California Eminent Domain Report : a blog following condemnation, inverse condemnation, and regulatory takings written by attorneys with Nossaman LLP.

The California Court of Appeal recently issued an unpublished decision, Ridge Properties v. County of Riverside Flood Control and Water Conservation District, which addresses whether a government agency's failure to pay an agreed amount of compensation gives rise to a claim for inverse condemnation.  The answer is "no."

In Ridge Properties, a property owner planned to develop an industrial park in Riverside County.  The conditions of approval for the project required the owner to dedicate some of its property and construct a drainage or flood control facility to protect downstream properties.  The facility would benefit the County and other owners, so the parties entered into a reimbursement agreement so the owner would only be responsible for its fair share of the costs of construction.  Like many construction projects, plans changed and costs escalated, and the owner ended up footing a bill six times larger than initially anticipated.  The County then declined to provide reimbursement for the additional costs incurred by the owner.

Because the flood control district participated in the design of the drainage facility and ultimately took ownership and operated the facility, the owner sued the flood control district for inverse condemnation, claiming the district "took its property without just compensation" when the owner was required not only to develop the regional drainage facility but also to dedicate its property.

The trial court sustained the flood control district's demurrer to the complaint, and the Court of Appeal agreed, holding that the owner's claim is against the County for breach of contract, not against the flood control district for inverse condemnation: 

the fact that the flood control district "took" [the owner's] property when it took ownership of the storm drain facility does not . . . give rise to a claim for inverse condemnation.

The Court explained that a claim for inverse condemnation does not arise when one public entity contracts for infrastructure but fails to pay as agreed, and another public entity ultimately takes control of the infrastructure.  While it is true that the second public entity has obtained property without compensation, it was not the action of that entity which caused any damage that the owner suffered; rather, the owner's damages resulted from the contracting agency's breach of contract. Under those circumstances, the developer's recourse is against the contracting public entity, not against the public entity which ultimately took possession of the property.

The Court differentiated past cases where a government agency has extorted property or improvements without offering to pay for either, as in this case, the county offered compensation, which the owner accepted, but then refused to pay once the facility was completed.

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Yesterday, we wrote about the Avenida San Juan Partnership v. City of San Clemente decision.  For more information on the decision, see the following:

• Our E-Alert, Court of Appeal Upholds Regulatory Takings Decision Under Penn Central Test;
• Man Bites Dog! California Property Owner Wins Regulatory Taking Case in the California Court of Appeal, a blog post by Gideon Kanner on Gideon's Trumpet;
• Either Reverse Your Unconstitutional Spot Zoning, Or Pay. Your Choice, by Robert Thomas on his inversecondemnation.com blog; and
• Eminent Domain: Winning Owner In Inverse Condemnation Battle Cannot Recoup Fees By Attorney Owner Or Reap A Fee Multiplier Request, a piece in California Attorney's Fees focused, not surpisingly, on the attorneys' fees portion of the opinion.

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Last April, we reported on a bizarre case arising out of the City of San Clemente's attempt to down zone a piece of property.  The trial court had concluded that the down zoning constituted a taking and ordered the City to rescind a decision supported by that down zoning.  The City had denied an application to develop the property because the application did not conform to the current general plan and zoning ordinance (the City seems to have sidestepped the fact that the development applications included applications to amend the general plan and zoning). 

In addition to a writ of mandate ordering the City to rescind its decision, the Court also awarded damages of $1.3 million, representing the overall value of the property ($2.8 million), less the anticipated cost to build a driveway needed to support its development ($1.5 million).  Following a post-trial motion, the Court amended the judgment to make clear that the City had the choice of either (1) rescinding the denial based on the down zoning or (2) paying the damages award.

Yesterday, the Court of Appeal issued its decision in Avenida San Juan Partnership v. City of San Clemente.  It upheld the writ and the determination that the owner was entitled to a damages award, but it remanded the case for recalculation of the amount of the award.  It's a long, complicated opinion, and we'll just hit some of the high points for now.

Spot Zoning.  The Court held that the City had specifically targeted this property for down zoning, leaving it as an "island" of "minimum lot size zoning in a residential ocean of substantially less restrictive zoning."  It didn't help that the enabling legislation that created the new RVL (residential, very low) zoning had described the zone as intended for preserving "open space in canyons" by rezoning "significant acreage."  The subject property was less than three acres - and not located in a canyon.  This was enough to qualify as "irrational discrimination" under cases such as Hamer v.
Town of Ross (1963) 59 Cal.2d 776 and Arcadia Development Co. v. City of Morgan Hill (2011) 197 Cal.App.4th 1526, 1536.   

Penn Central and "Economically Viable" Uses.  The City argued that its action fell short of a regulatory taking, as a matter of law, because the RVL zoning did not leave the owner with no economically viable use of he property, a fatal flaw under Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003.  The Court held that this view "is too limited," and that a taking occurs where a regulation goes "too far," even if some economically viable use remains.  (See Palazzolo v. Rhode Island (2001) 533 U.S. 606.)   Where this occurs, courts look to the "Penn Central" test, which the California Supreme Court has held contains three "core" factors:

1. The economic effect on the landowner;
2. The extent of the regulation's interference with investment-backed expectations; and
3. The character of the governmental action.

The Court quickly concluded that all three factors "readily appl[ied]" in this case. 

Timeliness.  As we have reported in the past, regulatory takings claims often fail on procedural grounds, either because they are too late, missing the applicable statute of limitations, or because they are premature, failing on ripeness grounds.  (We've even seen cases, such as MHC Financing Limited Partnership Two v. City of Santee, where claims failed because they were both too late - and too early.) 

Here, the City argued that the owner waited too long to challenge the RVL zoning.  The Court disagreed, concluding that the statute began to run on the challenge only when the City denied the owners' development applications in 2007.   The Court went through a painstaking analysis of the difference between "facial" and "as applied" challenges, holding that the owners' challenge clearly fell on the "as applied" side of the ledger, making it timely. 

The City also argued that the owners' claim was not ripe because the owners failed to apply for entitlements to build what the RVL would have allowed them:  a single dwelling.  The Court rejected this argument as well, holding that under Palazzolo, the City's denial of the application qualified as final. 

Damages.  The Court examined closely the damages award, ultimately concluding that the trial court's methodology was flawed.  The trial court had performed a simple analysis, taking opinions of the value of the property absent the RVL zoning, and subtracting out the cost the owners would have incurred to build the (expensive) driveway necessary to support the property's development. 

The Court correctly noted that this methodology ignores the fact that the takings conclusion was premised on on the Penn Central test, not a "no economically viable use" theory.  Because of this, damages had to take into account the fact that the property still has some value, even with the RVL zoning in place:  "A very large taking is not a total taking."

There were a number of other issues addressed in the Court's opinion, including an interesting attorneys' fees discussion, but I think they go beyond the scope of a blog post.   As we digest the opinion a bit further, we'll probably have more to say.

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"Downzoning" describes a government agency's rezoning a parcel of land once previously zoned for a more intense use to a more restrictive use (e.g., changing the commercial  zoning designation of an undeveloped parcel of land to agricultural or open space).  Those who purchase an undeveloped property zoned for commercial, industrial, or residential uses, only to later have that property rezoned for agricultural or open space uses unquestionably suffer a loss.  But when is it compensable?

There's an interesting news article on the Daily Zilla about an alleged downzoning case taking place in the City of Richmond, California.  A property owner alleges that the City intends to change the zoning of its undeveloped industrial property to open space so the property can eventually be acquired by the City at a reduced price for a public park.

If the City simply wants to change the zoning to a more restrictive use, California law provides that unless the change in zoning results in a regulatory taking or deprives the owner of a vested right, the property owner is not entitled to compensation.  In other words, the owner is not entitled to compensation unless (1) the new zoning designation results in a loss of substantially all economically viable uses of the property, or (2) the owner has done substantial work or expended large sums of money in good faith reliance on a development permit. 

However, if the downzoning is done in bad faith, the owner may be entitled to compensation.  For example, if the change in zoning can be shown as a subterfuge to reduce the acquisition price in a subsequent condemnation action, it constitutes a taking.  Similarly, compensation may be owed if the change in zoning was meant to accomplish the same purpose of acquisition of the land (i.e., for open space purposes).  And, a government agency may be on the hook if it tries to preserve the status quo by denying development applications for the purpose of reducing the eventual acquisition price. 

How this all plays out in the City of Richmond will be interesting.  We'll be sure to follow the story.

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We've covered in the past regulatory takings claims and the benchmark three-prong Penn Central test for analyzing potential liability.  We've also noted the issues involved in consistently applying those factors, and the resulting unpredictibility in evaluating the merits of potential regulatory takings claims.  

William Wade, Ph.D., a resource economist with the firm Energy and Water Economics, often writes about these issues, offering clearly articulated potential solutions to dealing with these Penn Central issues.  And Mr. Wade has done it again, as his recent article, Sources of Regulatory Takings Economic Confusion Subsequent to Penn Central appearing in the Environmental Law Reporter, is another fine piece of work.  Among other insights, Mr. Wade explains that

Courts have confused ad hoc considerations of case facts with economic valuation methods, which are not ad hoc."

We recommend checking out our colleague Robert Thomas' blog post about Mr. Wade's article at inversecondemnation.com.  And, as a shameless plug, take note of Mr. Wade's "Author's Note," paying thanks to yours truly for help with the article.  It was a truly enjoyable -- and honorable -- experience working with one of the foremost economic experts in the field of regulatory takings.

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The use of eminent domain in a declining real estate market presents a number of unique issues.  I often receive calls from property owners who are frustrated with the government's timing of condemnation proceedings, and want to know how they can get market-peak-values for their property. 

This issue was the hot topic of a previous IRWA seminar I chaired, Property Acquisition, Appraisal, and Relocation in an Upside Down Market.  And a recent blog post by the Weiss Serota Helfman law firm, Eminent Domain Valuation in a Falling Market Poses Questions for Condemning Agencies, triggered some thoughts I felt worthwhile to pass along. 

If a government agency has been long-planning to acquire a property, but the proposed project does not go forward for several years, property owners are typically left in limbo with a "cloud" of condemnation hanging over their property.  Sometimes, the agency's actions go too far, and result in liability.  When liability attaches in a rapidly declining real estate market, who bears the burden of the market decline:  the agency, or the property owner?  The answer depends on whether the agency is liable for (i) a de facto taking or (ii) precondemnation damages (or "Klopping" damages). 

• De Facto Takings:  Under a de facto taking claim, the landowner must demonstrate that a government agency’s particularly oppressive acts result in a taking of the property either through a physical invasion or through a direct legal restraint.   In assessing damages, the property is to be valued on the date that the “taking” occurs, and all decline in value after that date is to be borne by the condemning agency.  Since the taking is said to have occurred at this earlier date, damages would include those losses wholly unrelated to the precondemnation activity, such as losses due to a general decline in market value in the area.
• Precondemnation Damges:  Under a precondemnation damages claim, the landowner must demonstrate that the agency has acted unreasonably in issuing precondemnation statements, either by excessively delaying in bringing the eminent domain action, or by other oppressive conduct.  In assessing damages, the landowner is entitled only to those losses caused by the agency’s announcements, and not any decline in market value that is caused by general conditions unrelated to the activities of the condemning agency (i.e., the agency is not liable for any general market declines).

Both claims can be difficult to prove, a de facto takings claim more so.  But in a rapidly declining real estate market, understanding the nuances between the two claims is important, as it can make a significant difference on the amount of just compensation. 

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It is common practice for government agencies to condition approval of large developments on providing off-site public improvements.  Road widenings, park dedications, etc., are all too familiar for California developers.  When those improvements require others' property, many times the government agency utilizes eminent domain on the developer's behalf (with the developer footing the bill).  But what if the agency refuses?

According to an Inside Self-Storage article, "Derrel’s Mini Storage Owner Battles City, Homeowner in CA Self-Storage Eminent Domain Case," a self-storage developer is facing this situation in Visalia.  And he's not too happy about it.  The City previously approved the owner's storage facility, subject to an agreement which required all nearby owners to widen and improve the road to the proposed development.  The self-storage developer has agreed to pay for the street widening (a $1.4 million project), but there is one hold-out home owner who refuses to sell the frontage necessary for the street widening.  

The developer has sued the home owner for refusing to sell after entering into an agreement to do so, and he's also demanding that the City use eminent domain to acquire the frontage property.  The City has so far refused, and the developer is threatening to sue the City as well.  

You may wonder how the developer could threaten the City for refusing to use eminent domain.  There's actually a statutory obligation under the Subdivision Map Act (Cal. Gov. Code sec. 66462.5) for public agencies to acquire property on the developer's behalf when required for off-site public improvements.  Not knowing all the facts, it's tough to determine whether the obligation applies here, but if it does, the City may need to either (1) withdraw the street widening condition of approval (and allow the development to move forward), or (2) acquire the necessary property on the developer's behalf.  

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Anyone who's ever been involved in real estate development knows that as part of the permit approval process, developers are routinely required to make concessions to the government in order to move forward with proposed development plans.  And, if you're building near the coast, you usually need to jump through even more hoops (sometimes backwards and through fire) to please the Coastal Commission.  But when do the demanded concessions go too far?

We've covered in the past the "rough proportionality" and "nexus" requirements that development conditions must satisfy in order to withstand scrutiny, but a recent trial court decision in San Mateo County serves as a good reminder.  The case, Sterling v. California Coastal Commission, involves the owners of 143 acres of vacant land in Half Moon Bay challenging a dedication requirement imposed by the Coastal Commission.  The owners sought a permit to build a 6,000 square foot home, and in return, the Coastal Commission demanded that the owners convey an agricultural easement which would require farming the remainder of the property forever (with no other uses allowed).  You may be wondering, where's the nexus; where's the proportionality? 

As suspected, the "forced farming" condition was shot down by the court.  But the Coastal Commission decided to try again and came back with a new condition:  that the owners dedicate the remainder of the property to open space for the public good.  This imposed condition sure doesn't sound any better. 

The trial court once again shot down the condition, finding that the Coastal Commission's imposition of the open space requirement constituted an unconstitutional taking of property, as it is disproportionate to the public impact of the proposed development.  The Pacific Legal Foundation represented the owners, and it reports the court's ruling as follows:

The new condition, in the form of an open space deed restriction is not tailored to the development and is once again irreconcilable with Nollan and Dolan. As compared to the Commission’s prior failed attempt to impose an agricultural easement on the property, the Commission’s new attempt is a distinction without a difference.

The case serves as a good reminder that when conditions of approval go too far, they can constitute a regulatory taking of property.  You can read a more detailed summary by reviewing PLF's Press Release. 

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Access impairment disputes must be the hot topic.  I just wrote about the Wardany access impairment case, and now another similar dispute is brewing in the City of Temecula.  This one may be a bit more interesting.

According to a North County Times article by Aaron Claverie, TEMECULA: City looks ready to fight eminent domain suit, Old Town property owners Charles and Sylvia Hargis have filed an inverse condemnation action against the City of Temecula due to the City's purportedly closing off access to the Hargis' coffee shop during construction of the City's $70 million government complex.  The Hargis' are seeking $10 million in damages as their coffee shop closed down and they lost the property to foreclosure.

The City contends that regardless of the construction, the coffee shop was going to fail.  The City apparently was unwilling to resolve the matter at mediation, and the Hargis' attorney believes the case is headed to trial.  Stay tuned....

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When analyzing potential liability for a regulatory takings claim, most land use and eminent domain attorneys immediately look to the three-prong test set forth by the U.S. Supreme Court in Penn Central Transportation Co. v. New York City (1978) 438 U.S. 104.  Those three factors include:

• the economic impact of the regulation;
• the extent to which the regulation has interfered with distinct investment-backed expectations; and
• the character of the government's regulation.

Unfortunately, it's much easier said than done.  Practitioners and courts alike have struggled over the years in (1) deciding how to measure a regulation's economic impact and (2) determining whether the regulation has interfered with an owner's "distinct investment-backed expectations."  This is especially true given the Supreme Court's direction that each case deserves an independent, "ad hoc" factual inquiry.

William Wade, an expert in financial economics, has prepared an excellent article addressing what has resulted from this perplexity:  unpredictability in evaluating the merits of regulatory takings claims.  Mr. Wade's article, "A few thoughts about origins of confusion subsequent to Penn Central," suggests this stems from "too much talk and not enough math," as the calculations are straight-forward for financial experts, yet the waters are muddied through the courts' reluctance to apply economics and analyze income losses as opposed to property value depreciation.

For example, Mr. Wade suggests that while an appraisal may accurately measure a change in a property's value, it does not accurately measure economic losses to the owner of an income-producing property.  For purposes of analyzing a temporary regulatory taking, Mr. Wade urges us not to consider the property's percentage decline in value, but instead the property owner's change in income.  This is how damages are calculated in tort cases, and Mr. Wade advocates that damages in regulatory takings cases should be no different.

Mr. Wade sums up his article with the conclusion that "[u]ntil the Supreme Court puts an end to faulty understanding of economics within the Penn Central test, . . . widespread confusion of takings jurisprudence will persist."  

The recent Guggenheim Ninth Circuit en banc decision (pet. denied May 16, 2011) turns out be be consistent with standard economics expressed by the Court in Loveladies Harbor, Inc. v. U.S. (Fed. Cir. 1994) 28 F.3d 1171, 1177: 

[T]he owner who bought with knowledge of [a particular] restraint could be said . . . to have assumed the risk of any economic loss.  In economic terms, . . . the market had already discounted for the restraint, so that a purchaser could not show a loss in his investment attribu[table] to [the regulatory action]." 

While more recent Federal Circuit cases have confounded basic economics, Loveladies made sense at the time and rings true in Guggenheim.  Take a look at Mr. Wade's article for yourself.

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We've been following the Guggenheim case for more than a year now, and in the last week or so, there have been a number of developments.  As a quick recap, this decision by the Ninth Circuit Court of Appeals held that the City of Goleta's rent control ordinance - which had the effect of transferring the vast majority of a mobile home park's value from the park owner to the tenants - did not constitute a taking.  The decision followed an earlier decision by a different panel of the same court, in which the court held that the ordinance did qualify as a taking. 

Not surprisingly, the owner then sought review by the U.S. Supreme Court.  The Cert Petition is now pending, and the stack of amicus briefs on the case has been growing rapidly.  I could take the time to summarize them, but fortunately for me, someone else has already done it.  Here are some links to Robert Thomas'  inversecondemnation.com blog from the last week:

• Takings Claims Run With The Land, a post summarizing a brief by the National Association of Home Builders in support of the Guggenheims' Petition;
   
• No "Expiration Date" On The Takings Clause, a post summarizing a brief filed by the Cato Institute in in support of the Guggenheims' Petition;
   
• Ninth Circuit "Did Violence" To Penn Central Test, a post summarizing the brief Mr. Thomas filed and another brief filed by Equity Lifestyle Partners, both in support of the Petition;
   
• Ninth Circuit Applied All Penn Central Factors, a post summarizing the brief filed by the City in opposition to the Guggenheims' Petition.  
   

Aside from these posts, the blog contains a detailed resource page about the Guggenheim case, with links (at least as of the date of this post) to nine amicus briefs in support of the Guggenheims and three amicus briefs in support of the City. 

Nice work, Robert (and thanks for saving me the trouble of trying to keep track of all of this myself).

We'll let you know when the Supreme Court makes its decision. 

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A new bill -- AB 238 -- is working its way through the State Assembly which would require a reduction in compensation payable to a successful plaintiff in an inverse condemnation action in direct proportion to the owner’s percentage of fault in causing damages to the owner’s property.  While the doctrine of comparative fault is one of the cornerstones of tort law, it is rarely applicable to inverse condemnation actions. 

Ever since the seminal decision in Albers v. County of Los Angeles (1965) 62 Cal.2d 250, there has been a more or less bright line distinction between the strict liability standard for recovering in inverse condemnation and general tort doctrines such as negligence, foreseeability and comparative fault.  The only two exceptions to this rule involve non-compensable damages inflicted in the proper exercise of the police powers and those situations in which the state at common law had the right to inflict the damage, such as for public flood control projects.

Generally, liability for inverse condemnation will lie so long as the government’s project, as designed and constructed, is a substantial cause of damages.  The fact that the property owner is partially at fault for creating those damages in the first instance is largely irrelevant.  (Blau v. City of Los Angeles (1973) 32 Cal.App.3d 77, 84-85).  That is to say, under current law, a public entity will be held liable for 100% of the damages where its project causes physical damage to private property, regardless of whether others, including the owner, contributed to those damages. 

This strict liability standard has not been without controversy.  It is based upon a sort of “loss distribution” interpretation of the takings clause of the California Constitution (Article 1, § 19).  Its goal is to “to distribute throughout the community the loss inflicted upon the individual by the making of public improvements.”  (Bacich v. Board of Control (1943) 23 Cal.2d 343, 350).  On the other hand, it has been argued that to not apply comparative fault principles to inverse condemnation actions unfairly penalizes public entities for the wrongful conduct of others.  The cost of the public improvement would be evenly distributed throughout the community, and the owner of the damaged property would bear no more than his or her fair share, if the public entity’s liability was limited to the portion of the damages caused by the project itself. 

This later policy argument has found little support in the case law, outside of the arcane area of water law.  However, AB 328 would change all of this.  This common law doctrine of comparative fault would be enshrined in the Code of Civil Procedure as the new Section 1000 of Chapter 3.4 “Comparative Fault in Inverse Condemnation.”  Whether this bill gains traction remains to be seen, but we will be following it with great interest.

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We've reported on a number of rent control regulatory takings claims making their way through the court system, most notably the Guggenheim v. City of Goleta case.  Apparently, some cities and counties are fed up with the onslaught of challenges to their rent control ordinances, and they're looking for a way to recoup the attorneys' fees they expend in preserving the ordinances. 

According to an article in the Santa Cruz Sentinel, "Monning researching bill to address rent control lawsuits," Assemblyman Bill Monning looks to address this concern by considering a bill that would "allow city and county governments, when successful in defending rent control ordinances, to charge the party who brought the challenge for the government's legal expenses."  While the bill is still in the research phase, all new bills must be proposed to the legislature by February 18.

While such a bill would likely be supported by any city or county with a rent control ordinance, property owners, property rights advocates, and mobile home park owners in particular would likely be vociferously opposed to any such bill and the chilling effect it would have on legal challenges to rent control ordinances.  If this type of bill is proposed to the California legislature, you can expect a major battle.  We'll follow this closely and keep you updated.

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In case you missed it, in the news last month was a big story about the San Diego County Sheriff's Department torching a residence in Escondido as the only safe way to destroy a giant cache of explosives found in the house.  The house was burned to ashes in an effort to destroy the extremely volatile chemical compounds which could detonate at any second.  The house has since been dubbed, simply, the "Bomb House."

So what does this have to do with eminent domain?  Interestingly, the individual responsible for the explosives was a renter (who is now in jail), and the property owner -- who had no idea about the explosives -- is seeking just compensation.  According to an article in this week's North County Times, "ESCONDIDO: No easy answer in 'bomb house' compensation," the owner has filed a $500,000 claim against the County, which in response has denied the claim, insisting it is not liable since it acted to "protect public health and safety."

While one would initially think that the owner is entitled to compensation pursuant to the Fifth Amendment (providing that private property cannot be taken without just compensation), there are some exceptions.  For example, government agencies are allowed to exercise the police power to take necessary measures to eliminate threats to public safety.  In the land use context, you'll sometimes see this take place as homes are tagged as nuisances or safety hazards.

The owner will now likely file an inverse condemnation lawsuit against the County.  How will he fare?  It's not entirely clear.   My guess is that this will likely come down to whether the government acted reasonably in exercising its police powers.  Stay tuned.

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We've reported in the past about some of the regulatory takings issues created as a result of the Western Riverside County Regional Conservation Authority's ("RCA") efforts to conserve property pursuant to the Multiple Species Habitat Conservation Plan ("MSHCP").  It now appears that those conservation efforts have created quite the turmoil with citizens in the City of Murrieta.

According to a recent North County Times article, "MURRIETA: Landowners frustrated with conservation board, city leaders who refuse to meet," about 100 members have organized a group called the Members of Citizens for Quality of Life in Murrieta in an effort to get the City's and the RCA's attention about the ramifications of the MSHCP.  In particular, the property owners are frustrated with the MSHCP process and how they've been unable to develop their property without having to give up large portions of their land. 

The article recounts stories we've heard from many property owners, describing the exhausting maze of paperwork that must be completed, the hundreds of thousands of dollars that must be spent on biological studies, and the repeated denial of any attempt to ultimately develop.  And at the end of the process, the owners claim that they are often left with little choice but to sign a contingent, below-market-value purchase agreement proposed by the RCA that, according to one owner, "will destroy your ability to ever sell your land."

The group wants a sit-down meeting with the City and the RCA, but so far, that meeting has been rebuked.  The reason, according to the City and the RCA, is due to the fact that there is a pending lawsuit brought by the Calvary Chapel - Murrieta seeking $25 million in damages as a result of the MSHCP's designating the church's 118-acre property for conservation.  It will be interesting to follow that lawsuit and the impact it has on negotiations with other owners.

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An interesting battle is raging in the Santa Ynez Valley.  Mattei's Tavern, a "landmark" in Los Olivos for more than 100 years, is slated for a redevelopment plan by its owner.  A local activist group, known as the Valley Alliance, wants to stop the owner's plans.  And one arrow in their quiver has been to nominate the tavern for listing as a historical landmark. 

According to an April 29 article by Kathy Cleary in the Santa Ynez Valley Journal Valley Alliance Historic Landmark Nomination:  Eminent Domain Takeover?, the purpose of the nomination is to give the Historic Landmark Advisory Commission (HLAC) the power to approve (or deny) plans to alter the building.  And (at least according to Ms. Cleary), at least one member of the HLAC has expressed sympathy with the Valley Alliance's goal of stopping the owner's plans. 

What does this have to do with eminent domain?  Maybe nothing.  But the possible designation and assertion of control by the HLAC raises the specter of a regulatory takings claim pursuant to the Supreme Court's seminal decision in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).  That decision established a key, three-part test for analyzing regulatory takings claims: the economic impact of the regulation on the claimant; the extent to which the regulation has interfered with investment-backed expectations; and the character of the governmental action.  

If the owner can prove that the designation and, more particularly, the level of control the designation might place in the hands of the HLAC, meets the three-part Penn Central test, a court may hold that the act constitutes a compensable taking of the owner's property.  Indeed, deciding whether restraints imposed by designation as a historical landmark was the whole point of the Penn Central case (though the court ultimately found that the designation at issue there did not meet the very test established by the case). 

That the owner might assert a claim under Penn Central if the HLAC accepts the property's nomination has not been lost on government officials.  According to Ms. Cleary:

County Counsel has said that decisions on historic landmarking of property without the owners’ consent will be considered in light of the Penn Central eminent domain case.

What happens next?  At the owner's request, the HLAC continued the April 12 hearing on the nomination to its May 10 meeting.  In the meantime, the owner appears to be moving forward with its plans, which are described in more detail in a February 10 article in the Lompoc Record, Debate rages over Mattei’s Tavern future, and a January 19 article in the Santa Ynez Valley News, Landmark protection sought for Mattei’s Tavern,  

Finally, if you're looking for more about the building's history, take a look at a 1974 pamphlet, Mattei's Tavern.

Photo Note:  Image depicts Mattei's as it appeared in about 1888, when it was known as the Central Hotel and was a key stagecoach stop.

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Earlier this month, I reported on a Florida case now pending before the U.S. Supreme Court, Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection.  Earlier this week, I reported on some other property-rights issues currently in the news. 

Yesterday, one of my partners, Howard Coleman, took things a step further, attempting to tie recent property-rights issues into a big picture view of what it all may mean for California property owners.   

His piece, Sea Level Rise and Coastal Boundary Lines – Consequences of Climate Change, examines the Florida case, the Ninth Circuit's recent decision in United States v. Milner, and the California State Lands Commission's December 7 Report on Sea Level Rise Preparedness.

The focus of his piece is foreshadowing what these cases and potential future climate changes may mean for California property owners.  (For a look at the State Lands Commission's Report's findings about potential impacts to our ports, look at the December 10 Los Angeles Times article, Rise in sea levels threatens California ports.)

The bottom line -- at least according to Howard: 

[C]oastal property owners need to recognize the ramifications of sea level rise before it is upon them, in order to have the time to apply for and, if necessary, to litigate the right to build the required protective structures. Otherwise, such homeowners will find both their lands and rights lost to erosion.

The facts of the Milner case suggest owners would do well to heed this warning.  There, coastal landowners built coastal protection structures on their own lands, but were thereafter found liable for trespass when changes to the mean high tide line left the structures outside the owners' property boundaries.  (Yes, the court really did find the owners had "trespassed" on what was their own land before the change in the tide line.)

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A year or so ago, I attended a three-day symposium on regulatory takings that was held at Stanford University. At the end of the symposium, the final panel of speakers was asked to predict what the United States Supreme Court might be doing in the area of takings over the next couple of years. The answer of at least one panelist was essentially “nothing.” In his view (at least as I understood it), the Supreme Court had been grappling with various takings issues for years without coming up with particularly workable formulas and was done trying.

Well, based on an article in the Los Angeles Times today by David G. Savage, “Supreme Court to Hear Florida Beach Property Rights Dispute,” it looks like the Supreme Court will weigh in on a takings issue in Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection.

The twist that might save the accuracy of the panelist’s prediction is that the case is not a typical regulatory takings case, one where a government regulation, typically a zoning limitation, has gone too far, resulting in a substantial or complete loss in value to the property.

According to the article:

The Florida case began in 2004 when five property owners objected to a state-funded beach restoration project east of Pensacola. More than six miles of white sandy beaches had been eroded by several hurricanes, and the project called for adding up to 75 feet of new sand to the shoreline.

But this public benefit came with a downside for beachfront property owners. The newly built-out beach would be public land.

While many landowners accepted this deal, a few objected and then sued when the project went ahead. They claimed the government had taken their private property, or at least their right to a private beachfront.

"Everyone knows that waterfront property is more valuable than water-view property, and that a private beach is worth a lot more than a public one," said Kent Safriet, a Tallahassee, Fla., lawyer representing the property owners. "This is not a land grab by my clients. It is a land grab by the state to create a public beach."

On its face, a case involving the increase or decrease in the size of a beach would seem to have little relevance to other takings situations. Certainly no agency is likely to build a beach in front of my thoroughly land-locked home. But if the Supreme Court viewed the case so narrowly, it is unlikely that the Court would have agreed to hear it. Presumably, the Justices must instead expect that they can bring some clarity to takings law or can correct something they view as an error in the existing law.

The article mentions an “odd twist” in that the owners’ attorneys are asking the Court to rule that the state’s judges -- rather than a particular agency -- actually did the taking, i.e., it was a "judicial taking." I have to agree that this seems an “odd” holding: Who would actually pay the judgment? The judges themselves? But it is an issue in the case -- for reasons that would likely take several, boring pages to explain; so I won't try here.

Oral arguments in the case are scheduled to be heard by the Court today. It will be fascinating to read what the Court’s final opinion does or doesn’t do to takings law.

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The Cato Institute's blog has an interesting post concerning the government's ability to induce local government agencies to enact tougher zoning standards that decrease the value of property which the government may want to acquire in the future. 

The post, titled "A Special Kind of Eminent Domain Abuse," deals specifically with the federal government's actions with respect to property it has contemplated acquiring for 30 years in order to expand the Everglades National Park.  The post  by Ilya Shapiro reports that in the case of 480.00 acres of Land v. United States, the government has forced a property owner

to watch the value of his . . . property decline until the federal government finally condemned it — and paid him much lower compensation than he would otherwise have received.

The question posed is whether the federal government's actions must be the primary cause of the pre-condemnation depression of the property's market value, or whether there must only be a nexus between the government's actions and the depressed market value.  The Eleventh Circuit sided with the government, but the property owner petitioned the Supreme Court to review the case.  The Cato Institute filed an amicus brief in support of the property owner.  The Supreme Court will decide early next year whether to hear the case.  Stay tuned.

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In 2003, the County of Riverside and the cities within western Riverside County formed the Western Riverside County Regional Conservation Authority (commonly known as the "RCA").  They delegated to the RCA the task of acquiring approximately 153,000 acres of privately owned property deemed necessary for habitat conservation under the Western Riverside County Multiple Species Habitat Conservation Plan (the "MSHCP").

Many property owners whose land falls within the MSHCP conservation area find themselves with few options:  generally, they can either (1) sell their property to the RCA at a dramatically below market-value price (usually on the RCA's payment terms); or (2) allow the RCA's looming conservation cloud to hang over the property for years, essentially rendering it worthless.

Nossaman attorneys Rick Friess and Brad Kuhn have assisted several property owners over the past few years in challenging the RCA's acquisition/conservation tactics.  A few past examples:

• Last year, we represented Winchester 700, the owner of 454 acres of property north of Murrieta between the I-215 and SR-79, in an arbitration with the RCA.  The County had refused to process Winchester 700's proposed 1,034-unit residential development, and while the RCA demanded 100% conservation, it never made an offer.  The RCA ultimately agreed to pay over $70 million for the property, along with other acreage owned by Winchester 700.
• Earlier this year, we represented San Jacinto River Ranchos and the Meadows at Lone Cone, two owners working together to develop just over 200-acres of residential property.  Development entitlements for their land were stalled when the RCA deemed the property necessary for conservation.  The owners and the RCA ultimately reached a deal allowing the developers to keep about 70 acres for development purposes, with the RCA paying for the remaining property.

This week, after months of effort on behalf of Saul and Maria Delgado Velazquez, the owners of 80 acres of property in Wildomar that the RCA deemed it wanted for 100% conservation, we were able to assist in closing a sale transaction with the RCA.  The process was not easy, as the Delgados were forced to file a lawsuit against the RCA, alleging that the RCA's actions constituted a de facto taking and resulting liability for inverse condemnation, precondemnation damages, and violations of the state and federal relocation assistance and real property acquisition policies act. 

The RCA offered the Delgados a price well below fair market value, and refused to pay the purchase price until 2013.  After the Delgados filed their lawsuit, the RCA's Board approved a deal whereby the RCA is acquiring the property in phases at a value acceptable to the Delgados.  The acquisition of the first phase just closed.

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Just over a year ago, on October 1, 2008, the California Court of Appeal issued a fairly rare ruling:  it found a public agency had committed a regulatory taking and remanded the matter back to the trial court to determine the amount of damages to be paid to the property owners.  Specifically, the Court held in Monks v. City of Ranchos Palos Verdes that the City of Ranchos Palos Verdes' rules preventing development in an area susceptible to landslides (the infamous Portuguese Bend landslide area) constituted a regulatory taking that was not justified by the city's power to regulate nuisances and protect the public interest.  (For more details, Brad Kuhn and I wrote an article for the California Real Estate Journal, "California Court of Appeal Opens The Door to Regulatory Takings Claims," that details the holding in the case, and its potential implications.)

 Photo Credit:  Los Angeles Times/Rancho Palos Verdes

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Typically, regulatory takings litigation generates a lot of noise and gnashing of teeth but, at the end of the day, rarely are government agencies bitten with an order that they pay compensation. However, a new opinion from the federal 9th Circuit Court of Appeals, Guggenheim v. City of Goleta (Sept. 28, 2009, Case No. 06-56306), demonstrates that regulatory takings litigation can have teeth. In Guggenheim, the 9th Circuit holds that the city of Goleta's rent control ordinance on mobile home parks went too far and that the city will have to pay the park's owners just compensation. This case, particularly coupled with two other recent regulatory takings cases, Monks v. City of Rancho Palos Verdes and Casitas Municipal Water District v. United States, suggests that agencies may now need to pay close attention to their regulations if they hope to avoid a regulatory takings bite.

Whether these cases reflect a new trend remains to be seen, but it sure looks like the tide may be turning. And, if the “trend” continues, agencies in California should pay particular attention, since successful inverse condemnation plaintiffs stand to recover their attorneys’ fees, in addition to whatever damages they can prove. For more information about Guggenheim and regulatory takings generally, take a look at an October 15, 2009, article in the Los Angeles Daily Journal, "Adding Some Bite to the Bark."  
 

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