Amicus Curiae Brief — Ehrlich v. City of Culver City

Supreme Court. ¥. S. e

FILER,

SEP 13 1996

|

CLERK

No. 96-238 -

In the

Supreme Court of the United States

October Term, 1996

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RICHARD K. EHRLICH, as trustee of the 1985 Ehrlich

Family Trust and as Trustee of the July 28, 1965, Trust,

Petitioner,

Vv.

CITY OF CULVER CITY, CITY COUNCIL OF

THE CITY OF CULVER CITY, STEVEN GOURLEY,

JOZELLE SMITH, JAMES BOULGARDIES,

AND PAUL A. JACOBS

Respondents.

. 2

Petition for Writ of Certiorari

to the California Supreme Court

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BRIEF AMICUS CURIAE OF PACIFIC LEGAL

FOUNDATION IN SUPPORT OF PETITIONER,

RICHARD EHRLICH, AS TRUSTEE OF THE 1985

EHRLICH FAMILY TRUST AND AS TRUSTEE

OF THE JULY 28, 1965, TRUST

—

* JAMES. S. BURLING

*Counsel of Record

Pacific Legal Foundation

2151 River Plaza Drive, Suite 305

Sacramento, California 95833

Telephone: (916) 641-8888

Attorney for Amicus Curiae

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TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES CITED ............... iii

INTEREST OF AMICUS CURIAE ................ l

ee 8 bl 6: Ges eae fae ear 2

STATEMENT OF THE CASE ...........-..2200.: 2

REASONS FOR GRANTING THE WRIT ............ 3

yt 6 oy) 0 Se Pin ae aaa ieee 3

I. THE CALIFORNIA SUPREME COURT FAILED

TO UNDERSTAND THE LOGIC BEHIND NOLLAN

AND DOLAN AND THUS FAILED TO PROPERLY

APPLY THOSE CASES 2... ccc ccveccscvene’s +

Il. THERE IS A SERIOUS CONFLICT IN THE

LOWER COURTS WHICH ARE STRUGGLING

TO PROPERLY APPLY NOLLAN AND DOLAN

TO THE IMPOSITION OF DEVELOPMENT FEES .. 8

A. Many Lower Courts Have Failed to

Recognize the Rationale Behind

Nollan and Dolan and Thus Have Failed to

Apply the Proper Takings Standards ......... 8

B. A Number of Jurisdictions Have Applied

Nollan and Dolan Standards to Monetary

Exactions, Including Some That Were

Legislatively Imposed ............--6- 11

3

C. The Attention Focused on the

“Legislative” Exception to the

Takings Clause Has Been

Questioned by Members of This

Court, and Other Courts as Well .......... 13

Il. THE DECISION OF THE COURT BELOW

TURNS TRADITIONAL UNDERSTANDINGS

OF THE RELATIONSHIP BETWEEN

PRIVATE PROPERTY AND GOVERNMENTAL

REGULATION ON THEIR HEAD ............ 14

COIWLEARIMIN cecccnnestand tee US Ce eee See 18

iii

TABLE OF AUTHORITIES CITED

Page

CASES

Agins v. City of Tiburon, 447 U.S. 255 (1980) ......... 7

Amoco Oil Co. v. Village of Schaumberg,

661 N.E. 2d 380 (Illinois App. 1995) ............. 14

Arcadia Development Corp. v. City of Bloomington,

1996 WL 453243 (Minn. App. 1996) ............. 10

Aspen-Tarpon Springs, Ltd. v. George Stuart,

635 So. 2d 61 (Fla. App. 1994) ..........0.0008- 12

Avco Community Developers Inc. v. South Coast

Regional Commission, 17 Cal. 3d 785 (1976) ........ 18

Block v. Hirsh, 256 U.S. 135 (1921)... 2... eee w nes 17

City of Portsmouth v. Schlesinger,

OB 38 830 Gat Cir. IDES) i ie ere wc eee 12

Clark v. City of Albany, 904 P.2d 185 (Or. App. 1995) .. 11

Commercial Builders of Northern California v. City of

Sacramento, 941 F.2d 872 (9th Cir. 1991) .......... 10

Dolan v. City of Tigard, 512 U.S. __,

Soe Se Fi re 1,3-6,8-14,19

Fallbrook Irrigation District v. Bradley,

ake cues 7

iv

Page

First English Evangelical Lutheran Church of Glendale v.

County of Los Angeles, 482 U.S. 304 (1987) ......... i

Garneau v. City of Seattle, 897 F. Supp.

S5ES Gr Ae. Cs Ree dk tS VEN Nae ea 10

Hodel v. Irving, 481 U.S. 704 (1987) ............... 1

Home Builders Association v. City of Scottsdale,

OUP Fae Ser ee. AK Bee) ok a le ee CREE 9

Keystone Bituminous Coal Association v. DeBenedictis,

40 U.S. GAO CR ck Be ids Cs Ce Sc 1

Loyola Marymount University v. Los Angeles Unified

School District, 45 Cal. App. 4th 1256, 1996 WL

SOUS Cae ak ie os ee HEAD Sati. 9

Lucas v. South Carolina Coastal Council,

ae Shes ee nk cas 69.49% 00 SO Ew 1

Lynch v. Household Finance Corp.,

St Sis Se ROE 5 ows Coe E KS CES RED EO 17

Mayor v. Knoxville Water Co., 212 U.S. 1 (1909) ..... 17

Nollan v. California Coastal Commission,

Gap Ue. Be teed A eka v0 8 Ciba ewe 1,3-6,8-14,19

Northern Illinois Home Builders Association v.

County of Du Page, 884 P.2d 569

Ch. CR; Ae. Te eis i hie ds ses bia ew ees 11

Page

Parking Association of Georgia v. City of Atlanta,

Georgia, Inc., U.S. , 115 S. Ct. 2268 (1995) ... 13

Seawall v. City of New York, 74 N.Y.2d 92,

544 N.Y. Supp. 2d 542, 542 N.E.2d 1059 (1989) ..... 12

Terminal Plaza Corp. v. City and County of San Francisco,

FFF a re Ge 8 Se as oh SS tn BES 10

Trimen Development Co. v. King Co.,

Ore Pe Bee Ce: SI oe Sb 8 SE a A EASE 11

Village of Norwood v. Baker, 172 U.S. 269 (1898) ...... 7

Webb’s Fabulous Pharmacies v. Beckwith,

ee ARs ee I oo on die ea bw ee be wie ed ee ae 7

Wurts v. Hoagland, 114 U.S. 606 (1885) ............. 7

UNITED STATES CONSTITUTION

Pr MR oS Ae oe he ee Oe eRe eS 1

PI IN oi 0S ok TR eS HERA 1

MISCELLANEOUS

John Locke, Second Treatise on Government .......... 17

Marx and Engels, The Communist Manifesto, ch 2,414 .. 17

W. Blackstone, Commentaries 2 (1765) ........... 15-16

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INTEREST OF AMICUS CURIAE

Pacific Legal Foundation is a nonprofit, tax-exempt

corporation organized under the laws of the State of California for

the purpose of engaging in litigation in matters affecting the public

interest. PLF has over 20,000 contributors and supporters located

throughout the nation and maintains its principal office in

Sacramento, California. Policy is set by a Board of Trustees

composed of concerned citizens, many of whom are attorneys.

PLF’s Board evaluates the merits of any contemplated legal action

and authorizes such action only where the Foundation’s position

has broad support within the general community. PLF’s Board has

authorized the filing of an amicus curiae brief in this matter.

PLF has participated in numerous cases involving issues

arising under the Takings and Due Process Clauses of the Fifth

and Fourteenth Amendments to the United States Constitution.

PLF attorneys were counsel of record in Nollan v. California

Coastal Commission, 483 U.S. 825 (1987), and PLF participated

as amicus curiae in Keystone Bituminous Coal Association v.

DeBenedictis, 480 U.S. 470 (1987); Hodel v. Irving, 481 U.S. 704

(1987); First English Evangelical Lutheran Church of Glendale v.

County of Los Angeles, 482 U.S. 304 (1987); and Lucas v. South

Carolina Coastal Council, 505 U.S. 1003 (1992).

PLF joined with Richard K. Ehrlich (the petitioner in this

case) in an amicus brief in support of Florence Dolan’s petition for

certiorari in Dolan v. City of Tigard, 512 U.S. ___, 114 S. Ct.

2309 (1994), which this Court granted on November 29, 1993.

PLF also supported Richard Ehrlich’s first petition for certiorari,

Case Number 93-842, before this Court which was granted on

June 27, 1994, as reported at 512 U.S. __, 114 S. Ct. 2731.

PLF also participated as amicus, both in the filing of briefs and the

sharing of oral argument time, before the California Court of

Appeal and the California Supreme Covrt in this case.

Pacific Legal Foundation can provide a unique perspective

to this Court’s determination of whether it should again grant

certiorari in this case. The Foundation’s supporters who own

property are all too familiar with the way that government uses the

regulatory process to finance public goods. The Foundation has

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over 23 years of experience in dealing with governmental entities

who do not see private ownership of property as a means of

enhancing the public weal through the harnessing of private

enterprise. Instead these entities see private property either as an

impediment to amassing greater governmental authority or as an

opportunity to increase the public coffers or land base as a quid

pro quo for agreeing to change a use restriction (such as changing

a use designation, zoning, or granting a permit) that might enable

a landowner to make reasonable use of land.

Consent to the filing of this brief has been granted by all

parties to this case and letters of consent have been lodged with the

Clerk of the Court.

sil

OPINION BELOW

The opinion of the California Supreme Court is reported at

Ehriich v. City of Culver City, 12 Cal. 4th 854. The opinions and

orders below in this case are reproduced in petitioner’s appendix.

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STATEMENT OF THE CASE

This case involves a most extreme application of the notion

that when there is any change in the regulatory status of a parcel

of property, the government may use the occasion of that change

as a vehicle for demanding a “tribute” from the owner of the

property. In this case Richard Ehrlich wished to have a land use

restriction that permitted only a very particular type of commercial

recreation on his vacant property, a recreation use on which he had

been losing money for years until the facilities were lawfully

demolished, replaced with another land use restriction that would

accommodate condominiums. The City agreed to the change, but

imposed a price. Two costs in particular are the subject of this

litigation: Ehrlich had to pay $280,000 so the City could build four

public tennis courts and Ehrlich had to either pay $33,200

(calculated at 1% of the value of the project) to the City for public

art to be placed at a location of the City’s choosing or Ehrlich had

to agree to build and maintain public art on his property that would

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be worth at least $33,200. Appellant’s Appendix at A6-7, E4, G5-

6, L5, N1-12. The California Supreme Court, allegedly applying

a heightened scrutiny analysis, determined that the City could exact

some sort of public recreation fee, although it declined to decide

exactly how much that fee should be--allowing the City to make a

new calculation of the fee.' The court further declined to apply

heightened scrutiny to the arts fee because it was “legislatively”

enacted. The fee was upheld under a relaxed standard of review

since it was merely akin to an “aesthetic” regulation. 12 Cal. 4th

at 881, 885-86.

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REASONS FOR GRANTING THE WRIT

INTRODUCTION

It is true, no doubt, that the public has many desires. It may

also be true that a responsive government attempts to fulfill some

of those desires. In this case, the public desires public art and

public tennis courts. In the presence of these desires Richard

Ehrlich sought a change in the restrictions placed upon the use of

his property. The City of Culver City found this to be a splendid

opportunity to demand that Richard Ehrlich fulfill the public’s

desires in exchange for modifying a regulatory restriction so that

Ehrlich could put his property to reasonable use.

This Court has already indicated in Nollan vy. California

Coastal Commission, 483 U.S. 825, and Dolan v. City of Tigard,

114 §. Ct. 2309, that the permitting process is not an occasion for

a governmental entity to demand whatever it wishes from a person

attempting to make reasonable use of property. In this case the

' The Supreme Court remanded the case to the Court of Appeal,

directing the case to be returned to the City of Culver City, thus

terminating the litigation in California. 12 Cal. 4th at 887. As such,

the decision of the Court below establishing liability for a fee is final

and appropriately before this Court. In any event, the issue in

Ehrlich’s petition is not the amount of the fee, but the court’s

conclusive determination that any such fee could be imposed in the

first place.

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City as well as the courts below do not understand this Court's

message. They believe that Nollan and Dolan do not necessarily

apply when a property owner is told to write a check rather than

write a deed. They believe that if a legislative body takes an

Outrageous exaction that is permissible because it is done in the

open. They believe that if Nollan and Dolan do apply, the

constitutional “nexus” and “rough proportionality” standards are

easily satisfied when one land use restriction is replaced by

another. That is because a land use restriction has the same effect

as a servitude, meaning that a property owner can be forced to pay

a fee to have the restriction (or servitude) altered. Thus it follows

that the government can demand that a landowner provide to the

public whatever public benefits that might have flowed from the

original land use restriction. And they believe that legislatively

imposed uniform exactions are virtually immune to challenge under

the United States Constitution.

But as will be shown below, an attempt to alter the

restrictions placed upon the reasonable use of property does not

convert either the owner or the property into a money-tree for the

government.

The lower courts are in hopeless conflict over the question

of how the imposition of monetary permit exactions relate to the

Takings Clause. Only this Court can resolve the confusion and

misunderstandings of the lower courts.

I

THE CALIFORNIA SUPREME COURT

FAILED TO UNDERSTAND THE LOGIC

BEHIND NOLLAN AND DOLAN AND THUS

FAILED TO PROPERLY APPLY THOSE CASES

If for no other reason, this Court should grant certiorari in

order to dispel the persistent myth that land use permit conditions

that exact land are subject to the Takings Clause of the United

States Constitution while exactions of monetary fees are generally

not subject to careful constitutional review, meaning that this

Court's analyses in Nollan and Dolan can safely be ignored.

The California Supreme Court did not adopt the myth

totally, in that it found that some of the fees in this case were

5

indeed subject to the careful review called for in Nollan and

Dolan. However, it was not able to grasp the relevancy of Nollan

and Dolan to the art in public places fee, and it misunderstood why

the exaction of adjudicatively imposed are subject to constitutional

constraints. This misunderstanding ultimately led to the California

court's affirmance of the imposition of some public recreational

mitigation fee in this case, although it could not determine how

much the fee would be.

First, with respect to the public recreation fee, the California

Supreme Court did recognize that when fees are imposed in the

context of an individual permitting process they may be subject to

what it referred to as heightened judicial scrutiny under the takings

analysis of Nollan and Dolan. However, the court erroneously

focused on the way in which the fee was set, rather than on the

constraints caused by the fee on the ability to utilize real property.

Specifically, the court found that the public recreation fee was

subject to close scrutiny because it was set during the

“discretionary” context of an individualized permitting process.

12 Cal. 4th at 876. This is in contrast to legislatively imposed

permit fees (and presumably other conditions) that are set in a

different context. Because of the supposed greater potential for

mischief in the former (a debatable proposition at best) those fees

require closer review by the courts. Jd.

The court’s reasoning fails to follow the dictates of this

Court on the application of the Takings Clause to permit exactions.

The key is not the means by which the amount of the exaction or

fee is set, but the effect of the exaction on the constitutionally

protected right to make reasonable use of private property. In

Nollan this Court recognized that the ability to utilize and develop

real property, subject of course to reasonable permitting

requirements, is a right and not a mere benefit conferred by the

government. Nollan, 483 U.S. at 833 n.2. Thus, when

government imposes something substantively more tangible and

confiscatory upon a landowner than a mere permitting requirement,

Or a mere administrative fee, as a precondition for the ability to

exercise the right to make reasonable use of property, reviewing

courts must carefully analyze the nature of the imposition using the

6

standards of Nollan and Dolan to ensure that government does not

overreach and take private property without just compensation.

To be sure, a requirement that a person dedicate real

property to a public use is particularly intrusive of the rights of the

affected property owner. Standing alone such a condition plainly

would be a taking. In Dolan, for example, it would be quite

logical to conclude that if Mrs. Dolan had been required to give up

a bicycle path or greenway—outside the c#=text of a permitting

process--that would have been a taking. Dolan, 114 S.Ct.

at 2316. In fact, of course, Mrs Dolan did not agree to the

condition and appealed. The reason why the city’s action violated

the Takings Clause was not because the city took Mrs. Dolan’s

land for a bike path or green belt (it had not yet done so) but

because it was imposing a condition that it had not shown to be

closely enough related to any impacts caused by Mrs. Dolan’s

project. It failed to substantially advance a legitimate

governmental interest. The taking occurred because an unjustified

restriction was placed upon Mrs. Dolan’s right to make reasonable

use of her property. The fact that the restriction would also, by

itself and standing alone, be a taking highlights the government’s

overreaching in the case--but does not provide the essential

rationale for the holding.

Thus, nothing in the rationale of Nollan or Dolan suggests

that heightened scrutiny of a land use regulation must be confined

only to the circumstance where the condition of dedicating land is

imposed. As is the case here, the exactions in Nollan and Dolan

were imposed as conditions attached to a procedural prerequisite

necessary to exercise the right to use property. The exactions in

this case were not designed to ameliorate mere administrative

costs. They were created to provide substantial public benefits that

were not part of the project itself, will not benefit the project

itself, and have not been shown to be related to any significant

impacts caused by any project that would be facilitated by the

removal of the existing “commercial recreation” land use

designation. Ehrlich vy. City of Culver City, 15 Cal. App. 4th

1737, 1749-50 (1993), Appendix E9-10. Thus the condition

imposed on Mr. Ehrlich fails to substantially advance a legitimate

7

governmental interest and is a taking. See Agins v. City of

Tiburon, 447 U.S. 255, 260 (1980).

The holding that the exaction violated the Takings Clause

would not logically be any different if Mrs. Dolan had been told

to give enough cash to Tigard so it could buy the greenbelt and

bicycle path from her. Heightened scrutiny would still be required

because she could not exercise her right to reasonably develop her

property unless she paid a bounty that was not related to improving

her property. Indeed, if government were to demand that

Mrs. Dolan give away enough money to enable it to buy a bike

path that would be a taking of her right to make reasonable use of

her underlying property just as much as a demand for Mrs. Dolan

to actually build the bike path. The same applies for Mr. Ehrlich.

Whether he is told ta give away cash or tennis courts, cash or art,

he is being told he cannot use his land without agreeing to an

unrelated condition.’

Furthermore, many of the cases relied upon by the Dolan

majority in formulating its “roughly proportional" nexus test

involved fees:

All but one of the cases involve challenges to

provisions ... requiring developers to dedicate either

? Incidentally, just as the taking of Mrs. Dolan’s bike path or

greenway standing alone, would be a taking, so too would be the

taking of her money. This Court has previously held that where

government takes money the Takings Clause may be implicated.

See Webb’s Fabulous Pharmacies v. Beckwith, 449 U.S. 155, 164

(1980) (Takings Clause applies to property right in money); see

also Village of Norwood v. Baker, 172 U.S. 269, 296 (1898) (in

condemning property for a street, a town cannot assess a property

owner for the entire cost of the road); Fallbrook Irrigation

District v. Bradley, 164 U.S. 112, 176 (1896) (assessment for

water improvements must be in accordance with and in proportion

to the benefits conferred by the improvement or else the Takings

Clause 1s violated); Wurts v. Hoagland, 114 U.S. 606 (1885)

(same). That money can be taken, of course, is not the dispositive

factor here. It is that use of land is being unjustifiably restricted.

a percentage of the entire parcel ... or an equivalent

value in cash ... to help finance the construction of

... parks and playgrounds. In assessing the legality

of the conditions, the courts gave no indication that

the transfer of an interest in realty was any more

objectionable than a cash payment.

114 S. Ct. at 2324 (Stevens, J., dissenting) (emphasis added).

The standards articulated in Nollan and Dolan for reviewing

conditions imposed upon the use of real property are just as

applicable if there is an involuntary transfer of realty as there

would be for an involuntary cash payment. It is the lack of an

adequate nexus between the exaction and the use of property that

counts, not the precise nature of the exaction. Thus, when the

California Supreme Court found that the standards of Nollan and

Dolan applied to the exaction of a public recreation fee, it was

correct but not because that fee was set in the give and take of a

permitting procedure, but because the fee was interfering with the

exercise of the constitutional right to use property. By focusing on

the procedure by which the amount of the fee is set, instead of the

impediments imposed on the exercise of the constitutional right,

the California court failed to recognize the constitutional

requirement that the effect of the fee must be, in all cases, to

' offset some adverse consequences of the particular project

proposed for the particular property. Unfortunately, the California

court is not alone.

THERE IS A SERIOUS CONFLICT IN THE

LOWER COURTS WHICH ARE STRUGGLING

TO PROPERLY APPLY NOLLAN AND DOLAN

TO THE IMPOSITION OF DEVELOPMENT FEES

A. Many Lower Courts Have Also Failed to

Recognize the Rationale Behind Nollan

and Dolan and Thus Have Failed to

Apply the Proper Takings Standards

In the past few years many lower state courts have tackled the

question of whether the heightened scrutiny of Nollan and Dolan

Pe ee en ee

applies when a government imposes a fee upon the use of property

when the fee is designed to subsidize a public benefit not related,

or only marginally related, to any impacts caused by the project.

This reluctance to apply Nollan and Dolan to monetary exactions

has been especially pronounced when the exaction is imposed

pursuant to a legislative act.

For example, in Home Builders Association v. City of

Scottsdale, 902 P.2d 1347 (Ariz. App. 1995), the Arizona

appellate court upheld the city’s resource development fee that was

imposed on land owners in order to build a new water supply

infrastructure. The court found that while development fees are

subject to a takings analysis, 902 P.2d at 1350, Dolan did not

affect legality of the fee at issue and refused to apply heightened

scrutiny because the fee was “legislatively” imposed. /d. at 1352.

In dissent, the presiding judge disagreed with the idea that “a

legislative determination affecting the entire city” was exempt from

the Dolan test. In the light of Dolan, he argued, the appellate

court had been wrong to reverse the trial court (which had struck

down the fee). He argued that the majority applied a standard that

gave too much deference to the municipality’s determination that

the fee was proper as beneficial to the development. Jd. at 1353.

In Loyola Marymount University v. Los Angeles Unified

School District, 45 Cal. App. 4th 1256; 1996 WL 281345 (1996),

a California Court of Appeal upheld a fee levied for the benefit of

schools by the local school district on all commercial and industrial

construction. The university did not challenge the fee as a taking

but rather on the basis of due process, but nevertheless cited

Nollan and Dolan. Providing a taste of the confusion that will

follow in the wake of Ehrlich, the court concluded that, since

“[ujnlike Ehriich, the present case falls within the general category

of development fees,” “we conclude that the heightened scrutiny

standards articulated by the United States Supreme Court in takings

clause cases have no application in California cases involving

development fees.” 1996 WL at *10. In other words the Court

of Appeal here interpreted Ehrlich’s discussion of the distinction

between legislative and individually applied fees as a carte

10

blanche for local governments to impose development fees

legislatively and thus avoid serious constitutional analysis.

In Arcadia Development Corp. v. City of Bloomington,

1996 WL 453243 (Minn. App. 1996), a Minnesota appellate court

upheld the imposition of a tenant-relocation fee imposed on owners

of mobile home parks in exchange for permission to go out of the

mobile home park business. The appellate court rejected

application of Dolan to tenant relocation fees because the fee was

legislatively imposed. It found that “once legitimate governmental

interests are identified, courts simply require a nexus between the

local legislation and the legitimate governmental purposes.” Slip.

op. at 5-6. Here, the “redistribution of the benefits and burdens

of economic life” represented by the fee was a legitimate

governmental purpose. Slip. op. at 6.

In Garneau v. City of Seattle, 897 F. Supp. 1318 (W.D.

Wash. 1995), legislation provided that every low-income tenant

displaced by demolition, change of use, substantial rehabilitation,

or removal of use restrictions would be paid $2,000, half to be

paid by the city and half by the landlord. The court upheld the

fee, questioning whether Nollan and Dolan applied at all. 897 F.

Supp. at 1325. The court relied on a Ninth Circuit decision,

Commercial Builders of Northern California v. City of Sacramento,

941 F.2d 872 (9th Cir. 1991), for the proposition that Nollan

changed the level of scrutiny only as to cases involving physical

encroachments. Then, evidencing a misunderstanding of what this

Court meant in Dolan, the court proceeded to find that, even if

Dolan’s rough proportionality test were applied, requiring the

landlord to pay $1,000 for each displaced tenant’s moving expenses

would pass constitutional muster. 897 F. Supp. at 1326. The

problem was that the court engaged in no analysis purporting to

show a relationship between the fee and the owners’ use of their

property for other purposes. See also Terminal Plaza Corp. v.

City and County of San Francisco, 177 Cal. App. 3d 892 (1986)

(upholding a low-income tenant relocation fee prior to Nollan). J

;

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B. A Number of Jurisdictions Have Applied Nollan

and Dolan Standards to Monetary Exactions,

Including Some That Were Legislatively Imposed

Although courts in a number of jurisdictions have been

reluctant to rein in local governments that use the permitting

process as a public works slush fund, there have been at least a

few that recognize that the standards articulated in Nollan and

Dolan do apply to the imposition of development fees. For

example, in Northern Illinois Home Builders Association v.

County of Du Page, 884 P.2d 569 (Ill. Ct. Apps. 1994), the court

cited both Nollan and Dolan as setting a new standard for

analyzing monetary exactions imposed as permit conditions.

Ultimately, the fee in question, designed to pay for new

transportation projects, was struck down on statutory grounds.

In Trimen Development Co. v. King Co., 877 P.2d 187

(Wash. 1994), a developer had been given the choice of dedicating

or reserving land for open space or paying a fee in lieu of such

‘dedication. The court properly recognized the applicability of the

Dolan test to these legislatively imposed fees. 877 P.2d at 194.

The fees were upheld, incidentally, as the court found that the fees

were “reasonably necessary as a direct result of Trimen’s proposed

development.” Jd.

The broad applicability of the Nollan and Dolan analysis to

conditions (of all types) imposed on a land use permit was

recognized in Clark v. City of Albany, 904 P.2d 185 (Or. App.

1995), a case that did not involve development fees. In Clark, a

restaurant was required to design and construct improvements on

the street adjoining the site in exchange for a building permit. The

court found this requirement to constitute an exaction subject to the

Dolan requirement of rough proportionality. “[T]he fact that

Dolan itself involved conditions that required a dedication of

property interests does not mean that it applies only to conditions

of that kind.” 904 P.2d. at 189.

The imposition of fees upon property owners which are

designed to provide low-cost housing have been a particularly

fertile area for government abuse. In addition to those cases

described in the preceding section where such fees were upheld,

12

there have been a number with an opposite result. For example,

before Dolan was decided, but after Nollan, the New York Court

of Appeals struck down a fee imposed on owners of single room

occupancy hotels in Seawall v. City of New York, 74 N.Y.2d 92,

544 N.Y. Supp. 2d 542, 542 N.E.2d 1059 (1989). The fee had

been imposed by legislation and, as such, was uniformly applied.

542 N.E.2d at 1061-62. The court focused on the lack of a nexus

between the complex problem of low-income housing in New York

City and the landowners’ use of their property for other purposes.

Id. at 1069 (“Such a tenuous connection between means and ends

cannot justify singling out this group of property owners to bear

the costs required by the law toward the cure of the homeless

problem.”) Faced with the same facts, the Ehrlich court wold

have upheld on two possible grounds. First, because the fee had

been imposed pursuant to a legislative enactment, the Ehrlich court

would apply only a deferential standard of review. Second, the fee

was imposed to offset a change in a land use restriction, allowing

the use of the property for something other than hotel rooms,

depriving the public of the benefit of cheap hotel space.

In City of Portsmouth v. Schlesinger, 46 F.3d 133, 135

(ist Cir. 1995), the court reviewed a low-income housing fee that

had been imposed when the owner of the site of some low-income

apartments sought permission to replace the apartments with new

condominiums. Jd. at 134. While the challenge to the fee was

saddled with a statute of limitations problem, the court noted that

the facts were undisputed that no “rational nexus existed between

the amount of the Developers’ . . . [fee] and any burden imposed

on the City due to the zoning change.” Jd. at 135. If not for the

limitations problem, the court would have struck down the fee.

Under Ehrlich, however, the zoning change allowing

condominiums on the site of low-income housing could have

justified the fee.

Similarly, in Aspen-Tarpon Springs, Ltd. v. George Stuart,

635 So. 2d 61 (Fla. App. 1994), the Florida Mobile Home Act’s

> The court also found, as a separate ground for striking down the

ordinance that it was a physical invasion. Jd. at 1065.

eT Ge Ee

13

relocation fee was found to be unconstitutional in that it unfairly

singled out park owners thus failing to substantially advance

legitimate governmental interest. Again, Ehrlich would mandate

a conflicting result because the public would have allegedly lost

land dedicated to mobile home parks and the owner could have a

duty to mitigate this loss.

With some courts finding that Nollan and Dolan do not apply

to development fees, and the Ehrlich court finding that at least

some fees are subject to Nollan and Dolan, but not necessarily

understanding why, it is plain that confusion is the hallmark of the

lower courts today. Such confusion should be clarified by this

Court.‘

C. The Attention Focused on the “Legislative”

Exception to the Takings Clause Has Been

Questioned by Members of This Court

and Other Courts as Well

The notion that exactions that are legislatively imposed should

be treated any differently from those imposed as part of an

individual permitting process has been questioned by members of

this and other courts. For example, in Parking Association of

Georgia v. City of Atlanta, Georgia, Inc., __ U.S. __, 115.

Ct. 2268 (1995), the Georgia Supreme Court upheld a requirement

that parking lots dedicate 10% of their surface area to aesthetic

improvements. Although this Court did not grant certiorari, it is

notable that two members suggested that the time had arrived to

review the reliance upon a “legislative enactment” rationale to

avoid a careful scrutiny of certain exactions. 115 S. Ct. at 2269.

* These cases are not, of course, concerned with legislatively

imposed zoning schemes of general applicability which are not

necessarily subject to the heightened scrutiny of Nollan and Dolan.

See Dolan, 114 S. Ct. at 2316. It is the application of the

exaction to individual parcels of property that gives rise to

heightened scrutiny. Indeed, both Nollan and Dolan involved the

application of legislatively imposed or broadly applicable

conditions. Dolan, 1148S. Ct. at 2313; Nollan, 483 U.S. at 829.

14

Similarly, an Illinois appellate court agreed in Aymoco Oil

Co. v. Village of Schaumberg, 661 N.E. 2d 380 (Ill. App. 1995),

that

“although not binding as precedent, we find Justice

Thomas’ comments [in Parking Association of

Georgia) particularly persuasive and consonant with

the rationale underlying Dolan and similar cases.

Certainly, a municipality should not be able to

insulate itself from a takings challenge merely by

utilizing a different bureaucratic vehicle when

expropriating its citizen’s property.” Id. at 390.

Ii

THE DECISION OF THE COURT

BELOW TURNS TRADITIONAL

UNDERSTANDINGS OF THE RELATIONSHIP

BETWEEN PRIVATE PROPERTY AND

GOVERNMENTAL REGULATION ON THEIR HEAD

The California Supreme Court announced the novel

proposition, provided without citation, that “it is well accepted in

both the case and statutory law that the discontinuance of a private

land use can have a significant impact justifying a monetary

exaction to alleviate it.” 12 Cal. 4th at 879. From there the court

proceeded on a speculative exegesis of the sort of fees that might

be imposed on remand, suggesting that while replacing a private

tennis club with public tennis courts might be too much of a reach,

12 Cal. 4th at 883, perhaps Richard Ehrlich could be assessed a

fee to cover the “additional administrative expenses incurred in

redesignating other property within Culver City for recreational |

use.” Jd. at 884. The court surmised that it would be permissible

to impose a “fee [that] would enable the city to induce private

health club development by offering monetary incentives roughly

proportional to the land use incentive it relinquished when it

removed the recreational use restriction from plaintiff's property.”

Id. In other words, Ehrlich would have to pay a large enough fee

to induce another developer to come into Culver City, convert ;

property from its current designated use to commercial recreation,

and build a tennis and health club to replace the old one that

iene wamnee —~ lO

Se a RR TS eee Me ME Te nn N CR

15

consistently lost money for a dozen years while operating on

Ehrlich’s property.’ Unless the court was relying on the greater

fool theory,° it is apparent that most developers would want a

rather !arge sum of incentive money up front before they would

build a club that was a proven money-loser in this community.’

In short, for Ehrlich the fee to induce a new developer into Culver

City wold be worse than the cure.

More problematic, however, is what this sort of formulation

says about the court’s understanding of property. Since the days

of the Magna Carta it has been understood that a person has

dominion over his property. As later explained by Blackstone,

There is nothing which so generally strikes the

imagination, and engages the affections of mankind,

as the right of property; or that sole and despotic

* The court did not say whether Ehrlich would have to compensate

the new developer for whatever fees might be required of that

developer. Under the California court’s analysis fees would be

assessed against the developer to compensate the public for the loss

of the allowed uses of the new parcel before the use designation is

changed to commercial recreation. The court did not say how far

this domino effect would go.

* When a speculator buys a commodity at an inflated price, hoping

to sell it to another speculator at an even more inflated price, the

“greater fool” theory is at work. Who but a fool would attempt

to step into Ehrlich’s shoes? !

” Alternatively, a developer might demand other concessions,

such as permission to build a different sort of club from the one

that Ehrlich was restricted to by the detailed land use restriction on

his property. Ehrlich was not able to do this because his parcel

was too small. Appendix A-5, G-9. Treating a new developer

differently further avoids rough proportionality because Ehrlich

would be subsidizing a developer to do what he was not allowed

to do--which was the cause of Ehrlich attempting to get the use

restriction changed in the first place.

16

dominion which one man claims and exercises over

the external things of the world, in total exclusion of

the right of any other individual in the universe.

W. Blackstone, Commentaries 2 (1765). By having dominion over

property, the owner is free to do—or not to do--with his property

whatever the owner may desire--so long as the community and

neighbors are not adversely affected. The ownership of property

represents a place where the owner can be free from the control of

others, where a person can enjoy a certain sense of personal

liberty that is not dependent upon a governmental boon.

The relationship between private property ownership and

liberty is well known to this Court. It has stated that

the dichotomy between personal liberties and property

rights is a false one. Property does not have rights.

People have rights. The right to enjoy property

without unlawful deprivation, no less than the right to

speak or the right to travel, is in truth a “personal”

right .... In fact, a fundamental interdependence

exists between the personal right to liberty and the

personal right in property. Neither could have

meaning without the other.

17

Lynch v. Household Finance Corp., 405 U.S. 538, 552 (1972).*

And, in Mayor v. Knoxville Water Co., 212 U.S. 1, 18 (1909),

this Court wrote,

“[oJur social system rests largely upon the sanctity of

private property; and that state or community which

seeks to invade it will soon discover the error in the

disaster which follows.”

What this means, of course, should be obvious: property is

owned by the owner and not the public. Nor is property owned in

a euphemistic “cooperation” with either the government or the

public. While property may be regulated to prevent activities on

property from having an adverse impact on neighboring property,

it has never been understood, at least in nations with an English

common law heritage, that the public gains a permanent right or

servitude in a person’s private property from the imposition of a

regulation.

Zoning laws, for example, are regulations designed to prevent

Owners from using property in a way that is detrimental to

neighboring owners or the community—before the harm is done.

By establishing zones where it can be safely assumed that certain

designated uses will not have an adverse public impact, the task of

* This is, of course, what John Locke was explaining in the

SECOND TREATISE ON GOVERNMENT, when he stated, “it is not

without reason that he [man] seeks out and is willing to join in

society with others who are already united, or have a mind to unite

for the mutual preservation of their lives, liberties and estates,

which I call by the general name- property.” Paragraph 123. For

an opposing view, see Marx and Engels, THE COMMUNIST

MANIFESTO, ch 2, { 14, which dismissed the idea of “the right of

personally acquiring property as the fruit of a man’s own labour,

which property is alleged to be the groundwork of all personal

freedom, activity and independence” as no longer being relevant

in times dominated by the bourgeoisie. See also Block v. Hirsh,

256 U.S. 135, 165 (1921) (McKenna, dissent) (“[t]he security of

property next to personal security against the exertions of

government is of the essence of liberty.”)

’ ae

18

regulating property is simplified. Under most zoning laws,

however, an owner always should have an opportunity to prove

that another use will not have an adverse public impact. But under

no circumstances can it rationally be suggested that by establishing

a specific zoning or land use restriction, the public has acquired a

right to enjoy whatever benefits it may receive from the owner's

use of the property in accordance with the established restrictions.

But never before has a court found that there is a right owned

either by the public or a land owner to the perpetual enjoyment of

the status quo of existing land use restrictions.” This Court can

clarify that the application of a land use restriction does not give

the public a perpetual right to that restriction and does not give the

community the right to demand payment when the land use

restriction is changed.

The imposition of land use restrictions does not alter the

fundamental nature of property ownership. It does not transfer

dominion from the owner to the public. And yet the road

embarked upon by the California Supreme Court, whether or not

the court so intended, leads to an inexorable destruction of

traditional understandings of property. People will be seen in the

future to own their property in a “partnership” with the

government. Land use restrictions will not represent attempts to

prevent mischief to neighbors and the community but will be a

unilateral imposition by the government of a vested interest in the

future use of the property. An owner will have only the dominion

over property that the owner’s larger partner will allow. As

happened to Richard Ehrlich, an owner desiring to change a land

use restriction can be forced to “buy” out the larger partner. In

short, the ownership of property will lose its character as an

individual right and will become in a real sense just one more

government entitlement.

® Indeed under California law it is clearly established that the

property owner has no vested right in any use allowed by zoning.

Avco Community Developers Inc. v. South Coast Regional

Commission, 17 Cal. 3d 785, 796 (1976).

19

CONCLUSION

This Court has an opportunity to lead the California and other

errant courts back from a troubling path. By granting certiorari in

this case, this Court can determine whether a property owner

actually owns land in the traditional sense or whether the public

now Owns a continuing right to enjoy the “benefits” of whatever

land use restrictions the community placed upon a parcel of

property in the past-even if those benefits have not yet been

realized or have been lawfully discontinued. The lower courts are

in a state of confusion. They have looked at Nollan and Dolan

without recognizing the fundamental premises of property owner-

ship that are the foundation for the application of the Takings

Clause in these cases. Without this understanding, many lower

courts are adrift, upholding exactions and finding artificial reasons

not to apply the discipline invoked by these cases.

For all these reasons, this Court must grant certiorari in this

case.

DATED: September, 1996.

Respectfully submitted,

* JAMES. S. BURLING

*Counsel of Record

Pacific Legal Foundation

2151 River Plaza Drive,

Suite 305

Sacramento, California 95833

Telephone: (916) 641-8888

Attorney for Amicus Curiae