Thursday, January 30, 2014

The Boyd Theater in Philadelphia

It’s always interesting to check out land use controversies from other cities across the United States. There’s an interesting controversy in Philadelphia going on right now concerning the Boyd Theater, located on Chestnut Street in Center City, Philadelphia. The theater opened on Christmas Day 1928 and is the last of the old art deco movie houses constructed in the early days of American moviemaking.

Currently it is closed. The Friends of the Boyd have a website with photographs which show the theater’s beauty in its heyday; currently the exterior is in pretty bad shape and I’m sure the interior is not much better. However, the photos of the theater from its gold days are well worth a look.

The current owner has suggested retention of the fa├žade of the building while demolition of most of the rest of the structure to be replaced by an eight screen movie house. The Boyd is on the Philadelphia Register of Historic Places (since 2008) so that the owner needs to convince the Philadelphia Historical Commission that there is an economic hardship sufficient to allow the demolition of the interior.

Take a look at the Plan Philly blog page for additional information, including the applicant’s documentation concerning the economic hardship. To put it simply, rehabilitation of the structure would cost over $40 million, and the various uses that might be available simply will not generate enough income to cover the kind of debt load.

There was a hearing before the Historic Commission’s Committee on Economic Hardship last Tuesday, January 28, but no decision was reached. It certainly is a difficult proposition: the building was and could “beautiful, but finding a new use for the old building is quite challenging.

Friday, January 24, 2014

Koontz and Land Use Law: What's the Impact?

I attended an interesting seminar yesterday sponsored by the Tennessee Bar Association and its Environmental Section, concerning the impact of Koontz v St. Johns River Water Management District, 133 S Ct 2586 (US 2013), a case which we discussed on these pages several months ago. The seminar was extremely interesting; all of the speakers did an excellent job in their particular areas.

Of special interest was the presentation by Prof. J. B. Ruhl, Professor of Environmental and Land Use Law at Vanderbilt University, suggesting that the impact of Koontz may not be very pronounced in the environmental law area because environmental mitigation programs are already designed in a way which follows the Nollan/Dolan/Koontz paradigm. However, in the wild and woolly local land use arena, Koontz may encourage local governments and their agencies and officials to more carefully weigh the impact of mandated exactions and dedications so as to avoid an adverse constitutional determination. It is certainly true that local land use officials have not paid a great deal of attention to this area of the law in the past. I have given numerous seminars over the years, and any time I mention subdivision control, I always discuss the Supreme Court predecessors of Koontz: namely, Nollan v California Coastal Commission and Dolan v City of Tigard (I’ll be adding Koontz to my comments this year).

Notwithstanding this emphasis, I still believe that in any major planning commission across the state of Tennessee at any given public hearing, you can find examples of mandatory dedications and exactions which do not comply with the Nollan/Dolan/Koontz paradigm. For whatever reason, local officials are just not very cognizant of the constitutional issue.

I’m hopeful that Koontz will alert at least some of the more attentive and perceptive officials of the potential dangers that often remain obscured by the minutia of subdivision regulations.

Tuesday, January 21, 2014

A Cautionary Tale . . .

Back in December of last year, the Eastern District Court of New York issued a ruling in Qing Dong v Town of North Hempstead, 2013 WL 6407724 (ED NY Dec 9, 2013) dismissing with prejudice a takings claim against the defendant. The suit arose out of a zoning regulation that prohibited the use of vacant corner lots which were more than 100 feet in width (there's no explanation as to the rationale behind the regulation). The plaintiff bought a vacant corner property and applied for a permit which was of course denied. Plaintiff appealed for a variance to the board but was denied and then appealed to the state courts (concerning the denial of the variance, not the possible taking), which affirmed the zoning board decision.

The federal lawsuit was filed alleging a taking, but the difficulty was that although the plaintiff had apparently exhausted his administrative remedies, no condemnation action had been filed in state court. The famous case which arose out of Tennessee, Williamson County v Hamilton Bank, 473 US 172 (1985), requires that any administrative remedy must be pursued, as well as state judicial condemnation remedies before filing in federal court.

The plaintiff argued that under NY state law, a pre-ownership regulation (plaintiff bought the land after the regulation had been passed presumably with knowledge of the regulation) barred a suit for a taking. The district court held that the underlying state law did not matter; in order to be ripe for federal litigation, the state action had to be filed first; without that predicate the case had to be dismissed.

Finally, the federal court dismissed the case with prejudice. The statute of limitations in state court had run: there was no use in dismissing without prejudice because the plaintiff had no right to file the condemnation proceeding in state court any longer.

It is worthwhile to apply this cautionary tale to the law here in Tennessee. First, we don’t know whether a takings claim based on overbroad zoning or other regulation is recognized here in Tennessee. As Justice Koch said, “However, this Court has not yet held that a regulatory takings claim can be asserted under Article I, Section 21 of the Tennessee Constitution. Currently, we have recognized only two types of takings claims – physical occupation takings claims and nuisance-type takings claims . . . Regulatory takings do not fall into either of these categories.” B & B Enterprises v Wilson County, 318 S.W. 3d 839 (Tenn. 2010). It is however worth noting that in 2013, the Tennessee Court of Appeals quoted B & B:
A regulatory taking results when a governmental regulation places such a burdensome restriction on a landowner's use of its property that the government has for all intents and purposes “taken” the property. In 1922, a near unanimous United States Supreme Court noted that a regulation that goes “too far” is a taking of property, presumably as much as a physical taking or invasion of property is a taking.
Durrett Inv. Co., LP v. City of Clarksville, M2012-00807-COA-R3CV, 2013 WL 614411 (Tenn. Ct. App. Feb. 15, 2013).

The Court of Appeals then reversed the trial court decision dismissing the case of a city imposed moratorium on development. Presumably, our Tennessee courts would ultimately find that an overbroad regulation may amount to a taking under the proper circumstances.

Assuming that to be true, the question we are interested in here is how to preserve the right to sue in federal court if a local government has enacted an overbroad regulation. As noted above, the US Supreme Court decision in Williamson County requires that the plaintiff must exhaust their administrative remedies, and in addition must also exhaust any judicial remedies in state court before moving on to federal litigation.

Let’s take a sample case. Suppose a local government refuses to allow a property owner who owns a property which is somewhat smaller than the minimum required lot size in the applicable zoning district. Suppose for example the local government requires a 1 acre residential lot size, but the property owner has only three quarters of an acre. However, the lot was created in 1975, and the zoning regulations adopting the 1 acre minimum lot size were passed in 1980. Therefore, the creation of the lot predates the zoning regulations. Ordinarily, most zoning regulations have provisions for this type of difficulty and usually allow the use of such smaller lots when they were created prior to the adoption of the zoning regulations.

In our case however the city or County refuses to allow the use of the property for anything. The local government refuses to issue a permit. What’s to be done?

First, obviously, under the doctrine of Williamson County, the applicant must file an appeal to the zoning board requesting a variance or any other kind of relief which might be available to him. Ordinarily, the board will deny this application. A substandard lot size is ordinarily not a grounds for a variance here in Tennessee. You must have some exceptional physical feature of the property (not the size of the lot itself) to justify a variance.

What’s next? Certainly the property owner could appeal the decision of the zoning board by way of a common law writ of certiorari, but that is almost certainly doomed to failure. Again, if the variance was properly denied by the zoning board, and in most of these kinds of cases that certainly would be the case because the size of the lot itself is not an exceptional physical feature, the writ of certiorari is not likely to be helpful. Furthermore, unlike the case from New York we have been discussing above, under the Tennessee common law writ of certiorari, an original action may not be joined with the petition for writ of certiorari itself. Since a claim for damages because of a takings is an original action, it cannot be joined with the petition for writ of certiorari.

Therefore, once the board of zoning appeals has denied the application for a variance, and independent lawsuit (not an appeal from the zoning board) should be brought alleging damages. It is important to recognize that this lawsuit must be filed within one year after the date on which the owner is put on notice of the alleged taking. This is the ultimate holding in the Supreme Court decision involving B & B Enterprises. In that case, a subdivision application was denied and it took several years to appeal the decision and ultimately reverse it. After the decision was reversed, the property owner attempted to sue for a temporary taking. However, the Supreme Court found that since the lawsuit for the taking was filed well over a year after the denial by the planning commission of the subdivision application, the one-year statute of limitations had been exceeded.

B & B Enterprises of course argued that the takings claim was not complete or ripe until after the decision of the Tennessee Court of Appeals reversing the decision of the planning commission was entered. The Supreme Court disagreed.
The Planning Commission's action on February 26, 2002, put B & B Enterprises on notice that its reasonable investment-backed expectations for the use of its property had been frustrated. Regardless of the eventual outcome of the judicial proceedings, the Planning Commission began interfering with B & B Enterprises's economically beneficial use of its property by no later than February 26, 2002. While the duration of the judicial proceedings might later be relevant to determining the length of time that B & B Enterprises was denied the use of its property, it is not relevant to determining when B & B Enterprises was put on notice that a taking had occurred. Therefore, we hold that Tenn.Code Ann. § 29–16–124's one-year statute of limitations on B & B Enterprises's claim began to run on February 26, 2002.
B & B Enterprises of Wilson Cnty., LLC v. City of Lebanon, 318 S.W.3d 839, 847 (Tenn. 2010).

Thus, the result in B & B Enterprises is somewhat similar to the decision in Qing Dong from New York. In both cases, the developer’s claim for damages was ultimately frustrated by failing to properly pursue a takings claim in state court within the proper time frame. Although I think the New York case could have been easily predicted and prevented, the same probably cannot be true about B & B Enterprises. The Tennessee Supreme Court’s application of the one-year statute of limitations is likely different from the way most land use practitioners might have expected. It is important to understand this difference, and to recognize that any time there might be a takings claim involved, suit must be filed within a year of that date or the risk of losing it forever is probable.

Let me make this suggestion to attorneys working in this field of endeavor. First, it is often appropriate when filing a common law writ of certiorari, to consider whether there are other claims which should be pursued but which cannot be included in the petition for common law writ. Often, there are claims that might be most appropriate in a declaratory judgment action but which arguably may not be appropriate within the common law writ of certiorari. In the takings context, an action for damages may also be appropriate.

For that reason, whenever filing a petition for common law writ of certiorari, it is certainly appropriate to consider whether a companion case seeking damages and/or declaratory and injunctive relief might be appropriate. Certainly, other than the additional filing fees, if there is reasonable concern about the necessity of filing a separate action, it is well worth filing to avoid this difficulty. Certainly, several times in my career, having filed the companion declaratory judgment action has saved me from an embarrassing dismissal of the certiorari case. It is always worth at least consideration.

Finally, if for some reason a separate companion case is not advisable, it might also be worthwhile to include allegations of a takings claim and or declaratory judgment in the petition for writ of certiorari itself. The local government may move to dismiss those claims as being beyond the scope of a certiorari lawsuit, but presumably the claims would be dismissed without prejudice, and given the Tennessee savings statute, those claims could be reinserted within a year. To be on the safe side, I suggest filing separate actions is most appropriate however.

It is certainly easy to miss the statute on these kinds of takings claims. The attorney must be alert to the various possibilities and make sure to file within a year after the local governmental action.