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United States Supreme Court Extends Land Use Takings Claims to Include Money

Koontz v. St. Johns River Water Management District, 570 US ___ (June 25, 2013) involved discussions between plaintiff applicant and defendant Water Management District which had jurisdiction over permits to dredge or fill Florida wetlands.  The District had specific authority under state law to offset environmental damages, including “creating, enlarging, or preserving wetlands elsewhere.”  In 1972 plaintiff’s father had purchased a 14.9 acre parcel that included wetlands.  Plaintiff succeeded to that parcel and proposed to develop 3.7 acres in 1994, agreeing to dedicate approximately 11 acres to the District for wetland preservation.  Defendant found this action to be inadequate and proposed alternatives including development of just one acre (which would require a dedication of 13.9 acres to the District) or development of 3.7 acres so long as plaintiff would help restore wetlands on District-owned property within the same basin several miles away or pay an equivalent amount to do so. 

Plaintiff refused to undertake or propose other alternatives; thus the permit was denied. Plaintiff sued for a taking.  The trial court found actions above and beyond the 11-acre dedication proposal violated both the nexus and rough proportionality requirements of Nollan v. California Coastal Comm. 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), respectively.  The Florida Court of Appeals affirmed but the Florida Supreme Court reversed, finding no taking as there was no condition on which to predicate a Nollan/Dolan violation and because the claim involved a demand for money which it found not subject to a takings claim under those cases.  The United States Supreme Court granted certiorari.

The court found the doctrine of “unconstitutional conditions” applied, so that the Government may not deny plaintiff a benefit through coercion or otherwise because she exercises a constitutional right.  That doctrine has a special application in Nollan and Dolan that reflects, according to the majority, two “realities” of the land use permitting process:  1) that applicants are especially vulnerable to coercion prohibited under the doctrine of unconstitutional conditions and 2) that some proposed uses of land impose costs on the public that property dedications can offset.  Acknowledging that governments may regulate developers to internalize the negative externalities of their proposals, the court said it had developed the nexus and rough proportionality rules to provide a balance between those parties in the development process.  That balance does not depend on whether the application is approved or denied, i.e., whether a condition is actually imposed or the applicant is told that the application would not be approved until certain concessions were made.  In either case a public agency may not withhold the benefit (whether or not an applicant is entitled to it) for refusal to give up a constitutional right.

The Fifth Amendment may not apply where a permit is denied outright with no qualification of conditions which would result in approval.  However, where there is an excessive demand by way of an unconstitutional condition that results in denial, the question of money damages may not result from the federal constitutional question, but rather result in a cause of action under either state or federal law.  In this case, plaintiff brought an action under a Florida statute which the Supreme Court declined to apply, instead remanding the matter to the Florida Supreme Court for disposition.  That statute, Fla. Stat. Ann. § 373.617, allows a property owner to sue for damages if a state agency action is found to be “an unreasonable exercise of the State’s police power constituting a taking without just compensation.”  Whether and how the statute applies must be addressed on remand.

Defendant argued that plaintiff had a range of choices that included building on a lesser amount of land or expenditures to improve wetland facilities on other lands so no taking was involved.  However, the court concluded that the substance of the alternatives was that either more land would be required to be dedicated to the public or plaintiff would be required to expend more offsite mitigation costs – but the court found both alternatives to be subject to Dolan’s proportionality standard.  The fact that money is involved in one of the alternatives did not take the case outside Nollan and Dolan. The court noted the prevalence of “in lieu of” fees in planning practice and suggesting that it would be easy to avoid Nollan and Dolan by simply imposing these fees instead of a dedication.  The court concluded that such money requirements substituted for land dedication to be “functionally equivalent” to other types of land use exaction.  Moreover, the court found the exaction “operated upon” a specific parcel (by requiring an alternative to make a money payment), thus burdening the ownership of a property in a manner compatible to taking a lien (i.e., a right to income) from property by government.  A lien acquisition by the government would result in a taking according to the court’s view of its precedents.  If there is such a direct link, Nollan and Dolan operate to prevent diminishment of property value if the exaction were unjustified.

The court distinguished this unconstitutional conditions case from the most frequently raised takings claim, i.e., a regulatory takings claim under Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), as that issue was not raised, adding:

* * * The fulcrum this case turns on is the direct link between the government’s demand and a specific parcel of real property.  Because of that direct link, this case implicates the central concern of Nollan and Dolan:  the risk that the government may use its substantial power and discretion in land-use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue, thereby diminishing without justification the value of the property. * * *

The court denied such an approach served to second-guess the wisdom of governmental actions – the case involved a demand for a transfer of money or property interest to the government which the court found could operate as a per se taking in the same way as if it were a governmental acquisition of a lien.

The court also denied that its new test would fail to distinguish in a meaningful way land use exactions from property taxes or user fees, (which would not be a taking), concluding that it need not decide the line in this case, noting that if a tax were “so arbitrary” that it becomes the confiscation of property, it could be recognized as a taking.  In any event, the court said that state courts have dealt with challenges to monetary exactions using Nollan and Dolan, and that the political process would keep a check on excessive land use processing fees.  The case was thus remanded for further review by the Florida Supreme Court without regard to whether money, rather than property, may be exacted under Nollan and Dolan.  Nonetheless, the demand for money or property in a land use context will now be subject to these two cases.

Justice Kagan wrote a dissent for herself and three other justices.  She agreed that a no taking occurred by the proposed conditions, but disagreed with the majority’s view that demanding payment of money implicates the takings clause in those land use contexts.  Justice Kagan asserted that there was no taking in this case as the conditions at issue were never imposed – the landowner may seek to have an improper condition removed or more seek monetary remedies under applicable state law, however.

More importantly, Justice Kagan noted that there was no monetary demand or demand for property acceded to and concluded that there was no taking. She agreed that the standards for regulatory takings are not applicable here either, though the heightened scrutiny of Nollan and Dolan apply.  But she found that the Court’s 5-4 decision in Eastern Enterprises v. Apfel, 524 US 498 (1998) applied limiting taking claims for money to a “specific, separately identified fund,” so that obligations imposed to perform an act are not takings claims, and warning that:

* * * By applying Nollan and Dolan to permit conditions requiring monetary payments with no express limitation except as to taxes – the majority extends the Takings Clause, with its notoriously “difficult” and “perplexing” standards, into the very heart of local land-use regulation and service delivery.  * * *  Cities and towns across the nation impose many kinds of permitting fees every day.  Some enable a government to mitigate a new development’s impact on the community, like increased traffic or pollution – or destruction of wetlands. * * *

Justice Kagan decried the extension of Nollan and Dolan beyond real property and wonders whether the court can describe a coherent taking theory distinguishing land use exactions from other monetary requirements such as taxes, whether the new rules apply across the board or only to ad hoc fees that are quasi-judicial in nature, stating that the majority was seeking a prophylactic rule, but concluding that the result is a “prophylaxis in search of a problem” as there was no evidence to show that local governments routinely short-circuit Nollan and Dolan to exact real property interests having no relationship with development costs.  She suggested that other state or federal constitutional or statutory provisions are adequate to deal with these issues and that the new rule actually deprives state and local governments of the “necessary predictability” to operate the land use process.

Finally, Justice Kagan would affirm the Florida Supreme Court for two other reasons:  defendant never demanded plaintiff to give up anything in exchange for a permit and there was no taking.  As to the first issue, she expressed concern that negotiating requirements for approval between developers and public agencies could be transmuted into takings claims. This would also militate towards simple denials in lieu of further discussion, especially in view of the fact that the District said it would consider other mitigation alternatives in this case.  Moreover, this case is, according to Justice Kagan, not about a taking but rather the application of a Florida statute that allows for damage claims if there were an unreasonable exercise of the police power so as to constitute a taking (which, Justice Kagan asserted, did not happen).  Justice Kagan asked:

* * * In what legal universe could a law authorizing damages only for a “taking” also provide damages when (as all agree) no taking has occurred?  I doubt that inside-out, upside-down universe is the State of Florida.  Certainly, none of the Florida courts in this case suggested that the majority’s hypothesized remedy actually exists; rather, the trial and appellate courts imposed a damages remedy on the mistaken theory that there had been a taking (although of exactly what neither was clear). * * *

To summarize, the dissent found three independent reasons that the Takings Clause does not apply:  (1) That Clause does not apply to a condition imposed to pay money; (2) There was no demand made of plaintiff; and (3) the Florida statute only operates in the event of a consummated taking.

Koontz is a significant case.  Justice Alito’s majority opinion is strikingly similar in style and substance to that of Justice Scalia – full of property rights rhetoric, breathtakingly facile in ignoring (or reinterpreting) previous precedents dealing with the application of a takings clause to money and, while finding no taking, providing for the possibility of damages, as if there were a taking.  Perhaps the case involved a prophylaxis in search of a problem – The decision certainly appears to be a search for a desired result.


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