Decision Alert: Supreme Court Unanimously Holds That The Takings Clause Applies To Legislative (Not Just Administrative) Land-Use Permit Conditions

In yet another unanimous decision issued on April 12, 2024, the Supreme Court held in Sheetz v. Cnty. of El Dorado, California that the Fifth Amendment’s Takings Clause applies to administrative and legislative permit conditions. Justice Barrett delivered the opinion of the Court, which reversed the California Court of Appeal’s decision and remanded the case.

As previously summarized in Dykema’s February 2024 edition of Last Month at the Supreme Court, Sheetz applied for a permit to construct a manufactured or pre-fabricated house on his property. County regulations required him to pay a $23,420 traffic-impact fee as a condition for obtaining the permit. Sheetz argued the payment, meant to fund road improvements, was an unlawful condition. Sheetz specifically argued that the payment involved no individualized assessment showing an “essential nexus” and “rough proportionality” between the payment and the expected adverse public impacts of the relatively small-scale project as required by Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 837 (1987), and Dolan v. City of Tigard, 512 U.S. 374, 391 (1994). The California Court of Appeal, noting that the County’s Board of Supervisors is a legislative body under California law, held that Nollan and Dolan applied only to administrative conditions, not legislative conditions, and rejected Sheetz’s claim.

Reversing that decision, the Supreme Court held that “nothing in constitutional text, history, or precedent supports exempting legislatures from ordinary takings rules.” Indeed, the Court observed, because eminent domain power was often exercised through legislation at the time of the Fifth Amendment’s ratification, special deference to legislative taking would “have made little sense historically.” The Court remanded for consideration of the parties’ other arguments about the validity of the traffic-impact fee.

Despite the unanimous holding, the concurring opinions show a range of views on the proper balance between a state’s power over land-use planning and an individual’s rights under the Takings Clause. For instance, the Court left open “whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development.” Justice Gorsuch wrote that “nothing in Nollan, Dolan, or today’s decision supports distinguishing between government actions against the many and the few any more than it supports distinguishing between legislative and administrative actions.” On the other hand, Justice Kavanaugh (joined by Justices Kagan and Jackson) wrote that nothing in Sheetz, or the Court’s prior decisions, prohibits the “common government practices of imposing permit conditions” assessed on classes of development rather than specific parcels.

Justice Sotomayor suggested Nollan/Dolan scrutiny may nevertheless not apply based on Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 612 (2013). In her view, an antecedent question to applying Nollan/Dolan is “whether the permit condition would be a compensable taking if imposed outside of the permitting context,” as in Koontz. Because the California Court of Appeal did not consider that question, she joined the Court’s opinion.

Takeaway

• The Court is not as unified on Takings Clause issues as the unanimous decision implies. The Justices all agreed that legislative permit conditions are not exempt from Nollan/Dolan scrutiny but otherwise diverged. Most notably, several Justices disagree whether permits that apply to a class of properties (not just individual developments) must comply with Nollan/Dolan. Because class-based permit conditions are a “common government practice,” the resolution of this issue would be an important concern for state and local governments and developers, as well as land owners across the nation.

For more information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, Monika Harris, Puja Valera, or A. Joseph Duffy, IV.