The Federal Circuit of Appeals issued its opinion in Lost Tree Village Corp. v. United States, a regulatory takings case, on June 1, 2015.  Our Owners’ Counsel colleague Robert Thomas beat us to the punch (of course), and provided an excellent case synopsis in his Inverse Condemnation blog, available here.  In brief, the Court of Claims held that the government’s denial of a permit to fill 4.99 acres of wetlands constituted a per se regulatory taking under Lucas v South Carolina Coastal Commission, 505 U.S. 1003 (1992), and that there was a regulatory taking under Penn Central v. New York City, 438 U.S. 104 (1978).  The Circuit Court affirmed the Lucas Taking, and found that it was unnecessary to reach the trial court’s alternate holding.

The U.S. Army Corps of Engineers denied the permit application in 2004, and the owner sued alleging that the property was worth $4.8 million with a permit and $25,000 without a permit.  The government did not genuinely dispute the owner’s valuation, but argued that the relevant parcel included other lands owned by Lost Tree, which argument was successful before the Circuit Court ruled on the first appeal that the relevant parcel was the 4.99 parcel.  On remand, the trial court found that the permit denial resulted in a loss in value of of 99.4%.  The question presented was thus “whether residual value from non-economic uses precludes application of Lucas and requires application of Penn Central’s balancing test.”  The Circuit Court agreed with the government that “a Lucas taking is rare” but concluded that Lost Tree was an example of the breed, however rare.  The Court also rejected the government’s argument that sale – even for nominal consideration – was an economic use that precluded application of Lucas’ per se taking doctrine.

In affirming, the Circuit Court also relied on (and perhaps resurrected) Loveladies Harbor, Inc. v. United States, 28 F. 3rd 1171 (Fed Cir. 1994) a case which concerned Bayfront property on Long Beach Island.  There, the Federal Court also found a categorical Lucas taking of 12.5 acres of Barnegat Bayfront property caused by the Army Corps (and DEP’s) denial of a fill permit.

We’ll keep an eye out for the petition for certiorari.

Under North Carolina statute, once the department of transportation files  a map depicting a future taking, “no building permit shall be issued for any building or structure or part thereof located within
the transportation corridor, nor shall approval of a subdivision . . . be granted with respect to property within the transportation corridor.” N.C. Gen. Stat. § 136-44.51(a).  The property owners here complained that the filing of the map effectuated a taking of their property without just compensation. Kirby v. North Carolina Dep’t of Transportation (No. Carolina Court of Appeals, Feb. 17, 2015).  The statute provides for three exceptions to the general rule.  The plaintiffs filed complaint alleging takings claims, and further alleging that the administrative remedies set forth in the statute were “inadequate and unconstitutional.”

The question presented:  “In the present case, this Court must consider whether the restrictions of the Map Act that were applicable to Plaintiffs at the time the maps were filed substantially interfered with the elemental rights growing out of Plaintiffs’ ownership of their properties so as to have effected a taking and provided grounds for the trial court to consider Plaintiffs’ claims for inverse condemnation as ripe.”

The conclusion:  “Therefore, with potentially long-lasting statutory restrictions that constrain Plaintiffs’ ability to freely improve, develop, and dispose of their own property, we must conclude that the Map Act is distinguishable from the cases that established the rule that “the recording of a map showing proposed highways, without any provision for compensation to the landowners until future proceedings of condemnation are taken to obtain the land, does not constitute a taking of the land, or interfere with the
owner’s use and enjoyment thereof.”

The holding:  “we hold the trial court erred when it concluded Plaintiffs’ claims for inverse condemnation were not yet ripe based on its determination that Plaintiffs did not suffer a taking at
the time NCDOT filed the transportation corridor maps for the Western and Eastern Loops.”

New Jersey has a “map act.”  But unlike North Carolina, the statute does not expressly limit the owner’s future use or development of the property.  That statutory absence did not provide any relief or comfort to Helen Schnack when the State, Dep’t of Transportation filed a highway alignment map depicting her house within the path of a future highway. Schnack v. State (Docket No. A-4840-76).

Maybe its time to revisit the issue here in the Garden State.

Yesterday, a United States District Court judge restrained the U.S. Army Corps and NJDEP from any further action towards their joint Little Egg Inlet to Barnegat Inlet Storm Damage Reduction Project pending further hearings to be held in two weeks time.  The City of Margate, which owns the beach west of the State’s public trust area, does not want to be saddled with the DEP/Army Corps dune project, and filed a complaint in federal court alleging that the governmental entities had violated federal and State law when they attempted to “take” part of the municipalities ocean-front property without complying with the Eminent Domain Act.  The federal judge initially agreed and has issued an order temporarily restraining the federal and state agencies from acting in furtherance of the project.

Another hearing has been set for December 17th in the action.

We’ll keep you posted.

Related news coverage of the case:

Press of Atlantic City

Shore News Today

“The State may not put so potent a Hobbesian stick into the Lockean bundle.” Palazzolo v. Rhode Island, 533 U.S. 606, 627 (2001).  That was the United States Supreme Court’s response thirteen years ago to Rhode Island’s argument that property owners could claim no loss from legislation shaping and defining property rights enacted prior to acquiring title.  In Palazzolo, the Court examined whether Rhode Island’s denial of a request to fill a tidal salt marsh exacted a taking of private property without just compensation.  Explaining further, “[w]ere we to accept the State’s rule, the post-enactment transfer of title would absolve the State of its obligation to defend any action restricting land use, no matter how extreme or unreasonable.   A State would be allowed, in effect, to put an expiration date on the Takings Clause.   This ought not to be the rule.   Future generations, too, have a right to challenge unreasonable limitations on the use and value of land.”

Which brings us to the present.  This month, a panel of the Superior Court of New Jersey, Appellate Division upheld the dismissal of a complaint alleging a regulatory taking due to DEP’s refusal to grant a permit that would have allowed the property owner to fill his tidelands property in Atlantic City.  Scot Netherlands, Inc. v State, Dep’t of Environmental Protection  (Docket A-5156-11T3)(April 7, 2014, unpublished).  The moving rationale behind the decision was that the owner was aware of the regulation at the time of acquisition and therefore could not have had any reasonable investment backed expectation at the time of acquisition.  The ruling is directly contrary to the Palazzolo holding.

In March of 2007, 30 years after acquiring the property, the owner submitted an application to fill about 18 acres of wetlands in order to develop the property with a parking lot.  The application was denied in June of 2007.  Property owner appealed the agency decision and appeared before the Office of Administrative Law.  The parties stipulated that DEP regulations prohibited the proposed development.  Permit denial affirmed.

Instead of focusing on “whether an existing, general law can limit all economic use of property” and (i.e., whether the owner was left with any economically beneficial use without a permit), the trial court essentially criticized the owner for purchasing the property with notice of the regulation and therefore cannot now claim when the regulation was enforced against him to his extreme disadvantage.  The Appellate Division endorsed that rationale.  In addition, and significantly, the court found that the owner did have a beneficial use of the property – a billboard which produced rent for the owner, making the property worth approximately $200,000.  We wonder whether this fact, or the court’s apparent ignorance of holding in Palazzolo, led to its ruling.

A copy of the Scot Netherlands v. NJDEP opinion is available here.

Returning to Palazzolo:  “The Takings Clause is not so quixotic.   A blanket rule that purchasers with notice have no compensation right when a claim becomes ripe is too blunt an instrument to accord with the duty to compensate for what is taken.” (at 628).

 

 

 

 

 

In a two-judge unpublished opinion (full text here), a New Jersey appeals court reviewed a property owner’s claim that the City’s tactic – of threatening acquisition by eminent domain during land use proceedings – was a taking of private property warranting payment of just compensation. (100 Paterson Realty, LLC v. City of Hoboken, Docket No. A-1016-12T2).  The trial court found no taking, and the Appellate Division agreed.

The property consisted of 6,000 s.f. of land area containing a 3,000 s.f. commercial building.  The property was zoned R3 and would permit residential development.  The property was identified as potential open space/parkland in the 2004 Master Plan.  Appellant purchased the property in 2006 for $2M with knowledge of the zoning and the master plan notation.

Later in 2006, Appellant submitted an application to the Zoning Board of Adjustment for approval of 14 residential units.  That application was withdrawn due to “push back” from the public.

In late 2007, Appellant submitted a second application to the Zoning Board, which called for a mixed-use development (retail/commercial museum use with residential), which requirement “multiple variances.”  A hearing on the application was scheduled for June 17, 2008.  However, on June 11, 2008, the City Council took several actions inimical to the property owners pending application.  The Council passed a resolution that authorized acquisition of the property for open space, and also passed a resolution authorizing appraisal of the property (a statutory predicate to exercise of eminent domain).  Then, the Council introduced an Ordinance to change the zoning of the property from R3 to “Open Space.”  One of the resolutions asked the Zoning Board to “postpone consideration of all applications” then pending.  Therefore, the June 17, 2008 Zoning Board hearing was adjourned without date.

In October 2008, Appellant’s partner on the Museum venture withdrew due to altered circumstances.  Appellant sued the City in November 2008 alleging that the City’s actions affected a taking of private property for which compensation was due, i.e. filed an inverse condemnation action.  The City responded by advising that the Open Space ordinance had been “tabled permanently” and that the pending application could proceed without delay.

The parties agreed to stay the litigation and discussions ensued.  The City obtained an appraisal of the property at $2.1M, but in January 2010 advised that acquisition was not possible due to funding issues.

In January 2011, plaintiff filed an “as of right” plan for development of 9 residential units, which meant that the Planning Board would be required to approve the plan as drawn.  In March of 2011, Planning Board adopted a Master Plan Reexamination Report that continued to recommend the subject for parkland.  In August of 2011, Appellant voluntarily withdrew the “as of right” plan because the threatened acquisition and “parkland” designation frustrated his ability to obtaining financing, and rendered development of the property “fruitless”.

The dormant inverse case was revived and the case proceeded to trial.  The owner presented two witnesses to advance his theory.  The trial judge rejected the owner’s claims, finding that the commercial building was rented during the entire episode and that while the City’s actions may have impacted the owner’s ability to develop the property as he wanted, it did not deprive the owner of all beneficial use of the property.

The Appellate Division echoed the trial court’s findings and also underscored the fact that the owner voluntarily withdrew his “as of right” residential development.  The Court also held – as a matter of law – that the owner’s claims that the City’s action frustrated his ability to finance the project were not compensable. (“Lost economic opportunities allegedly occasioned by pre-taking government activity do not constitute a compensable “taking” under either the United States or New Jersey Constitutions.”) (Slip op. at 13).

That final aspect of the decision is inconsistent with regulatory takings jurisprudence.  If government action has an economic impact and frustrates an owner’s reasonable investment-backed expectations, the government action is a taking requiring payment of just compensation under the New Jersey, and United States, Constitution.  However, it appears that the as of right application should not have been withdrawn and that was the final nail in the coffin for this property owner.

Big Win For Property Rights in US Supreme Court 

Yesterday, the United State Supreme Court issued a decision which has caused property rights advocates and developers to rejoice, and is likely to become a historic property rights precedent for years to come.  The 5-4 decision in Koontz v. St. Johns River Water Mgmt District, No. 11-1447 (copy available here) limits the type and scope of “exactions” that can be placed by local government upon developers in exchange for land development permits and approvals.

The Koontz case involves a 15 acre property near Orlando, Florida, which the owner tried to develop for nearly 20 years.  The property consisted mostly of freshwater wetlands.  The owner sought to develop a portion of the property by dredging and filling it to construct a building and parking lot but, under Florida law, these activities required a “special permit” that local land-use agencies could condition upon mitigation efforts by the owner to offset any environmental damage that the development would cause.  Koontz had offered to permanently conserve the rest of his land from development in exchange for the permit to develop 3.7 acres.  The St. Johns River Water Management District objected to the as insufficient, instead proposing that Koontz he develop only one acre and conserve the rest, or that he pay for other wetlands mitigation efforts several miles away. Koontz turned down both options and sued instead, the litigation lasted more than 10 years, outliving Koontz who passed away during the process.

While the Florida trial court had awarded Koontz more than $300,000 in damages for the inability to use his property, the Florida Supreme Court reversed, finding that there was no “taking” of property, since only money was demanded.

The United States Supreme Court, by a 5-4 vote, held it was irrelevant that no real property was “taken” and that monetary exactions are subject to the same “essential nexus” and “rough proportionality” requirements set forth in the famous US Supreme Court cases  Nollan and Dolan , which standards have long been applied to property exactions and require that government can’t demand some concession from a property owner that is either unrelated to the harm caused, or disproportionate to it.  The Court also held that a property owner need not accept the government permit in order to challenge it.

Justice Samuel Alito authored the opinion and wrote:

“It makes no difference that no property was actually taken in this case. Extortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation.”

So the Fifth Amendment rises once again in Koontz.

Where it leads us will be very interesting as the opinion has already generated comment from various property rights advocates lauding it as a milestone, and criticism from environmental and planning concerns who are worried that Koontz will deprive local governments of the ability to insure that the costs of new development are fairly borne by the developers and users of that development.

More on this decision and its impacts is available on the Inverse Condemnation blog of our Owners Counsel of America colleague, Robert Thomas, who filed an amicus brief on behalf of Owners Counsel in the US Supreme Court case.  Robert is also leading an American Bar Association webinar next month to update practitioners on Koontz and its implications.

 

As you know from our December 2012 blog, the United States Supreme Court found that an Army Corps flooding program, which damaged a hardwood forest managed by the Arkansas Game & Fish Commission, may constitute a taking of private property.  Therefore, the Court upheld the property owner’s inverse condemnation claim, reversed the Fifth Court’s decision and remanded the matter to the Federal Court of Claims to adjudicate constitutional “just compensation.”

The parties have now submitted their briefs on remand.  Our Owners’ Counsel colleague, Robert H. Thomas, Esq. has them available on his blog. Click here for the property owner’s brief, and here for the government’s brief.   The government argues that it “did not take a flowage easement” and “at most, there was a modest, unforeseeable, and incremental increase in flooding.” (Db1).  The property owner argues that the Corp’s induced flooding resulted in “catastrophic mortality” of several different tree species. (Pb8).

We’ll keep you posted.

 

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