Epcon Homestead, LLC v. Town of Chapel Hill ( 2023 )

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 21-1713
EPCON HOMESTEAD, LLC,
Plaintiff - Appellant,
v.
TOWN OF CHAPEL HILL,
Defendant - Appellee.
Appeal from the United States District Court for the Middle District of North Carolina, at
Greensboro. N. Carlton Tilley, Jr., Senior District Judge. (1:20-cv-00245-NCT-JLW)
Argued: December 9, 2022 Decided: March 20, 2023
Before GREGORY, Chief Judge, THACKER, and RUSHING, Circuit Judges.
Affirmed by published opinion. Chief Judge Gregory wrote the opinion, in which Judge Thacker
joined, and Judge Rushing wrote a separate opinion concurring in the judgment.
ARGUED: Jeffrey Lawrence Roether, MORNINGSTAR LAW GROUP, Durham, North
Carolina, for Appellant. Dan M. Hartzog, Jr., HARTZOG LAW GROUP LLP, Raleigh,
North Carolina, for Appellee. ON BRIEF: William J. Brian, Jr., MORNINGSTAR LAW
GROUP, Durham, North Carolina, for Appellant. Katherine M. Barber-Jones, HARTZOG
LAW GROUP LLP, Raleigh, North Carolina, for Appellee.
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GREGORY, Chief Judge:
This case presents a narrow question: For plaintiffs challenging the constitutionality
of a land-use condition, when does their Section 1983 claim accrue? Under Fourth Circuit
precedent, a cause of action for a constitutional tort normally vests when the plaintiff knows
or has reason to know of the injury. But Epcon Homestead, LLC (“Epcon”) believes its
case warrants a departure from that standard.
The Town of Chapel Hill, North Carolina (the “Town”) requires housing developers
seeking a special use permit to set aside a portion of their developments for low-income
residents or pay a fee in lieu of that condition. In 2015, Epcon initiated its purchase of
property subject to the fee-in-lieu. Epcon paid the requisite fee installments, commenced
the development project, and sold each parcel. After Epcon satisfied its final fee
installment in March 2019, it brought this lawsuit under a state cause of action to recover
the whole sum it had paid to the Town and alleged federal takings and due process
violations.
The district court never reached those claims, however, because it determined that
Epcon waited too long to pursue them. Given that at least four years had passed between
when it first learned of the special use permit condition and when Epcon filed its complaint,
the district court dismissed the case under North Carolina’s three-year statute of limitations
for personal injury claims. Epcon promptly appealed, asking this Court to hold that the
statute of limitations on Epcon’s federal claims began instead when it paid the fee
installments. For the reasons to follow, we decline Epcon’s invitation and affirm the
district court’s ruling.
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I.
A.
The Town adopted Section 3.10 of its Land Use Management Ordinance (“LUMO”)
in 2010 “to create and preserve affordable housing opportunities for its residents” and “to
provide a structure for cooperative participation by the public and private sectors in the
production of affordable housing.” LUMO § 3.10; J.A. 87. This “inclusionary zoning”
provision requires developers to dedicate a certain percentage of their proposed
construction projects to affordable housing units. Id. § 3.10.2(a). As an alternative, the
Town Council retains the discretion to approve, among other things, the payment of a fee
in lieu of the set-aside. Id. § 3.10.3(d)(4); J.A. 91. The inclusionary zoning provision
applies to any new residential development project that will construct at least five single-
family dwellings within the Town’s jurisdiction. Id. § 3.10.1(a).
The Courtyards of Homestead is a housing development located in the Town
comprising sixty-three single-family housing units, bringing it within the inclusionary
zoning provision’s ambit. In October 2014, before Epcon acquired the property, Epcon’s
“affiliates” 1 received a special use permit for the Courtyards of Homestead. Rather than
abiding by the set-aside requirement, the affiliates agreed to pay the Town a $803,250 fee-
in-lieu over several installments. The fee-in-lieu was a condition of the special use permit,
without which the project could not be completed. Only after the installments were paid
would the Town issue the certificates of occupancy for each development unit.
1
Epcon’s First Amended Complaint refers to the former owners of the land as its
predecessors in interest and affiliates without further specification. See J.A. 73, 77.
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Following those negotiations, Epcon purchased the property “through several
transactions” beginning in 2015. Epcon constructed sixty-three single-family units on
residential lots as planned and sold each unit. Epcon also fulfilled its financial obligations,
making its first payment in July 2017 and its final payment in March 2019. In return, the
Town issued the necessary certificates of occupancy for the finished units.
B.
Once Epcon met its obligations under the special use permit and sold the sixty-three
Courtyards of Homestead lots, it filed a civil complaint on October 24, 2019 in North
Carolina state court. It initially brought claims under North Carolina statutory and common
law to recover the $803,250 it had paid the Town, as well as the reimbursement of
attorneys’ fees. Epcon then filed an amended complaint adding new claims under state and
federal law. It claimed that the Town Council’s special use permit condition was ultra
vires under North Carolina law and violated the state constitution. Epcon also invoked 28
U.S.C. § 1983, arguing that the fee-in-lieu was an unconstitutional taking under the Fifth
Amendment and a due process violation under the Fourteenth Amendment. The Town then
removed to federal court and moved to dismiss under Federal Rule of Civil Procedure 12(b)(6).
The district court dismissed the lawsuit because it concluded that the statute of
limitations had run on the federal causes of action. Applying a three-year statute of
limitations, the court first determined that a § 1983 claim accrues “when a plaintiff knows
or has reason to know of the injury that is the basis of the action.” J.A. 533 (citation
omitted). Then the district court found that “Epcon knew or had reason to know of the
[inclusionary zoning provision’s] mandates, including the fee-in-lieu alternative, certainly
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by the time the [special use permit] was issued in October 2014, when it—or its affiliates—
agreed to abide by the Ordinance’s terms.” J.A. 534. Therefore, the court held that
“whether the limitations period began accruing . . . when Epcon acquired the real property
beginning in 2015, or at an earlier date not articulated on the face of the Amended
Complaint, the three-year statute of limitations expired prior to Epcon bringing its claims
in October 2019.” Id. Because the court dismissed the federal claims as time-barred, it
declined to exercise supplemental jurisdiction over the state-law claims. Therefore, it
dismissed those claims without prejudice to renew in state court.
II.
We review the grant of a motion to dismiss a complaint for failure to state a claim
under Rule 12(b)(6) de novo. U.S. ex rel. Oberg v. Pa. Higher Educ. Assistance Agency,
745 F.3d 131, 136 (4th Cir. 2014). Dismissal is proper if the well-pleaded facts of the
complaint, taken in the light most favorable to the plaintiff and excluding “unwarranted
inferences, unreasonable conclusions, or arguments,” fail to state a plausible claim for
relief. Id. (citations omitted). The Court may also consider documents attached to the
complaint or incorporated by reference, including those attached to the motion to dismiss,
so long as they are integral to the complaint and authentic, and may take judicial notice of
matters of public record. See id. Claims may be dismissed at the Rule 12(b)(6) stage based
upon an affirmative defense, such as the statute of limitations in this case, where the
relevant facts “clearly appear on the face of the complaint.” Briscoe v. W.A. Chester, LLC,
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799 F. App’x 183, 183 (4th Cir. 2020) (unpublished) (citing Goodman v. Praxair, Inc., 494
F.3d 458, 464 (4th Cir. 2007)).
III.
A.
There is no dispute that the applicable statute of limitations for Epcon’s federal
claim is three years. Because § 1983 does not contain a statute of limitations, “courts
borrow the statute of limitations from the most analogous state-law cause of action.”
Owens v. Balt. City State’s Att’y’s Off., 767 F.3d 379, 388 (4th Cir. 2014); see also 42
U.S.C. § 1988(a) (providing that state law acts as a gap-filler where federal statutes are
“deficient in the provisions necessary to furnish suitable remedies”). In North Carolina,
the “analogous state limitations period is the three-years limitations period . . . relating to
personal injury actions.” Nat’l Advert. Co. v. City of Raleigh, 947 F.2d 1158, 1161–62 (4th
Cir. 1991); see also N.C. Gen. Stat. § 1-52(5).
Instead, the parties disagree about when the clock on Epcon’s § 1983 claim began
to tick. 2 If, as the district court decided and the Town endorses on appeal, Epcon’s claim
accrued when it first learned that its development project would be encumbered by the fee-
2
There is also a question about whether the Court should consider Epcon’s alleged
injuries under the Takings and Substantive Due Process clauses or just the Takings Clause.
Given that both claims stem from the same § 1983 injury, their legal distinctions do not
bear on the accrual analysis. The underlying injury—the special use permit condition that
Epcon set aside a certain number of affordable housing units or pay a fee-in-lieu—is the
same under either theory. See, e.g., Halle Dev., Inc. v. Anne Arundel Cnty., 121 F. App’x
504, 507 (4th Cir. 2005) (unpublished) (considering a Takings Clause and Equal Protection
Clause claim as flowing from the same injury for purposes of determining time of accrual).
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in-lieu condition, then the statute of limitations period was over by the time it filed this
lawsuit. However, Epcon challenges this theory. Epcon argues that the statute of
limitations did not begin to run until it started making payments because the gravamen of
its claim is that those payments commenced the intrusion on its constitutional rights.
“Although courts look to state law for the length of the limitations period, the time
at which a § 1983 claim accrues ‘is a question of federal law.’” McDonough v. Smith, 139
S. Ct. 2149, 2155 (2019) (quoting Wallace v. Kato, 549 U.S. 384, 388 (2007)). In federal
court, it is “the standard rule that the [accrual occurs] when the plaintiff has ‘a complete
and present cause of action,’” that is, when “the plaintiff can file suit and obtain relief.”
Bay Area Laundry & Dry Cleaning Pension Tr. Fund v. Ferbar Corp. of Cal., 522 U.S.
192, 201 (1997) (quoting Rawlings v. Ray, 312 U.S. 96, 98 (1941)). Put differently, “a
plaintiff's cause of action accrues, and the limitations period commences, when the plaintiff
knows or has reason to know of his injury (hence, the ‘standard rule’).” Owens, 767 F.3d at 389.
As the Supreme Court has recognized, though, the limitations period on common-
law torts may not always begin on the date that a plaintiff knows or has reason to know of
his or her injury. Wallace, 549 U.S. at 388. Determining when a plaintiff can obtain relief
requires identification of “the specific constitutional right alleged to have been infringed.”
McDonough, 139 S. Ct. at 2155 (internal quotations and citations omitted). As such, the
Court observed in Wallace that the “standard rule” does not always control the start of the
limitations period for a § 1983 claim either. 549 U.S. at 388. Instead, Wallace instructs
that if the common law provides a “distinctive rule” for determining when the limitations
period for the analogous common-law tort begins to run, a court must “consider[]” this
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“refinement” in determining when the limitations period for the plaintiff’s claim under
§ 1983 should commence. Id. at 388–89; see also Owens, 767 F.3d at 390.
When this Court has considered § 1983 injuries arising from alleged takings, we
have not applied the exception recognized by Wallace. Rather, we have held that those
claims accrued when the plaintiff became aware of the governmental conduct constituting
the taking. For example, in National Advertising Company v. City of Raleigh, an advertiser
challenged a city ordinance requiring an advertiser to bring his existing billboards into
compliance or to remove them before the expiration of a five-and-a-half year “grace
period.” 947 F.2d at 1160–61. We concluded that the advertiser’s § 1983 Takings Clause
claim accrued when the ordinance was enacted rather than at the conclusion of the grace period
because “[i]mmediately upon enactment,” the ordinance created “both substantial interference
with the property’s primary use so as to affect distinct investment-backed expectations and
also actual concrete injury accompanying that interference.” Id. 1163–64.
Then, in Halle Development, Inc. v. Anne Arundel County, a developer conveyed
land to the county to be used for school facilities, pursuant to an ordinance that entitled
developers who made such conveyances to negotiate for land development fee credits. 121
F. App’x 504, 505 (4th Cir. 2005) (unpublished). But the county did not give the developer
credits in exchange for the land conveyance. Id. When the developer brought a takings
claim a decade after the conveyance, this Court held that the statute of limitations had run.
Id. at 505–06. We determined that when the developer negotiated the deal, it “knew or
should have known of this alleged injury when [it] received notice that the County did not
intend to provide impact fee credits in exchange for the [] Parcel.” Id. at 507.
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The upshot of these decisions is that there is no “distinctive rule” in the Takings
Clause context to apply for determining when the limitations period for a § 1983 claim
begins to run. And the “standard rule” that a cause of action under § 1983 is “complete
and present,” Bay Area Laundry, 522 U.S. at 201, when the “plaintiff knows or has reason
to know of his injury,” Owens, 767 F.3d at 389, applies to Epcon’s claims. In both cases,
the Court concluded that the claim accrued when the government performed conduct
causing the injury, thereby notifying the plaintiff of its injury. In National Advertising,
that notice flowed from the enactment of the use ordinance because it immediately affected
the advertiser’s existing use of its property. In Halle, the developer received notice when
it conveyed the land because that transaction effected clear notice to the developer that it
would not receive impact fee credits as part of the deal.
Here, Epcon alleges that it suffered an injury under § 1983 stemming from the
application of an unlawful special use permit condition. As the district court concluded,
Epcon first had reason to know of this injury no later than 2015, when it began purchasing
the land subject to the special use permit. Thus, its claim that the permit condition violated
its rights to just compensation and due process accrued at that point and extinguished three
years later. 3 By the time Epcon filed suit in October 2019, the sun had set on its federal
claims.
3
Epcon cites Tommy Davis Construction, Inc. v. Cape Fear Public Utility Authority,
to argue that its constitutional claims accrued when it paid the fee installments. 807 F.3d
62, 66–67 (4th Cir. 2015) (concluding that the statute of limitations on the construction
company’s due process claim stemming from fees it paid for sewage service it never used
began when it “paid the impact fees under protest”). The construction company in Tommy
(Continued)
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B.
1.
Resisting this conclusion, Epcon maintains that it “suffered no taking or deprivation
of any property interest until it was compelled to pay the challenged fees to the Town
beginning in 2017 as a condition of the Town issuing certificates of occupancy for the
Project.” Opening Br. at 10. It emphasizes that “[a]t any time prior to that date, Epcon
could have sold the Property, requested a rezoning of the Property to pursue a non-
residential use, [or] redesigned the Project in a way that did not implicate the Ordinance’s
requirements.” Id. Thus, given that “Epcon does not allege a regulatory taking” and
instead “alleges an unlawful exaction that could not occur unless and until Epcon changed
the use of the property,” it argues that the claim did not accrue when the special use permit
was issued. Reply Br. at 6.
The distinction Epcon attempts to draw between exactions and regulatory takings
proves little more than that the government need not physically appropriate property to
enact a taking. Once the government conditions the grant of a land-use permit on the
surrender of a landowner’s right to just compensation, a Takings Clause claim becomes
cognizable. See Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 606 (2013)
(stating that the principles of takings case law “do not change depending on whether the
Davis did not challenge the ordinance requiring payment for water sewage service, but
instead challenged the application of that law to the company for a service it did not use.
Id. at 65. By contrast, Epcon’s legal theory is that the fees it paid were unlawful because
the special use permit condition (as negotiated by its affiliates) itself is unconstitutional.
So, Tommy Davis does not alter our conclusion on this score.
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government approves a permit on the condition that the applicant turn over property or
denies a permit because the applicant refuses to do so”); accord Knick v. Twp. of Scott, 139
S. Ct. 2162, 2177 (2019) (noting that a taking “is complete at the time of the taking”);
Pakdel v. City & Cnty. of San Francisco, Cal., 141 S. Ct. 2226, 2230 (2021) (holding that
a taking is final when “there [is] no question . . . about how the ‘regulations at issue apply
to the particular land in question’”) (quoting Suitum v. Tahoe Reg’l Planning Agency, 520
U.S. 725, 739 (1997)). The fact that the special use permit did not require and simply
permitted Epcon to develop the land for the use described in the application (subject to the
condition at issue) is hardly noteworthy—permitting a particular use is an essential feature
of any permit. Thus, when Epcon learned of the special use permit condition on its recently
acquired land, its takings claim became actionable.
2.
Likewise, Epcon’s argument that each payment constituted a “continuing wrong”
that tolled the statute of limitations is unpersuasive. State rules on tolling apply when a
state statute of limitations is borrowed in a federal question case. See Wade v. Danek Med.,
Inc., 182 F.3d 281, 289 (4th Cir. 1999). In North Carolina, the “continuing wrong doctrine”
extends the limitations period until “the violative act ceases.” Williams v. Blue Cross Blue
Shield of N.C., 581 S.E.2d 415, 423 (N.C. 2003). In other words, “the applicable
limitations period starts anew in the event that an allegedly unlawful act is repeated.”
Quality Built Homes, Inc. v. Town of Carthage, 813 S.E.2d 218, 226 (N.C. 2018). Epcon
argues that Quality Built Homes, compels the Court to apply the continuing wrong doctrine
here. We disagree.
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In Quality Built Homes, the North Carolina Supreme Court considered whether the
Town of Carthage had the authority to enact and enforce portions of a water impact fee
collection ordinance. Id. at 221. Thus, “[t]he essence of plaintiffs’ claim against the Town
[was] that the Town ha[d] exacted unlawful impact fee payments from them.” Id. at 227.
Even though “the [p]laintiffs, in [that] case, who [were] in the business of developing
property, knew at the moment the Ordinances were passed, that they would be subject to
the Ordinances’ requirement of the payment of water and sewer impact fees,” id. at 222,
the court rejected the town’s argument that the continuing wrong doctrine did not apply
because the “plaintiffs did not sustain any direct injury at the time that the challenged
impact fee ordinances were adopted[,]” id. at 227. As a result, “since plaintiffs’ injury
occurred when plaintiffs made the required impact fee payments to the Town,” the court
concluded that “Quality Built Homes’ claims against the Town accrued” each time it paid
an impact fee. Id.In relying on Quality Built Homes, Epcon conflates the nature of its state and federal
law claims. 4 While the essence of Epcon’s state return-of-fees claim is arguably the
4
For the same reason, Bill Clark Homes of Raleigh, LLC v. Town of Fuquay-Varina,
869 S.E.2d 1 (N.C. Ct. App. 2021), which Epcon cited as additional support for its position,
is distinguishable. Like Quality Built Homes, the nature of the claim “was, when viewed
realistically, one resting upon an alleged statutory violation that resulted in the exaction of
an unlawful payment.” Id. at 5 (internal quotations and citation omitted). The Bill Clark
Homes court was “unable to distinguish the nature of the claim” in its own case from that
of Quality Built Homes, so the same statute of limitations applied. Id.; see also id. (“Of
particular relevance here, our Supreme Court reasoned that it was ‘unable to conclude that
the one-year statute[s] of limitations set out in N.C.G.S. §§ 160A-364.1 and 1-54(10)’
applied because the plaintiffs’ claims did ‘not rest upon a challenge to the validity of the
Town’s zoning or unified development ordinances.’” (emphasis in original) (quoting
Quality Built Homes, 813 S.E.2d at 228 n.7)).
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unlawful fee payments exacted, its § 1983 injury was inflicted by the special use permit
condition requiring Epcon to set aside part of its property or pay the fee-in-lieu. Hence,
any violation of Epcon’s constitutional rights by the Town would have occurred prior to
when Epcon actually paid the fee installments. As the district court put it, “[t]he payments
were exactly what the continuing wrong doctrine is not: the continual ill effects from an
original violation laid out in the [special use permit].” J.A. 536 (cleaned up).
IV.
Because Epcon bought the property subject to the special use condition more than
three years before it finally filed this lawsuit, its federal claims are barred by the statute of
limitations. Accordingly, we affirm the district court’s dismissal of those claims. Having
disposed of Epcon’s federal claims, we also affirm the district court’s decision to decline
supplemental jurisdiction over Epcon’s state-law claims.
AFFIRMED
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RUSHING, Circuit Judge, concurring in the judgment:
Epcon’s 28 U.S.C. § 1983 claim is barred by the three-year statute of limitations,
see Nat’l Advert. Co. v. City of Raleigh, 947 F.2d 1158, 1161–1162 (4th Cir. 1991); N.C.
Gen. Stat. § 1-52(5), because its cause of action accrued by 2015. Under common-law
principles, “it is the standard rule that accrual occurs when the plaintiff has a complete and
present cause of action, that is, when the plaintiff can file suit and obtain relief.” Wallace
v. Kato, 549 U.S. 384, 388 (2007) (internal quotation marks, citations, and brackets
omitted); see Smith v. Travelpiece, 31 F.4th 878, 883 n.4 (4th Cir. 2022) (contrasting a
discovery rule of accrual). †
Epcon complains that the Town allegedly imposed an unconstitutional condition on
its special use permit. See Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 607
(2013). Applying the standard rule, Epcon’s takings claim and related substantive due
process claim accrued by 2015, when Epcon first purchased land subject to that permit
condition. See id. (unconstitutional conditions do not “take property” but rather
“impermissibly burden the right not to have property taken without just compensation”);
see also id. at 613 (“[T]he monetary obligation burden[s] [the plaintiff’s] ownership of a
specific parcel of land.”).
†
In the analogous common-law context of trespass, a claim accrued “at ‘the time
[the trespass] was committed, and not from the time when the full extent of the injury was
ascertained.’” Smith, 31 F.4th at 887 (quoting H.G. Wood, A Treatise on the Limitation of
Actions at Law and in Equity 422 (John M. Gould ed., 3d ed. 1901)); see Robert Brauneis,
The First Constitutional Tort: The Remedial Revolution in Nineteenth-Century State Just
Compensation Law, 52 Vand. L. Rev. 57, 63, 67–71 (1999) (explaining the history of
takings claims being asserted as trespass actions).
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The continuing-wrong doctrine does not help Epcon. As an initial matter, the
doctrine appears to be one of accrual, not tolling, so federal law controls. See, e.g., Quality
Built Homes Inc. v. Town of Carthage, 813 S.E.2d 218, 226 (N.C. 2018) (explaining that
“the ‘continuing wrong’ doctrine” determines when a claim “accrued” because it “does
nothing more than provide that the applicable limitations period starts anew in the event
that an allegedly unlawful act is repeated”). Under federal law, “[a] continuing violation
is occasioned by continual unlawful acts, not continual ill effects from an original
violation.” Nat’l Advert. Co., 947 F.2d at 1166 (internal quotation marks omitted). Thus,
if the alleged constitutional violation occurs “in a series of separate acts and if the same
alleged violation was committed at the time of each act, then the limitations period begins
anew with each violation . . . .” Id. at 1167 (internal quotation marks omitted). Epcon’s
federal claims allege the Town imposed an unconstitutional condition on its permit—a
single act. Epcon’s payments pursuant to that permit were not repeated constitutional
violations but rather continual ill effects of the original violation alleged. I therefore concur
in the Court’s judgment affirming the district court’s dismissal of Epcon’s federal claims.
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