Posted by: Patricia Salkin | October 28, 2010

4th Circuit Court of Appeals Finds Regulatory Takings Allegation Satisfies Ripeness Standard Where Further Administrative Review Would be Futile

In a somewhat complicated fact pattern, Acorn Land, LLC (Acorn) purchased a tract of land in Baltimore County in a residential zone. Shortly after, Acorn filed a petition to amend the property’s water/sewer classification to facilitate residential development. While several public agencies as well as the County Planning Board reviewed and all recommended approval of the petition, the Baltimore County Council (Council), without explanation, failed to approve Acorn’s petition preventing Acorn from proceeding with the development. Acorn then filed a petition for writ of mandamus in the Circuit Court to compel the Council to approve of the zoning petition. The court found that the Council’s denial was arbitrary and capricious. The County appealed but also filed a petition to rezone Acorn’s tract of land which was approved by the Council, ultimately cutting the residential density of the land in half. In essence, the Council’s decision to rezone Acorn’s property effectively allowed the County to sidestep the circuit court’s order. Based on these events, Acorn filed a complaint in the Circuit Court  asserting that the Council’s actions (1) were arbitrary and capricious and violated Acorn’s substantive due process rights, and (2) effected an unlawful taking without just compensation in violation of both the Maryland and United States Constitutions. The suit, upon the County’s notice of removal, was sent to the District of Maryland where it was dismissed as unripe due to Acorn’s failure to exhaust applicable state remedies namely their failure to petition the County Board of Appeals.

On appeal the Circuit Court considered Acorn’s argument that the district court erroneously dismissed its federal takings and substantive due process claims for lack of ripeness. To present a ripe regulatory takings claim, the plaintiff must demonstrate that: (1) the government entity charged with implementing the regulations in question has issued a “final decision regarding the application of the regulations to the property at issue,” and (2) the plaintiff has sought and been denied just compensation through available and adequate state procedures for seeking just compensation. Williamson County Reg’l Planning Comm’ n v. Hamilton Bank of Johnson City, 473 U.S. 172, 186, 195 (1985). As a result, the court looks at the issue of whether Acorn satisfied Williamson’s first, “final decision” prong. The court found that Acorn was subject to unfair and unreasonable zoning procedures when the Council denied Acorn’s petition, without explanation, after the petition met the County’s objective criteria for amending property classification. Further, the Circuit Court for Baltimore County went so far as to deem such action arbitrary and capricious. Despite the circuit court’s order to the Council, they still denied Acorn’s petition by rezoning the property. Therefore, the court held that under these circumstances “it would be both futile and unfair to require Acorn to jump through any additional administrative hoops to obtain a ‘final decision.” As a result of this the Williamson’s first prong is satisfied and the takings claim is ripe for review.

The court said that for a valid takings claim, a plaintiff must demonstrate that the government took property without just compensation. Further, in the regulatory takings context, a property regulation that goes “too far” will be recognized as a taking. The court found that Acorn’s complaint plausibly plead that the Council’s decision to rezone the property had an adverse economic effect on Acorn by prohibiting them from residentially developing its property. Also, Acorn had proven that they had a reasonable investment-backed expectation to residentially develop the property. Additionally, the court held that Acorn has properly pled that the Council’s actions constituted an illegitimate and inequitable attempt to prevent them from developing its property and that they have ultimately sufficiently pled a regulatory takings claim that is plausible on its face.

The court, however, also found that Acorn had failed prove an arbitrary and capricious substantive due process claim. To make this claim, Acorn must demonstrate “(1) that [it] had property or a property interest; (2) that the state deprived [it] of this property or property interest; and (3) that the state’s action falls so far beyond the outer limits of legitimate governmental action that no process could cure the deficiency.” Sylvia Dev. Corp. v. Calvert County, 48 F.3d 810, 827 (4th Cir.1995).  The court found that even assuming arguendo that Acorn’s complaint sufficiently meets the first two prongs, it would fail under the third prong because it did not plausibly plead that no state-court process could cure Acorn’s injury because their complaint did not assert that seeking such relief in state court would not rectify its injury. 

Acorn Land, LLC v. Baltimore County, 2010 WL 3736258 (C.A. 4th Cir. 9/21/2010)

 The opinion can be accessed at:

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