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.


Tobacco, Takings and the TPP

As furious negotiations continue to try to complete a Trans-Pacific Partnership (TPP) trade agreement, for which Congress granted the Obama administration fast track authority a few months  ago, a dispute has arisen over whether tobacco companies should be allowed to invoke the takings and other “investor protections” in the TPP to beat back efforts by developing countries to adopt regulations to protect their populations from the ravages of tobacco.  The Coalition for Tobacco Free Kids has a done a nice job of documenting how tobacco companies have used international investor-state claims under international trade agreements to attack tobacco regulation.  The Obama administration, under pressure from numerous public health groups, has proposed  a provision in the TPP to protect member countries from “abusive” tobacco company investor-state claims

A major argument against this approach by the tobacco companies and their allies in Congress has been: “First they come for the tobacco companies . . . “   In other words, maybe tobacco will be denied the opportunity to exploit the investor-state process today, but who knows what other kinds of “abusive’ takings claims will be targeted next?   Which is not a bad point.   If tobacco companies should be denied the opportunity to exploit trade agreements to challenge tobacco regulations, why shouldn’t this good thinking be applied to  protect all manner of lawful domestic environmental and social welfare legislation from abusive investor-state litigation?

Meanwhile, the Bloomberg and Bill and Melinda Gates foundations have set up a mufti-million dollar fund to provide advice to countries targeted by tobacco companies with investor-state litigation.    Which is all well and good, but one would hope the foundations would also pay some attention to the root causes of this international litigation explosion in the out-of-control  property rights ideology currently being promoted not only on the international scene but in our own domestic court system, including the U.S. Supreme Court.


Penn Central Lives On

During oral argument in the Koontz case Chief Justice John Roberts asked rhetorically of counsel for the government:  “Do you know of any case where the government has lost a Penn Central case?”   In response, counsel cited several Supreme Court cases in which Penn Central claims prevailed.   He also might have cited an assortment of successful Penn Central claims in the lower courts.   It is certainly true that most Penn Central claims fail, which is only natural given, for example, the bedrock understanding that the Takings Clause is reserved for “extreme circumstances” (Riverside Bayview Homes v. United States) and Justice Antonin Scalia’s affirmation that a “property owner necessarily expects the uses of his property to be restricted, from time to time, by various measures newly enacted by the State in legitimate exercise of its police powers.” (Lucas v. South Carolina Coastal Council).  But a claim under Penn Central certainly can be successful.

A sort of oddball case on point is the recent decision of the New York Appellate Division in In the Matter of New Creek Bluebelt, Phase 4.  The case was actually a straight condemnation case involving a half-acre parcel on Staten Island.  Normally the compensation award in a condemnation case takes into account the regulatory restrictions in place that limit the market value of the property.   But the claimants contended that wetlands regulations limiting the development of their property were so onerous that they constituted a taking, and that the condemnation award therefore should be increased to reflect the probability that the regulations were a taking. Read the rest of this entry »


Alleged Takings of Private Contracts

In Pennington v. Gwinnett County, the Georgia Court of Appeals has obliquely revisited the endlessly interesting question of whether the government can “take” private contract rights.   This case was a laydown for the government, but it still provides a useful opportunity to highlight how difficult it is to prevail against the government in this type of takings case. Read the rest of this entry »


WI Court of Appeals on the Parcel Rule and Just v. Marinette County

In Murr v. State of Wisconsin, the Wisconsin Court of Appeals has offered an instructive decision on how the parcel-as-a-whole rule applies to two contiguous, legally subdivided lots. Applying the traditional parcel-as-whole-rule in this context, the Wisconsin Court of Appeals affirmed a circuit court decision rejecting the owners’ claim that they suffered a taking as a result of a restriction on their ability to develop the (combined) lots. The decision also represents an interesting application of the Wisconsin Supreme Court’s landmark decision in Just v. Marinette County, 201 N.W.2d 761 (1972). Read the rest of this entry »


Fires and Takings in Alaska

The Alaska Supreme Court issued a troubling decision on November 28, 2014, in Brewer v State, reversing a trial court ruling absolving the State of liability under the Alaska Takings Clause for property damage caused by State firefighters in a successful effort to protect the plaintiffs’ properties from being consumed by wildfire.  In the summer of 2009, a major fire engulfed hundreds of thousands of acres of forestland south of Fairbanks.  In order to protect the plaintiffs’ structures from the approaching fire, firefighters lit a “backfire” on plaintiffs’ land in order to burn away combustible vegetation and deprive the oncoming fire of fuel.  The tactic worked, because the fire passed through the plaintiffs’ subdivision without destroying the plaintiffs’ buildings. Read the rest of this entry »


Takings Conference, Friday, September 19

On Friday, September 19, 2014, the 17th Annual Conference on Litigating Takings Challenges to Land Use and Environmental Regulations will be held at UC Davis School of Law in Davis, California. The event is sponsored by Vermont Law School, UC Davis School of Law, Georgetown University Law Center and many others.   The speakers include numerous experts from academia as well attorneys from the U.S. Department of Justice, the U.S. Army Corps of Engineers, the Congressional Research Service, the California Attorney General’s Office, the New York State Governor’s Office of Storm Recovery, the California Coastal Commission, the American Securitization Forum, as well as private and public interest practice.
The conference will feature a keynote “Appreciation of Joe Sax,” presented by Holly Doremus, who has the honor of sitting in Joe’s former seat, the James H. House and Hiram H. Hurd Professor of Environmental Regulation at UC Berkeley. Conference panels will address the long-term doctrinal and practical implications of Koontz, the latest permutations on the parcel as a whole issue, the controversial idea of “taking” underwater mortgages, Brandt and the rails to trails program, takings and water management, and the takings implications of adapting to sea level rise caused by climate change. Details are available here

Space is still available at the conference (go here to register). In addition, copies of the conference papers and audio recordings will be available after the conference. Articles based on conference papers will be published in an upcoming edition of the Vermont Law Review


Bailout Takings Cases

One might assume that “takings” would be a remote issue when it comes to the federal bailout of the automobile and financial services industries during the economic crisis of a few years ago.  After all, if the government spent billions of taxpayer dollars to protect particular companies, and the economy as a whole, from going over a cliff, how could the government be accused of taking anything?  But if one made this assumption, one would turn out to be wrong.  Two ongoing cases illustrate the point. Read on …


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.