Alto Eldorado v. The City of Santa Fe ( 2011 )

FILED
United States Court of Appeals
Tenth Circuit
March 16, 2011
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
ALTO ELDORADO PARTNERSHIP;
RANCHO VERANO, LLC;
CIMARRON VILLAGE, LLC;
DENNIS R. BRANCH; JOANN W.
BRANCH,
Plaintiffs - Appellants,
v. No. 09-2214
THE COUNTY OF SANTA FE,
Defendant - Appellee,
and
THE CITY OF SANTA FE,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
(D.C. NO. 6:08-CV-00175-JB-ACT)
Paul J. Beard II (Damien M. Schiff with him on the briefs), Pacific Legal
Foundation, Sacramento, California, for Plaintiffs-Appellants.
Robert H. Freilich, Esq., Freilich & Popowitz, LLP, Los Angeles, California
(Mark Basham, Esq., Basham & Basham, P.C., Santa Fe, New Mexico, and
Stephen Ross, Esq., Santa Fe County Attorney, Santa Fe, New Mexico, with him
on the brief), for Defendant-Appellee.
Before MURPHY, HOLLOWAY, and O’BRIEN, Circuit Judges.
MURPHY, Circuit Judge.
I. Introduction
Developers owning property in the County of Santa Fe, New Mexico,
(“County”) brought a lawsuit challenging as unconstitutional under the Takings
Clause an ordinance requiring the provision of affordable housing in new
subdivisions. The district court dismissed the complaint on ripeness grounds and
the developers appealed. Exercising jurisdiction pursuant to 28 U.S.C. § 1291,
this court AFFIRMS the district court’s order dismissing the complaint.
II. Background
A County ordinance requires developers seeking to subdivide land for
resale in designated areas of the County to develop and sell a certain percentage
of the lots as affordable housing. These units, which may amount to as much as
thirty percent of a development, must be sold to qualified buyers at prices not to
exceed set maximums. If an affordable housing unit is resold within ten years,
the difference between the price paid by the qualified buyer and the resale price is
divided between the buyer-reseller and the County. The County’s portions of the
proceeds are set aside in a trust fund used for affordable housing. The ordinance
also provides to developers meeting its conditions a waiver of certain
development fees and a density bonus, which allows developers to build more
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homes in a given area. Developers may seek a waiver of the ordinance’s
requirements by demonstrating hardship or, in lieu of compliance with the
affordable housing requirement, developers may pay a fee to the County. The
City of Santa Fe (“City”) has a similar ordinance.
Alto Eldorado Partners, Rancho Verano, LLC, Cimarron Village, LLC,
(collectively “developers”) and two individuals brought suit against both the City
and County alleging the ordinances effectuate an unconstitutional taking of
property and violate their equal protection and due process rights. They also
alleged violations of state law.
The City moved to dismiss the complaint for lack of standing. The district
court granted the motion because neither the individual plaintiffs nor the
developers alleged ownership of property within the City that would be affected
by the city ordinance.
The County moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(1)
for lack of jurisdiction because the claims were not ripe for judicial review and
under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be
granted. The district court, sua sponte, concluded the two individual plaintiffs
did not have standing to sue the County because they failed to allege ownership of
property within the County. In contrast, the district court concluded the
developers did have standing because they alleged they owned property within the
County subject to the ordinance, and their plans to develop those properties were
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impacted by the ordinance. The district court nonetheless dismissed the
complaint. It concluded that the developers’ Takings Clause claim was not ripe,
that the other constitutional claims rested on the same factual foundation and
therefore were also unripe, and that the remaining state law claims should be
dismissed under the supplemental jurisdiction statute. The individual plaintiffs
did not appeal. The developers limit their appeal to the district court’s decision
that their claims against the County are not ripe.
III. Standard of Review
Ripeness doctrine is rooted both in the jurisdictional requirement that
Article III courts hear only “cases and controversies” and in prudential
considerations limiting our jurisdiction. Salt Lake Tribune Publ’g Co. v. Mgmt.
Planning, Inc., 454 F.3d 1128, 1140 (10th Cir. 2006). This court reviews de novo
the district court’s order of dismissal premised on lack of ripeness. Id.IV. Discussion
The Takings Clause of the Fifth Amendment, applied to the States by
incorporation through the Fourteenth Amendment, provides: “[N]or shall private
property be taken for public use, without just compensation.” U.S. Const. amend.
V; Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 536 (2005). The classic taking is
the exercise of eminent domain to appropriate private property. Lingle, 544 U.S.
at 537. Nevertheless, as recently explained by the Supreme Court, government
regulation can also sufficiently interfere with private property rights as to amount
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to a taking. Id. A regulatory action is deemed to be a taking per se if it requires
a permanent physical invasion of private property. Id. at 538 (citing Loretto v.
Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)). A per se taking also
occurs if a regulation deprives the owner of all economically beneficial use of the
property. Id. (citing Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992)).
Even if a regulatory action does not amount to a taking per se, it may still rise to
the level of a taking under a multi-factor inquiry outlined in Penn Central
Transportation Co. v. New York City, 438 U.S. 104 (1978). Lingle, 544 U.S. at
538. The Penn Central inquiry focuses on the magnitude of the economic impact
of the regulatory action and the extent of the regulation’s interference with
property rights to determine if the regulatory action constitutes a taking. Id. at
540.
Importantly, the Takings Clause does not prohibit the taking of private
property for public use, but rather requires compensation when a taking occurs.
Williamson County Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 194
(1985). Such compensation does not have to be contemporaneous with the taking,
so long as there is an adequate provision for obtaining compensation that exists at
the time of the taking. Id.The Supreme Court has outlined a two-prong ripeness test for regulatory
Takings Clause claims. First, there must be a final decision about how a
regulation will be applied to the property in question, including whether the
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implementing administrative body will grant any waiver or variance. Id. at 186-
91. Second, a property owner may not challenge regulatory action under the
Takings Clause until the owner has sought compensation, assuming adequate
procedures exist for doing so. Id. at 194. Because contemporaneous
compensation is not constitutionally required, if the state provides a mechanism
for seeking compensation, the property owner must utilize the procedure and be
denied just compensation before a takings claim is ripe. Id. at 194-95.
The district court noted the County conceded the inapplicability of the first
prong of Williamson County to facial challenges under the Takings Clause. The
County has likewise conceded that point on appeal. 1 As to the second prong of
Williamson County, it is uncontested that the developers have not sought
compensation by bringing an inverse condemnation action under New Mexico
state law, N.M. Stat. Ann. § 42A-1-29.
The developers relied on two bases to exempt their claim from the second
prong of Williamson County: their claim was facial rather than as-applied, and it
was an unconstitutional-conditions claim. Although the district court agreed
with the developers that their claim as a facial challenge was exempt from the
ripeness requirement that they first seek compensation, it nonetheless concluded
the claim was unripe because the developers requested injunctive relief, which,
1
In light of this decision, and especially because the parties have not
briefed or argued the issue, it is unnecessary to decide whether the first prong
applies.
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the court decided, is not available where there is an unexplored avenue for
compensation. Irrespective of the nature of the remedy sought, however, the
claim here is unripe because the developers have not utilized the available state
procedure to seek compensation for the alleged taking as required by Williamson
County.
A. Facial Takings Clause Challenges
On appeal, the developers again argue their challenge is exempt from both
Williamson County ripeness requirements because it is a facial challenge. In
support of their argument, however, the developers rely primarily on a line of
cases now made obsolete by the Supreme Court’s recent decision in Lingle. In
Lingle, the Supreme Court considered the validity of challenges brought under the
Takings Clause alleging the regulation at issue did not substantially advance a
legitimate state interest. 544 U.S. at 545. In concluding the “substantially
advances” theory was not appropriate under the Takings Clause, the Supreme
Court explained that the Takings Clause merely requires compensation for an
otherwise valid governmental interference with private property rights. Id. at
543. It does not, in and of itself, provide a cause of action for allegations that the
interference with property rights is arbitrary or irrational, a theory that instead
resembles a due process claim. Id. at 542, 544.
Despite the developers’ insistence, the claim the developers bring here
under the Takings Clause is not a facial claim challenging the validity of the
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regulation itself. That type of claim is properly brought as a due process claim as
decided in Lingle. Rather, they advance a regulatory takings claim that, as stated
in their complaint, the ordinances “do not provide for any compensation for the
burdens they place” and thus “constitute an illegal taking of property.” 2 The
developers’ claim here is therefore unlike the facial claims at issue in the cases on
which they rely, which concern instead the now-defunct substantially advances
claims under the Takings Clause.
Yee v. City of Escondido, cited by the developers, is a case in which the
property owners used the “substantially advances” theory to allege a regulatory
taking. 503 U.S. 519, 534 (1992). Although the Court declined to address the
merits of the claim because it was not encompassed within the question presented
on certiorari, the Court noted the challenge was not subject to the Williamson
County requirements. Id. at 534, 537. It reasoned that the “substantially
advances” claim, a means of challenging the authority of the government to
regulate in a certain manner in the first place, did not depend on how the
regulation applied to any particular piece of property or whether compensation
was available. See id. Likewise, in San Remo Hotel, L.P. v. City & County of
2
Although it is clear the claim is not a facial claim attacking the validity of
the regulatory action, the parties have uniformly referred to this as a facial claim
and this court declines to recharacterize it. The sole question presented by the
parties is whether the second Williamson County requirement applies to the claim.
As discussed below, however the claim at issue here is labeled, there is no
support for waiving the second Williamson County requirement in this case.
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San Francisco, the Supreme Court stated the plaintiffs would not have had to
ripen their facial challenges to a regulation based on the “substantially advances”
theory to bring the action in federal court, with the immediate caveat that the
theory had been rejected as a takings claim by Lingle. 545 U.S. 323, 340 n.23,
346 & n.25 (2005). Although these cases suggest facial challenges are not subject
to the same ripeness requirements, those facial challenges are no longer available
under the Takings Clause.
The “substantially advances” takings theory, now obsolete, differs
dramatically from a Takings Clause claim alleging that a legislative or regulatory
action, while advancing an authorized purpose, effectuates a taking of property
without just compensation. The former, a claim that governmental interference
with property rights exceeds its permissible scope of authority, does not depend
on whether the landowner subject to the regulation has been compensated; the
regulatory action is invalid whether compensation is provided or not. 3 See Lingle,
544 U.S. at 543. Because no amount of compensation would alter the outcome of
3
There is a similarity in this respect between the now-obsolete
“substantially advances” challenges and valid Takings Clause claims alleging the
taking was not for “public use.” In “public use” Takings Clause challenges no
amount of compensation would render the taking constitutional because it was in
excess of the government’s authority to take private property. In the public use
context, courts also have not applied the requirement that the plaintiff first seek
compensation before bringing suit, decisions that support the distinction we draw
today. See Fideicomiso De La Tierra Del Cano Martin Pena v. Fortuno, 604 F.3d
7, 16 (1st Cir. 2010) (collecting cases). The developers have made no claim that
the provision of affordable housing is not a proper public use for which the taking
of private property is authorized.
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such a claim, a waiver of the Williamson County requirement that the plaintiff
first seek compensation before mounting a no-longer-available “substantially
advances” Takings Clause challenge is appropriate.
In contrast, an otherwise proper interference with property rights
amounting to a regulatory taking, whether under Lucas, Loretto, or Penn Central,
is constitutional so long as compensation is provided. Compensation negates the
constitutional Takings Clause claim altogether. See Williamson County, 473 U.S.
at 194. A plaintiff might argue the Williamson County requirement is met if a
regulation on its face makes compensation unavailable or if compensation can be
presumed unavailable by the nature of the regulation. See, e.g., Eastern
Enterprises v. Apfel, 524 U.S. 498, 521 (1998) (plurality) (presuming
compensation unavailable where challenged Act required direct transfer of funds).
In other cases, plaintiffs may be able to demonstrate that the state has provided no
procedure for seeking compensation. See Williamson County, 473 U.S. at 195.
Unless a method for seeking compensation is unavailable or compensation is
otherwise foreclosed, however, property owners will only be able to show
compensation has been denied after first seeking compensation through an
available procedure.
The developers fare no better in their reliance on the post-Lingle cases in
other circuits. The Fourth Circuit’s decision in Holliday Amusement Co. of
Charleston v. South Carolina, 493 F.3d 404 (4th Cir. 2007), instead supports this
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court’s decision today. There, the court notes that a facial challenge alleging a
regulatory action exceeds permissible authority is immediately ripe. Id. at 407. It
goes on to conclude, however, that the plaintiff’s claim is not a facial claim that
regulatory action exceeds permissible scope, but rather, just like the claim at issue
here, is a regulatory takings claim. See id. Accordingly, it applied the second
Williamson County requirement. Id.The developers’ argument is likewise not supported by the decisions they
cite from the First or Seventh Circuits. The First Circuit, in Asociacion De
Subscripcion Conjunta Del Seguro De Responsabilidad Obligatorio v. Flores
Galarz, stated facial claims are exempt from the requirement that plaintiffs first
seek compensation, but relied on cases brought under the “substantially advances”
theory. 484 F.3d 1, 13-14 (1st Cir. 2007). The First Circuit went on to analyze
whether the plaintiff’s claim was ripe under Williamson County anyway, and
concluded the plaintiff had met the compensation requirement by demonstrating
there was no adequate procedure aimed at providing compensation. Id. at 16-17.
This approach merely reflects the unremarkable proposition that the second prong
for ripeness under Williamson County is inapplicable if a procedure for
compensation is not available or compensation is otherwise foreclosed. 473 U.S.
at 195. Thus, Asociacion, provides little support for the proposition that the
second Williamson County requirement is inapplicable to the claim at issue here.
The Seventh Circuit’s statements concerning facial challenges in its Peters v.
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Village of Clifton decision are similarly dicta, and the court there concludes the
plaintiff actually was subject to the Williamson County requirement that he first
seek compensation. See 498 F.3d 727, 732-33 (7th Cir. 2007).
Courts considering claims alleging a regulatory taking without just
compensation, even when characterized as facial claims, have applied the second
Williamson County requirement consistent with this court’s decision today. In
Equity Lifestyle Properties, Inc. v. County of San Luis Obispo, the Ninth Circuit
considered a challenge to a city ordinance as a taking without just compensation.
548 F.3d 1184, 1186 (9th Cir. 2008). The court applied the requirement to seek
compensation if procedures are available to claims labeled both as facial and as-
applied challenges, although it concluded that because no available procedure for
seeking compensation existed, the plaintiff was excused from the requirement as
to its facial claim. Id. at 1190 & n.13, 1193 (9th Cir. 2008). The Third Circuit
has likewise held that plaintiffs alleging a taking without just compensation,
although framed as a facial challenge, are not excused from the Williamson
County requirement that they seek compensation prior to bringing suit. County
Concrete Corp. v. Twp. of Roxbury, 442 F.3d 159, 164-65 (3d Cir. 2006).
Thus, a plaintiff mounting a challenge to a regulation alleging a taking
without just compensation is required to meet the second Williamson County
requirement before bringing suit either by demonstrating a procedure for seeking
compensation is unavailable or by first seeking compensation. That such
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challenges are accordingly difficult to bring merely reflects the basic framework
of the Takings Clause under which claims are inextricably tied to the question of
compensation. See Lingle, 544 U.S. at 544. Here, the developers have not argued
compensation procedures are unavailable, and it is undisputed they have not
brought an inverse condemnation action in state court. They have thus not met
the ripeness requirements of Williamson County.
B. Nollan-Dolan Doctrine
The developers assert an alternate basis for a facial challenge based on the
Supreme Court decisions in Nollan v. California Coastal Commission, 483 U.S.
825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994). They further argue
the litigants in those cases, by the nature of their claims, were sheltered from the
second Williamson County ripeness requirement and the claims at issue here fall
within that exception.
In Nollan and Dolan, the Supreme Court considered whether the state could
appropriate without compensation easements that otherwise would constitute
takings per se as a condition for granting development permits to the landowners.
Lingle, 544 U.S. at 546-47. The Court held such an appropriation without
compensation was constitutional so long as it substantially advanced the same
interest that would be grounds for denying the development permit outright. Id.
at 547.
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The developers argue that Nollan and Dolan limit the power of the state to
interfere with property rights regardless of compensation by requiring permitting
exactions to “substantially advance” the same interest that would allow denial of
the permit. According to the developers, Nollan and Dolan thus authorize facial
challenges seeking to invalidate an alleged taking when the taking arises in the
context of a permitting requirement, akin to the now-defunct “substantially
advances” theory previously available to challenge any regulatory taking.
In both Nollan and Dolan, the alleged taking was a permanent physical
invasion of private property, a type of taking designated as a taking per se and not
subject to the Penn Central analysis. Lingle, 544 U.S. at 546. This court has
described the Nollan-Dolan land-use exaction claims as a “sub-category” of
physical per se takings. Ramsey Winch Inc. v. Henry, 555 F.3d 1199, 1208 (10th
Cir. 2009). In both cases, the permanent physical invasion was an easement
granting public way through private property. Dolan, 512 U.S. at 379-80; Nollan,
483 U.S. at 828. The developers’ claim in this case does not fall within Nollan
and Dolan for this reason alone: the regulatory action amounts to a restriction on
how the developers may use their land should they choose to subdivide it or, in
the alternative, the imposition of a fee. 4 These interferences with property rights
4
The developers fare no better in their contention, raised for the first time at
oral argument, that the regulation amounts to a physical taking per se because it
requires the developers to convey portions of the land to certain buyers
designated by the County. The affordable housing requirement is unlike physical
(continued...)
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do not constitute physical per se takings. See United States v. Sperry Corp., 493
U.S. 52, 62 n.9 (1989) (noting that requiring payment of money, which is fungible
property, cannot be considered a physical invasion of property); Loretto, 458 U.S.
at 426-27 (distinguishing permanent physical occupations of land from
regulations on the private use of property).
The developers, moreover, misunderstand Nollan and Dolan. The premise
of the challenge in both cases was that the takings were uncompensated. There
was no contention the state could not properly exercise its right to appropriate the
land use rights at issue in Nollan and Dolan if such takings were compensated;
rather, the question presented was whether the state could permissibly achieve the
same result without compensation by exacting the land use rights in exchange for
granting a permit it was otherwise entitled to deny. Nollan, 483 U.S. at 834; see
Lingle, 544 U.S. at 546-47.
Arguing that Nollan and Dolan provide a cause of action to facially
invalidate land-use exactions, rather than to invalidate those exactions only where
compensation is denied, the developers cite the Supreme Court’s reliance on the
unconstitutional conditions doctrine. As the Court stated in Dolan, however,
4
(...continued)
structures placed on private property or the easements at issue in Nollan and
Dolan. It is particularly inappropriate to conclude the regulations effect a per se
physical taking in circumstances like these in which waivers, alternate compliance
methods, and cost-offsetting provisions are available. The developers may
qualify for an alternative to the conveyance they claim is a per se taking.
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under this doctrine, “the government may not require a person to give up a
constitutional right–here the right to receive just compensation when property is
taken for a public use” to receive an unrelated discretionary benefit. 512 U.S. at
385 (emphasis added). That is, the right a property owner cannot be forced to
give up is the right to compensation; had the state justly compensated the
plaintiffs in Nollan and Dolan, no Takings Clause violations could have even
been alleged even under the unconstitutional conditions doctrine.
In essence, the developers attempt to turn Nollan and Dolan into loopholes
in the Lingle rule that challenges to regulation as not substantially advancing a
legitimate governmental interest are not appropriate under the Takings Clause.
Nollan and Dolan do not authorize challenges to permitting decisions as alleged
unconstitutional takings without first seeking compensation if the state has
provided the means to seek compensation.
Finally, neither Nollan nor Dolan presented a facial challenge to a
regulation and the ripeness concerns at issue here were not present in those cases.
In Nollan, the landowners sought a construction permit for beachfront property
that was granted only on the condition they allow a public easement over their
land. Nollan, 483 U.S. at 828. The property owners litigated the propriety of the
permit’s condition in state court, including their claim that the condition
constituted a taking. It was the state court ruling that the condition did not
constitute a violation of the Takings Clause that the owners appealed to the U.S.
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Supreme Court. Id. at 830-31. Likewise, in Dolan, the landowner applied for and
obtained a development permit with a condition that a public easement be granted
on the land. 512 U.S. at 379-80. Again, the owner litigated the claim in state
court and obtained a ruling that the uncompensated appropriation did not
constitute a taking before seeking a writ of certiorari from the Supreme Court. Id.
at 383.
In both cases, the way in which the regulation would affect a particular
piece of land was finally decided by the administrative body implementing the
regulation, and the challenge was an as-applied challenge to the way the
regulation interfered with the property. In any case, neither Nollan nor Dolan
featured a discussion of the ripeness analysis in Williamson County and they
cannot be the source to create a new breed of facial challenges that can be
brought in federal court without regard to the Williamson County requirements.
C. Prudential Ripeness
In the alternative, the developers argue this court may decline to apply the
Williamson County ripeness requirements and we should do so here. Citing the
Supreme Court’s characterization of the Williamson County requirements as
“prudential,” the developers claim that because the dispute is sufficiently
crystalized, this court should exercise jurisdiction in this case. See Suitum v.
Tahoe Reg’l Planning Agency, 520 U.S. 725, 733-34 (1997).
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This court declines the developers’ invitation to ignore the ripeness
requirements because the requirement to seek compensation prior to bringing suit
retains an important purpose here. Assuming that the ordinance effectuates a
taking of property, the County could decide to compensate the developers for the
taking rather than abandon the ordinance. See First English Evangelical Lutheran
Church of Glendale v. County of Los Angeles, 482 U.S. 304, 314, 317 (1987)
(noting the government’s choice, once a court has decided a taking has occurred,
either to compensate or to abandon the interference with property rights). As
discussed above, were the County to justly compensate the developers, even if the
regulation constitutes a taking, there would be no constitutional concern. The
Williamson County requirement that a plaintiff first seek and be denied
compensation for a Takings Clause claim to be ripe therefore serves the important
purpose of allowing the dispute to fully develop before a federal court intervenes
in the County’s administration of its land use regulations.
D. Other Claims
Concluding the developers’ other constitutional claims were subsumed
within the Takings Clause claims, the district court dismissed the other federal
claims as unripe under this circuit’s rule that Williamson County requirements
apply equally to other constitutional claims based on the same facts as a Takings
Clause claim. See Bateman v. City of West Bountiful, 89 F.3d 704, 709 (10th Cir.
1996). Having dismissed all of the developers’ federal claims, the district court
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also dismissed the developers’ remaining state law claims under the supplemental
jurisdiction statute. See 28 U.S.C. § 1367(c)(3). The developers have made no
argument on appeal that the dismissal of the remaining claims based on the
ripeness decision as to the Takings Clause claim was improper. Accordingly, the
district court’s decision to dismiss the remaining portions of the complaint is
affirmed.
V. Conclusion
For the foregoing reasons, we AFFIRM the decision of the district court.
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