Analysis: Del Monte Dunes Decision Isn't Total Property-Rights Victory
Although they appeared to lose on the most basic issue, municipal and environmental lawyers are claiming victory in the U.S. Supreme Court's recent Del Monte Dunes case. They claim that government agencies dodged a bullet when the Supreme Court refused to extend the so-called Nollan/Dolan test to takings cases.
In Del Monte Dunes v. City of Monterey, 99 C.D.O.S. 3846, the Supreme Court granted property owners the right to a jury trial in some regulatory takings cases if they are brought against state or local governments under federal civil rights law. On a 5-4 decision, the court upheld a $1.45 million jury award against the City of Monterey, which denied an oceanfront residential development in 1986.
No sooner had property-rights advocates claimed victory, however, than municipal lawyers, the American Planning Association and other groups sympathetic to the City of Monterey's case began arguing that they had won as well. The reason? The Supreme Court had rejected that portion of the Ninth U.S. Circuit Court of Appeals' ruling concluding that the Nollan/Dolan "rough proportionality" rule should be applied to takings cases in which the government agency actually denied development permits.
The day after the ruling was handed down, the American Planning Association issued a press release headlined: "Supreme Court Upholds Land-Use Planning Authority." And land-use law guru Daniel J. Curtin, author of Curtin's California Land Use and Planning Law, also hailed the court's ruling, calling it "the first unanimous decision in years by the high court on such an important takings issue."
When the Supreme Court's ruling in Del Monte Dunes was first handed down on May 24, it appeared to be a clear victory for property owners. Monterey had denied five different applications for the property, even though the proposed project got smaller each time. The property owner sued in federal court under the federal civil rights act, 42 U.S.C. § 1983. A judge ruled that the property owner had the right to a jury trial. The jury found a temporary taking and awarded $1.45 million in damages. The Ninth U.S. Circuit Court of Appeals affirmed the judge's ruling and the $1.45 million award.
In a narrow decision, the Supreme Court did the same. Property-rights lawyers hailed the ruling as a clear victory. "It's going to make people take notice that when they act this way, there is a penalty," proclaimed Michael Berger, a prominent property rights lawyer who represented Del Monte Dunes. (CP&DR Legal Digest, June 1999.)
Underneath the obvious victory, however, was a broader-based ruling on the part of the Supreme Court to reject the Ninth Circuit's decision to apply the Nollan/Dolan doctrine.
Based on two Supreme Court rulings (Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374), the Nollan/Dolan doctrine imposes a higher level of judicial scrutiny in exactions cases. The critical concept is "rough proportionality" — that is, when imposing a "physical" exaction such as an easement, a government agency must ensure that the impact of the exaction is approximately proportional to the impact of the project on the problem that the exaction is trying to ameliorate. In the case of Dolan, the Supreme Court threw out a requirement that an appliance store provide a bike path across its property in exchange for a building permit, claiming the city had done no analysis on the relationship between the expanded store and potential bike traffic.
Since 1992, the Nollan/Dolan doctrine has been applied only to exactions cases, not takings cases. Ruling in the Del Monte Dunes case after Dolan was issued, the Ninth Circuit applied the Nollan/Dolan doctrine in the takings context — stating, essentially, that the denial of the Del Monte Dunes project was not "roughly proportional" to the potential impact the project might have on the environment and the community.
"The government agencies were very scared that the Supreme Court might uphold this," said Katherine E. Stone, a municipal lawyer who specializes in land-use cases. In particular, said Stone and others, government agencies feared that Justice Antonin Scalia, who invented the Nollan/Dolan doctrine, would seize the opportunity to expand it.
However, the Supreme Court did not do so. In the plurality opinion, Justice Anthony Kennedy dispensed with the Nollan/Dolan doctrine quickly and easily. "The rule applied in Dolan considers whether dedications demanded as conditions of development are proportional to the development's anticipated impacts," he wrote. "It was not designed to address, and is not readily applicable to, the much different questions arising where, as here, the landowner's challenge is based not on excessive exactions but on denial of development." In separate opinions — which included some dissent — the other justices, including Scalia, concurred with that portion of Kennedy's ruling.
Georgetown University Law Center professor John Echeverria, who represented several environmental groups in the case, said the rejection of the Ninth Circuit's ruling on the rough proportionality issue was important for several reasons. Among other things, he said, the heightened scrutiny required under the Nollan/Dolan doctrine shifts the burden of proof from the property owner to the government agency.
But Berger, the winning attorney, said the rough proportionality angle was overblown. "I think these people overreacted to what the Ninth Circuit said and paid no attention to what the Ninth Circuit did," he said. The Ninth Circuit found ample reason to uphold the takings award on its own merits and added the Nollan/Dolan points at the last minute because the Supreme Court issued the ruling after Del Monte Dunes had been briefed before the appellate court, he said.
Pacific Legal Foundation lawyer James Burling, who filed an amicus brief in the case, also downplayed the significance of reversing the Ninth Circuit's ruling on Nolan/Dollan. Burling noted that the court upheld the judge's instructions to the jury, which included advice to consider whether a "reasonable relationship" existed between the problems presented by the project and the city's denial. "The cities were arguing that there should not be any analysis of the justification of the denial," he said. With "reasonable relationship," he said, "we don't have to talk about rough proportionality."
While conceding Burling's point as far as it goes, Echeverria claimed a distinction between what he called the "logic" of the denial — which he said the jury could properly question — and the precise issue of proportionality. Like other lawyers who sided with the government, Echeverria questioned how the application of rough proportionality to a project denial, as opposed to an exaction, would work.
While opening the door to jury trials in § 1983 cases, Del Monte Dunes apparently does not invite jury trials in inverse condemnation cases filed in state court. Even Burling agreed that inverse condemnation cases will continue to be heard before judges in state courts — partly because of the doctrine that property owners alleging takings must seek state remedies before going to federal court. (Del Monte Dunes pre-dated that doctrine, which was laid down in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987).
However, many property rights lawyers, including Burling and Berger, now argue that subsequent California takings cases have eroded the "state remedy" and therefore their clients should be permitted easier access to federal courts — that is, if California courts do not restore the remedy. The two lawyers pointed specifically to Landgate Inc. v. California Coastal Commission, 17 Cal. 4th 1006 (1998), in which a state appellate court ruled against a property owner in a takings case.
Katherine E. Stone, Myers Widders Gibson & Long, (805) 644-7188.
James Burling, Pacific Legal Foundation, (916) 362-2833.
John Echeverria, Georgetown University Law Center, (202) 662-9850.
Michael Berger, Berger & Norton, (310) 449-1000.