Federal Law in Land Use

Smell This, Please: Fourth Circuit Addresses Ripeness and Pleading In Zoning Context

A recently-unpublished federal appeals court decision signals both a victory for developer claims against inventive local governments as well as a loss for proponents of more lax pleading standards.

Appellant Acorn Land, LLC (“Acorn”) purchased a tract of land in Baltimore County, Marlyand. The land — situated among an interstate, an academic research park, and a number of single-family homes — was “burdened” by a water/sewer classification making residential development difficult. Acorn petitioned Baltimore County to amend the classification, which would facilitate residential development. A number of County agencies, including the County’s Planning Board, recommended approval of the water/sewer amendment. The County, however, took no action as to Acorn’s request.

Frustrated, Acorn filed a petition in the Circuit Court for a writ of mandamus to compel the County to approve the water/sewer amendment. The Circuit Court issued the writ, concluding that the County’s inaction was “arbitrary and capricious” and reasoning that “Acorn met Baltimore County’s established objective criteria for water/sewer reclassification.” The County appealed; in the interim — and this is critical — the County rezoned Acorn’s land to a lower density such that the writ of mandamus could not have any effect. In street slang, as the Fourth Circuit observed, the rezoning allowed the County to “sidestep the circuit court’s order [issuing the writ].”

Acorn filed a declaratory judgment suit in Circuit Court alleging, inter alia, that the rezoning amounted to (1) a violation of substantive due process rights and (2) an unlawful taking without just compensation. The County removed the action. The federal district court dismissed Acorn’s state and federal constituional claims for a failure to exhaust applicable state remedies.

In Acorn Land, LLC v. Baltimore County, Maryland, the Fourth Circuit reviewed dismissal of the federal takings and substantive due process claims for lack of ripeness as well as the sufficiency of the claims as plead. We’ll discuss in turn.

A regulatory takings claim is ripe where: (1) the government entity charged with implementing the regulations in question has issued a “final decision regarding the application of the regulations to the property at issue,” and (2) the plaintiff has sought and been denied just compensation through available and adequate state procedures for seeking just compensation. Williamson County Reg’l Planning Comm’ n v. Hamilton Bank of Johnson City, 473 U.S. 172, 186, 195 (1985).

Focusing on the second, “final decision” prong, the Court noted at the outset that such a requirement “does not require landowners to exhaust administrative remedies” where the entity or agency to which the landowner would appeal “is empowered only to review, not participate in, the lower agency’s decisionmaking.” The Court concluded, in other words, that ripeness cannot depend upon proceeding any further in the administrative context where the sought-after remedy — here, a return to the intial zoning — cannot be afforded in the administrative context.

The Court also pointed out that administrative remedies need not be pursued where “it is clear that the [local government] has dug in its heels.”

Adequacy of Pleading
As to properly pleading a regulatory takings claim, the Court found that Acorn alleged (1) it had had a reasonable investment-backed expectation to residentially develop the property, (2) the County’s decision to rezone the property had an adverse economic effect by prohibiting residential development, and (3) the County’s actions constituted an “illegitimate and inequitable attempt to prevent Acorn from developing its property.” Thus, having found the federal takings claim ripe, the Court also found the claim properly and adequately plead.

The substantive due process claim, though ripe, fared less well with regard to Acorn’s manner of pleading. The Court began its dicussion by stating ex cathedra that, to survive dimissal, a litigant must plead: “(1) that [it] had property or a property interest; (2) that the state deprived [it] of this property or property interest; and (3) that the state’s action falls so far beyond the outer limits of legitimate governmental action that no process could cure the deficiency.” Sylvia Dev. Corp. v. Calvert County, 48 F.3d 810, 827 (4th Cir.1995). Applying the articulated standard, the Court found that Acorn’s complaint fails under the third Sylvia prong because the complaint did not plausibly plead that no state-court process could cure Acorn’s injury.

To follow along, this means Acorn’s due process claim is ripe for federal adjudication from an administrative exhaustion standpoint, but nonetheless dismissable because Acorn did not “plausibly plead that no state-court process could cure Acorn’s injury.” A critical soundbite: “Indeed, the ‘[Due Process] Clause is violated only where the state courts can do nothing to rectify the injury that the state has already arbitrarily inflicted.'” Love v. Pepersack, 47 F.3d 120, 123 (4th Cir. 1995).

Let’s discuss. Is the Court’s analysis as to Acorn’s substantive due process claims more akin to a brand of abstention than to a legitimate discussion of pleading standards? And, lest we forget, wasn’t it the County that removed the action to the now-abstaining federal court, an action which Acorn intially filed with the very state court in which the Fourth Circuit chides Acorn for, in essence, not proceeding?

Well, this is good food for thought. The lesson: when proceeding in constitutional territory, especially with regard to land use cases, be certain to pay close attention to jurisdictional and prudential issues.

Mike Thelen is a lawyer in Womble Carlyle’s Real Estate Litigation practice group. He regularly represents a wide variety of clients in land use and land development issues, from local governments to businesses, in both state and federal venues throughout North Carolina.

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