Fed. Dist. Court of Alabama Finds Landowners Challenges to Rezoning were Adequately Plead to Survive a Motion to Dismiss

This post was authored by Matthew Loescher, Esq.

Plaintiff BVCV High Point, LLC (“BVCV”) owned undeveloped property in a mixed-use zoning area within the city limits of Prattville, Alabama. In 2021, the Prattville City Council rezoned BVCV’s property from R-4 (multifamily residential) to B-2 (general business). Challenging the rezoning ordinance, BVCV sued the City of Prattville and the four members of the Prattville City Council who voted in favor of the rezoning ordinance. In this case, BVCV argued that the rezoning ordinance was a takings under the Fifth and Fourteenth Amendments and violated substantive due process under the Fourteenth Amendment.

BVCV first argued that it had a constitutionally protected property interest in the R-2 residentially zoned property. In reviewing this claim, the court first noted the fact that the BVCV property has remained undeveloped since BVCV purchased it weighed in the City’s favor. Specifically, there were no allegations that BVCV had made any physical improvements to the property or had obtained any permits, and there was no demand for damages in the Complaint for the recovery of any investments made in developing the property. Notwithstanding this, the court found that these undeveloped arguments illustrated why the balancing should await discovery and the evidence. The record reflected that during the related Prattville City Council meeting, two council members expressed the sentiments of their constituents that they did not want additional multifamily housing in the district; however, the minutes did not indicate the reasons for those concerns and whether those concerns were directed toward the health and general welfare of the public.

The City next claimed that BVCV’s allegations of lost profits from a potential sale of the property were insufficient for measuring the reduction in the property’s value has support. The court noted a holding by the Federal Circuit, which set forth “the vast majority of takings jurisprudence examines, under Penn Central’s economic impact prong, not lost profits but the lost value of the taken property.” Here, BVCV did not attempt to compare the potentially lost profits “to anything, such as some benchmark standard.” Additionally, there were no allegations that, absent the 2021 rezoning ordinance, BVCV would have sealed the deal with a signed contract for the sale of Lot C. The reflected that the anticipated sale still was in the negotiations phase. Additionally, while BVCV alleged that the rezoning ordinance denied its ability to use the property for multifamily housing, it failed to allege that it had been denied these other uses of the property. The court found that the absence these allegations did not align with settled precedent that a land-use regulation can prohibit the most beneficial use of the property and still not rise to the level of a taking.

The court next found that the zoning ordinance in effect at the time of these negotiations rendered plausible the allegations that BVCV had a reasonable investment-backed expectation that it could sell the property to a third party for residential development. The allegations further showed that the 2021 rezoning ordinance interfered with this reasonable investment-backed expectation, as the ordinance put an end to BVCV’s negotiations for Lot C’s purchase by a third-party developer. As such, the allegations weighed in favor of BVCV on the second Penn Central factor.

The court lastly noted that rezoning BVCV’s property from R-4 to B-2, was facially inconsistent with the property’s designation of mixed-use transitional. As such, the allegation that “the purported adopting of the Rezoning ordinance was done in contravention of the City’s comprehensive plan” plausibly alleged that the City singled out BVCV’s property and prevented its owner from pursuing residential development. Thus, there was sufficient evidence in the Complaint that the takings claim, taken as true, survived Rule 12(b)(6) review. Additionally, the allegations were enough to establish a plausible basis for finding that the 2021 rezoning ordinance lacked a rational basis. The City’s motion to dismiss BVCV’s substantive due process claim was therefore denied.

BVCV High Point, LLC v City of Prattville, 2022 WL 3716592 (MD AL 8/29/2022)