Monday, November 5, 2018

Cunningham v Bedford County -- Takings Law

The Cunningham case (copy found here) also involved allegations of a regulatory taking by overbroad zoning. The property was zoned residential; the plaintiff argued that it should be zoned commercial and that the residential zoning worked a taking of the land. The lower court concluded that there was no taking based on the Tennessee Supreme Court reasoning in Phillips v Montgomery County, 442 S.W. 3d 233 (Tenn. 2014). The Court of Appeals affirmed.

The plaintiff evidently relied upon the fact that the plaintiff had been led to believe that the property would easily be rezoned to commercial and thus had legitimate investment backed expectations for commercial use of the land. Furthermore, because at some points in the rezoning process, the applicant was not permitted to make a presentation and because there might have been some conflicts of interest among the County commissioners, the argument was that the character of the governmental action was inherently suspect and taking should've been found.

The difficulty here is that was forced to rely on the multifactor analysis found in 10 Central Transportation v New York, 438 US 104 (1978). There are some cases involving overbroad regulatory actions, that somewhat easily fit into the proper analysis. For example, a required dedication for subdivision that does not ameliorate some significant impact of the development is simply a take. See Nolan v California Coastal Commission, 483 US 825 (1987). Or, if there is a regulation which completely eliminates the potential economic use of the land, that may be a taking per se. See Lucas v South Carolina Coastal Council, 505 US 1003 (1992). And certainly, if there is a physical invasion, no matter how slight, that is also a taking of a more traditional kind.

But if the governmental actions do not fit into any of those categories, Penn Central must be applied. The difficulty is that unlike in the other categories, there is no set formula for determining when the Constitution requires that economic injuries caused by public action be compensated. Penn Central suggested a few factors to include:

The economic impact on the claimant,
the extent to which the regulation has interfered with distinct investment backed expectations
and the character or extent of the governmental action.

However, as I've mentioned, balancing these factors is not nearly so simple as the more distinctive total take categories mentioned above. As a result, if the plaintiff has to rely on Penn Central, it is often difficult to prevail.

And certainly, that was true in this case. The Court of Appeals pointed out that the plaintiff purchased the property knowing it was zoned for residential use. He did not choose to make his contract contingent upon obtaining zoning change. His first application for a zoning change was made before he actually bought the property. The Court of Appeals did not believe that there was a significant economic impact. He could have drafted the contract in order to make sure that he did not have to buy the property unless the zoning change was obtained. In addition, his investment backed expectations were hopeful. There is no binding commitment that the zoning would be changed. Finally the character of the governmental action was a zoning application which was denied on a rational basis. Thus there was no element of a regulatory taking.

The difficulty I have is once again rooted in the conclusion that there was a rational basis for this decision. Both the planning official for the county, Chris White, and Lisa Keylon, an urban planner by training and education, indicated clearly that this area was prime commercial land and that the entire area ultimately would be rezoned to commercial. It may be that it was too soon to take the zoning in that direction, but it's unclear from the discussion of the facts by the Court of Appeals.

Assuming for example that there is not a rational basis for residential zoning at that location, that would lead to a conclusion of a regulatory taking and compensation paid by the local government.

But once again, this case gives the practicing bar a good idea of how strong a case you must have in order to prevail. Even with County representatives testifying that the land was prime commercial land, the Court of Appeals found a rational basis for the current zoning and ruled in favor of the county.

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