U.S. Supreme Court Delivers Major Property Rights Victory

July 1, 2019

 
Jackson Tidus e-Alert
On June 21, 2019, the United States Supreme Court delivered a major property rights victory by giving property owners a direct path to federal court that had been closed since 1985. In a 5-4 decision in Knick v. Township of Scott, Pennsylvania, 2019 WL 2552486, (U.S., 2019) (Knick v. Township), the Supreme Court held that a property owner has an actionable federal claim under the Takings Clause of the Fifth Amendment "when the government takes his property without paying for it" and may "bring his claim in federal court under [42 U.S.C] § 1983 at that time."
 

This decision overrules Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, (1985) (Williamson County) where the Supreme Court held that a property owner had not suffered a Fifth Amendment violation unless his claim for just compensation was first denied by a state court under state law. The decision also eliminates its 2005 decision in San Remo Hotel, L. P. v. City and County of San Francisco, 545 U.S. 323 (2005) (San Remo), which caused the most difficulties in takings jurisprudence.

The majority opinion and the minority opinion both paint different pictures of the impact of this decision. The majority minimizes the impact of its holding, stating that it "will not expose governments to new liability [and] will simply allow into federal court takings claims that otherwise would have been brought as inverse condemnation suits in state court." While the dissent states: "Today's decision sends a flood of complex state-law issues to federal courts. It makes federal courts a principal player in local and state land-use disputes." Both are, in part, correct.

Background

In Knick v. Township, Scott Township in Pennsylvania (Township), passed an ordinance in 2012 requiring all cemeteries to be kept open and accessible to the public during daylight hours. In 2013, a Township officer notified Rose Mary Knick (Knick) that "several grave markers" were on her property and that she was violating the Township's ordinance by failing to open her land to the public during the day. Knick sought declaratory and injunctive relief in state court claiming a "taking." The state court did not rule on Knick's request because "she could not demonstrate the irreparable harm necessary for equitable relief" as a result of the Township's withdrawal of its violation notice pending the court proceedings.

Knick then filed an action in the Federal District Court for the Middle District of Pennsylvania under 42 U.S.C. § 1983. Knick alleged that the ordinance violated the Fifth Amendment's Takings Clause. The District Court, following Williamson County, dismissed Knick's claim and the Third Circuit Court of Appeals affirmed (also following Williamson County). The Supreme Court granted review to "reconsider the holding of Williamson County that property owners must seek just compensation under state law in state court before bringing a federal takings claim under § 1983."

Majority Identifies Catch-22 and Overrules Williamson County

The majority's decision to overrule Williamson County  was based in part on the widely accepted premise that takings plaintiffs were faced with a Catch-22 as a result of Williamson County and the Supreme Court's 2005 decision in San Remo. In San Remo, the Supreme Court held that "a state court's resolution of a claim for just compensation under state law generally has preclusive effect in any subsequent federal suit." Thus, a takings plaintiff "cannot go to federal court without going to state court first; but if he goes to state court and loses, his claim will be barred in federal court."

The majority and dissent also had opposing interpretations on the text of the Takings Clause: "nor shall private property be taken for public use, without just compensation." Specifically, they disagreed on what action gives rise to a federal claim. According to the majority, it is the taking itself that gives rise to a federal claim. The dissent, however, opined that a Fifth Amendment violation only occurs if (1) there is a taking and (2) there is a failure to provide just compensation, with the second condition only satisfied "when the property owner comes away from the government's compensatory procedure empty-handed." The disagreement between the majority and dissent is highlighted by the following exchange:
 

Majority:    
"[The Takings Clause] does not say: 'Nor shall private property be taken for public use, without an available procedure that will result in compensation.'"

   

Dissent:   
"[H]ere's another thing the [Takings Clause] does not say: 'Nor shall private property be taken for public use, without advance or contemporaneous payment of just compensation, notwithstanding ordinary procedures.'"

 
The majority ultimately opined that Williamson County  was wrong and that its "reasoning was exceptionally ill founded and conflicted with much of our takings jurisprudence." As a result, the majority held that Williamson County's "state-litigation requirement imposes an unjustifiable burden on takings plaintiffs, conflicts with the rest of our takings jurisprudence, and must be overruled." The majority clarified that a government need not provide compensation in advance in order to protect its activities from injunctive relief as "long as the property owner has some way to obtain compensation after the fact." But even with such a procedure in place, "the property owner has suffered a violation of his Fifth Amendment rights when the government takes his property without just compensation" and may file his claim in federal court at that time.

Decision's Potential California Impacts

Only time will tell how California plaintiffs and California federal courts will apply inverse condemnation claims. For example, will plaintiffs first seek to adjudicate ancillary claims for invalidation of land use regulations before seeking federal court relief? How will the federal courts apply the California courts' requirements that to avoid the chilling effect of inverse condemnation claims on planning, plaintiffs must first seek to invalidate challenged land use regulations. While invalidation of the challenged land use regulations is not a prerequisite to an inverse condemnation claim in federal courts, it is possible that lack of an attempt at invalidation might have an impact on the claim.

Plaintiffs suing in state court first, will have to reserve their federal claims to have a "second bite" at the apple if they lose in California. Thus, due to the many state court claims a plaintiff can bring, will federal courts stay the federal claims and remand the state law claims to state court? There are a number of procedural issues that now have to be addressed.

Furthermore, the removal of the Williamson County procedural hurdle may not be a panacea for all takings claims. For example, California court precedent under rent control laws as to what is meant by a constitutional "fair return" may significantly impact whether there is a taking of property rights. As another example, California court precedent under the Coastal Act may limit whether mistaken assertion of Coastal Commission jurisdiction under the Coastal Act constitutes a taking. The substantive aspects of each particular inverse condemnation claim should be considered before filing in federal court.
 

Boyd L. Hill is a Shareholder in the Firm's Land Use Development group, and focuses on real estate and land use entitlement matters. He may be reached at 949-851-7491 and at bhill [at] jacksontidus.law.

 

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