$2B Takings Award for La. Oyster Fishermen "Shocks
Avenal v. State, 2003 WL 22501685 (La. App. 4 Cir.
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
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
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
Avenal, and a related case awarding roughly $600 million
in compensation, are being appealed.
Georgia High Court Rejects Takings Challenge, Limits Nollan/Dolan
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
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.
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,
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
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
Second Circuit Gives Developer Second Bite at Takings
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.
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
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
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.
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.
Right-to-Farm Laws as
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
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
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
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
Takings Claim Denied Under State Public Trust Doctrine
McQueen v. South Carolina Coastal Council, 2003 WL
(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
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
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
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.
Water Rights Not Taken When Government Denies Pipeline
Across BLM Land
Washoe County v. United States, 319 F.3d 1320 (Fed.
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.
SUPREME COURT IOLTA VICTORY PROTECTS LEGAL FUNDING FOR
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.
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
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.
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.php.