DECEMBER 2003
$2B Takings Award for La. Oyster Fishermen "Shocks
the Conscience"
Avenal v. State, 2003 WL 22501685 (La. App. 4 Cir.
10/15/03)
Oyster fishermen in Louisiana stand to receive an unprecedented
windfall from the state's courts, a result of two class-action
lawsuits alleging that the value of their state-issued oyster
bed leases was wiped out by a successful coastal restoration
plan. Thus far state courts have awarded some 200 claimants
more than $2 billion, an amount equal to one eighth of the
state's budget. The awards, the largest in U.S. history,
are worth more than the total value of all oysters harvested
in Louisiana since the state created its leasing program
in 1902. By way of comparison, in the 1803 Louisiana Purchase,
the United States bought more than 800,000 sq. mi. of land
extending from the Mississippi River to the Rocky Mountains,
doubling the size of the country, for about $15 million,
or roughly $230 million in today's dollars.
"This is the most ridiculous thing, this is when the
legal system doesn't work. This is totally skewed. If it
were me, I wouldn't pay it," said Gov. Mike Foster
on his radio program.
The restoration plan, which ironically was supported by
the oyster industry, involved diverting freshwater to reduce
artificial salinity in Breton Sound caused by Mississippi
River levee systems. The change in water salinity has improved
oyster conditions in some areas, but reduced oyster viability
in the areas of the claimants' leases. The U.S. Court of
Federal Claims previously rejected an identical takings
claim, ruling that the oyster harvesters had no property
interest in the artificial salinity levels caused by the
levee systems. The Federal Circuit affirmed, holding that
the claimants had no reasonable investment-backed expectations
because they had warning of, and indeed supported, the freshwater
diversion project.
The Avenal claimants found a warmer reception in
state court, which by a 3-2 vote affirmed a $1.3 billion
dollar jury award. Dissenting Judge Love wrote that the
award "shock[s] the conscience." In a bizarre
move, the court set damages not at the value of the leases
(which cost about $2 per acre) or even the value of the
oysters themselves, but chose instead the estimated replacement
cost of restoring or creating in another location suitable
water bottom conditions sufficient to support oysters. The
award includes more than $21,000 per acre to "restore"
their leases by adding some six inches of cultch material-crushed
shells and other debris to which oysters attach themselves.
Ironically, this amount of cultch was never present on most
of these leases in the first place.
Avenal, and a related case awarding roughly $600
million in compensation, are being appealed.
NOVEMBER 2003
Georgia High Court Rejects Takings Challenge, Limits
Nollan/Dolan Review
Greater Atlanta Homebuilders Ass'n v. DeKalb County,
2003 WL 22532675 (Ga. Nov. 10, 2003)
Just as hard cases make bad law, straightforward cases
can often produce some of the soundest, clearest analysis
in the law. In somewhat predictably rejecting a takings
challenge to a municipal tree ordinance, the Georgia Supreme
Court issued an important decision that touches on the limits
of Nollan/Dolan review and the importance of the
parcel-as-a-whole rule. The decision is a welcome contrast
to last month's Feature Case, Coast Range Conifers,
in which an Oregon appellate court rejected the parcel-as-a-whole
rule, potentially subjecting municipalities in the state
to sweeping takings liability.
The challenged tree ordinance conditions new development
permits on the submission of a tree survey and imposes various
preservation and replacement requirements. The Georgia Supreme
Court rejected the homebuilders' facial takings claim because
they failed to prove that the ordinance "does not substantially
advance legitimate state interests" or "denies
an owner economically viable use of his land." The
court concluded that the tree ordinance does not destroy
the homebuilders' ability to develop their lands but merely
imposes some additional management costs that are not sufficient
to sustain a takings claim.
The homebuilders argued that each tree was a separate piece
of real property, but the court flatly rejected their attempt
to ignore the parcel-as-a-whole rule and divide the property
into small parcels for takings purposes. Moreover, the court
declined to extend Dolan's rough proportionality test to
the tree ordinance because Dolan involved an as-applied
challenge to a land dedication requirement and was therefore
"inapposite" to run-of-the-mill exactions.
With cases involving the parcel-as-a-whole rule and Dolan
review still percolating through the courts, keep this Georgia
case in mind for supplemental authority.
OCTOBER 2003
Oregon Appeals Court Rejects Whole-Parcel Rule
Coast Range Conifers, LLC v. Oregon, 76 P.3d 1148
(Or. Ct. App. 2003)
On September 24, the Oregon Court of Appeals issued a stunning
takings ruling that flatly rejects the parcel-as-a-whole
rule, potentially opening up municipalities in the state
to takings liability for ordinary zoning and planning activities.
Coast Range Conifers sought a permit to log a 40-acre tract
of forestland that was later identified as a nesting site
for bald eagles, a "threatened" species under
the federal Endangered Species Act. The state forester permitted
logging on 31 acres but denied the company a permit to log
the nine acres closest to the nesting site. After losing
an appeal to the Board of Forestry, the company filed an
inverse condemnation action. The trial court dismissed the
company's claims, but the appellate court reversed in a
radical ruling that turns Oregon takings jurisprudence on
its head.
The parcel-as-a-whole rule is a bedrock principle of takings
law that protects government from liability for common land
use regulation. The Supreme Court has repeatedly reaffirmed
the proposition, first articulated in Penn Central,
that "'taking'
jurisprudence does not divide a single parcel into discrete
segments and attempt to determine whether rights in a particular
segment have been entirely abrogated."
The Oregon appellate court, however, chose to focus only
on the nine acres restricted by regulation, holding that
"although the Oregon courts have not been exactly generous
in their explanations * * * they have effectively rejected"
the whole-parcel rule. In so holding, the court relied heavily
on a questionable reading of Boise Cascade Corp. v. Board
of Forestry, 935 P.2d 411 (Or. 1997). The appellate
court also ignored unambiguous federal constitutional precedent
because it concluded that the parallel takings provisions
of the federal and state constitutions do not have the same
meaning.
The importance of the parcel-as-a-whole rule-and the potential
impact of this case on municipal planning-cannot be overstated.
If takings claimants can win compensation for infringement
of individual sticks in the proverbial bundle of rights
that characterize property, no zoning and planning law is
immune from potential challenge. We'll keep you posted on
the likely appeal.
SEPTEMBER 2003
Second Circuit Gives Developer Second Bite at Takings
Apple
Santini v. Connecticut Haz. Waste Mgt. Serv.,
2003 WL 22020555 (2d Cir., Aug. 28, 2003)
In rejecting a developer's takings claim last month, the
Second Circuit broke new procedural ground that is sure
to heighten debate over when litigants can assert federal
takings claims in the face of adverse state decisions.
Connecticut developer Evandro Santini sought compensation
after the state's waste management agency announced that
his property was under consideration for condemnation for
location of a low-level nuclear waste disposal facility.
Although the site was not chosen, Santini sued for $955,000
in compensation for the two-year period that construction
and sales were hampered by the siting announcement.
Following the requirements of Williamson County,
Santini filed a takings claim in state court, and the court
rejected the suit on the merits. He then filed a federal
claim in federal court. The Second Circuit held that where
a landowner "reserves"
the federal takings claim in state court, the reservation
immunizes the claimant against not only claim preclusion,
but also issue preclusion, effectively giving the claimant
a second bite at the apple on issues already litigated and
decided in state court. This ruling stands in stark contrast
to Dodd v. Hood River County, where the Ninth Circuit
held that a claimant can use a reservation to avoid claim
preclusion but that issue preclusion still bars relitigation
of specific issues already decided in state court. The Santini
court failed altogether to address a point central to the
Dodd ruling, the federal Full Faith and Credit Act,
which requires federal courts to give state judgments the
same preclusive effect that another court of that state
would give the ruling.
Williamson County issues are central to a number
of pending cases. For example, Kottschade is awaiting
a Supreme Court ruling on the landowner's petition for certiorari
(scheduled for conference later this month), and the San
Remo Hotel case is now on appeal to the Ninth Circuit.
AUGUST 2003
Adverse Possession As a Taking?
The First Circuit rejected a takings claim on procedural
grounds last month, but it left standing a bizarre district
court assertion that the government can cause a taking through
adverse possession. In Pascoag Reservoir & Dam, LLC
v. Rhode
Island, 2003 WL 21730581 (1st Cir. July 28, 2003), the
state argued that adverse possession is a background principle
of state law that, by definition, cannot cause a taking.
The First Circuit, however, assumed arguendo that a taking
could result and instead dismissed the case because the
claimants failed to bring a state action within the statute
of limitations.
Echo Lake, a man-made reservoir in Rhode Island, was created
in 1860. In 1964, the state purchased a lot abutting the
lake and constructed a public boat ramp the next year. Pascoag
took ownership of the reservoir in 1983. For 32 years, the
public used the state's ramp as an access point for boating,
fishing, and other recreational activities, but starting
in 1997 Pascoag banned public access to the lake. The state
asserted it had acquired property rights in the reservoir
through adverse possession.
The Rhode Island Supreme Court held that the state acquired
the lake area around the ramp by adverse possession, as
well as a prescriptive easement over the lake surface for
boating and recreation. Pascoag filed a federal takings
claim in October 2001, and the district court properly dismissed
the action for failure to seek a timely state remedy under
Williamson County. In doing so, however, the court
said in dicta that governments must generally compensate
for takings occurring through adverse possession or prescription,
stating: "It does not matter how the State takes property,
only whether the Constitution mandates that the State pay
compensation." Lucas made clear, however, that
no taking occurs where the challenged government action
simply mirrors background principles of property law. In
affirming the dismissal, the First Circuit unfortunately
let the district court's troubling reasoning pass without
comment. Although the disturbing dicta should be given no
precedential effect, how this will shake out remains to
be seen.
JULY 2003
Expectations in Heavily Regulated Industries
In Folden v. United States, 56 Fed. Cl. 43 (2003),
the U.S. Court of Federal Claims rejected a takings challenge
to the Federal Communications Commission's denial of applications
for cellular licenses. The claimants asserted that the FCC
abrogated an express or implied contract by not holding
a license lottery, and thereby took their property interests
in the contract. The court rejected the claim in part because
the claimants "failed to demonstrate that they could
have had distinct investment-backed expectations of static,
FCC application procedures * * *." The court stressed
that the claimants operate in a heavily regulated field
and thus can have no reasonable "expectations that
include reliance upon a legislative and regulatory status
quo."
The case serves as a useful reminder that Penn Central's
expectations analysis has unique, government-friendly application
where a takings claimant is in a market sector subject to
heavy regulation. The Supreme Court recognized this notion
in Ruckelshaus v. Monsanto (U.S. 1984), where it
rejected a takings challenge to the U.S. EPA's use of pesticide-related
trade secrets, stating that the claimant had no reasonable
expectation that its trade secrets would remain inviolate
given that the pesticide industry "long has been the
focus of great public concern and significant government
regulation."
With respect to land use restrictions, the heavily-regulated-industry
defense has been used more sparingly but with some success.
For instance, in Good v. United States (Fed. Cl.
1997), the court rejected a takings challenge to a wetlands
permit denial, expressly comparing land development in Florida
to the highly regulated businesses at issue in Monsanto
due to the pervasive network of federal and state land-use
regulation. The Federal Circuit affirmed, observing that
the claimant should have been aware that permitting standards
might become more exacting. Given the extensive state of
land-use regulation in most parts of the country we encourage
government attorneys to invoke the defense wherever appropriate.
JUNE 2003
Right-to-Farm Laws
as Takings
Farm bureaus may be rethinking their traditional support
for expansive takings jurisprudence after an Idaho court
struck down a portion of the state's Right-to-Farm law as
an unconstitutional taking in Moon v. North Idaho Farmers
Association, CV 2002 3890 (Idaho Dist. Ct. June 4, 2003).
Idaho enacted a provision in April that immunized farmers
who engage in crop residue burning from common law nuisance
or trespass actions. Neighbors argued that burning grass
seed stubble created noxious smoke and posed health risks.
Because Idaho's new law prohibited these neighbors from
suing the farmers for nuisance or trespass, they instead
asserted a takings claim.
The court ruled that by abolishing nuisance and trespass
claims, the Idaho legislature had imposed a "servitude"
on the neighbors' property. Because field burning "impacts
plaintiffs' right to exclusive possession" and the
law eliminated their potential remedies of damages or injunctive
relief, the court held the provision worked a taking. In
so ruling, the Idaho court relied heavily on Bormann
v. Board of Supervisors, a 1998 decision from Iowa that
likewise struck down a Right-to-Farm law immunizing farmers
from certain nuisance suits.
These cases show takings litigation can be a double-edged
sword. Every developer's claim to a "right" to
develop is counterbalanced by an equally or more valid claim
by a neighbor of a "right" to be free of spillover
costs. While we sympathize with the neighbors whose health
was threatened by the farm operations at issue, expansive
takings theories like those used in Moon and Bormann
might come back to haunt those who promote environmental
and other community protections.
No word yet on whether the Idaho farmers will appeal. But
it's safe to say that we haven't heard the last word on
this issue. A copy of the court's decision can be accessed
at www.communityrights.org/PDFs/Moon.pdf.
MAY 2003
Takings Claim Denied Under State Public Trust Doctrine
McQueen v. South Carolina Coastal Council, 2003 WL
1957496
(S.C. April 28, 2003)
In an important test of the reach of background principles
of state property law, the South Carolina Supreme Court
last month denied compensation to a landowner whose property
had reverted to tidelands and was no longer suitable for
building. The court reaffirmed that under Lucas,
even a regulatory denial of all viable use does not warrant
compensation if background principles of state law already
prohibited that use.
Sam McQueen purchased two lots adjacent to saltwater canals
in North Myrtle Beach in the early 1960s, but did not seek
a development permit until 1991. By that time, continuous
erosion had caused the lots to revert to saltwater wetlands
regularly inundated by tidal flow. After the state rejected
McQueen's proposal to backfill the lots and construct bulkheads
in preparation for development, a master-in-equity awarded
McQueen $100,000 for a total deprivation of economically
beneficial use of the lots. The state's highest court reversed,
but the U.S. Supreme Court granted certiorari and remanded
the case in light of Palazzolo.
In rejecting the compensation award on remand, the state
Supreme Court accepted as "uncontested" that McQueen
suffered a total taking. Under South Carolina's public trust
doctrine, however, the state holds "presumptive title
to land below the high water mark," including tidelands,
and "cannot permit activity" that significantly
impairs marine life, water quality, or public access. Because
tidelands are considered public trust lands, the court held
that McQueen's ownership rights no longer include the right
to develop the property. No compensation is due because,
in the court's words, "[a]ny taking McQueen suffered
is not a taking effected by State regulation but by the
forces of nature and McQueen's own lack of vigilance in
protecting his property."
The McQueen decision joins the Ninth Circuit ruling
in Esplanade Properties, LLC v. City of Seattle as
the latest use of the public trust doctrine and background
principles of property law to absolve the government of
the need to pay compensation. The Esplanade case
likewise considered the denial of a landowner's permit to
build on tidelands and found that the state's public trust
obligations precluded shoreline development. A petition
for certiorari in Esplanade is currently pending
in the U.S. Supreme Court.
Kudos to John Echeverria, Director of the Georgetown Environmental
Law & Policy Institute, who briefed and argued the case
for the South Carolina Coastal Council. Community Rights
Counsel submitted an amicus brief in support of the state
on behalf of a coalition of municipal groups.
APRIL 2003
Water Rights Not Taken When Government Denies Pipeline
Across BLM Land
Washoe County v. United States, 319 F.3d 1320 (Fed.
Cir. 2003)
In an interesting but quirky case, the Federal Circuit
recently put some meat on the bones of the Palazzolo
ripeness ruling, and clarified government authority over
public lands.
The court waded into a dispute over Nevada water rights
and denied a takings claim that was based solely on the
government's refusal to permit construction of a pipeline
across federal land. Owners of the Fish Springs Ranch in
western Nevada contracted with Washoe County to sell their
water rights to benefit the Reno-Sparks metropolitan area.
The county sought a right-of-way permit from the Bureau
of Land Management to construct a pipeline. When a neighboring
U.S. Army depot and an Indian tribe objected that the diversion
might harm their water supplies, the Secretary of the Interior
halted review of the project in 1994 until the applicants
addressed these objections.
After failing to gain the support of the neighboring landowners,
the county and ranch owners filed suit alleging that the
denial of the right-of-way application constituted a taking
of their water rights. Although the government questioned
whether the Secretary's 1994 order was a final decision,
the Federal Circuit found the claim ripe. Citing Palazzolo,
the court held "there was no further 'reasonable and
necessary step' Washoe County could have taken" to
allow BLM to consider its application. Given the "inalterably
adverse" position of the Army and the Tribe, the court
concluded it was "known to a reasonable degree of certainty"
that the permit would not be granted.
On the merits, the Federal Circuit recognized that a taking
of water rights might occur where the government has physically
diverted water for its own use or where it denies all meaningful
access to the claimant's property. The court held, however,
the government merely "den[ied] permission to use the
government's own land to exploit those rights." Because
the claimants had "no right to build on federal land,"
the court ruled that no private property right was truly
at stake and denied the claim.
Arizona Downzoning Win Secured
Emmett McLoughlin Realty, Inc. v. Pima County, 58
P.3d 39 (Ariz. Ct. App. 2002)
Back in November 2002, Arizona planners rejoiced when the
state appellate court struck down a 1998 property rights
law that barred counties from downzoning property without
first obtaining the owner's consent. We have since learned
that the landowners' expected appeal was not timely filed,
so that victory is now secure.
MARCH 2003
SUPREME COURT IOLTA VICTORY PROTECTS LEGAL FUNDING FOR
THE POOR
It's official: There is a public side winning streak in
takings cases. Okay, so it is only two wins, but after 15
years of losing, the win this week before the Supreme Court
in Brown v. Legal Foundation of Washington, 2003
WL 1523550 (U.S. March 26, 2003), coming on the heels of
last year's Tahoe victory, sure feels good. More
importantly, the Brown victory preserves programs
in virtually every state that provide approximately $160
million annually for legal services for the indigent.
Brown involved IOLTA ("Interest on Lawyers'
Trust Account") programs, which pool small amounts
of money held by lawyers for clients for short periods of
time and use the interest generated to fund legal services
for the poor. Funds go in IOLTA programs only if they are
so small and held for so short a time that they cannot generate
net interest outside the program. In other words, if IOLTA
programs didn't exist, the clients whose funds are placed
in IOLTA accounts would not earn a penny of net interest.
In Phillips v. Washington Legal Foundation (1998),
the Court held that interest generated in IOLTA programs
was the "property" of the clients depositing funds
in IOLTA accounts. In Brown, the Court assumed that
IOLTA programs worked a per se taking of that property.
Victory in Brown was snatched from the hands of defeat
in the final "just compensation" phase of the
takings inquiry. By a 5-4 ruling, the Court held that because
the clients could not otherwise earn net interest, no compensation
was due and, therefore, there was no constitutional violation.
Community Rights Counsel's brief in Brown, filed
on behalf of the National League of Cities, International
Municipal Lawyers Association, and Trial Lawyers for Public
Justice, focused exclusively on this dispositive issue.
Kudos to all who defended IOLTA programs in the case.
FEBRUARY 2003
Eighth Circuit Rejects Challenge to Williamson County
Kottschade v. City of Rochester, No. 02-1504MN (8th
Cir. Feb. 13, 2003)
The Eighth Circuit rejected a challenge to established
ripeness rules this month, applying Williamson County's
requirement that a landowner seek compensation in state
court before filing a federal takings claim in federal court.
Developer Franklin Kottschade sued the city of Rochester,
Minnesota, in federal court, alleging that the city's development
conditions took his property without compensation. A federal
district judge dismissed the case under Williamson County,
but despite this clear precedent, Kottschade appealed.
Kottschade argued on appeal that City of Chicago v.
International College of Surgeons (U.S. 1997) modified
Williamson County, even though that case does not
even cite Williamson County. In affirming the district
court's dismissal of the case, the Eighth Circuit held that
College of Surgeons addresses "only the question
of federal-question jurisdiction over a ripe takings claim"
and did not "explicitly answer the question of what
is necessary to render a takings claim ripe."
Kottschade's case has become a cause celebre in the homebuilding
industry, which has tried for years to undermine the holding
of Williamson County. The National Association of
Home Builders, which is representing Kottschade, has vowed
to take his case "all the way to the Supreme Court
if necessary." Indeed, NAHB's litigation role comes
on the heels of its failed efforts to lobby for a federal
bill that purported to give landowners a direct path to
the federal courts, effectively overturning Williamson
County's ripeness requirements. The Kottschade
opinion is available at http://www.ca8.uscourts.gov.
JANUARY 2003
U.S. Court of Federal Claims Rejects Takings Challenge
to Mining Protections
Appolo Fuels, Inc. v. United States, 2002 WL 31889325
(CFC, Dec. 18, 2002)
The U.S. Court of Federal Claims denied compensation last
month to a mining company that contended its coal was taken
as a result of a permit denial designed to protect drinking
water and the environment. The summary judgment decision
in Appolo Fuels stands in stark contrast to last
month's Feature Case, RTG v. State, in which the
Ohio Supreme Court held that similar protections worked
a taking even though the proposed mining threatened an important
aquifer.
Appolo Fuels, a Kentucky coal mining company, acquired
coal rights in some 2,600 acres, including coal seams within
the Little Yellow Creek watershed that spans the border
of Kentucky and Tennessee. The company began mining portions
of the property in 1989 and sought additional permits to
mine within the watershed area in 1994. In 1996, the Office
of Surface Mining approved a petition of the National Parks
and Conservation Association and the city of Middlesboro,
Ky., prohibiting surface mining in about half the watershed
because of potential harm to Middlesboro's water supply,
the Cumberland Gap Historical Park, and endangered species.
The OSM granted Appolo the right to conduct underground
mining on tracts both within and outside the petition area,
but the company sued, claiming that the surface mining restrictions
worked both a categorical and partial regulatory taking.
The court began its analysis by rejecting Appolo's argument
that the relevant parcel should include only its surface
mineable coal reserves within the watershed, concluding
that the parcel-as-a-whole rule requires inclusion of other
property interests both within and outside of the watershed.
Although the value of two of Appolo's leases dropped by
78 and 92 percent, Judge Christine Miller rejected Appolo's
categorical taking claim because the relevant parcel retained
economically viable use. The court also denied the company's
partial taking claim, ruling that "plaintiff held no
legitimate expectation that it could mine in the area unfettered
by regulation." Judge Miller further ruled that water
pollution was an "abatable nuisance" under Tennessee
law and that "OSM exercised its police power to protect
its citizens from a nuisance."
The Appolo Fuels court's insightful analysis and
fidelity to precedent demonstrates the aberrancy of the
Ohio Supreme Court's decision in RTG. Unfortunately,
earlier this month the Ohio court denied the state's motion
for reconsideration. For a cogent Columbus Dispatch editorial
denouncing the RTG decision, go to www.communityrights.org/legalresources/crcbriefs/RTG/CD1-13-03.asp.
