Texas, Flooding, and Public Use

On June 17, 2016, the Texas Supreme Court issued a decision in Harris County Flood Control District v. Kerr, available here, http://www.txcourts.gov/supreme/orders-opinions/2016/june/june-17,-2016.aspx, which should be of great interest to all those who follow major developments in takings doctrine.

The Texas Supreme Court, by a vote of 5-4, rejected a takings claim based on the theory that Harris County should be held liable for property damage allegedly caused by the county’s prior approval of upstream development without adequate flood mitigation. The headline is that the Court’s recent decision supersedes the Court’s prior decision in this case, issued on June 12, 2015, http://www.txcourts.gov/media/996484/130303.pdf, supporting, again by a 5 to 4 vote, the plaintiffs’ takings theory.  The change in outcome was explained by Justice Eva Guzman’s decision, in response to an application for rehearing, to switch her vote.

The plaintiffs in the case were more than 400 residents and homeowners in the Upper White Oak watershed in Harris County, Texas, which surrounds the City of Houston. They brought suit under the Texas Takings Clause, Article 1, Section 17 of the Texas Constitution.  The plaintiffs’ case was based on the theory that the county should be held liable for just compensation under the Takings Clause because (1) the county was substantially certain at the time it approved the development that it would cause downstream flooding and (2) the upstream development in fact caused increased flooding downstream resulting in property damage.   The trial court and the intermediate court of appeals ruled that the county was not entitled to dismissal of the case on summary judgment, saying that plaintiffs had created a factual dispute about whether they could prevail on their takings claim.  In its latest decision, the Texas Supreme Court ruled that plaintiffs’ claims were insufficient as a matter of law, principally because they had offered no evidence that the county was “consciously aware” that approval of any particular development  upstream was substantially likely to lead to flooding of plaintiffs’ specific downstream properties.

The Court made clear that it was influenced by a concern that a contrary ruling would open a Pandora’s box of takings liability, stating, “[t]he homeowners’ theory of takings liability would vastly and unwisely expand the liability of governmental entities.” The court also observed that plaintiffs’ theory “lacks any discernible limiting principle and would appear to cover many scenarios where the government has no designs on a particular plaintiffs’ property, but only knows that somewhere, someday, its routine governmental operations will likely cause damage to some as yet unidentified property.”   In its parade of horribles that it thought might follow from awarding plaintiffs a victory in this case, the Court cited a potential climate takings lawsuit by victims of sea level rise against the government for issuing permits to oil and gas drillers or power plant operators.

The Court also expressed concern that a ruling in favor of plaintiffs could undermine the doctrine of sovereign immunity, observing that if the plaintiffs were allowed to proceed under takings doctrine, as opposed to, say, tort doctrine, sovereign immunity would not defeat the plaintiffs’ claim. The Court stressed, quoting one of its venerable precedents, that “the doctrine of the non-suability of the state is grounded upon sound public policy,” for “[i]f the state were suable and liable for every tortious act of its agents, servants, and employees committed in the performance of their official duties, there would result a serious impairment of the public service and the necessary administrative function of government would be hampered.”  In a striking final flourish, the Court justified its ruling by citing Justice Robert Jackson’s famous caution that the Bill of Rights should not be converted “into a suicide pact.”

This case is full of ironies. The most striking feature of the case is that the county was charged with a taking for failing to take regulatory decisions which themselves might have generated takings lawsuits.   Plaintiffs alleged that the county failed to control downstream flooding by failing to impose adequate mitigation conditions on upstream development approvals.  But imposing those kinds of conditions will inevitably draw takings fire under Nollan, Dolan, and Koontz, which impose a heavy burden on government to justify development “exactions.”  In other words, under the plaintiffs’ theory, the county should have been liable under the Takings Clause for failing to impose regulatory restrictions which themselves might well have resulted in takings liability.  Talk about being caught between the devil and the deep blue sea!  Or as the, Court aptly put it, entry into a suicide pact!

A second striking feature of this case is the Court’s convoluted discussion of the issue of “public use.” The county contended that one of the reasons it could not be held liable for a taking was that issuing approvals for private development could not properly be regarded as a “public use” supporting takings liability.  In its latest decision, the Texas Supreme Court appeared to embrace this argument (although an ambiguous footnote considerably muddies the waters).  But Justice Lehrmann, who provided a crucial fifth vote to make the new majority, filed a concurring opinion emphasizing her position that a takings claim that fails the public use requirement can still support an award of compensation in an inverse condemnation case.  Property rights advocates have frequently adopted a similar line:  the public use requirement should be strictly enforced if the question is whether the government can exercise the power of eminent domain (see Kelo), but the lack of a public use should not be a barrier to recovery in an inverse condemnation case.

At least as a matter of federal takings doctrine, this argument is plainly errant nonsense. In its unanimous 2005 decision in Lingle v. Chevron USA, Inc. the Court made crystal clear that the public use requirement is fully applicable in inverse condemnation cases, stating:

“The [Takings] Clause expressly requires compensation where government takes    private property for public use. It does not bar government from interfering with property rights,    but rather requires compensation in the event of otherwise proper interference amounting to a taking. First English Evangelical Lutheran Church, 482 U. S., at 315 (emphasis added).  Conversely, if a government action is found to be impermissible, for      instance because it fails to meet the public use requirement or is so arbitrary as to violate due process, that is the end of the inquiry. No amount of compensation can authorize such action.”

Now, of course, the Texas Supreme Court is free to adopt its own special reading of the Texas Takings Clause. But as a matter of textual analysis and plain common sense, it would be illogical to read the phrase “public use” in the Texas Takings Clause to mean once thing in the eminent domain context and another thing in the inverse condemnation context.   And the fact that reading the phrase “public use” in a disjunctive fashion would be most beneficial to developers (an apparently favored class in Texas), and least protective of government (not so much), is not an argument in favor of this reading, at least not one rooted in law.

A final, sadly telling point:   The Texas Supreme Court has stepped back from the precipice of an expansive takings ruling, and has found a new respect for the constitutional principle of sovereign immunity, in a case in which hundreds of ordinary homeowners were seeking recovery for property damages they claimed to have suffered at the hands of their government (acting for the benefit of developers by issuing them lax permits)  Without disputing the merits of the Texas Supreme Court’s ruling in this case, one has to wonder about the Texas courts’ apparent lack of concern about  a “vast and unwise” expansion of takings doctrine, or about undermining the principle of sovereign immunity, when they issued rulings expanding the scope of takings doctrine for the benefit of developers and agricultural interests.  (See, e.g., Town of Flower Mound v. Stafford Estates Ltd. Partnership, 135 S.W.3d 620 (Tex. 2004) (ruling that an exaction imposed on a developer resulted in taking), or Edwards Aquifer Authority v. Bragg, 421 S.W.3d 118 (Tex. App. 20130, review denied (May 1, 2015) (ruling that implementation of the Edwards Aquifer Act resulted in taking of a farmer’s property),  In Texas, one has to wonder if there are property owners and then there are property owners.


Oregon Supreme Court on Physical Takings Claims

In the case of Dunn v. City of Milwaukie, the Oregon Supreme Court recently issued a valuable decision addressing the standards for when government can be held liable for a taking due to physical invasion of private property (at least under the Oregon Takings Clause, though the decision relies in part on federal precedent).

The case arose (hold your nose) when the city’s use of high-pressure “hydrocleaning” to wash the public sewer system caused sewage to back up and spill into the plaintiff’s house through toilets and other bathroom fixtures.   A jury found for the plaintiff and awarded compensation, and the award was affirmed by the Oregon Court of Appeals.  The Oregon Supreme Court has now reversed. Read on …


The Ninth Circuit Rules in Horne: The Plot Thickens

The Supreme Court’s takings decisions last term in Horne and Koontz have each generated considerable debate and consternation.  Now, the Ninth Circuit has issued a new ruling in Horne on remand that relies heavily on the analysis in Koontz to resolve the Hornes’ claim. The Ninth Circuit handed the government a win, ruling that the Hornes failed to demonstrate a taking due to the Secretary of Agriculture’s assessment of penalties against them for declining to “reserve” a portion of their raisin crop in accordance with the Agricultural Marketing Agreement Act of 1937.  Unfortunately, the Ninth Circuit’s legal analysis is an impenetrable tangle, largely because the Supreme Court itself has been so confusing, and the long-term implications of the Ninth Circuit’s decision are both unpredictable and troubling. Read on …


Koontz: Could it Get Any Worse?

Just when you thought the Koontz litigation couldn’t get any worse (see my article, Koontz: the Very Worst Takings Decision Ever?),the Florida Court of Appeals has issued a decision in the Koontz case on remand.  The Court split 2 to 1.

To recap, the case arose from the St John’s Water Management District’s denial of a permit to fill wetlands after the plaintiff and the District failed to come to terms on a combination of easement restrictions and off-site mitigation measures that would have allowed the District to issue the requested permit.  The Florida Supreme Court, reversing a decision by the Florida Court of Appeals, ruled that the Nollan/Dolan “exactions” standards do not apply to a permit denial when the government has imposed no “exactions.”  The U.S. Supreme Court reversed, holding that Nollan/Dolan do apply to a permit denial following a landowner’s refusal to accede to a demand for an exaction.

In this latest ruling in the case, on remand from the U.S. Supreme Court, the Court of Appeals reasoned that, since the court’s 2009 decision was “entirely consistent” with the Supreme Court’s 2013 decision, and since the Supreme Court’s  opinion “does not set forth a new legal construct” for analyzing the issues in the case, it should “reaffirm” its prior decision upholding the finding of a taking and a compensation award without the benefit of further briefing.  Given that the Court of Appeals previously awarded “just compensation” for a “taking” of private property, and the Supreme Court subsequently declared that the claim in Koontz was NOT based on a “taking,” the majority’s logic is more than a little suspect. Read on …


David Lucas’s Two Coastal Lots

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David Lucas’ Lots 1994

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David Lucas’ Lots 2014 (Courtesy of Meg Caldwell and Eric Hartge)


Second Circuit Decision on Williamson County

The Second Circuit has added new support to the Williamson County waiver theory in the case of  Sherman v. City of Chester.  In a nutshell, the court ruled that when a local government removes a federal takings claim from state court to federal court, it waives the opportunity to raise the state-exhaustion prong of Williamson County as an objection to the federal court proceeding.    This Second Circuit ruling follows a ruling by the Fourth Circuit in Sansonatta v. Town of Nags Head, issued in 2013, adopting the same conclusion.   The ruling in Sherman apparently means that a local government faced with multiple federal claims filed in state court will need to make an initial choice between litigating all the claims in federal court or litigating all of the claims in state court.

Importantly, the  decision does not cast doubt on the general rule that when a litigant initially files a takings claim in federal court, the government defendant can raise Williamson County and insist that the takings claim be litigated in state court.

The Second Circuit also ruled that the plaintiff met the finality prong of Williamson County by demonstrating that it would be “futile” to proceed with further applications because the town used “unfair and repetitive” procedures to raise a host of changing regulatory obstacles over about a decade to bar the plaintiff’s development project.

In a final interesting twist, the court concluded that the plaintiff stated a viable takings claim, at least sufficient to survive a Rule 12 motion to dismiss, on the theory that the shifting regulatory requirements that made it futile for plaintiff to seek to ripen his claim themselves constituted a taking.  We’ll be curious to see how this case unfolds on remand.