The NFIB Small Business Legal Center is constantly working to protect property rights because we know that those protections are vital for a free and prosperous society. They are especially important for small business owners who have often invested their own personal assets into acquiring land or equipment essential for their operations. This is why we’ve been fighting to oppose eminent domain abuse, to ensure compensation for overly burdensome regulatory restrictions, and full and equal access to the courts for landowners seeking just compensation for takings.
In our last post we highlighted an important property rights case—Murr v. Wisconsin—that the Supreme Court has agreed to hear this term. But as excited as we are that the Court has agreed to hear that case, we’re also hoping that SCOTUS will grant certiorari in at least one other major property rights case this term. There are a number of worthy petitions pending before the Court. Here is a quick run-down of those property rights cases that we think raise especially important questions for small business:
California Builders Association v. City of San Jose
In this case we’re asking the Supreme Court to resolve a conflict among the lowers on the question of whether government may—through legislative enactments—require landowners to dedicate private property to the public as a condition of obtaining a building permit. In 2013 we helped secure a win for property rights in Koontz v. St. Johns River Management District, wherein the court held that bureaucrats cannot require a landowner to pay money as a condition of getting a permit approval, unless the exaction bears a nexus and is roughly proportional to mitigate some anticipated public harm. Building on that decision, we would like the see the Supreme Court clarify that the same rules apply when permit conditions are imposed as a legislative requirement in an ordinance. But a number of courts—including the California Supreme Court—hold that legislatively imposed permit conditions are to be reviewed under a more lenient standard. Until that issue is resolved, landowners seeking to obtain permits will continue to face extortionate demands for dedication of land or money in many jurisdictions.
Arrigoni v. Town of Durham
We’re hoping the Supreme Court will grant review Arrigoni, so as to re-open the federal court house doors for landowners seeking to assert their constitutional rights. Since the Supreme Court’s 1985 decision in Williamson County Regional Planning Commission v. Hamilton Bank, the Court has held that landowners must first pursue claims for just compensation in state court—when their land has been taken by state actors. But, a growing body of scholarship argues that Williamson County was wrongly decided, and we would like to see the Supreme Court reconsider that decision. Until then, landowners will be shut-out of the federal courts, and forced to litigate in state courts that may be more inclined to side with state or local officials.
Resource Investment Corp. v. United States
Property owners asserting monetary claims of over $10,000 against the federal government are required to pursue those claims in the Court of Federal Claims (CFC), which means a property owner seeking just compensation for the taking of property will generally have to file in the CFC. And so as to prevent litigants from taking multiple bites at the same apple, the statute denies the CFC jurisdiction to hear any claim that a plaintiff might seek to bring if the plaintiff has another suit “for or in respect to” a claim pending against the United States or its agents in another court. Unfortunately this has resulted in major complications for small business property owners because the statute likewise denies the CFC jurisdiction to hear claims for equitable relief—meaning that a property owner may, in some cases, be forced to choose between pursuing a takings claim and asserting other protected constitutional rights.
For example, a property owner might seek a federal permit as a necessary requirement to develop a plat of land. Suppose a federal agency denies the permit without explanation. Since permit applicants are guaranteed a due process right against arbitrary and capricious government actions, the owner might then wish to file a complaint in a federal district court seeking a declaratory judgement that the permit should be issued. Yet at the same time, the permit denial might also be said to violate the owner’s constitutional rights if it is said to amount to an uncompensated taking.
The trouble is that, according to a recent decision from the Federal Circuit, the owner cannot pursue both claims simultaneously. The owner can choose to pursue either the takings claim or pursue injunctive relief, but cannot pursue both claims at the same time. This is highly problematic because, in many cases, the statute of limitations for the takings claim will expire before the owner gets a final decision in a separate suit. This presents a catch-22.
Importantly, the Supreme Court set this issue up back in 2011, in United States v. Tohono. In that case, the Court held that the CFC is barred from hearing a takings claim if it is predicated substantially on the same facts as presented in another case that the owner is pursuing in another court. But in Resource Investment, Inc., the Federal Circuit interpreted this as requiring it dismiss a takings case if it shares any of the same facts as those presented in the owner’s simultaneous suit for injunctive relief, which flatly bars the owner from seeking just compensation if he is pursuing any other cause of action predicated upon any of the same facts.
We hope the Supreme Court will take this case to rebuff the Federal Circuit’s interpretation of Tohono, because otherwise property owners will—in many cases—be forced into catch-22 cases: either assert one constitutional right and give-up the right to pursue a takings claim, or pursue a takings claim and give up the right to pursue another valid cause of action. Interestingly, Justice Sotomayer foresaw this problem in her concurrence in Tohono: “After today’s decision, § 1500 may well prevent a plaintiff from pursuing a takings claim in the CFC if an action to set aside the agency action is pending in district court. This type of plaintiff may face a choice between equally unattractive options: forgo injunctive relief in the district court to preserve her claim for monetary relief in the CFC, or pursue injunctive relief and hope that the statute of limitations on her takings claim, see 28 U.S.C. § 2501, does not expire be-fore the district court action is resolved.” Our hope is that the Supreme Court will grant this petition to redress this inequity.
Taylor v. Yee
In another promising petition, the Supreme Court is considering a case asking whether California’s Unclaimed Property Law violates due process. The petition alleges that the State has aggressively used its Unclaimed Property Laws to confiscate property (stocks, bank accounts, safety deposit boxes, etc)—selling taken property without fair notice to the rightful owners. Specifically, the case alleges that the State sends letters to knowingly stale addresses when the State could—with reasonable efforts—obtain current addressed: “As a result, some 28.6 million of California’s 38 million total inhabitants are today listed as ‘unknown.’ The Controller holds property belonging to such ‘unknown’ persons as the Queen of England (Elizabeth Windsor), Vladimir Putin, Presidents George W. Bush and Barack Obama, at least one member of the California Supreme Court, and two of the judges on the Ninth Circuit panel that heard this case below.”
In 1959 California’s Unclaimed Property Law allowed for confiscation of property from unknown persons if the property had been unclaimed and dormant for 15 years. But in 1976 the State shortened the time-frame for confiscation to seven years, then five years in 1988, and three years in 1990. This radical shortening of the time for escheat—combined with the State’s aggressive auditing practices to find unclaimed property—has resulted in the collection of “property valued at over $7.6 billion, taken from over 28.6 million persons.” Of course, these sort of unclaimed property laws are common throughout the United States. Thus the question is whether these states are acting consistent with due process when effectively confiscating such property without taking basic efforts to identify the owners:
“When California seeks to locate residents to force them to pay taxes that are due and owing, it is quick to resort to the Department of Motor Vehicles (‘DMV’) database and other readily available sources of information. Yet when it comes time to seize property under the mandatory language of UPL that requires the state officials to locate the owners and to return their property, and to otherwise provide constitutionally required notice prior to the appropriation of property, the same property owners are ‘unknown’ to the available databases. Inexplicably, the State is not able to find millions of its own citizens.”
Interestingly the case has been relisted for consideration six times. We assume this means the Court is seriously considering granting the petition or perhaps a remand to the Ninth Circuit. We will keep our fingers crossed, as this seems to raise an important issue of vital importance to property owners throughout the nation.