Koontz v St. John's River WMD

The US Supreme Court recently decided an extremely interesting mandatory exaction case involving wetlands development. Without going into the factual details to any great extent, in Koontz v St. Johns River Water Management District, the court invalidated a requirement that the developer pay to improve other properties belonging to the district as a condition of obtaining a permit to build on his own property. Because his property was burdened with wetlands restrictions, the district wanted improvements to their own in order to offset any harmful impacts the development might cause.

Of course, this brings up the interesting question of the applicability of Nollan v California Coastal Commission and Dolan v City of Tigard.  Nollan requires an essential nexus between any such condition involving real estate development; Dolan mandates that there be a rough proportionality between the amount of the condition and any negative impact the development might have.

In the world of land use planning law, these issues come up almost all the time in the context of subdivision applications. It is indeed a rare subdivision which does not require either a dedication of real property or some mandatory exaction.

However, in both Nollan and Dolan, not only was the required condition the dedication of real property, but also those cases both involve situations where the application was granted subject to the condition. In Koontz, the condition was that money be paid for off-site improvements, and the application was turned down when Mr. Coons indicated that he would not make the payments. In the federal courts, there was a division of authority. The Supreme Court took care of that.

First, with regard to the distinction between a monetary exaction and the dedication of real property, the court found that to be a difference without any meaning. From the perspective of the majority, an administrative agency can always substitute a monetary exaction in lieu of a real property dedication and in that way avoid the constitutional impropriety at any time.

Second, with regard to the distinction between granting approval with the condition and turning it down, the court also found that to be a distinction without any real significance. Once again, the administrative agency could clearly trapped its findings as a denial of the application if that was all it would take to render the decision constitutional. The court did not find that granting an application subject to the condition, as opposed to denying the application because the condition would not be complied with, had any significant; the real point is that the owner is deprived of a property right without just compensation either way.

Remember that under Nollan and Dolan, the burden of proof is reversed: the property owner does not have the burden of demonstrating that there is an essential nexus and rough proportionality; rather, the administrative agency must articulate why there is an essential nexus and rough proportionality at the time of the agency decision. Under the Koontz’s decision, it is now clear that the same reversal of the burden of production and persuasion applies whether the condition is for money or real property, and whether or not the application was granted or denied. Ultimately, all planning commissions should required the staff to prepare such justifications for every case in which a dedication or exaction is involved. Without some evidence in the record to justify the condition, there is a significant possibility of the decision being overturned on appeal.

As the court noted:

Nollan and Dolan involve a special application of this [unconstitutional conditions] doctrine that protects the Fifth Amendment right to just compensation for property the government takes when owners apply for land-use permits . . . 

Land-use permit applicants are especially vulnerable to the type of coercion that the unconstitutional conditions doctrine prohibits because the government often has broad discretion to deny a permit that is worth far more than property it would like to take. By conditioning a building permit on the owner's deeding over a public right-of-way, for example, the government can pressure an owner into voluntarily giving up property for which the Fifth Amendment would otherwise require just compensation. So long as the building permit is more valuable than any just compensation the owner could hope to receive for the right-of-way, the owner is likely to accede to the government's demand, no matter how unreasonable. Extortionate demands of this sort frustrate the Fifth Amendment right to just compensation, and the unconstitutional conditions doctrine prohibits them.

Legislative and Testimonial Immunity

There have been a number of interesting new land use cases over the last 20 or 30 days, both here in Tennessee and across the country as a whole. Over the next couple of weeks, I’ll try to address some of the more interesting cases. Today will start with a very interesting legislative and testimonial immunity case, Issa v Benson, (Tenn. App. June 24, 2013). A developer seeking a zoning change in Chattanooga sued a City Councilman for defamation, alleging that the Councilman had falsely accused the developer of offering him a bribe to support the zoning change. The Councilman later informed the Council, during argument concerning the zoning change on the floor of the Council, and not surprisingly, the zoning change was defeated. In addition, there was an earlier conversation between the two men where the developer warned that he would have to contest in court any decision denying the zoning change and the Councilman responded that if there was a lawsuit filed, he would testify that the developer had offered him a bribe in order to gain his support.

After the zoning change was defeated, the developer filed a defamation lawsuit and the Councilman filed a motion to dismiss based on both legislative and testimonial immunity (the court calls the latter litigation privilege). First, the court makes clear that the legislative immunity applies to lesser legislative bodies, such as local County and municipal legislatures. The developer tried to argue first that because there may have been a violation of the Open Public Meetings Act that was not an appropriate legislative session and therefore the privilege did not attach. Further he argued that bribery was beyond the bounds of the privilege itself.

The court found both arguments unavailing. First, the applicability of the Open Public Meetings Act was irrelevant to the issue of legislative immunity. Even if there had been a violation of the act, that would not render comments made by a local legislator potentially actionable. The privilege applied regardless of the Open Public Meetings Act.

Second, while certainly bribery is illegal and not to be condoned, the court noted that in a bribe had been offered, the other members of the local legislative body would be interested in that and it would certainly have an effect on the proposed legislation. As a result, the comments concerning the alleged bribery or well within the protection of the privilege and no liability could result.

Finally, the developer’s allegations concerning the earlier meeting took place outside the context of a legislative Council meeting. As a result, the developer argued that the legislative immunity did not apply. The court however ruled that there was a “litigation privilege” or as I usually call it, a testimonial immunity. The court held that since the developer had threatened litigation, the comments of the legislator were protected as “preliminary to proposed or pending litigation.” Since there was a threat of a lawsuit, this comment about the alleged bribery, was preliminary to the defamation lawsuit which was in fact file. As a result, the comments were protected by virtue of the litigation privilege or testimonial immunity.

A final couple of notes are in order. First, you might be wondering whether a witness in a zoning board hearing is protected by the testimonial immunity. In fact, they are. In Evans d/b/a Riverwood Riding Academy of Nashville v Nashville Banner, 1988 WL 105718 (Tenn. App. 1988), the court held:

Tennessee courts have extended this privilege to meetings of local legislative bodies, and to "quasi-judicial" proceedings conducted by state departments and agencies . . .  Zoning boards are generally considered to be "quasi-judicial" bodies having "quasi-judicial" functions. The Tennessee Supreme Court has followed the general rule. The Court has held that a county board of adjustment is acting as a "quasi-judicial" body when it grants a zoning variance. It has also held that "determinations made by a Board of Zoning Appeals are administrative determinations, judicial or quasi-judicial in nature."

The policy underlying the privilege is to encourage the public to speak freely at public, governmental hearings without the fear of a defamation suit. Local boards of zoning appeals take actions which affect not only . . . homes and neighborhoods but also the quality of people's lives. When these boards hold hearings, all interested persons should feel free to express their views without fear of a recriminating lawsuit. To this end, statements made at a public governmental meeting should be absolutely privileged.

Of course, the same safeguards of relevance apply in hearings conducted by local zoning boards that apply to full-fledged trials or legislative proceedings. Thus, before the privilege will apply, the statements must be related to the subject matter of the hearing.

Since the witness who testified against the applicant at the zoning board hearing was immunized, and the newspaper articles describing the hearing faithfully recounted the details, neither the witness who testified nor the newspaper which published the report had any liability for defamation.

Finally, one wonders what the Tennessee Anti-Slap Act of 1997,  Tenn. Code Ann. §4-21-1001, adds in this context. The protection purportedly offered by the statute seems less inclusive than the common law rule described above. As a result, it’s not entirely clear what the impact of the 1997 statute really is.

Generally, we can conclude that a defamation action against either a local legislator or a witness before a local zoning board or planning commission (or legislative body) is likely privileged. In the case of the witness, the testimony must have been generally relevant to the issues before the administrative body, but assuming that, no defamation action can be successfully maintained.

Regulatory Takings

The Tennessee Court of Appeals has released another interesting case related to zoning, land use planning law, and regulatory takings. In Phillips v Montgomery County, the issue was whether or not the denial of subdivision approval by the county because the location of the subdivision would essentially block the extension of a state highway, was unconstitutional.

Unfortunately, the plaintiff chose to sue solely under the terms of the Tennessee state constitution but did not include a cause of action under the federal Constitution. An interesting question, related to this issue, is whether or not you need the name either constitutional provision. Perhaps it’s safer to mention both, but it seems to me that the Tennessee Rules of Civil Procedure to not require it.

In any event, in this particular case, the Tennessee Constitution was specifically referenced as a result any potential claim concerning regulatory takings under the federal Constitution were waived. In addition, since the doctrine of regulatory takings has not yet been recognized by the Tennessee Supreme Court, the Court of Appeals was reluctant to make new law by concluding that there was a Tennessee doctrine prohibiting regulatory takings. The court did specifically note its earlier decision, B & B Enterprises of Wilson County, LLC v. City of Lebanon, 318 S.W.3d 839 (Tenn. 2010), and since that case was authored by Justice Koch, it may be that this decision was the Court’s way of suggesting that this case be appealed to the Tennessee Supreme Court, where this issue could be fully addressed. Certainly, one would assume that the state courts could entertain a theory based on a regulatory taking.

However, since the plaintiff had also sued under the theory of inverse condemnation, the Tennessee Court of Appeals dismissed the other claims and remanded based on the inverse condemnation claim under Tennessee law.

Although not involved in this case, the three United States Supreme Court decisions, Nolan v California Coastal Commission, Dolan v City of Tigard, and Koontz v St. James River Management Utility, the latter of which was only decided in late June of this year, clearly establish that if an application is denied based on what amounts to an unrelated requirement of the local government, that it is not only a take, but that the burden of proof is reversed and shifts to the local government itself.

For example, in this Phillips case, the government admitted that the only reason for the denial of the preliminary plat was the proposed future extension of the state highway. Presumably, the only reason to deny the plat approval would be to prevent construction and thereby hold down the amount of money which the state or local government would have to pay in order to condemn the property for the extension. But again, this is inappropriate. The single property owner should not have to pay, by having his project delayed, for a project of this nature. This is a cost of the entire government, state or local, and should be borne by the taxpayers of government. It is simply unacceptable for a local government to deny plat approval under those circumstances.