KNICK V. TOWNSHIP OF SCOTT. A SOURCE OF NEW UNCERTAINTY FOR STATE AND LOCAL GOVERNMENTS IN REGULATORY TAKINGS CHALLENGES TO LAND USE REGULATION.

AuthorBeaton, Laura D.

Introduction I. Sources of Uncertainty after Knick A. New Takings Law B. New Procedural Uncertainties i. Reasons to Prefer State Court ii. The Way Back to State Court Conclusion INTRODUCTION

Regulatory takings doctrine is famously muddled. But for the past three decades, one aspect of it has been completely clear: the procedure for initiating a regulatory takings claim. In Williamson County Regional Planning Commission v. Hamilton Bank, the U.S. Supreme Court held that plaintiffs claiming a Fifth Amendment regulatory taking allegedly caused by a state or local government must first seek compensation under whatever procedure is provided by the state. (1) Only when the claimant was denied compensation through that procedure could the claimant assert that her property was "taken for public use, without just compensation," (2) Thus, until that point, no federal takings claim under the Fifth and Fourteenth Amendments could accrue. (3)

The state procedure for seeking compensation is an action for inverse condemnation filed in state court. (4) Many state courts apply the Supreme Court's Fifth Amendment takings jurisprudence to such claims. (5) To the extent they do so, under the Full Faith and Credit statute, the state court judgment could preclude relitigation of the issues decided in a further federal court action under the federal Takings Clause. (6) Thus, claims for compensation for alleged takings by state or local agencies have been almost solely the province of state courts. (7) That is, until last term when the Supreme Court decided Knick v. Township of Scott. (8) There, the Court overruled the "state compensation" rule it had established in 1985 in Williamson County and had repeatedly reaffirmed thereafter. (9) In Knick, the Court held that a federal takings claim may be asserted in federal court under 42 U.S.C. [section] 1983 as soon as the challenged regulatory action is final. (10)

On its face, the Court seemed to replace one simple procedural rule (you must file your claim in state court) with a new simple rule (you may file your claim in federal court). However, this apparently simple procedural change is likely to create a fair bit of confusion, on subjects both procedural and substantive. That confusion will be especially pronounced for the participants in the arena of local land use regulation--local governments and property owners--as much regulatory takings litigation arises there.

First and foremost, Knick will change the law applicable to takings claims in unknown ways. While state courts played the primary role of developing takings law under the Williamson County regime, that role will now pass to federal courts, which are not obligated to follow the case law developed in the states in which they sit. Takings plaintiffs will undoubtedly take advantage of this new legal lacuna to bring claims previously barred by settled state law. State and local governments that have developed regulatory policy, particularly land use policy, in reliance on over thirty years of state court precedent, could be in for some uncomfortable surprises.

Second, despite the apparent simplicity of its holding, Knick promises new procedural uncertainty. Although federal takings claims may now be filed directly in federal court (or immediately removed there), litigants have several tools to try to force claims, in whole or in part, back into state courts. Unlike other federal constitutional claims, takings claims are fundamentally shaped by state law, particularly state property law. And land use cases frequently involve additional claims under state land use statutes or state administrative law. Thus, it can be expected that some litigants will seek to have those issues addressed in state court. Moreover, historically, lower federal courts have been deeply reluctant to referee land use disputes and may lack enthusiasm for a new category of claims in that field. As such, federal courts may be sympathetic to efforts to shift takings claims, or portions thereof, back to state courts.

  1. SOURCES OF UNCERTAINTY AFTER KNICK

  1. New Takings Law

    Although on its face a procedural decision, Knick may profoundly affect the substance of takings law. Because the lower federal courts --aside from the Court of Federal Claims and Federal Circuit--were not much involved with takings cases under the Williamson County regime, they had little opportunity to develop the law under the Takings Clause. (11) Additionally, the Supreme Court decides few takings cases, from whatever source, and the resolution of those cases tends to be narrow. (12) Leadership in developing takings law has thus been assumed by state courts, which have issued significant decisions in many areas of the doctrine. (13) If takings cases migrate to federal court, lower federal courts will be writing on a mostly clean slate.

    Indeed, it is hard to think of another field where the Court made a shift in the applicable law that left so much uncertainty about the new law to apply. When the Court abandoned federal common law in diversity cases in Erie Railroad Co. v. Tompkins, (14) for example, everyone knew state law would replace it. Under Knick, by contrast, the Court has supplanted established state takings law with an as-yet largely nonexistent federal takings law.

    Beyond the few pillars of the doctrine erected by the Supreme Court, state courts have taken the primary role in building the structure of takings doctrine. For example, the California Supreme Court has issued numerous significant decisions on the subject of exactions. Exactions involve the regulator's imposition of a condition of approval on a land use entitlement, such as a permit, for a development project that requires the developer to provide something of value to the regulator. (15) Under Nollan v. California Coastal Commission (16) and Dolan v. City of Tigard, (17) exactions of property interests in the landuse- regulatory process are subject to somewhat heightened scrutiny. (18) These conditions may be imposed to mitigate the project's environmental impacts or to offset the demands imposed by the project on public infrastructure or services. In our experience in representing public agencies in takings litigation, exactions challenges represent a large share of regulatory takings claims in the land use context.

    The California court was seventeen years ahead of the U.S. Supreme Court in deciding that the Nollan/Dolan doctrine applies to fees imposed on development projects as well as the exaction of interests in real estate. (19) Perhaps more significant, in San Remo Hotel v. City and County of San Francisco, (20) the California court applied a more lenient standard of review for exactions that are generally applicable and adopted by quasi-legislative action, such as adoption of an ordinance, rather than imposed on a discretionary, ad-hoc basis. (21) The distinction makes sense, as the risk the Supreme Court identified in Nollan and Dolan--extortionary use of land use permitting authority to extract unrelated goodies from permit applicants--is less of a concern where a local government applies uniform requirements to all new development in the jurisdiction. (22) The Supreme Court has not yet considered the San Remo principle. (23)

    After Knick, it is unclear whether federal courts will look to state takings precedents for guidance, or, if they do, which precedents they will adopt. This is undoubtedly an opportunity for landowners and the takings plaintiffs' bar. Now in federal court, they can bring claims that were previously foreclosed by the takings doctrine in their state.

    However, it will pose a real challenge for local governments as they make daily decisions about land use regulation. Particularly in states like California, where the state courts have developed significant bodies of takings law, agencies that have been able to rely for years on settled state court precedent face new uncertainty. Given the risk of large, unexpected takings verdicts, many local governments will undoubtedly be more conservative in their land use decisions, allowing landowners more intensive, and profitable, uses of their properties. Furthermore, previous decisions made in reliance on state takings cases may lead to unforeseen outcomes in the new venue of federal court.

    One area where Knick almost certainly promises a change in the applicable law is in the statutes of limitations governing takings claims. Inverse condemnation claims filed in state court were, of course, subject to state statutes of limitations. Insofar as Knick shifts takings litigation to federal court, the limitations periods applicable to takings claims will shift, and potentially dramatically, with repercussions for local government planning.

    In some states--California is a clear example--local land use decisions are subject to extraordinarily short statutes of limitations. In California, any challenge to a decision on a proposed subdivision of land, for example, is subject to a strict 90-day limitations period. (24) California courts held that this short limitations period applies to inverse condemnation claims brought by landowners challenging subdivision decisions. (25) Other land use statutes in California impose similarly short--or even shorter--statutes of limitations. (26)

    By contrast, Section 1983 claims, including takings claims filed in federal court after Knick, are subject to the personal injury statute of limitations in the state in which the claim arises. (27) In California, that period is two years, (28) and in other states it can be as long as six years. (29) As a result, plaintiffs who previously had to challenge land use decisions within three months can now wait to bring a takings claim years later. (30)

    This far longer statute of limitations creates additional uncertainty for local governments. In applying the short limitations periods established by land use statutes, courts emphasized the importance of certainty in...

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