Supreme Court Upholds Property Rights Against Attempted Regulatory Exaction and Agrees With Foundation’s Arguments

koontzwetlandIn KOONTZ v. ST. JOHNS RIVER WATER MGMT. DIST., No. 11-1447, decided today, the U.S. Supreme Court reversed the Florida Supreme Court and held that land use regulatory takings are subject to the same limitations and conditions as are physical takings of real property, and that lack of an actual title transfer because of the property owners refusal to cave in to a local or state government agencys demand did not render that demand a non-taking.

Coy Koontz, Sr. sought permits to develop a section of his property from respondent St. Johns River Water Management District (District). Florida law requires permit applicants wishing to build on wetlands to offset the resulting environmental damage. Koontz offered to mitigate the environmental effects of his development proposal by deeding to the District a conservation easement on nearly three-quarters of his property. The District rejected Koontzs proposal and demanded that he (1) reduce the size of his development and deed to the District a conservation easement on the remainder of his property and (2) hire contractors to make improvements to District-owned wetlands several miles away. Koontz filed suit under a state law that provides money damages for agency action that is an unreasonable exercise of the states police power constituting a taking without just compensation.

The trial court found the Districts actions unlawful because they failed the requirements of Nollan v. California Coastal Comm., 483 U. S. 825 (1987), and Dolan v. City of Tigard, 512 U. S. 374 (1994). The District Court of Appeal affirmed, but the State Supreme Court reversed on two grounds: it held that petitioners claim failed because, unlike in Nollan or Dolan, there was no transfer of property and the District denied the permit application; and a demand for money cannot give rise to a claim under Nollan and Dolan. In Nollan v. California Comm. and Dolan v. City of Tigard, the Court had held that the government may not condition the approval of a land use permit on the owners relinquishment of a portion of his property to the government or others unless there is a nexus and rough proportionality between the governments demand and the effects of the proposed land use.

In a 5-4 opinion by Justice Alito, joined by Roberts, Scalia, Kennedy, and Thomas, the Court concluded that the Nollan-Dolan rule applies when the government denies a land use permit. The majority concluded that the principles underlying Nollan and Dolan are the same regardless of whether the government approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so. Allowing Florida to evade the Nollan-Dolan rule simply by denying a permit request would scuttle the effect of the rule. Justice Kagan dissented, joined by Ginsburg, Breyer, and Sotomayor, arguing that the conditions the county required in order for Koontz to obtain a permit were tantamount to a fee and that such monetary exactions can never constitute a taking.

The Court held:

1. The governments demand for property from a land-use permit applicant must satisfy the Nollan-Dolan requirements even when the permit is denied because the property owner refuses to comply with the governments demands because those demands are Aunconstitutional conditions on the exercise of the property owners rights to use his land and is an attempt to coerce the property owner to surrender his Fifth Amendment right to just compensation for property the government takes when owners apply for land-use permits.

2. The principles in Nollan and Dolan do not change depending on whether the government approves a permit on the condition that the applicant turn over property or denies a permit because the applicant refuses to do so. Such a distinction would enable the government to evade the Nollan-Dolan limitations simply by phrasing its demands for property as conditions precedent to permit approval.

3. The governments demand for property from a land-use permit applicant must satisfy the Nollan-Dolan requirements even when its demand is for money because of the direct link between the governments demand and a specific parcel of real property and this case implicates the central concern of Nollan and Dolan that the government might use its substantial power and discretion in land-use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed use of the property at issue.

The Courts holding and reasoning are entirely consistent with the amicus brief the Foundation filed on behalf of itself, the Center for Constitutional Jurisprudence and the Reason Foundation: that regulatory limitations on the use of property are takings just as are physical expropriations, that the denial of permission to use property in the manner allowed by law was a denial of property rights, that the water management districts permit conditions cannot evade the Nollan and Dolan limitations based on the timing of the imposition of the condition or the type of property interest the District demanded the property owner surrender, and that the District imposed unconstitutional conditions on use of the Koontz property
Koontz is an important property rights case holding that government cannot condition the issuance of a permit on the surrender of property rights that would be unconstitutional “takings” if done directly. It is a win for property rights and for the Constitution.

You can access our brief here.