New California Court of Appeal Opinion Holds That Supreme Court's Seminal Nollan and Dolan Opinions do Not Apply Where a Permit Condition Does Not Otherwise Constitute a Taking

February 25, 2014

By Matthew Hinks

The well-known "nexus" and "rough proportionality" tests from the United States Supreme Court's opinions in Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994) do not apply where a condition to issuance of a building permit does not otherwise constitute a taking. So says the California Court of Appeal in Powell v. County of Humboldt, a new published opinion that could potentially limit the reach of Fifth Amendment takings protections for California property owners.

Factual Background

Scott and Lynn Powell own property near the Arcata-Eureka Airport in Humboldt County. The previous owners of the property constructed a covered porch and carport without securing a building permit. In May 2008, the County gave notice to the Powells that unless they secured an "after-the-fact" permit for the porch and carport they would be subject to monetary penalties. The Powells thereafter filed a permit application, which included work to secure the porch foundation and strengthen the structures to bring them into compliance with building codes. The County informed the Powells that, pursuant to a County general plan requirement, the County would require, as a condition to issuance of the permit, that the Powells dedicate an aircraft overflight easement over their property granting the County the right to, among other things, allow flights and noise inherent thereto, and regulate the release of substances, light and electrical emissions, in the airspace over the property.

The Powells challenged the constitutionality of the general plan's easement requirement arguing that the condition constituted a taking of their property without just compensation under Nollan and Dolan. The Court of Appeal disagreed and affirmed the trial court's summary judgment ruling in favor of the County.

Nollan and Dolan

The court's opinion offers an excellent discussion of the Supreme Court's influential Nollan and Dolan opinions. Relying on the analysis of the cases in the Court's opinion in Lingle v. Chevron USA, Inc., 544 U.S. 528 (2005), the court noted that "the takings clause is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking." The court explained that, "[e]arly case law required a direct government appropriation or physical invasion of private property before requiring compensation" but "[l]ater cases recognized that government regulation of private property may, in some instances, be so onerous that its effect is tantamount to a direct appropriation or ouster--and that such 'regulatory takings' may be compensable under the Fifth Amendment." The court described several classes of regulatory taking claims: claims involving a permanent physical invasion of property; claims involving regulations that completely deprive an owner of all economically beneficial uses of property; and other, "non-categorical" regulatory takings claims governed by the multi-factor test first articulated in Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978).

As the court explained, Nollan and Dolan govern takings claims brought in connection with the "special context of land-use exactions" - i.e., takings arising from conditions placed on the issuance of building permits and other land use entitlements. Under Nollan, "compensation is required unless there is an 'essential nexus' between the dedication condition and the asserted public purpose that would be advanced by denying the permit." Subsequently, Dolan added a further qualification that the dedication must also be 'roughly proportional' in nature and extent to the impact of the proposed development." In other words, a condition upon the issuance of a permit will be found to constitute a taking requiring the payment of just compensation where the condition is not related or is out of proportion to the impact caused by the proposed development.

Application to Humboldt County's Overflight Easement Dedication Requirement

The court rejected the Powells' argument that the Nollan/Dolan essential nexus and rough proportionality tests provide an independent, stand-alone test for determining whether a permit exaction is a compensable taking. "That view", according to the court, "puts the cart before the horse." Before scrutiny of a permit approval condition under Nollan and Dolan is required "a court must make a threshold determination whether the condition would rise to the level of a compensable taking for Fifth Amendment purposes if applied to the landowner outside the permitting process." "Unless that test is satisfied", court held, "the government is not in fact demanding the landowner to trade a constitutional right--the right to just compensation for the taking of property--in order to receive a discretionary government benefit." Examining both state and federal law regarding airspace rights, the court concluded that the Powells' property rights "do not include a right to exclude airplanes from using the navigable airspace above their property in accordance with applicable safety regulations." Thus, no taking could be found.

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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.