Recent Developments in Regulatory Takings

• Library: At the Cutting Edge: Land Use Law from The Urban Lawyer (ABA) (2014 Ed.)

Robert H. Thomas^*

I. Introduction

The Supreme Court's 2012 Term promised to be a banner year in regulatory takings law, with no less than three cases on the Court's docket.¹ In Arkansas Game and Fish Commission v. United States,² a case involving a takings claim against the federal government for compensation resulting from a flood, the Court held that flooding need not be "permanent" in order to result in liability, and reinforced the principle that categorical takings are not favored, and stated that the default analysis is the multi-factored Penn Central test.³ In Koontz v. St. Johns River Water Management District,⁴ the Court held that monetary development exactions fall within the reach of the takings clause and "must satisfy the nexus and rough proportionality requirements of Nollan and Dolan.⁵ In Horne vs. U.S. Dep't of Agriculture, the unanimous Court held that raisin farmers' takings claims could be raised as an affirmative defense in an agency enforcement proceeding even where the fine had not previously been paid.⁶

In addition to the Supreme Court, other courts around the country issued consequential rulings of note. This article reviews those major regulatory takings and inverse condemnation decisions of the past year. Section II details cases about whether particular scenarios result in takings liability. Section III details what sort of property might be considered protected. Section IV details cases analyzing whether application of Penn Central results in a taking. Section v focuses on ripeness, the most frequently applied procedural dodge to takings cases. Section vI considers other decisions involving such topics as judicial takings and standing.

II. What Qualifies as a Taking?

A. Supreme Court: A Government-Induced Flood Might Be a Taking

In Arkansas Game,⁷ the unanimous Supreme Court held that government-induced flooding could be a taking, even if temporary. The Court held that the federal government may be liable under the Takings Clause to pay just compensation because the Corps of Engineers damaged Arkansas' timber by purposely flooding land owned by the state downstream of a federal flood-control project.⁸ For more than a century, it has been settled law that when government-induced flooding was permanent (such as when lands are inundated as a result of dam building, for example) the government was liable for a taking.⁹ But the Supreme Court had never conclusively established whether flooding that was less than permanent would be subject to the same rule.

The Corps argued that it was not liable for the flooding of Arkansas' land and the resulting millions of dollars of loss to the state-owned timber because the floodwaters eventually receded.¹⁰ The Court of Federal Claims concluded otherwise and held the Corps liable, but the Federal Circuit reversed.¹¹ In that court's view, the flooding must be permanent in order for a property owner to recover compensation.¹² Thus, the flood at most created tort liability. What this meant is that if a property owner can prove the federal government was negligent, it might recover damages. The twist in this conclusion was that the federal government could not be held liable for tort damages resulting from flooding, because it has not consented to be sued under the Federal Tort Claims Act for such claims. Thus, absent a claim for a taking, Arkansas would recover nothing.

The Supreme Court roundly rejected the court of appeals' reasoning and concluded that purposeful water releases from a federally-controlled dam could, in some circumstances, result in a taking.¹³ The Court ruled that the government has no "automatic exemption" from the Takings Clause:

We rule today, simply and only, that government-induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection. When regulation or temporary physical invasion by government interferes with private property, our decisions recognize, time is indeed a factor in determining the existence vel non of a compensable taking.¹⁴

The Court remanded the case to the lower courts for an examination of several Penn Central-ish factors¹⁵ such as the duration of the flooding, whether it was "temporary and unplanned" and the result of "exigent circumstances," "the degree to which the invasion [by water] is intended or is the foreseeable result of authorized government action," the character of the land at issue and the owner's "reasonable investment-backed expectations" regarding the land's use (such as whether the land had been flooded before), whether the flooding was a one-time occurrence or repeated, and the "severity of the interference."¹⁶ The opinion reminds us that there are few situations in which the Court will conclude there is a taking as a matter of law: the "physical occupation" rule¹⁷ which the Court did not disturb even in flooding cases, and the deprivation of the owner's beneficial use of property under Lucas.¹⁸ Everything else is subject to the multi-factor Penn Central test. This seems to be the trend in takings cases, and the Court is apparently not keen to take major steps in this area, only to buff up the edges of the rules.¹⁹ Despite the nearly universal dislike of the Penn Central test,itappearsitisheretostay for now.²⁰

Thus, Arkansas Game is not an entirely satisfying ruling. As noted above, it would have been simpler for the Court to have adopted a brighter-line rule that all physical invasions that directly and substantially interfere with an owner's use are takings,²¹ and that the degree of damage inflicted is a question of compensation, not liability. That way, the courts would not need to wade into the metaphysical questions such as the "permanence" of the invasion—for what is truly "permanent?"—but could focus on the key question in takings cases: the degree to which a particular owner is being forced to shoulder more than her proportionate share of the public burden.²² Moreover, the Penn Central test is notoriously amorphous, and consequently provides little guidance to either property owners or government regulators about whether particular actions will be deemed to be takings, which only encourages aggressive regulation, reined in only by the possibility of a future compensation judgment. Which is to say not reined in very much. Those points aside, we can safely say that a goodly portion of government-induced floods that result in litigation should meet the special application of Penn Central articulated in Arkansas Game, and this decision will not materially alter the present landscape. At least the decision has removed an argument that we've always believed bordered on spurious, and property owners will not have to contend with it from here forward.

Even with this limitation, however, Arkansas Game must be considered a decisive victory for property owners and their rights. The Court confirmed that the government does not get a free pass from paying for the damage that flooding causes, just because the flooding may not be "permanent."²³ Moreover, the Court also reaffirmed the principle that good intentions do not insulate the government from liability. The Corps argued that flood control projects are good things—and who can doubt that?—and therefore it should not pay compensation when it chooses which downstream lands must be flooded in order to preserve others.²⁴ In that case, the Corps decided that downstream farmers needed a longer growing season, and as a result decided to flood Arkansas' timber lands at a different time of year than was normal. The Court rejected that argument and reaffirmed that in takings cases, the focus is not on the motivation of the government, but on the impact of its decision on property.²⁵ The Court reminded that "[t]he Takings Clause is 'designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.' "²⁶ In other words, a single property owner should not have to shoulder the entire financial burden of a public good.²⁷ This same rationale holds true in other cases, and bears repeating, and Arkansas Game is a good reminder that intent doesn't play a dispositive (or even a significant) role in the takings equation. The Court rejected the argument (pressed by Justice Sotomayor at oral argument) that because the damage to the Commission's trees was the result of a project designed to minimize the harm from flooding that was going to occur anyway, there's no taking when the Corps is simply deciding who has to take the hit.²⁸

B. Virginia: Single Instance of Flooding Can Support Inverse Condemnation Claim

Compare the Supreme Court's Arkansas Game approach with that of theVirginia SupremeCourt in Livingston v. Virginia Department of Transportation,²⁹ which concluded that a one-time flood can result in government liability for inverse condemnation. The plaintiffs claimed that in building the Washington Beltway in the 1960's, the virginia Department of Transportation (vDoT) straightened and relocated a portion of Cameron Run, a stream feeding into the Potomac River.³⁰ They also claimed that vDoT's failure to maintain the relocated channel in the intervening years, and that the latter failure resulted in their homes being flooded with sewage after a massive rainfall in 2006.

The homeowner filed an inverse condemnation action in state court to recover just compensation under the virginia Constitution, which requires compensation when private property is taken or damaged for public use.³¹ The defendants demurred, arguing that the plaintiffs lacked standing since they did not own the homes in the 1960's, and because a single instance of flooding could not result in inverse condemnation liability.³² The virginia Supreme Court concluded otherwise:

To the extent that the circuit court held that a single occurrence of flooding cannot support an inverse condemnation claim, it erred. We find nothing in Article I, Section 11's text or history that

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