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Community Rights Report Newsletter -
2003 On the Horizon Archive




DECEMBER 2003

Friedenburg v. New York Dep't. of Envtl. Conservation
2002 WL 32310111 (N.Y. App. Div. Nov. 24, 2003)

A New York appellate court dealt a blow to the state's wetlands protection efforts last month, ignoring the state's arguments on relevant parcel and background principles to hold that development restrictions on a tidal wetland in the Village of Southampton worked a taking under the Penn Central balancing test.

Gwendoline Londino purchased four waterfront lots with a single deed in 1962 for $121,830. Two of the lots were sold for development in 1966 for $165,000 and the third lot was sold in 1990 for $660,000. The owners sought a permit to build a single family home on the remaining 2.5 acres, but the state denied the request, finding that the project's sewage system would release effluent containing pathogenic bacteria into Shinnecock Bay and nearby wetlands. Londino's estate challenged the permit denial as a taking.

After rejecting a categorical taking under Lucas, the court focused its attention on what it called a "near total or substantial decrease in value" of the remaining land and the fact that the property was purchased prior to enactment of the regulations. But the court failed to even acknowledge the state's argument that the 2.5 acres was one of four lots originally purchased for investment, and that the land had already returned $825,000 through the sale of the first three lots. What's more, the court declined to address the state's assertion that the regulation was not a taking due to background principles of state law regarding nuisance and public trust. In awarding compensation, the court cited the Federal Circuit's decision in Florida Rock to support its conclusion that there was no reciprocity of advantage or shared benefit that justified the regulation.

The state is considering an appeal to New York's high court, and we will keep you apprised of any further developments.



NOVEMBER 2003

Battle Lines Drawn in Public Use Debate
City of Las Vegas Downtown Redev. Agency v. Pappas, 76 P.3d 1 (Nev. Sept. 8, 2003)

Municipalities have successfully used the eminent domain power to achieve community redevelopment goals since the U.S. Supreme Court approved the practice in the 1954 case of Berman v. Parker, but recently libertarian groups and property rights advocates have begun arguing in court that many redevelopment plans do not satisfy the Constitution's public use requirement.

The war on eminent domain is being waged primarily by the libertarian Institute for Justice, which earlier this year issued a report, Public Power, Private Gain (http://www.castlecoalition.org) that argues that many community redevelopment programs amount to an impermissible compelled transfer of property between private parties. The group is bringing cases around the country designed to test the limits of the public use doctrine by pitting sympathetic homeowners with well-kept properties against the efforts of municipalities to redevelop older and sometimes blighted neighborhoods.

In City of Las Vegas Downtown Redevelopment Agency v. Pappas, the Nevada Supreme Court rejected the Institute's argument as amicus curiae that condemnation of the landowners' property to permit a partnership of casinos to build a parking garage was not an appropriate public use. The garage, which would serve both the casinos and a new pedestrian mall and tourist attraction, was part of a major development project intended to revitalize a long-blighted area of downtown Las Vegas. The court held that public ownership of the garage is not a prerequisite for public use and that "so long as a redevelopment plan, or any individual redevelopment project, bears a rational relationship to the eradication of physical, social or economic blight, it serves a public purpose within the power of eminent domain."

The property owners and interest group amici intend to seek review of the Pappas ruling by the U.S. Supreme Court and are reportedly hoping for a "landmark decision" on what constitutes a public use. We doubt very much that the court will even hear their case. But given the time and money the Institute is devoting to this topic, government attorneys would be well advised to keep an eye on this issue.



OCTOBER 2003

Courts Consider Takings Challenges to California Hotel Ordinances

California cities in the San Francisco Bay area have tried to address blight, staggering home prices, and lack of affordable housing by imposing maintenance and other restrictions on hotels, particularly those that offer rooms for long-term rent. These provisions are under attack in the courts, but a recent Ninth Circuit decision rejecting a takings claim against the City of Oakland provides a welcome boost to these planning efforts.

In Hotel & Motel Association of Oakland v. City of Oakland, 344 F.3d 959 (9th Cir. Sept. 17, 2003), the Ninth Circuit held that Oakland's maintenance and habitability requirements substantially advance a legitimate government interest in preserving housing stock and reducing crime and safety concerns associated with run-down properties. The court rejected as unripe a facial takings claim because the association never pursued compensation through state courts or administrative procedures. The court also rejected the association's due process and equal protection challenges.

This support by the Ninth Circuit for Oakland's law will hopefully mean victory for another hotel ordinance case percolating through the courts. In San Remo Hotel v. City & County of San Francisco, 41 P.3d. 87 (Cal. 2002), the California Supreme Court gave local governments a major victory in 2001, when it upheld laws restricting the conversion of hotel-based affordable housing to other uses and broadly affirmed the right of governments to impose impact fees and other mitigation measures on new development. Now the Ninth Circuit must decide whether to permit San Remo to bring a takings claim in federal court despite having unsuccessfully pursued an identical claim in state court.

The San Remo appeal follows on the heels of a troubling Second Circuit ruling in Santini v. Connecticut Hazardous Waste Management Service (our Sept. 2003 Feature Case), which allows takings claimants to avoid claim and issue preclusion altogether by reserving their federal takings claims when first litigating in state court. The Ninth Circuit's decision thus could be critical to ensuring that takings claimants cannot get a second bite at the takings apple and burden municipalities by refiling identical claims in federal court. CRC will soon file a brief in San Remo, and we'll keep you apprised of developments.




SEPTEMBER 2003

Court Rules for Landowner in "Unique" Precondemnation Case

In Johnson v. City of Minneapolis, 667 N.W.2d 109 (Minn. 2003), the Minnesota Supreme Court awarded landowners $4.3 million last month due to precondemnation activities by Minneapolis that left the claimants' properties in limbo for more than seven years.

In 1983, the city adopted a redevelopment plan for three blocks of downtown Minneapolis. In 1987, the city informed landowners in the district that their properties were likely to be condemned for the project. In part due to the mayor's vocal opposition, the project developer was unableto secure tenants or win approval of its designs. The project fell through in 1989. The city reportedly waited until 1993 to inform the property owners that their properties would not be condemned.

The Minnesota Supreme Court ruled that the state's takings clause required compensation. Noting the general rule that precondemnation activities do not work a taking, the court held that an abuse of the power of eminent domain may rise to a taking "when that abuse is specifically directed against a particular parcel." The decision is troubling to the extent it portends greater scrutiny of precondemnation conduct, but local officials can take some comfort from the court's repeated statements that its decision is limited to the "unique" facts of the case. It remains to be seen whether the limitation holds.


AUGUST 2003

The Federal Circuit's Treatment of Economic Impact

Coming months should bring clarification as to how the Federal Circuit will consider the economic impact portion of Penn Central's multi-factor test.

Earlier this year, the Federal Circuit made clear that, in accordance with Tahoe-Sierra, it would apply Penn Central to any takings claim that does not involve a 100 percent devaluation of the claimant's land. See Cooley v. United States (Fed. Cir. April 1, 2003) (Lucas per se rule inapplicable to a 98.8 percent loss in value). Just last week, the United States (supported by a CRC amicus brief) filed its opening brief with the Federal Circuit in Rose Acre Farms, where the trial court ruled that federal protections against Salmonella food poisoning worked a taking even though the claimant's value loss was only 10-25 percent (depending on the definition of the relevant parcel). Also pending before the Federal Circuit is American Pelagic Fishing Co. v. United States, an appeal of a trial court ruling that federal legislation revoking fishing permits constituted a temporary taking of a fishing trawler. The case raises important issues regarding how to gauge economic impact and economically viable use when addressing restrictions that allegedly deny profitable use on a temporary basis.

We expect rulings in these cases from the Federal Circuit in the first half of next year.


JULY 2003

Nevada Court Considers $22 Million Claim While Airline Safety Hangs in the Balance

The Nevada Supreme Court heard oral arguments June 25 in County of Clark v. Tien Fu Hsu, a multi-million dollar takings challenge to safety-related height restrictions imposed in 1990 to accommodate expansion of the McCarran International Airport in Las Vegas.

Tien Fu Hsu claimed the value of his property was diminished after the height restrictions precluded him from building a 40-story hotel and casino on the property. In 2001, a jury awarded Hsu $13 million for a per se, physical invasion taking, but with interest and attorney's fees the verdict is worth some $22 million. The land is currently used profitably to support a trailer park. Clark County appealed and argued before a five-member court last week that the decision be reversed. Fourteen amicus briefs were reportedly filed in the case, including one by Community Rights Counsel on behalf of the American Planning Association and others.

Our sources tell us that at the argument, Justice Nancy Becker asked the majority of questions and pointed out that a significant development project could still take place on the parcel even accounting for the height restrictions. Interestingly, few of the justices addressed the per se taking issue, which formed the basis of the district court's ruling. Even the claimant seemed more focused on a Penn Central analysis, which given the property's continuing economic value would seem to preclude a taking.

We'll not attempt to divine the court's thinking, but we will inform you of the decision, which should be released early next year.



JUNE 2003

Governor Approves Settlement of Takings Claim
Environmental Groups Criticize $2.7 Million Payoff for Spotted Owl Protections

Environmental groups are concerned that a recent, controversial settlement of a takings claim could undermine protections down the road. On June 26, Washington Gov. Gary Locke approved a settlement of a dispute between the state and a timber company over protections for the northern spotted owl. Included in this year's state budget was a request for $2.7 million to buy 232 acres from SDS Lumber Company, which sued the state for compensation for restrictions on timber harvesting on a portion of its lands. Only five percent of SDS Lumber's timberlands are affected by the spotted owl protections.

The money funds a settlement reached just two weeks after the Supreme Court's landmark decision in Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, which strengthened the hand of state and local officials faced with takings challenges. In the wake of Tahoe-Sierra, many environmental groups hoped the state would pursue the appeal to the state supreme court and urged the governor to veto the appropriation.

A jury in Klickitat County ordered the government in May 2000 to pay SDS Lumber $2.25 million in compensation for restrictions imposed by the state Forest Practices Board when two nesting pairs of owls were found on company lands. The spotted owl is listed as threatened under the federal Endangered Species Act. On appeal, numerous environmental, timber, and building industry groups filed briefs that argued for and against the state's ability to regulate private lands without incurring takings liability, but the state-wary of mounting interest and litigation costs and hoping to avoid an adverse verdict that could limit future regulatory authority-agreed to settle.

The appropriations request originally required the state to seek reimbursement from the federal government, and short of that, to recoup the money from its forest practices budget or from asset management - i.e. timber sales on the property. Gov. Locke vetoed this provision and stressed that the settlement was a "one-time event limited to the facts of this specific case."

Gov. Locke's decision ends the court fight but sets an unfortunate benchmark for similar resource protection conflicts in the state. Our thanks goes to the Georgetown Environmental Law and Policy Institute, counsel for amici in the case, for keeping us up-to-date.

UPDATE ON HORIZON
In last month's On the Horizon, we reported on an effort by the property rights movement to obtain U.S. Supreme Court review of the New Hampshire Supreme Court's ruling in Torromeo v. Town of Fremont, which held that takings liability does not automatically arise whenever a municipality denies a permit under an ordinance that is subsequently declared to be void due to a procedural flaw. We are happy to report that on June 9, the U.S. Supreme Court denied review.


MAY 2003

Compensation for Every Procedural Glitch?

Who in their right mind would argue that taxpayers must compensate developers under the Takings Clause every time a municipal ordinance is invalidated due to a minor procedural error? The leading lights of the so-called property rights movement, that's who.

The National Association of Home Builders, supported by amici Defenders of Property Rights and Pacific Legal Foundation, has petitioned the U.S. Supreme Court for review of Torromeo v. Town of Fremont, 813 A.2d 389 (N.H. 2002), where the New Hampshire Supreme Court rejected takings claims brought due to a procedural flaw in Fremont's Growth Control Ordinance. In New Hampshire, a municipality may adopt a growth control ordinance only if it is supported by a Capital Improvement Program (CIP) that allows for the orderly construction of infrastructure projects. In March 1999, Fremont enacted a Growth Control Ordinance that restricted the number of permits to be issued for a one-year period, but state courts invalidated the Ordinance because the 1987 vote on the Town's CIP was procedurally flawed due to the failure to provide adequate public notice.

After the Ordinance and CIP were declared void, the Town issued the permits previously denied under the Ordinance, but two developers nonetheless sued Fremont for a temporary taking, arguing that the earlier denials did not substantially advance any public purpose because the Ordinance was invalid.

A serious question exists as to whether the "substantially advance" standard is a legitimate test of takings liability. Moreover, no court has ever adopted the developers' remarkable theory that a mere procedural defect in a municipal ordinance automatically gives rise to takings liability regarding every application denied under the ordinance. If embraced by the High Court, this theory could federalize procedural challenges to municipal land use ordinances across the country.

Incredibly, Defenders of Property Rights issued a press release asserting that the developers were denied all economically viable use of their land. Wrong. One developer already had built 22 homes in his 27-lot subdivision. The other had been issued permits for 5 lots in his 14-lot subdivision, and was told simply that other permits would not issue until the Ordinance's one-year window expired in April 2002. Neither situation even comes close to a denial of all viable use.

We suspect the Court will see through this flapdoodle. We'll keep readers apprised of the status of the cert. petition (No. 02-1507).


APRIL 2003

The Kennedy/O'Connor Shuffle

Five years ago, it was conventional wisdom that Justice Kennedy was the key swing vote in takings cases before the U.S. Supreme Court. His moderating concurrence in Lucas, his dissent from the takings ruling in Eastern Enterprises, and other writings offered hope to public-side litigators that he would sympathize with their arguments and join Justices Stevens, Souter, Ginsburg, and Breyer to form a winning majority.

Justice O'Connor, on the other hand, was viewed by many as entrenched in the claimant's camp, along with the Chief Justice and Justices Scalia and Thomas. She joined the majority opinions in Nollan, Lucas, and Dolan without qualification. She dissented in Keystone, and she wrote separately in Preseault to emphasize her view that the takings claims there might have merit. She joined the concurrence by Justice Scalia in Suitum suggesting that transferable development credit programs might work a taking. In Parking Ass'n of Georgia, Inc. v. City of Atlanta, she joined Justice Thomas in a dissent from a denial of certiorari calling for consideration of whether Dolan applies to legislatively imposed fees. And she joined Justice Scalia in a dissent from a cert. denial in Stevens v. City of Cannon Beach, which argued that the state court's application of the public trust doctrine raised serious takings concerns. Such cert. denial dissents are relatively rare and generally reflect the conviction of a "true believer."

In view of this history, it was not uncommon for public-side takings lawyers to talk in terms of "writing to Justice Kennedy" in the hope of securing a Kennedy-led, pro-government majority. Although he sometimes is a tough vote for government counsel to secure, he always seems to be in play. Justice O'Connor, on the other hand, often seemed out of reach.

The times, they are a-changin'. In Palazzolo, Justice O'Connor wrote separately to challenge Justice Scalia's assertion that notice of a land-use restriction at the time of purchase is irrelevant to takings analysis. In Tahoe, she joined the majority to reject a takings challenge to protections for the Lake, an opinion that quoted extensively from her Palazzolo concurrence. Most recently, in Brown she provided the fifth vote to reject a takings challenge to Interest-on-Lawyers'-Trust-Accounts (IOLTA) programs, even though she joined the Phillips majority in deeming that interest to be the client's private property.

Justice O'Connor arguably has supplanted Justice Kennedy as the key swing vote in takings cases. The common theme in her rulings appears to be a pragmatic desire to uphold government action that clearly promotes the public good, a theme reflected not only in Brown and Tahoe but also in her dissent in First English, which involved protections against deadly floods. On the other hand, she has displayed considerable sympathy for widows-in-wheelchairs claimants like Mrs. Suitum. Government counsel should keep that in mind when deciding which takings cases to take up to the High Court.


MARCH 2003

New Takings Bills Threaten State and Local Planning Efforts

State property rights advocates are once again pushing legislation aimed at curtailing municipal planning efforts and other community protections. The reprieve Oregon planners won last year when the state supreme court struck down Measure 7 has proven short lived. Now lawmakers are pushing House Bill 2137, dubbed "Son of Measure 7," which would force the government to pay compensation whenever regulations reduced the fair market value of a property by more than 10 percent.

Meanwhile, in Idaho, a House committee approved a pair of property rights bills. House Bill 256 requires state and local governments to perform a takings impact analysis for all zoning changes, while House Bill 257 would prevent local governments from enacting emergency ordinances of more than a year in duration.

In Florida, municipalities are fighting an amendment to the Bert J. Harris Jr. Private Property Rights Protection Act, which would subject local governments to retroactive liability for takings claims to the date of the Act's passage in 1995. Since then, some 250 claims have been filed statewide, with $24.8 million in claims pending in Miami Beach alone.


FEBRUARY 2003

Six States Request Limits on Recent Federalism Jurisprudence

If anyone unequivocally supported the Supreme Court's recent "federalism" jurisprudence, you'd think it'd be the states. After all, the Supreme Court inevitably invokes the "dignity interest" of the states as justification for its rulings limiting federal constitutional authority.

That is what makes the brief filed by the State of New York and five other states in Nevada Department of Human Resources v. Hibbs, No. 01-1368, so interesting. These states argue that it is critical that state agencies be held liable under the Family and Medical Leave Act in order to advance important objectives served by federal law.

FMLA was passed by Congress in 1993. Under the law's "family medical care provision," all workers, regardless of gender, are entitled to twelve weeks per year of unpaid leave for a family emergency. Williams Hibbs, a Nevada state social worker, has sued Nevada for being denied the full twelve weeks to care for his ill wife, and then fired.

This case is significant because it brings to the fore the effort by some Justices to scale back the power of the federal government when the Justices view those powers as unduly intruding upon state and local authority. The central question raised at the Jan. 15 oral argument in Hibbs was whether Congress acted within its constitutional power when it authorized state employees to sue a state for damages when the state violates FMLA. What remains to be seen is whether the court will shift from its recent rulings holding that Congress does not have the power to protect state employees against age or disability discrimination.


JANUARY 2003

Las Vegas Landowners Roll the Dice Once More

On February 10, the Nevada Supreme Court will hear oral argument in County of Clark v. Tien Fu Hsu, a $22 million takings challenge to height restrictions on 38 acres of land next to McCarran International Airport in Las Vegas.

In imposing the height controls, the County did nothing more than implement the Federal Aviation Administration's minimum standards designed to avoid catastrophic collisions in the event of an emergency deviation from normal flight paths. There is no evidence that any plane will ever invade the claimants' land, much less that any overflights would be so low and frequent as to meet the standard for an overflight taking set forth in Causby and Griggs. And it is undisputed that the challenged rules do not interfere with the existing, profitable use of the land as a trailer park. Nevertheless, the state trial court awarded the claimants $22 million for a per se, physical-invasion taking.

On appeal, CRC submitted an amicus brief supporting the County on behalf of the American Planning Association. We hope the Nevada Supreme Court follows the high court of Texas, which rejected a similar claim last year in City of Austin v. Travis County Landfill, 73 S.W. 3d 234 (Tex. 2002). Watch for a ruling in Clark County later this year.

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