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Monday, March 22, 2010

Norms, File-Sharing and the Latest from the Thomas Case

Legal institutions struggle when the legality of behavior, and the normative acceptability of that behavior, diverge.  Sometimes behavior that is formally illegal is normatively acceptable; sometimes behavior that is legal is normatively unacceptable.  Want proof?  When you drive home today, drive 1 mph under the speed limit.  You'll find that behavior that is illegal -- speeding -- is normatively acceptable, but that legal behavior -- driving below the speed limit -- is normatively unacceptable. 

Legal institutions facing those divergences falter in predictable ways.  Behavior that is legal but normatively unacceptable cannot trigger a formal response from legal institutions, so tends to trigger 'popular justice' responses -- sometimes as mild as tailgaiting, sometimes as severe as violent vigilantism.  Behavior that is illegal but normatively acceptable usually does not trigger a formal enforcement response, but it can -- at the enforcer's discretion.  The danger here is selective enforcement.  Consider again the speeding example: what is racial profiling but selective enforcement against illegal but normatively acceptable driving behavior?

The same dynamic is at work with regard to property rights, as the recent lawsuits brought against Jammie Thomas and Joel Tennenbaum demonstrate.  At least among the young and computer-savvy, non-commercial file-sharing seems to be normatively acceptable, even though it is illegal.  According to the Electronic Freedom Foundation, one in five American Internet users is a file-sharer.  Ask the next class you teach for a show of honest hands, and you'll probably find that estimate accurate.

The predictable danger when there is is such a wide divergence between the legality and normative acceptability of behavior is selective enforcement.  Courts aren't good at avoiding being used as vehicles for selective enforcement.  In both the Thomas and Tennenbaumcases, Judges Davis and Gertner openly lamented their inability to prevent their institution from being so used.  Judge Davis in the Thomas case expressed serious misgivings about the unfairness of singling Thomas out for liability, stating that Thomas "acted like countless other Internet users.  Her alleged acts were illegal, but common."  Judge Davis recently slashed the damagesawarded against Thomas by 97%, from $1.92M to $54,000.  He clearly is intent on fighting back against the perceived unfairness of selective enforcement against illegal but normatively acceptable behavior.  But the RIAA isn't giving up, either; they have filed a motion for new trial on damages.

But even the RIAA must realize that it cannot hope to use the courts to selectively enforce against normatively acceptable behavior forever.  Usually, eventually, property rights catch up to notions of normative acceptability.

Mark Edwards

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March 22, 2010 in Intellectual Property, Property Theory, Recent Cases | Permalink | Comments (2) | TrackBack (0)

Wednesday, January 27, 2010

Kelo, the Meaning of "Public Use," and Beyond

A recent decision from the United States District Court for the Western District of Pennsylvania presents some interesting issues about the law of eminent domain.  In Whittaker v. County of Lawrence, 2009 WL 4744392 (Dec. 7, 2009), the plaintiffs challenged the condemnation of their parcels in connection with a proposed redevelopment project.  Specifically, the plaintiffs argued that the project – a 500-acre industrial park – was not a public use under the Takings Clause.  The district court rejected that argument, concluding that a local government’s economic revitalization efforts were “undoubtedly” public.

So far, all of this sounds familiar and in keeping with the Supreme Court’s decision in Kelo v. City of New London.  But here’s the twist – unlike Kelo, where the state courts interpreted the state statutes as allowing the economic development taking at issue, the state law here (as construed by the state courts) affirmatively declared that this type of use was not “public” for purposes of the eminent domain power.  Acknowledging this fact, the district court nonetheless held that the use was public for purposes of the Fifth Amendment.  Here’s the central portion of the opinion (omitting citations):

States are undoubtedly free to create “public use” standards that are more demanding than that contained in the Fifth Amendment.  Indeed, subsequent to the Supreme Court’s decision in Kelo, the Pennsylvania Legislature passed legislation generally prohibiting the use of eminent domain power for the purpose of facilitating “private enterprise.”  It does not follow, however, that actions taken in contravention of such state proscriptions are likewise taken in contravention of the Public Use Clause.  The content of the Public Use Clause does not “vary from place to place and from time to time.”  The “public use” requirement is “coterminous with the scope of a sovereign’s police powers.”  It does not change based on how a particular sovereign chooses to use (or not use) its police powers.  As far as the United States Constitution is concerned, a “public use” in Connecticut is a “public use” in Pennsylvania.  The Plaintiffs attempt to convert state statutory standards into federal constitutional requirements, “[b]ut constitutional law does not work that way.”

Whittaker, 2009 WL 4744392, at *18.

This is an interesting development, and one that I have wondered about since the Kelo decision came down.  Even though Justice Stevens’ majority opinion in Kelo admitted that states were free to impose stricter “public use” requirements than that announced by the Court, it also stated that the Court’s authority “extend[ed] only to determining whether the City’s proposed condemnations [were] for a ‘public use’ within the meaning of the Fifth Amendment to the Federal Constitution.”  Kelo, 545 U.S. at 489-90.  The district court in Whittaker apparently took this last statement to heart.

One potential ramification of the reasoning used in Whittaker could be that property owners increasingly look to state courts and state law claims (either constitutional or statutory) for relief from proposed condemnations of their properties, rather than proceeding under the Takings Clause.  But apart from that, there is another possible ramification:  If “public use” under the Takings Clause is a matter of federal law that is defined uniformly regardless of any state pronouncements, then one might also argue that “property” under the Takings Clause is equally a federal question subject to uniform definition.  In other words, perhaps there is some normative constitutional baseline that qualifies as “property,” beyond which the states cannot regulate without providing just compensation (regardless of their ability to regulate or define property interests in the first instance).

This latter argument has significant federalism implications, especially with regard to the question of judicial takings currently before the Court in Stop the Beach Renourishment v. Florida Department of Environmental Protection (about which Ben excellently blogged here and here).  If “property” as defined in the Takings Clause means the same in Connecticut as it does in Pennsylvania (to paraphrase Whittaker), then perhaps it becomes easier for a federal court to say that a state court decision has taken that “property” irrespective of the state’s ability to change or define property rights as a matter of state law.

Mike Kent

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January 27, 2010 in Recent Cases, Takings | Permalink | Comments (2) | TrackBack (0)

Friday, December 4, 2009

New York Court Rejects Eminent Domain for Columbia Project

An intermediate appellate court in New York has rejected the use of eminent domain for a project associated with Columbia University.  The New York Times has a story on the case, and Ilya Somin comments at the VC.  There seems to be some conflict with the NY Court of Appeals' recent decision in the Atlantic Yards case.  Particularly because the intermediate appellate court's decision was 3-2, this case is quite likely to go up to the Court of Appeals.

Ben Barros

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December 4, 2009 in Recent Cases, Takings | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 2, 2009

Of Hotdog Stands and Beach Parties -- Oral Argument in Stop the Beach

The Supreme Court heard oral argument this morning in Stop the Beach Renourishment v. Florida DEP.  If you are new to the case, this post summarizes what it at stake.  My overall view of the case hasn't changed much after hearing oral argument.  I will update this post with notes from oral argument throughout the afternoon.  For now, here are some quick thoughts:

(1)  Justice Stevens was not on the bench.  Informed comment around the Court seemed to be that he has recused himself because he owns Florida beachfront property.  This is a potentially big deal because (a) Justice Stevens has been the most vocal advocate of the government position in the Supreme Court's recent regulatory takings jurisprudence and (b) because it increases the chances of a 4-4 decision.

(2) I'm really not sure how this case is going to come out.  There was a lot of support for the general idea of judicial takings on the bench, and Florida's counsel conceded that the right case could present a judicial taking.  The doubts are about whether there was a judicial taking in this case.  A number of justices who the petitioner need to win in this case -- the Chief Justice, Justice Scalia, and Justice Kennedy, all asked some skeptical questions.  Not that skeptical questions mean that much in this context.

More, including an explanation of the title of this post, soon.

A BIT LATER . . .

Okay, the transcript of oral argument is now available on the Supreme Court's website.  So I won't bother doing a blow-by-blow of the argument.  The title of the post comes from the hypotheticals that the members of the Court were playing around with.  The hot dog stand stuff starts pretty early with a question from Justice Sotomayor. 

Having thought about it a bit further, here are my thoughts on how the case comes out. First, the usual caveat that predicting case outcome based on oral argument questions is a fool’s game.  So call me a fool – here’s my guess.  I think that the Chief Justice and Justices Scalia, Alito, and Thomas are likely to be sympathetic to the Petitioner’s case.  (As usual, Justice Thomas didn’t ask any questions, so this is just a guess based on his general pro-property owner tilt in takings cases).  This seems to me to be a best-case for the Petitioner, and even these four votes might not be solid.  Justice Scalia, in particular, asked some questions that seemed to suggest that he thought that there might be some basis in Florida caselaw for the Florida Supreme Court’s decision.  Justice Scalia also wasn’t as aggressive in pressing Respondent’s counsel as I would have expected. 

That’s only four votes for the Petitioner, and the Petitioner needs five to win.  Justice Kennedy would be the most likely fifth vote, but he asked a number of questions that suggested that he is skeptical of Petitioner’s claims in this particular case.  He commented at one point that one Florida case that Petitioner had cited didn’t help Petitioner’s case.  He also suggested that this was a close case based on Florida law – if this is his view, then it is hard seeing him finding that this was a judicial taking.  Finally, Justice Kennedy asked a fairly skeptical question about what the standard would be for judicial takings.  This gist of the question was whether the standard would be based on a pile of adjectives like “sudden” and “unexpected” in describing a change in state property law.

Justice Breyer was fairly aggressive in trying to help Respondents’ counsel out during the argument.  As expected, Justice Ginsburg also appeared to be sympathetic to the government.  Justice Sotomayor asked some good, interesting questions, but these questions didn’t suggest to me that she was leaning either way.  Still, if the Petitioners appear to be having a hard time with Justice Kennedy, it seems likely that they will have difficulty getting Justice Sotomayor.

All of this said, there seemed to be some widespread concern among the members of the Court about judicial overreaching, and there didn’t seem to be a lot of hostility to the general idea of judicial takings.  Justice Breyer raised the hypothetical of a state Supreme Court suddenly holding that the state could put a power plant on someone’s private property without compensation, and phrased the question in a way that made it seem that he thought that this kind of judicial action would be an obvious taking.  The Chief Justice presented a hypothetical in which a state legislature passes a law, the state Supreme Court holds that it is a taking, a person runs for election to the state Supreme Court on a platform opposing the takings holding, is elected, and becomes part of a majority that changes the law to eliminate the takings problem.  This was very interesting hypothetical on a number of levels, but at the least it suggested that there was a set of facts that the Chief Justice thought would constitute a judicial taking.

So one possible outcome is an opinion of the Court that supports the general idea of judicial takings, but finds that there wasn’t one in this case.  At a panel held at Georgetown Law after the oral argument, Richard Lazarus made an interesting observation that Justice Stevens’ absence could be very important here.  If the Petitioners lose, and the Chief Justice is in the minority, then the opinion assignment would typically go to Justice Stevens.  With Justice Stevens recused, the senior justice in the majority may be Justice Kennedy, or even Justice Scalia.  Presuming that the senior justice keeps the opinion, then either Justice Kennedy or Justice Scalia might be expected to write an opinion more favorable to the general idea of judicial takings than Justice Stevens would.

Given the general lack of hostility on the Court to the idea of judicial takings, I’d be surprised to see an opinion that closed off the possibility of judicial takings entirely.  The more likely outcome would be an opinion that holds that this case didn’t present a judicial taking, and leaving the question of whether another case could constitute a judicial taking open.  And, of course, the possibility still remains that the Petitioners will get their fifth vote, and the Court will find a judicial taking in this case.

Ben Barros

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December 2, 2009 in Recent Cases, Takings | Permalink | Comments (4) | TrackBack (0)

Wednesday, November 25, 2009

NY Court of Appeals Decision in Atlantic Yards Case

The New York Court of Appeals has issued its opinion in the Atlantic Yards case.  Unsurprisingly, the court allowed the use of eminent domain to transfer private property to a private developer.  Ilya Somin comments at the VC, and the NY Times has a story on the case.

Ben Barros

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November 25, 2009 in Recent Cases, Takings | Permalink | Comments (0) | TrackBack (0)

Monday, November 9, 2009

Petitioner's Reply Brief in Stop the Beach . . .

is now available online.  All of the briefs in the case, including amicus briefs, can be found here (scroll down).

Ben Barros

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November 9, 2009 in Recent Cases, Takings | Permalink | Comments (0) | TrackBack (0)

Friday, September 11, 2009

Unclean Hands Defeat Equitable Reformation of Deed

A recent case handed down in Indiana demonstrates that equitable property doctrines are still alive and well in the common law: Hardy v. Hardy, 910 N.E.2d 851 (Ind. Ct. App. 2009).

Father owned 80 acres of farmland in Cass County, Indiana.  In 2004, Father faced methamphetamine charges in Oklahoma and Indiana, and the possibility of prison time, hefty fines, and the attachment of his land. With the intent of making himself judgment proof and to protect his land from forfeiture, Father transferred 70 of his acres to his Son and Daughter, as joint tenants with rights of survivorship via a warranty deed.  Daughter was 17 at the time and was not informed of the transfer. 

Father, from prison, instructed Son to lease the farmland and the proceeds were deposited in an account for Father's benefit.  Daughter's name was forged on the three leases.  Daughter learned that she was an owner of the land in 2005 when Son asked her to sign a quitclaim deed (without consideration) giving sole title to two acres to Son and his wife so that they could build a home.  Daughter began asking questions of Father and Son about the nature of her interest in the land.  Her questions went unanswered, so in 2008 she filed a complaint requesting partition and sale of the land, an accounting from Son, and an award of any credits owed to her.

Son answered by asking the court to “reform the deed to reflect the intent of the parties including [Father] and [to] impose a constructive trust to protect the interests of Father, Son, and Daughter.”  Son also moved for Father to join as a real party in interest, which the court granted.  Father claimed that he intended to deed the land to Son and Daughter subject to a life estate.  The trial court found that any mistake by Father in the original conveyance was a unilateral mistake of law and granted Daughter's petitions.  Father and Son appealed, claiming that the decision was clearly erroneous. 

The Indiana Court of Appeals was not persuaded by Father's claim that he intended to reserve a life estate for himself, noting that the trial record clearly established that Father's intent was to "place his property beyond the reach of his creditors-specifically, to evade government efforts to seize or lien his land."  Retaining any ownership interest in the land would have defeated that purpose. 

Father's attempt to appeal to equity was equally unsuccessful.  The Court of Appeals noted the old maxims that "whomever seeks equity must do equity" and "one who comes into equity must come with clean hands."  Finding that Father's actions were hardly equitable or clean, the appellate court found that the trial court decision was not clearly erroneous.

I'm a fan of equity, and it is is nice to see that the old rules are still getting some action.

Tanya Marsh

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September 11, 2009 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, September 7, 2009

Sometimes Fences Make Bad Neighbors

There was an interesting story in the New York Times a few days ago about a dispute between two neighboring landowners and the town of Westport, Connecticut over a stone wall.  Albert and Susan Hancock built the wall in 2005 around their home, replacing an earlier wall on approximately the same line.  They did not obtain a permit.  Jeffrey and Elizabeth Lillien, neighbors of the Hancocks, filed a complaint with the town to stop the construction citing a number of concerns, including possible wetlands issues and interference with sight lines. 

The legal issues are murky, but the story is interesting because of the sheer amount of money involved.  Westport is a wealthy community, where the median home price is $970,000.  The Hancocks spent $170,000 constructing the wall and have, to date, spent $150,000 on legal fees defending it, plus $50,000 on inspections and related costs.  The Lilliens and the town of Westport have also incurred significant expenses.  The Lilliens ' attorney told the Times that he has 30 property cases pending, including one in which a woman's vegetable garden was bulldozed by a neighbor.

This case is surely an anomaly in terms of cost, but it still highlights one reason that so few property disputes (particularly among homeowners) reach the appellate courts -- high litigation costs.  It also begs the question about how those in less favorable economic circumstances handle such disputes.  Both the Hancocks and the Lilliens believe that they are justified in enforcing their respective property rights.  In this case, they both have the resources to, in their own minds at least, fight the good fight.  But fundamental issues about social justice are raised in the more common case, where only one, or neither party, has such resources.

Tanya Marsh

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September 7, 2009 in Recent Cases | Permalink | Comments (3) | TrackBack (0)

Friday, September 4, 2009

The Looming Commercial Real Estate Crisis

I would like to begin my blogging by setting up a discussion about the commercial real estate industry, the looming crisis, and what this all means for property law.  In a nutshell, the problem is this: 

(1) Over the past ten years, commercial rents rose quickly, which supported a rapid increase in the “value” of commercial real estate. 

(2) The emergence of the Commercial Mortgage-Backed Securities (CMBS) market and the explosion of IPOs by real estate investment trusts created strong incentives for real estate owners to expand and to continue to drive up prices through demand, particularly in desirable markets like Florida and urban centers.

(3) Many CMBS loans were underwritten aggressively by lenders who were focused on closing a portfolio quickly and selling the securities.  As in the residential mortgage securities market, the lenders who originated the loans did not keep them on their books very long.  (This incentives problem has been obvious for a while -- here is an interesting 2007 article on the subject.)

(4)  The pressure of the recession on tenants and their ability to pay ambitious rents, combined with the sudden evaporation of capital means that most, if not all, collateral in the CMBS pools could not be sold or refinanced today for the amount of the existing debt.  (Here is a recent story from the New York Times on the subject.)

This all sounds familiar, right?  It is a very similar story to the residential real estate debacle.  There are a few important differences. 

First, although financial institutions have largely taken the hit for the losses felt in the residential real estate market, the significant losses in the commercial real estate market have yet to be fully internalized by either lenders or owners.  Unlike residential mortgages, which have a standard term of 30 years, “permanent” commercial loans have a standard term of 10 years.  Adjustable rate mortgages, aggressive borrowing, and a rising unemployment rate meant that many homeowners were unable to make their mortgage payments, triggering banks to recognize that some debt was unlikely to be repaid.  In the commercial realm, owners usually have other sources of income (or credit) that they can tap into to cover a property that isn't generating sufficient income to satisfy its own mortgage payments.  That strategy only stalls the inevitable, however and we will see a significant amount of commercial real estate debt begin to mature over the next 24 months.

Second, commercial real estate attorneys have put some fairly creative legal structures into place during the boom years.  As tenants seek to get out of their lease obligations and lenders seek compensation for vanished equity, we are (anecdotally) already seeing a significant uptick in commercial real estate litigation.  Surely some of these cases will make it to the appellate level, giving the courts new opportunities to consider the law of modern real estate transactions, financing, and leasing.

One such case, to which I plan to dedicate one or more posts, is the Chapter 11 filing of General Growth Properties (GGP), the second-largest operator of enclosed malls in the nation.  GGP filed for bankruptcy on April 16, 2009 citing “broken credit markets” which “require GGP to reduce and restructure [its] debt.”  (Read GGP’s fascinating FAQ on its bankruptcy here.) 

The GGP case highlights the box that CMBS loans created for borrowers – easy access to capital had a trade-off in the form of stringent loan covenants and restrictions on sale and refinancing.  It also highlights the economic reality faced by commercial real estate owners (and lenders) across the company.  When loans mature, extensions run out, and proceeds from sale or refinance are insufficient to pay off the debt, both owners and lenders will be faced with limited and undesirable options. 

Sorry for such a long post, but I wanted to set up future posts on the GGP bankruptcy, the legitimacy of special purpose entities, and other related topics.  Please comment below to let me know if there are any related issues that you are particularly interested in!

Tanya Marsh

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September 4, 2009 in Real Estate Transactions, Recent Cases | Permalink | Comments (1) | TrackBack (0)

Monday, August 3, 2009

Maine Supreme Court on Adult Adoptions

Terry Turnipseed (Syracuse) has passed on the news that the Maine Supreme Court recently ruled that an adult adoption of a same-sex partner was legitimate.  Terry notes that "the dispute mostly surrounded a very large trust set up by one of the founders of IBM for the benefit of his descendants and whether the adoptee-lover of a descendant could gain a share of the trust (worth huge bucks).  The Court said she was indeed part of the trust beneficiary class.  This adoption was one of two case studies I used in my latest article to show why someone might wish to adopt one’s lover or spouse.  States go both ways in allowing the adoption of an adult lover or spouse.  Despite its liberal leanings, for example, New York State, by common law, currently does NOT allow adult adoption of lovers or spouses, though the cases have flip-flopped over time.  Most states do, however."

Terry's article, Scalia's Ship of Revulsion Has Sailed: Will Lawrence Protect Adults Who Adopt Lovers to Help Ensure their Inheritance from Incest Prosecution?, is available on SSRN.  Here's the abstract:

There is a growing trend in this country - startling to many - of adopting one's adult lover or spouse for various reasons, mostly inheritance-based. Should one who adopts his or her adult lover or spouse be prosecuted for incest? Think about it: the person is having sexual relations with his or her legal child. Is that not incest? Even if a state agrees that it is, will Lawrence v. Texas now protect this behavior, preventing these people from being successfully prosecuted for this type of incest? Indeed, given its prevalence in modern society, will this be the first post-Lawrence individual sexual privacy rights case to which the Court will grant a writ of certiorari?

In no less than four instances, Justice Scalia in Lawrence warned that adult incest can no longer be outlawed by state or federal governments: with the decision in Lawrence, Justice Scalia lost his incest repellant (i.e., Bowers). Others have echoed Justice Scalia's sentiments. Since the Court's decision in Lawrence, the median viewpoint among legal scholars seems to be that incest is the next battle. It appears that neither Justice Scalia, nor legal scholars realize that the parade of horribles - with adult adoption of lovers leading the band - has already started. It has started with a whimper, though, and not a bang. It has not begun with what is considered "core" incest (sexual relations between biological parents and children or between biological full siblings), but instead with a growing set of behavior classified in many states as incest - sexual relations between an adult who adopts his or her lover or spouse where no parent/child relationship ever existed between the two (a subset of "non-core" incest that also includes sexual relations between distant relatives such as cousins).

For some time now adults - both heterosexual and homosexual - have been adopting their lovers and spouses all over the country for various reasons: to better guarantee the adoptee's right to inherit directly from the adoptor; to keep collateral relatives from having standing to contest the adoptor's estate plan; or to add a loved one to a class of trust beneficiaries (allowing the adoptee to inherit "through" the adoptor). It appears that, post-Lawrence, both the academy and the judiciary have completely overlooked this steadily growing, albeit stealthy, trend.

I wonder if both sides are scared to go to war? Are they scared to engage fully in a prosecution for this type of incest, only to be rebuffed by a Lawrence-based constitutional defense? The stakes are extraordinarily high. If a constitutional challenge to a prosecution for incest of an adult who adopted a lover where no parent/child relationship ever existed were successful, it would likely validate at least some, and possibly all, of Justice Scalia's anxious Lawrence dissent, and the whole house of sexual-crime cards could well fall with it: not only for this strand of incest laws, but also for laws addressing "core" incest, adultery, bestiality, masturbation, fornication, bigamy, and possibly ending with the brass ring of same-sex marriage. Though no one seems to realize it right now, the outcome of this upcoming battle might well impact millions of American lives.

It seems to me that, on balance, the stronger legal arguments favor constitutional protection against criminalization of sexual relations with one's adopted adult lover where no prior parent/child relationship ever existed, i.e., Lawrence protection for this non-core behavior. I suspect that with the right set of facts, the right proponents, and a Court that takes Lawrence at its word, incest laws as they relate to adult adoption of these lovers will fall, and fall relatively soon. My view is that incest statutes may survive a facial attack under Lawrence, but should fall in a challenge as-applied to the non-core incest scenarios addressed in this Article.

An adult who adopts his or her lover (neither ever having been in an adult/child relationship) would seem ripe for protection under Lawrence. This is happening with enough frequency that surely multiple cases will emerge over the next few years, very likely yielding differing results. This would make this issue primed for the Court to grant certiorari sooner rather than later, quite possibly the first post-Lawrence case down Justice Scalia's Teflon-coated slope. If, as I expect and hope, Lawrence is extended to protect against criminalization of this behavior, opponents and supporters will, in time, look back at this issue as the catalyst that spread the Lawrence wildfire. How much of the personal sexual privacy landscape that becomes enveloped by the protection of Lawrence is anyone's guess, but perhaps no post-Lawrence legal issue is presently riper for review, making adult adoption of lovers the stealth bomber that Justice Scalia should fear the most.

Ben Barros

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August 3, 2009 in Recent Cases, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 1, 2009

What’s At Stake in Stop the Beach Renourishment

800px-Destinflorida As I noted a couple of weeks ago, the Supreme Court recently granted cert in Stop the Beach Renourishment v. Florida Department of Environmental Protection.  The cert petition presented three questions, but the case will likely center on the first:

The Florida Supreme Court invoked “nonexistent rules of state substantive law" to reverse 100 years of uniform holdings that littoral rights are constitutionally protected. In doing so, did the Florida Court's decision cause a ''judicial taking" proscribed by the Fifth and Fourteenth Amendments to the United States Constitution?

This case gives the Court the opportunity to answer one of the great open questions in takings law:  when, if ever, can a judicial decision constitute a taking of private property in violation of the Fifth Amendment’s Just Compensation Clause?  There is a widespread assumption among many property professors that the answer to this question is “never.”  After all, we teach cases like Matthews v. Bay Head, where the Supreme Court of New Jersey appeared to alter the state’s property law to allow public access to beachfront property that had previously been private.  There is little doubt that if the legislature had required the same access it would have been a per se taking (see, e.g., Nollan, Loretto, Kaiser Aetna).  But because the judiciary, rather than the legislature, made the change, there is a sense that the takings problem somehow disappears.

The Supreme Court has not squarely addressed the judicial takings issue, although there is some precedent from early substantive due process cases that might help the petitioners in Stop the Beach.  The issue has also been addressed in some more recent concurring and dissenting opinions, and was raised at least by implication in Webb's Fabulous Pharmacies v. Beckwith.  One of the most important statements on judicial takings by a member of the Court is the following passage from Justice Stewart’s concurrence in Hughes v. Washington:

Surely, it must be conceded as a general proposition that the law of real property is, under our Constitution, left to the individual States to develop and administer.  And surely Washington or any other State is free to make changes, either legislative or judicial, in its general rules of real property law, including the rules governing the property rights of riparian owners. . . . To the extent that the decision of the Supreme Court of Washington on [the property issue in dispute] arguably conforms to reasonable expectations, we must of course accept it as conclusive.  But to the extent that it constitutes a sudden change in state law, unpredictable in terms of the relevant precedents, no such deference would be appropriate.  For a State cannot be permitted to defeat the constitutional prohibition against taking property without due process of law by the simple device of asserting retroactively that the property it has taken never existed at all.  Whether the decision here worked an unpredictable change in state law thus inevitably presents a federal question for the determination of this Court.

389 U.S. 295-97 (1967) (Stewart, J., concurring). 

Both Hughes and Stop The Beach involve the doctrine of accretion, which at common law gave ownership of land that was gradually deposited by the ocean to the beachfront property owner.  In Hughes, however, the beachfront land had been owned and conveyed by the United States before Washington became a state.  The Court therefore held that the issue of accretion was governed by federal rather than state law, and concluded that, as a matter of federal common law, the accreted land was owned by the beachfront owner.

This issue of prior federal ownership is not present in Stop The Beach, where the Florida Supreme Court (over vigorous dissent) held that as a matter of Florida law, the beachfront owner did not have a property right in the accreted land.  The petitioners argue that the Florida Supreme Court’s holding was contrary to more than a century of precedent, and therefore constituted an unconstitutional judicial taking of the beachfront owners’ property rights.  I have not read the prior Florida caselaw, but from reading the briefs on cert and the opinions in the Florida Supreme Court, I think that the petitioners make a good case that the Florida Supreme Court’s decision represents a radical departure from its prior law.  I seriously doubt that the Court would have granted cert it had been able to find precedential support for the Florida Supreme Court’s position.  It is also notable, though perhaps not directly relevant, that the Florida Supreme Court’s position is contrary to the U.S. Supreme Court’s statement of the common law in Hughes.

Stop The Beach therefore appears to squarely and cleanly present the judicial takings issue.  Below are some thoughts on how the case might play out and what’s at stake for the larger law of regulatory takings.  First a word of disclosure – I’m on the record (albeit in my student note) as favoring Supreme Court review of state court property decisions under a judicial takings theory.

(1) There are two different ways in which the judicial takings issue can present itself.  First, a state legislature might pass a law that appears to take property rights.  In deciding a takings challenge to the statute, a state court might hold that the claimed property rights did not exist, and reject the takings challenge because there was nothing to take.  Second, in a case brought by private litigants, a state court might make a major change to the state’s existing property law.  Matthews v. Bay Head is an example of the second type of case.  Stop the Beach is an example of the first – the underlying litigation was about provisions of Florida’s Beach and Shore Preservation Act, and the Florida Supreme Court insulated the Act from constitutional problems by holding that there was no protected private property interest to be taken.  There isn’t much of a theoretical basis for a distinction between the two categories, but the Supreme Court’s prior caselaw might be marginally more applicable to the facts in Stop the Beach because of the legislature’s involvement.  As Buzz Thompson has noted, the Court has held in cases such as Muhlker v. New York & Harlem Railroad, 197 U.S. 544 (1905) that it can review a state court’s property rights determination “where a property holder challenge[s] a legislative or executive action as a taking and the state court ha[s] ruled that there was no property to take.”  Barton H. Thompson, Jr., Judicial Takings, 76 Va. L. Rev. 1449, 1467 (1990).  The Supreme Court recently noted in Lingle v. Chevron that it can be problematic to rely on early substantive due process cases as precedent in contemporary regulatory takings cases, but I would expect cases like Muhlker to come into play in Stop the Beach.

(2) I would guess that Justice Scalia was instrumental in obtaining the cert grant.  I predict that the Supreme Court will find a taking in Stop the Beach and that Justice Scalia will write the opinion of the Court.  This, of course, is speculation, but it is informed speculation.  Justice Scalia has argued in the past that the Court should take up the judicial takings issue.  In a lengthy dissent (joined by Justice O’Connor) from a denial of cert in Stevens v. City of Cannon Beach, 510 U.S. 1207 (1994), Justice Scalia wrote:

As a general matter, the Constitution leaves the law of real property to the States. But just as a State may not deny rights protected under the Federal Constitution through pretextual procedural rulings, see NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 455-458, 78 S.Ct. 1163, 1168-1170, 2 L.Ed.2d 1488 (1958), neither may it do so by invoking nonexistent rules of state substantive law. Our opinion in Lucas, for example, would be a nullity if anything that a state court chooses to denominate “background law”-regardless of whether it is really such-could eliminate property rights. “[A] State cannot be permitted to defeat the constitutional prohibition against taking property without due process of law by the simple device of asserting retroactively that the property it has taken never existed at all.” Hughes v. Washington, 389 U.S. 290, 296-297, 88 S.Ct. 438, 442, 19 L.Ed.2d 530 (1967) (Stewart, J., concurring). No more by judicial decree than by legislative fiat may a State transform private property into public property without compensation. Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 164, 101 S.Ct. 446, 452, 66 L.Ed.2d 358 (1980). See also Lucas, supra, 505 U.S., at 1031, 112 S.Ct., at 2901. Since opening private property to public use constitutes a taking, see Nollan v. California Coastal Comm'n, 483 U.S. 825, 831, 107 S.Ct. 3141, 3145, 97 L.Ed.2d 677 (1987); Kaiser Aetna v. United States, 444 U.S. 164, 178, 100 S.Ct. 383, 392, 62 L.Ed.2d 332 (1979), if it cannot fairly be said that an Oregon doctrine of custom deprived Cannon Beach property owners of their rights to exclude others from the dry sand, then the decision now before us has effected an uncompensated taking.

I suspect that Justice Scalia has been looking for a suitable judicial takings case ever since.  The petitioners in Stop the Beach note that at least 15 cases have sought cert on the judicial takings issue.  I would guess that many of those previous cases had various problems with them that made them poor cert candidates.  This is one reason why I think that the Court (or some members, at least) were reasonably confident that the Florida Supreme Court opinion is not supported by prior Florida law – I don’t think they would have granted cert otherwise.

(3) The sentence referencing Lucas in Justice Scalia’s Cannon Beach dissent helps to explain how the judicial takings issue fits into the Court’s larger regulatory takings jurisprudence.  In Lucas, the Court held that a severe limitation on property rights that would constitute a per se taking would only be constitutional if the state’s background law of property or nuisance established that the property owner had no property rights to begin with.  I have heard anecdotally that some state courts have been aggressive in using the background principles of state law exception to defeat takings claims, perhaps going to the extent of creating such background principles out of what Justice Scalia terms “nonexistent rules of state substantive law”.  Note, by the way, that the cert petition in Stop the Beach quotes this language in describing the Florida Supreme Court’s action.  If the Court holds that such a judicial reformulation of property rights is unconstitutional, then it would place a practical limit on state courts’ ability to use the background principles exception to defeat takings claims.

(4) It should be obvious that accepting the idea of judicial takings would put the Supreme Court in the awkward position of reviewing a state court’s decisions on the substance of state property law.  I doubt that the Court, if it accepts the idea of judicial takings, would defer to a state court’s characterizations of their own decisions – to do so would be to replace the “stupid staffer” that Justice Scalia referred to in Lucas with the stupid law clerk or stupid state court judge.  So the Court would need to review the state court’s analysis to see if it was supported by precedent.  I expect that the Court would only find a judicial taking if the state’s prior law was remarkably clear and that the court decision under review represented a clear departure from that precedent.  Otherwise, the Court risks becoming the court of last resort in any state law property case.

(5) I worry that a decision in favor of the petitioners in Save the Beach will contain some language that can be read to place a broad limit on states’ ability to reform their property law.  Justice Stewart was clear in Hughes that this was not the result that he had in mind:  “surely Washington or any other State is free to make changes, either legislative or judicial, in its general rules of real property law . . . .”  The easiest way to avoid this problem in Stop the Beach would be to simply hold that the judiciary cannot achieve through deciding a case what the legislature cannot do by statute.  The Court’s current caselaw is clear that the legislature cannot transfer private property to public ownership without compensation, and this is what happened in Save the Beach if petitioners’ factual claims are accurate.  This transfer of ownership to the public might be a good way to distinguish between judicial alterations of property law that are takings and those that are not.  Beach access cases come up all the time in the judicial takings literature because they tend to present issues of public ownership or public access.  Similarly, the property reform that was invalidated in Hodel v. Irving involved a statute that escheated certain property interests to the government.  In Lucas, the ability to build on the property was destroyed outright, not transferred to another person.  In contrast with these types of scenarios would be cases that involved alteration of property rights between private parties.  Statutes and judicial decisions alter, and sometimes destroy, property rights all the time.  This does not seem to present a takings problem when the result is that one private party owns the property rather than another private party.  For example, the abolition of the fee tail in many states destroyed the reversionary right in the original owner, effectively transferring that right to the holder of the present interest.  Alterations in almost any part of property law, and many alterations in other areas such statutes of limitations and the law of contracts, can result in A owning a particular property rather than B owning that property.  It would be a big problem if stray language in a Supreme Court case raised questions about states’ ability to make these basic changes to the law.

(6) I wonder about procedural issues if the Court allows judicial takings claims.  Will litigants have to litigate these issues in state court, and rely on cert petitions to remedy judicial takings, or will litigants be able to bring takings claims against the states based on judicial decisions in the lower federal courts?  I’m not an expert on Williamson County and San Remo, and don’t know how those cases might impact the issue.

(7) There are two other questions presented in the cert petition that might be wild cards:

Is the Florida Supreme Court's approval of a legislative scheme that eliminates constitutional littoral rights and replaces them with statutory rights a violation of the due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution?

Is the Florida Supreme Court's approval of a legislative scheme that allows an executive agency to unilaterally modify a private landowner's property boundary without a judicial hearing or the payment of just compensation a violation of the due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution?

I read the first of these questions as raising a substantive due process claim and the second as raising a procedural due process claim.  I’m not sure how these might play out, though I note that Justice Kennedy has expressed sympathy for due process arguments in the takings context – see, for example, his concurrence in Lingle.

(8) Here’s my guess on how the case comes out:  5-4 in favor of petitioners; opinion of the Court by Justice Scalia, joined by the Chief Justice and Justices Kennedy, Thomas, and Alito.  [UPDATE:  I am fully aware of the Court's procedures for allocating writing assignments for majority opinions; my point in predicting that Justice Scalia will author the majority is that I think he has something that he wants to say in this case, and that he might try to seek out the writing assignment in this case].  Possible concurrence on due process grounds by Justice Kennedy.  Justices Stevens, Ginsburg, Breyer, and Sotomayor if confirmed, dissenting, with Justice Stevens especially likely to write.  This may be a case where the replacement of the moderate-conservative Justice Souter with the moderate-liberal Judge Sotomayor might make a difference in the voting, if not in the outcome.  Unlike earlier liberal justices like William Brennan (see, e.g., his dissent in San Diego Gas and Electric), the liberal wing of the current Court has rarely expressed much sympathy for regulatory takings claims.  Justice Stevens, of course, dissented in Penn Central, but has been the leader of the anti-regulatory takings wing of the Court since at least the mid-1980’s.

(9) If you are new to the judicial takings issue, here are four articles to read:  (a) Buzz Thompson’s article in the Virginia Law Review mentioned above – it is the classic on the subject; (b) David Bederman’s The Curious Resurrection of Custom:  Beach Access and Judicial Takings, 96 Colum. L. Rev. 1375 (1996); (c) Roderick Walston’s The Consitution and Property:  Due Process, Regulatory Takings, and Judicial Takings, 2001 Utah L. Rev. 379; and (d) David Sarratt’s Judicial Takings and the Course Pursued, 90 Va. L. Rev. 1487 (2004).

Ben Barros

Photo of Destin, Florida beach via Wikicommons

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July 1, 2009 in Recent Cases, Takings | Permalink | Comments (6) | TrackBack (1)

Saturday, May 30, 2009

More on Conwell v. Grey Loon

Thanks Ben, for asking me to share my thoughts on Conwell v. Grey Loon Outdoor Marketing Group, Inc. While Eugene Volokh describes it as “not the sexy sort of cyberlaw, I get tired of teaching “sexy” cases dealing with Playboy and various porn sites. But seriously, cases like this one are great teaching tools for that first part of the Property course when students wonder why we spend so much time talking about whether rights are “property” rights or not. This case also demonstrates that judges and lawyers really need to talk to people in the technology world to find out exactly what a web site is.

The plaintiffs in Conwell hired Grey Loon to design and host a web site for them. Grey Loon did so, and sometime later the plaintiffs asked for modifications. After the defendant modified the web site, plaintiffs decided that they didn’t want the modified web site, but wanted the old one. Plaintiffs didn’t pay for the modifications, so Grey Loon disabled the modified web site, which it could do, because it was the web site host. The defendant did not keep a copy of the original web site, so plaintiffs were left without a web presence. Defendant claimed breach of contract and plaintiffs counter-claimed conversion, arguing that the defendant’s action in terminating access to the original web site constituted conversion of the plaintiff’s property.

Early in the opinion, it looks like the court is going to be sympathetic to the conversion claim. The opinion does a reasonable job of explaining the roles of web site designer and web site host. It also explains that the plaintiff could have used another web site host, and if it had done so, it would have had to acquire the files from Grey Loon and transfer them to the other host. Hmm, if these files had to be acquired and transferred, they must be rivalrous, right? Otherwise, couldn’t anyone just copy them?

The court’s discussion of the contract claim previews how it will go awry on the property rights issue. First, it discusses its choice of the common law of contracts over Article 2 of the Uniform Commercial Code. The court recognizes that some courts hold that mass-market software is a good, but it rejects those decisions, stating that courts that treat software as a good simply because it is contained in a tangible medium “conflate the sale of a book with the sale of its intellectual content.” Exactly wrong! A book is a good. I own plenty of books, but I don’t hold the copyright in any of them. Likewise, I am the “owner” (okay, okay, licensee, perhaps) of the copy of Word with which I am typing this. While I’m using it, no one else can. If someone removes it from my computer without my permission, I’ll be ticked off. But I don’t own the copyright in it, so I can’t make a bunch of copies of it and sell them. Does the court think that everything that is intangible is intellectual property?

Apparently so. In its conversion discussion, the court jumps right into copyright law, finding that the web site was not a work made for hire and that Grey Loon had not transferred its copyright to the plaintiffs. It then finds that the plaintiffs, who were conducting their business through their website, were merely nonexclusive licensees of that site! Simple, according to the court: the plaintiffs did not own the web site, therefore they could not sue for conversion. 

The concurrence touches upon, or more accurately brushes against, the law of conversion, recognizing that several courts have held that intangible assets, such as electronic data and internet domain names (the “sexiest” cyberlaw case of all) can be converted. As I have argued (shameless plug warning) elsewhere, these cases are not very useful because the courts tried hard to fit a specific asset into the law of conversion without discussing the main characteristic that should make an intangible asset the subject of a conversion action: its rivalrousness. Conversion is an action for the deprivation of possession of an asset; while intangible assets cannot be manually possessed, some of them, such as domain names, can be exclusively controlled.

Can a web site be exclusively controlled and therefore converted? It seems that the answer is “yes,” but I don’t know for sure. But the people involved in resolving these disputes really have to become more familiar with how emerging intangible assets are created, possessed and transferred in order to create law that will be useful to those dealing in such assets. 

Juliet Moringiello

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May 30, 2009 in Intellectual Property, Recent Cases | Permalink | Comments (3) | TrackBack (1)

Thursday, May 28, 2009

New Case on Property Rights in Web Sites

Eugene Volokh notes an interesting new case about property rights in web sites, Conwell v. Gray Loon Outdoor Marketing Group, Inc.  The opinion is available here.

Ben Barros

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May 28, 2009 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, April 2, 2009

Notice to Commercial Tenants of Eminent Domain Taking

The New Jersey Eminent Domain Blog has an interesting post on a recent decision by a New Jersey intermediate appellate court holding that a commercial tenant was not entitled to notice of eminent domain proceedings against the property.  The post is highly critical of the decision, and suggests that the issue may go up to the New Jersey Supreme Court.  I don't know enough about New Jersey law to know whether the criticisms in the post are accurate, but as a general matter this seems like a bad result.

Ben Barros

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April 2, 2009 in Real Estate Transactions, Recent Cases, Takings | Permalink | Comments (1) | TrackBack (0)

Wednesday, April 1, 2009

Supreme Court Opinion in Hawaii v. Office of Hawaiian Affairs

The Supreme Court issued an opinion yesterday in Hawaii v. Office of Hawaiian Affairs.  The case is a bit outside of my area of expertise, but might be of interest to PropertyProfs interested in landownership by indigenous peoples.  It also might be of interest to devotees of Aloha Jurisprudence

Ben Barros

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April 1, 2009 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, March 12, 2009

Fed Cir Decision in Rose Acre Farms

The Federal Circuit issued a decision in the long-running Rose Acre Farms case.  Here are the first paragraphs:

In 1992, Rose Acre Farms, Inc. (“Rose Acre”) filed the present action in the United States Court of Federal Claims, claiming that United States Department of Agriculture (“USDA” or “the government”) regulations that restricted egg sales from its farms and caused the loss of egg-laying chickens that tested positive for the presence of salmonella bacteria effected a taking requiring compensation under the Fifth Amendment. In 2003, the trial court held that Rose Acre was entitled to compensation for a taking of the eggs affected by the regulations as well as for hens seized for testing.

In our previous appeal, we held that the court misapplied the standards governing regulatory takings claims under Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). We vacated and remanded for appropriate reconsideration.  We must again decide whether the trial court correctly held that the government’s regulations, which restricted the sale of certain of Rose Acre’s eggs during the approximately two-year period, constituted a taking for which just compensation is due. As explained below, we hold that, upon a proper assessment of the Penn Central factors, the USDA did not commit a compensable taking. We therefore reverse the judgment of the Court of Federal Claims.

I need to spend more time with the opinion, but I think I disagree with the Court's discussion of the impact of Lingle on the character of the government act prong of the Penn Central test.  In any event, a very interesting opinion that really engages in Lingle's impact on takings law.

Ben Barros

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March 12, 2009 in Recent Cases, Takings | Permalink | Comments (3) | TrackBack (0)

Wednesday, November 19, 2008

Montana S. Ct. Resolves Mitchell Slough Dispute

The Montana Supreme Court resolved a long-running water rights dispute, which focused on whether the Mitchell Slough was a natural watercourse:

In a case with statewide implications, the Montana Supreme Court ruled Monday that Mitchell Slough is open to recreation under the state's stream access law.

The court said the 16-mile-long slough roughly follows the historical course of a waterway mapped 130 years ago, and therefore is subject to public access and required permitting, as are other natural waterways.

The 54-page decision overturned two earlier rulings by state district courts that found the slough was not a “natural, perennial-flowing stream. . . .

Since nearly every river and stream in Montana has been affected in some manner by man, the high court concluded: “The District Court's dictionary-based definition, which essentially requires a pristine river unaffected by humans in order to be deemed natural, results in an absurdity: For many Montana waters, the SAL would prohibit the very access it was enacted to provide.”

The Supreme Court also overturned the lower court's conclusion that the water captured by the slough in return flows from irrigation was “artificial” and “not natural,” saying that many Montana streams carry discharged irrigation flows.

The court also disputed landowners' claims the slough was a “man-made water conveyance system” that exists only because of man's manipulations.

“The claim that man has made the Mitchell Slough is a bold one, indeed,” the court's decision reads.

The court did offer a caveat on the issue of public access.

The slough runs through private property and the public only has the right to recreate under the terms of the state streamside access law, which allows access on the water and up to the ordinary high-water mark on the slough's bank, the court said.

Ben Barros

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November 19, 2008 in Natural Resources, Recent Cases | Permalink | Comments (2) | TrackBack (0)

Sunday, November 9, 2008

Never Forget The True Owner In Finding Cases

A while ago, we noted a dispute between a contractor and a homeowner about a bunch of 1920s currency found in a wall.  Classic finder v. owner of the locus dispute, right?  Well, the publicity generated by the dispute brought the true owner's descendents out of the woodwork, and they'll get a share.  Of course, the lawyers will probably get the biggest share.

Ben Barros

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November 9, 2008 in Personal Property, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Sunday, August 10, 2008

New Jersey Case Invalidating Blight Taking

Ilya Somin has the details on City of Long Branch v. Anzalone at the VC.

Ben Barros

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August 10, 2008 in Recent Cases, Takings | Permalink | Comments (0) | TrackBack (0)

Sunday, July 27, 2008

Update on the Trees v. the Solar Panels

A while back, we noted an interesting California case that involved a conflict between redwoods and solar panels.  The Times has an update on the story.  An excerpt:

More than six months after two Santa Clara residents were convicted under a state nuisance law for letting their redwoods cast shade on a neighbor’s solar panels, the governor signed into law a bill that gives trees the right to grow as they please — as long as they predate any solar panels they might be shading. . . .

The new law is not retroactive; the original conviction stands. But the neighborhood fight is not over. Mr. Vargas has gone back to civil court, suing his neighbors in part because of the solar-panel issue, but also because he claimed the trees’ roots damage an underground storm drain and because they violate state laws prohibiting spite fences.

Ben Barros

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July 27, 2008 in Land Use, Recent Cases | Permalink | Comments (0) | TrackBack (0)