For more than three decades, most property owners have been relegated to state courts when pursuing a takings claim against a state or local agency.  In a 5-4 decision issued this week, the U.S. Supreme Court reversed itself and opened the door to the federal courthouse, allowing property owners to bypass the state courts and file a Fifth Amendment takings claim in federal court in the first instance.  Knick v. Township of Scott, 588 U.S. __ (June 21, 2019).  What this eventually means for property owners, and the federal courts, only time will tell.  However, one can reasonably assume that forum shopping, once an unheard of practice in the world of takings claims, will now be commonplace, as property owners will evaluate state and federal judges, and their related bodies of law, and file lawsuits in what they believe to be the more favorable forum.

A detailed summary of the facts in Knick v. Township of Scott is available here.  In summary, Ms. Knick filed a state court challenge to a local ordinance requiring her to keep her property open to the general public during daylight hours.  After the Township agreed to stay enforcement of the ordinance while the state court action was pending, the state court dismissed the action finding that since enforcement was stayed Ms. Knicks could not demonstrate the irreparable harm necessary for equitable relief.  Ms. Knick then filed a Fifth Amendment takings claim under 42 U.S.C. § 1983 in federal court.  But the federal district court dismissed the lawsuit, and U.S. Court of Appeals for the Third Circuit affirmed, relying on Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985).

In 1985, the Supreme Court issued its decision in Williamson County, holding that a property owner cannot pursue a takings claim in federal court unless (1) the state or local agency’s decision was final, and (2) the property owner has pursued compensation through any applicable state procedures.  Twenty years later, in San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005), the Supreme Court held that a state court’s resolution of a takings claim would essentially govern in any subsequent federal lawsuit.  Thus, as pointed out by the majority in its recent decision, “the guarantee of a federal forum rings hollow for takings plaintiffs, who are forced to litigate their claims in state court.”

While leaving the finality requirement from Williamson County in place, the Supreme Court, in a decision penned by Chief Justice Roberts, held that “the state-litigation requirement imposes an unjustifiable burden on takings plaintiffs, conflicts with the rest of our takings jurisprudence, and must be overruled.”

One of the key legal issues debated by the majority and the strongly worded dissent authored by Justice Kagan, was the issue of when a Fifth Amendment violation is deemed to have taken place.  According to the majority, the violation takes place when property is taken without compensation, not after the exhaustion of state court remedies.  The majority analogized the situation as follows:

“A bank robber might give the loot back, but he still robbed the bank.  The availability of a subsequent compensation remedy for a taking without compensation no more means there never was a constitutional violation in the first place than the availability of a damages action renders negligent conduct compliant with the duty of care.”

Not surprisingly, the majority then concluded that “because a taking without compensation violates the self-executing Fifth Amendment at the time of the taking, the property owner can bring a federal suit at that time.”

Notably, the majority did caution that its decision should not be interpreted as opening the door to injunctive relief for regulatory actions that are found to result in a taking, because “[a]s long as just compensation remedies are available—as they have been for nearly 150 years—injunctive relief will be foreclosed.”