The Finality Conundrum: The Gaping Hole in the Supreme Court’s Liberalization Program for Takings Claims

For the eminent domain bar, there is reason to be optimistic. The present composition of the Supreme Court appears to be engaged in a program of liberalizing takings jurisprudence to be more plaintiff-friendly after years of a doctrinal trendline generally extending in the opposite direction. Compare Tyler v. Hennepin Cnty., 598 U.S. 631 (2023); Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021); Knick v. Twp. of Scott, 139 S. Ct. 2162 (2019); with Murr v. Wis., 582 U.S. 383 (2017); Kelo v. City of New London, 545 U.S. 469 (2005); Williamson Cnty. Reg’l. Planning Comm’n. v. Hamilton Bank, 473 U.S. 172 (1985); and Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (1978). Decisions such as Tyler, Cedar Point, and Knick show the Court’s willingness to view broadly what governmental actions might comprise compensable takings, as well as a desire to make it easier for litigants to petition the federal courts for redress.

Additionally, three decades ago in Nollan v. Cal. Coastal Comm’n., 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), the Supreme Court outlined a two-part test to determine whether the government has violated the takings clause through permitting conditions by seeking to compel the applicant to convey a property interest in return for the grant of the requested permit: (1) there must be an “essential nexus,” i.e., a logical relationship, between the condition and the impacts or effects of the applicant’s proposed development or use; and (2) there must be a “rough proportionality” between the condition and those impacts or effects. More recently, in Koontz v. St. John’s River Water Mgmt. Dist., 570 U.S. 595 (2013), the Court extended the so-called Nollan/Dolan doctrine to purely monetary conditions or exactions, and in a context in which a permit application was denied because of an applicant’s unwillingness to accede to such conditions or exactions. The Court is poised to potentially expand this doctrine further still in the upcoming case Sheetz v. Cnty. of El Dorado, 216 L. Ed. 2d 1312 (2023) cert. granted, to be heard during the Supreme Court’s 2024 spring term. There, the Court will determine whether Nollan/Dolan/Koontz applies to legislatively mandated development impact fees. The Supreme Court’s decision to hear Sheetz further evinces the Court’s agenda in this area of constitutional law.

However, rapid movements and developments in the common law are not without their costs, particularly in this self-apparent transitional period in takings doctrine. These costs saliently include unpredictability of outcomes, and a lack of doctrinal consistency between the Supreme Court, on the one hand, and the inferior courts of the Federal Judiciary, on the other, as the latter must catch up with the former’s program of liberalization, and resists change from the status quo ante. The moment de jure and de facto (regulatory) takings are deemed to occur provides a prime example of the challenges facing the eminent domain bar in counseling private clients, and prosecuting claims.

The seminal decision on the effective date of a de jure taking is U.S. v. Dow, 357 U.S. 17 (1958). There, the Court held that it is the date upon which the government takes physical possession of private property and appropriates it for public use that sets the date of the taking, rather than the date upon which title formally vests in the government. In particular, the Court reasoned that “the passage of title does not necessarily determine the date of ‘taking.’ The usual rule is that if the United States has entered into possession of the property prior to the acquisition of title, it is the former event which constitutes the act of taking. It is that event which gives rise to the claim for compensation and fixes the date as of which the land is to be valued and the Government's obligation to pay interest accrues. The owner at the time the Government takes possession rather than the owner at an earlier or later date, is the one who has the claim and is to receive payment.” Dow, 357 U.S. at 22(citations omitted). Ultimately, the Court held that “the date of ‘taking’ is the date on which the Government entered and appropriated the property to public use.” Dow, 357 U.S. at 23 (emphasis added).

Dow remains good law and is considered, today, to be the decision that governs the date of any de jure taking under the Takings Clause. However, the Dow Court dismisses out of hand (and cavalierly from any title attorney’s perspective) the petitioner’s claim that allowing the act of possession and appropriation to public use to define the moment of the taking would inject factual uncertainty into claim accrual and valuation questions. While there is no indeterminacy with the execution of orders of taking and recordation of the same in land records, there can be bona fide factual disputes about the off-record date upon which the government takes physical possession of property for public use. And, yet, the Court was decidedly not impressed by these truisms when it handed down Dow.

Dow also happened to involve facts in which the U.S. Government took possession before formally taking title, but what about when the government takes title, but fails to immediately, or ever, take possession? Dow provides discussion about governmental abandonment of property taken by eminent domain; however, abandonment typically and traditionally requires an affirmative act demonstrating the intent to relinquish a vested right, i.e., doing nothing (mere non-use) does not equate with abandonment at common law. See Tyler, 143 S. Ct. at 1380. The failure to take possession would not per se cause the abandonment of title and, under Dow, the government’s failure to take possession calls into question whether a compensable de jure taking has even occurred. However, even under existing doctrine, which is confused and confusing, a compensable taking may occur although the government never takes possession, and thus no de jure taking has occurred. See Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992); Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (1978); and Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).

Nevertheless, similar timing issues pose challenges for de facto, constructive, or regulatory takings claims as well. The Supreme Court in Williamson originally imposed a two-pronged state law exhaustion requirement for such claims: (1) finality, also known as the “ripeness doctrine,” i.e., that the governmental action amounting to a taking must be sufficiently final so that the injury is not hypothetical; and (2) exhaustion of state-law constructive or regulatory takings claims and remedies for damages in state court. Under Williamson, a plaintiff would need to satisfy both before filing in federal court. Recently, however, the Supreme Court in Knick abrogated the second prong, leaving intact only the finality prerequisite for a properly ripened regulatory or constructive taking claim. Knick was a positive development in takings jurisprudence because, under San Remo Hotel, L. P. v. City and County of San Francisco, 545 U. S. 323 (2005), state court judgments entered pursuant to the second prong of Williamson exhaustion have preclusive effect and forever close the door to any federal court remedies. This catch-22 effectively nullified regulatory takings as a federal constitutional injury before Knick.

Nevertheless, with the first prong finality requirement intact, there remain serious difficulties in determining when a regulatory takings claim is properly ripe and therefore has accrued. The conditions for finding a final decision elude consensus. A comparison of recent decisions from the Supreme Court and the First Circuit Court of Appeals exemplifies the problem. In Pakdel v. City & Cty. of San Francisco, 141 S. Ct. 2226 (2021) (per curiam), a married couple in the process of converting a building into a condominium were required by the city’s condominium conversion ordinance to offer lifetime leases to tenants. The couple sued arguing the required lifetime lease amounted to a de facto taking, but the district court and the Ninth Circuit ruled that the claim was unripe because, despite the city denying the couple’s relief twice, the couple had made a further request for an administrative exemption and that the exemption request remained pending.

The Supreme Court in Pakdel disagreed and held that the couple had met the finality requirement, reasoning that “nothing more than de facto finality is necessary.” The Court further opined that “[t]he finality requirement is relatively modest. All a plaintiff must show is that ‘there [is] no question . . . about how the ‘regulations at issue apply to the particular land in question.’” The Court reasoned that, “[i]n this case, there is no question about the city’s position: Petitioners must ‘execute the lifetime lease’ or face an ‘enforcement action.’” Pakdel, 141 S. Ct. at 2230 (citations omitted). Therefore, according to the Pakdel Court, “there [wa]s no question that the government’s ‘definitive position on the issue . . . inflict[ed] an actual, concrete injury’ of requiring petitioners to choose between surrendering possession of their property or facing the wrath of the government.”

The Court further cited to “[t]he rationales for the finality requirement” as “underscore[ing] that nothing more than de facto finality [should be] necessary. This requirement ensures that a plaintiff has actually ‘been injured by the Government’s action’ and is not prematurely suing over a hypothetical harm.” “Along the same lines, because a plaintiff who asserts a regulatory taking must prove that the government ‘regulation has gone “too far,”’ the court must first ‘kno[w] how far the regulation goes.’” “Once the government is committed to a position, however, these potential ambiguities evaporate and the dispute is ripe for judicial resolution.” Pakdel, 141 S. Ct. at 2230 (citations omitted).

In this way, the Court attempted to provide further guidance on the finality requirement, but, despite this extensive verbiage, the rules of the road remain vague, circular, and thus susceptible to lower courts ignoring their guiding principles. Pakdel explicitly states that “the finality requirement is relatively modest.” Given its facts and procedural posture, Pakdel further would seem to indicate that a party’s request for an exemption, like the variance request that was required by Williamson, is now unnecessary, and need not be decided against the claimant before a federal regulatory taking lawsuit may be initiated. However, Pakdel is a per curiam, unsigned decision that does not purport to change or abrogate existing doctrine.

This lack of clarity would seem to explain the First Circuit’s recent decision in Haney v. Town of Mashpee, 70 F.4th 12 (1st Cir. 2023). Haney, while citing Pakdel, appears to ignore the Court’s reasoning and holding in light of Pakdel’s facts. In Haney, an applicant was twice denied variances, and a wetlands permit once, over an eight-year period, from the beginning of permitting proceedings to the filing of a federal taking claim. These serial permitting proceedings would have allowed the plaintiff-property owner to construct a bridge to, and a single-family residence on, an island owned by the plaintiff off Cape Cod. The U.S. District Court and the First Circuit both held on the municipality’s motion to dismiss that the town’s governmental actions and land use regulations were not sufficiently final to allow a regulatory taking claim to properly lie. Despite citing to the principles enunciated in Pakdel, the First Circuit reasoned that it was impossible to infer that the town’s permitting denial, as written, was a denial with prejudice. As such, since the denial inferentially left the door open for the plaintiff to seek another bite at the apple, and the ultimate grant of the necessary permits, the local governmental action was not adequately final. See Haney, 70 F.4th at 20–21.

Under the contemporary scheme, it is wholly impossible to define with clarity when finality has ripened into a justiciable taking claim. As of now, the answer seemingly lies somewhere between a final administrative decision of a municipality and the complete exhaustion of all possible remedies, no matter how long such process takes. This ambiguity is particularly concerning because 42 U.S.C. section 1983, which governs these claims, takes its statute of limitations from the applicable state, so with increased ambiguity on accrual comes increased risk of prohibitive timing issues. Because of these vying binding authorities, the unpredictability and complexities of the finality requirement will likely chill takings claims at the precise moment that the Supreme Court is attempting to create a renaissance in this area of law. Assuming it is serious about liberalizing takings doctrine, the Supreme Court ought to provide true clarity with respect to the dates upon which these claims accrue. In the interim, practitioners will have to help clients try to navigate this doctrinal mess.