$600 Million Takings Claim Pits Old West Against New
When Defenders of Wildlife hoisted its logo over the door
of a renovated black marble building in Washington, D.C. that
formerly served as the headquarters of the National Mining
Association, few missed the image's potent symbolism. But
Old West policies like the Mining Law of 1872, which remarkably
still allows people to maintain royalty-free claims to mineral
resources on the public lands, die hard. Now a $600 million
takings claim over mineral rights in the Siskiyou Mountains
stands as an equally vivid symbol of the continued debate
between resource protection and resource extraction.
Walt Freeman owns 161 mining claims that he says entitles
him to dig for nickel, iron, and chromium in the Siskiyou
region of southern Oregon. Boasting more than 300 plant species,
some of which are found nowhere else in the world, the Siskiyou
National Forest is considered one of the most biologically
rich areas in North America. Federal agencies have thus far
blocked the project to protect the environment, and Freeman
believes he should be paid handsomely to give up his claims.
Under the 1872 Mining Law, even if Mr. Freeman does develop
his claims, he will pay no royalties and has little responsibility
to account for the environmental harm his operations could
cause. Congress has attempted to reform the law since the
1970s but mining interests have prevented any significant
changes to rules set up to encourage pioneers to settle the
West. What's more, the Bush administration recently reversed
a Clinton-era ruling limiting the amount of public land acres
available by right to claimants for processing ore and dumping
often toxic mine waste.
The Supreme Court rejection of a takings challenge where
federal law extinguished a mining claim in United States
v. Locke (U.S. 1985) gives us hope that the government
will prevail. Mr. Freeman's claim, if successful, could seriously
impede the ability of the natural resource agencies to protect
public lands under federal land laws and other laws without
incurring huge liability for takings claims.
Does the Takings Clause Guarantee a Reasonable Rate of
Cienega Gardens v. United States, 331 F.3d 1319 (Fed
Cir. June 12, 2003)
The Federal Circuit has issued clunkers before - cases such
as Florida Rock v. U.S. and Loveladies Harbor v.
U.S. - and, happily, few courts around the country have
taken much notice. Let's hope a similar fate awaits the court's
recent decision to award compensation to owners of property
serving low-income tenants who argued that restrictions on
their ability to prepay their mortgages - and thereby escape
obligations to rent their properties to low-income tenants
- constituted a taking.
In the late 1960s, the owners of the Cienega Gardens apartments
obtained low-interest forty-year mortgages with the assistance
of the Department of Housing and Urban Development. In return,
the owners agreed to rent a percentage of their property to
low-income tenants. Regulations in effect at the time allowed
the owners to prepay their mortgages and be free of restrictions
after twenty years, but they also allowed for changes to the
regulations "at any time and from time to time."
As the twenty-year mark approached, Congress passed legislation
to preserve affordable housing that prohibited prepayment
of mortgages under this program. The owners brought suit alleging
contractual violations and a temporary taking of their property.
In 2001, the Federal Circuit rejected Cienega Gardens' per
se taking claim but remanded for consideration of their claim
under Penn Central. The Court of Federal Claims dismissed
the case, but this summer the appellate court held that the
claimants had a property interest in the contractual right
to prepay and exit the housing program. Notwithstanding the
explicit regulatory provision allowing for a change in the
regulatory program, the Federal Circuit held that the plaintiffs
had reasonable, investment-backed expectations in the terms
of their mortgage contracts. Even more remarkably, the Court
focused entirely on the owner's estimated loss in annual profits,
rather than the diminution in their property value (estimated
by the government to be only 35%), in finding that Cienega
Gardens had suffered sufficient economic loss to maintain
a Penn Central claim.
Interestingly, a different Federal Circuit panel on the same
day decided a case on the similar facts, Chancellor Manor
v. United States, 331 F.3d 891, but declined to find a
taking and indicated, without prejudging the outcome, that
the government might be able to defend itself against a
Penn Central claim on remand.
House Panel Reviews Takings Executive Order
Property rights advocates and environmentalists debated a
new General Accounting Office study on the implementation
of the much-criticized Reagan Takings Executive Order before
a panel of the House Committee on the Judiciary October 16,
possibly teeing up a renewed effort to revise the order and
Roger Marzulla of Defenders of Property Rights testified that
takings law's evolution since President Reagan issued the
order in 1988 required new guidance and urged Congress to
pass legislation making the executive order legally enforceable.
By contrast, John Echeverria of the Georgetown Environmental
Law and Policy Institute told the panel the order was "fundamentally
flawed from its inception" and said the GAO, rather than
focusing on the sufficiency of implementing guidance, "should
be asking whether Executive Order 12630 should simply be scrapped."
The GAO report and witness testimony are available on the
panel's website - http://www.house.gov/judiciary/constitution.htm.
In our July 2003 Eye on Washington, we
reported on developer efforts to seek U.S. Supreme Court reconsideration
of Williamson County through a petition for certiorari
in Kottschade v. City of Rochester. On October 6, the
Court denied the petition.
Federal Circuit Rejects Oil Tanker Takings Claim
On September 9, in Maritrans, Inc. v. United States,
2003 WL 22076611, the Federal Circuit rejected the claims
of tank barge owners who alleged that the double hull requirement
of the Oil Pollution Act of 1990 worked a taking of their
single hull barges. The law, enacted in the wake of the Exxon
Valdez disaster, reduced the value of Maritrans' barges
by 13.1 percent. Although the result is laudable, the court's
reasoning is flawed in at least two respects.
First, the court rejected the government's position that
the barge owners lacked a property interest in the use of
the vessels in interstate navigation. That the owners had
a property interest in the barges themselves was indisputable,
but the Court muddled the more precise question of whether
the barge owners had a cognizable interest in the use of the
barges for the specific purpose at issue. Surprisingly, the
appeals court upheld the trial court's finding that the law
interfered with Maritrans' reasonable expectations notwithstanding
the long history of heavy regulation in the industry.
What's more, the court failed to consider adequately the
distinction between real and personal property under the Fifth
Amendment. The government argued that the Lucas per
se rule does not apply to personal property, relying on the
Lucas court's holding that "in the case of personal
property, by reason of the State's traditionally high degree
of control over commercial dealings, [the owner] ought to
be aware of the possibility that new regulation might even
render his property economically worthless." The Federal
Circuit blithely responded that "tangible property may
be the subject of a takings claim," without recognizing
the important analytical distinctions that come into play
when applying the Lucas per se rule.
The court will have a chance to address these important issues
again in Rose Acre Farms (see Sept.
2002 Takings Watch) and other cases. They demand
a more nuanced analysis.
"We sure get a kick out of it when the sheep are around."
That's not a comment one expects to hear from residents of
a resort development. But Walecia Konrad of The New York
Times recently reported that more and more builders are
realizing that by conserving open space around their development
projects, they can actually increase land value and enhance
homebuyer enjoyment. See http://www.nytimes.com/2003/08/01/realestate/01LAND.html
As Konrad put it, "the ultimate second-home amenity
is a slice of wilderness." These open areas not only
provide scenic views of bighorn sheep and other wildlife,
but also shield residents from strip malls or other unattractive
development. People are willing to pay more for these benefits,
with studies conducted in California showing that property
values within a mile of open space increase by 8-10 percent.
This is good news for states and municipalities facing takings
challenges to open space protections. These studies support
the argument that regulations restricting development of a
portion of land (for example, in a wetlands area) benefit
the developer by enhancing the property's overall value. The
case that first recognized the concept of a regulatory taking
-- Pennsylvania Coal Co. v. Mahon (1922) -- introduced
the notion of "reciprocity of advantage" as a justification
of various laws. More recently, the Supreme Court reaffirmed
the reciprocity theory in Keystone Bituminous Coal Ass'n
v. DeBenedictis (1987), explaining that "while each
of us is burdened somewhat by such restrictions, we, in turn,
benefit greatly from the restrictions that are placed on others."
And in Tahoe-Sierra, the court cited the reciprocity
of advantage enjoyed by property owners subject to a common
land use planning program designed to protect Lake Tahoe,
which provides much of the land value in the Tahoe Basin.
Thanks to nature-lovers everywhere, the defense of reciprocity
of advantage is gaining strength. Let's hear it for those
who enjoy watching sheep from the front porch.
Developers Press for High Court Review in Kottschade
v. City of Rochester
Despite two swings and two big misses in the lower courts,
development interests are back in the batter's box swinging
for the fences in what could be their final strike at Williamson
County's ripeness requirement. Franklin Kottschade, backed
by the National Association of Home Builders and a small armada
of developer amici, has filed a petition for certiorari
in the U.S. Supreme Court.
Kottschade maintains the development conditions imposed by
the City of Rochester, Minnesota took his property without
compensation. Despite Williamson County's unambiguous
ruling requiring aggrieved property owners to seek redress
in state courts before filing a federal takings claim, Kottschade
sued in federal district court without first having pursued
his claim at the state level. Citing Williamson County,
the district judge dismissed the claim, but Kottschade appealed
to the Eighth Circuit where he pressed the novel argument
that City of Chicago v. International College of Surgeons
(U.S. 1997) modified Williamson County's ripeness rule
even though that case never cited Williamson County.
In February, the Eighth Circuit rejected this contention and
affirmed the dismissal.
Development interests are supporting Kottschade's petition
with no fewer than six amicus briefs. Filing separate briefs
thus far are Pacific Legal Foundation, American Forest and
Paper Association, Wisconsin Builders Association, Santini
Homes, Inc. (of Vernon, CT), Defenders of Property Rights,
and land use professor Daniel Mandelker of Washington University
in St. Louis.
Kottschade has shifted ground in te Supreme Court and is
no longer arguing (ridiculously) that Williamson County
already has been overruled. Instead, he is now urging
the Supreme Court simply to abandon Williamson County.
The city's opposition is due August 25. Given the absence
of a circuit split, the Court's repeated reaffirmation of
the unanimous Williamson County ruling, and the ruling's
grounding in a century of precedent, the case is uncertworthy
in the extreme. Here's hoping the High Court will strike out
this most recent assault on Williamson County.
High Court Denies
Cert. in Esplanade, Review to Be Sought in McQueen
The Supreme Court denied certiorari June 16 in Esplanade
Properties, LLC v. City of Seattle, a Ninth Circuit ruling
that relied on the public trust doctrine as a background principle
of property law to absolve the government of the need to pay
compensation to a landowner who was denied a permit to build
on tidelands. The Ninth Circuit held that the state's public
trust obligations precluded shoreline development. Pacific
Legal Foundation filed the cert. petition, which was supported
by several amici from the developers' bar. The Supreme
Court's denial of certiorari, while not unexpected, is still
In other news involving the public trust doctrine, the Washington
Legal Foundation recently pledged on its website to seek Supreme
Court review of McQueen v. South Carolina Coastal Council
(last month's Feature Case) "at the earliest possible
opportunity." As in Esplanade, the McQueen
court invoked the public trust doctrine to reject a takings
claim by a landowner denied permission to fill tidal wetlands.
We'll keep you posted on future developments.
Linking Judicial Junkets and Judicial Pay
For nearly five years, Community Rights Counsel has been
fighting to ban "judicial junkets": lavish trips
for federal judges, bankrolled by polluting corporations,
which are designed to advance an anti-regulatory legal agenda.
Our particular concern has been trips offered by a Montana-based
outfit called Foundation for Research on Economics and the
Environment (FREE), whose programs advance extreme views on
subjects like the Takings Clause.
It has been a busy couple of months on this front. In April,
Senator Patrick Leahy, the Ranking Democrat on the Senate
Judiciary Committee, introduced S. 787, the Fair and Independent
Judiciary Act of 2003, a bill that would link a ban on
judicial junkets to a judicial pay raise. This past week,
Senator Leahy indicated his intention to seek to amend a separate
judicial pay raise bill, introduced by Senator Orrin Hatch,
to include his ban on junkets. He was supported in this effort
by Senator Russ Feingold, who had introduced a similar bill
in July 2000. Two dozen national organizations, including
the Leadership Conference on Civil Rights, the American Association
of University Women, Natural Resources Defense Council, and
Defenders of Wildlife, wrote letters supporting this proposed
To head this amendment off, representatives of the Judicial
Conference (the judiciary's policy-making body) met with Senator
Leahy and assured him that they would revisit and revise their
internal ethical guidance to address his concerns. Given the
prior adamant opposition by the Judicial Conference to any
reform in this area, this represents significant movement
on their part. Still, both Senators Leahy and Feingold expressly
left open the possibility of future efforts to move legislation
on these issues, with Senator Feingold, in particular, stating
that he would evaluate the progress the Judicial Conference
had made by the time the pay raise bill was scheduled for
floor action and decide then whether to pursue an amendment
on the floor. We will keep Takings Watch readers posted
as this drama unfolds.
UPDATE ON TAHOE-SIERRA
The Tahoe-Sierra litigation, which yielded last year's
landmark ruling from the U.S. Supreme Court, has finally ended.
On February 28, the Ninth Circuit disposed of the remaining
claims, ruling that the challenges to the 1987 Regional Plan
were barred by principles of res judicata because they were
substantially similar to claims previously dismissed as barred
by the applicable statute of limitations. The court further
ruled that certain claims brought by landowners subject to
various mitigation provisions were not ripe for failure to
pursue administrative relief. Assuming the landowners do not
once again seek certiorari (unlikely, in our view), the long-running
Tahoe-Sierra litigation is now over.
"Obtain" vs. "Take"
In Scheidler v. National Organization of Women, Inc.,
123 S. Ct. 1057 (2003), the Court interpreted the word "obtain"
as used in the federal Racketeer Influenced and Corrupt Organizations
Act, concluding that the petitioners had not "obtained"
the respondents' property even though they significantly interfered
with its use:
There is no dispute in these cases that petitioners interfered
with, disrupted, and
in some instances completely deprived respondents of their
ability to exercise their property rights. * * * But even
when their acts of interference and disruption achieved their
ultimate goal of "shutting down" a clinic that performed
abortions, such acts did not constitute extortion because
petitioners did not "obtain" respondents' property.
Petitioners may have deprived or sought to deprive respondents
of their alleged property right of exclusive control of their
business assets, but they did not
acquire any such property.
Id. at 1065-66 (citation omitted).
If one cannot "obtain" property by shutting down
a business or otherwise interfering with the owner's use of
the property, one wonders how local officials can be deemed
to have "taken" property where community protections
interfere with land use. Community Rights Counsel has long
encouraged government counsel to emphasize the narrow plain
meaning of the word "taken" in the Takings Clause.
While it is unlikely that the Court will abandon the doctrine
of regulatory takings anytime soon, the narrow meaning of
"taken" should act as a forceful check against the
inappropriate expansion of takings liability. Let's hope that
the Court's recent cogitations on the meaning of "obtain"
have a beneficial spillover effect on its takings jurisprudence.
Last month, we reported on efforts by property rights groups
to persuade the U.S. Supreme Court to review two cases involving
legislative impact fees: Rogers Machinery Co. v. City of
Tigard (Or. Ct. App. 2002), and Agencia La Esperanza
Corp. v. Orange County Bd. of Supervisors (Cal. Ct. App.
2002). On March 10, the Court declined to review both cases.
The Campaign to Eliminate Legislative Impact Fees
The U.S. Supreme Court is currently considering requests
by property rights groups, amply supported by developer amici,
to review two state court cases holding that Dolan's
rough proportionality test does not apply to legislatively
imposed impact fees. The cases will be considered at the court's
February 28th conference. If embraced by the court, the petitioners'
contentions could severely limit, if not scuttle altogether,
legislatively imposed impact fees across the country.
In Rogers Machinery Co. v. City of Tigard, 45 P.3d
966 (Or. Ct. App. 2002), the court refused to apply Dolan
to a traffic impact fee imposed as a condition to a permit
to build a new corporate headquarters. The court observed
that "with near uniformity," other courts have declined
to apply Dolan to legislatively imposed fees. Id. at 977.
In Agencia La Esperanza Corp. v. Orange County Bd. of Supervisors,
2002 WL 681798 (Cal. Ct. App. 2002), the court declined to
apply Dolan to a traffic impact fee imposed on all
applicants for nonresidential building permits based on the
square footage of the project. The court rejected arguments
that the fee was unfair because the claimant's proposed self-storage
facility would have less severe traffic impacts than other
These rulings flow directly from Dolan, which expressly
relied on the adjudicative nature of the permit condition
at issue to justify imposition of its rough proportionality
standard on government officials. Moreover, cases involving
impact fees (as opposed to dedication requirements) make exceptionally
poor vehicles for further illumination of takings jurisprudence.
In Eastern Enterprises, five Justices (Kennedy, Breyer,
Stevens, Souter and Ginsburg) concluded that the Takings Clause
does not apply to a government-imposed monetary liability
that does not affect an identified property interest.
The petitioners, represented respectively by Oregonians in
Action Legal Center and Pacific Legal Foundation, argue that
permit applicants should be able to use Dolan's rough
proportionality test to attack reasonable legislative judgments
about the impact of new development. Under their theory, a
developer could challenge a school-impact fee by showing that
a small portion of its subdivision sales went to seniors or
others without children in the home. In essence, they contend
that permitting officials must adjust impact fees on an individual
basis. If subject to second-guessing on a permit-by-permit
basis, the entire notion of legislatively imposed fees could
fall by the wayside, thereby significantly increasing the
cost of reviewing plans for approval.
The U.S. Supreme Court has repeatedly declined to grant review
on precisely this issue. Let's hope the Court continues to
see this ruse for what it is.
Welcome to the Team,
We thought we were dreaming when we read recently in the
National Law Journal that Roger Marzulla -- founder
and General Counsel of Defenders of Property Rights and a
mainstay of the property rights movement -- helped defeat
a multi-billion dollar regulatory takings claim brought by
Coastal Petroleum against the State of Florida based on Florida's
cancellation of oil leases. But Mr. Marzulla's welcome defection
is simply the latest in a lengthy list of prominent conservatives
who have argued against an unduly expansive application of
the Takings Clause and other constitutional provisions.
As we've previously reported, Solicitor General Theodore
Olson personally defended the moratorium upheld in Tahoe.
Conservative pundit James Kilpatrick recently opined in favor
of the government in the pending takings challenge to Washington
State's IOLTA program. In his book, Narrowing the Nation's
Power, Reagan-appointee and respected legal historian
Judge John Noonan created a stir last year with a scathing
criticism of the Rehnquist Court's federalism jurisprudence.
And Judges J. Harvie Wilkinson III and Bobby R. Baldock, both
Reagan-appointees, have denounced anti-environmental judicial
Perhaps it would be asking too much for Richard Epstein to
renounce his takings treatise, but with the arrival of the
New Year, hope springs eternal.