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Tuesday, June 25, 2013

Koontz's Unintelligible Takings Rule: Can Remedial Equivocation save the Court from a Doctrinal Quagmire?

Federal takings doctrine is the jurisprudential equivalent of a land war in Asia -- a quagmire from which any aggressive initial expedition will eventually have to extricate itself with patently phoney declaration that the mission was accomplished after being bogged down in the swamps and rice paddies of mushy doctrinal distinctions and sniped at by local government guerrillas too elusive to pin down in open battle. Every once in awhile, the SCOTUS attempts one of these invasions of subnational governments' land-use prerogatives, invariably to retreat in disarray when it discovers that (a) it does not understand the legal terrain and (b) its district court foot soldiers balk at getting involved in what Justice Sutherland once called the "tedious and minute detail" of land-use law's implementation. (Examples of such embarrassed retreats include Louisville & Nashville Ry. v. Barber Asphalt Paving (1906) and San Remo Hotel v. San Francisco (2005))

The Court's decision in Koontz v. St. Johns River Water Management District, handed down this morning, seems like yet another data point confirming the story above: The idea that the Court will enlist federal courts to duplicate the work of state courts in policing conditions on literally hundreds of thousands of land-use permits, as suggested by Justice Alito, seems laughable, because the feds lack the manpower and electoral legitimacy to pull off such an act of imperialism. Thankfully, as I explain after the jump, Koontz carefully preserves a convenient albeit disingenuous "remedial" exit strategy that should insure that the decision is a dead letter.

1. First, why do I say that serious enforcement of Nollan-Dolan against a broad range of conditions on land-use development would lead to a quagmire? The Court declared that a demand on a developer to improve some off-site culverts is covered by the Nollan/Dolan line of cases, thereby embarking on what looks to be a futile effort to police the literally hundreds of thousands of conditional permissions for land development from roughly 35,000 general purpose local governments. Justice Alito tried to cheer us up by asserting that "teasing out the difference between taxes and takings is more difficult in theory than in practice" (Slip Op. at 19). But the very form of this encouragement suggests that SCOTUS either does not know what it is getting into or is being disingenuous about the burden that it is assuming: The problem is not merely distinguishing taxes from takings but also distinguishing all other routine conditions on land-use permits (e.g., obligations to build affordable housing, finance public plazas, bank wetlands, hire local folks for construction jobs, improve subway stops, etc.) that are the routine currency of conditional map amendments, conditional use permits, variances, PUD approvals, and the like. The notion that the federal courts will apply the Nollan-Dolan "rough proportionality" test to all of these conditions seems patently unrealistic -- but where will the courts draw the line, now that they have held that an obligation to finance off-site culverts is covered by the federal doctrine?

Ilya Somin over at Volokh's claims that Justice Alito "deals effectively with this argument [that the federal courts are over-extending themselves] by "noting ... that the rule adopted by the majority is already the law in many states, yet the sky has not fallen there." But Ilya and Justice Alito both beg the central question of federalizing land-use law by using state courts as a model for federal judicial behavior. The problem with the feds is that they lack the decentralized flexibility and democratic legitimacy to mimic state courts' behavior. State courts can adopt different decentralized solutions reflecting regional differences in political culture: The feds cannot. Some state courts -- Pennsylvania and Washington, for instance -- tend to be more aggressive in policing local regulation. Some, like New York and New Jersey, are much more lax. Each courts' capacity to crack down on municipalities depends critically on the signals of political support that they get from their relevant constituencies through amendments to the state constitution, zoning enabling acts, and state judicial elections. The federal judges are obliged to aspire towards a one-size-fits-all solution without any electoral feedback mechanism. It is precisely because the state courts have the situation under control (or as under control as such a situation can be) that the feds should butt out. To use the land-war-in-Asia analogy, just because the Iraqi police can handle street patrols in Baghdad does not mean that the U.S. Marines should try to do so as well.

3. So how will the federal courts eventually exit this quagmire? The answer might be remedial equivocation. Nollan-Dolan has so far mostly been a dead letter in zoning litigation, because the remedy in lower courts has usually (although not universally) been restoration of the pre-exaction status quo in which the developer is unconditionally denied the desired permission to build. (See Goss v. City of Little Rock, (8th Cir. 1996), for an example of how this remedy guts the right, or read Mark Fenster's Failed Exactions). Such a remedy means that developers will rarely sue, and the ones that do sue get nothing for their troubles. Koontz did nothing to disturb this remedial equivocation, declaring that "[b]ecause petitioner brought his claim pursuant to a state law cause of action,the Court has no occasion to discuss what remedies might be available for a Nollan/Dolan unconstitutional conditions violation either here or in other cases" (Slip op. at 11).

This may be the most important sentence in the opinion -- a hint at the SCOTUS's "exit strategy" when developers start challenging plazas, parks, playgrounds, and the like. San Remo Hotel v. San Francisco severely limits developers' power to bring a federal takings claim in federal court: If state courts can continue to define the Nollan-Dolan remedy as invalidation of the illegal condition and denial of the zoning permission, then Koontz will be a practical dead letter. And a good thing, too, if one cares about federalism and believes, as I do, that Nollan-Dolan was always a quixotic expedition to control land-use decisions far too numerous and fact-specific to be amenable to federal judicial policing.

Posted by Rick Hills on June 25, 2013 at 03:41 PM | Permalink


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Great post. The other open issue -- where the Court, despite pushback from the dissent (citing Bill Fischel!), refused to tread -- is how open a "demand" must be to become a "condition" for Nolan/Dolan purposes. ("This Court therefore has no occasion to consider how concrete and specific a demand must be to give rise to liability under Nollan and Dolan.") I suspect many things that are part of discussions between local government and developers will be considered something short of demands but rather as factors in the lg's analysis of whether to approve.

Also, one wonders whether home builders will end up regretting their support for Koontz -- if it does have legs, restrictions on conditional permitting will lead many LGs to just not allow building at all (Glaeser found in greater Boston that LGs restrict density beyond the property value maximizing point and this may be because of existing limits on entry fees).

Posted by: D.Schleicher | Jun 26, 2013 9:36:10 AM

Thanks for the shout-out, Rick. I would add a side-point, which is related to point #3 above. The Court's failure to follow a federalist path emanates in part from its complete failure to follow the Constitution's text. The Fifth Amendment specifies the exclusive remedy of just compensation. Why does the majority need to look to state law to find a remedy -- only to find it in a statute that clearly ignores Supreme Court takings precedent by allowing compensation for an "unreasonable exercise" of state power? Because, as Justice Scalia noted in oral argument, nothing was taken here, and so it would be impossible to actually decide what compensation is due. So best to dodge the question, act like there's no problem here, and make an odd and empty feint to federalism.

The only doctrinal hook the majority can come up with besides the generalized concern with unfairness is the unconstitutional conditions doctrine, which apparently provides a free conceptual pass to ignore the text, ignore precedent, and stomp state and local governments. And, of course, likely harm property owners in places like California and New York, where smart city and county attorneys will just shut the door to any discussions about possible conditions, especially with new market entrants who can't be trusted not to sue.

I can't really understand why Scalia, who demonstrated some understanding of the complex issues here in oral argument (and in his dissent from the denial of cert in Lambert v. San Francisco), and Kennedy, who has also shown some understanding of the complex issues in regulatory takings and in Nollan and Dolan, would sign on to this deeply mediocre decision. I can only assume that their attention was elsewhere, as I suppose we'll soon find out....

Posted by: Mark Fenster | Jun 26, 2013 10:42:48 AM

Your quagmire argument seems to me to assume either that (1) Nollan/Dolan scrutiny is always fatal in fact or (2) extortionate demands in land use permitting are rampant. From personal experience I can affirm that (1) is not true, and I am sure that you would deny (2). Hence, the quagmire objection is overblown.

It also seems unlikely that land use authorities will now simply deny land use permits outright; doing so will substantially increase their potential liability under Lucas and Penn Central.

Finally, I simply do not understand the critique of the Koontz majority on federalism grounds. The Court has made clear in recent years (e.g. Bond v. US) that federalism is not an end in itself; it is simply a means to diffuse government power and thereby protect individual liberty. Moreover, Koontz is about protecting one's right to be free from governmental expropriation, a power that obviously neither the federal nor the state governments retain under 5th and 14th amendments.

Posted by: Damien Schiff | Jun 26, 2013 5:17:11 PM

Damien, a doctrine does not have to result in liability in order to be a docket-clogging nuisance to a busy judge. If a doctrinal inquiry involves mushy policy issues requiring measurement of intangibles like the risk of a development's imposing aesthetic or environmental harm, then that doctrine will put the federal judge in a difficult position of choosing between experts in an essentially arbitrary way. This is especially true if virtually every condition ever suggested, from improved lighting and berms to plazas and subway stations, falls into the category of potentially unconstitutional condition.

I have no idea what "extortionate" means, so it is hard to know whether “extortionate demands" are "rampant.” I am guessing that, by “extortion[],” you refer to municipalities’ threatening to withhold development approvals unless the developer hands over the benefit that the landowner derives from that approval. But why is this extraction of the developers’ benefit “extortion”? Special assessments traditionally extract the special benefit that a landowner receives from governmental action without being branded “extortionate.” I am not sure why governments should not be able to extract regulatory windfalls as well as infrastructure windfalls from developers.

And this question about "extortion" applies just as well to your statement that the Bill of Rights protects "one's right to be free from governmental expropriation." yes, of course -- but what is "expropriation"? The problem is that one person's expropriation is another person's property right. You say that some zoning rule is "expropriation": Someone else says that they bought their land in reliance on precisely that rule's restrictions on neighboring lots. Who is correct? Candor would lead us all to confess that the question is deeply uncertain -- that people have reasonable disagreements about the proper meaning of "property."

When such reasonable disagreements arise, then there are (at least) two approaches to resolving them -- the winner-take-all approach of having your faction on SCOTUS shove your particular view of rights down everyone else's throats. Or the federalism way, in which different regions can go their different ways, so long as their resolutions of the disputed question of right does not cross the line of what a rational and respectful citizen could deem to be protection of "property." I tend to regard the latter as more respectful of the right to have a say about the meaning of rights -- the 'right of rights," in Jeremy Waldron's phrase. You seem to like the more centralized approach. I will not repeat what I said about risk aversion and rights in a post on this website (http://prawfsblawg.blogs.com/prawfsblawg/2013/06/rights-and-risk-aversion-should-the-left-embrace-the-gift-of-federalism-on-marriage-and-family.html) except to note that risk aversion suggests a reason for being deferential to states about the meaning of "property."

Posted by: Rick Hills | Jun 26, 2013 7:41:16 PM

Rick, I love your Asia analogy. I will be using that at some point (with proper attribution, of course!). I do disagree that that Koontz will be a dead letter, at least for the foreseeable future. I predict that developers will immediately begin using this decision to discourage land use negotiation and well-informed approval entities would be wise to shy away from coming up with creative conditions. The net effect will be that boards will favor denying applications with out attempting to find creative solutions through negotiation or regulation. Most approval entities don't have the resources to litigate cases and will simply avoid negotiation to reduce litigation exposure.

Posted by: Sean Nolon | Jun 27, 2013 1:42:48 PM

"You say that some zoning rule is "expropriation": Someone else says that they bought their land in reliance on precisely that rule's restrictions on neighboring lots. Who is correct?"

Well, it can't be the second fellow, because he hasn't any cause of action against anyone if the zoning board decides to relax restrictions (no right without a remedy). If you want a property right to prevent someone else using their property (neglecting nuisance law for a moment) you have to get an easement (or similar).

What about the first fellow? Well if the "zoning rule" takes away the value of his property then yes, he's expropriated.

Note that "zoning rules" weren't the issue in Koontz anyway. In Koontz Florida had simply decided to (in effect) seize a conservation easement across all property it considered "wetlands" but allow property owners to wished to use their land to ransom it by purchasing and dedicating other land and/or paying however much money a local board chose to demand. The Supreme Court rightly ruled that conditioning ministerial actions (issuance of a building permit) on surrender of one's property interest (or similar value in money, whether or not used to procure substitute property) works a taking, un-Constitutional because the State did not offer to pay compensation.

It's no good saying that refusing a permit to people who won't pay a ransom doesn't work a taking.* When a State tells a property owner he may not develop his land because the State wants it left vacant for the general convenience of the public,** the State effectively takes that land. The State could condemn the land (or a conservation easement) and pay for it. The State could enter the land and thereby subject itself to an inverse condemnation suit. But when the State refuses to do either, preferring to mock the landowner with a confiscatory permit process, the State violates the Fifth and Fourteenth Amendments. All the Supreme Court really said is "if the State won't pay 'just compensation' then it may not take the land."

*It's actually in the State's favor to call refusing a building permit without a legitimate reason a "taking." Otherwise it would be something worse. For a "taking" the State need only pay "just compensation," which in American law is nearly always much less than making the expropriated person whole.

**The State wants to preserve "wetlands" for the diffuse benefits they provide to the public as a whole.

Posted by: Hideous | Jun 27, 2013 8:21:38 PM

This is a very late post. I had noticed the case but had not read the dissent and Kagan's cite to Regulatory Takings until Aaron Gruen gave me a heads-up this week. Justice Kagan's cite is on point, and it seems that the most likely outcome of Koontz is to inhibit mutually beneficial trade between regulators and landowners, especially given that inclusion of spending on offsite projects seems to be now included in the not-nexus prohibition.
I do want to respond to Rick's dismissal of concern about "extortion." It is not an empty term, but it requires some limits. Two that come to mind are (1) that the government's demand is imposed on a small set of landowners (perhaps just one) and not on others without some justification for the different treatment and (2) that the amount demanded is well above the value of the arguable harm to the public even though the landowner can afford to pay it. I think "rough proportionality" of Dolan covers at least the latter criterion. Perhaps Nollan's "nexus" addresses the first criterion, but it does so in a way that could do a lot of collateral damage to beneficial negotiations.
That said, I agree with Rick that this should mostly be a state law issue and that the Court's remedy-less decision will prevent much additional damage to the development process. After all, Loretto has not stopped the telecom industry from locating its bread-box-size facilities where it needs them. The sociological question is why the Court would want to stir this particular pot. My guess is they have conceded that they cannot develop a substantive rule about regulatory takings other than "no [reasonable?] economic use" of Lucas and the squishy potpourri of Penn Central. But they still look down at the states and see stuff they don't like, and we shouldn't like it, either. It is possible that the Coy Koontzes were being jerked around by the water district guys, and urging the states to think about proportionality, even roughly, is not so bad. But its also possible that the jerks were the Koontzes, sitting on their wet, low-value property for years and hoping to get a windfall out of the process. You just cannot tell from the distance to the controversy at which judges and scholars usually sit. It was actually kind of weird to have US Supreme Court Justices recite the kind of facts I used to write on the Hanover zoning board. At least we had some chance of figuring out which party (if any) was trying to game us. Hayekian “local knowledge” is not perfect, but it usually beats the view from Olympus.

Posted by: Bill Fischel | Aug 15, 2013 4:52:16 PM

Now that we have had a year for all of the "Koontz suits" to get docketed...wait...! Alito's decision does not change the substantive review of takings claims; it merely confirmed that a cause of action previously established in Brown was available to developers in land use scenarios. This debate doesn't seem to be taking place anywhere in the U.S. except in the class rooms of law schools. Koontz certainly didn't have a the tumultuous repercussions that some were warning about...and it is not the "worst land use decision in Supreme Court history" as some have said. The real practice of land use occupies a vacuum between statutory limitations and common law deference...and whether or not the Koontz decision changed the law (and I don't think it did), that is not going to affect the day to day business of land use.

Kagan's reliance on Eastern Enterprise was misplaced, and Kennedy's concurrence in that case was not, and should not have been used as controlling precedent for Koontz.

Posted by: Joshua Johnson | Nov 12, 2014 7:32:56 PM

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