Opinion ID: 810963
Heading Depth: 2
Heading Rank: 1

Heading: Federal Takings Claim

Text: The Fifth Amendment provides, “nor shall private property be taken for public use, without just compensation.” There are two types of “per se” takings: (1) permanent physical invasion of the property, Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426 (1982); and (2) a deprivation of all economically beneficial use of the property, Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015-16 (1992). Plaintiffs do not contend that the ordinances constitute a “per se” taking. They argue, instead, that the ordinances constitute a regulatory taking because the ordinances go “too far.” Pa. Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). 1 Plaintiffs also filed a petition for review with the state administrative agency, alleging certain state-law violations. The agency found that Defendant had violated certain state-law provisions but declined to reach, for lack of jurisdiction, the constitutional issues. Those administrative proceedings are not part of this appeal. 2 Plaintiffs also argue that the district court abused its discretion by granting a motion to quash certain notices of deposition filed by Plaintiffs. See Mattel Inc. v. Walking Mountain Prods., 353 F.3d 792, 813 (9th Cir. 2003) (holding that we review for abuse of discretion a district court’s decision on a motion to quash). We hold that the district court did not abuse its discretion. The evidence sought is either known to Plaintiffs or is irrelevant to the facial challenges. LAUREL PARK COMMUNITY v. CITY OF TUMWATER 12969 [1] As a general rule, zoning laws do not constitute a taking, even though they affect real property interests: “[T]his Court has upheld land-use regulations that destroyed or adversely affected recognized real property interests. Zoning laws are, of course, the classic example, which have been viewed as permissible governmental action even when prohibiting the most beneficial use of the property.” Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 125 (1978) (citations omitted); see Pa. Coal, 260 U.S. at 413 (“Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law.”); see also Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538 (2005) (holding that, in considering a regulatory taking case, “we must remain cognizant that ‘government regulation—by definition— involves the adjustment of rights for the public good’ ” (quoting Andrus v. Allard, 444 U.S. 51, 65 (1979)). [2] Nevertheless, as noted, regulations that go “too far” constitute a taking. Determining whether a regulation goes too far requires a court to engage in “essentially ad hoc, factual inquiries.” Penn Cent., 438 U.S. at 124. “[R]egulatory takings challenges are governed by the standards set forth in [Penn Central].” Lingle, 544 U.S. at 538. “Primary among [the relevant] factors are [1] the economic impact of the regulation on the claimant and, particularly, [2] the extent to which the regulation has interfered with distinct investment-backed expectations. In addition, [3] the character of the governmental action . . . may be relevant in discerning whether a taking has occurred.” Id. at 538-39 (citation, internal quotation marks, and brackets omitted). “[T]hese three inquiries . . . share a common touchstone. Each aims to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain.” Id. at 539. At the outset, we note that Plaintiffs bring a facial challenge. It is not clear that a facial challenge can be made under 12970 LAUREL PARK COMMUNITY v. CITY OF TUMWATER Penn Central. Guggenheim v. City of Goleta, 638 F.3d 1111, 1118 & n.32 (9th Cir. 2010) (en banc), cert. denied, 131 S. Ct. 2455 (2011). As we did in Guggenheim, we will “assume, without deciding, that a facial challenge can be made under Penn Central.” Id. at 1118. We turn, then, to the three Penn Central factors. 1. “Economic Impact of the Regulation on the Claimant” [3] Plaintiffs offer very little evidence of economic effect resulting from enactment of the ordinances. At best, Plaintiffs have presented information that reflects an economic loss of less than 15% with respect to one of the three Plaintiff properties and no effect on the other two Plaintiff properties or the properties of the remaining affected MHP parks.3 Although there is no precise minimum threshold, Plaintiffs’ evidence is of very little persuasive value in the context of a federal takings challenge. See, e.g., Cienega Gardens v. United States, 331 F.3d 1319, 1343 (Fed. Cir. 2003) (holding that a taking occurred when a regulation effected a 96% loss of return on equity). A small decrease in value, for only one affected property, falls comfortably within the range of permissible landuse regulations that fall far short of a constitutional taking. See Penn Cent., 438 U.S. at 125 (“[T]his Court has upheld land-use regulations that destroyed or adversely affected recognized real property interests.”). The Supreme Court cases “uniformly reject the proposition that diminution in property value, standing alone, can establish a ‘taking,’ see Euclid v. 3 The one Plaintiff property that showed a decrease in value was Velkommen. Various reports and assessments—operating under different background assumptions—valued the park: One report assigned a preordinance value of $2.7M and a post-ordinance value of $2.4M (11.1% decrease); one assessment assigned a pre-ordinance value of $1.8M and a post-ordinance value of $1.6M (11.1% decrease); and a final report assigned a pre-ordinance value of $1.675M and a post-ordinance value of $1.45M (13.4% decrease). The other two Plaintiff properties showed no change pre-ordinance and post-ordinance (with appraised values of $6.3M and $4.37M, respectively). LAUREL PARK COMMUNITY v. CITY OF TUMWATER 12971 Ambler Realty Co., 272 U.S. 365 (1926) (75% diminution in value caused by zoning law); Hadacheck v. Sebastian, 239 U.S. 394 (1915) (87 1/2% diminution in value).” Penn Central, 438 U.S. at 131. [4] In sum, the minimal economic effect of the ordinances does not support a takings claim. 2. “Distinct Investment-backed Expectations” [5] When Plaintiffs bought the properties, they had the expectation that, when they desired or when market conditions made it attractive, they could convert to a more profitable use, such as multi-family housing or housing developments. The zoning laws previously allowed such development, and the ordinances now foreclose that option (at least until Plaintiffs show that there are no economically viable options available under the other uses expressly permitted by the ordinances). But those facts are no different than the assertions that could be made by property owners adversely affected by any zoning law. As the Supreme Court wrote in Penn Central, “the submission that [the plaintiffs] may establish a ‘taking’ simply by showing that they have been denied the ability to exploit a property interest that they heretofore had believed was available for development is quite simply untenable. Were this the rule, this Court would have erred [in many of its previous takings cases].” Id. at 130. Of most importance, Plaintiffs retain the ability to continue operating the properties as manufactured home parks. “So the law does not interfere with what must be regarded as [Plaintiffs’] primary expectation concerning the use of the parcel.” Id. at 136. In other words, although the ordinances affected one of Plaintiffs’ expectations—that at some indefinite time in the future they could convert their properties to some other specific uses —the ordinances did not affect Plaintiffs’ “primary expectation.” In Guggenheim, we held that “ ‘[d]istinct investmentbacked expectations’ implies reasonable probability, like 12972 LAUREL PARK COMMUNITY v. CITY OF TUMWATER expecting rent to be paid, not starry eyed hope of winning the jackpot if the law changes.” 638 F.3d at 1120. In our view, the ordinances at issue here fall between the two poles used in that example. Plaintiffs’ expectation of converting their properties is speculative to a degree, because it depends on future events (chief among them, market forces making conversion economically attractive). But it is not as speculative as “winning the jackpot if the law changes,” because it depends only on unknown future economic trends, not an outright change in law. Our clarification later in the same paragraph provides a means of assessing Plaintiffs’ expectations here: “Speculative possibilities of windfalls do not amount to ‘distinct investment-backed expectations,’ unless they are shown to be probable enough materially to affect the price.” Id. at 1120-21. As discussed above, the speculative possibility of converting the properties to another use had little to no effect on price. [6] This factor, too, fails to support a takings claim. 3. “The Character of the Governmental Action” “[T]he character of the governmental action—for instance whether it amounts to a physical invasion or instead merely affects property interests through some public program adjusting the benefits and burdens of economic life to promote the common good—may be relevant in discerning whether a taking has occurred.” Lingle, 544 U.S. at 539 (internal quotation marks omitted). The government generally cannot “ ‘forc[e] some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’ ” Id. at 537 (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). [7] Although it is a close call, we agree with Plaintiffs that the character of the governmental action here slightly favors their takings claim. The intent and effect of the ordinances are to require only Plaintiffs and the other affected owners of LAUREL PARK COMMUNITY v. CITY OF TUMWATER 12973 manufactured home parks to continue to provide the public benefit (manufactured home parks), when the benefit could be distributed more widely (for example, by providing relocation assistance to owners of manufactured homes or a larger MHP zone district). The ordinances do allow many other uses but, at least at the moment, those other uses do not appear to provide truly economically attractive alternatives to the existing manufactured home parks. As a practical matter, Plaintiffs must continue to use their properties as manufactured home parks. Indeed, that was the intended effect of the ordinances. [8] That analysis goes only so far, however. Unlike in other cases where the challenged law required continued operation of an existing use, e.g., Cienega Gardens, 331 F.3d at 1338-39, the ordinances here do not force Plaintiffs to continue operating their properties as manufactured home parks. See Lingle, 544 U.S. at 537 (holding that the government cannot “forc[e] some people alone to bear public burdens”). As just a few examples, Plaintiffs could decide to close their parks, to convert their properties to other allowed uses, or to sell the properties, and the ordinances have no effect on those possibilities. 4. Conclusion [9] Because the first two factors weigh strongly against a takings claim and the third factor weighs only slightly in favor of a takings claim, we conclude that, on their face, the ordinances do not constitute a taking under the Fifth and Fourteenth Amendments. See also Guggenheim, 638 F.3d at 1120 (holding that the first two factors are the “primary” factors to consider; the character of the governmental action is not on equal footing).