Billionaire vs surfers case may go to high court

The last time the U.S. Supreme Court took up an important property rights case -- Murr v. Wisconsin, 137 S. Ct. 1933 (2017) -- a 5-3 court majority (Associate Justice Neil Gorsuch did not participate because he was not on the court when oral argument occurred) passed up a golden opportunity to provide clear guidance in the notoriously challenging area of regulatory takings law. Few bright-line rules exist, and many ambiguous multi-factor tests typically work against landowners. Instead of providing a clear rule for identifying the relevant parcel, or denominator, in a regulatory takings case when a landowner owns contiguous lots, the court held that "the question of the proper parcel in regulatory takings cases cannot be solved by any simple test." Thus, following that dubious conclusion, the court created yet another subjective multi-factor test that further erodes private property rights and adds layers of needless complications to takings law.

At the time, I wrote in the Daily Journal that, "[c]onsistent with much of the U.S. Supreme Court's takings jurisprudence, Murr is of little solace to land use attorneys, regulators, and courts, all of whom remain guessing about how the Court will react to the next case and the one after that." Inevitably, a petition for writ of certiorari was filed in the next potential case, Martins Beach 1, LLC v. Surfrider Foundation (17-1198), on Feb. 22, and it has the potential to be a blockbuster should the court elect to consider it.

Martins Beach involves a heavily litigated 89-acre parcel near Half Moon Bay, south of San Francisco. Vinod Khosla, a co-founder of Sun Microsystems, purchased the land for approximately $32.5 million in 2008. Khosla's predecessors owned the land for decades and during that time allowed the public to enter the property and access the beach for a fee as small as $0.25. They also erected a billboard that invited the public to use the picturesque beach and provided a general store, public toilet and a parking area.

Khosla initially followed his predecessors' practice of allowing public access to Martins Beach, but the business was not profitable and he terminated public access by closing and locking a gate across Martins Beach Road, adding signs to the gate stating the beach was closed, painting over the billboard, and hiring security guards to prevent public access.

The county of San Mateo informed Khosla that such changes in the public's ability to access the shoreline at Martins Beach requires a coastal development permit because they represent a change in the "intensity" of use or access to the Pacific Ocean, which the California Coastal Act considers "coastal development" subject to discretionary permitting requirements. The county also sought an explanation for Khosla's decision to paint over the billboard, which it also considered to potentially constitute unpermitted "coastal development."

Multiple disputes eventually arose, involving the county and the California Coastal Commission, an unincorporated association known as "Friends of Martins Beach," and eventually the Surfrider Foundation, which advanced the County's and Commission's claims that even if the land is entirely private, Khosla engaged in unpermitted "coastal development" by closing the gate, painting over the sign, and preventing public access to Martins Beach.

The San Mateo County Superior Court ruled in favor of Surfrider, holding that Khosla was required to obtain a permit. The court also issued an injunction requiring him to unlock the gate and allow public access until he obtained a permit to do otherwise.

But instead of applying for a permit, Khosla appealed, arguing that closing the gate, painting over the sign, and preventing public access do not constitute "development" under the Coastal Act. He also argued that if the Coastal Act really does require a private landowner to obtain a permit before exercising the right to exclude others from his property or even to change the message on a sign inviting the public to use his property, then the act violates the federal takings clause and the First Amendment. In addition, Khosla argued that the injunction itself is a per se physical taking because it compels him to keep his property open to the public immediately and provides no compensation for the compelled easement.

The 1st District Court of Appeal affirmed the trial court decision, holding that Khosla's conduct is "development" under the Coastal Act. The Court of Appeal also held that Khosla's takings claim is not ripe because, under Williamson Co. Regional Planning v. Hamilton Bank, 473.U.S. 172 (1985), he failed to obtain a final decision on the application of the applicable regulations to his property. In other words, according to the court, Khosla's claim is not ripe because the bare permit requirement is not a taking. The court also rejected his claim that the injunction is an uncompensated per se taking because it is temporary and physical takings cannot be per se takings requiring compensation unless they are permanent.

The Supreme Court of California denied Khosla's request for review.

His expected petition for writ of certiorari to the U.S. Supreme Court relies principally on the deep split in the federal and state courts over whether physical takings must be permanent to be per se compensable. The brief spotlights the untenable divide, arguing convincingly that "any difference between 'permanent' and 'temporary' physical invasions goes only to the amount of compensation that is just, not the duty to compensate."

The brief also argues that the court should grant certiorari to address the constitutionality of the trial court's injunction, which is based on the Coastal Act's requirement that landowners may not take any action that would affect the "intensity" of the public's use or access to the Pacific Ocean, including exercising the fundamental right to exclude others, without first obtaining a coastal development permit. According to Khosla's brief, "[b]y counter-intuitively interpreting a reduction in the intensity of use occasioned by exercising a previously unexercised right to exclude as 'development,' the decision below interprets the Coastal Act to simply demand a public easement (not to mention continued operation of a business at a loss and compelled speech) unless and until petitioner can obtain a permit."

Finally, the brief argues that treating the painting over of a preexisting sign that advertised public access to the land as unpermitted "development" because changing how the sign advertises access might decrease the "intensity" of use or access to the Pacific Ocean is compelled speech prohibited by the First Amendment.

Commentators often suggest that, given the roughly 8,000 certiorari petitions the Supreme Court receives each year, granting certiorari in a particular case unlikely. But that unhelpful generic analogy is something like suggesting that a particular student might not be accepted to a desirable university because of its low acceptance rate. Some students are stronger on paper than others, and generalized statistics about the probability of acceptance simply do not apply. Although Vinod Khosla has not received a final decision on a coastal development permit, much less applied for one, he has presented a compelling petition for certiorari addressing critical property rights issues that appears to have high odds of being granted, and I suspect his petition will be granted later this term.