DECEMBER 2003
$600 Million Takings Claim Pits Old West Against New
When Defenders of Wildlife hoisted its logo over the door
of a renovated black marble building in Washington, D.C.
that formerly served as the headquarters of the National
Mining Association, few missed the image's potent symbolism.
But Old West policies like the Mining Law of 1872, which
remarkably still allows people to maintain royalty-free
claims to mineral resources on the public lands, die hard.
Now a $600 million takings claim over mineral rights in
the Siskiyou Mountains stands as an equally vivid symbol
of the continued debate between resource protection and
resource extraction.
Walt Freeman owns 161 mining claims that he says entitles
him to dig for nickel, iron, and chromium in the Siskiyou
region of southern Oregon. Boasting more than 300 plant
species, some of which are found nowhere else in the world,
the Siskiyou National Forest is considered one of the most
biologically rich areas in North America. Federal agencies
have thus far blocked the project to protect the environment,
and Freeman believes he should be paid handsomely to give
up his claims.
Under the 1872 Mining Law, even if Mr. Freeman does develop
his claims, he will pay no royalties and has little responsibility
to account for the environmental harm his operations could
cause. Congress has attempted to reform the law since the
1970s but mining interests have prevented any significant
changes to rules set up to encourage pioneers to settle
the West. What's more, the Bush administration recently
reversed a Clinton-era ruling limiting the amount of public
land acres available by right to claimants for processing
ore and dumping often toxic mine waste.
The Supreme Court rejection of a takings challenge where
federal law extinguished a mining claim in United States
v. Locke (U.S. 1985) gives us hope that the government
will prevail. Mr. Freeman's claim, if successful, could
seriously impede the ability of the natural resource agencies
to protect public lands under federal land laws and other
laws without incurring huge liability for takings claims.
NOVEMBER 2003
Does the Takings Clause Guarantee a Reasonable Rate
of Return?
Cienega Gardens v. United States, 331 F.3d 1319 (Fed
Cir. June 12, 2003)
The Federal Circuit has issued clunkers before - cases
such as Florida Rock v. U.S. and Loveladies Harbor
v. U.S. - and, happily, few courts around the country
have taken much notice. Let's hope a similar fate awaits
the court's recent decision to award compensation to owners
of property serving low-income tenants who argued that restrictions
on their ability to prepay their mortgages - and thereby
escape obligations to rent their properties to low-income
tenants - constituted a taking.
In the late 1960s, the owners of the Cienega Gardens apartments
obtained low-interest forty-year mortgages with the assistance
of the Department of Housing and Urban Development. In return,
the owners agreed to rent a percentage of their property
to low-income tenants. Regulations in effect at the time
allowed the owners to prepay their mortgages and be free
of restrictions after twenty years, but they also allowed
for changes to the regulations "at any time and from
time to time." As the twenty-year mark approached,
Congress passed legislation to preserve affordable housing
that prohibited prepayment of mortgages under this program.
The owners brought suit alleging contractual violations
and a temporary taking of their property.
In 2001, the Federal Circuit rejected Cienega Gardens'
per se taking claim but remanded for consideration of their
claim under Penn Central. The Court of Federal Claims
dismissed the case, but this summer the appellate court
held that the claimants had a property interest in the contractual
right to prepay and exit the housing program. Notwithstanding
the explicit regulatory provision allowing for a change
in the regulatory program, the Federal Circuit held that
the plaintiffs had reasonable, investment-backed expectations
in the terms of their mortgage contracts. Even more remarkably,
the Court focused entirely on the owner's estimated loss
in annual profits, rather than the diminution in their property
value (estimated by the government to be only 35%), in finding
that Cienega Gardens had suffered sufficient economic loss
to maintain a Penn Central claim.
Interestingly, a different Federal Circuit panel on the
same day decided a case on the similar facts, Chancellor
Manor v. United States, 331 F.3d 891, but declined to
find a taking and indicated, without prejudging the outcome,
that the government might be able to defend itself against
a Penn Central claim on remand.
OCTOBER 2003
House Panel Reviews Takings Executive Order
Property rights advocates and environmentalists debated
a new General Accounting Office study on the implementation
of the much-criticized Reagan Takings Executive Order before
a panel of the House Committee on the Judiciary October
16, possibly teeing up a renewed effort to revise the order
and implementing guidelines.
Roger Marzulla of Defenders of Property Rights testified
that takings law's evolution since President Reagan issued
the order in 1988 required new guidance and urged Congress
to pass legislation making the executive order legally enforceable.
By contrast, John Echeverria of the Georgetown Environmental
Law and Policy Institute told the panel the order was "fundamentally
flawed from its inception" and said the GAO, rather
than focusing on the sufficiency of implementing guidance,
"should be asking whether Executive Order 12630 should
simply be scrapped." The GAO report and witness testimony
are available on the panel's website - http://www.house.gov/judiciary/constitution.htm.
UPDATE
In our July 2003 Eye on Washington,
we reported on developer efforts to seek U.S. Supreme Court
reconsideration of Williamson County through a petition
for certiorari in Kottschade v. City of Rochester.
On October 6, the Court denied the petition.
SEPTEMBER 2003
Federal Circuit Rejects Oil Tanker Takings Claim
On September 9, in Maritrans, Inc. v. United States,
2003 WL 22076611, the Federal Circuit rejected the claims
of tank barge owners who alleged that the double hull requirement
of the Oil Pollution Act of 1990 worked a taking of their
single hull barges. The law, enacted in the wake of the
Exxon Valdez disaster, reduced the value of Maritrans'
barges by 13.1 percent. Although the result is laudable,
the court's reasoning is flawed in at least two respects.
First, the court rejected the government's position that
the barge owners lacked a property interest in the use of
the vessels in interstate navigation. That the owners had
a property interest in the barges themselves was indisputable,
but the Court muddled the more precise question of whether
the barge owners had a cognizable interest in the use of
the barges for the specific purpose at issue. Surprisingly,
the appeals court upheld the trial court's finding that
the law interfered with Maritrans' reasonable expectations
notwithstanding the long history of heavy regulation in
the industry.
What's more, the court failed to consider adequately the
distinction between real and personal property under the
Fifth Amendment. The government argued that the Lucas
per se rule does not apply to personal property, relying
on the Lucas court's holding that "in the case
of personal property, by reason of the State's traditionally
high degree of control over commercial dealings, [the owner]
ought to be aware of the possibility that new regulation
might even render his property economically worthless."
The Federal Circuit blithely responded that "tangible
property may be the subject of a takings claim," without
recognizing the important analytical distinctions that come
into play when applying the Lucas per se rule.
The court will have a chance to address these important
issues again in Rose Acre Farms (see Sept.
2002 Takings Watch) and other cases. They demand
a more nuanced analysis.
AUGUST 2003
Evolving Reciprocities
"We sure get a kick out of it when the sheep are around."
That's not a comment one expects to hear from residents
of a resort development. But Walecia Konrad of The New
York Times recently reported that more and more builders
are realizing that by conserving open space around their
development projects, they can actually increase land value
and enhance homebuyer enjoyment. See http://www.nytimes.com/2003/08/01/realestate/01LAND.html
(registration required)
As Konrad put it, "the ultimate second-home amenity
is a slice of wilderness." These open areas not only
provide scenic views of bighorn sheep and other wildlife,
but also shield residents from strip malls or other unattractive
development. People are willing to pay more for these benefits,
with studies conducted in California showing that property
values within a mile of open space increase by 8-10 percent.
This is good news for states and municipalities facing
takings challenges to open space protections. These studies
support the argument that regulations restricting development
of a portion of land (for example, in a wetlands area) benefit
the developer by enhancing the property's overall value.
The case that first recognized the concept of a regulatory
taking -- Pennsylvania Coal Co. v. Mahon (1922) --
introduced the notion of "reciprocity of advantage"
as a justification of various laws. More recently, the Supreme
Court reaffirmed the reciprocity theory in Keystone Bituminous
Coal Ass'n v. DeBenedictis (1987), explaining that "while
each of us is burdened somewhat by such restrictions, we,
in turn, benefit greatly from the restrictions that are
placed on others." And in Tahoe-Sierra, the
court cited the reciprocity of advantage enjoyed by property
owners subject to a common land use planning program designed
to protect Lake Tahoe, which provides much of the land value
in the Tahoe Basin.
Thanks to nature-lovers everywhere, the defense of reciprocity
of advantage is gaining strength. Let's hear it for those
who enjoy watching sheep from the front porch.
JULY 2003
Developers Press for High Court Review in Kottschade
v. City of Rochester
Despite two swings and two big misses in the lower courts,
development interests are back in the batter's box swinging
for the fences in what could be their final strike at Williamson
County's ripeness requirement. Franklin Kottschade,
backed by the National Association of Home Builders and
a small armada of developer amici, has filed a petition
for certiorari in the U.S. Supreme Court.
Kottschade maintains the development conditions imposed
by the City of Rochester, Minnesota took his property without
compensation. Despite Williamson County's unambiguous
ruling requiring aggrieved property owners to seek redress
in state courts before filing a federal takings claim, Kottschade
sued in federal district court without first having pursued
his claim at the state level. Citing Williamson County,
the district judge dismissed the claim, but Kottschade appealed
to the Eighth Circuit where he pressed the novel argument
that City of Chicago v. International College of Surgeons
(U.S. 1997) modified Williamson County's ripeness
rule even though that case never cited Williamson County.
In February, the Eighth Circuit rejected this contention
and affirmed the dismissal.
Development interests are supporting Kottschade's petition
with no fewer than six amicus briefs. Filing separate briefs
thus far are Pacific Legal Foundation, American Forest and
Paper Association, Wisconsin Builders Association, Santini
Homes, Inc. (of Vernon, CT), Defenders of Property Rights,
and land use professor Daniel Mandelker of Washington University
in St. Louis.
Kottschade has shifted ground in te Supreme Court and is
no longer arguing (ridiculously) that Williamson County
already has been overruled. Instead, he is now urging
the Supreme Court simply to abandon Williamson County.
The city's opposition is due August 25. Given the absence
of a circuit split, the Court's repeated reaffirmation of
the unanimous Williamson County ruling, and the ruling's
grounding in a century of precedent, the case is uncertworthy
in the extreme. Here's hoping the High Court will strike
out this most recent assault on Williamson County.
JUNE 2003
High Court Denies
Cert. in Esplanade, Review to Be Sought in McQueen
The Supreme Court denied certiorari June 16 in Esplanade
Properties, LLC v. City of Seattle, a Ninth Circuit
ruling that relied on the public trust doctrine as a background
principle of property law to absolve the government of the
need to pay compensation to a landowner who was denied a
permit to build on tidelands. The Ninth Circuit held that
the state's public trust obligations precluded shoreline
development. Pacific Legal Foundation filed the cert. petition,
which was supported by several amici from the developers'
bar. The Supreme Court's denial of certiorari, while not
unexpected, is still most welcome.
In other news involving the public trust doctrine, the
Washington Legal Foundation recently pledged on its website
to seek Supreme Court review of McQueen v. South Carolina
Coastal Council (last month's Feature Case) "at
the earliest possible opportunity." As in Esplanade,
the McQueen court invoked the public trust doctrine
to reject a takings claim by a landowner denied permission
to fill tidal wetlands. We'll keep you posted on future
developments.
MAY 2003
Linking Judicial Junkets and Judicial Pay
For nearly five years, Community Rights Counsel has been
fighting to ban "judicial junkets": lavish trips
for federal judges, bankrolled by polluting corporations,
which are designed to advance an anti-regulatory legal agenda.
Our particular concern has been trips offered by a Montana-based
outfit called Foundation for Research on Economics and the
Environment (FREE), whose programs advance extreme views
on subjects like the Takings Clause.
It has been a busy couple of months on this front. In April,
Senator Patrick Leahy, the Ranking Democrat on the Senate
Judiciary Committee, introduced S. 787, the Fair and
Independent Judiciary Act of 2003, a bill that would
link a ban on judicial junkets to a judicial pay raise.
This past week, Senator Leahy indicated his intention to
seek to amend a separate judicial pay raise bill, introduced
by Senator Orrin Hatch, to include his ban on junkets. He
was supported in this effort by Senator Russ Feingold, who
had introduced a similar bill in July 2000. Two dozen national
organizations, including the Leadership Conference on Civil
Rights, the American Association of University Women, Natural
Resources Defense Council, and Defenders of Wildlife, wrote
letters supporting this proposed amendment.
To head this amendment off, representatives of the Judicial
Conference (the judiciary's policy-making body) met with
Senator Leahy and assured him that they would revisit and
revise their internal ethical guidance to address his concerns.
Given the prior adamant opposition by the Judicial Conference
to any reform in this area, this represents significant
movement on their part. Still, both Senators Leahy and Feingold
expressly left open the possibility of future efforts to
move legislation on these issues, with Senator Feingold,
in particular, stating that he would evaluate the progress
the Judicial Conference had made by the time the pay raise
bill was scheduled for floor action and decide then whether
to pursue an amendment on the floor. We will keep Takings
Watch readers posted as this drama unfolds.
APRIL 2003
UPDATE ON TAHOE-SIERRA
The Tahoe-Sierra litigation, which yielded last
year's landmark ruling from the U.S. Supreme Court, has
finally ended. On February 28, the Ninth Circuit disposed
of the remaining claims, ruling that the challenges to the
1987 Regional Plan were barred by principles of res judicata
because they were substantially similar to claims previously
dismissed as barred by the applicable statute of limitations.
The court further ruled that certain claims brought by landowners
subject to various mitigation provisions were not ripe for
failure to pursue administrative relief. Assuming the landowners
do not once again seek certiorari (unlikely, in our view),
the long-running Tahoe-Sierra litigation is now over.
MARCH 2003
"Obtain" vs. "Take"
In Scheidler v. National Organization of Women, Inc.,
123 S. Ct. 1057 (2003), the Court interpreted the word "obtain"
as used in the federal Racketeer Influenced and Corrupt
Organizations Act, concluding that the petitioners had not
"obtained" the respondents' property even though
they significantly interfered with its use:
There is no dispute in these cases that petitioners interfered
with, disrupted, and
in some instances completely deprived respondents of their
ability to exercise their property rights. * * * But even
when their acts of interference and disruption achieved
their ultimate goal of "shutting down" a clinic
that performed abortions, such acts did not constitute extortion
because petitioners did not "obtain" respondents'
property. Petitioners may have deprived or sought to deprive
respondents of their alleged property right of exclusive
control of their business assets, but they did not
acquire any such property.
Id. at 1065-66 (citation omitted).
If one cannot "obtain" property by shutting down
a business or otherwise interfering with the owner's use
of the property, one wonders how local officials can be
deemed to have "taken" property where community
protections interfere with land use. Community Rights Counsel
has long encouraged government counsel to emphasize the
narrow plain meaning of the word "taken" in the
Takings Clause. While it is unlikely that the Court will
abandon the doctrine of regulatory takings anytime soon,
the narrow meaning of "taken" should act as a
forceful check against the inappropriate expansion of takings
liability. Let's hope that the Court's recent cogitations
on the meaning of "obtain" have a beneficial spillover
effect on its takings jurisprudence.
EYE UPDATE
Last month, we reported on efforts by property rights groups
to persuade the U.S. Supreme Court to review two cases involving
legislative impact fees: Rogers Machinery Co. v. City
of Tigard (Or. Ct. App. 2002), and Agencia La Esperanza
Corp. v. Orange County Bd. of Supervisors (Cal. Ct.
App. 2002). On March 10, the Court declined to review both
cases.
FEBRUARY 2003
The Campaign to Eliminate Legislative Impact Fees
The U.S. Supreme Court is currently considering requests
by property rights groups, amply supported by developer
amici, to review two state court cases holding that
Dolan's rough proportionality test does not apply
to legislatively imposed impact fees. The cases will be
considered at the court's February 28th conference. If embraced
by the court, the petitioners' contentions could severely
limit, if not scuttle altogether, legislatively imposed
impact fees across the country.
In Rogers Machinery Co. v. City of Tigard, 45 P.3d
966 (Or. Ct. App. 2002), the court refused to apply Dolan
to a traffic impact fee imposed as a condition to a permit
to build a new corporate headquarters. The court observed
that "with near uniformity," other courts have
declined to apply Dolan to legislatively imposed fees. Id.
at 977. In Agencia La Esperanza Corp. v. Orange County
Bd. of Supervisors, 2002 WL 681798 (Cal. Ct. App. 2002),
the court declined to apply Dolan to a traffic impact
fee imposed on all applicants for nonresidential building
permits based on the square footage of the project. The
court rejected arguments that the fee was unfair because
the claimant's proposed self-storage facility would have
less severe traffic impacts than other nonresidential facilities.
These rulings flow directly from Dolan, which expressly
relied on the adjudicative nature of the permit condition
at issue to justify imposition of its rough proportionality
standard on government officials. Moreover, cases involving
impact fees (as opposed to dedication requirements) make
exceptionally poor vehicles for further illumination of
takings jurisprudence. In Eastern Enterprises, five
Justices (Kennedy, Breyer,
Stevens, Souter and Ginsburg) concluded that the Takings
Clause does not apply to a government-imposed monetary liability
that does not affect an identified property interest.
The petitioners, represented respectively by Oregonians
in Action Legal Center and Pacific Legal Foundation, argue
that permit applicants should be able to use Dolan's
rough proportionality test to attack reasonable legislative
judgments about the impact of new development. Under their
theory, a developer could challenge a school-impact fee
by showing that a small portion of its subdivision sales
went to seniors or others without children in the home.
In essence, they contend that permitting officials must
adjust impact fees on an individual basis. If subject to
second-guessing on a permit-by-permit basis, the entire
notion of legislatively imposed fees could fall by the wayside,
thereby significantly increasing the cost of reviewing plans
for approval.
The U.S. Supreme Court has repeatedly declined to grant
review on precisely this issue. Let's hope the Court continues
to see this ruse for what it is.
JANUARY 2003
Welcome to the
Team, Roger!
We thought we were dreaming when we read recently in the
National Law Journal that Roger Marzulla -- founder
and General Counsel of Defenders of Property Rights and
a mainstay of the property rights movement -- helped defeat
a multi-billion dollar regulatory takings claim brought
by Coastal Petroleum against the State of Florida based
on Florida's cancellation of oil leases. But Mr. Marzulla's
welcome defection is simply the latest in a lengthy list
of prominent conservatives who have argued against an unduly
expansive application of the Takings Clause and other constitutional
provisions.
As we've previously reported, Solicitor General Theodore
Olson personally defended the moratorium upheld in Tahoe.
Conservative pundit James Kilpatrick recently opined in
favor of the government in the pending takings challenge
to Washington State's IOLTA program. In his book, Narrowing
the Nation's Power, Reagan-appointee and respected legal
historian Judge John Noonan created a stir last year with
a scathing criticism of the Rehnquist Court's federalism
jurisprudence. And Judges J. Harvie Wilkinson III and Bobby
R. Baldock, both Reagan-appointees, have denounced anti-environmental
judicial activism.
Perhaps it would be asking too much for Richard Epstein
to renounce his takings treatise, but with the arrival of
the New Year, hope springs eternal.
