Koontz oral argument: Should Nollan and Dolan apply only to “stupid districts”?

January 17, 2013 | By CHRISTINA MARTIN

Tuesday, the United States Supreme Court heard Koontz v. St. Johns River Water Management District, argued by PLF attorney Paul Beard. A local government agency denied Coy Koontz a building permit because he refused to agree to unreasonable permit conditions. PLF argued that this permit denial was unconstitutional.

In the hearing, the Court considered whether the protections of Nollan and Dolan apply to the St. Johns River Water Management District’s demands. Nollan and Dolan were Supreme Court cases that established that the government cannot make unreasonable demands as a condition for a permit. Such demands must be both related to the impact of the proposed development and roughly proportional to the expected harm caused by the development.  In other words, a permit application is not an opportunity for the government to practice extortion.

Koontz asks (1) whether Nollan and Dolan protections apply to government permit conditions demanding money or other property (and not just real property) and (2) whether a permit application must be granted in order for Nollan and Dolan to apply to such demands.

The biggest issue at oral argument revolved around the second question — the timing of the permit conditions. As Paul Beard explained in a post yesterday, in Nollan and Dolan the government approved permits that would only become valid when the property owners surrendered easements to the government. But in Mr. Koontz’s case, the District did not issue a conditional permit, though it admitted that it would have had Mr. Koontz agreed to the District’s demands. The government had cleverly asked for Mr. Koontz to satisfy its unreasonable demands rather than setting the demands in a formal conditioned permit approval. When Mr. Koontz refused, they denied the permit application and claimed that since there is no conditional permit, Nollan and Dolan protections do not apply.

As Justice Alito put it, such an interpretation amounts to “making Nollan and Dolan a trap only for really stupid districts. [T]hey say the right words and then they are out from under it[.]” In other words, the government could demand whatever it wants in exchange for a permit, provided that it is clever enough to not explicitly write the demand on a permit acceptance or denial. Justice Roberts pointed out that such a ruling would also amount to instructing property owners to accept unconstitutional permit conditions in order to challenge them.

As expected, some justices indicated support for the government’s position. However, surprisingly, Justice Scalia indicated that since no permit was issued, there is no taking under the Fifth Amendment.

JUSTICE SCALIA: Here, there’s nothing that happens. The permit was denied, unlike in [ ] Dolan where the permit was granted and it was understood that if she went ahead with it, she was going to lose [ ] some land rights. Here, the permit’s been denied.

I can’t see where there’s a taking here. Nothing’s been taken.

This is leading some people, including Lyle Denniston at SCOTUSblog, to conclude that Justice Scalia is unlikely to apply Nollan and Dolan. Since four other Justices indicated likewise, the case is probably lost for Mr. Koontz, they think.

Yet, a closer look at Scalia’s statements suggests that Scalia believes the District did attempt to impose an unconstitutional condition – he just does not think it is a taking:

MR. BEARD: We’re entitled under the Unconstitutional Conditions Doctrine to not have to bear a public burden that has no bearing on the impact that we’re trying to use on our property.

JUSTICE SCALIA: Yes, that’s fine. That –that would enable you to challenge the denial of the permit, saying it’s based upon an unconstitutional condition. But how does it — how does it enable you to say there’s been a taking? What has been taken?

Scalia states that a claim under the unconstitutional conditions doctrine is “fine,” allowing a challenge to the permit denial. But he seems to want it to rest under some other constitutional protection. Which one is unclear.

This is consistent with Justice Scalia’s thirteen-year-old dissent from the Court’s denial of a petition for writ of certiorari in Lambert v. City & County of San Francisco. In his dissent, Justice Scalia wrote that the court should settle the legal question of whether Nollan and Dolan could apply when a permit had been denied. He said:

From one standpoint, of course, such a distinction [between a permit denial and a permit acceptance] makes no sense. The object of the Court’s holding in Nollan and Dolan was to protect against the State’s cloaking within the permit process “‘an out-and-out plan of extortion,'” Nollan, 483 U.S. at 837 . . . There is no apparent reason why the phrasing of an extortionate demand as a condition precedent rather than as a condition subsequent should make a difference. It is undeniable, on the other hand, that the subject of any supposed taking in the present case is far from clear. Whereas in Nollan there was arguably a completed taking of an easement (the homeowner had completed construction that had been conditioned upon conveyance of the easement), and in Dolan there was at least a threatened taking of an easement (if the landowner had gone ahead with her contemplated expansion plans the easement would have attached), in the present case there is neither a taking nor a threatened taking of any money. If petitioners go ahead with the conversion of their apartments, the city will not sue for $ 600,000 imposed as a condition of the conversion; it will sue to enjoin and punish a conversion that has been prohibited.

Perhaps, there is room to debate that Justice Scalia was not then inclined to protect Lambert and nothing has changed. However, the overall tenor of his opinion is clear: Nollan and Dolan are intended to protect against the state using extortion in the permit process. His language (not to mention his history of holdings) suggest that he thinks the Constitution protects individuals from such sordid behavior – whether or not it can be labeled a “taking.”

Whatever theory Scalia chooses, he may be the deciding vote in what has been called the most important property case of the Roberts Court. The Court’s decision in Koontz will affect the liberties of every property owner in this country. Government holds a monopoly power to grant or deny permits.  Accordingly, without Constitutional protection, government can effectively hold use of your property hostage for payment of a ransom. This is precisely the sort of “out-and-out extortion” which Nollan and Dolan and the Constitution forbid. Hopefully, the Supreme Court will agree.