Alto Eldorado v. The City of Santa Fe

• Court: Court of Appeals for the Tenth Circuit
• Decided: March 16, 2011
• Docket: 09-2214
• Status: Published

Opinion

FILED United States Court of Appeals Tenth Circuit

March 16, 2011 PUBLISH Elisabeth A. Shumaker Clerk of Court UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

ALTO ELDORADO PARTNERSHIP; RANCHO VERANO, LLC; CIMARRON VILLAGE, LLC; DENNIS R. BRANCH; JOANN W. BRANCH,

Plaintiffs - Appellants, v. No. 09-2214 THE COUNTY OF SANTA FE,

Defendant - Appellee,

and

THE CITY OF SANTA FE,

Defendant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO (D.C. NO. 6:08-CV-00175-JB-ACT)

Paul J. Beard II (Damien M. Schiff with him on the briefs), Pacific Legal Foundation, Sacramento, California, for Plaintiffs-Appellants.

Robert H. Freilich, Esq., Freilich & Popowitz, LLP, Los Angeles, California (Mark Basham, Esq., Basham & Basham, P.C., Santa Fe, New Mexico, and Stephen Ross, Esq., Santa Fe County Attorney, Santa Fe, New Mexico, with him on the brief), for Defendant-Appellee.

Before MURPHY, HOLLOWAY, and O’BRIEN, Circuit Judges. MURPHY, Circuit Judge.

I. Introduction

Developers owning property in the County of Santa Fe, New Mexico,

(“County”) brought a lawsuit challenging as unconstitutional under the Takings

Clause an ordinance requiring the provision of affordable housing in new

subdivisions. The district court dismissed the complaint on ripeness grounds and

the developers appealed. Exercising jurisdiction pursuant to 28 U.S.C. § 1291,

this court AFFIRMS the district court’s order dismissing the complaint.

II. Background

A County ordinance requires developers seeking to subdivide land for

resale in designated areas of the County to develop and sell a certain percentage

of the lots as affordable housing. These units, which may amount to as much as

thirty percent of a development, must be sold to qualified buyers at prices not to

exceed set maximums. If an affordable housing unit is resold within ten years,

the difference between the price paid by the qualified buyer and the resale price is

divided between the buyer-reseller and the County. The County’s portions of the

proceeds are set aside in a trust fund used for affordable housing. The ordinance

also provides to developers meeting its conditions a waiver of certain

development fees and a density bonus, which allows developers to build more

-2- homes in a given area. Developers may seek a waiver of the ordinance’s

requirements by demonstrating hardship or, in lieu of compliance with the

affordable housing requirement, developers may pay a fee to the County. The

City of Santa Fe (“City”) has a similar ordinance.

Alto Eldorado Partners, Rancho Verano, LLC, Cimarron Village, LLC,

(collectively “developers”) and two individuals brought suit against both the City

and County alleging the ordinances effectuate an unconstitutional taking of

property and violate their equal protection and due process rights. They also

alleged violations of state law.

The City moved to dismiss the complaint for lack of standing. The district

court granted the motion because neither the individual plaintiffs nor the

developers alleged ownership of property within the City that would be affected

by the city ordinance.

The County moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(1)

for lack of jurisdiction because the claims were not ripe for judicial review and

under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be

granted. The district court, sua sponte, concluded the two individual plaintiffs

did not have standing to sue the County because they failed to allege ownership of

property within the County. In contrast, the district court concluded the

developers did have standing because they alleged they owned property within the

County subject to the ordinance, and their plans to develop those properties were

-3- impacted by the ordinance. The district court nonetheless dismissed the

complaint. It concluded that the developers’ Takings Clause claim was not ripe,

that the other constitutional claims rested on the same factual foundation and

therefore were also unripe, and that the remaining state law claims should be

dismissed under the supplemental jurisdiction statute. The individual plaintiffs

did not appeal. The developers limit their appeal to the district court’s decision

that their claims against the County are not ripe.

III. Standard of Review

Ripeness doctrine is rooted both in the jurisdictional requirement that

Article III courts hear only “cases and controversies” and in prudential

considerations limiting our jurisdiction. Salt Lake Tribune Publ’g Co. v. Mgmt.

Planning, Inc., 454 F.3d 1128, 1140 (10th Cir. 2006). This court reviews de novo

the district court’s order of dismissal premised on lack of ripeness. Id.

IV. Discussion

The Takings Clause of the Fifth Amendment, applied to the States by

incorporation through the Fourteenth Amendment, provides: “[N]or shall private

property be taken for public use, without just compensation.” U.S. Const. amend.

V; Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 536 (2005). The classic taking is

the exercise of eminent domain to appropriate private property. Lingle, 544 U.S.

at 537. Nevertheless, as recently explained by the Supreme Court, government

regulation can also sufficiently interfere with private property rights as to amount

-4- to a taking. Id. A regulatory action is deemed to be a taking per se if it requires

a permanent physical invasion of private property. Id. at 538 (citing Loretto v.

Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)). A per se taking also

occurs if a regulation deprives the owner of all economically beneficial use of the

property. Id. (citing Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992)).

Even if a regulatory action does not amount to a taking per se, it may still rise to

the level of a taking under a multi-factor inquiry outlined in Penn Central

Transportation Co. v. New York City, 438 U.S. 104 (1978). Lingle, 544 U.S. at

538. The Penn Central inquiry focuses on the magnitude of the economic impact

of the regulatory action and the extent of the regulation’s interference with

property rights to determine if the regulatory action constitutes a taking. Id. at

540.

Importantly, the Takings Clause does not prohibit the taking of private

property for public use, but rather requires compensation when a taking occurs.

Williamson County Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 194

(1985). Such compensation does not have to be contemporaneous with the taking,

so long as there is an adequate provision for obtaining compensation that exists at

the time of the taking. Id.

The Supreme Court has outlined a two-prong ripeness test for regulatory

Takings Clause claims. First, there must be a final decision about how a

regulation will be applied to the property in question, including whether the

-5- implementing administrative body will grant any waiver or variance. Id. at 186-

91. Second, a property owner may not challenge regulatory action under the

Takings Clause until the owner has sought compensation, assuming adequate

procedures exist for doing so. Id. at 194. Because contemporaneous

compensation is not constitutionally required, if the state provides a mechanism

for seeking compensation, the property owner must utilize the procedure and be

denied just compensation before a takings claim is ripe. Id. at 194-95.

The district court noted the County conceded the inapplicability of the first

prong of Williamson County to facial challenges under the Takings Clause. The

County has likewise conceded that point on appeal. 1 As to the second prong of

Williamson County, it is uncontested that the developers have not sought

compensation by bringing an inverse condemnation action under New Mexico

state law, N.M. Stat. Ann. § 42A-1-29.

The developers relied on two bases to exempt their claim from the second

prong of Williamson County: their claim was facial rather than as-applied, and it

was an unconstitutional-conditions claim. Although the district court agreed

with the developers that their claim as a facial challenge was exempt from the

ripeness requirement that they first seek compensation, it nonetheless concluded

the claim was unripe because the developers requested injunctive relief, which,

1 In light of this decision, and especially because the parties have not briefed or argued the issue, it is unnecessary to decide whether the first prong applies.

-6- the court decided, is not available where there is an unexplored avenue for

compensation. Irrespective of the nature of the remedy sought, however, the

claim here is unripe because the developers have not utilized the available state

procedure to seek compensation for the alleged taking as required by Williamson

County.

A. Facial Takings Clause Challenges

On appeal, the developers again argue their challenge is exempt from both

Williamson County ripeness requirements because it is a facial challenge. In

support of their argument, however, the developers rely primarily on a line of

cases now made obsolete by the Supreme Court’s recent decision in Lingle. In

Lingle, the Supreme Court considered the validity of challenges brought under the

Takings Clause alleging the regulation at issue did not substantially advance a

legitimate state interest. 544 U.S. at 545. In concluding the “substantially

advances” theory was not appropriate under the Takings Clause, the Supreme

Court explained that the Takings Clause merely requires compensation for an

otherwise valid governmental interference with private property rights. Id. at

543. It does not, in and of itself, provide a cause of action for allegations that the

interference with property rights is arbitrary or irrational, a theory that instead

resembles a due process claim. Id. at 542, 544.

Despite the developers’ insistence, the claim the developers bring here

under the Takings Clause is not a facial claim challenging the validity of the

-7- regulation itself. That type of claim is properly brought as a due process claim as

decided in Lingle. Rather, they advance a regulatory takings claim that, as stated

in their complaint, the ordinances “do not provide for any compensation for the

burdens they place” and thus “constitute an illegal taking of property.” 2 The

developers’ claim here is therefore unlike the facial claims at issue in the cases on

which they rely, which concern instead the now-defunct substantially advances

claims under the Takings Clause.

Yee v. City of Escondido, cited by the developers, is a case in which the

property owners used the “substantially advances” theory to allege a regulatory

taking. 503 U.S. 519, 534 (1992). Although the Court declined to address the

merits of the claim because it was not encompassed within the question presented

on certiorari, the Court noted the challenge was not subject to the Williamson

County requirements. Id. at 534, 537. It reasoned that the “substantially

advances” claim, a means of challenging the authority of the government to

regulate in a certain manner in the first place, did not depend on how the

regulation applied to any particular piece of property or whether compensation

was available. See id. Likewise, in San Remo Hotel, L.P. v. City & County of

2 Although it is clear the claim is not a facial claim attacking the validity of the regulatory action, the parties have uniformly referred to this as a facial claim and this court declines to recharacterize it. The sole question presented by the parties is whether the second Williamson County requirement applies to the claim. As discussed below, however the claim at issue here is labeled, there is no support for waiving the second Williamson County requirement in this case.

-8- San Francisco, the Supreme Court stated the plaintiffs would not have had to

ripen their facial challenges to a regulation based on the “substantially advances”

theory to bring the action in federal court, with the immediate caveat that the

theory had been rejected as a takings claim by Lingle. 545 U.S. 323, 340 n.23,

346 & n.25 (2005). Although these cases suggest facial challenges are not subject

to the same ripeness requirements, those facial challenges are no longer available

under the Takings Clause.

The “substantially advances” takings theory, now obsolete, differs

dramatically from a Takings Clause claim alleging that a legislative or regulatory

action, while advancing an authorized purpose, effectuates a taking of property

without just compensation. The former, a claim that governmental interference

with property rights exceeds its permissible scope of authority, does not depend

on whether the landowner subject to the regulation has been compensated; the

regulatory action is invalid whether compensation is provided or not. 3 See Lingle,

544 U.S. at 543. Because no amount of compensation would alter the outcome of

3 There is a similarity in this respect between the now-obsolete “substantially advances” challenges and valid Takings Clause claims alleging the taking was not for “public use.” In “public use” Takings Clause challenges no amount of compensation would render the taking constitutional because it was in excess of the government’s authority to take private property. In the public use context, courts also have not applied the requirement that the plaintiff first seek compensation before bringing suit, decisions that support the distinction we draw today. See Fideicomiso De La Tierra Del Cano Martin Pena v. Fortuno, 604 F.3d 7, 16 (1st Cir. 2010) (collecting cases). The developers have made no claim that the provision of affordable housing is not a proper public use for which the taking of private property is authorized.

-9- such a claim, a waiver of the Williamson County requirement that the plaintiff

first seek compensation before mounting a no-longer-available “substantially

advances” Takings Clause challenge is appropriate.

In contrast, an otherwise proper interference with property rights

amounting to a regulatory taking, whether under Lucas, Loretto, or Penn Central,

is constitutional so long as compensation is provided. Compensation negates the

constitutional Takings Clause claim altogether. See Williamson County, 473 U.S.

at 194. A plaintiff might argue the Williamson County requirement is met if a

regulation on its face makes compensation unavailable or if compensation can be

presumed unavailable by the nature of the regulation. See, e.g., Eastern

Enterprises v. Apfel, 524 U.S. 498, 521 (1998) (plurality) (presuming

compensation unavailable where challenged Act required direct transfer of funds).

In other cases, plaintiffs may be able to demonstrate that the state has provided no

procedure for seeking compensation. See Williamson County, 473 U.S. at 195.

Unless a method for seeking compensation is unavailable or compensation is

otherwise foreclosed, however, property owners will only be able to show

compensation has been denied after first seeking compensation through an

available procedure.

The developers fare no better in their reliance on the post-Lingle cases in

other circuits. The Fourth Circuit’s decision in Holliday Amusement Co. of

Charleston v. South Carolina, 493 F.3d 404 (4th Cir. 2007), instead supports this

-10- court’s decision today. There, the court notes that a facial challenge alleging a

regulatory action exceeds permissible authority is immediately ripe. Id. at 407. It

goes on to conclude, however, that the plaintiff’s claim is not a facial claim that

regulatory action exceeds permissible scope, but rather, just like the claim at issue

here, is a regulatory takings claim. See id. Accordingly, it applied the second

Williamson County requirement. Id.

The developers’ argument is likewise not supported by the decisions they

cite from the First or Seventh Circuits. The First Circuit, in Asociacion De

Subscripcion Conjunta Del Seguro De Responsabilidad Obligatorio v. Flores

Galarz, stated facial claims are exempt from the requirement that plaintiffs first

seek compensation, but relied on cases brought under the “substantially advances”

theory. 484 F.3d 1, 13-14 (1st Cir. 2007). The First Circuit went on to analyze

whether the plaintiff’s claim was ripe under Williamson County anyway, and

concluded the plaintiff had met the compensation requirement by demonstrating

there was no adequate procedure aimed at providing compensation. Id. at 16-17.

This approach merely reflects the unremarkable proposition that the second prong

for ripeness under Williamson County is inapplicable if a procedure for

compensation is not available or compensation is otherwise foreclosed. 473 U.S.

at 195. Thus, Asociacion, provides little support for the proposition that the

second Williamson County requirement is inapplicable to the claim at issue here.

The Seventh Circuit’s statements concerning facial challenges in its Peters v.

-11- Village of Clifton decision are similarly dicta, and the court there concludes the

plaintiff actually was subject to the Williamson County requirement that he first

seek compensation. See 498 F.3d 727, 732-33 (7th Cir. 2007).

Courts considering claims alleging a regulatory taking without just

compensation, even when characterized as facial claims, have applied the second

Williamson County requirement consistent with this court’s decision today. In

Equity Lifestyle Properties, Inc. v. County of San Luis Obispo, the Ninth Circuit

considered a challenge to a city ordinance as a taking without just compensation.

548 F.3d 1184, 1186 (9th Cir. 2008). The court applied the requirement to seek

compensation if procedures are available to claims labeled both as facial and as-

applied challenges, although it concluded that because no available procedure for

seeking compensation existed, the plaintiff was excused from the requirement as

to its facial claim. Id. at 1190 & n.13, 1193 (9th Cir. 2008). The Third Circuit

has likewise held that plaintiffs alleging a taking without just compensation,

although framed as a facial challenge, are not excused from the Williamson

County requirement that they seek compensation prior to bringing suit. County

Concrete Corp. v. Twp. of Roxbury, 442 F.3d 159, 164-65 (3d Cir. 2006).

Thus, a plaintiff mounting a challenge to a regulation alleging a taking

without just compensation is required to meet the second Williamson County

requirement before bringing suit either by demonstrating a procedure for seeking

compensation is unavailable or by first seeking compensation. That such

-12- challenges are accordingly difficult to bring merely reflects the basic framework

of the Takings Clause under which claims are inextricably tied to the question of

compensation. See Lingle, 544 U.S. at 544. Here, the developers have not argued

compensation procedures are unavailable, and it is undisputed they have not

brought an inverse condemnation action in state court. They have thus not met

the ripeness requirements of Williamson County.

B. Nollan-Dolan Doctrine

The developers assert an alternate basis for a facial challenge based on the

Supreme Court decisions in Nollan v. California Coastal Commission, 483 U.S.

825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994). They further argue

the litigants in those cases, by the nature of their claims, were sheltered from the

second Williamson County ripeness requirement and the claims at issue here fall

within that exception.

In Nollan and Dolan, the Supreme Court considered whether the state could

appropriate without compensation easements that otherwise would constitute

takings per se as a condition for granting development permits to the landowners.

Lingle, 544 U.S. at 546-47. The Court held such an appropriation without

compensation was constitutional so long as it substantially advanced the same

interest that would be grounds for denying the development permit outright. Id.

at 547.

-13- The developers argue that Nollan and Dolan limit the power of the state to

interfere with property rights regardless of compensation by requiring permitting

exactions to “substantially advance” the same interest that would allow denial of

the permit. According to the developers, Nollan and Dolan thus authorize facial

challenges seeking to invalidate an alleged taking when the taking arises in the

context of a permitting requirement, akin to the now-defunct “substantially

advances” theory previously available to challenge any regulatory taking.

In both Nollan and Dolan, the alleged taking was a permanent physical

invasion of private property, a type of taking designated as a taking per se and not

subject to the Penn Central analysis. Lingle, 544 U.S. at 546. This court has

described the Nollan-Dolan land-use exaction claims as a “sub-category” of

physical per se takings. Ramsey Winch Inc. v. Henry, 555 F.3d 1199, 1208 (10th

Cir. 2009). In both cases, the permanent physical invasion was an easement

granting public way through private property. Dolan, 512 U.S. at 379-80; Nollan,

483 U.S. at 828. The developers’ claim in this case does not fall within Nollan

and Dolan for this reason alone: the regulatory action amounts to a restriction on

how the developers may use their land should they choose to subdivide it or, in

the alternative, the imposition of a fee. 4 These interferences with property rights

4 The developers fare no better in their contention, raised for the first time at oral argument, that the regulation amounts to a physical taking per se because it requires the developers to convey portions of the land to certain buyers designated by the County. The affordable housing requirement is unlike physical (continued...)

-14- do not constitute physical per se takings. See United States v. Sperry Corp., 493

U.S. 52, 62 n.9 (1989) (noting that requiring payment of money, which is fungible

property, cannot be considered a physical invasion of property); Loretto, 458 U.S.

at 426-27 (distinguishing permanent physical occupations of land from

regulations on the private use of property).

The developers, moreover, misunderstand Nollan and Dolan. The premise

of the challenge in both cases was that the takings were uncompensated. There

was no contention the state could not properly exercise its right to appropriate the

land use rights at issue in Nollan and Dolan if such takings were compensated;

rather, the question presented was whether the state could permissibly achieve the

same result without compensation by exacting the land use rights in exchange for

granting a permit it was otherwise entitled to deny. Nollan, 483 U.S. at 834; see

Lingle, 544 U.S. at 546-47.

Arguing that Nollan and Dolan provide a cause of action to facially

invalidate land-use exactions, rather than to invalidate those exactions only where

compensation is denied, the developers cite the Supreme Court’s reliance on the

unconstitutional conditions doctrine. As the Court stated in Dolan, however,

4 (...continued) structures placed on private property or the easements at issue in Nollan and Dolan. It is particularly inappropriate to conclude the regulations effect a per se physical taking in circumstances like these in which waivers, alternate compliance methods, and cost-offsetting provisions are available. The developers may qualify for an alternative to the conveyance they claim is a per se taking.

-15- under this doctrine, “the government may not require a person to give up a

constitutional right–here the right to receive just compensation when property is

taken for a public use” to receive an unrelated discretionary benefit. 512 U.S. at

385 (emphasis added). That is, the right a property owner cannot be forced to

give up is the right to compensation; had the state justly compensated the

plaintiffs in Nollan and Dolan, no Takings Clause violations could have even

been alleged even under the unconstitutional conditions doctrine.

In essence, the developers attempt to turn Nollan and Dolan into loopholes

in the Lingle rule that challenges to regulation as not substantially advancing a

legitimate governmental interest are not appropriate under the Takings Clause.

Nollan and Dolan do not authorize challenges to permitting decisions as alleged

unconstitutional takings without first seeking compensation if the state has

provided the means to seek compensation.

Finally, neither Nollan nor Dolan presented a facial challenge to a

regulation and the ripeness concerns at issue here were not present in those cases.

In Nollan, the landowners sought a construction permit for beachfront property

that was granted only on the condition they allow a public easement over their

land. Nollan, 483 U.S. at 828. The property owners litigated the propriety of the

permit’s condition in state court, including their claim that the condition

constituted a taking. It was the state court ruling that the condition did not

constitute a violation of the Takings Clause that the owners appealed to the U.S.

-16- Supreme Court. Id. at 830-31. Likewise, in Dolan, the landowner applied for and

obtained a development permit with a condition that a public easement be granted

on the land. 512 U.S. at 379-80. Again, the owner litigated the claim in state

court and obtained a ruling that the uncompensated appropriation did not

constitute a taking before seeking a writ of certiorari from the Supreme Court. Id.

at 383.

In both cases, the way in which the regulation would affect a particular

piece of land was finally decided by the administrative body implementing the

regulation, and the challenge was an as-applied challenge to the way the

regulation interfered with the property. In any case, neither Nollan nor Dolan

featured a discussion of the ripeness analysis in Williamson County and they

cannot be the source to create a new breed of facial challenges that can be

brought in federal court without regard to the Williamson County requirements.

C. Prudential Ripeness

In the alternative, the developers argue this court may decline to apply the

Williamson County ripeness requirements and we should do so here. Citing the

Supreme Court’s characterization of the Williamson County requirements as

“prudential,” the developers claim that because the dispute is sufficiently

crystalized, this court should exercise jurisdiction in this case. See Suitum v.

Tahoe Reg’l Planning Agency, 520 U.S. 725, 733-34 (1997).

-17- This court declines the developers’ invitation to ignore the ripeness

requirements because the requirement to seek compensation prior to bringing suit

retains an important purpose here. Assuming that the ordinance effectuates a

taking of property, the County could decide to compensate the developers for the

taking rather than abandon the ordinance. See First English Evangelical Lutheran

Church of Glendale v. County of Los Angeles, 482 U.S. 304, 314, 317 (1987)

(noting the government’s choice, once a court has decided a taking has occurred,

either to compensate or to abandon the interference with property rights). As

discussed above, were the County to justly compensate the developers, even if the

regulation constitutes a taking, there would be no constitutional concern. The

Williamson County requirement that a plaintiff first seek and be denied

compensation for a Takings Clause claim to be ripe therefore serves the important

purpose of allowing the dispute to fully develop before a federal court intervenes

in the County’s administration of its land use regulations.

D. Other Claims

Concluding the developers’ other constitutional claims were subsumed

within the Takings Clause claims, the district court dismissed the other federal

claims as unripe under this circuit’s rule that Williamson County requirements

apply equally to other constitutional claims based on the same facts as a Takings

Clause claim. See Bateman v. City of West Bountiful, 89 F.3d 704, 709 (10th Cir.

1996). Having dismissed all of the developers’ federal claims, the district court

-18- also dismissed the developers’ remaining state law claims under the supplemental

jurisdiction statute. See 28 U.S.C. § 1367(c)(3). The developers have made no

argument on appeal that the dismissal of the remaining claims based on the

ripeness decision as to the Takings Clause claim was improper. Accordingly, the

district court’s decision to dismiss the remaining portions of the complaint is

affirmed.

V. Conclusion

For the foregoing reasons, we AFFIRM the decision of the district court.

-19-