The takings hits keep on coming from the Supremes

The Supreme Court, on June 25, handed down its decision in Koontz v. St. John's River Water Management District. The 5 to 4 decision should be of keen interest to regulators who must decide how to issue permits for construction projects that impact wetlands.

In takings cases, the general concern is whether government regulation so severely restricts a person's use and enjoyment of their real property as to effectuate an unconstitutional "taking without just compensation" in violation of the Fifth Amendment, the classic case being Penn Central Transp. Co. v. New York City, 438 U. S. 104 (1978).

The Supreme Court's decisions in Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), layered another level of protection for property owners in special cases involving land exactions - that is, where the government seeks to have a person surrender real property in exchange for a permit to develop a piece of land. To avoid an unconstitutional taking, the government must demonstrate that its demand bears a logical relationship (or “nexus”) to, and is proportional to, the impacts of the proposed land development.

In Koontz, Justice Alito, writing on behalf of the Supreme Court's conservative majority, said that (1) it doesn't matter whether the state issues a permit with an unconstitutional condition or denies the permit because the applicant will not assent to the unconstitutional condition - both cases are unconstitutional; and (2) even when the government demands monetary expenditures as compensation for harm, that claim must satisfy the Nollan and Dolan standards of nexus and proportionality.

As in Pennsylvania, Florida law requires a person obtain a permit to build in a wetland, and in the process, the applicant must mitigate any harm to the wetlands.  Koontz offered to provide a conservation easement to the state for almost three-quarters of his property as mitigation for harm to a portion of the wetland. The Conservation District wanted a smaller development and a larger easement than what Koontz had offered. As an alternative, the District requested that Koontz hire a contractor to make improvements to wetlands several miles away.  Koontz filed suit under a state law allowing for takings claims, and the District denied the permit.

The trial court found that the District had acted unlawfully because the conditions were unreasonable for failing to satisfy standards of  Nollan and Dolan.  The State Supreme Court reversed on two grounds - that the case was distinguishable because the District ultimately denied the permit, and that a takings claim could not be based on a demand for money. The U.S. Supreme Court overturned that decision.

In a dissenting opinion authored by Justice Kagan, the Supreme Court's minority only contested the second part of the majority decision - that Nollan and Dolan should not be extended to cases where the government conditions issuance of a permit on the expenditure of money.  Nollan and Dolan, Kagan argued, should apply "only when the property the government demands during the permitting process is the kind it otherwise would have to pay for—or, put differently, when the appropriation of that property, outside the permitting process, would constitute a taking."