Petition for Writ of Certiorari — Michael Zito, et ux., Petitioners v. North Carolina Coastal Resources Commission

Appendix A-1

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

_____________

No. 20-1408

_____________

MICHAEL ZITO; CATHERINE ZITO,

Plaintiffs – Appellants,

v.

NORTH CAROLINA COASTAL RESOURCES

COMMISSION,

Defendant – Appellee.

------------------------------------NORTH CAROLINA COASTAL FEDERATION,

Amicus Supporting Appellee.

_____________

Appeal from the United States District Court for the

Eastern District of North Carolina, at Elizabeth City.

James C. Dever III, District Judge. (2:19-cv-00011-D)

_____________

Argued: May 4, 2021

Decided: August 9, 2021

_____________

Before GREGORY, Chief

THACKER, Circuit Judges.

Judge,

MOTZ,

and

Appendix A-2

_____________

Affirmed by published opinion. Chief Judge Gregory

wrote the opinion, in which Judge Motz and Judge

Thacker joined.

_____________

ARGUED: J. David Breemer, PACIFIC LEGAL

FOUNDATION,

Sacramento,

California,

for

Appellants. Ryan Y. Park, NORTH CAROLINA

DEPARTMENT OF JUSTICE, Raleigh, North

Carolina, for Appellees. ON BRIEF: Glenn E. Roper,

North Highlands, Colorado, Erin E. Wilcox, PACIFIC

LEGAL FOUNDATION, Sacramento, California, for

Appellants. Joshua H. Stein, Attorney General,

Sarah G. Boyce, Deputy Solicitor General, Mary

Lucasse, Special Deputy Attorney General, Marc

Bernstein, Special Deputy Attorney General, NORTH

CAROLINA DEPARTMENT OF JUSTICE, Raleigh,

North Carolina, for Appellee. Ramona H. McGee,

Sierra B. Weaver, Elizabeth R. Rasheed, SOUTHERN

ENVIRONMENTAL LAW CENTER, Chapel Hill,

North Carolina, for Amicus North Curiae.

_____________

GREGORY, Chief Judge:

This case asks whether a Fifth Amendment

takings claim against the North Carolina Coastal

Resources Commission (the “Commission”) is barred

by State sovereign immunity. When the Commission

denied Plaintiffs Michael and Catherine Zito (the

“Zitos”) permission to rebuild their vacation home due

to environmental regulations, the Zitos brought suit

in federal court, claiming that the State deprived

them of the value of their property and committed a

Appendix A-3

taking under the Fifth Amendment. The district court

granted the State’s motion to dismiss for lack of

subject matter jurisdiction due to the State’s

immunity from suit in federal court. We affirm the

district court’s dismissal.

I.

In 2008, the Zitos purchased a beachfront house

and lot (the “Property”) in South Nags Head, North

Carolina. The Property is located on one of the State’s

barrier islands, a system of narrow islands that run

along the State’s coast. Between 2008 and 2016, the

Zitos used the house as a vacation home and rental

property. But on October 10, 2016, the house caught

fire and burned to the ground. Following the fire, the

Zitos sought to rebuild the house on the same lot.

Given its location, the Zitos’ Property is governed

by North Carolina’s Coastal Area Management Act

(“CAMA”). Enacted in 1974, CAMA created the

Commission to implement rules regulating land-use

planning,

development

permits,

and

beach

management and restoration along North Carolina’s

coasts.

N.C.

Gen.

Stat.

§§

113A103(2), -107, -110, -120, -134.11. One of CAMA’s goals

is “[t]o [e]nsure that the development or preservation

of the . . . coastal area proceeds in a manner consistent

with the capability of the land and water for

development, use, or preservation based on ecological

considerations.” Id. § 113A-102(b)(2).

To do so, CAMA requires coastal property

development to be set back a certain distance from the

vegetation line—the first line of natural vegetation

which marks the boundary between the beach and

Appendix A-4

more stable land. 15A N.C. Admin. Code 07H

.0305(a)(5), .0306(a)(1). These set-back requirements

protect property owners from coastal storms and

encroaching waters while also preventing disturbance

to the beaches and dunes that act as buffers for the

property and environment further inland. See id. at

.0306(a); Br. of N.C. Coastal Fed’n, as Amicus Curiae

in Support of Appellee at 11–12. Under CAMA,

buildings with less than 5,000 square feet must be set

back a distance at least 60 feet or 30 times the local

rate of erosion, whichever is farther. 15A N.C. Admin.

Code 7H.0306(a)(5)(A). But buildings of less than

2,000 square feet built before June 1, 1979 fall under

a grandfather provision, requiring the property to be

set back only 60 feet from the line of vegetation. 15A

N.C. Admin. Code 7H.0309(b).

Though the Zitos’ Property qualifies for the

grandfather provision, it fails to satisfy the 60 feet setback limit. Based on an October 2017 survey, the

Property is currently set back only 12 feet from the

vegetation line. In 2018, the coastline by the Property

eroded at an average rate of six feet per year. The next

year, the average rate of erosion climbed to seven feet

per year. According to amicus curiae, coastal erosion

and rising sea levels could cause the Property to be

underwater by 2024. Br. of N.C. Coastal Fed’n, as

Amicus Curiae in Support of Appellee at 7. 1

1 The effects of annual erosion are offset, to some extent, by the

State’s beach renourishment projects. North Carolina has

carried out beach renourishment projects in 2010 and 2019. The

2019 renourishment project appears to have still been in

progress in June 2020, but the record does not indicate whether

the 2019 project is now complete or whether it has affected the

setback lines. See J.A. 55.

Appendix A-5

To enforce its set-back regulations, CAMA

requires a permit for property development that will

affect “any area of environmental concern,” such as

the barrier islands where the Property is located. N.C.

Gen. Stat. § 113A-118(a). To acquire a minor permit—

for the construction of a small residential building,

such as a house 2—individuals must apply to the local

city or county; if the initial application is denied,

applicants may seek administrative review or a

variance from the Commission. Id. §§ 113A118(b), -120.1, -121(b), -121.1; 15A N.C. Admin. Code

07J.0201.

The Zitos applied for a permit from the Town of

Nags Head. The Town’s local permit officer denied the

application because the Property did not meet

CAMA’s set-back requirements. The Zitos then filed a

petition for a variance with the Commission. After

considering the petition at a public hearing, the

Commission issued its Final Agency Decision denying

the variance on December 27, 2018. When notifying

the Zitos of the denial, the Commission also informed

them of their right to appeal the decision in state

superior court.

The Zitos filed suit in federal court, arguing that

CAMA’s restrictions amounted to an unconstitutional

taking. The Commission filed a motion to dismiss for

lack of subject matter jurisdiction, claiming that the

2 Though the Zitos wished only to replace the house that had

previously been built on the lot, the Commission’s regulations

consider the “[r]eplacement of structures damaged or destroyed

by natural elements, fire or normal deterioration” to be

“development [that] requires CAMA permits.” 15A N.C. Admin.

Code 7J .0210.

Appendix A-6

suit was barred by State sovereign immunity. The

district court agreed with the Commission. First, it

found that the Commission qualifies as an arm of the

State subject to the protections of sovereign

immunity. Zito v. N.C. Coastal Res. Comm’n, 449 F.

Supp. 3d 567, 577–79 (E.D.N.C. 2020). It then relied

upon this Court’s decision in Hutto, where we held

that “the Eleventh Amendment bars Fifth

Amendment taking claims against States in federal

court where the State’s courts remain open to

adjudicate such claims.” Id. at 576 (quoting Hutto v.

S.C. Ret. Sys., 773 F.3d 536, 552 (4th Cir. 2014)).

Determining that North Carolina’s Constitution

permits individuals to bring takings claims in state

court, the district court concluded that Plaintiffs’

claims against the State were barred by sovereign

immunity in federal court. Id. at 580–83. The Zitos

appealed.

II.

A.

State sovereign immunity presents a question of

law that we review de novo. See Hutto, 773 F.3d at

542. Because sovereign immunity is waivable, this

Court treats it “akin to an affirmative defense,”

meaning that the defendant bears the burden of

demonstrating that sovereign immunity applies. Id.

at 543.

The Zitos do not dispute that the Commission is

an arm of the State, such that sovereign immunity

may apply. But they argue that the Fifth

Amendment’s Takings Clause overcomes State

sovereign immunity.

Appendix A-7

The Eleventh Amendment states that “[t]he

Judicial power of the United States shall not be

construed to extend to any suit in law or equity,

commenced or prosecuted against one of the United

States by Citizens of another State, or by Citizens or

Subjects of any Foreign State.” U.S. Const. amend. XI.

While courts—including this one—frequently refer to

States’ immunity from suit as “Eleventh Amendment

immunity,” see, e.g., Hutto, 773 F.3d at 542, the phrase

is “something of a misnomer, for the sovereign

immunity of the States neither derives from, nor is

limited by, the terms of the Eleventh Amendment.”

Alden v. Maine, 527 U.S. 706, 713 (1999). Rather,

“States’ immunity from suit is a fundamental aspect

of the sovereignty which the States enjoyed before the

ratification of the Constitution, and which they retain

today . . . except as altered by the plan of the

[Constitutional] Convention or certain constitutional

amendments.” Id.

The Fifth Amendment provides that “private

property [shall not] be taken for public use, without

just compensation.” U.S. Const. amend. V. The Zitos

contend that because the Fifth Amendment’s Takings

Clause is self-executing—guaranteeing a remedy of

just compensation—it reflects a Constitutional

structure that exempts takings claims from the

limitations of sovereign immunity. 3 While the

3 Plaintiffs briefly draw a comparison to the Bankruptcy Clause,

which the Supreme Court held to create a constitutional

exception to sovereign immunity. See Cent. Va. Cmty. Coll. v.

Katz, 546 U.S. 356, 373–78 (2006). But the Supreme Court has

since declared that this exception is “limited to the Bankruptcy

Clause” due to the “singular nature” of bankruptcy jurisdiction.

Allen v. Cooper, 140 S. Ct. 994, 1002 (2020). The Supreme Court

“view[s] bankruptcy as on a different plane, governed by

Appendix A-8

Takings Clause originally applied only to the federal

government, Plaintiffs argue that its incorporation to

the States in the Fourteenth Amendment abrogated

the sovereign immunity of States as well.

However, this Court adopted a different reading

of the Takings Clause and sovereign immunity in

Hutto, 773 F.3d at 540. In Hutto, South Carolina

public employees challenged a state law amending

pension benefits and contributions for public

employees who returned to work after retirement. Id.

They argued that changes to the law amounted to a

taking because the changes ended benefits and

required the employees to make additional

contributions. Addressing sovereign immunity, the

plaintiffs in Hutto made the same claim the Zitos

make here—that “sovereign immunity never bars a

constitutional takings claim” due to the Takings

Clause’s guarantee of just compensation. Id. at 551.

This Court disagreed. We observed that the

Supreme Court has recognized the surrender of State

sovereign immunity in six contexts:

(1) when a State consents to suit; (2) when a

case is brought by the United States or

another State; (3) when Congress abrogates

sovereign immunity pursuant to Section 5 of

the Fourteenth Amendment or pursuant to

the Bankruptcy Clause; (4) when a suit is

brought against an entity that is not an arm

of the State; (5) when a private party sues a

principles all its own.” Id. at 1003. Its treatment of the

Bankruptcy Clause and sovereign immunity is therefore “a goodfor-one-clause-only holding.” Id.

Appendix A-9

state official in his official capacity to prevent

an ongoing violation of federal law; and

(6) when an individual sues a state official in

his individual capacity for ultra vires conduct.

Id. (citing S.C. State Ports Auth. v. Fed. Mar. Comm’n,

243 F.3d 165, 176–77 (4th Cir. 2001)). We declined to

create an additional, blanket exception for the

Takings Clause. Although “there is arguably some

tension” between the Fifth Amendment guarantee of

just compensation and the bar of sovereign immunity,

“that tension is not irreconcilable.” Id.

To resolve that tension, this Court compared the

Takings Clause to the Due Process Clause’s right to a

remedy for taxes collected in violation of federal law.

Id. at 551–52. “In a long line of cases,” the Supreme

Court “has established that due process requires a

‘clear and certain’ remedy for taxes collected in

violation of federal law.” Reich v. Collins, 513 U.S.

106, 108–09 (1994) (citing McKesson Corp. v. Div. of

Alcoholic Beverages and Tobacco, Fla. Dep’t of Bus.

Regulation, 496 U.S. 18 (1990) and “the long line of

cases upon which McKesson depends”). “[D]espite the

constitutional requirement that there be a remedy,

the Supreme Court expressly noted in Reich . . . that

the sovereign immunity that States enjoy in federal

court, under the Eleventh Amendment, does generally

bar tax refund claims from being brought in that

forum.” Hutto, 773 F.3d at 110 (cleaned up).

Nevertheless, Reich held that state courts must allow

suits to recover taxes unlawfully collected, the

“sovereign immunity [that] States traditionally enjoy

in their own courts notwithstanding.” Reich, 513 U.S.

at 110. “Reasoning analogously,” this Court concluded

Appendix A-10

that “the Eleventh Amendment bars Fifth

Amendment taking claims against States in federal

court when the State’s courts remain open to

adjudicate such claims.” Hutto, 773 F.3d at 551. 4

B.

The Zitos argue that the Supreme Court’s ruling

in Knick v. Township of Scott, 139 S. Ct. 2162 (2019)

undermined Hutto’s reasoning. Because Knick held

that plaintiffs can bring a takings claim in federal

court, regardless of state remedies available, the Zitos

believe Knick abrogated Hutto’s rule applying

sovereign immunity in federal court if state courts are

open to such claims.

Knick addressed the substantive requirements of

a takings claim: It decided when the plaintiff has

“suffered a violation of his Fifth Amendment rights”

and is “able to bring a ‘ripe’ federal takings claim in

federal court.” Knick, 139 S. Ct. at 2168. Before Knick,

the Supreme Court held in Williamson County that “if

a State provides an adequate procedure for seeking

just compensation, the property owner cannot claim a

violation of the Just Compensation Clause until it has

used the procedure and been denied just

compensation.” Williamson Cnty. Reg’l Planning

Comm’n v. Hamilton Bank of Johnson City, 473 U.S.

172, 195 (1985). In other words, the Williamson

County Court believed a person to be denied just

4 This Court “[did] not decide the question whether a State can

close its doors to a takings claim or the question whether the

Eleventh Amendment would ban a takings claim in federal court

if the State courts were to refuse to hear such a claim.” Hutto,

773 F.3d at 551.

Appendix A-11

compensation at the moment a person’s claim for

compensation was denied in state court. But

Williamson County inadvertently laid a “trap” for

potential litigants. Because the full faith and credit

statute, 28 U.S.C. § 1738, requires federal courts to

give preclusive effect to a state court decision,

Williamson County’s substantive definition of a

takings claim effectively prevented federal courts

from reviewing federal takings claims. Knick, 139 S.

Ct. at 2169. Reversing Williamson County, the

Supreme Court held in Knick that a property owner is

denied just compensation and has an actionable claim

in federal court “as soon as a government takes his

property for public use without paying for it.” Id. at

2170.

Knick did not address sovereign immunity, as it

involved a suit against a town. See Jinks v. Richland

Cnty., 538 U.S. 456, 466 (2003) (“[M]unicipalities,

unlike States, do not enjoy a constitutionally

protected immunity from suit.”). Thus, every circuit to

address Knick’s effect on sovereign immunity has

concluded that Knick did not abrogate State sovereign

immunity in federal court. See Williams v. Utah Dep’t

of Corr., 928 F.3d 1209, 1214 (10th Cir. 2019) (“But

Knick did not involve Eleventh Amendment

immunity, which is the basis of our holding in this

case.”); Bay Point Props., Inc. v. Miss. Transp.

Comm’n, 937 F.3d 454, 456–57 (5th Cir. 2019) (“Nor

does anything in Knick even suggest, let alone require,

reconsideration of longstanding sovereign immunity

principles protecting states from suit in federal

court.”), cert. denied, 140 S. Ct. 2566 (2020); Ladd v.

Marchbanks, 971 F.3d 574, 579 (6th Cir. 2020) (“[T]he

Appendix A-12

Court’s opinion in Knick says nothing about sovereign

immunity.”), cert. denied, 141 S. Ct. 1390 (2021).

To sidestep this fact, the Zitos suggest that Knick

indirectly altered the sovereign immunity framework

by recognizing the self-executing nature of the

Takings Clause in federal court. But the Supreme

Court recognized the self-executing nature of the

Takings Clause in federal court well before Knick. See

Jacobs v. United States, 290 U.S. 13, 16 (1933)

(“[S]uits [ ] based on the right to recover just

compensation for property taken by the United States

. . . . rested upon the Fifth Amendment. Statutory

recognition was not necessary.”). Knick itself makes

this point when quoting Jacobs to explain that the

form of a state remedy does not qualify the

substantive takings claim because the claim “rest[s]

upon the Fifth Amendment.” Knick, 139 S. Ct. at 2170

(quoting Jacobs, 290 U.S. at 16). So Knick did nothing

new with respect to the self-executing nature of the

Takings Clause in federal court. 5

Additionally, Knick’s discussion of the Takings

Clause does not imply any link between the selfexecution of the Takings Clause and the elimination

of sovereign immunity. To the contrary, the Supreme

Court’s analysis compares the Takings Clause to other

5 This Court likewise recognized the self-executing nature of the

Takings Clause in Hutto. See 773 F.3d at 551–52 (“Just as the

Constitution guarantees the payment of just compensation for a

taking, so too does the Due Process Clause provide the right to a

remedy for taxes collected in violation of federal law.”); id.at 553

(quoting other circuits stating that the “self-executing” nature of

a takings claim does not override sovereign immunity in federal

court).

Appendix A-13

constitutional rights that may be subject to sovereign

immunity. The Court wrote,

Although Jacobs concerned a taking by the

Federal Government, the same reasoning

applies to takings by the States. The

availability of any particular compensation

remedy, such as an inverse condemnation

claim under state law, cannot infringe or

restrict the property owner’s federal

constitutional claim—just as the existence of

a state action for battery does not bar a

Fourth Amendment claim of excessive force.

Knick, 139 S. Ct. at 2171. By drawing a comparison to

Fourth Amendment claims of excessive force, the

Supreme Court indicated that its analysis did not deal

with sovereign immunity, which otherwise limits

Fourth Amendment suits seeking damages against

States. Ultimately, the Knick Court expressed its

belief that Williamson County made the Takings

Clause an inferior right “among the provisions of the

Bill of Rights”; by reversing Williamson County, the

Court meant to “restor[e] takings claims” to equal and

“full-fledged status . . . among the other protections in

the Bill of Rights.” Id. at 2169–70; see also id. at 2177

(“Takings claims against local governments should be

handled the same as other claims under the Bill of

Rights.”). By treating the Takings Clause the same as

other constitutional rights, the Supreme Court

suggests that it remains subject to the same

limitations on those other rights—including sovereign

immunity. See Will v. Mich. Dep’t of State Police, 491

U.S. 58, 66 (1989).

Appendix A-14

Accordingly, Knick did not undermine Hutto,

where this Court held sovereign immunity to bar a

takings claim against a State in federal court if state

courts remain open to adjudicating the claim.

III.

We next consider whether North Carolina courts

remain open to adjudicating the Zitos’ takings claim.

The parties agree that state courts satisfy this

requirement if they provide a “reasonable, certain,

and adequate” means for challenging an action as a

taking and obtaining compensation if the challenge is

successful. See Oral Argument at 29:03–29:19;

Mountain Valley Pipeline, LLC v. 6.56 Acres of Land,

915 F.3d 197, 213 (4th Cir. 2019) (quoting Cherokee

Nation v. S. Kan. Ry. Co., 135 U.S. 641, 659 (1890)).

Though North Carolina’s Constitution generally

provides a cause of action for plaintiffs to bring

takings claims, see Corum v. Univ. of N.C., 413 S.E.2d

276, 289 (N.C. 1992), the Zitos contend that takings

claims against the Commission are governed by North

Carolina General Statutes § 113A-123(b)–(c), which

provides an “exclusive” procedure where invalidation

of the state action is the sole remedy. Because

invalidation does not compensate the plaintiff for any

temporary taking, the Zitos insist that North Carolina

courts do not provide an adequate avenue for just

compensation.

Section 113A-123(b) states that any person with a

recorded interest in land affected by a final order of

the Commission may “petition the superior court to

determine whether the petitioner is the owner of the

land in question” and “determine whether . . . the

Appendix A-15

order constitutes the equivalent of taking without

compensation.” N.C. Gen. Stat. § 113A-123(b). “Either

party shall be entitled to a jury trial on all issues of

fact, and the court shall enter a judgment . . . as to

whether the Commission order shall apply to the land

of the petitioner.” Id. “The method provided in this

subsection for the determination of the issue of

whether such order constitutes a taking without

compensation shall be exclusive and such issue shall

not be determined in any other proceeding.” Id. If the

court has determined the action to be a taking, and

the State still intends to regulate the property, then

the State must initiate eminent-domain proceedings

“under the provisions of Chapter 146 of the General

Statutes,” id. § 113A-123(c), which would result in

compensation. See N.C. Gen. Stat. §§ 136103, -104, -109, -112.

The Zitos, however, emphasize the outcome if the

state court rules the Commission’s action to be a

taking and the State does not pursue eminent-domain

proceedings (i.e., if the State agrees to cease the

regulatory restriction). To the Zitos, § 113A-123(b)

would invalidate the restriction but offer no

compensation for the temporary taking. In this

situation, the Commission asserts that the plaintiff

may bring a subsequent suit under the North Carolina

Constitution to obtain compensation for the

temporary taking. 6

6 At oral argument, the State represented that a plaintiff could

file a claim for compensation for the temporary taking the same

day that the state court found the Commission’s action to be a

taking. See Oral Argument at 39:12–40:08.

Appendix A-16

We agree with the Commission. Section 113A123(b) states that its procedure “shall be exclusive”

only “for the determination of the issue of whether

such

order

constitutes

a

taking

without

compensation.” N.C. Gen. Stat. § 113A-123(b)

(emphasis added). It does not state that this shall be

the exclusive procedure for determining all available

remedies. Because the North Carolina Constitution

provides an independent cause of action for plaintiffs

to seek damages for a takings claim, Corum, 413

S.E.2d at 289, it permits the Zitos to pursue damages

after establishing through § 113A-123(b) that the

regulation amounted to a taking.

Even if we assume that N.C. Gen. Stat. § 113A123(b) provides the exclusive remedy for a takings

claim brought against the Commission, North

Carolina’s constitutional guarantees would override

that limitation to the extent it prevented the redress

for a temporary taking. See Carolina Beach Fishing

Pier, Inc. v. Town of Carolina Beach, 163 S.E.2d 363,

371 (N.C. 1968) (“It is familiar learning that a citizen

may sue the State . . . for taking his private property

for a public purpose under the Constitution where no

statute affords an adequate remedy.”); Corum, 413

S.E.2d at 289 (“[I]n the absence of an adequate state

remedy, one whose state constitutional rights have

been abridged has a direct claim against the State

under our Constitution.”); Taylor v. Wake Cnty., 811

S.E.2d 648, 652 (N.C. Ct. App. 2018) (“A Corum claim

allows a plaintiff to recover compensation for a

violation of a state constitutional right for which there

is either no common law or statutory remedy, or when

Appendix A-17

the common law or statutory remedy that would be

available is inaccessible to the plaintiff.”). 7

For instance, in Midgett, a landowner sued the

State Highway Commission for a taking because its

construction of a nearby highway caused his property

to become flooded. Midgett v. N.C. State Highway

Comm’n, 132 S.E.2d 599, 602 (N.C. 1963), rev’d on

other grounds by Lea Co. v. N.C. Bd. of Transp., 304

S.E.2d 164 (N.C. 1983). Though North Carolina

provided an “ordinarily exclusive” statutory remedy

for the taking, the applicable condemnation statute

contained a statute of limitations that “would make a

recovery by the plaintiff in the instant case

impossible.” Id. at 608. Nevertheless, the North

Carolina Supreme Court held that the plaintiff’s

taking claim could be maintained under the State

Constitution. Id. The Court explained that the State

Constitution’s promise of just compensation for a

taking is not “susceptible of impairment by

legislation,” and where “no statute affords an

adequate remedy under a particular fact situation, the

common law will furnish the appropriate action for

adequate redress of such grievance.” Id.; see also Craig

7 Though this right of action arises from a state constitutional

right, North Carolina uses the same standard for determining

whether a taking has occurred under both the U.S. and North

Carolina Constitutions. See Finch v. City of Durham, 384 S.E.2d

8, 19 (N.C. 1989) (holding that a rezoning did not constitute a

taking under the North Carolina Constitution and that the

rezoning therefore did not constitute a taking under the U.S.

Constitution “for the same reasons”); Guilford Cnty. Dep’t of

Emergency Servs. v. Seaboard Chem. Corp., 441 S.E.2d 177, 183

(N.C. Ct. App. 1994) (“We find that these tests are consistent and

therefore analyze Seaboard’s state and federal constitutional

[takings] claims together.”).

Appendix A-18

ex rel. Craig v. New Hanover Cnty. Bd. of Educ., 678

S.E.2d 351, 356–57 (N.C. 2009) (reaffirming Midgett

and North Carolina’s “long-standing emphasis on

ensuring redress for every constitutional injury”).

In reply, the Zitos contend that even if they can

bring a takings claim for damages after § 113A-123(b)

proceedings, the statutory proceedings effectively

create an exhaustion requirement forbidden by the

Supreme Court in Knick. But again, the Zitos misstate

the holding of Knick. Knick prohibited the use of state

procedures as an exhaustion requirement for a

takings claim in federal court. See Knick, 139 S. Ct. at

2167. But Knick did not prohibit States from

establishing procedural requirements in their own

courts. Indeed, Knick reaffirmed Ruckelshaus v.

Monsanto Co., 467 U.S. 986, 1018 n.21 (1984), where

the Supreme Court upheld a federal statute that

“required the plaintiff to attempt to vindicate its

[takings] claim [ ] through arbitration before

proceeding [with their takings claim] under the

Tucker Act.” Knick, 139 S. Ct. at 2173. This

requirement was permissible because Congress “is

free to require plaintiffs to exhaust administrative

remedies before bringing constitutional claims” in

federal court. Id.; see also Ladd, 971 F.3d at 579 (“In

reaffirming [Ruckelshaus], the Court notes that

Congress can, as a condition of its waiver of sovereign

immunity in the Tucker Act, require takings plaintiffs

to exhaust administrative remedies before proceeding

to federal court.”). If Congress can condition its waiver

of federal sovereign immunity in federal court by

requiring plaintiffs to satisfy certain exhaustion

requirements, it follows that States may condition

their waiver of State sovereign immunity the same

Appendix A-19

way in their courts as well. See Felder v. Casey, 487

U.S. 131, 138 (1988) (“No one disputes the general and

unassailable proposition . . . that States may establish

the rules of procedure governing litigation in their

own courts.”).

Of course, there are limits on the procedural

constraints that the States may impose. The Supreme

Court has warned that state procedures violate the

Supremacy Clause if the procedures effectively

deprive plaintiffs of their federal rights. See id.

(“[W]here state courts entertain a federally created

cause of action, the ‘federal right cannot be defeated

by the forms of local practice.’”). For example, a State

may not adopt procedures that discriminate between

state and federal claims. See Haywood v. Drown, 556

U.S. 729, 738 (2009); Felder, 487 U.S. at 141. But the

Zitos’ arguments revolve around Knick, and they

otherwise offer no argument for why North Carolina’s

procedures might impede their federal rights in

violation of the Supremacy Clause. As explained

above, North Carolina’s procedures are consistent

with Knick; North Carolina’s procedures guarantee

the ability to challenge the Commission’s action as a

taking in state court; and if North Carolina’s statutes

do not provide an adequate constitutional remedy, the

North Carolina Constitution guarantees the Zitos the

ability to seek that remedy in state court.

Thus, North Carolina’s courts remain open for

takings claims. Under Hutto, this means that

sovereign immunity bars the Zitos’ claims against the

State in federal court. 773 F.3d at 552.

Appendix A-20

IV.

We recognize there must be sorrow in the Zitos’

loss of their home, and even more so in light of the

steadily rising swells of our oceans’ waters. But State

sovereign immunity bars their takings claims against

the Commission in federal court when North

Carolina’s courts remain open to adjudicating those

claims. For the foregoing reasons, we affirm the

district court’s judgment.

AFFIRMED

Appendix B-1

Filed March 27, 2020

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF NORTH

CAROLINA

NORTHERN DIVISION

No. 2:19-CV-11-D

MICHAEL ZITO, and

CATHERINE ZITO,

)

)

)

Plaintiffs, )

v.

)

)

NORTH CAROLINA

)

COASTAL RESOURCES

)

COMMISSION,

)

)

Defendant. )

ORDER

On March 6, 2019, Michael and Catherine Zito

(“the Zitos,” or “plaintiffs”) filed a complaint against

the North Carolina Coastal Resources Commission

(“the Commission”) alleging a taking of private

property without just compensation in violation of the

Fifth Amendment of the United States Constitution.

See Compl. [D.E. 1] ¶¶ 63-78. 1 The Zitos seek

declaratory relief, damages, just compensation,

reasonable attorney fees and costs, and all other

appropriate relief. See id. at 13. On August 9, 2019,

the North Carolina Coastal Federation (“the

1 On June 5, 2016, the Zitos waived count one of their complaint,

which alleged an “inverse condemnation” takings claim under

the North Carolina Constitution. See [D.E. 16] 1 n.1; cf. Compl.

¶¶ 48-62.

Appendix B-2

Federation”) moved to intervene as a matter of right

under Federal Rule of Civil Procedure 24(a)(2), or

alternatively, by permission under Federal Rule of

Civil Procedure 24(b) [D.E. 24]. On August 20, 2019,

the Commission moved to dismiss the complaint for

lack of subject-matter jurisdiction under Federal Rule

of Civil Procedure 12(b)(1) [D.E. 36]. On that same

date, the Commission amended its initial answer to

the complaint [D.E. 39]. On August 27, 2019, the Zitos

opposed the Federation’s motion to intervene [D.E.

40]. On September 5, 2019, the Federation replied

[D.E. 41]. On September 6, 2019, the Zitos responded

to the Commission’s motion to dismiss [D.E. 42]. On

September 20, 2019, the Commission replied [D.E.

44]. On September 25, 2019, the Zitos moved to clarify

the status of the stipulated administrative facts [D.E.

45]. On October 16, 2019, the Commission responded

[D.E. 49]. On October 24, 2019, the Zitos replied [D.E.

50].

As explained below, Hutto v. South Carolina

Retirement System, 773 F.3d 536, 542-43 (4th Cir.

2014), requires this court to hold that the Eleventh

Amendment bars the Zitos’ Fifth Amendment takings

claim. If the Zitos are to obtain relief on this claim,

they first must get such relief from the United States

Court of Appeals for the Fourth Circuit sitting en banc

or from the United States Supreme Court. Thus, the

court grants the Commission’s motion to dismiss [D.E.

36] and dismisses the complaint without prejudice for

lack of subject-matter jurisdiction. The court denies as

moot the Federation’s motion to intervene [D.E. 24]

and the Zitos’ motion to clarify the status of the

stipulated administrative facts [D.E. 46].

Appendix B-3

I.

The Zitos are residents of Timonium, Maryland

and own a beachfront lot at 10224 East Seagull Drive

in South Nags Head, North Carolina (“the property”).

See id. at ¶¶ 11-12. The Zitos bought the beachfront

lot in 2008 for $438,500 and the lot contained a 1,700

square foot home built in 1982. See id. at ¶¶ 12-13. On

October 10, 2016, a fire destroyed the Zitos’ home on

the property. See id. at ¶ 18. On July 31, 2017, the

Zitos sought to rebuild their home, with a total floor

area of 1,792 on a 32' x 28' footprint, and submitted a

North Carolina Coastal Area Management Act

(“CAMA”) Minor Permit application to the Town of

Nags Head’s CAMA Local Permit Officer (“LPO”) See

id. at ¶¶ 20, 26-27.

CAMA governs development of North Carolina’s

ocean areas and establishes various rules and

regulations. See id. at ¶¶ 20-22. These rules and

regulations include set-back requirements for oceanfront development on property within the Ocean

Erodible Area of Environmental Concern (“AEC”) that

are based on a combination of annual erosion rates,

the location of the first stable, natural vegetation line,

and the size of the building. See id. at ¶¶ 20-24; 15A

N.C. Admin. Code 7H.0304. Buildings of less than

5,000 square feet have a set-back line from the first

stable line of vegetation of at least 30 times the annual

erosion rate. See Compl. at ¶ 23; 15A N.C. Admin.

Code 7H.0306(5)(a). Buildings of less than 2,000

square feet built before June 1, 1979, fall under a

grandfather provision that establishes a reduced setback line of 60 feet from the line of vegetation, if the

standard set-back line would otherwise prevent

Appendix B-4

building. See Compl. at ¶ 24; 15A N.C. Admin. Code

7H.0309(b). For CAMA permits, the local coastal

governments are the initial decisionmakers, and

applicants can seek a variance from the Commission

if their initial permit is denied. See Compl. at ¶ 25.

The Zitos’ property falls within the AEC. See id.

at 29. The AEC official erosion rate is 6 feet per year,

which, when multiplied by 30 as required by CAMA,

results in a standard setback line of 180 feet from the

first line of stable vegetation. See id.; 15A N.C. Admin.

Code 7H.0306(5)(a). On April 26, 2018, the Town of

Nags Head LPO denied the Zitos’ CAMA Minor

Permit. See Compl. ¶ 32; Ex. C [D.E. 1-4]. The LPO

did so because the “[the Zitos’] home is setback

approximately 12 ft. landward of the static vegetation

line,” and thus did not meet CAMA’s requirements.

See Compl. ¶ 32; Ex. C [D.E. 1-4] 3.

After the denial, the Zitos filed a variance petition

with the Commission. See Compl. ¶¶ 25, 34. On

November 27, 2018, the Commission considered the

variance petition at a public hearing. See id. at ¶ 35.

On December 27, 2018, the Commission denied the

variance and issued a “Final Agency Decision.” See id.

at ¶ 36; Ex. D [D.E. 1-5]. In its “Final Agency

Decision,” the Commission concluded that the Zitos

failed to demonstrate the requisite hardship to qualify

for a variance. See Compl. ¶ 37; Ex. D [D.E. 1-5] 1116. On March 6, 2019, the Zitos filed this action and

sought declaratory relief, just compensation,

reasonable attorney fees and costs, and all other

appropriate relief.

On May 9, 2019, the Commission moved to

dismiss; the complaint, asserting three grounds for

Appendix B-5

dismissal: (1) under Rule 12(b)(1) of the Federal Rules

of Civil Procedure for lack of subject-matter

jurisdiction; (2) under the Eleventh Amendment’s

grant of sovereign immunity; and (3) under Rule

12(b)(6) of the Federal Rules of Civil Procedure for

failure to state a claim [D.E 13, 14]. On June 5, 2019,

the Zitos responded in opposition, and waived the

state law inverse condemnation takings claim in count

one of their complaint [D.E. 16]. On June 19, 2019, the

Commission replied [D.E. 17].

On June 21, 2019, the Supreme Court decided

Knick v. Township of Scott, 139 S. Ct. 2162 (2019). In

Knick, the Court overruled Wi11iamson County

Regional Planning Commission v. Hamilton Bank of

Johnson City, 473 U.S. 172 (1985), a case that had

formed a core part of the Commission’s motion to

dismiss. See Knick, 139 S. Ct. at 2167-68; [D.E. 14] 917. In Knick, the Court removed Williamson County’s

state-litigation requirement and held that a “property

owner has suffered a violation of his Fifth Amendment

rights when the government takes his property

without just compensation, and therefore may bring

his claim in federal court under [section] 1983 at that

time.” Knick, 139 S. Ct. at 2168. On June 26, 2019,

this court denied the Commission’s motion to dismiss

and motion for leave to file a supplemental

memorandum in light of Knick [D.E. 19]. See [D.E. 20,

21]. On July 10, 2019, the Commission answered the

complaint [D.E. 22], and on August 20, 2019, amended

its answer [D.E. 39].

On August 20, 2019, the Commission moved, for a

second time, to dismiss for lack of jurisdiction [D.E.

36] and filed a supporting memorandum with three

Appendix B-6

arguments [D.E. 38]. First, the Eleventh Amendment

bars the Zitos from asserting their federal takings

claim in federal court since they could have brought a

takings claim in state court. See [D.E. 38] 7-10; Hutto,

773 F.3d at 552. Second, and relatedly, the Eleventh

Amendment provides the Commission Eleventh

Amendment immunity in federal court because it is

an “arm of the state.” See [D.E. 38] at 10-20. Third,

Congress has not abrogated the Commission’s

Eleventh Amendment immunity, and the Commission

has not waived it. See id. at 21-24.

On September 6, 2019, the Zitos responded in

opposition [D.E. 42]. They argued that the Fifth

Amendment’s Just Compensation Clause is selfexecuting, that it is binding on the states through the

Fourteenth Amendment, and that the Eleventh

Amendment does not bar claims against states under

the Just Compensation Clause in federal court. See id.

at 7-10. The Zitos also argued that, even if the Just

Compensation Clause is not self-executing, they

cannot bring a takings claim in North Carolina state

court and thus the Eleventh Amendment should not

apply. See id. at 12-16. On September 20, 2019, the

Commission replied and argued that Hutto remains

binding precedent, that North Carolina state courts

remain open for the Zitos to assert their takings claim,

and that the court should not accept wholesale the

Zitos’

statement

of

facts

concerning

the

administrative and statutory scheme. See [D.E. 44].

Appendix B-7

II.

A.

The Fifth Amendment Takings Clause applies to

the States through the Fourteenth Amendment See,

e.g., Murr v. Wisconsin, 137 S. Ct. 1933, 1942 (2017);

Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536

(2005). It provides that private property shall not “be

taken for public use, without just compensation.” U.S.

Const. amend. V. This prohibition “was designed to

bar Government from forcing some people alone to

bear public burdens which, in all fairness and justice,

should be borne by the public as a whole.” Armstrong

v. United States, 364 U.S. 40, 49 (1960). It applies to

temporary government actions as well as permanent

ones. See Tahoe-Sierra Pres. Council, Inc. v. Tahoe

Reg’l Planning Agency, 535 U.S. 302, 322 (2002); First

English Evangelical Lutheran Church v. Cty. of Los

Angeles, 482 U.S. 304, 318-19 (1987); Front Royal &

Warren Cty. Indus. Park Corp. v. Town of Front Royal,

135 F.3d 275, 285 (4th Cir. 1998).

“The paradigmatic taking requiring just

compensation is a direct government appropriation or

physical invasion of private property.” Lingle, 544

U.S. at 537. For example, when the government uses

its eminent domain power to condemn a person’s land

for some public purpose (such as to build a road or a

military base), the government has “taken” that land

and must pay just compensation for it. See, e.g., Ark.

Game & Fish Comm’n v. United States, 568 U.S. 23,

31-32 (2012); Stop the Beach Renourishment Inc. v.

Fla. Dep’t of Envtl. Prot., 560 U.S. 702, 713-15 (2010);

Lingle, 544 U.S. at 537; Tahoe-Sierra, 535 U.S. at 32122.

Appendix B-8

A taking also occurs when instead of

appropriating or invading private property, the

government undertakes “regulatory actions that are

functionally equivalent to the classic taking.” Lingle,

544 U.S. at 539; see Murr, 137 S. Ct. at 1942-43; Horne

v. Dep’t of Agric., 135 S. Ct. 2419, 2427 (2015). “[N]o

magic formula enables a court to judge, in every case,

whether a given government interference with

property is a taking.” Ark. Game & Fish Comm’n, 568

U.S. at 31; see Stop the Beach Renourishment Inc., 560

U.S. at 713. Nonetheless, the Supreme Court has

identified two situations in which a regulation will,

per se, constitute a taking. First, a regulation is a

taking if it authorizes a “permanent physical

occupation” of property. Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419, 426 (1982); see,

e.g., Ark. Game & Fish Comm’n, 568 U.S. at 32.

Second, a regulation is a taking if it requires a

property owner to sacrifice all economically beneficial

use of the property, unless the regulation does no more

than enforce limits that “inhere in the title itself, in

the restrictions that background principles of the

State’s law of property and nuisance already place

upon land ownership.” Lucas v. S.C. Coastal Council,

505 U.S. 1003, 1029 (1992). 2

Regulations that fit neither per se rule are

evaluated using the multi-factor balancing test in

Penn Cent. Transp. Co. v. City of New York, 438 U.S.

104 (1978). See Horne, 135 S. Ct at 2427; Ark. Game

& Fish Comm’n, 568 U.S. at 31-32; Lingle, 544 U.S. at

538-39. The so-called “'Penn Central factors” include

This principle also applies under the North Carolina

Constitution. See, e.g., Helms v. City of Charlotte, 255 N.C. 647,

655-57, 122 S.E.2d 817, 824-25 (1961).

2

Appendix B-9

(1) the regulation’s economic impact on the claimant,

(2) the extent to which the regulation interferes with

the claimant’s reasonable, investment-backed

expectations, and (3) the character of the

government’s action. See Murr, 137 S. Ct at 1943;

Lingle, 544 U.S. at 538-39; Penn Cent., 438 U.S. at

124. A regulatory taking (just like a “classic taking”)

can be either permanent or temporary. See TahoeSierra, 535 U.S. at 322-23; Lucas, 505 U.S. at 1030 &

n.17; First English, 482 U.S. at 318-19; Sansotta v.

Town of Nags Head, 97 F. Supp. 3d 713, 729-30

(E.D.N.C. 2014).

B.

The Eleventh Amendment states, in full: “The

Judicial power of the United States shall not be

construed to extend to any suit in law or equity,

commenced or prosecuted against one of the United

States by Citizens of another State, or by Citizens or

Subjects of any Foreign State.” U.S. Const. amend. XI.

The Eleventh Amendment provides states with

“immuni[ity] from suits brought in federal courts by

her own citizens as well as by citizens of another

state,” a concept known as sovereign immunity.

Edelman v. Jordan, 415 U.S. 651, 663 (1974).

Historically, the “Fourth Circuit has ‘been unclear on

whether a dismissal on Eleventh Amendment

immunity grounds is a dismissal for failure to state a

claim under Rule 12(b)(6) or a dismissal for lack of

subject-matter jurisdiction under Rule 12(b)(1).’”

Kariuki v. Dep’t of Ins., No. 5:18-CV-341-D, 2019 WL

2559807, at *3 (E.D.N.C. June 20, 2019) (unpublished)

(quoting Andrews v. Daw, 201 F.3d 521, 524 n.2 (4th

Cir. 2000)), appeal dismissed, 2020 WL 1062217 (4th

Appendix B-10

Cir. Mar. 5, 2020) (per curiam) (unpublished). But the

Fourth Circuit recently held that “sovereign immunity

deprives federal courts of jurisdiction to·hear claims,

and a court finding that a party is entitled to sovereign

immunity must dismiss the action for lack of subjectmatter jurisdiction.” Cunningham v. Gen. Dynamics

Info. Tech., Inc., 888 F.3d 640, 649 (4th Cir. 2018)

(quotation omitted); see Ackerson v. Bean Dredging

LLC, 589 F.3d 196, 207 (5th Cir. 2009); Hill v. CBAC

Gaming LLC, No. DKC 19-0695, 2019 WL 6729392, at

*4 (D. Md. Dec. 11, 2019) (unpublished). Accordingly,

the court analyzes the Commission’s assertion of

Eleventh Amendment sovereign immunity under

Rule 12(b)(1).

A Rule 12(b)(1) motion to dismiss for sovereign

immunity under the Eleventh Amendment tests

subject-matter jurisdiction, which is the court’s

“statutory or constitutional power to adjudicate the

case.” Steel Co. v. Citizens for a Better Env’t, 523 U.S.

83, 89 (1998) (emphasis omitted). A federal court

“must determine that it has subject-matter

jurisdiction over [a claim] before it can pass on the

merits of that [claim].” Constantine v. Rectors &

Visitors of George Mason Univ., 411 F.3d 474, 479-80

(4th Cir. 2005). In considering a motion to dismiss for

lack of subject-matter jurisdiction, the court may

consider evidence outside the pleadings without

converting the motion into one for summary

judgment. See Evans v. B.F. Perkins Co., 166 F.3d 642,

647 (4th Cir. 1999). Although plaintiffs bear the

burden of establishing that this court has subjectmatter jurisdiction over their claims, see, e.g., Steel

Co., 523 U.S. at 104; Evans, 166 F.3d at 647;

Richmond, Fredericksburg & Potomac R.R. v. United

Appendix B-11

States, 945 F.2d 765, 768 (4th Cir. 1991), the party

asserting sovereign immunity bears the burden of

demonstrating that immunity. See Hutto, 773 F.3d at

543 (collecting cases).

In Hutto, the Fourth Circuit held that “the

Eleventh Amendment bars Fifth Amendment taking

claims against States in federal court where the

State’s courts remain open to adjudicate such claims.”

Hutto, 773 F.3d at 552 (emphasis omitted). Thus, to

dismiss a Fifth Amendment takings claim, Hutto

requires: (1) an entity to enjoy sovereign immunity

under the Eleventh Amendment and (2) the state to

provide an open forum to adjudicate such a takings

claim. See id. at 551-52.

The Zitos argue that the Eleventh Amendment

offers states, and their related. entities, no protection

against a Fifth Amendment takings claim in federal

court. See [D.E. 42] 7-11. Specifically, the Zitos

contend that given “the automatically-effective nature

of the damages remedy in the Just Compensation

Clause, the imposition of that Clause on the states

through the Fourteenth Amendment was the sole

congressional action needed to open states to takings

claims seeking damages.” [D.E. 42] 10-11. In order to

distinguish Hutto and to support their argument, the

Zitos cite footnote 9 in First English, 482 U.S. at 316

n.9. The Zitos then contend: (1) “the Hutto panel was

not presented with the full, Fourteenth Amendmentbased argument against sovereign immunity”; and

(2) the Hutto panel did not “consider the Supreme

Court’s decision in First English.” [D.E. 42] 11.

This court cannot ignore binding Fourth Circuit

precedent, even if the Zitos offer a persuasive

Appendix B-12

rationale to consider doing so. Just as a court of

appeals cannot overrule the Supreme Court, a district

court cannot overrule a court of appeals. See

Rodriguez de Quijas v. Shearson/Am. Express, Inc.,

490 U.S. 477, 484 (1989) (“If a precedent of [the

Supreme] Court has direct application in a case, yet

appears to rest on reasons rejected in some other line

of decisions, the Court of Appeals should follow the

case which directly controls, leaving to [the Supreme]

Court the prerogative of overruling its own

decisions.”). Hutto controls the disposition of this case,

and this court must follow it until either the Fourth

Circuit sitting en banc or the Supreme Court instructs

otherwise. See Agostini v. Felton, 521 U.S. 203, 237-38

(1997); United States v. Sterling, 724 F.3d 482, 501-02

(4th Cir. 2013); Waugh Chapel S., LLC v. United Food

& Commercial Workers Union Local 27, 728 F.3d 354,

363 (4th Cir. 2013); United States v. Logan, No. 5:08CR-20-D, 2008 WL 11422532, at *7 (E.D.N.C. Sept. 4,

2008) (unpublished), aff’d in part, vacated in part, 395

F. App’x 38 (4th Cir. 2010) (per curiam) (unpublished);

Brown v. N.C. Div. of Motor Vehicles, 987 F. Supp.

451, 458 (E.D.N.C. 1997), aff’d, 166 F.3d 698 (4th Cir.

1999).

Alternatively, the Zitos underrate Hutto’s

analysis and overrate the strength of footnote nine in

First English. As for Hutto, the Fourth Circuit

provided a tight analogy from Supreme Court

precedent to support its holding. See Hutto, 773 F.3d

at 551-52. Just as states can invoke sovereign

immunity for tax disputes in federal court so long as a

state forum remains open, so too states can invoke

sovereign immunity for takings claims in federal court

so long as a state forum remains open. See id.; Reich

Appendix B-13

v. Collins, 513 U.S. 106, 110 (1994) (“[T]he sovereign

immunity [that] states enjoy in federal court, under

the Eleventh Amendment, does generally bar tax

refund claims from being brought in that forum,” but

state courts must hear suits to recover taxes

unlawfully extracted in violation of federal law

notwithstanding the “sovereign immunity [that]

[s]tates traditionally enjoy in their own courts.”); 3 cf.

Alden v. Maine, 527 U.S. 706, 740 (1999) (holding that

Congress, under Article I of the Constitution, cannot

subject nonconsenting states to private suits for

damages in state courts for allegedly violating federal

law, but declining to overrule Reich because the

obligation in Reich “arises from the Constitution

itself”). Moreover, the Fourth Circuit in Hutto

discussed two cases that rejected the Zitos’ proposed

resolution

between

the

self-executing

Just

Compensation Clause in the Fifth Amendment and

sovereign immunity in federal court in the Eleventh

Amendment. See Hutto, 773 F.3d at 553; Seven Up

Pete Venture v. Schweitzer, 523 F.3d 948, 954 (9th Cir.

3 In Reich, plaintiff was a retired federal military officer who sued

Georgia in Georgia state court seeking a refund of taxes that

Georgia imposed on plaintiff’s federal retirement benefits. See

Reich, 513 U.S. at 108. The Georgia tax scheme violated the

intergovernmental tax immunity doctrine dating back to

McCulloch v. Maryland, 4 Wheat. 316 (1819), and generally

codified at 4 U.S.C. § 111. See Reich, 513 U.S. at 108. The Georgia

Supreme Court refused to permit plaintiff to obtain a refund in

state court. See id. at 109-12. The United States Supreme Court

held that “a denial by a state court of a recovery of taxes exacted

in violation of the laws or Constitution of the United States by

compulsion is itself in contravention [of the Due Process Clause]

of the Fourteenth Amendment.” Id. at 109 (quotation omitted).

Thus, plaintiff could seek relief in Georgia state court for taxes

that Georgia improperly imposed on his federal retirement

benefits in violation of federal law. See id. at 108-112.

Appendix B-14

2008) (“[W]e conclude that the constitutionally

grounded self-executing nature of the Takings Clause

does not alter the conventional application of the

Eleventh Amendment”); DLX, Inc. v. Kentucky, 381

F.3d 511, 526 (6th Cir. 2004) (“Treating DLX’s claim

as a self-executing reverse condemnation claim, . . . we

conclude that the Eleventh Amendment’s grant of

immunity protects Kentucky from that claim . . . .”).

As for footnote nine in First English, footnote nine

cannot bear the weight that the Zitos place on it. See

First English, 482 U.S. at 316 n.9. First, footnote nine

is dicta in that the Court was responding not to a

principal argument of the parties, but rather to the

United States’ amicus brief. See id. Second, footnote

nine was not essential to deciding First English. See

id. Indeed, First English did not concern the Eleventh

Amendment or even mention it. Rather, in First

English, the Supreme Court reversed the California

First District Court of Appeal and held that a

landowner who claimed that his property has been

“taken” in violation of the Fifth and Fourteenth

Amendments by a “land-use regulation may [] recover

damages for the time before it is finally determined

that the regulation constitutes a ‘taking’ of his

property.” Id. at 306-07. In addition, the Hutto panel

analyzed Seven Up and DLX to explain the

significance of a state-court remedy to the Eleventh

Amendment’s self-executing nature and discussed

Reich and Alden to support its holding. See Hutto, 773

F.3d at 551-53; Seven Up, 523 F.3d 954-956; DLX, 381

F.3d at 526-28. Although the Hutto panel did not cite

First English, the Hutto panel grappled with the

issues that footnote nine in First English presented.

Accordingly, the court rejects the Zitos’ argument.

Appendix B-15

III.

A.

Because the Commission is asserting sovereign

immunity, it bears the burden of proving such

immunity. See Hutto, 773 F.3d at 542-43. The

Eleventh Amendment protects not only states, but

also “‘state agents and state instrumentalities,’ or in

other words, arms of the state.” Lane v. Anderson, 660

F. App’x 185, 195 (4th Cir. 2016) (per curiam)

(unpublished) (quoting Regents of the Univ. of Cal. v.

Doe, 519 U.S. 425, 429 (1997)). “The purpose of the

arm-of-state inquiry is to distinguish arms or alter

egos of the state from mere political subdivisions of

[the] State such as counties or municipalities, which,

though created by the state, operate independently

and do not share the state’s immunity.” U.S. ex rel.

Oberg v. Pa. Higher Educ. Assistance Agency, 804 F.3d

646, 651 (4th Cir. 2015) (alteration in original)

(quotation omitted); see Kitchen v. Upshaw, 286 F.3d

179, 184 (4th Cir. 2002). To determine whether a

state-created entity is an “arm of the state,” the court

considers four, non-exclusive factors:

(1) whether any judgment against the entity

as defendant will be paid by the State or

whether any recovery by the entity as plaintiff

will inure to the benefit of the State;

(2) the degree of autonomy exercised by the

entity, including such circumstances as who

appoints the entity’s directors or officers, who

funds the entity, and whether the State

retains a veto over the entity’s actions;

Appendix B-16

(3) whether the entity is involved with state

concerns as distinct from non-state concerns,

including local concerns; and

(4) how the entity is treated under state law,

such as whether the entity’s relationship with

the State is sufficiently close to make the

entity an arm of the State.

S.C. Dep’t of Disabilities & Special Needs v. Hoover

Universal, Inc., 535 F.3d 300, 303 (4th Cir. 2008)

(quotation and alteration omitted); see Lane, 660 F.

App’x at 195; Oberg, 804 F.3d at 650-51; Ram Ditta v.

Md. Nat’l Capital Park & Planning Comm’n, 822 F.2d

456, 457-58 (4th Cir. 1987). Although each factor is

significant, the most important, but not dispositive,

factor “is whether the state treasury will be

responsible for paying any judgement that might be

awarded.” Hutto, 773 F.3d at 543 (quotation omitted);

see Lane, 660 F. App’x at 195; United States ex rel.

Oberg v. Pa. Higher Educ. Assistance Agency, 745 F.3d

131, 137 n.4 (4th Cir. 2014); Ram Ditta, 822 F.2d at

457. When factors conflict, the twin reasons for the

Eleventh Amendment—protecting state treasuries

and respecting state sovereign dignity—must guide

the analysis. See Oberg, 804 F.3d at 676; Gray v. Laws,

51 F.3d 426, 432 (4th Cir. 1995). At bottom, the court

must “determine whether the governmental entity is

so connected to the State that the legal action against

the entity would . . . amount to ‘the indignity of

subjecting a State to the coercive process of judicial

tribunals at the instance of private parties.’” Cash v.

Granville Cty. Bd. of Educ., 242 F.3d 219, 224 (4th Cir.

2001) (quoting Seminole Tribe v. Florida, 517 U.S. 44,

58 (1996)).

Appendix B-17

As for the first factor concerning responsibility for

judgments, the finances of the Commission and North

Carolina are intertwined. The Commission, along

with the DCM and larger CAMA programs, “receive[s]

funding from the North Carolina General Assembly

(“NCGA”), federal grants and appropriations, and

permit revenue,” which become state funds when

deposited in State Treasury accounts. Davis Dec.

[D.E. 14-2] ¶ 10; see N.C. Gen. Stat. §§ 143C-11(d)(25). Ultimately, the Commission’s budget is part

of the Governor’s budget, and not independent of the

state. See Davis Dec. at ¶ 11; N.C. Gen. Stat. §§ 143C3-3(a), 3-5(a), and 5-4(b). The Commission does not

administer its own accounts. Rather, the state does.

See N.C. Gen. ·Stat. § 147-77. Likewise, the

Commission does not “own any property or have any

resources apart from the state with .which to pay a

judgment.” Davis Dec. at ¶ 12. Moreover, with any

judgment serving as an “unbudgeted expense” for the

Commission, the state would feel the effect directly

through its Treasury because “the State is the

Commission’s exchequer.” [D.E. 38] 12; see Davis Dec.

at ¶ 13. Although the state is not explicitly liable for

the Commission’s liability, the state is functionally

liable for any judgment. See Oberg, 804 F.3d at 658

(“A state may also be functionally liable if the funds

available to pay any judgment effectively belong to the

state rather than the agency.”). Thus, the first factor

strongly favors the Commission.

As for the second factor concerning autonomy, the

Commission is not autonomous. In analyzing

autonomy, the court considers “the degree of

autonomy exercised by the entity, including such

circumstances as who appoints the entity’s directors

Appendix B-18

or officers, who funds the entity, and whether the

State retains a veto over the entity’s actions.” Oberg,

804 F.3d at 668 (quotation omitted). Both the

appointment and funding considerations reveal that

the Commission lacks autonomy. Either the Governor

or the NCGA appoints its directors, see N.C. Gen. Stat.

§§113A-104(b1) and 104(i), and the NCGA funds the

Commission as part of the Governor’s budget. See N.C.

Gen. Stat. §§ 143C-3-3(a), 3-5(a), and 5-4(b). Although

the Governor and the NCGA lack an explicit veto over

the Commission’s actions, the Attorney General of

North Carolina serves as the Commission’s attorney

and approves use of private counsel and any

settlement over $75,000. See N.C. Gen. Stat. §§ 113A124(d), 114-2.3, and 114-2.4.

As for the third factor concerning statewide

concern, the Commission regulates the coastal areas

of North Carolina and thereby affects areas of statewide importance. See Adams v. N.C. Dep’t of Nat. &

Econ. Res., 295 N.C. 683, 691-93, 249 S.E.2d 402, 40708 (1978); Oberg, 804 F.3d at 674. As for the fourth

factor concerning the entity’s treatment under state

law, North Carolina treats the Commission as if it

were part of the state in several ways. For example,

the NCGA created the Commission. See N.C. Gen.

Stat. § 113A-104. Good governance laws such as the

State Government Ethics Act apply to the

Commission. See N.C. Gen. Stat. § 113A-104(c2).

North Carolina’s Administrative Procedure Act

applies to the Commission. See N.C. Gen. Stat.

§§ 113A-121.1(a), 150B-2(1a). Thus, all four factors

weigh in favor of granting the Commission sovereign

immunity.

Appendix B-19

Because the Commission has proven that it is an

arm of the state and has sovereign immunity under

the Eleventh Amendment, the burden shifts to the

Zitos to prove that the Commission has waived its

sovereign immunity, or that the Commission’s

sovereign immunity has been abrogated. See Williams

v. Big Picture Loans, LLC, 929 F.3d 170, 177 (4th Cir.

2019) (“Once a defendant has [proven that it is an arm

of the state], the burden to prove that immunity has

been abrogated or waived would then fall to the

plaintiff.”). As for waiver, the Zitos have alleged no

facts to demonstrate that the Commission has clearly

and unequivocally waived immunity to a federal

takings claims in federal court. See, e.g., Port Auth.

Trans-Hudson Corp. v. Feeney, 495 U.S. 299, 305-06

(1990); Atascadero State Hosp. v. Scanlon, 473 U.S.

234, 241 (1985), superseded by statute, 42 U.S.C.

§ 2000d-7; Pennhurst State Sch. & Hosp. v.

Halderman, 465 U.S. 89, 99 (1984); Pense v. Md. Dep’t

of Pub. Safety & Corr. Servs., 926 F.3d 97, 101 (4th

Cir. 2019). As for abrogation, the Zitos argue that the

self-executing nature of the Fifth Amendment means

that Congress need not provide statutory

abrogation—the Fourteenth Amendment already did

so itself. See [D.E. 42] 10-11; cf. Kimel v. Fla. Bd. of

Regents, 528 U.S. 62, 73 (2000) (“To determine

whether a federal statute properly subjects States to

suits by individuals, we apply a simple but stringent

test:

Congress

may

abrogate

the

States’

constitutionally secured immunity from suit in federal

court only by making its intention unmistakably clear

in the language of the statute.”) (quotation omitted).

However, Hutto forecloses this argument. See Hutto,

773 F.3d at 551-552. Accordingly, the Commission has

Appendix B-20

not waived its sovereign immunity, and it has not

been abrogated.

B.

North Carolina also provides a forum to

adjudicate the Zitos’ takings claim. Under Hutto, a

state court must remain available to hear a takings

claim in order for a state to enjoy sovereign immunity

in federal court. See Hutto, 773 F.3d at 551-552. Here,

the Zitos can seek relief under both the state statutory

scheme and the North Carolina Constitution. As for

the state statutory scheme, N.C. Gen. Stat. § 113A123 grants the ability to challenge Commission

actions in state court, setting numerous procedural

requirements that include venue, statute of

limitations, and a jury-trial right, among others. See

N.C. Gen. Stat. § 113A-123(b). If a state court finds a

taking, the Commission may petition the Department

of Administration to begin eminent domain

proceedings. See N.C. Gen. Stat. § 113A-123(c). Under

N.C. Gen. Stat. § 113A-123, the state compensates a

property owner only as part of the eminent domain

proceedings that can be triggered after a court

invalidates a taking. Cf. id.; see N.C. Gen. Stat. §§ 14624(c), 136-103(b)(5). That statute also provides that

“[t]he method provided in this subsection for the

determination of the issue of whether such order

constitutes a taking without compensation shall be

exclusive and such issue shall not be determined in

any other proceeding.” N.C. Gen. Stat. § 113A-123(b)

(emphasis added).

The Zitos construe the eminent domain and

exclusivity portions of N.C. Gen. Stat. § 113A-123 to

mean that North Carolina is not open to their state

Appendix B-21

takings claim. See [D.E. 42] 12-16. According to the

Zitos, N.C. Gen. Stat. § 113A-123 only invalidates

regulatory actions by the Commission, making the

taking temporary until eminent domain proceedings

occur. Cf. First English, 482 U.S. at 319 (“Invalidation

of the ordinance or its successor ordinance after this

period of time, though converting the taking into a

‘temporary’ one, is not a sufficient remedy to meet the

demands of the Just Compensation Clause.”). Section

113A-123(c) does provide monetary compensation

once such eminent domain proceedings have run their

course; however, the Zitos argue that they require

monetary compensation in the meantime for the

denial of the permit that resulted in a temporary loss

of value of their property. See [D.E. 42] 14-15.

Coupling the temporary-taking gap in the broader

statutory scheme with the “exclusive” nature of the

N.C. Gen. Stat. § 113A-123(b), the Zitos assert that

North Carlina state courts are closed to claims such

as the one at issue here.

The court rejects the Zitos’ argument. The Zitos

misconstrue the term “exclusive” in N.C. Gen. Stat.

§ 113A-123(b) and ignore that a plaintiff can recover

monetary compensation in state court under the

North Carolina Constitution for a temporary taking.

As for exclusivity, the “exclusive” in N.C. Gen. Stat.

§ 113A-123(b) applies to “whether such order

constitutes a taking without compensation,” meaning

that the procedure that the statutory scheme

describes shall be exclusive. N.C. Gen. Stat. § 113A123(b) (emphasis added). Moreover, that procedure is

the “method provided in this subsection for the

determination of the issue,” which includes “a jury

trial on all issues of fact” and other procedural

Appendix B-22

provisions. Id. Thus, the procedural method outlined

in N.C. Gen. Stat. § 113A-123(a) and (b) is exclusive

for determining whether a taking occurred. See Weeks

v. N.C. Dep’t of Nat. Res. & Cmty. Dev., 97 N.C. App.

215, 223, 388 S.E.2d 228, 233 (1990) (“[T]he statute’s

‘method’ contemplates both legal and factual

determinations only of whether a ‘taking’ occurred.”).

However, N.C. Gen. Stat. § 113A-123(b) does not

require that the remedies provided by the statutory

scheme, invalidation of a taking and monetary

compensation as part of eminent domain proceedings,

are exclusive. See N.C. Gen. Stat § 113A-123(b).

As for other remedies, although the Zitos correctly

note that N.C. Gen. Stat. § 113A-123(b) does not

provide a monetary remedy for temporary takings

during the eminent domain procedure, the North

Carolina Constitution provides such a remedy.

Notably, the North Carolina Constitution does not

expressly prohibit governments from taking private

property for public use without just compensation, but

the Supreme Court of North Carolina has found such

a prohibition in the Law of the Land Clause. See, e.g.,

Finch v. City of Durham, 325 N.C. 352, 362-63, 384

S.E.2d 8, 14 (1989). The Supreme Court of North

Carolina uses the same standard for determining

whether a government took property in violation of

the North Carolina Constitution as the Supreme

Court of the United States uses to assess a Fifth

Amendment takings claim. See, e.g., id. at 371-72, 384

S.E.2d at 19; N.C. Dep’t of Transp. v. Cromartie, 214

N.C. App. 307, 314-15, 716 S.E.2d 361, 367 (2011);

Adams Outdoor Advert. v. N.C. Dep’t of Transp., 112

N.C. App. 120, 122, 434 S.E.2d 666, 667 (1993). Thus,

the Zitos can sue under the Law of the Land Clause of

Appendix B-23

the North Carolina Constitution, which states in

relevant part: “No person shall be taken, imprisoned,

or disseized of his freehold, liberties, or privileges, or

outlawed, or exiled, or in any manner deprived of his

life, liberty, or property, but by the law of the land.”

N.C. Const. art. I, § 19.

The Zitos’ takings claim cannot be remedied fully

under N.C. Gen. Stat. § 113A-123 because the eminent

domain procedures fail to compensate for the

temporary loss in value during the duration of the

proceedings. The Supreme Court of North Carolina,

however, has recognized “inverse condemnation”

claims, similar to the regulatory taking at issue here,

as allowing for damages. See Finch, 325 N.C. at 36263, 384 S.E.2d. at 14; Longy v. City of Charlotte, 306

N.C. 187, 195-96, 293 S.E.2d 101, 107-08 (1982),

superseded on other grounds by statute, Act of July 10,

1981, ch. 919, sec. 28, 1981 N.C. Sess. Laws 1382,

1402; see also Kirby v. N.C. Dep’t of Transp., 368 N.C.

847, 855-56, 786 S.E.2d 919, 925-26 (2016). Moreover,

North Carolina courts have allowed “vested rights

claims,” which are “rooted in the due process of law

and the law of the land clauses of the federal and state

constitutions,” to proceed as claims under the North

Carolina Constitution in the context of zoning claims.

Godfrey v. Zoning Bd. of Adjustment, 317 N.C. 51, 62,

344 S.E.2d 272, 279 (1986) (quotation omitted)

(emphasis added); see Swan Beach Corolla, L.L.C. v.

Cty. of Currituck, 244 N.C. App. 545, 781 S.E.2d 350,

2015 WL 8747777, at *3-4 (2015) (unpublished table

opinion). Thus, North Carolina provides a forum to

adjudicate the Zitos’ takings claim.

Appendix B-24

C.

This case raises two significant issues concerning

the effect of Hutto. First, Hutto’s state court remedy

requirement is in tension with the Supreme Court’s

reasoning in Knick. Second, Hutto concerned a federal

takings claim in federal court, but did not mention

litigating a federal takings claim in state court. As for

Hutto’s tension with Knick, the Court in Knick

removed the state-litigation requirement that had

forced litigants to file their takings claims under state

law in state court before pursuing a takings claim in

federal court. See Knick, 139 S Ct. at 2167-68. Hutto,

however, still forces litigants who wish to pursue a

takings claim under the Fifth Amendment into state

courts. See Hutto, 773 F.3d at 551-52.

Of course, the Court in Knick did not consider

sovereign immunity under the Eleventh Amendment

because Knick involved a suit between a private

property owner and a locality that was not entitled to

sovereign immunity under the Eleventh Amendment.

Knick, 139 S. Ct. at 2167-71; Bay Point Properties, Inc.

v. Miss. Transp. Comm’n, 937 F.3d 454, 456-57 (5th

Cir.), petition for cert. filed, No. 19-798 (2019);

Williams v. Utah Dep’t of Corr., 928 F.3d 1209, 1214

(10th Cir. 2019). But in reiterating the self-executing

nature of the Just Compensation Clause, the Court in

Knick foreshadows the day when the Court will have

to address the interplay between the Fifth

Amendment’s Just Compensation Clause and the

Eleventh Amendment. Cf. Knick, 139 S. Ct at 2171;

Lumbard v. City of Ann Arbor, 913 F.3d 585, 591 (6th

Cir.) (Kethledge, J., concurring) (“But the Takings

Clause does not say that private property shall not ‘be

Appendix B-25

taken for public use, without just compensation, and

without remedy in state court.’ Instead the Clause

says that private property shall not ‘be taken for

public use, without just compensation’ period.”), cert.

denied, 140 S. Ct. 267 (2019). Although Hutto binds

this court, the court recognizes the force of the Zitos’

arguments, notes the significant constitutional issues

that the Zitos raise, and acknowledges that “the

guarantee of a federal forum rings hollow for takings

plaintiffs, who are forced to litigate their claims in

state court.” Knick, 139 S. Ct. at 2167.

As for litigating a federal takings claim in state

court, Hutto does not foreclose a state forum for a

federal takings claim. See Hutto, 773 F.3d at 552

(“[W]e conclude that the Eleventh Amendment bars

Fifth Amendment taking claims against States in

federal court when the State’s courts remain open to

adjudicate such claims.” (emphasis omitted)). State

courts can hear federal constitutional claims just like

federal courts. See, e.g., Yellow Freight Sys., Inc. v.

Donnelly, 494 U.S. 820, 823 (1990); Tafflin v. Levitt,

493 U.S. 45S, 458-59 (1990); Gulf Offshore Co. v.

Mobil Oil Corp., 453 U.S. 473, 477-78 (1981). Whether

the Commission successfully can invoke sovereign

immunity for a federal takings claim in state court is

a different question for a different court on a different

day. Cf. Howlett v. Rose, 496 U.S. 356, 367-81 (1990)

(holding that a state court cannot use state law

sovereign immunity to decline jurisdiction over an

action for money damages under 42 U.S.C. § 1983,

where state courts entertained similar state-law

actions against state defendants); Will v. Mich. Dept.

of State Police, 491 U.S. 58, 65-66 (1989) (holding that

a State is not a “person” against whom a claim for

Appendix B-26

money damages under 42 U.S.C. § 1983 can be

asserted); Long, 306 N.C. at 203, 293 S.E.2d at 11112; Beroth Oil Co. v. N.C. Dep’t of Transp., 220 N.C.

App. 419, 432-33, 72S S.E.2d 651, 660-61 (2012), aff’d

in part, vacated in part, 367 N.C. 333, 757 S.E.2d 466

(2014). Nonetheless, this court dismisses the Zitos’

complaint without prejudice, and this dismissal does

not affect the Zitos’ ability to assert a takings claim in

state court directly under the Fifth and Fourteenth

Amendments 4 or under 42 U.S.C. § 1983. 5

IV.

In sum, the court GRANTS the Commission’s

motion to dismiss [D.E. 36] and DISMISSES the

complaint WITHOUT PREJUDICE for lack of subjectmatter jurisdiction. The court DENIES as moot the

Federation’s motion to intervene [D.E. 24] and the

Zitos’ motion to clarify the stipulated administrative

facts [D.E. 46].

SO ORDERED. This 27 day of March 2020.

/s/ James C. Dever

JAMES C. DEVER III

United States District Judge

4 See First English, 482 U.S. at 316 n.9; Lawyer v. Hilton Head

Pub. Servs. Dist. No. 1, 220 F.3d 298, 302 n.4 (4th Cir. 2000);

Mann v. Haigh, 120 F.3d 34, 37 (4th Cir. 1997); Sansotta, 97 F.

Supp. 3d at 728 n.4.

5 See City of Monterey v. Del. Monte Dunes at Monterey, Ltd., 526

U.S. 687, 709-22 (1999); Sansotta, 97 F. Supp. 3d at 728 n.4.