SUPREME COURT:

Wetlands regulation at heart of Fla. property rights dispute

In late 1993 and early 1994, Coy Koontz Sr. applied for two permits from a Florida agency as he sought to build on wetlands he owned just east of Orlando.

Today, Koontz has been dead for 13 years, his family no longer owns the property and the permits have long been approved. And yet a legal dispute about the permitting process is about to be argued at the Supreme Court.

When it hears arguments in the case Tuesday, the court will consider whether Koontz -- whose son, Coy Koontz Jr., has taken his place in the litigation -- should have received compensation under the takings clause of the Fifth Amendment for the squabble over permit conditions that lasted from 1994 to 2005, when the government agency in question, the St. Johns River Water Management District, finally approved the permit.

The case, Koontz v. St. Johns River Water Management District, raises major questions about the right of government to impose conditions in return for permit approval.

As Koontz Jr., a 68-year-old retiree, put it in an interview, his father felt that the district could do whatever it wanted.

"When he went down there to get a permit, they had changed the ground rules," he said.

The case is one of three property rights cases the court has agreed to hear this term. It is the first time since the 2004-2005 term that the court has heard more than one on the issue (Greenwire, Nov. 6, 2012).

The justices will delve into the question of whether Supreme Court precedents limiting the ability of government entities to place conditions on landowners in exchange for permits -- which generally apply to limitations on the use of the property in question -- also apply to "money, services, labor, or any other type of personal property."

The court will also consider whether a constitutional violation can occur even when no permit has been issued.

A ruling in favor of Koontz would be a major victory for property rights advocates and would be met with dismay by federal, state and local government officials who handle land-use permitting.

"It's a major case," said John Echeverria, a professor at Vermont Law School who has filed a brief in support of the Florida agency. "It deals with the traditional standard that deals with government review of permit conditions."

'No dedication of property'

Koontz Sr. applied for two permits in December 1993 and February 1994 for his 14.9-acre property, which is within the Econlockhatchee River Hydrologic Basin and located at a busy intersection. All but 1.4 acres was part of a state riparian habitat protection zone. His proposal would have led to the destruction of 3.4 acres of wetlands and 0.3 acre of protected uplands. Koontz's lawyers say the land itself did not contain any existing wetlands due to a state-built ditch that had drained all the water.

In his application, Koontz offered to place 11 acres of the property into a conservation easement in return for the permit. The district said that he would need to not only dedicate the 11 acres but also provide more mitigation, most likely in the form of work he would pay for to improve wetlands owned by the district several miles away. The district said the work would cost up to $10,000. Koontz said it would have been more like $90,000 to $150,000.

Government agencies are somewhat limited as to what requirements they can impose on landowners as a result of two previous Supreme Court decisions. In a 1987 case, Nollan v. California Coastal Commission, the court held there needs to be an "essential nexus" between the government request and the need to alleviate a problem created by the property owner's proposal. In 1994, the court held in Dolan v. City of Tigard that there needs to be "rough proportionality" between the conditions imposed and the impact of the proposed development.

In practice, those precedents only apply when a condition is imposed on the landowner if a permit has been issued. In such situations, a government entity is required to justify any request that requires a donation of land for public use. The law varies from state to state; in some, the government already must justify conditions that include monetary transactions.

At the federal level, one of the agencies that could be affected by the case is the Army Corps of Engineers, which issues "dredge and fill" permits for wetlands. Solicitor General Donald Verrilli noted in a brief that monetary payments for either off-site mitigation or mitigation credits "are now the federal government's preferred option" for dealing with mitigation.

The Supreme Court now has an opportunity to decide once and for all whether to apply the Nollan and Dolan precedents to a broader range of conditions, including money payments, although it would first have to decide whether Koontz would have a claim based on the fact that no permit was actually issued at the time Koontz claimed the taking occurred.

Koontz sued back in 1994. The case went to trial in 2002 on the question of whether the off-site mitigation requirement was a taking.

The court awarded Koontz's son $327,500 for the temporary regulatory taking from the date the permit was denied to the date it was finally issued in 2005. The court cited the two Supreme Court precedents in finding there had been a taking.

On appeal, the Florida Supreme Court ruled in favor of the government agency, saying the Supreme Court precedent did not apply in the case because there was no "dedication of real property," and the agency had not issued a permit.

Koontz's attorneys are from the Pacific Legal Foundation, a Sacramento, Calif.-based conservative legal group that has made its name litigating property rights cases. Most recently, the group won a Supreme Court case last term when the court ruled that property owners have a right to go to court to contest compliance orders issued by U.S. EPA (Greenwire, Aug. 17, 2012).

Attorney Paul Beard, who will be arguing his first case in the Supreme Court, maintains his client was forced to choose between two constitutional rights: the right to make use of his own property and his right to seek compensation for the cost that would be incurred if he made the improvements required by the district in return for the permit.

By making its offer on one hand and refusing to issue the permit on the other, the district was attempting to "bargain its way around the takings clause's requirement that property taken for a public use be compensated," Beard wrote in a court filing.

It was exactly the type of conduct the Nollan and Dolan decisions were intended to prevent, Beard added.

Attorneys for the district, led by Paul Wolfson of WilmerHale, frame the question differently. As they put it, Koontz is seeking compensation for the denial of a permit "where his land has not been physically invaded and retains economically viable uses." Koontz was not required to donate property or spend any money, the district says.

Put simply, a property owner cannot seek compensation "for property that was never taken," Wolfson wrote. He also insisted that the district never said it would deny the permit purely on the grounds that Koontz would not agree to the mitigation payment. Under the relevant regulations, landowners are required to come up with a proposal for mitigation if there are concerns that the proposed development will negatively affect wetlands. Koontz did not submit any suggestions and rejected several alternatives the district proposed, the district says.

Only then did the district deny the permit application, Wolfson said in his brief.

"All that the district required was that petitioner offset -- in whatever way he chose -- the adverse environmental impact of his project in a manner sufficient to comply with the applicable regulatory standards," he wrote.

The Obama administration has sided with the water management district. Solicitor General Verrilli wrote in his brief that it would be a taking only if there was the "actual appropriation of property."

'Velvet-covered hammer'

Law professor Echeverria, who filed his brief on behalf of the National Governors Association and other government-affiliated groups, said a ruling for Koontz could "hamstring local officials trying to regulate development activity."

Among other things, it would "compel courts to attempt to make highly speculative determinations about numerous, ill-defined potential conditions that may have been considered but were ultimately not adopted," Echeverria wrote in his brief.

Similarly, Verrilli warned in his brief that a Supreme Court decision in favor of Koontz "would impose inappropriate burdens and costs on state and federal land-use regulation and would not be in the interests of either landowners or government."

In Florida, for example, the state and federal government help landowners identify mitigation measures. Those government entities "would refrain from assisting permit applicants to identify acceptable mitigation measures" in the future if the landowners could then make a takings claim if they disagree with the suggestions, Verrilli said.

Supporters of Koontz, including business groups like the National Association of Homebuilders, downplay the impact of a favorable ruling for Koontz.

In a brief filed by the homebuilders group and other property owner interests, attorney Michael Berger of Manatt Phelps & Williams wrote that the burden should be on the government, not the property owner, to show that its permit conditions are legally valid.

He stressed that the "sky will not fall" if government entities cannot "coerce citizens to pay for public improvements for which they did not create the need."

But Koontz attorney Beard sees a nightmare scenario if the court doesn't reverse the Florida court's ruling.

The Supreme Court's own precedent-setting cases "will be dead letters," he said, because agencies could "skirt around" them by imposing stringent conditions and then denying permits when the property owner balks.

If the rule stands, "governments will simply make all conditions prior to approval," he added.

Robert Thomas, a Hawaii-based lawyer who filed a brief on behalf of the Owners' Counsel of America and represents property owners seeking permits, said his clients often accept stringent conditions on a regular basis simply so they can pursue their projects in a timely manner.

"They are willing to live with what might be unconstitutional requirements," Thomas said.

Government agency proposals are not mere "suggestions," as pro-government lawyers have argued, Thomas added. "It's a velvet-covered hammer," he said.

Koontz Jr. -- who now lives in North Carolina -- will be an observer in court next week, along with his wife and two grandchildren. As he noted, a trip to the Supreme Court is likely to be "a one-time experience for me."

Not surprisingly, he is glad the end of his family's legal odyssey is in sight.

"We are going into the 19th year, and I would like to get this done and over with," he said.

As for the property that has been the subject of such hard-fought litigation -- it remains undeveloped.