Fifth Circuit Deals with Viewpoint Discrimination in Texas License Plate System

state license platesTexas Division, Sons of Confederate Veterans v. Vandergriff, 2014 WL 3558001 (5th Cir.) involved the rejection of Plaintiff’s specialty license plate design application (which includes the Confederate Battle Flag) submitted to Defendants, the Chair and Motor Vehicle Board of Texas. In addition to publicly-issued license plates, Texas allows private vendors to propose plates to the Board and specifically allows nonprofit organizations to propose plate designs.  The Board may deny the design if it “may be offensive to any member of the public.”  The Sons of Confederate Veterans (SCV) had its license plate design rejected because of the association of the Confederate flag with hate and hate groups.  The Federal District Court found the Texas specialty license plate program was a non-public forum, that the denial was content-based rather than viewpoint based, and that the rejection was reasonable under the circumstances, so that a First Amendment violation did not occur.

On review, the Fifth Circuit turned first to jurisdiction, and it had previously denied relief in Henderson v. Stalder, 407 F.3d 351 (5th Cir., 2005), pursuant to the Tax Injunction Act in a case in which pro-choice advocates alleged Louisiana was engaged in allowing pro-life license plates inimical to its views.  The court distinguished Henderson and like cases when the license fees imposed were not a tax, a party (other than a taxpayer) is the plaintiff and the result will be to enrich, rather then to deplete, public coffers.  Here, SCV is not a taxpayer and the result of the litigation, if successful, would raise state revenues.  The Fifth Circuit then proceeded to review the grant of summary judgment by the trial court on a de novo basis.

The court saw the issues on appeal as: whether the speech at issue was public or private and, if private, whether the denial constituted a permissible content-based regulation or impermissible viewpoint discrimination.

The First Amendment does not regulate government speech but prohibits most government regulations of private speech.  The difference between public and private speech is determined whether a reasonable spectator would believe that the government was speaking to them.  In this case, unlike a permanent monument in a park, a license plate is temporary expression and, in this case, open for diverse expressions of viewpoints by the public agency and nonprofits.  Few would classify vanity license plates or the 350 existing specialty plates in Texas as government speech.

Having found the speech to be private, the court turned to whether the action was content, regulation or viewpoint discrimination, the latter of which is “presumptively impermissible” and, in reality, an egregious form of impermissible content discrimination.  SCV argued the views of those offended by the Confederate battle flag is no different then the many number of veterans license plates available in Texas for those who have fought in our country’s wars and the only reason the subject design was rejected was because of the viewpoint it represents.  The First Amendment was designed to protect speech from coercion over its viewpoint.  The standard used in this case “might be offensive to any member of the public” lacks any limiting sideboards and gives unbridled discretion to the Board.  The First Amendment is not met when a public entity suppresses all viewpoints on a particular subject.  A public agency may not shield the public from minority views that might be offensive to some.  Accordingly, the trial court decision was reversed.

Judge Jerry E. Smith dissented, finding no “reasonable observer” standard in the United States Supreme Court case law.  The dissent agreed that SCV had standing, notwithstanding the Tax Injunction Act and that the case could be classified as viewpoint discrimination, but the dissent also thought that the design constituted government speech.  Because the reasonable observer test was not appropriate (in large part because that standard was derived from a concurring opinion of Justice Souter in Pleasant Grove City, Utah v. Summum, 555 U.S. 467 (2009), which the rest of the court did not adopt and which the dissent felt was contradicted by other Supreme Court precedent).

The dissent agreed that four or five of the other circuits had found similar licensing programs were not “government speech” but suggested that none of the decisions deals adequately with Summum (in which the United States Supreme Court found the placement of monuments was government speech, to which the First Amendment was not applicable).  Whether the monument were financed publically or privately and installed with government permission was irrelevant.  In that event, license plates (which are mandatory) could have a program under which private persons or nonprofit organizations could engage an alternative design, subject to Board approval.  The court added:

* * *The reasoning in Summum informs that if Texas license plates would constitute government speech only if Texas has designed the plates itself, they do not lose their governmental character just because Texas accepted a privately designed message, endorsed it, and then placed it on its plates.  [Footnote omitted.]

As with monuments in public places, license plates are identified with the state governments that issue them and specialty license plates cannot exist without the state’s cooperation and offer to manufacture and sell them.  Thus the law allows Texas to choose whether it wishes to be associated with the Confederacy by others.  SCV has other means to advance its message and the state is not required to have the state embrace that message.  Confederate flags may be displayed as bumper stickers or other appendages on cars, houses, etc.  The proper analogy in this case is to monuments in public parks, rather then leafleting.

The dissent rejected the binary choice of the majority that the distinction is between government and private speech and that, if the speech be private, there can be no viewpoint discrimination so that if a driver sees an offensive license plate design, she would naturally attribute that design to the driver, rather than the state.  But in Summum, the United States Supreme Court found the government had the right to speak and express its own views in monuments, regardless of how those monuments were financed.  The association that public and private persons present at events (such as sponsorships in football games) is voluntary and meant to promote that association in the public mind.  Summum says that government need not be forced to associate with all viewpoints because it has associated itself with one.  The government may not force someone to disseminate its message (so that a state could not force a driver to have a “choose life” or “support choice” license plate), and it need not accommodate all views in license plate designs.

While this case does not, strictly speaking, relate to land use it does have importance in dealing with uses and public spaces as well as with messages that are regulated under land use law.  The dissent in this case appears to have the more cogent argument.

Texas Division, Sons of Confederate Veterans v. Vandergriff, 2014 WL 3558001 (5th Cir.)

News Update! The United States Supreme Court has granted cert in this case, now referred to as Walker v. Texas Division, Sons of Confederate Veterans. 

 

ALL THOSE YEARS

Ed Sullivan One of your faithful columnists, Ed Sullivan, is retiring after forty-five years of law practice at the end of 2014.  While he will continue to write this column for a little longer, he shares his thoughts on the evolution of Oregon land use law over that time.

I graduated from Willamette University College of Law in 1969, having come to Oregon only three years previously and knowing no one when I arrived.  Fortune directed me to Washington County, a very different place than it is now, to become an Assistant County Counsel, and in less than 18 months, County Counsel.

Fortune also smiled in giving me the Fasano v. Washington County case to brief and argue.  This case involved approval of a manufactured home park in a suburban residential area now part of Tigard.  But the case was a vehicle to ponder the way that Oregon views small area rezoning and the relationship of the comprehensive plan to land use regulation.  While the County lost the case in 1973 because the findings (which I did not write) were inadequate, the case formed a solid basis for Oregon land use planning by requiring county land use regulations and actions to “carry out” a required comprehensive plan and treating small tract rezoning as “quasi-judicial” actions, requiring hearings officers or bodies to allow the presentation and rebuttal of evidence, to avoid or reveal ex-parte contacts, and to justify their decisions by findings.  A similar case in 1974, Baker v. City of Milwaukie, required that cities align their regulations and actions to their plans as well.  I was fortunate enough to appear as an amicus curiae before the Oregon Supreme Court on behalf of the predecessors to the American Planning Association and even more fortunate to be allowed to present oral argument to the court.  These cases aligned well with the emerging Oregon planning system enacted in 1973 by SB 100.

After receiving my LL.M. in London, I entered private practice and represented applicants, opponents and local governments in many hearings and appeals.  Among those cases were persuading Clackamas County to deny its own permit for gravel mining, getting approval of the Lake Oswego water system expansion from West Linn, getting the Douglas County plan and regulations acknowledged by LCDC, and assisting Cannon Beach in the adoption of its short term rental ordinance.  I’ve also represented a number of local governments, including Oregon City for the last 25 years.

Perhaps my most unusual task was dealing with the Rajneesh sect, which came to Oregon in 1981 and sought to establish a city on the “Big Muddy Ranch” in Wasco and Jefferson Counties and managed to antagonize just about everyone.  While the land use efforts were generally successful, the other activities of that group in taking over an adjacent city, poisoning salad bars and bringing in homeless people to register to vote in sparsely populated areas, resulted in its downfall.  The offensive tactics of that group, and the reaction to them, tell us a lot about Oregon.

Besides the cases and controversies, I have been able to watch new planners and lawyers grow for over 40 years, teaching at the Portland State University School of Urban and Public Affairs and at the Lewis and Clark and Willamette law schools.  In addition, I have been privileged to serve as Chair of the Section on State and Local Government Law of the American Bar Association, Regional Vice President of the International Municipal Lawyers Association,  and have done many presentations on land use in the United States and internationally.

It has been a good run with fascinating people, places and events.  While I will end my law practice, I hope to continue to teach, write and speak, especially on land use planning issues, for as long as those efforts are useful.  Thanks for reading and commenting on this column.

Edward J. Sullivan has specialized in land use law for over 40 years and is an owner in the Portland Office of Garvey Schubert Barer.  Mr. Sullivan is a Past Chair of the State and Local Government Law Section of the American Bar Association and may be reached at 503-228-3939 or at esullivan@gsblaw.com.

 

Grab a Bowl of Popcorn and Watch the Next Segment of the Great Measure 49 Debate – Transferrable Development Credit Rules in the Works

In 2007 the voters approved Measure 49 with the effect that certain property owners were authorized to develop additional home sites on land that many thought would see no new development.  Now, DLCD is trying to breathe new life into the home approval authorizations through a transferrable development credit (TDC) program authorized under subsection 11(9) of Chapter 424, Oregon Laws 2007 (Measure 49) and ORS 94.531. According to the purpose of the draft regulations, this will enable landowners to realize the value of their Measure 49 authorizations without developing the property from which the claim arose. These programs will permit landowners, on a voluntary basis, to transfer their development interest under Measure 49 from one property (sending) to another property (receiving) at a more suitable location.  DLCD hopes these programs will reduce the adverse impact of scattered residential development on farm and forest and other resource land.

Under the proposed regulations, each county can establish its own program and DLCD will provide a model ordinance.  The new ordinance will require counties to amend their comprehensive plans to designate sending and receiving areas for the TDCs.  The regulation will require identification of approved holders of conservation easements and allow some form of third party enforcement – likely by the county or DLCD.

TDCs will be measured as one credit for each new dwelling authorized under the Measure 49 Final Order from DLCD.  But, what TDC program would be complete without a bonus provision?  Density bonuses may be available for sending properties that agree to some form of protection based on size – where a conservation easement for sending areas greater than 20 acres or a deed restriction for smaller sending areas may qualify for bonus TDCs.  Notably, a conservation easement would still allow for agricultural, forest, public parks, and conservation uses, as well as any lawyer’s favorite undefined use – “low intensity uses.”  TDC bonuses may also be available by virtue of the sending land being designated resource land, including high value farmland, high value forestland, natural areas and historic sites.

The draft regulations identify a few areas that county ordinances can designate to receive TDCs.  These include rural residential areas zoned with 5 and 10 acre minimums that would be allowed densities with minimum lots sizes of 2.5 or 5 acres, respectively.  Also, substantially developed subdivisions in resource zones could benefit from increased density.  Last, in EFU zones, TDCs could be used for the purpose of allowing a lot or parcel with two dwellings to be partitioned, subject to some limitations.  Receiving areas are to be selected to minimize conflicts with agriculture and forest operations.

DLCD will be required to sign off on an Amended Measure 49 Final Order for property owners entering into a TDC arrangement.  But, if you hold a Measure 49 authorization, beware – some Measure 49 properties may still not be eligible for designation as sending properties if they are unbuildable.  TDCs are fully transferrable but will be subject to a 10 year development clock measured from when the TDC is issued by DLCDs Amended Final Order.  Last, some regional transfer of TDCs may be allowed along the typical division – Metro, Willamette Valley, Coastal, Southern and Eastern counties of the state.

Based on DLCD’s efforts with these draft regulations, the Measure 49 debate is being rekindled and those who thought they had some certainty will again be thrown into a planning process that could include a variety of outcomes.  Perhaps resource lands will be protected, but those in rural residential areas might not be too excited to be receiving the gift.  Moreover, the bonus TDCs are certainly an enticement, and those who worked so hard to limit Measure 49 rewards may not be inclined to support additional development rights to holders of Measure 49 approvals and related TDCs.  DLCD staff’s tentative plan is to bring a recommendation for the new rules to LCDC at the January 22-23 meeting in Portland.

 

RESIDENTIAL BROKERAGE COMMISSIONS – FURTHER UPHEAVAL

HUD housing and urban developmentRecent editions of the The Seattle Times (Sunday, November 16, 2014) and the Puget Sound Business Journal (November 13, 2014) discussed a new local “disruptive” company on the residential real estate brokerage scene, Surefield.com.  The Pacific Northwest, home to Zillow.com as well as Redfin.com, is known as an innovation hub in this industry.  Surefield is an online residential real estate brokerage, which plans on dramatically undercutting the traditional 6-5% real estate commission paid by sellers (usually divided 3 or 2.5% for the listing agent and 3 or 2.5% for buyer’s agent), charging only 1.5% to sellers.

As quoted in the piece by Ben Miller, Contributing Editor of the PSBJ, David Eraker, Surefield CEO said:  “The U.S. real estate industry has been operating as a quasi-cartel for far too many years, just look at the high commission rates as proof of tacit collusion.”   While commissions have been negotiable in theory, in practice, it has been challenging to find a good broker to vary greatly from the general price range and format.

Zillow primarily provides online property information rather than brokerage services, like Redfin, which allows property listings and has its own stable of agents to work on a seller’s or buyer’s behalf.  Redfin charges 1.5% for a listing (as opposed to the traditional 3 to 2.5%) and provides full service brokerage services accompanied by its online tools.  The commissions charged buyers are less than the traditional model, and based on the price of the property.  Redfin, like some other new firms in the space, pays its agents a salary rather than a share of the broker commission.

Other entrants into the tech brokerage market include UpNest.com, which allows residential real estate brokers to bid for a listing, competing by marketing proposal and commission rates.  There are also on line brokers like Shopprop.com, which have a set discounted listing fee, less than the traditional 2.5 to 3%, and a graduated buying commission based on the number of services provided and the price.  Seattle-based Findwell.com is another entrant into the growing online brokerage field.

What’s the future of these and other online services, and how do you compare them to the traditional brokers?

In the past, one of the most important roles of the real estate agent was as gatekeeper to information about the market.  That is the most significant change.  Instead of asking your agent to locate and screen properties in the your price range and which otherwise meet your requirements, online tools now allow a buyer to view listings, filtered by price, bedrooms, location and amenities, often with interactive virtual home tours available.  The new portals, such as zillow.com, as well as sites from traditional brokerage firms, like windermere.com or johnlscott.com, have made the property search and identification process much more efficient.

Technology can also help foster competition and efficiency in selecting the agent who can assist you in the sale/purchase process.   One aspect of technology that I appreciate when I go out to dinner, stay in hotels or hire a contractor is the customer feedback/rating process.   Companies like Redfin and UpNest have internal ratings based on customer feedback.  I understand Redfin financially compensates agents who get great customer feedback.   I like that.  This screening function is helpful, but is not entirely new.   Brokers at good traditional agencies also screen agents working for them, a process I know takes place at Windermere and John L Scott.  Those that don’t perform well aren’t retained.  And as a real estate lawyer, I often get asked for and check with my colleagues about agent referrals.  It may be that with the right tools, quality will rise to the top even faster than in the past.

Is it good that there is a wider range of commissions offered?  Yes, unless you’re on the receiving side of the equation.  There are times when a property will sell itself. In those situations, having the option of selling through a low cost brokerage with minimal agent involvement makes sense. More commonly, however, the process of properly pricing, staging and marketing/showing are as important as ever for a seller.  From the buyer’s perspective, a skilled agent’s advice about the nuances of value, building issues, neighborhoods, negotiation and the buying process is also critical.   Working with smart, hard-working agents is as important as ever.   But from an agent’s perspective, commissions are coming down.   The best agents will learn to use the technological tools to become more efficient, and will find platforms which cost less from which to deliver their services.  In residential real estate, as in most of the economy, the ground rules are rapidly changing, and for the most part, consumers benefit.   Here’s to the future!

 

FLORIDA APPELLATE COURT FINDS NO TAKING OF ONE OF TWO SEPARATE TRACTS ZONED WHILE IN SINGLE OWNERSHIP

FloridaOcean Palm Golf Club Partnership v. City of Flagler Beach, 2014 WL 2217255 (Fla. App.) was an inverse condemnation act involving two tracts—one of 34 acres on which a 9-hole golf course existed and the other consisting of 2.94 acres completely surrounded by the first.  At one time, these tracts were in common ownership and used as a golf club with the smaller tract being used as a driving range.  The former owner threatened the City with a taking suit because the land use designations, in the owner’s view, were insufficient to provide a viable economic use.  To resolve the dispute, the owner entered into a Development Agreement with the city in 1989, whereby the golf course use would remain on the larger tract, which would be designated as open space, and the smaller tract would be used for condominium development for 84 units.  By its terms, the Development Agreement would remain in force until 2003.

In 1999, before any development applications were made, the original owner sold both tracts to different corporate entities in which there was the same principal.  The design of the condominium development uses were rejected on two occasions by the City.  That tract was then sold to different owners, but the purchasing entity contained many of the same principals as had an interest in the golf course property.  After the second proposal was denied in 2002 for the development of the condominium tract, the current Plaintiff, as purchaser, sought a further approval and an extension of the Development Agreement.  While the city approved the design of the proposal, it denied an extension.  The conditions placed on the design approval would not accommodate the applicant’s restaurant, pro shop and other amenities it was required to undertake according to the Development Agreement.  When the Development Agreement expired, the owners of the condo tract sought approval of yet another plan, which required the owner to purchase a 1-acre piece of land from the golf course site, which they were unable to do, so the plan lapsed.  The owners of the property originally designed for condominium development then sought to change the designation on both tracts to allow for a single-family development on both tracts to single-family residential.  The City denied the proposal and, on appeal, that decision was affirmed.

The owners of the condominium tract brought a takings claim, alleging no viable economic use of that tract could occur and that the City’s actions resulted in a partial or total taking.  At trial, Plaintiff introduced evidence to the effect that the golf course could not operate without the development of a condominium tract to support it, noting that the original golf course use never realized profit.  The golf course had closed in 2008 and the owners of that tract were unable to meet its mortgage payments so that tract was foreclosed upon and there was a $1.6 million mortgage outstanding.  As to the condominium property, there was testimony that it could not yield sufficient return that was economically feasible in the current condominium market.  The owners of that tract accused the City of rejecting its proposals as a way of “running out the clock” on the Development Agreement.

The expert testimony before the trial court focused on the economic viability of the tracts either together or separately.  Plaintiff addressed the two tracts separately due to the different ownership and uses.  Plaintiff’s expert testified that the economic viability of the golf course was untenable as it was too small to compete with nearby 18-hole golf courses, especially in such a small local market and valued the golf course tract at $170,000, assuming that the City would never re-designate that tract.  However, Plaintiff’s expert also said that if that tract were re-designated as low-density residential, it would be worth $8.125 million (as the resulting lots could be proximate to the ocean and near coastal waterway).  However, Defendant’s appraiser valued the golf course tract at $560,000 under current zoning regulations.  That appraiser admitted he had not considered whether it were economically feasible to rehabilitate and operate the now closed golf course and had no opinion as to what the difference in value would be if that tract were developed for single family use.  Defendant also presented evidence on the economic viability of the two tracts combined, notwithstanding objections to that evidence by Plaintiff.  That testimony concluded there was no appreciable difference between the two tracts as currently zoned and as zoned in the matter requested by Plaintiffs.  That appraiser also testified that a higher value would result if the owners of the two tracts would work cooperatively.  On cross-examination, the City’s expert testified the most likely development scenario was that the owners of the residential property would acquire the golf course and operate it as a loss but as an amenity to the residential use, adding that it made no economic sense for the golf course to sit idly otherwise.  That expert also testified that, given the costs already incurred, it was unlikely that the golf course would ever generate a profit.

In this non-jury trial, the judge found for the City and concluded that, whether the property was treated as a single or dual tracts, there was an economically beneficial use as a golf course, finding the losses for the last ten years were the result of the use of basis costs, which would be omitted in calculating economically beneficial use— thus, deducting interest and depreciation costs, there was a viable economic use of this tract.

Plaintiff contended the refusal to amend the plan in 2008 constituted a total taking of the golf course tract and that there was no competent substantial evidence to support a contrary conclusion because Defendant’s appraiser treated the two tracts as a single unit.  The Court turned first to the “relevant parcel,” i.e., to determine of the two tracts in this case should be treated as a single economic unit.  The Court used three factors to make that determination: physical contiguity, unity of ownership, and unity of use.  In addressing the unity of use issue, the Court considered

(1) intent of the owner, (2) the adaptability of the property, (3) the dependence between parcels, (4) the highest and best use of the property, (5) zoning, (6) the appearance of the land, (7) the actual use of the land, and (8) the possibility of tracts being combined in use of the reasonably near future.

(citing Town of Jupiter v. Alexander, 747 So. 2d 395, 400 (Fla. App. 1998)).

While the condominium and golf course tracts are two legally distinct lots and were both now undeveloped and unoccupied, there was a rebuttable presumption of separateness.  However, in this case, the unity of use rebutted that presumption, noting that the two tracts were one historically until 1989 when the Development Agreement first treated them as two tracts.  For development purposes, even after they were made separate, the two tracts were developed symbiotically.  The Court also noted that though the two tracts were in different ownership, principals in both had a substantial overlap.  Finally, there is a physical contiguity of the two tracts (the residential tract being within the golf course).  The presumption of separateness that thus has been rebutted and the Court upheld the analysis by Defendant’s appraiser which treated the tracts as one in concluded that Plaintiff was not deprived of all viable economic use.

The Court agreed that a regulatory taking could result from a public agency refusal to reclassify property, particularly in the light of changed conditions, but noted that the character of the area surrounding these uses has not changed.  All that changed was the real property market for golf courses.  There is no requirement that a public agency guaranty a profit for a landowner faced with a changing market.

Nor did the Appellate Court find grounds for a partial takings claim in the application of the three-factor test of Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).  Plaintiff admits it did not meet the investment-backed expectations factor as it had purchased the tract with knowledge of its land use designation, but argued that the other two Penn Central factors weighed in favor of a partial taking.  The Court disagreed, for while the third factor, the character of the governmental action, favored Plaintiff because the burden of the regulation fell disproportionately on Plaintiff, the first factor, the economic impact of the regulation, was not met because, as the Defendant’s appraiser concluded, the two tracts, taken together, retained an economically beneficial use.  Thus, the Trial Court dismissal of the inverse condemnation claim is affirmed.

This case illustrates the point that a Court will not find a regulatory taking by focusing on a single tract if that parcel is really part of a larger parcel and no regulatory taking exists against the parcel as a whole.

Ocean Palm Golf Club Partnership v. City of Flagler Beach, 2014 WL 2217255 (Fla. App.)

 

New FCC Rules on Modifications to Wireless Facilities

Wireless TowerOn October 21, 2014, the Federal Communications Commission (the “FCC”) issued new rules addressing modifications of “wireless facilities.”  The new rules have not yet been published in the Federal Register and will not become effective until 90 days after they are published, so there is some time before they take effect, but wireless providers, neighborhood activists and local governments should be aware of the impact of the new rules.

The entire order is over 150 pages long (although the rules themselves only extend for 10 pages) and is intended to implement a 2012 Federal statute that required the following:

“A state or local government may not deny, and shall approve, any eligible facilities request for a modification of an existing wireless tower or base station that does not substantially change the physical dimensions of such tower or base station.”

The statute provided little further guidance, leaving that to the FCC, which has now set out how local governments must address modifications to existing wireless facilities.

There are several pieces to the rules, but generally, local governments must approve collocation, replacement or removal of wireless facilities, so long as the request does not propose a “substantial change to the physical dimension” of the facility.  For cell towers, “substantial change” is defined to exclude modifications that increase the height by less than 20 feet or 10% of the existing tower height.  For “support structures,” substantial change does not include installation of the “standard number of new equipment cabinets for the technology involved” or, if there are preexisting cabinets, cabinets that are less than 10% larger in height or volume than any other ground cabinet.

The new rules also address the review process and put in place a new “shot-clock” rule, limit local governments ability to request documentation and specifically prohibits a local government from requiring any documentation regarding the business need for the modification.

There is a chance that reconsideration of the rules will be sought or that the rules could be appealed.  But unless that happens, all involved in siting wireless facilities should begin thinking about implementing the new rules.

SECOND CIRCUIT DISMISSES ZONING CHALLENGE FOR FAILURE TO EXHAUST LOCAL REMEDIES

Ed Sullivan Holt v. Town of Stonington, 2014 WL 4251291 (2nd Cir.) involved the application of Defendant’s zoning requirements which allowed an exception to certain single-family minimum lot size requirements for undersized lots created before the adoption of the current zoning regime.  Plaintiff purchased her lot in 2005 after receiving a letter from the town’s zoning enforcement officer stating that the lot qualified under this exception.  On that basis, Plaintiff purchased the lot.  However, the zoning enforcement office overlooked a 1981 land sale of a 10-foot strip to an adjacent property owner, which disqualified the remainder of the lot from the exception.  The town’s zoning board of appeals overturned the enforcement officer’s letter interpretation and Plaintiff attempted to appeal the decision to state court.  The state court found the letter was a “preliminary, advisory opinion and not a decision subject to appeal.”  Plaintiff then filed suit in federal court inter alia to estop the Town from preventing construction of the single-family home on her property.  The trial court entered an injunction estopping the Defendant Town from declaring that the subject site was “unbuildable under the Town’s zoning regulations.”  The Town appealed from that decision.

The Second Circuit dismissed the case because Plaintiff failed to exhaust her remedies and stated that exhaustion was jurisdictional and therefore not waivable.  The court added that the exhaustion requirement is grounded in a policy of fostering an orderly process of administrative adjudication and that the doctrine facilitates judicial review because a reviewing court will have the benefit of the Town’s findings and conclusions.  Additionally exhaustion avoids premature decisions in questions entrusted to an administrative agency, allows that agency to develop a factual record, and to exercise its discretion and apply its expertise.

The Second Circuit recognized exceptions to the exhaustion requirement under Connecticut law – i.e. when the administrative remedy is futile or inadequate.  A remedy is adequate when it can provide a plaintiff with all the relief sought and contains a mechanism for judicial review of that decision.  While Plaintiff did seek review of the action regarding the zoning enforcement officer’s interpretation, she withdrew her actual zoning permit application – an action that could have determined the issue now sought to be litigated.  To be reviewable, there must be a final decision to grant or deny an application for a certificate of zoning compliance.  Here, the Plaintiff withdrew that application and thus never completed the very proceedings necessary to exhaust remedies, although those mechanisms existed.  Moreover the possibility of denial is an insufficient basis to demonstrate futility.  In order for the futility defense to operate, Plaintiff must show that the available remedy mechanism could not result in a favorable decision.

The court rejected Plaintiff’s further justification for use of a federal court in that the zoning board of appeals could not give her the specific relief she sought – i.e. estoppel of the Town to deny any prospective single-family home building permit.  The court stated that it was not the type or label attached to the relief that had to be unavailable, but the relief itself, i.e. the issuance of building permit for a single-family home.  If a remedy exists, it must be used before resort to the courts is had.  If not, the courts lack jurisdiction to consider the matter.  The trial court decision in this case was thus reversed.

This case is another object lesson for the need to complete local proceedings before resorting to the courts, especially the federal courts.  One can just imagine the report of the lawyer for the landowner in this case when not prevailing after a great deal of now shown to be fruitless litigation.

 

 

 

STILL NO COMPENSATION FOR LOST OR RESTRICTED ACCESS RIGHTS IN OREGON CONDEMNATION ACTIONS

Eminent DomainState v. Alderwoods (Oregon), Inc., 2014 WL 4823607 (Or. App. Sept. 17, 2014)

The issue of whether a property owner is entitled to compensation for the taking of abutter’s rights of access to a public highway was again taken up by the Court of Appeals in State v. Alderwoods (Oregon), Inc.  The case involved an eminent domain action relating to the recent improvements to Highway 99W near its intersection with Highway 217.  The State filed an eminent domain action seeking to take a temporary construction easement in order to improve the sidewalk and to remove the curb cuts and driveways that allowed access to the Alderwoods (Oregon), Inc.’s property from Highway 99W.  The property retained indirect access to Highway 99W from Warner Road. In its Complaint, the State alleged that, in addition to the temporary construction easement, it was seeking to acquire “[a]ll abutter’s rights of access, if any” to Highway 99W.  After the Complaint was filed but before trial, ODOT exercised its regulatory authority to remove the property’s access to Highway 99W through a separate administrative action.  Prior to trial, the trial court granted the State’s motion in limine to exclude all evidence of diminution in the value of Alderwoods’s land resulting from the loss of direct access to Highway 99W.  The parties stipulated to a general judgment awarding just compensation for the temporary construction easement and Alderwoods appealed the trial court’s ruling on the motion in limine.

The Court of Appeals heard the appeal en banc and an equally divided Court issued a per curiam decision affirming the trial court’s ruling. Judge Armstrong wrote the concurring opinion in favor of affirming the trial court’s decision.  Judge Sercombe wrote a separate concurring opinion.  Judge Wollheim wrote the dissent. All three opinions agree that, generally, “there is no right to compensation for a loss or restriction of access to an abutting street if access to the property is not completely eliminated by the project for which the other property is being condemned.” Id. at *8. Although a property owner has a common law right of access to an abutting public right of way, that access right is subservient to the public’s right of free use of the streets.  The state may protect that right through the exercise of its police powers.  Thus, if the state exercises its police power to eliminate or restrict property’s access to an abutting public right of way (so long as all access is not eliminated), the property owner is not entitled to compensation regardless of the diminution of value caused by the loss or restriction of access.

The three opinions differ on whether the State is required to pay just compensation where it seeks to take or restrict a property owner’s right of access through an eminent domain action as opposed to an administrative action exercising its police powers.  Judge Armstrong in his concurring opinion reasoned that Alderwoods had a common law right of access to Highway 99W.  However, because that right of access was lost by administrative action “the property has no lawful access to Highway 99W irrespective of the condemnation of the access to the highway.” Id. at *7 (emphasis in original).  Therefore, Judge Armstrong concluded that the evidence of diminution of value was irrelevant and properly excluded by the trial court.

Judge Sercombe in his separate concurring opinion finds that an abutter’s common law right of access is general and unfixed.  Judge Sercombe reasons that compensation is only required if the state takes both the direct and indirect access to the public right of way. Id. at *9.  Judge Sercombe concludes that Alderwoods was not entitled to compensation for the loss of direct access to Highway 99W in the eminent domain action because the State did not also seek to take Alderwoods’s indirect access.  The fact that the State also took Alderwoods’s right of access through an administrative action did not factor into Judge Sercombe’s opinion.

Judge Wollheim’s dissent concludes that Alderwoods should have been allowed to present evidence of damages resulting from the State’s taking of its abutter’s right of access to Highway 99W in the eminent domain proceeding. Judge Wollheim does not dispute that the State has the right to take or restrict access through its regulatory authority without compensation (so long as all access is not eliminated).  However, because the State chose to take the access through its eminent domain under the authority granted by ORS 374.035, the State was statutorily required to pay just compensation in the eminent domain proceeding.  Judge Wollheim did not consider the administrative action eliminating access, in part, because the State did not argue that the regulatory action eliminated Alderwoods’s right to compensation.

It is anticipated that Alderwoods will file a petition of review with the Oregon Supreme Court.  Until the Supreme Court weighs in on the issue, the primary take away from the Court of Appeals per curiam decision is that the condemner should exercise its regulatory authority to eliminate or restrict a property’s abutter’s rights of access before it files an eminent domain action.  It is clear under all three opinions that a property owner is not entitled to just compensation for a restriction or elimination of abutter’s right of access through the state’s regulatory authority (so long as all access is not eliminated).

 

SECOND CIRCUIT REMANDS AND AFFIRMS TRIAL COURT IN RLUIPA HISTORIC PROPERTY CASE

coexist_orig   Flickr   Photo SharingChabad Lubavitch of Litchfrield County, Inc. v. Litchfield Historic District Commission. United States Court of Appeals, Second Circuit, Case Nos. 12-1057-cv and 12-1495-cv, (September 19, 2014) involves the purchase of property in a historic district by plaintiff religious organization, led by plaintiff Rabbi Joseph Eisenbach in order alter the principal building and expand it for use in the religious mission of the organization. Defendant Historic District Commission (HDC) denied the application with leave to reapply. Plaintiffs, the religious organization and its Rabbi, contest the denial under the Religious Land Use and Institutionalized Persons Act (RLUIPA) and Connecticut statutory law, seeking an injunction and declaration, damages, attorney’s fees and the appointment of a federal monitor.

The trial court dismissed the claims of the Rabbi for lack of standing for want of a sufficient property interest and the failure to distinguish his claims from that of the religious organization. The trial court found that Connecticut’s historic district law was facially neutral and generally applicable and thus none of the plaintiffs as a matter of law could be subject to a “substantial burden” on their religious exercise. The trial court also denied plaintiffs’ discrimination claims for failure to identify a sufficient comparator against which to measure the discrimination alleged. Because Defendant asserted that RLUIPA was unconstitutional, the United States intervened to defend the constitutionality of the act; however, that defense was not raised on appeal.

The Second Circuit concluded that the trial court erred in dismissing the Rabbi’s claims on standing and remanded that case for a determination of the merits of certain of the claims while also affirming a dismissal of the remainder for his failure to brief them. As to the claims of all parties, the Second Circuit concluded that the proceeding before the Historic District Commission resulted in an “individual assessment” of plaintiffs’ land use which was subject to RLUIPA’s substantial burden provisions and that plaintiffs need not show an identical comparator under RLUIPA’s nondiscrimination provisions.

The facts showed that the religious organization spent great sums of money to rent space to fulfill weekly and other religious services to its members and had brought the Litchfrield property, which was located in a historic district and had significant historic components, and thus was subject to the Historic District Commission’s authority for any modification of structures. Plaintiffs’ proposed changes that were significant (a 17,000 sq. foot addition to the existing house, a 5,000 sq. foot residence for the Rabbi and his family, and a new clock tower with a Star of David on top). Defendant divided its review of the project into two pieces – one to deal with the modification of the historic structures and the other to determine whether any denial would place “substantial burden” on plaintiffs’ religious exercise. Plaintiffs continued to modify the proposed design and asserted its need for a larger structure but did not provide certain data, such as the size of its congregation or the number of students that would attend its religious classes. Defendant denied the application, but added that if certain changes were made, the application could be approved. Plaintiffs did not take any administrative appeal but rather filed this suit in Federal District Court.

As to the Rabbi’s standing, the court undertook a de novo review to determine whether the factual allegations of the complaint allows a court to draw a reasonable inference that defendants are liable for the alleged misconduct, drawing all inferences in favor of the non-moving party in reviewing the grant of summary judgment to Defendant.

Turning first to the substantial burden claim of the religious organization, the court looked to whether there were any individualized assessment in the evaluation of the proposed use of property under the town’s land use regulations. If a substantial burden be found, the public agency must show a compelling governmental interest applied in the least restrictive manner. The court noted that if there were no such assessment required, there would be no RLUIPA liability; however, it found such an individualized assessment required under the Connecticut statute and the Litchfield code. The Connecticut statute relating to historic districts necessarily involves application of subjective criteria by the local governments implementing the same. The District Court had found that there were individualized assessments, but also found that RLUIPA was inapplicable because the statutory scheme was of general applicability. In doing so, the trial court erred in applying RLUIPA, particularly its substantial burden provision.

The Second Circuit made an analogy of the substantial burden provision in RLUIPA to the disparate impact analysis used in employment discrimination cases. The court had used such an analysis in Westchester Day School v. Village of Maronek, 504 F3rd 308 (2007). On remand, the trial court was instructed to apply these factors which the court summarized as follows:

whether the conditions attendant to the HDC’s denial of the Chabad’s application themselves imposed a substantial burden on the Chabad’ s religious exercise, whether feasible alternatives existed for the Chabad to exercise its faith, and whether the Chabad reasonably believed it would be permitted to undertake its proposed modifications when it purchased the property at 85 West Street. The district court should also consider, of course, whether the proposed modifications shared a “close nexus” with and would be consistent with accommodating the Chabad’s religious exercise.

As to the equal term’s claims under RLUIPA, plaintiffs bear the initial burden to make a prima facie case of unequal treatment, after which the government bears the burden of persuasion. The court noted a division among Federal Appeals Courts as whether evidence of a secular comparator must be shown to evaluate similarly situated structures of a religious or non-religious nature to religious use and on what grounds the comparison is made. However, the court found it unnecessary to deal with this issue as there was no evidence to establish a prima facie case under any equal terms standard. However, the court said that different treatment by different zoning regimes is not necessarily equivalent to unequal treatment. An HDC decision regarding the Wolcott Library, another secular historical structure in the historic district, under which a permit was granted to make a substantial addition to its historic structure, was done under a different land use scheme and a different land use authority and thus was an insufficient comparator in any event.

As to the non-discrimination claims under RLUIPA, plaintiff again bears the initial burden of proof to establish a prima facie case, after which the government bears the burden of persuasion. The Second Circuit, as a matter of first impression, required intent to target to the religious use and found the United States Supreme Court’s decision in Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520 (1993) pertinent. In that case, the Supreme Court used an equal protection analysis applicable to a religious discrimination claim now used under RLUIPA, looking at both direct and circumstantial evidence of discrimination. Three types of equal protection violations were possible in such case: (1) a facial discrimination; (2) a facially neutral law adopted and applied in a discriminatory manner; and (3) a facially neutral law applied in a discriminatory manner. The trial court erroneously required an identical comparator in lieu of the required “sensitive inquiry” into the direct and circumstantial evidence of intent to discriminate. The trial court thus overlooked that evidence, instead focusing upon an identical comparator. However, RLUIPA’s non-discrimination provisions prohibit facial or as applied discrimination on the basis of religion or religious denomination. The Second Circuit thus remanded this claim to determine whether there was discrimination on the basis of religion in the Historic District proceedings.

The court also determined that the remainder of the religious organization’s claims was waived by failure to brief them adequately. The federal claims were called out and the trial court’s ruling identified, but no more. Two other claims before the trial court were not even raised on appeal.

As to the Rabbi’s claims for standing, the Second Circuit found that a property interest was not required for these claims to be made. The issue is whether a particular statute confers standing, which thus required statutory interpretation. The court concluded that the Rabbi met Article III standing requirements – he and his family proposed to live at the facility, so that denial and the proposed conditions deprived him of the ability to do so – an injury that may be redressed by the court. The case was remanded to allow the trial court to determine whether the Rabbi had standing under RLUIPA and the claims that were made. However, the court affirmed dismissal of most of the Rabbi’s federal and state claims as those claims merely involved assertions made in a conclusorily manner and without record citations, to support the Rabbi’s conclusion that there were “independent constitutional claims” clearly expressed in the complaint. Without more, the claims were waived.

The court also remanded defenses of immunity to the trial court for resolution in the first instance. The trial court decision was thus affirmed in part and remanded in part.

This case demonstrates the necessity of careful pleading of both RLUIPA claims and defenses and the preservation of error. There is no doubt that RLUIPA will be interpreted in a fairly broad manner, but much will depend upon the facts alleged and pleading of adequate facts.

Chabad Lubavitch of Litchfrield County, Inc. v. Litchfield Historic District Commission. United States Court of Appeals, Second Circuit, Case Nos. 12-1057-cv and 12-1495-cv, (September 19, 2014).

An Ill Wind for PURPA: the Fifth Circuit’s Recent Exelon Wind Decision

Wind EnergyThe Public Utility Regulatory Policies Act of 1978, 16 U.S.C. §§ 824a (PURPA), requires utilities to purchase electricity from renewable and other alternative energy facilities (referred to in PURPA as “qualifying facilities” – or “QFs”) at the utilities’ avoided cost.  A recent decision by the U.S. Court of Appeals for the Fifth Circuit, Exelon Wind 1, LLC v. Nelson, No.12-51228 (September 8, 2014), involves a Texas Public Utility Commission regulation (Texas PUC Rule 25.242) adopted in connection with PURPA’s mandatory purchase provision.  A sharply divided three-judge panel ruled that the Texas PUC regulation trumped a conflicting PURPA regulation adopted by the Federal Energy Regulatory Commission, the agency charged by Congress with administration of PURPA.  A petition for rehearing by the full Fifth Circuit has been filed, and Exelon Wind raises important principles of administrative law with potential implications for a broad array of federal regulatory laws in addition to PURPA.

The objective of PURPA’s mandatory purchase provision is to encourage the development of alternative energy sources such as QFs.  The applicable FERC regulation, 18 C.F.R. § 292.304(d), establishes two alternative means to implement the purchase requirement, both of which are at the option of the QF, that is, the seller.  One alternative is for the QF to rely on the spot market and sell its electricity for immediate delivery at the then-current market price (i.e., the buyer’s avoided cost at the time of delivery).  The other alternative is for the QF to enter a contract (the regulation uses the term “legally enforceable obligation”) to deliver electricity over a specified period based on the buyer’s avoided costs at the time of delivery or when the contract is entered.  Texas PUC Rule 25.242, on the other hand, restricts the options that FERC’s regulation provides for the QF.  More specifically, the Texas rule confines the second alternative, supra, only to QFs that sell “firm power,” i.e., power that is available 24/7, which generally excludes wind and solar power QFs.  Since nothing in 18 C.F.R. § 292.304(d) authorizes such a restriction, FERC issued a declaratory order finding that Texas PUC Rule 25.242 contradicts the federal regulation.

The immediate issue in Exelon Wind is whether the Texas PUC’s regulation impermissibly conflicts with the underlying federal regulation, as FERC determined.  Although the Fifth Circuit majority found no conflict, a vigorous dissenting opinion says the majority disregarded the regulation’s plain meaning.  See slip op. at 37-40.  In addition, the dissent concludes (id. at 50) that the majority improperly “minimizes the effect of” FERC’s declaratory order, which the majority characterized as only “an informal guidance document” that is not entitled to judicial deference. See id. at 18. As the dissent emphasizes, “the majority does not provide a good reason to refuse to give controlling weight to FERC’s interpretation of its own regulation,” id. 57, and, as a consequence, “contravenes established principles of interpretation and administrative law and disrupts the scheme that Congress intended.”  Id. at 34.

The majority opinion in Exelon Wind appears to be in tension with Supreme Court precedent that requires agency deference under circumstances similar to those in this recent Fifth Circuit case.  See, e.g., Auer v. Robbins, 519 U.S. 452, 462 (1997); NationsBank of North Carolina, N.A. v. Variable Annuity Life Insurance Co., 513 U.S. 251, 256-57 (1995).  Given the increasing national focus on development of alternative energy, as well as the fundamental principles of federal administrative law that Exelon Wind implicates, future developments in the case will be important to monitor.

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