Daily Development for
Thursday, June 5, 1997

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

CONSTITUTIONAL LAW; TAKINGS; REGULATORY TAKINGS; "SAFETY VALVE" STATUTES: New Jersey court upholds New Jersey statute that gives public agencies "second chance" to change their regulatory policy after a court has determined that such policy results in a taking.

East Cape May Assoc. v. State of New Jersey, A-4852-95T5 (Super Ct., App. Div. 4/29/97) (unpublished opinion).

This apparently is the first crack that the New Jersey appeals courts have had at the New Jersey statute, designed to ease the financial impact on land use regulators of decisions that result in takings.

The plaintiffs here were successors to the original landowners, but the court held that they acquired all the rights to make a takings claim that the original landowners had. The landowners owned property that had been subject to wetlands restrictions. The restrictions restricted "impermeable" construction to only 5% of the land, and further imposed obstacles to development that, in the view of the landowners, deprived the landowners of all economically viable use in the property. The court noted that a few cases have concluded that even where less than all economically viable uses have been taken, there could be a taking, but it did not follow those cases here. Nevertheless, it did find a taking because the landowners had no economically viable use, notwithstanding protestations of state officials to the contrary.

The court also concluded that the plaintiffs were not required to carry out an elaborate permit application process, requiring the filing of extensive information that would have been expensive to obtain, if the basic standards being applied by the agency would have resulted in a denial of development rights no matter what the required information revealed. Similarly, no appeal from the denial of the permit was deemed necessary, as it would have been futile.

But N.J.S.A. 13:9B-22b provides that where a court determines that public regulation results in a taking, it must then provide to the affected public agency the opportunity to either condemn the property formally or modify its action or inaction "so as to minimize the detrimental effect to the value of the property." The landowners, of course, argued that this permitted the government agency to take their property with impunity, since they always could reverse their decision once the plaintiffs had completed an expensive legal challenge.

The trial court had held that it was appropriate to appoint Commissioners to evaluate damages notwithstanding this statute, because even if the agency reversed its rulings, a temporary taking had occurred. But the appeals court concluded that no taking can be deemd to have occurred until the local agency has had the opportunity to react to the court's preliminary determination that the questioned regulation constitutes a taking.

The appeals court concluded that the statutory requirement is a reasonable substitute to requiring the landowner to file repeated applications at the outset of the land use dispute, so that the agency has an adequate opportunity to evaluate all the alternatives. Here, the court did not require an extensive "pre-litigation" application process, but did conclude that statute provides a "post-litigation" opportunity for negotiation between landowner and agency.

As to the trial court's conclusion that a temporary taking, at least, had occurred, the court concludes that this determination is not warranted, in light of the statute and its purposes. It views the "post litigation" negotiation period between landowner and regulator as part of the permit process, and points out that existing case law acknowledges that a reasonable application process may be protracted when important environmental considerations are at stake.

The case, incidentally, includes a provocative discussion of the question of what "denominator" ought to be used when it appears that the landowner owns other contiguous land that is not affected by the regulatory decision. The court concludes that current case law in New Jersey is unclear on this point. Although it cannot be said as a fixed principle that all a landowner's contiguous land ought to serve as the "denominator," neither can it be said that the court should look only to the land that is being regulated. There are many other considerations bearing upon the appropriateness of taking the landowner's other property into account. The issue was not ripe for decision on summary judgment in this case.

Comment: The case is "loose at the joints" in permitting wide judicial discretion as to the determination of whether a partial taking has occurred as a consequence of the length of and justification for the overall review period, including "post litigation" negotiations. If subsequent New Jersey courts also recognize that the statute creating the "post litigation" "safety valve" justify truncating the "pre litigation" application process, then perhaps most will agree that the court and legislature have fashioned a better mousetrap.

It is true that the landowner does not get "rewarded" with a good cash recovery as a consequence of the takings litigation, but that ought not to be the purpose of the rules here anyway. And if the overall period is too burdensome, the landowner will get some compensation for its pains anyway. On the other hand, the court's ruling might be abused by trial courts or local agencies to "double up" on the landowner - mandating extensive pre-litigation costs, including repeated applications, and then still providing the "safety valve" for the public land use regulator when the court finds its behaviour to be unconstitutional.

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