SPEAKERS CONTENTS INSERTS Tables
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AMENDMENT TO THE WEBB–KENYON ACT; AND THE PRIVATE PROPERTY IMPLEMENTATION ACT OF 1997
THURSDAY, SEPTEMBER 25, 1997
House of Representatives,
Subcommittee on Courts and Intellectual Property,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in room 2237, Rayburn House Office Building, Hon. Howard Coble (chairman of the subcommittee) presiding.
Present: Representatives Howard Coble, Elton Gallegly, Bob Goodlatte, Edward A. Pease, Christopher B. Cannon, Charles T. Canady, John Conyers, Jr., William D. Delahunt and Steven R. Rothman.
Also present: Mitch Glazier, chief counsel; Debbie Laman, counsel; Blaine Merritt, counsel; Vince Garlock, counsel; Veronica Eligan, staff assistant; Robert Raben, minority counsel; and Johnny Mautz, Intern.
OPENING STATEMENT OF CHAIRMAN COBLE
Mr. COBLE. Good morning. It is 10:00 and I do not like to penalize those of you who have arrived in a timely fashion, so we will get this train underway.
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The Subcommittee on Courts and Intellectual Property will come to order. Today the subcommittee is conducting a legislative hearing on two bills, H.R. 1063, a bill to amend the Webb-Kenyon Act, and H.R. 1534, the Private Property Rights Implementation Act of 1997.
First we will turn our attention to H.R. 1063. The Webb-Kenyon Act, in conjunction with the 21st amendment, carved out an exception to the commerce clause and gave States the power to regulate the importation and sale of alcoholic beverages within their own borders. Although the act prohibited any shipment or transportation of alcoholic beverages from one State to another in violation of that State's liquor laws, it did not provide a remedy or mechanism for enforcement.
In recent years improved methods of shipment and the advent of the Internet have made it possible for small wineries and breweries to reach a much broader market. These groups usually use direct shipment as a means of transporting their product. This bypasses many State-instituted systems of alcohol distribution and sales and is often done in violation of State laws against direct shipment. States also claim that direct shipment of alcoholic beverages to consumers deprives a State of tax revenue and presents the possibility that minors may receive alcohol through the mail.
The States, however, are left without a mechanism to enforce their own liquor laws. The State of Florida brought an action in Federal court to enjoin the illegal shipment of alcohol into the State. The action was dismissed because the court determined the State did not have a cause of action under the Webb-Kenyon Act. The State of Florida was also dismissed in State court for lack of personal jurisdiction over the violators.
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H.R. 1063 would amend the Webb-Kenyon Act to allow States to bring an action in Federal court to enjoin illegal activity or to enforce State liquor laws. Wineries and breweries are concerned that giving enforcement capability to the States without predicating it on reasonable access to markets will have a negative effect on the financial viability of their respective businesses. The hearing today on H.R. 1063 is intended to encourage discussion about the issue with the hope that a compromise will develop.
I am sure there are people in this hearing room today who feel adamantly on either side of this issue. The President is not going to sign Mr. Ehrlich's bill into law tomorrow. We are here to engage in dialogue—and hopefully a compromise will be realized.
Let me now turn our attention to H.R. 1534. This bill is about the Congress' duty to implement the fifth amendment to the Constitution. The U.S. Constitution protects individuals from having their private property ''taken'' by the government without receiving just compensation. To file a claim of a violation of that fundamental right, the plaintiff encounters several high obstacles which must be crossed before Federal courts will take or hear the case. Plaintiffs alleging violation of other fundamental rights in many instances do not encounter the same hurdles to gain access to Federal court.
Plaintiffs filing takings claims in Federal court are met with steep requirements before their case is considered to be ripe. A plaintiff must show that there has been a final decision from the State or local governmental entity which has authority over land use and that the plaintiff has requested compensation by exhausting all possible State remedies. Ironically, it may be impossible to then get any Federal remedy because the case has been forced to be heard in State court, and a case in many instances cannot be tried twice. Deprivation of a Federal remedy goes against what our Founding Fathers saw as a uniquely Federal matter.
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Lower courts attempting to interpret when a final decision has occurred have reached conflicting and confusing decisions which are not instructive to takings plaintiffs trying to determine when their case is ripe. H.R. 1534 defines when a final decision has been reached in order to give takings plaintiffs some certainty in the law so that their fifth amendment rights are properly preserved.
Takings plaintiffs also confront the barrier of the abstention doctrine when filing a claim in Federal court. This judicially created doctrine gives Federal judges the discretion to refuse to hear cases that are otherwise properly before the court. Judges reluctant to get involved in land use issues may abstain from hearing the case at hand.
H.R. 1534 remedies this by prohibiting district courts from abstaining from or relinquishing jurisdiction when the case does not allege any violation of a State law, right or privilege. H.R. 1534 would not affect the traditional abstention doctrines, Younger, Pullman, and Burford, used by the court because it applies only when a Federal claim is alleged.
Opponents to the bill include many environmental groups, planning associations and groups of local city attorneys and officials. They are concerned that H.R. 1534 will allow the circumvention of local authorities in land use decisions and claim it may cause a clog in the Federal courts. This is a complex area of the law, and this hearing will no doubt provide valuable debate on this issue.
I look forward to today's testimony.
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[The statement of Mr. Coble follows:]
PREPARED STATEMENT OF HON. HOWARD COBLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA, AND CHAIRMAN SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
The Subcommittee on Courts and Intellectual property will come to order. Today the subcommittee is conducting a legislative hearing on two bills: H.R. 1063 a bill to amend the Webb Kenyon Act, and H.R. 1534 the ''Private Property Rights Implementation Act of 1997.''
First, we will turn our attention to H.R. 1063. the Webb-Kenyon Act, in conjunction with the Twenty-First Amendment, carved out an exception to the Commerce Clause and gave states the power to regulate the importation and sale of alcoholic beverages within their own borders. Although the act prohibited any shipment or transportation of alcoholic beverages from one state to another in violation of that state's liquor laws, it did not provide a remedy or mechanism for enforcement.
In recent years, improved methods of shipment and the advent of the Internet have made it possible for small wineries and breweries to reach a much broader market.
These groups usually use direct shipment as a means of transporting their product. This by-passes many state instituted systems of alcohol production and sales and is often done in violation of state laws against direct shipment. States also claim that direct shipment of alcoholic beverages to consumers deprives a state of tax revenues and presents the possibility that minors may receive alcohol through the mail.
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The states, however, are left without a mechanism to enforce their own liquor laws. The State of Florida brought an action in federal court to enjoin the illegal shipment of alcohol into the state. The action was dismissed because the court determined the state did not have a cause of action under the Webb-Kenyon Act. The State of Florida was also dismissed in state court for a lack of personal jurisdiction over the violators.
H.R. 1063 would amend the Webb-Kenyon Act to allow states to bring an action in federal court to enjoin illegal activity or to enforce state liquor laws.
Wineries and breweries are concerned that giving enforcement capability to the states without predicating it on reasonable access to markets will have a negative effect on the financial viability of their businesses.
The hearing today on H.R. 1063 is intended to encourage discussion about this issue, with the hope that a compromise will develop.
Next we will turn to H.R. 1534. This bill is about Congress' duty to implement the fifth amendment to the constitution. The U.S. constitution protects individuals from having their private property ''taken'' by the government without receiving just compensation. To file a claim of a violation of that fundamental right, the plaintiff encounters several high obstacles which must be crossed before federal courts will hear the case. Plaintiffs alleging violations of other fundamental rights do not encounter the same hurdles to gain access to federal court.
Plaintiffs filing takings claims in federal court are met with steep requirements before their case is considered to be ''ripe.'' A plaintiff must show both that there has been a final decision by the state or local governmental entity which has authority over land use and that the plaintiff has requested compensation by exhausting all possible state remedies. Ironically, it may be impossible to then get any federal remedy because the case has been forced to be heard in state court and a case can not be tried twice. Deprivation of a federal remedy goes against what our founding fathers saw as a uniquely federal matter.
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Lower courts attempting to interpret when a final decision has occurred have reached conflicting and confusing decisions which are not instructive to takings plaintiffs trying to determine when their case is ripe. H.R. 1534 defines when a final decision has been reached in order to give takings plaintiffs some certainty in the law so that their fifth amendment rights are properly preserved.
Takings plaintiffs also confront the barrier of the abstention doctrine when filing a claim in Federal Court. This doctrine gives Federal Judges the discretion to refuse to hear cases that are otherwise properly before the court. Judges reluctant to get involved in land use issues may abstain from hearing the case.
H.R. 1534 remedies this by prohibiting District Courts from abstaining from or relinquishing jurisdiction when the case does not allege any violation of a state law, right or privilege. H.R. 1534 would not affect the traditional abstention doctrines—Younger, Pullman, and Burford—used by the courts because it applies only when a federal claim is alleged.
Opponents to the bill include many environmental groups, planning associations and groups of local city attorneys and officials. They are concerned that H.R. 1534 will allow the circumvention of local authorities in land use decisions and claim it could cause a clog in the federal courts.
This is a complex area of the law and this hearing will no doubt provide valuable debate on this issue.
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I look forward to today's testimony and now turn to the ranking democratic member of this subcommittee, the gentleman from Massachusetts, Mr. Frank, for his opening statement.
Mr. COBLE. The Ranking Member is not here at this point and we have the bell ringing for a vote. In the interest of time, I would like to hear from Mr. Ehrlich now, and, Bob, if you could keep it to 5 minutes. Then, we will adjourn and come back and hear from Mr. Riggs. As you know, when the red light illuminates, that is your signal that your 5 minutes have expired. We won't keelhaul you, but if you could comply with the 5-minute rule today, we will be appreciative.
Mr. EHRLICH. Being a landlocked Member of the House, I am not sure, was it ''keel-locked''? I am not sure that sounds favorable.
Mr. COBLE. Keelhauled.
Mr. EHRLICH. Mr. Chairman, I appreciate the opportunity. I will present my testimony in less than 2 minutes.
I really appreciate the opportunity you have given me to have this hearing today. Your counsel has been super. Your staff has been super. The backgrounder is right on point. I would like to thank my colleague, Mr. Riggs, who has a relevant secondary issue that he would like to discuss today that I have uncovered during the course of my research with respect to H.R. 1063.
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I have two paragraphs I would like to read at this time. I do have, Mr. Chairman, two letters in support of the bill and my statement I would like to submit for the record.
Mr. COBLE. Without objection.
Mr. EHRLICH. As the chairman noted, H.R. 1063 was introduced in March to give individual States standing to seek a remedy against illegal shipment of alcoholic beverages into their States. I stress the word ''illegal.'' This legislation does not impact legal shippers. As I have researched the issue of alcohol shipments across State lines, I have been apprised of a secondary issue that, in my opinion, has merit and should be recognized and will be addressed by Mr. Riggs. Although I am here to testify on H.R. 1063, I also acknowledge this issue and thank my colleague very much for his presence and his interest in this issue, as well as my colleague and good friend, George Radanovich from California.
Mr. Chairman, as you discussed, H.R. 1063 amends the Webb-Kenyon Act to allow any State, the District or U.S. territory to bring an injunctive action in U.S. District Court to enjoin the shipment or transportation of liquor in violation of the act or to enforce that jurisdiction's laws with respect to such transportation. H.R. 1063 will provide States the authority to enforce their laws in Federal court with respect to illegal shipments. The urgent need for congressional action results from the failure of the Bureau of Alcohol, Tobacco and Firearms to act to assist States despite numerous requests and judicial rulings and some Federal—recent Federal court decisions.
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As I said, Mr. Chairman, I do have a statement. We have a panel of experts. We have two real issues here, one which was the genesis of the bill; the second, Mr. Riggs will testify to. I thank you for your interest in this issue. I look forward, despite your warning to the contrary, that we may actually get a piece of legislation together this term, bring it to your subcommittee for preparation for a full passage. I thank you very much.
Mr. COBLE. I thank you, sir, for your precise statement.
[The prepared statement of Mr. Ehrlich follows:]
PREPARED STATEMENT OF HON. ROBERT L. EHRLICH, JR., SECOND CONGRESSIONAL DISTRICT OF MARYLAND
Mr. Chairman, Members of the Subcommittee, I want to thank you for conducting this hearing on my bill, H.R. 1063. I want to thank you, Chairman Coble, for your friendship and for providing me, and other witnesses the opportunity to discuss this legislation before your subcommittee.
As you may know, I introduced H.R. 1063 on March 13, 1997 to give individual states a judicial forum in which to seek a remedy against the illegal shipment of alcohol beverages into their states—and I stress the word illegal. Please know this legislation does not impact legal shippers. As I have researched the issue of alcohol shipments across state lines, however, I have been apprised of a secondary issue that, in my opinion, has merit and should be recognized. Although I am here today to testify on H.R. 1063, I also acknowledge the secondary issue of access to markets which will be discussed by my colleague, Congressman Frank Riggs.
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Alcohol drinking products have an unique place in American history and are probably the only product specifically identified in the U.S. Constitution in the form of the Twenty-First Amendment. My bill focuses on this product's illegal shipment between states. Section 2 of the Twenty-First Amendment states specifically: ''The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.'' This Amendment and the federal laws resulting which regulate the interstate shipment of alcohol beverages are a result of the bygone era of bootlegging and prohibition. A key-statute, the Webb-Kenyon Act, was enacted in 1935 (for the second time) and prohibits the interstate shipment of alcohol beverages in violation of applicable state law. The Twenty-First Amendment and the Webb-Kenyon Act clearly give states the right to pass laws restricting or prohibiting the importation of alcohol beverages. The reason for H.R. 1063 and today's hearing is that interpretations of federal law do not protect states nor provide states an adequate judicial remedy in the enforcement of their laws.
State laws vary widely with respect to interstate shipment of alcohol beverages. Approximately twenty states prohibit the direct shipment of alcohol beverages. In some of these states (Florida, Kentucky, Georgia), it is a felony for anyone other than a licensed distributor to import alcohol beverages. In approximately twenty other states, direct shipments of alcohol are limited, under controlled conditions. The remaining states allow direct shipments of limited quantities of alcohol to consumers provided the states involved have reciprocal laws in effect. Regardless of the particular law regulating shipment of alcohol into a state, each state must have an adequate enforcement mechanism available. Despite this variance in state laws, there are several standards which apply nationwide: Alcohol cannot be legally sent via the U.S. Mail; federal and state tax laws are assessed on alcohol beverages; and all states prohibit underage drinking.
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The purpose of H.R. 1063, as introduced, is to amend the Webb-Kenyon Act to allow any State, the District of Columbia, or U.S. territory to bring an action in U.S. District Court to enjoin the shipment or transportation of liquor in violation of such Act, or to enforce that jurisdiction's laws with respect to such transportation. In short, H.R. 1063 will provide states the authority to enforce their laws in a U.S. District Court with respect to the illegal shipment of alcohol beverages across state lines. The urgent need for Congressional action results from the failure of the Bureau of Alcohol, Tobacco, and Firearms (BATF) to act to help states, despite numerous requests, and judicial rulings in some recent federal court decisions.
In 1996, a Circuit Court in Florida dismissed a case (State of Florida v. Rochambeau Wines and Liquors. Inc.) to halt the shipment of alcohol beverages in violation of Florida law due to lack of jurisdiction. The court held that states do not have access to federal courts under the Webb-Kenyon Act. Further, a recent decision by a District Court in Florida (State of Florida v. Sam's Wines and Liquors. et al.) held that states do not have jurisdiction in state courts over out-of-state violators. Accordingly, a federal statute is needed to allow states the opportunity to enforce their laws.
Illegal interstate shipping of alcohol not only violates a state's ability to regulate incoming alcohol beverages, it also bypasses state excise taxes. The companies that obey current law and ship alcohol beverages in accordance with existing state laws pay a significant amount of money in taxes. Illegal shippers deprive states of excise and state sales tax revenue which is generated from sales of alcohol beverages. The tax revenue lost to states due to illegal shipments is estimated to be between $200 and $600 million a year.
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In recent years, select wines and speciality brews have become popular ail over the country. The Internet and mail-order catalogs have given consumers easier access in ordering difficult-to-find beers and wines. As a result, illegal shipments of alcohol beverages have risen to new levels. Further, many aggressive shippers continue to ignore state laws and feel immune to prosecution. Whether someone thinks a state law, or any law for that matter, is right or wrong does not absolve that person from obeying the law.
H.R. 1063 does not answer the question of whether shipping a bottle of wine from California to Florida should be permitted and with what regulatory oversight. The respective state legislatures should be the appropriate forum to debate this issue and decide what is appropriate. H.R. 1063 simply gives states the appropriate authority to enforce the laws they have decided are best for their citizens.
The secondary issue brought to my attention relates to market access of particular wines and microbrews. The three-tiered system of wholesalers, distributors, and retailers is an established and respected system that maintains strict control over the market access of alcohol beverages. Many small wineries and brewers feel discriminated against under the three-tier system. As consumer demand for special wines and select brews increases, the number of illegal shipments will rise, ignoring state laws and taxes in the process. Recognizing that it is in the best interest of everyone involved to work together, I support efforts on both sides to reach a compromise with respect to market access. While this subcommittee may not be the appropriate jurisdiction to decide this issue, market access should be addressed by Congress and state legislatures to ensure current laws are meeting the needs of consumers.
At this time, Mr. Chairman, I ask that you include in the record a copy of a letter from the Maryland Comptroller of the Treasury, Mr. Louis L. Goldstein, and a copy of a letter from Chairman of the Joint Committee of the States, Mr. Charles Ehart. Both of these letters express support for passage of H.R. 1063.
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Finally, Mr. Chairman, I want to thank my friend, Congressman Frank Riggs, for his testimony and perspective on this issue. I look forward to any questions you or the members of the Subcommittee may have regarding H.R. 1063.
| Comptroller of the Treasury, |
| Annapolis, MD, September 11, 1997. |
Hon. HOWARD COBLE, Chairman,
Subcommittee on Courts and Intellectual Property,
House Judiciary Committee,
Washington, DC.
Re: H.R. 1063
DEAR CONGRESSMAN COBLE: I was pleased to learn that your subcommittee plans to hold a hearing on H.R. 1063, sponsored by Maryland Representative Robert L. Ehrlich, Jr., on September 25, 1997. H.R. 1063 deals with direct shipments of alcoholic beverages to consumers, commonly known as mail order alcohol. The bill would give individual states standing in the federal court system to seek remedies under the federal Webb-Kenyon Act. Any penalties would be those set forth under each state's laws and regulations.
I strongly urge your subcommittee to give favorable consideration to Congressman Ehrlich's bill. In recent years, mail order sales have become a major concern for those of us who regulate alcoholic beverages. Maryland has been at the forefront in addressing the growing challenge of mail order alcohol in order to prevent underage access to alcohol and to protect state revenue. Clearly, however, additional administrative and enforcement mechanisms are needed. The passage of this bill would give each state another tool to use in combating this problem.
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I am sure many states will provide other information to the committee explaining why mail order sales of alcoholic beverages present problems. I request that this letter be made a part of the record showing my strong support of H.R. 1063. Thank you for your interest and concern in this matter.
With kindest personal regards and best wishes to you and your staff for continued success, good health and happiness, I remain.
Most cordially yours,
LOUIS L. GOLDSTEIN, Comptroller.
LLG/cd
cc: Representative Robert L. Ehrlich, Jr.,
Maryland Congressional Delegation.
Charles Ehart, Director, Maryland Alcohol & Tobacco Tax Unit.
| Joint Committee of the States, |
| Alexandria, VA, March 17, 1997. |
Hon. Robert L. Ehrlich, Jr.,
U.S. House of Representatives,
Washington, DC.
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DEAR CONGRESSMAN EHRLICH: It was a pleasure meeting with you and others recently to discuss your plans to introduce legislation in Congress to give individual states the authority to seek relief in the federal court system to deal with the problem of direct shipments of alcoholic beverages to consumers (also known as ''mail-order alcohol''). As you know, in addition to such shipments circumventing state excise taxes and the normal three-tier distribution system, they create a very real threat that persons under the age of 21 may order and/or receive alcoholic beverages.
The issue of mail-order alcohol is of great concern to the Joint Committee of the States. The Joint Committee is a representative group of the National Alcohol Beverage Control Association (NABCA) and National Conference of State Liquor Administrators (NCSLA) and is charged with studying and dealing with issues that impact all states. These two associations represent all state alcoholic beverage regulators in the country.
Please be assured that your proposal has the full support of the Joint Committee of the States as well as the two national state associations. Please let us know if there is anything we can do to further assist you with this effort.
Once again thank you for your interest and concern. With kindest regards and best personal wishes, I am
Most sincerely,
CWE: ae
cc: Eugene Hallman,
President, NABCA.
David C. Reitz,
President, NCSLA.
James M. Squeo,
Executive Director, NCSLA.
Aaron L. Stansbury,
Executive Secretary-Treasurer, NCSLA.
Mr. COBLE. Frank, can you keep yours within 5 minutes?
Mr. RIGGS. I think so, Mr. Chairman.
Mr. COBLE. The gentleman from California.
Mr. RIGGS. Mr. Chairman, let me just note, as someone who represents a district that is home to the towering redwood forest and lush wine valleys, I have an interest in both pieces of legislation which are the subject of today's hearing. I am here to, really in my role, informal role or capacity as the wine Congressman, representative for all of Napa County and northern Sonoma County area, actually my home, which is the premier wine and grape-growing region of the country, to express my concern that this legislation could have some unintended and rather draconian effects. It could have a chilling effect on the marketability of premium wines around the country, and it could cause legal consequences for some otherwise very law-abiding, upstanding and prominent citizens who are engaged in what I think is a very important and reputable business.
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I should also point out, Mr. Chairman, that there is an increasing body of scientific knowledge which would tend to indicate that moderate consumption of wine actually produces beneficial health effects.
That all said, most wineries are small, family-owned operations. They ship anywhere, they sell anywhere, produce and sell anywhere from a few hundred to a few thousand cases a year.
Mr. COBLE. In fairness to you, Frank, why don't we stand in recess and come back. I do not want you to feel that you are being rushed. We will stand in momentary recess. Once we complete our vote, we will return.
[Brief recess.]
Mr. COBLE. I apologize for the delay. We are back, ready to resume battle. Mr. Riggs, we recognize you.
Mr. RIGGS. As I was saying, I represent a district that includes the Napa Valley, and I also, just by way of background, want to mention that there are roughly 1600 wineries scattered around the country; 800 of those, or half of those, are located in California. While 90 percent of all U.S. wine is produced in California, only 10 wineries produce that 90 percent. So there is sort of a lopsided equation in terms of the production aspect of this industry.
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Also this industry is extremely important for tourism in northern California and the Napa Valley. In fact, many tourists, after visiting Napa or Sonoma County or Mendocino County, walk away with a bottle of their favorite wine. Unfortunately after that wine is consumed, a wine lover is often unable to purchase that wine in a local retail outlet in their home community.
Since the repeal of the 18th amendment to the Constitution, the Nation has operated under a three-tier system of alcohol distribution. This system of distribution hierarchy has been unable in recent years to accommodate the wine industry expansion of small family-owned wineries. The three-tiered system, comprised of producers, wholesalers and retailers, concentrates promotion on high-volume, nationally known brands. Small producers often have little means to reach the growing population of discriminating wine consumers.
The three-tiered system begins with the producer, not just large producers like Mondavi, Kendall Jackson or Gallo, but small family-owned and -operated wineries. Vineyards in the wake of enormous consumer demand have sprung up all over the Nation. I can tell you they continue to proliferate in my congressional district. The great number of these small vineyards makes it nearly impossible for the three-tiered system to promote every winery's product.
The second tier of the three-tier system, the wholesaler, is quite simply oft-times a bottleneck. Unfortunately the massive consolidation at the wholesale level has created an industry capable of promoting large winemakers while leaving the small labels without access to national markets.
With so many labels available, retailers, the final tier of the three-tiered system, simply do not have the shelf space to promote every wine label. The reality of the situation is this: An abundance of wine labels, a consolidated wholesale system and limited retail space.
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In order to promote their wines on a national level in a growing market, small wineries must be allowed to deliver their products through direct shipment. Vintners should be allowed access to every market, and every consumer should be allowed access to every wine. Over the past decade 15 States have revised their laws to allow wineries access to consumers by allowing the shipment of wine directly to the consumer via common carrier. These States have given consumers the ability to find, purchase and enjoy their favorite wines. Additionally, these States have allowed small family-owned wineries to market their product and carve out a niche in a market dominated largely by the bigger wine companies.
Yet some States have chosen to completely close their borders to direct shipments. In radical cases such as the State of Florida, the States have actually enacted felony laws to punish the direct shipment of wine. Florida lawmakers cite underage drinking and taxation as the root of their law. While consumption of alcohol by underage children is a serious problem in the United States, one which we all acknowledge, I do not believe juveniles would choose to have a case of wine directly shipped to their parents' home. I think that stretches credulity. Furthermore all common carriers shipping wine require an adult signature to receive alcohol. I brought with me today part of a UPS package. You will see right here on the package there is a label clearly indicating that an adult signature is required to receive shipment of the wine that was contained in that particular package.
To address the loss of State tax revenues, States could enact laws much like crafted in Louisiana earlier this year. The Louisiana—so-called Louisiana compromise requires wine producers to apply for a permit to direct-ship wine into Louisiana. Furthermore, a producer may ship only 60 bottles of wine per adult per year. Extensive reporting and paperwork requirements allow Louisiana to collect taxes on the purchase of wine.
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Mr. Chairman, H.R. 1063 would allow States to use the Federal court system. It would give States standing to proceed in Federal court to prosecute wine producers who violate a State's laws prohibiting the direct shipment of wine. However, wine producers are already subject to Federal jurisdiction. As you well know, the Bureau of Alcohol, Tobacco, and Firearms currently has jurisdiction over all holders of Federal basic permits, including wine producers. H.R. 1063 thus would add another layer of unwarranted restrictions, in my view.
The current three-tiered distribution system has worked well in the past. Unfortunately, the nature of today's dynamic and growing wine industry has rendered this system largely obsolete. Current demand for wine has outgrown the ability of wholesalers to provide the American consumer with the means to purchase and enjoy the Nation's superb selection of wines. While State sovereignty and a State's right to enact and enforce its laws must be respected, I believe many States have gone too far in outlawing the direct shipment of wine to consumers.
We engage now in this rather at times heated debate, and I would like to propose a solution. I intend in the very near future to introduce legislation which would create an independent Presidentially-appointed commission to study, review and report to Congress on the best solution to end this conflict. I think we all recognize that this issue involves interstate commerce, and therefore there is a very legitimate Federal interest and a Federal Government role in helping to resolve this dispute.
It is my belief and hope that this Commission's recommendations might result in legislative action by the Congress. The Commission would be comprised of——
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Mr. COBLE. Your colleague from Maryland is a little better with the time constraints than you. If you could please wrap it up.
Mr. RIGGS. The Commission would be comprised of vintners, State tax officials, State attorneys general, wholesalers and distributors. Its mission would be to recommend changes to Federal law and/or model State legislation to facilitate interstate shipment of wine directly to consumers while protecting the legitimate tax and law enforcement interests of the destination States.
Mr. Chairman, we are trying to find common ground between producers, wholesalers and States. We can no longer deny consumer access to the high-quality wine products of this Nation, and furthermore, we can no longer deny small family-owned vintners access to, again, this growing national marketplace.
I thank you and Congressman Pease for the opportunity to testify on this matter today. Suffice it to say, it is a very important issue to a sizable segment of my constituency.
[The prepared statement of Mr. Riggs follows:]
PREPARED STATEMENT OF FRANK D. RIGGS, A REPRESENTATIVE OF THE FIRST CONGRESSIONAL DISTRICT OF CALIFORNIA
Good morning, Mr. Chairman. I am Frank Riggs, Representative of the First Congressional District of California. I appear today to express my concerns with the legislation before you: H.R. 1063, a bill that would allow states to use the Federal Court System for the enforcement of the Webb-Kenyon Act.
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The Congressional District I represent includes the Napa Valley, widely regarded as the prime growing region of the United States wine industry: an industry which produces an award-winning, high-value product that is the best in the world.
There are approximately 1600 wineries scattered throughout 48 states. 800 of those wineries are located in my home state of California. Of the approximately 10,000 labels produced each year, over 4,000 are from California. While 90 percent of all U.S. wine is produced in California, only 10 wineries produce that 90 percent. These wineries make up the majority of the readily available labels carried in most marketplaces.
The remaining wineries are small, family owned operations. Most produce limited volumes of wine, perhaps as many as a few thousand cases a year: some produce only a few hundred.
Each year, many tourists vacation in Northern California and the Napa Valley. Attracted by the local flavor, the visitors stop by our local wineries in order to tour the vineyards, sample wine, and enjoy the Northern California landscape. Most walk away with a bottle of a favorite wine they had tasted. Unfortunately, after that wine is consumed, a wine lover is often unable to purchase that wine in a local retail outlet.
Since the repeal of the Eighteenth Amendment to the Constitution, the Nation has operated under a three-tier system of alcohol distribution. This distribution hierarchy has been unable to accommodate the wine industry's expansion of small, family-owned wineries. The three-tier system, comprised of producers, wholesalers and retailers, does not promote competition since it concentrates promotion on only high-volume, nationally known brands. Small producers often have no means to reach the growing population of discriminating wine connoisseurs.
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The three-tier system begins with the producer: Not just large producers like Mondavi, Kendall Jackson, or Gallo, but small, family-owned and operated wineries. Vineyards, in the wake of enormous consumer demand, have sprung up all over the Nation. The great number of these small vineyards make it nearly impossible for the three-tier system to promote every winery's product.
The second tier of the three-tier system, the wholesaler, is quite simply, a bottleneck. At this tier, there are literally thousands of labels available for promotion to the consumer. Unfortunately, the massive consolidation of the wholesale level has created an industry capable only of promoting large winemakers, while leaving the small labels without access to national markets necessary to sell their high-quality product to the consumer.
With a small production base, family-owned wineries do not have the resources necessary to promote their wines through the high-priced three-tier distribution network. With so many labels available, retailers, the final tier of the three-tier system, simply to not have the shelf-space to promote every wine label. The reality of the situation is: An abundance of wine labels; a consolidated wholesale system; and limited retail space.
In order to promote their wines on a national level, small wineries must be allowed to deliver their product to consumers through direct shipments. Vintners should be allowed access to every market and every consumer should be allowed access to every wine.
When a consumer finds a wine he or she enjoys, whether through direct sampling or reading about the wine in a particular wine industry publication, that consumer should be allowed to purchase that bottle of wine. Often times their local retailer does not stock that particular wine. The consumer might then special order the wine from the retailer. Unfortunately, it is often the case that the wholesaler, because it moves high-volume wines, does not sell that wine.
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Over the past decade, 15 states have revised their laws to allow wineries access to consumers by allowing the shipment of wine directly to the consumer via common carrier. By allowing direct shipments, these states have given consumers the ability to find, purchase, and enjoy their favorite wines. Additionally, these states have allowed small, family owned wineries to market their product and carve out a niche in a market dominated by large wine companies.
Yet, some states have chosen to completely close their borders to direct shipments. These states have deprived their citizens of the opportunity to fully enjoy wine. In radical cases, states such as Florida have actually enacted felony laws to punish the direct shipment of wine. Essentially, Florida has sought to reach across state boundaries and punish wine makers as felons if they direct-ship wine to an adult Florida resident. Florida lawmakers cite under age drinking and tax issues as the root of the law.
While consumption of alcohol by underage children is a serious problem in the United States, I do not believe juveniles would choose to have a case of wine directly shipped to their parents' home. Furthermore, all common carriers shipping wine require an adult signature to receive alcohol. With clearly marked packages and adult signature requirements, the direct shipment of wine should be restricted to adults.
To address the loss of state tax revenue, states could enact laws much like the law crafted in Louisiana earlier this year. The ''Louisiana Compromise'' requires wine producers to apply for a permit to direct-ship wine into Louisiana. Furthermore, a producer may ship only 60 bottles of wine per adult per year. Extensive reporting and paperwork requirements allow Louisiana to collect taxes on the purchase of wine.
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Mr. Chairman, H.R. 1063 would allow states to use the Federal court system to prosecute wine producers who violate a state's laws prohibiting the direct shipment of wine. However, wine producers are already subject to federal jurisdiction. The Bureau of Alcohol, Tobacco, and Firearms currently has jurisdiction over all holders of Federal Basic Permits. Currently, wine producers—wholesalers or importers, and distillers—must hold these permits if they are going to operate. By allowing states to sue in Federal Court, H.R. 1063 only adds another layer of unwarranted restrictions.
I do not deplore the current three-tiered distribution system. It has worked well in the past. Unfortunately, the nature of today's wine industry has rendered the system obsolete. Current demand for wine has outgrown the ability of the wholesalers to provide the American consumer with the means to purchase and enjoy this Nation's superb selection of wines. While state sovereignty and a state's right to enact and enforce its laws must be respected, I believe many states have gone too far in outlawing the direct-shipment of wine to consumers.
Today, I propose a solution to this heated debate. I intend to introduce legislation creating an independent, Presidentially appointed commission to study, review, and report to the Congress on the best solution to end this conflict.
The commission would be comprised of vintners, state tax officials, state attorneys general, wholesalers and distributors. The commission's mission would be to recommend changes to federal law and/or model state legislation to facilitate interstate shipment of wine directly to consumers, while protecting the legitimate tax and law enforcement interests of the destination states.
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Mr. Chairman, small, family-owned wineries must be allowed access to consumers across the Nation. Currently, prohibitive state laws and an inadequate national distribution system have provided little access for small vintners. Small wineries, because of direct-shipping restrictions, are unable to compete directly with the large wineries promoted by the wholesalers and retailers. Adult consumers are unable to find many of their favorite wines in local outlets, but are still forbidden from purchasing wine by states which refuse to allow their citizens the access to small producers through direct shipments.
We must seek to find common ground between producers, wholesalers, and states. We can no longer deny consumer access to the high-quality wine products of this Nation. Furthermore, we can no longer deny small, family-owned vintners access to the national marketplace.
I thank Chairman Coble and the Members of the Subcommittee for the opportunity to testify before you.
Mr. COBLE. The label to which you referred is affixed by whom? Who affixes it to the container?
Mr. RIGGS. The shipper. The common carrier.
Mr. COBLE. Mr. Pease, do you have questions?
We thank you both for being with us, gentlemen. I am sure you all will continue to engage in dialogue as you go along this trail that hopefully will lead to a compromise warmly embraced by all.
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If the next panel would please come forward, I will introduce you as you make your way to the table. Mr. Jim Simpson is the Chairman of the Government Affairs Committee of the National Licensed Beverage Association and the owner of a liquor store located in Waldorf, Maryland. Prior to assuming the chairmanship, he was the President of the National Licensed Beverage Association.
Mr. James Goldberg is a principal in the Washington, D.C., law firm of Goldberg and Associates. He has nearly 30 years' experience in representing trade associations and professional societies. He serves as a general counsel to the National Alcohol Beverage Control Association.
Our third witness is Mr. Jerry Douglas, who serves as Vice President of Marketing and Sales, directing the marketing efforts for the Biltmore Estate Wine Company. During his 13 years at Biltmore, the wine company has grown from selling 4,000 bottles of wine to selling in excess of 700,000 bottles per year to visitors and to markets in the Southeast.
Our final witness is Mr. Louis Foppiano, who is the general manager for the Foppiano Wine vineyards. He served as President of the Sonoma County Wineries Association in 1979 and 1980 and has served as a member of the board of directors of the California Wine Institute since 1986.
I appreciate you all coming today. We have copies of your written statements, which will be submitted into the record in their entirety, without objection.
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Again, gentlemen, I dislike having to do this, but we are on a short leash today. If you all can keep a sharp lookout for the red light warning you that your 5 minutes have expired. Good to have each of you with us.
Mr. COBLE. Mr. Simpson, why don't we start with you.
STATEMENT OF JIM SIMPSON, CHAIRMAN, GOVERNMENT AFFAIRS COMMITTEE, NATIONAL LICENSED BEVERAGE ASSOCIATION
Mr. SIMPSON. On behalf of the NLBA, I would like to thank you once again for the ability to appear before your committee on another subject.
Mr. Chairman, on December 5, 1997, we will mark the anniversary of the 64th year of the ratification of the 21st amendment to the Constitution. This is, of course, popularly known as the amendment which ended prohibition on alcohol beverages. But it did more than end an unpopular experiment. It crafted a new system for the regulation of beer, wine and liquor. Congress, indeed this committee, debated what form that new system should take, and the language they added to our Constitution is quite explicit. They did not grant a choice to the Federal Government, but rather an obligation to the States to control alcohol beverages within their State borders.
This is an important point, Mr. Chairman, and the language is very instructive for our hearing today. The second clause of the 21st amendment reads as follows: ''The transportation or importation into any State, territory or possession of the United States for delivery or use therein of intoxicating liquors in violation of the laws thereof is hereby prohibited.''
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Congress at that time rejected a one-size-fits-all Federal control and chose instead a new dimension in democracy, granting the people of each State an extraordinary degree of control over how alcohol beverages should be regulated within their borders. States determine under their own laws their requirements as to the importation into their State of alcohol beverages. Throughout this long history it has always been accepted that the control of alcohol beverages is one of the powers that the States did not relinquish to the Federal Government. The NLBA and its members across the country feel very strongly regarding this prerogative of States rights.
If the Constitution of the United States of America is not clear enough on this States rights issue, Congress passed the Webb-Kenyon Act in 1913 and reenacted it in 1935 prohibiting the interstate shipment of alcohol beverages in violation of States rights. NLBA members have become greatly alarmed at the increasing frequency of consumers being solicited to buy beverage alcohol directly through catalogs, magazines, direct mail and the Internet. These direct sales to consumers by out-of-state businesses circumvent the licensed three-tier system of lawful and orderly beverage alcohol distribution and sale. Direct sales, in most cases, avoid State excise and sales taxes, bypass laws against selling to underage persons, and sidestep the laws in dry areas that prohibit or severely restrict the availability of beverage alcohol.
Forbes Magazine estimates that the direct shipments of wine approach $1 billion in sales annually. This estimate does not include direct sales of beer and liquor, which are substantial and are growing. It is reasonable to assume that taxes are not paid on these sales. The loss in State revenues from excise and sales taxes could amount to as much as $100 million. This hemorrhage of tax revenue will only increase as mail order, telephone and Internet sales become more popular. The explosion of alcohol beverage product offerings on the Internet has created a virtual 24-hour open bar for anyone of any age to order wine, beer and spirits.
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NLBA members, indeed all licensed retailers of beverage alcohol, have a strong interest in maintaining the orderly and regulated alcohol beverage marketplace which has been crafted in each State. Those States' systems are the result of more than 60 years of refinement, balancing concerns about public health, public safety, public revenue and, of course, the legitimate commercial interests of those who have invested their life savings and careers to serve the public's desire for these products. The explosion of Internet and other marketing technologies now pose a real threat to the stability of these State systems. Once one part starts to break down, it is reasonable to expect that other parts will become stressed as well.
Merely because modern communications, credit cards and shipping techniques make it possible to easily circumvent these State regulatory systems is no cause for it to be permitted. Therefore, the NLBA has joined with the two organizations of State alcohol beverage control officials, the National Alcohol Beverage Control Association and the National Conference of State Liquor Administrators, as well as with the wine, liquor and beer wholesale community represented by the National Beer Wholesalers Association and the Wine and Spirits Wholesalers of America in supporting introduction and passage of H.R. 1063 this session of Congress.
The issue is simply this: Current Federal law does not provide sufficient ability for State regulatory officials to enforce State laws prohibiting against interstate shipment of alcohol beverages. The bill does not create new Federal enforcement authority, nor does it prohibit legitimate shippers of alcohol beverage products from shipping their products across State lines. The legislation simply gives State alcohol beverage enforcement authorities who choose to take action the authority to enforce against the illegal interstate activity.
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Thank you very much.
[The prepared statement of Mr. Simpson follows:]
PREPARED STATEMENT OF JIM SIMPSON, CHAIRMAN, GOVERNMENT AFFAIRS COMMITTEE, NATIONAL LICENSED BEVERAGE ASSOCIATION
Mr. Chairman, members of the Subcommittee, I am Jim Simpson, Chairman of the Government Affairs Committee of the National Licensed Beverage Association (NLBA), past President of both the NLBA and the Maryland State Licensed Beverage Association and owner of The Liquor Store, Waldorf, MD. I am testifying on behalf of the NLBA, representing retailers of alcohol beverages throughout the United States.
Mr. Chairman, December 5, 1997 will mark the sixty-fourth anniversary of the ratification of the 21st Amendment to the United States Constitution. This, of course, is popularly known as the amendment which ended Prohibition of alcohol beverages. But it did more than end an unpopular experiment—it crafted a new system for the regulation of beer, wine, and liquor. Congress, indeed this Committee, debated what form that new system should take, and the language they added to our Constitution is quite explicit. They did not grant a choice to the federal government but rather an obligation to the states to control alcohol beverages within their state borders. This is an important point Mr. Chairman, and the language is very instructive for our hearing today. The second clause of the Twenty-First Amendment reads as follows:
''The transportation or importation into any state, territory or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.''
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Congress rejected ''one-size fits all'' federal control and chose instead a new dimension in democracy, granting the people of each state an extraordinary degree of control over how alcohol beverages would be regulated within their borders. States determine, under their own laws, their requirements as to the importation into their state of alcohol beverages. Throughout this long history it has always been accepted that the control of alcohol beverages is one of the powers that the states did not relinquish to the federal government. The NLBA and its members across the country feel very strongly regarding this prerogative of states rights.
If the Constitution of the United States of America is not clear enough on this states rights issue, Congress passed the ''Webb-Kenyon Act'' in 1913 and re-enacted in 1935 (27 USC 122) prohibiting the interstate shipment of alcohol beverages in violation of states' law. NLBA members have become greatly alarmed at the increasing frequency of consumers being solicited to buy beverage alcohol directly through catalogues, magazines, direct mail, and the Internet. These direct sales to consumers by out-of-state businesses circumvent the licensed three-tier system of lawful and orderly beverage alcohol distribution and sale. Direct sales, in most cases, avoid state excise and sales taxes, bypass laws against selling to underage persons, and sidestep the laws in ''dry'' areas that prohibit or severely restrict the availability of beverage alcohol.
Forbes magazine estimates that direct shipments of wine approach $1 billion in sales annually. This estimate does not include direct sales of beer and liquor, which are substantial and growing. It is reasonable to assume that taxes are not paid on these sales. The loss in state revenues from excise and sales taxes could amount to as much as $100 million.
This hemorrhage of tax revenue will only increase as mail order, telephone, and Internet sales become more popular. The explosion of alcohol beverage product offerings on the Internet has created a virtual 24 hour open bar for anyone, of any age, to order wine, beer, and spirits.
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NLBA members, indeed all licensed retailers of beverage alcohol, have a strong interest in maintaining the orderly and regulated alcohol beverage marketplace which has been crafted in each state. Those state systems are the result of more than sixty years of refinement, balancing concerns about public health, public safety, public revenue, and of course, the legitimate commercial interests of those who have invested their life savings and careers to serve the public desire for these products. The explosion of Internet and other marketing technologies now pose a real threat to the stability of these state systems. Once one part starts to break down, it is reasonable to expect that other parts will become stressed as well. Merely because modern communications, credit cards and shipping techniques make it possible to easily circumvent these state regulatory systems is no excuse for it to be permitted.
Therefore the NLBA joined with the two organizations of state alcohol beverage control officials, the National Alcohol Beverage Control Association (NABCA) and the National Conference of State Liquor Administrators (NCSLA), as well as with the wine, liquor, and beer wholesale community represented by the National Beer Wholesalers Association (NBWA) and the Wine and Spirits Wholesalers of America (WSWA) in supporting the introduction and passage of H.R. 1063 this Session of Congress.
The issue is simply this—current federal law does not provide sufficient ability for STATE regulatory officials to enforce STATE law prohibitions against interstate shipment of alcohol beverages. The bill does not create new federal enforcement authority, nor does it prohibit legitimate interstate shippers of alcohol beverage products from shipping their products across state lines. The legislation simply gives state alcohol beverage enforcement authorities, who choose to take action, the authority to enforce against illegal interstate activity. It is our understanding that the Bureau of Alcohol, Tobacco, and Firearms (BATF) has issued industry circulars on mail order sales, but illegal shipments have not stopped and BATF has said it will not aggressively prohibit these shipments. States need the authority of H.R. 1063 to enter federal courts to enforce their state laws in this area.
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Let me reemphasize, Mr. Chairman, we are not testifying against wineries or the small wine operators today. We are not advocating limited markets for their products. We are not against any seller of alcohol beverages who conforms to state law requirements.
Mr. Chairman, the NLBA urges this Subcommittee to report favorably to the full House Judiciary Committee H.R. 1063 as introduced. We are joined by the regulators of our business from all 50 states and from the wholesaler community in all 50 states. We look forward to working with you and the members of this Subcommittee on this legislation.
Mr. COBLE. Mr. Goldberg.
STATEMENT OF JAMES M. GOLDBERG, ATTORNEY, ON BEHALF OF THE JOINT COMMITTEE OF STATES
Mr. GOLDBERG. Mr. Chairman, my name is James Goldberg. I am here this morning on behalf of the Joint Committee of the States, an organization which, through its two active member participants, represents all of the State alcohol beverage regulatory agencies in the United States.
On behalf of the State alcohol beverage regulators, we are pleased to endorse and strongly support H.R. 1063, which, as has been pointed out, would merely give States the ability to go into Federal court and enforce their laws pertaining to alcohol beverages shipped interstate.
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Since the early days of this country, alcohol beverages have been a controversial and highly regulated product. But save for the imposition of excise taxes and the proscription against certain unfair trade practices contained in the Federal Alcohol Administration Act, the great bulk of alcohol beverage regulation has occurred at the State and local level.
Indeed, over 100 years ago, Congress acknowledged the special nature of alcohol beverages and the diversity of public attitudes pertaining to its regulation. By so doing, Congress stripped alcohol beverages of the protection afforded most products under the Constitution's commerce clause. That is the ability to be freely traded between and among the States. The Wilson Act, in 1890, followed by the Webb-Kenyon Act conditions the interstate trade in alcohol beverages on compliance with State laws.
In recent years the direct marketing and shipment of alcohol beverages across State lines to individual consumers has been increasing. The result has been an interstate shipment industry which, as has been indicated, is estimated by one national magazine at $1 billion annually. There is only one major problem with this phenomenon. It is illegal in many States to ship or in some cases even personally carry alcohol beverages from another State. Thus today's illegal interstate shipper is the 1990s equivalent of the bootlegger and the moonshiner who operated in the 1920s and 1930s. Instead of using word-of-mouth advertising in back alleys and souped-up jalopies to outrun the ''revenooers,'' today's illegal interstate shipper is using sophisticated marketing methods and plain brown wrappers in plain brown trucks to avoid capture by alcohol beverage regulators.
Mr. Chairman, about 2 weeks ago, in anticipation of this hearing, I placed a call to an interstate shipper in New York. The shipper is not a winery. The shipper is not a brewery. Frankly, I am not sure what the shipper is because the State of New York says they are not licensed, at least under the name in which they operate. What was delivered to me, Mr. Chairman, is what I have in front of me. It is a plain brown box. All it has as a return address is the initials of the company, the address. And although it says, ''Adult signature required 21 years or older,'' the UPS driver who delivered to it my house did not ask for any signature, did not check ID, or made no effort to determine who was receiving the shipment.
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With your permission, Mr. Chairman, I will open it up for you. What we have is an nice pail, and the pail happens to be full of ale or beer.
Mr. Chairman, this is the kind of thing which is taking place across the country today and which has been thwarted by the courts in the States' efforts to enforce their laws. As has been indicated earlier, the State of Florida has been rebuffed by both Federal and State court in its effort to enforce their law. Some States have resorted to felony prosecutions. The State of Utah, as an example, filed a seven-count criminal information against a major interstate shipper earlier this year. That case is pending.
But, Mr. Chairman, States are really not interested in felony prosecution. What States are interested in doing is enforcing their laws that pertain to direct shipment. Some States, Mr. Chairman, permit direct shipment. Others condemn it. But the issue is not about whether direct shipping should be allowed or should not be allowed. The issue, in our opinion, is whether States should be empowered to enforce the laws that they make, that the people of those States make with regard to alcohol shipment.
If I can quote just briefly from a Department of Justice brief that was filed on behalf of the State of Florida in its appeal. ''A Federal injunction,'' said the Department, ''is the only effective remedy for these interstate activities. Clearly the Webb-Kenyon Act was enacted to assist the States in the enforcement of their alcohol beverage laws and to enable them to prevent sales of alcohol beverages in a manner illegal under State law. The Federal courts should be open to the States to permit them to achieve this objective with maximum efficiency.''
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In conclusion, I think that says it all. What the State regulatory people are asking for is the ability to enforce their laws against people who choose to violate them.
[The prepared statement of Mr. James Goldberg follows:]
PREPARED STATEMENT OF JAMES M. GOLDBERG, ATTORNEY, ON BEHALF OF THE JOINT COMMITTEE OF STATES
Mr. Chairman, Members of the Subcommittee, my name is James M. Goldberg. I am an attorney in private practice in Washington, DC. I am here this morning on behalf of the Joint Committee of the States, an organization which, through its two Active Member organizations, represents all of the state alcohol beverage regulatory agencies in the United States.
The Joint Committee's two Active Members are:
The National Alcohol Beverage Control Association (NABCA), comprised of the 18 states (plus Montgomery County, MD) which directly control the distribution of alcohol beverages through state-operated retail and/or wholesale outlets. In addition, NABCA's members also act as regulators of private sector alcohol beverage sales. I serve as General Counsel for NABCA.
The National Conference of State Liquor Administrators (NCSLA) represents the remaining jurisdictions, called ''license states,'' which act as alcohol beverage regulators only.
I appreciate the opportunity to appear here this morning to voice the strong support of the Joint Committee of the States for H.R. 1063, a bill which would enable states to gain access to the federal court system for the limited purpose of enforcing state laws pertaining to the interstate shipment of alcohol beverages.
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History of Alcohol Beverage Regulation and Enforcement
Since the early days of this country, alcohol beverages have been a controversial, and highly regulated, product. But, save for the imposition of excise taxes and the proscription against certain unfair trade practices contained in the Federal Alcohol Administration Act (27 U.S.C. §201 et seq.), the great bulk of alcohol beverage regulation has occurred at the state and local level.
The federal government's most ambitious regulatory attempt of all, Prohibition (''a great experiment, noble in motive,'' according to President Herbert Hoover), failed miserably. However, several states still continue Prohibition in the form of ''dry'' cities and counties; for example, nearly 50% of the land area of the State of Illinois is ''dry.''
Congress long ago acknowledged the special nature of alcohol beverages and the diversity of public attitudes pertaining to its regulation. By so doing, Congress stripped alcohol beverages of the protection afforded most products under the Constitution's Commerce Clause, i.e., to be freely traded between and among the states. In 1890, Congress adopted the Wilson Act (27 U.S.C. §121), also known as the ''Original Packages Act,'' which was designed to ''limit the effect of the regulations of commerce between the several States. . . .'' However, the Wilson Act was found to be ineffective, so Congress enacted the Webb-Kenyon Act (27 U.S.C. §122), the purpose of which, according to the U.S. Supreme Court was
to prevent the immunity characteristic of interstate commerce from being used to permit the receipt of liquor through such commerce in states contrary to their laws, and thus in effect afford a means by subterfuge and indirection to set such laws at naught.(see footnote 1)
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The Webb-Kenyon Act was actually adopted twice by Congress, once in 1913 and again in 1935, after the Twenty-First Amendment's repeal of the Eighteenth Amendment.
A federal district judge subsequently stated the situation more succinctly, holding that alcohol beverages
when transported in interstate commerce, . . . cease to be under national control to the extent that states have enacted laws governing the transportation, sale and use within their boundaries.(see footnote 2)
Interstate Shipments of Alcohol Beverages
In recent years, the direct marketing and shipment of alcohol beverages across state lines to individual consumers has been increasing, due undoubtedly to several factors:
the growing popularity of wine, coupled with individual travel to wineries in California and elsewhere, where consumers can sample new products which, due to limited production, may not be available to them;
the establishment of new microbreweries, which produce a myriad of products different in taste from the mass-produced beers;
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the growing popularity of ''unique'' and ultra-premium distilled spirits, such as single-malt Scotches and small- batch bourbons; and
the sharp increase in overall consumer purchases from catalogs and via the Internet.(see footnote 3)
There are, however, more ''ominous'' factors—at least from a state regulatory perspective—at work:
new wineries and breweries are complaining that they are unable to obtain distribution of their products through traditional wholesale channels; and
decreasing consumption of alcohol beverages puts pressure on retailers and others to maintain their sales volume through use of non-traditional means.
The result has been an interstate shipment industry which was estimated by one national magazine at $1 billion annually. While that figure seems high—given the fact that Beer Across America, Inc., which claims to be the largest direct marketer of alcohol beverages, reports sales volume of $25 million a year—it is undisputed that interstate shipments are growing at a rapid rate.
There is only one major problem with this phenomenon: it is illegal in many states to ship or, in some cases, even personally carry, alcohol beverages from another state.
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Thus, today's illegal interstate shipper is the 1990's equivalent of the ''bootlegger'' and the ''moonshiner'' of the 1920's and 1930's. Instead of using handmade stills and ''souped-up'' jalopies to outrun the ''revenooers,'' today's illegal interstate shipper is using sophisticated marketing methods and plain-brown wrappers in plain brown trucks to avoid capture by alcohol beverage regulators.
State laws on interstate shipment vary widely. Approximately 13 states have adopted a version of the Reciprocal Wine Shipment Act, passage of which was encouraged nearly a decade ago by the National Conference of State Legislatures.(see footnote 4) This law permits a limited quantity of wine to be direct-shipped to consumers from a state which has adopted similar legislation. The law generally requires labeling of cartons, prohibits shipment to minors and, in some cases, prohibits solicitation of orders by means of catalogs or other advertisements. Many of the labeling and other requirements seem to be routinely ignored.
Another 19 states permit limited direct shipments from other states, but under tightly controlled conditions such as permits obtained from state regulatory agencies. Again, these laws seem to be widely ignored.
Finally, some 20 states prohibit direct shipments altogether.
State Enforcement Stymied
Against this backdrop of growing illegal interstate shipments, states have been frustrated in their attempts to enforce their laws.
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For example, in 1995, the State of Florida filed suit in U.S. District Court seeking an injunction prohibiting four named and numerous unnamed out-of-state shippers from continuing to ship alcohol beverages into the state in violation of state law banning all such shipments. In May, 1996, however, Judge William Stafford dismissed the case, noting that the federal Webb-Kenyon Act does not specify a right of action in federal court.(see footnote 5) The opinion held that there is no implied right of action in federal courts for state enforcement of Webb-Kenyon proscriptions.(see footnote 6) Judge Stafford's decision has been appealed to the United States Court of Appeals for the Eleventh Circuit, and was argued August 29, 1997. Based on reports of the argument, the outlook is not favorable to the state's position.
In 1996, the State of Florida commenced a similar action against different defendants in Circuit Court for Leon County, Florida. On September 3, 1997, Judge George S. Reynolds III dismissed the action, noting that the court did not have personal jurisdiction against the defendants, because, among other reasons, their sales to Florida residents were explicitly consummated outside of the State.(see footnote 7)
Earlier this year, the State of Utah filed a seven-count criminal information against Beer Across America, Inc. and its President Louis A. Amoroso, charging, among other things, that the defendants unlawfully shipped beer into the state and engaged in a pattern of unlawful activity (i.e., racketeering).(see footnote 8) Motions to dismiss have been filed and are pending at this time.
Also during this period, several states have amended their illegal importation statutes to make violation a felony rather than a misdemeanor or an offense punishable by a civil penalty only. Among the states adopting such laws is North Carolina, which provides that violation is punishable as a Class 1 felony and/or by a $10,000 fine. In adopting the law, the state estimated a loss of some $2 million annually in excise and sales tax revenue due to illegal direct shipments. The rationale behind these actions is to enable state alcohol beverage regulators to attempt extradition of out-of-state violators in appropriate circumstances. Many in industry have condemned these laws, and several wineries announced plans to ''boycott'' Kentucky, the first state to adopt such a felony law, by not shipping into the state.(see footnote 9)
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When the State of Florida adopted a felony statute in 1997, one California winery wrote the Governor of Alabama, asking him to stop purchasing Florida citrus as a way of protesting Florida's action.
Some states have had limited success in halting illegal shipments. Earlier this year, the State of Maryland accepted a $35,000 ''offer in compromise'' from Kendall-Jackson Winery, which had shipped a case of wine to an official of the state's Alcohol and Tobacco Tax unit in violation of law. However, Maryland was only able to secure Kendall-Jackson's acquiescence because the winery holds an out-of-state shipper's license issued by the state.
Federal Enforcement Activity
State efforts to enlist the aid of the Bureau of Alcohol, Tobacco and Firearms have thus far achieved only minimal success. Several states and industry representatives met with BATF officials in the spring of 1996 to urge the agency to act and received a less-than-enthusiastic welcome. BATF officials did point out that its enforcement capability was hampered by the fact that since it does not issue so-called ''basic permits'' to brewers and retailers, it has no ability to take action against those segments of the industry.
BATF did issue Industry Circular 96–3, notifying the alcohol beverage industry that compliance with state laws was an implied condition of the issuance of a ''basic permit'' and noting that the agency would review complaints of illegal interstate shipping filed by state regulatory agencies. However, BATF stated that it would ''independently'' determine whether the state law violation has ''some pronounced impact'' on the regulatory and/or criminal enforcement scheme of the state in question.
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BATF is supportive of states enforcing their own laws against interstate shipping. BATF did file an amicus curiae brief in Florida's appeal of its unsuccessful federal court litigation, and we believe that the agency would support the adoption of H.R. 1063.
Illegal Interstate Shipments Negatively Impact States
Illegal interstate shipments of alcohol beverages can, and do, have a negative impact on state regulatory efforts. Although all states prohibit the sale of alcohol beverages to anyone under 21 years old, the vast majority of interstate shipments are sold without regard to the age of the purchaser and without a way for a skeptical seller to check proper identification, as would be the case in an over-the-counter sale. Further, since most interstate shipments do not label the contents of the package being shipped or delivered, interstate delivery services, such as UPS and Federal Express, do not check the age of the recipient.
As indicated, there are many states which still maintain ''dry'' areas, where residents have determined, either through referendum or through their elected representatives, that they wish to remain ''alcohol-free'' zones. Illegal interstate shipments into these areas violate those proscriptions and give out-of-state sellers an unfair competitive advantage over in-state, licensed and regulated sellers.
There is also the matter of state tax collection. Perhaps second only to tobacco, alcohol beverages are the most heavily taxed product sold in this country. Out-of-state sellers shipping illegally into a state deprive the state of the excise tax revenue which is generated from in-state sales of beer, wine and distilled spirits, not to mention the sales tax revenue which goes uncollected from an illegal interstate sale.(see footnote 10)
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H.R. 1063 is Necessary to Insure Effective State Enforcement
Adoption of H.R. 1063 is thus critical if states are to effectively enforce their laws against illegal interstate shipping of alcohol beverages.
There may be some who believe that state prohibitions on interstate shipment of alcohol beverages are anachronistic and just plain wrong. However, with all due respect, the issue is not about whether this Subcommittee believes a particular state's policy is right or wrong, but whether the Subcommittee believes, as Congress has historically believed, that states should be permitted to set their own laws regulating alcohol beverages.
That is why we would reject calls to amend H.R. 1063 to allow state access to federal courts only for those states which have enacted laws permitting a limited amount of direct shipping. To adopt such an amendment would be substituting Congress' view of proper regulation for those of each individual state.
There may be others who support H.R. 1063, but say that subjecting the holder of a BATF ''basic permit'' to state action as well as possible revocation of their permit would amount to ''double jeopardy.'' But H.R. 1063 does not speak to felony actions, and ''basic permit'' holders today are subject to BATF as well as state enforcement action if they violate a variety of other state alcohol beverage regulations.
Some will argue that H.R. 1063 should be rejected because it would ''clog'' already crowded federal court dockets. However, H.R. 1063 only authorizes suits by 50 plaintiffs, i.e., the states, and we do not anticipate a multiplicity of litigation against thousands of shippers by each of the states. All states with laws prohibiting interstate direct shipment wish to do is ''send a message'' to out-of-state shippers to respect their laws.
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We do, however, think one addition should be made to H.R. 1063. As introduced, the bill makes no mention of venue, that is, the appropriate federal court in which a state should bring its action. We believe that venue is appropriate in either the jurisdiction in which the interstate shipper is headquartered or where the illegal shipment is received.
Conclusion
In conclusion, Mr. Chairman, the Joint Committee of the States urges this Subcommittee to approve H.R. 1063 with the change indicated. States have the tools to deal with ''moonshiners'' and ''bootleggers'' within their borders; they need the help of Congress to effectively enforce their laws against the out-of-state ''bootlegger'' who brazenly flouts existing law.
We have supplied additional background information on this issue to both the majority and minority staffs and we would be pleased to work with you to address whatever questions or concerns you may have about this most important bill.
DISCLOSURE PURSUANT TO RULE XI, CLAUSE 2(G)(4) OF THE RULES OF THE HOUSE OF REPRESENTATIVES
National Alcohol Beverage Control Association, a member of the Joint Committee of the States, received a $150,000 grant from the National Highway Traffic Safety Administration to research and compile a ''best practices'' list of retail-oriented underage drinking prevention programs.
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SUMMARY
The Joint Committee of the State is comprised of representatives of the National Alcohol Beverage Control Association (NABCA) and the National Conference of State Liquor Administrators (NCSLA). Together, NABCA and NCSLA represent state alcohol beverage regulatory agencies in all 50 states.
More than 100 years ago, Congress recognized the diversity of opinion with regard to the distribution and enacted legislation (the Wilson Act, followed by the Webb-Kenyon Act, 17 U.S.C. 122) requiring that the interstate transportation of alcohol beverages comply with state laws. The Act thus represents an exception to the general rule that only Congress can regulate interstate commerce.
Although several states totally prohibit the direct shipment of alcohol beverages to consumers by out-or-state suppliers and many other states place restrictions on such distribution, the illegal interstate shipment of alcohol beverages is growing, estimated by one national magazine to total $1 billion annually. Illegal shipment deprives states of needed revenue from excise taxes on alcohol beverages and thwarts regulatory efforts to enforce laws prohibiting sales to underage individuals and others.
States have been frustrated in their efforts to enforce their laws, largely because the Webb-Kenyon Act does not specifically provide for access to federal courts to obtain injunctions. State courts have ruled that access can be nullified by lack of personal jurisdiction. Some states have even resorted to enacting felony penalty laws as a means of securing jurisdiction over illegal interstate sellers.
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H.R. 1063 would provide relief to the states by amending the Webb-Kenyon Act to allow states to enter federal courts for the limited purpose of enforcing their laws regarding the interstate shipment of alcohol beverages.
The bill does not take a position on whether interstate shipment of alcohol beverages is a good or bad idea, leaving that determination to the states, to which Congress has historically deferred. As alcohol beverages are a heavily regulated and taxed product, they are not like other commodities which are, and should be, freely treaded in interstate commerce.
Mr. COBLE. Mr. Douglas.
STATEMENT OF JERRY DOUGLAS, VICE PRESIDENT, MARKETING, BILTMORE ESTATE WINE COMPANY, ON BEHALF OF THE AMERICAN VINTNERS ASSOCIATION
Mr. DOUGLAS. My name is Jerry Douglas, Vice President of Marketing for Biltmore Estate Wine Company in Asheville, North Carolina. I am here today on behalf of the American Vintners Association, the national trade association for American wineries, an organization that represents 500 wineries in 42 States. In this capacity I am here to ask your support of a market access amendment to H.R. 1063 which would require States using the Federal courts for enforcement of Webb-Kenyon to establish reasonable access for wine shipments to consumers.
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First allow me to provide you with a profile of our membership. Most of our members' businesses are small, family-owned farms whose economic lifeblood is some combination of selling wine to tourists and limited off-site wine sales. Like most businesses we would like to be able to compete on a level playing field, and we would like to be able to ship our wine to consumers who request it. But the wine industry is unique because we are required to ship our wines through wholesalers as part of an antiquated three-tier distribution system of producers, wholesalers and retailers, the system enacted by States just after Prohibition. This unusual power of State government over interstate commerce is the result of interpretations of the 21st amendment that limits application of the Constitution's commerce clause.
Under this system we must operate with limited and restrictive access to our customers and potential customers, denying them in many cases market access to those customers who wish to purchase our agricultural product. The middle tier of the system is comprised of a distributor network, which has, through consolidation, reduced the number of distributors from over 500 in 1987 to around 300 today. The result is there are too few distributors representing thousands of wines from around the world and not enough retail shelf space for the approximately 7000 to 10,000 labels of wine produced in the United States, let alone imports.
This environment makes it economically nonviable for smaller wineries in particular to compete. Costs for pushing wine through the distribution channel become exorbitant, especially if you have a small production base. Let me use Biltmore Estate as an example. Our property receives over 800,000 visitors per year from all 50 States and several foreign countries. Most of those visitors have the opportunity to taste our wines in our restaurants, shops or winery. Most enjoy their wine-tasting experience and decide to purchase a bottle of our wine to take home.
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Problems arise when they wish to purchase additional Biltmore wine at home. Some 75 percent of our visitors live in the Southeast, where we market our wines through the established system with varying degrees of success in the Carolinas, Tennessee, Florida, Virginia and Georgia. But approximately 25 percent of our visitors, which is well over 200,000 people, hail from the remaining 44 States spread across the country in such a way that makes reaching them through the current distribution system untenable, unrealistic and unaffordable. Still we know there is demand. Just in the past 2 weeks we have received calls about our wines from previous visitors from Kansas, Illinois, Delaware, New Jersey, Kentucky, Ohio, Texas and Oregon. All of them wished to purchase our wines. We had to tell all of them that was not possible. Few could appreciate the reasons why it was illegal for us to ship them our wine.
It is outdated thinking to exclude the wine industry from being able to offer consumers the variety and convenient access to products they demand in every other purchasing realm. The modern consumer is used to ordering a wide variety of specialty products by mail or phone and is frustrated that they cannot do the same for wine. Wineries are capable of choosing and should be allowed to choose the best distribution methods in order to service their customers and to promote healthy growth in this industry. We would also expect to be part of addressing and finding solutions for the valid concerns created by changing the system.
In conclusion, there is a Federal interest in accessibility to legal products to allow open commerce between the States. My example of Biltmore Estate could be retold by any of the other 1600 wineries that produce wines commercially in 47 States.
The solution is twofold. One, small businesses require market access to consumers in other States. This access must permit freedom of reasonably unfettered trade between the States for competition to flourish. Two, the enforcement provision permitting use of the Federal court system must be balanced by a freedom of commerce provision to allow fair market access. The Members of the American Vintners Association believe that the proposed market access amendment would accomplish these goals. I would ask you to help our Members in 42 States by approving the access amendment to H.R. 1063.
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[The prepared statement of Mr. Douglas follows:]
PREPARED STATEMENT OF JERRY DOUGLAS, VICE PRESIDENT, MARKETING, BALTIMORE ESTATE WINE COMPANY, ON BEHALF OF THE AMERICAN VINTNERS ASSOCIATION
Good morning. My name is Jerry Douglas and I am vice president of marketing for Biltmore Estate Wine Company in Asheville, North Carolina. I am here today on behalf of the American Vintners Association, the national trade association for American wineries, an organization representing over 500 wineries in 42 states. In this capacity, I am here to ask your support of a Market Access Amendment to H.R. 1063 which would require states using the Federal Courts for enforcement of Webb-Kenyon to establish reasonable access for wine shipments to consumers [Attached]
First, allow me to provide you with a profile of our membership. Most of our members' businesses are small family-owned farms, whose economic lifeblood is some combination of selling wine to tourists and limited off-site wine sales. Like most small businesses, we would like to be able to compete on a level playing field and we would like to be able to ship our wine to consumers who request it. But the wine industry is unique because we are required to ship our wine through wholesalers as part of an antiquated three-tiered distribution system (producers, wholesaler, and retailers) enacted by states just after Prohibition. This unusual power of state government over interstate commerce is a result of interpretations of the 21st Amendment that limit application of the Constitution's Commerce Clause.
Under this system, we must operate with limited and restrictive access to our customers and potential customers, denying in many cases, market access to those customers who wish to purchase our agricultural product. The middle tier of the system is comprised of a distributor network which has, through consolidation, reduced the number of distributors from over 500 in 1987 to around 300 today. The result is there are too few distributors representing thousands of wine brands from around the world and not enough retail shelf space for the approximately 7,000 to 10,000 labels of wine produced in the United States (let alone imports). This environment makes it economically non-viable for smaller wineries, in particular, to compete. Costs for pushing wine through the distribution channel become exorbitant, especially if you have a small production base.
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Let me use Biltmore Estate as an example. The property receives over 800,000 visitors per year from all fifty states and several foreign countries. Most of those visitors have the opportunity to taste our wines in our restaurants, shops and winery. Most enjoy their wine-tasting experience and decide to purchase a bottle of our wine to take home.
The problem arises when they wish to purchase additional Biltmore wine at home. Some 75 percent of our visitors live in the Southeast, where we market our wines through the established system with varying degrees of success in the Carolinas, Tennessee, Florida, Virginia and Georgia. But approximately 25 percent of our visitors hail from the remaining 44 states, spread across the country in such a way that makes our reaching them through the current distribution system untenable, unrealistic and unaffordable. Still, we know there is demand. Just in the past two weeks, we have received calls about our wines from previous visitors from Kansas, Illinois, Delaware, New Jersey, Kentucky, Ohio, Texas and Oregon. All of them wished to purchase our wines. We had to tell all of them that was not possible. Few could appreciate the reasons why it was illegal for us to ship them our wine.
It is outdated thinking to exclude the wine industry from being able to offer consumers the variety and convenient access to products they demand in every other purchasing realm.
The modern consumer is used to ordering a wide variety of speciality products by mail or phone and is frustrated that they cannot do the same for wine. Wineries are capable of choosing and should be allowed to choose the best distribution methods in order to service their customers and to promote healthy growth in this industry. We would also expect to be part of addressing and finding solutions for the valid concerns created by changing the system.
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In conclusion, there is a federal interest in accessibility to legal products to allow open commerce between the states. My example of Biltmore Estate could be re-told by any of the other 1,600 wineries that produce wines commercially in 47 states. The solution is twofold:
(1) Small businesses require market access to consumers in other states. This access must permit freedom for reasonably unfettered trade between the states for competition to flourish.
(2) The enforcement provision permitting the use of the Federal court system must be balanced by a freedom of commerce provision to allow fair market access.
The members of the American Vintners' Association believe that the proposed market access amendment would accomplish these goals. I would ask you to help our members in 44 states, by approving the access amendment to H.R. 1063.
AMERICAN VINTNERS ASSOCIATION PROPOSED WINE ACCESS AMENDMENT TO H.R. 1063.
''State access to federal court jurisdiction shall be contingent upon establishing reasonable market access for limited shipments of wine to consumers by United States wineries. Compliance with this clause to be certified by the Secretary of the Treasury.''
Summary of Testimony on H.R. 1063 by Jerry Douglas of Baltimore Estate Wine Co., Asheville, NC on behalf of the American Vintners Association (AVA). September 25, 1997. The AVA is the Association of American Wineries and represents over 500 wineries in 42 states.
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America's 1600 wineries produce 7,000 to 10,000 labels of wine, far too many to be stocked by retailers or distributed by wholesalers who focus primarily on the wines of the top 50 wineries. Consumers, many of whom have visited a winery in another state, are anxious to purchase some of these wines but are frustrated because in over 30 states, no mechanism exists for a consumer to place an order and receive the wine directly.
In many states a restrictive system developed just after Prohibition requires all wine shipments to be made through wholesalers without allowance for direct shipment of wine to consumers. This system denies market access to those customers who wish to purchase the agricultural products produced by the vast majority of family owned farm wineries. At the same time it threatens the livelihoods of families owning wineries who cannot ship their wine to consumers who request it.
The modern consumer is used to ordering a wide variety of specialty products by mail or phone and is frustrated that they cannot do the same for wine. Wineries are capable of choosing and should be allowed to choose the best distribution methods in order to service their customers and to promote healthy growth in this industry.
There is a federal interest in accessibility to legal products to allow open commerce between the states. The enforcement provision of H.R. 1063 permitting the use of the Federal court system should be balanced by a freedom of commerce provision to allow fair markets access.
AVA PROPOSE WINE ACCESS AMENDMENT TO H.R. 1063
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''State access to federal court jurisdiction shall be contingent upon establishing reasonable market access for limited shipments of wine to consumers by United States wineries. Compliance with this clause to be certified by the Secretary of the Treasury.''
Mr. COBLE. Mr. Foppiano.
STATEMENT OF LOUIS M. FOPPIANO, VICE PRESIDENT, L. FOPPIANO WINE CO. INC., ON BEHALF OF THE WINE INSTITUTE
Mr. FOPPIANO. Mr. Chairman, I am Louis Foppiano of Foppiano Vineyards, which is a family-owned and -operated winery, and it has been in our family for about 101 years. I resent the gentleman referring to us as sleazy bootleggers. I do not think that exactly is what I see myself as these days. I resent the remark.
In addition, I am chairman of the Wine Institute Direct Shipment Subcommittee. The Wine Institute is an industry association representing over 400 wineries. California's wineries and grape growers along with their counterparts in other States comprise a significant agricultural industry that continues in the proud tradition of family-owned farms.
As others have explained today, since the repeal of Prohibition, the wine industry has utilized the three-tier system to sell our wines. This is a system which served our industry well, and we value the partnerships we have developed over the years. When the number of wine producers was more limited, it was possible for our wholesalers to handle the volume of brands and varietals offered for sale. However the exponential growth in the number of wineries during the last 2 decades to over 1000, coupled with the striking consolidation which has occurred within the wholesale tier, have created an environment which no longer allows for the full service of all winegrowers and consumers.
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We have realized that the three-tier system no longer is able to service the needs of all consumers nor all segments of the industry. Therefore, our attempts are directed to preserving the essentials of the system while providing necessary reforms.
The desire of consumers throughout the States for small speciality wines has only increased over the years. It is now commonplace for consumers in other States to learn about and want to purchase wines that are not available locally. Such basic transactions have now been elevated to the level of a felony in States such as Florida, Georgia and Kentucky, primarily at the urging of wholesalers and retailers in those States who fear the losing of market share.
During the last 10 years, 15 States have passed legislation to offer solutions allowing their citizens to have wines they cannot readily find at home be shipped directly to them. These proposals were first based on the concept of reciprocity, which, in effect, is trade agreements between the States allowing a limited flow of direct shipments. Just this summer Louisiana enacted a new creative law establishing a means of registering out-of-state shippers and collecting all tax revenues for Louisiana from resulting shipments. Included in this law, referred to by the industry as the Louisiana Compromise, are reasonable annual limits on the quantities shipped, appropriate penalties for those who violate the law's provisions.
The opponents of direct shipments continue to raise the issue of sale to minors. Despite the high-profile sting operations which have taken place in States which currently outlaw direct shipments, there has been no evidence of a pattern of such abuses.
The Members of the Wine Institute respect the need for States to be able to administer the laws which they have on the books, even as we work to create more consumer-friendly legislation across this country. Last year the proponents of H.R. 1063 asked the BATF to take jurisdiction over illegal shippers, and on February 11 of this year, the BATF issued Industry Circular 96–3, which states that it has jurisdiction over any holder of a Federal basic permit, that is, winery, distillery, wholesaler or importer, found to be in violation of a State's laws. For them to take action, a State must simply report to the BATF any basic permit holder breaking that State's laws. Then the BATF, after its own inquiry, will take punitive action up to and including the suspension or revoking of a license if a basic permit holder is in violation of the State's law.
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When first contacted about the proposed legislation, representatives of the Wine Institute talked with proponents about exempting Federal basic permit holders from the legislation on the basis that Federal jurisdiction already exists over winegrowers. When asked why such an exemption was not acceptable, a State regulator replied that in case he did not like the punishment that the ATF did, he wanted to be able to take the winery to court. We feel that such double-dipping in the Federal judiciary system is both unwarranted, unfair, and a poor use of the court's time.
During the 1997 legislative session, both North Carolina and Louisiana specifically recognized the role of the BATF in overseeing the activities of the Federal basic permit holders. In both States the laws instruct the ABC officials to turn violators over to the BATF.
My fellow winegrowers and I continue to work with various States to craft laws so that the consumers in all States can have reasonable access to the amounts of the wines which are currently not regularly available to them. H.R. 1063 proposes to solve a problem for the States by turning to the crowded Federal court system. However, a partial solution to that problem is already in place, since BATF, another arm of the Federal Government, already has agreed to take jurisdiction in these matters over me and my fellow winemakers. There is no need for the States to be granted access to the overburdened Federal court system as a second venue in which to pursue citizens and small wineries with further penalties because a State official may not like the actions of the BATF. The Wine Institute strongly opposes H.R. 1063. Winegrowers simply want to be able to respond to the request of the consumers for access all over the country to our fine product. That is the challenges for all of us today to focus on and to work together to solve. On behalf of the members of the Wine Institute, I thank the committee for this opportunity to express our views.
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[The prepared statement of Mr. Foppiano follows:]
PREPARED STATEMENT OF LOUIS M. FOPPIANO, VICE PRESIDENT, L. FOPPIANO WINE CO. INC., ON BEHALF OF THE WINE INSTITUTE
Mr. Chairman: I am Louis Foppiano, Vice President of L. Foppiano Wine Company, a family-owned and operated winery located in Healdsburg, California, which was founded in 1896. In addition, I am Chairman of the Wine Institute's Direct Shipments Subcommittee. Wine Institute is an industry association representing over 400 California wineries.
California's wineries and winegrape growers, along with their counterparts in other states, comprise a significant agricultural industry that continues in the proud tradition of family-owned farms. Wine's rich heritage is an asset to our economy, culture and cuisine which should be supported. Small winery owners should not be forced into the role of potential lawbreakers and even felons for simply responding to the requests from consumers across the country who want our fine products.
Our traditions, which began centuries ago in Europe, define us as agriculture, cuisine and tourism. As winemakers, we take great pride in the growth of our industry and with the fine quality of the wines which we are growing. These successes have been underscored by the astonishing growth of the premium wine industry over the past two decades, a time when nearly 1,000 new wineries have been founded across the country. With this success has also come media and critical acclaim for our wines.
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I. The Wine Industry's Recent Success Has Challenged The Traditional Distribution System
As others will explain today, since the repeal of Prohibition, the wine industry has utilized the three-tier distribution system to sell our wines. This is a system which served our industry well and we value the partnerships we have developed with our colleagues over the years. When the number of wine producers was more limited, it was possible for our wholesalers to handle the volume of brands and varietals offered for sale. However, the exponential growth in the number of wineries during the last two decades, coupled with the striking consolidation which has occurred within the wholesale tier, have created an environment which no longer allows for full service for all winegrowers and consumers. There are currently over 800 wineries in California alone, each of which produces approximately five different labels each year. That, in itself, is over 4,000 labels per year from California alone. There is simply no way that wholesalers and retailers in all cities and states can carry all of these wines.
It has always been the position of the Wine Institute membership that we respect and depend upon the three-tier system of distribution. We have realized that the three-tier system is no longer able to service the needs of all consumers nor all segments of the industry and, therefore, our attempts are directed at preserving the essentials of the system while providing necessary reforms. When reviewing wine industry statistics, it was found that the 10 largest wineries produce over 90% of the wine. While the three-tier system is well suited to handle the wines made by these producers, it is not in a position to offer a similar complete distribution system for the more typical small, family-owned winery. Many wineries produce only a few thousand cases of wine each year (and some varietals in only a few hundred cases) and, therefore, simply do not have the quantities necessary to accommodate the needs of wholesalers. In addition, even large wineries sometimes have consumer requests for rare, older vintage ''library'' wines which are only available in extremely limited supply and, therefore, not offered through the traditional distribution system.
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The desire of consumers throughout the states for these small specialty wines has only increased over the years. In the last 20 years, the attention of the media on the remarkable successes of the American wine industry has increased dramatically, with the proliferation of wine and food magazines, wine columns in local and national newspapers, and programs on television and radio. It is now commonplace for consumers in other states to learn about and want to purchase wines that are not available to them in their own states.
Our success has been further enhanced by the fact that the wine industry, in California and in many other states, has become a prime tourist attraction. Out-of-state visitors to our tasting rooms, as well as the tasting rooms in 40 other states, sample these small lots of wine, and want to purchase limited amounts to ship back to their homes, or else place phone orders for the wines upon their return home. Such basic transactions have now been elevated to the level of a felony in states such as Florida, Georgia and Kentucky, primarily at the urging of the wholesalers and retailers in those states who fear losing possible market share.
II. Some States Have Found Ways To Accommodate Their Consumers
During the last ten years, 15 states have passed legislation which offer solutions allowing their citizens to have the wines they cannot readily find at home be shipped directly to them. These proposals were at first based on the concept of ''reciprocity'', which in effect created trade agreements between states allowing a limited flow of direct shipments between states enacting such legislation. Just this summer, Louisiana enacted a new, creative law establishing a means of registering out-of-state shippers and collecting all tax revenues for Louisiana from resulting shipments. Included in this law, referred to by the industry as the ''Louisiana Compromise'', are reasonable annual limits on quantities shipped, and appropriate penalties for those who violate the law's provisions.
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The opponents of direct shipments continue to raise the issue of sales to minors. Despite the high-profile sting operations which have taken place in states which currently outlaw direct shipments, there has been no evidence of patterns of such abuses in direct shipment states. In fact, the protections in place in direct shipment states, where all packages are openly marked that they contain alcohol and must be signed for by someone over 21 years of age, are much better preventative measures than simply banning all shipments. Only when packages are shipped legally and correctly identified as containing alcohol, can common carriers know how to handle the signature and special delivery rules which delivery companies employ. Furthermore, we find it highly unlikely that minors would choose the very costly option of direct shipping, not to mention taking the risk of leaving the considerable paper trail of credit card charges and shipping receipts.
On August 7 of this year, the National Conference of State Legislatures' Executive Committee (NCSL) approved a resolution supporting direct interstate shipments, stating that solutions need to be developed in all states which protect the interests of the states, small winegrowers, as well as the three-tier system. Among the proposed solutions to be considered by the NCSL Wine Task Force were improved access to out-of-state markets, reciprocity agreements between states, and state registration and regulation of out-of-state shippers. We believe this is in line with the approaches already undertaken in over a quarter of the states.
III. Using The Federal Court System To Regulate Wineries Is Not Necessary
The members of Wine Institute respect the need for states to be able to administer the laws which they have on the books, even as we work to create more consumer-friendly legislation across the country. Last year, the proponents of H.R. 1063 asked the ATF to take jurisdiction over illegal shippers, and on February 11 of this year ATF issued Industry Circular 96–3. ATF stated that it has jurisdiction over any holder of a Federal Basic Permit (a winery, distillery, wholesaler or importer) found to be in violation of a state's laws. For ATF to take action, a state must simply report to the ATF any Basic Permit holder breaking a state's law. ATF, after its own inquiry, will take punitive action, up to and including the suspension or revocation of a license if a Basic Permit holder is in violation of a state's law.
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When first contacted about the proposed legislation, representatives of Wine Institute talked with the proponents about exempting Federal Basic Permit holders from the legislation, on the basis that federal jurisdiction already exists over winegrowers. When asked why such a reasonable exemption was not acceptable, a state regulator replied that, in case he didn't like the punishment imposed by ATF, he wanted to be able to take the winery to court. We feel that such a double-dipping into the federal judicial system is both unwarranted, unfair and a very poor use of the court's time.
During the 1997 legislative sessions, both North Carolina and Louisiana specifically recognized the role of ATF in overseeing the activities of Federal Basic Permit holders, by specifying a separate penalty provision for such permit holders should they violate the law. In both laws, the state has instructed ABC officials to turn violators over to ATF, while imposing penalties on shippers who do not hold a Federal Basic Permit. Wine Institute supported both states in their recognition that ATF holds jurisdiction over our members' licenses.
IV. Conclusion
My fellow winegrowers and I will continue to work with the various states to craft laws so that consumers in all states can have reasonable access to limited amounts of the wines which currently are not readily available to them. In the meantime, we recognize that in order to continue to do business, we must comply with the laws of the various states in order to retain our Federal Basic Permits, without which we cannot operate.
H.R. 1063 proposes to solve a problem for the states by turning to the crowded federal court system. However, a partial solution to that problem is already in place since ATF, another arm of the federal government, has already agreed to take jurisdiction in these matters over me and my fellow winemakers. There is no need for states to be granted access to the over-burdened federal court system as a second venue in which to pursue citizens and small wineries with further penalties, because a state official may not like the actions of ATF. Winegrowers simply want to be able to respond to the requests of consumers from across the country who want our fine products. That is the challenge for all of us today to focus on and work together to solve. On behalf of the members of Wine Institute, I thank the Committee for this opportunity to express our views.
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SUMMARY
California's wineries and winegrape growers, along with their counterparts in other states, comprise a significant agricultural industry that continues in the proud tradition of family-owned farms. Wine's rich heritage is an asset to our economy, culture and cuisine which should be supported. Small winery owners should not be forced into the role of potential lawbreakers and even felons for simply responding to the requests from consumers across the country who want our fine products.
The wine industry has utilized the three-tier distribution system to sell our wines. When the number of wine producers was more limited, it was possible for our wholesalers to handle the volume of brands and varietals offered for sale. However, the exponential growth in the number of wineries during the last two decades, coupled with the striking consolidation which has occurred within the wholesale tier, have created an environment which no longer allows for full service for all winegrowers and consumers. There are currently over 800 wineries in California alone, each of which produces approximately five different labels each year. That, in itself, is over 4,000 labels per year from California alone. There is simply no way that wholesalers and retailers in all cities and states can carry all of these wines.
We have realized that the three-tier system is no longer able to service the needs of all consumers no all segments of the industry and, therefore, our attempts are directed at preserving the essentials of the system while providing necessary reforms. The 10 largest wineries produce over 90% of the wine. While the three-tier system is well suited to handle the wines made by these producers, it is not in a position to offer a similar complete distribution system for the more typical small, family-owned winery.
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The wine industry, in California and in many other states, has become a prime tourist attraction. Out-of-state visitors to our tasting rooms, as well as the tasting rooms in 40 other states, sample these small lots of wine, and want to purchase limited amounts to ship back to their homes, or else place phone orders for the wines upon their return home. Such basic transactions have now been elevated to the level of a felony in states such as Florida, Georgia and Kentucky, primarily at the urging of the wholesalers and retailers in those states who fear losing possible market share.
During the last ten years, 15 states have passed legislation which offer solutions allowing their citizens to have the wines they cannot readily find at home be shipped directly to Them. These proposals were at first based on the concept of ''reciprocity'', which in effect created trade agreements between states allowing a limited flow of direct shipments between states enacting such legislation. Just this summer, Louisiana enacted a new, creative law establishing a means of registering out-of-state shippers and collecting all tax revenues for Louisiana from resulting shipments.
Included in this law are reasonable annual limits on quantities shipped, and appropriate penalties for those who violate the law's provisions.
Last year, the proponents of H.R. 1063 asked the ATF to take jurisdiction over illegal shippers, and on February 11 of this year ATF issued Industry Circular 96–3. ATF stated that it has jurisdiction over any holder of a Federal Basic Permit (a winery, distillery, wholesaler or importer) found to be in violation of a state's laws. For ATF to take action, a state must simply report to the ATF any Basic Permit holder breaking a state's law. ATF, after its own inquiry, will take punitive action, up to and including the suspension of revocation of a license if a Basic Permit holder is in violation of a state's law.
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We recognize that in order to continue to do business, we must comply with the laws of the various states in order to retain our Federal Basic Permits, without which we cannot operate. H.R. 1063 proposes to solve a problem for the states by turning to the crowded federal court system. However, a partial solution to that problem is already in place since ATF, another arm of the federal government, has already agreed to take jurisdiction in these matters over me and my fellow winemakers. There is no need for states to be granted access to the over-burdened federal court system as a second venue in which to pursue citizens and small wineries with further penalties, because a state official may not like the actions of ATF.
Mr. COBLE. Back in my state of North Carolina, bootlegging was a widespread means, of employ in years gone by. Aside from the fact that these fellows, and in some instances women, had an aversion to paying Federal tax on the product they manufactured, they were, for the most part, good old boys.
Mr. FOPPIANO. My father actually got $25 a load for delivering sugar to the stills back in the 1920s in our area.
Mr. CONYERS. My dad tried to develop gin in the bathtub during the Depression in Detroit. Can you top this example?
Mr. DELAHUNT. It is called Beefeaters now, by the way.
Mr. COBLE. Mr. Simpson, some States have enacted laws making it a felony to directly ship alcoholic beverages in order to guarantee jurisdiction over State liquor law violators. Let us assume for the moment that H.R. 1063 is enacted. What is your opinion as to the effect that would have on those existing laws, and what do you think States that are considering enacting similar laws would do?
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Mr. SIMPSON. I could not begin to——
Mr. COBLE. What is your best opinion?
Mr. SIMPSON. I would hope that if H.R. 1063 were enacted, that the State, the individual State legislatures, would take a hard look at those laws. A felony is a serious matter, and H.R. 1063 would, I think, streamline the process, and then you wouldn't have a patchwork of laws all over the country, felony laws here and there. This would make it more consistent across the country. I would hope that they would look at those laws and possibly rescind them.
Mr. COBLE. Mr. Goldberg, the BATF, Bureau of Alcohol tobacco and Firearms, recently issued a circular explaining the regulations and consequences of illegal direct shipping. Should we let that circular have a chance to work before Congress enacts this legislation?
Mr. GOLDBERG. Mr. Chairman, there is only one problem with the BATF approach. BATF has no authority to regulate brewers or retailers. Those segments of the marketplace do not hold a basic permit, and therefore, there is nothing that ATF can do to regulate those people. We think that a significant portion of the illegal direct shipment which is taking place in this country is done by unregulated entities; that is, retailers. This company right here that I ordered from is not a producer. They are not a winery. They are not a distillery. I do not think they are a brewery either. They are a retailer, and therefore they are outside of ATF jurisdiction.
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Mr. COBLE. I now say to my fellow Carolinian, Mr. Douglas, it is good to have you up here. I am told that several wine wholesalers have offered to carry the products of small wineries needing distribution and that no wineries have responded. Why would that be the case?
Mr. DOUGLAS. Well, I am not sure for other wineries. In our situation, what we have right now, we are trying to control our growth in a very small geographic area where we have an opportunity to make a sale way outside of that jurisdiction. Taking that one small sale through the three-tiered system right now takes a fairly lengthy amount of time, which is not really the way we would like to respond to our consumers' requests. Trying to find a distributor in Oregon, for example, who would pay us for the wine could be done, and it would take some time for my office to do that. They would pay the State tax; hopefully they would pay us. He, in turn, would have to ship that wine to a retail store, hopefully one that would be convenient for that consumer, and then that consumer would have to go into that store and actually buy that wine from that retail shop.
For me, I have no way of responding to the consumer to tell him when the wine would be there, how much it would cost. And with the advent of shopping at home, which is becoming very, very prevalent in our marketplace, taking 2 to 3 to 4 weeks to close that transaction is really, I think, another viable solution in many cases. The idea of trying to open markets just because a distributor would purchase wine from me without that customer request, trying to push that wine through the channel is extremely cost-prohibitive for small wineries.
Mr. COBLE. Mr. Foppiano, what mechanisms are in place to verify that the recipient of an interstate alcohol beverage shipment is, in fact, of legal age?
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Mr. FOPPIANO. Well, it all boils down, when we were shipping a fair amount of wine on UPS to States that have—when we still do to States that have reciprocity where it is legal, we have a red sticker that goes on there. It says this is an alcoholic beverage. Over 21 must be—must sign for it, words to that effect. And I think that is the reason why I want to make this more legal, because if it is illegal, then this stuff goes in a brown paper wrapper, and neither UPS or Federal Express or anybody else that is used will know what is in that box. This is a good example of what can happen when it is done illegally.
It says somebody over 21 must do it, but the word ''alcoholic beverage'' does not trigger anything, whereas we have red stickers printed by the shipping company that we put on the boxes so the delivering carrier is alerted to what is in the box and will take care to do it.
Mr. COBLE. Mr. Douglas, are you familiar with the Louisiana law?
Mr. DOUGLAS. Somewhat.
Mr. COBLE. Do you believe that wineries now shipping illegally would apply for permits?
Mr. DOUGLAS. I would certainly hope so. I think everyone would like to. As a condition of my employment that we obey the law, I would hope that having that reasonable access would—that most of the wineries would choose to partake that way.
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Mr. COBLE. I thank you. The red light applies to me as well. I will conclude and recognize the gentleman from Michigan, the Ranking Member of the full committee, Mr. Conyers.
Mr. CONYERS. Thank you, Mr. Chairman. I am happy to be here today to help resolve the squabbles between you Republicans that we keep having to confront in this session of Congress. Here are Riggs and Ehrlich at it again. They have come before us for a fair disposition of a very complex matter in a way. Name-calling has ensued. Sleazy bootleggers. If you used those terms on the floor, those words could be taken down, and you could be hauled before the front of the Speaker's rostrum and be given whatever punishment he deemed appropriate that day. So the thing is we have not called for police security in the room yet, but if all you wine people can control yourselves, we will have a civilized hearing as is normal in the Judiciary.
Now, Brother Ehrlich, you carry a heavy load. Do you know what you are up against? Let us look at it. California, 52 Members; New York, a few less; Tennessee, I start thinking of the States. You are a man of incredibly more courage than I first imagined when you came to this floor, the halls of Congress. You have deep convictions, and you are not afraid to fight for what you believe is right.
I believe there is a certain amount of validity in the arguments that are being presented by yourself and the beverage association, the joint committee of States. But what does it matter? You can count. This is going to be a long, drawn out battle in which if we do not strike a compromise, I would shudder to think about the results if we asked for a record vote.
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So let us treat these other guys real nice. Let us be very careful about the language we use to describe each other's economic activities that earn them a livelihood, and maybe you will come out of this next year with some kind of compromise that will make this thing work out.
Otherwise, I have a concern that is bounded by some constitutional considerations. One of the problems we have in our society is that drinking causes more trouble, alcoholic drinking, abusive drinking causes more problems, costs more money than higher drugs, automobile lives, the whole bit. A lot of crimes are committed under the influence of alcohol. On the other hand, with our technology, more and more people are buying this stuff through computers, the Net, Internet.
Somebody in these hearings has to think along with me about how we are going to restrict it from kids. We are going through that with tobacco right now. We should—this should be in the front of everybody's mind. I think it is going to be an important part of how a number of people weigh in to help resolve the otherwise important issue that you bring before us today.
I thank you, Mr. Chairman.
Mr. COBLE. I thank the gentleman from Michigan.
Mr. CONYERS. Could I ask if any of the distinguished panelists have any observations they would like to make about anything I have said?
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Mr. SIMPSON. Just to address briefly the issue of control and keeping it away from the underaged, when you go through the system as it is now structured, and someone walks into a retail establishment, it is my moral and legal duty as a retailer in a face-to-face transaction to card that person and make sure that they are of legal drinking age. If I should fail in my duties to verify age, I am personally liable for that sale. My lifeline and my livelihood are in jeopardy.
In this type of situation where beverage alcohol is flying around through the mail and through the common carrier, there are no safeguards. We have seen it time and time again that it is just delivered, no signature asked for and no identification or verification.
Mr. CONYERS. Thank you for that information. It is something we will have to be watching very carefully as this legislation moves forward.
Mr. Foppiano.
Mr. FOPPIANO. I was just going to say, first of all, wineries have to be very careful. If I were to have a permit, get a felony, I would lose our basic permit. That is automatic. We would have to cease to be a winery, or the winery would have to be sold to somebody else. You cannot have a felony and hold a basic permit. So we take this very seriously. I would hate to have somebody in my winery inadvertently ship one case of wine to a State and then that State decides to make a Federal case of it, and our family, as owning the winery, then get a felony against us, and then we are out of business. There is no second recourse. BATF will pull the license immediately, and we will be closed up. This is a very serious thing that could happen, and I do not want something like that to happen.
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Mr. CONYERS. Mr. Goldberg.
Mr. GOLDBERG. If I might, I think the States treat the felony approach as a very serious matter as well. I do not think the States want to enact, from an alcoholic beverage regulatory standpoint—laws to put people in jail. I do not think the point is to enact felony statutes that would strip people like Mr. Foppiano of their basic permit issued by BATF.
On the other hand, given what has happened in Florida, in the Federal courts and in the State court, the felony route at this time seems to be the only viable alternative for effective enforcement of State laws. That is why we would hope that this committee would adopt H.R. 1063, either with some amendments or as compromised, because that would give the States the ability to go into Federal court and seek injunctions, which is what I think they are interested in doing, saying we have a law that proscribes direct shipment. Do not do it anymore.
Mr. CONYERS. Thank you very much.
Mr. COBLE. Thank you, Mr. Conyers.
Gentlemen, we have a vote on. We will suspend and stand in recess until we return from voting.
[Brief recess.]
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Mr. COBLE. Gentlemen, I will excuse you all because all the other Members are not back. You all have done the Lord's work, as we say here on the Hill. I appreciate your testimony. I encourage you all to work with one another to reach some sort of compromise. Thank you.
We will now shift our attention to H.R. 1534. Is Mr. John Dwyer in the room? Mr. Dwyer was named the Acting Associate Attorney General for the United States Department of Justice for Attorney General Janet Reno in December of 1996. Mr. Dwyer has oversight of the Environment and Natural Resources Division. He is an alumnus of the University of California at Berkeley and the Harvard School of Law.
Mr. Dwyer, it is good to have you with us. We have copies of your written statement, which will be submitted into the record in its entirety. Did you hear my courteous admonition earlier?
Mr. DWYER. I did.
Mr. COBLE. I would appreciate it if you can confine your comments to about 5 minutes.
For the benefit of other witnesses in the room, I assure you that your written testimony will not be casually discarded and ignored. It will be examined and studied. Just because we are holding your oral testimony to 5 minutes does not mean that we are not going to read your written statements in their entirety.
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Mr. COBLE. Mr. Dwyer, if you will proceed.
STATEMENT OF JOHN C. DWYER, ESQ., ACTING ASSOCIATE ATTORNEY GENERAL, UNITED STATES DEPARTMENT OF JUSTICE
Mr. DWYER. Thank you, Mr. Chairman. I appreciate this opportunity to present the Justice Department's views on H.R. 1534.
The Department has serious concerns about the bill, and we strongly oppose it. If passed in its current form, the Attorney General would recommend that the President veto it.
H.R. 1534 purports to streamline the process by which property owners who believe that their property has been ''taken'' can seek compensation from the responsible local, State or Federal Government. It does this by significantly altering two important, though little known, Federal legal doctrines, the doctrines of ripeness and abstention. The result of these changes would be to shift substantial authority to decide basic local land use decisions from municipal planning commissions, city councils and other local bodies to the Federal courts.
The Department of Justice opposes this federalization of local land use planning for several reasons. First, we disagree with the basic assumption that seems to underlie H.R. 1534 that the Federal courts are better situated than local communities to decide how best to regulate the use of private property. Local land use planning directly affects our neighborhoods, our communities and our quality of life. It involves decisions like where to put a garbage dump whether to grant a permit for a liquor store or for an adult book store how close a noisy industrial plant should be to our homes and schools and whether communities need another shopping mall. You typically do not find these issues discussed on the network news. Instead, they are debated at county board meetings and in community newspapers and at the local barber shop. Communities across the country have developed procedures to ensure that the voices of as many of the affected individuals as possible are heard in making these decisions. H.R. 1534 is designed to circumvent these procedures and enhance the role of the Federal courts in these decisions at the expense of the affected communities. We think that is a bad idea.
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Second, it is not at all clear to us that there is such a substantial problem with regard to local land use planning that such an intrusive Federal response is warranted. Every day city officials across the country make hundreds, if not thousands, of decisions involving land use and urban development issues. The ''horror'' stories that are recounted in support of H.R. 1534 are few in number. There seems to be little, if any, evidence of a systemic nationwide problem. Rather, local land use planning works, and it works because it is done at the local level by people most sensitive to local concerns. If procedures in particular cities or towns are in need of improvement, change should come at the local level. In fact, communities across the country are developing innovative ways to streamline their land use procedures as we speak today.
Third, the ripeness and abstention doctrines are not legalistic obstacles that serve no purpose other than to make it more difficult to get one's day in court. Both are important legal principles that have been developed over time to avoid the adjudication of certain matters not properly before the Federal courts. The ripeness doctrine ensures that issues decided by Federal courts are mature enough or developed enough that judicial intervention is appropriate. In the takings context, the doctrine helps ensure that land use decisions are made at the local level wherever possible, that local decisionmaking processes are not bypassed, and that Federal courts have a sufficiently developed factual record before deciding a Federal court challenge to a local decision. The abstention doctrine allows Federal courts to abstain from deciding novel or complex issues of State law so that those issues can be decided by State tribunals. It is based on the notion of cooperative federalism.
H.R. 1534 would curtail both of these doctrines and promote litigation at the earliest possible moment in disputes involving land use questions. The result would be that a property rights dispute would be considered ripe for judicial review regardless of whether the claimant has worked closely with local officials to resolve the dispute, regardless of whether local officials have made a truly final decision regarding the property in question, and regardless of whether the factual record is sufficient to allow for proper resolution of the lawsuit. Federal courts would be compelled as well to assume a greater role in interpreting State and local laws. The end result will be more confrontation and litigation, more distant decisionmaking and less well-informed decisionmaking.
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Finally, if, as the supporters of this legislation assert, H.R. 1534 is strictly procedural in nature, it is not at all clear what effect these changes on the law will have. Once in Federal court, the developer or other claimant, under the Supreme Court's decision in Penn Central will have to establish the economic impact of the challenged action on the claimant and the extent to which the government action interferes with its distinct, investment-backed expectations. The claimant will have a difficult time doing so without having sought compromise with local officials or having received a final decision as to not just what development would not be allowed, but also as to what lesser development would be allowed. As the Supreme Court has noted, ''the rejection of exceedingly grandiose development plans does not logically imply that less ambitious plans will receive similarly unfavorable reviews.'' Similarly, if the claimant has failed to seek compensation from the State, the claimant will have failed to establish a constitutional claim for a taking without just compensation. The Federal court will have no choice but to dismiss the action.
Mr. Chairman, in closing, let me say that by and large local land use planning works and has greatly benefited the vast majority of property owners. If land use procedures in particular areas are in need of reform to give developers a fair shake, let us urge revision of those local laws.
Thank you. I will be happy to answer any questions.
Mr. COBLE. Mr. Dwyer, thank you, sir.
[The prepared statement of Mr. Dwyer follows:]
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PREPARED STATEMENT OF JOHN C. DWYER, ESQ., ACTING ASSOCIATE ATTORNEY GENERAL, UNITED STATES DEPARTMENT OF JUSTICE
Introduction and Summary
Mr. Chairman and Members of the Subcommittee, I appreciate this opportunity to present the Justice Department's views on H.R. 1534, the ''Private Property Rights Implementation Act of 1997.'' The Department has serious concerns about this bill, and we strongly oppose it. The Attorney General would recommend that the President veto the bill if passed in its present form.
The bill appears to be directed primarily at local land use issues, such as where to locate a garbage dump, whether to grant a building permit for a liquor store or an adult bookstore, how close a noisy industrial plant should be to homes and schools, and whether a community needs another shopping mall. Because issues such as these directly affect discrete neighborhoods and communities, local land use agencies have historically decided them. H.R. 1534 is designed to take these issues away from local communities and present them to the federal judiciary. There is no need to do so.
Under current law, federal courts pay proper respect to local decision-making in two important ways. First, where appropriate, they abstain from deciding novel or complex issues of state law so state tribunals can decide those issues. Second, federal courts require developers and other property owners to make every effort to resolve land use disputes with local officials before proceeding to federal court. This ''ripeness'' requirement helps ensure that land use decisions are made at the local level where possible and that federal courts have a sufficiently developed factual record before deciding a property rights challenge to the local decision.
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H.R. 1534 would alter this common sense approach. First, section 2 of the bill would amend our law to prohibit federal courts from abstaining on state law issues in challenges to local decisions. As a result, federal courts would be compelled to assume an unnecessarily greater role in interpreting state and local laws.
Second, the bill would deem a property rights challenge to local government action ''ripe'' for federal court review regardless of whether local officials have made a truly final decision on the land use dispute. If H.R. 1534 is enacted, local dispute resolution procedures will be circumvented and rendered irrelevant. The end result will be far more litigation and far less incentive for developers to work with local planning officials to achieve workable compromises. Federal courts could be flooded with new claims and effectively transformed into zoning review boards.(see footnote 11)
The Department has six main concerns about H.R. 1534 that I will now address in more detail.
1. H.R. 1534 would allow developers and others to sue in federal court without adequately seeking to resolve their disputes with local officials through local procedures.
During the past five years, the Administration has worked with both parties in Congress to enhance federal partnerships with state and local governments. From welfare reform to empowerment zones to the unfunded mandates law, we have given greater resources and authority to state and local officials to enhance those partnerships.
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Local governments should not be relegated to a diluted partnership in the area of land use. The Supreme Court has emphasized that local land use agencies are singularly flexible institutions'' that are well suited to resolving land use conflicts in a reasonable way. Suitum v. Tahoe Regional Planning Agency, 117 S. Ct. 1659, 1667 (1997) (quoting MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, 350 (1986)). Local officials are more sensitive to local concerns; they give affected stakeholders a chance to voice their opinions; and they generally settle disputes without expensive and time-consuming litigation.
Rather than promoting these benefits and furthering federal-state partnerships, H.R. 1534 would go in the opposite direction. Instead of empowering local officials with more resources and authority, H.R. 1534 would shift decision-making authority over quintessentially local matters away from state and local officials to federal courts. The most dramatic effect would result from the bill's changes to well established principles of ''ripeness.''
Under current law a claimant must pursue available avenues of local decision making, and the local government's decision regarding a proposed land use must be final before a claim is considered ''ripe'' for federal court review. MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340 (1986); Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985). By not permitting a claimant immediately to litigate in federal court when a locality refuses to approve a proposed land use, this ripeness requirement encourages landowners to work with local officials to resolve land use conflicts outside the courtroom. The requirement also conserves scarce federal court resources by reducing the risk that a change of position at the local level will moot a federal court proceeding or decision.
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H.R. 1534 would overturn this longstanding doctrine. Section 2 of the bill would allow claimants to proceed to federal court after receiving ''a definitive decision regarding the extent of permissible uses on the property'' and a single denial of an appeal or waiver request. This section of the bill would change existing ripeness requirements in at least three ways: First, the ''definitive decision'' language, when read in conjunction with the ''single appeal or waiver'' provision, appears intended to require the claimant to submit just a single land use application.(see footnote 12) The claimant is thereby exempt from working with local officials to determine whether changes to the initial proposal would make it acceptable. Second, by deeming a challenge ripe after denial of just one local appeal or waiver request, the bill allows a claimant to sidestep other available stages of state or local review for resolving the dispute and to proceed directly to federal court. Third, whereas existing law excuses a claimant from having to appeal or request a waiver only when such efforts would be genuinely futile, section 2 of the bill eases that standard by excusing the local appeal or waiver where the claimant's ''prospects of success are reasonably unlikely.''
By relaxing ripeness requirements, H.R. 1534 would give developers and other potential claimants a new club to wield in their dealings with local officials: the threat of a premature and potentially expensive federal lawsuit. Under current law, if a developer files a federal lawsuit without engaging in good faith negotiations with local officials, the locality immediately can move to dismiss the suit on ripeness grounds. But if the ripeness defense is removed or curtailed, as H.R. 1534 would do, local officials could face years of discovery, pre-trial motions, trial, and appeals that all too often accompany federal court litigation.
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While the prospect of facing one federal court trial could be daunting to a small town, the cumulative effect of repeated federal lawsuits by the same developer, or multiple suits by several developers, could be overwhelming. Faced with the possibility of spending countless hours in depositions or trials, or responding to document requests, interrogatories, and other litigation demands, a local official may feel pressured to approve development projects, despite their deficiencies and risks to the community, simply to avoid litigation.
Finally, proponents of H.R. 1534 have failed to demonstrate any need to change federal ripeness rules. Proponents argue that only six percent of land use claims in federal court are deemed ripe for review. They would have us infer from this statistic that scores of meritorious takings claims are rejected every year due to some obscure legal principle. A closer look at this statistic, however, cannot support any such sweeping conclusion. The study providing the six percent figure is based on an examination of the 36 cases in which a ripeness defense was asserted during a four-year period.(see footnote 13) That so few federal land use cases were available for analysis (less than one per state over four years) suggests state compensation remedies are more effective than the proponents of H.R. 1534 would have us believe. Furthermore, the study tells us nothing about the number of cases in which no ripeness defenses were raised or what percentage of the total number of takings cases were dismissed on ripeness grounds.
Before we undertake a major redistribution of power from the states to the federal judiciary, we owe it to the American people to be able to explain the extent of the problem that justifies such a remedy. The Department of Justice does not believe the proponents of this legislation have met that burden.
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2. H.R. 1534 would deem ''ripe'' for adjudication cases in which there is an insufficient factual record for decision or the claimant has not sought compensation from the state.
In addition to undermining local decision making, the bill's ripeness provisions could result in poorly informed federal court rulings. Moreover, if these provisions are interpreted to modify the substantive content of certain constitutionally secured property rights, they would exceed Congress's constitutional authority.
Current ripeness standards promote the proper resolution of takings claims by allowing an adequate factual record to develop before a federal court decides the claim. While regulatory action that ''goes too far'' may constitute a taking, Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922), ''[a] court cannot determine whether a regulation has gone 'too far' unless it knows how far the regulation goes.'' MacDonald, 477 U.S. at 348. Until a property owner obtains a truly final local decision, it is often impossible for a court to determine with any precision the extent to which local officials would allow the land to be developed. This information is essential to the resolution of a takings claim. Id. at 349; Williamson County, 473 U.S. at 190–91. H.R. 1534, however, would make ripe for federal court review those cases in which the local land agency has not had the opportunity to speak to the land use it would allow.
Similarly, the bill would deem ripe for federal court adjudication a property rights claim where the claimant has been denied just one waiver or appeal of the challenged government action, regardless of whether the factual context of the land use dispute allows for proper analysis of the claim. Suppose, for example, a developer applied for a permit to build a large shopping mall, and local officials denied the permit due to serious traffic risks posed to area residents. If the developer submitted a single waiver application and that application was denied, the developer could proceed directly to federal court under H.R. 1534. The developer would have this right even if he or she failed to pursue available local procedures to determine whether the proposal could be redesigned to reduce the traffic risks. The developer could argue that the claim is ''ripe for adjudication'' even though good-faith negotiations with planning officials might have yielded a workable compromise. H.R. 1534 could be construed as an instruction for federal district courts to rule on the merits of challenges without knowing whether the proposals would have been approved in modified form had local decision making processes been played out.
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Section 2 of H.R. 1534 also raises serious constitutional issues. Under existing law, a property owner who challenges a local decision as a taking must seek compensation through state courts before filing a claim in federal court. See Suitum, 117 S. Ct. at 1665; Williamson County, 473 U.S. at 194–96. This requirement flows from the ''nature of the constitutional right'' under the Just Compensation Clause (id. at 195 n.13), which prohibits only uncompensated takings. Where state action is challenged as a violation of the Just Compensation Clause, a federal court cannot find that the state has engaged in an uncompensated taking unless the state has denied the claimant compensation. Where the state provides for such compensation (for example, under inverse condemnation procedures), no violation of the federal Constitution occurs. See First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304 (1987).
If the proposed legislation is interpreted to allow developers and other property owners to bring takings claims against local governments in federal court without first seeking compensation in state courts, it would alter not only ripeness principles but the substantive standard under which district courts adjudicate takings claims against state and local authorities.(see footnote 14) This would be inconsistent with the Supreme Court's guidance that the obligation to seek compensation in state court before alleging an uncompensated taking derives from the nature of the right defined by the Just Compensation Clause. Williamson County, 473 U.S. at 195 n.13. We believe this interpretation of H.R. 1534 would violate constitutional limits on congressional power. See City of Boerne v. Flores, 117 S. Ct. 2157 (1997).
3. H.R. 1534's ''finality'' standard would also disrupt the administration of federal protections.
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Sections 3 and 4 of H.R. 1534 apply the bill's ripeness standards to claims against the United States. The bill's sweeping definition of ''final decision''—any ''definitive decision regarding the extent of permissible uses on the property''—would disrupt federal protections. Claimants likely would argue that this broad definition is met even where federal administrative processes have not played themselves out. For example, a claimant might proceed to federal court to challenge an initial agency decision after just one appeal, notwithstanding the availability of other stages of review within the agency. Other claimants could circumvent agency review procedures altogether by arguing that their prospects for success at the agency are ''reasonably unlikely'' under the bill, thereby drawing federal courts into the dispute much earlier in the process. By allowing for premature federal court challenges, H.R. 1534 would disrupt the administration of critical federal protections. These federal protections are crafted carefully to prevent environmental degradation and to protect human health and safety. They are premised on regulating harmful private uses to protect the public good.
4. By prohibiting abstention, H.R. 1534 would shift authority over local issues from state and local tribunals to federal courts.
Longstanding abstention doctrines allow a federal court to decline to exercise its jurisdiction in cases that would involve the federal judge in delicate interpretation of state law so that a state or local tribunal may resolve those issues. Abstention promotes federalism by enhancing ''comity,'' which the Supreme Court has described as ''a proper respect for state functions, a recognition * * * that the National Government will fare best if the states and their institutions are left free to perform their separate functions in their separate ways.'' Younger v. Harris, 401 U.S. 37, 44 (1971).
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Abstention reflects a proper respect for state sovereignty and a recognition that state and local tribunals are best positioned to interpret complex local laws. New Orleans Public Service, Inc. v. Council of City of New Orleans, 491 U.S. 350, 360–61 (1989). Abstention may be particularly appropriate where there is a parallel state court proceeding that will allow the state court to resolve the state law issue pending before the federal court, or where a state court has not had a previous opportunity to interpret the state law.
Section 2 of the bill would prohibit federal courts from abstaining on state law issues in cases brought under 28 U.S.C. §1343 so long as the claimant asserts no state law claim. The bill's distinction between a state law claim and a state law issue is critical because many federal claims can give rise to state law issues even though the claimant has not asserted a separate state law claim. Take, for example, the case of Meredith v. Talbot County, 828 F.2d 228 (4th Cir. 1987), in which developers sued a county and its planning officer for damages and injunctive relief due to the county's refusal to allow the subdivision of five lots. The refusal was based on the planning officer's application of the Chesapeake Bay Critical Area Protection Program, a then-newly enacted state law that the Maryland courts had not yet interpreted. The developers alleged a federal takings claim and a federal claim under the Fourteenth Amendment based on alleged violations of state and local law. Id. at 231. No state law claim for relief was asserted. The trial court abstained from ruling on the federal claims until the developers sought a state court ruling on the case's complex and novel issues of state and local law. The federal court of appeals affirmed, ruling that the county zoning procedures at issue constituted the kind of complex regulatory program that required abstention to avoid needless federal court conflict with a state's administration of its own affairs. Id.
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Had H.R. 1534 been in effect at the time, it would have prevented the trial court from abstaining in Meredith v. Talbot County and in other similar cases and, thus, would have forced important issues of state law to be decided in the first instance by federal, rather than state, courts. Federal courts have abstained in a wide variety of challenges to local land use planning decisions, including cases involving the application of local annexation laws,(see footnote 15) the adequacy of public services for residential areas,(see footnote 16) and eminent domain issues.(see footnote 17) If H.R. 1534 is enacted, federal courts facing sensitive state law issues in cases such as these will have no choice but to expand their role in the resolution of state and local issues, at the expense of state tribunals.(see footnote 18)
H.R. 1534's abstention ban would apply regardless of whether there are related state judicial proceedings, the importance of the state laws and policies that the case implicates, and other factors that have long caused federal courts to defer to state and local tribunals. Such a drastic change in abstention procedures would impair state sovereignty, undermine federalism, and increase the likelihood and frequency of conflicting results as federal and state courts are forced to interpret and apply the same laws.(see footnote 19)
5. H.R. 1534 would run counter to takings jurisprudence requiring courts to analyze the effect of government action on the relevant ''parcel as a whole.''
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H.R. 1534 also may carry with it the unintended consequence of altering a basic concept of takings law referred to as the relevant ''parcel as a whole.'' Federal courts have long held that the validity of a takings claim depends on the effect of the challenged government action on the entire parcel of property the claimant owns. See Concrete Pipe and Products of California, Inc. v. Construction Laborers Pension Trust, 508 U.S. 602, 644 (1993); Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 130–31 (1978). The courts have rejected claimants' attempts to segment property into the affected and unaffected portions of the whole parcel. If segmentation were allowed, ''one could always argue that a set back ordinance requiring that no structure be built within a certain distance from the property line constitutes a taking because the footage represents a distinct segment of property for takings law purposes.'' Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 498 (1987).
Under section 2 of the bill, however, a claim would be ''ripe'' where there is a definitive decision regarding the use of the property allegedly infringed or taken ''without regard to any uses that may be permitted elsewhere.'' This language could be read to direct federal courts to resolve takings claims without knowing or considering the impact of the government action on the full parcel.
6. H.R. 1534 would further burden the already crowded federal docket.
H.R. 1534 would further burden the federal docket in several ways. First, because the bill would allow claimants to circumvent existing state and local procedures for resolving land use disputes, the bill inevitably would result in more claims being filed in federal courts against public officials and local governments. The bill would not only re-direct claimants from state courts to federal courts but also generate new cases in situations that currently are resolved through local procedures without litigation. The number of new federal cases spawned by the bill, therefore, could exceed the number of federal property rights claims currently filed in state courts on an annual basis.
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Second, sections 3 and 4 of the bill would allow premature claims to proceed against the United States. These would be the very kinds of cases courts have deemed unfit for federal court adjudication, including cases currently resolved through federal administrative processes. And finally, the bill's abstention ban would deprive federal courts of the ability to shift cases to state courts where appropriate.
The cumulative impact of H.R. 1534 would be to delay the resolution of meritorious claims as federal courts struggle to review claims better resolved at the state and local level.
Conclusion
Mr. Chairman, by and large, local land use planning works and has greatly benefitted the vast majority of property owners. If land use procedures in particular areas are in need of reform, those local laws should be revised. But we should not federalize local land use planning as H.R. 1534 would do. We should not pass federal legislation that would substantially recalibrate the balance of local and federal authority on inherently local issues. And we should not inundate the federal courts with claims the courts themselves have deemed unripe for decision.
In his classic study of the political and social institutions of the United States, Democracy in America, Alexis de Tocqueville described local governments as ''the strength of free nations.'' He observed that nowhere do the people exercise their sovereign power more immediately than through municipal institutions. We should respect the wisdom of the people and their local representatives in deciding how best to protect our neighborhoods and communities. Because H.R. 1534 would undermine the vital role local officials play in local land use planning, the Justice Department strongly opposes it. As noted above, the Attorney General would recommend that the President veto the bill if passed in its present form. Thank you.
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Mr. COBLE. Some argue that fundamental rights founded upon the first and fourth amendments may be given preferential treatment under the law as opposed to fundamental rights founded upon the fifth amendment. How do you respond to that?
Mr. DWYER. Certainly the Department of Justice and this administration do not think that—that is correct. The Supreme Court has spoken to that and made it clear that property rights under the fifth amendment are not some sort of lower level Constitutional right.
But I think it is important to look at the nature of the rights we are talking about. A violation of the right to just compensation does not exist, according to the Supreme Court, until both the property is taken and the claimant seeks compensation from the State or local entity. Therefore, you don't have a claim, a constitutional violation, until the individual has actually sought compensation. That is a significant part of what the ripeness doctrine tries to get at.
Mr. COBLE. The conflicting district court decisions regarding when a final decision for purposes of meeting the ripeness requirement has occurred presents a problem. I think you would probably agree to that. And I don't mean to insert words into your mouth. How would you propose that we clarify when a case is ripe?
Mr. DWYER. I think it is clear that there are some cases where there is some confusion, and it is clear that there are some people who think that this is a significant problem. I do think you have to look at whether or not you have a problem of such great magnitude that it calls for a Federal response, and a Federal response that calls for Federal intervention in State proceedings.
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I think it is a case-by-case determination, which is part of the confusion, but I think what is going on around the country is actually exciting on this front. That is why I urge this committee to allow local communities to decide that type of question. There are very unique things happening around the country, trying to streamline the process so that there is less uncertainty built into the process.
Mr. COBLE. We have a vote on, but let me ask the gentleman from Utah, can you ask your questions, Mr. Cannon, in 5 minutes?
Mr. CANNON. Mr. Chairman, given the fact that we have the constraint. I appreciate your being here, Mr. Dwyer. This, of course, is a complex issue that has been around for a long time. Having dealt with it myself, I have been involved in some of these cases. There is a broad consensus that the time it takes for an individual to get into court is much too great. One study by the Home Builders Association shows that it takes 9-1/2 years of reapplication and litigation before they ever get to the merit, and then the economic life of an individual, which starts sometime—he becomes a reasonable businessman at 30, and he is going to retire at 60 or 70, that is a large portion of his life, if he has an asset he is developing or if there is a larger project. Is there anything going on in your Department to begin to deal with this issue, to try and help it out, to try to make it move more quickly?
Mr. DWYER. There are two different areas where this plays out. First, there are allegations involving Federal takings. I do think the administration, over the last several years, particularly with regard to wetlands matters and Endangered Species Act matters, has tried to streamline the process to address that.
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Second, with regard to what most of the conversation and discussion has been about, which is really more local land use planning, I think there are some exciting things that are taking place. They are not taking place in the Department of Justice because these are, I think, inherently local issues. But I am from the State of California, and let me just describe two things going on there, which I think are interesting.
In the San Francisco Bay Area, communities near the Silicon Valley—San Carlos, Santa Clara, Palo Alto—are experimenting and just about to go on-line with an Internet planning approval process. The idea would be that you have a whole lot of people sitting around computers in different locations actually with the city planners making changes to a development proposal, hoping to expedite the process. It will be interesting to see how that plays out. That is an experiment that is about to take place.
Also in San Diego, Mayor Susan Golding has embarked on a major initiative to make its land use permitting system more streamlined and user-friendly, developing an ombudsman, one-stop shopping process, all of which are aimed at the very problems that you have identified.
Mr. CANNON. Would you mind describing, are you personally familiar with what the administration has done on endangered species and wetlands? Would you describe a little bit about that for us?
Mr. DWYER. I will. With regard to wetlands, the administration recently issued a new general nationwide permit that would allow landowners to affect up to one-half acre of wetlands to construct a single-family home or related features without having to go through the individual permit process. The Army Corps of Engineers, which is the Federal agency with primary responsibility, has also proposed a rule, which I believe is part of the appropriations process, which would allow for an administrative appeal process of certain wetlands decisions, hoping again to get quicker final resolution.
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With regard to the Endangered Species Act, Secretary Babbitt is in the process of implementing reforms to the Act to address landowner concerns. Under one initiative specifically designed for small landowners, low-impact activities that affect five acres or less will be presumed to have only negligible adverse effect on threatened species. And then under another initiative called the ''no surprises policy,'' property owners who agree to help protect endangered species on their property are assured that their obligations will not change over time, even if the needs of the species change over time. All of this goes to trying to provide greater certainty with regard to Federal law for private property owners.
Mr. CANNON. It seems to me that there are many little things, naturally in our society we are going to be moving that way, especially as we have electronic information. The more information is available, the easier it is to make some of these decisions. We are—as a society, we are making progress. It still seems to me what you are suggesting you are dealing with are very little things at the low end, whereas we have big, long time frames in some of these cases. Is there any activity going on in Justice to say how do we—what can we do to make maybe this bill work instead of just saying it doesn't work? How do we deal with that problem in a larger sense rather than on the low end of detail?
Mr. DWYER. We would be happy to look at any proposals and see if we think they would have a positive effect. I think the first question we have to ask ourselves is whether or not there is a nationwide systemic problem that calls for Federal intervention.
I know one of the studies that is often cited by different scholars on this issue found that 96 percent of the cases in which a ripeness defense was asserted ultimately were found not to be ripe for adjudication. I think that is one of the leading statistics that are put forward. When you go back, you need to actually look at that statistic. It turns out it is based upon 36 reported cases over a 4-year period. If, in fact, there are only 36 reported cases over a 4-year period, less than one case per State every 4 years in which ripeness is asserted, I think we have to ask ourselves, ''is this really a national problem calling for the Federal Government to intervene in what I think most of us would agree is sort of an inherently local process?''
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Mr. CANNON. Let me just say that I believe that the problem of statistics, you find what you measure. What part of the problem is is how much people are not doing things who are chilled because of the system. I would appreciate it if you would take a look at this in your new position and see if you can grapple with the problem, come up with some ways to improve it. I personally think the bill is important.
Mr. COBLE. I thank the gentleman.
Mr. GALLEGLY. Mr. Chairman, I would like to have a significant amount of time. In view of the vote, I do not want to keep Mr. Dwyer tied up. I do have one quick question.
Mr. COBLE. Mr. Dwyer, we may be in touch with you for written responses as well.
Mr. Gallegly.
Mr. GALLEGLY. Mr. Dwyer, thank you very for being here.
Indeed, we have heard Federal judges and Supreme Court Justices quoted several hundred times as stating justice delayed is justice denied. I am sure you have heard that on more than one occasion.
Earlier this year the Supreme Court ruled on the Suitum case. You may be familiar with the Suitum case. After 8 years, her case was finally deemed ripe. Do you believe that people like Bernadine Suitum should have had to wait 8 years to get to the merits of a case heard in the Federal court? And maybe you can give us some idea of what changes you are prepared to suggest to ensure that people do not have to go all the way to the Supreme Court to get their case considered?
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Mr. COBLE. Mr. Dwyer, I am going to withdraw to the floor. Please respond to Mr. Gallegly who can then declare a recess. We appreciate your being here. We will excuse you at the conclusion of the questioning.
Mr. DWYER. Thank you, Mr. Chairman.
With regard to the recent Supreme Court case, I think it is very hard to defend the time it took. It is a process that took Mrs. Suitum 8 years. But I think it is important to remember what was at stake there. The question had to do with transferable development rights, which is a relatively new and very important land use mechanism. The courts never had a chance to rule on what the impact ''TDRs'' were to the ripeness doctrine. Oftentimes when there is something new and something important, it takes a while to get a definitive answer. That is part of the process in light of our having one Supreme Court. Ultimately, though, there is some clarity, and at least with regard to TDRs, I do not think you are likely to have another situation with Mrs. Suitum or somebody in her position, who will have to take 8 years, because the Court has now ruled on that very question.
Mr. GALLEGLY. I appreciate the gentleman's response. I think you would also yield that this is not in and of itself a very unique situation. We hear case after case after case where it literally takes 8, 10, 12 years to get adjudication on whether there has been just compensation or property rights denied. During that period of time a person is really held hostage; is that not correct?
Mr. DWYER. I think there are cases that you have identified and that others have identified that raise great concern. I share that concern. At the same time, as I was mentioning earlier, I do think we need to look at those from the perspective of the literally thousands of land use decisions that are made every day across the country, and then make a determination of whether those cases warrant a Federal response.
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Mr. GALLEGLY. And with that understanding, the committee will stand in recess until we return from the vote. Thank you, Mr. Dwyer.
Mr. COBLE. I again apologize to you all for the delay, but this is the nature of the beast up here. There is a vote scheduled to occur in about 45 to 50 minutes. I think we can probably finish this panel and excuse you all for the day.
Our first witness on this panel is Mr. Don Betsworth, President of the North Carolina Home Builders Association. He is here today to represent the National Association of Home Builders.
Don, good to have you with us. You are from my State as well as my district.
Our second witness on this panel is Mr. Carl Goldberg. Mr. Goldberg has been active with the National Association of Home Builders since 1984. A licensed realtor, he began his real estate career with Bertram Associates in 1979 as a project manager for the development of single-family homes.
Next, we have Ms. Elizabeth Osenbaugh who is the Solicitor General of the Attorney General's Office in Des Moines, Iowa. Mrs. Osenbaugh was the former Chair of the Iowa State Bar Association's Section on Administrative Law on two different occasions.
Our final witness is Mr. Daniel Mandelker. Mr. Mandelker is the Howard A. Stamper Professor of Law at Washington University School of Law in St. Louis, and is considered to be one of the preeminent authorities on land use regulation in the United States, and has written several case books used by law students nationwide.
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We have copies of your written statements which will be submitted into the record in their entirety without objection. You all have heard me bark again and again today about the red light. You will not be flogged if you do not comply, but please prepare to wrap up once the red light illuminates. Your written testimony will be, of course, examined very carefully.
Prior to hearing from you, Mr. Betsworth, the gentleman from California has asked to be recognized.
Mr. GALLEGLY. Mr. Chairman, as you so ably stated, this morning has been difficult at best. In the interest of time, I would ask that we have unanimous consent that the opening statement that I had prepared be made a part of the record rather than me reading it into the record. It will just be placed in the record in the interest of time.
Mr. COBLE. Without objection, that will be done.
[The prepared statement of Mr. Gallegly follows:]
PREPARED STATEMENT OF HON. ELTON GALLEGLY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Chairman, thank you very much for agreeing to hold this hearing on my bill, H.R. 1534, the Private Property Rights Implementation Act of 1997.
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I am pleased to inform the Chairman and the members of the Subcommittee that H.R. 1534 has 223 bipartisan cosponsors in the House. Additionally, a strong bipartisan companion bill has been introduced by Senator Paul Coverdell. Among the supporters of S. 1204 are Democratic Senators Mary Landrieu, Byron Dorgan, Harry Reid and Wendell Ford.
A broad coalition of organizations supports this legislation, including: the American Farm Bureau, the National Association of Home Builders, the National Association of Realtors, the National Grange and the National Cattlemen's Beef Association.
I think this support indicates that H.R. 1534 will address a very real problem.
Federal law and the U.S. Constitution provide individuals with protection from having their property ''taken'' by the government. Under these protections, if property is taken for a public purpose, the owner has the right to be compensated.
However, landowners often cannot even get a hearing in federal court on the merits of their claim without a lengthy and expensive process of multiple administrative appeals and litigation. This is because the federal courts sometimes avoid ruling on Fifth Amendment cases by saying they are premature, or not ''ripe.''
The testimony we will hear today will show that upwards of 80 percent of the time that landowners submit a Fifth Amendment claim in federal court, their cases are refused on grounds such as ripeness or abstention. When cases do make it past the ripeness test, it is usually after many years of trying to overcome these procedural hurdles.
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H.R. 1534 would provide reforms that will allow more straightforward and equitable access to the courts for landowners who are injured by government actions.
Earlier this year, the Supreme Court ruled on a case brought by Mrs. Bernadine Suitum. This case provides an excellent example of the need for private property rights reforms.
Mrs. Suitum was basically denied 99 percent of the use of her property, which is in the Lake Tahoe area. She was told she could not build her retirement home, or anything else, on her lot.
For eight years, Mrs. Suitum sought to have her request for compensation heard in the federal courts. However, it is only now, after the Supreme Court ruled unanimously that her case was ''ripe,'' that the merits of her case are being heard.
It never should have taken her that long. If Mrs. Suitum couldn't get the merits of her case heard for eight years, what chance do other property owners have?
I'm sorry that the Court did not seize the opportunity the Suitum case presented to address the convoluted procedures landowners must go through to get their cases heard. Instead, the Justices decided on the most narrow grounds possible that her case was ripe. This means that future Mrs. Suitums will face the same daunting task of trying to get their day in the federal courts.
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I would like to note that the American Planning Association filed an Amicus Curiae brief on the Suitum case that is very helpful. The APA is made up of land use planning professionals who often work on behalf of local governments. Although they actually argue against Mrs. Suitum's claim, the APA brief includes some very helpful admonitions.
I am attaching a copy of the brief to my testimony. However, I would like to make a few observations about its content. In their official brief to the Supreme Court, the APA argue that the present finality doctrine is unworkable and should be clarified. Their brief asserts that it should ultimately be up to the landowner to weigh the risks of litigation or to decide to proceed with multiple reapplications. They agree that ''federal courts should not require takings plaintiffs to go to state court to seek compensation before taking advantage of the federal remedy.'' Their brief even goes further to urge the adoption of a futility exception to the ripeness rule.
The conclusion of the brief is particularly helpful. The APA noted:
This case affords the Court an opportunity to clarify the application of the ''finality'' requirement of the ripeness doctrine to land use cases so that the requirement serves its intended purpose. That purpose is to encourage the decision maker to arrive at a definitive position on the issue that is alleged to inflict an actual, concrete and justiciable injury. It is not to encourage the creation of complex, time-consuming review and approval processes that waste the resources of local government and create a climate of regulatory uncertainty that does not promote the public interest.
Although the Supreme Court failed to take advantage of this opportunity, Congress is certainly empowered to do so. I hope my bill, the Private Property Rights Implementation Act, will help move us in that direction.
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H.R. 1534 will allow more straightforward and equitable access to the courts for persons who are injured by government actions. The focus of the bill is on giving property owners their day in court, not on choosing sides in takings questions.
The bill addresses cases involving land-use restrictions imposed by local, regional or federal governments. No new cause of action is created by the bill because, under the Fifth Amendment, people already are protected if their property is taken for a public purpose.
To allow Constitutionally-protected property rights to be implemented, the bill instructs the federal courts not to abstain their jurisdiction over Fifth Amendment claims, in cases where only federal claims have been asserted. A person should have an uncomplicated way to litigate their claim in federal court, rather than being shipped back to the state courts.
The bill does not give the federal courts any new authority or jurisdiction over state or local issues. To protect states' rights, the bill accounts for situations when important, and unclear, questions of state or local law arise in the course of the federal claim. The federal court can ''certify'' that question with the relevant state court. Only after the state court has answered that question can the federal case go forward. The bill does not change the existing certification procedures of any state, to require a state to take any action.
The bill would define ''final decision'' as one time through the application process and one time through the appeals process. At present, the courts sometimes require property owners to seek multiple appeals or waivers before considering their claim that property has been taken. The bill states that a person must only appeal an agency action once, and be denied, in order for the agency action to be considered ''final.'' If the court determines that appealing the decision would be futile, it can proceed with a hearing on the merits of the claim.
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H.R. 1534 is strictly procedural in nature. It would not change substantive law. The bill does not define a ''taking'' or establish a trigger for when compensation is due. All the legislation would do is provide a less complicated way for property owners to have their day in court.
As is currently the case, under H.R. 1534, whether a property owner has a legitimate claim for compensation would be determined by the court. The property owner still would have the burden of proof and would have to make the case that property interests have been harmed and compensation is due.
Mr. Chairman, I would like to stress that, with this legislation, we are not seeking to create a property right; we seek to allow Americans to exercise the property rights that they already have. By helping people get their day in court, we will be implementing a fundamental part of the federal property right.
I look forward to the testimony we will hear today. Again, I thank you for this opportunity and look forward to working with you on moving this bill forward.
Mr. COBLE. The gentleman from New Jersey has asked to be recognized briefly.
Mr. ROTHMAN. Thank you, Mr. Chairman. I just wanted to welcome the entire panel. I am looking forward to your testimony, in particular Mr. Carl Goldberg from the Garden State, who is a well-regarded developer and entrepreneur in our State. I am sure he will have very important things to say to our committee.
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Mr. COBLE. Mr. Betsworth.
STATEMENTS OF DONALD BETSWORTH, PRESIDENT, NORTH CAROLINA HOME BUILDERS ASSOCIATION, ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS
Mr. BETSWORTH. My named is Donald Betsworth. I am President of the North Carolina Home Builders Association. Today I am speaking on behalf of the 190,000 member firms of the National Association of Home Builders. I would like to express my strong support for H.R. 1534, the Private Property Rights Implementation Act introduced by Representative Elton Gallegly.
I am a property owner and a businessman. My livelihood and the livelihood of all my employees depends upon having some degree of certainty as to the use of the property my company has purchased for development. If I cannot reasonably predict how I will be allowed to use my property and thus how much income can be derived from its development, I cannot determine the level of risk I am taking in purchasing a piece of property.
There are often very good reasons why a government agency puts restrictions on how I use my land. The restrictions may benefit the environment or minimize the impact on transportation, sewers or schools; or maybe the only reason is for aesthetics, some planner's vision of how an area should look. Whatever the reason, my business has to comply with these kinds of restrictions all the time when submitting building plans.
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When the limitations on development are reasonable and when the agency involved is acting in good faith, negotiating an agreement on how we use our land only makes sense. Builders like myself are in the business of building, not suing. If I can work out my land use disputes, I will.
Unfortunately, government agencies, whether Federal, State or local, do not always act in good faith when making land use decisions. On occasion government agencies find it either too inconvenient or too expensive to consider the rights of those who own the property before imposing laws or regulations restricting its use. The fifth amendment to our Constitution guarantees that the government shall not take private property for public use without just compensation. If a government agency determines that my property would better serve a public good than my own, whether for environmental, organizational or aesthetic reasons, I am not going to be very happy at all, but I should at least be compensated for it. Again, our Constitution guarantees that.
The problem is that it is nearly impossible to assert my fifth amendment rights as a property owner. When I cannot work out my differences with the government agency which has restricted the use of my property, and my only recourse is to seek relief in the court, the door is effectively closed to me. Under current law, the procedural and legal hurdles I would face trying to assert my property rights in Federal court are so time-consuming and expensive, it is not worth the effort. Only the wealthiest of property owners can afford to clear every hurdle and obstacle, a process that can take years and cost millions in legal fees just to have the merits of a case heard in Federal court.
I know that and the government agencies know that. Therefore, in essence, land use agencies hold all the cards in determining the extent of the permissible uses of my property. When I feel that an agency has violated my constitutional rights, I should at least have the option of defending my rights in court.
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H.R. 1534, the Private Property Rights Implementation Act, is a fair, balanced way of addressing this kind of problem. H.R. 1534 is a procedural bill allowing property owners like me an opportunity to have access to Federal court when my constitutional rights have been infringed upon by a government agency. Although other property right bills from the 104th Congress were attacked on these grounds, H.R. 1534 does not affect any environmental law, impact the budget or define for the courts when a taking has occurred. Instead, the bill simply attempts to clear the procedural hurdles that currently prevent property owners from having their case heard in court in a fair and expeditious way.
Some have tried to allege that H.R. 1534 will force land decisions to be made at the Federal level instead of at the local level. Let me assure you that nothing could be further from the truth. As a businessman, I would far prefer that local land use decisions be made at the local level instead of at the Federal level. Local officials are in a far better position than bureaucrats in Washington to know how best to deal with land use questions. In fact, NAHB has been arguing for more local control on land use decisions for years as it applies to Federal laws regulating the environment, like the Clean Water Act and the Endangered Species Act. However, when my Federal constitutional rights have been violated by any government official, Federal or local, I should have the ability to seek relief in Federal court.
H.R. 1534 is a reasonable, modest, targeted approach to dealing with the concerns of property owners who feel that their rights have been infringed upon by government actions. Thank you for this opportunity to express to you how important H.R. 1534 is to property owners and the 190,000 member firms of the National Association of Home Builders.
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Mr. COBLE. Thank you, Mr. Betsworth.
[The prepared statement of Mr. Betsworth follows:]
PREPARED STATEMENT OF DONALD BETSWORTH, PRESIDENT, NORTH CAROLINA HOME BUILDERS ASSOCIATION, ON BEHALF OF THE NATIONAL ASSOCIATION OF HOME BUILDERS
My name is Donald Betsworth and I am president of the North Carolina Home Builders Association. Today, I am speaking on behalf of the 190,000 member firms of the National Association of Home Builders. I would like to express my strong support for H.R. 1534, the Private Property Rights Implementation Act introduced by Representative Elton Gallegly (R–CA).
I am a property owner and a businessman. My livelihood, and the livelihood of all my employees, depends on having some degree of certainty as to the use of the property my company has purchased for development. If I cannot reasonably predict how I will be allowed to use my property, and thus how much income can be derived from its development, I cannot determine the level of risk I am taking in purchasing a piece of property.
The taxes I will pay on that property are real. The interest payments I will pay on the loan are real. The salaries and benefits I will pay to my employees are real. The costs of doing business, including geological surveys, building equipment, environmental analyses, etc. are real. When government agencies make decisions about land use, the impact on people like me and my employees is real. And when those land use decisions prohibit me from building on property I have purchased for that very purpose, I can assure you that the very real costs of doing business, including the taxes I pay, do not go away.
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There are often very good reasons why a government agency puts restrictions on how I use my land. The restrictions may benefit the environment, or minimize the impact on transportation, sewers, or schools. Or maybe the only reason is for aesthetics—some city planners' vision of how an area should look. Whatever the reason, my business has to comply with these kinds of restrictions all the time when submitting building plans. When the limitations on development are reasonable, and when the agency involved is acting in good faith, negotiating an agreement on how we use our land only makes sense. Builders like myself are in the business of building, not suing. If I can work out my land use disputes, I will.
Unfortunately, government agencies—whether federal, state, or local—do not always act in good faith when making land use decisions. On occasion, government agencies find it either too inconvenient or too expensive to consider the rights of those who own the property before imposing laws or regulations restricting its use. The Fifth Amendment to our Constitution guarantees that the government ''shall not take private property for public use without just compensation.'' If a government agency determines that my property would better serve a public good than my own—whether for environmental, organizational, or aesthetic reasons—I am not going to be happy about it, but I should at least be compensated for it. Again, our Constitution guarantees that.
The problem is that it is nearly impossible to assert my Fifth Amendment rights as a property owner. When I cannot work out my differences with the government agency which has restricted the use of my property, and my only recourse is to seek relief in court, the door is effectively closed to me. Under current law, the procedural and legal hurdles I would face trying to assert my property rights in federal court are so time-consuming and expensive it is not worth the effort. Only the wealthiest of property owners can afford to clear every hurdle and obstacle, a process that can take years and cost millions in legal fees, just to have the merits of a case heard in a federal court. I know that, and the government agencies know that. Therefore, in essence, land use agencies hold all the cards in determining the extent of the permissible uses of my property. When I feel that an agency has violated my constitutional rights, I should at least have the option of defending my rights in court.
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What kinds of problems do we face as property owners? Let me describe a typical scenario. One property owner in my home state of North Carolina, a husband and wife, have owned a small residential plot of land since 1954. They had a home on the Northeast corner of the 11 1/2 acre property. Since 1954, this couple paid taxes on the full 11 1/2 acres and the home—the land was valued at $18,000 an acre. The couple attempted to sell the home and decided to subdivide the property, selling the house separately from the rest of the vacant land. Subdividing the property into two lots met the existing zoning requirements.
However, the city informed the property owner that the ''price'' to subdivide the property was to dedicate about 5 1/2 acres, almost half of the entire lot, to the city and the county for a street right of way and for ''drainage and open space and utility easement or thoroughfare. '' This 5 1/2 acres that had to be dedicated as the price for subdividing the property had a tax value of over $80,000 at the time. This couple was not compensated for this loss of their property—not one dime. The city reasoned that the land they took was ''land the owner could not have built upon and couldn't use.'' First, the city is in no position to make that judgement on another's property. Second, the couple had paid taxes on that property for 40 years—now the city claims that they couldn't really use it anyway. At a minimum, they should have received a tax refund for those years of payments.
This couple did not have the money or the time to '' fight city hall.'' Even though the Supreme Court ruled in Nollan v. California Coastal Commission that property owners should not be subjected to ''extortion'' as the price for the right to use their property, the couple was informed of the long, expensive legal battle ahead if they chose to assert their rights. Rather than face a potential 10 years in court just waiting for the right to have a trial on the merits, this couple, like most couples, gave in.
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H.R. 1534, the Private Property Rights Implementation Act, is a fair, balanced way of addressing this kind of problem. H.R. 1534 is a procedural bill, allowing property owners like me an opportunity to have access to federal court when my Constitutional rights have been infringed upon by a government agency. Although other property rights bills from the 104th Congress were attacked on these grounds, H.R. 1534 does not affect any environmental law, impact the budget, or define for the courts when a ''taking'' has occurred. Instead, the bill simply attempts to clear the procedural hurdles that currently prevent property owners from having their case heard in court in a fair and expeditious manner.
The first major hurdle is resolving when a decision of an administrative agency is ''final'' for purposes of being ripe for court review. The federal courts require that property owners first try to resolve their land-use disputes with the government agency before suing for compensation under the Fifth Amendment. That seems reasonable enough. In our litigious society, the courts would be flooded with cases if there were not some rules to determine whether someone had a case. However, the way the current rules are interpreted by the courts puts property owners at an enormous disadvantage. We are required to meet a standard above and beyond what any other federal litigant would have to meet to prove that we have tried to resolve differences peacefully.
Property owners have to prove that the agency's decision is final and that we have exhausted all available judicial remedies provided by the state before we can bring our Fifth Amendment claim in federal court. What does a ''final decision'' mean? I don't know, and I don't think anyone can honestly say that they know. Property owners seeking redress in federal court are caught in a guessing game. Let's suppose I've been rejected on three appeals and have designed 3 different plans to mitigate the problem raised by the local planning agency—is that enough? It depends. I can spend the time and money to file my claim in federal court only to be told that I need to try different avenues of administrative relief. When is enough, enough?
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H.R. 1534 answers that question. The bill simply says that once an agency has rendered a ''definitive decision'' rejecting my application to use my property, I cannot file a Fifth Amendment claim in federal court unless I first submit an appeal or waiver request to the appropriate administrative agency—unless I can prove in court that any attempt to deal with that agency would be futile. The government should be able to tell me why my permit or application was denied and what it will accept—if I cannot build 25 homes, can I build 15 homes. If the agency rejects my reapplication, appeal or waiver, then the agency's decision is considered ''final'' as far as the federal court is concerned. Does that mean I have to go to court, or that my incentive to negotiate an agreement with the agency is gone? No. H.R. 1534 simply puts an objective, defined end to the process of appeals so that I can make the decision, as a property owner and businessman, whether I have a chance of coming to an agreement with the government as to how I use my property or whether my only recourse is to find relief in the courts. Right now, I don't have any choice. My fate is completely in the hands of the government agency to determine whether its decision about my land is final.
Despite the arguments of some opponents of H.R. 1534, the bill does not bypass the requirement that property owners seek permit approvals from administrative agencies. It simply sets an objective criterion for when I have done enough, spent enough time, spent enough money, to have the right to consider seeking relief in federal court. My hope is that H.R. 1534 will reduce unnecessary litigation, which costs me and the government time and money and keeps the lawyers rich. Instead of filing multiple lawsuits trying to find out whether I have met the ripeness requirements of the federal courts, which government agencies must pay to defend against, I will get a more expedient answer based on the merits of my case as to whether my rights have been violated and whether I should choose the option of litigation. Government agencies, including city governments, that negotiate with property owners in good faith and do not trample individual rights should applaud this effort to save them years of litigation costs.
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The second major hurdle is knowing whether their case belongs in federal court or state court. It only makes sense that if I am making a federal claim, I should have the right to be heard in federal court; if I am making a state or local claim, it would normally belong in state court. For example, if a local police force breaks into my home without a search warrant and I want to file a federal claim that my Fourth Amendment rights have been violated there is no question that the federal courts would have jurisdiction over that claim—even though it arose from the actions of a local government agency. Or, I could instead choose to seek relief in state court, by filing a claim that the action violated state or local laws prohibiting entry without a warrant. As the injured party, I would be able to choose how best to protect my rights as a citizen.
For property owners claiming that their Fifth Amendment rights have been violated, the equation is not so simple. These federal claims are handled far differently than other federal claims. Uniquely, property owners can be told by a federal court that they must first seek relief in state court before their case will be heard—even if there is no state claim being made. Imagine a First Amendment victim being told that they have to file in state court first to see whether state law provides any protection against government limits on free speech. It doesn't happen. Only property owners are forced to clear that hurdle before having their day in federal court.
H.R. 1534 simply states that if an individual is filing a federal claim in federal court, the federal court cannot abstain and force the property owner to re-file in state court. It ensures that property owners are treated the same as everyone else. Again, the bill applies only to federal claims filed in federal court. The bill further states that if there is a question of state or local law that is both essential to the federal claim being filed and patently unclear to the federal court, the federal court can certify that question to the state court to be determined. It does not change the certification procedures of any state.
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Some have tried to allege that H.R. 1534 will force land use decisions to be made at the federal level instead of at the local level. Let me assure you that nothing could be farther from the truth. As a businessman, I would far prefer that local land use decisions be made at the local level, instead of at the federal level. Local officials are in a far better position than bureaucrats in Washington to know how best to deal with land use questions. In fact, NAHB has been arguing for more local control on land use decisions for years as it applies to federal laws regulating the environment—like the Clean Water Act and Endangered Species Act. However, when my federal constitutional rights have been violated by any government official—federal of local—I should have the ability to seek relief in federal court.
H.R. 1534 is a reasonable, modest, targeted approach to dealing with the concerns of property owners who feel that their rights have been infringed by government actions. Thank you very much for this opportunity to express to you how important H.R. 1534 is to property owners and the 190,000 member firms of NAHB. I look forward to your questions.
Mr. COBLE. Professor Mandelker, I just uttered sterling complimentary words about you in your absence. It is good to have you at the table.
Mr. Goldberg is recognized for 5 minutes.
STATEMENT OF CARL GOLDBERG, PARTNER, ROSELAND PROPERTY COMPANY, ON BEHALF OF THE NEW JERSEY HOME BUILDERS ASSOCIATION
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Mr. GOLDBERG. Thank you, Mr. Chairman. I am Carl Goldberg, partner with the Roseland Property Company in New Jersey. My company is involved in all aspects of the shelter industry with special emphasis on rental housing in our urban areas. In this calendar year alone, my company anticipates completing over 500 rental units with approximately 125 of those being deed-restricted for low- and moderate-income families.
In my professional capacity, I have acquired substantial experience with those who regulate land use at every level of government, local, State and Federal. They are for the most part competent professionals who responsibly implement programs to protect our health, safety and our environment. While few, if any, question the goals of land use and environmental regulations, it is recognized that such measures can adversely affect selected citizens, notably property owners. And where such inequitable outcome occurs, a disagreement between our public servants and the affected citizens is virtually inevitable.
Most of us believe that negotiation and cooperation are the best means of resolving disagreements between private applicants and public agencies concerning the balancing of public goals on the shoulders of private citizens. Where the two can find a reasonable accord, no one individual is asked to bear an undue burden on behalf of the rest. I think we all recognize, however, the unequal bargaining position of the two parties. Private citizens have finite resources. While public agencies can defer decisions with little effort, the cumulative impact of these procedural hurdles and the delays they impose on someone seeking to use their own property is tantamount to denying an application without ever rendering a decision. It is not clear that the statutory objectives of the regulators are advanced by such an outcome. It is clear, however, that the citizen's property and due process rights are frustrated, and except for those with substantial amounts of time and money, the current legal process offers no relief.
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This may be far more common than policymakers believe. According to a study by Linowes and Blocher, over 80 percent of all compensation claims in Federal district court never get a hearing on the merits. Since it takes on average some 10 years to gain a hearing on the merits of a compensation claim, the disincentives to pursuing such a claim are obvious. Equally obvious is the absence of any incentive to the regulators to seek accommodations that will accomplish their policy purpose without unduly injuring individual property owners.
H.R. 1534 is intended to restore some balance to the relationship between those who regulate and those who are regulated. It responds to the often mentioned maxim this morning, but I think it is equally still true, that justice delayed is, in fact, justice denied.
The importance of this legislation can be illustrated by the experience of Mr. William Ullman from my home State of New Jersey in a Federal court case commonly known as Loveladies Harbor. Mr. Ullman was not wealthy. Instead, he was a Department of Treasury employee who owned some property in south Jersey. This property was a nest egg for Mr. Ullman to supplement his income through the construction and sale of homes.
Following passage of the Clean Water Act, the U.S. Army Corps of Engineers ordered Mr. Ullman to cease development until he obtained the required Federal permit. He complied and submitted the required applications beginning with the appropriate State agencies. Although the State agencies issued their permits, they asked the Army Corps to deny Mr. Ullman's Federal application.
Mr. Ullman was to spend the next 2 decades seeking a final decision on his application and, upon its denial, compensation for the taking of his property. Ultimately, as a consequence of the Loveladies Harbor decision, Mr. Ullman's claim for compensation was honored. Unfortunately, Mr. Ullman was still denied his day in court and was still denied his nest egg. He had died before the courts finally reached their decision.
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I am confident that no one associated with the Loveladies case envisioned, much less desired, the tragic outcome. They were diligently implementing the law within the existing legal context. Nonetheless, in the absence of the reforms inherent in H.R. 1534, Mr. Ullman was denied his day in court. He was denied his constitutionally protected rights.
As a real estate professional, I accept, indeed I support, government's role in protecting our health and safety through a variety of land use and environmental measures. Further, I accept that government agencies can order the cessation of any activity thought to violate the laws and regulations intended to give us that protection. But even as I accept the legitimacy of such regulations, I recognize the potential for inequities and the need to guard against them. The current system does not provide such protection, even though the fifth amendment mandates it.
H.R. 1534 is intended to reform the system so that those citizens whose property is taken have some protection against the use of convoluted procedures that deny them their day in court. It is to be emphasized that H.R. 1534 merely opens the door to the courts. It does not change the standards by which the courts will then consider the claim.
In allowing claimants their day in court, H.R. 1534 in no way alters the standards that property owners must satisfy in order to qualify for compensation. Those who argue that simply by granting citizens timely access to the judiciary, H.R. 1534 will increase takings payments implicitly admit that citizens' rights are currently being violated. Under the current circumstances, why should we expect otherwise? What incentives exist to encourage sensitivity to the impacts on private property owners if injured parties are denied timely access to the courts? Where are the checks and balances to ensure equitable and efficient regulation?
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Mr. Chairman, H.R. 1534 provides a much-needed balance to our system of regulating private property, in no way diminishing our government's ability to protect our health and safety.
Mr. COBLE. Mr. Goldberg, are you about ready to wrap up?
Mr. GOLDBERG. It alters no land use or zoning authority. H.R. 1534 simply assures that all these legitimate functions are pursued equitably. Thank you.
[The prepared statement of Mr. Carl Goldberg follows:]
PREPARED STATEMENT OF CARL GOLDBERG, PARTNER, ROSELAND PROPERTY COMPANY, ON BEHALF OF THE NEW JERSEY HOME BUILDERS ASSOCIATION
Thank you Mr. Chairman and members of the committee: I am Carl Goldberg, a partner with the Roseland Property Company in New Jersey. My company is involved in all aspects of the shelter industry, with special emphasis on rental housing in our urban areas.
In my professional capacity, I have acquired substantial experience with those who regulate land use at every level of government—local, state and federal. They are, for the most part, competent professionals who responsibly implement programs to protect our health, safety and environment.
While few, if any, question the goals of land use and environmental regulations, it is recognized that such measures can adversely affect selected citizens, notably property owners. And where such an inequitable outcome occurs, a disagreement between our public servants and the affected citizens is virtually inevitable.
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Most of us believe that negotiation and cooperation are the best means of resolving disagreements between private applicants and public agencies concerning the balancing of public goals on the shoulders of private citizens. Where the two can find a reasonable accord, no one individual is asked to bear an undue burden on behalf of the rest.
I think we all recognize, however, the unequal bargaining position of the two parties. Private citizens have finite resources. While public agencies can defer decisions with little effort. The cumulative impact of these procedural hurdles, and the delays they impose on someone seeking to use their own property, is tantamount to denying an application without ever rendering a decision. It is not clear that the statutory objectives of the regulators are advanced by such an outcome. It is clear, however, that the citizen's property and due process rights are frustrated. And, except for those with substantial amounts of time and money, the current legal process offers no relief.
This may be far more common than policymakers believe. According to a study by Linowes and Blocher (a copy accompanies my submission) over 80% of all compensation claims in federal district court never get a hearing on the merits. Since it takes, on average, some 10 years to gain a hearing on the merits of a compensation claim, the disincentive to pursuing such a claim are obvious. Equally obvious is the absence of any incentive to the regulators to seek accommodations that will accomplish their policy purpose without unduly injuring individual property owners.
H.R. 1534 is intended to restore some balance to the relationship between those who regulate and those who are regulated. It responds to the maxim that ''justice delayed is justice denied.''
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The importance of this legislation can be illustrated by the experience of Mr. William Ullman from my home state of New Jersey. In a federal court case known as Loveladies Harbor, Mr. Ullman was not wealthy; instead he was a Department of Treasury employee who owned some property in South Jersey. This property was a ''nest egg'' for Mr. Ullman to supplement his income through the construction and sale of homes.
Following passage of the Clean Water Act. The U.S. Army Corps of Engineers ordered Mr. Ullmann to cease development until he obtained a federal permit. He complied and submitted the required applications, beginning with the appropriate state agency. Although the state agency issued their permit, they asked the Army Corps to deny Mr. Ullmann's federal application.
Mr. Ullmann was to spend the next two decades seeking a final decision on his application and, upon its denial, compensation for the taking of his property. Ultimately, as a consequence of the Loveladies Harbor decision, Mr. Ullman's claim for compensation was honored. Unfortunately, Mr. Ullmann was still denied his ''nest egg'' because he died before the courts finally issued their decision.
I am confident that no one associated with the Loveladies case envisioned, much less desired, this tragic outcome. They were diligently implementing the law within the existing legal context. Nonetheless, in the absence of the reforms inherent in H.R. 1534, Mr. Ullmann was denied his day in court. He was denied his constitutionally protected rights.
Like Mr. Ullmann, Mrs. Bernadine Suitum is not a wealthy developer. She is an elderly widow too infirm even to appear before this hearing. Mrs. Suitum wanted to build her retirement home on a piece of property she had bought many years before for that very purpose. After she bought her property, the local planning commission decided that no more development could occur there—even though her lot is surrounded on all sides by three other homes and a paved road.
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Mrs. Suitum spent seven years in court, fighting for the right to get a hearing in federal court on the grounds that her Fifth Amendment rights had been violated. For those seven years, the planning agency argued in federal court that her case was not ripe and that she did not deserve a trial on the merits. The Supreme Court finally disagreed in a unanimous decision earlier this year.
However, Mrs. Suitum has not received any compensation for her land—after seven years in court she only won the right to have another trial, this time on the merits. She could still lose her case. H.R. 1534 won't help Mrs. Suitum on the merits of her case, but it can help future Mrs. Suitums from being forced into a seven year court battle to defend her constitutional rights.
As a real estate professional, I accept—indeed support—government's role in protecting our health and safety through a variety of land use and environmental measures. Further, I accept that government agencies can order the cessation of any activity thought to violate the laws and regulations intended to give us that protection.
But even as I accept the legitimacy of such regulations, I recognize the potential for inequities and the need to guard against them. The current system does not provide such protection, even though the Fifth Amendment mandates it.
H.R. 1534 simply puts property owners on a level playing field with other individuals asserting constitutional rights. If a local police force breaks into my home without a search warrant, and I chose to go to federal court to allege that my Fourth Amendment rights have been violated, there would be no question that I could have the merits of my case heard. Would anyone argue that having Fourth Amendment rights protected in federal court forces local law enforcement decisions to be made at the federal level? Does my right to go to federal court with that claim pose a threat to states' rights?
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Supreme Court Justices William Brennan and Thurgood Marshall wrote in 1981 in the San Diego Gas & Electric Company v. City of San Diego dissenting opinion (which six years later became the majority view):
''Indeed, land-use planning commentators have suggested that the threat of financial liability for unconstitutional police power regulations would help to produce a more rational basis of decisionmaking that weighs the costs of restrictions against their benefits. Such liability might also encourage municipalities to err on the constitutional side of police power regulations, and to develop internal rules and operating procedures to minimize overzealous regulatory attempts.
After all, a policeman must know the Constitution, then why not a planner?''
Indeed, why not a planner? Why shouldn't land-use planning agencies be aware of a property owner's rights when making decisions affecting his/her land? And when the agency goes too far, should not that individual have a fair and expeditious hearing—not on the ripeness of the case, but on the merits of the case?
H.R. 1534 is intended to reform the system so that those citizens whose property is taken have some protection against the use of convoluted procedures to deny them their ''day in court.'' It is to be emphasized that H.R. 1534 merely opens the door to the courts; it does not change the standards by which the courts will then consider the claim.
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In allowing claimants their ''day in court,'' H.R. 1534 in no way alters the standards that property owners must satisfy in order to qualify for compensation. Those who argue that simply by granting citizens timely access to the judiciary H.R. 1534 will increase takings payments implicitly admit that citizens' rights are currently being violated.
Under the current circumstances, why should we expect otherwise? What incentive exists to encourage sensitivity to the impacts on private property owners? If injured parties are denied timely access to the courts, where are the checks and balances to ensure equitable and efficient regulations?
Mr. Chairman, H.R. 1534 provides much needed balance to our system of regulating private property. It in no way diminishes government's ability to protect our health or safety; it changes no environmental program; it alters no land use or zoning authority.
H.R. 1534 simply assures that all of these legitimate functions are pursued equitably, so that all citizens share their costs and benefits.
Thank you, Mr. Chairman, for the opportunity to speak in support of H.R. 1534.
Mr. COBLE. Ms. Osenbaugh, we have a vote on. Can you give your testimony in 5 minutes?
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Ms. OSENBAUGH. Yes, Mr. Chairman.
STATEMENT OF ELIZABETH M. OSENBAUGH, SOLICITOR GENERAL, IOWA ATTORNEY GENERAL'S OFFICE, DEPARTMENT OF JUSTICE
Ms. OSENBAUGH. Mr. Chairman, I am honored to be here today to testify on behalf of Iowa Attorney General Tom Miller and to present a letter in opposition to H.R. 1534 that is signed by the attorneys general of 37 States and three territories.
We are very concerned that section 2 drastically expands Federal court jurisdiction at the expense of important State interests. It orders Federal courts to hear cases more appropriately resolved by State courts. Under current law Federal courts abstain from hearing challenges to State and local action where to do so would disrupt important State proceedings. Examples would range from criminal proceedings, to licensing proceedings, to land use proceedings.
Abstention doctrine preserves important State interests and assures that Federal courts will not reach constitutional questions unnecessarily. If a lawyer can simply draft an abstention-proof pleading by simply omitting any State law claims, then it is clear that this bill would provide two opportunities for defendants to derail important State administrative and judicial proceedings.
The bill would also federalize land use disputes. It encourages Federal litigation before local land use disputes are resolved. It requires Federal courts to hear claims prematurely and in lieu of State compensation processes.
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Property law is an area that is traditionally a State and local matter of intense local concern. The States have developed zoning processes that provide for variances and appeals to assure that the States do not violate the constitutional prohibition against takings without just compensation. Those processes assure consideration of competing interests designed to mitigate undue hardships through variances and provide official accountability and consistency by providing for appeals to the city council, board of adjustment, head of the State agency, the final decisionmaker with regard to the issue.
This bill would shortcut the very processes developed by the States and local governments to consider all of these interests and to assure compensation in cases of taking. It would discourage the mediation and resolution of local disputes at the local level, and it would waste Federal judicial resources because there would be many lawsuits which would have been resolved had the State processes been completed.
The cost to State and local treasuries is enormous, because it will encourage persons to sue for damages and attorney's fees in Federal court rather than resolve disputes. It will often require our lawyers to be litigating in two forums at the same time.
The Constitution does not prohibit takings. It prohibits takings without the payment of just compensation. By permitting suit in Federal court before the State remedies are exhausted this statute would authorize actions against States where there has been no constitutional violation because the State has not yet had the opportunity to determine whether the payment of just compensation is required and to award it.
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This bill runs contrary to basic principles of federalism. As the Chair has indicated, abstention and ripeness is a complex area of the law. That law reflects many important considerations, and we would request that the Congress not revise that law without careful consideration of the impact on State and local governments. That is why I am here and why the bill is opposed by 40 State attorneys general, the U.S. Conference of Mayors, and the National Municipal Lawyers Association. I would ask that the letter from the State attorneys general be entered into the record.
Mr. COBLE. Without objection.
Ms. OSENBAUGH. And those additional letters.
I thank the committee for its consideration of our views.
[The prepared statement of Ms. Osenbaugh follows:]
PREPARED STATEMENT OF ELIZABETH M. OSENBAUGH, SOLICITOR GENERAL, IOWA ATTORNEY GENERAL'S OFFICE, DEPARTMENT OF JUSTICE
I am honored to be here today to testify on behalf of Iowa Attorney General Tom Miller and to present a letter in opposition to H.R. 1534 which is signed by the Attorneys General of 37 States and three territories.
Section two of H.R. 1534 would drastically expand federal court jurisdiction at the expense of important State interests. The bill would do so by ordering federal courts to hear cases which are more appropriately heard in state proceedings. Under current law, federal courts abstain from hearing cases challenging state or local action in instances where to do so would disrupt important State proceedings, such as on-going criminal cases or attorney license disciplinary proceedings. Abstention preserves important state interests and also assures that federal judges not reach constitutional questions unnecessarily. If a lawyer can challenge any state proceeding by simply omitting any state law claim from the federal petition, as provided in section two of H.R. 1534, defendants in state criminal or disciplinary proceedings will have two opportunities to derail a state prosecution.
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H.R. 1534 would ''federalize'' land use disputes and encourage persons to sue in federal court before local land use disputes are resolved. New 28 U.S.C. section 1343(e) would require federal courts to hear takings cases prematurely and in lieu of state court compensation processes. Property law is traditionally a matter of intense State and local concern. Zoning laws typically provide for variance and appeal processes to assure consideration of competing interests, mitigate undue hardship, and provide official accountability by having boards of adjustment or city councils render final decisions. This bill would short-cut this process and discourage mediation and resolution of local disputes. The waste of judicial resources is great because many of these disputes would otherwise be resolved through state and local remedies. The cost to State and local treasuries can be enormous as developers are encouraged to sue for damages and attorneys fees rather than resolve disputes.
The Constitution does not prohibit takings of property; it prohibits takings without just compensation. By permitting suit in federal court before state remedies are exhausted, the statute would authorize actions where there has been no constitutional violation. We question whether federal courts could constitutionally hear such claims against State officials.
H.R. 1534 runs contrary to principles of federalism. Its provisions would displace carefully crafted functional tests which prevent undue and premature federal judicial intrusion into State and local matters. The law of abstention, finality, and ripeness reflects many considerations. We would ask that this body of law not be revised without careful consideration of the impact on state and local governments throughout the country. That is why I am here. It is also why forty Attorneys General, the U.S. Conference of Mayors, the International Municipal Lawyers Association, the American Planning Association, and others have expressed their opposition to the bill.
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Thank you for your consideration of these views.
STATE ATTORNEYS GENERAL
A COMMUNICATION FROM THE CHIEF LEGAL OFFICERS OF THE FOLLOWING STATES
Hon. HENRY J. HYDE,
Chairman, Committee on the Judiciary,
U.S. House of Representatives, Washington, DC.
DEAR CHAIRMAN HYDE: We, the Attorneys General of Alabama, Alaska, Arizona, California, Connecticut, Delaware, Florida, Georgia, Guam, Hawaii, Idaho, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, Tennessee, Texas, Vermont, Virgin Islands, Washington, Wisconsin, and Wyoming, are writing to express our strong opposition to H.R. 1534. Entitled an act ''to simplify and expedite access to the Federal courts for injured parties . . .,'' H.R. 1534 invades the province of state and local governments and directs federal judges to intrude into matters pending before state and local officials and courts. Not only does the bill catapult many state land use decisions into federal court but it also authorizes defendants in any type of state or local case, civil or criminal, to seek the intervention of a federal judge.
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We are also concerned that H.R. 992, ''the Tucker Act Shuffle Relief Act,'' also pending in this committee, may be construed to subject state defendants to unconstitutional exercises of judicial power by judges not appointed under Article III of the Constitution.
H.R. 1534
Section two of H.R. 1534 literally compels federal judges to intrude into state and local matters. It does so in three very damaging ways. First, it prohibits federal judges from abstaining from hearing issues which are pending in important state adjudicative proceedings. Second, it restricts federal judges from certifying state law questions to state courts. Third, it orders federal judges to hear ''takings'' claims before state or local land use proceedings are completed and in disregard of state procedures to pay just compensation.
ABOLISHING ''YOUNGER'' ABSTENTION
Section two [by adding new 28 U.S.C. §1343(c)] would effectively abolish ''Younger abstention'' in any case brought alleging a deprivation of federal constitutional rights. The section would amend 28 U.S.C. §1343 by prohibiting a federal court from abstaining in an action where no violation of state law is alleged. Younger v. Harris, 401 U.S. 37 (1971), held that federal courts must almost always dismiss civil rights suits challenging ongoing state criminal prosecutions. The Younger doctrine also prevents federal courts from intervening in pending state civil or administrative adjudicatory proceedings which implicate important state interests and which provide full and fair opportunity to resolve the federal constitutional claim. Ohio Civil Rights Comm'n v. Dayton Christian Schools. Inc., 477 U.S. 619 (1986). This doctrine has been applied to protect the jurisdiction of state agencies and courts to hear and decide criminal cases, prison discipline, attorney or doctor disciplinary matters, and drivers license revocation, for example.
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Abstention assures that important State proceedings will not be disrupted. State administrative processes are designed to accommodate the many interests involved in diverse areas of state regulation. (For example, a medical doctor charged with incompetence cannot now jump into federal court to avoid peer review by other doctors in a licensing case. Often, an incompetent doctor might prefer to take a chance with a ''battle of the experts'' in federal court on an allegation of denial of equal protection, for example.) Abstention not only preserves important State interests in its own decision-making processes but also assures that federal judges not reach constitutional issues unnecessarily. Abstention protects state and federal courts from conflicts and wastes of resources. If a lawyer can craft an abstention-proof petition by simply omitting state law claims, many cases will be tried in state and federal proceedings simultaneously, thus giving defendants in state criminal or disciplinary proceedings two opportunities to derail a state prosecution. State and local prosecutors would be forced to expend resources in simultaneously prosecuting and defending lawsuits where the state proceeding could effectively resolve all federal and state claims.(see footnote 20)
RESTRICTING THE CERTIFICATION OF STATE LAW QUESTIONS
Section two would order federal courts not to certify questions of State law to State courts unless the State law question will significantly affect the merits of the Federal claim and the question is ''so unclear and obviously susceptible to a limiting construction as to render premature a decision on the merits of the constitutional or legal issue in the case.'' It is unclear whether this section is intended to abolish ''Pullman abstention'' in such cases in favor of a national process for certification of state law questions. Railroad Commission of Texas v. Pullman Co., 312 U.S. 496 (1941), held that federal courts should abstain where a case raised unclear questions of state law and a state court decision on those questions might eliminate the need to resolve the federal constitutional question. So, for example, it might be appropriate for a federal court to abstain from hearing a challenge to a state statute regulating sexually explicit materials where a state court adjudication could provide a limiting construction of state law and where simultaneous federal and state proceedings might result in two different interpretations of a state statute. See, e.g., Almodovar v. Reiner, 832 F.2d 1138, 1140 (9th Cir. 1987). Certification of state law questions to the State's highest court is also helpful but certification is not a substitute for Pullman abstention in cases where there are issues of fact because the state appellate court cannot conduct an evidentiary hearing.
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About two-thirds of the states have adopted statutes providing for certification of state law questions. The reason is obvious: state courts are the ultimate arbiters of state law. Federal district courts should not make educated guesses at the meaning of state law when a mechanism exists to assure that a definitive state law interpretation can be had.
FEDERALIZATION OF LAND USE DISPUTES
Section two, new 28 U.S.C. §1343(e), would require federal courts to hear ''takings'' cases prematurely and in lieu of state court compensation processes. This will involve federal courts in local land use disputes, defeat local procedures designed to balance interests of neighboring land owners, and force local zoning procedures to conform to a federal procedural mandate.
This subsection states that a claim for ''the deprivation of a property right or privilege secured by the Constitution'' is ripe for federal court action if a definitive decision regarding the extent of permissible uses on the property is made by ''any person'' acting under color of state law and if the party has applied for one appeal or waiver. Further, persons are not required to exhaust state judicial remedies before suing in federal court (overruling Williamson County Regional Planning Comm'n. v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985)).
Property law is traditionally a matter of intense State and local concern. In most states, land use is primarily a local function. Local zoning and land use ordinances typically provide for an initial staff decision on a building or use permit but with built-in appeal and variance procedures to assure consideration of competing interests, to mitigate undue hardship, and to provide official accountability and consistency by having boards of adjustment or city councils render the final decision. Further, state laws recognize that the Constitution prohibits takings without just compensation. The states all have administrative and judicial processes designed to prevent takings without just compensation. These procedures typically provide for judicial review to prevent a ''taking'' under the ostensible exercise of the police power and second, provide inverse condemnation actions to assure that just compensation is paid if the governing body refuses to rescind the ''taking.''
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SOVEREIGN IMMUNITY
The invasion of State sovereignty in favor of federal courts would be accompanied by a high cost to State and municipal treasuries. The bill encourages developers and others to drop out of processes designed to work out disputes and to instead sue for damages and attorneys fees in federal court.
We question whether federal courts could constitutionally hear the suits against State officials (to be paid from State treasuries) permitted by the proposed amendment of 28 U.S.C. §1343(e) under H.R. 1534. Because the Fifth and Fourteenth Amendment prohibit only those takings made without payment of just compensation, a statute that authorizes damages remedies before the State has determined whether to ''take'' the property or the amount of compensation is not merely a procedural statute. Congress lacks the authority to interfere so directly in the operation of State and local governments and to authorize suits against the States in federal court beyond its power to enforce the Fourteenth Amendment. See Printz v. United States, 521 U.S. XX, 138 L.Ed.2d 914, 117 S.Ct. XX (1997) (Congress has the power to regulate individuals, not States); City of Boerne v. Flores, 521 U.S. XX, 138 L.Ed.2d 624, 117 S.Ct. XX (1997) (Congress lacks the power to substantively re-define constitutional limitations on the States), Seminole Tribe v. Florida, 517 U.S. XX, 134 L.Ed.2d 252, S.Ct. 1114 (1996) (Congress lacks power to abrogate State's Eleventh Amendment immunity under the Commerce or Indian Commerce Clauses or to expand federal jurisdiction beyond that provided in Article III).
H.R. 992
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We are concerned that H.R. 992, expanding the jurisdiction of the Court of Federal Claims to invalidate federal agency action, will subject State and local governmental officials to the jurisdiction of this legislative court. While on its face, H.R. 992 extends to an ''agency action'' adversely affecting private property interests and the term ''agency action'' is defined to encompass only actions of the United States, we are concerned that inclusion of a definition for the term ''state agency action'' may be construed as suggesting the availability of Tucker Act relief against States or their officials. If these ''State agency actions'' are subject to relief in the Court of Federal Claims, then we are very concerned about the wisdom and constitutionality of a non-Article III court invalidating state agency action or awarding damages against States and local government. State officials are also frequently parties to challenges to federal agency action (which is often a means of challenging state projects, such as roads, receiving federal funds). We are concerned that property owners can elect a distant forum to litigate issues of State and local concern and avoid not only the applicable state court but also the applicable federal district and appellate courts. Others affected by regulation of public concern do not have this option but would be subjected to suit in an alien forum.
For all of these reasons, we request that the Committee not approve H.R. 1534 and H.R. 992.
Very truly yours,
INSERT OFFSET RING FOLIOS 1 TO 3 HERE
Mr. COBLE. Professor, we will stand in a brief recess while we go vote. Thank you.
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[Brief recess.]
Mr. COBLE. We will reconvene.
Professor, we will be happy to hear from you, sir.
STATEMENT OF DANIEL R. MANDELKER, STAMPER PROFESSOR OF LAW, UNIVERSITY OF WASHINGTON, ST. LOUIS, MO
Mr. MANDELKER. Thank you very much, sir. I am testifying here today on my own behalf in support of H.R. 1534. I have appeared in the past before congressional committees in support of the planning and zoning system, and it is my pleasure today to support this bill as well, which I think is a very useful addition to the way in which land use cases are heard and determined.
The need for H.R. 1534 has already been quite adequately stated. As pointed out earlier, a survey done by Linowes and Blocher shows that over 80 percent of takings cases that start in U.S. district courts are dismissed before the merits are even reached. This bill attempts to deal with this problem.
First, there is no change in substantive law in this bill, nor does this bill mandate any change in local procedures. The bill merely clarifies how a citizen can get into a Federal courthouse to litigate his takings claim. It is a bill that proposes strictly procedural reforms. It does not substantively alter any provision of the Constitution. It is a bill simply providing for access to the Federal courts.
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There is no fear of crowding of Federal dockets as some have claimed, no fear that the bill will open the floodgates to takings claims. Land use cases are already in the Federal courts. They are there because of Amendment V to the Federal Constitution and because section 1983 of the Federal Civil Rights Act authorizes lawsuits in land use cases.
This bill, to the contrary, would allow for a more efficient use of judicial resources and judicial time by allowing the parties to focus on the merits rather than on the question of whether a Federal court even has jurisdiction.
What about the issue of State sovereignty? Opponents have charged that H.R. 1534 would interfere with State sovereignty, but the bill is narrowly designed to ensure only Federal court adjudication of Federal claims. It does not affect the adjudication of State claims which are a matter for State courts. Only if the citizen's fifth amendment property rights have been violated do the provisions of H.R. 1534 take effect.
Let me briefly outline the provisions of the bill on ripeness. Let me say first that on pages 32 and 33 of my testimony, you have the bill as introduced with amendments that I have suggested, which should take care of many of the questions that have been raised today concerning abstention and other matters.
There are principally two parts to the bill as it concerns ripeness. First of all, the bill provides that a takings claim is ripe, that a final decision arises when the government renders a definitive decision that causes actual and concrete injury to a landowner. The bill, in dealing with perhaps what is the most serious problem in ripeness cases, also provides that a takings claim ripens after one meaningful development application has been submitted and denied, but it also requires an administrative appeal or waiver on the part of the landowner in addition. So the suggestion that the bill is somehow doing away with local administrative and land use procedures is not correct.
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Now, as far as State remedies are concerned, the bill would not require, which is presently the case, that landowners go back to the State courts and litigate their claim there on the theory that there they might get compensation from a State court. When the Supreme Court adopted the ripeness rules, there was no Federal remedy for compensation for takings. That is why I believe the Supreme Court decided that landowners should go to the State courts first. But today there is that remedy for compensation for takings in the Federal courts, and there is no reason why litigants in these cases should not be able to go to the Federal courts first in order to secure compensation, if necessary, for their takings claims.
Insofar as abstention is concerned, our bill makes modest changes in the abstention rules simply to allow Federal courts to retain jurisdiction in these cases if questions of State law come up, and then provides for certification to the State appellate courts when State law is unclear. So contrary to what has been stated here, the bill does not allow the Federal courts to decide questions of State law.
Thank you very much.
[The prepared statement of Mr. Mandelker follows:]
PREPARED STATEMENT OF DANIEL R. MANDELKER, STAMPER PROFESSOR OF LAW, UNIVERSITY OF WASHINGTON, ST. LOUIS, MO
House Judiciary Subcommittee on Courts and Intellectual Property,
Rayburn House Office Building, Washington, DC.
Re: H.R. 1534
DEAR SUBCOMMITTEE MEMBERS: in preparation for the hearing to be held on September 25, 1997, regarding the above referenced bill, I am pleased to submit the enclosed written testimony for your consideration.
Sincerely,
Enclosure.
H.R. 1534 is designed to expedite and clarify the avenues by which a citizen can access the federal courts in cases where the government impermissibly infringes property rights protected by the Fifth and Fourteenth Amendments. The bill proposes strictly procedural reforms, and does not substantively alter any provision of the Constitution. The need for H.R. 1534 is evidenced by the lower federal courts' overwhelming predisposition to dismiss federal land use cases on jurisdictional grounds such as abstention and ripeness. Thus, citizens who spend years negotiating with land use officials, and are thereafter forced to litigate to preserve their property rights, are effectively denied their day in court because federal judges typically refuse to reach the merits of their claims.
H.R. 1534 would remedy this situation through two reform measures. First, in actions concerning the unconstitutional conduct of local officials, the bill limits the ability of federal judges to abstain from jurisdiction when property owners only assert deprivations of federal rights. When an unsettled question of state law is patently unclear but essential to resolve the alleged Constitutional violation, or when a complex state or local regulatory scheme must be interpreted, the bill permits a federal judge to certify a question of state law to the highest court of the pertinent state. However, a federal judge still retains jurisdiction and a property owner is ensured a federal hearing on the constitutional violations. State sovereignty is preserved by ensuring that state judges resolve important but unresolved issues arising under state and local law.
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Second, H.R. 1534 clarifies the confusing patchwork of decisions that determine when a federal land use case becomes ripe for review on the merits. The bill's ripeness reform measures apply against both local and federal governments, by addressing the Supreme Court's two-part test in Williamson County Regional Planning Comm'n v. Hamilton Bank. H.R. 1534 makes clear that a ''final decision'' arises when the government renders a ''definitive decision'' that causes ''actual and concrete injury'' to a landowner regarding the permissible uses of private property. The bill clarifies—for the benefit of both citizens and land use officials—that a takings claim ripens after one meaningful development application has been submitted but denied, and one waiver request or appeal to an administrative agency is rejected. In this manner, the parties can avoid an endless carousel of roundabout negotiations. Furthermore, the bill would not require property owners to litigate their solely federal claims in state court first, before they could enter the door of the federal courthouse.
By no means does H.R. 1534 specify when a constitutional violation arises, such as when a taking occurs and compensation must be paid. Rather, the bill simply preserves a meaningful option of federal court access for property owners who believe they have no other alternative but to litigate government conduct.
I am Daniel R. Mandelker, the Stamper Professor of Law at the University of Washington in St. Louis, Missouri. My area of expertise is the law of zoning and land use planning. I am the author of numerous articles in this area and have written 16 books on the topic. A copy of my curriculum vitae is attached. I am pleased to submit these comments on H.R. 1534, the Private Property Rights Implementation Act of 1997. I am here on my own behalf to support the bill. In offering this testimony I do not represent any interest group nor have I received any compensation, but the National Association of Home Builders has agreed to reimburse me for my travel and lodging expenses so I could appear here today. To prepare my submission I have reviewed, among other materials, the letter dated August 15, 1997, from Andrew Fois, Assistant Attorney General, United States Department of Justice, to Senator Patrick Leahy raising many policy concerns about H.R. 1534. I have also read the letter responding to the Department of Justice's criticisms, dated September 5, 1997, from John J. Delaney and Duane J. Desiderio of Linowes and Blocher LLP, to Mr. Fois. Some of this testimony relies upon those portions of the Linowes and Blocher letter, with which I concur.
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My written testimony has three goals. First, I will explain why, in my opinion, H.R. 1534 is necessary to afford aggrieved landowners access to the federal courts when they suffer from unconstitutional government conduct. Second, I intend to explain what H.R. 1534 does, and does not, accomplish. Third, I will offer suggestions to amend the proposed text which, in my opinion, better achieve the bill's objectives. A complete iteration of H.R. 1534 with my suggested edits is set forth at pages 32–35.
I. THE NEED FOR H.R. 1534
A. The Fifth Amendment Restricts the ''Taking'' of Private Property.
The Fifth Amendment prohibits the federal government from ''taking'' private property for public use unless the affected property owner is paid ''just compensation.'' The restrictions of the takings clause apply to state and local governments through the Fourteenth Amendment.
The Constitution thus operates under the presumption that all levels of government can regulate private property for public purposes—such as zoning, environmental preservation, or any other reason to protect the safety, health and welfare of the community. However, in the words of Justice Holmes, sometimes government regulation for a public purpose goes ''too far'' and causes a taking. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922) (Holmes, J.) For this reason, one of the ''principal purposes'' of the takings clause is to prevent government '' 'from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.' '' Nollan v. California Coastal Comm'n, 483 U.S. 825, 835 n.4 (1987) (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). Government regulation effects a taking, and requires the payment of just compensation, if it does not substantially advance a legitimate state interest or denies an owner economically viable use of his or her land. See Agins v. City of Tiburon, 447 U.S. 255, 260 (1980).
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B. Ripeness Rules and the Fifth Amendment.
Before a property owner can bring a takings claim against a government body, he must satisfy certain rules established by the Supreme Court to ensure the case is ''ripe.'' In Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985), the Court announced a two-part ripeness test before a court can decide, on the merits, whether a regulation ''goes too far'' so as to require the payment of compensation. First, a land use agency must deliver a final decision ''regarding how [a landowner] will be allowed to develop its property,'' that represents ''a definitive position . . . inflict[ing] an actual, concrete injury'' upon the property owner. 473 U.S. at 191, 192. Second, a property owner must exhaust any compensation remedies under state law before litigating its federal constitutional claims in federal court. Id. at 194–95. In applying this two-part test, the Court has found takings claims unripe where a property owner did not: (1) submit initial development plans for approval in the first instance;(see footnote 21) (2) submit to a process to obtain a permit that may allow development;(see footnote 22) (3) apply for a variance or waiver from applicable land use regulations;(see footnote 23) or (4) provide alternate or scaled-down development plans compared to an initial proposal.(see footnote 24)
I agree that certain rules are necessary to determine when a takings claim is ripe for adjudication. However, the lower courts' applications of the Supreme Court's precedents are riddled with obfuscation and inconsistency. Indeed, ''[t]he lack of uniformity among the [federal] circuits in dealing with zoning cases . . . is remarkable.'' Pearson v. City of Grand Blanc, 961 F.2d 1211, 1217 (6th Cir. 1992) (substantive due process land use case). The ripeness opinions are in such disarray that federal judges and landowners need some objective criteria so that all parties know, up front, the point at which a government land use decision becomes final. I believe that H.R. 1534 goes a long way to achieve that objective, in a manner that is fair to both property owners and government officials.
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C. The Lower Federal Courts' Rejection of their Duty to Resolve Cases Concerning Constitutionally-Protected Property Rights.
In my opinion, federal judges have distorted the Supreme Court's ripeness precedents to achieve an undeserved and unwarranted result: they avoid the vast majority of takings cases on their merits. The circumstance is all-too-frequent that federal judges greet land use matters with an air of condescension—even though private property rights protected by the Fifth and Fourteenth Amendments are at stake.
When lower courts are asked to decide whether property is taken by final agency action without compensation, I disagree with the Ninth Circuit's assessment that they sit as ''the Grand Mufti of local zoning boards.'' Hoehne v. County of San Benito, 870 F.2d 529, 532 (9th Cir. 1989). I find it unconscionable that federal judges are predisposed to dismiss cases raising deprivations of constitutionally-protected property rights as ''garden-variety zoning dispute[s] dressed up in the trappings of constitutional law.'' Coniston Corp. v. Village of Hoffman Estates, 844 F.2d 461, 467 (7th Cir. 1988). This mind-set is causing a chilling effect to dissuade aggrieved citizens from seeking judicial redress, even though they have suffered at the hand of unconstitutional government conduct. One commenter notes that judges avoided the merits in over 94% of all takings cases litigated between 1983–1988. See Gregory Overstreet, The Ripeness Doctrine of the Takings Clause: A Survey of Decisions Showing Just How Far Federal Courts Will Go To Avoid Adjudicating Land Use Decisions, 10 J. LAND USE &and Blocher LLP, of Silver Spring, Maryland, has been provided to this Subcommittee. I have reviewed this survey, and note that 81% of the takings claims initially raised in the United States district courts, from 1990–1997, never reached the merits. For those property owners that commenced land use litigation in the federal trial courts and brought appeals therefrom during the same period, more than half saw their takings claims dismissed.
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The lower courts' condescension against constitutional land use matters ''forget[s] that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.'' Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 416 (1922) (Holmes, J.) H.R. 1534 would prevent federal judges from their persistent efforts to sacrifice the takings clause on the ripeness altar. The bill would curtail the nearly wholesale abdication of federal jurisdiction in law suits where issues are raised concerning the constitutional validity of land use regulation.
D. Abuses of the Ripeness Doctrine.
Land use agencies across the country have applied the ripeness requirement to frustrate as-applied takings claims in federal court. I was of counsel on an amicus curiae brief submitted by the American Planning Association (''APA'') in a ripeness takings case decided last term.(see footnote 25) Although the brief supported the land use agency in this matter, it also recognized that current ripeness rules
invite[] local government to create a more complicated and time consuming review and approval process. It is, in fact, an open invitation for some local governments to do mischief. Unscrupulous officials can and often do easily assert, after the fact, that they ''would have been willing'' to consider an intensity of use or an alternative type of use that the landowner never proposed. This is plainly unfair and an abuse of [the ripeness requirement]. . . .
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Brief Amicus Curiae of the American Planning Association in Support of Respondent, Suitum v. Tahoe Regional Planning Agency, No. 96–243, at 13 (''APA Brief''). Examples of these sentiments, in the reported case law alone, are legion. The problem is especially serious because property owners may have neither the means nor stomach to litigate ripeness issues indefinitely. See Stein, Regulatory Takings and Ripeness in Federal Courts, 48 VAND. L. REV. 1, 43 (1995) (''PRACTICALLY SPEAKING, THE UNIVERSE OF PLAINTIFFS WITH THE FINANCIAL ABILITY TO SURVIVE THE LENGTHY RIPENING PROCESS IS SMALL'').
Consider Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 920 F.2d 1496 (9th Cir. 1990). In 1981, the property owners submitted a subdivision proposal to build 344 residential units. The plan was rejected, and city planners informed that a plan for 264 units would be reviewed favorably. The owners then submitted a plan for 264 units; city planners rejected it, and informed that a plan for 224 units would be reviewed favorably. The owners then submitted a plan for 224 units; city planners rejected it, and informed that a plan for 190 units would be reviewed favorably. The owners then submitted a plan for 190 units; city planners rejected it, and the owners appealed to the city council. The city council found the plan ''conceptually satisfactory,'' and granted a conditional 18-month use permit to commence construction for the project. Subsequently, the developer worked with planning board staff to meet the city council's conditions for the 190-unit development. Staff recommended approval of the site plan, but the planning board overrode staff's recommendation and issued a denial. The property owners then appealed this decision to the city council, which this time denied the site plan for 190 units. Meanwhile, a sewer moratorium was imposed, a request to extend the special use permit was rejected, and the permit expired. The local officials thus expected the developer to start from square one. Following this Kafkaesque process, the federal district court dismissed a takings claim for lack of ripeness, but the appellate court then reversed. See 920 F.2d at 1502–1506.
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Glendon Energy Co. v. Borough of Glendon, 836 F.Supp. 1109 (E.D. Pa. 1993), also merits discussion. There, after a local board rejected a development plan, the property owner purchased buffer lands so the applicable zoning could accommodate the proposed development. Subsequently, the county council met clandestinely in a ''behind-closed-doors'' executive session to re-zone the property and repeal the earlier provisions of the zoning ordinance that would have permitted the development. Nonetheless, the property owner was not able to get the federal court to address the merits of his federal constitutional grievances. Even though the property owner never had the opportunity to participate in the secret session, and even though the re-zoning was done for the specific purpose of preventing the development at issue, the court said the claims were unripe because the property owner never challenged the re-zoning's validity.
A California state case typifies the situation that landowners commonly confront when dealing with local officials. In Healing v. California Coastal Comm'n, 27 Cal Rptr. 758 (Ct. App. 1994), a state agency denied a permit for constructing a one-story, three-bedroom home, where it had not received a recommendation from a non-existent board as to whether the property should be restricted from development under a non-existent program for acquisition and set-asides of lots in the Santa Monica mountains. When the property owner sought compensation for a taking, the state argued that the claim was unripe. The court decided that the claim was, in fact, ripe, and acknowledged the abuses of the land use process inflicted upon the property owner:
It is in the nature of our work that we see many virtuoso performances in the theaters of bureaucracy, but we confess a sort of perverse admiration for the Commission's role in this case. It has soared beyond both the ridiculous and the sublime and presented a scenario sufficiently extraordinary to relieve us of any obligation to explain why we are reversing the judgment. . . . To state the Coastal Commission's position is to demonstrate its absurdity.
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Id. at 764.
It is my opinion that, based on the nature of the takings clause, property owners must first pursue some negotiation with land use officials to determine how far a regulation goes. However, I do not believe that ripeness barriers should be arbitrary, insurmountable or labyrinthine. I support H.R. 1534 because it would facilitate the negotiation process, while providing a more precise and just basis for determining when federal courts have jurisdiction in takings cases.
II. HOW THE BILL DEALS WITH THE ''RIPENESS MESS.''
I suggest that H.R. 1534 goes a long way to remedy the ''ripeness mess'' that currently precludes landowners from asserting constitutional takings claims in federal court. See Michael M. Berger, The Ripeness Mess in Federal Courts, or How the Supreme Court Converted Federal Judges into Fruit Peddlers, INSTITUTE ON PLANNING, ZONING AND EMINENT DOMAIN 7–1 (1991). BEFORE I DISCUSS SPECIFIC PROVISIONS OF THE BILL, I TAKE THIS OPPORTUNITY TO BRING SOME LARGER ISSUES TO THE SUBCOMMITTEE'S ATTENTION.
A. No Change in Substantive Law. H.R. 1534's purpose is to establish avenues of access to federal courts in constitutional land use cases. It does not alter the substantive law of Fifth Amendment takings or any other constitutional provision. For example, some prior bills have specified that, if a land use regulation causes a reduction in property values by a certain arbitrary percentage (i.e., 25%, 30%), then the landowner must be compensated. H.R. 1534 does nothing of this sort; it proposes strictly procedural reforms. The bill clarifies those circumstances in which property owners can obtain access to federal courts, so judges can perform their sworn task to interpret the Constitution and decide whether a land use regulation is a taking of property.
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To make H.R. 1534's procedural remedy clear, the bill does not amend 42 U.S.C. §1983—the statute creating a cause of action to remedy the unconstitutional conduct of those acting under ''color of State law.'' Rather, H.R. 1534 proposes to amend the statutes conferring jurisdiction in the United States district courts and the Court of Federal Claims, for Section 1983 and takings claims against municipalities and the federal government.
B. Solely Federal Claims. The court access benefits conferred by H.R. 1534 would apply only when a landowner raises a federal claim in federal court. It would not cover situations where a property owner decides to litigate a state law claim concurrently with a federal one. Under this latter scenario, federal judges may utilize their traditional discretion to abstain from jurisdiction.
C. No Change in Sovereign Immunity Case Law. H.R. 1534 does not tamper with Section 1983 precedent regarding sovereign immunity. The Supreme Court has established that, while Section 1983 contemplates law suits against those acting ''under color of State law,'' the Eleventh Amendment renders state officials, acting in their official capacities, immune from suit in federal court. See Scheuer v. Rhodes, 416 U.S. 232 (1974). However, municipalities and counties are not immune from suit under Section 1983. Owen v. City of Independence, 445 U.S. 622, 636–37 (1980); Monell v. Department of Social Servs., 436 U.S. 658–69 (1978). Consequently, H.R. 1534's procedural reforms would apply to landowners who bring suit against local governments for unconstitutional takings. In short, the bill does not alter the sovereign immunity law that has developed in the Section 1983 cases.
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D. The Option of Court Access. In essence, the benefit of H.R. 1534 to property owners and to government agencies is simply to preserve a meaningful option of court access that can test the scope of the takings clause. Under the bill, when a landowner receives a final decision from a land use agency and pursues a waiver and/or appeal therefrom, she can either: (1) further negotiate with local officials or (2) sue. Based on the reality of the regulatory process, in my opinion the vast majority of landowners will opt for further negotiation and pursue less intensive land uses compared to their initial development applications. Developers do not hastily select litigation as their best opportunity to achieve the maximum profit expectations in their land. They would much rather spend funds to build their projects than pay legal fees.
If a property owner decides to litigate, H.R. 1534 by no means ensures that a taking will be found and compensation awarded; a plaintiff would still need to prove on the merits that a taking has occurred. This is a heavy burden indeed, and would likely require proof that the land use agency has denied all economically viable uses of the parcel at issue. See, e.g, Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). Considering this difficult evidentiary burden, it is doubtful that landowners will rashly opt to pursue litigation over further negotiation. Nonetheless, when a land use regulation may not permit the economically viable use of land, or when local decision-making procedures may require the submission of repetitive proposals, I submit that the jurisdictional requirements for resolving constitutional claims must be clarified. This is H.R. 1534's overriding purpose.
E. No Fear of Crowding Federal Dockets. I understand that concerns have been raised regarding the potential for H.R. 1534 to overload the federal courts with takings cases. I believe these fears are unfounded for several reasons. First, land use litigation already assumes an active position on the federal docket; however, the parties and the courts typically remain preoccupied with jurisdictional issues like ripeness. By specifying when a takings claim is ripe H.R. 1534 could result in more efficient use of judicial resources, allowing litigants and judges to devote their attention to the merits.
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Second, I do not think the bill would cause a rush of property owners into the federal court. Quite simply, the overwhelming disincentive to litigation is cost. This is especially true in the takings arena, where it is so hard to win on the merits. The primary objective of landowners, particularly those in the development business, is to realize their projects and make a profit. They will be far more inclined to negotiate with zoning officials rather than antagonize them with needless litigation. Third, I am not convinced that groundless prophecies of overwhelmed federal judges should excuse a citizen's right to litigate meritorious federal claims in federal court. Landowners should be secure in their right of access to a fair and impartial federal tribunal when their property has been taken in violation of the Fifth Amendment.
F. Clarify Ripeness Requirements for Other Constitutional Claims in Land Use Cases. In land use cases concerning constitutional rights, property owners often allege deprivations of procedural due process, substantive due process and equal protection, in addition to claims of taking without just compensation. The lower federal courts have utterly failed to agree on the ripeness requirements for claims other than a taking. Some of the federal courts proclaim that a ripe due process or equal protection claim is governed by the same two-part test from Williamson County. See, e.g., River Park, Inc. v. City of Highland Park, 23 F.3d 164 (7th Cir. 1994); Acierno v. Mitchell, 6 F.3d 970 (3d Cir. 1993). Other judges, however, rule that due process and equal protection claims are not subject to the ripeness requirement for a taking. See, e.g., Smithfield Concerned Citizens for Fair Zoning v. Town of Smithfield, 907 F.2d 239 (1st Cir. 1990); Oberndorf v. City and County of Denver, 900 F.2d 1434 (10th Cir.), cert. denied, 498 U.S. 485 (1990). Indeed, even the same circuit, in the same year, reached varying conclusions on the issue. Compare Harris v. County of Riverside, 904 F.2d 497, 500–501 (9th Cir. 1990) (procedural due process claim does not require the same ripeness requirements as a takings claim) with Southern Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498, 507 (9th Cir. 1990) (''[a]ll as-applied challenges to regulatory takings, whether based on the just compensation clause, the due process clause, or the equal protection clause, possess the same ripeness requirement. . . .'').
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I do not believe that ripeness standards should vary based on the type of constitutional claim a plaintiff makes in a land use controversy. I support H.R. 1534 because it would level the playing field for all constitutional claims asserted by property owners. The bill provides courts and litigants with the certainty that the same ripeness requirements apply to claims arising under due process, equal protection, and takings clauses.
III. H.R. 1534 SECTION 2: SECTION 1983 ACTIONS
A. In General. Section 2 of H.R. 1534 would amend 28 U.S.C. §1343 subsection (a)(3), the provision conferring original jurisdiction in the United States district courts over actions under Section 1983.
B. Abstention. Ripeness is not the only problem litigants face when they bring land use cases in federal courts. The opportunity for judges to abstain from hearing cases that raise state law questions creates additional barriers to federal jurisdiction. Federal courts may abstain from hearing a land use case when state law is not clear (Pullman abstention), when a state judicial proceeding is pending (Younger abstention), and when complex issues in state regulatory programs require interpretation (Burford abstention).
I am aware that some opponents have criticized the bill because they construe its abstention provisions as applying in any Section 1983 case, regardless of the alleged constitutional violation. However, this is not the intent of H.R. 1534. The bill is designed only to address abstention doctrine in cases where land owners bring Section 1983 actions to redress unconstitutional infringements of private property rights. To make this circumstance clear, I suggest that the text of proposed Section 1343(c) be amended as follows (my suggestions are underscored):
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''(c) Whenever a district court exercises jurisdiction under subsection (a) in an action where the operative facts concern the uses of real property, it shall not abstain from exercising or relinquish its jurisdiction to a State court where no claim of a violation of a State law, right, or privilege is alleged. . . .''
Abstention of jurisdiction can significantly delay the resolution of constitutional claims by federal courts. See, e.g., LAURENCE TRIBE, AMERICAN CONSTITUTIONAL LAW, §3–29 AT 201 (2D ED. 1988) (ABSTENTION DOCTRINE ''IMPOSES SUBSTANTIAL COSTS [ON LITIGANTS] THROUGH THE DELAY OF FEDERAL CONSTITUTIONAL ISSUES COMMON WHERE A DEFINITIVE STATE COURT RESOLUTION OF THE STATE ISSUES IN THE CASE MUST BE OBTAINED''). THE SUPREME COURT HAS DECLARED THAT '' 'ABSTENTION FROM THE EXERCISE OF FEDERAL JURISDICTION IS THE EXCEPTION, NOT THE RULE.' '' Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 236 (1984) (citation omitted). Unfortunately, this rule has been turned on its head in the takings arena. Federal courts routinely dodge the merits of Fifth Amendment land use cases, and have invoked abstention doctrine to achieve this result.
I understand that the Department of Justice fears that H.R. 1534 would ''radically shift'' authority over local issues from state and local courts to federal courts because it will modify abstention rules. I disagree. Justice O'Connor recently wrote that the Supreme Court ''has frequently acknowledged the importance of having federal courts open to enforce and interpret federal rights.'' Idaho v. Coeur d'Alene Tribe of Idaho, 117 S.Ct. 2028, 2045–46 (1997) (O'Connor, J, concurring). H.R. 1534 comports with this principle, and I do not believe it would work an injustice on abstention doctrine. The bill would simply ensure that aggrieved property owners, raising solely federal claims, have the right to have those claims resolved in federal court. Should a landowner decide to allege a claim of state constitutional, statutory, or common law pendent to the federal claim, H.R. 1534 would not apply.
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In my opinion, the bill is carefully drafted to accommodate a property owner's right to access the federal courts with the historic discretion of federal judges to certify questions of state law, and with the basic constitutional precept recognizing state sovereignty. The following tabulation best portrays the situations in which H.R. 1534 would (and would not) apply, and depicts the bill's efforts to preserve a state court's right to resolve issues of state or local law:
The three branches of abstention relevant to H.R. 1534 are discussed below in more detail.
(1) Younger Abstention. H.R. 1534 avoids the problem of so-called Younger abstention. Under this branch of abstention, a federal court has the discretion to abstain from exercising its jurisdiction over federal claims (or relinquishing it altogether and dismissing the federal suit), where parallel state proceedings would apparently provide an adequate forum for airing the constitutional claims. See Younger v. Harris, 401 U.S. 37 (1971). While state courts have concurrent jurisdiction to decide Section 1983 cases, see Felder v. Casey, 487 U.S. 131, 139 (1988), my understanding is that Younger abstention is beyond H.R. 1534's scope because the bill does not contemplate institution of a parallel state proceeding. To make this circumstance clear, I would suggest that proposed new Section 1343(c) be revised as follows (my suggestions are underscored):
''(c) Whenever a district court exercises jurisdiction under subsection (a) in an action where the operative facts concern the uses of real property, it shall not abstain from exercising or relinquishing its jurisdiction to a State court in an action where no claim of a violation of a State law, right, or privileged is alleged, and where a parallel proceeding in State court arising out of the same operative facts as the district court proceeding is not pending.''
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(2) Pullman Abstention. Federal courts sometimes abstain jurisdiction even in situations where a plaintiff asserts only federal claims. Under the doctrine of Pullman abstention, when a ''federal constitutional claim is premised on an unsettled question of state law, the federal court should stay its hand in order to provide the state courts an opportunity to settle the underlying state-law question and thus avoid the possibility of unnecessarily deciding a constitutional question.'' Harris County Comm'rs Court v. Moore, 420 U.S. 77, 83 (1975) (construing Railroad Comm'n of Texas v. Pullman Co., 312 U.S. 496 (1941)). Federal courts have used Pullman abstention to avoid deciding land use controversies wherein property owners allege infringements of the United States Constitution. See, e.g., Pearl Inv. Co. v. San Francisco, 774 F.2d 1460, 1463–64 (9th Cir. 1986), cert. denied, 476 U.S. 1170 (1986); Bob's Home Serv., Inc. v. Warren County, 755 F.2d 625, 628 (8th Cir. 1985).(see footnote 26)
(3) Burford Abstention. Another branch of abstention calls for federal courts to avoid construing ''complex'' state regulatory programs. See Burford v. Sun Oil Co., 319 U.S. 315 (1943). Federal judges have sometimes invoked Burford abstention to dodge the merits of land use matters, even though constitutionally-protected property rights are at stake. See Front Royal & Warren County Indus. Park Corp. v. Town of Front Royal, 945 F.2d 760, 764 (4th Cir 1991), cert. denied, 503 U.S. 937 (1992); 2BD Ltd. Partnership v. County of Commissioners for Queen Anne's County, 896 F.Supp. 518 (D. Md. 1995).
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C. Certification of State Law Question. The bill addresses Pullman and Burford abstention in Section 1983 cases. I favor the mechanism in proposed new Section 1343(d), through which a federal court can certify an unsettled but significant question of state law to the highest appellate court of the pertinent state to assist in resolving whether a land use agency has violated the federal Constitution. Professor Tribe recognizes:
Delay can be substantially diminished under a promising alternative to Pullman abstention, allowing the direct submission of state law question to an authoritative state tribunal, thereby removing the need to file a separate state action and speeding ultimate disposition of the case; a significant number of states have passed statutes allowing such certification. See generally Note, Certification Statutes: Engineering a Solution to Pullman Abstention Delay, 59 NOTRE DAME L. REV. 1339 (1985); see also Field, The Abstention Doctrine Today, 125 U.PA.L. REV. 590, 605–09 (1977).
TRIBE, supra, §3–30 at 201 n. 18. The bill's certification provision thus respects local decisionmaking processes in particular and state sovereignty in general, insofar as state courts are provided the opportunity to interpret matters of state and local law.
While certification can expedite resolution of a Section 1983 suit, I submit that the mechanism should not be blithely invoked to delay consideration of the merits. H.R. 1534 wisely proposes that a federal district court should not certify a question unless the state law issue will ''significantly affect the merits of the injured party's federal claim.'' The apparent intent here is that only unsettled state questions essential for resolving the federal Section 1983 claim are susceptible for certification. The second check on certification is that the state law question must be patently unclear. The language in proposed Section 1343(d)(ii) tracks the Supreme Court's sentiments in Hawaii Housing Auth. v. Midkiff, 467 U.S. 229, 236–37 (1984), and thus states that certification should not be permitted unless the state law question ''is so unclear and obviously susceptible to limitation as to render premature a decision on the merits of a constitutional issue.''
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H.R. 1534 would have no effect on state law certification procedures already in existence, nor would it create any certification mechanism. Accordingly, questions could not be certified to the highest appellate courts in the twelve (12) states that lack a certification procedure.(see footnote 27) However, even in these jurisdictions, federal courts hearing diversity cases decide state law issues all of the time, so I do not believe that H.R. 1534 would undermine the authority of local officials or impair principles of federalism. For example, federal courts in the twelve states without formal certification procedures routinely interpret local statutes and ordinances to assess their constitutionality on the merits.(see footnote 28) In any event, federal courts in these twelve states are well-qualified to decide the ultimate issue of whether local officials have denied property owners federal constitutional rights.
D. Ripeness. As noted earlier (supra pp. 2–9), the ripeness rules spawned by Williamson County raise significant impediments to federal court resolution of takings claims on the merits. To reiterate, Williamson County requires two ripening elements for a takings claim: (1) a final agency decision on the application of the regulations at issue to the particular land in question; and (2) exhaustion of state court compensation remedies. H.R. 1534 addresses both prongs of Williamson County.
(1) Final Decision Prong. Proposed new Section 1343(e) provides that, when a claimant suffers an ''actual and concrete injury'' from a ''definitive decision regarding the extent of permissible uses on the property that has allegedly been infringed or taken,'' the Fifth Amendment claim would be ripe. Williamson County is the patent inspiration for the proposed text. According to the Supreme Court, a takings challenge ripens when ''the initial decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury.'' 473 U.S. at 193. The bill further amplifies the ''final decision'' requirement in three respects, as discussed below: (a) on-site uses; (b) one meaningful application; and (c) futility.
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(a) On-Site Uses. The first clarification, in proposed new Section 1343(e)(2)(A), states that a ''final decision'' exists when a person acting under color of State law ''expresses a definitive decision regarding the extent of permissible uses on the property . . . without regard to any uses that may be permitted elsewhere'' (emphasis supplied). I believe this language would simply confirm the recent holding in Suitum v. Tahoe Regional Planning Agency, 117 S.Ct. 1659 (1997). The Court unanimously ruled that a property owner did not need to sell her transferable development rights (''TDRs'') to yield a ripe takings claim, but never reached the merits of whether a taking had, in fact, occurred. TDRs, by definition, contemplate property uses elsewhere, apart from the subject parcel; they are rights that the owner of the regulated parcel can sell to another landowner to permit more intense development, that would not otherwise be allowed, on the property receiving the TDRs. For ripeness purposes only, H.R. 1534's intent is to make clear that a final decision regarding land uses on the property at issue is all that is required, without reference to development on other lands. The ''on the property'' language does not address the current debate in federal courts regarding whether, as a substantive matter, the relevant ''denominator'' in the takings fraction is the parcel as a whole or the portion of the tract burdened by land use regulation.(see footnote 29)
(b) One Meaningful Application. Proposed new Section 1343(e)(2)(B) further clarifies the ''final decision'' requirement. In MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, 348 (1986), a case involving denial of a single subdivision application, the Supreme Court decided that a takings claim is unripe without a ''final and authoritative determination of the type and intensity of development legally permitted on the subject property.'' Following this pronouncement, property owners aggrieved by government action have been plagued by the following question: How many proposals or applications must they submit to a land use body before a takings claim ripens?
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For example, in Southview Assocs. v. Bongartz, 980 F.2d 84, 92 (2d Cir. 1992), cert. denied, 507 U.S. 987 (1993), the court decided a takings claim was not ripe because the landowner ''did not attempt to modify the location of the units or otherwise seek to revise its application.'' The court failed to decide how many reapplications would be necessary to reach the merits. In Schulze v. Milne, 849 F.Supp. 708 (N.D. Cal. 1994), aff'd in part, rev'd in part on other grounds, 98 F.3d 1346 (9th Cir. 1996), property owners submitted a total of 13 revised plans over three years to renovate their home. Each time they submitted a plan ''in compliance with all applicable zoning laws,'' local officials nonetheless ''refused to approve the plan, and instead informed plaintiffs that there were additional requirements, not found in any zoning or other statutes, which plaintiffs had yet to meet.'' 849 F.Supp. at 709. Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 920 F.2d 1496 (9th Cir. 1990), discussed earlier (supra pp. 6–7), typifies the conundrum that many property owners confront when they must submit application after application to obtain development approvals.
The bill would bring order to the chaos surrounding the reapplication requirement. H.R. 1534 uniformly calls for submission of one development application to a zoning body, and pursuit of one available waiver and/or appeal therefrom. I understand that this provision is intended to codify the body of cases requiring that a property owner make ''one meaningful application'' to the relevant land use decisionmaking body to ripen a constitutional claim.(see footnote 30) It is interesting that the Ninth Circuit, a court typically sympathetic to local governments in constitutional land use cases, has pioneered the ''one meaningful application'' rule. See Gregory Overstreet, Update on the Continuing and Dramatic Effect of the Ripeness Doctrine on Federal Land Use Litigation, 20 ZONING AND PLANNING LAW REPORT 21–22 (MARCH 1997).
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I agree with H.R. 1534's goal to render a decision ripe after one meaningful development proposal is submitted to a land use agency, and a waiver or appeal is pursued from a denial of the application. To make this requirement unequivocal, I suggest that the text of proposed new Section 1343(e)(2)(B) be re-drafted as follows:
''(B) one meaningful application to use the property has been submitted but denied, and the party seeking redress has applied for but is denied one appeal or waiver where the applicable statute, ordinance, custom or usage provides a mechanism for appeal to or waiver by an administrative agency.
As one commenter notes, ''[t]he reapplication requirement forces a property owner to concede away portions of his or her constitutional rights in order to gain access to the federal courts.'' Gregory Overstreet, supra, 20 ZONING AND PLANNING L. REP. AT 22. PROPERTY OWNERS MUST OFTEN SUBMIT MULTIPLE APPLICATIONS IN WHICH THEY BARGAIN AWAY VALUABLE INTERESTS IN THE DEVELOPMENT OF THEIR LAND IN ORDER TO GET LOCAL APPROVAL. H.R. 1534 WOULD REMEDY THIS PROBLEM BY GIVING THE LANDOWNER THE OPTION TO PURSUE LITIGATION AFTER HE HAS MADE ONE MEANINGFUL APPLICATION TO A LAND USE AGENCY, WITHOUT RISKING A TORTUOUS PROCESS OF RE-SUBMISSION, REJECTION, AND MORE RE-SUBMISSION.
As I previously advocated:
[T]he determination of when ''enough is enough'' [for ripeness purposes] should not be left for the local governments to decide. Rather, it should be for the landowner or developer who must weigh the risks of litigation versus another application proposal to decide whether in fact to contest the decision rendered after the first application.
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APA Brief at 13. H.R. 1534 is consistent with this judgment. The bill preserves the option for property owners to choose federal court resolution of their constitutional grievances, rather than meander through an open-ended game of reapplication where land use officials play dual roles as both player and referee.
(c) Futility. The bill offers an additional gloss on the ''one application'' requirement: following Section 1343(e)(2)(B), the proposed text provides that a property owner need not make one application, or pursue a waiver/appeal therefrom, where ''the prospects for success are reasonably unlikely and intervention by the district court is warranted to decide the merits.'' This provision would codify the so-called ''futility'' exception to ripeness. See Gilbert v. City of Cambridge, 932 F.2d 51, 61 n. 12 (1st Cir. 1991) (futility exception applies ''where the degree of hardship that would be imposed by waiting for the permit process to run its course is so substantial and severe, and the prospects of obtaining the permit are so unlikely, that the property may be found to be meaningfully burdened and the controversy concrete enough to warrant immediate judicial intervention''); Kinzli v. City of Santa Cruz, 818 F.2d 1449, amended, 830 F.2d 968 (9th Cir. 1987), cert. denied, 484 U.S. 1043 (1988) (takings claim ripened after plaintiff made one application and sought one variance and both were denied, because further reapplications would be futile).
In the Suitum case, I urged the Supreme Court to establish a futility exception similar to that proposed in H.R. 1534:
It is respectfully submitted that the ''futility'' exception should always apply after one application has been made for a land use approval or administrative relief. . . . [T]he finality requirement should be applied reasonably to recognize that a local government's position on the nature and intensity of development can be determined from factors other than repeated applications and denials.
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APA Brief at 21. While I concur that the futility exception should be codified, I would modify the proposed language in H.R. 1534 to ensure that property owners are compelled only to pursue available avenues for appeal and/or waiver. I therefore suggest that H.R. 1534 reject cases like Shelter Creek Dev. Corp. v. Oxnard, 838 F.2d 375, 379 (9th Cir. 1988), which required an application for an unavailable variance to ripen a takings claim. The language of the bill following proposed Section 1343(e)(2)(B) should thus be revised as follows (my suggestion are underlined):
''The party seeking redress shall not be required to apply for an appeal or waiver described in subparagraph (B) if no such appeal or waiver is available, if it cannot provide the relief requested, or if the prospects for success are reasonably unlikely and intervention by the district court is warranted to decide the merits.''
(2) State Exhaustion Prong. The second prong of Williamson County requires claimants to exhaust available state compensation remedies before receiving a federal hearing on the merits of a taking. Williamson County, 473 U.S. at 194–95. In my opinion, however, a federal court charged with the responsibility of determining constitutional violations is as qualified as a state court to decide when the Fifth Amendment has been violated. Indeed, a federal court is better able to make this decision where, as in the scenario covered by H.R. 1534, a citizen asserts solely federal claims.
Santa Fe Village Venture v. City of Albuquerque, 914 F.Supp. 478 (D.N.M. 1995), illustrates the serious problems that occur when plaintiffs in takings cases must run the gauntlet between federal and state courts. In that case, the local city council established a building moratorium to preclude any development on lands near a national monument site. Plaintiff had an option to purchase land within areas subject to the moratorium, but never exercised that option because of the total land use restriction. Rather, it filed a lawsuit in federal district court seeking just compensation from the local government for its inability to develop the property. That first suit was dismissed on ripeness grounds, because the property owner never sought a compensation remedy in state court. In other words, exhausting state compensation procedures was necessary to make a federal claim ripe for resolution. The property owner then filed a second action for inverse condemnation in state court without raising any federal claims. The state court dismissed this complaint for lack of standing. After exhausting state proceedings, plaintiff then filed a third suit in federal court under Section 1983, alleging only deprivations of federal rights (including due process, equal protection, and takings). The United States District Court for the District of New Mexico then dismissed this federal action as unripe, because the federal claims were not raised in state court—even though the state court already decided that the property owner lacked standing to bring its action there.
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In this regard it is important to consider the interplay between the state exhaustion prong for ''compensation ripeness,'' and the concept of res judicata. Res judicata, or claim preclusion, provides that ''a final judgment on the merits bars further claims by parties or their privies on the same cause of action.'' United States v. Mendoza, 464 U.S. 154, 158 n.3 (1984). This doctrine precludes parties from re-litigating claims ''that were or could have been raised'' in an initial litigation. Kremer v. Chemical Constr. Corp., 456 U.S. 461 n. 6 (1982) (emphasis added). A federal court must afford res judicata effect to a final judgment rendered in a prior state court proceeding.(see footnote 31) The concept is extremely pertinent here. If a property owner exhausts state proceedings to obtain a compensation remedy but receives no award, then Williamson County would deem her federal taking claim ripe and allow her to litigate the alleged constitutional violation in United States district court. A federal judge, however, could still preclude all federal court access under res judicata, because the property owner could have raised her Section 1983 claim for federal relief in the earlier state proceeding. Accordingly, even if the property owner strictly adheres to Williamson County, her failure to raise a federal constitutional claim in state court could destroy her chances from ever having a federal judge address the Fifth Amendment claim. I do not think that property owners should be forced to litigate federal takings claims in state court, yet this is the ironic effect of the synergy between ripeness and res judicata. In my opinion, H.R. 1534 resolves this tension.(see footnote 32)
I believe that the cases requiring a plaintiff to seek compensation in state court ''effectively drain the ripeness rules of any meaning. They prevent federal courts from ever reaching the final decision issue because, under this view, a takings plaintiff must seek compensation in state court until that court clearly says it will not entertain a compensation remedy.'' APA Brief at 24. In short, I wholly concur with H.R. 1534's objective to remove the state exhaustion requirement from the ripeness landscape.
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IV. H.R. 1534 SECTIONS 3 AND 4: TAKINGS CLAIMS AGAINST THE FEDERAL GOVERNMENT.
A. In General. H.R. 1534 Section 3 proposes amendments to 28 U.S.C. §1346. This provision confers concurrent jurisdiction in the United States district courts and the United States Court of Federal Claims for claims against the federal government, including Fifth Amendment takings, where $10,000 or less is at stake. Section 4 proposes amendments to 28 U.S.C. §1491, the Tucker Act provision conferring exclusive jurisdiction in the United States Court of Federal Claims, for claims against the federal government (including takings) for more than $10,000. I am mindful that, considering the expense of takings litigation, Section 1346 is rarely invoked as a practical matter. However, I believe it is correct to amend both statutes to achieve consistency. The bill's reform measures should clarify court access to any takings claim against the federal government, whatever the amount.
B. Abstention. Sections 3 and 4 concern federal law suits premised on unconstitutional takings committed by federal agencies, under federal laws. For example, these sections would address ''takings'' by the U.S. Army Corps of Engineers under Section 404 of the federal Clean Water Act; the U.S. Fish and Wildlife Service under the federal Endangered Species Act; the U.S. Environmental Protection Agency under federal Superfund; or the Department of Interior under the federal Surface Mining and Control Reclamation Act.
In these actions, no person would be acting under color of State law, and no parallel state proceedings could be instituted. Abstention thus is not an issue when property owners bring federal takings claims against federal actors.(see footnote 33) For this reason, H.R. 1534 Sections 3 and 4, unlike Section 2, do not address the abstention problem.
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C. Ripeness. In contrast, ripeness is an issue that federal courts have addressed in federal takings cases.(see footnote 34) See, e.g., Good v. United States, 1997 U.S. Claims LEXIS 179, at *64-*71 (Aug. 22, 1997) (discussing the re-application requirement and futility exception, in case concerning wetlands permitting and endangered species issues). Federal courts have also addressed the issue of whether a takings claimant can avoid seeking a permit or variance from federal regulations under the ''futility'' exception. See, e.g., Whitney Benefits, Inc. v. United States, 18 Cl. Ct. 394, 407 (1989), aff'd, 926 F.2d 1169, 1171 (Fed. Cir. 1991), cert. denied, 502 U.S. (1991) (in context of facial challenge, takings occurred upon enactment of federal statute because it would have been futile to apply for permit; no opinion regarding same issue in context of as applied challenge); Broadwater Farms, supra, 35 Fed. Cl. at 236 (federal takings claim ripe where it would have been futile to apply for an ''after-the-fact'' wetlands permit from the Corps).
For these reasons, the bill properly incorporates ripeness reform measures for federal takings claims in new Sections 3 and 4, similar to those stated in Section 2 for Section 1983 actions. I propose that my suggested changes to the bill regarding ''one meaningful application'' and ''futility,'' discussed earlier on pages 21–24 and 24–25, respectively, also be incorporated where appropriate in Sections 3 and 4 dealing with federal takings actions.(see footnote 35)
V. CONCLUSION
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The ripeness rules developed by the courts have caused hardship to property owners who seek court access so their constitutional claims can be heard. Williamson County and its progeny should no longer be misused to block takings cases where concrete and ascertainable injuries flow from final land use decisions. The Supreme Court has declared that ''the takings clause of the Fifth Amendment [is] as much a part of the Bill of Rights as the First or Fourth Amendment, [and] should not be relegated to the status of a poor relation. . . .'' Dolan v. City of Tigard, 512 U.S. XXX, 114 S.Ct. 2309, 2320 (1994). I believe that H.R. 1534 would help restore the takings clause to its deserved place of importance, and ensure that federal courts apply the takings clause to test the constitutional parameters of government action.
H.R. 1534, WITH COMPLETE REVISIONS
SUGGESTED BY PROFESSOR DANIEL R. MANDELKER(see footnote 36)
A BILL
To simplify and expedite access to the Federal Courts for injured parties whose rights and privileges, secured by the United States Constitution, have been deprived by final actions of Federal agencies, or other government officials acting under color of State law; to prevent Federal courts from abstaining from exercising Federal jurisdiction in actions where no State law claim is alleged; to permit certification of unsettled State law questions that are essential to Federal claims arising under the Constitution; and to clarify when government action is sufficiently final to ripen certain Federal claims arising under the Constitution.
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SECTION 1. SHORT TITLE.
This Act may be cited as the ''Private Property Rights Implementation Act of 1997.''
SECTION 2. JURISDICTION IN CIVIL RIGHTS CASES.
Section 1343 of title 28, United States Code, is amended by adding at the end the following:
''(c) Whenever a district court exercises jurisdiction under subsection (a) in an action where the operative facts concern the uses of real property, it shall not abstain from exercising or relinquish its jurisdiction to a State court in an action where no claim of a violation of a State law, right, or privileged is alleged, and where a parallel proceeding in State court arising out of the same operative facts as the district court proceeding is not pending.''
''(d) Where the district court has jurisdiction over an action under subsection (a) that cannot be decided without resolution of a significant but unsettled question of State law, the district court may certify the question of State law to the highest appellate court of that State. After the State appellate court resolves the question certified to it, the district court shall proceed with resolving the merits. The district court shall not certify a question of State law under this subsection unless the question of State law——
''(1) will significantly affect the merits of the injured party's Federal claim; and
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''(2) is so unclear and obviously susceptible to a limiting construction as to render premature a decision on the merits of the constitutional or legal issue in the case.
''(e)(1) Any claim or action brought under section 1979 of the Revised Statutes of the United States (42 U.S.C. 1983) to redress the deprivation of a property right or privilege secured by the Constitution shall be ripe for adjudication by the district courts upon a final decision rendered by any person acting under color of any statute, ordinance, regulation, custom or usage, of any State or territory of the United States, that causes actual and concrete injury to the party seeking redress.
(2) For purposes of this subsection, a final decision exists if——
''(A) any person acting under color of any statute, ordinance, regulation, custom, or usage, of any State or territory of the United States, makes a definitive decision regarding the extent of permissible uses on the property that has allegedly been infringed or taken, without regard to any uses that may be permitted elsewhere; and
''(B) one meaningful application to use the property has been submitted but denied, and the party seeking redress has applied for but is denied one appeal or waiver, where the applicable statute, ordinance, custom or usage provides a mechanism for appeal to or waiver by an administrative agency.
The party seeking redress shall not be required to apply for an appeal or waiver described in subparagraph (B) if no such appeal or waiver is available, if it cannot provide the relief requested, or if the prospects for success are reasonably unlikely and intervention by the district court is warranted to decide the merits.
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''(3) For purposes of this subsection, a final decision shall not require the party seeking redress to exhaust judicial remedies provided by any State or territory of the United States.''
SECTION 3. UNITED STATES AS DEFENDANT.
Section 1346 of title 28, United States Code, is amended by adding at the end the following:
''(h)(1) Any claim brought under subsection (a) that is founded upon a property right or privilege secured by the Constitution, but was allegedly infringed or taken by the United States, shall be ripe for adjudication upon a final decision rendered by the United States, that causes actual and concrete injury to the party seeking redress.
''(2) For purposes of this subsection, a final decision exists if——
''(A) the United States makes a definitive decision regarding the extent of permissible uses on the property that has allegedly been infringed or taken, without regard to any uses that may be permitted elsewhere; and
''(B) one meaningful application to use the property has been submitted but denied, and the party seeking redress has applied for but is denied one appeal or waiver, where the applicable law of the United States provides a mechanism for appeal to or waiver by an administrative agency.
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The party seeking redress shall not be required to apply for an appeal or waiver described in subparagraph (B) if no such appeal or waiver is available, if it cannot provide the relief requested, or if the prospects for success are reasonably unlikely and intervention by the district court or the United States Court of Federal Claims is warranted to decide the merits.''
SECTION 4. JURISDICTION OF THE COURT OF FEDERAL CLAIMS.
Section 1491(a) of title 28, United States Code, is amended by adding at the end the following:
''(3) Any claim brought under subsection (a) that is founded upon a property right or privilege secured by the Constitution, but was allegedly infringed or taken by the United States, shall be ripe for adjudication upon a final decision rendered by the United States, that causes actual and concrete injury to the party seeking redress.
''(2) For purposes of this subsection, a final decision exists if——
''(A) the United States makes a definitive decision regarding the extent of permissible uses on the property that has allegedly been infringed or taken, without regard to any uses that may be permitted elsewhere; and
''(B) one meaningful application to use the property has been submitted but denied, and the party seeking redress has applied for but is denied one appeal or waiver, where the applicable law of the United States provides a mechanism for appeal or waiver.
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The party seeking redress shall not be required to apply for an appeal or waiver described in subparagraph (B) if no such appeal or waiver is available, if it cannot provide the relief requested, or if the prospects for success are reasonably unlikely and intervention by the United States Court of Federal Claims is warranted to decide the merits.''
Mr. COBLE. We have a series of votes on now, folks; a 15-minute vote and then four 5-minute votes. I think it would probably be best to go ahead and stand in recess. If you all want to grab a quick sandwich, we will be back in about 30 minutes. We will stand in recess for the moment. Again, I apologize, but I do not run the train. I just ride on it.
[Brief recess.]
Mr. COBLE. I again apologize. The best laid plans of mice and men oft-times go awry. Today has certainly been no exception.
I think you all completed your testimony. Let me start with you, Mr. Betsworth. Please explain the process of filing a land development proposal and the costs and liabilities involved therein.
Mr. BETSWORTH. In my region, it is rather involved, probably just like any other region across the States. But first we hire engineers, or obviously get the land that we are after, or start talking to a customer and hire an engineer and a land planner to sketch some drawings so people can take a look at it. Then we approach our county or city for zoning or rezoning application. Then maybe we tweak those plans; after they take a look at it, we might tweak the plans based on their recommendation as what they may be looking for on that particular piece of property. Then we apply for zoning or rezoning, whatever the case may be. Then we go to plan review, and, of course, that is where they take a good look at those plans and maybe ask us again to tweak those plans, take a look at them and ask for whatever they are looking for. After that we go to approval for zoning, and then we go to the planning board for approval. And then we go to the city council or the county government for their approvals as well.
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Also immediately following that is what we call TRC, which is the technical review committee, which consists of engineers and lawyers and environmental groups and so on within our region. They take a good look at the plans as well. They may make comments as to some changes on those plans. If they do, then we start all over again.
Mr. COBLE. What sort of costs are we talking about?
Mr. BETSWORTH. The main cost that we are dealing with here is time and then the money that is involved. If you purchase land, for example, the clock is ticking at the bank, but the time is really a strong element of this. What I mean by that is that if delays are continuing on a continual basis, then you may miss the market window of selling these particular homes that you were planning to build on that particular piece of property. So if that happens, you may have to throw out the plans that you have already drawn up for the type house you want to build. The market has passed you by, it is winter, whatever the case may be. You planned on having the development already started and going and selling homes in the summertime, and you are already in the middle of winter or January. That is an element that you have to be prepared for in our process as well.
Mr. COBLE. Mr. Goldberg, let me ask you a hypothetical question. Let us assume for the sake of discussion that H.R. 1534 is enacted. Would that encourage you or give you any incentive to file takings claims in Federal court?
Mr. GOLDBERG. Mr. Chairman, absolutely not. I am in the business for the long term, and I have been so for nearly 20 years. The way to be productive in this industry is by compromising and negotiating with the local land regulators, both at the county level and the local level, and in particular at State government through the permitting process of the DEP. The courts would continue to be an arena of absolute last resort.
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Mr. COBLE. Professor, H.R. 1534 defines a final decision as when, after one denied application, the landowner receives one denied appeal or waiver. Please explain the reasoning behind only one appeal or waiver?
Mr. MANDELKER. I think the reason is that in most local land use regulations, there are provisions available for a variety of different kinds of appeals or waivers, exceptions and special uses and such. The reason for that requiring only one waiver or appeal is that usually given the nature of the land use, only one will apply. So there is no need really to go on and apply for more because that one appealed waiver should resolve the issues.
Mr. COBLE. Ms. Osenbaugh, I am told that Iowa has a procedure by which Federal courts can certify questions to the State court and thereby allow the State courts to make decisions regarding State regulatory matters and then permit the Federal court to proceed. Is that true?
Ms. OSENBAUGH. Yes, that is correct.
Mr. COBLE. Do you want to elaborate on that?
Ms. OSENBAUGH. The certification process can be very helpful when there is a Federal lawsuit that involves a discrete State law issue that has not been previously addressed, like interpretation of a statutory question. But using that in lieu of abstention is not appropriate, in our view, because abstention assures that an ongoing State proceeding, for example, will occur before the board selected by the State legislature and with the expertise to resolve it. With abstention, the matter can proceed through State courts. The certification process only asks the abstract question of law. It does not utilize the State processes, and thus it is not—it is not an alternative to, it is an additional mechanism to be used in certain instances.
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Mr. COBLE. Let me recognize the gentleman from California Mr. Gallegly for 5 minutes.
Mr. GALLEGLY. Mr. Chairman, thank you very much.
Ms. Osenbaugh, thank you very much for being here. I have to say that as a former mayor, a mayor of a city of about 100,000 folks, I served in that capacity for about 8 years before coming here, I have a great deal of interest and am very sensitive to some of the issues that you have brought forth. As you know, I also recognize that there have been for all too long some major problems with people having their day in court and being able to have justice, as I see it, served.
You answered the question, I think, that I first wanted to ask about the certification process. Do you believe that this process is really working well in Iowa?
Ms. OSENBAUGH. I believe it works well for those instances to which it applies.
Mr. GALLEGLY. Are you aware that we, in H.R. 1534, propose to use a certification to resolve a lot of these issues, that that is a part of the bill?
Ms. OSENBAUGH. Yes, but I read the section as, in fact, limiting the use of certification and also substituting certification for instances when the Federal courts would now defer to the State process.
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Mr. GALLEGLY. How many times do you think a landowner should have to go through the application process before a final decision is rendered?
Ms. OSENBAUGH. Well, ideally it would be possible to determine it in one process. But you may have an instance where the property owner wishes to take the original proposal through all the different stages that may be authorized, say, for example, requesting that it be approved by staff and then either the board of adjustment at the city level or a State agency board, and does not want to seek a variance in the first instance.
I think that you should look at the specific process that is involved and assure that before any claim is made for compensation and before determination as to whether it is a taking, that the agency official with accountability for rendering the final decision has all the facts before them, including any grounds for a hardship variance, before they act.
Mr. GALLEGLY. In Iowa what type of safeguards do you see or do you have to prevent abuses and overly long delays in place? Or is that something that you really are not concerned with, just getting through the process?
Ms. OSENBAUGH. No, I think that at the State level, I can speak, and from what I know at the local level, that one of the ways to expedite the process is to encourage interaction between agency staff and the developer and the developer's engineers or planners to attempt to in formally resolve disputes, and we encourage settlement of those kinds of disputes.
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I think also that our State court processes are much more rapid so that I think that the State administrative processes and the State judicial processes are designed to reach a fairly expeditious result.
Mr. GALLEGLY. The experience I have had as a mayor and working through the plan, for example, process in an area that was going through a real boom in building, it was a—I lived in a city that in 1960 had a population of 6,000 and in 1985 had a population of 110,000, so I can tell you that there was a lot of growth and infrastructure, all these things. I can tell you from my own personal experience the power that staff has to usurp their own ideology sometimes can be kind of overwhelming and very frustrating. Quite frankly, that has had a lot to do with me initiating this legislation.
I am trying to solve a problem that I think that even those on the other side, if they are being intellectually honest, will acknowledge that there really is a problem that remains unsolved.
How long should—how many times do you think—we talked briefly about this, how many times a landowner or a property owner can keep coming back or not have any real direction? How often do they get the right direction? How do they know how many times it is going to take to get through the process?
Ms. OSENBAUGH. I think that would depend upon the land use ordinance or process that was in question. But I think that the problem with attempting to make it a one-step limit is that that will not address the facts of the individual cases to determine whether it really is appropriate to seek a compensation remedy and as to whether the process has reasonably been exhausted. We are concerned that if it is one appeal or one variance, that it will prevent State and local agencies from being able to assure the consistency and accountability of having an appeal process; so that, in other words, our concern, one concern, is that if the initial hearing would have to be before the final decisionmaker, that would obviously cause city councils or boards of adjustment or State agency commissions to have to sit and hear many more hearings than now on matters that would be resolved at one level; so, if it is just one application process, that there is not the opportunity to actually go back and forth and mediate and resolve disputes and hear competing interests.
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Mr. GALLEGLY. Just one final question, Mr. Chairman.
Do you think the current system, the way it exists today, is fair and equitable and does not need any change?
Ms. OSENBAUGH. I believe that the State courts are fully capable of resolving issues as to whether there has been a taking without just compensation.
Mr. GALLEGLY. The answer to my question is you think the current system is a fair one.
Ms. OSENBAUGH. Yes, I believe the current system is a fair one, and I think if, as issues arise that could make it work better in the initial steps or in the zoning process, that we should be focusing on attempts to address that at the local level.
Mr. GALLEGLY. Thank you, Mr. Chairman.
Mr. COBLE. Professor, one final question I failed to ask you. In your testimony you referred to those who criticize H.R. 1534 in regards to the abstention provision that may apply to all other section 1983 claims. Is there a way that you can suggest that would make it clear that this bill is designed to address the cases involving unconstitutional infringements on real property rights?
Mr. MANDELKER. I think that language could easily be added to the bill. I don't see any problem with that.
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Mr. COBLE. Mr. Gallegly, did you hear the response to that?
Mr. GALLEGLY. I am sorry. I was distracted.
Mr. COBLE. Again, to all panelists, I apologize for this chaotic day and to our able court reporter, who has been with us along the way. I thank the witnesses for their testimony. The subcommittee very much appreciates your contribution.
This concludes our hearing on these bills. The record will remain open for 1 week. Thank you again, and the subcommittee stands adjourned.
[Whereupon, at 2:23 p.m., the subcommittee was adjourned.]
A P P E N D I X
Material Submitted for the Hearing
[The bills, H.R. 1063 and H.R. 1534 follows:]
INSERT OFFSET RING FOLIOS 4 TO 11 HERE
PREPARED STATEMENT OF WALTER CAPPS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Thank You, Mr. Chairman, for this opportunity to offer testimony on this important issue to me and thousands of my constituents on the Central Coast of California.
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I speak to you as the Representative of one of this country's finest wine producing regions. Santa Barbara and San Luis Obispo County vintners—both large and small—have become a vital part of our economy and a distinctive feature of the Central Coast cultural community. The success of our small, family wineries in particular is also key to keeping unwanted development at bay and preserving the natural beauty in what is arguably one of the country's most beautiful areas. And, of course, wine production is the largest segment of our agricultural community, and wineries and their popular tasting rooms are a key attraction of our fast growing tourist industry.
The legislation the Subcommittee is holding hearings on this morning is part of a direct attach on this critical part of our economy by attempting to unreasonably curtail direct shipments of wine. This bill would allow States to turn to the crowded Federal court system to pursue wineries even though a more appropriate venue would be through the Bureau of Alcohol, Tobacco and firearms.
A number of states, encouraged by members of the wholesale liquor industry, are attempting to limit consumers' choices when it comes to buying wine. For small wineries in my district and throughout California, unreasonable limitations on direct shipment sales would be devastating. This drive to cut down on direct shipment sales is inevitably fueled by false or overblown claims of minors purchasing alcohol through the Internet and of lost tax revenue to the states. Wineries are not in the business of selling to minors and I am hard pressed to believe that $10–20 bottles of fine wine are the alcohol of choice for minors across the country. And the wine industry has been willing to work with States on the issue of sales taxes.
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As you may know, I recently wrote, along with the entire California Congressional delegation, to Governor Lawton Chiles urging that he work to repeal an egregious Florida law that makes it a felony for a resident of that state to purchase any quantity of wine or beer from an out-of-state carrier. Even his own Attorney General urged him to veto that bill. Our letter also cited the recently passed Louisiana law which deals with interstate alcohol shipment in a thoughtful and reasonable manner.
I believe that the Louisiana model, which works with ATF and relies on Federal Basic Permit system, is a workable compromise that recognizes the interest of states, consumers and the wine industry. The bill before the Subcommittee is unnecessary and has great potential for harm I look forward to working with the Subcommittee as it considers the bill so that together we can craft legislation that ensures fairness for all parties.
| Congress of the United States, |
| House of Representatives, |
| Washington, DC., September 26, 1997. |
Hon. HOWARD COBLE, Chairman,
Subcommittee on Courts and Intellectual Property,
Washington, DC.
DEAR CHAIRMAN COBLE: Once again, thank you for the opportunity to testify before your Subcommittee yesterday. The testimony was both engaging and valuable.
I request that you include in the Subcommittee record the attached newspaper articles following my testimony on H.R. 1063.
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Again, thank you for the opportunity to testify. I look forward to working with you and Mr. Ehrlich in crafting a compromise to address all the concerns raised at Thursday's hearing.
Sincerely yours,
| Frank D. Riggs, |
| Member of Congress. |
INSERT OFFSET RING FOLIOS 12 TO 17 HERE
PREPARED STATEMENT OF GEORGE RADANOVICH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Thank you, Chairman Coble and Members of the Subcommittee for allowing me the opportunity to provide my input on H.R. 1063, sponsored by my friend and colleague, Congressman Bob Erlich.
By way of background, I am a California farmer. In 1982, I established a small vineyard and winery in the sierra foothills community of Mariposa, my hometown. The Radanovich label, which carries sauvignon blanc, chardonnay, merlot, zinfandel and cabernet sauvignon, has grown to about 4,000 cases annually. I am currently the only vintner to serve in the U.S. Congress.
Like most wineries, mine is small. Of the 1,600 wineries in this country, only 50 are available in a typical marketplace. More specifically, only 20 wineries produce 90 percent of all the wine produced. Despite this, sales of regional or limited availability wines—of which there are perhaps over ten thousand labels—have grown. Unfortunately, traditional distribution avenues are insufficient for the shipment and delivery of these numerous small labels. Direct mail, the Internet and other unique forms of distribution have helped these small labels stay afloat, while at the same time helped to satisfy the growing demand for the smaller, lesser known wines produced in this country.
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In many instances, the wine industry produces not just a quality product, but also serves as a major tourist attraction for the major wine grape growing centers in California and other wine producing states. Every year, thousands of tourists visit tasting rooms to sample these lesser known labels. Many, in turn, request to have these labels shipped back to their homes, or order them by phone once they return from their vacations. Unfortunately, this important relationship would be threatened by the legislation that is before us today.
Make no mistake, I appreciate the efforts of my colleague, Congressman Erlich, for what I believe are his best intentions in introducing H.R. 1063. As it is written, however, I am opposed to the bill. H.R. 1063 would modify the Webb-Kenyon Act to allow states to bring to Federal court an action to enjoin the shipment or transportation of liquor in violation of the laws of a particular state. While the measure would provide states with an additional federal inroad in the regulation of alcohol producers, I believe that it would have the unintended consequence of crippling small wineries in this country.
Proponents believe that H.R. 1063 would help to ensure the proper collection of state excise taxes or prevent the ability of wineries to avoid these taxes. While this may be both a necessary and important goal, this legislation would do little to achieve what is at best a minor problem. Even in states where the shipment and delivery of wines or other alcoholic beverages is legal, very little wine is actually shipped for delivery. Furthermore, the increased cost of shipping of lower priced wines is prohibitive for both the producer and the consumer. It is simply unrealistic to assume that a direct mail consumer would be willing to pay a shipping premium and wait up to a week for a label that is available at their local store simply to avoid an excise tax.
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While I do not believe that these taxes should be avoided, I understand that the amount of revenue that is lost due to shipments of wine is minimal. The State of Maryland, as an example, collects approximately $3.6 million in wine excise taxes each year. Even if wines shipped to Maryland without the payment of taxes grew to the national average—0.4 percent of total wine sales—the loss of revenue to the state would amount to $14,400 annually. This hardly makes it necessary to contribute to the caseload of the already overloaded federal court system, as this measure allows, to recapture less than $15,000 a year. There exists already sufficient administrative, civil and criminal avenues for states to address violations of laws restricting shipment of alcoholic beverages and I support the aggressive enforcement of these laws.
This legislation also proposes to curb the delivery of alcohol products to underage purchasers. While I believe that there are few more important causes than to stem the tide of underage drinking in this country, this measure does not address the root of the underage drinking problem. The two states with the highest consumption of wines—California and New York—have long permitted intrastate shipments ordered by phone or mail. These states have concluded that direct delivery of wine in an insignificant contributor to the problem of underage drinking. Simply stated, a typical underage drinker neither enjoys nor is able to afford the wines offered for home or mail-order delivery. Furthermore, I know of no major shipper of wines that does not require the signature of an adult before they release the product to the consumer.
Finally, proponents of this bill argue that it is necessary in order to avoid the potential violation of rules concerning dry areas. While the original intent of Webb-Kenyon was to provide a federal umbrella against the shipment of alcohol into dry states or regions, the fact is there are no remaining dry states and very few dry counties left in the United States. Those pockets of dry counties that do remain are more vulnerable to ''smuggling'' in the trunks of automobiles than they are from common carrier deliveries.
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Mr. Chairman, I have made clear my opposition to this measure. However, should you decide to move forward with this legislation, I suggest that it be amended to accommodate the legitimate desire of consumers to obtain access to a wide variety of wines, especially the wines of small producers who lack the distribution capabilities of the major wine producers in this nation. To meet these consumer needs, I point to the 12 states have chosen to enact variations of a ''reciprocal shipment'' law, waiving local taxes and allowing consumer to directly order a limited number of cases of wine. I also direct your attention to a recently enacted ''shipper permit'' law in Louisiana, which allows out-of-state shippers to register with the state in order to collect all of the tax revenues generated from resulting shipments of wine.
Thank you, again, for the opportunity to address this Subcommittee. I look forward to working with you and Congressman Erlich to resolve our differences concerning H.R. 1063.
PREPARED STATEMENT OF HON. RON SARASIN, PRESIDENT, NATIONAL BEER WHOLESALERS ASSOCIATION
Mr. Chairman, thank you very much for scheduling this hearing on an issue of great importance to the 3,000 federally licensed beer wholesalers in the United States. Beer wholesalers are the independent, often family-owned small businesses that proudly distribute America's beverage.
Our strong support for the Ehrlich bill stems from a very simple premise: The National Beer Wholesalers Association opposes the direct shipment of licensed beverages to consumers in violation of state law.
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As you know, the 21st Amendment to the Constitution, which repealed Prohibition, also granted to States extraordinary authority over licensed beverages within their borders. Section 2 of the Amendment bears repeating here:
The transportation or importation into any State, Territory, or Possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.
Some 24 states prohibit such shipments outright; 19 others have significant restrictions on the quantities of licensed beverages that can be directly shipped. Nonetheless, many companies continue to ship licensed beverages into states that prohibit direct shipments.
A recent Internet search by my staff found twenty-two companies offering to ship beer directly to anyone filling out the on-line questionnaire. Most of these web sites contained a line about the buyer having to be 21 to make the purchase. However, none of them contained any indication that half the states prohibit direct shipments and many more place heavy restrictions on the quantities that may be purchased in this manner. In my opinion, Mr. Chairman, that comes close to fraud.
The main justification for enactment of the Ehrlich bill is that States face a nearly impossible enforcement task in trying to identify and take action against direct shipments that violate state law. Often, the only way a state can even find out about a violation of law is through a ''sting'' operation, when an agent of the state places the order, receives the illegally shipped order, and then files a complaint against the shipper. Even then, out of state companies are often beyond the reach of the authorities. In fact, it is interesting to note that the Wine Institute's web site devoted to direct shipping has this to say about the legality of direct shipments:
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We counsel our members that the legality of a shipment is more easily determined than the risks involved in illegality. To date, there has been very little enforcement of shipment prohibitions in other states. In a virtual enforcement vacuum, competition replaces the law as the determining factor in whether to ship wine direct. Your competition is shipping direct, and possibly doing so illegally in many cases, because there has been little incentive to comply with the law. (www.winelaw.org/faq.htm, emphasis added.)
Mr. Chairman, enactment of the Ehrlich bill will provide incentive for all to obey the law. It will provide state law enforcement authorities with the ability to go into federal court to enforce its laws against direct shipments. It is fundamentally a states' rights approach to this vexing problem.
Indeed, there are many sound reasons for a state to prohibit direct shipments to consumers:
to stem the loss of state tax revenue, estimated to be $200–600 million a year;
to keep minors from getting licensed beverages delivered to their doors;
to prevent deliveries to ''dry'' areas;
to ensure a level playing field for wholesalers and retailers within the state;
to preserve and protect the three-tier system for licensed beverage distribution.
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Of these reasons, perhaps the most misunderstood today is to preserve and protect the three-tier system. I submit to you that the three-tier system, developed in nearly every state in the wake of Prohibition, is more vital today than when it was established. The system requires an independent wholesale tier to insulate retailers from undue influence by suppliers, ensure the integrity of the product, provide a paper trail of handling of the product, and permit state enforcement officials to stop the flow of particular licensed beverages into their state for reasons of health, safety or violation of law.
There are legal alternatives to direct shipping. In Maryland, for instance, a consumer may order a particular licensed beverage not normally available and secure delivery through a wholesaler and retailer at no great additional cost. The CellarMasters wine program is another notable success in providing consumers access to hard-to-find beverages. NBWA is committed to helping small brewers and microbreweries get their product to market and, to that end, we have joined forces with the Brewers Association of America, representing small brewers, to make it happen.
But direct shippers who operate in violation of state law are more interested in avoiding the state excise taxes and keeping the increased profits obtained by eliminating the in-state retailer and wholesaler than they are in consumer welfare. This is simply not a consumer issue.
Mr. Chairman, the beer wholesalers in your state are licensed, pay all appropriate taxes, keep all required records and sell one of the most regulated products available today. Simply put, we believe that a beer-of-the-month club halfway across the country should have to obey the same laws.
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We strongly support the right of states, as guaranteed by the 21st Amendment, to regulate the distribution and sale of licensed beverages within their borders. Enactment of the Ehrlich bill will make that possible.
PREPARED STATEMENT OF DOUGLAS W. METZ, MANAGING DIRECTOR, WINE AND SPIRITS WHOLESALERS OF AMERICA, INC.
Mr. Chairman, the Wine and Spirits Wholesalers of America, Inc. enthusiastically supports H.R. 1063 introduced by Congressman Robert Ehrlich at the request of the Joint Committee of the States of the National Conference of State Liquor Administrators (NCSLA) and the National Alcohol Beverage Control Association (NABCA).
WSWA is the trade association of distributors of wines and distilled spirits accounting for over 90 percent of the wines and spirits wholesaled in the 32 license states, the District of Columbia and Puerto Rico, and over seventy-five percent of the wines distributed under license in the control states. Licensed wholesalers pay over $3.5 billion dollars annually in state excise taxes on alcohol beverages.
The volume of illegal interstate shipments of alcohol beverages (primarily wine) has skyrocketed to a billion dollars a year, spurred by the rapid growth of direct marketing by mail and the Internet.
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States are unable to protect their excise and sales tax revenue, ''dry'' areas, and persons under the legal drinking age because they cannot obtain personal jurisdiction over the out-of-state shipper who uses common carriers to deliver alcohol beverages directly to homes and offices.
The Webb-Kenyon Act (27 U.S.C., sec. 122) makes it illegal for any person to ship any alcohol beverages on interstate commerce in violation of the laws of any state. This law, however, has no penalty provision.
To add meaning and vitality to this statute, H.R. 1063 would give the states access to the federal district courts to enforce their own laws on interstate shipments under their 21st Amendment prerogatives. Lacking such a remedy as H.R. 1063 would provide, the states are increasing the penalties for illegal direct shipments to consumers from misdemeanors to felonies. A felony penalty would enable a state to obtain personal jurisdiction through extradition of the alleged offenders.
Enactment of H.R. 1063 would relieve pressure on states to enact felony penalties and would enable states to enforce their own laws as implied by the Webb-Kenyon Act. This interpretation has been supported by the U.S. Department of Justice in an amicus brief filed in State of Florida v. Rochambeau Wines and Liquors, Inc. et al, now on appeal to the 11th Circuit, a copy of which is appended to this statement.
Thank you for this opportunity to present our views in support of this important and much needed legislation.
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INSERT OFFSET RING FOLIOS 18 HERE
CERTIFICATE OF TYPE SIZE AND STYLE
Pursuant to Eleventh Circuit Rule 28–2(d), I certify that the size and style of type used in the brief in 12 point.
CERTIFICATE OF INTERESTED PERSONS AND CORPORATE DISCLOSURE STATEMENT
State of Florida v. Rochambeau Wines and Liquors, Inc., No. 96–2772.
Pursuant to Eleventh Circuit Rule 28–2(b), I certify that the following person and entities have or may have an interest in this case:
1. Hon. Robert Butterworth.
2. California Wine Club.
3. Jonathan Cohen.
4. Denis Dean.
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5. David S. Goldstein.
6. Hinman and Carmichael.
7. Frank W. Hunger.
8. Thomas A. Klein.
9. John S. Koppel.
10. Other Mail-Order Shippers of Alcoholic Beverages Into Florida.
11. Passport Wine Club.
12. Rochambeau Wines and Liquors, Inc.
13. St. Helena Wine Merchants.
14. Shutts & Bowen.
15. Hon. William Stafford.
16. Stafford's Fine Wine & Specialty Co.
17. State of Florida, Department of Business Regulation, Division of Alcoholic Beverages and Tobacco.
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18. State of Florida, Department of Legal Affairs.
19. Mark B. Stern.
20. Eric J. Taylor.
21. United State of America.
22. Wine Club Santa Ana, Inc.
23. Robert T. Wright, Jr.
24. Roy C. Young.
25. Young, van Assenderp & Varnadoe, P.A.
26. Zachy's Wine and Liquor, Inc.
| John S. Koppel, |
| Attorney. |
INSERT OFFSET RING FOLIOS 19 TO 42 HERE
WINE INSTITUTE
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WINE INSTITUTE OPPOSES FURTHER FEDERAL ENCROACHMENT ON DIRECT SHIPMENTS OF WINE
Washington, DC—Today, the House Judiciary Committee's Courts and Intellectual Property Subcommittee held a hearing on H.R. 1063 (Ehrlich) which would allow states to bring action in federal court to enforce a state's anti-shipping laws. In testimony before the committee, California vintner Louis M. Foppiano of L. Foppiano Wine Co. spoke in opposition to the legislation. Foppiano, speaking on behalf of the Wine Institute and as the chairman of Wine Institute's Direct Shipments Subcommittee, informed Congress that wineries are already under federal jurisdiction and use of the already strained federal courts is unwarranted. All wineries must hold a Federal Basic Permit in order to operate, and last February the Bureau of Alcohol, Tobacco and Firearms (ATF) issued an Industry Circular stating that it has jurisdiction over basic permit holders found to be in violation of a state's shipping law.
Foppiano testified that small winery owners should not be forced into the role of potential lawbreakers and even felons for simply responding to the requests from consumers across the country who want their fine products. He pointed out that the exponential growth in the number of wineries during the last two decades, coupled with the striking consolidation which has occurred within the wholesale tier, has created an environment which no longer allows for distribution of all wines. In his statement, he said, ''It has always been the position of the Wine Institute membership that we respect and depend upon the three-tier system of distribution. However, we have realized that the three-tier system is no longer able to service the needs of all consumers nor all segments of the industry and, therefore, our attempts are directed at preserving the essentials of the system while providing necessary reforms.''
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During the last 10 years, 15 states have passed legislation which offer solutions allowing their citizens to have wines they cannot readily find at home shipped directly to them. These proposals were at first based on the concept of ''reciprocity,'' which in effect created trade agreements between states allowing a limited flow of direct shipments between states enacting such legislation. Just this summer, Louisiana enacted a new, creative law establishing a means of registering out-of-state shippers and collecting all taut revenues for Louisiana from resulting shipments. Included in this law, referred to by the industry as the ''Louisiana Compromise,'' are reasonable annual limits on quantities shipped, and appropriate penalties for those who violate the law's provisions.
Foppiano pledged that he and his fellow winegrowers ''will continue to work with the various states to craft laws so that consumers in all states can have reasonable access to limited amounts of wine currently not available to them.
In conclusion, Foppiano stated, ''There is no need for states to be granted access to the already over-burdened federal court system as a second venue in which to pursue citizens and small wineries with further penalties because a state official may not like the actions of ATF.''
| National Association of Beverage Retailers NABR, |
| September 23, 1997. |
Hon. HOWARD COBLE, Chairman,
Subcommittee on Courts and Intellectual Property,
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U.S. House of Representatives, Washington, DC.
DEAR REPRESENTATIVE COBLE: The National Association of Beverage Retailers (NABR) would like to thank you for holding a hearing on H.R. 1063 which would ''Amend the Webb-Kenyon Act to allow any State, territory, or possession of the United States to bring an action in Federal court to enjoin violations of that Act or to enforce the laws of such State, territory, or possession with respect to such violations.''
The 21st Amendment gives to the States the authority to regulate the sale and distribution of alcohol beverages within their respective borders. It remains a fact that states should retain the right to enforce their own laws and should be able to penalize out-of-state violators who illegally ship or distribute beverages into that state.
In-state companies which ship or distribute alcohol beverages are subject to enforcement and must now comply with the law. But, out-of-state companies are not subject to effective enforcement—and consequently have little to lose by violating the law. The legislation under consideration by this subcommittee would give to the States a vehicle to enforce these laws in federal court.
There remain a number of key enforcement areas, which are possible through in-state retail sale, that cannot effectively be enforced with regard to out-of-state mail order transactions including:
Sale and delivery to underage persons
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Sale and delivery to chronic alcohol abusers
Sale and delivery in dry areas
Sale and delivery of illegally large quantities (i.e. to bootleggers)
Sale of mislabeled product
Sale of adulterated product
Deceptive or misleading advertising
Payment of state taxes
H.R. 1063 makes no action illegal which is not now already a violation of state law. H.R. 1063 simply gives the states the ability to enforce their laws in a federal court.
In an ''Analysis of Various State Laws Regarding Mail Order of Wine and Other Alcohol Products From Out of State Sources'' conducted by Niemann & Niemann, L.L.P. for the National Association of Beverage Retailers, the conclusion demonstrates, ''The majority of the states prohibit mail order sales of any alcohol products. A few states have clear statutory language expressly prohibiting mail order sales, but most conclude that mail order sales are prohibited due to their licensing, taxation, and general regulation scheme. Many states appear to be frustrated regarding their ability to effectively enforce the prohibitions. There does not appear to be any 'magic bullet' statutory language or enforcement remedy. . .'' Amending Webb-Kenyon, via H.R. 1063, would help states significantly by allowing them to enforce their alcohol beverage laws in federal court.
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The National Association of Beverage Retailers supports H.R. 1063 and believes it should apply equally to out-of-state manufactures, wholesalers and retailers regardless of whether they hold a federal permit.
Thank you for the opportunity to submit this letter for the record.
Sincerely,
| John B. Burcham, Jr., |
| Executive Director. |
NAHB RESPONSE TO THE DEPARTMENT OF JUSTICE LETTER
The Department of Justice has expressed its opposition to H.R. 1534 through a letter written by Assistant Attorney General Andrew Fois to Senator Patrick J. Leahy, Ranking Member of the Senate Judiciary Committee. The National Association of Home Builders is obligated to respond in light of the Department's mischaracterization of the legislation and its impact on the courts and current law. This bill is not just about helping ''developers;'' it is about correcting a flaw in our legal system that prevents individuals from having fair and equal access to federal court in defense of their civil rights.
The underlying premise of the DOJ letter is that the rights of property owners are already well protected and the current system is flexible, fair, and expedient. This bill, DOJ alleges, would undermine the smooth-operating system currently in place to ensure that government agencies fully consider the rights of property owners when making land use decisions. If that were the case, there would not be such a strong demand from property owners for relief from arbitrary and abusive government activities that result in violations of their constitutional rights as citizens.
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This response explains where DOJ has erred in their analysis of H.R. 1534 and answers each of the six objections they raised:
DOJ Objection #1: ''The bill would dramatically shift authority to decide local issues from State and local courts to federal courts.''
NAHB Response:
H.R. 1534 would apply only to federal claims filed in federal court. We agree with the Department of Justice that local land use decisions should be made locally, not at the federal level. H.R. 1534 does not give federal courts any expanded authority to interfere in local land use decisions. Violations of the Fifth Amendment are federal issues by nature—in the same way that a federal court would have jurisdiction over a case in which a local police force was accused of an illegal search and seizure under the Fourth Amendment. As Supreme Court Justice William Brennan wrote in the San Diego Gas & Electric v. City of San Diego: ''After all a policeman must know the Constitution then why not a planner?''
The fact that constitutional claims can arise from the actions of local governments does not make them less valid. Federal courts are uniquely qualified to rule on federal claims—even those stemming from the Fifth Amendment.
State and local claims should bet and will continue to be under H.R. 1534, handled in state, rather than federal court. Federal courts should not, however, force property owners to resubmit their claims to state court when no state or local question is alleged.
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Only Fifth Amendment claims are subject to such treatment. H.R. 1534 simply puts property owners on a level playing field with other federal litigants.
DOJ claim: ''The bill attempts to reduce the adverse effects of its abstention ban by allowing for certification of issues to State courts under narrowly defined circumstances.''
NAHB Response:
To protect state sovereignty, H.R. 1534 ensures that any question of state or local law that is both patently unclear and fundamental to the merits of the case is to be remanded back to the state courts before the federal court can continue. DOJ is correct that 12 states (Arkansas, California, Illinois, Missouri, Nevada, New Jersey, North Carolina, Pennsylvania, Tennessee, Utah, Vermont, and Virginia) do not have certification procedures in place. The bill does not require any state to change its current procedures for certifying state or local questions for the federal courts.
DOJ falsely asserts that in states that do not accept certified questions, the bill would ''force federal courts to resolve State law issues on which they would otherwise defer to State and local tribunals.'' The exact opposite is true. In those 12 states, the property owner would most likely have to re-file the case in state court to have the affected state law question resolved before having his or her federal claim heard in federal court (exactly as they do now), rather than be able to take advantage of a more expedited certification procedure.
H.R. 1534 is simply designed to instruct federal courts to stop abstaining on Fifth Amendment claims and sending property owners back to state court when no state or local claim is alleged. That's all. DOJ has chosen to respond with hyperbole and scare tactics—that is their choice.
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DOJ Objection #2: ''The bill would allow developers and others to sue local officials in federal court without adequately seeking to resolve their disputes with local officials through local procedures.
NAHB Response:
Local land-use decisions should be made locally. But when those decisions infringe upon constitutionally-guaranteed rights, property owners deserve the same ability to defend their rights in court that anyone else has—even if they are ''developers.''
The DOJ letter claims that ''a locality's denial of a single land-use proposal would tell the court very little about the kind of land use the locality would allow.'' The problem is it doesn't tell the property owner much either. Currently, a property owner can go through multiple attempts to get a permit without ever getting a definite answer as to what he/she can or cannot do on his/her own property. Current law requires that a property owner get a definitive answer as to the allowed uses of the property before he/she can file a takings claim in federal court. Government agencies know well that as long as they do not give a final answer (instead, stringing the property owner along for years until they go away) they are practically immune. The time and expense required to follow through on a takings claim are so oppressive, only the very wealthiest property owners can afford to fight City Hall.
H.R. 1534 does not change the requirement that a final decision be reached before the federal court hears a takings claim. It simply defines what a ''final decision'' is. The bill states that a property owner must get an answer from the agency and be rejected on an appeal or waiver attempt. DOJ claims this prevents a land-use dispute from being ''worked out'' at the local level. NAHB claims this is essential for these disputes to be ''worked out'' at the local level. When government agencies hold all the cards, deciding both how you can use your property and when they have made that ''final decision,'' there can be no negotiation. H.R. 1534 does not force property owners to go to court; it simply gives them that choice—to exercise their Fifth Amendment rights, as guaranteed in the Constitution.
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The DOJ letter invents a ridiculous scenario to describe the horrific impact of defining a ''final decision.'' Once again, a ''developer'' has proposed an intensive plan that would create traffic hazards, floods, hurricanes, pestilence, and locusts. In the example provided, that developer could file a takings claim in federal court—with or without H.R. 1534. The only difference is that he/she would have the case tossed out on the merits of the case instead of on the ''ripeness'' of the case. The illustration is meaningless, except as a scare tactic.
Builders want to build. Filing federal lawsuits costs both time and money. In the vast majority of land use disputes, property owners would much prefer to ''work things out'' at a local level instead of having to resort to federal court. Developers, in particular, have to work with local officials on all sorts of issues—and will continue to in the future. Only a foolish businessperson would choose to anger a local government holding all his/her future permits by filing a frivolous federal lawsuit the first time a permit is denied.
Even the American Planning Association (APA), which represents many government land-use planning officials, agrees that government officials cannot continue to be both player and referee in land-use disputes. APA filed an Amicus curiae in the Suitum v. Tahoe case stating:
''The determination of when 'enough is enough' should not be left to local governments to decide.'' ''The Court [has] an opportunity to clarify the application of the 'finality' requirement of the ripeness doctrine to land use cases so that the requirement serves its intended purpose. That purpose is to encourage the decision maker to arrive at a definitive position on the issue that is alleged to inflict an actual, concrete and justiciable injury. It is not to encourage the creation of complex, time-consuming review and approval processes that waste the resources of local government and create a climate of regulatory uncertainty that does not promote the public interest.''
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It is important to note the APA's claim that current ripeness doctrine—defended by DOJ—is both unfair to property owners and wastes the resources of local governments. NAHB would agree on both counts.
DOJ Objection #3: ''The bill would deem 'ripe' for adjudication cases in which there is an insufficient factual record for decision, thereby raising the risk of poorly informed rulings.''
NAHB Response:
This charge is leveled without any explanation given for why such an ''information vacuum'' would occur. Besides, if a property owner does not have sufficient evidence that an uncompensated taking has occurred, he/she will lose on the merits of the case. Nothing in the bill changes the current burden of proof. The DOJ letter repeatedly asserts that ''premature'' claims will be considered ''ripe ' for adjudication under H.R. 1534, as if calling them premature makes them so.
DOJ Claim: ''A federal court will not know whether the State has engaged in an uncompensated taking unless the claimant seeks compensation from the State.''
NAHB Response:
DOJ's argument is erroneous on two counts. First, DOJ is well aware that the bill does not apply to state government actions because states are immune from federal lawsuits under the Eleventh Amendment—but it references state actions anyway. Second, the fact that a state constitution also requires compensation for a government taking does not supercede rights guaranteed under the federal Constitution. DOJ would not likely argue, for example, that someone attempting to sue in federal court on the grounds that his/her right to free speech had been violated should be required to first exhaust any remedy they might have under the state constitution before going to federal court.
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The DOJ letter then adds that the ''problematic provisions'' of H.R. 1534—namely the definition of ripeness—could apply not only to takings claims, but to any claim founded on a property right or privilege. As an example, they offer a claim raised by an employee of a public hospital based on the denial of a promotion. However, that employee would already would have access to federal court if he/she chose to pursue a federal discrimination claim in federal court—only property owners asserting Fifth Amendment claims are subject to the ''ripeness'' hurdles that keep them from having their case heard. Their example proves the need for H.R. 1534, not the danger of it.
DOJ Objection #4: ''The bill would disrupt the administration of federal protections.''
NAHB Response:
Here, the DOJ is trying to have things both ways. On the one hand, DOJ asserts that H.R. 1534 would undermine the principle that local land-use decisions should be made locally. On the other hand, they claim that federal laws protecting the environment through control of local land use would be disrupted. DOJ seems to want federal involvement in local land-use decisions if it is to ''prevent environmental degradation,'' but not to protect the Constitutionally protected rights of individuals.
H.R. 1534 amends no environmental law or any federal statute protecting human health and safety. The only way ''federal protections'' may be disrupted is that federal agencies will have to think about the impact of their decisions on private property owners before acting. That is precisely the kind of ''disruption'' the authors of the Bill of Rights intended when they imposed limits on the power of the federal government by guaranteeing the rights of individuals.
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DOJ Objection #5: ''The bill would complicate judicial application of longstanding precedent under the Just Compensation Clause of the Fifth Amendment regarding the relevant 'parcel as a whole' ''
NAHB Response:
H.R. 1534 does not, in any way, engage in the ongoing ''parcel as a whole'' debate. The section of the bill DOJ refers to applies to the rapidly increasing use by local governments of ''transfer development rights'' or ''TDRs.'' A TDR allows a property owner to sell their development rights to another land owner, who can then use that ''transfer right'' to engage in more development than originally permitted. In Suitum v. Tahoe, the Supreme Court ruled unanimously that a property owner does not need to sell his/her TDR's before a takings claim can be considered ripe. The bill language simply codifies that ruling.
Even the DOJ letter admits that the bill ''appears to be purely procedural.'' Any attempt by DOJ to inject the ''parcel as a whole'' question into the debate is either a misunderstanding of the bill's intent or an effort to distract from the merits of H.R. 1534.
DOJ Objection #6: ''The bill would burden the already overcrowded federal docket at the expense of meritorious claims by allowing unripe and unwarranted claims to proceed in federal court.''
NAHB Response:
Again, the DOJ letter seems to think that by simply calling claims unripe and unwarranted makes them so. There is no basis given whatsoever for this charge.
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Seeking relief in Federal court is still expensive, even if the bill allows better access. Combined with the significant burden of proof required for a property owner to win compensation, it seems unlikely that very many property owners without a clear-cut case will pursue this route. But property owners should at least have the option, like any other individual claiming his/her constitutional rights have been violated.
In fact, passing H.R. 1534 could help clear the court dockets. Currently, these cases are frequently bumped back and forth between a variety of state and federal courts, all ruling as to whether or not the owner has standing to sue. With H.R. 1534, the issue is resolved and the courts can move ahead with deciding the merits of the case instead of wasting time on whether the property owner has the right to sue.
Regardless, a busy schedule is no excuse for not protecting individual rights.
INSERT OFFSET RING FOLIOS 43 TO 48 HERE
STATEMENT FOR MR. SENSENBRENNER, SUBCOMMITTEE ON COURTS AND INTELLECTUAL PROPERTY
Mr. Chairman, thank you for holding a hearing on H.R. 1534, the Private Property Rights Implementation Act of 1997 and thank you, Mr. Gallegly, for introducing this important piece of property rights legislation.
For many years, I have been an outspoken advocate for the need to enhance private property rights and economic liberty and make government more accountable for the burdens it imposes on ordinary Americans. H.R. 1534 takes a small but significant step in that direction.
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H.R. 1534 is not as complicated as many of its opponents would like to portray it. This bill simply makes it easier for an aggrieved property owner to receive a swift hearing of his federal constitutional takings claim in a federal court.
Under this bill, once an agency making a land-use decision has denied a property owner's appeal or waiver attempt, the property owner would be allowed to go straight to federal court with their 5th amendment claim that their property was taken for public use without just compensation. Currently, property owners making 5th Amendment federal takings claims are required to exhaust all state remedies first. I believe this is unreasonable, especially in light of the fact that citizens asserting other federal claims, such as 1st or 4th amendment claims, bear no such burden.
It is important to remember that this bill does not greatly expand the jurisdiction of the federal courts, it does not amend a single federal environmental law, nor does it nullify any local zoning ordinances. H.R. 1534 merely opens the court-house door to achieved property owners while preserving the substantive law that will be adjudicated inside.
Again, I am grateful the Chairman has called this hearing because it is certainly time for the 105th Congress to institute some measures to preserve individual property rights.
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PREPARED STATEMENT OF JOHN CONYERS, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
I strongly oppose this bill which is being characterized as a purely procedural and noncontroversial piece of legislation. H.R. 1534 would permit property owners to move their litigation to Federal District Court faster than current law permits in most cases.
My Republican colleagues usually argue that the Federal government should stay out of the ''states'' business—yet—they offer this legislation that would flood the Federal courts and totally disregard states courts and local administrative bodies.
The central point of the legislation is to circumscribe States, counties and other local governments from exercising appropriate control over their local zoning, land use and local environmental plans. The proposed legislation truncates the existing ''ripeness'' doctrine, a carefully crafted jurisprudential requirement which is meant to ensure that before a case comes before a particular court, the facts of the case are as fleshed out by appropriate administrative bodies or lower courts as fully as possible.
This legislation would allow the developer who was denied permission to build homes by a local community board to skip the zoning board or state appeal process and go straight to the Federal courts. I would ask the sponsors' of the legislation—how are Federal courts better situated to review facts than the local adjudicative bodies? Federal court judges would have to determine a fact intensive question—whether an initial determination by a state body resulted in a compensable taking—without an adequate record.
The legislation is a mix of inappropriate forum shopping and hostility to States' rights. It is Federal legislation that say in the end there States or municipalities that are not competent to adjudicate their land disputes, and that a Federal Court many be brought in at the absolute earliest possible point in the litigation to save localities from their incompetence. This legislation is nonsensical and impractical.
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I am not alone in this view. The Department of Justice, the National Wildlife Federation, the Sierra Club, the National League of Cities, Scenic America and 40 State Attorney General including Michigan oppose this legislation.
I urge Members to join me in opposing this H.R. 1534.
On H.R. 1063, I looking forward to the discussion this morning concerning the conflict between the 14th Amendment's due process standards for minimum contacts, and a special waiver from traditional commerce clause jurisprudence when it comes to alcohol.
I understand that the market problem is that wineries and other direct shippers of alcohol sell to customers in States which seek to bar direct shipment. I also understand that this conflict is exacerbated by modern travel and the internet.
It is important that we carefully review all the facts before we open the Federal courts to more litigation.
| National Conference of State Legislatures, |
| Washington, DC., September 24, 1997. |
Hon. ELTON GALLEGLY,
U.S. House of Representatives,
Washington, DC.
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DEAR REPRESENTATIVE GALLEGLY: I write on behalf of the National Conference of State legislatures (NCSL) to express concern about H.R. 1534, the Private Property Rights Implementation Act of 1997.
The members of NCSL appreciate the good intentions of the sponsors of H.R. 1534 related to the protection of property rights. Many state legislature, in fact, have taken action in recent years to better protect the property rights of their citizens from overzealous government regulators. NCSL also has expressed its misgivings about the actions of federal agencies that arguably disregard the letter and spirit of state laws and constitutions that protect the property rights of state citizens.
The law of real property in our American constitutional tradition is largely a matter of state, not national, concern. Moreover, many state constitutions provide guarantees of property rights that are as extensive or more extensive than those recognized in the federal constitution. Too often in past years, however, the federal government has cavalierly ignored or even preempted state law in this area. H.R. 1534, though intended to protect property rights, seeks to expand the authority of the federal courts at the expense of the states in a way similar in form, if not in substance, to previous federal intrusions.
NCSL is concerned that H.R. 1534 might serve to further federalize this area of law and policy. As a consequence, NCSL urges you not to move hastily to mark-up the bill. Much more careful and deliberate consideration, we believe, should be given to some very serious federalism questions. Specifically:
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1. Given that property rights litigation ordinarily involves substantial questions of state law, should not such suits be pursued in the first instance in state court?
2. How will the ''certification'' process contemplated in H.R. 1534 work in states that do not provide authority for their supreme courts to issue advisory opinions?
3. If plaintiffs can circumvent state courts and go directly to federal court, will this result in suits intended simply to force states and cities to settle with plaintiffs because of the cost of going to trial in federal court?
4. Would the bill ''open the floodgates'' to costly litigation in federal court against states and cities, as many routine disputes that are now resolved in the local administrative process or in state court find their way to federal district court?
5. Will the federal courts have the time and expertise to resolve a potentially large number of suits involving complex issues of local policy and state law?
6. Ultimately, won't the bill result in an additional centralization of power in an unelected federal judiciary?
7. How, in the end, will H.R. 1534 protect the rights of family farmers and other small property owners who may not find federal court to be a hospitable or inexpensive venue?
Please understand that NCSL has not concluded that these questions represent valid criticisms of H.R. 1534. NCSL has not yet decided whether to support or oppose H.R. 1534. Nonetheless, we have almost instincts misgivings about any proposed legislation that would shift decision authority from state to federal court, and we would welcome a response to the seven questions posed above.
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We appreciate your consideration of our views, and look forward to working with you on this issue. NCSL is open-minded on this approach to federal property rights legislation but we need reassurance that the legislation will be crafted in a way that respects our federal system of government.
Sincerely,
| Jeanne Adkins, |
| Colorado House of Representatives, |
Chair, NCSL Committee on Law and Justice.
ALLIANCE FOR JUSTICE, CENTER FOR MARINE CONSERVATION ENVIRONMENTAL DEFENSE FUND, ENVIRONMENTAL WORKING GROUP, NATIONAL AUDUBON SOCIETY, NATIONAL TRUST FOR HISTORIC PRESERVATION, NATIONAL WILDLIFE FEDERATION, NATURAL RESOURCES DEFENSE COUNCIL, SIERRA CLUB, THE WILDERNESS SOCIETY
Hon. HENRY J. HYDE, Chairman,
Committee on the Judiciary,
U.S. House of Representatives, Washington, DC.
DEAR CHAIRMAN HYDE: The undersigned organizations are writing to express our strong opposition to H.R. 1534, the ''Private Property Rights Implementation Act of 1997.''
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The proposed legislation would expand enormously the volume of litigation in federal court against cities and towns, other local governments, an the federal government. The legislation would, among other things, alter the standards established by the U.S. Supreme Court in Williamson County v. Hamilton Bank and subsequent decisions for determining when a ''takings'' suit is ''ripe'' for adjudication. Existing ripeness doctrine helps foster informal resolution of property disputes short of full-scale litigation, and also helps ensure that, if a suit is filed, the court can resolve the case based on a clear understanding of the actual amount of development the community will allow.
The bill also would significantly limit federal courts' existing authority to ''abstain'' from hearing certain property-related cases and thereby allow state courts to resolve disputes arising from the implementation of local land use programs. In addition, the proposed legislation may overturn the U.S. Supreme Court's ''parcel as a whole'' rule, and allow a takings claimant to demand ''compensation'' for any limitation on property value, no matter how slight.
By expanding the potential financial liability of government at all levels, the legislation would grossly interfere with the ability of elected representatives and duly appointed public officials to adopt necessary rules and regulations to protect public health and safety, the environment, and homeowners' property rights. At the same time, the legislation would interfere with the informal resolution of land use and natural resource disputes by encouraging the early filing of adversarial litigation.
The legislation also would dramatically increase the workload of the federal courts, cause greater delays in the processing of the existing federal court workload, and potentially create a need for the appointment of more federal judges.
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Finally, by expanding opportunities for developers and other claimants to sue cities and other local governments in federal court, the legislation would produce greater federal court involvement in essentially local issues, impose greater financial burdens on local governments, and interfere with the ability of local governments to make reasonable, carefully considered decisions.
The undersigned organizations appreciate your consideration of our views on this important subject.
Sincerely,
INSERT OFFSET RING FOLIOS 49 HERE
| Judicial Conference of the United States, |
| Washington, DC., September 29, 1997. |
Hon. HOWARD COBLE,
Chairman, House Judiciary,
Subcommittee on Courts and Intellectual Property,
Washington, DC.
DEAR CHAIRMAN COBLE: As Secretary to the Judicial Conference of the United States, I write to provide you with the following position adopted by the Judicial Conference on September 23, 1997, concerning the Private Property Rights Implementation Act of 1997 (H.R. 1534):
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The Judicial Conference of the United States expresses concerns with the Private Property rights Implementation Act of 1997, H.R. 1534. The bill would alter deeply-ingrained federalism principles by prematurely involving the federal courts in property regulatory matters that have historically been processed at the state and local levels. The bill may also adversely affect the administration of justice and delay the resolution of property claims. For example, H.R. 1534 would: restrict the use of the abstention doctrine in takings, as well as non-takings, cases; codify the takings provisions within 28 U.S.C. §1343, which may create confusion because of the availability of the general jurisdictional statute, 28 U.S.C. §1331; and result in imprudent or inefficient procedures because of the restrictions on the use of the abstention doctrine and the liberalization of the requirement of ripeness.
We would appreciate your consideration of this position of the federal judiciary, which is further explained below, as your subcommittee proceeds to consider this legislation. We would also respectfully request that this letter be made part of the record of the subcommittee hearing held on September 25, 1997.
H.R. 1534 is intended, among other things, to ''simplify and expedite access to the Federal courts for injured parties whose rights and privileges, secured by the United States Constitution, have been deprived by final actions of federal agencies, or other government officials or entities acting under color of State law.'' The novel provisions in this bill, however, raise significant federalism concerns. The legislation would prematurely entangle the federal judiciary in traditionally local matters. It would permit a property owner to circumvent state and local remedies and proceed in federal court even though state officials may not have had a full opportunity to resolve the property dispute.(see footnote 37)
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H.R. 1534 also raises three legal issues: abstention, ripeness, and justiciability. With regard to abstention, the bill provides that whenever a district court exercises jurisdiction pursuant to section 1343 of title 28, United States Code, the court may not abstain from exercising or relinquishing its jurisdiction to a state court in an action where no state law claim is raised. This would affect the long-standing abstention doctrine which promotes comity, preserves federalism, and protects scarce judicial resources. For example, H.R. 1534 might prohibit a federal court from abstaining in a property rights case when the same property is already the subject matter of state proceedings.
Concerning ripeness, the bill defines the term ''final decision'' in such a way as to expedite consideration of takings cases in the federal court. As a result, H.R. 1534 would allow cases to be filed in federal court before the property owner has pursued all available remedies at the state level, which would be contrary to the principles annunciated in Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985). In effect, filing would be allowed to occur before it is clear that the property owner cannot derive any economic benefit from the land and before the issue of just compensation has been raised or determined at the state and local levels. As such, the bill raises two concerns: (1) that the factual record might not be developed enough for a federal court to assess whether the government has deprived the property owner of the use of his or her property; and (2) that H.R. 1534 might violate Article III insofar as the Legislation—by expediting a federal court's consideration of a takings claim before a property owner has been denied compensation—may circumvent the requirement of a cognizable injury in the context of a constitutional taking. See, e.g., Suitum v. Tahoe Regional Planning Agency, 117 S.Ct. 1659, 1665 n. 7 (1997) (recognizing that the ripeness doctrine has both constitutional and prudential elements).
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Even if this legislation accomplishes its objective of opening the federal court's door by easing the ripeness requirements, these cases might nevertheless be dismissed at the pleading stage for failure to satisfy the substantive elements for a taking under the Fifth and Fourteenth Amendments. The Supreme Court has interpreted the Just Compensation Clause to require claimants to prove that substantially all value of the property has been lost and that compensation has been denied—conditions that may not be satisfied if the property owner has not exhausted state remedies.
In addition, H.R. 1534 may create unintended consequences in that the abstention provisions included within this property rights bill are not specifically limited to takings cases. Also, the bill amends section 1343 of title 28, United States Code, which provides district courts with original jurisdiction in civil rights cases. The utility of this section, however, has been questioned following the elimination of the amount in controversy requirement in the more frequently used jurisdictional statute, section 1331.
Lastly, H.R. 1534 would encourage the filing of cases in federal court that may be either unripe or nonjusticiable or that might have been resolved at the state or local level. Furthermore, the bill is applicable to actions by federal agencies as well as state and local entities. This legislation, therefore, will undoubtedly add to the workload of the federal courts. The magnitude of the impact, however, is unclear.
Again, we appreciate your consideration of the views of the federal judiciary. If you have any questions, please contact Mike Blommer, Assistant Director, Office of Legislative Affairs, at 202–273–1120.
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Sincerely,
| Leonidas Ralph Mecham, |
| Secretary. |
cc: Hon. Barney Frank, Ranking Member,
Members of the Subcommittee.
| United States Conference of Mayors, |
| Washington, DC., July 16, 1997. |
Hon. HENRY J. HYDE, Chairman,
Committee on the Judiciary,
U.S. House of Representatives, Washington, DC.
DEAR CHAIRMAN HYDE: On behalf of the United States Conference of Mayors, I am writing to express opposition to H.R. 1534, the ''Private Property Rights Implementation Act of 1997'' introduced on May 6, 1997, and referred to the Committee on the Judiciary.
H.R. 1534 would change the standards and procedures governing so-called ''takings'' lawsuits against cities and other units of local government. The bill would attempt to assign to the federal courts jurisdiction to hear lawsuits that do not meet the U.S. Supreme Court's ''ripeness'' standards. The bill also would eliminate the existing requirement that takings claimants first pursue available state remedies before filing suit in federal court, and restrict the ability of federal courts to ''abstain'' from hearing taking suits so that these controversies may be resolved in the first instance in the state court systems.
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This proposed legislation would impose an enormous new burden on cities across the country. The bill would subject cities to increased liability, which in turn would encourage the filing of even more lawsuits in the future. It would also require cities to defend against takings suits not only in state courts, but in federal courts as well. Ultimately, this new burden on cities would interfere with the ability of city officials to fairly and efficiently implement zoning ordinances and other traditional municipal regulations.
In addition, H.R. 1534 would impose on the federal courts the responsibility of resolving a large volume of essentially local disputes now resolved by the state courts. As a result, H.R. 1534 would greatly expand the federal courts' workload and authority, contradicting ongoing efforts in Congress to limit the reach of federal court authority over fundamentally local issues.
Thank you for your interest in the position of the U.S. Conference of Mayors on this proposed legislation.
Sincerely,
| Larry Jones, |
| Assistant Executive Director. |
cc: Judiciary Committee Members.
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| IMLA, International Municipal Lawyers Association, |
| Washington, DC., July 15, 1997. |
Hon. HENRY J. HYDE, Chairman,
Committee on the Judiciary,
U.S. House of Representatives, Washington, DC.
Re: H.R. 1534
DEAR MR. CHAIRMAN: I am writing on behalf of the International Municipal Lawyers Association (IMLA) to encourage your opposition to H.R. 1534, the Private Property Rights Implementation Act. IMLA is a professional organization of city and county attorneys representing over 1400 local governments. I am the current IMLA President and City Attorney of Daytona Beach, Florida.
In 1995, the IMLA Board of Directors unanimously adopted a resolution in opposition to federal takings legislation. City and county attorneys remain united in their opposition to federal takings legislation such as H.R. 1534. We believe the proposed legislation expands opportunities for takings litigants to sue local governments in federal courts, resulting in increased federal involvement in essentially local issues, thereby impeding the ability of local governments to reach reasonable, thoughtful land use decisions. Moreover, the proposed legislation would severely undermine existing, more informal efforts to mutually resolve land use disputes by encouraging unwarranted, more rapid resort to litigation in the already overburdened federal court system.
Local governments believe in and act on the requirement that private property owners be treated fairly and be eligible to receive just compensation for takings of their properties consistent with the guarantees of the Fifth Amendment. Local governments also adhere to the belief that it is the obligation of all citizens to protect the common good, including the environment, public health, and public safety.
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The passage of legislation that clearly will lead to the filing of many more lawsuits will impose major new financial burdens on our nation's local governments and will significantly impair the ability of our communities to develop and implement land use plans tailored to specific community needs. In our view, H.R. 1534 represents a step backward in the efforts to develop a balance between public and private interests in the use and development of land.
For these reasons, we ask you to oppose H.R. 1534.
Sincerely,
| Frank B. Gummey, III, |
| IMLA President. |
cc: Speaker Newt Gingrich.
Minority Leader Richard A. Gephardt.
Other Members of the House Judiciary Committee.
| American Planning Association, |
| Washington, DC., September 16, 1997. |
Hon. HENRY J. HYDE, Chairman,
Committee on the Judiciary,
U.S. House of Representatives, Washington, DC.
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Re: H.R. 1534
DEAR MR. CHAIRMAN: I am writing to you on behalf of the American Planning Association, which I serve as president. APA is a service organization with approximately 30,000 members nationwide. The organization and its members are dedicated to improving the livability of communities through comprehensive land-use planning. APA opposes H.R. 1534 for many reasons, but chiefly because it is an unnecessary and inappropriate federal intervention in matters long handled, and best addressed, by local governments and the legislatures that define their powers. In general, however, APA believes in, and actively supports, property rights. (See the attached APA's Position on ''Takings,'' at section 1.A., Policy Guide of APA, 1995. This Policy Guide was approved unanimously by APA's national Chapter Delegate Assembly on April 11, 1995 and ratified by our Board of directors the same day.)
Land use is a local matter, but H.R. 1534 would force land-use disputes into the federal courts. The preamble to the bill clearly states that its purpose is to expedite access to federal courts once government officials take final action. ''Government officials'' naturally include local officials who administer local land-use regulations. Ever since the U.S. Supreme Court first upheld zoning in 1926, zoning and land-use controls have remained fundamentally local matters, carried out under the guidelines of state law. Often the local land-use regulations that our members administer attempt to balance the many different interests of neighboring landowners. A landowner exercising his alleged ''right'' to build a landfill or feedlot may encroach on the property rights of others in the neighborhood. Similarly, business people and homeowners may have different views of the property rights involved when a community receives a proposal to build a gas station, a convenience store, a fast food restaurant, or an adult bookstore in a residential neighborhood. It is obvious that local governments are far better suited than any court to balance such competing interests.
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Local government adopt land-use regulations not for the purpose of infringing on property rights, but in good faith—to make their communities more livable. Given the great potential for disagreement among competing interests, local land-use regulations are more remarkable for their success than for the relatively small number of horror stories that are sometimes used to support such radical proposals as those outlined in H.R. 1534. Local regulations actually protect landowners' property values, for example by preventing factories from being built next to homes. Yet, because these systems affect millions of pieces of property and must satisfy a great variety of local interests, they may work less than perfectly. To address these situations, APA has proactively proposed additional remedies.
H.R. 1534 promotes takings litigation at the earliest possible moment—in some instances without local appeals. These early jumps into federal court clash with APA's Policy Guide, which calls for out-of-court solutions by more effective means, including:
limiting the scope of local land-use regulations to that which is necessary to accomplish public purposes:
permitting reasonable regulatory flexibility in order to minimize impact on property rights;
modifying regulations to offer landowners relief; and
adopting and using innovative local administrative mechanisms to accomplish the same.
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As you know, H.R. 1534 makes takings claims ''ripe,'' or eligible for litigation, if a decision has been rendered by a government and an appeal or waiver has been pursued (if one is authorized by local law). However, H.R. 1534 allows landowners to skip the appeal or waiver ''if the prospects of success are reasonably unlikely'' (H.R. 1534 §(e)(2)).
APA opposes H.R. 1534 because its premature litigation will discourage the development, adoption, use, and effectiveness of local administrative mechanisms that are now in place to resolve land-use disputes. The clearly stated purpose of H.R. 1534 is to increase the amount of takings litigation in federal courts. If local solutions are not sought, local records will not be developed properly for litigation, and courts will have greater difficulty discerning whether or not a taking has occurred. At best, litigants and federal courts will suffer more lengthy and costly hearings. At worst, local landowners will skip over local hearings to go to federal court, where the sole question will be, ''Was the landowner justified in bypassing the local mechanism because he was reasonably unlikely to win a waiver or appeal?'' Thus, the early leaps into federal courts over taking claims will not only make the federal courts work harder and more often with poorly developed (or no) public records, but valuable local opportunities to resolve the disputes will be needlessly skipped, deemphasized, lost, or never developed. Under an adopted H.R. 1534, tremendous local land-use expertise that could be applied to resolving the disputes will be ignored while federal judges will labor long and hard over inadequate records.
Rather than adopting H.R. 1534 and inevitably wasting gigantic amounts of public funds in premature and needless litigation, Congress should allow local governments to spend their resources designing mechanisms that can give landowners administrative relief if their property rights are unduly burdened. APA's Policy Guide promotes the creation of a landowner's relief mechanism—for example, when landowners are burdened by conflicts between multiple public agencies. Our representatives will enthusiastically testify in favor of such reasonable proposals before state legislatures or before committees of Congress. If H.R. 1534 is passed, all levels of government will have much less incentive and fewer resources to develop these resolution mechanisms.
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Supporters of this bill have indicated the intent to quote from a brief prepared for APA as amicus curiae in the cast of Suitum v. Tahoe Regional Planning Agency, 117 S.Ct. 1659 (1997). APA hereby repudiates what amounts to dicta in Sections IV and V of the brief. APA relies on volunteers to prepare its amicus briefs. The authors of the brief were such volunteers and were authorized by APA to file a brief in this case and to take the position noted in Sections I, II, and III of the brief. Their arguments in Sections IV and V exceeded the scope of their authority. APA leaders have seriously discussed the problems with this brief since it was filed. These problems led me, as the elected president of this organization, to restructure the Amicus Curiae Committee under a new chair and to ask that the new committee be more proactive in reviewing future briefs to ensure that they do not contain blatant contradictions of adopted APA policy, as this brief did.
We as an organization and I personally take this issue very seriously. If we can be of assistance to you in addressing it, please feel free to call on us. Our Policy Director in Washington is Jeff Soule (202–872–0611). You may feel free to call on me directly at Ball State University, where I serve as Dean of the college of Architecture and Planning (765–285–5861). As a planner and lawyer who has written and spoken on takings and the need for appropriate remedies for many years, this issue is one of great personal interest to me.
Sincerely,
PREPARED STATEMENT OF ANNA LOUISE STRONG, EMERITUS PROFESSOR OF CITY AND REGIONAL PLANNING, UNIVERSITY OF PENNSYLVANIA
Qualifications
I am here to represent the American Planning Association (APA) and its over 30,000 members who are planners, elected and appointed officials. I am a member of the American Institute of Certified Planners, and I was one of the contributors to APA's Policy Guide: APA's Position on ''Takings.''
My non-academic background includes service on the Pennsylvania State Planning Board, the Easttown Township, PA Planning Commission, and the Chester County, PA Housing Authority, providing me with experience in local and state government planning and administration of land use and housing.
H.R. 1534: An Overview
Section 2 of H.R. 1534 is an anomaly. The bill, titled the ''Private Property Rights Implementation Act of 1997,'' seeks to expedite access to federal courts by limiting the powers of local and state administrative agencies and state courts. Yet Congress and the Federal courts, not to mention advocates for the wise use and property rights movements, have been inveighing against concentration of power over property at the federal level. The U.S. Supreme Court has repeatedly stressed the return of greater authority to the states and their local governments at the expense of the federal government. Yet here is a bill that attempts to swim upstream against the prevailing current. What can be the rationale for a bill that wrests decision making power from those closest to the land and vests it in the federal judiciary? Is the underlying assumption that the local and state structure of land use decision making is fundamentally flawed, so flawed that it is time to assert federal authority over what is and has been a local and state responsibility?
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Section 3 and 4 of the bill, addressing property claims in which the United States is the defendant, would encourage by-passing of the administrative appeals process to provide more rapid access to the federal judiciary. Again, is the administrative review process by agencies with direct experience concerning particular types of property issues so flawed that these claims should be leap-frogged to district court or the Court of Federal Claims?
My answers to these rhetorical questions is no. The following comments are a critique of several aspects of the bill—in general, the shift in responsibility from state and local governments to the federal government, and, in particular, the certification provision, abstention, limitations on what constitutes a taking and the ''reasonably unlikely'' test and ripeness. The first three arguments apply to Section 2 only and will be discussed first. The taking and the ripeness arguments are applicable to all three sections of the bill and will be discussed last.
Less Power To The People More Power To The Federal Government
Land use planning and regulation are jealously guarded local prerogatives in the United States. Some states have moved in recent decades to provide a superstructure of state guidelines and regulations to shape urban growth and protect environmentally sensitive areas. Sometimes these state initiatives have led to a backlash, resulting in state enactment of assessment or takings bills. There is tremendous variation across the states in the factors that underlie land use policies, including natural conditions, political culture, growth pressures, and conflicts between economic and environmental goals. These variations have led to a bewildering array of laws that affect use of property.
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Each state, in the context of its own situation, has established a structure for decision making that typically includes local authorization to grant conditional uses and special exceptions, local authorization to exact land or money equivalent contributions in return for certain specified types of development, specifications for the local administrative appeals process, and specifications for appeals to the state judiciary. Land owners, developers, and local and state governments have established a modus vivendi that for the most part works well. Where it does not, the state courts and the federal courts, where there is a federal claim, have acted to rein in excessive demands and dilatory strategies on the part of government. This is an immensely complex system that permits diversity to flourish. The federal district courts, already overloaded, are not well equipped to plunge into these turbulent, murky waters.
Section 2 of H.R. 1534 would permit certification, under certain circumstances (circumstances that Sec. 2(d)(2) leaves unclear to this commentator), of a question of state law by a district court to the highest court of a state, by-passing action by the lower state courts. If the certification occurred in one of the states that does not permit such action, would the federal court proceed to answer the unsettled question of state law? Surely this is not a desirable outcome.
Section 2 also prohibits a district court from abstaining from jurisdiction ''where no claim of a violation of a State law, right, or privilege is alleged.'' This wording is an attempt to by-pass existing law, which provides that federal courts may abstain from taking jurisdiction when there are important issues of state law to be resolved. However, there may well be issues of state law even if the claimant has not asserted them forcing federal courts into accepting jurisdiction would place them in the unrenable and undesirable position of settling questions of state law.
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Revisions To Taking Definition Ripeness
All three sections contain the same language, as part of a definition of what is a final decision, that rather obliquely modifies existing law on what constitutes a taking. The phrase, defining what constitutes a final decision is: ''. . . makes a definitive decision regarding the extent of permissible uses on the property that has been allegedly infringed or taken, without regard to any uses that may be permitted elsewhere . . .'' The key question is what does elsewhere include? A succession of Supreme Court decisions, starting with Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), have held that property may not be segmented for purposes of a taking claim. Under H.R. 1534, could a claimant assert a taking as to only a portion of a tract? Does elsewhere apply to development rights that may be transferred to another site and make them ineligible for inclusion in the determination of what constitutes a taking? Although Justice Scalia urged this latter interpretation in his concurring opinion in Suitum v. Tahoe Regional Planning Agency, 117 S. Ct. 1659 (1997), the Court did not reach such a conclusion.
The ripeness language of the three sections of the bill further states that the claimant shall have been denied one appeal or waiver but that the claimant need not seek such an appeal or waiver ''. . . if the prospects of success are reasonably unlikely . . .'' What is the definition of ''reasonably unlikely,'' and is it to be the task of the district courts to make this determination? Concerning ripeness of challenges to state of local action, the current rule in a number of the federal circuits is that there must be one state appeal before a claimant can proceed to a Section 1983 action. This is a sensible rule, avoiding the delays of several appeals at the state level but allowing a state court to rule on what are state questions. Similarly, why should there not be one appeal at the federal administrative level before the claimant is entitled to go to district court?
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Overall the impacts of this bill would be to increase federal litigation, decrease the power of local and state administrative and judicial bodies, and, possible most serious in terms of cost for various levels of government, reduce the likelihood that local disputes can be settled quickly and by negotiation. At a time when the temper of this Nation and its Congress is to reduce the roles of the federal government and its judiciary, this bill is the wrong legislation at the wrong time.
INSERT OFFSET RING FOLIOS 50 TO 57 HERE
| Linowens and Blocher LLP, |
| Silver Spring, MD, September 24, 1997. |
Hon. HOWARD COBLE, Chairman,
House Judiciary Subcommittee on Courts and Intellectual Property,
Washington, DC.
Re: H.R. 1534: Private Property Rights Implementation Act of 1997—Response to Department of Justice Letter
DEAR CHAIRMAN COBLE: Our law firm has provided assistance to the National Association of Home Builders with respect to the referenced matter, which is scheduled for hearing before the Subcommittee on September 25, 1997.
Enclosed is a copy of a letter from the undersigned and Duane J. Desiderio of our office to The Honorable Andrew Fois, Assistant Attorney General, U.S. Department of Justice, Office of Legislative Affairs, responding to a letter that Mr. Fois wrote to Senator Patrick Leahy on August 15, 1997, concerning the referenced Bill. We respectfully request that our response to Mr. Fois be included in the record of these proceedings.
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Respectfully Submitted,
JJD: sp
Enclosure
| Linowens and Blocher LLP, |
| Silver Spring, MD, September 5, 1997. |
Hon. ANDREW FOIS,
Assistant Attorney General,
U.S. Department of Justice,
Washington, DC.
Re: H.R. 1534: Private Property Rights Implementation Act of 1997
DEAR MR. FOIS: Our law firm has provided assistance to the National Association of Home Builders (''NAHB'') with respect to the referenced matter. We have received a copy of your letter of August 15, 1997, to Senator Patrick Leahy expressing the views of the Department of Justice on H.R. 1534, the Private Property Rights Implementation Act of 1997 (the ''DOJ Letter''). We would like to take this opportunity to clarify key misperceptions and correct certain misstatements in the DOJ Letter.
Safeguarding property rights protected by the Fifth and Fourteenth Amendments is a major and growing concern of many citizens who are involved in the American shelter industry. As the Supreme Court recognizes, the Fifth Amendment, like ''many of the provisions of the Constitution, [is] designed to limit the flexibility and freedom of governmental authorities . . . .'' First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304, 321 (1987). However, the federal courts are dodging their obligations to resolve law suits where government action unconstitutionally takes private property. Takings litigation has become so notoriously expensive and time consuming, by virtue of ''ripeness'' barriers erected by the courts, that there is a chilling effect to dissuade landowners from seeking judicial redress even though their constitutional rights have been violated by arbitrary government conduct. It is telling that DOJ entirely ignores the wide-spread abuses of the ripeness doctrine worked by government at all levels, which has denied aggrieved landowners the option of access to the federal courts.
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For this reason, H.R. 1534 is vitally important to our constituents. The bill's purpose is to ensure that landowners have their day in court without the oppressive delays and expenses inherent to current ripeness doctrine. In the process, H.R. 1534 will untangle the knot of land use cases already clogging federal dockets with ripeness and abstention issues.
We take this opportunity to address the six specific ''concerns'' raised by DOJ in its assessment of H.R. 1534. First, allow us to provide a general overview of what the bill does, and does not, accomplish.
OVERVIEW
DOJ creates the impression that H.R. 1534 would work a sea-change in existing law. In fact, the bill is far more tailored and focused than DOJ chooses to recognize.
H.R. 1534 is not a substantive bill. It does not define when a taking occurs. It does not specify a certain percentage of reduction in property values that land use regulation cannot exceed. It does not create a remedy for a partial take, nor would it codify the relevant ''denominator'' in the takings fraction. Rather, H.R. 1534 is simply procedural. It clarifies those circumstances in which property owners can obtain access to the federal courts, so judges can perform their sworn task to uphold the Constitution and decide whether or not it has been violated by arbitrary government action.
H.R. 1534 applies only when landowners raise federal claims in federal court. The bill does not apply in any situation where a property owner raises a state law claim in federal court. Justice O'Connor recently wrote that the Supreme Court ''has frequently acknowledged the importance of having federal courts open to enforce and interpret federal rights.'' Idaho v. Coeur d'Alene Tribe of Idaho, 117 S.Ct. 2028, 2045–46 (June 23, 1997). H.R. 1534 comports with this principle. The bill would require courts to decide, on the merits, cases where a litigant only raises claims arising under the United States Constitution.
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H.R. 1534 would not impede local land use functions: DOJ fears that the bill would spur property owners to ''bypass'' negotiations with local officials and run into court. This is fallacious. The primary goal of property owners (particularly builders and developers) is to bring their development plans to fruition (and as the case may be, to realize a profit)—not to antagonize local zoning officials, upon whom they depend for approvals, with needless litigation. Legal action is, and will remain, a last resort because it is time-consuming, expensive, and draws from the bottom line. In this regard, one of H.R. 1534's significant benefits is that it may alert local zoning officials to unconstitutional exercises of their decision-making authority. Indeed, county police officers must know what action is within constitutional parameters when they keep the peace. ''[If] a policeman must know the Constitution, then why not a planner?'' San Diego Gas & Elec. Co. v. City of San Diego, 450 U.S. 621, 661 n. 26 (Brennan, J., dissenting).
H.R. 1534 does not allow for takings challenges against state officials. DOJ is under the misconception that H.R. 1534 creates wholesale opportunities for takings cases against state officials. This is incorrect. The bill operates within the confines of the current case law under 42 U.S.C. §1983 (''Section 1983''), the provision that allows suits to redress federal constitutional violations committed by individuals acting under ''color of state law.'' Under Section 1983, state officials acting in their official capacities are immune from suit under the Eleventh Amendment. See Scheuer v. Rhodes, 416 U.S. 232 (1974). H.R. 1534 does not abrogate this sovereign immunity of state officials. However, the bill would clarify when a claim ripens against municipalities and counties rendering unconstitutional land use decisions. This is because local entities are not immune from the consequences of their unconstitutional actions. See Owen v. City of Independence, 445 U.S. 622,636–37 (1980); Monell v. Department of Social Servs., 436 U.S. 658, 690 (1978).
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H.R. 1534 would imbue the Fifth Amendment with the degree of importance recognized by the Supreme Court. Where the prospect exists that free speech may be silenced, or when reasonable expectations of privacy may be invaded, courts do not raise hurdle after hurdle to determine whether, in fact, these constitutional guarantees have been impinged. For example, when local zoning agencies regulate land use in a manner that allegedly infringes on the freedoms of speech or religion, property owners do not typically confront barriers like ripeness and abstention before a federal court can hear the case. However, if that same zoning agency regulates ''too far'' and takes property in violation of the Fifth and Fourteenth Amendments, then the courts uniformly erect jurisdictional hurdles before reaching the merits.
The Constitution does not establish a pecking order of fundamental rights. We believe that H.R. 1534 would require the lower federal courts to consummate what the Supreme Court has already made clear: ''the takings clause of the Fifth Amendment, as much a part of the Bill of Rights as the First Amendment or the Fourth Amendment, should [not] be relegated to the status of a poor relation. . . .'' Dolan v. City of Tigard, 512 U.S. XX, 114 S.Ct. 2309, 2320 (1994).
RESPONSE TO SPECIFIC DOJ COMMENTS
DOJ CONCERN NO. 1
DOJ Letter, p. 2: ''H.R. 1534 would prohibit abstention under 28 U.S.C. §1343 and thereby radically shift authority over local issues from State and local courts to federal courts.''
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Linowes and Blocher Response:
As noted above, H.R. 1534 would simply ensure that federal courts resolve cases where solely federal rights are alleged. This is hardly the ''radical'' shift in authority that DOJ fears. Abstention may be warranted in actions where state claims are alleged pendent to federal ones; consequently, the bill does not address this scenario.
DOJ Letter, p. 3: ''[F]ederal courts could be compelled to assume a far greater role in the resolution of State and local issues. . . . Many state courts, however, do not accept certified questions, and thus the bill would force federal courts to resolve State law issues on which they would otherwise defer to State and local tribunals.''
Linowes and Blocher Response:
H.R. 1534 provides that, in certain circumstances, the district court can certify an unsettled question of state law that is essential to resolve the federal claim. Contrary to DOJ's statements, only twelve (12) states lack certification procedures.(see footnote 38) Of course, even in these states, federal courts decide issues of state law all of the time (such as in diversity cases), without fear that the federal government is usurping local decisionmaking. DOJ thus exaggerates that H.R. 1534 will ''impair state sovereignty'' and ''undermine federalism.'' (DOJ Letter, p. 3.) Certainly federal courts in states without certification procedures are well-qualified to address whether federal constitutional rights have been abrogated. Indeed, the bill's certification provision, which provides an avenue to avoid premature federal resolution of state law issues, was crafted to preserve state sovereignty.
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The bill would have no effect on State law certification procedures already in existence, nor does it create any certification procedure.
DOJ Letter, p. 4: ''The premature resort to Federal court authorized by H.R. 1534 thus threatens many property owners with greater uncertainty and instability in local land use law. . . .''
Linowes and Blocher Response:
The bill does not promote ''premature resort to Federal court.'' H.R. 1534 requires a landowner to obtain a final decision from a local land use agency and, if that decision is adverse to the property owner, seek a waiver from that decision and/or appeal it to the appropriate administrative board. Only after a waiver and/or appeal is pursued can a constitutional claim be ripe for judicial review under the bill.
We believe that H.R. 1534 will achieve the reverse of DOJ's sentiments: property owners will enjoy greater certainty and stability if the bill becomes law. Citizens will be protected from local government abuses because all parties will know when a final, reviewable agency action arises.
DOJ CONCERN NO. 2
DOJ Letter, p. 4: ''H.R. 1534 would allow developers and others to sue in federal court without adequately seeking to resolve their disputes with local officials through local procedures.''
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Linowes and Blocher Response:
In essence, the bill provides landowners with a choice: after receiving a final decision from a land use agency and pursuing a waiver and/or appeal therefrom, property owners can either further negotiate with local officials or sue. The vast majority of landowners will opt for further negotiation and pursue ''less intensive development.'' (DOJ Letter, p. 4.) Developers will not hastily select litigation as their best opportunity to achieve the maximum profit expectations in their land. They would much rather spend funds to build their projects than line the pockets of lawyers.
If a property owner decides to litigate, H.R. 1534 by no means ensures that a taking will be found and compensation awarded; a plaintiff developer would still need to prove on the merits that a taking has occurred. This is a heavy burden indeed, and would likely require proof that the land use agency has denied all economically viable uses of the parcel at issue. See, e.g. Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). Considering this difficult evidentiary burden, it is doubtful that landowners will rashly opt to pursue litigation over further negotiation. Nonetheless, when an agency does not intend to permit any economically viable use of land, or where local officials act in bad faith and would otherwise require a developer to exhaust countless administrative procedures, the jurisdictional requirements for resolving constitutional claims must be clarified. This is H.R. 1534's overriding purpose.
In light of the foregoing, a landowner would be ill-advised to bring a lawsuit along the lines of the hypothetical raised in the DOJ Letter (p. 4.) Under DOJ's scenario, a developer proposes ''a very intensive development plan'' that the local authorities reject for environmental reasons, but are ''willing to approve less intensive development.'' Assuming the developer seeks a waiver (if one is available under the hypothetical ordinance) and brings an administrative appeal, then she would have a ripe claim under H.R. 1534—because the agency has rendered a final decision as to what uses will not be permitted on her property. By all means, however, responsible counsel would strongly encourage this developer to further negotiate and downscale her proposal before filing a takings law suit.
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DOJ Letter, p. 4: ''[T]he bill would deem the government action a 'final decision,' and a challenge thereto 'ripe' for adjudication, so long as the claimant has applied for and been denied one such appeal or waiver. This provision would shift considerable authority from local decision makers to federal courts.''
Linowes and Blocher Response:
The bill's requirement for submission of one development application to a zoning body, and pursuit of one waiver and/or appeal therefrom, is not novel law. Rather, it finds inspiration from a body of opinions requiring that a property owner make ''one meaningful application'' to the relevant land use decisionmaking body to ripen a constitutional claim.(see footnote 39) It is interesting that the Ninth Circuit, a court typically sympathetic to local governments in constitutional land use cases, has pioneered the ''one meaningful application'' rule. See Gregory Overstreet, Update on the Continuing and Dramatic Effect of the Ripeness Doctrine on Federal Land Use Litigation, 20 ZONING AND PLANNING LAW REPORT 21–22 (March 1997). In the circuits that apply the ''one meaningful application,'' DOJ's fears of a ''considerable shift'' away from local zoning prerogatives have not materialized.
DOJ Letter, pp. 4–5: ''In those situations where a single denial gives rise to a genuinely ripe claim, the courts are already able to identify the claim as ripe and decide the case.''
Linowes and Blocher Response:
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Contrary to DOJ's assertion, courts rarely agree on when a constitutional claim is ripe following denial of a single application. In MacDonald, Sommer & Frates v. Yolo County, 477 U. S. 340, 348 (1986), a case involving denial of a single subdivision application, the Supreme Court decided that a takings claim is unripe without a ''final and authoritative determination of the type and intensity of development legally permitted on the subject property.''
Following this pronouncement, property owners have no idea as to how many proposals or applications they must submit to ripen a takings claim. For example, in Southview Assocs. v. Bongartz, 980 F.2d 84, 92 (2d Cir. 1992), cert. denied, 507 U.S. 987 (1993), the court decided a takings claim was not ripe because the landowner ''did not attempt to modify the location of the units or otherwise seek to revise its application.'' The court failed to decide how many reapplications would be necessary to reach the merits. In Schulze v. Milne, 849 F.Supp. 708 (N.D. Cal. 1994), aff'd in part, rev'd in part on other grounds, 98 F.3d 1346 (9th Cir. 1996), property owners submitted a total of thirteen (13) revised plans over three years to renovate their home. Each time they submitted a plan ''in compliance with all applicable zoning laws,'' local officials nonetheless ''refused to approve the plan, and instead informed plaintiffs that there were additional requirements, not found in any zoning or other statutes, which plaintiffs had yet to meet.'' 849 F.Supp. at 709.
The theme recurs in Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 920 F.2d 1496 (9th Cir. 1990). In 1981, the property owners submitted a subdivision proposal to build 344 residential units. The plan was rejected, and city planners informed that a plan for 264 units would be reviewed favorably. The owners then submitted a plan for 264 units; city planners rejected it, and informed that a plan for 224 units would be reviewed favorably. The owners then submitted a plan for 224 units; city planners rejected it, and informed that a plan for 190 units would be reviewed favorably. The owners then submitted a plan for 190 units; city planners rejected it, and the owners appealed to the city council. The city council found the plan ''conceptually satisfactory,'' and granted a conditional 18-month use permit to commence construction for the project. Subsequently, the developer worked with planning board staff to meet the city council's conditions for the 190-unit development. Staff recommended approval of the site plan, but the planning board overrode staff's recommendation and issued a denial. The property owners then appealed this decision to the city council, which this time denied the site plan for 190 units. Meanwhile, a sewer moratorium was imposed, a request to extend the special use permit was rejected, and the permit expired. The local officials thus expected the developer to start from square one. Following this Kafkaesque process, the federal district court dismissed a takings claim for lack of ripeness, but the appellate court then reversed. See 920 F.2d at 1502–1506.
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No semblance of harmony exists in how land use officials treat property owners. H.R. 1534, however, would bring some order to the chaos.
As one commenter notes, ''[t]he reapplication requirement forces a property owner to concede away portions of his or her constitutional rights in order to gain access to the federal courts.'' Gregory Overstreet, supra, 20 ZONING AND PLANNING L. REP. at 22. In the development approval process, local land use bodies typically mandate a concession of private property for myriad public purposes. Following such land set-asides, the injury to constitutionally-protected property interests is sufficiently concrete so that, at the very least, a takings claim should be ripe. While H.R. 1534 would allow a claimant to proceed to court strictly as a procedural matter, it merits re-emphasis that the bill would not compel a substantive finding that a taking has occurred. H.R. 1534 would only allow the property owner to get into court, without fear that the government could exact more land from him.
DOJ Letter, p. 5: ''Because the bill would deprive localities of control over local decisions, it reflects serious disrespect for local procedures and the officials who are best positioned to make these decisions.''
Linowes and Blocher Response:
The DOJ Letter is somewhat disingenuous in stating that the bill ''reflects serious disrespect'' for local procedures and officials, considering the all-too-common circumstance by which landowners are subject to arbitrary municipal conduct. The cases discussed thus far only skim the surface.
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For example, in Suitum v. Tahoe Regional Planning Agency, 80 F.3d 359 (9th Cir. 1996), local regulators denied an elderly woman the right to build her retirement home, or anything else, on her lot in a residential subdivision. The agency did not dispute that Mrs. Suitum's property was off-limits to any development whatsoever. The land use agency argued, and two lower courts agreed, that Mrs. Suitum's takings claim was not ripe because she did not attempt to sell her transfer development rights (''TDRs'') to some other unidentified property owner for use on some other unidentified piece of land. Mrs. Suitum could only sell ''land coverage rights'' amounting to 1% of her lot's coverage or 183 square feet—approximately the size of a master bedroom. Mrs. Suitum submitted plans to construct her retirement home in 1989; it took eight years of regulatory negotiation and litigation before the Supreme Court finally decided that her takings claim was ripe for adjudication, without awarding her any compensation on the merits. See 117 S.Ct. 1659 (1997).
Glendon Energy Co. v. Borough of Glendon, 836 F.Supp. 1109 (E.D. Pa. 1993), also merits consideration. There, after a local board rejected a development plan, the property owner purchased buffer lands so the applicable zoning could accommodate the proposed development. Subsequently, the county council met clandestinely in a ''behind-closed-doors'' executive session to re-zone the property and repeal the earlier provisions of the zoning ordinance that would have permitted the development. Nonetheless, the property owner was not able to get the federal court to address the merits of his federal constitutional grievances. Even though the property owner never had the opportunity to participate in the secret session, and even though the re-zoning was done for the specific purpose of preventing the development at issue, the court said the claims were unripe because the property owner never challenged the re-zoning's validity.
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A California state case typifies the situations that landowners commonly confront when dealing with local land use officials. In Healing v. California Coastal Comm'n, 27 Cal Rptr. 758 (Ct. App. 1994), a state agency denied a permit for constructing a one-story, three bedroom home, where it had not received a recommendation from a non-existent board as to whether the property should be restricted from development under a non-existent program for acquisition and set-asides of lots in the Santa Monica mountains. When the property owner sought compensation for a taking, the state argued that the claim was unripe. The court decided that the claim was, in fact, ripe, and acknowledged the abuses of the land use process inflicted upon the property owner:
''It is in the nature of our work that we see many virtuoso performances in the theaters of bureaucracy, but we confess a sort of perverse admiration for the Commission's role in this case. It has soared beyond both the ridiculous and the sublime and presented a scenario sufficiently extraordinary to relieve us of any obligation to explain why we are reversing the judgment. . . . To state the Coastal Commission's position is to demonstrate its absurdity.''
Id. at 764.
These cases are not celebrated or unique. They illustrate the ''ripeness mess'' plaguing the courts. They represent how land owners have suffered from agency abuses of the ripeness doctrine. And they confirm the need for H.R. 1534. See Michael M. Berger, The ''Ripeness'' Mess in Federal Land Use Cases, or How the Supreme Court Converted Federal Judges into Fruit Peddlers, INSTITUTE ON PLANNING, ZONING AND EMINENT DOMAN 7–1 (1991).
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DOJ CONCERN NO. 3
DOJ Letter, p. 5: ''H.R. 1534 would deem 'ripe' for adjudication cases in which there is an insufficient factual record for decision.''
Linowes and Blocher Response:
DOJ's caveat is premised on pure conjecture and surmise. The best it can muster is that H.R. 1534 ''could'' result in judicial review of inappropriate cases. If a landowner cannot produce sufficient evidence to prove a taking has occurred, then she will lose on the merits. The exorbitant costs associated with litigation provide tangible disincentive to prevent property owners from pursuing cases with sketchy facts.
Moreover, DOJ ignores language in the bill requiring the affected landowner to suffer an ''actual and concrete injury'' directly ''caused'' by the land use review body. See H.R. 1534 §2 (page 3, lines 8–9); §3 (page 4, lines 15–16); §4 (page 5, lines 16–17). Thus, a takings claimant must produce sufficient evidence showing he suffers an actual and concrete injury before proceeding with the merits of his claim. Given this requirement, DOJ's evidentiary concerns, regarding the extent of regulation as applied to a plot of land, are amply satisfied.
DOJ Letter, p. 5: ''Where State action is being challenged as a violation of the Just Compensation Clause, a federal court will not know whether the State has engaged in an uncompensated taking unless the claimant seeks compensation from the State.''
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Linowes and Blocher Response:
The requirement that a takings claimant must first exhaust state compensation mechanisms derives from Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 194–96 (1985). However, a federal court, charged with the responsibility of determining constitutional violations, is as qualified as a state court to determine when the Fifth Amendment has been infringed. Indeed, a federal court is better positioned to make such an inquiry where, as in the scenario covered by H.R. 1534, a citizen asserts solely federal claims.
It is noteworthy that the American Planning Association (''APA'') has argued to abolish the requirement that a takings claimant must first exhaust state court proceedings before litigating in federal court. The APA understands that ''[l]ower federal courts have abused this requirement.'' See Brief Amicus Curiae of the American Planning Association in Support of Respondent, Suitum v. Tahoe Regional Planning Agency at 23–24 (S. Ct. No. 96–243.) The APA further stated that the cases ''effectively drain the ripeness rules of any meaning. They prevent federal courts from ever reaching the final decision issue because, under this view, a takings plaintiff must seek compensation in state court until that court clearly says it will not entertain a compensation remedy.'' Id. at 24. H.R. 1534 thus reflects the position endorsed by the major national association representing land use planners who work in the public sector.
One commenter notes that less than 6% of land use takings cases between 1983–1988 had been found ripe. See Gregory Overstreet, The Ripeness Doctrine of the Takings Clause: A Survey of Decisions Showing Just How Far Federal Courts Will Go to Avoid Adjudicating Land Use Decisions, 10 J. LAND USE &(1994). Similarly, over 90% of the land use cases between 1990–1997 raising Fifth Amendment concerns are sacrificed on the ripeness altar, primarily because aggrieved claimants did not first litigate in state court. We submit that the Supreme Court did not envision that Williamson County would effectively cause the federal courts to abdicate their jurisdiction over constitutional issues in such a wholesale manner.
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Santa Fe Village Venture v. City of Albuquerque, 914 F.Supp. 478 (D.N.M. 1995), illustrates the gross inequities to aggrieved landowners that must run the gauntlet between the federal and state courts. In that case, the local city council established a building moratorium to preclude any development on lands near a national monument site. Plaintiff had an option to purchase land within areas subject to the moratorium, but never exercised that option because of the total land use restrictions. Rather, it filed a lawsuit in federal district court seeking just compensation from the local government for its inability to develop on the property. That first suit was dismissed on ripeness grounds, because the property owner never sought a compensation remedy in state court. In other words, exhausting state compensation procedures was necessary to render any federal claim ripe for resolution. The property owner then filed a second action for inverse condemnation in state court without raising any federal claims. The state court then dismissed the complaint for lack of standing. After exhausting state proceedings, plaintiff then filed a third suit in federal court under Section 1983, alleging only deprivations of federal rights (including due process, equal protection, and takings). The United States District Court for the District of New Mexico then dismissed as unripe this federal action, alleging solely federal claims, because the federal claims were not raised in state court—even though the state court already decided that the property owner lacked standing to bring its action there. In short, the property owner tried to play by the ripeness rules, ping-ponged back and forth between the state and federal systems, but could still find no judge to hear its case on the merits.
DOJ Letter, p. 6: ''It is virtually unprecedented for a federal statute to deprive federal courts of the ability to keep their dockets free from unripe claims. We are unaware of any provision in the U.S. Code that purports to define when a claim is 'ripe'. . . .''
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Linowes and Blocher Response:
DOJ's criticism misunderstands the Constitution's structure. Article III, Section 1 states: ''The judicial Power of the United States, shall be vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.'' Congress thus has the power to shape and qualify the jurisdiction of the United States district and circuit courts. The lower federal courts ''cannot use their power to review the constitutionality of any government action unless Congress first authorizes the federal courts to exercise jurisdiction.'' LAURENCE H. TRIBE, AMERICAN CONSTITUTIONAL LAW §3–5 at 42 (2d ed. 1988). Congress is thus empowered to place limits on the jurisdiction of Article III courts in the manner proposed by H.R. 1534.
DOJ CONCERN NO. 4
DOJ Letter, p. 6: ''H.R. 1534's 'finality' standard would also disrupt the administration of federal protections.''
Linowes and Blocher Response:
We fully agree that federal land use regulations, such as those protecting wetlands and endangered species, further meritorious public purposes. However, the Fifth Amendment's raison d'AEe3tre is to check government regulation that ''goes too far'' in achieving those public goals, at the expense of private land owners. One of the ''principal purposes'' of the takings clause is to prevent government '' 'from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.' '' Nollan v. California Coastal Comm'n, 483 U.S. 825, 835 n.4 (1987) (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960). Accordingly, we are not persuaded that H.R. 1534—which simply allows access to courts to determine whether a regulation goes too far—will cause wholesale disruption of federal land use programs.
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DOJ Letter, p. 6: ''[T]he bill's sweeping definition of 'final decision' . . . would disrupt federal protections.''
Linowes and Blocher Response:
Under the bill, a ''final decision'' arises, in part, when a land use agency ''expresses a definitive decision regarding the extent of permissible uses on the property. . . .'' Moreover, H.R. 1534 requires that the final decision ''cause[] actual and concrete injury to the party seeking redress.'' This language tracks the specific wording in Williamson County. The Supreme Court explained that a ripe land use decision does not occur until the ''initial decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury. . . .'' 473 U.S. at 192 (emphasis supplied). The Court also explained that the final decision must pertain to how a property owner will ''develop its property,'' (id. at 191), and that the decision must apply to ''the property at issue.'' 473 U.S. at 186. Therefore, a ''final decision'' under H.R. 1534 is no more ''sweeping'' than the Supreme Court's own precedent.
DOJ Letter, p. 6: ''This definition [i.e., 'final decision'] is so broad that it arguably would be met whenever the United States restricts a harmful use of property. . . .''
Linowes and Blocher Response:
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DOJ's concern is specious. The bill does not upset the fundamental principle that ''harmful or noxious uses'' of property, rightfully prohibited by government action, are not compensable under the Fifth Amendment. See, e.g., Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1020–1026 (1992). H.R. 1534 would not award compensation to a landowner that maintains a nuisance or other harmful use on her property. We remind DOJ that putting property to productive use—such as home construction—has never been considered a nuisance under federal or state law.
DOJ CONCERN NO. 5
DOJ Letter, p. 6: ''H.R. 1534 would run counter to takings jurisprudence regarding the need to analyze the effect of government action on the relevant 'parcel as a whole.' ''
Linowes and Blocher Response:
Another smokescreen. The bill does not even address the ''parcel as a whole'' debate. Even DOJ recognizes as much: ''[T]he bill's ripeness provision could not alter this basic precept of Constitutional takings jurisprudence. . . .'' (DOJ Letter, p. 7.) We thus question why DOJ would cloud meaningful inquiry on the merits of H.R. 1534.
DOJ takes issue with the bill's language that ripeness is satisfied when a municipality makes a definitive decision on land uses ''without regard to any uses that may be permitted elsewhere.'' The intent of this language is simply to confirm the recent holding in Suitum v. Tahoe Regional Planning Agency, 117 S.Ct. 1659 (1997). The Court unanimously ruled that a property owner did not need to sell her transfer development rights (''TDRs'') to yield a ripe takings claim, but never reached the merits of whether a taking had, in fact, occurred. TDRs, by definition, contemplate property uses elsewhere, apart from the subject parcel; they are rights that the owner of the regulated parcel can sell to another land owner to permit more intense development, that would not otherwise be allowed, on the property receiving the TDRs. For ripeness purposes only, H.R. 1534's intent is to make clear that a final decision regarding land uses on the property at issue is all that is required, without reference to development on nearby lands.
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While it is beyond H.R. 1534's scope, DOJ states that ''courts have rejected attempts by claimants to segment property into the affected and unaffected portions of the relevant parcels. . . .'' (DOJ Letter, p. 7.) We note that the Supreme Court has expressly left this issue open for future resolution (Lucas, 505 U.S. at 1016 n. 7). Thus, neither of the hypotheticals posited in the DOJ letter (p. 7) would be affected by the bill's procedural reforms.
DOJ CONCERN NO. 6
DOJ Letter, p. 7: ''H.R. 1534 would further burden the already crowded federal docket.''
Linowes and Blocher Response:
Bald statements that federal courts will become deluged with land use claims are not persuasive. Busy dockets should not excuse the federal courts from exercising jurisdiction over cases where only federal claims are alleged.
Land use cases already occupy an active position in the federal courts. However, the vast majority of these cases remain mired in ripeness, abstention and other jurisdictional issues. H.R. 1534 would significantly reduce the amount of court time devoted to these issues, and facilitate decisions on the merits.
CONCLUSION
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In closing, we firmly believe that H.R. 1534 would afford American property owners, of all means, the procedural fairness that is absent from modern land use litigation. The bill simply seeks to clarify the rules of the takings game, so a citizen can pursue orderly and predictable means of redress when they suffer constitutional violations at the hand of arbitrary government land use regulation.
Very truly yours,
| John J. Delaney |
| Duane J. Desiderio |
cc: Hon. Patrick Leahy,
United States Senate.
Hon. Orrin G. Hatch, Chairman,
Committee on the Judiciary.
Hon. Henry J. Hyde, Chairman,
Committee on the Judiciary.
Hon. John Conyers,
Ranking Minority Member,
Committee on the Judiciary.
Hon. Elton Gallegly.
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MEMORANDUM
TO: House Judiciary Committee, Subcommittee on Courts and Intellectual Property
FROM: John J. Dehney, Duane J. Desiderio
DATE: September 22, 1997
RE: H.R 1534 Tabulation of Federal Land Use Cases, 1990–1997
Our law firm has assisted the National Association of Home Builders with respect to the abovereferenced matter. To aid the Subcommittee in understanding why landowners need the reforms proposed in H.R. 1534, we have compiled a table of land use cases decided in the lower federal courts between 1990–1997. As this survey reveals, the vast majority of takings cases are dismissed on jurisdictional grounds such as ripeness or abstention. Most citizens are thus denied the opportunity to test the merits of their constitutional challenges. Moreover, the minority of takings cases that overcome ripeness hurdles exact a considerable cost on financial and judicial resources, and require many years of duplicative and expensive litigation before a judge even reaches the merits. We believe that the ripeness rules have become stumbling blocks before the doors of the local federal court house, particularly for smaller property owners who cannot afford the lawyers they need to navigate the takings maze.
I. METHODOLOGY
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We sought to examine all takings cases decided by the lower federal courts between 1990–1997, whereby property owners sought some approvals or permits from a state or local regulatory agency to put their land to a variety of uses—such as to build a retirement house, remodel their home, plan a residential subdivision, or even to construct a fully-permitted landfill facility. We conducted searches in Westlaw databases and located 124 federal land use cases. They are listed at Tab 1.
Next, we reviewed each case to focus the survey universe on situations where property owners brought as-applied challenges to land use regulation under the takings clause. In this regard, we rejected cases: (1) where property owners alleged only facial challenges to land use regulations; (2) where only physical, and not regulatory, takings claims were alleged; (3) where the courts did not rule on either ripeness or the merits vis-a-vis takings claims (even though other constitutional provisions, such as the Due Process Clause, the Equal Protection Clause, or the First Amendment, were decided); and (4) where the property owner did not seek some type of development or land use approval. For example, we ignored takings cases listed at Tab 1 that concerned such issues as rent control or mobile home ordinances.
The cases that remained are the 58 lower federal court cases shown at Tab 2.
Cases 1–31 of the survey are those takings cases whose litigation history included a reported United States district court opinion, from 1990 or later. For purposes of this memorandum, these opinions are referred to as the ''District Cases.''
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Cases 32–58 of the survey list takings opinions decided in the United States Circuit Courts of Appeals, in which the district court opinions were either not reported or were decided prior to 1990. Our research also located unreported appellate opinions. For purposes of this memorandum, these are referred to collectively as the ''Appellate Cases.''
II. RESULTS
31 District Cases were tabulated. Of these, judges failed to reach the merits in 25 cases. In other words, property owners received no resolution of their takings claims in 81% of the District Cases.
In the 6 District Cases where judges reached the merits, 4 of them reflect histories of prolonged negotiation and litigation with land use regulators of 5 years or more.(see footnote 40) See, e.g.
Case 4, Front Royal and Warren County Industrial Park Corp. v. Town of Front Royal, 749 F. Supp. 1439 (W.D. Va. 1990), vacated and remanded, 945 F.2d 760 (4th Cir. l991), on remand, 922 F.Supp. 1131 (W.D. Va. 1996): Before the federalcourt could award compensation for a taking, the property owner was required to pay for seven years of litigator in both federal and state courts. Presumably, the property owner entered the negotiation process with local land use officials long before it first filed suit.
Case 5, Corn v. City of Lauderdale Lakes, 771 F. Supp. 1557 (S.D. Fla. 1991), aff'd in part, rev'd in part and remanded, 997 F.2d 1369, after remand, 95 F.3d 1066 (11th Cir. 1996): Property owner required to litigate about 11 years before the federal court decided, on the merits, that no taking had occurred.
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Case 9, Treister v. City of Miami, 893 F.Supp. 1057 (S.D. Fla. 1992): Litigation alone spanned at least six years, in both federal and state courts. Further litigation or negotiation was apparently pursued to determine how much compensation was owed.
Case 11, Carpenter v. Tahoe Regional Planning Agency, 804 F.Supp. 1316 (D. Nev. 1992): Ten years elapsed from submission of first application for development, to court's decision that two of the takings claims alleged were ripe. Further proceedings were still needed to decide how much compensation was owed.(see footnote 41)
We submit the Appellate Cases warrant separate analysis in light of the expense of the land use approval and litigation processes. Considering that 81% of property owners never survive the first round of takings litigation in the District Cases, we believe that an even fewer number of takings litigants have the financial wherewithal to pay for more legal fees to fund an appeal—only to gamble that a federal circuit judge will simply find their claim ripe and require more litigation before damages are awarded.
We located 27 Appellate Cases. Of these, the merits still were not reached in 15 cases. In other words, for those property owners that could afford appellate litigation, less than half received a determination that their takings claims were ripe.
Of those 12 Appellate Cases where takings claims were found ripe,(see footnote 42) in more than half property owners had to underwrite additional litigation to determine whether or not a taking occurred on the merits. See Cases 32, 34, 40, 46, 49, 51, 55, 57. In other words, more than 60% of the ripe Appellate Cases required property owners to first litigate in the federal trial court, bring an appeal, and then return to the federal trial court to decide whether any compensation would be due.
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Of those 12 Appellate Cases where takings claims were found ripe it took property owners, on the average, 9.5 years to have an appellate court reach its determination. These land owners thus endured almost a decade of negotiation and litigation to obtain a judicial determination that their takings arguments could be heard on the merits.
H.R 1534—SURVEY UNIVERSE OF CASES
1. Del Monte dunes at Monterey, Ltd. v. City of Monterey, 920 F.2d 1496 (9th Cir. 1990)
2. Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 911 F.2d 1331 (9th Cir. 1990)
3. Eide v. Sarasota County, 908 F.2d 716 (11th Cir. 1990).
4. Hodge Capital Co. v. City of Sausalito, 908 F.2d 976 (9th Cir. 1990)
5. Jackson v. Thornburgh, 907 F.2d 194 (D.C. Cir. 1990)
6. Smithfield Concerned Citizensfor Fair Zoning v. Town of Smithfield, 907 F.2d 239 (1st Cir. 1990)
7. Harris v. County of Riverside, 904 F.2d 497 (9th Cir. 1990)
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8. Estate of Himelstein v. City of Fort Wayne, 898 F.2d 573 (7th Cir. 1990)
9. Eide v. Sarasota County, 895 F.2d 1326 (11th Cir. 1990)
10. Diaz v. City of Riverside, 895 F.2d 1416 (9th Cir. 1990)
11. Southern Pacific Transp. Co. v. City of Los Angeles, 922 F.2d 498 (9th Cir. 1990)
12. Acacia Villa v. Kemp, 774 F. Supp. 1240 (C.D. Cal. 1990)
13. Front Royal and Warren County Indus. Park Corp. v. Town of Front Royal, 749 F.Supp. 1439 (W.D. Va. 1990)
14. Asociacion de Pescadores de Vieques, Inc. v. Santiago, 747 F.Supp. 134 (D. Puerto Rico 1990)
15. Gilbert v. City of Cambridge, 745 F.Supp. 42 (D. Mass 1990)
16. General Offshore Corp. v. Farrelly, 743 F.Supp. 1177 (D. Virgin Islands 1990)
17. Saffold v. Carter, 739 F.Supp. 1541 (S.D. Ga. 1990)
18. Langley Land Co. v. Monroe County, 738 F.Supp. 1571 (M.D. Ga. 1990)
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19. Martinez v. Junta de Planificacion de Puerto Rico, 736 F.Supp. 413 (D. Puerto Rico 1990)
20. Arroyo Vista Partners v. County of Santa Barbara, 732 F.Supp. 1046 (C.D. Cal. 1990)
21. AzalPacifico, Inc. v. City ofLos Angeles, 948 F.2d 575 (9th Cir. 1991)
22. Midnight Sessions, Ltd. v. City of Philadelphia, 945 F.2d 667 (3rd Cir. 1991)
23. McDougal v. County of Imperial, 942 F.2d 668 (9th Cir. 1991)
24. Samaad v. City of Dallas, 940 F.2d 925 (5th Cir. 1991)
25. Gilbert v. City of Cambridge, 932 F.2d 51 (1st Cir. 1991)
26. Fitzerald v. Utah County, 931 F.2d 900 (lOth Cir. 1991)
27. Executive 100, Inc. v. Martin County, 922 F.2d 1536(l1thCir. 1991)
28. Biddison v. City of Chicago, 921 F.2d 724 (7th Cir. 1991)
29. SoutAview Associates, Ltd v. Individual Members of Vermont Environmental Bd, 782 F.Supp. 279 (D. Vt. 1991)
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30. U.S. ex. rel. Free v. Peters, 778 F.Supp. 431 (N.D. III. 1991)
31. Milne v. Township of Oregon, 777 F. Supp. 536 (E.D. Mich. 1991)
32. Cap'n Hook Auto Parts, Inc. v. Board of Tp. Trustees, Liverpool Tp., 773 F.Supp. 71 (N.D. Ohio 1991)
33. MBank New Braunfels, N.A. v. Federal Deposit Ins. Corp., 771 F. Supp. 1187 (S.D. Fla. 1991)
34. Corn v. City of Lauderdale Lakes, 771 F. Supp. 1557 (S.D. Fla. 1991)
35. Associated Builders & Contractors, Golden Gate Chapter Inc. v. Baca, 769 F.Supp. 1537 (N.D. Cal. 1991)
36. Seniors Civil Liberties Ass'n, Inc. v. Kemp, 761 F.Supp. 1528 (M.D. Fla. 1991)
37. Richardson v. City and County of Honolulu, 759 F. Supp. 1477 (D. Hawaii 1991)
38. Fitzgerald v. Utah County, 963 F.2d 382 (lOth Cir. 1992)
39. Pearson v. City of Grand Blanc, 951 F.2d 1211 (6th Cir. 1992)
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40. Medina Corp. v. City of Charleston, 959 F.2d 231 (4th Cir. 1992)
41. Bannum, Inc. v. City of Louisville, 958 F.2d 1354 (6th Cir. 1992)
42. Southview Associates, Ltd. v. Bongartz, 980 F.2d 84 (2nd Cir. 1992)
43. Lockary v. Kayfetz, 974 F.2d 1166 (9th Cir. 1992)
44. Rocky Mountain Materials & Asphalt, Inc. v. Board of County Com'rs. Of El Paso County, 972 F.2d 309 (lOth Cir. 1992)
45. Seguin v. City of Sterling Heights, 968 F.2d 584 (6th Cir. 1992)
46. Reahard v. Lee County, 968 F.2d 1131 (11th Cir. 1992)
47. Warner Cable Communications Inc., v. Borough of Schuylkill Haven, 784 F.Supp. 203 (E.D. Pa 1992)
48. Rent Stabilization Ass'n of New York City, Inc. v. Dinkins, 805 F.Supp. 159 (S.D. N.Y. 1992)
49. Anderson v. Alpine City, 804 F.Supp. 269 (13. Utah 1992)
50. Carpenter v. Tahoe Regional Planning Agency, 804 F.Supp. 1316 (D. Nev. 1992)
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51. Naegele Outdoor Advertising, Inc. v. City of Durham, 803 F.Supp. 1068 (M.D. N.C. 1992)
52. Richardson v. City and County of Honolulu, 802 F.Supp. 326 (D. Hawaii 1992)
53. Villas of Lake Jackson, Ltd. v. Leon County, 796 F.Supp. 1477 (N.D. Fla. 1992)
54. Mid Gulf, Inc. v. Bishop, 792 F.Supp. 1205 (D. Kan. 1992)
55. Treister v. City of Miami, 893 F.Supp. 1057 (S.D. Fla. 1992)
56. AMSAT Cable Ltd. v. Cablevision of Connecticut Ltd. Partnership, 6 F.3d 867 (2nd Cir. 1993)
57. Corn v. City of Lauderdale Lakes, 997 F.2d 1369 (11th Cir. 1993)
58. Christensen v. Yolo County Bd. Of Sup'rs., 995 F.2d 161 (9th Cir. 1993)
59. Cable Holdings of Georgia, Inc. v. McNeil Real Estate Fund VI, Ltd., 988 F.2d 1071 (11th Cir. 1993)
60. Hartman & Tyner, Inc. v. Charter Tp. Of West Bloomfield, 985 F.2d 560 (6th Cir. 1993)
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61. New Port Largo, Inc. v. Monroe County, 985 F.2d 1488 (11th Cir 1993)
62. Taylor Inv., Ltd. v. Upper Darby Tp., 983 F.2d 1285 (3rd Cir. 1993)
63. Michigan Chrome and Chemical Co. v. City of Detroit, 12 F.3d 213 (6th Cir. 1993)
64. Golden Gate Hotel Ass'n v. City and County of San Francisco, 864 F.Supp. 917 (N.D. Cal. 1993)
65. Restigouche, Inc. v. Town of Jupiter, 845 F.Supp. 1540 (S.D. Fla. 1993)
66. Golden Gate Hotel Ass'n v. City and County of San Francisco, 836 F. Supp. 707 (N.D. Cal. 1993)
67. Patrick Media Group, Inc. v. City of Clearwater, 836 F.Supp. 833 (M.D. Fla. 1993)
68. Blumberg v. Pinellas County, 836 F.Supp. 839 (M.D. Fla. 1993)
69. Glendon Energy Co. v. Borough of Glendon, 836 F. Supp. 1109 (E.D. Pa. 1993)
70. Triomphe Investors v. City of Northwood, 835 F. Supp. 1036 (N.D. Ohio 1993)
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71. Unix System Laboratories, Inc. v. Berkeley Software Design, Inc., 832 F.Supp. 790 (D. N.J. 1993)
72. W. Birkenfeld Trust v. Bailey, 827 F. Supp. 651 (E.D. Wash. 1993)
73. First Bet Joint Venture v. City of Central City By and Through City Council, 818 F.Supp. 1409 (D. Colo. 1993)
74. Sterling Homes, Inc. v. Swape, 816 F.Supp. 319 (M.D. Pa. 1993)
75. Celentano v. City of West Haven, 815 F. Supp. 561 (D. Conn. 1993)
76. Christopher Lake Development Co. v. St. Louis County, 35 F.3d 1269 (8th Cir. 1994)
77. Resolution Trust Corp. v. Town of Highland Beach, 18 F.3d 1536 (11th Cir. 1994)
78. New Port Largo, Inc. v. Monroe County, 873 F.Supp. 633 (S.D. Fla. 1994)
79. Provident Mut. Life Ins. Co. of Philadelphia v. City of Atlanta, 864 F.Supp. 1274 (N.D. Ga. 1994)
80. Virgin Islands Conservation Sac., Inc. v. Virgin Islands Bd. Of Land Use Appeals, 857 F.Supp. 1112 (D. Virgin Islands 1994)
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81. Adamson Companies v. City of Malibu, 854 F.Supp. 1476 (C.D. Cal. 1994)
82. Schulz v. Milne, 849 F. Supp. 708 (N.D. Cal. 1994)
83. Trinity Resources, Inc. v. Township of Delanco, 842 F.Supp. 782 (D. N.J. 1994)
84. Flagon Production Corp. v. Petera, 70 F.3d 1566 (lOth Cir. 1995)
85. Millington Homes Investors, Ltd v. City of Millington, Tenn., 60 F.3d 828 (6th Cir. 1995)
86. Dodd v. Hood River County, 59 F.3d 852 (9th Cir. 1995)
87. DeBlasio v. Zoning Bd. Of Adjustmentfor Tp. Of West Amwell, 53 F.3d 592 (3rd Cir. 1995)
88. Triomphe Investors v. City of Northwood, 49 F.3d 198 (6th Cir. 1995)
89. Oliverson v. West Valley City, 875 F.Supp. 1465 (D. Utah 1995)
90. Santa Fe Village Venture v. City of Albuquerque, 914 F.Supp. 478 (D. N.M. 1995)
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91. Bloomsburg Landlords Ass'n, Inc. v. Town of Bloomsburg, 912 F.Supp. 790 (M.D. Pa. 1995)
92. Herrington v. City of Pearl, 908 F.Supp. 418 (S.D. Miss. 1995)
93. Quality Refrigerated Services, Inc. v. City of Spencer, 908 F.Supp. 1471 (N.D. Iowa 1995)
94. Pedrina v. Chun, 906 F.Supp. 1377 (D. Hawaii 1995)
95. Villas of Lake Jackson, Ltd. v. Leon County, 906 F.Supp. 1509 (N.D. Fla. 1995)
96. Panhandle Eastern Pipe Line Co. v. Madison County Drainage Bd., 898 F.Supp. 1302 (S.D. Ind. 1995)
97. 2BD Ltd. Partnership v. County Com'rs for Queen Anne's County, 896 F.Supp. 518 (D. Md. 1995)
98. TJ's South, Inc. v. Town of Lowell, 895 F.Supp. 1116 (N.D. Ind. 1995)
99. Liberty Cable Co., Inc. v. City of New York, 893 F.Supp. 191 (S.D. N.Y. 1995)
100. James Emory, Inc. v. Twiggs County, Ga, 883 F.Supp. 1546 (M.D. Ga. 1995)
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101. Patel v. Penman, 103 F.3d 868 (9th Cir. 1996)
102. Preseault v. U.S., 100 F.3d 1525 (Fed. Cir. 1996)
103. Schak v. Milne, 98 F.3d 1346 (9th Cir. 1996)
104. Sinclair Oil Corp. v. County of Santa Barbara, 96 F.3d 401 (9th Cir. 1996)
105. Corn v. City of Lauderdale Lakes, 95 F.3d 1066 (11th Cir 1996)
106. New Port Largo,Inc. v. Monroe County, 95 F.3d 1084(11th Cir. 1996)
107. Kardules v. City of Columbus, 95 F.3d 1335 (6th Cir. 1996)
108. Del Monte Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422 (9th Cir. 1996)
109. Bateman v. City of West Bountiful, 89 F.3d 704 (lOth Cir. 1996)
110. Bickerstaff Clay Products Co., Inc. v. Harris County, Ga By and Through Bd Of Com'rs, 89 F.3d 1481 (11th Cir. 1996)
111. Able v. U.S., 88 f.3d 1280 (2nd Cir 1996)
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112. Hager v. City of West Peoria, 84 F.3d 865 (7th Cir. 1996)
113. Martin v. Jefferson County, 78 F.3d 585 (6th Cir. 1996)
114. Kruse v. Village of Chagrin Falls, Ohio, 74 F.3d 694 (6th Cir. 1996)
115. Harris v. City of Wichita, Sedgwick County, 74 F.3d 1249 (lOth Cir. 1996)
116. Bensch v. Metropolitan Dade County, 952 F.Supp. 790 (S.D. Fla 1996)
117. Hallco Texas, Inc. v. McMullen County, 934 F.Supp. 238 (S.D. Tex. 1996)
118. Reserve, Ltd. v. Town of Longboat Key, 933 F.Supp. 1040 (M.D. Fla. 1996)
119. Front Royal and Warren County Indus. Park Corp. v. Town of Front Royal, 922 F.Supp. 1131 (W.D. Va. 1996)
120. Specialty Malls of Tampa v. City of Tampa, 916 F.Supp. 1222 (M.D. Fla. 1996)
121. Marshall v. Board of County Com'rs for Johnson County, 912 F.Supp. 1456 (D. Wyo. 1996)
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122. McKenzie v. City of White Hall, 1997 WL 194035 (8th Cir. 1997)
123. Macri v. King County, 110 F.3d 1496 (9th Cir. 1997)
124. Tri County Industries, Inc. v. District of Columbia, 104 F.3d 455 (D.C. Cir. 1997)
INSERT OFFSET RING FOLIOS 58 TO 71 HERE
| National Association of Realtors, |
| Washington, DC., September 26, 1997 |
Hon. HOWARD COBLE, Chairman,
House Judiciary Subcommittee on Courts and Intellectual Property, Washington, DC.
Re: H.R. 1534
DEAR REPRESENTATIVE COBLE: On behalf of the nearly 720,000 members of the NATIONAL ASSOCIATION OF REALTORS, I am pleased to submit the enclosed written testimony regarding H.R. 1534. I respectfully request that this testimony be entered into the official record of the hearing held on Thursday, September 25, 1997. Thank you for your consideration of NAR's views on this important piece of legislation.
Sincerely,
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| Steve Driesler, |
| Senior Vice-President and Chief Lobbyist. |
STATEMENT OF THE NATIONAL ASSOCIATION OF REALTORS
On behalf of the 720,000 members of the NATIONAL ASSOCIATION OF REALTORS (NAR), we appreciate the opportunity to offer our comments on H.R. 1534, the ''Private Property Rights Implementation Act of 1997,'' which seeks to streamline the judicial process for adjudicating claims associated with private property rights.
NAR has worked for many years on all levels of government to encourage a balanced approach to environmental protection. NAR's perspective encourages both the cost-effective protection of natural resources and a healthy and growing economy. NAR opposes environmental and natural resource legislation that result in uncompensated takings of private property through government action. It is essential that the rights of private property owners be fully recognized in local, state, and federal programs and laws.
In recent years, as efforts to protect the environment have escalated, the administrative and judicial procedures for obtaining a development permit or contesting an uncompensated taking through the court system have become increasingly burdensome. NAR strongly supports environmental protections, but believes that restrictions on the use of property should be balanced with the rights guaranteed under the 5th Amendment of the Constitution.
H.R. 1534 will help property owners ''have their day in court'' to prove an uncompensated taking has occurred. Currently, property owners are required to pursue all possible state-level court and administrative remedies before they can proceed to a federal court. H.R. 1534 streamlines this process to help more property owners appeal to federal court in cases of violations of federal statutory and Constitutional law. This bill also defines when a government agency's land-use decision is final, so property owners are not left in a frustrating cycle of futile appeals.
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Over the past few years, increasingly the federal courts have recognized the validity of claimants who have argued that their property rights have been infringed by government regulation. In the recent Dolan v. City of Tigard case, the U.S. Supreme Court made it clear that it considers private property rights to be of equal importance with environmental regulation. Writing for the Court, Chief Justice Rehnquist stated, ''We see no reason why the Takings Clause of the Fifth Amendment, as much a part of the Bill of Rights as the First or Fourth Amendment, should be relegated to the status of a poor relation.''
Opponents of H.R. 1534 claim this legislation would change the standards and procedures that currently govern ''takings'' lawsuits. They also claim the bill would attempt to change long-standing jurisdictional standards by which claims are heard in federal court.
First, H.R. 1534 is not a ''takings'' bill. It does not define a ''taking'' or assign a trigger level of lost property values. It does, however, make procedural improvements to allow property owners the same access to federal court as other claimants. Second, the bill does not change the standards of jurisprudence regarding a lawsuit's ''ripeness'' to be heard at the federal level. It does clarify what a ''final decision'' is at the state level and prevents endless and costly rounds of appeal.
In sum, H.R. 1534 does not change any environmental law. It does not mandate compensation or impose new burdens on state or local governments. It does provide certainty and gives property owners their ''day in court'' to make their case on how to use their property. The NATIONAL ASSOCIATION OF REALTORS strongly supports H.R. 1534 and urges the Sub-Committee on Courts and Intellectual Property to take action this year on this vital legislation.
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NATIONAL ASSOCIATION OF HOME BUILDERS
HOUSING NEWS
BUILDERS URGE CONGRESS TO PASS BILL TO RESTORE CONSTITUTIONAL RIGHTS OF PROPERTY OWNERS
WASHINGTON, Sept. 25—The nation's home builders today called on Congress to pass the ''The Private Property Rights Implementation Act'' (H.R. 1534), a bill that reaffirms for landowners a constitutional right enjoyed by other citizens: access to the federal judicial system.
''This legislation puts property owners on a level playing field with other individuals asserting constitutional rights, by bringing balance to the regulation of private property,'' Carl Goldberg, a home builder from Roseland, New Jersey and a member of the National Association of Home Builders (NAHB), told the House Judiciary Committee's Subcommittee on Courts and Intellectual Property today.
The Fifth Amendment of the Constitution guarantees that the government ''shall not take private property for public use without just compensation.'' Unfortunately, under the current judicial system ''it is nearly impossible to assert my Fifth Amendment rights as a property owner,'' Donald Betsworth, a home builder from Greensboro, North Carolina, told the subcommittee.
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''When I cannot work out my differences with the government agency which has restricted the use of my property, and my only recourse is to seek relief in court, the door is effectively closed to me,'' Betsworth told the subcommittee. ''Under current law, the procedural and legal hurdles I would face trying to assert my property rights in federal court are so time-consuming and expensive it is not worth the effort.''
In addition to H.R. 1534, introduced earlier this year by Representative Elton Gallegly (R-Calif.), the nation's home builders are also supporting S. 1204, the ''Property Owners' Access to Justice Act,'' introduced on Sept. 23 by Senators Paul Coverdell (R-Ga.) and Mary Landrieu (D-La) and co-sponsored by Senators Orrin Hatch (D-Utah) and Byron Dorgan (D–N.D.).
The two bills are congressional responses to local, state and federal governments' continued practice of delaying takings claims hearings for years by forcing property owners to exhaust all ''administrative remedies'' before the claim can be heard in court. Unlike any other citizen, landowners must maneuver their way over numerous hurdles while they incur thousands of dollars in attorney's fees just to have their day in court.
Neither bill would affect local, state or federal land use regulations. Property owners would still be required to try to resolve their differences with the agency in question. However, once the agency has denied their appeal or waiver attempt, the property owner would have the right to go to federal court to prove that they deserve compensation for their taking. A property owner would be given the choice of either pursuing state and federal claims in state court or pursuing only his or her federal takings claims in federal court.
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''H.R. 1534 is intended to reform the system so that those citizens whose property is taken have some protection against the use of convoluted procedures that deny them their day in court,'' Goldberg told the subcommittee. ''H.R. 1534 merely opens the door to the courts; it does not change the standards by which the courts will then consider the claim.''
The lengthy time frame required to have a takings claims heard has proven to be an effective deterrent, Goldberg said. ''Over 80% of all compensation claims in federal district court never get a hearing on the merits,'' he noted, quoting from a study conducted by the law firm of Linowes and Blocher. ''Since it takes, on average, some 10 years to gain a hearing on the merits of a compensation claim, the disincentives to pursuing such a claim are obvious.''
Examples abound of landowners having to maneuver their way through one administrative maze after another, Goldberg said. One of the most notable cases involved Bernadine Suitum, an elderly landowner who was denied use of her land by the Tahoe Regional Planning Agency.
''Mrs. Suitum spent seven years in court, fighting for the right to get a hearing in federal court on the grounds that her Fifth Amendment rights had been violated. For those seven years, the planning agency argued in federal court that her case was not ''ripe'' and that she did not deserve a trial on the merits. The Supreme Court finally disagreed in a unanimous decision earlier this year,'' Goldberg said.
''H.R. 1534 won't help Mrs. Suitum on the merits of her case,'' he added, ''but it can help future Mrs. Suitums from being forced into a seven-year court battle to defend their constitutional rights.''
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Betsworth said the Gallegly bill would provide property owners with something all Americans cherish: access to the courts. ''H.R. 1534 is a reasonable, modest, targeted approach to dealing with the concerns of property owners who feel that their rights have been infringed upon by government actions,'' he said.
| National Conference of State Legislatures, |
| Washington, DC., September 24, 1997. |
Hon. BARNEY FRANK,
U.S. House of Representatives,
Washington, DC.
DEAR REPRESENTATIVE FRANK: I write on behalf of the National Conference of State Legislatures (NCSL) to express concern about HR 1534, the Private Property Rights Implementation Act of 1997.
The members of NCSL appreciate the good intentions of the sponsors of HR 1534 related to the protection of property rights. Many state legislatures, in fact, have taken action in recent years to better protect the property rights of their citizens from overzealous government regulators. NCSL also has expressed its misgivings about the actions of federal agencies that arguably disregard the letter and spirit of state laws and constitutions that protect the property rights of state citizens.
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The law of real property in our American constitutional tradition is largely a matter of state, not national, concern. Moreover, many state constitutions provide guarantees of property rights that are as extensive or more extensive than those recognized in the federal constitution. Too often in past years, however, the federal government has cavalierly ignored or even preempted state law in this area. HR 1534, though intended to protect property rights, seeks to expand the authority of the federal courts at the expense of the states in a way similar in form, if not in substance, to previous federal intrusions.
NCSL is concerned that HR 1534 might serve to further federalize this area of law and policy. As a consequence, NCSL urges you not to move hastily to mark-up the bill. Much more careful and deliberate consideration, we believe, should be given to some very serious federalism questions. Specifically:
1. Given that property rights litigation ordinarily involves substantial questions of state law, should not such suits be pursued in the first instance in state court?
2. How will the ''certification'' process contemplated in HR 1534 work in states that do not provide authority for their supreme courts to issue advisory opinions?
3. If plaintiffs can circumvent state courts and go directly to federal court, will this result in suits intended simply to force states and cities to settle with plaintiffs because of the cost of going to trial in federal court?
4. Would the bill ''open the floodgates'' to costly litigation in federal court against states and cities, as many routine disputes that are now resolved in the local administrative process or in state court find their way to federal district court?
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5. Will the federal courts have the time and expertise to resolve a potentially large number of suits involving complex issues of local policy and state law?
6. Ultimately, won't the bill result in an additional centralization of power in an unelected federal judiciary?
7. How, in the end, will HR 1534 protect the rights of family farmers and other small property owners who may not find federal court to be a hospitable or inexpensive venue?
Please understand that NCSL has not concluded that these questions represent valid criticisms of HR 1534. NCSL has not yet decided whether to support or oppose HR 1534. Nonetheless, we have almost instinctive misgivings about any proposed legislation that would shift decision authority from state to federal court, and we would welcome a response to the seven questions posed above.
We appreciate your consideration of our views, and look forward to working with you on this issue. NCSL is open-minded on this approach to federal property rights legislation but we need reassurance that the legislation will be crafted in a way that respects our federal system of government.
Sincerely,
| National League of Cities, |
| Washington, DC., September 24, 1997. |
Hon. BARNEY FRANK,
U.S. House of Representatives,
Washington, DC.
DEAR REPRESENTATIVE FRANK: On behalf of the nation's mayors and municipal elected officials, we are writing to express strong opposition to H.R. 1534, the ''Private Property Rights Implementation Act.'' This bill would impose severe and unwarranted burdens on America's cities and towns by greatly enhancing the ability of developers and other claimants to sue cities in federal court for alleged ''takings.'' Such a federal action would expose local governments to increased financial liability and interfere with the ability of local governments to make reasonable land use decisions.
Further, we believe it would lead to significant property tax increases, as well as undercut one of the most fundamental rights of our nation's citizens to resolve land use and zoning issues at the local level.
The bill would also allow developers and other landowners to sue cities in federal court far more frequently than finder existing law, resulting in substantial new federal preemption and involvement in purely local issues. The ability of federal courts to hear arguments and make decisions that are legitimately the domain of state and local courts would be a significant infringement on state and local sovereignty. We think this would undermine efforts underway in Congress to turn more authority back to state and local governments
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In addition, by granting developers and other landowners the option to sue in either federal or state court, the bill would encourage tactical forum shopping, put cities at a new litigation disadvantage, and undermine uniform judicial enforcement of local regulations.
Finally, by significantly changing the standards for ''ripeness'' developed over the years by the U.S. Supreme Courts the bill would preempt less litigious approaches to the resolution of essentially local issues and, instead, encourage more litigation against cities and towns by forcing federal courts to intrude prematurely into informal local resolution of local land use disputes. Such increases in litigation would impose major new costs on local government. We believe two enactment of legislation which would impose major new administrative and financial burdens on cities and towns is contrary to the well-known philosophy of this Congress and to the Unfunded Mandates Reform Act of 1995, in which Congress specifically sought to limit legislative, regulatory, and administrative financial burdens imposed on local governments.
In our view, the resolution of the complex issues raised by this legislation should be left to the courts. The Supreme Court has developed an extensive body of precedent addressing such issues as the allocation of responsibilities between federal and state courts, and ripeness. We believe that precedent is essentially sound. Moreover, the courts are in the best position, on a case-by-case basis, to consider how, if at all, these precedents should be reconsidered.
For over 200 years, we have relied on the Fifth Amendment of the U.S. Constitution, as interpreted and applied by the courts, to successfully balance the rights of property owners against the rights of the public. We believe the enactment of H.R. 1534 will not offer greater protections to private property owners. Instead, it is likely to undermine Congressional respect for the traditional and sovereign powers of states and local governments and their need to ensure reasoned, carefully considered land use and zoning decisions.
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For these reasons, we urge you to oppose H.R. 1534.
Thank you for considering the views of the National League of Cities and The U.S. Conference of Mayors on this Legislation.
Sincerely,
| Paul Helmke, |
| Mayor, Fort Wayne, Indiana, |
| President, The U.S. Conference of Mayors |
| Mark Schwartz, |
| Council Member, Oklahoma City, Oklahoma, |
| President, the National League of Cities |
1ST BRIEF OF LEVEL 1 PRINTED IN FULL FORMAT.
BERNADINE SUITES, Petitioner, v. TAHOE REGIONAL PLANNING AGENCY, Respondent.
NO. 96–243
OCTOBER TERM, 1996
JANUARY 9, 1997
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ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT.
BRIEF AMICUS CURIAE OF THE AMERICAN PLANNING ASSOCIATION IN SUPPORT OF RESPONDENT
BRIAN W. BLAESSER *, H. BISSELL CAREY, III, ROBINSON & COLE, One Boston Place, Boston, Massachusetts 02108, (617) 557–5900.
* Counsel of Record
Of Counsel: DANIEL R. MANDELKER, Stamper Professor of Law, Washington University in St. Louis, Campus Box 1120, St. Louis, Missouri 63130, (314) 698–7233, Counsel for Amicus Curiae.
TABLE OF AUTHORITIES
CASES:
Acierno v. Mitchell, 6 F.3d 970 (3d Cir. 1993)
Agins v. City of Tiburon, 447 U.S. 255 (1980)
Carroll v. City of Prattville, 653 F. Supp. 933 (M.D. Ala. 1987)
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Christensen v. Yolo County Bd. of Supervisors, 995 F.2d 161 (9th Cir. 1993)
City of Merriam v. Bd. of Zoning Appeals of the City of Merriam, 748 P.2d 883 (Kan. 1988)
Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211 (1986)
Dodd v. Hood River County, 59 F.3d 852 (9th Cir. 1995)
East-Bibb Twiggs Neighborhood Ass'n v. Macon Bibb County Planning & Zoning Comm'n, 896 F.2d 1264 (11th Cir. 1989)
Estate of Himelstein v. City of Fort Wayne, 898 F.2d 573 (7th Cir. 1990)
Fields v. Sarasota Manatee Airport Authority, 953 F.2d 1299 (11th Cir. 1992)
First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987)
Glisson v. Alachus County, 558 So.2d 1030 (Flat Dist. Ct. App. 1st Dist. 1990), review denied, 570 So.2d 1304 (Flat 1990)
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Goldblatt v. Hempstead, 369 U.S. 590 (1962)
Golemis v. Kirby, 632 F. Supp. 159 (D.R.I. 1985)
Hadacheck v. Sebastian, 239 U.S. 394 (1915)
HMK Corp. v. County of Chesterfield, 616 F. Supp. 667 (E.D.Va. 1985)
Kaiser Development Co. v. City and County of Honolulu, 649 F. Supp. 926 (D.Hawaii 1986), aff'd, 898 F.2d 112 (9th Cir. 1990), cert. denied, 499 U.S. 947 (1991)
Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470 (1987)
Kinsli v. City of Santa Cruz, 818 F.2d 1449 (9th Cir.), modified, 830 F.2d 968 (9th Cir. 1987), cert. denied, 484 U.S. 1043 (1988)
Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)
MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, reh'g denied, 478 U.S. 1035 (1986)
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Mary Gardner v. New Jersey Pinelands Commission, 125 N.J. 193, 593 A.2d 251 (1991)
Miller v. Schoene, 276 U.S. 272 (1928)
Mugler v. Kansas, 123 U.S. 623 (1887)
Nectow v. City of Cambridge, 277 U.S. 183 (1928)
Northern Va. Law School, Inc. v. City of Alexandria, 680 F. Supp. 222 (E.D. Va. 1988)
Oberndorf v. City and County of Denver, 900 F.2d 1434 (10th Cir.), cert. denied, 498 U.S. 845 (1990)
Ochoa Realty Corp. v. Faris, 815 F.2d 812 (1st Cir. 1987)
Palomar Mobilehome Park Ass'n v. San Marcos, 989 F.2d 362 (9th Cir. 1993)
Patsy v. Florida Board of Regents, 457 U.S. 496 (1982)
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Penn Central Transportation Co. v. City of New York, 438 U.S. 104, reh'g denied, 439 U.S. 883 (1978)
Reahard v. Lee County, 30 F.3d 1412 (11th Cir. 1994), cert. denied, U.S., 115 S. Ct. 1693 (1995)
River Park, Inc. v. City of Highland Park, 23 F.3d 164 (7th Cir. 1994)
Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984)
Shelter Creek Dev. Corp. v. City of Oxnard, 838 F.2d 375 (9th Cir.), cert. denied, 488 U.S. 851 (1988)
Shubert Organization, Inc. v. Landmarks Preservation Comm'n, 166 A.D.2d 115, 570 N.Y.S.2d 504 (1st Dep't 1991), appeal dismissed without op., 78 N.Y.2d 1006, 575 N.Y.S.2d 456, 580 F.E.2d 1059 (1991), and appeal denied, 79 N.Y.2d 751, 579 N.Y.S.2d 651, 587 F.E.2d 289 (1991), and cert. denied, 504 U.S. 946, 112 S. Ct.
2289 (1992)
Silver v. Franklin Township Bd. of Zoning Appeals, 966 F.2d 1031 (6th Cir. 1991)
Southview Assocs., Ltd. v. Bongartz, 980 F.2d 84 (2d Cir. 1992), cert. denied, 507 U.S. 987 (1993)
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Suitum v. Tahoe Regional Planning Agency, 80 F.3d 359 (9th Cir. 1996)
Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 938 F.2d 153 (9th Cir. 1991)
Tari v. Collier County, 56 F.3d 1533 (11th Cir. 1995)
United States v. Caltex, Inc., 344 U.S. 149 (1952), reh'g denied, 344 U.S. 919 (1953)
Unity Ventures v. County of Lake, 841 F.2d 770 (7th Cir.), cert. denied, 488 U.S. 891 (1988)
Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985)
Zilber v. Town of Moraga, 692 F. Supp. 1195 (N.D. Cal. 1988)
MISCELLANEOUS:
L. Kendig, PERFORMANCE ZONING (American Planning Association 1978)
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Pub. L. No. 95–625, §502, 92 Stat. 3492 (codified at 16 U.S.C.A. §471i) (1996)
3 Edward H. Ziegler, Jr., RATHKOPF'S THE LAW OF ZONING AND PLANNING at §39.02[d] (1996)
3 Edward H. Ziegler, Jr., RATHKOPF'S THE LAW OF ZONING AND PLANNING at §39.02[e] (1996)
INTERESTS OF AMICUS CURIAE *
* The consents of the parties to the filing of this amicus brief are on file with the Clerk.
The American Planning Association (''APA'') is a non-profit association of 27,000 members, all of whom are employed in the field of land use planning or are otherwise vitally concerned with the discipline.
Virtually all members of APA are engaged in land use planning either on behalf of governmental bodies exercising regulatory authority over the use of real property or for the benefit of holders of land subject to land use regulation. Consequently, APA does not represent the interests of those who seek to increase the constitutionally permissible scope of government regulation nor of those who promote the interests, constitutional or otherwise of individual landowners. APA and its members are fundamentally and vitally interested in the promotion of the rational, predictable, effective, and beneficial use of real property consistent with the needs of individuals having recognized interests in property and the public at large. APA members are the professionals who engage in the planning to accomplish that fundamental goal.
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SUMMARY OF ARGUMENT
Mrs. Suitum's takings claim is not ripe because she has not submitted an application for a development rights transfer that would determine the economic impact of the regulatory system on her property. Neither is there evidence in the record that Mrs. Suitum's property is made valueless by the Tahoe Regional Planning Agency (''TRPA'') regulations, and this Court has held that the retention of some value in property is enough to defeat a takings claim. This Court has made clear that under its takings jurisprudence there is no assumption that the only uses of property cognizable under the Constitution are developmental uses.
Mrs. Suitum's filing of a building permit application did not satisfy the requirement that she make at least one application for approval because it was clear under TRPA's regulations that the building permit could not issue. However, there is a tension between the Agins-MacDonald rule that a landowner must submit one ''meaningful'' application and the Hamilton Bank rule that a landowner must utilize all available administrative relief at the local level. This tension creates a weakness in ripeness law that, frankly, some local governments have exploited to frustrate ''as-applied'' takings claims in federal courts.
This weakness in ripeness law promotes uncertainty in land use decision making by local governments that ultimately undermines the rational, predictable, effective and beneficial use of property—goals of vital concern to Amicus curiae. Because of these two rules, a landowner whose proposal has been denied has an agonizing choice. Should she ''reapply'' with something ''less ambitious,'' or apply for relief from the land use agency? What is ''meaningful'' and what is ''grandiose'' within the limits of a planning and zoning program is a matter of judgment. Amicus curiae believes the Court should resolve this tension between these two rules and create a more precise and fair basis for determining when federal courts have jurisdiction in takings cases.
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Amicus curiae submits that it is the developer who should decide whether she wishes to reapply for a land use approval or risk litigation on her takings claim over the denial of one application. This Court should also clarify the confusion in the lower federal courts over the scope of the reapplication rule and hold that while the one application rule is always applicable to ''as applied'' challenges, the reapplication requirement is not relevant to substantive due process and equal protection claims. Because such claims challenge the rationality of a regulatory decision and do not require proof that a landowner's property has been rendered valueless by the regulation, these two claims do not require speculation on what forms of less intensive development a local government might have permitted.
This Court required applicants specifically to apply for a variance to make their takings claims ripe, but it should recognize that a variance is only one type of administrative relief available to landowners. The type of administrative relief available depends upon the land use regulatory system the local government has adopted. The transfer of development rights system option available in this case is simply another form of administrative relief available in many land use regulatory systems.
This Court should also recognize a futility exception to the ripeness rule and should apply it after a landowner has made one application for a land use approval or administrative relief. Landowners should be able to rely on a number of factors, including official statements and local land use policies and regulations, to show futility.
This Court should also eliminate the second prong of the ripeness doctrine that requires landowners to seek and be denied just compensation through available state procedures. Landowners with regulatory takings claims should be able to pursue their federal compensation remedy in federal court.
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TEXT: ARGUMENT
The Petitioner, Mrs. Suitum, did not seek authorization for transferable development rights (''TDRs'') under the land use and development regulations of the Respondent, the TRPA. Therefore, the Court of Appeals for the Ninth Circuit properly held that Plaintiff's regulatory taking claim was premature under the ''finality requirement,'' the first prong of the ripeness standard enunciated in Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985). The Ninth Circuit stated:
Without an application for the transfer of development rights, TRPA is foreclosed from determining the extent of the use of Suitum's property. By failing to apply to the TDR program, Suitum denies TRPA the ability to grant a ''different form [ ] of relief . . . which might abate the alleged taking.'' Without pursuit of the transfer of development rights, we cannot know whether the regulations have gone too far because at this point, no one knows how far the regulations have gone. Without attempting to transfer the rights she currently possesses, Suitum cannot know the ''nature and extent of permitted development[,]'' and thus cannot know the regulations' full economic impact or the degree of their interference with her reasonable investment-backed expectations, two critical components of a regulatory taking claim analysis.
Suitum v. Tahoe Regional Planning Agency, 80 F.3d 359, 362–63 (9th Cir. 1996) (citations omitted).
I. MRS. SUITUM'S TAKINGS CLAIM IS NOT RIPE BECAUSE SHE DID NOT SUBMIT AN APPLICATION FOR TRANSFERABLE DEVELOPMENT RIGHTS (TDRS) TO ENABLE A COURT TO DETERMINE THE EXTENT OF ECONOMIC IMPACT OF TRPA'S LAND USE REGULATORY SYSTEM.
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In the context of land use regulation, this Court's ripeness doctrine was intended to address the Article III posture of regulatory takings claims by determining if, and the extent to which, the decision maker has inflicted a concrete economic injury to the plaintiff. Ironically, the first land use case in which this Court applied the ripeness doctrine was Penn Central Transportation Co. v. City of New York, 438 U.S. 104, reh'g denied, 439 U.S. 883 (1978), a case involving land use regulations that also included provisions for use of transferable development rights (TDRs). The Court rejected a taking claim based on a refusal of the city's landmarks commission to approve a high-rise building over Grand Central Terminal, which had been designated an historic landmark. In rejecting Penn Central's taking claim, this Court based its decision on lack of ripeness on two factors, noting first that Penn Central had ''not sought approval for the construction of a smaller structure'' than the proposed 50-story office building. Id. at 137. For this reason, the Court did ''not know'' whether the plaintiff would be denied ''any use'' of the airspace above the Terminal building. Second, the Court noted that Penn Central could not accurately assert that it had ''been denied all use'' of its ''pre-existing air rights'' because these rights were transferable to other parcels. Id. As to the relevance of the city's TDR program to the takings claim, the Court stated:
While these [TDR] rights may well not have constituted ''just compensation'' if a ''taking'' had occurred, the rights nevertheless undoubtedly mitigate whatever financial burdens the law has imposed on appellants and, for that reason, are to be taken into account in considering the impact of regulation.
Id. (citation omitted) (emphasis added)
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A. There is No Evidence in the Record that Mrs. Suitum's Property Has Been Rendered Value-less.
In order to conclude that the finality requirement of the ripeness doctrine allows Mrs. Suitum to stop short of making any application under the TDR program, it must be assumed that Mrs. Suitum's property has been rendered valueless under TRPA's regulations. n1 However, there is no evidence in the record below that this is the case. By contrast, in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), the state trial court-had found that the prohibition against erecting any permanent habitable structures on Lucas's parcels under the state's Beachfront Management Act (the ''Act'') rendered those parcels '' 'valueless' '' Id. at 1007. The Court in Lucas also made clear that its takings jurisprudence makes no assumption that the only uses of property cognizable under the Constitution are '' 'developmental uses,' '' stating:
We make no such assumption. Though our prior takings cases evince an abiding concern for the productive use of, and economic investment in, land, there are plainly a number of noneconomic interests in land whose impairment will invite exceedingly close scrutiny under the Takings Clause.
Id. at 1020 n.8. Moreover, this Court in Lucas never restricted the ''property interest'' involved in takings to a developmental interest. In fact, the Court acknowledged that the ''rhetorical force'' of its '' 'deprivation of all economically feasible use' rule is greater than its precision, since the rule does not make clear the 'property interest' against which the loss of value is to be measured.'' Id. at 1016 n.7. The Court observed:
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When, for example, a regulation requires a developer to leave 90% of a rural tract in its natural state, it is unclear whether we would analyze the situation as one in which the owner has been deprived of all economically beneficial use of the burdened portion of the tract, or as one in which the owner has suffered a mere diminution in value of the tract as a whole.
Id. The Court did not need to reach this ''difficult question'' because the record demonstrated that the Act had left each of Lucas's beachfront lots ''without economic value.'' Id.
n1 Of course, even if that were true, this Court has held that in some circumstances a law that renders property valueless may nonetheless not constitute a taking. See, e.g., First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 313 (1987); Goldblatt v. Hempstead, 369 U.S. 590, 596 (1962); United States v. Caltex, Inc., 344 U.S. 149, 155 (1952), reh'g denied, 344 U.S. 919 (1953); Miller v. Schoene, 276 U.S. 272 (1928); Hadacheck v. Sebastian, 239 U.S. 394, 405 (1915); Mugler v. Kansas, 123 U.S. 623, 657 (1887); cf. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1011 (1984); Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 225 (1986). In Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 490 (1987), the Court stated: '' 'Although a comparison of values before and after' a regulatory action' is relevant . . . it is by no means conclusive' '' (citation omitted).
Plainly the Court's language in Lucas indicates that the principal focus of regulatory takings analysis is the impact of the regulation upon economic value, not the loss of the opportunity to physically develop the property. As in Penn Central, the TDRs available to Mrs. Suitum could mitigate the financial burden imposed by TRPA's regulatory system and must be taken into account in considering their economic impact. However, because Mrs. Suitum never submitted an application under the transferable development rights (TDRs) program, she has made it impossible for a court to determine the extent of the economic impact of TRPA's regulatory system on her property. In Patsy v. Florida Board of Regents, 457 U.S. 496 (1982), the Court recognized that ''the finality requirement is concerned with whether the initial decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury;. . . .'' Hamilton Bank, supra, at 193. It begs the question for a court to commence an assessment of that impact under a takings claim without the court having the evidence of a TDR application before it. In MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, reh'g denied, 478 U.S. 1035 (1986), the Court referred explicitly to use of an available TDR program as one means to satisfy the ripeness question.
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The local agencies charged with administering regulations governing property development are singularly flexible institutions; what they take with the one hand they may give back with the other. In Penn Central Transportation Co. v. New York City, for example, we recognized that the Landmarks Preservation Commission . . . had authority in appropriate circumstances to authorize alterations, remit taxes, and transfer development rights to ensure the landmark owner a reasonable return on its property. [citation omitted] Because the railroad had ''not sought approval for the construction of a smaller structure'' than its proposed 50-plus story office building, [citation omitted], we concluded ''that the application of New York City's Landmark Law had not effected a 'taking' of [the railroad's] property.'' [citation omitted]. Whether the inquiry asks if a regulation has ''gone too far,'' or whether it seeks to determine if proffered compensation is ''just,'' no answer is possible until a court knows what use, if any, may be made of the affected property.
Id. at 350 (emphasis added).
B. By Merely Filing a Building Permit Application, Mrs. Suitum Did Not Satisfy the One Application Rule Developed in Agins, Hamilton Bank, and MacDonald.
In Agins v. City of Tiburon, 447 U.S. 255 (1980), this Court held that a landowner must obtain a decision on his land use proposal from the local government before he can bring an as applied takings challenge. In that case, the plaintiffs had attacked the ordinance facially, as a taking, without submitting a development plan. This Court dismissed the case because the plaintiffs were ''free to pursue their reasonable investment expectations by submitting a development plan to local officials.'' Id. at 262. Although the Court in Agins did not use the term, the decision clearly meant that a case involving a claim that an ordinance as applied to a landowner's property constitutes a taking is not ripe for a judicial decision unless the plaintiff has submitted a development plan for approval when the ordinance permits such an application. n2
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n2 In Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470 (1987), this Court held that a facial takings challenge, namely, a claim that a regulation on its face and in its entirety, as it applies to all property affected by it (including the landowner's), effects a taking, is not subject to the ripeness doctrine. However, it noted that plaintiffs ''face an uphill battle in making a facial attack on [a regulation] as a taking.'' 480 U.S. at 495.
Once an application is submitted, the applicant must pursue all other required approvals related to that application to enable the decision maker to arrive at a ''final, definitive position'' as to the application of the regulations to the plaintiff's land. Hamilton Bank, supra, at 191. firs. Suitum's building permit application did not satisfy this requirement because the building permit could not issue under TRPA's land use regulations.
This Court again addressed the application requirement in MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, reh'g denied, 478 U.S. 1035 (1986). There the plaintiff had submitted one subdivision application and the county had rejected it. Nevertheless, the Court stated that it was not clear the county would not allow ''some development,'' id. at 351–52, and explained that the history of the case indicated ''not that future applications would be futile, but that a meaningful application had not yet been made.'' Id. at 352 n.8. In addition, the Court stated that ''rejection of exceedingly grandiose plans does not logically imply that less ambitious plans will receive similarly unfavorable reviews,'' suggesting that reapplication may be necessary before a court can determine the extent of economic injury. Id. at 353 n.9 (emphasis added).
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Amicus curiae believes the tension between the Agins-MacDonald rule that a landowner must submit one ''meaningful'' application and the Hamilton Bank rule that a landowner must utilize all available administrative relief at the local level, creates a weakness in ripeness law that many local governments have exploited to frustrate as-applied takings claims in federal courts. We believe the Court should resolve this tension and create a more precise and fair basis for determining when federal courts have jurisdiction in takings cases.
II. THE COURT SHOULD RESOLVE THE TENSION BETWEEN THE AGINS-MACDONALD RULE, THAT A LANDOWNER MUST SUBMIT AT LEAST ONE ''MEANINGFUL'' APPLICATION FOR APPROVAL, AND THE HAMILTON BANK RULE, THAT A LANDOWNER MUST UTILIZE ALL AVAILABLE ADMINISTRATIVE RELIEF AT THE LOCAL LEVEL.
A. Simplify the One Application Rule
The MacDonald Court no doubt thought that by elaborating on the Agins rule to say that rejection of ''grandiose development'' plans is not enough and that reapplication is necessary, it was adding clarification to the ripeness doctrine. However, in attempting such clarification the MacDonald Court ignored the realities of land use control and, consequently, created an agonizing choice for the landowner. The reality is that what is ''grandiose'' and what is ''meaningful'' within the limits of a local planning and zoning program is a matter of judgment. Because of the Agins-MacDonald and Hamilton Bank rules, the Landowner whose development proposal has been denied, does not know what to do. Should the landowner ''reapply'' with something less ambitious, or apply for relief from the land use agency? If the landowner decides to reapply, the landowner does not know how many times to reapply—risking that a court will decide that her project is ''grandiose'' or that her application is not ''meaningful'' no matter how many times it is rejected, and require her to apply again. Neither is it clear who has the burden of proof to show that the reapplication process has been exhausted.
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Amicus curiae submits its brief on behalf of an association of planners, many of whom work for local governments. Many other planners who belong to the association work for members of the development community. In fairness to the development community, it must be recognized that the reapplication requirement invites local government to create a more complicated and time consuming review and approval process. It is, in fact, an open invitation for some local governments to do mischief. Unscrupulous officials can and often do easily assert, after the fact, that they ''would have been willing'' to consider an intensity of use or an alternative type of use that the landowner never proposed. This is plainly unfair and an abuse of the reapplication rule and is why such a rule is unrealistic and should no longer be required to demonstrate ripeness for adjudication.
Amicus curiae submits that, as discussed below, the determination of when ''enough is enough'' should not be left to the local governments to decide. n3 Rather, it should be for the landowner or developer who must weigh the risks of litigation versus another application proposal to decide whether in fact to contest the decision rendered after the first application. Unless the Court's ruling in the case sub judice resolves this tension between the Agins-MacDonald rules, that a landowner must submit a ''meaningful'' plan for approval, and the Hamilton Bank rule, that a landowner must utilize all available administrative relief at the local level, landowners will continue to be faced with an agonizing and unfair choice. Put simply, if the landowner seeks administrative relief before reapplying with a less ''grandiose'' project, the reapplication requirement of the ripeness rule will, in all likelihood, bar the landowner's takings claim. That surely is not the result that this Court intended under the ''finality'' requirement of the ripeness doctrine.
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n3 In fact, many lower federal courts have openly admitted their difficulty in determining ''when enough is enough'' under this aspect of the ''finality'' requirement. See, e.g., Zilber v. Town of Moraga, 692 F. Supp. 1195 (N.D. cal. 1988); Kaiser Development Co. v. City and County of Honolulu, 649 F. Supp. 926 (D.Hawaii 1986), aff'd, 898 F.2d 112 (9th Cir. 1990), cert. denied, 499 U.S. 947 (1991); HMK Corp. v. County of Chesterfield, 616 F. Supp. 667 (E.D.Va. 1985).
B. The Reapplication Rule Is Irrelevant to Due Process and Equal Protection Claims.
In MacDonald, the Court stated that ''our cases uniformly reflect an insistence on knowing the nature and extent of permitted development before adjudicating the constitutionality of the regulations that purport to limit it.'' MacDonald, 477 U.S. at 351. Many lower courts have focused upon this sentence and, where they have found a takings claim to be unripe, have dismissed substantive due process and equal protection claims as equally unripe. See River Park, Inc. v. City of Highland Park, 23 F.3d 164 (7th Cir. 1994); Acierno v. Mitchell, 6 F.3d 970 (3d Cir. 1993); Shelter Creek Dev. Corp. v. City of Oxnard, 838 F.2d 375 (9th Cir.), cert. denied, 488 U.S. 851 (1988); Kinsli v. City of Santa Cruz, 818 F.2d 1449 (9th Cir.), modified, 830 F.2d 968 (9th Cir. 1987), cert. denied, 484 U.S. 1043 (1988); Unity Ventures v. County of Lake, 841 F.2d 770 (7th Cir.), cert. denied, 488 U.S. 891 (1988); Ochoa Realty v. Faria, 815 F.2d 812 (1st Cir. 1987); Golemis v. Kirby, 632 F. Supp. 159 (D.R.I. 1985). Other courts, however, have declined to apply the reapplication rule. See Carroll v. City of Prattville, 653 F. Supp. 933 (M.D. Ala. 1987); Oberndorf v. City and County of Denver, 900 F.2d 1434 (1Oth Cir.), cert. denied, 498 U.S. 845 (1990).
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The Court of Appeals for the Ninth Circuit, following its earlier ruling in Kinzli, held in this case that Mrs. Sultum's substantive due process and equal protection claim were also premature under the ripeness doctrine. Amicus Curiae submits, however, that because substantive due process and equal protection claims challenge the rationality of a regulatory decision and do not require proof that a landowner's property has been rendered valueless by the regulation, these two claims do not require speculation as to what forms of less intensive development might have been permitted by the local government. This Court should clarify the confusion in the lower federal courts on this issue and rule that while the one application rule reasonably applies to substantive due process and equal protection claims, the reapplication rule is not relevant.
III. HAMILTON BANK REQUIRED TAKINGS PLAINTIFFS TO APPLY FOR A VARIANCE TO MARE THEIR TAKINGS CLAIMS RIPE, BUT THE RELATED APPROVALS NECESSARY TO MAKE A TAKINGS CASE FINAL SHOULD DEPEND ON THE TYPE OF LAND USE REGULATORY SYSTEM.
In Hamilton Bank, this Court held a takings case not final because the plaintiff had not applied for a variance from applicable subdivision control regulations. This Court's emphasis on the need for a variance has confused lower federal courts that have tried to apply Hamilton Bank. The reason is that zoning systems usually include other forms of administrative relief besides the variance, and this Court should provide guidance on when administrative relief besides a variance is necessary.
Under the traditional Euclidean zoning system, the variance was originally conceived as a ''safety valve'' to give relief to a landowner while protecting the ordinance from invalidation on the constitutional ground that the particular landowner's property was burdened to a greater extent than other land in the vicinity, in violation of the due process clause. n4 The courts generally distinguish between a use variance and an area variance. The area variance fits the notion that was originally intended in the State Standard Zoning Enabling Act (SSZEA) promulgated by the U.S. Department of Commerce in 1926. It authorizes departures from ordinance restrictions on the construction or placement of buildings and other structures. In other words, the area variance allows adjustments to the requirements for yards, height, frontage, setbacks and similar dimensional aspects. A use variance quite simply permits a use that is otherwise prohibited in the particular zoning district. See, e.g., City of Merriam v. Bd. of Zoning Appeals of the City of Merriam, 748 P.2d 883 (Kan. 1988).
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n4 Nectow v. City of Cambridge, 277 U.S. 183 (1928) (invalidating a zoning ordinance on constitutional grounds as applied to a particular parcel, and articulating a balancing test weighing the public interest against the private interest).
Traditional zoning systems also usually include another form of administrative relief, known as a ''conditional use'' or ''exception.'' A conditional use is a use authorized by the zoning ordinance if certain criteria are met, such as a requirement that the use be compatible with uses in the surrounding area. The conditional use is not a safety valve. It is not appropriate to require a takings plaintiff to ask for an amendment, as some federal courts require, because an amendment is a legislative, not an administrative, act. See, e.g., Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 938 F.2d 153 (9th Cir. 1991).
There are also land use systems based on what is known as ''performance'' zoning. Performance zoning is a flexible zoning technique designed to permit maximum development on a site in a manner that minimizes impacts upon neighboring uses and systematically avoids the wastage of land and the destruction of natural resources. n5 Under performance zoning, each tract of land is considered unique—a function of its size, shape, and natural features. Unlike conventional zoning, which controls development by means of rigid lot size, setback, and housing regulations, performance zoning controls intensity of development with standards that set maximum density, impervious surface coverage, and minimum open space, or buffer yards. For example, in the residential land use context, performance zoning utilizes two key elements: (a) bufferyard standards that provide a range of options to a developer; and (b) housing-type options based upon site capacity analysis. Flexible bufferyard provisions enable a developer to build at varying land use intensities on a particular site without significantly impacting neighboring land uses. Housing-type options based upon site capacity analysis free the developer of the restrictions in sizes and types of housing under conventional zoning districts and enable the developer to provide housing at various sizes and scales of units in response to a fluctuating housing market, subject to performance criteria. In this type of regulatory system, ''variances'' are not typically relied upon as a relief or adjustment mechanism. Rather, the municipality simply decides to give or withhold approval as part of an administrative decision making system.
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n5 See generally, L. Kendig, PERFORMANCE ZONING (American Planning Association 1978).
It is important, therefore, that the extent to which approvals relating to an application must be pursued is assessed within the context of the particular type of land use system, whether it be based on a Euclidean zoning system, a performance zoning system, or some other type of land use control system. Transfer of development rights (TDR) is simply another form of administrative relief available in many zoning systems, including traditional and performance zoning. Transfer development rights are well recognized in many jurisdictions as an integral component of the local government's overall land use regulatory system, particularly in efforts to preserve agricultural lance and natural resource areas. n6 In New Jersey, for example, the Pinelands TDR program has made it possible to mitigate the effects of regulations enacted to preserve unique resources of the pine-oak forest and wild and scenic rivers, which include habitats for many rare, threatened and endangered plant and animal species. n7 In addition to preserving these resources, TDR regulations protect the seventeen-trillion-gallon Cohansey aquifer, believed to be one of the largest untapped sources of pure water in the world.
n6 3 Edward H. Ziegler, Jr., RATHKOPF'S THE LAW OF ZONING AND PLANNING at §39.02[d] (1996).
n7 Mary Gardner v. New Jersey Pinelands Commission, 125 N.J. 193, 198; 593 A.2d 251 (1991). The U.S. Congress enacted The National Parks and Recreation Act of 1978 to establish the one million acre Pinelands Natural Reserve. Pub. L. No. 95–625, §502, 92 Stat. 3492 (codified at 16 U.S.C.A. §471i) (1996).
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Many local governments have also enacted TDR programs to save open space. no Programs can be found in Malibu and Monterey Counties, California, and cities and towns in Florida, New Jersey, Vermont, Montana and Pennsylvania. For example, the 3,100 acre special study area in the Cross Creek region of Alachua County, Florida, with its exceptional wetlands and upland habitat areas, has been saved through the use of TDR. n9
n8 3 Edward H. Ziegler, Jr., RATHKOPF'S THE LAW OF ZONING AND PLANNING at §39.02[e] (1996).
n9 Glisson v. Alachua County, 558 So. 2d 1030, 1036 (Flat Dist. Ct. App. 1st Dist. 1990), review denied, 570 So.2d 1304 (Flat 1990).
Another major area in which governments have put TDR to work to save critical resources while preserving property rights is landmarks preservation. n10 Private property owners, developers, planners and preservationists all benefit by the use of TDR in landmarks preservation. The use of TDR today enables future generations to experience and appreciate our historic resources.
n10 Penn Central Transportation Company v. City of New York, 438 U.S. 104 (1978); Shubert Organization, Inc. v. Landmarks Preservation Comm'n, 166 A.D.2d 115, 117–18, 570 N.Y.S.2d 504 (1st Dep't 1991), appeal dismissed without op., 78 N.Y.2d 1006, 575 N.Y.S.2d 456, 580 N.E.2d 1059 (1991), and appeal denied, 79–N.Y.2d 751, 579 N.Y.S. 2d 651, 587 N.E.2d 289 (1991), and cert. denied, 504 U.S. 946, 112 S. Ct. 2289 (1992).
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In short, over the last 30 years TDR programs to preserve critical natural resources, open space and landmarks have become important and integral components of land use planning and regulatory programs in this country.
IV. THIS COURT SHOULD RECOGNIZE A FUTILITY EXCEPTION TO THE RIPENESS RULE AND SHOULD REQUIRE COURTS TO APPLY IT AFTER A PLAINTIFF HAS MADE ONE APPLICATION FOR A LAND USE APPROVAL OR ADMINISTRATIVE RELIEF.
This Court, of course, has recognized that a landowner is not required to use ''unfair'' procedures or to make ''futile'' applications. Hamilton Bank, supra, at 205–206 (Stevens, J., concurring). However, this Court seems to be unaware of the importance of exceptions to the ripeness doctrine or the impact they could ultimately have on the doctrine scope and effect. Amicus curiae submits that the major difficulty is that this Court sees more certainty and less discretion in the land use control process than actually exists, and views its final decision requirement as a simple requirement, easily met. Nothing could be further from the truth in a system where judgments are qualitative and administration requires the exercise of substantial discretion.
Cases in the Ninth Circuit have developed the futility exception most fully. Kinzli v. City of Santa Cruz, 818 F.2d 1449, amended, 830 F.2d 968 (9th Cir. 1987), cert. denied, 484 U.S. 1043 (1988). This case held the futility rule applies after a plaintiff has made one application or an application for a variance.
It is respectfully submitted that the ''futility'' exception should always apply after one application has been made for a land use approval or administrative relief. In addition, the ''one meaningful'' application suggested in MacDonald, because it has been abused by many local governments and misinterpreted by the lower courts, should not be used to gauge whether the futility exception is satisfied. Rather, the finality requirement should be applied reasonably to recognize that a local government's position on the nature and intensity of development can be determined from factors other than repeated applications and denials. These factors should include:
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1. Site feasibility studies (i.e., environmental)
2. Statements of officials before and during the application process
3. Local land use policies and regulations
4. The history of zoning and other land use decisions in the community
5. The nature of surrounding land uses.
A. Site-Specific Studies, Including Environmental Studies
Often a land use agency will reject a development because site conditions make it ineligible for approval. For example, an ordinance may allow approval of a conditional use only if services available to the site, or adequate. If a land use agency rejects a proposal because services at the site are inadequate, the applicant should be able to show that further application is futile because services are adequate yet the agency refused to give approval.
B. Statements of Officials Before, During and After the Application Process
Local zoning officials often make statements on pending land use applications, either during a hearing or in public. These statements can demonstrate that further application is futile, once land use agency has rejected an application.
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C. Local Land Use Policies and Regulations
Often a land use agency will reject a land use application because of a local land use policy continued either in a comprehensive plan or in development regulations. Unless there is some evidence that the municipality may be willing to change the policy, further application will be futile.
D. The History of Zoning and Other Land Use Decisions in the Community
The rejection of a plaintiff's development application may simply be part of a pattern of similar rejections in the community. For example, the application may be for low-cost housing and the applicant may be able to show the community has regularly rejected applications for such housing. Evidence of this also should be enough for a futility holding.
E. The Nature of Surrounding Land Uses
The nature of surrounding land use is often critical to the success of a land use application, such as an application for a conditional use. If an application is rejected in this kind of case because the land use agency claims surrounding uses are incompatible, but the applicant can show they are compatible, further application will be futile and the claim should be ripe.
V. THE COURT SHOULD ELIMINATE THE SECOND PRONG OF THE RIPENESS DOCTRINE REQUIRING THE LANDOWNER TO HAVE SOUGHT AND BEEN DENIED JUST COMPENSATION THROUGH AVAILABLE STATE PROCEDURES AND ALLOW LANDOWNERS WITH REGULATORY TAKINGS CLAIMS TO PURSUE THEIR FEDERAL REMEDY IN FEDERAL COURT.
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When the Supreme Court first adopted the ripeness rules in Hamilton Bank, it held that one prong of the doctrine requires takings plaintiffs to seek compensation in state court if it is available. Lower federal courts have abuse, this requirement. Some courts require a showing that state courts will grant a compensation remedy. See, e.g., Reahard v. Lee County, 30 F.3d 1412 (11th Cir. 1994), cert. denied, U.S. , 115 S.Ct. 1693 (1995); Silver v. Franklin Township Bd. of Zoning Appeals, 966 F.2d 1031 (6th Cir. 1991); Ochoa Realty Corp. v. Faris, 815 F.2d 812 (1st Cir. 1987). Other courts bar plaintiffs from federal court even when it is not clear a state court remedy is available. They hold a plaintiff must attempt to seek compensation in state court until the state court holds the compensation remedy is unavailable. See, e.g., Southview Assocs., Ltd. v. Bongartz, 980 F.2d 84 (2d Cir. 1992), cert. denied, 507 U.S. 987 (1993); Estate of Himelstein v. City of Fort Wayne, 898 F.2d 573 (7th Cir. 1990); East-Bibb Twiggs Neighborhood Ass'n v. Macon Bibb County Planning & Zoning Comm'n, 896 F.2d 1264 (11th Cir. 1989).
These holdings effectively drain the ripeness rules of any meaning. They prevent federal courts from ever reaching the final decision issue because, under this view, a takings plaintiff must seek compensation in state court until that court clearly says it will not entertain a compensation remedy.
Some federal courts take an even more extreme position on the availability of a state compensation remedy. They hold that takings plaintiffs must sue in state court under the implied federal constitutional action for compensation created in First English. Tari v. Collier County, 56 F.3d 1533, 1537 n.23 (11th Cir. 1995); Christensen v. Yolo County Bd. of Supervisors, 995 F.2d 161 (9th Cir. 1993); Northern Va. Law School, Inc. v. City of Alexandria, 680 F. Supp. 222 (E.D. Va. 1988). This view of ripeness even more clearly makes the ripeness rules an absolute bar to a taking remedy. The federal constitution is always actionable in state court. If takings plaintiffs must always sue in state court first on the federal remedy, they will never establish federal court jurisdiction over a takings claim.
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This problem becomes even more serious if a takings plaintiff cannot return to federal court once a state court adjudicates the takings claim. A plaintiff usually is barred from relitigating a state case in federal court under res judicata and collateral estoppel principles. An exception exists when a federal court forces a plaintiff into a state court by abstaining, but it is not clear whether it applies when ripeness rules force a plaintiff into state court. Compare Fields v. Sarasota Manatee Airport Authority, 953 F.2d 1299 (11th Cir. 1992) (exception applies), with Palomar Mobilehome Park Ass'n v. San Marcos, 989 F.2d 362 (9th Cir. 1993) (contra).
Amicus curiae submits that the rule that takings plaintiffs must first sue in state court for compensation under the federal constitution is incorrect. When this Court first adopted the ripeness rules, there was no remedy for compensation in federal courts. Indeed, this Court adopted ripeness rules to avoid deciding whether a federal compensation remedy is available. In the absence of a federal compensation remedy, it perhaps made sense to require takings plaintiffs to seek a state compensation remedy first.
This situation has now changed. In 1987, in First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 302 (1987), this Court held that a remedy for compensation in takings cases is available under the federal constitution. Federal courts should not require takings plaintiffs to go to state court to seek compensation before taking advantage of this federal remedy.
A Ninth Circuit panel has now held that the availability of a compensation remedy in state court under First English does not satisfy the requirement that a takings plaintiff must sue for compensation first in state court. Dodd v. Hood River County, 59 F.3d 852 (9th Cir. 1995). The court held that federal ripeness rules require the availability of a state compensation remedy. It stated that ''to hold that a taking plaintiff must first present a Fifth Amendment claim to the state court system as a condition precedent to seeking relief in a federal court would be to deny a federal forum to every takings claimant.'' Id. at 860. The court was ''satisfied that Williamson County may not be interpreted to command such a revolutionary concept and draconian result.'' Id. at 861.
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This issue is important in Suitum because forcing the plaintiff to seek a remedy under First English in state court will make her case unripe even though she later satisfies the final decision rule. The is Court should follow the holding in Dodd in order to make it clear that plaintiffs in as-applied takings cases can obtain a ruling in federal court on the federal takings law that this Court has developed so extensively in recent years.
CONCLUSION
This case affords the Court an opportunity to clarify the application of the ''finality'' requirement of the ripeness doctrine to land use cases so that the requirement serves its intended purpose. That purpose is to encourage the decision maker to arrive at a definitive position on the issue that is alleged to inflict an actual, concrete and justifiable injury. It is not to encourage the creation of complex, time-consuming review and approval processes that waste the resources of local government and create a climate of regulatory uncertainty that does not promote the public interest.
The Court's ruling in this cave should resolve the tension between the Agins-MacDonald rule, that a landowner must submit a ''meaningful'' plan for approval, and the Hamilton Bank rule, that a landowner must utilize all available administrative relief at the local level. The Court's clarification and guidance on the ''finality'' prong of the ripeness doctrine will promote the rational, efficient and predicable and beneficial use of real property in concert with the public interest.
January 9, 1997
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Respectfully submitted,
| BRIAN W. BLAESSER, |
| * H. BISSELL CAREY, III, |
| ROBINSON & COLE, |
| Attorneys for Amicus Curiae. |
* Counsel of Record
Of Counsel:, DANIEL R. MANDELKER, Stamper Professor of Law, Washington 1University in St. Louis,
COMMONLY ASKED QUESTIONS ABOUT H.R. 1534
Q: Why do property owners need better access to Federal court?
A: Property owners seeking protection of their property rights, as acknowledged in the 5th Amendment to the Constitution, are frequently told that they must resolve all of their state court remedies and their administrative remedies before their case is ''ripe'' for a hearing in federal court. Unfortunately, most property owners cannot afford the long and often fruitless process of resolving ''all possible remedies'' before their case is ripe. This process can mean years of court battles and tens of thousands of dollars in legal fees just to win the right to have the merits of the case heard in federal court. The hurdles are so oppressive that one study concluded that less than 6% of takings claims filed during the 80's were ever deemed ripe for federal court adjudication. Property owners, like any other claimant, deserve at least access to federal court to assert their federal claims.
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Q: How does H.R. 1534 resolve this problem of access to court?
A: The requirement that property owners exhaust ''all administrative remedies'' before getting their day in court often results in endless rounds of appeals with the relevant agency. Property owners have a legitimate expectation to know with some degree of certainty what rights they have on their own property. H.R. 1534 says that property owners must try to resolve their differences with the agency in question, but once the agency has denied their appeal or waiver attempt, the property owner has the right to go to court. The property owner still has the burden of proof in court that he/she has been injured and deserves compensation, but at least he/she has the ability to have the merits of the case heard. And there is an end to the process—the property owner is not left in the regulatory limbo of appealing and appealing and appealing before getting the right to seek relief in court.
To deal with the problem of resolving ''all state court remedies,'' H.R. 1534 essentially gives property owners a choice of how to assert their property rights under the Constitution. If the property owner wants to pursue action against a local or state agency that has infringed on his/her rights. he/she can sue in state or local court (as he would now). However, if the property owner wants to reject that route and instead pursue only compensation for a takings under the 5th Amendment. the case can be heard in Federal court. The property owner cannot pursue both.
Q: Will H.R. 1534 result in a flooding of the federal courts with compensation cases?
A: Not likely. Seeking relief in Federal court is still expensive, even if the bill allows better access. Combined with the significant burden of proof required for a property owner to win compensation. it seems unlikely that very many property owners without a clear-cut case will pursue this route. Most will continue to pursue their remedies in state courts. But property owners should at least have the option.
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In fact, passing H.R. 1534 could help clear the court dockets. Currently, these cases are bumped frequently back and forth between a variety of state and federal courts, all ruling as to whether or not the owner has standing to sue. With H.R. 1534, the issue is resolved and the courts can move ahead with deciding the merits of the case instead of wasting time on whether the property owner has the right to sue.
Q: Does H.R 1534 infringe on state's rights or create new federal court authority over state or local questions?
A: Absolutely not. All H.R. 1534 says is that federal claims should be handled in federal courts and state and local claims should be handled in state and local courts. In fact, the bill builds in a safeguard to ensure protection of state court rights. If a property owner has chosen to pursue his claim in federal court, and there is a question of state or local law that is both (a) crucial to resolving the case and (b) patently unclear, that particular issue is sent back to state court to be resolved under whatever procedure that state has established for certification. The Federal courts should not be making decisions on issues that are legitimately the domain of state and local courts. but they should be deciding questions of Constitutional rights violations.
Q: Does H.R. 1534 give property owners ''special access'' to federal court?
A: No. On the contrary, it allows property owners the same access to federal court that other claimants currently have. Citizens alleging violations of their First Amendment rights or their Fourth Amendment rights are not instructed to resolve their administrative and state court remedies first—they go to federal court. Property owners deserve to be treated the same as every one else.
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Q: Does H.R. 1534 affect environmental laws, like the Endangered Species Act?
A: No. H.R. 1534 does not alter substantive law at all. It is simply a procedural bill providing guidelines for the courts to follow when faced with a property rights case. It does not determine the outcome it simply allows better access to court.
Q: Is there a ''trigger'' for when compensation is due?
A: No. Some property rights bills try to define a ''taking'' as a decline in property value of 20%, 33%, or 50%. H.R. 1534 takes a different approach. The courts will still decide the merits of the case and determine whether a taking has occurred or if compensation is due. H.R. 1534 simply lets those merits be heard in court.
Q: Will H.R. 1534 be a budget buster?
A: No. H.R. 1534 has no budgetary impact whatsoever. It does not affect substantive law or require any appropriations or new bureaucracies. H.R. 1534 simply clarifies the rules so that property owners have the opportunity to have their day in court.
Q: How does H.R 1534 differ from H.R. 992, Rep. Lamar Smith's bill?
A: The two are complementary. Both address different, but related, problems property owners face when trying to have the merits of their case heard in Federal Court. While H.R. 1534 addresses ripeness and finality, H.R. 992 solves the jurisdictional question of which federal court should hear the property owner's claim—the U.S. District Court or the Federal Court of Claims. Once a property owner's case has finally been deemed ''ripe,'' it is often subject to what is called the Tucker Act Shuffle. While the District courts are supposed to hear cases against a federal agency (for violations of the Administrative Procedures Act, for example), the Court of Claims has jurisdiction over claims for compensation. Without H.R. 992, which lets property owners choose to pursue both kinds of claims in either court, the property owner is ''shuffled'' back and forth between the two with neither claiming jurisdiction to hear the merits of the case. Both H.R. 1534 and H.R. 992 will help property owners have their day in court to have the merits of their case heard—just in different ways.
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49–988 CC
1997
AMENDMENT TO THE WEBB–KENYON ACT; AND THE PRIVATE PROPERTY IMPLEMENTATION ACT OF 1997
HEARING
BEFORE THE
SUBCOMMITTEE ON
COURTS AND INTELLECTUAL PROPERTY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
ON
H.R. 1063
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THE WEBB–KENYON ACT
AND
H.R. 1534
THE PRIVATE PROPERTY IMPLEMENTATION ACT OF 1997
SEPTEMBER 25, 1997
Serial No. 53
Printed for the use of the Committee on the Judiciary
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
STEVEN SCHIFF, New Mexico
ELTON GALLEGLY, California
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CHARLES T. CANADY, Florida
BOB INGLIS, South Carolina
BOB GOODLATTE, Virginia
STEPHEN E. BUYER, Indiana
SONNY BONO, California
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRISTOPHER B. CANNON, Utah
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
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WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
THOMAS E. MOONEY, Chief of Staff-General Counsel
JULIAN EPSTEIN, Minority Staff Director
Subcommittee on Courts and Intellectual Property
HOWARD COBLE, North Carolina, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
SONNY BONO, California
EDWARD A. PEASE, Indiana
CHRISTOPHER B. CANNON, Utah
BILL McCOLLUM, Florida
CHARLES T. CANADY, Florida
BARNEY FRANK, Massachusetts
JOHN CONYERS, Jr., Michigan
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
ZOE LOFGREN, California
WILLIAM D. DELAHUNT, Massachusetts
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MITCH GLAZIER, Chief Counsel
BLAINE MERRITT, Counsel
VINCE GARLOCK, Counsel
DEBBIE K. LAMAN, Counsel
ROBERT RABEN, Minority Counsel
C O N T E N T S
HEARING DATE
September 11, 1997
TEXT OF BILLS
H.R. 1063
H.R. 1534
OPENING STATEMENT
Coble, Hon. Howard, a Representative in Congress from the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property
WITNESSES
Betsworth, Donald, President, North Carolina Home Builders Association, on Behalf of the National Association of Home Builders
Douglas, Jerry, Vice President, Marketing, Biltmore Estate Wine Company, on Behalf of the American Vintners Association
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Dwyer, John C., ESQ., Acting Associate Attorney General, United States Department of Justice
Fippiano, Louis M., Vice President, L. Foppiano Wine Co. Inc., on Behalf of the Wine Institute
Goldberg, Carl, Partner, Roseland Property Company, on Behalf of the New Jersey Home Builders Association
Goldberg, James M., Attorney, on Behalf of the Joint Committee of States
Mandelker, Daniel R., Stamper Professor of Law, University of Washington, St. Louis, MO
Osenbaugh, Elizabeth M., Solicitor General, Iowa Attorney General's Office, Department of Justice
Simpson, Jim, Chairman, Government Affairs Committee, National Licensed Beverage Association
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Betsworth, Donald, President, North Carolina Home Builders Association, on Behalf of the National Association of Home Builders: Prepared statement
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Coble, Hon. Howard, a Representative in Congress from the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property: Prepared statement
Douglas, Jerry, Vice President, Marketing, Biltmore Estate Wine Company, on Behalf of the American Vintners Association: Prepared statement
Dwyer, John C., ESQ., Acting Associate Attorney General, United States Department of Justice: Prepared statement
Ehrlich, Hon. Robert L., Jr., Second Congressional District of Maryland: Prepared statement
Fippiano, Louis M., Vice President, L. Foppiano Wine Co. Inc., on Behalf of the Wine Institute: Prepared statement
Gallegly, Hon. Elton, a Representative in Congress from the State of California: Prepared statement
Goldberg, Carl, Partner, Roseland Property Company, on Behalf of the New Jersey Home Builders Association: Prepared statement
Goldberg, James M., Attorney, on Behalf of the Joint Committee of States: Prepared statement
Mandelker, Daniel R., Stamper Professor of Law, University of Washington, St. Louis, MO: Prepared statement
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Osenbaugh, Elizabeth M., Solicitor General, Iowa Attorney General's Office, Department of Justice: Prepared statement
Riggs, Frank D., a Representative in Congress from the State of California: Prepared statement
Simpson, Jim, Chairman, Government Affairs Committee, National Licensed Beverage Association: Prepared statement
APPENDIX
Material submitted for the hearing
(Footnote 1 return)
Clark Distilling Co. v. Western Maryland Railway Co., 242 U.S. 311, 37 S.Ct. 180, 61 L.Ed. 326 (1917).
(Footnote 2 return)
General Sales & Liquor Co. v. Becker, 14 F.Supp. 348 (E.D. Mo. 1936).
(Footnote 3 return)
Data from the Census Bureau indicates that mail order retailing has been the largest growth sector in the retail industry over the last decade.
(Footnote 4 return)
Maine adopted the statute, but repealed it effective June 26, 1997, reportedly because of widespread non-compliance.
(Footnote 5 return)
State of Florida v. Rochambeau Wines and Liquors, Inc., et al., Case No. TCA 95–40462–WS (N.D. Fla.).
(Footnote 6 return)
Citing Georgia v. Wenger, 74 F.Supp. 976 (E.D. Ill. 1950), aff'd 187 F.2d 285 (7th Cir.) cert. denied 342 U.S. 822 (1951).
(Footnote 7 return)
State of Florida v. Sam's Wines & Liquors, Inc., et al., Case No. 96–3602.
(Footnote 8 return)
It should be noted that Beer Across America, Inc. surrendered its Illinois alcohol beverage retailer's license and is no longer a state-licensed seller. It bills itself as a ''marketing company.''
(Footnote 9 return)
It is ironic that many of those who most vigorously condemn felony statutes are supportive of a Louisiana law enacted earlier this year which provides for a felony punishment, but, unlike Florida and other states, permits a limited amount of direct shipping to occur, thus demonstrating that the real issue is one of access, not of punishment.
(Footnote 10 return)
The inability of states to effectively collect sales and use tax revenue on interstate sales of all types of products remains a major problem. The Advisory Commission on Intergovernmental Relations has estimated that some $3.1 billion goes uncollected each year because Congress' failure to authorize effective state collection of this revenue.
(Footnote 11 return)
H.R. 1534 makes these changes through amendments to the nation's civil rights laws. As a result, the bill would have an impact far beyond just real property disputes. For example, the bill's abstention provisions would apply to any claim under 28 U.S.C. §1343, which is the jurisdictional basis for claims alleging violations of federal rights under color of state law. The bill's ripeness provisions would apply to a broad range of claims involving tangible and intangible property. Thus, the bill could increase the number of federal court claims by prisoners, state employees, and others under the due process clause and other constitutional provisions.
(Footnote 12 return)
See generally, Memorandum to Sen. Patrick Leahy from Congressional Research Service, American Law Division, on ''Issues Raised by H.R. 1534, the Private Property Rights Implementation Act,'' at 12 (Aug. 15, 1997) (referring to the bill's ''one application/one-waiver/one-appeal provisions ).
(Footnote 13 return)
Blaesser, Closing the Federal Courthouse Door on Property Owners: the Ripeness and Abstention Doctrines in Section 1983 Land Use Cases, 2 Hofstra Property Law Journal 73, 91 (1988).
(Footnote 14 return)
The only other possible interpretation of H.R. 1534 would render the legislation a nullity in circumstances where the claimant has failed to seek compensation from the state prior to bringing a federal action. Under that interpretation, a federal district court would treat the claim under H.R. 1534 as ripe for adjudication (assuming that the case or controversy requirement of Article III is satisfied). However, the court would then reject the claim on the merits for failure to allege a viable claim for relief due to the failure of the claimant to seek compensation from the state.
(Footnote 15 return)
Front Royal and Warren County Indus. Park Corp. v. Town of Front Royal, 945 F.2d 760, 764–65 (4th Cir. 1991) (abstention is proper ''[b]ecause the annexation court system is a matter of purely state and local law, and because there may be other state remedies available to plaintiffs''), cert. denied, 503 U.S. 937 (1992).
(Footnote 16 return)
C–Y Development Co. v. City of Redlands, 703 F.2d 375, 378 (9th Cir. 1983) (abstention is appropriate because ''[d]elicate issues of local land use planning such as these are precisely the type of issues which should be left to the state courts to decide under the doctrine of abstention.'').
(Footnote 17 return)
Ahrensfeld v. Stephens, 528 F.2d 193, 196–200 (7th Cir. 1975) (abstention is appropriate on federal claim that village had improperly condemned private property without an adequate public purpose); Creel v. City of Atlanta, 399 F.2d 777, 778 (5th Cir. 1068) (''Not only is municipal eminent domain ordinarily a local matter, but it is difficult to imagine a situation where more confusion would arise than would be the case if the parties here were allowed to simultaneously pursue both this federal action and the state condemnation proceeding.'').
(Footnote 18 return)
The bill's abstention ban would apply not only to property rights claims, but to all claims asserted under 28 U.S.C. §1343, which covers a wide variety of cases in which courts have found abstention to be appropriate, including actions involving gender-based discrimination, the Sixth Amendment right to counsel, and the denial of Medicaid benefits. We are unaware of any analysis that supports this sweeping change.
(Footnote 19 return)
Although the bill attempts to reduce the adverse effects of its abstention ban by allowing for certification of issues to state appellate courts under narrowly defined circumstances, many states have no process to accept certified questions, including California, New Jersey, Pennsylvania and Virginia.
(Footnote 20 return)
Federal suits challenging a prosecution can be very disruptive to an overworked prosecutor's office even though the claims are baseless. For example, in a case from Black Hawk County, Iowa, on the eve of trial of weapons offenses and terrorism charges, the defendants filed an action under 28 U.S.C. §1983 alleging violations of the Second Amendment and requesting a temporary restraining order. The Federal court abstained. Under this bill, the prosecutor would be forced to brief the merits of a motion to dismiss or resistance to the temporary restraining order while trying the state law action.
(Footnote 21 return)
Agins v. Tiburon, 447 U.S. 255, 260 (1980) (takings claim challenging zoning ordinance held unripe, because property owners had not yet submitted development plans).
(Footnote 22 return)
Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1011–13 (1992) (had a ''special permit procedure'' to the Coastal Council, for the purpose of determining permanent deprivations of viable land uses, been available to petitioner, he would have been required to pursue those avenues for a ripe takings claim).
(Footnote 23 return)
Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452 U.S. 264, 297 (1981) (court rejects facial challenge to Surface Mining Control and Reclamation Act, because ''[t]here is no indication in the record that appellees have availed themselves of the opportunities provided by the Act to obtain administrative relief by requesting either a variance . . . or a waiver. . . ''; thus, takings claim ''not ripe for judicial resolution''); Williamson County, 473 U.S. at 192 (1985) (takings claim not ripe because developer had not sought variances from zoning ordinance).
(Footnote 24 return)
MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, 348 (1986) (property owners submitted only one subdivision proposal rejected by a zoning body; as alternative uses of the site existed other than the one proposed, the takings claim was unripe because the zoning body had not yet rendered ''a final and authoritative determination of the type and intensity of development legally permitted on the subject property''); Penn Central Transp. Co. v. New York City, 438 U.S. 104, 136–37 (1978) (property owners had not sought approval for any plan other than constructing a 50-foot office building above Grand Central Terminal; thus it was unclear whether the Landmarks Preservation Commission would deny approval for all uses).
(Footnote 25 return)
However, the opinions expressed herein are my own.
(Footnote 26 return)
State law issues can potentially be relevant in the context of federal takings claims. See, e.g., Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1025–327 (1992) (state nuisance law can define constitutionally-protected property interests); Nollan v. California Coastal Comm'n, 483 U.S. 825, 857 (1987) (''state law is the source of those strands that constitute a property owner's bundle of property rights''); Broadwater Farms Joint Venture v. United States, 35 Fed. Cl. 232, 240 (1996) (relying on Lucas, and recognizing that state law treats ''each lot as a separate parcel for tax purposes''). At least theoretically, Pullman abstention could arise in the context of a federal takings claims if pertinent and crucial issues of state property law are ''unsettled.''
(Footnote 27 return)
Arkansas, California, Illinois, Missouri, Nevada, New Jersey, North Carolina, Pennsylvania, Tennessee, Utah, Vermont, and Virginia.
(Footnote 28 return)
See, e.g., Berry v. City of Little Rock, 904 F.Supp. 940 (E.D. Ark. 1995) (interpreting city housing code ordinance); Golden Gate Hotel Ass'n v. City and County of San Francisco, 864 F.Supp. 917 (N.D. Cal. 1993) (city residential hotel ordinance); Independent Coin Payphone Ass'n, Inc. v. City of Chicago, 863 F.Supp. 744 (N.D. Ill. 1994) (city franchise and zoning ordinances); Bender v. City of St. Ann, 816 F.Supp. 1372 (E.D. Mo. 1993) (Missouri city's commercial sign ordinance); Carpenter v. Tahoe Regional Planning Agency, 804 F.Supp. 1316 (D. Nev. 1992) (zoning ordinance of California/Nevada compact agency); Crow-New Jersey 32 Ltd. Partnership v. Township of Clinton, 718 F.Supp. 378 (D.N.J. 1989) (New Jersey township's land use ordinance); South Shell Inv. v. Town of Wrightsville Beach, 703 F.Supp. 1192 (D.N.C. 1988) (North Carolina town's zoning ordinance); Bloomsburg Landlords Ass'n v. Town of Bloomsburg, 912 F.Supp. 790 (M.D. Pa. 1995) (Pennsylvania town's ordinance regulating rental units); Knights of the Klu Klux Klan v. Martin Luther King, Jr. Worshippers, 735 F.Supp. 745 (M.D. Tenn. 1990) (local parade permit ordinance); Katsos v. Salt Lake City Corporation, 634 F.Supp. 100 (D. Ut. 1986) (airport authority ordinance); Keleher v. New England Tel. & Tel. Co., 755 F.Supp. 117 (D. Vt. 1991) (ordinance of Vermont municipality); Stuart Circle Parish v. Board of Zoning Appeals of the City of Richmond, 946 F.Supp. 1225 (E.D. Va. 1996) (court would not avoid substantive interpretation of zoning code on abstention grounds).
(Footnote 29 return)
This substantive takings issue has yet to be decided by the Supreme Court. See Lucas v. South Carolina Coastal Council, 505 U.S. 103, 1016 n. 7 (1992).
(Footnote 30 return)
See, e.g., Eastern Minerals Int'l, Inc. v. United States, 36 Fed. Cl. 541, 548 (1997) (''Each plaintiff must satisfy the threshold requirement of a single meaningful application'' to yield a ripe takings claim); Kawaoka v. City of Arroyo grande, 17 F.3d 1227, 1232 (9th Cir.), cert. denied, 115 S.Ct. 193 (1994) (property owners must submit ''one formal development plan''); Unity Ventures v. Lake County, 841 F.2d 770, 775 (7th Cir. 1988).
(Footnote 31 return)
See 18 Wright, Miller & Cooper, Federal Practice and procedure, §4466 at 30,042 (''Res judicata doctrine cannot escape the federalistic problems that permeate our overlapping systems of courts and substantive rights''). See also id §4469–4471 (federal courts supplying res judicata effect to state court decisions).
(Footnote 32 return)
The related doctrine of collateral estoppel, or issue preclusion, requires a federal court to avoid relitigating issues that were actually decided by, and necessary to, the judgment of a state court. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n. 5 (1979). Like res judicata, collateral estoppel's relationship to Williamson County prong 2 can prevent a property owner from ever litigating a federal taking claim in federal court. See, e.g. Dodd v. Hood River County, 59 F.3d 852, 861–62 (9th Cir. 1995) (although property owner exhausted compensation remedy under Oregon law, court remands for consideration as to whether related doctrine of collateral estoppel bars any further litigation in federal court).
(Footnote 33 return)
For example, in the myriad reported Section 404 takings cases brought against the Corps, issues of state property law have not arisen to the extent that abstention has become a concern. See e.g., Florida rock Indus., Inc. v. Unites States, 18 F.3d. 1171 (Fed. Cir. 1994); Tabb Lakes Ltd. v. United States, 10 F.3d 796 (Fed. Cir. 1993); Broadwater Farms, supra, 35 Fed. Cl. 232 (1996); Bowles v. Unites States, 31 Fed. Cl. 37 (1994); Formanken v. Unites States, 26 Cl. Ct. 332 (1992); Ciampitti v. Unites States, 22 Cl. Ct. 332 (1991) Deltona Corp. v. Unites States, 657 F.2d 1184 (Ct. Cl. 1981); Jentgen v. Unites States, 657 F.2d 1210 (Ct. Cl. 1981).
(Footnote 34 return)
Exhaustion of remedies also can potentially delay federal courts from addressing the merits of federal takings claims. See, e.g. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1016–19 (1984) (provisions of federal Insecticide, Fungicide and Rodenticide Act ''implement[] an exhaustion requirement as a precondition to a Tucker Act claim''); Burlington Northern R.R. Co. v. Unites States, 752 F.2d 627 (Fed. Cir. 1985) (takings claim dismissed without prejudice because owner failed to apply for federal permit and government argued permit could be granted if sought). Cf. Whitney Benefits, Inc. v. Unites States, 752 F.2d 1554, 1558 (Fed. Cir. 1985) (pursuit of a coal exchange under 30 U.S.C. §1260(b)(5) is not a remedy that must be exhausted before bringing suit under Tucker Act).
(Footnote 35 return)
The full text of Sections 3 and 4 with my suggestions are set forth at pp. 33–35.
(Footnote 36 return)
Suggested revisions are underscored.
(Footnote 37 return)
H.R. 1534 also allows district courts to certify ''significant but unsettled'' questions of state law to the state's highest appellate court. It is unclear whether H.R. 1534 includes those states that currently have not adopted certification procedures or alters certification procedures that only permit certification from an appellate court. this provision, therefore, may raise federalism questions. In addition, certification is customarily designed to allow federal courts in certain circumstances to refer novel or unclear questions of state law to a state's highest court, not, as here, for the general purpose of applying complex regulations to a particular set of facts.
(Footnote 38 return)
Namely, Arkansas, California, Illinois, Missouri, Nevada, New Jersey, North Carolina, Pennsylvania, Tennessee, Utah, Vermont and Virginia.
(Footnote 39 return)
See, e.g., Eastern Minerals Int'l, Inc. v. United States, 36 Fed. Cl. 541, 548 (1996) (''Each plaintiff must satisfy the threshold requirement of a single meaningful application'' to yield a ripe takings claim); Kawaoka v. City of Arroyo Grande, 17 F.3d 1227, 1232 (9th Cir.), cert. denied, 115 S.Ct. 193 (1994) (property owners must submit ''one formal development plan''); Unity Ventures v. Lake County, 841 F.2d 770, 775 (7th Cir. 1988).
(Footnote 40 return)
In our opinion, property owners confronted reasonable administrative and judicial delays in only 2 of these 31 cases. See Panhandle Eastern Pipeline Co., 898 F.Supp. 1302 (S.D. Ind. 1995) (Case 25—three years elapse between submission of development proposal and court's ruling on the merits); Marshall v. Board of County Commissioners for Johnson County, 912 F.Supp. 1456 (D.Wyo. 1996) (Case 27—four years Lapse between submission of development proposal and court's ruling on the merits).
(Footnote 41 return)
We understand Hat H.R. 1534 proposes strictly procedural reforms, but note that only two of the District Cases (Cases 4 and 25) resulted us affirmative awards of compensation on the merits.
(Footnote 42 return)
See Tab 2, Cases 32, 34, 36, 38, 39, 40, 46, 49, 50, 51, 55, 57. While we understand that H.R. 1534 proposes strictly procedural reforms, we note that only one of these 27 Appellate Cases resulted in an affirmative award of compensation to the affected land owner (Case 50), while three found that no taking occurred on the merits (Cases 36, 38, and 39).