Eminent Domain Report

As we previewed in our recent "year in review" piece, the U.S. Supreme Court has some takings issues before it this term.  One case, Koontz v. St. John's River Water Management District, took center stage yesterday. 

At issue in the case is whether the the "nexus" and "proportionality" tests that we have all come to know in the context of real property dedications also apply to other efforts to impose exactions relative to property-development efforts. 

The case presents a new branch on the tree that arises from cases such as 1987's Nollan v. California Coastal Commission, in which the Court held that it was unconstitutional for the state to require that a property owner grant an easement across his property for public beach access as a condition of rebuilding his home because there was no "nexus" between the dedication requirement and the owner's plan, and 1994's Dolan v. City of Tigard, in which the Court held that any dedication requirement must be "proportional" to the impact of the property owner's planned project. 

These dual requirements have formed the basis for countless regulatory takings cases over the past 25 years, but do those requirements apply where the exaction takes the form of something other than a dedication requirement imposed as a condition of a project's approval?  Enter the Koontz case. 

Koontz wanted to improve his property, but the local River Management District told him it would only approve his permit if he agreed to improve 50 acres of wetlands on the district's property -- property located miles from Koontz's property.  Koontz refused, and the District denied his permit.  He sued, and following a series of decisions and appeals (the last of which held in favor of the District, finding no taking), Koontz petitioned the Supreme Court. 

The Supreme Court is considering two issues:  (1) whether a taking occurs where an agency denies a permit because the owner refuses to agree to an unlawful condition (as opposed to more traditional situations where the agency approves the project, subject to the unlawful condition); and (2) whether a condition that amounts to the payment of money falls within the scope of the "nexus" and "proportionality" requirements. 

At oral argument yesterday, the Court seemed to focus not on the facts of Koontz itself as much as the implications of "expanding" regulatory takings claims to cover these types of situations.   If any government regulation that required an owner to expend money could qualify as a taking, it might constitute "an enormous floodgate," to quote Justice Sotomayor. 

Any effort to divine what a court will rule based on the tenor of the oral argument comes with a fair amount of risk.  Maybe the probing questions were coming from a minority view trying to convince a majority, and maybe a Justice was trying to make a point for purposes of another issue in another case.  But based on the summaries coming out the Court from yesterday's argument, it would appear that the Court is likely to conclude that no taking occurred.  Whether that is because (1) the government action did not take the form of a condition of approval, and/or (2) the exaction involved payment of money, as opposed to a dedication requirement remains to be seen.  But for now, my money is on a finding of "no taking" for this one.

One final note as we await the Koontz ruling.  If the Court does rule in favor of the government and, depending on one's view, either (a) significantly narrow the scope of Nollan and Dolan or (b) refuse to extend those decisions to another, similar context, this would appear contrary to the Court's recent decision in Arkansas Game and Fish Commission v. United States, in which the Court was persuaded that a taking could exist for temporary flooding situations, arguably expanding the scope of another leading regulatory takings decision, Penn Central Transportation Co. v. City of New York. 

We'll let you know what happens.  In the meantime, if you're looking for more to read about the Koontz case and its implications, here are two very different perspectives:

•  Richard Frank, Previewing This Week’s Oral Arguments in the Supreme Court’s Most Important Property Rights Case This Term; and
  

• Richard A. Epstein, When Government Takes You Hostage.