NFIB Asks SCOTUS to End Legislative Exaction of Property Rights

Date: June 20, 2016

NFIB Asks SCOTUS to End Legislative Exaction of Property Rights

The National Federation of Independent Business (NFIB) has joined with Southeastern Legal Foundation (SLF) urging the U.S. Supreme Court to hear a case to clarify a murky area of the law. Specifically, the case concerns the Fifth Amendment right against uncompensated takings of property, and asks whether that right applies when government demands that you must dedicate your property as a condition of a permit approval? 

A Little Background

The dispute in Common Sense Alliance v. San Juan County, Washington revolves around a local ordinance requiring owners of shorefront property to dedicate a portion of their land as a conservation area in exchange for development permits. In the words of the late Justice Scalia, such a regime amounts to an “out-and-out plan of extortion.” 
Citing environmental concerns, San Juan County bases this controversial permitting requirement on reports purporting to show a public need for filtered storm water. The county ordinance, however, does not require site specific analysis to determine the necessary size of the conservation area. Instead, San Juan County uses a one size fits all approach, requiring owners to dedicate roughly 60-70% of their shoreline land as a conservation area, in order to filter storm water pollutants running off of other people’s land.

NFIB’s Position in Common Sense Alliance

NFIB and SLF argue that the time has come for the Supreme Court to decide once and for all whether such permit conditions are constitutional when required by ordinance. We point to a deep split among the federal circuits and state courts on this question. Some courts hold that conditions requiring dedication of property are subject only to minimal review when imposed by ordinance, whereas other courts apply a more demanding standard, which places the burden on the permitting authorities to demonstrate that a contested condition is needed to mitigate adverse impacts of development. 

This more demanding standard comes from Koontz v. St. Johns River Management District, which essentially says that the government cannot force a property owner to surrender their Fifth Amendment right to just compensation in exchange for permit approval. But, there is a longstanding rift between the lower courts as to whether this heightened standard of review should apply when a permit condition is imposed by ordinance. While the lower courts recognize extortionate conditions as unconstitutional when imposed administratively, at the discretion of permitting authorities, many courts refuse to apply that same standard when the permit condition is imposed legislatively. Yet, as NFIB argues, the Fifth Amendment should apply just the same, regardless of which branch of government takes one’s property.

Previous Efforts and Issues with the Distinction

NFIB has raised this concern with the Court multiple times. Most recently, the Court denied certiorari in the case of California Building Association v. City of San Jose, California. But, Justice Thomas wrote a separate concurring opinion in which he indicated his willingness to resolve the circuit split in the near future. Thomas said that he did not support certiorari in California Building Association, because he did not view that case as the best vehicle for resolving the issue. But we believe that Common Sense Alliance raises the issue more directly, and presents an even better opportunity for the Court to resolve this troubling split. Indeed, there is no question in this case that – if the exaction was imposed administratively, it would have been held an unconstitutional taking; however, because it was imposed through a legislatively enacted ordinance, the Washington courts chose to apply a toothless standard of review to uphold the ordinance.

On its face, the distinction between legislative and administrative exactions does not make sense for a few reasons. To start, the Koontz decision itself dealt with a legislatively imposed exaction. And the same is true of the Supreme Court’s seminal decision in Nollan v. California Coastal Commission, in which the Court held that the California Coastal Commission could not require a landowner to dedicate property to public use as a condition of permit approval – notwithstanding the requirements of the California Coastal Act. 

Secondly, distinguishing between which government entity is responsible for the taking does not appear to have any legal basis. Justice Thomas expressed concern over this distinction in his concurrence in California Builders Association. And relatedly, the distinction does not make sense from a procedural standpoint. Through stare decisis and other procedural safeguards, people going into courts suing on similar federal issues should expect similar outcomes. By allowing the distinction to remain, the Court is allowing similarly situated people across the country to receive entirely different determinations of the same issues. 
What this Means for Small Business Owners and Why You Should Care

The determination of this issue is of incredible import to NFIB members. If certiorari is denied, the current split will remain in effect. This will allow legislative bodies to skirt Constitutional requirements – and to continue to manipulate our constitutional rights out of existence. 

This is why NFIB and SLF have filed an amicus brief in support of a grant of certiorari. A final decision from the Supreme Court in favor of the Koontz test would be a big victory for small businesses. By closing the legislative exaction loophole, small businesses and property owners will have extra protection from unjustified government takings. Additionally, full adoption of the Koontz rule will allow for more predictable adjudication concerning Fifth Amendment takings. 

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