Eminent Domain Report

In 1985, the U.S. Supreme Court issued Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172, a landmark decision (as Supreme Court decisions often are) that drastically slashed the number of federal takings claims.  In Williamson County, the Supreme Court held that courts lack jurisdiction over federal regulatory takings claims unless a final decision has been issued and the property owner has exhausted all "adequate State procedures."  The Supreme Court also clarified that exhaustion of adequate State procedures generally requires pursuing a State law takings claim in State court.  As a result of Williamson County, courts have been dismissing federal takings claims left and right, finding that the claim was not ripe, moot, or sometimes both all at the same time.  Needless to say, over the years the Williamson County roadblock has been a thorn in the side of numerous property owners seeking just compensation.      

However, less than two weeks ago, in Horne v. Department of Agriculture, the U.S. Supreme Court carved out an exception to Williamson County.  This week, perhaps emboldened by the Supreme Court's recent decision, the United States District Court for the Southern District of California permitted a federal takings claim to proceed despite plaintiffs' failure to pursue a takings claim in State court.

In Valerio v. City of San Diego, the plaintiffs, who specialized in outdoor advertising, contacted the city to inquire about using the west wall of a historical building for advertising purposes.  Plaintiffs informed the city that they planned to replace the existing sign on the west wall advertising the Agua Caliente Racetrack in Tijuana, Mexico.  After submitting a historical resources report and advertising plan, the city's principal planner issued a permit authorizing plaintiffs' use of the west wall for advertising purposes.  Shortly after obtaining the permit, the plaintiffs entered into a lease with the owner of the historical building.  Under the terms of the lease, in exchange for a monthly payment of $10,500, plaintiffs could use the advertising space themselves or sublease the space to other businesses.  Plaintiffs believed that based on the market, the wall space could be subleased for about $40,000 per month.  

Apparently spurred on by members of the city council and a local historical resources preservation group who believed that the Agua Caliente sign was historically significant, the city planner sent an email notifying plaintiffs that the permit had been revoked and would only be re-issued after the submittal of a historical resources report for the Agua Caliente sign and site survey.  Rather than ceding to the city's demands, however, plaintiffs filed a lawsuit in federal court alleging, among other claims, an unlawful taking without just compensation.

In response, the city filed a motion for judgment on the pleadings.  As for the takings claim, the city first argued that plaintiffs did not have a constitutionally protected property interest in the permit because it was issued illegally.  The city argued that under local law a historical resources report for the Agua Caliente sign was required before any permit could issue.  The district court rejected this argument, concluding that a historical resources report was only required if the planner requested one, and in this case the planner did not request one for the sign.  The district court also found that because plaintiffs had acted in good faith and incurred substantial liabilities, plaintiffs had obtained a vested property right.

The city next argued, invoking old reliable, that under Williamson County the claim was not ripe because a final decision had not been issued and plaintiffs had not exhausted their state court remedies.  Specifically, with respect to the final decision prong, the city argued that the email was not a final decision of denial because plaintiffs' permit could potentially be re-issued if a historical resources report and site plan were submitted.  The district court quickly rejected this argument, stating that if the city "had an unlimited ability to rescind and re-condition the authorization of permits they have already approved, no permittee could ever rely on a permit to begin development or construction."  Therefore, because the decision inflicts a "concrete harm," as plaintiffs are obligated to continue to make the lease payments, the decision is "final."

As for the second prong of Williamson County, the district court stated it was "unimpressed by Defendants' bare assertion that they are entitled to judgment since Plaintiffs have failed to file" an inverse claim in State court.  Then, after noting that there was "[a]t least one case suggest[ing] that the Ninth Circuit may interpret Williamson County in a way that does not require the takings claimant to pursue adjudication in state court in every instance," the district court found that the city had failed to establish that plaintiffs' takings claim must fail for lack of ripeness.

Thus, in less than two weeks, Williamson County, the decision that made any federal takings claim a dead letter, was pushed aside not once, but twice.