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Tuesday, June 25, 2013

Supreme Court: Takings Analysis Applies to Government Denial of Wetlands Permit (Koontz)

In a 5-4 opinion issued today, the U.S. Supreme Court reversed the lower court's decision dismissing a property owner's takings claim against a water reclamation district, holding that the Nollan/Dolan takings requirements apply even when a governmental body denies a permit, and where the government imposes monetary exactions.  Koontz v. St. Johns River Water Management District
We reported on the Koontz case previously on this blog, summarizing the lower court's ruling and hypothesizing as to the U.S. Supreme Court's pending decision.  You may recall the facts of this case.  In 1994, Koontz sought to develop land lying within a Riparian Habitat Protection Zone in Florida. Because most of the property was wetlands, Koontz was required to obtain a permit from the St. Johns River Water Management District. In order to mitigate the impact from the development, the District required Koontz to reduce the scale of his proposed development; restore and enhance at least 50 acres of wetlands on a parcel 4.5 miles away; or perform similar off-site mitigation at a site seven miles away. Koontz was also asked to perform on-site mitigation through a conservation easement or deed restriction on the rest of his property. Koontz rejected each of the District’s proposals and filed suit, arguing that the District was liable for a taking of his property requiring compensation. The District argued that the takings analysis of Nollan and Dolan do not apply to the denial of Koontz's permit because no dedication of land was required and no damages were incurred.  The case made its way to the Florida Supreme Court, which held that the takings test adopted by the U.S. Supreme Court in the seminal Nollan/Dolan cases did not apply because (1) the District did not impose conditions on approval and (2) there is a distinction between a demand for real property and a demand for money. 
The Supreme Court disagreed with the District, and reversed the Florida Supreme Court.  First, the Court summarized the Nollan and Dolan cases as protecting the Fifth Amendment right to just compensation for property the government takes from a land owner as part of the land use permitting process. The Court acknowledged that a government can avoid the payment of just compensation if it can establish a nexus and rough proportionality between the property that the government demands and the social costs of the owner's proposal.  The Court extended the Nollan/Dolan test beyond the traditional situation where a government approves with conditions to now apply to a situation where a government denies the permit because the owner refuses to turn over property. 
In the Court's opinion, the owner forfeits a constitutional right whether it is coerced into accepting a condition or is denied benefits for refusing to accept that condition.  The Court emphasized that a contrary rule would enable a government to evade the takings requirements by imposing conditions precedent to permit approval - i.e., a permit is denied until certain conditions are met.  Under the Court's analysis, therefore, a taking can occur even where no property of any kind was actually taken.  The Court's view is that a constitutionally cognizable injury occurs when a property owner refuses to give up a constitutional right in the face of government "coercive pressure." 
Finally, the Court overturned the Florida Supreme Court's dismissal of the claim because the District asked Koontz to spend money rather than give up an easement on his land.  The Court held that "in lieu" fees are functionally equivalent to other types of land use exactions, and must satisfy the nexus and rough proportionality requirements of Nollan and Dolan.  The Court did not apply Penn Central's regulatory taking test, and instead chose to apply a per se takings test because it found a direct link between the District's demand for money and Koontz's property interest.  The Court rejected the District's and dissent's argument that its ruling would restrict a government's ability to impose property taxes or user fees without implicating the takings clause. 
Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, dissented from the majority opinion.  First, the dissent agreed with the majority that the Nollan/Dolan takings requirements apply to both approvals with conditions subsequent, as well as denials with conditions precedent.  However, the dissent parts ways with the majority as to whether the takings requirements apply to the payment or expenditure of money.  In the dissent's view, the Florida decision should be affirmed because (1) the District never demanded anything (including money)  in exchange for a permit and (2) Koontz never agreed to the demand and, therefore, no property changed hands.  As a result, Koontz should not be entitled to money damages, according to the dissenting opinion.
The bulk of the dissenting opinion addresses the dissent's concerns over the majority's extension of the Takings Clause to monetary exactions. The dissent cites to the Court's earlier decision in Eastern Enterprises v. Apfel holding that a government requirement that a company pay money for health benefits did not result in a taking.  Applying that holding to the current case, the dissent concluded that "a requirement that a person pay money to repair public wetlands is not a taking."  In the dissent's view, the majority opinion will impact cities and towns across the nation that impose permitting fees every day, requiring governments to meet the Nollan/Dolan test for every land use fee.


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