Posted by: Patricia Salkin | March 24, 2010

District Court Dismisses State Taking Claim but Allows Federal Takings, Retaliation, Equal Protection and Due Process Claims to Proceed

Plaintiff petitioned the City for annexation of their property in order to create a residential subdivision which was a part of the 60 acre lot of farmland they purchased.  The plaintiffs received preliminary plat approval but the development ran into problems.  Plaintiffs and defendants disagreed over many aspects of the development and plaintiff alleges that defendants “actively frustrated and delayed its development efforts, at least in part, due to a preference in favor of other area developers. . ..”  Because of the delays, plaintiff incurred additional development costs.  Specifically, plaintiff wanted to move development along despite disputes about the location of the sewer line.  The City approved “an early grading permit” which allowed plaintiff to conduct site clearing and grubbing as well as mass grading and shaping of the site. In 2005, the City issued a stop work order but Plaintiff did not comply.  The City issued a second stop work order asserting it was concerned about contamination.  Then in 2006, the City sent an email to Plaintiff making four representations about the project which had not been previously discussed with Plaintiff. Plaintiff went on to receive final bids from developers but due to the delays in development, the market value in the lots dropped.  Plaintiff alleged, among other things lost profits due to delay but also additional costs for interest payments on loans. The City assert that the parties’ 2006 public improvements contract should govern because the contract was the result of many drafts and revisions and included an integration clause stating that all previous agreements were not binding.  Plaintiffs, however, disagreed and argued that the public improvement contract was simply to ensure plaintiffs completed the improvements.

The District Court concluded that the Plaintiff’s state takings claim fails because Plaintiff was able to sell the majority of the parcels of land.  Oregon law states that “taking occurs only when a property owner is deprived of all beneficial use of its property by the government’s allegedly unlawful actions.”  The court reasoned that the approximate $4 million in profit to the Plaintiff did not deprive Plaintiff of all beneficial use. Under the federal takings claims, plaintiff asserts that the exactions were specific enough to be subject to the rough proportionality analysis.  Plaintiff alleges that the changes for the right of way were exactions. The City has the burden of showing compliance with the rough proportionality standard and in this instance the City did not meet their burden.   The court finds that there is a genuine issue of material fact concerning the federal takings clause. 

Plaintiffs’ retaliation claims stems from the City allegedly increasing the right of way dedication, requiring improvement on a property near City property and refusing to grant a temporary easement for utility installation.  Plaintiff asserts that this issue should be assessed as a regulated entity raising a claim against a regulatory authority instead of being a contract issue.  The court looks at the relationship between plaintiff and defendant to determine if it was a like a “business vendor operating under a contract with a public agency.”  The court determined the relationship to be similar to that found between a regulated entity and regulated agency because there was no employment relationship involved, the contract between the two parties did not involve services, and plaintiff sought permission to develop its property.  Plaintiff further argues that it repeatedly insisted that the City comply with the Sewer Master Plan.  This insistence on proper application of the law by public officials is protected under the First Amendment.   The City argues that plaintiffs had a right to bring grievances against the City but plaintiffs do not have a right if their grievances are not legitimate.  The court disagreed.

Plaintiff also alleged both substantive and procedural due process violations. Plaintiff alleges it had a protected property interest after defendants issued the preliminary plat approval.  Looking to Oregon courts, the District Court determined that ‘the approval of a preliminary plat for a subdivision is a final appealable order, which may be challenged by a writ of review.”  Thus, the plaintiffs did have a property interest in this case and in denying the City’s motion for summary judgment, the Court concluded that there is a genuine issue of material fact.           

David Hill Development, LLC v. City of Forest Grove, 2010 WL 649743 (Dist. Ct. OR 2/23/2010)

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