The Constitutional Issues at Stake in Koontz, Simplified

Many thanks to the newsletter for the Constitutional Law Committee of the American Bar Association's Section of Environment, Energy, and Resources, which recently published my article about Koontz v. St Johns River Water Management District, No. 11-1447 (argued Jan. 15, 2012). I sought to provide another plain-language summary of the case, although more to a legal audience than my last summary. Here it is:

U.S. Supreme Court Hears Important Florida Exactions Case

These days, Florida is a hotbed of property rights litigation. Three years ago, Florida was defending its beach renourishment program before the U.S. Supreme Court. Stop the Beach Renourishment, Inc. v. Fla. Dep't of Envtl. Prot., 130 S. Ct. 2592 (2010). That case broke new ground when a plurality of justices acknowledged that a court can take property, just as the legislative and executive branches can.

Now that the U.S. Supreme Court has heard Koontz v. St. Johns River Water Management District, No. 11-1447 (cert. granted Oct. 5, 2012, argued Jan. 15, 2013), environmental attorneys, constitutional scholars, and land use planners are wondering if Florida will again be on the forefront of takings law. This could be the most important decision in the world of environmental and land use permitting in years. It could draw into question common bargaining practices by governments when requesting conditions in exchange for development permits.

In the development approval process, governments commonly require a dedication of real property to mitigate adverse impacts. But what if the request is for cash or for services? What if the request is unreasonable, and the landowner cannot use the property?

Background

The Takings Clause of the Fifth Amendment to the U.S. Constitution ensures that private property cannot “be taken for public use, without just compensation.” The Takings Clause was intended to bar government from forcing individuals from bearing public burdens alone. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 548 (2005). Early cases focused on physical invasions of property. As the regulatory state grew in the twentieth century, the U.S. Supreme Court began to recognize that government regulation of private property can sometimes be so onerous that it is tantamount to the government appropriating the property. Id. An exaction is a government requirement to donate something in exchange for the right to develop property. Oftentimes, this is a requirement to dedicate real property. Generally, the government cannot force landowners to give up the right to exclude others from property in return for the ability to develop it. It can, however, require mitigation of adverse development impacts. The U.S. Supreme Court has given some limited guidance on how to determine whether an exaction passes constitutional muster:

1. There must be an “essential nexus” between the exaction and the interest that the exaction is advancing. Nollan v. Cal. Coastal Com., 483 U.S. 825, 837 (1987).
2. There must be a “rough proportionality” in both nature and extent between the exaction and the impact of the proposed development. Dolan v. Tigard, 512 U.S. 374, 391 (2005).

Nollan and Dolan both addressed exactions of easements for public access. The U.S. Supreme Court left open whether the Nollan-Dolan test applied to exactions not involving real property, such as exactions for money or other personal property. Courts have differed on this question, leading to confusion among landowners, planners, regulators, and government officials.

The Koontz Cases

In St. Johns River Water Management District v. Koontz, 77 So. 3d 1220 (Fla. 2011), the Florida Supreme Court declined to recognize an exaction under U.S. Supreme Court precedent. Koontz  had owned his property since 1972. He been trying to develop his property since 1994, when he had applied to the District for a permit to develop his property. All but 1.4 acres of the 14.2-acre property were in a Riparian Habitat Protection Zone. Koontz only wanted to develop 3.7 acres of the property, but he would have to fill 3.4 acres of wetlands to do so.

The District agreed to grant the permit on two conditions. First, the District required that Koontz deed the remainder of his property into a conservation area, which he agreed to do. Second, the District required that Koontz perform offsite mitigation several miles by replacing culverts and plugging drainage canals on District-owned properties seven miles from his property, which Koontz refused.

When the District then denied the permit, Koontz sued in state court, arguing that the District’s offsite mitigation condition was an unconstitutional exaction because it violated the Nollan-Dolan test. The case bounced around between the trial court and the intermediate appellate court for years, producing some important takings jurisprudence in Florida. Ultimately, the trial court found that the District had taken Koontz’s property through an unconstitutional exaction because the condition was not related to the impacts of his project. The intermediate appellate court affirmed.

The Florida Supreme Court reversed, holding there was no taking. The court explained that the Nollan-Dolan test only applied to exactions of real property, where a permit was actually issued imposing the onerous exaction. The court acknowledged a line of cases applying the Nollan-Dolan test beyond real property exactions, but it held that these cases went beyond the U.S. Supreme Court’s decisions. The court also pointed to Monterev v. Del Monte Dunes at Monterev, Ltd., 526 U.S. 687 (1999), and Lingle v.Chevron U.S.A., Inc., 544 U.S. 528 (2005), to support its conclusion that the Nollan-Dollan only applies when the government actually issues the permit that is sought because only then is the owner’s property interest subject to dedication.

Finally, even though the court denied the property owner’s claim, it expressed a public policy concern for other developers and landowners. It worried that “agencies will opt to simply deny permits outright without discussion or negotiation rather than risk the crushing costs of litigation. Property owners will have no opportunity to amend their applications or discuss mitigation options because the regulatory entity will be unwilling to subject itself to potential liability. Land development in certain areas of Florida would come to a standstill. We decline to approve a rule of law that would place Florida land-use regulation in such an unduly restrictive position.” Koontz, 77 So. 3d at 1231.

Consequently, the Florida Supreme Court held there was no taking because (1) no permit was ever issued, (2) the exaction did not demand real property, and (3) public policy precluded expansion

The U.S. Supreme Court Hears Koontz

On October 5, 2012, the U.S. Supreme Court granted certiorari, and it heard oral arguments on January 15, 2013. Koontz asks the Court to establish:

1. The Nollan-Dolan exactions test applies to exactions other than real property, such as where a permit applicant is required to pay for work; and
2. The Nollan-Dolan exactions test applies even where a permit is denied because an applicant rejects an exaction.

Koontz argues that the Court does not have to stretch far to make such a ruling, as it has held in other contexts that government may not withhold discretionary benefits on the condition that the beneficiary surrender a constitutional right. Koontz also argues that both of these issues need to be settled by the Court because the law on these issues has developed such a split across the country that courts facing the issue are having to choose a side, necessitating clear guidance from the Court.

The District, on the other hand, argues that the Court does not have jurisdiction because of Koontz only brought state law claims in state courts (not federal claims). Echoing the Florida Supreme Court, the District also argues it did not exact or take anything because it never issued a permit or collected an exaction.

Early on, there were reasons to think that this case would be an important case for planners and land use lawyers to watch. First, the Pacific Legal Foundation, which is representing Koontz, has shown a knack for litigating environmental and property rights cases before the U.S. Supreme Court, having participated in more than half a dozen landmark decisions. Indeed, it argued and won Nollan, and in March of this year, it won Sackett v. EPA, 566 U.S. __ (2012), which gave property owners the right to take EPA to court over a compliance order dealing with wetlands. Second, this case is positioned well as a vehicle for the Court’s property-rights advocates, as it seems to present the review of a clean issue of law, rather than a messy fact-specific or jurisdictional fight. Justices Scalia, Kennedy, and Thomas have shown an interest in the past in the timing of permit conditions. See Lambert v. San Francisco, 529 U.S. 1045, 1048 (2000) (dissenting from denial of certiorari).

Reading the tea leaves of oral arguments at the Supreme Court is always a dangerous business. That said, I and others have made several observations. First, Justice Scalia, who the landowner almost certainly needs to win a majority, seemed critical of whether anything had actually been taken. Second, while a majority of the Justices appeared at least somewhat sympathetic to the landowner’s plight, there was little agreement amongst them in terms of whether there was a constitutional harm and, if so, what the remedy to it should be. Finally, the reach of the unconstitutional conditions doctrine, which Nollan, Dolan, and Lingle indicate is the origin of exactions law, took center stage. This notoriously murky doctrine stands for the proposition that [a]cts generally lawful may become unlawful when done to accomplish an unlawful end, and a constitutional power cannot be used by way of condition to attain an unconstitutional result.” Frost v. R.R. Comm'n of Cal., 271 U.S. 583, 598-99 (1926). The Supreme Court has traditionally struggled with appropriate breadth of this doctrine, and they appear to be struggling with it in this case, as well.

Jacob T. Cremer is an attorney at Bricklemyer Smolker, P.A., in Tampa, Florida. His practice focuses on property rights, environmental, and land use law. He assisted counsel of record before the U.S. Supreme Court for the landowner-petitioners in Stop the Beach Renourishment, Inc. v. Fla. Dep't of Envtl. Prot., 130 S. Ct. 2592 (2010). He co-authored an amicus brief in support of the landowner-petitioner in Koontz and attended oral arguments. Follow the developments on this case and others at his blog, The Florida Land Environment, www.jacobtcremer.com.