Knick: Williamson County Overruled

On June 21 the Court issued its decision in Knick v. Township of Scott overruling Williamson County and establishing that developers and other property owners suing local governments for alleged takings can henceforth file suit in either federal or state court.  In retrospect, the writing was on the wall when the Court issued its November 2018 order, following the initial oral argument the prior month, scheduling the case for a second oral argument.  The first time around the Court had only eight sitting justices, suggesting a 4 to 4 deadlock.  By the second argument newly confirmed Justice Brett Kavanaugh had joined the Court.  The upshot was a 5 to 4 decision, with all the Republican-appointed justices siding with the property owner and the four Democratic-appointed justices in dissent.  Sadly, one can say (and wish it were true) that there are no Republican or Democratic justices, but the votes in Knick suggest otherwise.

So what to make of the Knick decision?   How does it affect takings doctrine more generally?  And what are the practical implications for takings litigation?

The Merits of the Decision.  The merits of the decision warrant only brief comment.  Justice Elena Kagan correctly stated that the Court not only overruled Williamson County but “smashe[d] a hundred-plus years of legal rulings to smithereens.”  In Williamson County, the Court established that a takings claimant cannot sue a local government in federal district court under the Takings Clause if the state courts afford an opportunity for the claimant to secure the compensation she seeks.  As Justice Kagan explained, this decision logically followed from the principle, frequently repeated in cases stretching back to the late 19th century, that an alleged taking cannot be said to violate the Takings Clause so long as the government has established a procedure for a property owner to seek and secure compensation for a taking.  Williamson County simply recognized that widely available state court inverse condemnations proceedings met this requirement and therefore generally barred property owners from suing local governments in federal court under section 1983 in the first instance because their constitutional rights had not been violated.

In Knick, the Court, in an opinion authored by Chief Justice John Roberts, jettisoned the former bedrock principle that a taking (by itself) does not violate the Constitution, and ruled that a taking without advance or concurrent compensation violates the Takings Clause, so there is no reason the claimant cannot pursue her claim in either federal or state court.   The Court explained away the voluminous precedent establishing that a taking (by itself) does not violate the Takings Clause by saying these cases stand for the proposition that takings claimants are not entitled to an injunction when they can pursue a remedy at law by suing for just compensation.   As Justice Kagan explained in her dissent, this “inventive” explanation contradicts the Court’s actually stated reasoning in these prior cases (thus “smashing them to smithereens”), and also does not explain the contrary precedent arising from cases not involving requests for injunctive relief.

To support its new position that a taking violates the Takings Clause creating an immediate right to a compensatory remedy, the Court pointed to takings cases filed in the U.S. Court of Federal Claims, which are said to be “founded upon” the Takings Clause, and the decision in First English Evangelical Lutheran Church v. Los Angeles, in which the Court ruled that a citizen who suffers a taking is entitled to monetary compensation for a temporary taking even if the government rescinds the regulation in the face of a judicial finding of a taking.   The Knick Court goes so far as to suggest that First English “eliminate[d] the rationale for the state-litigation requirement” and set the table for the eventual overruling of Williamson County; but the First English Court nowhere said as much and explicitly explained that the holding in that case was compatible with Williamson County.  Neither First English nor the rulings addressing claims court litigation directly contradicted the long-standing rule that a local government does not violate the Takings Clause if the state provides an opportunity to secure compensation and prevent an uncompensated taking from ever occurring.

Adding the vitally important doctrine of stare decisis to the mix, the dissenters had the better of the argument based on basic takings principles and the weight and logic of prior Court precedent considered as a whole.   But that, as the saying goes, is water over the dam.

No Injunctive Relief.  Perhaps the most interesting question going forward is what Knick portends for the ability of property owners to sue to enjoin takings which, in the Court’s new terminology, “violate” the Constitution.   The Court’s opinion is replete with absolute or nearly absolute statements that going forward takings claimants will be limited to suit for compensatory relief and cannot seek injunctive relief.  For example, the Court says, “As long as just compensation remedies are available – as they have been for nearly 150 years — injunctive relief will be foreclosed,” and in the same vein, “As long as an adequate provision for obtaining just compensation exists, there is no basis to enjoin the government’s action effecting a taking,”  Somewhat less absolutely, the Court also says, “Given the availability of post-taking compensation, barring the government from acting will ordinarily not be appropriate,” and “because the federal and nearly all state governments provide just compensation remedies to property owners who have suffered a taking, equitable relief is ordinarily unavailable.”

In a concurring opinion, Justice Clarence Thomas distanced himself from the Court’s assurance that equitable relief would never (or almost never) be available in a takings case.  He insisted the Takings Clause “does not merely provide a damages remedy” for a taking, but makes contemporaneous payment of just compensation a “prerequisite” for a valid taking.    While recognizing that injunctive relief against uncompensated takings need not be routine, Justice Thomas said “I do not understand the Court’s opinion to foreclose the application of ordinary remedial principles to takings claims.”  In other words, in his view, takings claimants can seek to use Knick as a vehicle to expand the remedies available in takings cases.

The Court’s firm insistence that injunctive relief is generally not available in takings cases may appropriately be regarded as Knick’s silver lining.  Prior precedent justified the general rule that injunctive relief is not appropriate in takings cases by pointing out that a taking by itself is not unconstitutional so long as the claimant can pursue after-the-fact compensation.  Knick undermined the reasoning of these older cases by holding that a government taking “violates” the Constitution.    So what is the basis for the Court’s assurance that injunctive relief will still remain generally unavailable in takings cases?

The Court appears to be correct that after Knick injunctive relief should remain unavailable in takings cases (except in the above-mentioned exceptional cases), and the reason is that a viable takings claim (still) presupposes that the government is acting for a lawful “public use.”  The Knick Court approvingly explained that in Ruckelshaus v. Monsanto Co. the Court rejected the plaintiff’s claim for injunctive relief because “[e]quitable relief is not available to enjoin an alleged taking of private property for a public use, duly authorized by law, when a suit for compensation can be brought against the sovereign subsequent to the taking.”  The significance of the public use requirement also was highlighted in the Court’s First English decision, upon which the Knick majority relied heavily; the First English Court explained that the public use requirement demonstrates that the Takings Clause “is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking.”

Knick unquestionably establishes, for better or for worse, that a taking without concurrent compensation “violates” the Takings Clause.  But the public use requirement of the Takings Clause means that a taking violates the Constitution in a different way than other types of government action that violate other provisions of the Bill of Rights.  A violation of the First Amendment or the Fourth Amendment, for example, involves a wrongful government act appropriately remedied using the full suite of litigation remedies generally available.   But a taking for a public use, by definition, is a lawful and rightful act — but for the fact that it is uncompensated.   This follows from the core principle (undisturbed by Knick) that the Takings Clause does not bar government from acting, but instead implicitly endorses the use of the eminent domain power (one of the basic attributes of sovereignty), so long as the taking is for a public use and the property owner is compensated.

Given the distinctive nature of a claim for compensation based on an alleged taking for a public use, compensation is the only logically permissible remedy, provided the compensation remedy is, in fact, available.   Thus, contrary to Justice Thomas’s suggestion, there is no reason to believe that lower courts can or should approach remedies in takings cases after Knick in the same way they approach remedies in other types of constitutional litigation.  Also, when the government has taken property for public use and paid compensation for the property taken, the government is entitled to ownership of the property.  The idea that a takings claimant might be entitled to enjoin a taking would deprive the government of the benefit of its decision, intentional or otherwise, to exercise the eminent domain power.

Justice Thomas offers no meaningful support for his suggestion that “ordinary remedial principles” should apply in takings cases.  He cites Justice Kennedy’s plurality opinion in Monterey v. Del Monte Dunes at Monterey Ltd. for the notion that takings “are not only unconstitutional, but may be tortious as well.”  Justice Kennedy made this statement in the context of addressing whether a property owner asserting a section 1983 takings claim was entitled to a jury trial.  His statement has no bearing on the issue of the appropriate remedy for a taking for public use.

More Complex Takings Cases.  In terms of litigation practice, the Knick decision will probably make takings litigation against local governments more procedurally complex than it was before.   Prior to Knick, a well–counseled property owner seeking to bring a takings claim against a local government filed suit in state court.  Period.   Now, lawyers representing property owners in takings lawsuits can forum shop between federal and state court.    This may well be advantageous to claimants in some circumstances; for example, if the precedents on a particular issue vary between the federal and state courts systems, filing in one court or the other might offer better prospects for litigation success.

Knick will undoubtedly give rise to numerous new questions about whether takings cases should be transferred in whole in part from federal court to state court or vice versa.  A threshold issue in every takings case is the nature and scope of the property interest allegedly taken.  That issue is almost always governed by state rather than federal law, a fact highlighted by Justice Kagan in her dissent. If a takings case is filed in federal district court, the federal court may wish to abstain in favor of state court, or invoke the certification process (where available) so a state court can authoritatively resolve the threshold state law issue.  The U.S. Court of Federal Claims and the U.S. Court of Appeals for the Federal Circuit commonly certify state law issues in takings cases against the United States to the highest court of the relevant state, and federal courts handling takings cases against local governments may well emulate this practice.  Enlisting the aid of the state courts in resolving state law issues raised in federal court takings cases will make the litigation process more protracted than it would be if plaintiffs simply filed in state court in the first instance.

At the same time, if the plaintiff sues in state court, the local government defendant may now seek to remove the case to federal court.   Prior to Knick, some local government defendants sought to remove takings cases to federal court, but that tactic was generally problematic because under Williamson County only the state courts could adjudicate such claims.   After Knick, of course, federal courts clearly have jurisdiction over takings claims against local governments.  Thus, removal should now be freely permitted when a government defendant sees some advantage in taking that step.

No doubt as the dust settles on the Knick decision there will be further issues to consider.  But this is a start.

Knick Goes On and On

In the pending case of Knick v Township of Scott, the U.S. Supreme Court is reexamining its longstanding Williamson County rule that a property owner suing a local government for just compensation for a “taking” of private property must proceed initially in state rather than federal court.   While the Knick case appears to present a relatively arcane procedural issue, the case may well produce one of the most important takings rulings from the Supreme Court in many years. Read the rest of this entry »

Reversal in St. Bernard Parish Case

On Friday, April 20, 2018, the U.S. Court of Appeals for the Federal Circuit issued an important ruling in the case of St. Bernard Parish v. United States, reversing a judgment of the U.S. Court of Federal Claims that threatened to impose hundreds of millions of dollars of liability on U.S. taxpayers based on flood losses allegedly attributable to the construction and management of the Mississippi River-Gulf Outlet (MRGO) navigation channel.  The decision represents a potential landmark precedent limiting the extent to which the government can be held financially responsible for flood damages, an already serious challenge for private landowners that will only get more serious with advancing climate change. Read the rest of this entry »

Water, the Public Range, and the Takings Clause: Here We Go Again!

The U.S. Court of Federal Claims in Washington D.C. recently issued a remarkable opinion in a case captioned Sacramento Grazing Association, Inc. v. United States.   The court ruled that a cattle ranching corporation using U.S. Forest Service lands in New Mexico is entitled to a financial payment from the taxpayers because the agency’s efforts to control the damage the corporation’s cattle were doing to the public lands “took” private property rights in water in violation of the U.S. Constitution.

The remarkable nature of the opinion, authored by Chief Judge Susan Braden, begins with the first paragraph, which reads:  “On January 2, 2016, several dozen ranchers, who unsuccessfully attempted to find common ground with environmental groups and officials from Oregon’s Malheur National Wildlife Refuge for over a decade, decided to take up arms to protest federal policy and regulations to prioritize migrating bird water habitat, by limiting the number of cattle that historically grazed and used water in that area–decades before it was subject to federal control. In contrast, the Sacramento Grazing Association, Inc. (“SGA”) filed a complaint in the United States Court of Federal Claims for an adjudication of its right to beneficial use of stock water sources within the Sacramento Allotment of the Lincoln National Forest, New Mexico.” Read the rest of this entry »

Big Victory for State and Local Governments in Murr

On June 23, 2017, the U.S. Supreme Court issued its decision in Murr v. State of Wisconsin, affirming the judgment of the Wisconsin Court of Appeals that enforcement of a “lot merger” provision in a county zoning ordinance did not result in a compensable taking under the Fifth Amendment. While seemingly narrow and technical, Murr represents the most significant takings decision from the Supreme Court in at least a decade.  The Court’s opinion has particularly important implications for future takings litigation involving land use and environmental regulations.  Here are the basic takeaways from Murr.  (Full disclosure:  I filed an amicus brief in Murr on behalf of a group of land economists urging the Court to embrace a more rigorous analysis of how land values are affected by regulation.) Read the rest of this entry »

Floodplain Regulation Not a Taking in South Carolina

Yesterday the South Carolina Supreme Court produced an important ruling in a regulatory takings case involving floodplain management.  In Columbia Venture, LLC v. Richland County, the Court issued a unanimous decision affirming a ruling by a Special Referee that county restrictions on development in a federally-designated floodway did not result in a taking.   This ruling is consistent with an apparently unbroken string of precedent from around the country holding that floodplain development restrictions do not represent takings. Read the rest of this entry »

California Supreme Court Upholds Inclusionary Housing

Earlier this week the California Supreme Court issued a major takings decision rejecting a suit by the California Building Industry Association (“CBIA”) seeking invalidation of the City of San Jose’s inclusionary housing ordinance. The unanimous decision In CBIA v. City of San Jose is not only a ringing affirmation of the constitutionality of inclusionary housing policies but also an important explication of the line between “exactions” (subject to unusually strict judicial review) and land use regulation (subject to more traditional, deferential review). The case was brought under both the California and the Federal takings clauses, but the California Court assumed the two clauses should be interpreted congruently in this context. Read the rest of this entry »

Lost Tree Redux: How Do We Measure Economic Impact?

In Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), the Supreme Court famously announced that when, as in that case, the trial court found that a regulation rendered the property “valueless,” the owner could assert a per se takings claim on the theory that he had been “called upon to sacrifice all economically beneficial uses” of his property.  Several justices in Lucas expressed discomfort with the idea that a regulation barring development can literally render property “valueless,” and courts and scholars have struggled to define the scope of the Lucas rule ever since.

The very recent decision of the U.S. Court of Appeals for the Federal Circuit in Lost Tree Village Corp. v. United States considerably deepens the mystery surrounding the Lucas per se rule and, unless reexamined by the Federal Circuit or overturned by the Supreme Court, will make the Lucas rule considerably harder to apply in practice.

A little background on the Lost Tree case:  In 1968, plaintiff acquired an option to purchase several thousand acres of land along the Atlantic coast in Florida.  Over the ensuing decades plaintiff purchased portions of the property in increments and developed them, gradually creating a very high-end gated community complete with two golf courses, a beach club and so forth.  Toward the end of the development process, plaintiff purchased the five-acre wetland property at issue in the Lost Tree case for the modest price of $5370, and originally announced that it would set the area aside for conservation purposes, but later changed its mind.  The Federal Circuit has now ruled that the parcel had a value of $4,245,000 for development and that the Army Corps of Engineers’ rejection of a section 404 wetlands-fill permit constituted a taking entitling plaintiff to just compensation in (roughly) that amount.

How the plaintiff came to the decision to develop the five-acre property is itself instructive.  A neighboring property owner, likewise subject to federal wetlands strictures, identified a separate undeveloped portion of plaintiff’s vast property holdings as a suitable location to conduct wetlands mitigation work that would generate “mitigation credits” and allow the neighbor to proceed with a planned development project under the Army Corps regulations.   Thus alerted to the opportunity to generate mitigation credits on its property, plaintiff decided to try to use the credits for its own account; this led plaintiff to search for development opportunities on its lands that would require mitigation, which is turn led plaintiff for the first time to consider developing the five acres. So if you ever wondered if the Army Corps wetlands mitigation policies can actually foster wetlands destruction, here is proof positive that they can!

In an initial appeal to the Federal Circuit, the court of appeals rejected the government’s effort to defeat the claim based on application of the parcel as a whole rule.  See Lost Tree Village Corp. v. United States, 707 F.3rd 1286 (Fed Cir. 2013).  The government argued that the five-acre parcel on which plaintiff based its claim should be considered in the context of the several thousand acres that comprised the entire development; in the alternative, the government argued that, at a minimum, the trial court properly rejected the takings claim by evaluating the five-acre parcel in conjunction with several other adjacent and nearby parcels.  But the Federal Circuit rejected both arguments, concluding that the special history leading to the plaintiff’s decision to attempt to develop this particular parcel several years after the rest of the development had been largely completed somehow meant that plaintiff had developed “distinct economic expectations” with respect to this particular parcel, justifying its treatment as a distinct parcel for the purpose of takings analysis.   It remains a mystery why, if (as the court correctly assumed) the parcel rule would bar the takings claim if the developer sought to develop the five-acre parcel concurrently with the rest of the development, the result should be different because this particular parcel had so little development interest that the developer essentially forgot about it until the rest of the development had been completed.  Nonetheless, the Federal Circuit denied an application for rehearing and the case has proceeded on the basis that the five acres represented the relevant parcel.

On remand, the trial court found that the permit denial constituted a taking under Lucas and the Federal Circuit has affirmed; the Federal Circuit declined to reach the trial court’s alternative holding that the plaintiff also suffered a taking under Penn Central.   The most interesting part of this recent decision is the Court’s problematic reasoning for rejecting the government’s argument that the trial court’s conclusion that the property retained (post permit-denial) a residual value of $27,500 precluded a finding of a taking under Lucas.  Under Lucas, the government argued, the destruction of value must be total, as under the facts of Lucas, or as the Court articulated the test in the Tahoe-Sierra case.   The Federal Circuit’s answer to this argument was that the parcel’s residual value only reflected its “environmental value” and not its “economic value,” and that property value attributable to environmental value can and should be disregarded for the purpose of applying the Lucas test.

But this approach is surely wrong, on multiple grounds.   First, there is no warrant in the Takings Clause for privileging property value that derives from the development of land from value that depend on its preservation.   The government’s expert testified at trial that the land had economic value for recreational purposes, and the courts accepted that testimony; even if this use is “environmental” in nature, there is no reason why the value of the land for private recreational purposes should not be taken into account in determining a property’s value after a permit application has been denied.  Also, as illustrated by the origins of this case in wetlands mitigation, undeveloped areas (either in pristine or restored states) can have real economic value in the marketplace as mitigation sites and there is no sound reason why these values should be disregarded for the purpose of takings analysis.

Second, the Federal Circuit’s approach is flawed because it divorces takings analysis from the realities of the actual marketplace in land.  Takings analysis is difficult enough, and already subject to too much gamesmanship.  Tethering estimates of the economic impact of regulation on land values to actually observable real estate values provides at least some assurance that takings law will remain in touch with reality.  But if the courts decide that some factors affecting land values are legally cognizable (because they are “economic” in nature) and others are not (because they are “environmental” in nature), then fact-based data on the market value of regulated property become irrelevant.  Environmental values, like development opportunities, can have significant impacts on the market value of land.   But, in the real world, the impacts of these different influences on land value cannot be distinguished one from the other.   If the courts are supposed to look for evidence of land value divorced from environmental value, they will come up empty handed, meaning that the search for economic impact for the purpose of takings analysis will become a purely abstract exercise.  Absent some grounding in actual data, takings analysis will likely become difficult if not impossible to perform; at a minimum, it will become more random and unpredictable.

Perhaps the Federal Circuit needs to rethink its latest decision.

Ruling in MR-GO Takings Lawsuit

Yesterday, on May 1, 2015, in Saint Bernard Parish Government v. United States, the U.S. Court of Federal Claims found the U.S. government liable in a major takings case arising from property damage in Louisiana caused by Hurricane Katrina and other hurricanes.  The lawsuits were brought by St Bernard Parish itself and by numerous property owners in the Lower Ninth Ward of New Orleans and in St Bernard Parish.  The takings claims are based on the theory that Army Corps of Engineer’s construction, expansion, operation and failure to maintain the Mississippi River – Gulf Outlet (“MR-GO”) resulted in temporary takings by causing increased flooding of the plaintiffs’ properties during Hurricane Katrina and several lesser hurricanes. Read the rest of this entry »

The Horne Case and the Public Trust in Wildlife

Who could have imagined that the takings case of Horne v Department of Agriculture argued in the Supreme Court this past Wednesday might portend revival of the doctrine of public trust ownership of wildlife?  But it might. Really. Read the rest of this entry »