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Takings Watch Newsletter -
2002 On the Horizon Archive


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


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


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 too soon.


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 one.

JULY 2002

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 the future.

JUNE 2002

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 cases.

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.

MAY 2002

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 avoidance.

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.

APRIL 2002

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

MARCH 2002

Does Dolan Apply to Impact Fees and Other Non-Land Exactions?

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 fees.

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. 2001).

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 and Griggs.

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 are accurate.

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 final outcome.

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 here.

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