United States Supreme Court Rules in Favor of Real Property Owner in Federal Constitutional Takings Case

by Buchanan Ingersoll & Rooney PC

The Supreme Court of the United States published an important land use case on June 25, 2013, which provided a partial victory for a real property owner, based on the denial of a permit by a Florida permitting agency. The property owner argued that Florida’s St. Johns River Water Management District had committed a “taking” of property rights without “just compensation” by denying a Management and Storage of Surface Water (MSSW) Permit, and a Wetlands Resources Management (WRM) Permit. Specifically, the Court held that when a land use agency demands exactions (in the form of either real property set asides or monetary payments), as a condition for approving a permit, the government’s demands must have a “nexus” and a “rough proportionality” to the effects of the proposed land use for which a permit is sought. Based upon its holding the U.S. Supreme Court reversed the Florida Supreme Court’s determination that the denial of the permit could not result in a “takings” claim under the Fifth Amendment of the U.S. Constitution, and remanded the case for further proceedings.

The Court’s opinion provides that in the land use context, the conditions for issuing a permit cannot be extortionate and out of proportion to the impact of the project. If a permitting agency seeks to apply out-of-proportion requirements as a condition precedent to issuing a permit, then it is effectively taking the real property owner’s property, and must pay just compensation. Otherwise, the agency is impermissibly denying a constitutional right in violation of the unconstitutional conditions doctrine. This is true, even if the permitting agency would have been within its rights to deny the permit for some other reason.

This case involved a 14.9 acre piece of property owned by Roy Koontz, Sr. located adjacent to the intersection of State Road 50 and State Road 408, east of Orlando. The property owner proposed developing the 3.7 acres northern section of his property, and dedicating a conservation easement over the remaining southern 11 acres to the water management district. Based on the facts presented in the majority opinion for the court, the water management district considered the 11 acre conservation easement inadequate, and indicated it would approve the development if: (1) the petitioner reduced the development to 1 acre and deeded the remaining 13.9 acres to the district; or (2) paid for a District off-site wetland mitigation project. The petitioner filed suit, asserting that the mitigation demands were disproportionate to the environmental effects of the project he was seeking to permit.

The U.S. Supreme Court’s opinion reversed the holding of the Florida Supreme Court determining that the actions by the water management district did not constitute a taking under the U.S. Supreme Court’s decisions in two earlier land use takings cases (Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994)). The Florida Supreme Court held that a taking did not occur since the permit had been denied once the property owner would not agree to the requested conditions, rather than approved subject to conditions. The U.S. Supreme Court found that this distinction did not save the water management district’s action from constituting a taking: “The principles that undergird our decisions in Nollan and Dolan do not change depending on whether the government approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so.” (Opinion, p.8).

The Florida Supreme Court also held that the actions by the water management district could not constitute a taking because the petitioner was given the alternative of securing the permit by agreeing to spend money. This holding was also rejected by the U.S. Supreme Court. The U.S. Supreme Court said that a constitutional taking in the context of a land use case does not need to depend upon a taking of real property. Even if the agency is seeking “monetary exactions” rather than the relinquishment of real property, the “monetary exactions” must satisfy the nexus and rough proportionality requirements of the Court’s earlier decisions. (See Opinion, p. 15) .

The U.S. Supreme Court’s decision has the potential to have large implications for land use and permitting within Florida and throughout the United States. Just how large of an impact it will have remains to be seen. The 5 U.S. Supreme Court Justices siding with the majority opinion clearly disagreed with the 4 U.S. Supreme Court Justices who dissented regarding the magnitude of the ramifications of this decision. Justice Kagan, in her dissent concluded by saying: “The majority’s errors here are consequential. The majority turns a broad array of local land-use regulations into federal constitutional questions.” In contrast, Justice Alito, writing for the majority, said, “Finally, we disagree with the dissent’s forecast that our decision will work a revolution in land use law by depriving local governments of the ability to charge reasonable permitting fees. (Post, at 8). Numerous courts – including courts in many of our Nation’s most populous States – have confronted constitutional challenges to monetary exactions over the last two decades and applied the standards from Nollan and Dolan or something like it.” (Opinion, p.21)

Certainly, it appears that in light of this case, property owners will want to look closely at whether the actions by governmental entities and agencies during a permitting or land use negotiation would result in the imposition of burdensome conditions that do not bear a reasonable connection and proportionality to the activity sought to be permitted. If they do not, then under the Koontz decision, the property owner could be entitled to just compensation for an unconstitutional taking of property in violation of the Fifth Amendment of the U.S. Constitution.

Regarding the final outcome for this property owner, the case has been remanded by to the State courts, and the decision by the U.S. Supreme Court leaves many questions unanswered. The Court did not address whether the exaction or concession sought by the agency from the property owner was disproportionate to the environmental effects of the development the property owner tried to permit. Nor did it answer whether the actions by the agency were specific and definite enough to constitute conditions precedent to the issuance of the permit. (See Opinion, p. 13). The court also left open the question of whether damages would be the appropriate remedy for a “taking” under federal law when a permit is denied, rather than an injunction ordering the issuance of the permit. The court noted that it did not need to decide this issue of federal law because the property owner in this case brought its claim under state law which allowed it to seek damages. (See Opinion, p.13). In light of the many unanswered questions and the remand of the case back to the Florida courts, additional issues will be addressed if this case continues its process through the court system. We will continue to report regarding future developments.

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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