Posted by: Patricia Salkin | August 4, 2008

Ninth Circuit Certifies Takings Questions to Oregon Supreme Court

In a case involving appeals from the determination that a taking of its property did not occur as the result of certain actions by the City, that other actions did constitute inverse condemnation and that defendant violated plaintiff’s First Amendment rights by retaliating against plaintiff for its speech, the defendant removed the case to federal court following a state court action over a maintenance bond requirement.  Plaintiff also alleged, inter alia, inverse condemnation and retaliation claims.

            The Ninth Circuit said that the inverse condemnation claim was a dominant claim and must be reached first, certifying three questions to the Oregon Supreme Court:

            1.         Whether under Oregon Law an inverse condemnation plaintiff alleging a physical taking or unconstitutional exaction must first exhaust local remedies before resorting to courts;

            2.         Whether construction of off-site improvements imposed as a condition of development approval may constitute an exaction or physical taking; and

            3.         Whether a street vacation under ORS 271.110 is ultra vires as not complying with the landowner consent provisions of Oregon law.

            The court noted that in 1903, defendant accepted the Willamette Tracts subdivision.  Later, a portion of that area was approved for a corporate park with conditions.  Plaintiff entered into a public improvement guarantee (“pig”) with the City to assume completion of public improvement conditions.  Plaintiff paid systems development charges for some improvements which charges exceeded the cost of those improvements so plaintiff, instead of giving a refund and cash, awarded plaintiff a certificate with the face value of $384,450.00.  However, this was not the only way the City had handled this issue before, having given cash refunds on another occasion.  The certificate could not be redeemed for cash, was valid only for 10 years, and could only be used for half the cost of improvements.  While the certificates may be sold or transferred, there was a small market for them and plaintiff was only able to sell it at a 75% discount.  Plaintiff did not complete its improvements on time but had prospective tenants ready to occupy the park, so it entered into an agreement by which it got a temporary occupancy permit and released certain public improvement claims.  Plaintiff claimed defendant breached the agreement by requiring additional public improvements and refusing to release its transportation improvement performance bond.

            Plaintiff filed suit in state court.  Subsequently the matter was removed to federal court which dismissed certain of plaintiff’s claims and held a 9-day bench trial on the remaining claims, as well as the City’s five counterclaims, in 2005.  The magistrate denied the City’s counterclaims, as well as some of plaintiff’s claims but granted relief to plaintiff on two inverse condemnation claims and one for unconstitutional retaliation.  However, the magistrate also found two other inverse condemnation claims unripe as plaintiff did not take advantage of available relief from the City.  Defendant appealed the denial of its counterclaims and plaintiff’s prevailing on the two inverse condemnation claims and unlawful retaliation claim.  The city appealed denial of its counterclaims, as well as the judgment in plaintiff’s favor.

            Under ORS 28.200, certification is permitted, inter alia, if the question of law is unresolved by Oregon case law.  Under Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985), a takings claim must be ripe, so that plaintiff must avail itself of all available administrative remedies and use state compensation procedures before resorting to the Fifth Amendment and federal courts.  Ripeness is jurisdictional.  However, when a physical taking is alleged, use of the local administrative remedies is not required, according to Ninth Circuit case law. 

The first question relates to whether the filing of an inverse condemnation complaint in this case by itself fulfils ripeness requirements.  The Oregon Supreme Court has not passed on this issue and there are two cases, one at LUBA and the other in the Oregon Court of Appeals, reaching different conclusions, i.e. Nelson v. City of Lake Oswego, 869 P.2d 350 (Or. App. 1994) and Reeves v. City of Tualatin, 31 Or. LUBA 11 (1996).  In this case, plaintiff did not exhaust its administrative remedies and the unresolved question is whether it was required to do so.

            Similarly, the Oregon Supreme Court has not weighed in on the question of whether off-site improvements may be the basis of a takings claim.  The Oregon Court of Appeals’ decisions go both ways.  Compare Clark v. City of Albany, 904 P.2d 185 (Or. App. 1995) with Dudek v. Umatilla County, 69 P.2d 751 (Or. App. 2003).  The question arises because the condition at issue does not involve the physical transfer of property as part of a development application.  If it is an exaction and does not require exhaustion, it may be examined under the Dolan analysis.  If not, it is unclear whether these requirements involve inverse condemnation.

            Finally, the court noted that a street vacation in this case was granted in error, as the landowner consent provisions of ORS 271.080 were not met.  The City contends that this failure voids the action it took in granting the vacation.  The issue is whether the vacation was ultra vires and void so that plaintiff did not acquire the property interest in adjacent land and the takings conclusion of the magistrate was in error.  If a vacation is in fact valid, the judgment on this issue must be affirmed.

            The court thus certified these three questions to Oregon Supreme Court and has stayed for the proceedings pending the response of the Oregon Supreme Court.

           

 

West Linn Corporate Park, LLC v. City of West Linn, ___ F3d ___ (9th Cir., July 28, 2008).  The opinion can be accessed at:

http://www.ca9.uscourts.gov/ca9/newopinions.nsf/C20D2A36D6AB28278825749400584071/$file/0536061o.pdf?openelement

 

Special thanks to Edward J. Sullivan, Esq. of Garvey Schubert and Barer in Portland, Oregon for providing this case abstract.

http://www.gsblaw.com/people/bio.asp?EmployeeID=S157970608

 

See Robert Thomas’s summary of the case at InverseCondemnation:

http://www.inversecondemnation.com/inversecondemnation/2008/08/ninth-circuit.html


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