Koontz: 5-4 Supreme Court Sides with Landowner in Takings Case

This morning, the U.S. Supreme Court issued a divided decision in Koontz v. St. John’s River Water Management District that expands Takings Clause protections for landowners.  I raised the possibility last October that the case could serve as a vehicle for the Court to provide some sense of clarity to the field of takings jurisprudence that would benefit both landowners and government regulators alike, yet it appears on my first read of the 5-4 opinion that the Court has failed in this regard.  Moreover, while the decision is undoubtedly a victory for proponents of a conception of property grounded in individual autonomy and control, there may be some silver lining for those who understand property as a socially contingent institution. 

In this post, I will provide some background on the Court’s decision, address some unanswered questions surrounding the Court’s expansion of takings protections, identify some potential points of hope in the opinion for proponents of sensible land use regulation, and offer some brief commentary on the vision of government officials espoused by the majority.

Background on Today’s Decision

Local governments routinely attach conditions, or “exactions,” to development permits in an effort to address the environmental and infrastructural impacts of individual projects. However, to protect landowners from exactions that are either unrelated or disproportionate to the problems caused by their proposed development, the U.S. Supreme Court curtailed the exercise of this power in its conveniently rhyming Nollan and Dolan decisions by establishing a constitutional takings framework unique to exaction disputes. Under this peculiar framework, it is the government—as the defendant— who has the burden of proving that a challenged exaction bears both an “essential nexus” to and “rough proportionality” with the development’s impacts.

Today’s case involves a Florida landowner, Coy Koontz, who hoped to construct a commercial shopping center on his 14.2-acre lot. A discretionary permit from the regional Water Management District was necessary because nearly all of Koontz’s property lies within a protected hydrologic basin.  Construction of the shopping center would require the destruction of 3.4 acres of protected wetlands and 0.3 acres of protected uplands.  In his application, Koontz offered to “mitigate” the wetland loss by preserving the remaining undeveloped portion of his property in its natural state through a conservation easement. 

That the District found Koontz’s self-proposed “mitigating” condition inadequate is quite unremarkable, given that Florida law is premised on avoiding net wetland loss.  While the District could have exercised its authority to deny Koontz’s application outright at that point, it instead identified several possible conditions—including reducing the size of his development or funding offsite wetland improvements—that, if accepted by Koontz, could allow for the development to proceed. Moreover, the District left the door open for Koontz to propose other conditions to offset the wetland loss. 

Koontz, however, refused the District’s proposals and chose not to offer any of his own.  Therefore, the District ultimately denied Koontz’s development application.  Koontz then alleged that the District’s proposed conditions were unconstitutional in light of Nollan and Dolan, even though those conditions were never actually imposed upon him and did not, as was the case in Nollan and Dolan, require public occupation of Koontz's real property.

At the appellate level, Koontz prevailed on the theory that the Nollan/Dolan framework (1) is applicable at the point in time when an exaction is merely proposed, and (2) applies to exactions beyond those that require public occupation of private lands.  The Florida Supreme Court reversed, and, last fall, the U.S. Supreme Court granted Koontz’s petition for certiorari.

In today’s opinion authored by Justice Alito, a five-Justice majority reversed and remanded to the Florida Supreme Court.  Largely agreeing with the state appellate court, Justice Alito wrote that (1) the heightened scrutiny of Nollan and Dolan is applicable at the point in time when a condition is merely proposed, even if the permit ultimately is denied; and (2) Nollan and Dolan apply to conditions beyond those that require public occupation of private lands to include conditions that would require the applicant to fund offsite mitigation. 

In dissent, Justice Kagan, joined by Justices Ginsburg, Breyer, and Sotomayor, agreed with the majority that Nollan and Dolan apply not only upon the issuance of a permit conditioned on the owner’s conveyance of a property interest but also when the government denies a permit until the owner conveys a property interest.  However, Justice Kagan forcefully disputed whether any particular condition actually had been proposed here and, even assuming one had, admonished the majority for subjecting conditions requiring the payment of money to Nollan and Dolan, for doing so sets up a situation where lower courts will struggle to distinguish between takings and taxes/fees.

More Muddling of Takings Law

The majority opinion did not provide any guidance on the contours or applicability of the traditional Penn Central framework in permitting cases that fall outside of Nollan and Dolan, and only confused and complicated matters regarding where and when Nollan and Dolan apply.  Here are four examples:

First, the entire Court conceded that no property actually was taken from Koontz and that he therefore is not entitled to just compensation in accord with the Fifth Amendment.  The majority offered that the potentially unconstitutional act here is the government’s “impermissibly burden[ing] the right not to have property taken without just compensation,” but did not discuss what remedy, if any, might be available to a claimant who successfully argues that a proposed exaction does not pass Nollan and Dolan muster. 

(Though not discussed in today’s opinion, the District ultimately issued the permit conditioned only on Koontz’s original, self-proposed conservation of 10.5 acres.  The state appellate court concluded that Koontz was entitled to approximately $400,000 in compensation for lost rents over the period of time between the denial of his original development application and the issuance of the permit.)

Second, the majority acknowledged that some proposed conditions might not be “concrete and specific” enough “to give rise to liability under Nollan and Dolan,” but did not remark on which types of proposed conditions might fit this bill.

Third, the majority said that since the landowner wanted to build a shopping mall on 3.7 acres and one of the government’s proposed conditions was to reduce the size of the mall to 1 acre, the “government benefit” at issue was a “permit to build on … 2.7 acres.”  Justice Alito did not explain why the claimant should be the one to determine the baseline property interest at stake.

Fourth, responding to a concern raised by the dissent, the majority asserted that it has “had little trouble distinguishing between” the power of taxation/fee-imposition and the power of eminent domain.  This claim does not bear out in Supreme Court case law, according to property scholars from markedly different corners.  Moreover, lower courts in some jurisdictions routinely identify as taxes or fees impositions that other jurisdictions consider to be takings.

Silver Lining

There is little doubt that today’s decision will constrain government’s ability to promote some responsible development while ensuring that the public health, public safety, and environmental impacts of new, intensified land uses are equitably born by its developers and users.  Burdening governmental entities with possible takings liability for statements made during pre-decisional negotiation sessions is nearly certain to place a significant chilling effect on regulator-landowner coordination.  Governmental officials may be forced into uncommunicative rejections or unconditioned approvals of development applications when a more amenable compromise may have been available.  As Justice Kagan wrote in dissent, “If every suggestion could become the subject of a lawsuit under Nollan and Dolan, the [District’s] lawyer can give but one recommendation: Deny the permits, without giving Koontz any advice—even if he asks for guidance.”

However, proponents of sensible land use regulation can take some solace in several aspects of the Court’s opinion.  For instance, on a general level, the majority fully endorsed the state’s interest in protecting against wetland loss and acknowledged that “[i]nsisting that landowners internalize the negative externalities of their conduct is a hallmark of responsible land-use policy.”  These types of statements arguably bode well for the constitutional fate of environmental regulations moving forward. 

More specific to this case, the majority did not decide whether the District’s proposed conditions actually fail to comport with Nollan and Dolan's demands, only that they are subject to those demands (so long as, apparently, the proposed conditions are “concrete and specific” enough).  That the proposed conditions here seemingly result in, as explained in more detail below, a net loss of wetlands offers the Florida Supreme Court a clear path to rule against the landowner on the merits on remand. 

A Certain Vision of Government

The Court’s decision offers a vision of governmental permitting officials as powerful, strategic extortionists.  For instance, the majority, without citing empirical support, referred to the prospect of permitting officials attempting to “circumvent Nollan and Dolan,” “maneuver,” “coerce,” “evade,” make “extortionate demands,” “leverage its legitimate interests,” and “pressure [applicants] into doing [something].”  However, there, of course, is a competing narrative—one long espoused in Takings cases by the likes of former Justices Brennan, Blackmun, and Stevens and regularly asserted in legal scholarship critical of public choice theory—that suggests these officials are not only quite capable of acting but regularly do act in pursuit of the common interest. 

Given the perspective offered by Justice Alito, it seems appropriate to acknowledge its flipside: it is possible—and there is at least some anecdotal evidence to support the idea—that local governmental entities can be overwhelmed by the power of developer interests in certain circumstances.  In this light, while the SCOTUS considered in Koontz whether the Water District asked for too much in wetlands mitigation, it is seems quite possible that the Water District may not have asked for enough. 

Demanding that Koontz conserve 13.2 wetland acres in exchange for destroying 1 acre of wetlands does not “mitigate” the wetland impact but instead results in a net wetland loss. To actually mitigate the destruction of one wetland acre (upon which development is otherwise prohibited), it seems more appropriate that the government demand that an applicant: (1) create a certain multiple number of acres of new wetlands; (2) restore degraded wetlands; (3) enhance the functionality of existing wetlands; or (4) place a conservation restriction on valuable upland wetland buffers or wetlands that for some reason are not protected by existing law.

Of course, if there were a concern that a project might result in an external impact but the government chose not to consider an exaction to offset it (and instead simply chose to issue the permit), current exaction takings law seemingly places no limits on such governmental inaction, despite the ill-effects suffered by the neighbors and nearby residents of the development site and the workers and those who recreate in its vicinity.  But it seems worth asking why we are so focused on what the protesting landowner lost but hardly at all on what the public has lost.  In other words, it seems worth considering not only whether the government has, in Justice Holmes immortal words, gone “too far” in serving the public interest but also whether it has gone far enough.

-Tim Mulvaney ([email protected])

UPDATE, 6/27/13:  Ilya Somin praises the Court’s decision on The Volohk Conspiracy.  Meanwhile, Rick Hills (buttressed by a comment from exaction takings guru Mark Fenster) and Eduardo Penalver are quite critical of the decision on Prawsblawg, as is John Echeverria in a New York Times op-ed.  Somin responds to Hills here.