On October 6, 2015, the First Circuit Court of Appeals will hear oral argument in Perfect Puppy, Inc. v. City of East Providence, R.I., an important and interesting takings case. The dispute, described more fully here and here, arose when the City of East Providence passed an ordinance last spring that banned all pet stores selling live dogs and cats. This was a major problem for Perfect Puppy, Inc. because it had just opened a new store in the city, a store specializing in the sale of pure breed puppies.
Perfect Puppy’s owners had been operating a successful store in another part of Rhode Island when they decided to open the new East Providence business. Indeed, the City enacted the pet sales ban only after perfect Puppy had leased retail space in the city, secured a state license, passed city inspections, and opened their puppy sales business.
The city acted at the urging of pet shelters and others concerned about pet over-population and “puppy mills.” Although Perfect Puppy does not get its dogs from puppy mills, personally inspects every breeder it patronizes, and takes many steps to ensure the health of all its dogs, the City Council made no exception for Perfect Puppy, nor did it provide a means to compensate the store owners for their losses.
Because the City’s action destroyed Perfect Puppy’s lease, license and pre-existing business, Perfect Puppy responded with a lawsuit in state court. Part of the suit claimed that the City had unconstitutionally taken Perfect Puppy’s property interests. The City transferred the case to federal court, as allowed by federal law, and then convinced the judge to dismiss the case, in part on the ground it should go through state courts. Perfect Puppy then appealed and PLF attorneys took over representation.
On appeal, PLF has argued that, whether or not the City has power to outlaw pet stores, it must provide a means for compensation when it uses its power to destroy a licensed business. PLF has also argued that the City may not avoid such constitutional liability by playing procedural games– like arguing that a case transferred from state to federal court cannot be “ripe” for a federal hearing until state courts get the first shot. As explained in this PLF law review article, basic principles of fairness bar local governments from claiming that federal courts cannot hear cases the government itself drags to the federal court (and out of state court) until the plaintiff exhausts state court procedures. Since the government thwarted state procedures by transferring the case to federal court, it is barred from asserting a “go to state court first” defense once in federal court.
These issues will soon be heard by the First Circuit Court of Appeals at Roger Williams Law School in Bristol, Rhode Island. PLF hopes and believes that the court will do the right thing. Local governments have authority to enact laws to address perceived public problems. But when they pass an ordinance that terminates a pre-existing and lawfully created business, the law must have a mechanism for just compensation or it violates the Constitution — in both federal and state court.