Recapping Oral Argument at the Supreme Court in the Takings Case of Koontz v. St. John's

When, in the middle of just the second sentence uttered by Petitioner’s counsel, Justice Ginsburg interjected “Let’s back up…,” the parties must have known they were in for a long hour of oral argument before the U.S. Supreme Court yesterday in the takings case of Koontz v. St. John’s River Water Management District.

Two decades ago, in the matters of Nollan and Dolan, the U.S. Supreme Court declared that the government bears the burden of proving that a demand for a permanent public easement that is attached as a condition of a discretionarily-issued development permit (i.e., a permit “exaction”) bears an “essential nexus” to and is in “rough proportionality” with the adverse public impacts associated with the applied-for development to avoid having to pay compensation under the Federal Constitution’s Takings Clause. 

In most other takings contexts, the government currently is not subject to such heightened scrutiny; instead, the plaintiff bears the burden of proof in accord with an ad hoc, context-based analysis discussed in the Court’s 1978 decision in Penn Central.  As discussed in multiple posts on this blog in the past, Koontz raises two important questions regarding potential expansion of the heightened scrutiny of Nollan and Dolan:

1. whether such heightened scrutiny applies to exactions that the government proposes but the landowner refuses, such that the government denies the permit application outright; and
2. whether such heightened scrutiny applies to permit conditions beyond those that require public occupation of private lands (such as demands for conservation restrictions or the expenditure of money for mitigating measures).

At oral argument, the first issue almost completely overshadowed the second.  According to the unofficial transcript, the Justices—lead by Justices Ginsburg, Sotomayor, Breyer, and, somewhat surprisingly given his pro-property-rights stance in many prior takings cases, Scalia—peppered the landowner’s attorney, Paul Beard of the Pacific Legal Foundation, with questions regarding how his client conceivably could maintain an exaction takings claim when the water district never ultimately exacted anything.  Echoing a puzzling assertion made in Petitioner’s reply brief, Mr. Beard’s responses seemed to concede that his client did not have a federal takings claim for which he was entitled to compensation, but that, instead, his client held a state statutory right to payment because the water district proposed an “unconstitutional condition” under Nollan and Dolan. 

Chief Justice Roberts and Justice Alito dominated the questioning of the water district’s counsel, Paul Wolfson, and appeared exacerbated by Mr. Wolfson’s argument that the property owner must accept a conditional permit to be able to challenge the condition as violative of Nollan and Dolan.

Several things stood out at yesterday’s argument. I will mention four here. 

First, the argument predictably exposed deep disagreement among the Justices regarding the applicability of the Penn Central framework in permitting cases.  What is interesting, however, is that, with respect to Penn Central, Justice Breyer’s position might be considered to result in  more successful takings claims than that of Justice Scalia.  Justice Breyer suggested that the denial of a permit following a landowner’s refusal to accede to a permit condition that is not imposed on “anybody else” and “bears no relation” to the development could amount to a taking under Penn Central. Justice Scalia, however, intimated that such a condition is not relevant to a Penn Central claim, for a Penn Central claim can only succeed if the denial of a permit for some legitimate reason (here, protecting wetlands) results in a near total diminution in the value of the claimant’s property.  Regardless of this disagreement, though, both of these Justices expressed skepticism with the Petitioner’s allegation that Nollan and Dolan apply to conditions that are proposed but never issued because the permit is denied.

Second, several members of the Court posed outlandishly demanding hypothetical development permit conditions (e.g., permits conditioned on the applicant paying “one million dollars,” “building a football stadium,” or handing over “the moon”).  Yet these hypotheticals came off as so far removed from the facts of this case and, more generally, the day-to-day workings of modern permitting programs that their import moving forward lies in some doubt.  On the agreed-upon Koontz facts, the landowner admitted that the wetlands destruction that would result from his development would need to be mitigated under Florida law, yet he rejected half-a-dozen mitigation options offered by the water district and failed to pose any alternatives of his own beyond agreeing not to fill the wetlands that he did not ask for permission to fill.  As Justice Sotomayor remarked, “From the record it’s very clear that a conservation offer is not considered mitigation because there’s still a net loss of wetlands.”

Perhaps more importantly, though, these rather bizarre hypotheticals served to draw a distinction between viewing the Takings Clause as affording (a) some type of a punitive damage remedy for extortionate government conduct, and (b) as the Court unanimously concluded in the 2005 Lingle case, just compensation for what otherwise is a perfectly proper regulatory act. 

Third, the United States appeared as amicus curia in support of the water district.  However, Deputy Solicitor General Edwin Kneedler seemed to offer a significant concession to the landowner.  Mr. Kneedler suggested that a proposed exaction would trigger Nollan and Dolan scrutiny if the permit denial explicitly mentions the applicant’s refusal of that condition as a justification for the denial.  Even if the denial did explicitly mention the applicant’s refusal of one particular condition (the parties disputed this fact, opening the door to the possibility—however unlikely—that the case will be dismissed as improvidently granted), the water district likely would disagree that anything was taken.  It would seem that in such an instance the denial occurred not because of the refusal of that proposed condition but rather because of the wetland impacts of the proposed development.

Fourth, as I advocated on this blog on Monday, at least several Justices took a significant step back from the assertion in the Court’s unanimous December 2012 decision in Arkansas Game that “the sky [will] not fall” on government regulators with continued expansion of takings protections. For instance, Justice Sotomayor noted, “I see an enormous flood gate here [if we conclude that proposed exactions are subject to Nollan and Dolan scrutiny], … in which we [would be] sending a signal that perhaps States should be more quiet than engaging.”

***

On the whole, I see the day as a moderate victory for the water district, particularly in light of Justice Scalia’s apparent aversion to the landowner’s position.  But while Lyle Denniston at SCOTUSblog found the argument heavily tilted in the water district’s favor, I am more cautious about whether the argument sheds great light on how the Court ultimately will decide the case.   Justices Ginsburg and Sotomayor came across as the most sympathetic to the water district’s position, while Chief Justice Roberts and Justice Alito seem most likely to align with the landowner.  Yet Justice Thomas characteristically did not ask any questions, and the other Justices’ questioning did not in my estimation definitively tip their hands. 

On the first issue before the Court, the argument offered the possibility of a highly fractured decision, not only for the reasons discussed above but also because several Justices seemed open to reviewing the type of government action posed here under the Equal Protection or Due Process Clauses, as opposed to the Takings Clause.  If the government prevails on the first issue, it is not evident that the Court even will reach the second, which, as noted at the top of this post, received scant attention at the argument.

The only thing that seems absolutely clear from yesterday’s oral argument in Koontz is that both property rights advocates and proponents of reasonable land use regulation will be on the edge of their seats awaiting the release of the Court’s decision this spring.  A decision is expected by June.  Please stay tuned to the Environmental Law Professors Blog for updates and analysis on this important takings case.

-Tim Mulvaney ([email protected])