Legislative? Administrative? Constitutional? Land-use law is in disarray

Seven months ago, this column reviewed the recent Court of Appeal decision in Sheetz v. County of El Dorado, 84 Cal. App. 5th 394 (2022). The case involved the question of the ability of government agencies to exact property or money as a condition to the issuance of a land use permit. As a reminder, Mr. Sheetz wanted to construct a modest (1,854 square foot), single-family, manufactured home on his property in Placerville. As a condition, the county imposed a fee of $23,420 for unrelated local road improvements.

It is no longer a secret that California has always been among the most stringent in reviewing such conditions and the most forgiving of governmental overreaching. Don't take our word for it. A number of years ago, two prominent land use commentators put it this way: "California has always been notorious for being the first jurisdiction to sustain extreme municipal regulations. Practitioners in other states have joked about why a developer would sue a California community when it would cost a lot less and save much time if he simply slit his throat." Richard F. Babcock & Charles L. Siemon, The Zoning Game Revisited (1985). Things haven't improved much in the intervening years.

The Sheetz case is only the most recent example of how California has been unrepentant. It has long seemed to us that the California courts have been out of sync with the United States Supreme Court decisions in Nollan v. California Coastal Commission, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994) and Koontz v. St. Johns River Water Management District, 570 U.S. 595 (2013) as well as the unconstitutional conditions doctrine that underlies all of them. Nollan held that, to be valid, a land use condition must have an "essential nexus" between the exaction imposed and the burden caused by the development. Dolan expanded that by holding that there must be a "rough proportionality" linking the exaction and the expected impact of the project. Those two cases dealt with the exaction of property. Koontz closed the circle by holding that the same rule applied whether the exaction was of property or "only money."

In its continuing effort to limit governmental liability for the impact of its own actions, California's judiciary found a way to restrict the impact of Nollan, Dolan, and Koontz by saying that exactions come in two flavors: those that are imposed across the board by legislation and those that are imposed ad hoc in administrative proceedings, one parcel of property at a time. In California, only the latter will subject the government to liability. Mr. Sheetz was unfortunate enough to have run afoul of a legislatively imposed exaction, that is, one that is imposed on all comers regardless of the circumstances. And so he lost.

Candidly, we have never been able to fathom the difference between the two types of imposition from either a pragmatic or a constitutional viewpoint. In both, property or money is exacted (or, as the U.S. Supreme Court put it in Nollan, "extorted") in exchange for the issuance of a land use permit. From the property owner's standpoint, there is no difference. In order to obtain a permit, the property owner must part with either property or money. California's judicial response that the remedy for overreaching government action lies at the polls (i.e., the classic "throw the rascals out" rubric) has always rung a bit hollow. Unless government acts so outrageously to so many people simultaneously, such an uprising seems unlikely.

As we put it in that earlier column, "It is time for either the California Supreme Court to revisit its earlier decisions in light of the clear holdings and analysis of Nollan, Dolan and Koontz, or for the U.S. Supreme Court to once again bring California back into line with federal constitutional law." We say "once again" because, in 1987, the United States Supreme Court reversed the California courts twice (in the space of two weeks) in order to deliver the message that California's view of the protection provided to property owners by the Fifth Amendment's just compensation clause was out of line with predominant federal law. See First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 305 (1987); Nollan v. Cal. Coastal Comm'n., 483 U.S. 825 (1987).

Nonetheless, the California Supreme Court denied review in Sheetz, and the inevitable petition for certiorari was recently filed. In a cogent plea to the high court for relief, Sheetz points out two central issues: first, that Supreme Court cases do not discriminate between the mode of imposition of the exaction (nor is there a reason to do so) and second, that lower courts (both state and federal) are in conflict as to how to treat the distinction (if any).

In an earlier (albeit unsuccessful) effort to bring this issue to the Supreme Court's attention, Justice Clarence Thomas had this to say: "This case implicates an important and unsettled issue under the Takings Clause" that has remained unresolved for decades, leaving "property owners and governments ... uncertain about ... whether cities [and other state and local governments] can legislatively impose exactions that would not pass muster if done administratively." Cal. Bldg. Indus. Ass'n v. City of San Jose, 577 U.S. 1179 (2016) (Thomas, J., concurring in denial of petition raising the exact same issue of whether legislative exactions are subject to Nollan/Dolan scrutiny, but denying cert on procedural grounds).

Mr. Sheetz was fortunate (from the standpoint of petition drafting, if not from that of receiving sympathetic treatment from the California courts) in that he was able to satisfy the generally easiest mode of attracting the Supreme Court's attention: conflict among lower court decisions. In league with California, and immunizing legislatively imposed exactions, are Arizona, Colorado, Maryland, Oregon, and Washington, along with the Tenth Circuit Court of Appeals. On the other side of the ledger are Florida, Illinois, Ohio, North Carolina, and Texas, along with the Sixth and Ninth Circuit Courts of Appeals.

In fact, Sheetz is diametrically opposed by the very recent decision in Knight v. Metropolitan Government of Nashville, 2023 WL 3335869 (6th Cir. May 10, 2023). That court put it bluntly at the outset of its opinion: "We side with the landowner plaintiffs. Nothing in the relevant constitutional text, history, or precedent supports Nashville's distinction between administrative and legislative conditions." Later in its analysis, the court became even more expansive, concluding that "[the city's] requested distinction also conflicts both with the Supreme Court's unconstitutional-conditions precedent and with its takings precedent." Explaining the place of intermediate appellate courts in the judicial hierarchy, the court concluded that, "[a]s a 'middle management' court, we must follow the Supreme Court's precedent whether or not we think it in disarray .... And once we accept Nollan and the cases applying it (as we must), there is no basis in the Constitution's text or history to distinguish legislatively compelled conditions from discretionary executive ones."

Knight went on to carefully analyze Nollan, Dolan and Koontz, along with the unconstitutional conditions rule that unites the three of them. Indeed, its extensive explication (along with its collection of what appears to be a complete inventory of cases on both sides of the legislative/administrative divide) could serve as an unintended (but undoubtedly welcome) amicus presentation in support of the Sheetz cert petition. Side by side, Sheetz and Knight present an abject picture of the law in disarray.

That should be enough of a split to get the Supreme Court's attention. Whatever one may think about the ultimate outcome of the issue, there is no excuse for the resolution of a fundamental issue of constitutional law to depend on the state or federal circuit in which one resides. Stay tuned.