Petition for Writ of Certiorari — Blue Jeans Equities West v. City & County of San Francisco

feme Court, U.S,

92-117 FIIED

- —fL SUL 15 1992

| OFFICE Gr iit CLERK

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1992

BLUE JEANS Eouities WEs1

A Jormt Venture

Petitioner.

\ VS.

City & COUNTY OF SAN FRANCISCO

A Municipal Corporation,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE CALIFORNIA COURT OF APPEAL

HOWARD N. ELLMAN*

KENNETH N. BURNS

THOMAS M. SHERWOOD

ELLMAN, BURKE, HOFFMAN &

JOHNSON

A Professional Corporation

One Ecker Building, Suite 200

San Francisco, CA 94105

(415) 777-2727

Attorneys for Petitioner

BLUE JEANS EQUITIES WEST

July 14, 1992

* Counsel of Record

BOWNE OF SAN FRANCISCO INC + ISO NINTH ST + SF CA 94103 + (415) 864-2300

QUESTIONS PRESENTED

| Whether this Court’s opinion in Nollan v. California

Coastal Commission, 483 U.S. 825 (1987), holding that the “just

compensation” clause of the Fifth Amendment requires that an

exaction imposed as a condition of project approval must substan-

tially advance legitimate public interests directly related to the

project approved, applies to all exactions—or is the holding in

Nollan \imited solely to exactions of interests in land, as the

California Court of Appeal held.

2. Whether this Court’s decision in Nollan, supra, applies

only to “possessory takings” cases and does not apply to “regula-

tory takings” cases, as the California Court of Appeal held

3. Whether the action of the City and County of San Fran-

cisco (“City”) constitutes a “taking” under the Fifth and Four-

teenth Amendments of the United States Constitution when City

has sought to impose a regulatory fee of $3,100,000 on a project

approved two years pricr to the enactment of the regulatory fee

and where the fee seeks to alleviate impacts that were not found

to have been caused or created by the project in question at the

time it was approved.

il

LIST OF PARTIES

The caption of the case in this Court contains the names of all

parties to the proceeding in the Court of Appeal of the State of

California.

ll

TABLE OF CONTENTS

CTI TIL noe cee eee tes e eee e eens

lo ae tie rr ire To

CONSTITUTIONAL PROVISIONS INVOLVED .....

STATEMENT OF THE CASE ...........52020052 25

A. Procedural Posture: Ripeness .........---+--+++::

B.

ee ee eee er ee eee os oor

re ere ees eee

A. The California Court of Appeal Wrongly Concluded

B.

That Nollan Applies Only To “Possessory Takings”

and Not “Regulatory Takings” Cases ..........--

The Fifth Amendment Protects Property Owners

From Excessively Burdensome Restriction On The

Use Of Property: It Requires Compensation If The

Burden Exceeds That Which The Individual Should

Be Required To Bear .........--- 2. sees eee eres

1. Takings Are Determined By The Impact On The

Property Owner. The Nature Of The Interest

Taken Does Not Control ..........--+--+++:

2. The Fifth Amendment’s Just Compensation Re-

quirement Applies Equally To Cash Exactions

As It Does To Land Dedication Requirements

As Applied To Levi’s Plaza, The TIDF Plainly Fails

The Substantial Advancement Test Required By

aa kca bask sxe deenee sa ee eee rep es

PEO ogg icc u ca cakvecescseeysensenenaeanes

12

14

iV

. TABLE OF AUTHORITIES CITED

Cases

Page

Agins v. City of Tiburon 447 U.S. 255 (1980).......... 13,18

Andrus v. Allard 444 U.S. 51 (1979) ................. 16, 18

Armstrong v. United States 364 U.S. 40 (1960) ......... 12

Atlantic Coast Line Railroad Co. v. Phillips 332 U.S. 168

EN creas tk as kd ene coe 21

Avco Community Developers v. South Coast Regional Com. q

mission 17 Cal.3d 785, 132 Cal. Rptr. 386, 553 P.2d 546° -

fe) ee ee rere ree eat ony Ae Cee ee een 4

Blue Jeans Equities West v. City & County of San Francisco

3 Cal.App. 4th 164, 4 Cal. Rptr. 2d 114 (1992) ....... 2

Board of Regents of State Colleges v. Roth 408 U.S. 564

3) ee ere a entre niet rarer pee ee 4,14

Commercial Builders v. City of Sacramento 941 F.2d 872

(9th Cir. 1991) cert. denied 60 U.S.L.W. 3782 (1992)... 11

Connolly v. Pension Benefit Guaranty Corporation 475 U.S.

BEE CEE De bd Sawin a ek ss oa en ee enes 13, 16, 17, 18

Erlenbaugh v. United States 409 U.S. 239 (1972) ....... 21

FCC v. Florida Corp 480 U.S. 245 (1987) .............. 10

First English Evangelical Lutheran Church of Glendale v.

County of Los Angeles 482 U.S. 304 (1987) ......... 12, 18

Grupe v. California Coastal Com. 166 Cal.App.3d 148, 212

ae SH: EE EE no ko 54 00040 k Ap E ARES A Sa OK aa

Horn v. County of Ventura 24 Cal.3d 605, 156 Cal. Rptr.

Mt re eee 23

Kaiser Aetna v. United States 444 U.S. 164 (1979). .9, 16, 17, 18

Keystone Bituminous Coal Association v. DeBenedictis 480

Bee I 8.4 chu up ab ead 6 405040005 000 ee0u aes 11, 13

Lakeview Development Corporation v. South Lake Tahoe

tee ge FF. fe | errerrr error rr Terr 4

Loretto v. Teleprompter Manhattan CATV Corp. 458 U.S.

| Ry Se Pre Peer re eae 9, 10, 16, 17, 18

Lucas v. South Carolina Coastal Com. 60 U.S.L.W. 4842

Re rr reer ery rer rr or 18, 19

V

.« TABLE OF AUTHORITIES C'TED

CASES

Page

Lynch v. Household Finance Corp. 405 U.S. 538 (1972).. 15

MacDonald, Sommer & Frates v. County of Yolo 477 U.S.

SAD ATU) 8 kik ioe 38544 ee ee 3

Nollan v. California Coastal Commission 483 U.S. 825

CIDR en cd Pine See ee eee ee eee passim

Oscanyan v. Winchester Repeating Arms Co. 103 U.S. 26]

¢5 |) rr arar arreranne Caterast rata ey Ty 5

Penn Central Transportation Company v. New York City

450. US. WOO CIRTED on cee ces iiacaeseaepee ees 13, 18

Pennsylvania Coal v. Mahon 260 U.S. 393 (1922) ...... 13,18

PruneYard Shopping Center v. Robins

SET ULSD. TS CGO oocccd ddysteunscess eee 10, 11,17

Pumpelly v. Green Bay Co. 13 Wall. 166 (1872) ........ 10

Ruckelshaus v. Monsanto Co.

yess ee St, | eereererrr Tr yt 4, 12, 14, 16, 17

Russ Building Partnership v. City & County of San Fran-

cisco 44 Cal.3d 839, 244 Cal. Rptr. 682, 750 P.2d 324

CIDER) nnd ccaccsccuecunwapceenap unease eieeeeeees 4,8

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

186 Cal.App.3d 814, 230 Cal. Rptr. 875 (1986) ....... 4

United States v. General Motors Corp., 323 U.S. 373

4) eer rer eer ree rr 12

United States v. Stewart 311 U.S. 60 (1940)............ 21

Ward v. County of Riverside 273 Cal.App.2d 353, 78 Cal.

ae Ei. | Perrone rT ry re ert ce 23

Webb’s Fabulous Pharmacies, Inc. v. Beckwith 449 U.S.

LSS, CHORD oo vnc ee cesennsesiin ieee 4, 14, 16

Yee v. Escondido 60 U.S. L.W. 4301 (April 1, 1992) ...9, 10, 11

Constitutional Provisions and Statutes

Fifth Amendment, United States Constitution ......... passim

Fourteenth Amendment, United States Constitution... .2, 13, 16

Cal Combet Bs TFAK ow occ cas canes sewecdesses 4

yo Bh. oe BC) ree penrere rrr ern 2

vi

TABLE OF AUTHORITIES CITED

Other

Page

L. Carroll, Through the Looking Glass and What Alice

POURNE TOGO oo. oon nuxnae0cabus sheet 20

G. Hunt, VI The Writings of James Madison ........... 16

John Locke, Two Treatises of Government .............. 16

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1992

BLUE JEANS EQUITIES WEST

A Joint Venture

Petitioner,

VS.

City & COUNTY OF SAN FRANCISCO

A Municipal Corporation,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO TH CALIFORNIA COURT OF APPEAL

Petitioner, BLUE JEANS EQUITIES WEST, a joint venture

(“BJEW?”’), petitions for a Writ of Certiorari to review the order

of the California Court of Appeal, First Appellate District,

Division Three. The California Supreme Court denied BJEW’s

request for review and there are no other avenues for review of the

decision and judgment within the California court system.

NOTE: In all quoted material, footnotes are omitted and emphasis is

ours unless otherwise stated. We support factual statements by citation

to the record before the California Court of Appeal. We use “RT” to -

signify citations to the Reporter’s Transcript and “AA” to signify

citations to Appellant’s Appendix (containing documents filed with the

Court Clerk) by document and page reference where appropriate. We

refer to trial exhibits by exhibit number.

2

OPINION BELOW

The opinion of the Court of Appeals is reported at 3

Cal.App.4th 164, 4 Cal. Rptr. 2d 114 (January 31, 1992). A copy

of the opinion is attached as Appendix A. The order of the

California Supreme Court denying BJEW’s Petition for Review

was filed on April 29, 1992. A copy of the Supreme Court’s Order

is included as Appendix B.

JURISDICTION

The California Supreme Court's denial of BJEW’s Petition for

Review constitutes the final decision of California‘s highest court

in this matter. This Court has jurisdiction under 28 USC Section

1257(a).

.

CONSTITUTIONAL PROVISIONS INVOLVED

Fifth Amendment, United States Constitution:

... nor shall private property be taken for public use, without

just Compensation.

Fourteenth Amendment, United States Constitution:

SECTION 1...No State shall make or enforce any law

which shall abridge the privileges or immunities of citizens of

the United States; nor shall any State deprive any person of

life, liberty, or property, without due process of law; nor deny

to any person within its jurisdiction the equa! protection of

the laws.

STATEMENT OF THE CASE

A. Procedural Posture: Ripeness.

This case concerns the validity of a permit condition imposed

by the City and County of San Francisco (“City”) when it gave

its final approval to a development project, a high-rise office and

retail building. City finally interpreted the permit condition when

it demanded payment of a regulatory fee that it claimed was owed

under that permit condition. BJEW paid the fee under protest and

a ieeiemeaeaniec eee al

3

commenced this action to contest it. It seeks this writ to reverse

an adverse ruling after a bench trial on the merits, affirmed on

appeal by the California Court of Appeal, and after review was

denied by the California Supreme Court.’

B. Summary.

In Nollan v. California Coastal Commission, 483 U.S. 825

(1987), this Court held that a condition imposed in connection

with the approval of a project violates the “just compensation”

requirement of the Fifth Amendment of the United States Con-

stitution unless it alleviates an impact caused by the project

approved. /n this case, the California courts have held that the

Nollan doctrine does not apply to the facts recited below—that

City can require BJEW to pay a regulatory fee without showing

that the imposition substantially advances a legitimate public

interest that the project impacts. The California courts have

concluded that Nollan does not apply because it is a “‘possessory

takings” case, and the constitutional requirement that Nollan

declares does not apply to the regulatory imposition of fees.

BJEW is the owner of an office and retail complex known as

“Levi's Plaza” located at the foot of Telegraph Hill in the

Northeast Waterfront section of San Francisco, California.’ City

granted final approval for Levi’s Plaza on January 4, 1979.°

The approval resolution (“Resolution”) contained many condi-

tions. The condition at issue here is:

5(c) The owner of the project shall make a good faith effort

to participate in future funding mechanisms to assure ade-

' City has made “a final and authoritative determination” of the terms

and conditions upon which it would allow development to proceed.

BJEW’s claims are ripe for adjudication under the doctrine of MacDon-

ald, Sommer & Frates v. County of Yolo, 477 U.S. 340, 348 (1986).

>See Map, Appendix C attached.

> Ex. 2.

4

quate transit service to the area of the City in which the

project is located.*

This case arises out of City’s effort to collect $3,100,000 as a

fee to raise money for capital transit improvements pursuant to an

ordinance enacted two years after it approved Levi's Plaza. By

that time, Levi's Plaza was nearly complete. Unless Paragraph

S(c) requires BJEW to pay, City cannot constitutionally collect

the fee.°

City had no transit funding mechanism in place or in contem-

plation while it was considering and approving Levi's Plaza.

“Ex. 2, Para. 5(c). Approval resolutions are the “law of the City.”

The rules of statutory construction apply. See Terminal Plaza Corp. v

City and County of San Francisco, 186 Cal.App.3d 814, 825, n. 7, 230

Cal. Rptr. 875, 880 n. 7 (1986).

* Ordinance No. 224-81, San Francisco Admin. Code 38.1, ef seg.;

Ea. 3.

* Russ Building Partnership v. City & County of San Francisco, 44

Cal.3d 839, 244 Cal. Rptr. 682, 750 P.2d 324 (1988) determined that

the fee here in question was a development or regulatory fee, and not a

tax. If the fee had been determined to be a “tax,” it would have violated

California Proposition 13 limits because it was enacted without the

required two-thirds vote. Cal. Constitution Article 13A. As a develop-

ment fee, it cannot apply to a project protected by a “vested nght,” i.e.

the mght to proceed free of regulation adopted after the vested right

accrued. Russ Building Partnership, 44 Cal.3d, at 845-46; Avco Commu-

nity Developers v. South Coast Regional Commission, 1? Cal.3d 785,

132 Cal. Rptr. 386, 553 P.2d 546 (1976), appeal dism'd, 429 U.S. 1083

(1977). State law controls the definition and extent of “vested rights” as

an incident of the concept of “property.” See, e.g., Lakeview Develop-

ment Corporation v. South Lake Tahoe, 915 F.2d 1290 (9th Cir. 1990).

As this Court has stated, “[W]e are mindful of the basic axiom that

*“[ p]roperty interests ... are not created by the Constitution. Rather,

they are created and their dimensions are defined by existing rules or

understandings that stem from an independent source such as state

law.” ’” Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001 (1984),

quoting from Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S.

15S, 161 (1980), quoting in turn from Board of Regents of State

Colleges v. Roth, 408 U.S. 564, 577 (1972).

Indeed, Levi's Plaza was the first commercial project approved by

City where City’s planners recognized a possible “linkage” be-

tween new development and impact upon transit service.

When it approved Levi’s Plaza, City did not have enough

evidence of the project’s expected impact on transit to impose a

mandatory requirement.* Its ideas were “general and amorphous

... The only funding mechanism tentatively discussed during

consideration of Levi’s Plaza was an assessment district, a device

that would impose the cost of additional transit service upon all

developed property rather than simply upon new development.'°

More than two years later, City enacted the Transit Impact

Development Fee Ordinance (“TIDFO”) imposing a $5.00 per

square foot fee on new construction in the “Downtown Area” of

the City, broadly defined to include the Northeast Waterfront

area where Levi's Plaza is located.'' Claiming that the TIDFO

constitutes the funding mechanism referred to in Paragraph 5(c)

of the Resoiution, City demanded that BJEW pay $3,100,000.

BJEW paid the money into escrow under protest and commenced

’ See note 15, infra

* See note 16, infra.

” Testimony of Assistant Planning Director, RT 172:2-3. At trial, the

City Attorney characterized the situation as follows:

“As of January 4, 1979 [when Levi's Plaza was approved] .. . no

[City] employee knew what kind of funding mechamism, if any,

would be imposed on BJEW to mitigate the transit impact

generated by the Levi's project.” RT 49:18-23.

This statement purports to paraphrase Paragraph 18 contained in a

supulation of facts in the Clerk’s Record at AA 29. It is an admission

binding on City. See Oscanyan v. Winchester Repeating Arms, Co., 103

U.S. 261 (1881).

RT 75:8-23; 76:5-9; 101:17-102:12: 105:28-107:15; AA 28-29.

19 16-17.

The “Downtown Area” as defined by the TIDFO includes an

attenuated geographical appendage, apparently designed to include

Levi's Plaza notwithstanding its remoteness from the traditional down-

town area. See Appendix C.

6

this action to contest it. The amount in issue now exceeds

$4,000,000, with interest.

When it was considering BJEW’s application for approval of

Levi's Plaza, City prepared an environmental impaci report. That

report, and other material available at the time, showed that

Levi's Plaza might impose a burden on transit service. Designed

to house the corporate offices of Levi Strauss & Co., the project

would relocate Levi's employees away from the traditional down-

town area to the Northeast Waterfront—an area that was then

underserved by transit.'”

The transit deficit in the Northeast Waterfront, however, was

not then related to office use; nor was it seen as part of a larger

problem besetting the urban core. In its very next action recogniz-

ing possible linkage between project construction and transit

impact, City imposed a condition on approval of a residential

project in language identical to that used with respect to Levi's

Plaza.'* Despite the identical language in its permit and its

location close to Levi's Plaza, the “Downtown Area” as defined

by the TIDFO excludes this project.

None of the planning documents or data considered by City

while it was processing or approving the permit for Levi's Plaza

quantified its expected impact on transit or defined an area of

impact broader than the Northeast Waterfront. Members of the

City Staff thought there was an impact—but they didn’t know

what it was and didn’t know that they would ever know with

sufficient certainty to impose a mandatory requirement. '*

‘? Ex. | (Levi's Plaza Final Environmental Impact Report Excerpts at

7); RT 25:14-19; 27:21-28:27; 29:9-15; 113:5-13. At the time the project

was approved, Broadway was generally regarded as the northern bound-

ary of the downtown area. RT 123:16:24. Levi’s Plaza is considerably

north of Broadway. See Appendix C.

‘> Approval Resolution For Wharf Park Residential Project, Exhibit

19, Para. 6, adopted June, 1979. See Appendix C for location.

'*See note 9, supra. Rai Okomoto, City’s then Planning Director,

testified:

Question (by Mr. Ellman, counsel for BJEW):

All of these uncertainties were compounded by City’s long-

standing “transit-first’”” policy—a policy that had been in place

and implemented in several ways long before Levi's Plaza was

proposed. The “transit-first” policy discourages the use of private

automobiles by commuters in the hopes of compelling urban

employees to utilize public transportation.’ For example, City

prohibits construction of parking garages in its office commercial

areas, does not allow new buildings to provide parking to serve the

needs of commuters, and mandates the imposition of parking fees

that discriminate against all-day parkers. These policies are ex-

pressly intended to increase the burden on transit wholly apart

from new construction.’

Enacted more than two years after City considered and ap-

proved Levi’s Plaza, the TIDFO effectively redefined the impact

on transit the project supposedly caused, redrew the boundaries of

the area impacted—and crystallized a vague concept into a

precise and formidable exaction. Instead of focusing on the

Northeast Waterfront, it defined impacts in terms of an expansive

Downtown Area. Levi’s Plaza falls within the newly defined

Downtown Area only through creation of an improbable extrusion

The first phrase of this [paragraph 5(c) of Exhibit 2, the exaction

condition] refers to ‘a good faith effort’.... What is the under-

standing that you had in the Planning Department of the meaning

of that term in an approval resolution?

Answer:

" | think again at that time this relationship between development

and transportation was just beginning to be understood as a

significant phenomenon, if you will, in the course of planning, and

I] think that we felt at the time, and I believe the Commission

agreed, which is undoubtedly why they adopted this language, that

we hadn't provided enough evidence that could lead us to make it a

mandatory requirement that developers assume some burden of

the impact on transit. The phrase “good faith effort”, was in effect

then a kind of compromise. ... RT 104:7-105:7.

'S See, e.g., RT 168:22-169:8; San Francisco Master Pian Transporta-

tion Element pp. 1.4.9, 11, 13; I1.1.38, 40.

'© RT 179:19-28. [Admission by Assistant Director of Planning. ]

8

from the traditional northern boundary of the City’s urban core.'”

Instead of dealing with transit impact generally, the TIDFO

focuses solely on the impact caused by “cumulative” office

development.'* Rather than creating an assessment on all bene-

fited property—as would be the case with an assessment district—

it lays the entire burden on new construction. And from a

“general and amorphous” idea, insufficiently specific to create

mandatory obligation and contemplating a “good faith effort to

participate ..., it creates a specific, mandatory and substantial

fee.

City did all this with a Jegislative enactment, making its

determination apply to all office buildings by virtue of their

proposed use and location. The TIDFO provides no mechanism

for defining the impact or the mitigation by reference to the

specific attributes of specific projects. The TIDFO did not purport

to address Levi’s Plaza or the findings that had been made in the

environmental impact report for that project. It simply threw the

project into the basket with the others, relying on a provision that

made the fee apply to all projects that had a “future funding

mechanisms...” provision in their approval resolutions.

The California courts have now held that Nollan does not apply

to the foregoing facts. Believing that result to be wrong and a

violation of its constitutional right to just compensation, BJEW

petitions this Court for certiorari.

'’ Appendix C.

'* TIDFO, Ex. 5. The purpose of the TIDFO is Summarized in Russ

Building Partnership v. City and County of San Francisco, 44 Cal.3d

839, 844-45, 244 Cal. Rptr. 683-84, 750 P.2d 324, 325-26 (1988). Russ

Building held that the TIDFO could be applied to two projects approved

later than Levi's Plaza but prior to enactment of the TIDFO, based on

language in approval resolutions that differs substantially from that

contained in the approval resolution for Levi’s Plaza. The Court in Russ

Building refused (apparently on procedural grounds) to apply No/llan to

the facts before it. See 44 Cal.3d at 845, n.6.

'? See note 9, supra.

© See note 15, supra.

9

ARGUMENT

A. The California Court of Appeal Wrongly Concluded That

Nollan Applies Only To “Possessory Takings” and Not

“Regulatory Takings” Cases.

The California Court of Appeal states its conclusion in the first

paragraph of its opinion:

In this action we consider whether the heightened scrutiny

test alluded to in Nollan...should be applied to the

[ TIDFO] .... We conclude the Nollan analysis is applicable

only to “‘possessory takings,’ rather than ‘‘regulatory tak-

ings,’ and does not apply to the TIDF.

3 Cal.App.4th at 166, 4 Cal. Rptr. 2d at 115.

As a preliminary matter, we submit that if a recent, landmark

interpretation by this Court of the Fifth Amendment of the

United States Constitution is to be limited, it is for this Court, not

the California Court of Appeal, to make that determination. As it

happens, this Court explicitly rejected the Court of Appeal’s

limiting postulate in an opinion filed 60 days later.”'

Yee v. Escondido, 60 U.S.L.W. 4301 (April 1, 1992) defines

the difference between “possessory takings” and “regulatory tak-

ings” as follows:

*! The error in the Court of Appeal’s conclusion is obvious on the face

of the Nollan opinion. For example:

In Loretto (Loretto v. Teleprompter Manhattan CATV Corp., 458

U.S. 419 (1982)), we observed that where governmental action

results in “[a] permanent physical occupation of the property, by

the government itself or by others, see 458 U.S., at 432-433, n.9,

“our cases uniformly have found a taking to the extent of the

occupation, without regard to whether the action achieves an

important public benefit or has only minimal economic impact on

the owner,” id., at 434-435. Nollan, 483 U.S., at 831-32.

The Court concluded that the “permanent physical occupation” analysis

did not apply to the facts before it. If Nollan was truly a possessory

takings case, then this Court could have cited Loretto, supra, and Kaiser

Aetna v. United States, 444 U.S. 164 (1979) and left the matter at that.

10

... The government effects a physical taking only where it

requires [emphasis in original] the landowner to submit to

the physical occupation of his land. “This element of re-

quired acquiescence is at the heart of the concept of occupa-

tion.” FCC v. Florida Corp., 480 U.S. 245, 252 (1987). Thus

whether the government floods a landowner’s property,

Pumpelly v. Green Bay Co., 13 Wali. 166 (1872), or does no

more than require the landowner to suffer the installation of

a cable (citing Loretto v. Teleprompter Manhattan CATV

Corp., 458 U.S. 419 (1982)), the Takings Clause requires

compensation if the government authorizes a compelled

physical invasion of property.

Such compulsion is lacking, however (and the case becomes a

“regulatory takings” case), if the imposition occurs as a result of

voluntary action on the part of the property owner.”

The Court zs onlied “regulatory takings” analysis to Yee because

the condition ot which Yee complained was imposed upon the

conduct of a business that he could discontinue,” as the plaintiffs

in Nollan and in PruneYard Shopping Center v. Robins, 447 U.S.

74, 82-84 (1980), could have avoided the impositions of which

they complained by electing not to engage in the activities that

triggered them. The Nollans could have avoided dedicating the

22 Cf. Nollan, 483 U.S., at 834.

3 Yee, 60 U.S.L.W., at 4303:

But the Escondido rent control ordinance, even when considered

in conjunction with the California Mobilehome Residency Law,

authorizes no such thing [requirement of physical invasion].

Petitioners voluntarily rented their land to mobile home owners.

At least on the face of the regulatory scheme, neither the City nor

the State compels petitioners, once they have rented their property

to tenants, to continue doing so. To the contrary, the Mobilehome

Residency Law provides that a park owner who wishes to change

the use of his land may evict his tenants... (Citation). Put

bluntly, no government has required any physical invasion of

petitioners’ property. Petitioners’ tenants were invited by petition-

ers, not forced upon them by the government. (Citation).

1]

offensive easement by electing not to take the benefits of the

permit restricted by the easement condition. PruneYard could

have excluded unwanted political solicitors by ceasing to engage

in the commercial activity found to have invited them.

Here, BJEW complains of a condition attached to a permit.

The condition regulates the exercise of a right, i.e., the right to

use its property for a specific purpose.” As in Yee, Nollan,

PruneYard and other “regulatory takings” cases, BJEW could

have avoided the imposition by electing not to proceed.

In short, the conclusion of the California Court of Appeal on

the pivotal issue in this case is inescapably wrong, flying in the

face of rationale often repeated in opinions of this Court on issues

of taking that were restated with emphatic clarity in Yee.*> Nollan

is a regulatory takings case.

Setting aside the clear error in its use of terminology, it is

possible that the Court of Appeal intended to limit No/llan to

those cases where the government exacts an interest in the

regulated land rather than payment of a fee or the imposition of

another form of burden on the night to use property. Such a

limitation is equally wrong. We deal with it in the next sections of

Argument.

**.. the right to build on one’s own property—even though its

exercise can be subjected to legitimate permitting requirements—

cannot remotely be described as a “governmental benefit.”

-Nollan, 483 U.S., at 834, n.2.

*> The Court of Appeal relied on Commercial Builders v. City of

Sacramento, 941 F.2d 872 (9th Cir. 1991) cert. denied, 60 U.S.L.W.

3782 (1992) which reached a similar result on similar reasoning.

Commercial Builders deals with a facial attack on the constitutionality

of an ordinance requiring developers of commercial buildings to contrib-

ute funds for low cost housing. In a facial attack, the plaintiff must

establish that there is no state of facts to which the ordinance can be

constitutionally applied. Keystone Bituminous Coal, Association v.

DeBenedictis, 480 U.S. 470 (1987). This is not a facial Attack case. This

case went to tral and must be decided on its facts.

12

B. The Fifth Amendment Protects Property Owners From

Excessively Burdensome Restriction On The Use Of Prop-

erty: It Requires Compensation If The Burden Exceeds That

Which The Individual Should Be Required To Bear.

1. Takings Are Determined By The Impact On The Prop-

erty Owner. The Nature Of The Interest Taken Does

Not Control.

In Armstrong v. United States, 364 U.S. 40, 49 (1960), the

Court stated:

The Fifth Amendment's guarantee that private property

shall not be taken for a public use without just compensation

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.”

In Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1004-5 (1984),

the Court quoted United States v. General Motors Corp., 323 U.S.

373, 378 (1945), as follows:

...[C]Jourts have held that the deprivation of the former

owner rather than the accretion of a right or interest to the

sovereign constitutes the taking. Governmental action short

of acquisition of title or occupancy has been held, if its

effects are so complete as to deprive the owner of all or most

of his interest in the subject matter, to amount to a taking.

A regulation may advance a legitimate State interest and still

constitute a taking. Police power regulations that fail to advance a

legitimate public purpose are void for that reason alone. Thus, the

fact that the TIDFO may have a valid: purpose—funding for

enhanced public transit—does not end tlte inquiry. It answers only

the first portion of the threshold question, nothing more. Once the

government establishes the facial legitimacy of its action, the

focus shifts to the opposite pan of the balance, i.e., the impact of

*° See also First English Evangelical Lutheran Church of Glendale v.

County of Los Angeles, 482 U.S. 304, 318-19 (1987).

13

the regulation on a particular property owner based on the facts of

that specific case.”

Nollan deals with the problem created by a particular class of

regulatory takings cases, those in which the government imposes

conditions upon the issuance of a permit.”* The Court held that a

regulatory condition goes “too far””’ in imposing a burden upon a

property owner unless the condition directly alleviates an impact

the proposed project would otherwise cause and that would have

justified a refusal to approve the project without the mitigating

condition. Unless so constrained—in the absence of such a nexus

— the condition does not substantially advance a legitimate state

interest and it exceeds the constitionally permissible burden

government can impose upon a property owner without payment

of just compensation.

The issue posed by this case is whether or not that doctrine

applies only to conditions that require a property owner directly to

give away an interest in the permitted property itself. In so

holding, the Court of Appeal necessarily concluded that this

-” This Court has repeatedly stated that takings cases must be decided

on their particular facts. See, e.g., Keystone Bituminous Coal Associa-

tion v. DeBenedictis, 480 U.S. 470, 492-93, 495 (1987); Connolly v.

Pension Benefit Guaranty Corporation, 475 U.S. 211, 224 (1986); Agins

v. City of Tiburon, 447 U.S. 255, 260 (1980); Penn Central Transporta-

tion Company v. New York City, 438 U.S. 104, 138 (1978).

** Given, then, that requiring uncompensated conveyance of the

easement outright would violate the Fourteenth Amendment, the

question becomes whether requiring it tg be conveyed as a

condition for issuing a land-use permit alters the outcome....

Our cases have not elaborated on the standards for determining

what constitutes a “legitimate state interest” or what type of

connection between the regulation and the state interest satisfies

the requirement that the former “substantially advance” the

latter.

Nollan, 483 U.S., at 834.

2° Pennsylvania Coal v. Mahon, 260 U.S. 393, 413, 415 (1922).

14

Court would have found no infirmity in a condition requiring the

Nollans to pay a fee to acquire the very easement they could not

be required to dedicate. The conclusion is i'logical, unsupported

by any authority and plainly contrary to this Court’s conclusion

that “...the Fifth Amendment’s Property clause... [is] more

than a pleading requirement, and compliance with it... [is]

more than an exercise in cleverness and imagination.” Nollan,

483 U.S., at 841.

2. The Fifth Amendment’s Just Compensation Require-

ment Applies Equally To Cash Exactions As It Does To

Land Dedication Requirements.

It is the burden imposed upon the exercise of property rights

that must be tested by constitutional formulations stated by this

Court. The nature of the exaction does not determine the extent

of the burden, nor should it be used as the yardstick to determine

when governmental action has gone “too far” and traversed the

takings threshold.

The concept of property protected by the Fifth Amendment's

just Compensation requirement is not a sterile or rigid concept,

restricted to interests in land. To the contrary, this Court has

recognized that “property” encompasses a vast range of funda-

mental rights protected by the Constitution although not defined

by it.”

*° “We are mindful of the basic axiom that “‘[p]roperty interests

... are not created by the Constitution. Rather, they are created and

their dimensions are defined by existing rules or understandings that

stem from an independent source such as state law.”””’ Ruckelshaus v.

Monsanto Co., 467 U.S. 986, 1001 (1984) (quoting Webb's Fabulous

Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161 (1980), quoting in turn

from Board of Regents of State Colleges v. Roth, 408 U.S. 564, 577

(1972)).

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

states:

(T]he 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 mght to speak or the nght to

travel, is in truth a “personal” right, whether the “property”

in question be a welfare check, a home, or a savings account.

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. That nights in

property are basic civil rights has long been recognized.

This oft-quoted statement echoes teachings of the Framers as

well as their antecedents. For example, James Madison wrote of

‘“property:”

This term in its particular application means: “that domin-

ion which one man claims and exercises over the external

things of the world, in exclusion of every other individual.”

In its larger and juster meaning, it embraces every thing to

which a man may attach a value and have a right; and which

leaves to every one else the like advantage. (Emphasis in

original).

In the former sense, a man’s land, or merchandise, or

money is called his property.

In the latter sense, a man has property in his opimions and

the free communication of them

He has a property of peculiar value in his religious opin-

ions, and in the profession and practice dictated by them

He has property very dear to him in the safety and liberty

of his person.

He has an equal property in the free use of his faculties

and free choice of the objects on which to employ them.

In a word, as a man is said to have a mght to his property,

he may be equally said to have a property in his nghts

16

Where an excess of power prevails, property of no sort is

duly respected. No man is safe in his opinions, his person, his

faculties or his possessions.

G. Hunt, VI The Writings of James Madison at p.101 (The

Knickerbocker Press, 1906), (quoting from The National Ga-

zette, March 29, 1792).”'

The Fifth and Fourteenth Amendments” do not differentiate

between types or classes of property interest, nor do they suggest

that money is entitled to less protection than land.

This Court has consistently used the same verbal formula in its

regulatory takings cases without regard to the type of interest

being regulated—and allegedly taken. For example, see Webb's

Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980) (an

excessively burdensome fee); Andrus v. Allard, 444 US. 51

(1979) (regulation of the sale of bird feathers); Ruckelshaus v.

Monsanto Co., 467 U.S. 986 (1984) (regulation of intellectual

property rights in chemicals registered by the EPA); Connolly v.

Pension Benefit Guaranty Corporation, 475 U.S. 211 (1986)

(regulation of monetary nghts under ERISA).

The Court’s opinions in these cases provide no support for a

distinction in takings analysis based upon the nature of property

required to be given up. For example, Connolly takes pains to

reconcile its opinion with a list of regulatory takings cases that

includes Loretto and Kaiser Aetna. See Connolly, 475 U.S., at

224. Loretto and Kaiser Aetna are both cases where the govern-

ment took a possessory interest in land. The regulation attacked

*' See also, John Locke, TWO TREATISES OF GOVERNMENT

(P. Laslett, rev.ed. 1988, Section 124, Sections 201, 202 (“Whenever

the Legislators endeavor to take away and destroy the Property of the

People... they put themselves into a state of War with the People who

are thereupon absolved from any farther obedience.” (Emphasis in

original) ).

*? “—N Jor shall private property be taken for public use, without just

compensation.”

17

as a taking in Connolly was a provision of ERISA imposing a

monetary liability in the operation of pension trust funds.

Connolly also cites Ruckelshaus as part of the authoritative line

of takings cases that includes Loretto and Kaiser Aetna. Ruckel-

shaus, an intellectual property regulation case, in turn cites and

relies upon land use regulation cases including PruneYard, a

regulatory takings case—but a case where the regulation required

a certain type of physical invasion of real property as a condition

to its use for certain purposes. And to complete the circle,

Ruckelshaus is cited and relied upon by Nollan (another regula-

tory taking, land invasion case) as articulating the controlling

“regulatory takings” formula. 483 U.S., at 833 n.2.

The Court of Appeal quoted a portion of the Nollan opinion

attempting to support its conclusion that the “heightened scru-

tiny” required by the case applies only to conditions that exact

interests in the regulated land. 3 Cal.App.4th, at 169. The entire

passage in which that sentence occurs is as follows:

We view the Fifth Amendment’s Property Clause to be more

than a pleading requirement, and compliance with it to be

more than an exercise in cleverness and imagination. As

indicated earlier, our cases describe the condition for abridg-

ment of property rights through the police power as a

“substantial advanc[ing]” of a legitimate state interest.

[Emphasis in original]. We are inclined to be particularly

careful about the adjective where the actual conveyance of

property is made a condition to the lifting of a land-use

restriction, since in that context there is heightened risk that

the purpose is avoidance of the compensation requirement,

rather than the stated police-power objective.

483 US., at 841.

This language, we submit, says nothing more than that dedication

requirements (as opposed to cash conditions) should be viewed

with greater suspicion because they are more likely to be illegal,

18

not because land gets more constitutional protection than

33

money.

C. As Applied To Levi’s Plaza, The TIDF Plainly Fails The

Substantial Advancement Test Required By Nollan.

Intense analytical scrutiny is not needed to show that the

TIDFO—applied to Levi's Plaza on the facts of this case—fails

both parts of the Nol/an substantial advancement test.

Nollan begins with the proposition that if a public purpose

justifies the imposition of a regulation prohibiting exercise of a

right to develop the subject property, then the property owner can

* The second piece of Nollan to which the Court of Appeal might

have referred is:

Had California simply required the Nollans to make an easement

across their beachfront available to the public on a permanent basis

in order to increase public access to the beach, rather than condi-

tioning their permit to rebuild their house on their agreeing to do so,

we have no doubt there would have been a taking.... We have

repeatedly held that, as to property reserved by its owner for private

use, “the nght to exclude [others is] ‘one of the most essential

sticks in the bundle of rights that are commonly characterized as

property.*”

(Citing Loretto and Kaiser Aetna). Nollan, 483 U.S., at 831. This

passage is preliminary to the main argument, stating a premise in

response to Justice Brennan’s dissent. It does not suggest that exaction

of an interest in the regulated real estate or “the right to exclude others”

is essential to a finding of a taking or to the “substantial advancement”

rationale the Court adopted to define the takings threshold. We have

long passed the point where it could seriously be argued that no

regulation can go “too far” unless it deprives the property owner of a

right to exclude others. See, e.g., Lucas v. South Carolina Coastal Com.,

60 U.S.L.W. 4842 (June 29, 1992); First English Evangelical Lutheran

Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987);

Connolly v. Pension Benefit Guaranty Corp., supra; Andrus v. Allard,

supra; Agins v. Tiburon, 447 U.S. 255 (1980); Penn Central Transpor-

tation Company v. New York City, 438 U.S. 104 (1978).

19

raise no constitutional objection to a regulation that directly

serves the same end while allowing development to proceed. A

justifiable building ban provides the starting point. 483 US., at

836.

Here, City cites impact upon public transit as its justification.

At the time City considered and approved Levi's Plaza, however,

it could not define the impact, it had no mitigation (building ban

or otherwise) in mind and its planning staff had no idea whether,

at what point and in what form it would resolve these issues.** On

this state of facts, we submit that City could not lawfully have

banned construction of Levi’s Plaza because of its potentially

“general and amorphous” impact on public transit.

Once it is established that “.. . the right to build on one’s own

property—even though its exercise can be subjected to legitimate

permitting requirements—cannot remotely be described as a

‘governmental benefit” [Nollan, 483 US., at 834, n.2], it should

be clear beyond argument that a regulation prohibiting develop-

ment must have a stronger base than that advanced here. Thus,

City’s effort to apply the TIDF to Levi's Plaza, viewed as of the

time the project was considered and approved on its specific facts,

fails at the first hurdle of the Nollan test.

The question remains whether City cured this defect by the

“findings” in the TIDFO. Being unable to find a potential impact

on transit sufficient to justify a regulatory ban on the right to

construct Levi’s Plaza when the project was before it, can City

create a justification by legislative findings—adopted to apply

generally and without regard to the specific attributes of the

project—two years after the fact? Lucas suggests not.’ Even

* See notes 9 and 16, supra.

38 In Lucas. the State of South Carolina claimed the right to prohibit

use of certain property for its only economic beneficial purpose without

payment of just compensation based upon a general legislative finding

that such uses would constitute a nuisance. This Court rejected the idea

20

without that suggestion, however, the question does not raise

serious analytical difficulties.

Plainly, no permit reservation can expand the scope of what is

constitutionally permissible under No/lan, nor can the City create

additional regulatory conditions after vested rights have accrued.

So the permitting authority is bound by the more restrictive of the

answers to the following questions: Was the imposition fairly

contemplated within the permit reservation? And, if so, does the

imposition meet the Nollan test?

In this case, the California Courts rejected the second question

altogether. They then applied California’s loose and forgiving

interpretive approach to the former. They allowed general, legisla-

tive findings to supersede the specific fact-findings of the project

approval process. We know from this record that when Levi's

Plaza was approved, City viewed transit impact as an attribute of

project /ocation in the Northeast Waterfront of the City and not

as an attribute of office use.*° If City considered transit impact an

that such a nuisance finding could properly be made by generally

applicable legislative enactment. 60 U.S.L.W. at 4842.

* See note 13, supra. At trial, City’s witnesses sought to explain away

the references in this record to the Northeast Waterfront by testifying

that enhanced bus service to the Northeast Waterfront benefits other

areas of the City because the buses move from place to place, etc. RT

101:17-102:12; 134:4-10; 136:23-27. This testimony was advanced to

show that references to the “Northeast Waterfront” should be construed

to include the entire “Downtown Area” (redefined in the TIDFO to

include virtually the entire eastern third of City) because the bus routes

extend into those areas. The argument perfectly exemplifies Humpty

Dumpty’s rule: “When I use a word, it means just what I choose it to

mean—neither more nor less.” L. Carroll, Through the Looking Glass

and What Alice Found There, Chapter 6. Because if the Northeast

Waterfront (the “area of the City in which the project is located...”

[ Exhibit 2, paragraph 5(c) } is defined to include anywhere the buses go,

the phrase means anything that the maker of the bus routes chooses to

21

attribute of office use, it would not have imposed a transit impact

condition on a residential project in the Northeast Waterfront

area in the very next action it took in which it imposed a transit

condition on the approval of any project anywhere.’

Nor does the language of the permit condition calling for a

“good faith effort to participate” contemplate a mandatory fee.

That language calls for affirmative participatory action on the part

of BJEW—as would be required to form an assessment district—

the only funding mechanism under discussion at the time Levi's

Plaza was approved.

The TIDFO does not deal specifically with the conditions of

Levi's Plaza. It makes general findings that cumulative office

development in a broadly defined Downtown Area impact transit

and require payment of a $5 mandatory fee. No participation by

property owners is required other than to write and deliver a

check. The TIDFO redefines the impacted area, the nature of the

impact and the funding mechanism as perceived at the time of

Levi’s Plaza.

City and the California Courts have shrugged all this off on the

grounds that Levi’s Plaza had an impact on transit and the

approval resolution condition gave City the right to redefine that

make it mean—in this case, two years after the fact in aid of City’s quest

for funds.

37 The Wharf Park approval is also the law of the City. See note 4,

supra. City’s actions closest in time after Levi's approval provide highly

probative evidence of its intent. See, e.g., United States v. Stewart, 311

U.S. 60, 64-65 (1940):

__. The later act can therefore be regarded as a legislative interpre-

tation of the earlier act (citations) in the sense that it aids in

ascertaining the meaning of the words as used in their contempo-

rary setting. /t is therefore entitled to great weight in resolving any

ambiguities and doubts.

See also, Atlantic Coast Line Railroad Co. v. Phillips, 332 US. 168

(1947); Erlenbaugh v. United States, 409 U.S. 239 (1972).

22

impact in any terms that might fit within the broadest definition

of “future funding mechanism...” At best, this is nothing more

than the “indirect relationship” approach explicitly rejected in

Nollan.** At worst, the northern boundary of the “Downtown

Area” as defined by the T1DFO—with its sharp-edged bulge

reaching more than four blocks to take in Levi’s Plaza—punctu-

ates, we submit, City’s “*... out-and-out plan of extortion.’

(Citation). Nollan, 483 U.S., at 837.

We agree that Condition 5(c) in the Levi's Plaza approval

resolution deals with transit as does the TIDFO. More than that is

required, however, for the TIDFO to apply to Levi's Plaza. As

this Court observed, some sort of condition dealing with “visual

access” might have been constitutionally permissible in Nollan.

483 U.S., at 835. The access condition selected by the Commis-

sion, however, was not—because it did not alleviate a burden

caused by the Nollans’ project.

** In Nollan, the California Court of Appeal stated its conclusion as

follows:

In Grupe v. California Coastal Com., (1985) 166 Cal.App.3d

148, 165, 212 Cal.Rptr. 578, the court construed the leading

California case on the constitutionality of exactions, (citation) to

hold that only an indirect relationship between an exaction and a

need to which the project contributes need exist. We agree with the

Grupe reasoning....The Court in Grupe held that the access

condition was related to a need for pubic access to which Grupe’s

project contributed, even though standing alone it had not created

the need for access... ..

223 Cal.Rptr. 28, 30 (1986).

It is precisely this “indirect relationship” formula that this Court

rejected. 483 U.S., at 838, 841. Despite that rejection, it is precisely the

same indirect, general relationship that the Court of Appeal has used in

this case.

23

Fifth Amendment “just compensation” cases are decided on

their particular facts.*’ In no class of cases can that be more clear

than those where permit conditions must directly mitigate im-

pacts on the public interest that (i) a proposed project would

otherwise cause and that (ii) would be sufficient to justify

prohibiting development of the project in the first instance. We

doubt that a fact specific requirement of this sort can be met by a

generally applicable legislative enactment adopted two years after

the fact. Such a conclusion is particularly compelling when the

enactment purports to crystalize the pivotal issues of impact,

mitigation and public interest that City admits it could not resolve

when it was engaged in the very fact-finding exercise upon which

the validity of the imposition in this case must depend.*”

We submit that if the nature and extent of an imposition such

as a regulatory fee is reserved for future determination, that

determination must meet the same constitutional standards ar-

ticulated in the Nollan case that would have been required at the

time the permit was issued. It must be based on the same facts

and the same public interest considerations. The City must be

able to show that the condition substantially advances a legitimate

interest that would have justified a regulation prohibiting develop-

ment of the project in the first place. And the condition reserving

that judgment to a future date must precisely spell out the public

interest to be served, the impact to be alleviated and the type of

mitigation that would achieve the purpose.

None of that happened here, nor did the California Courts

require it. They rejected Nollan entirely and did not get past the

39 See authorities cited at note 28.

“ Issuance of a permit for a project such as Levi's Plaza is an exercise

in administrative adjudication to which the requirements of due process

apply. See, e.g., Horn v. County of Ventura, 24 Cal.3d 605, 156 Cal.

Rptr. 718, 596 P.2d 1134 (1979); Ward v. County of Riverside, 273

Cal.App.2d 353, 78 Cal. Rptr. 46 (1969).

24

general concept of “transit.’’ In so doing, they vindicated City’s

demand for $3,100,000.

Nollan applies—and it requires more than City could or did

show to sustain the TIDFO exaction against Levi's Plaza.

CONCLUSION

The California Court of Appeal erred when it rejected Nollan

as precedent for resolution of this case. In holding that Nollan

does not apply to a monetary imposition, the California Court of

Appeal drastically and erroneously limited a landmark opinion of

this Court.

This Court should issue a writ of certiorari to reverse the result

below and hold that Nollan applies to monetary exactions im-

posed as conditions upon the issuance of permits; and that the

imposition in this case fails the substantial advancement test

Nollan articulates.

Dated: July 14, 1992

HOWARD N. ELLMAN*

KENNETH N. BURNS

THOMAS M. SHERWOOD

ELLMAN, BURKE, HOFFMAN &

JOHNSON

A Professional Corporation

Attorneys for Petitioner

BLUE JEANS EQUITIES WEST

* Counsel of Record

(APPENDICES FOLLOW)

oe

A-1

APPENDIX A

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF

CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

FILED JANUARY 31, 1992

BLUE JEANS EQUITIES WEST,

Plaintiff and Appellant,

v.

CITY AND COUNTY OF SAN FRANCISCO.

Defendant and Respondent.

A051759

(Super. Ct. No. 814330

San Francisco County)

WHITE, P.J. In this action we consider whether the height-

ened scrutiny test alluded to in Nollan vy. California Coastal

Comm'n (1987) 483 U.S. 825 (hereafter Nollan) should be

applied to San Francisco’s Transit Impact Development Fee

(TIDF) Ordinance. (Ord. No. 224-81, codified at S.F. Admin.

Code, § 38.1 et seq.) We conclude the Nollan analysis is applica-

ble only to “possessory takings,” rather than “regulatory takings,”

and does not apply to the TIDF.

FACTS AND PROCEDURAL BACKGROUND

Plaintiff Blue Jeans Equities West is the owner and developer

of Levi’s Plaza, a five-building office, retail and condominium

complex in the north or northeast waterfront section of San

Francisco. This area of San Francisco is located away from the

financial district, the traditional area of downtown office space. At

the time of the project’s conception, the main tenant was to be

Levi Strauss & Company, which was then located in the financial

district of the city. Prior to construction of the complex, a final

environmental impact report was prepared by the San Francisco

A-2

Department of City Planning. Among other things, the report

discussed the adverse impact the project would have on

transportation. '

The permit for Levi’s Plaza was approved by the San Francisco

Planning Commission’s Resolution No. 8142 on January 4, 1979.

The resolution contained a condition in its transit mitigation

section, designated as paragraph 5(c), which provided: “The

owner of the project shall make a good-faith effort to participate

in future funding mechanisms to assure adequate transit service to

the area of the city in which the project is located.”

On May 5, 1981, the San Francisco Board of Supervisors

enacted the TIDF ordinance. As our Supreme Court described it:

“The ordinance, which became effective the following month,

requires developers of downtown buildings containing new office

space to pay a TIDF as a condition of issuance of a certificate of

completion and occupancy. [Citation.] The TIDF, not to exceed

$5 per square foot of new office space, provides revenue for the

municipal railway to offset the anticipated costs of the increased

peak-period ridership generated by the new office space over the

useful life of each office building.” [Citation.]” (Russ Bldg.

Partnership v. City and County of San Francisco (1988) 44

Cal.3d 839, 844-845 (hereafter Russ J/).) At the time of its

enactment, plaintiff had not yet received a certificate of coinple-

tion for Levi’s Plaza.

Plaintiff filed a complaint for declaratory relief against the city,

contending the TIDF ordinance is unlawful and invalid as applied

to the Levi’s Plaza project and the TIDF may not be imposed

with respect to plaintiff. While the case was pending, the parties

'The report states in pertinent part: “Employees arriving by BART,

AC Transit, SAMTRANS, Southern Pacific, and the ferries would have

to transfer to another mode (MUNI) to reach the project site. The

proportion of vehicle drivers among Levi Strauss employees would tend

to increase from about 16% to about 17.5%. Sixteen additional bus runs

on Routes 15/42 and 32 would have to be operated during the peak hour

to provide adequate capacity to sustain the 17.5% vehicle-driver modal

split. This would represent about 4-minute headways on the combined

15 and 42 routes and about 6-minute headways on Route 32.”

A-3

stipulated to the fee calculation and plaintiff deposited the agreed

amount, over $3.1 million, in trust, pending the case’s outcome.

The trial court entered judgment for defendant, finding that the

TIDF ordinance is not an unconstitutional “taking” on its face or

as applied to plaintiff, plaintiff acquired no vested right to build or

use Levi's Plaza without payment of the TIDF, and defendant is

not estopped from requiring plaintiff to pay the TIDF. This appeal

followed.

DISCUSSION

In Russ Bldg. Partnership v. City and County of San Francisco

(1987) 199 Cal.App.3d 1496 (hereafter Russ J). Division Five of

this District held the San Francisco TIDF ordinance was a valid

development fee, which could not be challenged under arti-

cles XIII A and XIII B of the California Constitution or the

equal protection and due process clauses of the federal and state

Constitutions. In eesence, the opinion finds the TIDF a fee. rather

than a special tax. (/d., at p. 1507.)

In Russ II, the Supreme Court addressed the question of

whether the TIDF ordinance could be applied to projects which,

at the time of the enactment of the ordinance, were in the course

of construction pursuant to building permits conditioned on the

developers’ participation “in a downtown assessment district, or

similar fair and appropriate mechanism, to provide funds for

maintaining and augmenting transportation service... .”

(Russ II, supra, 44 Cal.3d at p. 843.)’ The high court concluded

that the condition encompassed the TIDF, and held that the

TIDF could be imposed on the projects without impairing the

developers’ vested rights. (/bid.) However, the Russ IJ court

expressly declined to address whether the TIDF violated the

takings clause of the United States Constitution, as interpreted in

Nollan. (Russ II, supra, 44 Cal.3d at p. 845, fn. 6.)

2Russ II left intact the Russ J holding that the TIDF was a valid

development fee. (Russ II, supra, 44 Cal.3d at p. 845.)

A-4

In Nollan, the United States Supreme Court held the Califor-

nia Coastal Commission had violated the Fifth Amendment by

conditioning a building permit for beachfront property on the

owners’ dedication of an easement allowing the public to walk on

the portion of the property nearest to the ocean. The condition

requiring an easement violated the “taking” clause, because it did

not serve a governmental purpose related to the permit to rebuild.

(Nollan, supra, 483 U.S. at p. 838.) At least one California court

has interpreted the Nollan holding as providing “there must be a

substantial connection, or ‘nexus’ between the public burden

created by the construction and the necessity for the easement.”

(Surfside Colony, Ltd. v. California Coastal Com. (1991) 226

Cal.App.3d 1260, 1267, fn. omitted). This interpretation is based,

in part, on footnote 3 of the Nolian opinion: “[O]ur opinions do

not establish that these standards are the same as those applied to

due process or equal protection claims. To the contrary, our verbal

formulations in the takings field have generally been quite differ-

ent. We have required that the regulation ‘substantially advance’

the ‘legitimate state interest’ sought to be achieved, [citation],

not that ‘the State ‘could rationally have decided’ that the

measure adopted might achieve the State’s objective.’ [Cita-

tions.]” (Nollan, supra, 483 U.S. at pp. 834-835, fn. 3.)

A threshold issue is whether the Nollan nexus test should be

applied to the case at bench. Plaintiff takes an affirmative posi-

tion, while defendant disagrees.

It is settled that any regulation of economic interests which

“goes too far” becomes a “taking” under principles of inverse

condemnation. (Penna. Coal Co. v. Mahon (1922) 260 U.S. 393,

415; First Lutheran Church v. Los Angeles County (1987) 482

U.S. 304, 316; Golden Cheese Co. v. Voss (1991) 230 Cal.App.3d

727, 731.) However, there is no set formula for determining what

constitutes a “taking”; the courts rely instead on ad-hoc, factual

inquiries into the circumstances of individual cases: (Connolly v.

Pension Benefit Guaranty Corp. (1986) 475 U.S. 211, 224; Pen

Central Transp. Co. v. New York City (1978) 438 U.S. 104, 123-

124.)

In Agins v. Tiburon (1980) 447 U.S. 255, the United States

Supreme Court stated: “The application of a general zoning law

A-5

to particular property effects a taking if the ordinance does not

substantially advance legitimate state interests, [citation], or

denies an owner economically viable use of his land, [citation].

The determination that governmental action constitutes a taking

is, in essence, a determination that the public at large, rather than

a single owner, must bear the burden of an exercise of state power

in the public interest.” (/d., at p. 260). Nollan has been construed

as refining the first prong of the Agins test “to require that the

regulation advance the precise state interest which avowedly

motivated it.” (Long Beach Equities, Inc. v. County of Ventura

(1991) 231 Cal.App.3d 1016, 1029.)

However, the high court appears to make a distinction between

“regulatory taking,” i.e., economic regulation, most forms of

zoning, and other restrictions on land use, and “possessory tak-

ings,’ where the government, or an authorized third person,

physically intrudes upon or appropriates the property. (See Man-

heim, Tenant Eviction Protection and the Takings Clause, 1989

Wis. L.Rev. 925, 939.)

Nollan specifically points out that “our cases describe the

condition for abridgment of property rights through the police

power as a ‘substantial advanc[ing]’ of a legitimate state interest.

We are inclined to be particularly careful about the adjective

where the actual conveyance of property is made a condition to

the lifting of a land-use restriction, since in that context there is

heightened risk that the purpose is avoidance of the compensation

requirement, rather than the stated police-power objective.”

(Nollan, supra, 483 U.S. at p. 841, emphasis in original.) Based

on this language, most legal scholars have concluded the Nollan

strict scrutiny approach is limited to unconstitutional conditions

and possessory takings cases. (See, e.g., Manheim, supra, 1989

Wis. L.Rev. at p. 950; Lawrence, Means, Motives, and Takings;

The Nexus Test of Nollan v. California Coastal Commission

(1988) 12 Harv. Envtl. L.Rev. 231, 263; but see Been, “Exit” as

a Constraint on Land Use Exactions: Rethinking the Unconstitu-

tional Conditions Doctrine (1991) 91 Colum. L.Rev. 473.)

Case law subsequent to Nollan appears to confirm this view.

Pennel v. San Jose (1988) 485 U.S. 1, concerns a city rent control

ordinance that permits consideration of “hardship to a tenant”

A-6

when determining whether to approve a rent increase proposed by

a landlord. In addressing whether rent control was per se a taking

the court stated: “[WJe have ‘consistently affirmed that States

have broad power to regulate housing conditions in general and

the landlord-tenant relationship in particular without paying com-

pensation for all economic injures that such regulations entails.’

(/d., at p. 12, fn. 6, quoting Loretto v. Teleprompter Manhattan

CATV Corp. (1982) 458 U.S. 419, 440.) Pennell appears to

reaffirm the traditional view that as long as governmental regula-

tions do not require a landowner to suffer the physical occupation

of a portion of his real estate, the regulations will be analyzed as

nonpossessory governmental activity. (See Loretto, supra, 458

U.S. at p. 440.)

More on point, in Commercial Builders v. Sacramento (9th

Cir. 1991) 941 F.2d 872, commercial developers challenged a city

ordinance that conditioned nonresidential building permits on

payment of a fee to offset burdens associated with the influx of

low-income workers to work on such developments. The develop-

ers argued that pursuant to Nollan, an ordinance that imposes an

exaction on developers can be upheld only if it can be shown that

the development is directly responsible for the social ill that the

exaction is designed to alleviate. Citing St. Bartholomew's Church

v. City of New York (2nd Cir. 1990) 914 F.2d 348, 357, fn. 6,

Adolph v. Federal Emergency Management Agency (Sth Cir.

1988) 854 F.2d 732, 737, and Naegele Outdoor Advertising, Inc.

v. City of Durham (4th Cir. 1988) 844 F.2d 172, 178, the Ninth

Circuit concluded Nollan’s heightened scrutiny test was inappli-

cable to regulations that do not constitute a physical encroach-

ment on land. (Commercial Builder, supra, 941 F.2d at p. 874.)

Plaintiff principally relies on Bixel Associates v. City of Los

Angeles (1989) 216 Cal.App.3d 1208, to support its claim that a

heightened scrutiny test should be employed. In Bixel, a devel-

oper was required to pay a fire hydrant fee as a condition of the

issuance of a building permit. The fee was established by two city

ordinances. The developer argued that the fee was a specia! tax,

which violated article XIII of the California Constitution. The

Court of Appeal agreed, holding that the fire hydrant fee ordi-

nances did not contain language embodying the required constitu-

A-7

tional safeguards | which must be employed in fashioning a valid

development fee.’ (/d., at p. 1220.) Bixe/ neither considered nor

decided whether the fee constituted a taking in violation of the

Fifth Amendment. (J/bid. )

In light of the above-quoted language in Nollan and post-

Nollan case law, we hold that any heightened scrutiny test

contained in Nollan is limited to possessory rather than regulatory

takings cases.

Plaintiff also contends condition 5(c) of its building permit did

not contemplate payment of the TIDF. First, it submits the

language of the condition, i.e., “the owner. . . shall make a good-

faith effort to participate in future funding mechanisms to assure

adequate transit service to the area of the city in which the project

is located,” denotes a voluntary rather than manaatory obliga-

tion.* We disagree. Good faith performance of a contract “em-

phasizes faithfulness to an agreed common purpose and

consistency with the justified expectations of the other party.”

(Careau & Co. v. Security Pacific Business Credit, Inc. (1990)

222 Cal.App.3d 1371, 1393, fn. 15, quoting Rest.2d Contracts

(Tent. Draft Nos. 1-7) § 231, com. a.) Thus, the “good faith”

language in condition 5(c) may not be employed to make

plaintiff's participation discretionary.

Plaintiff next asserts the condition was devoted to improving

transit service “to the area of the city in which the project is

‘The Bixel court explicitly distinguished the imprecise basis for

determining the fee in that case with the methodology employed and

described in Russ /. (Bixel, supra, 216 Cal.App.3d at p. 1219.)

“In its statement of decision, the trial court stated: “The Court further

finds that the phrase ‘good faith effort’ was not included to allow mere

voluntary participation in the support of transit funding mechanisms, but

anticipates BJEW’s participation in whatever funding mechanism the

City and County could best devise that reasonably met the requirements

of the transit demands. The phrase does not connote the mandatory

language of ‘shall,’ however, such-mandatory language was not neces-

sary. The phrase was intended to acknowledge notice of an obligation to

participate in whatever reasonable funding mechanism was devised.”

A-8

located.”’ It points out this condition was identical with the permit

conditions for Wharf Park I and II, which are residentia!

projects.” Plaintiff compares this language with the articulated

purpose of the TIDF ordinance and the wording contained in the

permits for projects considered in Russ /, and concludes the

commitments were different. We find the argument unpersuasive.

The TIDF ordinance was enacted “[i]n order to be able to

provide public transit services for new development in the Down-

town Area,...[{j] It is the purpose of this ordinance to require

developers of new development in the Downtown Area to pay a

fee which is related directly to the incremental financial burden

imposed upon the Municipal Railway both for initial capital

outlay for the acquisition of rolling stock and the construction of

facilities; and for the long term operation, maintenance and

replacement of those facilities once they are in place.” (S.F.

Admin. Code § 38.3.) Each of the plaintiffs in Russ J and Russ I

had, as a condition of its building permit, the following language:

“In recognition of the need for expanded transportation services

to meet peak demand generated by cumulative office develop-

ment in the downtown area, [the developer] shall participate in a

downtown assessment district, or similar fair and appropriate

mechanism, to provide funds for maintaining and augmenting

transportation service, should such a mechanism be established

by the City.” (Russ II, supra, 44 Cal.3d at p. 844.) While the

wording of the condition contained in the Russ plaintiffs’ permits

differs from that in condition 5(c), our Supreme Court found the

conditions substantially similar. (/d., at p. 844, fn. 2.)

‘The Levi's Plaza approval provided that plaintiff “shall make a good-

faith effort to develop... housing on a nearby site, for low- and

moderate-income occupants.” Plaintiff complied with this provision by

building Wharf Park I and II, residential projects located between Levi's

Plaza and Pier 39.

<_<

A-9

The fact that Levi’s Plaza is located away from the traditional

downtown area does not alter our view that the project is subject

to the TIDF. Plaintiff stipulated that the project is within the

geographic downtown area as defined by the ordinance. Plaintiff

had notice that its development would adversely impact on public

transportation and agreed to participate in funding mechanisms to

assure adequate transit service to its project.

DISPOSITION

The judgment is affirmed.

White, P. J.

We concur:

Mermill, J.

Werdegar, J.

A-10

Blue Jeans Equities West v. City and County of San Francisco

A051759

Tnal Court:

Trial Judge:

Counsel of Appellants:

Counsel for Amicus

Curae on Behalf of

Appellants:

Counsel for

Respondent:

San Francisco County

Superior Court

Daniel M. Hanlon

Howard N. Ellman

Ellman, Burke, Hoffman & Johnson

One Ecker Building

Suite 200

San Francisco, CA 94105

Ronald A. Zumbrun

Edward J. Connor, Jr.

Richard M. Stephens

Pacific Legal Foundation

2700 Gateway Oaks Drive

Suite 200

Sacramento, CA 95833

Louise H. Renne

City Attorney

George E. Krueger

Utilities General Counsel

Robin M. Reitzes

Deputy City Attorney

City Hall, Room 206

San Francisco, CA 94102-4682

A-1]

APPENDIX B

First Appellate District, Division Three, NO. A051759

S025468

IN THE SUPREME COURT

OF THE STATE OF CALIFORNIA

IN BANK

Blue Jeans Equities West,

Appellant

V

City & County of San Francisco,

Respondent

Supreme Court Filed

April 29, 1992

Robert Wandruff Clerk

Deputy

Appellant’s petition for review DENIED.

The request for an order directing depublication of the opinion is

denied.

Lucas

Chief Justice

A-12

APPENDIX C

r f. Cable Car Line

KEY

» Levi's Plaza

Wharf Park

- cc Two Projects Involved

In Russ Bldg Partuershig

FILBERT

,

Pon

\ele + Pag

= $ - AS

ca

yiave

ose

as

BOSTON” wrtAL

> “paD

At gt

eume

>ja7a

paar SEY

)

“1% aid | Morne

\s =

woort® LY

mo lan pore =}

ye | gust