An invalid targeted taking

Some cases present a multitude of issues. Each of the issues in South Grande View Dev. Co., Inc. v. City of Alabaster, 1 F.4th 1299 (11th Cir. 2021), could have warranted a separate column, but the courts got them all at once and we will deal with the most prominent.

The plaintiff property owner (referred to in the opinion as SGV) bought 547 acres of land and proceeded to develop the property as a residential unit. The city approved its master plan in 1995 and development ensued. Most of the development had been completed by 2008. All except 147 acres. If you remember 2008, you might recall that the country experienced a major financial recession. So development of the remaining 147 acres was delayed, even though the property had been graded and prepared for development.

Meanwhile, the city decided to rezone the remainder of the property. Where the property had been graded according to the old zoning, the city rezoned it in such a way that the three and a half million dollars that SGV had spent getting this part of the project ready for development would have been wasted. Far fewer homes could be built and the grading would have been radically different. A jury determined that the city's action constituted a regulatory taking within settled Supreme Court standards. The impact of the rezoning was severe. The jury found a taking because it determined that the value of the 147 acres before the rezoning was $3,532,849.19, while its value after the rezoning was $500,000 -- one seventh its earlier value.

The first issue the court had to deal with was the city's claim that the suit was not yet ripe for litigation. If you have been reading these columns carefully, you will recall that ripeness is one of the favorite tools in the litigational war chest of regulatory bodies. It is a defense that (at least) allows them to kick the can down the road and deal with the problem (if at all) at a later date. It is also a defense that allows judges to rest easy. If they accept the argument, they can rule for the government and remain secure in the (theoretical) belief that they have not hurt the plaintiff because they left open the opportunity for future litigation. Trust me; it doesn't usually work out that way.

In this case, the city urged that the case was not ripe because SGV had not sought a permit to develop the property under the new zoning or a variance from the new, harsh requirements. Generally speaking, courts have held that ripeness requires both an application for development and an application for some sort of variance, and the denial of both. These courts were not impressed. This case, they held, was different. Here, the rezoning ordinance applied only to this 147 acre parcel, and it told everyone exactly what could be done on the property. Moreover, the rezoning had been the subject of much discussion, and its adoption had been opposed by SGV. In other words, contrary to the more ordinary situation, where the courts deal with a general ordinance covering all or a large part of a city, and a regulation providing a variety of possible uses that might be made, this zoning ordinance left no doubt. It applied to one property and was very clear what use could be made.

The idea that a case needs to be ripe (in this case, meaning that the city had reached a final decision about the property's use) was satisfied here without going through the standard application/variance process. Here, as the court put it, this "zoning ordinance was a final matter which could be adjudicated" because its terms were clear and certain and had been hammered out in public. Here, "the city passed a specific ordinance that targeted precisely and only [the subject property]. ... In this case, there was no ambiguity as to how a general plan would be applied to a specific project -- the zoning ordinance itself was the City's final decision on the matter." As the Supreme Court explained, the point of the ripeness rule is not simply to force litigants to spin wheels, but to determine whether the regulatory entity had reached a final decision about property use. "[O]nce ... the permissible uses of the property are known to a reasonable degree of certainty, a takings claim is likely to have ripened." Palazzolo v. Rhode Island, 533 U.S. 606, 620 (2001). Armed with such knowledge, further attempts to ask for municipal change would be "futile" and unnecessary.

So, the case was ripe for litigation. What next? Trial. To a jury. The right to a jury trial is the bulwark of American liberties. Chauffeurs, Teamsters, etc. v. Terry, 494 U.S. 558, 565 (1990). In regulatory taking cases, the determination of liability by a jury (as well as the amount of compensation) is vouchsafed under the 7th Amendment. City of Monterey v. Del Monte Dunes, 526 U.S. 687, 720-21 (1999). This jury heard how the SGV property had been the target of a campaign to radically reduce its viability. It heard witnesses explain how it was not financially feasible to convert the already graded lots to conform to the new zoning. It heard how a developer who had purchased lots in this development before could not do so the strictures of the new zoning. And it heard witnesses explain how the rezoning had precisely the effect intended, as it reduced the value to one seventh of its earlier value overnight. Although some other courts have concluded that there cannot be a regulatory taking unless virtually all value has been stripped from the property, this court felt that the impact was severe enough.

The moral of this little story should not be lost on regulatory bodies: Be fair. Enact general ordinances that apply across the board. Leave property owners with economically productive uses. These issues will be with us for a while. There is too much uncertainty in the law. Plan on revisiting them in the future. See, e.g., Michael M. Berger, "Whither Regulatory Takings," 51 The Urban Lawyer 171 (2021). 