Temporary Regulatory Takings and Development Moratoria: The Murky View From Lake Tahoe

Steven J. Eagle¹

In its landmark decision in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles,² the U.S. Supreme Court established that temporary regulatory takings must be compensated under the Fifth Amendment's Takings Clause.³ However, neither First English nor the Court's subsequent cases have comprehensively defined what constitutes a "temporary regulatory taking." Recently, the U.S. Court of Appeals for the Ninth Circuit held that development moratoria cannot result in compensable takings under First English, even when they deprive owners of all economically beneficial use of land for extended periods. The case, Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency,⁴ was decided in June 2000. The Ninth Circuit voted against en banc review in October,⁵ although a vehement dissent was filed.⁶ This Article reviews Tahoe-Sierra and concludes that the court's analysis is inconsistent with First English.

The First English Doctrine

The events leading to the Court's First English holding are not complex. In 1957, the First English Evangelical Lutheran Church purchased a 21-acre parcel in a canyon in Los Angeles County. It constructed a dining hall, two bunkhouses, an outdoor chapel, and other facilities on the 12-acre flat portion of its land. The complex housed "Lutherglen," a camp center used for retreats and recreation for handicapped children. However, a forest fire during the summer of 1986 denuded the hills upstream from Lutherglen, and the complex was destroyed by ensuing floods the following February.⁷ In response, the county prohibited the construction or reconstruction of buildings within that area.⁸ The church sued the county and the local flood control district for damages caused by alleged negligence and also sought damages in inverse condemnation.⁹

The trial court struck the takings claim from the complaint on the ground that it was precluded as a cause of action by the California Supreme Court's decision in Agins v. Tiburon.¹⁰ A state court of appeal concurred and the California Supreme Court declined review.¹¹ Agins had ruled that the appropriate remedy for what it deemed "excessive regulation" is invalidation, and not the award of monetary damages.¹²

In combination, the need for preserving a degree of freedom in the land-use planning function, and the inhibiting financial force which inheres in the inverse condemnation remedy, persuade us that on balance mandamus or declaratory relief rather than inverse condemnation is the appropriate relief under the circumstances.¹³

In his opinion for the Court reversing the California decision in First English, Chief Justice Rehnquist expressed somesympathy for the desire of the California courts in Agins to spare localities the chilling effect that comes with the potential for monetary damages being assessed against them.¹⁴ Citing to cases in which the Court had stressed state [31 ELR 10225] and local autonomy, he assured that eminent domain would remain a "legislative function."¹⁵ Government may abandon its intrusion or regulation, and has the flexibility to take private property not in fee if that is its wish, but rather for a time span that it selects.¹⁶

With autonomy comes responsibility, the Court noted. "We merely hold," Rehnquist added, "that where the government's activities have already worked a taking of all use of property, no subsequent action by the government can relieve it of the duty to provide compensation for the period during which the taking was effective."¹⁷ Furthermore, where the landowner could show that it had been deprived of all use of its property for a considerable period, the "invalidation of the ordinance without payment of fair value for the use of the property during this period of time would be a constitutionally insufficient remedy."¹⁸ Most significantly, "'temporary' takings which, as here, deny a landowner all use of his property, are not different in kind from permanent takings, for which the Constitution clearly requires compensation."¹⁹

The opinion also clarified that the Court was not speaking to issues that would arise in the course of applying temporary regulatory takings doctrine, such as those involving "normal delays" while localities considered development applications.²⁰

Justice Stevens' dissent disputed that the denial of economically beneficial use for a substantial period could constitute a regulatory taking.²¹ He argued that "repeal will, in virtually all cases, mitigate the overall effect of the regulation so substantially that the slight diminution in value that the regulation caused while in effect cannot be classified as a taking of property."²² Stevens added:

We may assume, however, that this may not always be the case. There may be some situations in which even the temporary existence of a regulation has such severe consequences that invalidation or repeal will not mitigate the damage enough to remove the "taking" label. This hypothetical situation is what the Court calls a "temporary taking." But, contrary to the Court's implications, the fact that a regulation would constitute a taking if allowed to remain in effect permanently is by no means dispositive of the question whether the effect that the regulation has already had on the property is so severe that a taking occurred during the period before the regulation was invalidated.²³

Justice Stevens continued with an analysis of the "three-dimensional" nature of regulations. They have "depth" (intensity of proscription), "width" (extent of property covered), and "length" (duration).²⁴ In order for invalidation not to be a sufficient cure, the regulation would have to both impose "substantial" restrictions and remain in place for a "significant percentage of the property's useful life."²⁵ The dissenting opinion also termed the cases cited by the majority for temporary takings damages "inapposite," since they dealt with physical invasions, where the diminution of value test is inapplicable.²⁶

Development Moratoria and Tahoe-Sierra

Tahoe-Sierra,²⁷ a case with a long and complex history,²⁸ was brought by owners of lands around Lake Tahoe, a pristine alpine lake. The property owners had attempted for almost 20 years to obtain permission to build vacation or retirement homes, but the Tahoe Regional Planning Agency was able to block their efforts. The moratorium at issue in this case was one of a series of restrictions and regulations that prevented economic use of the land. The restrictions largely resulted from concern about eutrophication problems. As nutrients washed into Lake Tahoe from surrounding lands, the growth of algae increased, causing the lake to become discolored and fish to be threatened by oxygen depletion.

The landowners claimed that the agency's temporary moratorium on development effected unconstitutional regulatory takings of their property. The district court agreed,²⁹ stressing that the regulation completely denied the plaintiffs economically viable use of their property. Furthermore, although the regulation "was clearly intended to be temporary, since it was adopted pending the enactment of a new regional plan, there was no fixed date for when it would terminate."³⁰

The district court noted that it was unclear whether development moratoria remained legitimate planning tools after First English. The fact that some courts held in the affirmative might be consistent with the Supreme Court's [31 ELR 10226] allowance for "normal delays."³¹ It distinguished moratoria like those in First English, which had no expiration date, from the "interim planning moratorium," which is enacted with a deadline and usually extends for a short period. In the latter case, the government's "culpability" would be less. However, in the present case, "enacting an unconstitutional ordinance with no plans to end it is different than simply putting a hold on development for a few months while trying to formulate a plan under which development will be possible."³²

The Ninth Circuit reversed. Writing for the court, Judge Reinhardt stated the gravamen of the court's position:

It is true that First English holds that, when a taking has occurred, the government must compensate property owners, even if the taking is "temporary." Contrary to the plaintiffs' suggestion, however, the Court's holding in First English was not that temporary moratoria are "temporary takings." In fact, the opposite is true. The First English Court very carefully defined "'temporary' regulatory takings [as] those regulatory takings which are ultimately invalidated by the courts."³³ What is "temporary," according to the Court's definition, is not the regulation; rather, what is "temporary" is the taking, which is rendered temporary only when an ordinance that effects a taking is struck down by a court. In other words, a permanent regulation leads to a "temporary" taking when a court invalidates the ordinance after the taking.³⁴ The Court's definition, therefore, does not comprehend temporary moratoria, which from the outset are designed to last for only a limited period of time. In short, we reject the plaintiffs' contentions that First English applies to temporary moratoria and that it works a radical change to takings law by requiring that property interests be carved up into finite temporal segments.³⁵

Judge Reinhardt discussed at some length the Court's rejection of "conceptual severance" of parcels, citing Professor Margaret Jane Radin for the proposition that "[a] planning regulation that prevents the development of a parcel for a temporary period of time is conceptually no different than a land-use restriction that permanently denies all use on a discrete portion of property, or that permanently restricts a type of use across all of the parcel."³⁶ Each of these three types of regulation will have an impact on the parcel's value, because each will affect an aspect of the owner's "use" of the property—by restricting when the "use" may occur, where the "use" may occur, or how the "use" may occur.

In line with this review of the three-dimensional nature of regulatory intrusion, Judge Reinhardt acknowledged that:

were a temporary moratorium designed to be in force so long as to eliminate all present value of a property's future use, we might be compelled to conclude that a categorical taking had occurred. We doubt, however, that a true temporary moratorium would ever be designed to last for so long a period.³⁷

While the Ninth Circuit voted not to review the panel decision en banc,³⁸ a sharp dissent by Judge Kozinski³⁹ asserted that the panel "does not like the Supreme Court's Takings Clause jurisprudence very much, so it reverses First English Evangelical Lutheran Church v. County of Los Angeles, and adopts Justice Stevens's First English dissent."⁴⁰

The only difference between this case and Lucas is that the regulation here had a finite duration. It was originally supposed to expire after two years and then was extended for another eight months. (In fact, its prohibitions continue to this day under subsequent development plans.) So the question is whether there is something special about a finite moratorium that relieves the government from its duty to compensate. The Supreme Court answered that question in First English when it said that "temporary" takings which, as here, deny a landowner all use of his property, are not different in kind from permanent takings, for which the Constitution clearly requires compensation.⁴¹

Judge Kozinski noted that while Judge Reinhardt nowhere cited Justice Stevens' First English dissent, "the reasoning—and even the wording—bear an uncanny resemblance."⁴² Although done sub rosa, "by adopting Justice Stevens's dissent, the panel places itself in square conflict with the majority's opinion in First English.⁴³

Commentary

The Supreme Court recently made the rather casual admission, in City of Monterey v. Del Monte Dunes at [31 ELR 10227] Monterey, Ltd.,⁴⁴ that it has yet "to define with precision the elements of a temporary regulatory takings claim."⁴⁵ Few scholars or lawyers would dispute that assertion. The Ninth Circuit in Tahoe-Sierra declared that "the First English Court very carefully defined 'temporary regulatory takings [as] those regulatory takings which are ultimately invalidated by the courts.'"⁴⁶ Yet the full sentence from which this quotation is taken indicates that the Court was responding to the case before it—one in which a permanent regulation had been invalidated—and not that the Court intended to define "temporary takings" as applying only to that situation.⁴⁷

Also, Tahoe-Sierra confuses two sets of concepts. The first is the relationship between property and value. The Ninth Circuit's three-dimensional takings analysis emphasizes diminution in value.⁴⁸ Yet, as the Court declared in Lucas v. South Carolina Coastal Council,⁴⁹ it was not loss of value that rendered the regulation a taking, but rather it was that "total deprivation of beneficial use is, from the landowner's point of view, the equivalent of a physical appropriation."⁵⁰ Nothing in the Tahoe-Sierra distinction between the effects of development moratoria and invalidated regulations has any bearing on the Court's statement in First English that "'temporary' takings which, as here, deny a landowner all use of his property, are not different in kind from permanent takings, for which the Constitution clearly requires compensation."⁵¹

In fact, there is no clear-cut distinction between a permanent prohibition and a temporary one. This is so both because of the possibility that one "temporary" regulatory barrier could be crafted after another, with no individual regulation being deemed a taking. The facts in Tahoe-Sierra well illustrate that point. More fundamentally, regulations now "permanent" may be fleeting and regulations now "temporary" may endure for generations. As Judge Plager of the U.S. Court of Appeals for the Federal Circuit has observed, "yesterday's Everglades swamp to be drained as a mosquito haven is today's wetland to be preserved for wildlife and aquifer recharge; who knows what tomorrow's view of public policy will bring, or how the market will respond to it."⁵² Judge Kozinski made the same point in his dissent to denial of en banc review in Tahoe-Sierra, noting that "governmental policy is inherently temporary while land is timeless."⁵³

After First English, it makes no sense to speak of "invalidated" regulations in a takings context. Governmental entities may impose whatever (otherwise permissible) restrictions they wish. A finding that a regulation constitutes a taking does not require its abrogation. The government entity has the choice between terminating the regulation and paying just compensation for a temporary taking, or continuing the regulation and paying just compensation for a permanent taking.⁵⁴

In First English, the Supreme Court established as a temporary takings baseline the date on which the regulation deprived the owner of all economically viable use, deferred by the "reasonable delays" inherent in the permitting process.⁵⁵ The Ninth Circuit has asserted in Tahoe-Sierra that it might find a taking "were a temporary moratorium designed to be in force so long as to eliminate all present value of a property's future use."⁵⁶ This seems directly contrary to the Supreme Court's mandate. It also is in direct conflict with the Federal Circuit's holding in Tabb Lakes, Ltd. v. United States⁵⁷ that ataking occurs "only after the delay becomes unreasonable," without regard to whether at that time the challenged regulation or regulatory action "has ultimately been held invalid."⁵⁸

In essence, then, the crucial element is not whether the regulation is "designed" as a "true" moratorium, as the Ninth Circuit would have it,⁵⁹ but rather whether the moratorium works a taking under First English principles.

1. Professor of Law, George Mason University School of Law, Arlington, Virginia.

2. 482 U.S. 304, 17 ELR 20787 (1987).

3. U.S. CONST. amend. V ("Nor shall private property be taken for public use, without just compensation.").

4. 216 F.3d 764, 30 ELR 20638 (9th Cir. 2000).

5. Tahoe-Sierra Preservation Council v. Tahoe Reg'l Planning Agency, 228 F.3d 998 (9th Cir. 2000) (denying rehearing and rehearing en banc).

6. Id. at 999 (Kozinski, J., dissenting).

7. First English, 482 U.S. at 307, 17 ELR at 20788.

8. Id. (citation to record omitted).

9. Id. at 308, 17 ELR at 20788.

10. 598 P.2d 25, 9 ELR 20260 (Cal. 1979), aff'd on other grounds, 447 U.S. 255, 10 ELR 20361 (1980).

11. First English, 482 U.S. at 309, 17 ELR at 20788.

12. 598 P.2d at 28, 9 ELR at 20262.

13. First English, 482 U.S. at 317, 17 ELR at 20790 (quoting Agins, 598 P.2d at 31, 9 ELR at 20262).

14. Id. ("We, of course, are not unmindful of these considerations"). Id. at 321, 17 ELR at 20791:

We realize that even our present holding will undoubtedly lessen to some extent the freedom and flexibility of land-use planners and governing bodies of municipal corporations when enacting land-use regulations. But such consequences necessarily flow from any decision upholding a claim of constitutional right; many of the provisions of the Constitution are designed to limit the flexibility and freedom of governmental authorities ….

15. Id. at 321, 17 ELR at 20791.

16. See id. at 317-18, 17 ELR at 20790 (citing cases).

17. Id. at 321, 17 ELR at 20791.

18. Id. at 322, 17 ELR at 20791.

19. Id. at 318, 17 ELR at 20791.

20. Id. at 321, 17 ELR at 20791 ("We limit our holding to the facts presented, and of course do not deal with the quite different questions that would arise in the case of normal delays in obtaining building permits, changes in zoning ordinances, variances, and the like which are not before us.").

21. Id. at 322, 17 ELR at 20792 (Stevens, J., dissenting).

22. Id. at 328, 17 ELR at 20793 (Stevens, J., dissenting).

23. Id. at 328-29, 17 ELR at 20793 (Stevens, J., dissenting).

24. Id. at 329, 17 ELR at 20793 (Stevens, J., dissenting).

25. Id. at 329, 17 ELR at 20794 (Stevens, J., dissenting).

26. Id. (Stevens, J., dissenting). "Why should there be a constitutional distinction between a permanent restriction that only reduces the economic value of the property by a fraction—perhaps one-third—and a restriction that merely postpones the development of a property for a fraction of its useful life—presumably far less than a third?" Id.

27. 216 F.3d at 764, 30 ELR at 20638.

28. See id. at 768-69, 30 ELR at 20639-40 (noting the Ninth Circuit's three prior published decisions, lower court decisions, and other aspects of the litigation).

29. Tahoe-Sierra Preservation Council v. Tahoe Reg'l Planning Agency, 34 F. Supp. 2d 1226, 29 ELR 21290 (D. Nev. 1999).

30. Id. at 1250, 29 ELR at 21300.

31. Id. at 1249, 29 ELR at 21299 (citing cases, including Santa Fe Vill. Venture v. City of Albuquerque, 914 F. Supp. 478, 483 (D.N.M.1995) and Zilber v. Town of Moraga, 692 F. Supp. 1195, 1206-07 (N.D. Cal. 1988)).

32. Id., 29 ELR at 21300 (quoting Woodbury Place Partners v. City of Woodbury, 492 N.W.2d 258, 262 (Minn. App. 1992)) (citations omitted).

33. 216 F.3d at 778, 30 ELR at 20643 (quoting First English, 482 U.S. at 310, 17 ELR at 20788). The Ninth Circuit noted, in a footnote, that "the [First English] Court was careful to include quotation marks around the word 'temporary' whenever it referred to a 'temporary' taking, in order to make clear that it was using the concept in the specific sense in which it had defined it." Id. at 778 n.16, 30 ELR at 20643 n.16.

34. Id. (quoting 482 U.S. at 319, 17 ELR at 20791) ("Invalidation of the ordinance or its successor ordinance after this period of time, though converting the taking into a "temporary" one, is not a sufficient remedy to meet the demands of the Just Compensation Clause."), id. at 317, 17 ELR at 20790 (discussing the fact "that the government may elect to abandon its intrusion or discontinue regulations," and thereby turn what would otherwise be a "permanent taking" into a "temporary" one).

35. Id. at 778, 30 ELR at 20643 (other footnote omitted).

36. Id. at 776, 30 ELR at 20642 (citing Margaret Jane Radin, The Liberal Conception of Property: Cross Currents in the Jurisprudence of Takings, 88 COLUM. L. REV. 1667, 1674-78 (1988)).

37. Id. at 781, 30 ELR at 20644.

38. Tahoe-Sierra Preservation Council v. Tahoe Reg'l Planning Agency, 228 F.3d 998 (9th Cir. 2000).

39. Id. at 999 (Kozinski, J., dissenting, joined by O'Scannlain, Trott, T.G. Nelson, and Kleinfeld, JJ.).

40. Id. (citing First English).

41. Id. at 999-1001 (citing First English, 482 U.S. at 318, 17 ELR at 20790 (emphasis in Judge Kozinski's opinion).

42. Id. at 1000.

43. Id. at 1002.

44. 526 U.S. 687, 29 ELR 21133 (1999). See Steven J. Eagle, Del Monte Dunes, Good Faith, and Land Use Regulation, 30 ELR 10100 (Feb. 2000); John D. Echeverria, Revving the Engines in Neutral: City of Monterey v. Del Monte Dunes at Monterey, Ltd., 29 ELR 10682 (Nov. 1999).

45. 526 U.S. at 721, 29 ELR at 21136.

46. 216 F.3d at 778, 30 ELR at 20643 (quoting First English, 482 U.S. at 310, 17 ELR at 20788).

47. See First English, 482 U.S. at 310, 17 ELR at 20788:

Appellant asks us to hold that the California Supreme Court erred in Agins v. Tiburon in determining that the Fifth Amendment, as made applicable to the States through the Fourteenth Amendment, does not require compensation as a remedy for "temporary" regulatory takings—those regulatory takings which are ultimately invalidated by the courts.

48. See, e.g., 216 F.3d at 776-77, 30 ELR at 20642 (citing cases in which a diminution in value was not sufficient to establish a taking, and adding: "There is no plausible basis on which to distinguish a similar diminution in value that results from a temporary suspension of development.").

49. 505 U.S. 1003, 22 ELR 21104 (1992).

50. Id. at 1017, 22 ELR at 21108.

51. 482 U.S. at 318, 17 ELR at 20790.

52. Florida Rock Indus. v. United States, 18 F.3d 1560, 1566, 24 ELR 21036, 21039 (Fed. Cir. 1994) (citing Florida Rock Indus. v. United States, 791 F.2d 893, 902-03, 16 ELR 20671, 20674 (Fed. Cir. 1986)).

53. 228 F.3d at 1001 (Kozinski, J., dissenting).

54. See First English, 482 U.S. at 321, 17 ELR at 20791. The unsettled nature of the Court's temporary regulatory takings jurisprudence also renders proper assessment of damages uncertain. For the author's views on this point, see Steven J. Eagle, Just Compensation for Permanent Takings of Temporal Interests, 10 FED. CIR. B.J. (forthcoming 2001).

55. Id.

56. 216 F.3d at 781, 30 ELR at 20644.

57. 10 F.3d 796, 24 ELR 20169 (Fed. Cir. 1993).

58. Id. at 803, 24 ELR at 20172 (quoting First English, 482 U.S. at 320, 17 ELR at 20791).

59. Tahoe-Sierra, 216 F.3d at 781, 30 ELR at 20644.