Good News About Takings
In early 2006, the American Planning Association will publish Community Rights Counsel’s new book, The Good News About Takings. This short book is intended to give planners, planning commissioners, municipal attorneys, and others a guide to the remarkable and heartening developments in takings law over the past few years. The Supreme Court’s decisions under the Fifth Amendment’s Takings Clause were as recently as five years ago widely deemed a significant obstacle to innovative environmental and land use planning efforts at the federal, state and local levels. Happily, that is no longer true.
Starting in 2002 with Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, and culminating in the 2005 ruling in Lingle v. Chevron, the Supreme Court has made it clear that the state of takings law is this: There must be a wipeout of substantially all property value of the entire parcel for a government to be held liable for a regulatory taking. Most regulations do not meet this threshold, so local officials have wide latitude in protecting the environment and designing land use plans. Even cases like Nollan v. California Coastal Commission, Dolan v. City of Tigard, and Lucas v. South Carolina Coastal Council, which seemed like significant threats to land use planning when they were handed down, have since been interpreted narrowly, giving local officials even more scope for deciding how communities grow and change.
The book’s nine chapters take up common planning issues, such as downzoning, protections for ecologically sensitive areas, temporary building moratoria, dedications, impact fees, permit conditions, and eminent domain, and explain the current Supreme Court case law on these issues.
We hope that this exciting new publication will counter the aggressive efforts of some developers to use the threat of lawsuits to block reasonable regulations that protect property values and communities. The National Association of Home Builders has called the threat of litigation a “hammer to the head” of state and local officials. Surveys and scholars alike have shown that fear of big litigation bills alters the behavior of local officials. But the law is fundamentally on the side of local officials. That’s the Good News, and we hope that it spreads widely.
Not All Ventures Lead to Gains
Early next year, the Supreme Court will decide whether to hear a takings case arising out of a Montana ban on using cyanide to mine gold and silver. The petitioners, a group of disappointed mining companies and investors, are asking the Court to decide if the loss of an “opportunity” to receive a mining permit constitutes a compensable taking.
In 1992, the Seven Up Pete Venture (a mining company subsidiary) approached the State of Montana about receiving an operating permit for a mine that would use cyanide heap-leaching to extract about 15 million ounces of gold and silver near Lincoln, Montana. Cyanide heap-leaching requires spraying a cyanide solution over a pile of ore. As the cyanide permeates the pile, it attracts gold and silver like a magnet, and the gold and silver is later extracted from the holding pond into which the cyanide solution drains. But the cyanide solution often finds its way into groundwater, wells, and creeks. A report by the Montana Environmental Information Center listed more than 40 mining-related cyanide leaks, spills, and seepages between 1982 and 1998. Two spectacular leaks put tens of millions of gallons of cyanide solution into Montana waters.
The Venture submitted its permit application at the end of 1994, and agreed that the State would rule on the application by the end of January 2000. But before the State ruled, Montana voters passed Initiative 137, which banned all new cyanide heap-leach mining. Mines with an existing permit were allowed to continue the practice. The Venture sued, saying that, with I-137, the State had taken its “opportunity for a favorable ruling on its mining permit application.” The Montana Supreme Court in Seven Up Pete Venture v. Montana, (327 Mont. 306 (2005)) held that there was no compensable property right in the “opportunity” to receive a permit. No property right meant no taking.
Our office dictionary defines “venture” as “an undertaking involving uncertainty as to the outcome, esp. a risky or dangerous one” or “a business enterprise or speculation in which something is risked in the hope of profit; a commercial or other speculation.” The Venture’s multi-million dollar gamble and subsequent loss is not the same as a compensable taking, especially in view of the obvious risks to the public posed by its cyanide-laced proposal. The Montana Supreme Court recognized the difference. We hope the U.S. Supreme Court does the same and declines to grant cert.
High Court Federalism Cases
In addition to the wetland cases discussed on page one, several other cases pending in the U.S. Supreme Court implicate federalism issues of concern to state and local officials. The case getting the most attention is Gonzales v. Oregon, No. 04-623, a challenge to a federal interpretive rule under the Controlled Substances Act that restricts the use of controlled drugs for physician assisted suicide, even in states like Oregon that have laws permitting such use.
In U.S. v. Georgia, No. 04-1203, and Goodman v. Georgia, No. 04-1236, the court will decide whether Congress may use Section 5 of the 14th Amendment to abrogate the states’ sovereign immunity under Title II of the Americans With Disabilities Act as applied to discrimination against the disabled in state prisons. The case is a follow-up to Tennessee v. Lane (2004), which holds that Congress properly abrogated immunity under the ADA with respect to discrimination that undermines access to the courts.
Finally, in an important Dormant Commerce Clause case, DaimlerChrysler Corp. v. Cuno, No. 04-1704, the court will review a Sixth Circuit decision invalidating Ohio’s local investment tax credit. It should be an interesting term. We’ll keep you apprised of developments.
The Takings Clause as Insurance Against Business Risk:
Wensmann Realty, Inc. v. City of Eagan (Minn. Ct. App.)
On August 29, CRC filed an amicus brief on behalf of the League of Minnesota Cities in support of the City of Eagan in this takings challenge to the city’s refusal to amend its Comprehensive Plan to allow for residential development on about 120 acres of land that has been used as a golf course since 1965.
The claimants would like to build 480 homes on the property because the existing golf course allegedly can no longer be run profitably due to increased competition and other factors. The City decided against amending its plan (and the longstanding zoning law underlying the plan) due to serious concerns regarding traffic risks, inadequate school capacity, harm to water quality, drainage problems, and wildlife loss. The trial court ruled that the city’s action worked a compensable taking.
The trial court’s decision is extraordinary. In the typical regulatory takings case, a landowner challenges a new regulation that restricts previously permissible uses of the land. It is virtually unprecedented, however, for a court to find takings liability where local officials refuse to amend Comprehensive Plan requirements that prevented the claimant from ever having a reasonable expectation to use the land in a manner inconsistent with those requirements.
Investments sometimes go bad due to changes in market conditions. In effect, the claimants are asking the state courts to use the Takings Clause to require Minnesota taxpayers to provide landowners with insurance against the risk of new competition and other marketplace developments that can transform seemingly sound investments into unprofitable ventures, or alternatively to compel local officials to abandon longstanding community protections in their comprehensive land-use plans.
In its amicus filing, CRC argued that the claimants had no objectively reasonable expectation of using the land at issue for residential development given the longstanding zoning and Comprehensive Plan provisions that prohibit such use. Moreover, it is reasonable to presume that the change in value was de minimis because the land’s market value already would have been discounted to reflect the longstanding restrictions on residential development. We’re hopeful the appeals court quickly reverses the trial court’s double bogey.
The California Coastal Comm’n Lives On
Last month, the California Supreme Court issued a ruling that is good news for supporters of environmental protection in California and elsewhere. In Marine Forests Society v. California Coastal Commission ( Cal. 2005), the court upheld the constitutionality of the California Coastal Commission, the body that for three decades has protected California’s treasured coastline.
The case arose in 1999, after the Marine Forests Society applied to the Commission for a permit to dump garbage in the ocean off Newport Harbor. The Society dreamed of mimicking natural reefs and creating aquatic havens out of discarded tires, plastic jugs, and other detritus. The Commission found that the science behind this optimistic plan was weak, and denied the permit.
So the Society sued, saying that the Commission was actually a legislative body, and that under the separation of powers clause of the state constitution the Commission was unable to issue or deny permits or institute enforcement proceedings at all, since those are executive and judicial functions. At the time the suit commenced, one-third of the Commission’s voting members were appointed by the governor, one-third by the Senate Rules Committee, and one-third by the Speaker of the state Assembly. Each voting member had a two-year term, and was removable at will by his or her appointing authority. Both the trial court and intermediate appeals court agreed that this structure allowed for inappropriate legislative control over the Commission.
In 2003, while the case was pending before the California Supreme Court, the legislature changed the appointment and removal rules for the Commission. The voting members appointed by the legislative branches now have four-year terms and are not subject to at-will removal. (The old rules still apply to the Governor’s appointees). The Supreme Court held that this new structure does not violate the California constitution’s separation of powers clause. The legislature neither “improperly intrude[s] upon a core zone of executive authority” nor “retain[s] undue legislative control over a legislative appointee’s executive actions.” Just as crucially, the court upheld the validity of the Commission’s acts prior to the 2003 tenure changes.
The Marine Fisheries Society was represented in the case by Richard Zumbrun, a long-time foe of the Commission. Although the Society plans to seek review by the U.S. Supreme Court, we hope that Zumbrun reconciles himself to the continued existence of the Commission. Maybe a long, meditative walk on one of the state’s beaches will renew his appreciation for the Commission’s good work.
There was no On The Horizon for July 2005.
High Court Rejects Duplicative Takings Relitigation,
But Four Justices Invite Future Review of Williamson
In its June 20 ruling in San Remo Hotel, L.P. v. City
and County of San Francisco, No. 04-340, the U.S. Supreme
Court rejected arguments by developers and the so-called
property rights movement, urging that takings claimants
be given two bites at the litigation apple, first in state
court and then in federal court. Instead, the court ruled
that the federal Full Faith and Credit Act, 28 U.S.C. §
1738, requires federal courts to apply normal principles
of issue preclusion to state court findings and conclusions
once a takings claimant returns to federal court after first
seeking compensation in state court as required by Williamson
The procedural history of San Remo is complicated,
but the ruling is broadly applicable. After noting that
the Full Faith and Credit Act was enacted in 1790 and has
remained essentially unchanged since then, the court observed
the doctrines of claim and issue preclusion (also called
res judicata and collateral estoppel) embodied in that law
long predate the Republic and are found in every system
of jurisprudence because they are essential to repose and
finality. The court then drew upon a long line of precedent
to reject the notion that plaintiffs have a right to vindicate
their federal claims in a federal forum, even where the
plaintiff would have preferred not to litigate in state
court. The court also emphasized that "state courts
are fully competent to adjudicate constitutional challenges
to local land-use decisions."
The court did note that when takings claimants first seek
compensation in state court as required by Williamson
County, they may file their federal takings claims
in state court "in the alternative." Many, if
not most, state courts appear to allow this procedure already.
The phrase "in the alternative" suggests that
state courts should first address the state takings claim
and turn to the federal takings claim only if the former
is unsuccessful. E.g. Town of Flower Mound v. Stafford
Estates Limited Partnership, 135 S.W.3d 620, 645-46
(2003) (refusing to award attorneys fees under §1988
regarding the claimant's federal takings claim where the
claimant prevailed on its state takings claim). [Hat tip
to Robert Brown at Brown & Hofmeister, LLP, for this
What remains "on the horizon"? Four Justices
(Chief Justice Rehnquist, joined by Justices O'Connor, Kennedy,
and Thomas) issued a separate concurrence to note that they
would be willing to reconsider the Williamson County
requirement that takings claimants seek compensation in
state court first. The concurrence agrees with the majority
that takings claimants should not be allowed two bites at
the apple, but it questions whether constitutional or prudential
considerations require claimants to seek compensation in
state court first. It remains to be seen whether there are
five votes on the court to abandon this requirement.
CRC filed an amicus brief supporting San Francisco on behalf
of the California State Association of Counties, the League
of California Cities, and the American Planning Association.
Three Federal Judges Leave Junkets Board in Response
to CRC Ethics Petitions / Will the Fourth Follow Suit?
On May 6, two federal appellate court judges -- Chief Judge
Douglas Ginsburg of the D.C. Circuit and Judge Jane Roth
of the 3rd Circuit -- resigned from the board of directors
for the Foundation for Research on Economics and the Environment
(FREE) in response to ethics petitions filed last year by
CRC. These resignations came on the heels of an order reflecting
the resignation of Judge Andre Davis of the federal district
of Maryland, also in response to a CRC ethics petition.
FREE regularly provides federal judges with free trips
to a dude ranch in Bozeman, Montana, where the judges attend
lectures often deeply critical of environmental laws, and
explore theories of how the courts might invalidate those
laws. The ethics petitions, filed under 28 U.S.C. §
351, resulted from years of research and analysis by CRC
on judicial junkets. The petitions allege that membership
on FREE's board constitutes "conduct prejudicial to
the effective and expeditious administration" of the
courts due to severe appearance problems. The petitions
may be viewed at http://www.communityrights.org/TaintedJustice/
CRC's Executive Director, Doug Kendall, said the resignations
establish "the simple point that a judge cannot sit
on the board of an organization that takes money from corporations
to influence the outcome of environmental cases."
One federal appellate jurist, Judge Danny J. Boggs of the
Sixth Circuit, remains on FREE's board and is the subject
of a fourth CRC ethics petition. We hope Judge Boggs soon
follows the example of his colleagues.
Immunity from Takings Claims
On April 4, the U.S. Supreme Court denied certiorari in
DLX, Inc. v. Commonwealth of Kentucky (6th Cir. 2004),
which raised the interesting issue of whether states enjoy
sovereign immunity, in federal district court, from a takings
claim brought under the Fifth and Fourteenth Amendments.
Notwithstanding this denial of review, expect the issue
to continue to percolate in the lower federal courts, and
prepare for the possibility of a cert. grant down the road.
Oral Argument in San Remo
On March 28, the U.S. Supreme Court entertained oral arguments
in the third takings case heard this term, San Remo Hotel
v. San Francisco, No. 04-340. The case raises issues
concerning the intersection of (1) the federal Full Faith
and Credit Act, 28 U.S.C. § 1738, which requires federal
courts to respect state court rulings by giving them preclusive
effect, and (2) Williamson County v. Hamilton Bank
(U.S. 1985), which requires takings claimants to seek compensation
in state court under state law before filing a federal takings
claim in federal court. The question presented in San
Remo is whether a federal court should apply issue preclusion
to a state court's findings and conclusions rendered in
a takings suit that was filed to comply with Williamson's
The case involves a regulatory takings challenge to San
Francisco's 1981 Hotel Conversion Ordinance. This affordable
housing measure prevents owners of residential hotels from
converting units historically used for tenants into lodging
for tourists unless they take steps to mitigate the housing
lost to permanent residents. The ordinance allows the hotels
either to replace the converted units through construction
of an equal number of units for residents, or to rehabilitate
an equal number of residential hotel units, or to make an
"in lieu payment" to cover part of the construction
costs for the number of units being converted. According
to the city, the measure is a vital source of funding to
offset the loss of housing stock caused by conversion to
The procedural history of the case is complex, but the
bottom line is that Sam Remo lost in the California courts.
It now seeks to relitigate the same issues in federal court.
At oral argument, the Justices seemed highly skeptical
of the argument made by San Remo's counsel that takings
claimants should be allowed to re-litigate, in federal court,
issues already litigated and decided by a state court. Various
members of the Court obliquely raised the possibility of
revisiting Williamson County, but they seemed to
recognize that its viability was not properly raised in
this case. The Court will rule in the case before the Term
ends in late June.
CRC filed an amicus brief in support of San Francisco on
behalf of California municipalities and the American Planning
Association, available at http://www.communityrights.org/PDFs/Briefs/SanRemo2005.pdf
For a CRC op-ed on the case that appeared in the San Francisco
Daily Journal, go to http://www.communityrights.org/PDFs/LADJ3-28-05.pdf
The San Remo Case: Let's Put an End to this Nonsense
On March 1, San Francisco will file its merits brief before
the U.S. Supreme Court in San Remo v. San Francisco,
which raises the issue of how preclusion principles under
the federal Full Faith and Credit Act intersect with Williamson
County's requirement that takings claimants suing local
officials seek compensation in state court.
The case is the latest manifestation of a decade-long assault
on Williamson County by the National Association
of Home Builders and its allies. No one in this familiar
cast of characters provides any compelling argument as to
why the Court should disregard the plain requirements of
the Full Faith and Credit Act, one of the oldest provisions
in the U.S. Code and a bulwark of our federal system. Several
amici supporting San Remo evidently recognize this,
arguing instead that the Court should overrule Williamson
County, an issue not before the Court.
Oral argument is March 28. One hopes this unpleasant walk
down memory lane will be the last one local officials need
to take. CRC is filing an amicus brief for California
municipalities and the American Planning Association.
Supreme Court Update
The High Court has three property rights cases pending before
it, cases that could make this Term one of the most significant
in takings history. Community Rights Counsel is filing amicus
briefs in all three. Here's what's happening:
In Lingle v. Chevron U.S.A., Inc. -- which raises
the issue of whether the Agins "substantially
advance" test is a viable standard for regulatory takings
liability -- Chevron filed its merits brief on January 14.
It is supported by eight amici, including Pacific Legal
Foundation, National Association of Home Builders, and Cato
Institute. Oral argument is scheduled for February 22, the
same day as Kelo (see below). The Court has granted
10 minutes of argument time to the United States as amicus
in support of Governor Lingle.
In Kelo v. City of New London -- which raises the
issue of whether the Fifth Amendment's "public use"
provision prohibits the use of eminent domain for economic
development -- New London filed its opening brief on January
21. It is supported by more than a dozen amici. Oral argument
will be held February 22. As in Lingle, Community
Rights Counsel, along with the State and Local Legal Center,
filed an amicus brief on behalf of the National League of
Cities and other state and local government groups (available
In San Remo Hotel v. San Francisco -- which raises
the issue of whether a takings claimant, who files in state
court as required by Williamson County, gets
a second bite at the apple in federal court on issues already
resolved in state court -- San Remo filed its opening merits
brief on January 21. It is supported by several amici, including
the Home Builders and Ohio Representative Steve Chabot.
San Francisco's brief is due February 28. Argument will
be held March 28.