Knick’s Cemetery Decision Buries Williamson – Supreme Court Rules that the Takings Clause Provides Access to the Federal Courts

The United States Supreme Court overturned a 34-year-old precedent established by Williamson Planning Comm’n v. Hamilton Bank, holding that landowners pursuing takings claims need not seek redress in state courts before pursuing a federal claim.  Knick v. Township of Scott, No. 17–647 (U.S. S.Ct. Jun. 21, 2019).

The Knick decision arose from a dispute about a cemetery. Rose Mary Knick had a private cemetery on her ranch in a small community north of Scranton, Pennsylvania. The local township passed an ordinance requiring that all public and private cemeteries remain open and accessible to the public during daylight hours.  Ms. Knick sued in federal court, arguing that the ordinance amounted to an uncompensated taking of her property.  The trial and appellate courts dismissed her claims based upon Williamson, a 1985 Supreme Court decision in which the Court held that property owners may pursue federal takings claims against local governments in federal courts only after first exhausting all remedies provided by state courts.

In a 5-4 opinion, the Supreme Court expressly overruled Williamson, stating that its “reasoning was exceptionally ill-founded and conflicted with much of our takings jurisprudence.” The Court held that property owners may pursue federal takings claims in federal court without initiating or exhausting remedies in state courts. The Court reasoned that a property owner’s right to full compensation arises at the time property is taken without compensation, irrespective of the availability of any post-taking remedies. Even if full compensation is later paid, a constitutional violation results when a taking occurs without compensation. “A bank robber might give the loot back,” the Court said, “but he still robbed the bank.”

The Knick Court’s ruling eliminated what it referred to as the “San Remo preclusion trap.”  In San Remo L.P. v. City and County of San Francisco, the Supreme Court held that a “state court’s resolution of a claim for just compensation under state [and local] law generally has a preclusive effect in any subsequent federal suit.” Williamson and San Remo together resulted in the inability of property owners to reach the federal court system on federal takings claims. The Knick Court observed that “The takings plaintiff thus finds himself in a Catch-22: He cannot go to federal court without going to state court first; but if he goes to state court and loses, his claim will be barred in federal court. The federal claim dies aborning.”

Four Justices signed onto a dissenting opinion in Knick, pointing out that because it cannot usually be known in advance whether implementing a regulation will effect a taking, well-meaning officials will now “often have no way to avoid violating the Constitution.”  The dissent also predicted that granting access to federal courts will result in a bevy of complex state-law issues being pursued in federal courts and that the “federal courts [will become] a principal player in local and state land-use disputes.”

Knick opens the door to federal takings claims against state and local government agencies being pursued in the first instance in federal courts. However, because the decision does not alter the standards for adjudicating taking claims, the extent to which the ruling benefits landowners is unknown. Nonetheless, as the dissenting Justices observed, the decision is likely to result in a marked increase in the number of takings cases brought by property owners in federal courts, which may significantly affect the development of the law in this area.

California Supreme Court Upholds Validity of Local Aesthetic Regulation of Telecommunications Infrastructure

Local governments may require a permit conditioned on compatibility with aesthetic standards to install and maintain wireless communications infrastructure in the public right-of-way, the California Supreme Court held in T-Mobile West LLC v. City and County of San Francisco, No. S238001 (April 4, 2019). The court rejected a facial challenge brought by telecommunications companies to a San Francisco ordinance that requires a permit to install and operate wireless service facilities in the public right-of-way and establishes standards for aesthetic compatibility in historic districts and other areas.

Public Utilities Code Section 7901 Does Not Preempt Local Aesthetic Regulations

Public Utilities Code section 7901 grants a statewide franchise to telecommunications companies to install equipment on public roads, waters or lands in the state “in such manner and at such points as not to incommode the public use of the road or highway or interrupt the navigation of the waters.”

Plaintiffs argued that the San Francisco ordinance was preempted because it conflicted with the terms of Section 7901, hindered the accomplishment of the statute’s purposes and intruded into a field that had been fully occupied by the legislature. The court rejected all three theories, finding that while Section 7901 prevented local governments from requiring a franchise for a telecommunications company, it did not prevent local governments from exercising their traditional authority over land use by requiring a permit based on aesthetic or other considerations.

Conflict Preemption. The court found no conflict because it was possible to comply with both Section 7901 and local laws that required a permit on aesthetic grounds. The court explained that because Section 7901 “says nothing about the aesthetics or appearance of” telecommunications equipment, San Francisco’s ordinance regulating those features “is not inimical to the statute.”

Obstacle Preemption. The court concluded that local aesthetic regulations did not hinder the accomplishment of the purposes of Section 7901. Assuming that the purpose of Section 7901 was to encourage technological advancement in the state’s telecommunications networks, the court held that there was no indication that the Legislature intended to pursue that goal at all costs. Rather, the court reasoned, the Legislature’s inclusion of the “incommode” clause indicated that the goal of technological advancement was not paramount to all other objectives. Continue Reading

Court of Appeal Denies Project Opponents a Chance to Relitigate CEQA Claims

The court of appeal held that a challenge to a partially recirculated EIR of the County of Amador was barred by the doctrine of res judicata, which precludes relitigation by the same parties of issues previously adjudicated on the merits. Ione Valley Land, Air and Water Defense Alliance v. County of Amador, No. C081893 (3rd. Dist., March 20, 2019).

The County approved the Newman Ridge Quarry Project, a 278-acre quarry and a 113-acre processing and transportation facility and certified the project’s EIR. Plaintiffs filed a writ petition challenging the EIR, alleging the County failed to adequately analyze various impacts and should have recirculated the draft EIR. The trial court partially granted plaintiffs’ petition, finding two deficiencies in the County’s traffic analysis. The trial court ordered the County to recirculate a revised draft EIR pertaining to traffic issues but upheld the EIR in all other respects.

The County revised the traffic analysis, recirculated that portion of the EIR, and recertified and reapproved the Project. The trial court subsequently discharged the writ. Plaintiffs then filed a second writ petition, alleging the recirculated EIR’s analysis was deficient with regards to traffic, water supply, biological resources, air pollution, and responses to comments, and that the County should have recirculated the entire EIR. The trial court denied plaintiffs’ second petition for writ of mandate and plaintiffs appealed.

The appellate court held that plaintiffs’ claims, except for those related to the recirculated traffic analysis, were barred by the doctrine of res judicata. The court reasoned that all of plaintiffs’ objections were either brought or could have been included in the first writ petition. The court rejected plaintiffs’ claim that res judicata did not apply because the trail court had ordered the County to vacate the certification of the original EIR, concluding that the decertification of the entire EIR was immaterial — the pertinent fact was that the sufficiency of the EIR had been previously litigated. The trial court’s order only required the County to revisit traffic impacts — thus the County was not required to revisit any impacts besides traffic impacts, and res judicata barred plaintiffs from challenging the unchanged EIR sections.

In an unpublished portion of the opinion, the court also rejected plaintiffs’ challenge to the adequacy of the revised traffic analysis.

A Resolution to Dissolve a Fire District is Not Subject to Referendum

The court of appeal held that a fire district’s resolution to dissolve the district was not a legislative act subject to voter referendum. Southcott v. Julian-Cuyamaca Fire Protection District, No. D074324 (4th Dist., Mar. 7, 2019).

The Fire Protection District Law, which authorizes the formation of fire districts, mandates compliance with the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 for any change in organization of the fire district, including dissolution. The Local Agency Formation Commission must be presented with a petition or a resolution adopted by the legislative body of the local agency and must then receive and act upon any objections to the dissolution at a hearing.

The Julian-Cuyamaca Fire Protection District Board of Directors passed a resolution to apply to the San Diego LAFCO to dissolve the District. The plaintiffs presented the District with a referendum petition to rescind the resolution or have the resolution set for an election. The District took no action on the referendum petition, and the plaintiffs filed a petition for writ of mandate.

The court of appeal held that the resolution to dissolve the District was not subject to referendum because the Reorganization Act established the exclusive method for dissolving and/or protesting dissolution of a fire protection district. Under the Reorganization Act, the LAFCO, not the District, holds the power to review and approve (with or without change) dissolution of the District. The Reorganization Act also contains detailed provisions regarding the method of protesting a proposed dissolution of a district and when elections concerning dissolution are required. The court found that if a district’s resolution of application for dissolution were subject to referendum, opponents could undermine the Reorganization Act’s exclusive method of considering and challenging dissolution proposals.

The court also concluded the resolution was not subject to referendum because it was an administrative, not legislative, act. The voters’ right to referendum may only be used to review a local government’s legislative acts (establishing a new plan or policy), not administrative acts (implementing policy). A local government’s legislative act becomes administrative if “the state’s system of regulation over a matter of statewide concern is so pervasive” that the local legislative body becomes an administrative agent of the state. The court found that while the District’s resolution could be characterized as a legislative act in a local context, it was administrative in the context of the comprehensive state regulation governing fire district dissolution, which vested LAFCO with the authority to approve or disapprove dissolution.

Ordinance Prohibiting Short-Term Rentals Did Not Conflict with Federal Policies Promoting Development of the Internet

The Ninth Circuit held that a local ordinance prohibiting short-term vacation rentals (such as those available on Airbnb and other websites) did not conflict with Congressional policies fostering development of the Internet or violate the First Amendment. v. City of Santa Monica, No. 18-55367 (9th Cir., March 13, 2019).

Finding that short-term rentals had negatively affected the quality and character of its neighborhoods, the City of Santa Monica passed an ordinance regulating the short-term vacation rental market by authorizing licensed “home-sharing” (rentals where residents remain on-site with guests) but prohibiting all other home rentals of 30 consecutive days or less. As to home-sharing rentals, the ordinance imposed certain obligations directly on hosting platforms such as Airbnb, including disclosing certain listing and booking information regularly to the City and refraining from booking transactions for properties not licensed by the City.

Airbnb and sued the City, arguing that the Ordinance violated the Communications Decency Act of 1996 (“Act”), which provides internet companies with immunity from certain claims in furtherance of congressional policy “to promote the continued development of the Internet and other interactive computer services.” They also contended that the Ordinance effectively imposed a “content-based financial burden” on commercial speech in violation of the First Amendment.

The Ninth Circuit rejected both claims. The court found no merit to plaintiffs’ argument that the Ordinance violated the Act because it required them to monitor and remove third-party content, and therefore interfered with federal policy protecting internet companies from liability for posting third-party content. The court stated that the Ordinance prohibited processing transactions for unregistered properties; it did not require plaintiffs to review the content provided by the hosts listing on their websites. Rather, the only monitoring that appeared necessary to comply with the Ordinance was of the incoming requests to complete a booking transaction—content that, while resulting from the third-party listings, was “distinct, internal, and nonpublic.”

The court also rejected plaintiffs’ claim that the Ordinance was preempted by the Act, concluding that the Ordinance would not pose an obstacle to Congress’s aim of promoting “the vibrant and competitive free market that presently exists for the Internet . . . unfettered by Federal or State regulation.” The court acknowledged plaintiffs’ concerns about the difficulties of complying with numerous state and local regulations but pointed out that it had consistently avoided a broad reading of the Act “that would render unlawful conduct magically . . . lawful when [conducted] online,” and therefore “give online businesses an unfair advantage over their real-world counterparts.” Like brick-and-mortar businesses, the court said, internet companies had to comply with any number of local regulations concerning employment and taxes as well as zoning.

As to the First Amendment claim, court noted that the Ordinance was plainly a housing and rental regulation, which did not target speech or otherwise regulate expressive conduct. Because the prohibited conduct at issue — completing booking transactions for unlawful rentals — consisted only of nonexpressive conduct, the Ordinance did not implicate the First Amendment.

Coastal Development Permit Cannot Be Challenged in Court Until After Coastal Commission Decides an Appeal

A court challenge to a local agency’s decision to grant a coastal development permit becomes moot when the Coastal Commission accepts an appeal of the decision, the California court of appeal ruled in Fudge v. City of Laguna Beach, No. G05571 (4th Dist., Feb. 13, 2019).

In 2017, the Laguna Beach City Council approved a coastal development permit for the demolition of a house in the coastal zone. Fudge, a neighbor, filed an appeal to the California Coastal Commission, as well as a petition for writ of mandate in superior court. In August 2017, the Coastal Commission accepted the appeal. The City and homeowner then sought to have the superior court case dismissed as moot.

Under the Coastal Act, local coastal governmental entities must develop local coastal programs in consultation with the Coastal Commission. After the Commission certifies a local coastal program, the local agency has responsibility for issuing coastal development permits within its jurisdiction. An aggrieved party may appeal a local government’s decision on a coastal development permit to the Coastal Commission. If the Coastal Commission accepts the appeal, it hears the appeal de novo.

Fudge argued that his case was not moot because the Coastal Commission would not hear his appeal in the same manner as the matter was originally decided by the City. Fudge reasoned that CEQA applied to the to the City’s issuance of the coastal development permit, whereas the Coastal Act applied to the Coastal Commission’s appeal hearing.

The court ruled that the Coastal Commission’s appeal hearing is truly de novo and, when the Coastal Commission accepts an appeal, it nullifies the local agency’s decision to issue the coastal development permit. The court explained that the crux of Fudge’s argument—that an appeal hearing is not “in the same manner” as the original decision on a permit application—relied on a phrase in an old California Supreme Court case that had not been followed in subsequent cases interpreting when an appeal is de novo. The court noted that the Coastal Commission reviews local coastal programs under a certified regulatory program that is the “functional equivalent” of CEQA review. Thus, it did not matter that the CEQA rules and procedures (for the local agency’s decision) were different from the Coastal Act rules and procedures (for the Coastal Commission’s appeal hearing). Finally, the court explained, its conclusion was consistent with the statutory structure, under which the Coastal Act takes precedence over CEQA.

This case reaffirms earlier cases concluding that when the Coastal Commission accepts an appeal of a local agency’s issuance of a coastal development permit, the local agency’s decision becomes a nullity; any pending case challenging the local agency’s decision then becomes moot, and a new case may be brought later to challenge the Coastal Commission’s decision on the appeal. An alternative conclusion, the court said, would give project opponents “an inexplicable two bites at the apple” (by allowing them to attack the local agency’s original decision in civil court and simultaneously attack the same decision in Coastal Commission proceedings) and would “undermine the ability of the Commission to implement uniform policies governing coastal development.”

Court of Appeal Holds CEQA Review Is Not Required for Project That Is Only Subject to Design Review

The court of appeal held that the City of St. Helena did not violate CEQA by approving a demolition permit and design review for a multi-family residential project without preparing an environmental impact report. McCorkle Eastside Neighborhood Group v. City of St. Helena (2018) 31 Cal.App.5th 80.  The court held that because the city’s discretion under its local design review ordinance did not extend to addressing the project’s environmental effects, CEQA review was unnecessary.

In 2016, the city amended its zoning ordinance to eliminate the conditional use permit (CUP) requirement for multi-family dwellings within the High Density Residential (HR) districts.  By eliminating the CUP requirement, multi-family dwelling units are permitted uses by right under the HR district, subject to design review.

Joe McGrath applied to the city for a demolition permit and design review for a proposed 8-unit multi-family residential building. The city council approved the permit and design review (conducted by the Planning Commission) and adopted a resolution finding that the Class 32 categorical exemption for infill projects applied and was consistent with the city’s limited discretion to consider and address environmental impacts under the city’s design review ordinance.  The city council resolution stated that “the City’s discretion, and thus scope of its CEQA review, [is] limited to design issues such as scale, orientation, bulk, mass materials, and color, and it has no authority or ability to meaningfully address non-design related issues or impacts[.]”

The court concluded that the Class 32 exemption was unnecessary and upheld the city’s actions, holding that the city properly found that its discretion was limited to design review, given that no use permit was required for multi-family housing in HR districts. It also upheld the city council’s determination that the issues addressed during design review did not require the separate invocation of CEQA.

The court summarily rejected the petitioner’s argument that because the city had discretion to conduct design review, the entire project was discretionary and subject to CEQA.  The court explained that CEQA does not apply to “mixed” discretionary/ministerial approvals where the “discretionary component” does not give the agency the authority to mitigate environmental impacts. The court therefore held that “[b]ecause of the City’s lack of discretion to address environmental effects it is unnecessary to rely on the Class 32 exemption and equally unnecessary to spend much time on appellant’s contention that the proposed project did not qualify for an exemption because it was not consistent with the general plan.”

Court Upholds Class 1 Exemption for Improvements to Amusement Park in City of San Diego

The court of appeal found that an amended and restated lease requiring upgrades and improvements to an existing amusement park was exempt from the requirements of CEQA under the Class 1 exemption. San Diegans for Open Government v. City of San Diego, 31 Cal.App.5th 349 (2018).

In 1987, the City of San Diego entered into a long-term lease with a private developer to revitalize and renovate Belmont Park, an amusement park.  The lease included a development plan that described the permitted uses on the property.  Shortly after execution of the lease, the city’s voters approved Prop. G, which limited development of Belmont Park to recreational and visitor-serving parkland uses but exempted certain of the improvements called for under the lease.

In 2015, the city executed an amended and restated lease for Belmont Park which provided that the lessee would make $5.9 million in structural repairs, upgrades, and improvements to existing facilities.  The lease recited that the developer had already made $18 million in improvements to the premises.  The city determined that the lease was exempt from CEQA under the Class 1 exemption for the “operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structure, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of use beyond that existing at the time of the lead agency’s determination.”

The court rejected the plaintiff’s argument that the Class 1 exemption did not apply because the amended lease called for the construction of new facilities.  The court stated that the key issue in determining the applicability of the Class 1 exemption is whether the project involves the “expansion of use beyond that existing at the time of the lead agency’s determination.”  Since the $18M in improvements had already been completed at the time of the city’s determination, they were considered existing facilities and the $5.9M in refurbishment of improvements were within the categories of allowed uses set forth in the 1987 Lease and therefore fell “squarely within the existing facilities exemption[.]”

The court similarly rejected the plaintiff’s argument that the “unusual circumstances exception” applied, under which “[a] categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.”  (Cal. Code Regs., tit.14, §15300.2.)  The plaintiff argued that unusual circumstances existed because Prop. G expressed the voters’ distinct interest in minimizing the environmental impacts in this particular part of the City, and there was a reasonable possibility that there would be traffic and noise impacts due to a significant increase in visitors to the site.  The court rejected this argument, finding it “entirely speculative” whether the amended lease would result in a significant increase in visitors, and whether, in turn, the increase in visitors would result in increased traffic and noise. The fact that the lease recited that the City would obtain over $100 million in revenues over the course of the lease did not establish that the lease would result in increased traffic and noise. Moreover, the court stated, even if there had been evidence that the lease would result in increased traffic and noise, plaintiff had not shown that the increased traffic and noise would be the result of anything in Prop. G.

State Minimum Wage Law Applies to Charter Cities

The Second District Court of Appeal has held that California’s minimum wage law is a matter of statewide concern and hence applies to charter cities as well as general law cities. Marquez v. City of Long Beach, No. B282270 (2nd. Dist., Feb. 25, 2019)

Plaintiffs, employees of the City of Long Beach, filed a class action against the City for the failure to pay the legally mandated state minimum wage of $10.00 per hour established under the Labor Code and orders of the Industrial Welfare Commission (IWC). In response, the City argued the plaintiffs’ claims were barred under the home rule doctrine because wages set by charter cities are municipal affairs not subject to state regulation.

The case involved a collision between two provisions of the California Constitution — Article XIV, section 1, which states that the “legislature may provide for minimum wages and for the general welfare of employees” and Article XI, section 5, which grants to cities authority over municipal affairs, including “plenary authority” to provide for the compensation of city employees. With regard to the latter, the City relied heavily on the California Supreme Court’s decision in State Building & Construction Trades Council of California v. City of Vista (2012) 54 Cal.4th 547, 558 (discussed in our July 14, 2012, post). There, the court held that state prevailing wage laws, which require payment of the local prevailing wage for public construction projects, were not a matter of statewide concern and hence did not constrain the power of charter cities to set wage levels for public works. The court reasoned that construction of local public works projects for the benefit of a city’s inhabitants was “quintessentially a municipal affair” and that the regional or statewide impacts of local spending on wages were not sufficient to make them a matter of statewide concern.

The Long Beach court, however, found sufficient differences between prevailing wage laws and minimum wage laws to warrant a different outcome. Analyzing the legislative history of the minimum wage laws (including the original constitutional amendment proposed by the legislature and adopted by the voters), the court found they reflected strong public policies favoring protection of workers’ general welfare and society’s interest in a stable job market. The laws also directly implicated the state’s own finances because employees receiving below-minimum wage were more likely to receive state-funded public assistance.

The court found that its conclusion was bolstered by the scope of the minimum wage mandate, which is of very broad and general application, covering every industry regulated by the IWC, including both private and public sectors. This was in contrast to other state compensation laws the California Supreme Court had determined not to apply to charter cities, including prevailing wage laws, and laws requiring binding arbitration of wage disputes, nullifying agreements between localities and their public employees for cost-of-living wage increases, and specifying salaries for police officers and firefighters in municipalities over a certain size.

The court further noted that prevailing wage law had a more significant impact on local control than the minimum wage law because by requiring payment of wages prevailing in an industry locally, the law was “effectively a salary setting statute.” By contrast, the court said, minimum wage law does not effectively determine the wage for all employment relationships it regulates, but simply sets a floor on the permissible hourly rate of compensation. Cities thus retained authority to provide wages for their employees above that minimum as they saw fit.

In sum, the court held, the Legislature’s goals of ensuring workers a sufficient wage to provide the necessities of life and raise them above the poverty level reflected a statewide concern sufficient to justify interference in what would otherwise be a municipal affair and hence applied to charter cities.

Public Agency Could Validly Accept Dedication After Twenty Years By Physically Occupying the Property

Twenty years was a reasonable period of time for a public agency to accept a right-of-way dedication offer by physically occupying the property. Prout v. Department of Transportation, 31 Cal. App. 5th 200 (2019).

Prout developed a 165-acre residential subdivision that fronted State Highway 12 in Calaveras County. In 1989, Prout submitted to the California Department of Transportation (Caltrans) an application for an encroachment permit to connect his subdivision’s private road to Highway 12. Caltrans approved the encroachment permit conditioned upon Prout dedicating a 20-foot-wide strip of vacant land along Highway 12 (1.31 acres total) as public right-of-way. Final subdivision maps recorded in 1990 labeled the 20-foot strip as “area in the process of being deeded to Caltrans for highway purposes.” However, “the matter simply ‘fell through the cracks,’” and the 20-foot strip was never transferred by deed to Caltrans. In the subsequent years, Prout never was assessed or paid property taxes on the 20-foot strip, and he did not fence the area within his subdivision parcels.

Two decades later, while planning for work to improve Highway 12, Caltrans discovered that the 20-foot strip of land had never been transferred by deed. Caltrans requested that Prout sign a deed to convey the strip of land; Prout refused. Caltrans proceeded with widening Highway 12 to include the 20-foot strip of land, completing the work in 2011.

Prout filed an inverse condemnation action against Caltrans, alleging that Caltrans owed him just compensation for physically occupying the 20-foot strip of land. Caltrans filed a cross-complaint for breach of contract, promissory estoppel, and specific performance, alleging that Prout had accepted the benefit of the encroachment permit but refused to finalize the dedication and deed of the 20-foot strip. In response, Prout argued that if the dedication of the 20-foot strip was a condition of the encroachment permit (as claimed by Caltrans), it was an illegal exaction. Continue Reading