The year 2016 was an eventful one for home building.
Supreme Court Rules on Land-Use Case
In what some have called a landmark case, the U.S. Supreme Court has braced individual property owners' rights over government regulation.
In what some have called a landmark case, the U.S. Supreme Court has braced individual property owners’ rights over government regulation. In a 5-4 vote, the Court upheld lower court rulings in the case of City of Monterey, Calif. v. Del Monte Dunes at Monterey, Ltd, which ruled that developers have the constitutional right to have regulatory takings lawsuits heard by a jury.
Del Monte Dunes, a California developer, originally filed the lawsuit in the mid-1980s after the city of Monterey repeatedly rejected its plans to develop a 37.6-acre parcel of land. The land was deemed sensitive because one side was ocean frontage, another side bordered sand dunes, and in the middle was a designated habitat for an endangered butterfly. The developer went before the city five times, each time meeting the previous density demands of the local government, and was rejected every time. This prompted the developer to file a suit claiming regulatory takings without compensation, which was awarded by a jury in the amount of $1.45 million.
Justice Kennedy, in writing for the majority, suggested the Court was not ruling broadly on this issue, because the developer did not challenge the constitutionality of the city’s land-use ordinances and the Court’s holding did not extend to those aspects. This is in keeping with the Court’s usual practice of ruling on property rights on a case-by-case basis. But others involved with the case on both sides see far-reaching implications.
"This case is great news for landowners," says Gus Bauman, an attorney in the Washington, D.C. office of Beveridge and Diamond, who filed briefs in the Del Monte Dunes case on behalf of the National Association of Home Builders (NAHB). He points to three areas of special significance:
- Builders and developers have the constitutional right to have their regulatory takings lawsuits heard by a jury, who are typically less predictable and give bigger awards than judges.
- The Court rejected claims by local, state and federal government agencies, environmental associations, and even the American Planning Association that if a greater public good is in mind, they have a right to regulatory takings.
- The Court unanimously upheld the current test for regulatory takings, which the original jury used in the original lawsuit.
Richard Lazarus, a law professor at Georgetown University, has represented government interests in regulatory takings cases in the Supreme Court before, but gave only advice in an academic capacity for this case. He says both sides exacted their own pound of flesh.
"Builders and developers have a powerful weapon in challenging land-use regulations through jury trials," says Lazarus. But he claims the Court’s rejection of the rough-proportionality inquiry in the Del Monte Dunes case is a victory for local, state and federal government agencies. Rough proportionality is the notion that exactions and restrictions on permits must be roughly proportional to the severity of the problem they are meant to address. The Supreme Court ruled that since this case was a denial rather than a conditional approval of a development, rough proportionality was not germane.
"No court ever said rough proportionality applied in this case until the 9th Circuit Court, and that was the most troubling aspect for many government regulators," says Lazarus. "Rejecting that ruling was a big win for them."
Lazarus also states that what would seem to be a big win for developers may turn out to be just another irrelevant decision, because the right to a jury trial only applies in federal court. Land-use cases are difficult to bring to federal court on the first try; they must be tried in state court first, where a judge hears them.
"It is unclear whether you can then bring it into federal court; that’s subject to arguments in several courts across the country," says Lazarus. "If it turns out you can’t, then the Del Monte Dunes case will be a dead letter."
Bauman is much more optimistic. He says this victory against those who "attempted to take this developer’s land and regulate it to uselessness is the most significant land-use decision to come out of the Supreme Court in many years."