Opinion ID: 835006
Heading Depth: 1
Heading Rank: 2

Heading: was plaintiff required to pursue administrative remedies?

Text: As noted, the Ninth Circuit views Oregon law regarding the pursuit of administrative remedies to be unsettled based on a conflict that it perceives between the decision of the Court of Appeals in Nelson v. City of Lake Oswego, 126 Or.App. 416, 869 P.2d 350 (1994), and the decision of LUBA in Reeves v. City of Tualatin, 31 Or. LUBA 11 (1996). In Nelson, the plaintiffs alleged that the city had effected a taking of their property under the state and federal constitutions when the city manager required, as a condition of development, that the plaintiffs dedicate a 55-foot easement to the city. The plaintiffs filed judicial claims for inverse condemnation without first appealing the city manager's decision to the city council. The court recognized that plaintiffs who base inverse condemnation claims on use restrictionsclaims that the court described as regulatory takings claimsmust exhaust administrative remedies for two reasons: First, the fact that one use is impermissible under the regulations does not necessarily mean that other economically productive uses are also precluded; and second, until alternative uses are applied for or alternative means of obtaining permission for the first use are attempted, there can be no conclusive authoritative determination of what is legally permitted by the regulations. Therefore, the courts cannot perform their adjudicative function on a claim predicated on a single denial, because something more must be decided by the local or other regulatory authority before there can be a demonstrable loss of all use and, therefore, a taking. See Suess Builders v. City of Beaverton, [294 Or. 254, 261-62, 656 P.2d 306 (1982)]. 126 Or.App. at 422, 869 P.2d 350 (emphasis in original). However, the court distinguished a local government's requirement that a property owner dedicate real property from such regulatory takings and decided that exhaustion of administrative remedies was not required under the circumstances presented in Nelson, because the condition has been imposed and the easement has been acquired by the city. There is nothing left to happen at the local or administrative level in order for the claim to be susceptible to adjudication; the only question is whether what has occurred is a taking under the legal test that the condition must bear a reasonable relationship to the impacts of the use to which the city has attached it. Dolan v. City of Tigard, 317 Or. 110, 854 P.2d 437, cert. granted 510 U.S. 989[, 114 S.Ct. 544, 126 L.Ed.2d 446] (1993). The facts on both sides of the equation are readily susceptible to conventional judicial proof, and the adjudication of the facts and of the applicable law is well within the judicial competence. Id. (emphasis in original). Reeves was a LUBA decision that purported to apply the court's decision in Nelson, The petitioner in Reeves, like the plaintiffs in Nelson, objected to a required dedication of real property. LUBA ruled that the petitioner was required to seek a variance from the city before appealing that requirement to LUBA. LUBA noted that that option had not been available to the plaintiffs in Nelson. Reeves, 31 Or. LUBA at 17. Further, in Nelson, the city had acquired the easement at issue, and there was nothing left to happen at the local level in order for a claim to be susceptible for adjudication. Reeves, 31 Or. LUBA at 17 (citing Nelson, 126 Or.App. at 422, 869 P.2d 350) (internal quotation marks omitted). In Reeves, the city had not yet acquired the easement, and there were other actions that the city could take that could affect LUBA's decision. Id. LUBA explained that, until it could ascertain how and to what extent the conditions will be imposed on the petitioner's property, [it would] have no way of determining whether the conditions bear an `essential nexus' to the impacts of the development and whether any exactions are roughly proportional to the impacts of petitioner's proposed development. Id. In addressing the Ninth Circuit's first question, plaintiff argues that Nelson is controlling Oregon law and stands for the proposition that exhaustion is not required when a plaintiff brings an inverse condemnation action based on a taking under Nollan and Dolan. We disagree. Although we do not apprehend the conflict that the Ninth Circuit sees as rendering Oregon law unsettled, we also do not see Nelson as determinative of the question that the Ninth Circuit poses. In this case, the city did not require plaintiff to dedicate real property as a condition of its development. Because the circumstances extant here may argue for exhaustion for the reasons that LUBA stated in Reeves and that the Court of Appeals did not have the opportunity to fully explore in Nelson, we take up the merits of the first question that the Ninth Circuit poses. We begin with a review of relevant precedent. In Fifth Avenue Corp. v. Washington County, 282 Or. 591, 622 n. 23, 581 P.2d 50 (1978), this court determined that a plaintiff that sought a declaratory judgment that a comprehensive plan was unconstitutional on the basis that it was arbitrary, capricious, and unreasonable as applied was required to exhaust administrative remedies before asserting that claim in court. [12] The comprehensive plan prohibited the plaintiff from building a district shopping center on its property, but local procedure entitled the plaintiff to seek a zone change or a plan amendment, which, if obtained, would have permitted that development. The court treated the issue as one of exhaustion of administrative remedies and observed that one of the purposes of that doctrine is to permit an administrative body with expertise to determine[,] at least initially, factual and policy questions with which it is familiar, and, if litigation does result, to provide the reviewing court with a complete and well[-]organized record upon which it may base its judgment. Id. at 623 n. 23, 581 P.2d 50. The court relied on the local planning body's expertise and the principle that [o]rdinarily those who seek judicial relief must show they have exhausted their administrative remedies in holding that the plaintiff's failure to exhaust administrative remedies barred his claim. Id. at 614, 581 P.2d 50 (internal quotation marks omitted). The court extended the exhaustion requirement of Fifth Avenue to a plaintiff's claim for inverse condemnation in Suess Builders. In that case, the plaintiff alleged that the city had designated its property for future public acquisition and that that designation constituted a taking for which just compensation was required. The court decided that the plaintiff could not rest its claim on the plan designation, but had to demonstrate that it had sought relief, including pursuing administrative procedures for amending the plan. The court stated that, if a means of relief from the alleged confiscatory restraint remains available, the property has not been taken. 294 Or. at 262, 656 P.2d 306. In Boise Cascade, the court declined, however, to require appeal to LUBA as a prerequisite to an inverse condemnation action. 325 Or. 185, 935 P.2d 411 (1997). Although LUBA has jurisdiction to decide whether governmental action constitutes a compensable taking, Dunn v. City of Redmond, 303 Or. 201, 207, 735 P.2d 609 (1987), the court in Boise Cascade refused to stay the plaintiff's inverse condemnation action until LUBA had an opportunity to rule, reasoning that the issue presentedwhether a taking had occurredwas a constitutional question that fell within an area traditionally adjudicated by courts. Boise Cascade, 325 Or. at 196, 935 P.2d 411. Fifth Avenue and Suess Builders impose a requirement that a property owner obtain a clear and final ruling from the local government as to the permitted uses of its property before filing judicial action to challenge limitations on the use of that property. That rule can be viewed as ensuring that the decision of the local government is in truth its final decision or as a general requirement of efficiency in judicial administration. Through either lens, that requirement permits the local government to fully determine and review factual questions about the effect that its regulations have on a particular property and policy questions about whether, given the specific circumstances presented, the government wishes to enforce those regulations. And through either lens, that requirement is of great benefit in avoiding unnecessary litigation or better informing a court should litigation ensue. With regard to whether Oregon law imposes a requirement of finality or exhaustion before permitting the filing of an action for inverse condemnation, we do not see a significant difference between takings claims that are based on regulations that limit the use of property and those that are based on regulations that place conditions on its development. In either instance, a property owner that asserts objections to the regulations at the local level may obtain relief from regulatory restraint. In either instance, a requirement that a property owner take administrative steps prior to bringing judicial action permits the local government to determine the necessary effects of the regulations and whether, knowing those effects, it wishes to impose or enforce them. Just as a court benefits by requiring that local governments have the opportunity to assess fully the effects that use limitations have on property owners, so too does a court benefit from requiring that local governments have the opportunity to consider fully whether the conditions on development that it seeks to require are proportional to the impacts of development and whether to insist on imposing those conditions, given the assessment that it makes. That conclusion does not mean, however, that a landowner must appeal the decision of the local government to LUBA before filing an action for inverse condemnation. LUBA reviews the decisions of local government, but it does not decide facts and cannot make policy decisions for local governments. See ORS 197.829(1)(c) (LUBA shall affirm local government's interpretation of a regulation unless that interpretation is inconsistent with underlying policy of comprehensive plan or land use regulation); ORS 197.835(2)(b) (LUBA bound by any findings of fact of the local government for which there is substantial evidence in the record); ORS 197.835(7)(a), (b) (LUBA shall reverse land use regulation if not in compliance with local government's comprehensive plan or the comprehensive plan lacks specific policies which provide the basis for the regulation). Requiring appeal to LUBA would not serve the same purposes as does requiring the pursuit of local government remedies. [13] Accordingly, we answer the Ninth Circuit's first question as follows: Assuming that Oregon law permits an inverse condemnation action premised on allegations that a condition of development requires a landowner to construct off-site improvements at a cost not roughly proportional to the impacts of development, Oregon law requires the landowner to pursue available local administrative remedies, but not to appeal to LUBA, as a prerequisite to bringing that action in state court. [14] In this case, it is undisputed that plaintiff did not use available local procedures to seek to modify or annul the requirement that it construct off-site improvements. West Linn, 534 F.3d at 1102. Therefore, assuming that plaintiff had viable claims for inverse condemnation against the city, it did not pursue available local administrative remedies before bringing those judicial claims.