Order for the Courts: Reforming the Nollan/dolan Threshold Inquiry for Exactions

JurisdictionUnited States,Federal
CitationVol. 35 No. 04
Publication year2012


Order for the Courts: Reforming the Nollan/Dolan Threshold Inquiry for Exactions

Winfield B. Martin(fn*)

I. Introduction

For decades prior to 2005,(fn1) Fifth Amendment regulatory takings jurisprudence languished in a state of confused neglect. Rather than articulating a clearly discernable standard for determining whether a violation of the Takings Clause had occurred, Justices rebuffed government action that seemed to amount to "an out-and-out plan of extortion"(fn2) and nodded in approval when they deemed the government to have "acted diligently and in good faith"(fn3) or in furtherance of a "compelling interest."(fn4) In trying to parse this imprecise thicket, scholars have characterized the Court's approach to regulatory takings as a "muddle,"(fn5) in "disarray,"(fn6) and "incoherent."(fn7) Professor Kent even noted that it is "now axiomatic" that this period of regulatory takings jurisprudence is considered a "constitutional quagmire."(fn8)

During this period of inexactitude, the Court relied upon the formula it had articulated in Agins v. City of Tiburon(fn9) to determine if a regulatory taking had occurred. Under Agins, a taking may occur if regulation "does not substantially advance legitimate state interests."(fn10)

It was under the Agins regime that the Court decided Nollan v. California Coastal Commission(fn11) and Dolan v. City of Tigard,(fn12) twin decisions that constitute the entirety of the Court's evaluation of exactions of any type. An exaction is a condition that the government places upon a property owner in exchange for permission to develop his land- typically, an exaction requires that a landowner dedicate either money or property to public use to offset the increased burden of development.(fn13) Combined, Nollan and Dolan mandate that a regulation is not a taking only if there is an "essential nexus"(fn14) between the exaction and the impact caused by the proposed development, and the exaction is "rough[ly] proportional"(fn15) to the development's impact. When Nollan and Dolan were decided in 1987 and 1994, respectively, it was presumed that they extended the Agins "substantial advancement" formulation. With only two exactions cases to assist them, however, lower courts had difficulty applying Nollan and Dolan with consistency. Particularly stringent disagreement arose as to what types of exactions the Nollan/Dolan standard properly applied to. The Nollan and Dolan cases concerned adjudicatively imposed exactions-that is, conditions imposed upon development on an ad hoc, case-by-case basis.(fn16) Without further guidance, some lower courts elected to apply Nollan and Dolan to legislative(fn17) and monetary exactions as well, while others declined and chose to utilize alternative tests.(fn18)

The confusion in applying its takings jurisprudence did not go unnoticed by the Court. When it decided Lingle v. Chevron U.S.A., Inc.(fn19) in 2005, the Court wryly noted that "our regulatory takings jurisprudence cannot be characterized as unified."(fn20) The Court took the opportunity in Lingle to resurvey its takings jurisprudence, reaching all the way back to its 1922 decision in Pennsylvania Coal Co. v. Mahon.(fn21) Though Lingle itself was not an exactions case, it nonetheless considered the entirety of takings jurisprudence and discussed Nollan and Dolan at length.(fn22) In reconsidering and streamlining its takings jurisprudence, the Court whittled decisively away at the very underpinnings of that body of law: that, per Agins, a taking cannot be effected if the regulation substantially advances a legitimate state interest.(fn23) The Court rejected the Agins language due to its limited ability to "help to identify those regulations whose effects are functionally comparable to government appropriation or invasion of private property."(fn24) Instead, Lingle re-characterized Nollan and Dolan and, therefore, evaluations of exactions-as an application of the doctrine of unconstitutional conditions.(fn25) That doctrine dictates that "the government may not require a person to give up a constitutional right- here the right to receive just compensation when property is taken for a public use-in exchange for a discretionary benefit conferred by the government where the benefit has little or no relationship to the property."(fn26)

This Comment argues that the Court's recalibrated view of Nollan and Dolan as applications of the doctrine of unconstitutional conditions suggests that nexus and proportionality standards should be applied to both legislatively and adjudicatively imposed exactions. Part II discusses the pre-Lingle state of exactions analysis and the debate regarding the appropriate level of scrutiny to apply to different types of exactions. Part III reviews the Lingle decision itself and its determination that Nollan and Dolan are based upon the doctrine of unconstitutional conditions. Part IV proposes a balancing test to resolve the difficult threshold inquiry of whether an exaction should be examined under heightened scrutiny. Part V revisits the Ninth Circuit's holding in McClung v. City of Sumner that legislative exactions are outside of the Nollan/Dolan framework,(fn27) applying the balancing test in lieu of a formalistic determination.

II. Exactions in the Pre-Lingle World

The proposition that a government regulation may violate the Takings Clause of the Fifth Amendment if it "goes too far" has existed since the Court's 1922 opinion in Pennsylvania Coal Co. v. Mahon.(fn28) In Ma-hon, Justice Holmes acknowledged that "government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change," but noted concurrently that "when [a regulation] reaches a certain magnitude . . . there must be an exercise of eminent domain and compensation to sustain the act."(fn29) Holmes added, a bit unhelpfully, that "the question depends upon the particular facts."(fn30) In a subsequent decision, Armstrong v. United States, the Court articulated the rationale behind its takings jurisprudence as an interest in "bar[ring] 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."(fn31) But Holmes's "too far" phrasing from Mahon,(fn32) even in conjunction with the rationale stated in Armstrong, created an imprecise standard that scholars criticized as a "we know it when we see it" scheme.(fn33) This vagueness occasioned a procession of tests that were "created, used, and discarded"(fn34) in an effort to create a more comprehensible takings standard.

The Court's reluctance to enunciate bright-line rules to guide regulatory takings analysis led to the creation of four alternative tests that endure today. In Pennsylvania Central Transportation v. City of New York, the Court announced a deferential test that determines whether a regulation goes "too far" based upon a balancing of three factors: the economic impact of the regulation, the interference with the property owner's investment-backed expectations, and the character of the regulation.(fn35) The Penn Central test is considered to be the most deferential of the four.(fn36) The remaining three tests each subject the challenged government action to higher scrutiny. In Loretto v. Teleprompter Manhattan CATV Corp., the Court held that a regulation mandating a physical invasion of privacy, regardless of the size of the invasion, constitutes a taking.(fn37) The Court announced another categorical taking in Lucas v. South Carolina Coastal Council, which held that any regulation that strips property of all economically viable use effects a taking.(fn38) Lastly, the combined Nollan/Dolan standard enjoins the government from requiring that a landowner dedicate property to public use in exchange for a development permit unless the government is able to demonstrate that there is an essential nexus between the development's impact and the dedication, and that the dedication is proportional to that impact.(fn39)

In Nollan v. California Coastal Commission, property owners challenged the Commission's practice of requiring landowners to trade exclusive access to the beachfront portion of their property for building permits.(fn40) The Nollans had sought permission to demolish their one-story bungalow and replace it with a two-story house.(fn41) The Commission would grant the requisite permit only if the Nollans agreed to dedicate to public use the roughly one-third of the property that ran parallel to the ocean.(fn42) It justified the requirement as a mechanism for offsetting the loss of ocean visibility to travelers on Highway 1, which ran behind the Nollans' property, that would result if the height of the residence was increased.(fn43) The Commission described the diminished visibility as a "psychological barrier."(fn44)

The Court, conversely, considered the Commission's scheme an "out-and-out plan of extortion."(fn45) It rejected the Commission's demand and announced that conditions of this nature are permissible only if certain conditions are present. First, the impact of the proposed development must, in and of itself, be sufficient to merit refusing the building permit-a refusal that would not itself effect a taking.(fn46) Second, as an alternative to flatly denying the building permit, a...

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