Fifth Circuit Court of Appeals Rejects Claim that Denial of Zoning Application Amounted to a Regulatory Taking and Violated Owner’s Rights to Substantive Due Process and Equal Protection

Plaintiff Hackbelt 27 Partners, L.P. owned 20.74 acres of undeveloped land in the city of Coppell, Texas, that was zoned for agricultural use. In 2012, Hackbelt entered into contracts to sell a portion of its property to developers to develop a mixed-use project. Hackbelt then filed an application with the City to change its property’s zoning designation from agricultural to a “Planned Development district for mixed-use.” Hackbelt appealed from the order granting summary judgment in favor of the City of Coppell, and requested a zoning change, which the City ultimately denied. Hackbelt sued, claiming the denial of its application amounted to a regulatory taking and violated its rights to substantive due process and equal protection. The district court disagreed and granted summary judgment for the City on all claims.

On appeal, Hackbelt argued that issues of material fact remained regarding whether the City’s denial was rationally related to the general welfare. However, the record indicated that City Council members expressed concern that Hackbelt’s proposal lacked the “cohesive and integrated quality” possessed by other mixed-use developments. The Council members also did not see Hackbelt’s proposed development as the best use for the property and believed that the proposed hotel was not ideal. The court found these rationales were sufficiently related to the City’s interest in promoting the general welfare to sustain the City’s action. Accordingly, the court affirmed the district court’s grant of summary judgment for the City on Hackbelt’s federal substantive due process and state due course of law claims.

Hackbelt next contended that the district court erred in granting summary judgment on its equal protection claims asserted under the state and federal constitutions. The court found that Hackbelt’s equal protection claims failed because Hackbelt and its comparator, The Avenue, were not similarly situated. Hackbelt’s property and zoning application were different from The Avenue’s because its property was ten times smaller than Hackbelt’s, and its zoning application did not include a request to build a hotel. Given the smaller size of The Avenue’s plan, the district court found that the various uses (i.e., residential and retail) were “very close together.”

Hackbelt lastly argued that issues of material fact remained regarding whether the City’s zoning decision constituted a regulatory taking under the Texas Constitution. However, Hackbelt failed to establish a material fact dispute as to whether the City’s decision substantially advanced a legitimate government interest, as Hackbelt’s property was still zoned and could be used for agriculture. Furthermore, Hackbelt failed to argue that the denial of its application had taken any value from the property for agricultural purposes. Despite Hackbelt’s claim that the City’s denial of its application has caused it to lose its development contracts, resulting in substantial financial loses, the court found that Hackbelt had no reasonable expectation to build a mixed-use development on its property when the property had been zoned for agricultural use only. Accordingly, the court found that there was no material issue of fact as to whether the City’s denial of Hackbelt’s zoning request unreasonably interfered with Hackbelt’s right to use and enjoy its property.

Hackbelt 27 Partners, L.P. v. City of Coppell, 2016 WL 5396660 (5th Cir. CA 9/27/2016)