Ninth Circuit “Taking” – When Does the Government Need to Pay?

McClung v. City of Sumner, 545 F.3d 803 (9th Cir.(Wash.) Sep 25, 2008) (NO. 07-35231)

Governments often make onerous or expensive requirements a condition for a building permit. The United States Constitution protects against a “taking” of perperty without compensation. When do these preconditions constitute a “taking” under the United States Constitution which the government must compensate?

The City of Sumner gave the McClungs the choice of either agreeing to install a 12-inch pipe and pay the usual fees, or install a 24-inch pipe and receive the fee waiver. The McClungs accepted the latter 24-inch pipe option. The McClungs claimed an unconstitutional compulsion by the city resulting in a “taking.”

The Ninth Circuit addressed for the first time whether a legislative, generally applicable development condition that does not require the owner to relinquish rights in the real property, as opposed to an adjudicative land-use exaction, should be addressed under the Penn Central or Nollan/Dolan framework. Other courts addressing this general issue have come to different conclusions.

A plaintiff seeking to challenge a government action as an uncompensated taking of private property may proceed under one of four theories: by alleging (1) a physical invasion of property, (2) that a regulation completely deprives a plaintiff of all economically beneficial use of property, (3) a general regulatory takings challenge pursuant to Penn Central, or (4) a land-use exaction violating the standards set forth in Nollan and Dolan. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 548, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005). At issue here is application of the latter two doctrines.

In Penn Central, the New York City Landmarks Preservation Commission refused to approve plans to construct an office building over Grand Central Terminal due to its “landmark” status under the Landmarks Preservation Law. Penn Central, 438 U.S. at 116-17, 98 S.Ct. 2646. Penn Central recognized that “[a] ‘taking’ may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.” Id. at 124, 98 S.Ct. 2646 (citation omitted); see also Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning Agency, 535 U.S. 302, 322-23, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002) (distinguishing cases involving physical possession of property versus regulations that do not cause a categorical taking). Penn Central acknowledged that it was “unable to develop any ‘set formula’ ” for evaluating these types of claims, but identified relevant factors, such as the economic impact of the regulation on the claimant, the extent to which the regulation has interfered with distinct investment-backed expectations, and the character of the governmental action. Penn Central, 438 U.S. at 124, 98 S.Ct. 2646; see also Lingle, 544 U.S. at 538-39, 125 S.Ct. 2074 (discussing Penn Central ).

In comparison to Penn Central, “[b]oth Nollan and Dolan involved Fifth Amendment takings challenges to adjudicative land-use exactions-specifically, government demands that a landowner dedicate an easement allowing public access to her property as a condition of obtaining a development permit.” Lingle, 544 U.S. at 546, 125 S.Ct. 2074. In Nollan, the California Coastal Commission conditioned the grant of Nollan's development/rebuilding permit of his beachside home on Nollan's dedication of an easement on the property to the public. Nollan, 483 U.S. at 828, 107 S.Ct. 3141. In Dolan, the Oregon Land Use Board of Appeals conditioned the grant of Dolan's permit to expand a store and parking lot on Dolan's dedication of a portion of the relevant property as a “greenway” and bicycle/ pedestrian pathway. Dolan, 512 U.S. at 379-80, 114 S.Ct. 2309. The Supreme Court recently described the holdings of these cases as follows:

In each case, the Court began with the premise that, had the government simply appropriated the easement in question, this would have been a per se physical taking. The question was whether the government could, without paying the compensation that would otherwise be required upon effecting such a taking, demand the easement as a condition for granting a development permit the
government was entitled to deny. The Court in Nollan answered in the affirmative, provided that the exaction would substantially advance the same government interest that would furnish a valid ground for denial of the permit. [Nollan, 483 U.S. at 834-37, 107 S.Ct. 3141.] The Court further refined this requirement in Dolan, holding that an adjudicative exaction requiring dedication of private property must also be “‘rough[ly] proportiona[l]’ ... both in nature and extent to the impact of the proposed development.” [Dolan, 512 U.S. at 391,
114 S.Ct. 2309.]

In Nollan, the Court stuck down the condition as an unconstitutional taking because there was no logical connection (i.e., no “essential nexus”) between the adverse impacts of the development and the required easement. Nollan, 483 U.S. at 837, 107 S.Ct. 3141. In Dolan, the Court found the exactions unconstitutional because the City failed to show that the conditions were roughly proportional to the negative impacts caused by the development. Dolan, 512 U.S. at 394-95, 114 S.Ct. 2309.

The facts of Nollan and Dolan-involving adjudicative, individual determinations conditioning permit approval on the grant of property rights to the public-distinguish them from the line of cases upholding general land use regulations. Dolan, 512 U.S. at 384-85, 114 S.Ct. 2309. Unlike the facts of Dolan, cases questioning land use regulations “involve[ ] essentially legislative determinations classifying entire areas of the city” and placing limitations on the use owners may make of their property. Id. at 385, 114 S.Ct. 2309. In comparison to legislative land determinations, the Nollan/Dolan framework applies to adjudicative land-use exactions where the “government demands that a landowner dedicate an easement allowing public access to her property as a condition of obtaining a development permit.”

The court concluded that there was no “taking” by the City of Sumner because the McClungs were not compelled to install a 24-inch pipe, but voluntarily contracted with the City to do so.