests are even better property, and neither can be taken away without the benefit of a jury. 

Yesterday's Oil States arguments hit on some of these issues, if only tangentially. For example Chief Justice Roberts posed this question to Petitioner's counsel:

CHIEF JUSTICE ROBERTS: What is - what is the relationship between your position and the takings clause? The government can certainly diminish the value of your property rights quite extensively when it comes up with new -- new regulation.

You have a lot that you think you could have built a mansion on, and then the government passes a law and you can only build a shed on it and -- and yet we often say -- or give the government a lot of leeway in saying that -- that they don't have to pay compensation.

So, if the government can restrict your property right in real property to that extent, why can't it do so with respect to patent rights?

Transcript at 12.

Justice Breyer also saw hints of the takings issue:

JUSTICE BREYER: So -- so is that -look, the answer -- what I'm thinking, quite seriously, is saying should we leave open, assuming I basically agree with you, but leave open the question of what happens if there has been huge investment?

That, I think, is what was dividing -what was worrying Brandeis in Crowell. I -- I think that -- that we don't face it here in this case, and it seems to me it would be properly raised more likely under either a takings clause or the due process clause probably.

Transcript at 55.

Justice Gorsuch saw the issue much more starkly, suggesting that private rights (like patents and property) can only be taken in Article III forum:

JUSTICE GORSUCH: Why not -- why not, though, Ms. Ho, just simply say the question is whether there's a private right involved? In answering Justice Kagan's questions and Justice Breyer's questions, you struggled with how much of an adjudication does an inquisitorial process have to have before it becomes an adjudication. Why does that matter at all?

If -- if you really want to stake your ground and think McCormick's right, why not just say anytime a private right is taken by anyone, it has to be through an Article III forum?

Transcript at 23.

We don't think Oil States will necessarily take care of the Brott issue, although depending on the outcome in Oil States, the Court could, conceivably, GVR Brott in light of that case. But we'll see. In the meantime, we'll be preparing an amicus brief in Brott in support of the property owners.

More about Oil States in this report: "Supreme Court deeply divided on patent review process."

Transcript, Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712 (Nov. 27, 2017)

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

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

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

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

Watch, listen, and learn.  

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

2018 ALI-CLE Eminent Domain Conference - Agenda And Faculty Now Posted

The complete agenda and faculty list has now been posted on the ALI-CLE website, and early registration is open! Go now and reserve your spot. 

We paid a visit to Charleston recently, the venue for our January 2018 conference, to scout it out. We can report that we're going to have a great time, for sure. When we polled you last year, you selected Charleston as your first choice (a new city for the Conference), and it is shaping up to be a very good selection. In addition to the usual lineup of CLE programming, there are a ton of things to see and do in the area. We recorded a short video down at the "four corners of law" (the intersection of Meeting Street and Broad Street), to give you a preview (the weather was much better than in our 2016 preview video, too).

As an added exclusive bonus, there will also be a special sneak preview of the movie about Kelo v. City of New London, Little Pink House. If you joined us in Austin in 2016, you’ll remember that we spoke with Ted Balaker, the film's producer about the movie, which was then being shot. It is now complete, and we're privileged to be getting a before-the-public screening of the film on Friday evening of the Conference.  

So plan on joining us in Charleston, January 25-27, 2018. See you there. 

2018 ALI-CLE Eminent Domain and Land Valuation Litigation and Condemnation 101, Charleston, SC, January 25-... 

ABA CLE, NYC: "Murr and Beyond: Implications for Regulatory Takings" - Aug 11, 2017

If you are scheduled to be in or near New York City on Friday, August 11, 2017, please consider attending one or both of the following events:

• 10-11:30am, Midtown Hilton, Concourse E, Concourse level: "Murr and Beyond: Implications for Regulatory Takings." Yes, Murr is the case that keeps on giving, and has already given CLE providers numerous opportunities to add to their coffers. The ABA is sponsoring this program, which includes the lawyers for the two main parties, and two (me included) lawyers who do this kind of thing. Come,  join your colleagues for a roundtable discussion of the case, and more importantly, what comes next. With John M. Groen, Principal Attorney, Pacific Legal Foundation, Sacramento,CA; Robert Thomas, Damon Key Leong Kupchak Hastert, Honolulu, HI; Hon. Misha Tseytlin, Solictor General , WI Dept. of Justice, Madison,WI; and Nancy Stroud, Land Use Attorney, Lewis Stroud & Deutsch, Boca Raton, FL. Our moderator will be the Hon. Peter Buchsbaum.
• 6-7:30pm: Incoming Chair's Reception, The Three Monkeys, 236 West 54th Street: Come join us up on the rooftop deck as we celebrate becoming the Chair of the ABA Section of State and Local Government Law.  

Hope to see you at these events. Make a day of it. 

Condemnor Didn't Have To Pay For Escaped Gas

Escaping gas isn't enough, it has to be captured.

Yes, a clickbaity title, but this one is about just compensation, so please. You can create your own puns for this case, Northern Natural Gas Co. v. L.D. Drilling Defendants, No. 15-3272 (July 11, 2017), in which the U.S. Court of Appeals for the Tenth Circuit considered things like natural gas injections and escapes, companies that can't control their gas, and the difference between "migrating," "injected," and "native" gas. Yeah, baby.  

Northern owned a mostly-depleted underground natural gas field, and when the gas in place ran out, it used the area as a gas storage area. Over time, it noticed that it was pulling out less gas than it was putting in, leading to the conclusion that some of its stored gas was leaking out into nearby fields, owned by others. So it exercised its delegated power of eminent domain to condemn these nearby fields, some of which had active wells to extract the underground gas. After the commissioners determined compensation, affirmed by the District Judge, both sides appealed.

The most interesting argument was Northern Gas's claim that the just compensation award should not have included payment for the gas which it claimed it already owned (the gas which it stored in its underground facility, but which escaped into the condemnees' property). The court concluded that under a Kansas statute, gas injected into an underground storage facility remains the property of the injector, subject to certain conditions. Otherwise, it is the property of whomever "captures" it. Here, however, 

while the Landowners and Producers may have held certain property rights over the natural gas in and under their land at some point in time before Northern obtained the authority (via private lease agreements and proper regulatory certification) to include the property within the Cunningham Field’s legal boundaries, these rights had been eliminated by the date of taking. On the date of taking, the gas “in place” in and under the Extension Area land was within the Cunningham Field’s certified boundaries as required by Kansas law and, accordingly, was wholly Northern’s property. Because of Northern’s ownership, the gas was not subject to the rule of capture. Thus, the commission erred by including the value of that gas in the condemnation award when the Landowners and Producers had no vested property rights or ownership interests in the gas on the date of taking.

Slip op. at 19. 

The court rejected the condemnees' takings argument, because they couldn't exercise the right of capture, which "confers only a right to produce the migrated gas. It confers no right to the gas itself." Because the migrated gas was still in the ground, it had not been "produced." 

To capitalize on their opportunity to “capture” the gas, the Landowners and Producers would have had to actually produce the gas and would then own the produced gas. But here, the Landowners and Producers seek compensation for gas they did not produce but which remained in the ground on the date of taking. Rather than yielding an unconstitutional taking, Kansas law merely prohibits the Landowners and Producers from recovering the value of storage gas that Northern both (1) originally owned and injected, and (2) acquired certificate authority over.

Slip op. at 20. 

So here's your rule of law: you don't need to pay compensation for escaped gas which you already own. A good one to keep in mind for future reference.  

Northern Natural Gas Co. v. L.D. Drilling Defendants, No. 15-3272 (10th Cir. July 11, 2017) 

Cases And Links From Today's American Planning Association's 2017 Planning Law Review

Here are links to the cases and materials we spoke about today during our portions of the APA's 2017 Planning Law Review webinar:

• Justice Kennedy's Social Justice Warrior Test For Takings Clause "Property" In Murr v. Wisconsin
• The Federal Circuit's Lost Tree decision (cert denied just after Murr, so this should be seen as a bookend to that case).
• Town of Ponce Inlet v. Pacetta, LLC, No. 5D14-4520 (Fla. Dist. Ct. App. June 16, 2017).
• Case to watch: 616 Croft Avenue, LLC v. City of West Hollywood, No. 16-1137 (cert. petition filed Mar. 17, 2017) (legislative vs. administrative exactions). 
• Case to Watch II: Highland-in-the-Woods, LLC v. Polk County, No. 2D15-2801 (Fla. Dist. Ct. App. Apr. 28, 2017) (quasi-legislative exactions and Nollan/Dolan).
• Case to Watch III: Scher v. Burke, No. S230104 (Cal. June 15, 2017) (public recreational dedications along the coast, and vested rights).
• Case to Watch IV: State of New Jersey v. North Beach 1003, LLC, No. A-3393-15T4 (N.J. App. Div. June 22, 2017) (coastal dunes and takings). 
• Case to Watch V: "Voters May Not Usurp City’s Administrative Land Use Authority Through Initiative Process" (from Miller, Starr, Regalia's land use blog). 

Thanks to all those who were on the call. They tell us there was record attendance. 

Friday, Aug 11, 2017, New York City: Chair-Elect Reception, Unpacking Murr - ABA State & Local Govt Law Section

If my colleagues don't wise up and change their minds before August, I am slated to become Chair of the ABA's Section of State and Local Government Law (which, by the way, includes an Eminent Domain Committee, Chaired by Howard Roston, and co-Chaired by Kelly Walsh and John Peloso). On Friday, August 11, at the ABA Annual Meeting in New York City, we'll be having a party to celebrate, and you are invited. 

Earlier that day, our Section is producing a CLE session about the US Supreme Court's recent decision in Murr v. Wisconsin, "Murr and Beyond: Implications for Regulatory Takings," featuring two of the arguing counsel in the case (John Groen (PLF), and Misha Tseytlin (Wisconsin SG), and commentary from me and Nancy Stroud (FL). Judge (ret.) Peter Buschbaum (NJ) is moderating. We'll not only try and figure out what the majority did in Murr, but what we do from here, and what this might mean for regulatory takings and eminent domain down the road. Make it a "two fer" and come for the CLE, and then stay for the reception. 

Also, if you are looking for a place to do Bar Association things, let me, Howard, Kelly, or John know.  We have a very active Section, and there are opportunities for publishing, CLE’s, and other such things. Our section is a mix of private practitioners like us, government lawyers and outside counsel, legal scholars, and jurists. The Section also now produces the annual Land Use Institute, a two-day conference on Planning, Regulation, Litigation, Eminent Domain, and Compensation (Detroit, April 19-20, 2018), 

Invitation to the Chair-Elect Reception (State & Local Govt Law Section), Friday, Aug. 11, 2017, New York C... 

New Article: "Property" And Investment-Backed Expectations In Ridesharing Regulatory Takings Claims

Earlier this year, I had the honor of moderating a panel speaking about transportation sharing legal issues at the University of Hawaii Law Review's sharing economy symposium. The editors have been hard at work since, and the symposium issue is being printed as we speak.

They also permitted me to pen this little missive, a short essay in which I discuss several recent cases about transportation sharing to illustrate what I see as one of the problems with how regulatory takings claims are framed. 

This essay will review several cases which the sharing economy has thus far produced, cases where taxicab companies have sued municipalities for allowing ridesharing services to operate without medallions, most often employing a regulatory takings theory. I argue that the approach employed by these courts wrongly focus on the property interests involved, rather than where the real analytical question resides: what are the investment-backed expectations of those already providing vehicle-for-hire services in the marketplace. Shifting the analysis from artificial distinctions between property for purposes of the Takings Clause and other forms of property, would, I conclude, put the focus where it should be—an owner’s expectations when she obtains a taxicab medallion. Doing so would place these questions in the proper takings context, to be measured along with the other factors which courts consider in most regulatory takings cases.

Check it out: "Property" and Investment-Backed Expectations in Ridesharing Regulatory Takings Cases, 39 U. Haw. L. Rev. 301 (2017). Given the Supreme Court's recent foray into the definition of Takings Clause "property," and Justice Thomas' call to revisit regulatory takings doctrine, I'm hoping this essay will add to the creative flow for our next steps. 

My thanks to the editors for accommodating my practitioner's schedule, and for allowing the essay to serve as the foreword to the scholarly articles on the sharing economy in the rest of the symposium volume. We'll post up notice when the other articles in the symposium are available -- I've read them, and they are well worth it for those of you interested in this developing area of law.   

"Property" and Investment-Backed Expectations in Ridesharing Regulatory Takings Claims, 39 U. Haw. L. Rev.... 

Justice Kennedy's Social Justice Warrior Test For Takings Clause "Property" In Murr v. Wisconsin

What to make the Justice Kennedy-authored 5 justice majority opinion in Murr v. Wisconsin, No. 15-214 (June 23, 2017)? 

There, the majority adopted -- maybe "created from whole cloth" would be a more accurate description -- a multifactor test for determining the "larger parcel' or "denominator" in regulatory takings cases where the owner possesses more than a single parcel of land.  We quoted the opinion's list in this post, and won't repeat it entirely here, but below is a short list of things that now must be considered by lower court judges (not juries) when they are deciding how much of the property the plaintiff owns can be used to measure the impact of the regulation on the parcel which she claims was taken:

• The "treatment of land." Yes, the actual metes-and-bounds of the legal parcel, but also, get this, the "expectations ... an acquirer of land must acknowledge legitimate restrictions affecting his or her subsequent use and dispensation of the property." So in other words, not just the regs in existence at the time, but break out your crystal balls, property owners, you've got to maybe figure out future regulations. 
• The "physical characteristics" of the property. "These include the physical relationship of any distinguishable tracts, the parcel’s topography, and the surrounding human and ecological environment." Topography ... seriously? And the human and ecological environment. What in the world could that touchy-feely factor actually mean in practice? This isn't a the Lockean view of property (the one that was, we thought, baked into the Fifth Amendment), this is a Leviathan-esque view of property as the mere product of positive law. You only own property as defined by "the human and ecological environment," according to five justices of the Supreme Court. 
• Also, judges will need to look at the "value of the property under the challenged regulation," which is about as recursive a test as we could imagine, since it bootstraps the entire takings question into the bootstrapped property question. So in order to determine whether there's been a taking of property, the owner will need to show not only that the regulation has the same effect as eminent domain on the merits, but will also have to show that the regulation has the same effect as eminent domain to even get past the summary judgment threshold of whether the owner owns "property."

But the regulation must be "reasonable" according to Justice Kennedy, as if rational basis review were some kind of safety net for property owners. Besides, we thought after Lingle rejected Agins' "substantially advance" test that the reasonableness, vel non, of the regulation wasn't supposed to be part of the takings calculus. But after Murr, apparently it is back. See also Kennedy's Kelo and Lingle concurring opinions for more of his substantive due process view of the world. 

From our point of view, the majority went completely off the rails here, and the opinion represents the four-plus-Kennedy simply throwing up their hands and tossing intellectual honesty out the window in favor of a test that federalizes common law (i.e., state law) property concepts which had survived mostly unchanged for a millennium. 

Why would they do such a thing? All we can figure is that the majority may have predicted that Murr would be one of their last chances to influence the development of regulatory takings doctrine for a long time. COVFEFE! I only hope I am around when the true story of this case comes out.

The Court granted the cert petition when Justice Scalia was still alive, and it appeared that Hillary Clinton was the odds-on favorite to appoint a new, left-leaning Court majority during her predicted tenure with a lock on making a generation of liberal decisions. Perhaps the four solid conservatives (CJ Roberts, Scalia, Alito, and Thomas) believed that Murr would be one of their last chances to influence takings law before it inevitably swung leftward after the election, hence the grant of certiorari.

But those assumptions radically changed after Justice Scalia passed, and especially in November 2016, of course, and fortunes were radically reversed: The all-but-certain future liberal majority now could see that their presumed dominance had evaporated overnight. We speculated that the conservatives might -- during the months the Court delayed scheduling oral arguments -- try to muster support for dismissing the petition as improvidently granted.

We wondered whether there was any maneuvering on that, given the ultimate weakness in the facts which Chief Justice Roberts recognized in his dissent (he noted that even under the proper test, the Murrs might lose), and we predicted after oral arguments that he could be the sixth vote to affirm. So maybe better to dump the case than to risk a chance of it serving as a vehicle for the four liberal justices to convince Justice Kennedy this was one of the final cases in which he could cement his already spotty conservative property law legacy by moving regulatory takings doctrine two steps back, something he seemed to be hankering to do since Lucas by making it all due-processey and, like seemingly everything in his view, a mishmash test of “reasonableness.”

But that never happened. 

So maybe the liberal majority, viewing Murr as the last charge of Wyatt Earp and his Immortals, threw principle to the wind, created a metaphysical, social justice warrior test for property that undercuts a thousand years of common law principles, deprives juries of the opportunity to decide what is and what isn’t reasonable reliance on metes-and-bounds, and takes the power to define property away from both property owners and state and local legislators, and hands it to mostly unelected philosopher-kings in black robes. 

The Murr majority gives lower court judges a chance to play Justice Kennedy for a day and decide what counts as property (for today, but may not be tomorrow, who knows?), all based on what Your Honor believes is fair, or isn't, or is or isn’t worthy of being compensated, or whether the government can really afford to pay. There will no doubt be a plethora of law review articles which will try and justify these vague SJW factors as based somewhere in our common law property traditions. The authors would have a mighty hard time convincing us, because under Justice Kennedy's ad hoc-ism, you really don't know whether you own property until you make a takings claim and some judge decides you deserve to not be compensated when it is impressed into public service. 

That’s not law, that’s judicial mob rule.

Strong letter to follow!

* * * *

Programming note: we'll be sponsoring a program at the ABA Annual Meeting in New York City on August 11, 2017 at the Hilton Midtown, Concourse E, entitled "Murr and Beyond: Implications for Regulatory Takings," featuring the arguing counsel for the parties (and us!). Ping me to sign up to attend. 

SCOTUS Argument Preview: Does Fee Simple Absolute Mean Anything? The "Larger Parcel" Issue In Regulatory Takings

As takings mavens are no doubt already aware, next Monday, the 8-Justice Supreme Court will hear arguments in Murr v. Wisconsin, the regulatory takings case which asks whether the county can avoid application of the Lucas wipeout standard on one parcel by taking advantage of the fact that the plaintiffs also own the adjacent parcel. Thus, the county argues, both parcels should be combined to determine how the regulation has impacted the property. 

Others have done a better job at previewing the issues than we could hope to (see SCOTUSblog, the National Constitution Center, and the Federalist Society), so we won't do a big summary here, but will limit ourselves to pointing out what we think will be the key areas of contention. Go read the voluminous briefing as well. And with the Court one-Justice-down for this case, we're certainly not going to even venture into guessing about the outcome. 

Watering Down the Lucas Test

Under Lingle, the core question which a regulatory takings claim is trying to solve is whether a regulation is so restrictive that it deprives the owner of the economically beneficial use of her property and has an impact similar to the government's exercise of eminent domain. At heart, the question the Court is being asked in Murr is how much of an owner's entire property holdings can be used to measure the impact.

There's little question that the parcel the Murrs claim was regulated to near worthlessness, standing alone, has little value to them in its regulated state. They can't build on it except in combination with their other parcel, they can't sell it. Only when combined with the neighboring parcel which the Murrs also own can the county argue that its regulations merely are a reduction in value for the Murrs, and not a total loss. If the Murrs only owned the one parcel, they wouldn't be in this fight. In short, the issue to be resolved is whether on the merits, the court will apply the Lucas per se test -- a claim the Murrs are very likely to win -- or the Penn Central ad hoc takings test which is heavily slanted in favor of the county. 

A Millennium of Fee Simple vs a Century of Combination

The Murrs argue that their separate fee simple parcels should treated as separate, at least as the starting point. And before they can be combined to measure a taking, the county needs to show more than the same owners own two adjoining substandard parcels. As Professor Lee Fennell recently wrote, title to fee simple parcels in the foundation on which our concept of private property is built:

Nearly all privately owned real estate in the United States is held in fee simple absolute, or fee simple for short. Every law student learns that the fee simple is the most extensive of all the estates in land—endless in duration, unencumbered by future interests, alienable, bequeathable, and inheritable. Behind these descriptive elements lies the implicit normative message that the fee simple represents the endpoint of real property’s evolution, a more or less final answer to the question of how a modern society should structure access to land.

Fennell, Fee Simple Obsolete, 91 N.Y.U. L. Rev. 1456, 1456-57 (2016) (footnotes omitted). 

The county, state, and their amici take a much different approach, arguing that fee simple metes-and-bounds are just lines on a map, and that Wisconsin property law -- on which the Murrs rely to define their fee simple property rights -- also includes the regulations which require combining substandard, adjacently-owned parcels. People don't own property parcel-by-parcel, they claim, but more like a Monopoly game in which an owner collects up different deeds, and what really matters is all of your stuff considered together. 

In our view, the owners' discrete parcel approach is the better one, since fee simple absolute title of identified parcels of land is the building block on which property law has been built for a thousand years. Ask a real person (not a lawyer or planner) about ownership of land, and chances are they will talk about a parcel, defined by its metes-and-bounds. Robert Frost wouldn't just combine adjacent properties (good fences make good neighbors, right?), and we think the Court will be hard-pressed to say the starting point for the Murrs isn't their recognized fee simple parcel, and is a vaguely-defined combination of two legally distinct pieces. Title matters to most people, and it should here. It isn't like the Murrs segmented their property "bundle" into its various "sticks," then argued the regulations worked a wipeout of one stick. And the net result which an eventual win by them will presumably be that they will sign over the deed to their entire second parcel to the government, once they are paid compensation.

Locke and Load

Another problem for the county, state, and their amici is more conceptual than physical. Their arguments are built on a very Hobbesian foundation -- the Murrs rely on Wisconsin property law for their fee simple title to the parcel they claim has been taken, so the limiting regulations are also part of that body of law, and the Murrs have to take the bitter with the sweet. Savvy property owners have to know about these and similar ordinances nationwide.

That argument, as the headline reveals, is very Levianthan-esque in our view. Too Levianthan-esque for the Court to want to visit, since it has always suggested that property ownership isn't one of those things that is totally subject to state definition or redefinition. See, for example, the Stop the Beach case (for judicial redefinition), or our recently-filed cert petition (for legislative redefinition of property). The Founders certainly had a Lockian outlook on property (see John Adams’ proclamation that "property must be secured or liberty cannot exist," and John Locke's Second Treatise on Civil Government. Part XI, section 138, if you want to get really specific). We don't think a majority of today's Court would be willing to jettison those principles just yet.

And state law has never been the be-all, end-all of the question of what constitutes "property" as the county and state and their amici argue, at least as far as what is a compensable property interest. There are some principles which transcend a state's ability to define it (the right to physically exclude, the right to transfer, the right to make economically beneficial use), regardless of state definitions. See Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980).

The Just Compensation Clause is self-executing, which means that once "property" is taken, the state cannot avoid paying for it. As much as Wisconsin is free to tailor its property law to its own needs, it cannot avoid the Fifth Amendment's requirements when it does so. And the ordinance's prohibition on sale to a third party owner who might be able to make use of it is the part which we think will bring the most grief from the Justices. Not only can the Murrs not use their second parcel unless combined with their first, they can't even sell so someone who can. 

For Richer For Poorer?

If the Murrs didn't happen to own adjoining parcels, they'd be in Lucasland for sure. Thus, what the county is essentially arguing is that the more affluent the plaintiff, the less the complete loss of a single separate parcel will have on her overall wallet. The more you own, the less a taking of a discrete parcel hurts. There's some inherent appeal with the argument because as we all know, eminent domain is focused on the "loss to the owner" (and not the "gain to the taker"), and we expect some questions on this for the owners' counsel from the left side of the Court's bench on Monday. 

But there doesn't seem to be a limiting principle to that argument, unless the Court is ready to say that a more wealthy plaintiff is entitled to less constitutional protection. We'd be surprised if there were five votes for that. Truth be told, we'd be surprised if there were more than one vote for that (scroll down the linked post to "Lone Wolf"). We think even if the Court were inclined to go there, the practicalities would take over - the more wealthy a property owner, the more sophisticated she is likely to be; the more sophisticated, the more likely she would be able to structure ownership of multiple parcels in such a way to avoid formal common ownership, so any such rule could fairly easily be avoided or overcome. 

What About Straight Takings Doctrine?

The federal government's amicus brief -- ostensibly in favor of the county and state, but in reality much more a "neither party" type of argument -- argues that the Court's doesn't like bright lines in takings cases, and it shouldn't draw them here. There's a lot of appeal to that argument because, yes, the Court has reminded us a number of times that clear rules are a "temptation" that must be "resisted." See, e.g., Palazzolo v. Rhode Island, 533 U.S. 606, 636 (2001) ("The temptation to adopt what amount to per se rules in either direction must be resisted.”). Instead, the feds suggest a rule that looks an awful lot like the three-factor test for "larger parcel" in eminent domain. 

You eminent domain lawyers know what we're talking about, the "three unities." In cases where a condemnor is taking Parcel A, the owner may claim severance damages to Parcel B if all or some combination of three elements are met. The more an owner can show that she formally owns both, that they are nearby, and that they are used together, the more likely it will be that the finder of fact will award severance damages for the parcel not formally taken. In that analysis, the most important is whether the condemnee uses the two parcels together such that they can be treated by the court as one. Thus, when a parking lot is condemned, the condemnor may have to pay severance damages to the business across the street that uses the parking lot, if the parking lot owner also owns the business. Separate parcels, but they can be treated as one for purposes of eminent domain law if they are used together. 

We think the Justices may consider importing this approach into regulatory takings law, since it could be applied in a wide variety of reg takings situations, and has the additional intellectual value of bringing some symmetry to regulatory takings and eminent domain doctrine. Our own view is that there is nothing incompatible with the Murrs' argument that fee simple absolute metes-and-bounds title is the presumptive starting point for analysis of the larger parcel in regulatory takings.

The Murrs are not asserting that settling on their proposed rule (fee simple title is the denominator is reg takings unless the government can prove that there's some other reason otherwise) will dispose of their case. They still have to show denial of all economically beneficial use of their primary parcel. Title is the starting point in eminent domain cases, and the Court may like that it is the starting point in regulatory takings as well.

Predictions?

As we noted above, we aren't going to hazard a guess on how this one will come out. With only eight Justices hearing the arguments, even if we see a Justice Gorsuch soon, it's very likely that he will not play a part in deciding this case. We could even see a four-four split, which means affirmed by an equally-divided Court. Or a dismissal of the writ for being improvidently granted. Wait for the next case (and there are other cases in the pipeline which present this issue). Or we could see a wholesale revisit to Penn Central's ad hoc three-part test.

We won't be able to be there in person on Monday, but we'll bring you our thoughts on the arguments as soon as we can read the transcript. Stay tuned. 

Monday Links: Murr SCOTUS Preview, Mass. Reg Takings Verdict, Great Wall Of America, Train Takings

Here's what we're reading this Monday:

• Preview of SCOTUS oral arguments in Murr v. Wisconsin. This is the "larger parcel" case which will be heard next Monday, March 20. The Cato Institute is having a session on it at its DC facility, "Rethinking Regulatory Takings." If you can't be there in-person, it will be live streamed. More here. We'll have our own preview later this week. 
• Our colleagues at the Massachusetts Land Use Monitor comes this report ("Regulatory Taking, Anyone?") about a recent jury verdict which concluded that denial of a variance resulted in a loss of all beneficial use of property. And you know what that means, don't you? 
• Professor Ilya Somin writes about the "Potential pitfalls of building Trump's Great Wall of eminent domain" in the Washington Post. 
• Professor Gerald S. Dickinson adds his thoughts on the Wall: "The biggest problem for Trump's border wall isn't money. It's getting the land." 
• Professor Gideon Kanner has also weighed in on the wall: "That Big Fence on the Mexican Border Means Lots of Eminent Domain Cases."
• And one more on the wall: an immigration lawyer adds his two cents on eminent domain law: "Eminent Domain Litigation Will Halt Border Wall Construction." 
• "'Come and take it': Eminent domain dispute and heart of bullet train battles." The Dallas-to-Houston "bullet train" and the power to take.

U. Hawaii Law Review Sharing Economy Symposium (Feb. 17, 2017)

This year, the University of Hawaii Law Review is devoting one of its issues to a symposium on issues related to the sharing economy. 

On Friday, February 17, 2017, the law review is sponsoring a series of presentations from 9:00 am - 4:30 pm at the law school (lunch included if you RSVP ahead of time), followed by a reception in downtown Honolulu.

Presenters include national experts such as Professor Stephen Miller (who is also the founding Chair of the ABA State and Local Government Law Section's Sharing Economy Committee), Christina Sandefur of the Goldwater Institute, local players such as Michael Formby, the Director of Transportation Services for the City and County of Honolulu and Greg Kugle of my law firm, and industry insiders such as Timothy Burr Jr., Senior Public Policy Manager for Lyft. 

The day will see presentations on Housing, Transportation, and Discrimination, as well as a keynote address by Professor Erez Aloni, "Access and Excess in the P2P Economy: A Comparative Approach." 

I'll be moderating the panel on Transportation issues, so come on up to campus and get educated on these cutting-edge issues.

If you can't make it there, you should join us downtown after the day's presentations for a reception at 1003 Bishop Street in the main second floor lobby. Free parking! 

More on the symposium and a complete agenda (including speakers and topics) is posted here. 

UH Law Review Sharing Economy Symposium 

2017 ALI-CLE Eminent Domain Conference Wrap, 2018 Venue Announcement

When we previewed the 2017 ALI-CLE Eminent Domain & Land Valuation Litigation Conference while we were getting buried in the snow a couple of weeks ago, we promised there would be better weather in San Diego than much of the country was then experiencing. As you can see, we delivered.

We -- and by "we" I mean the faculty, the ALI-CLE staff, and the record number of attendees who came to San Diego -- also delivered on a really great conference. See our posts on several of the presentations here, here, here, and here for a flavor.

We also announced that the date and location for the 2018 Conference has been set, and the hotel and site have been booked:

2018 ALI-CLE
Eminent Domain & Land Valuation Litigation Conference
Francis Marion Hotel
Charleston, South Carolina
January 25-27, 2018

Stay tuned for details. Send your ideas for what you'd like to see at the 2018 Conference. Tell your colleagues to come if they missed out this year. The more who attend, the better this gets.

We'll post more once the agenda, faculty, and registration process are ready. See y'all in Charleston. 

Day 1, 2017 ALI-CLE Eminent Domain And Land Valuation Litigation Conference, San Diego

Here are the links and references to the cases we spoke about today at our opening session on the national trends in eminent domain law at the 2017 ALI-CLE Eminent Domain and Land Valuation Litigation Conference in San Diego. 

We again have a record attendance, and a good number of new attendees. If you aren't here now, we're sorry you didn't make it. But fear not: ALI-CLE has already set the date and location for the 2018 Conference: save the date on your calendars now -- January 25-27, 2018, Charleston, South Carolina, at the Francis Marion Hotel. 

• North Carolina's Map Act case (Kirby). Land banking to keep the eventual acquisition price low, is a taking.
• Nevada: No Regulatory Taking When DOT Announced Future Plans To Condemn.
• California's City of Indio case: temporary "no build" area while city gets around to taking the property is a taking.
• Municipal takings of public utilities: Montana Supreme Court writes "more" out of the "more necessary" clause.
• Pennsylvania Supreme Court: Delegation Of Eminent Domain Power To Pipeline Companies Violates Fifth Amendment's Public Use Clause.
• Through, Not To: A Pipeline With No Kentucky Offramps Isn't For Public Use (for Kentucky).
• Pipeline takings: Pennsylvania appellate court agrees that the polar vortex made them do it.
• Creative Thinking Prize: Texas Supreme Court sides with property owner who formed conservation district to beat back a taking. Don't tell me no, tell me how.
• Georgia appellate court: appraisal "before" negotiations means just that.
• Colorado Supreme Court reads its eminent domain statute narrowly: when it says Commission must approve taking, DOT can't do it.
• Virginia: an unacceptably low appraisal = "bona fide" offer.
• Entry statutes: the California Supreme Court decision in Property Reserve: the court rewrites the statute in order to save it.
• Virginia federal court rejects facial challenge to Virginia's entry statute.
• North Dakota Supreme Court finds that small entries are "examinations" and not takings.
• Who decides, Part II: West Virginia Supreme Court concludes that condemnor (not the courts) is sole determiner of sufficiency of quick take deposit.
• Tex App: Rail Construction Cutting Off Access Can Be Inverse Condemnation - Even When There's Been No Taking.
• Kauai condemnation: Hawaii Supreme Court arguments in "larger parcel" case. 
• SCOTUS and larger parcel in regulatory takings: Murr v. Wisconsin - the "larger parcel' in regulatory takings.
• Who decides? California Supreme Court in City of Perris -- judge decides Nollan/Dolan issues (but they may be project influences, so property owners do the happy dance).

Related articles

Amici Brief: Precondemnation Entry That Goes Beyond "Innocuous" And "Superficial" Is A Taking

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

inversecondemnation.com: Hawaii Supreme Court Oral Argument In Lucas "Economically Beneficial Use" Taking Case

Ode To A Road

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Notes And Links From Today's Hawaii Land Use Conference Session On Reg Takings

To supplement your written materials for the 2017 Hawaii Land Use Conference, here are the decisions and other materials which we spoke about this morning at the 2017 Hawaii Land Use Conference:  

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

Related articles

Kelo At 10: Still Stinks, And A Decade Has Not Lessened The Odor

Ode To A Road

inversecondemnation.com: Hawaii Supreme Court Oral Argument In Lucas "Economically Beneficial Use" Taking Case

Amici Brief: Precondemnation Entry That Goes Beyond "Innocuous" And "Superficial" Is A Taking

Annual Hawaii Bar Association Land Use Update Video

Every year, our partners Greg Kugle and Mark M. Murakami update the Hawaii State Bar Associations Real Property Section on the latest decisions and issues in Hawaii and national land use law. The week before last, they did their thing, and the HSBA kindly recorded it for those of you who couldn't be there. 

Well worth watching or listening. 

Mark Your Calendars: The Land Use Institute Is Returning - February 1-2, 2017, Miami

 

After a short absence and a change of lead sponsor (from ALI-CLE, to the American Bar Association's Section of State and Local Government Law), the Land Use Institute is back on.

Download the print brochure here, or visit the LUI web site for more. It will be held February 1-2, 2017, in Miami, Florida, at the Brickell City Centre's Akerman Conference Center, in conjunction with the ABA's Midyear Meeting. One of the best aspects of this program is the registration fee, a mere $300, $250 if you are a judge, an academic, young lawyer, or government attorney (perhaps the best deal in CLE). Register on line here. For those who cannot attend in-person, the LUI will be live-streamed. Register here. 

Planning Chairs Frank Schnidman and Dean Patrica Salkin have assembled a very good faculty and program. Topics include: "Nuts and Bolts of Land Use Practice: Vested Rights and Regulatory Takings: Where Are We Now?," "Public-Private Partnerships," "Climate Change and Resilient Development," "Client Representation: Developer, Government and Citizen Groups," "Regulating Navigable Airspace: The Drones Are Here," "Housing Supply and Affordability: Planning Alternatives and Legal Consequences," and "Community Benefits Agreements, Environmental Justice and Access to Housing." The Annual Richard Babcock Keynote Address will be by Deborah Rosenthal, "From the Ground Up: Unshared Assumptions in Law and Planning." Complete agenda here. 

We'll be speaking on the Vested Rights panel, along with Professor Steven Eagle, Amy Boulris, and Howard Roston.

The faculty list is impressive; all national experts in land use law: Lisa M. Agrimonti, Fredrikson & Byron, P.A., Minneapolis, MN; Cecily T. Barclay, Perkins Coie, LLP, San Francisco, CA; Amy Boulris, Gunster, Miami, FL; Frederick K. Brewington, Hempstead, NY; Mary T. Cagel, Inspector General, Miami-Dade County, Miami, FL; David Callies, Benjamin A. Kudo Professor of Law, University of Hawaii at Manoa, William S. Richardson School of Law, Honolulu, HI; Nadia L. Costa, Miller Starr Regalia, Walnut Creek, CA; Steven J. Eagle, Professor, George Mason University School of Law, Arlington, VA; W. Andrew Gowder, Jr. Austen & Gowder, Charleston, SC; The Honorable Keon Hardemon, Commissioner, District 5, Miami, FL; Neisen Kasdin, Akerman, LLP, Miami, FL; Wendie L. Kellington, Lake Oswego, OR; Victor Marquez, The Marquez Law Group, San Francisco, CA; Dwight Merriam, Robinson + Cole, Hartford, CT; James F. Murley, Chief Resilience Officer, Miami-Dade County, Miami, FL; Ellen F. Rosenblum, Oregon Attorney General, Salem, OR; Deborah Rosenthal, FitzGerald Yap Kreditor, LLP, Irvine, CA; Howard Roston, Fredrikson & Byron, P.A., Minneapolis, MN; Katherine Fernandez Rundle, State Attorney, Miami-Dade County, Miami, FL; Julie A. Tappendorf, Ancel Glink, P.C., Chicago, IL; Benjamin F. Wilson, Beveridge & Diamond, Washington, D.C.; and Steven W. Zelkowitz, Gray/Robinson, Miami, FL. More on the faculty here. 

Miami is pretty nice in February, we hear. Come join us.

2017 Land Use Institute brochure - ABA State & Local Govt Law Section, Miami, Feb 1-2 

Details: ALI-CLE Eminent Domain And Land Valuation Conference - San Diego, January 26-28, 2017

We've teased some of the details on the 2017 ALI-CLE Eminent Domain and Land Valuation Litigation and Condemnation 101 Conference, to be held at the Westin San Diego, January 26-28, 2017, but here are the details you've been waiting for.

This is the "big one," our annual 3-day festival of all things eminent domain, property, takings, inverse condemnation, and just compensation. Truly national in scope, this is the 34th annual edition, and the one conference you must attend. Our 2016 conference in Austin was one of the best in years, and we're on the way to replicating it in 2017, with a great venue in an exciting city. 

Look for the web and printed brochures to show up in your mailboxes, but in the meantime, here are some of the highlights (we'll post more in the next few days):

• Relocation, relocation, relocation: we are featuring two sessions on this important and growing area of law. Our first panel will address the tension between condemnors, property owners, and tenants in securing relocation benefits, and our second will be a case study of an appeal under the Uniform Relocation Act, complete with lessons learned and traps for the unwary. Featuring a slate of experts: David Arnold (Virginia), Janet Handy Bush (Maryland), Kenneth Gindy (Texas), Brian Kunze (Virginia), Jill Gelineau (Oregon), Kelly Walsh (Washington), and Martyn Daniel (Washington). 
• Present and Future Highway Projects: we have several panels on issues related to present and planned highways and other transportation projects. We'll focus on the issues that arise when a highway authority plans to take property but doesn't do so immediately -- where are the lines between planning and taking in those cases? Strategies for property owners in obtaining information from the highway department under public records laws, and the role of federal funding in these and similar cases. Featuring Linde Hurst Webb (Ohio), Matthew Bryant (North Carolina), W. Andrew Gowder (South Carolina), Minming Wu (from the Federal Transit Administration (invited)), and Mark Murakami (Hawaii). 
• Trial and practice insights: we have several panels devoted to the latest strategies from condemnation jury trial experts: how to use experts (appraisers and others) to make your case; how to employ a jury consultant to maximize your results; winning valuation evidentiary issues before and during trial; admitting or excluding the "lowball" offer; and maximizing the property owner's testimony in the just comp phase. With Jeremy Hopkins (Virginia), Mary Nell Bennett (Louisiana), Christian Torgrimson (Georgia), Darius Dynkowski (Michigan and Ohio), Andrew Brigham (Florida), Scott Jenny (California), Justin Hodge (Texas), and Susan MacPherson (Minnesota)
• Inverse and regulatory takings: It's been 25 years since the Supreme Court blockbuster Lucas -- has the sky fallen? With Dwight Merriam (Connecticut), and Luke Wake (California and DC). Where the line is between an exercise of the police power to protect the public, and a taking is something we've been trying to figure out for nearly a century since Pennsylvania Coal. David Breemer (California) and I (Hawaii) will bring you the latest. 

There's a lot more, of course, Reserve your space by registering for the conference here. 

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

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

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

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

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

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

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

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

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

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

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

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Cal App: Vested Rights Are All About Timing

A land use diversion, to take you into the weekend. As land users know, the vested rights and zoning estoppel doctrines are all about timing. When did the government gave the green light" (however that is defined in your jurisdiction), what did the property owner do after that, and when did the government decide "hey, wait a minute, we've changed our mind" about that earlier green light? For more, see this law review article we co-authored a few years ago that highlights these dynamics. Even the title reflects that it is all about timing: "Arrow of Time: Vested Rights, Zoning Estoppel, and Development Agreements in Hawaii."

As we wrote, "These closely-related principles permit the government to retain flexibility in land use planning only if a property owner has not proceeded sufficiently along the development path that it would unconstitutional or unfair to prevent it from completion." 

Well, here's an opinion from the California Court of Appeal that illustrates that principle. In Stewart Enterprises, Inc. v. City of Oakland, No. A143417 (June 23, 2016), the court concluded that a property owner had vested rights to build a crematorium. The court rejected the city's argument that a subsequently-adopted ordinance requiring a conditional use permit for new crematoria prohibited the owner from going forward. 

We won't go into the details of the case, but vested rights mavens will be familiar with the basic tale: the crematorium was okay under existing law, and after purchasing the property, it obtained a building permit from the city. The city's own ordinance provided that after a building permit is secured, "neither the original adoption of the zoning regulations nor the adoption of any subsequent rezoning or other amendment ... shall prohibit the construction ... authorized by said permit."

But crematoria are the type of LULU's that can get neighbors up in arms, which predictably did. Responding to these concerns, the city adopted an interim "emergency ordinance" that required a conditional use permit for new crematoria. This was, the ordinance, noted, "necessary to preserve the public peace, health, welfare or safety ... of the community." Not thinking it fair that it should go get a CUP, the owner sued, alleging, among other things, that its rights had vested.

The trial court and the court of appeals agreed. The city focused its arguments on the police power and the necessity for the CUP requirement, but the court held that the city had not introduced enough evidence that allowing the already-permitted crematorium to go forward would be so detrimental to the public welfare. Slip op. at 10. This really wasn't an emergency, at least an emergency of such magnitude that it would justify stopping the construction. There was no "menace to the public health and safety or a public nuisance." Slip op. at 12. 

The court also rejected the city's claim that the new CUP ordinance "trumped" the permit vesting ordinance, and any rights which the owner gained there. The court held that the city's timing was all wrong. It's not whether the CUP ordinance was a good idea, but whether it was adopted after the owner's rights had already vested:

These argument are misdirected. The determination whether Stewart had a vested right in the building permit “is not made by looking at the effect of the [City’s] subsequent enactments but is made as of the time” Stewart obtained the permit. (Davidson, supra, 49 Cal.App.4th at pp. 647-648.) And under its plain terms, the permit-vesting ordinance conveyed a vested right because it shielded the holder of a lawfully issued building permit from having to comply with any subsequently adopted zoning regulations if such regulations would “prohibit the construction . . . authorized by said permit.”

Slip op. at 8. That's what vested rights are all about. 

Finally, the court also rejected the city's claim that requiring a CUP wasn't a prohibition of the owner's right to build. It didn't ban building, only required the owner to go get another permit. Not so, held the court, "prohibit" here means "to prevent or hinder," and to make the owner go get another permit would certainly do that. It couldn't build the already-permitted crematorium until it did. "The possibility that Stewart could regain the right to build the crematorium if it applied for and was granted a CUP does not change this fact." Slip op. at 10.

Build it, and they will come.  

Final postscript: the city subsequently repealed that "vested rights" ordinance. The City Attorney is on the job, it appears. 

Stewart Enterprises, Inc. v. City of Oakland, No. A143417 (Cal. App. June 23, 2016) 

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Mich App: Forced Employee Contributions To Retirement Fund - Still A Taking

There's a lot of procedural history to digest in the Michigan Court of Appeals' opinion in AFT Michigan v. Michigan, No. 303702 (June 7, 2016), because it is merely the latest in a long string of opinions from that court, and the Michigan Supreme Court, interspersed with the Michigan legislature's attempts to react. The opinion lays it all out, and we won't repeat it here.

The short story is that the legislature adopted a statute which required public school employees to contribute 3% of their salaries to the retirement and health care system. Adding insult to injury, the withholding was labeled as an employer contribution.

The employees sued, alleging a taking among other claims. The court of appeals agreed it was a taking, but while the case languished in the Michigan Supreme Court awaiting discretionary review, the legislature revised the offending parts of the statute. In a different case, the court of appeals upheld the statute, concluding that the revisions to the law "served to remedy the constitutional defects" which the court had identified in the earlier version. The Michigan Supreme Court affirmed. Shortly thereafter, the Michigan Supreme Court vacated the court of appeals' earlier decision and sent the case back to that court to determine whether that case was moot in light of subsequent events. 

The court held that no, it was not moot, and stuck by its earlier ruling, concluding that the statute, prior to its revision, effected a taking, at least while it was in effect. IN other words, the statute was a taking for the period in which it required school employees to contribute 35 of their wages, even though that statute was later amended. 

We're going to skip over the court's Contracts Clause analysis on pages 8 to 11 of the opinion and its substantive due process analysis (pages 14 to 15), and jump straight to the takings analysis. Here's the summary:

• Salaries are "specific funds" in which the employees "unquestionably had a property interest." Slip op. at 12. 
• The court rejected the State's argument that money was somehow a different kind of property than real property (we thought this was settled in Koontz).
• During the time the mandatory withholding was effective, "[t]here is no doubt" that "three percent of plaintiff employees' wages were 'taken' in the dictionary-defintion sense of the word." Id. 
• This was not an assessment of money or a fee (which would not be a taking), but rather a case where the employees "had a contract-based property right in their own wages" that was taken from them. Slip op. at 13. 

Case over (for now?). 

AFT Michigan v. Michigan, No. 303702 (Mich. App. June 7, 2016) 

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Tex App: How To State A Penn Central Regulatory Takings Claim

The plaintiffs in FLCT, Ltd. v. City of Frisco, No. 02-14-00335-CV (May 26, 2016), owned two adjoining parcels in the Dallas-Ft Worth area at the southeast corner what could be a very busy (and therefore profitable) intersection of two parkways. After checking with the city that the restriction in the Commercial zoning which prohibited the sale of beer and wine within 300 feet of a school wasn't going to prohibit such sales if they sold the southern portion of the parcels for a school, the owners did so. The owners and their new southern neighbor the school district executed a development agreement that acknowledged that the sale of alcohol on the remaining parcels was okay. Building permit issued. 

A Racetrac gas/convenience store was what they had in mind. But the City amended the zoning code. And that was enough, apparently, to make the planning department change its mind about allowing the sale of alcohol near a school, which by then was under construction. Racetrac went elsewhere. (As it turns out, "elsewhere" meant on the other side of the intersection, the northwest corner, which is just outside the 300-foot zone, as the above photo reveals.) The owners had more success lining up a 7-Eleven, which also would sell beer and wine. But when they went to the City for final approvals for their new plans, the City demurred. The city told the owners that it always prohibited the sale of alcohol near schools, and that if it had earlier told the owners otherwise, that was a mistake.

The owners sued, claiming a vested right to sell alcohol, and that prohibiting it from doing so was a regulatory taking of its property. The trial court dismissed for lack of jurisdiction, concluding that the case somehow wasn't ripe, and that the owners didn't have a takings claim because the right to sell beer and wine on the parcels wasn't property." You bought the property subject to the limitation, and the city never validly said otherwise.    

The court of appeals' opinion is long (71 pages) and detailed. We won't go into the parts that focus on local government law, but will focus on the takings portion that starts on page 59. There, the court concluded that the owners stated a valid ad hoc regulatory takings claim. The opinion analyzed each of the three Penn Central factors, and concluded that there was enough in dispute that the owners could go forward.

• Character of the government action: The court held that it didn't need to accept the owners' claim that the city intentionally targeted them, but that it was enough that the city's actions enforcing its zoning ordinance denied their allegedly vested use. "Thus, Owners alleged a refusal by the City that impacted their ability to use the Property in accordance with its applicable zoning classification. Whether the City actually had an enforceable first-in-time policy is a factual determination that goes to the merits of Owners’ claims and not the trial court’s jurisdiction." Slip op. at 62.
• Economic impact: The alleged diminution of 46% of value is enough to get by a motion to dismiss. Might or might not be enough to win, but it's enough to go forward. Slip op. at 63. 
• Investment-backed expectations: The court concluded that the regulatory milieu and the owners' knowledge of the applicable restrictions was part of their expectations, but that "Owners presented evidence that both times a purchaser or tenant reached the alcoholic beverage permit application process in conjunction with the planned development set forth in the preliminary site plan application, the City’s stated position that the separation requirements applied caused the prospective purchaser and tenant to back out." Slip op. at 65. The owners weren't required to have already applied for and recieved a permit in order to possess reasonable expectations that they'd be allowed to proceed, only that the governing regulations would allow their use. Slip op. at 66. "Nevertheless, we do not hold that a prior permit held by a property owner is not significant for purposes of this analysis but rather that the fact that a permit had not yet been granted at the time of the alleged taking is not outcome determinative of whether the owner’s investment-backed expectations are reasonable." Id. at 66-67. 

The court reversed the dismissal, and sent the case back for trial. "Although whether a valid takings claim has been alleged is a question of law, here, fact issues exist that must be resolved by a fact finder, including the extent of the economic impact on the Property and whether the City had a first-in-time policy regarding development." Slip op. at 69.

FLCT, Ltd. v. City of Frisco, No. 02-14-00335-CV (Tex. App. May 26, 2016)

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New York Appellate Division: Applying New Workers Comp Provisions Retroactively Is A Taking

First, the good part of the recent opinion issued by the New York Supreme Court Appellate Division, First Department (dun dun) in American Economy Ins. Co. v. New York, No. 16095 (Apr. 14, 2016):

Plaintiffs also established that the amendment, as applied retroactively, violates the Contract Clause of the US Constitution because it retroactively impairs an existing contractual obligation to provide insurance coverage “[w]here *** the insurer does not have the right to terminate the policy or change the premium rate” (Health Ins. Assn. of Am. v Harnett, 44 NY2d 302, 313 [1978] [internal quotation marks omitted] [asterisks in original]; see US Const, art I, § 10, cl 1). Defendants failed to show that the impairment is “reasonable and necessary to serve” “a significant and legitimate public purpose *** such as the remedying of a broad and general social or economic problem” (19th St. Assoc. v State of New York, 79 NY2d 434, 443 [1992] [internal quotation marks omitted] [asterisks in original]). Indeed, the legislation’s stated purpose of preventing a windfall to insurance carriers was based upon the erroneous premise that premiums already cover this new liability.

Retroactive application would also constitute a regulatory taking in violation of the Takings Clause (see US Const Amend V; NY Const, art I, § 7[a]; Eastern Enterprises, 524 US at 528-529 [“it imposes severe retroactive liability on a limited class of parties that could not have anticipated the liability, and the extent of that liability is substantially disproportionate to the parties’ experience”]).

Plaintiffs have therefore established that the amendment, as applied retroactively to policies issued before October 1, 2013, is unconstitutional.

Slip op. at 13-14.

New York state amended its workers compensation statutes which since 1933 had provided for a special fund to cover claimants whose claims were closed, and then later reopened. The fund -- appropriately titled the "reopened case fund" -- was funded by assessments against the insurance companies, and insurance companies relied on the existence of the funds when they established their premiums.

In 2013, New York amended the statute to close the reopened case fund to newly reopened claims (say that three times), which meant that any reopened claims that would have been transferred to the reopened case fund would become the obligation of the insurance carriers.

The insurance companies, unhappy because the premiums which they had charged to employers before the amendment did not account for their future liability for reopened claims, sued (presuming that the reopened case fund would cover those claims). They asserted the amendments imposed on them additional liability retroactively, which they claimed was a taking and impaired their existing contracts. 

As noted above, the Appellate Division agreed. It rejected the state's argument that this was just one of those economic regulations, and the court should as a consequence wash its hands of the matter. The court held this was the legislature imposing retroactive liability, or more precisely, the legislature "retroactively deprived them of the entirety of the benefit of [the] right [to transfer eligible cases to the reopened case fund] and created a new class of unfunded liability." Slip op. at 12.

Is the Appellate Division's opinion the last word on this issue? We're guessing not.   

American Economy Ins. Co. v. New York, No. 16095 (N.Y.A.D. Apr. 14, 2016)

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Hadacheck Revisited: The More Things Stay The Same Dep't...

Earlier this week, we posted our visit to the site of the U.S. Supreme Court's decision in Hadacheck v. Sebastian, 239 U.S. 394 (1915). It's been over 100 years since that case was decided by the Court, but to Hinga Mbogo, the Dallas auto mechanic profiled in the above video from the Institute for Justice, 2016 sure must seem like 1915.

The more things change...

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Hawaii Federal Court: Get Ready For Trial On Lucas And Penn Central Takings Claims

As we noted here ("Latest On The Latest Hawaii Takings Case: Unconstitutional Conditions, Statutes Of Limitations, And Vested Rights") the U.S. District Court for the District of Hawaii is considering a regulatory takings case (removed by the defendant State of Hawaii from Hawaii courts) involving a stalled development on the Big Island.

At the hearing last month, District Judge Mollway stated she was inclined to grant a part of the State's motion for summary judgment and deny the rest, and that she would issue a formal ruling by the end of the month. In this order, filed on the last day of an extended February, the court as promised issued its decision. 

Bottom line: the plaintiff's takings claims (Lucas and Penn Central) are going to trial, the balance of the remaining claims (vested rights, etc.) are gone.

This case came about after a property owner -- the developer of the Aina Lea project on the Big Island -- challenged the State Land Use Commission's reclassification of Aina Lea's land, just north of the Waikoloa beach area, from urban to agriculture. The owner also challenged the imposition of an affordable housing requirement. In the words of an order by the court last year, "Plaintiff Bridge Aina Lea, LLC ('Bridge'), the owner of the parcel, claims that, in reclassifying the land, the Commission and certain commissioners violated Bridge's rights under the United States Constitution, the Hawaii Constitution, and various Hawaii laws." Order at 1-2. For more detail on the claims, see this post, "Guest Post: Federal Courts Flashback - Takings And Vested Rights Challenge To Land Use Commission." 

The litigation began as two lawsuits originally filed in state court in the Third Circuit. The first was an original jurisdiction civil rights lawsuit against the State Land Use Commission which originally sought, among other things, just compensation for the taking of the right to develop its property. The other case was an administrative appeal under the Administrative Procedures Act from the LUC's decision.

The State removed the civil rights lawsuit to U.S. District Court in Honolulu and promptly moved to dismiss, and this portion of the case nearly caused us to flash back to our Federal Courts class in law school, since it raised a host of procedural questions such as the effect of removal, whether certain defendants are "persons" under 42 U.S.C. § 1983, whether the federal court must have abstained from addressing the federal takings claim, whether there is a state damage remedy for deprivation of constitutional rights, and zoning estoppel under Hawaii law, among others. The federal courts (District and Ninth Circuit) delayed making any decisions pending the outcome of the administrative appeal as it wound it way up through the state court appeals process.

Eventually, the Hawaii Supreme Court held the Commission was wrong when it reverted the land to its previous agricultural classification, but only because it did not comply with the requirements of state law (the Commission did not make specific findings of fact as required by statute). The court also rejected owner's state constitutional claims, and in a footnote, it arguably decided the federal constitutional claims, which had been reserved for the federal lawsuit, when it held the conditions were "valid."

The federal case, which by then was in the Ninth Circuit -- which had held off its decision pending the ruling by the Hawaii Supreme Court -- was sent back to the District Court, which in late 2015 in this order, got rid of most of the federal case. The only claims left unresolved were the property owners claim for just compensation and damages for the temporary taking of its right to develop the property, and a claim for damages for the owner's vested rights claim.

There's a lot going on in the District Court's order granting in part the State's motion for summary judgment:

• The owner's Nollan/Dolan/Koontz unconstitutional condition claim is barred because the Hawaii Supreme Court already ruled on that issue in Footnote 17, when it noted that given the "broad authority [provided to the LUC under Hawaii statutes] and Bridge's representations to the LUC, the affordable housing conditions and its included deadline were valid. Bridge cites no authority that would prevent the LUC from imposing benchmarks or deadlines on development schedules." The court didn't address Nollan or Dolan in the footnote, but the owner's briefs had addressed the cases, which means "[t]he Hawaii Supreme Court, therefore, had occasion to consider Bridge's arguments regarding Nollan and Dolan, was ultimately unpersuaded, and, in characterizing the affordable housing condition as "valid," found it constitutional." Slip op. at 12. 
• But that leaves out the rest of the sentence, in our view: it is pretty clear to us from our reading of Footnote 17 that the Hawaii Supreme Court ruled that the LUC's imposition of the affordable housing condition was "valid" under the 'broad authority" in Haw. Rev. Stat. § 205-4(g), which "gives the LUC broad authority to impose conditions, including those necessary 'to assure substantial compliance with representations made by the petitioner.'" 
• To us, it's a real stretch to say that the Hawaii Supreme Court decided the constitutionality of the affordable housing condition with this language, and was only deciding the "validity" of the condition in relation to the LUC's statutory authority. Of course, even if the LUC has the authority to do something, it is another matter entirely whether it is constitutional for it to do so. Especially where the issues were raised in a separate lawsuit, and could not have been raised in an administrative appeal, since the LUC does not have the authority to determine whether its enabling statutes are constitutional. So count us as unconvinced.
• The District Court also clarified that the unconstitutional conditions doctrine isn't really a takings theory, but one where the government cannot require someone to give up a constitutional right in exchange for a discretionary benefit. In the land use context, these claims look a lot like takings claims because the right that the owner is being asked to surrender is the right to just compensation. But the property owner here made actual takings claims, "based on the LUC's decision to reclassify the property in issue as agricultural," and not on the imposition of an affordable housing condition. Slip op. at 14.
• Thus, the owner's claims are truly takings claims -- either a Lucas wipeout, or a Penn Central regulatory taking -- and not unconstitutional conditions claims. And since the State didn't really address these claims in its motion for summary judgment, they're going to trial. 
• The court also rejected the State's statute of limitations argument, which asserted that the takings claims accrued when the conditions were imposed or the land was classified. The court, however, concluded that the federal taking only ripened (under Williamson County) when the State denied compensation. And that didn't happen until the owner filed its lawsuit. So the claim ripened at the same time.  
• The court also held that the State of Hawaii's environmental study law, Haw. Rev. Stat. chapter 343 (our EA/EIS requirement) isn't a "background principle" of law that would preclude the owner from having a property interest in a parcel regarding which an EA/EIS has not been conducted. The State had argued that there was no taking for not allowing development because, hey, the owners failed to get an EIS, and that's the reason they couldn't build, not us. 
• The court concluded that the State did "not carry [its] burden, as they offer no support for their argument that '[t]he requirement of obtaining a valid EIS was a background principle of Hawaii property law.'" Slip op. at 23. The requirement to secure an EIS in not "the type of proscriptive regulation that qualifies as a background principle of state nuisance or property law under Lucas. Notable, Haw. Rev. Stat. § 343-5 is not a prohibition on land use based on principles of nuisance or property law. The statute instead merely requires that an owner seek an assessment of the proposed use's potential environmental impact. Lucas does not automatically preclude a landowner from recovering under a takings claim just because other regulations or requirements must be satisfied." Id.  
• Finally, the court granted summary judgment to the State on the owner's vested rights claims, which sought damages as a remedy. The court relied on a Hawaii Supreme Court decision, Allen v. City and Cnty of Honolulu, 58 Haw. 432, 571 P.2d 328 (1977), which held that the "builder's remedy" (an injunction) is the only remedy available to a landowner for a vested rights claim. As we've written before (see Arrow of Time: Vested Rights, Zoning Estoppel, and Development Agreements in Hawaii, 27 U. Haw. L. Rev. 17 (2004)), after First English, a state court cannot deny a compensation remedy if it precludes a landowner from making all beneficial use of its property, even if the prohibition is temporary. The District Court concluded that that requirement was satisfied here by the owner's viable federal constitutional takings claims. "[V]ested rights," on the other hand, "support a separate theory under state common law." Slip op.a t 26. Therefore no separate damage remedy for such claims.   

So absent a settlement, there's going to be a federal court trial on Lucas and Penn Central takings claims regarding whether the State must pay compensation and damages for the temporary prohibition on the owner's use of the land.

Will we follow along? Great advocates, cutting-edge issues, and a court familiar with the law? You bet we will. 

Order Granting in Part and Denying in Part Motion for Summary Judgment, Bridge Aina Lea, LLC v. State of Ha...

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Upcoming Events And CLE's - Appellate, RLUIPA, Sharing Economy, And More

Here are some upcoming events in which you may be interested, in chronological order:

• Sharing Economy: this Friday, October  16, 2015, from 1:00 pm - 2:30 pm ET: "Is Sharing Really Caring? Part I: The Law of Transportation Sharing: Uber, Lyft, and the Sharing Economy." This is a webinar-format program, a follow up the in-person program which we moderated at the recent ABA Annual Meeting. This program features expert presenters from the National League of Cities, the Liberty Justice Center, the Goldwater Institute, Tampa International Airport, and the University of Idaho School of Law. And yes, we will touch on takings issues. A timely program on a very important topic. Details and registration information here. 
• RLUIPA: next Thursday, October 22, 2015, our colleagues Evan Seeman (RLUIPA Defense Blog) and Dan Dalton are on the panel of the American Planning Association's program on "Planning for Religious Uses Under The Religious Land Use and Institutionalized Persons Act." The program "will explain several different strategies and approaches that can be used to avoid RLUIPA litigation, including through revisions to local zoning codes and accommodating religious uses when appropriate." More here. 
• Appellate: next Friday, October 23, 2015, from 8:30 am - 10:45 am Hawaii Time, I will be joining a a panel of fellow appellate practitioners at the Hawaii State Bar Association's annual meeting at the Hawaii Convention Center for "Appellate Practice Pointers and Brief Writing Seminar."  We have a good chunk of time, so we will be able to cover a lot of ground on civil and criminal appeals, how to prepare the record, and do's and don'ts for appellate work in Hawaii state courts. Immediately following the practitioner module, Chief Justice Recktenwald, Associate Justice Pollack, and Court of Appeals Judge Nakamura will hold a session on the view from their side of the lectern. More information here. Register here.  
• Environmental - Climate Change: finally, on Friday, November 6, 2015, I'm the planning co-chair, along with Tom Lindley of Perkins Coie's Chicago and Portland offices of "Rising Tides: Climate Change and the Economic and Business Impact in Hawaii," an all-day program at the Hilton Waikiki Beach hotel. This isn't your typical "climate change" program and we're really not going to be debating the science. Frankly, it doesn't matter whether it is real or not, or caused by man or not, because governments are adopting regulations that property owners and businesses are going to have to comply with, regardless. So we've assembled an expert national and local faculty and an agenda to give a crash course about the science, the government reactions, the need to protect property rights in the process, and practical matters like insurance, compliance, and business planning.

I hope you can join us for one or more of these programs.

Takings International - Canada, Philippines ... And More

We've been remiss in updating for the past few days, caught up in the whirlwind that is the ABA Annual Meeting. But that's now over and we can finally return to our usual blogging routine. 

First up, News of the World:

• The Supreme Court of Canada has a new Justice, Russell Brown. He's a blogger (well, former blogger), and property guy. And friend of this blog: back when Justice Brown was lawprof Brown at the University of Alberta a few short years ago, he spoke at a panel we moderated at an ABA conference in Miami, in which we explored the ways that different countries approached what we call "regulatory takings." We wonder whether the addition of Justice Brown will have us looking more at that court's property rulings in the future. We hope so.  
• Will the Philippine Supreme Court order a half-built skyscraper to be torn down? Anyone who has ever toured Manila will almost certainly have visited the monument honoring the Philippines' "national hero" Jose Rizal. In a case recently argued over several days, the Justices of the Philippine Supreme Court are considering whether Torre de Manila, a 46-story skyscraper being built on private property near to the monument should be de-constructed simply because it mars the views from and to the memorial. Check out the photos. According to this story, "Torre de Manila is clearly visible behind the monument, and can easily steal the attention of a visitor away from the monument which, up until the construction, had uncontested control over the sightline." A fascinating case to follow for those of us in jurisdictions which do not recognize view planes or sight lines as protected from interference, as may (or may not) the Philippine Constitution. And what about vested rights? Even in California, a half-built skyscraper might be deemed to be "vested." Add in the Philippine Constitution's protection of private property rights, and you've got a legal battle that has no obvious solution.
• Which brings us back to Takings International. From time to time we like seeing how the other half lives (see here, our review of Australia's compulsory acquisition movie "The Castle," and here for our review of a docfilm about Donald Trump and Compulsory Purchase Orders in Scotland). And a few years ago, our Section of the ABA published a book which details how various countries around the world approach what we call "regulatory takings." If that sort of thing floats your boat, check it out.

Now, back to our regularly scheduled programming.

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9th Circuit: Fee To "Activate" Workers' Comp Lien Not A Taking - The Liens Are Not Property

There's apparently a huge backlog in California of liens which workers' comp medical providers file to seek payment for services they've provided to injured workers.

These are liens possessed by service providers for workers whose employers declined to provide treatment on the ground it is not work related. In those cases, the worker may seek treatment on her own, and if the injury is later determined to be covered by workers' comp, the employer is liable for payment. The service provider cannot seek payment from the injured employee, and is limited to filing a lien on the workers' comp case. The lien filing gives the provider standing in the workers' comp case to protect its interests. The rights of a lien holder are contingent on the worker prevailing on her claim that the injury is work-related.  

In response to the huge backlog in processing such liens, the legislature adopted a $100 and $150 "activation fee" for liens that were already filed and pending (the fee varies, based on the date of the lien filing). The purpose of the activation fee is "to deter the filing of liens generally, and particularly to deter the filing of frivolous liens." If the activation fee isn't paid, the lien is "dismissed by operation of law." The lien holder may recover the activation fee in certain circumstances. 

In Angelotti Chiropractic, Inc. v. Baker, No. 13-56996 (June 29, 2015), the Ninth Circuit held this scheme did not work a taking, because the liens were not property. Generally speaking, liens are  considered property, but here, the workers' comp liens were not "vested," and thus were just contingent future interests. Only after the workers' claims are "reduced to final judgment" does the lien holder have any rights. The Ninth Circuit relied on California law, which treats these liens as "inchoate" rights, and only become worth something when the worker wins her case.

"Thus, because the right to workers' compensation benefits does not vest until reduced to a final judgment, it would be illogical to reach a different conclusion as to the liens." Slip op. at 15. Yes, liens are generally considered property protected by the Takings Clause, but in each case the Supreme Court has considered, the lien in question was secured by specific property. See, e.g, one of our favorite cases, Armstrong v. United States, 364 U.S. 40 (1960), a case about a lien on a boat, in which the Supreme Court held that a seizure of the boat was also a seizure of the liens. 

The court also rejected the plaintiffs' due process and equal protection claims. 

Angelotti Chiropractic, Inc. v. Baker, No. 13-56996 (9th Cir. June 29, 2015)

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Michigan: Voluntary "Giving" By Public School Employees To Fund Failing Retiree Health Benefits Is Not A Taking

In AFT Michigan v. State of Michigan, No. 148748 (Apr. 8, 2015), the Michigan Supreme Court upheld a state statute which mandated a 3% reduction in public school employees' salaries (to fund a failing school employee retiree health care system), and concluded it was not a taking because it was a voluntary giving by the employees. They were not required after all, to provide the 3% contribution, and could avoid the reduction and maintain their present salary levels by opting out of their own publicly-funded retirement health care.

There's a lot more to the statute and the unanimous opinion of course -- including a rejection of a Contracts Clause claim -- but the heart of the takings analysis starts on page 21:

Voluntary healthcare contributions do not violate Const 1963, art 10, § 2 and US Const, Ams V and XIV because, as a general proposition, the government does not, for constitutional purposes, "take" property that has been voluntary given. Here, the state is offering a retirement benefit-- publicly subsidized healthcare -- to public school employees who serve for the requisite period of time. The state is not obligated to provide such a benefit to any of its public school employees, but rather has made an affirmative decision to do so. It is therefore entirely reasonable for the state to request in turn that any eligible employee who desires access to this benefit should help to pay for it.

Slip op. at 21-22 (footnote omitted). 

The court also rejected an unconstitutional conditions claim (which "essentially disputes the Court of Appeals' conclusion that retiree healthcare contributions are made voluntarily"). Relying on Dolan, the court concluded the 3% option wasn't truly "coercive." 

The state here is not coercing public school employees into giving up their rights under Const 1963, art 10, § 2 and US Const, Ams V and XIV, but is merely seeking, as a condition for receiving access to retiree healthcare benefits, the assistance of public school employees in paying for these benefits.

Slip op. at 30. Held: there's a nexus and proportionality. 

A decision well worth reviewing in detail. 

AFT Michigan v. State of Michigan, No. 148748 (Mich. Apr. 8, 2015)

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Amici Brief: Property Owners Have Right Of Direct Access To Highways That Can't Be Regulated Away

Here's the amici brief on behalf of Central Oregon Builders Association, Oregonians in Action, and Owners' Counsel of America in a case being considered by the Oregon Supreme Court, State of Oregon v. Alderwoods (Oregon), Inc., No. S062766. 

In an eminent domain action to improve Highway 99W in Tigard, Oregon, the DOT condemned Alderwoods' two driveways, which had been in place since the 1930's, which provided direct access to and from the property to the highway (approximate location red arrow). After it filed the action, however, the DOT purported to administratively eliminate the driveways because they were too close to the 99W/217 intersection to be safe. The trial court agreed with the DOT that the post-condemnation elimination meant that Alderwoods did not have a property interest in the two direct access driveways. The court prohibited Alderwoods from presenting evidence to the jury of the loss of value to its remaining property due to the loss of its two Highway 99W driveways. 

As we posted here ("Oregon App: Your 'Common Law' Right To Access A Street Can Be Regulated Away, So You're Owed Nothing If It's Taken"), a majority of the twelve Oregon Court of Appeals judges could not reach a consensus, and affirmed by an equally-divided court. Five judges concurred in the judgment and would have held that Alderwoods possessed a property interest in direct Highway 99W access, but that the DOT's post-complaint administrative action eliminated that interest under regulatory takings principles. One judge concluded that Oregon's common law right of "access" to a highway from an adjacent property is only a right of indirect access, and because the DOT's elimination of the driveways did not totally landlock the property because drivers could still enter and exit to the highway by a driveway on Warner Avenue (blue arrow), noting was taken from Alderwoods.

The photo below is the property in its "after" condition, showing the  solid curb/sidewalk on Highway 99W, and the remaining ingress/egress on Warner. 

Six judges dissented, and concluded that Alderwoods possessed a right of direct access that was taken by the DOT, and that the jury should have been allowed to consider its evidence of loss of value. 

Here's the Summary of Argument from the OCA amici brief:

For more than half a century, this Court has recognized that property owners enjoy a right of direct access to abutting highways that “cannot be extinguished without compensation.”  Highway Com. v. Burk, 200 Or 211, 228, 265 P2d 783 (1954).  Under both the state and federal constitutions, such established property interests cannot simply be regulated out of existence, especially by a condemning agency during the course of its eminent domain lawsuit to take the property.

This case poses the question whether Defendant Alderwoods (Oregon), Inc., (“Alderwoods”) possessed compensable property interests in two points of direct access from Alderwoods’ property to Highway 99W (the “access points”), which undisputed evidence in the record shows had existed lawfully since at least 1936.  If Alderwoods did possess compensable property interests in those two access points, then defendant was entitled to have a jury determine whether the taking of those two access points diminished the value of defendant’s property.

The Court of Appeals, sitting en banc, failed to reach agreement on that question and affirmed by an equally divided court.  ODOT v. Alderwoods (Oregon), Inc., 265 Or App 572, 336 P3d 1047 (2014).  The court produced two concurring opinions which would have held that Alderwoods did not have compensable property interests in the two access points.  Id. at 574 (Armstrong, J., concurring); id. at 584 (Sercombe, J., concurring).  The concurring judges could not agree on a supporting rationale, however.  Id.

The rationales set out in the Court of Appeals’ concurring opinions do not withstand scrutiny.  Judge Armstrong concluded that ODOT’s decision to administratively close the two access points—made only after ODOT initiated condemnation proceedings and took possession of the property—deprived Alderwoods of its preexisting and long-recognized access rights, but without entitling Alderwoods to any compensation.  See id. at 582-83 (Armstrong, J., concurring).  In other words, Judge Armstrong held that, although Alderwoods may have had compensable property interests in the two access points at the time that ODOT initiated condemnation proceedings and took possession of the property, Alderwoods lost those interests when ODOT—permissibly, in Judge Armstrong’s view—regulated them out of existence.  Id.

Judge Armstrong’s concurrence runs afoul of constitutional law in at least three respects.  First, Judge Armstrong’s opinion ultimately holds that preexisting property rights permissibly may be extinguished administratively without payment of just compensation; in other words, Judge Armstrong’s conclusion approves the taking of private property by legislative fiat without just compensation.  Cf. Koontz v. St. Johns River Water Mgmt. Dist., __ US __, 133 S Ct 2586, 2598-99, 186 L Ed 2d 697 (2013) (government commits a “per se taking” if it “seize[s]” an existing property interest); cf. also Thornburg v. Port of Portland, 233 Or 178, 185, 376 P2d 100 (1962) (Article I, section 18, of the Oregon Constitution requires compensation when government action extinguishes preexisting property interest).

Second, in holding that Alderwoods lost its property rights after ODOT had initiated condemnation proceedings and taken possession of the property, Judge Armstrong’s concurrence violates the principle of eminent domain law that condemned property is valued at the time that the condemner initiates a condemnation action or takes possession of the property, whichever occurs first.  State of Oregon v. Lundberg, 312 Or 568, 574, 574 n 6, 825 P2d 641 (1992).  Third, and finally, in holding that ODOT permissibly could administratively extinguish Alderwoods’ property interests in the two access points after initiating condemnation proceedings and taking possession of the property, Judge Armstrong’s concurrence violates the federal constitutional principle prohibiting a condemner from actively diminishing the value of property after it has committed to the condemnation.  See United States v. Virginia Elec. Co., 365 US 624, 636, 81 S Ct 784, 5 L Ed 2d 838 (1961) (articulating that principle).

Judge Sercombe’s concurring opinion also fails to withstand scrutiny.  Judge Sercombe starts from the incorrect premise that property owners possess only a “generalized” right of access to public highways, rather than possessing a direct right of access when the property directly abuts a public highway.  See Alderwoods, 265 Or App at 609 (Wollheim, J., dissenting) (explaining that “Judge Sercombe’s position is contradicted by” the case law).  From that flawed premise, Judge Sercombe concludes that Alderwoods has no compensable property interests in the two access points providing direct access to Highway 99W, because defendant also has indirect access to Highway 99W by way of SW Warner Avenue.  Because Alderwoods had a long-recognized property interest in the ability to directly access Highway 99W, however, Judge Sercombe’s concurrence also sanctions the unconstitutional taking of private property without compensation.

The fractured analyses in the Court of Appeals’ concurring opinions fail to recognize long-established principles of Oregon and federal constitutional law and, if accepted by this Court, will jeopardize the rights of every property owner in Oregon.  By contrast, Judge Wollheim and five other judges would have held that Alderwoods possessed a recognized and established property interest in direct access to Highway 99W, and that the jury should be permitted to determine the extent to which the loss of that property interest diminished the value of Alderwoods’ remaining property.  Alderwoods, 265 Or App at 592 (Wollheim, J., dissenting).

Amici respectfully submit that Judge Wollheim’s dissenting opinion sets out the correct analysis.  This Court should adopt the reasoning of the dissenting opinion, reverse the trial court’s judgment, and remand the case to allow the jury to consider evidence of the impact of the loss of Alderwoods’ two access points on the value of Alderwoods’ remaining property.

At least one other amicus brief has been filed, and we'll post that shortly along with the merits brief of the property owner. Definitely a case to watch. 

Brief on the Merits of Amici Curiae Central Oregon Builders Ass'n, Oregonians in Action, and Owners'...

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What Were They Thinking, Part II: DOT Can't Take Advantage Of "Scrivener's Error" To Avoid Eminent Domain

The Wisconsin Court of Appeals' decision in Somers USA, LLC v. Wisconsin Dep't of Transportation, No. 2014AP1092 (Mar. 25, 2015), is the second case we're posting today that has us asking -- just what was the government thinking?

This kerfuffle resulted from the DOT trying to take advantage of Somers' scrivener's error, made when Somers recorded a map (known as a "CSM") that stated it was "dedicating" some of its property for a future state highway, rather than merely "reserving" it for highway use. No one disputed that this was an error, and no one doubted that Somers had not intended to donate its property for the highway. 

But the DOT said "thank you very much," and it went ahead and built its highway without condemning the land or paying compensation.

Somers' inverse condemnation claim followed, as you might expect. The DOT conceded that the "dedication" language was "no doubt an error" and that Somers had not intended to convey title to the state. The trial court ordered the DOT to pay.

The Wisconsin Court of Appeals affirmed. It rejected the DOT's argument that the mistake conveyed title, and thus the state owned the land in fee simple and didn't need to take it, because when a dedication is recorded, it becomes effective. Not so, held the court. The procedure for actually dedicating property is set out in statutes -- with the critical event being an agency's formal approval of the dedication -- and besides, the donor must have an intent to dedicate, which Somers did not. But the DOT was not through:

Undeterred by the evidence that no dedication was ever intended or approved, the State proffers the absurd argument that it can still take Somers’ property without compensation as it was entitled to rely on an invalid dedication in a CSM. As the circuit court noted, the State’s current position contradicts its earlier statement at the hearing where Kenosha County was dismissed from the case: “If we built erroneously because there was a defective dedication, then we owe” Somers.

Slip op. at 7. 

The court rejected the DOT's estoppel argument (we relied on Somers' error to our detriment), holding that the DOT had not shown detrimental reliance, and even if it had, reliance wasn't reasonable "when doubts were raised about the validity of the dedication." 

Which takes us back to the question we've been asking today: what is up with these type of arguments, and why did the DOT dig in its heels rather than simply pay for what it was taking?  

Somers USA, LLC v. State of Wisconsin Dep't of Transportation, No. 2014AP1092 (Mar. 25, 2015)

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

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

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

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

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

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

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

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

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

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

Slip op. at 28-29. 

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

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

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

Slip op. at 52.

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

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

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A Zoning Due Process Violation From The Land Of Euclid: Owner Can't Lose Nonconforming Use By Actions Of Tenant

Check out State ex rel. Sunset Estate Properties, LLC v. Village of Lodi, No. 2013-1856 (Mar. 10, 2015),  a case in which the Ohio Supreme Court held that a local zoning ordinance was unconstitutional on its face.

The Village's zoning code, adopted in 1987, banned manufactured home (trailer) parks. Of course, the ordinance could not ban those parks already in existence, which were allowed as nonconforming uses. Sunset Estates was one such park.

The ordinance also provided that if a nonconforming use was discontinued for six months, that was evidence of the owner's intent to abandon the nonconforming use:

Whenever a nonconforming use has been discontinued for a period of six months or more, such discontinuance shall be considered conclusive evidence of an intention to legally abandon the nonconforming use. At the end of the six-month period of abandonment, the nonconforming use shall not be re-established, and any further use shall be in conformity with the provisions of this Zoning Code. In the case of nonconforming mobile homes, their absence or removal from the lot shall constitute discontinuance from the time of absence or removal.

Slip op. at 4 (quoting Lodi Zoning Code 1280.05(a)).

"In reliance on this provision, when a tenant left one of appellees’ mobile-home-park lots and the lot was vacant for longer than six months, Lodi would refuse to reconnect water and electrical service when a new tenant wanted to rent the lot." Slip op. at 2. This meant that the owners of the Sunset Park were not able to rent those lots.

They sued, alleging that it was unconstitutional that they lost their nonconforming use rights to a portion of their property by virtue of their tenants' acts. They sought a declaratory judgment that the ordinance was facially unconstitutional (due process), and for Ohio's version of inverse condemnation (under Ohio procedure, a property owner alleging a taking does not sue for damages in inverse, but seeks a writ of mandamus compelling the government to institute eminent domain proceedings). 

Long story short: the Ohio Supreme Court held it is a due process violation. There isn't much analysis in the opinion, and this is about all Their Honors had to say:  

The Fourteenth Amendment to the United States Constitution and Article I, Section 16 of the Ohio Constitution provide that no person shall be deprived of life, liberty, or property without due process of law. The plain language of the last sentence of the ordinance imputes a tenant’s abandonment of a lot within a mobile-home park on the park’s owner. In so doing, the provision impermissibly deprives the owner of the park of the right to continue the use of its entire property in a manner that was lawful prior to the establishment of the zoning ordinance. Pursuant to the due-process clauses of the United States and Ohio Constitutions, this impermissible deprivation of the vested private-property ;rights of mobile-home-park owners defeats Lodi’s argument that the provision is rationally related to its legitimate goals of protecting property values and encouraging development. Thus, the last sentence of the ordinance is an unconstitutional deprivation of a property right and may not be applied.

Slip op. at 7.

The key sentence in that paragraph is the second one, where the court appeared offended that the tenant's abandonment is imputed to the park owner.   

State ex rel. Sunset Estate Properties, LLC v. Village of Lodi, No. 2013-1856 (Ohio Mar. 10, 2015)

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9th Cir: No Need For Pullman Abstention In Aina Lea After Hawaii Supreme Court Ruling

Last we checked in with the Bridge Aina Lea case, the Ninth Circuit said it would hold off on a decision until the Hawaii Supreme Court ruled in the associated state court litigation (see 9th Cir Says "Let's Wait" On Hawaii Supreme Court To Rule In Bridge Aina Lea).

This is the federal court side of a case in which a developer is suing the State Land Use Commission (and certain Commissioners in their individual capacities) after the LUC reclassified its land on the Big Island from urban to agricultural use. Aina Lea filed two actions in state court: an administrative appeal under the administrative procedures act, and an original jurisdiction civil rights complaint. The defendants removed the latter action to federal court. The District Court, however, abstained. After oral arguments in the Ninth Circuit, the panel withdrew the case from submission to allow the Hawaii Supreme Court to make its ruling. Meanwhile, the state case chugged forward, and late last year, the Hawaii Supreme Court issued its opinion. After that, we've been waiting for the other shoe to drop, and today it did.

In this short memorandum opinion, the Ninth Circuit panel sort of affirmed ("While this case originally met Pullman’s requirements . . ."), but concluded that the issue was pretty much mooted by the Hawaii Supreme Court's ruling: 

After the district court’s decision, and after oral argument to this court, the Supreme Court of Hawai‘i held that the LUC erred when it reclassified the parcel as agricultural without following the state’s procedural requirements under Section 205-4 of the Hawai‘i Revised Statutes.

Slip op. at 3. The court remanded the case back to the District Court for "appropriate action" and a decision "in the first instance whether the LUC commissioners sued in their individual capacites are entitled to some form of judicial immunity." Slip op. at 4.

Bridge Aina Lea, LLC v. Chock, No. 12-15971 (9th Cir. Jan. 23, 2015) (Memorandum)

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Our Final 2014 Opinion Post: Vested Rights In North Carolina

Here's that last case in our 2014 opinion queue, from way back in July. It's also coincidentially the 2,500th post on the blog.

In Sawn Beach  Corolla, LLC v,.County of Currituck, No. COA13-1272 (July 1, 2014), the North Carolina Court of Appeals considered vested rights and takings claims in a fact pattern than streched back decades. 

In 1966, the owners purchased 1400 acres for residential development. In 1969, the owners recorded a subdivision plat, to make both residential and commerical uses. The county had no zoning ordinance in place at that time. The owners spent $425,000 on preliminary work and infrastructure, such as surveying, engineering and grading. Big bucks in 1960's dollars.

The county adopted a zoning ordinance in 1971, zoning the property for "RO2," which prohibits most businesses, including those contemplated by the owners. "Nevertheless, plaintiffs continued to believe that they would be allowed to commerically develop their property." Slip op. at 4. 

They were wrong. Flash forward to 2004. The owners sought to develop the commerical portions of the land, to build a convenience store, offices, a post office, and a restaurant. The county said no. Three years of trying to convince the county otherwise was to no avail. The owners filed suit. The trial court dismissed for failure to state a claim, apparently accepting the county's argument the owners had not exhausted administrative remedies, the defendants had immunity, and the statute of limitations had expired. You know the drill.

The court of appeals reversed the dismissal in part, holding that the owners exhausted their administrative remedies, and "sufficiently pled" their vested rights claims. There was no need to avail themselves of more administrative procedures, "because the Currituck County Board of Adjustment would not be authorized to hear plaintffs' common law vested rights claim." Slip op. at 10. The role of the agency is only to interpret and apply the zoning ordinance and whether to grant a variance. These type of boards do not have jurisdiction to adjudicate constitutional claims. Seems about right to us. 

As to vested rights, the owners alleged:

their property was not zoned at the time they made their expenditures to prepare the business lots. They have alleged that this use was lawful at the time the expenditures were made and that the expenditures were made in good faith reliance on that fact. They have alleged that they expended over $400,000 on the development. They allege that they are prejudiced by the zoning ordinance because their intended commercial use would not be permitted under the ordinance.

Slip op. at 17-18. That was enough, because under North Carolina decisional law, a vested rights claim is based on substantial expenditures made in reliance on a lack of zoning.

The court also concluded that the defendants were not immune from the federal constitutional claims (section 1983, equal protection, due process). 

The court upheld the dismissal of the owners' claim that the county had to allow business development of the property because for years it had taxed the property as business property. 

Sawn Beach Corolla, LLC v County of Currituck, No. COA13-1272 (N.C. App. July 1, 2014) 2014

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There's one citation notably missing from the opinion of the Texas Court of Appeals in Anderton v. City of Cedar Hill, No. 05-12-00969-CV (Aug. 22, 2014): Williamson County.  

This was case where in response to the city's petition that the Anderdons' use of their property was illegal, they counterclaimed that they had nonconforming use rights, that the city's petition violated their vested rights, and resulted in a taking of their property. The trial court granted the city summary judgment on the counterclaim, holding that the owners did not present evidence of their nonconforming use status, and that their inverse condemnation claim was not ripe because they had not pursued available administrative remedies under the zoning code.

The court of appeals reversed. It concluded that the owners did submit enough evidence to get past a summary judgment motion that their use was nonconforming. Most interestingly for our purposes, the court also concluded that their inverse claim was ripe, rejecting the city's argument that the owners had not availed themselves of administrative relief under the zoning ordinance "which would have allowed the City to reach a final decision regarding proposed uses of Lot 5." Slip op. at 12. The court agreed with the owners that the very filing of the petition by the city ripened their claim because it established that the city had reached a final decision on the uses which it would allow. It would have been futile for the owners to try more. 

The heart of the court's ripeness analysis is at pages 12-15, and we recommend you read that part of the opinion in detail. The court engaged in what we view as a very practical and straighforward analysis of the issues, not bounded by the weird formalism or dogmatism we usually see in an application of Wiliamson County. 

If only it were so in all courts. 

Anderton v. City of Cedar Hill, No. 05-12-00969-CV (Tex. App. Aug. 22, 2014)

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Fifth Circuit: Forced Sale Of Home In Bankruptcy Not A Taking Because Bankruptcy Law Preceded Purchase

Continuing our year-end opinion rush, here's Thaw v. Moser, No. 14-40108 (Oct. 9, 2014).

Mr. Thaw sought bankruptcy protection. As part of the process, the trustee was going to sell the house he owned with Mrs. Thaw, who was not bankrupt, and claimed a homestead exemption. 

The Fifth Circuit rejected Mrs. Thaw's claim that selling her interest in the house was a taking. Before 2005, the bankruptcy code allowed a non-debtor spouse to have a compensable interest in a home jointly-owned with the debtor. But amendments to the code in 2005 capped and eliminated the homestead exemption. And since the Thaws purchased their home after 2005, Mrs. Thaw did not have a vested right that was taken.

The court rejected the argument that in Palazzolo v. Rhode Island, 533 U.S. 606 (2001), the Supreme Court eliminated the "notice" argument:

Palazzolo’s narrow exception has no application here. Kernell does not connect the “certain circumstances” identified in Palazzolo to the Bankruptcy Code provisions at issue here. She does not argue that the sale of her interest in the property is “so unreasonable or onerous as to compel compensation,” id., so the trustee’s actions do not fall within any limit imposed by Palazzolo. Just as the Bankruptcy Code protects a non-debtor from gratuitous confiscation, it makes the sale of the property not “so unreasonable or onerous as to compel compensation.” Moreover, the forced sale will not disturb Kernell’s investment-backed expectations. See Palazzolo, 533 U.S. at 617 (considering, in determining whether a taking occurred, “the extent to which the regulation interferes with reasonable investment-backed expectations”). Since BAPCPA was in effect before the Thaws purchased the property, and because the Thaws purchased the property after they had knowledge of the judgment against Stanley, Kernell was on constructive notice of how the Bankruptcy Code would operate in the event of Stanley’s bankruptcy. In sum, the sale of the property is neither a “gratuitous confiscation” nor “so unreasonable or onerous as to compel compensation.”

Slip op. at 8-9. 

Thaw v. Moser, No. 14-40108 (5th Cir. Oct. 9, 2014)

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Guest Post - Hawaii SCT In Aina Lea Case: The Rationales Behind The Opinion

We bring you the latest guest post by colleague Paul Schwind, who has been tracking the issues and arguments that recently led the Hawaii Supreme Court to conclude, in DW Aina Lea Development, LLC v. Bridge Aina Lea, LLC, No. SCAP-13-0000091 (Nov. 25, 2014), that the Hawaii Land Use Commission wrongfully rescinded an earlier reclassification of land (read: "rezoning" to all you non-Hawaii land users).

The oral argument recording is posted above.

We'll post up our thoughts on the decision in a separate post. 

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

Hawaii Supreme Court In Aina Lea: The Rationales Behind The Opinion

by Paul J. Schwind*

Robert has asked me to summarize the rationales behind the holdings in the Hawaii Supreme Court’s recent opinion in DW Aina Lea Development, LLC v. Bridge Aina Lea, LLC, No. SCAP-13-0000091 (Nov. 25, 2014), which he summarized the following day, outlining the litigation history of the state case below in the Land Use Commission and the agency appeal in the Hawaii Third Circuit Court. I last reported on the litigation in a post on June 24, 2014, about the status of the federal case (involving whether LUC commissioners have quasi-judicial immunity from federal law damages claims, and whether the federal court should abstain from a case also involving state law issues). Counsel for the parties now have 14 days from November 25 to notify the U.S. Ninth Circuit Court of Appeals of the Hawaii Supreme Court’s decision.

There are three primary conclusions in the Hawaii Supreme Court opinion, two of which are further bifurcated into subordinate parts. I'll take each conclusion in turn to examine the court’s reasoning behind its dicta and holdings.

I.  Background: The LUC Can "Rescind" Boundary Amendments, And "Revert" The Land To Its Prior Classification

In an Order to Show Cause proceeding to determine whether a property should be reverted to its original land use district classification, as a threshold matter the LUC must first determine whether the petitioners have “substantially commenced” use of the land.

If the answer is “yes,” the LUC is required to follow the procedures under Haw. Rev. Stat. § 205-4(h) applicable generally to land use district boundary amendments. As such, the LUC must find by a clear preponderance of the evidence that the reclassification is (1) reasonable; (2) not violative of § 205-2 (considerations for classifying all lands into four land use districts); and (3) consistent with the policies of § 205-16 (conformance to the Hawaii State Plan) and § 205-17 (consideration of applicable district standards, areas of state concern, standards and criteria for important agricultural lands, county plans, and petitioners’ representations). In addition, there must be six affirmative votes for reclassification (or reversion), and the matter must be resolved within 365 days.

If the answer is “no”, i.e. if the petitioners have not substantially commenced use of the land, the LUC need not follow the procedures outlined in § 205-4(h), as long as it complies with the procedures in Haw. Admin. R. § 15-15-93 (procedures for how conditions, representations, and commitments are enforced generally). Slip op. at 57.

The Supreme Court’s rationale for the distinction in OSC procedures to be followed depending on “substantial commencement” of petitioners’ proposed land use(s) lies in the plain language of of § 205-4(g), which provides that after approving a boundary amendment: 

... [t]he commission may provide by condition that absent substantial commencement of use of the land in accordance with such representations, the commission shall issue and serve upon the party bound by the condition an order to show cause why the property should not revert to its former land use classification or be changed to a more appropriate classification. Such conditions, if any, shall run with the land and be recorded in the bureau of conveyances.

The court also detailed the legislative history of § 205-4(g), in which the legislature authorized the LUC to void a boundary amendment only where the petitioners do not substantially commence the approved land use activity. In other words, reversion pursuant to an OSC is a limited exception to the general principles for land use reclassification set forth in Chapter 205. Slip op. at 54-55. Nevertheless, the LUC has broad authority to impose conditions on boundary amendment petitions, and to downzone land for violation of those conditions, even though it is the counties that have been delegated the general enforcement power for boundary amendments. See Lanai Co. v. Land Use Comm’n, 97 P.3d 372, 393-94 (Haw. 2004).

II.  "Substantial Commencement, Not Substantial Completion" 

The court then analyzed the factual questions: whether the developers had substantially commenced work on the property, and if so, whether they had done so timely within the parameters set forth under § 205-4(g).

In a nutshell, the court found that as of the deadline established by the LUC (March 31, 2010), the developers had constructed 16 townhouses ready to hook up to utilities, had partially constructed 56 more, and had completed mass grading of the site, grading for internal roadways, and foundation slabs for 64 more townhouses; in so doing, they had expended more than $20 million for plans and construction work on the project. Slip op. at 59-60. This was plainly sufficient for the Court to conclude that petitioners had “substantially commenced” use of the property.

The timing of the OSC was even more problematic. It was initially issued on December 9, 2008, but was rescinded on September 28, 2009, on the condition that the 16 townhouses be “completed” by March 31, 2010. On July 26 of that year, the LUC determined that the condition had not been satisfied, and the OSC then remained pending without resolution until the LUC filed its order reverting the property from the urban district to the agricultural district on April 25, 2011. That filing failed to make the specific findings of fact and conclusions of law required by § 205-4(h), and did not resolve the OSC within the 365 days required by § 205-4(g).

Based on its findings regarding the developers' “substantial commencement” and the LUC’s defective filing of the OSC, the court affirmed in part the lower court’s decision by holding that the LUC erred in reverting the property without complying with the requirements of HRS § 205-4. Slip op. at 64-65.

III.  Evidentiary Issues

The Supreme Court parted company with the circuit court regarding some other issues. The LUC argued that the circuit court erred during the agency appeal hearing below in denying its (LUC’s) motion to strike portions of the record on appeal designated by petitioners, consisting of 9,917 pages from six other cases. However, there was no indication that petitioners requested the court to take judicial notice of these documents, which had not been part of the LUC docket prior to the appeal, nor was there indication that the court relied on the documents. In an agency appeal, judicial review is generally confined to the administrative record. Haw. Rev. Stat. § 91-14(f); see also Diamond v. Dobbin, 319 P.3d 1017, 1033 (Haw. 2014). Accordingly, although the error may have been harmless, the Supreme Court held that the court below did err in denying the LUC’s motion to strike. Slip op. at 68.

IV.  Raising Constititional Issues In Judicial Review Of Administrative Appeals 

Although the Supreme Court normally does not decide constitutional questions if a case can be decided on statutory or common law grounds (see State v. Lo, 675 P.2d 754, 757 (Haw. 1983)), the Court, in the interest of judicial economy, made an exception here due to the pendency of the federal case on appeal (see Bridge Aina Lea, LLC v. Haw. Land Use Comm’n., Nos. 12-15971 and 12-16076 (Order; 9th Cir. June 12, 2014)). Slip op. at 69-70.

The LUC argued that the circuit court erred in determining that the LUC violated the developers' constitutional rights to due process and equal protection, in part because the LUC had no opportunity to present evidence for jury trial during the agency appeal. As a preliminary matter, the court disposed of this initial claim by noting that the circuit court has authority to reverse or modify an agency decision if petitioners’ substantial rights may have been prejudiced by violation of constitutional provisions, without any condition requiring the presentation of evidence for trial by jury; see Haw. Rev. Stat. § 91-14(g). The court therefore held that it was proper for the circuit court to have considered petitioners’ constitutional arguments in reversing and vacating the LUC’s final order. Slip op. at 70.

V.  No Due Process Violation 

However, while it was proper for the circuit court to consider constitutional arguments during the agency appeal, in this case at least, the court did not reach the proper conclusions.

Regarding procedural due process, the circuit court had concluded that the LUC “denied Bridge and DW their rights to [notice and] a meaningful opportunity to be heard”, which – before governmental deprivation of their significant property interest – would violate the rule established in Sandy Beach Def. Fund v. City Council of City & Cnty. of Honolulu, 773 P.2d 250, 261 (Haw. 1989), that before an owner may be deprived of a property interest, it must receive notice and the opportunity to be heard. The court pointed out, however, that the developers had three months prior notice that the LUC was considering issuing an OSC, which was two months before DW acquired an interest in the property.

They also had no less than eleven opportunities to testify at LUC hearings, all but the last of which occurred during the pendency of the OSC. This was plainly notice that the land use district classification for the property might be reverted, and opportunity to be heard sufficient to satisfy due process. Thus, the court reversed the circuit court, concluding that that the developers' did not suffer a deprivation of due process. Slip op. at 71-73.

With respect to substantive due process, the circuit court had determined that the LUC’s final order was “arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare”, which would violate In re Applications of Herrick, 922 P.2d 942, 962 (Haw. 1996). The Supreme Court, however, found that the facts did not support this conclusion.

From the time the subject property had first been reclassified to the urban district in 1989, until 2008, the property had changed hands numerous times, but little had been done to develop the property. By late 2010 (notwithstanding the construction of 16 townhouses), petitioners had not complied with numerous other representations made to the LUC, including satisfaction of an affordable housing condition. Accordingly, the LUC’s conduct was not “arbitrary and unreasonable,” and the court held that the court below erred in concluding the LUC violated petitioners’ substantive due process rights. Slip op. at 71, 73-74.

VI.  Equal Protection

Finally, the Supreme Court took up the circuit court’s conclusion that the LUC had intentionally treated petitioners Bridge and DW differently and less favorably than others in substantially similar circumstances, without any rational basis for such adverse differential treatment. An equal protection claim such as this may be brought by a “class of one” under Vill. of Willowbrook v. Olech, 528 U.S. 562, 564 (2000). If true, such a claim would violate the equal protection clauses of the federal and state constitutions, which mandate that all similarly situated persons be treated alike by government. See State v. Freitas, 602 P.2d 914, 922 (Haw. 1979).

However, any evidence that the developers in this case were treated differently by the LUC than similarly situated developers could not be demonstrated, because documents from other LUC cases that might have made such a showing were not properly designated for inclusion in the record on appeal. Moreover, even with such a showing, the equal protection argument of differential treatment would still fail because the developers did not establish (given the long history of this project) that the LUC had no rational basis for its reversion action. Finally, the LUC has broad discretion to attach conditions to reclassification orders, and broad authority and power to determine if those conditions are breached. See Lanai Co., 97 P.3d at 393. Enforcement of such conditions affecting particular individuals is well within the ambit of discretionary decision-making acceptable under the equal protection clause. See Engquist v. Oregon Dept. of Agric., 553 U.S. 591, 603 (2008). The court thus had no difficulty in holding that petitioners’ equal protection rights were not violated, because the record did not establish that the LUC lacked a rational basis for its decisions. Slip op. at 75-77.

VII.  Conclusion

In conclusion, the Supreme Court affirmed the circuit court’s second amended final judgment to the extent it is based on the circuit court’s conclusion that the LUC erred in failing to comply with the requirements of § 205-4, and vacated the final judgment to the extent it is based on the circuit court’s conclusion that the LUC violated petitioners’ constitutional rights.

The court remanded the case to the circuit court for further proceedings consistent with its opinion. Slip op. at 78.
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*Voluntary inactive member of the Hawaii Bar.

DW Aina Lea Development, LLC v. Bridge Aina Lea, LLC, No. SCAP-13-0000091 (Haw. Nov. 25, 2014)

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