The Ninth U.S. Circuit Court of Appeals has issued two takings decisions from outside California favorable to property owners.
Actually, the decision most likely to have an impact in California was specifically not a takings decision, but a due process ruling. In a case from Sun Valley, Idaho, the court — relying on the U.S. Supreme Court's ruling in the Lingle case from two years ago — ruled that a developer could pursue a due process claim stemming from property regulation. The decision reverses "well-settled law in this circuit [that] does not allow substantive due process claims pursuant to the Fourteenth Amendment when the interest at stake is real property."
The Sun Valley decision followed an unrelated decision from Las Vegas, Nevada, in which the Ninth Circuit upheld a lower court determination that zoning around an airport constituted a compensable taking of property owners' airspace.
The Sun Valley case concerned a claim filed by Crown Point Development, which is developing a 39-unit subdivision called Crown Ranch. The developer built 26 units in the first four phases. When Crown Point sought to complete the project with the final 13 townhouses, it met resistance from the homeowners association, and the City Council denied an application. Crown Point sued in Idaho state court, and a district court ruled the council's decision was arbitrary and capricious. The Idaho Supreme Court reversed the decision but remanded the case for further proceedings because the findings of fact were insufficient (Crown Point Dev., Inc. v. City of Sun Valley, 156 P.3d 573 (Idaho 2007)).
Crown Point also filed a federal action based on civil rights law, arguing that its substantive due process rights had been violated. The federal district court rejected the claim because of Armendariz v. Penman, 75 F.3d 1311 (9th Circuit 1996), in which the court ruled that the Fifth Amendment's takings clause preempts due process claims from property owners.
However, the U.S. Supreme Court's decision in Lingle v. Chevron U.S.A., Inc., 544 U.S. 528 (2005) (see CP&DR, July 2005), "pulls the rug out from under our rationale for totally precluding substantive due process claims based on arbitrary or unreasonable conduct," Judge Pamela Ann Rymer wrote for the Ninth Circuit panel. This is because Lingle rejected the "Agins test," which held that a regulation that does not "substantially advance legitimate state interests" is a taking. Instead, the Lingle court ruled that a claim based on the substantially advances test is actually a due process — not a Fifth Amendment takings — claim.
"We now explicitly hold that the Fifth Amendment does not invariably preclude a claim that land use action lacks any substantial relation to the public health, safety, or general welfare," Rymer wrote. "Therefore, we must reverse, as the district court dismissed Crown Point's claim solely on the authority of Armendariz, which held to the contrary."
The Ninth Circuit did not rule on the merits; it merely sent Crown Point's lawsuit back to the District Court for a decision. The Ninth Circuit ruling appears to open a new avenue for landowners to challenge land use regulation.
The Las Vegas case has a more colorful history but may not mean as much for California as the Sun Valley decision does. There are numerous aspects to the Las Vegas case and commentators have not agreed on which is most important.
Essentially, the Ninth Circuit upheld a lower court ruling in favor of some owners of property near McCarran International Airport. They argued that two Clark County ordinances adopted in 1990 constituted takings. The lower court ruled that Ordinance 1221 imposing a building height limit was a taking, but Ordinance 1198 imposing an overlay zone that prohibited anything except a parking lot or landscaping on 1.25 acres was not a taking. The court awarded the landowners $10.1 million in damages, fees and interest, plus $600,000 in attorney's fees.
The procedural gymnastics: The Ninth Circuit rejected the county's argument that the federal court had no jurisdiction because the lower court — a federal bankruptcy court, actually — accepted the case even though a state court judge had indicated he was going to dismiss identical claims filed in state court. (Typically, a property owner cannot pursue a taking claim in federal court after having it rejected in state court.) In addition, the Ninth Circuit found that the federal court claims were "ripe" for a decision because the landowners had filed litigation in state court. The state court lawsuit was essentially part of the state's administrative process for seeking compensation, the Ninth Circuit determined. The fact that a federal bankruptcy court judge heard the case — and later signed the final decision as a district court judge after receiving a new appointment — also was not a problem for the Ninth Circuit.
For the planners: The Ninth Circuit said it was bound to abide by the Nevada Supreme Court's decision in McCarran International Airport v. Sisolak, 137 P3d 1110 (Nevada 2006). In Sisolak, the court ruled that Clark County Ordinance 1221 limiting the height of buildings near the airport was a per se taking of privately owned airspace. The Nevada Supreme Court awarded the property owner $16 million — even though the county had approved an application for a 600-room hotel-casino on Sisolak's property.
The Sisolak ruling stunned planners and airport authorities because the court said that the landowner had a right to airspace up to 500 feet above the surface. Essentially, the Nevada Supreme Court ruled that federally defined navigable airspace was subject to private ownership, and that a zoning ordinance impinging on use of this airspace was a taking under state and federal law.
In the case at hand, Ninth Circuit Judge Milan Smith Jr. wrote, "We respectfully disagree with our colleagues on the Nevada Supreme Court concerning their interpretation of federal takings jurisprudence. No Fifth Amendment taking of the landowners' property occurred under the standards set forth in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978)."
However, in Sisolak the Nevada Supreme Court said claims in that state are not subject to Penn Central, which provides strict standards for pressing a takings claim. The Sisolak court said the Nevada Constitution limits the exercise of takings more than the federal constitution does — even though the takings clauses in the two documents are nearly identical.
The Ninth Circuit said that, because the landowners in the case at hand had filed claims based on the Nevada Constitution, it was bound by Sisolak and therefore must uphold the lower federal court ruling. "We hold that federal airport regulations do not preempt Sisolak's application to the Nevada Constitution's takings clause with respect to Ordinance 1221," Judge Smith wrote. The court sent the case back to district court for a final decision on interest owed by the county.
The decision probably means little in California, where state courts have long applied the Penn Central standard for takings claims. Still, the decision demonstrates one Ninth Circuit panel's willingness to abide by a state court decision that planners had hoped would be an outlier.
Crown Point Development, Inc. v. City of San Valley, No. 06-35189, 07 C.D.O.S. 12732, 2007 DJDAR 16452. Filed November 1, 2007.
For Crown Point: J. David Breemer, Pacific Legal Foundation, (916) 419-7111.
For the city: James J. Davis, (208) 336-3244.
Vacation Village, Inc. v. Clark County, Nevada, No. 05-16173, 07 C.D.O.S. 8614, 2007 DJDAR 11170. Filed July 23, 2007.
For Vacation Village: Paul Ray, John Peter Lee, (702) 382-4044.
For the county: Kirk Lenhard, Jones Vargas, (702) 734-2220.