The Agins "Substantially Advance" Test
in the Ninth Circuit
In Chevron USA Inc. v. Cayetano (No. 02-15867), the
United States Court of Appeals for the Ninth Circuit will
once again address the question whether the "substantially
advance" test is a legitimate theory of takings liability.
Ever since Agins v. City of Tiburon (1980) -- where
the Supreme Court wrote that government regulation works a
taking where it "does not substantially advance legitimate
state interests" -- courts and commentators have been
debating whether this means-end inquiry is appropriately conducted
under the Takings Clause or better viewed as a due process
inquiry. In articulating the "substantially advance"
test, Agins did not rely on takings precedent, but
rather on a single due process case. In Eastern Enterprises
v. Apfel (1998), a majority of the Court -- Justice Kennedy
in concurrence and four others in dissent -- concluded that
normative evaluations about the wisdom of government action
should take place under the Due Process Clause, not the Takings
Clause. The following year in Del Monte Dunes, the
Court affirmed an award of compensation for a regulatory taking,
but ironically not a single Member of the Court was willing
to endorse the jury instruction's means-end theory of liability
used in that case.
The Chevron claimants challenge Hawaii's Act 257,
a measure designed to control retail gasoline prices by limiting
the rent that gasoline wholesalers may charge to gas station
lessees. The State must overcome law-of-the-case and law-of-the-circuit
arguments raised by an earlier ruling in the case, but its
briefs set forth a compelling case for rejection of the previous
ruling or, at a minimum, the use of a deferential standard
of review to evaluate the challenged statute.
No matter how the current panel rules, expect the losing
party to seek en banc review. Down the road, the case also
might present the U.S. Supreme Court with a chance to clarify
this troubling area by consigning the means-end inquiry to
its rightful place in due process analysis.
NAHB's Continued Attack on Williamson County
On October 10, the U.S. Court of Appeals for the Eighth Circuit
heard argument in Kottschade v. City of Rochester (No.
02-1504), yet another frontal assault on Williamson County's
ripeness requirements by the National Association of Home
Builders. Having failed to gut Williamson County through
federal legislation, NAHB now takes the remarkable position
that Williamson County already has been eviscerated
by a 1997 ruling called City of Chicago v. International
College of Surgeons.
Appearing on the brief for Kottschade, NAHB argues to the
Eighth Circuit that College of Surgeons "axiomatically
modified" Williamson County's state-court compensation
requirement. Yet College of Surgeons does not even
cite Williamson County, much less overrule it. Moreover,
the Supreme Court has cited Williamson County's state-court
compensation requirement with approval after College of
Surgeons in the Del Monte Dunes case. NAHB relies
on the 1999 "Takings Retreat Report," even though
the report expressly declined to advocate change in the essentials
of Williamson County's ripeness requirements, and the
ABA Section on State and Local Government Law (which co-sponsored
the retreat) refused to ratify the report.
Fortunately, at oral argument the Eighth Circuit expressed
little sympathy for NAHB's misreading of College of Surgeons.
But NAHB's website trumpets the case and vows to take it "all
the way to the U.S. Supreme Court if necessary." We'll
keep readers apprised of future developments. (For copies
of the briefs, including CRC's amicus brief, and a tape recording
of the oral argument, go to http://www.ca8.uscourts.gov).
IOLTA Teed Up for the Supreme Court
It is unlikely that any case this Supreme Court term will
match the legal firepower assembled on the opposing sides
in Washington Legal Foundation v. Legal Foundation of Washington
(On The Horizon, June 2002), the only takings case the Court
has decided to review so far this year.
Leading Washington Legal Foundation's crusade against Interest
on Lawyer Trust Account (IOLTA) programs is Reagan Administration
Solicitor General Charles Fried. Weighing in on the other
side are three former Solicitors General (Seth Waxman, Walter
Dellenger, & Drew Days), preeminent Supreme Court advocate
Carter Phillips, and many of the nation's most prestigious
law firms. This star-studded lineup ensures a lively and interesting
oral argument before the Supreme Court on December 9th.
The impressive assemblage of legal talent presented a quandary
for Community Rights Counsel. What could we say on behalf
of our clients -- the National League of Cities, International
Municipal Lawyers Association, and Trial Lawyers for Public
Justice -- that would do more than echo the arguments made
by our more famous brethren? We responded by focusing our
brief exclusively on a sometimes overlooked, but potentially
dispositive, question: if a taking occurs, but causes no economic
harm, is there a violation of the Just Compensation Clause.
We argue "no" based on a straightforward reading
of the Fifth Amendment (which bars only takings without just
compensation) and precedent from numerous physical takings
cases. Because IOLTA programs use only those funds that could
not otherwise generate net interest, they cause no economic
harm, and thus just compensation for any alleged taking would
be zero. Hence, no violation.
The Legal Foundation of Washington's brief (pp. 34-35) directs
the Supreme Court's attention to our brief's discussion of
this critical issue and informs the Court that because this
issue is so straightforward, "the Court may wish to consider
only the just compensation question and affirm on that basis."
Sound advice in our opinion.
(To read CRC's IOLTA brief, visit www.communityrights.org/legalresources/crcbriefs/indexofbriefs.php)
Dolan in the Texas Supreme Court
On August 23, the Texas Supreme Court requested full briefing
in an appeal of a decision holding that (1) Dolan's
rough proportionality test applies to an adjudicative, non-dedicatory
permit condition, and (2) a road-improvement permit condition
was not "roughly proportional" under Dolan
even though the cost imposed upon the town by subdivision
traffic far exceeded the cost of the condition upon the developer.
See Town of Flower Mound v. Stafford Estates Ltd. Ptnrshp.,
71 S.W.3d 18 (Tex. Ct. App. 2002). The intermediate appeals
court affirmed the trial court's judgment of more than $425,000
for the developer due to a permit requirement that the developer
construct and pay for offsite road improvements designed to
promote traffic safety and road durability. Although the town
imposed the requirement pursuant to a legislative mandate,
the court concluded that the requirement was adjudicative
because the town had exempted other developers from the requirement
and initially approved the subdivision at issue without the
condition. Even more remarkably, the court found a taking
under Dolan even though the town proved at trial that
the proposed subdivision would result in about 750 additional
car trips per day and extra traffic costs on the town of nearly
$880,000. Rather than weighing these traffic costs against
the far smaller costs imposed by the permit condition, the
court improperly used the Dolan test as a vehicle for
second-guessing the wisdom of the permit condition.
After a period of relative calm, the Texas Supreme Court
has shown renewed interest in takings cases, requesting additional
briefing where an appeals court found a taking based on a
presumed 38 percent value loss (see Dec. 2001 Takings Watch),
and reversing a $2.95 million judgment against the City of
Austin in an airport zoning case (see May 2002 Takings
Watch). Given the steady stream of aberrant rulings from
Texas appeals courts, high court intervention is coming none
Police Searches as Takings?
On appeal to the U.S. Court of Appeals for the Third Circuit
is Jones v. City of Philadelphia, 2001 WL 1295648 (E.D.
Pa. 2001), an unusual takings challenge to the execution of
a search warrant. While recognizing that the issue was one
of first impression, the federal district court concluded
that a taking occurred based on a SWAT team's unsuccessful
search for drugs at a store in a high crime neighborhood.
Although the jury found that the police had conducted the
search under the authority of a valid warrant, the district
court held that police searches may work a temporary taking
of the detained individuals and their personal property under
the Fifth Amendment, even where the search is deemed reasonable
under the Fourth Amendment.
Municipal officials, particularly those in Pennsylvania,
New Jersey, and Delaware, should keep a close eye on this
Developers Challenge Long Island Pine Barrens Act
Despite previously failed efforts in state and federal court,
developers are once again challenging New York State's protections
for the Long Island Pine Barrens. In Dittmer v. County
of Suffolk, the Second Circuit has an opportunity to uphold
an important environmental statute and end a cycle of litigation
that threatens to chill the region's planning efforts.
Enacted in 1993, the Long Island Pine Barrens Maritime Reserve
Act established a comprehensive planning framework for the
Barrens, an ecologically unique area that is also the sole
source of drinking water for 2.5 million Long Island residents.
The District Court dismissed two of Dittmer's three claims
in 1999 and granted summary judgment for the State on the
last claim in February 2002. On appeal, Dittmer reasserts
his equal protection and due process claims, and raises for
the first time the frivolous argument that the Act is an unconstitutional
bill of attainder.
Dittmer is a prime example of how developers sometimes
embark on costly and protracted litigation schemes designed
to chill and frustrate government planning efforts. A good
decision from the Second Circuit could stop such lawsuits
from taking up years of the community's time and energy in
High Court to Hear 2nd IOLTA Case
In our October and November 2001 issues of Takings Watch,
we predicted that the U.S. Supreme Court would jump back into
the fray over "Interest on Lawyers Trust Accounts"
(IOLTA) programs. On June 10, 2002, the Court did exactly
that, granting certiorari in Washington Legal Foundation
v. Legal Foundation of Washington, No. 01-1325.
All 50 states have IOLTA programs that use the interest on
funds deposited by clients with their lawyers to generate
tens of millions of dollars for legal aid services for the
poor. When considering the takings implications of IOLTA programs,
the key fact to keep in mind is that no client funds qualify
for the program unless they are so small and held for such
a short duration that they could not generate net interest
(interest minus any bank fees) for the client on their own.
Under the IOLTA program, the funds are pooled and thus generate
interest. The clients do not lose a penny because without
the IOLTA program, no interest would be generated at all.
No harm, no foul, one might say.
The Court's first foray into IOLTA occurred in Phillips
v. Washington Legal Foundation, 524 U.S. 156 (1998), where
the Court held that the interest produced by IOLTA accounts
is the property of the clients. Now the Court will decide
two issues expressly left open in Phillips: whether IOLTA
programs result in a taking of private property and, if so,
whether any just compensation must be paid. The case also
will decide when injunctive relief is available in takings
The lead plaintiff in the campaign against IOLTA is Washington
Legal Foundation, a non-profit group with little to gain except
the satisfaction of depriving poor people of needed legal
services. One federal judge compared the plaintiffs to the
dog in Aesop's fable who refused to allow the cow into the
manger to feed on the hay, even though the hay was of no use
to the dog.
The Supreme Court's ruling will resolve a conflict between
the Ninth Circuit, which ruled en banc to uphold IOLTA, and
the Fifth Circuit, which struck down the Texas IOLTA program
last October. Stay tuned.
Verizon is Now Off the Horizon
In our September 2001 "On the Horizon" column,
we noted that the U.S. Supreme Court had agreed to hear Verizon
Communication, Inc. v. FCC, 122 S. Ct. 1646, a challenge
to provisions in the Telecommunications Act of 1996 that are
designed to make local phone service more competitive. The
challengers contended that the case raised the interesting
issue of whether takings concerns may be used to justify a
narrow interpretation of a statute under the doctrine of constitutional
Here's the follow-up we promised in last year's column. On
May 13, 2002, the Court rejected the challenge, holding that
the case did not present "a serious question" of
constitutional avoidance. Given the technical nature of the
ruling (it's a snoozer), it won't have much impact on regulatory
takings cases in the land-use context. Unless you're in the
throes of utility ratemaking, scratch Verizon from
your must-read list.
Peeking at Pending Cert. Petitions
With the U.S. Supreme Court cranking out five reg-take
rulings in 1987 (First English, Nollan, Keystone,
Hodel v. Irving, Florida Power) and one almost
every Term since then (Pennell, Sperry, Preseault,
Lucas, Yee, Concrete Pipe, Dolan,
Suitum, Phillips, Eastern Enterprises,
Del Monte Dunes, Palazzolo, and Tahoe),
it's natural to speculate as to what might be next from the
high court. CRC's web site makes such speculation easier by
listing pending petitions for certiorari in reg-take cases
and identifying the issues they raise. We also list more than
40 recent petitions that have been denied so that Court watchers
can get a sense of the kinds of takings issues being presented
to the Court on a regular basis. To see what may be on the
horizon at the Supreme Court, go to www.communityrights.org/legalresources/legalmain.php
Does Dolan Apply to Impact Fees and Other Non-Land
One of the cutting-edge issues in the post-Dolan era is whether
Dolan's rough proportionality test applies to impact fees.
The California Supreme Court has split the baby, recently
reaffirming in San Remo (see Feature Case above) that Dolan
applies to monetary exactions imposed on an individualized
and discretionary basis, but not to legislatively imposed
In Eastern Enterprises v. Apfel (U.S. 1998), however,
five Justices of the U.S. Supreme Court concluded that the
Takings Clause should not be applied to general monetary obligations.
They observed that a requirement to pay money "does not
operate upon or alter an identified property interest"
and "is not applicable to or measured by a property interest."
As a result, they concluded that the Takings Clause does not
apply and that courts should evaluate general monetary obligations
under the Due Process Clause. Although these five Justices
expressed their views in a concurrence and a dissent, the
Federal Circuit recently ruled that lower courts are "obligated
to follow the views of that majority" and thus refused
to apply the Takings Clause to an obligation to pay money.
Commonwealth Edison Co. v. United States (Fed. Cir.
Eastern Enterprises naturally raises the question
of whether the Takings Clause applies to impact fees. The
Washington Supreme Court is considering a case that might
well provide additional guidance: Benchmark Land Co. v.
City of Battle Ground (2000). The lower court applied
Dolan to strike down a permit condition requiring road improvements
near the proposed development. CRC filed an amicus brief in
support of the City arguing, among other things, that the
Takings Clause does not apply to the exaction, citing Eastern
Enterprises. The issue is also percolating through the
Texas courts in Town of Flower Mound v. Stafford Estates
Ltd. Ptnrshp. (2002), in which a state appeals court held
that an impact fee worked a taking under Dolan. We'll keep
you posted on how the Washington and Texas Supreme Courts
resolve the issue.
Disturbing Airport Zoning Case
Do taxpayers have to pay to acquire every sliver of airspace
that might be invaded by a plane deviating from its normal
flight path? That is the issue in County of Clark v. Tien
Fu Hsu, Case No. 38853, recently scheduled for review
in the Supreme Court of Nevada. The district court awarded
the landowners more than $22 million for a taking of air rights
over 38 acres of land adjacent to McCarran International Airport
in Las Vegas, concluding that county zoning designed to protect
public safety works a per se physical-invasion taking.
The challenged rules impose mere height restrictions. They
do not compel or authorize any invasion of the air space above
the claimants' land. Rather, they restrict the height of structures
on land adjacent to the normal flight path to provide a margin
of safety in the event of an unplanned deviation from the
flight path. The district court found a per se, physical-invasion
taking even though there is no evidence that any plane ever
will invade the claimants' airspace, much less that any overflights
would be so low and so frequent as to rise to the level of
a taking under the leading overflight precedents, Causby
It is undisputed that the challenged rules do not interfere
with the existing, profitable use of the land as a trailer
park. The landowners filed the suit because they wanted to
sell the land to a developer to build a 40-story casino, a
use that was prohibited by other height restrictions imposed
before the claimants acquired the property.
Other landowners in the area have filed similar claims for
compensation exceeding $500 million. Community Rights Counsel
is preparing an amicus brief for the American Planning Association
and others in support of the County.
U.S. Supreme Court Contemplates the Tahoe Moratorium Case
In reporting on the January 7 oral argument in the Lake Tahoe
case, the New York Times headline proclaimed: "Property-Rights
Claim Meets Resistance." In contrast, the headline in
the Los Angeles Times announced: "High Court Gives Lake
Tahoe Landowners a Sympathetic Ear." Both perspectives
Several Justices, including swing Justices Kennedy and O'Connor,
gave a chilly reception to the landowners' argument that every
moratorium that prohibits all use of land works a compensable
taking. They were highly skeptical of the landowners' contention
that the combined rulings of First English and Lucas
require compensation for every temporary denial of all
use, no matter how reasonable in scope and duration. Justice
Souter's questioning, in particular, set useful limits on
these rulings that seemed to reflect common ground among most
of the Justices.
On the other hand, certain Justices expressed concern when
Michael Berger, attorney for the Tahoe landowners, asserted
that only a handful of the claimants may build on their land
even today, twenty years later. John Roberts, counsel for
the Tahoe Regional Planning Agency, did a masterful job of
clarifying that legal challenges to permanent controls in
the Tahoe Basin are not before the Court. He also explained
that most of the claimants have sold their properties for
more than their purchase price and most of the rest may now
build. But it remains to be seen whether Mr. Berger's extra-record
assertions will color the equities in a way that affects the
Solicitor General Theodore Olson, arguing on behalf of the
United States in support of the Agency, urged the Court to
follow the admonition in Justice O'Connor's Palazzolo concurrence
to resist the temptation to fashion sweeping per se rules
in takings jurisprudence. (See Quote of the Month, below).
Attempting to read the Court's tea leaves is always a precarious
venture. Many observers left the argument predicting a government
win. With this Court, we'll believe it when we see it.
To read On the Horizon from our 2001 issues, click