Daily Development for Monday, March 20, 2000

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

CONSTITUTIONAL LAW; DUE PROCESS, SUBSTANTIVE DUE PROCESS: Third Circuit will permit 1983 damages for County's refusal to grant subdivision approval where record indicates that the application satisfied the County' standards; County cannot hide behind "discretionary decision" argument.

Woodwind Estates,LTD v Gretkowski , 2000 U.S. App. LEXIS 2889 (3rd Cir. 2/28/00)

Developer proposed a large subdivision for low and moderate income families. The attorney for the planning commission advised the commission that the proposal met all the standards for a subdivision, but a homeowner's group strenuously opposed the project at the hearing.

The Commission delayed substantially consideration of the proposal, determining that it was required to file further information. The developer filed a revised plan which the Commission's own attorney again determined met the standards for approval. Then, after doing nothing for six months, the Commission recommended to the County Board of Supervisors that it reject the proposal on the ground that the project needed to qualify as a PUD, a more onerous and time consuming process. The Board of Supervisors unanimous vote, but filed no reasons for its decision.

Subsequently, the attorney for the opposition homeowners' group contacted one of the members of the Board and suggested that the order refusing the permit was inadequate unless it was based upon findings. Thereafter, the Board reissued its ruling with the findings taken largely from a letter by the opposition attorney. The attorney had not sent a copy of the letter to the applicant developer .

Because of the substantial delay, the developer lost the funding availability for its project, and sued for damages for denial of substantive due process under section 1983. The trial court, after taking evidence, granted summary judgment for the Board.

On appeal: held: Reversed. The Third Circuit held that the Board's activities created a substantial issue as to whether its conduct was "irrational and arbitrary," and therefore a denial of substantive due process.

The Board argued that the granting of a subdivision permit was essentially discretionary with the Board and that consequently the developer had no property right which entitled it to Constitutional Due Process protection. The Third Circuit responded that the Board's own rules set forth standards controlling the exercise of discretion in a particular case and that this gave rise to a Constitutional issue:

"This court has recognized "that the issue of whether and when statecreated property interests invoke substantive due process concerns has not been decided by the Supreme Court." In this circuit, " 'not all property interests worthy of procedural due process protection are protected by the concept of substantive due process.' We [have] stated that "a substantive due process claim grounded in an arbitrary exercise of governmental authority may be maintained only where the plaintiff has been deprived of a 'particular quality of property interest," and further explained that "all of these cases involving zoning decisions, building permits, or other governmental permission required for some intended use of land owned by the plaintiffs," implicated the kind of property interest protected by substantive due process. It follows that the holder of a land use permit has a property interest if a state law or regulation limits the issuing authority's discretion to restrict or revoke the permit by requiring that the permit issue as a matter of right upon compliance with terms and conditions prescribed by the statute or ordinance." (Citations omitted)

Although the court admitted that, even granting that the developer had a property interest, the scope of review of public land use decisions is extremely narrow, it stated that where evidence shows that there is no demonstrable basis for the decision in the regulations relating to the decision in question, raises the possibility that the decision was based upon reasons unrelated to the merits of the application and therefore biased. Here, it the court concluded that there was evidence that the decision to deny the subdivision approval was not consistent with the agency's own regulations, that it based its decision on the letter of the opponent's attorney, and not upon its own deliberations and conclusions, and that the Commission had wilfully delayed processing the application in order to push the developer past the funding deadline for its financing.

Of equal significance is the court's ruling on the immunity question. In essence the court holds that there is no immunity for a discretionary decision when the court concludes that the decision is at odds with the requirements controlling that discretion:

"In the instant case. . . when the evidence is viewed in the light most favorable to the plaintiff, it is clear that the supervisor defendants could not have reasonably believed that their conduct did not violate plaintiff 's rights. Under the local ordinance, the Woodwind plan as submitted must have been approved as a subdivision because it satisfied all of the objective criteria. Yet the supervisor defendants denied approval for the subdivision plan. The supervisor defendants have not shown that their interpretation or understanding of the ordinance was reasonable or that Pennsylvania law on the subject was unclear. Accordingly, the defense of qualified immunity is not available to the supervisor defendants in the instant matter."

Comment 1: Once again, as in the recently reported U.S. Supreme Court decision in Olech v. Village of Willowbrook, 160 F.3d 386 (7th Cir. 1998) affirmed 2000 WL 201157 (U.S. 2/23/00 ) (the DIRT DD for 2/28/00), we are faced with the question of whether the court is reviewing the decision below for competency or for bias. The question is significant, because if the courts now are going to be reviewing actively all land use decisions for their rationality, and finding Section 1983 damages when decisions are irrational, it is a new day dawning for local land use decision makers (or perhaps we should say a new night falling).

The court here obviously was suspicious that the decision was more than just wrong, but biased based upon the unpermitted basis that the local authorities opposed low and moderate income housing regardless of the rules. If the limit of the court's review is to penalize only those decisions made for the wrong reasons, this is a significant threat to local decision makers, but probably a manageable one.

Unfortunately, the court does not make it a bit clear that its opinion is limited to the case of bad reasons. It seems to be saying that every incorrect decision can be the basis for a 1983 action. Of course, we can hide behind the notion that there must be "no support in the record" for the decision, but courts that disagree with the decision below has little difficult in dismissing the record.

Comment 2: In Willowbrook, Justice Breyer's concurring opinion was a last ditch attempt to narrow the Supreme Court's statements of what the federal courts are to review in these decisions. But it may be that the cat is 95% out of the bag.

Comment 3: This case, like Willowbrook, involves a land use decision that is based upon preestablished standards. It is not a zone change decision. There may be some reason to believe that pure zone change decisions still involve sufficient unbounded discretion that a property interest is not implicated.

Note also that this case is a substantive due process case, and not an equal protection case. Willowbrook involved equal protection considerations, but this case was decided without benefit of the Supreme Court's decision in Willowbrook, and may have looked different had it had that benefit.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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