Developers' Rights Alert: California Property Owner Prevails in Significant Regulatory Takings Case

June 7, 2013

By Matthew Hinks

Chief Justice John Roberts recently observed during oral argument on the Supreme Court's latest foray into the field of regulatory takings that the government does not lose a Penn Central case very often. A new opinion from the California Court of Appeal in Lockaway Storage v. County of Alameda represents one of those rare instances. But more than offering just an isolated example of a property owner victory in such cases, the court's opinion in the Lockaway case delivers a significant blow to a major obstacle that has stood in the way for developers alleging damages caused by project delays -- the California Supreme Court's seminal decision in Landgate v. California Coastal Commission.

Facts of Complaint

In May 2000, Lockaway Storage ("Lockaway") purchased an 8.45-acre parcel of land in an unincorporated area of Alameda County. The property was zoned for agricultural uses with an alternative conditional use for "open storage of recreational vehicles and boats". Prior to Lockaway's purchase of the property, the County had issued a Conditional Use Permit ("CUP") authorizing an rv storage facility, which would expire if it was not implemented by September 22, 2002.

Six months after Lockaway's purchase, in November of 2000, voters in Alameda County approved Measure D, a growth control initiative that amended the County's General Plan. Among other things, Measure D prohibited the development of a storage facility in the area of Lockaway's property. Section 22 of Measure D, however, contained a grandfather clause providing that the ordinance "does not affect existing parcels, development, structures, and uses that are legal at the time it becomes effective." Section 22 further provided that, "[e]xcept to the extent there is a legal right to development, the restrictions and requirements imposed by this ordinance shall apply to development which has not received all necessary discretionary County and other approvals and permits prior to the effective date of the ordinance."

Lockaway continued to pursue its plan to develop its property. County planning department staff continued processing the application and offered assurances that Measure D did not prevent the development. However, planning staff reversed course in August 2002 and required Lockaway to obtain a new CUP to proceed with its project. Lockaway applied for a new CUP under protest, which the County denied in a final decision on March 6, 2003.

Trial Court Proceedings

Lockaway sued. In February 2005, the trial court issued a writ of mandate commanding the City (1) to recognize the validity of the 1999 CUP; (2) to recognize that Lockaway's rights in the CUP had vested; and (3) to allow construction to proceed on the property. The County initially resisted complying with the mandate but finally issued the permits in August 2005. After a partial settlement of certain other claims, the court tried Lockaway's claims based on alleged delays in the permitting process between the expiration date of the 1999 CUP and the issuance of the writ of mandate. Finding the County's actions amounted to a temporary regulatory taking, the trial court awarded Lockaway damages of almost $1 million plus attorneys' fees greater than $700,000.

Court of Appeal's Analysis

The court of appeal affirmed.

Initially, the court grappled with the trial court's issuance of the writ of mandate. The County asked the court to reverse the writ even though it acknowledged that it had issued permits allowing the project to proceed and that Lockaway had completed the project and had been operating its facility for years. Nevertheless, the County contended that it appeal from the writ was not moot because Lockaway can always be forced to tear the project down and because a decision overturning the writ would undermine the damages award. The court rejected both arguments. Interestingly, the court rejected the County's argument that Lockaway could be forced to remove project improvements reasoning that the project was completed as a result of the trial court's writ ruling allowing it to proceed.

Turning to the merits of the regulatory taking claim, the court rejected each of the County's arguments regarding the application of Section 22 and upheld the trial court's ruling that the Lockaway project was exempt from the use restrictions of Measure D. With those arguments disposed of, the court determined the facts of the case met each of the Penn Central factors governing regulatory takings that do not involve a physical invasion or the loss of all economically beneficial use of the property. Important to the court' analysis was the County's sudden reversal of position in 2002 -- which it termed a "regulatory about face" -- finding the shift to be "manifestly unreasonable" because of its "devastating economic impact on Lockaway" and "because it deprived Lockaway of a meaningful opportunity to protect its property rights."

Impact of Court of Appeal's Opinion

The most significant part of the Lockaway decision is its discussion of the California Supreme Court's opinion in Landgate. Landgate held that delays in the permitting process do not generally give rise to temporary takings claims. The court's analysis raises significant questions over whether Landgate remains good law. At a minimum, the court clarified that Landgate is no longer relevant to takings claims given the Supreme Court's decision in Lingle v. Chevron, which reversed a prior Supreme Court case upon which the Landgate opinion was based.

The Landgate opinion has remained a significant obstacle to a large number of regulatory takings claims despite the intervening Lingle opinion. The analysis of the Lockaway court -- the first California appellate court to recognize Lingle's impact upon Landgate -- opens a potential new avenue for relief for property owners and developers who have experienced damages occasioned by project delays due to government action.

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Matthew Hinks is a litigator with a wide-ranging practice that focuses primarily on the representation of real estate developers in difficult land use cases. Matt has extensive experience litigating complex mandamus actions and other claims involving signage disputes, governmental takings, CEQA challenges, planning and zoning law, civil rights violations, eminent domain issues, title disputes, lease disputes and community redevelopment and density bonus law. He has extensive experience in both federal and state courts, including trial courts and courts of appeal, as well as in arbitration, mediation and administrative settings. Contact Matt at MHinks@jmbm.com or 310.201.3558.