General Publications June 28, 2019

“High Court’s Knick Ruling Is a Big Win for Property Rights,” Law360, June 28, 2019.

Extracted from Law360.com 

The takings clause of the Fifth Amendment to the U.S. Constitution bars uncompensated takings of private property. If, say, a state or local government[1] takes property without providing just compensation, the owner has a federal taking claim — and, presumably, has the right to take his case to federal court. But until the U.S. Supreme Court's recent decision in Knick v. Township of Scott,[2] the owner had no such right: Astonishingly, a federal takings claimant was effectively barred from federal court. How could that be?

Rewind to 1985, when the Supreme Court decided Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City.[3] In that case, the court fashioned a rule requiring a federal takings claimant to first litigate his claim through the state court system — and lose — before bringing that claim in federal court.

Unfortunately, the Williamson County court failed to anticipate the practical consequences of such a unique requirement — a requirement that applies to no other federal constitutional right. In San Remo Hotel LP v. City and County of San Francisco,[4] the court held that a state court decision denying a federal taking claim would be given preclusive effect under the “full faith and credit” statute,[5] resulting in a federal court’s dismissal of that claim.

Thus, Williamson County created what the Knick court aptly described as a Catch-22: “He cannot go to federal court without going to state court first; but if he goes to state court and loses, his claim will be barred in federal court. The federal claim dies aborning.” That “preclusion trap” came to end with the court’s decision in Knick.

Knick Overrules Williamson County’s Catch-22

In Knick, the Township of Scott, Pennsylvania, enacted a law requiring all cemeteries to be kept open and accessible to the general public during daylight hours. The owner of a small family graveyard, Rose Mary Knick, brought a federal civil rights action against the town in federal court, challenging the ordinance as a violation of the takings clause. The federal district court dismissed her claim under Williamson County, holding that she had to first seek compensation in state court before bringing her federal takings claim in federal court. The Third Circuit Court of Appeals affirmed.

On June 21, the Supreme Court reversed the Third Circuit and ruled in Knick’s favor. Importantly, the court expressly overruled Williamson County’s state-litigation requirement on the ground that it had no basis in the original meaning of the takings clause or in more well-settled, well-reasoned takings precedents. Thanks to Knick, property owners can bring a federal takings claim as soon as their property has been taken without compensation, regardless of any other remedies (including in state court) that might be available to them.

As a consequence of this groundbreaking decision, one can expect a steady stream of new takings claims against state and local actions that deprive (or significantly impair) an individual’s or business’s property rights or interests.

Consider, for example, state and local governments’ favorite tool for taking property without compensation: the land-use permit condition. As most developers and other project proponents know, the land-use permit process is fraught with opportunities for public agencies to leverage the need for a land-use permit to exact fees, land and other interests in real property (e.g., easements) that have no relationship to the actual public impacts of the proposed project. Agencies often view their land-use permit authority as a convenient means of taking such property for free, without having to pay just compensation — a win for both the agencies (politically) and taxpayers (financially), but at great expense to the project proponent. The court has declared such attempts at uncompensated takings to be unconstitutional exactions under the takings clause — or, in the court’s words, “out and out plan[s] of extortion.”[6]

One sensible route for a project proponent wanting to, say, challenge a law imposing such unconstitutional takings in the permit process is to sue for that law’s invalidation in federal court. Before Williamson County’s demise, some federal courts would dismiss takings claims for equitable relief on the theory that the project proponent would have to first litigate and lose a claim for compensation in state court — even though that was not the nature or purpose of the challenge.[7] By eliminating the state-litigation requirement, Knick definitively eliminates one ground for barring challenges to statutes and ordinances authorizing unconstitutional permit conditions in federal courts.

Unlawful permit conditions are not the only fertile ground for increased federal-court litigation of takings claims. If a statute or ordinance — outside the permitting context — purports to immediately deprive an owner of all (or much) of his property’s “productive use,” the owner can now bring a federal takings claim for just compensation in federal court, without having to first litigate and lose a compensation claim in state court.[8] For example, in the energy-regulation space, one can expect more — and more successful — compensation claims in federal court against laws that purport to destroy or significantly damage (i.e., “take”) oil, gas and mineral rights.

Not only do we expect to see an increase in federal takings claims brought in federal courts across the country, but like other groundbreaking property rights cases over the years that have made it easier to sue public entities for takings,[9] Knick may also serve as a prophylactic against attempts to pass more onerous laws and regulations. With the new threat of federal court litigation, those laws and regulations may never see the light of day for government fear of protracted and costly litigation.

Knick is noteworthy, too, in that it finally restores property rights — enshrined in the Bill of Rights — to its rightful place among other vital constitutional rights. Before this decision, a federal takings claim was the only kind of constitutional claim that was effectively barred from federal court review. That is no longer true after Knick.


Footnotes:

[1] When the federal government takes private property without compensation, the federal takings claimant brings his claim in federal court. Thus, the issue addressed in Knick is where a claimant challenging a taking by a state or local government must prosecute his claim.

[2] Knick v. Township of Scott, No. 17-647 (June 21, 2019).

[3] Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985).

[4] San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005).

[5] 28 U.S.C. § 1738.

[6] Nollan v. California Coastal Commission, 483 U.S. 825 (1987).

[7] See, e.g., Alto Eldorado Partnership v. County of Santa Fe, 634 F.3d 1170 (10th Cir. 2011).

[8] Before Knick, courts routinely dismissed such claims. See id; see also Holliday Amusement Co. of Charleston, Inc. v. South Carolina, 493 F.3d 404 (4th Cir. 2007); County Concrete Corp. v. Township of Roxbury, 442 F.3d 159, 164-65 (3d Cir. 2006).

[9] For example, in 1992, the court decided the landmark property rights case Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). In that case, the court held that a regulation purporting to deprive an owner of all economically beneficial use of his land, without compensation, was actionable as a taking. In reaction to that decision, many land-use agencies became more careful about denying project proponents all use of their properties, acknowledging that such a decision could give rise to a (successful) Lucas taking; as a consequence, those agencies deliberately allowed proponents some productive use of their properties. We may see the same kind of cautious action from public agencies in response to Knick.
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