January 18, 2013

Koontz oral argument: what "radical change?"

By Jonathan Wood Attorney

In the Koontz oral argument, the justices expressed concern over how to distinguish exactions, which are analyzed under Nollan and Dolan, from general regulatory schemes, which are not.  If no line could be drawn between the two categories, a decision in the Koontz’ favor would be a “radical change;” subjecting routine governmental actions to constitutional scrutiny, which neither the government, nor the courts, want.

This issue was the focus of the Deputy Solicitor General’s argument on behalf of the United States:

Mr. Kneedler:  I would like to emphasize at the outset that petitioner’s argument that Nollan and Dolan should apply in this context would – would constitute a radical change in the – in the way standard generally applicable regulatory programs are operated.  It is standard procedure when someone applies for a permit from the government, it is the permit applicant’s burden to establish that he complies with the regulatory program.  Nollan and Dolan shift that burden to the government.  That has never been the case under regulation, including land use regulation.

Part of the justices’ difficulty with this problem may be that it doesn’t fit neatly into either of the questions presented.  PLF’s petition for certiorari raised two questions: whether the denial of a land-use permit for failure to accede to an unconstitutional condition can be analyzed under the tests from Nollan and Dolan; and whether those cases apply to demands by the permitting agency for all forms of property or only real property.  Rather, the general regulatory scheme question is logically antecedent to the questions presented and goes to the meaning, and applicability, of the unconstitutional conditions doctrine.

As previously explained, the unconstitutional conditions doctrine prohibits the government from conditioning a discretionary benefit on the waiver of a constitutional right.  General regulatory schemes could not run afoul of the unconstitutional conditions doctrine because they don’t involve discretionary benefits.

Consider taxes.  Property taxes are a common form of government fund-raising, and apply to all property owners subject to the tax.  If PLF’s argument in Koontz implicated the legitimacy of property taxes per se that would raise substantial problems.  But, of course, PLF’s argument doesn’t implicate property taxes because when property taxes are assessed, the government doesn’t confer any discretionary benefit.  Therefore, the unconstitutional conditions doctrine simply does not apply.

This issue arises in Koontz because Florida law requires that any development which would destroy wetlands must include mitigation for that effect.  The statute containing the regulatory scheme at issue in Koontz is “general”, in the sense of being vague, but it is not “general” in the sense of a general regulatory scheme.  Rather than containing universal requirements, this scheme does not apply equally to everyone subject to it.  Instead, the Florida statute directs the government in how to consider building permit applications, and authorizes them to extract unique conditions in individual permits.

This regulatory scheme is strikingly similar to the scheme in Nollan.  The California Coastal Commission demanded that the Nollans grant public access as a condition of a permit to build a single-family home.  It made this demand under its authority to enforce the Coastal Act.  Much like the Florida statute, California’s Coastal Act contains “general”—meaning vague—regulatory standards which, when applied to particular permit applications, trigger Nollan and Dolan review.  For example, the Coastal Act identifies the maximization of public access to and along the coast as one of the goals of the act.  It also directs the Commission to require the provision of public access along the coast as a condition for any new development permit.  The Court rightly recognized that these unique demands made on particular permit applicants are subject to scrutiny under the unconstitutional conditions doctrine.

Compare this case and Nollan to the Deputy Solicitor General’s example:

Mr. Kneedler:  This is a very different situation because the other way in which Petitioner’s theory would constitute a radical departure is that compliance with regulatory programs frequently, maybe almost always, requires the expenditure of money.  If someone wants to build a power plant, a coal-fired power plant, he’s going to have to install a scrubber to protect the air, to prevent no diminution of air quality.  Constructing that costs money.  It can’t be that the requirement to spend money to comply with a regulatory program is itself a taking.

Mr. Kneedler is correct.  Nollan and Dolan are not obstacles to the scrubber requirement because the unconstitutional conditions doctrine is not implicated.  Section 112 of the Clean Air Act requires that all new major stationary sources meet EPA set emission standards.  These standards apply to categories of new major stationary sources, such as coal-fired power plants.  Every proposed construction within a category is subject to a uniform standard.  This is what makes Mr. Kneedler’s example a “general” regulatory scheme.  Because there is no discretionary benefit being distributed and the same standard applies to everyone who wants to build a new power plant or other pollution source, the extortion concerns underlying the unconstitutional conditions doctrine are not implicated by general regulatory schemes.

Interestingly, the attorneys on the other side seemed to acknowledge that this issue doesn’t neatly fit into either question presented.  Mr. Kneedler agreed with PLF, that it makes no constitutional difference whether a permit is granted with an unconstitutional condition or denied because the applicant wouldn’t accept the proposed unconstitutional condition:

Justice Sotomayor: Assuming we narrow it not to undifferentiated money, but is there a difference between a denial or a grant?

Solicitor Kneedler: No.

Mr. Wolfson, the attorney for St. John’s Water District also appears to have acknowledged that the Takings Clause applies to demands of money or services:

Justice Alito: All right.  I want to get to my third.  The permit is denied but it will be granted if you give us the fair market value of the third of the land, and once you have done that then we’re going to condemn your land and pay you the fair market value for it.

Mr. Wolfson: Justice Alito, I think that this Court’s decision, this Court decision in Village of Norwood, essentially says if what is going on is just a pure contrivance to avoid the requirement of compensation in the Just Compensation Clause, that the Court has said, no, it will look through to the substance of the demand and determine that there was – you know, essentially an evasion of the just compensation requirement.

Since general regulatory schemes don’t raise the concerns of the unconstitutional conditions doctrine and don’t require a particular answer to either of the questions presented, a PLF victory in Koontz will not result in a “radical change.”

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St. Johns River Water Management District v. Koontz

Coy A. Koontz sought to develop commercial land, most of which lies within a riparian habitat protection zone in Orange County, Florida. He applied for a dredge and fill permit with the St. Johns Water Management District, which  agreed to grant the permit only on the condition that he place a conservation easement over his land, and perform mitigation off-site by replacing culverts and plugging certain drainage canals on distant District-owned properties. When Koontz refused to perform the off-site mitigation, St. Johns denied the permit. PLF successfully represented Koontz before the U.S. Supreme Court, which held that a land-use agency cannot condition a permit on the payment of a mitigation fee to be used to pay for facilities that have no connection to the impacts of the permitted development.

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