Legal Briefs

Taking Issue with Taking by Regulation

The story is familiar to property owners and legal practitioners: In 1990, John and Florence Dolan attempted to obtain approval from the city of Tigard, Oregon, to replace their existing plumbing and electrical supply store in downtown Tigard with a new one. As a condition of its approval, the city required that the Dolans dedicate approximately 10 percent of their land for open space and pedestrian and bicycle paths. The Dolans objected and sued the city.

The ending to this story—or at least what most people consider to be the ending—is well-known. In 1994, the case gained national attention when the U.S. Supreme Court, in Dolan v. Tigard, ruled in favor of the Dolans and established a three-pronged test to determine whether governmental regulation of land is so intrusive as to constitute a taking for which compensation must be made. First, does the regulation amount to a taking? Second, does the regulation serve a legitimate public interest? Finally, is the exaction roughly proportional to the government’s legitimate interest? If the answer to each of these questions is "yes," then the property owner is not entitled to compensation.

On its surface, the 1994 case appeared to be the culmination of the dispute between the Dolans and Tigard and a fairly clear test for future cases on taking by regulation. The history of the case since the Supreme Court’s decision, however, is quite different.

For nearly four years after the decision, the dispute between the Dolans and Tigard continued unresolved. The Supreme Court had remanded the case for reconsideration of the conditions that the city had imposed on issuing the Dolans’ permit. However, notwithstanding the Supreme Court’s decision, the city again decided to regulate the Dolans’ property without compensation. Again, the Dolans brought suit, and it was only recently that the city and Florence Dolan (John Dolan died before the case was resolved) finally reached a settlement. The city agreed to pay $1.4 million for property taken from the Dolans, as well as $100,000 in attorneys’ fees, and granted Florence Dolan the right to build the new store. In addition, a commemorative plaque of the Supreme Court’s 1994 decision will be erected along the pathway built on land taken from the Dolans.

The protracted length of the dispute between the Dolans and Tigard only highlights the real-life difficulties that governmental entities and property owners face in balancing the public interest against a property owner’s private interests.

Post-Dolan Decisions
The July 1998 case of Burton v. Clark County, decided by the Washington Court of Appeals, reflects some of the subtleties involved in determining when governmental regulation of land use constitutes a taking. In Burton, the county conditioned its approval of a plat pertaining to land owned by Lance Burton upon Burton’s agreement to allow a road right-of-way across his property.

In considering this case, the Washington court applied the Dolan test, with some embellishment. The court first noted that when the government puts conditions on a land-use permit, it must identify a public problem, or problems, that the condition is designed to address. Second, the government must show that the development for which a permit is sought will create or exacerbate the identified public problem. Third, the government must show that its proposed condition or exaction tends to solve, or at least alleviate, the identified public problem. Finally, the government must show that its proposed solution to the problem is roughly proportional to that part of the problem created or exacerbated by the landowner’s development.

In Burton, the court found that the county’s proposed condition related to legitimate public concerns: minimization of pocket neighborhoods (residential neighborhoods isolated from other residential neighborhoods), increased traffic congestion, and a need for emergency vehicle access. However, the court did not find sufficient evidence that the county’s condition of a road right-of-way would solve the identified concerns. The court noted that there was no way of knowing when, if ever, the road across Burton’s property would extend to another existing road so that the identified concerns would be addressed. The court stated, "We assume that the government may sometimes rely on the future as well as the present when attempting to establish [the relationships between the project, the identified public problems, and the proposed condition]. At a minimum, however, it may not rely on the future unless the record furnishes a basis for inferring what the foreseeable future holds."

The progeny of post-Dolan cases continue to refine the applicability of the Dolan test to property owners’ challenges to various types of governmental regulation. For example, in the recent case of Garneau v. City of Seattle, decided by the U.S. Court of Appeals for the Ninth Circuit in May, that court concluded that the Dolan test applies only to cases in which governmental action affects a specific piece of property, and not to cases in which the mere enactment of a statute is challenged (as opposed to applying that statute to particular property). Thus, the court declined to apply the Dolan test to a situation in which landlords brought a state court action against Seattle to challenge the constitutionality of an ordinance requiring landlords to pay half the cost of relocating displaced low-income tenants.

Unfortunately, for reasons not entirely clear from the court’s decision, in Garneau, the landlords refused during the discovery phase of the case to produce information concerning the value of their properties and the projected impact the ordinance would have on the value of each property. They were thereafter prohibited from producing such evidence as a sanction for their apparent continued refusal to comply with court orders for the city’s request for such information. Accordingly, insufficient evidence existed in the record to support an argument that the ordinance impermissibly had affected the value of the landlords’ properties.

Numerous other cases involve challenges of governmental regulation or action as impermissible takings. Indeed, the past decade has witnessed a marked increase in the number of court challenges to governmental regulation. The unfortunate side to this is that the legislative system historically was intended as the primary system to balance the needs of the American public as a whole. Instead, the court system, historically intended as the forum of last resort to resolve disputes and which, by its nature, addresses the needs of the particular parties, increasingly is being utilized to forge the law of the land in the land-use arena.

Samuel H. Weissbard, JD, and Camellia K. Schuk, JD

Samuel H. Weissbard, JD, is senior counsel and Camellia K. Schuk, JD, is an associate in the Irvine, Calif., office of Cox, Castle, & Nicholson, LLP. Contact them at (949) 260-4600 or sweissbard@ccnlaw.com and cschuk@ccnlaw.com.The discussion of legal issues in this column is for informational purposes only. Results may vary depending on state laws and individual circumstances.

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