Opinion ID: 3171495
Heading Depth: 3
Heading Rank: 2

Heading: Sufficiency of the Third Amended Complaint

Text: Article III, Section 40 of the Maryland Constitution provides: “The General Assembly shall enact no Law authorizing private property, to be taken for public use, without just compensation, as agreed upon between the parties, or awarded by a Jury, being first paid or tendered to the party entitled to such compensation.” Section 40 has been determined to “have the same meaning and effect in reference to an exaction of property, and that the decisions of the Supreme Court on the Fourteenth Amendment[11] are practically direct authorities.” Bureau of Mines of Maryland v. George’s Creek Coal & Land Co., 272 Md. 143, 156, 321 A.2d 748, 755 (1974). Although this constitutional provision covers specifically eminent domain actions, it also grounds a cause of action that has come to be known as an inverse condemnation. 11 “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law.” U.S. Const. amend. XIV, § 1. 11 An inverse condemnation claim is characterized as “a shorthand description of the manner in which a landowner recovers just compensation for a taking of his property when condemnation proceedings have not been instituted.” Coll. Bowl, Inc. v. Mayor & City Council Of Baltimore, 394 Md. 482, 489, 907 A.2d 153, 157 (2006) (citing United States v. Clarke, 445 U.S. 253, 257, 100 S.Ct. 1127, 1130, 63 L.Ed.2d 373, 377 (1980)). Essentially, a plaintiff may “recover the value of property which has been taken in fact by the governmental defendant, even though no formal exercise of the power of eminent domain has been attempted by the taking agency.” Coll. Bowl, Inc., 394 Md. at 489, 907 A.2d at 157 (quoting D. Hagman, Urban Planning and Land Development Control Law 328 (1971)). The Supreme Court explains that a government is liable for inverse condemnation if it “forc[es] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Coll. Bowl, Inc., 394 Md. at 489, 907 A.2d at 157 (citing PruneYard Shopping Center v. Robins, 447 U.S. 74, 83, 100 S.Ct. 2035, 2041, 64 L.Ed.2d 741, 753 (1980)). To state a claim for inverse condemnation, a plaintiff must allege facts showing ordinarily that the government action constituted a taking. Defining a “taking” for purposes of an inverse condemnation claim is a “fact-intensive” inquiry. The Supreme Court has explained that a plaintiff seeking to state a claim for inverse condemnation “bears a substantial burden” and must be able to show that “justice and fairness” entitle him or her to compensation. Eastern Enters. v. Apfel, 524 U.S. 498, 523, 118 S. Ct. 2131, 2146 (1998). Significant factors in the analysis include: “the economic impact of the regulation, its interference with reasonable investment backed expectations, and the 12 character of the governmental action.” Eastern Enters., 524 U.S. at 523-24, 118 S. Ct. at 2146 (citations omitted). Accordingly, an inverse condemnation claim may arise ordinarily in multiple ways: [T]he denial by a governmental agency of access to one’s property, regulatory actions that effectively deny an owner the physical or economically viable use of the property, conduct that causes a physical invasion of the property, hanging a credible and prolonged threat of condemnation over the property in a way that significantly diminishes its value, or, closer in point here, conduct that effectively forces an owner to sell. Coll. Bowl, Inc., 394 Md. at 489, 907 A.2d at 157. A difficulty with Ms. Litz’s claim of a “taking” fitting neatly within conventional thinking about inverse condemnation is that her allegations focus predominantly on the inaction of Respondents, rather than any affirmative action by those parties. There is no controlling Maryland law that we could find that sheds light on this wrinkle. Thus, we look outside our borders for guidance. Upon this review, it seems appropriate (and, in this case, fair and equitable, at least at the pleading stage of litigation) to recognize an inverse condemnation claim based on alleged “inaction” when one or more of the defendants has an affirmative duty to act under the circumstances. Therefore, we hold, as a matter of Maryland law, that an inverse condemnation claim is pleaded adequately where a plaintiff alleges a taking caused by a governmental entity’s or entities’ failure to act, in the face of an affirmative duty to act. Our survey revealed that, in some states, unalloyed allegations of government inaction alone may suffice to plead adequately an inverse condemnation claim. For example, the language of the Minnesota Constitution provides that “[p]rivate property 13 shall not be taken, destroyed or damaged for public use without just compensation therefor, first paid or secured.” Minn. Const. Art. I, § 13. In application of this provision, the Minnesota courts follow a standard that “[a]n unconstitutional taking is a governmental action or inaction that deprives a landowner of all reasonable uses of its land.” Evenson v. City of St. Paul Bd. of Appeals, 467 N.W.2d 363, 365 (Minn. Ct. App. 1991) (emphasis added). In contrast, in South Carolina, a plaintiff brought a cause of action against the City of Greenville alleging that the city “improperly and negligently designed and maintained its municipal drainage system in the area where his business was located,” which led to substantial damage to his business and property after heavy rains resulted in flooding. Hawkins v. City of Greenville, 594 S.E.2d 557, 560 (S.C. Ct. App. 2004). The South Carolina Court of Appeals concluded that the plaintiff could not state a claim for inverse condemnation by alleging only “failures to act.” Hawkins, 594 S.E.2d at 562. The failure to act would not sustain a claim for inverse condemnation because the case law in South Carolina held: “To establish an inverse condemnation, a plaintiff must show: ‘(1) an affirmative, positive, aggressive act on the part of the governmental agency; (2) a taking; (3) the taking is for a public use; and (4) the taking has some degree of permanence.’” Id. (emphasis added). Of course, the major distinction between the Minnesota and South Carolina approaches is the specific requirement of the South Carolina case law requiring an “affirmative” act on the part of the government. This 14 requirement is more specific than found in Maryland case law and, thus, is not persuasive in our analysis of the present case.12 We find more persuasive cases which sanction a plaintiff advancing an inverse condemnation claim in the face of government inaction where the governmental agency had an affirmative duty to act under the particular circumstances. A case from a Florida District Court found that when a county failed to “reasonably maintain and repair Old A1A [a county-owned road] that it has effectively abandoned it, thereby depriving [the appellants] of access to their property without compensation[, it was] a cognizable claim.” Jordan v. St. Johns Cnty., 63 So. 3d 835, 839 (Fla. Dist. Ct. App. 2011). Old A1A had been subject over the years to considerable damage from storms and erosion. Jordan, 63 So. 3d at 837. The appellants owned property located in a subdivision accessible only by Old A1A because the subdivision was located on a barrier island. Jordan, 63 So. 3d at 836. The court concluded that “governmental inaction—in the face of an affirmative duty to act—can support a claim for inverse condemnation.” Jordan, 63 So. 3d at 839. Because it was the county’s responsibility to maintain this road and it failed to do so, the pleaded inaction supported maintenance of an inverse condemnation cause of action against the county. 12 Similar to the Minnesota Constitution, the language of Maryland’s eminent domain provision of the Maryland Constitution is general and broad: “The General Assembly shall enact no Law authorizing private property, to be taken for public use, without just compensation, as agreed upon between the parties, or awarded by a Jury, being first paid or tendered to the party entitled to such compensation.” Md. Const. Art. III, § 40. 15 The California appellate courts have held also that “in order to prove the type of governmental conduct that will support liability in inverse condemnation it is enough to show that the entity was aware of the risk posed by its public improvement and deliberately chose a course of action—or inaction—in the face of that known risk.” Arreola v. Cnty. of Monterey, 122 Cal. Rptr. 2d 38, 55 (Cal. Ct. App. 2002), as modified on denial of reh’g (July 23, 2002). In Arreola, the county had been alerted by concerned property owners starting in 1977 about the potential failure of a river levee due to the weakening effects of a build-up of vegetation and the increased risk of resultant flooding. Arreola, 122 Cal. Rptr. 2d at 56. Monterey’s actual knowledge of the maintenance problems and its ability to control the project, made it immaterial whether the county had “responsibility for operation of the project.” Arreola, 122 Cal. Rptr. 2d at 69-72. In spite of its knowledge of the problem, the County “did not take any action to correct the situation until 1991 or later [and the] knowing failure to clear the Project channel, in the face of repeated warnings and complaints was” enough for an inverse condemnation claim after floods damaged the plaintiff’s property. Id. We find persuasive these cases. Within the Third Amended Complaint, Ms. Litz alleges that the Town had “undertaken [since at least 1973] the task of correcting its failing community sewage system.” Her complaint includes allegations that, by 1985, the Town was informed of the results of a study conducted by the Caroline County Department of Health, which concluded that immediate action was necessary. These warnings continued between 1985 and 1996 before any purported affirmative “action” was taken, to wit, the Consent Order was executed. Additionally, Ms. Litz was notified 16 by a 12 June 1996 letter from the Caroline County Health Department that, because the sewage discharges had not been eliminated, Lake Bonnie continued to be a health threat. Even after the 1996 Consent Order was signed between MDE and the Town, Respondents failed to effect any changes to the sewage treatment or drainage systems in the Town. In 2004, the Caroline County Health Department distributed a warning to the Town regarding additional septic or building permits being approved. The Court of Special Appeals referred to this situation as an overall “failure to regulate.” The cases cited by the intermediate appellate court to support this characterization focused on interference with various types of property rights by third parties, which government failed to avert, mitigate, or cure.13 Those cases are not persuasive here. Two of those cases involved assertions that the Federal Government had committed a taking because it failed to regulate conduct by third parties; however, the property interest at issue for each plaintiff was not a traditional in-fee property interest. See Georgia Power Co. v. United States, 633 F.2d 554, 555 (Ct. Cl. 1980) (company claimed a taking of its electrical powerline easement); Alves v. United States, 133 F.3d 1454, 1455-56 (Fed. Cir. 1998) (plaintiff “argued that the [Bureau of Land Management’s] failure to contain the trespass [by others] constituted a Fifth Amendment taking and a breach of contract based on his interpretation of his grazing permits and/or an exchange-of-use agreement as contracts”). Neither of these cases resulted in a 13 This endorsed the theory put forth by the State that any damage to Lake Bonnie and Ms. Litz’s property was attributable to third-party, private property owners, not Respondents. 17 “taking” because the regulations imposed by the Federal Government were not meant to act as an “insurer that private citizens will act lawfully with respect to property subject to governmental regulation.” Alves, 133 F.3d at 1458. Additionally, the courts determined that both of these situations were more like private tort actions, as opposed to an unconstitutional taking, because of the nature of the implicated property rights and the allegations advanced by the plaintiff. The Town of Goldsboro relies on Casey v. Mayor & City Council of Rockville, 400 Md. 259, 929 A.2d 74 (2007), for the proposition that “[e]ssential to the successful assertion of any regulatory takings claim is a final and authoritative determination of the permitted and prohibited uses of a particular piece of property.” Casey, 400 Md. at 308, 929 A.2d at 103-04; but see Falls Rd. Cmty. Ass’n, Inc. v. Baltimore Cnty., 437 Md. 115, 142-44, 85 A.3d 185, 201-02 (2014) (even after there was a final administrative order and the county has the general duty and responsibility “to enforce land use and zoning requirements, it clearly does not pursue enforcement on every arguable violation”). Certainly we do not disagree with this statement from Casey in the context of the zoning action involved there, but we disagree with the Town’s characterization of Ms. Litz’s claim as being analogous. Our intermediate appellate court colleagues viewed Ms. Litz’s claim as a “failure to regulate.” Her claim was not expressed as a regulatory taking, such as a “down-zoning,” which might require analysis under the Casey precedent. Although the sewage was flowing from the failed septic systems of private citizens and/or businesses (which governmental entity approved the installation of the systems and whether the approvals were proper has yet to be explored in this case because 18 discovery has yet to occur), Ms. Litz alleges that the Town and the State were aware of the failure of the community sewage systems, the contamination of the surface and groundwater, and the conveyance of the sewage to Lake Bonnie via the community drainage system. It is not merely a case of a property right being affected adversely by private third parties solely and exclusively. Ms. Litz’s property was alleged to have been “condemned” by the failure of the State and Town in the face of an affirmative duty to abate a known and longstanding public health hazard. Although questions of which Respondents had statutory or legal duties with regard to abatement of the contamination are open in the proceeding as far as it has advanced, it is not frivolous to hypothesize that state, county, and municipal agencies may have duties to step in to protect the public health, as illustrated by the execution of the 1996 Consent Order. In State Dep’t of Env’t v. Showell, 316 Md. 259, 264, 558 A.2d 391, 393 (1989), this Court held that it was within the broad powers of the State Department of Health and Mental Hygiene to execute a consent order to protect the public health when it was clearly a “‘reasonable remedial measure’ executed within the authority of the Department to promote a legitimate governmental objective.” These powers afforded to the Department to protect public health included: In respect to the scope of the Department’s powers, § 9-204(a) of the Health-Environmental Article provides that “[t]he Secretary has general supervision and control over the waters of the State, insofar as their sanitary and physical condition affect the public health or comfort and may make and enforce rules and regulations and order works to be executed to correct and prevent their pollution.” As to existing sewerage systems, the Secretary may “[c]ompel their operation in a manner that will protect the public health and comfort.” § 9-204(b)(1). 19 Showell, 316 Md. at 270, 558 A.2d at 396 (alterations in original). Under the current version of the Environment Article of the Maryland Code, the State is empowered to step-in to ensure the enforcement of the Federal Water Pollution Control Act. See Maryland Code (1984, 2013 Repl. Vol.), Environment Article, § 9-253 (“Env’t”). Even if, however, it is determined on remand that the State Respondents and the Town did not have a general or specific statutory duty to act to abate this public health hazard, Ms. Litz’s allegations may be read to assert that execution of the Consent Order created an affirmative duty to act. Without discovery regarding the origins of and seeming failure to enforce the Consent Order and its terms, it was premature to resolve Ms. Litz’s claim for inverse condemnation by the grant of the motions to dismiss. Moreover, at the current stage of these proceedings and given our holding here regarding governmental inaction as a basis for an inverse condemnation claim, the parties have not briefed or argued the applicable law under these circumstances. Although we agree that Ms. Litz stated adequately a claim for inverse condemnation, we caution that our decision should not be seen by any party as either an unqualified victory or calamity. Ms. Litz may not succeed ultimately on her inverse condemnation claim against any or all of the Respondents. We conclude only that it was improper to decide as a matter of law, at the present stage of the litigation, that Ms. Litz failed to state a claim for inverse condemnation. Her entitlement to relief may become clearer or blurred after the respective sides have the opportunity to conduct discovery and argue the law of liability. c. Application of the LGTCA and the MTCA to an Inverse Condemnation Claim 20 The LGTCA was created “to limit the designated local governments’ financial liability as well as to provide the employees of local governments certain protections from damages.” Rounds v. Maryland-Nat. Capital Park & Planning Comm’n, 441 Md. 621, 638, 109 A.3d 639, 648-49 (2015), reconsideration denied (Mar. 27, 2015). We conclude that the General Assembly did not intend to include a claim for inverse condemnation to come within the ambit of the provisions of either tort claims act.14 A claim for inverse condemnation is not a tort in a traditional sense and has been treated routinely and differently than torts. In Reichs Ford Rd. Joint Venture v. State Roads Comm’n of the State Highway Admin., 388 Md. 500, 506 n.2, 880 A.2d 307, 310 n.2 (2005), the circuit court dismissed all of the plaintiff’s tort claims for failure to follow the notice requirements of the MTCA. The plaintiff’s inverse condemnation claim, however, was allowed to move forward, without the necessity of proof of compliance with the notice provision of the MTCA. Id. 14 In Rounds v. Maryland-Nat. Capital Park & Planning Comm’n, 441 Md. 621, 643, 109 A.3d 639, 651-52 (2015), we explained: Nothing in the statute’s language or its legislative history indicates that the General Assembly intended to exclude any category of tortious conduct committed by a local government or its employees, from the scope of the LGTCA notice requirement. As we have previously indicated, “[t]his Court has been most reluctant to recognize exceptions in a statute when there is no basis for the exceptions in the statutory language.” See also Lee v. Cline, 384 Md. 245, 256, 863 A.2d 297, 304 (2004) (holding that “[t]here are no exceptions in the statute for intentional torts or torts based upon violations of the Maryland Constitution. This Court has been most reluctant to recognize exceptions in a statute when there is no basis for the exceptions in the statutory language”). 21 Additionally, it is well-established that “that agents of the State do not enjoy immunity with respect to a wrongful taking of property without just compensation.” Dep’t of Nat. Res. v. Welsh, 308 Md. 54, 60, 521 A.2d 313, 316 (1986). We have explained: . . . it would be strange indeed, in the face of the solemn constitutional guarantees, which place private property among the fundamental and indestructible rights of the citizen, if this principle could be extended and applied so as to preclude him from prosecuting an action. . . against a State Official unjustly and wrongfully withholding property. Lee v. Cline, 384 Md. 245, 263, 863 A.2d 297, 308 (2004) (citation and quotations omitted). These constitutional guarantees require that state officials not be immune from suit because, as “expressed in Article 19 of the Maryland Declaration of Rights, that a plaintiff injured by unconstitutional state action should have a remedy to redress the wrong.” Lee, 384 Md. at 264, 863 A.2d at 308. It is only logical that courts would treat eminent domain and inverse condemnation claims differently from common law or statutory torts because the remedy afforded to the respective plaintiff is different. We have explained that “constitutionally speaking, fair market value is usually the only measure of damages in an eminent domain condemnation.” Reichs Ford Rd. Joint Venture, 388 Md. at 513, 880 A.2d at 314 (citing Kimball Laundry Co. v. United States, 338 U.S. 1, 5–6, 69 S.Ct. 1434, 1438, 93 L.Ed. 1765(1949)).15 We have recognized “that 15 Within the context of eminent domain and inverse condemnation proceedings, fair market value is defined as: (Continued…) 22 applying the LGTCA damages cap to a constitutionally based taking, or inverse condemnation could conflict with a vested right to just compensation.” Espina v. Jackson, 442 Md. 311, 332-33, 112 A.3d 442, 455 (2015) (citations and quotations omitted). This conflict arises because the eminent domain provision of the Maryland Constitution16 creates “an implied contract between the government and a private landowner.” Widgeon v. E. Shore Hosp. Ctr., 300 Md. 520, 531, 479 A.2d 921, 926 (1984). This implied contract differs from the duty element of Maryland tort law. Because the remedy afforded to a plaintiff in the case of a taking is fair market value, the damages “cap” associated with the LGTCA and the MTCA should not apply. By parity of reasoning, the notice requirements of each tort claims act would not apply either. (…continued) (b) The fair market value of property in a condemnation proceeding is the price as of the valuation date for the highest and best use of the property which a vendor, willing but not obligated to sell, would accept for the property, and which a purchaser, willing but not obligated to buy, would pay, excluding any increment in value proximately caused by the public project for which the property condemned is needed. In addition, fair market value includes any amount by which the price reflects a diminution in value occurring between the effective date of legislative authority for the acquisition of the property and the date of actual taking if the trier of facts finds that the diminution in value was proximately caused by the public project for which the property condemned is needed, or by announcements or acts of the plaintiff or its officials concerning the public project, and was beyond the reasonable control of the property owner. Maryland Code (1974, 2003 Repl. Vol.), Real Property Article, § 12-105(b) (“RP”). 16 “The General Assembly shall enact no Law authorizing private property, to be taken for public use, without just compensation, as agreed upon between the parties, or awarded by a Jury, being first paid or tendered to the party entitled to such compensation.” Md. Constitution, Art III, § 40. 23 Therefore, we conclude that Ms. Litz’s claim for inverse condemnation is not covered by the LGTCA or the MTCA, and especially their respective notice requirements.