The Supreme Court sided today with a Florida landowner who challenged terms for a state-issued permit for developing wetlands, establishing a significantly stricter standard for conditions regulators place on permit applications.
The 5-4 decision along ideological lines in Koontz v. St. Johns River Water Management District is a major win for property rights activists who have long claimed the government has too much control over landowners in the permitting process.
Advocates contend landowners deserve greater protections under the Fifth Amendment's "takings clause," which states that no private property may be taken for public use "without just compensation."
Justice Samuel Alito, writing for the majority, said a more stringent takings standard established by two previous Supreme Court decisions should apply to permit terms that require the landowner to spend money.
In its 1987 Nollan v. California Coastal Commission and 1994 Dolan v. City of Tigard, the high court held that the government may not condition the approval of a land-use permit on owners' relinquishing a portion of their property unless there is a "nexus" or "rough proportionality" between the government's demand and the effects of the proposed land use.
Reversing a Florida Supreme Court decision, Alito said such a standard should have applied to the case of Coy Koontz Sr., even though Florida regulators denied the permit and the land was never developed.
"It makes no difference that no property was actually taken in this case," Alito wrote. "Extortionate demands for property in the land-use permitting context run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation."
Koontz, of Orange County, Fla., sought to develop 3.7 acres in the early 1990s that the St. Johns River Water Management District classified as a habitat protection zone.
He applied for two permits for his 14.9 acres, the majority of which was in the habitat protection zone. Under his proposal, 3.4 acres of wetlands would have been destroyed, along with 0.3 acre of protected uplands.
He then offered to place his remaining 11 acres into a conservation easement in return for the permit.
But state regulators asked him to do more, including reducing the size of the proposed development to 1 acre. Alternatively, the water district also said Koontz could move forward with his development as long as he hired contractors to make improvements to district-owned wetlands miles away.
Koontz refused either of the terms, and his permit application was denied.
He sued the district arguing that the proposed options were excessive. He used a state law that allowed property owners to recovery "monetary damages" if a state's action is "an unreasonable exercise of the state's police power constituting a taking without just compensation," a reference to the Fifth Amendment.
Koontz died in 2000, but the court awarded his son, Coy Koontz Jr., $327,500 for a temporary regulatory taking. That was later reversed by the Florida Supreme Court, arguing there was no taking because no property was forfeited.
Alito, however, wrote that the Nollan and Dolan standard must apply even when a permit is denied. Such criteria, he wrote, are important because landowners are "especially vulnerable" to "coercion" by the government in the land-use permit process. Government terms for permits, he said, can amount to "extortion" in some circumstances.
The conservative justice went on to say the standard should apply when the government "commands the relinquishment of funds liked to a specific, identifiable property interest."
Justin Pidot, a former litigator in the Department of Justice's environmental division, said the decision is extremely important because it gives property owners another significant way to challenge permitting authorities in court.
"Nollan and Dolan is a much more exacting standard," said Pidot, now a professor at the Sturm College of Law at the University of Denver. "Property rights activists have long tried to move takings analysis into a more heightened scrutiny framework."
Paul Beard of the Pacific Legal Foundation, which represented Koontz, said "it could not have been a better written opinion for us."
"This is a monumental expansion of Nollan," Beard said. "Basically what this does is it ensures at the federal level across all 50 states that all states must recognize that the Constitution requires heightened scrutiny, including monetary extractions."
The court remanded the case back to the Florida Supreme Court for further proceedings.
More permit challenges ahead
Several legal experts said that although many of the implications of the ruling are unclear, one thing is certain: There will likely be a rise in lawsuits challenging monetary conditions attached to land-use permits.
Over time, Beard said, agencies will likely incorporate the Nollan and Dolan standard when weighing permit applications.
Landowners who currently disagree with terms placed on their permits have another strong arrow in their quiver, he said, and that may lead to a flood of new litigation.
Other wetland mitigation experts, however, cautioned that mitigation requirements -- even off-site -- should stand up if they follow current national and state standards.
Jan Goldman-Carter of the National Wildlife Federation said current guidelines, if implemented correctly, would satisfy the Nollan and Dolan standard.
The "bottom line is that the majority opinion accepts wetland mitigation as a legitimate government policy and does not disparage or question off-site wetland mitigation or other wetland mitigation conditions," said Goldman-Carter, who wrote an amicus brief in the case.
"The court does not reject or question the case we made ... that such conditions would meet the nexus and rough proportionality tests of Nollan-Dolan if they are applied."
But Pidot said the ruling could have ramifications beyond land-use and mitigation permits.
For example, say EPA is considering a Clean Air Act permit for a new power plant. The agency may require that the facility install scrubbers to reduce hazardous air emissions. But that takes money, so is that condition also subject to the Nollan and Dolan standard?
"The murky area is how broad is the rule that the court's articulating," Pidot said. "The court is clearly saying that when a government demands a payment in exchange for a permit, that falls under this framework. But what happens when the government requires a landowner to do something that only requires the expenditure of money?"
Justice Elena Kagan and the court's liberal wing disagreed with Alito's interpretation and, writing the court's dissent, said the majority ruling is much too sweeping. Koontz should not have prevailed, she wrote, because the water district "never demanded anything" in return for the permit -- it only presented him options -- and, second, no taking occurred because Koontz never agreed to anything and no property changed hands.
"The boundaries of the majority's new rule are uncertain," she wrote. "But it threatens to subject a vast array of land-use regulations, applied daily in States and localities throughout the country, to heightened constitutional scrutiny. I would not embark on so unwise an adventure."
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