Federal Court Decides to Take a Back Seat to State Takings Case

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In Knick v. Township of Scott, 139 S.Ct. 2162 (2019), the Supreme Court reversed over three decades of precedent when it eliminated the requirement that a plaintiff exhaust state court remedies before pursuing a takings challenge in federal court.  After the Supreme Court’s decision, federal courts experienced a significant uptick in the number of federal takings lawsuits.  In Gearing v. City of Half Moon Bay, the City was able to convince the federal court to take a back seat and allow a later-filed state court eminent domain action to proceed while the federal takings lawsuit was put on pause.  

Plaintiffs own six undeveloped parcels of land in the City of Half Moon Bay in an area subject to development limitations.  These development limitations were established through a certified Land Use Plan that the City adopted in an effort to comply with the California Coastal Act.  

In 2019, the California Legislature enacted Senate Bill 330 (SB 330), which is intended to expedite the development of housing by, among other things, limiting a public agency’s ability to deny certain housing development projects.  In October 2020, plaintiffs submitted an SB 330 application with the City of Half Moon Bay.  The City refused to process the application, asserting that the application did not comply with the requirements in the certified Land Use Plan.  Plaintiffs were told by the City Council that the decision was final and not appealable.

That same year, the City Council approved an update to the Land Use Plan that allowed for residential development but prioritized public acquisition.  In December 2020, the City sent plaintiffs a notice of decision to appraise as a preliminary step in the acquisition process.  In January 2021, the City made a formal offer to purchase plaintiffs’ property.  In March, plaintiffs filed an action in federal court alleging a regulatory taking of their property in violation of the Fifth and Fourteenth Amendments, a federal due process claim, and a federal equal protection claim.  The next day, the City adopted a resolution of necessity.  Approximately one week later, the City filed an eminent domain action in state court seeking to acquire plaintiffs’ property.  

In an effort to move forward with the state eminent domain action and delay the federal proceedings, the City filed a motion to stay the federal lawsuit based on the application of the Pullman abstention doctrine.  Abstention doctrines essentially acknowledge that the federal court has proper jurisdiction over a matter, but permits the federal court to stay or dismiss the federal proceeding because of a competing interest.  The competing interests vary with the abstention doctrine.  With respect to Pullman abstention, the federal court must find that: (1) the complaint touches on a sensitive area of state social policy, (2) the constitutional question in the federal action can be avoided or narrowed based on a definitive ruling in the state case on a state issue, and (3) the state law issue is novel or unresolved.

The federal court in this case found that all three requirements were met, and exercised its discretion to stay the federal action until the state eminent domain action concluded.  With respect to the first factor, the federal court found that because the federal lawsuit involved state land use policies as embodied in SB 330, it touched upon a sensitive area of social policy.  With respect to the second factor, the federal court found that the resolution of the state case would at a minimum narrow the federal takings issues, as it would result in just compensation for the permanent taking of the property as of the date of deposit.  The federal court did note, however, that the state case would not resolve the federal temporary takings claim, since the plaintiffs asserted the regulatory taking occurred when the City denied the application in October 2020, which was months before the deposit was made.  With respect to the third factor, the federal court found that because both the state eminent domain action and federal regulatory takings case would likely require an interpretation of SB 330, and because SB 330 was a relatively recent enactment with limited case authority, the proceedings “may resolve novel issues regarding S.B. 330, [and] the third Pullman factor is met.”  

While the federal court granted the City’s motion to stay, it also expressly retained jurisdiction of the federal constitutional questions, including the federal due process and equal protection claims, which were not alleged in the state eminent domain action. 

Abstention doctrines are generally permissive, in that they allow a federal court to abstain from resolving an issue but do not require the court to do so.  Thus, the ability for a defendant agency to prevail on a Pullman abstention motion will depend upon the particular judge and the particular facts.  In this case, for example, the judge might have been swayed by the fact that the City was clearly moving forward with acquisition efforts before the federal lawsuit was filed.  As such, the major takeaway from this case, is that even after Knick, federal courts retain their discretion to abstain from deciding federal takings claims when the circumstance justify invoking one of these abstention doctrines.   

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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