Court Hears Takings Case: But Del Monte Dunes Decision May Not be Sweeping
U.S. Supreme Court justices gave mixed signals during the oral arguments in the Del Monte Dunes case, a closely watched dispute from California that may determine whether developers should have the right to compensation for unreasonable delays because of land-use regulations.
However, it appears the high court will not issue a sweeping decision on the question of whether developers have the right to a jury trial in such cases. The muddled arguments and questions suggested the court's decision might be less momentous than the opposing forces in the property rights debate had expected.
Conservative justices appeared sympathetic to arguments to uphold a $1.45-million jury award that a California developer, Del Monte Dunes, won after an unsuccessful, five-year effort to build an oceanfront residential development in the City of Monterey.
"When you have a consistent process of turning down one plan after another, isn't there some point where you begin to smell a rat?" Justice Antonin Scalia said during the oral argument on October 7.
But some justices voiced doubts that the developer had successfully made the case that its property had been unconstitutionally taken.
"Isn't it always true," Justice John Paul Stevens asked, "that there will be some time in the permit application process when a property owner is blocked from making use of its land?" Stevens is the only former city attorney on the high court.
Still other justices confessed puzzlement about some of the issues in the case, including the question whether developers are entitled to a jury trial in inverse condemnation cases in federal court. "I don't know what to do with this case," Justice Stephen G. Breyer said at one point.
The justices' questions in the hour-long argument left opposing advocates in the property rights debate uncertain about how broad a decision to expect. "I came away pretty baffled," said John Echeverria, a professor at Georgetown University Law Center who filed a brief in the case for several environmental groups.
But a leading property-rights advocate said she was "cautiously optimistic" that the court will enlarge landowners' right to compensation in taking claims. Nancie Marzulla, president of Defenders of Property Rights, said she was looking for a new "intermediate standard" that examines the reasonableness of the government's actions under "a higher level of scrutiny."
The case stemmed from a plan to develop a 37.6-acre parcel once used as an oil tank storage zone and now viewed as environmentally sensitive by Monterey officials. The original developer, Ponderosa Homes, sought approval in 1981 to build 344 residential units on the site. Over the next five years, the city rejected four more plans. The last of the plans called for 190 units. By that time, Ponderosa had sold the land to Del Monte Dunes.
The city had imposed requirements that all but 5.1 acres of the tract be set aside for public space, private landscaped space, or private and public streets. In its last action, the city said the developer needed to consult with the U.S. Fish and Wildlife Service on how to preserve habitat for an endangered insect, the Smith Blue Butterfly.
At that point, Del Monte Dunes filed suit against the city under the federal civil rights law, 42 U.S.C. section 1983. By the time the case was tried, it had sold the tract to the state for a nature preserve — and made an $800,000 profit. But a federal court jury ruled that the city's refusal to approve the construction amounted to a "temporary taking" of property and awarded the developer $1.45 million in damages. Earlier, the judge in the case had ruled that the city had not violated Del Monte Dunes' due process rights because its actions were not arbitrary or capricious.
In appealing the Ninth Circuit's decision upholding the jury award, the city presented three separate questions to the Supreme Court. But two of the issues, including the developer's right to a jury trial, appeared either to disappear or diminish in importance during the arguments.
On the jury trial issue, Justice Ruth Bader Ginsburg pointed out the suit had been filed before the Supreme Court's 1987 decision, First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304, requiring states to provide compensation for government overregulation of property. Since states now have to give landowners a remedy in their own courts, Ginsburg said, the jury trial issue will apply only to the federal court cases "that are still hanging around from the 1980s."
Michael Berger, the veteran Los Angeles property rights litigator representing Del Monte Dunes, agreed.
The justices also appeared uninterested in another issue the city had raised. San Francisco attorney George Yuhas, representing the city, argued the Ninth Circuit was wrong to have judged its actions under the "rough proportionality" test established by a 1994 decision, Dolan v. City of Tigard, 512 U.S. 374. That test, Yuhas said, applied only to so-called exactions — provisions for public use of land as a condition of approving development or construction.
Justice Sandra Day O'Connor, who usually backs landowners in property-rights cases, appeared to agree, suggesting the court might simply set aside that part of the Ninth Circuit's ruling.
Several of the court's conservative justices, however, voiced strong sympathies for the developer's frustrations with the city's handling of the permit applications.
Chief Justice William Rehnquist and Justice Anthony Kennedy both emphasized the five-year span covered by the various applications to proceed with the project. "Isn't the history relevant to the reasonableness of the city's actions?" Kennedy asked.
"The landowner here thinks that it was essentially getting jerked around," Scalia said.
Yuhas defended the city's handling of the applications. But both he and Deputy Solicitor General Edwin Kneedler, supporting the city, spent more time arguing that there had been no taking because Del Monte Dunes had not been deprived of all "economically viable use" of the property. They both noted that the developer's own expert witness testified that the property was worth $3 million while the construction applications were pending.
In his turn, Berger argued that the unreasonableness of the city's actions satisfied a separate test for a temporary taking — that the regulations were not substantially advancing a legitimate government interest. But liberal-leaning justices questioned how the jury could find the city's actions unreasonable if the judge had already ruled on the due process claim that the regulations were not arbitrary.
"I guess there's some intermediate standard between arbitrary and not advancing a state interest," Stevens remarked doubtfully.
In closing, Berger said the issue in the case was simply whether the Fifth Amendment's takings clause would be enforced. "People like this developer need to know that when they deal with their local regulating agency, their rights will be protected," he said. "They can't be simply abused and strung along at the city's whim."
Afterward, Echeverria said the case posed a "fundamental issue whether arbitrary and capricious actions come under the Takings Clause at all."
"It's arguably an issue the court has yet to address," he said. "If the court's going to resolve that, it would be a very important ruling."
City of Monterey v. Del Monte Dunes at Monterey, Ltd., 97-1235
For City of Monterey: George Yuhas, (415) 392-1192.
For Del Monte Dunes: Michael Berger, (310) 449-1000.
Kenneth Jost, a former editor of the Los Angeles Daily Journal, is a staff writer for Congressional Quarterly and author of The Supreme Court Yearbook.