LAND USE U P D AT E Takings Litigation and Zoning Reform Takings Litigation Last spring, the Supreme Court clarified the ripeness rules for bringing takings cases in federal court. For decades, property owners had to sue for compensation in state court to make their takings ripe for federal court. This requirement became a trap. If a property owner sued in state court and lost, she was blocked by issue preclusion if she returned to federal court to relitigate the takings claim. In Knick v. Township of Scott, 139 S. Ct. 2162 (2019), the Court found problems and mistakes in its earlier ripeness decision that had required the state compensation remedy, saw the inequity of the catch-22 trap, and held that a property owner did not have to sue for compensation in state court before bringing a takings case in federal court. Knick did not overrule the second part of the ripeness rule, which requires a property owner to obtain a final decision before she can bring a takings case in federal court. The difficulty is that it is not clear how the final decision rule should be applied. A facial takings attack on a land use regulation, which claims it can never be applied so that a taking will not occur, does not have to comply with the finality requirement. An absolute prohibition on hillside development is an example. But what if the takings case is an as-applied takings claim, and the prohibited development could be Land Use Update Editor: Daniel R. Mandelker, Stamper Professor of Law Emeritus, Washington University School of Law, St. Louis, Missouri.
allowed with an administrative hardship variance or a zoning amendment that changes the zoning map to a new zoning district where the development is permitted? Does the final decision ripeness rule mean that a plaintiff must exhaust these remedies? Pakdel v. City and County of San Francisco, 141 S.Ct. 2226 (2021), a per curiam opinion, provided a partial answer to these questions. A married couple owned a unit as tenants in common in a multi-unit residential building that they rented out. They decided to convert their property interest to condominium ownership, and the city‘s conversion program allowed unit owners to seek conversion to condominium ownership after paying a filing fee and meeting several conditions. One condition required nonoccupant owners like this couple, who rented their unit, to offer their tenants a lifetime lease. The owners of the unit offered a lifetime lease to the tenant, and the city approved the condominium conversion, but the owners backed out and asked the city either to excuse them from executing the lifetime lease or to pay them compensation for the lease requirement. The city refused both requests, and the owners sued in federal court under Section 1983 of the federal Civil Rights Act, 42 U.S.C. § 1983, claiming that the lifetime lease requirement was an unconstitutional regulatory taking. Although the city denied their requests twice and could no longer grant relief, a panel of the Ninth Circuit held its decision was not truly “final” because the request for an exemption came at the end of the administrative process, and the property owners
had not made a timely request for an exemption through “prescribed procedures.” The Court reversed and held that the city had made a final decision. This requirement is “relatively modest,” it said, and “nothing more than de facto finality is necessary” to show that a final decision has been made. In this case, the decision was final because there was no question about the city’s position, and it inflicted an actual concrete injury because the property owners had to choose “between surrendering possession of their property or facing the wrath of the government.” The Supreme Court also held the Ninth Circuit was wrong when it required exhaustion of administrative remedies. Some background is necessary here. Exhaustion of remedies is required in state court before a suit can be brought to challenge a land use regulation with a taking or any other claim. Exhaustion of remedies is not required as a condition in an action brought under Section 1983. Takings claims under the federal constitution are self-executing and do not have to be brought under Section 1983, but attorneys usually bring them under Section 1983 because they can collect attorney’s fees if they prevail in the litigation. The property owners in Pakdel sued under Section 1983, and the Court held that Section 1983 “guarantees ‘a federal forum for claims of unconstitutional treatment at the hands of state officials.’” That guarantee includes “the settled rule” that “exhaustion of state remedies is not a prerequisite to an action” under Section 1983. The Ninth Circuit’s holding that the plaintiffs must
Published in Probate & Property, Volume 36, No 4 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
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July/August 2022
