Collins and Shands Regulatory Taking Decisions Reversed by Third DCA

The Third District Court of Appeal released its REVERSALS of Circuit Judge Audlin's dismissals of Collins, et al., v Monroe County & The State of Florida, and Shands v. City of Marathon, on New Year's Eve -- six months after oral argument. And the opinion is signed by District Judge Suarez -- not Chief Judge Gersten -- so I got that part wrong.

You can read the opinions by clicking on their captions in the previous sentence. You can also view them on the Court's website by clicking on the title of this post. The Collins case number is 3D07-1603; Shands is case number 3D07-3288.

After extensive hearings before Chief Judge Richard Payne after the Collins case was filed in late 2004 -- all favorable to the landowners -- his successor, David Audlin, made it very clear that he was going to get rid of our regulatory taking cases any way he could. He did just that by declaring that the 11 Collins landowners had not sued within four years of the effective dates of the County's confiscatory ordinances. Rescinding Judge Payne's rulings in the landowners' favor -- without even the merest request to do so from the defendants -- Judge Audlin ruled that the County's unique Beneficial Use Determination ("BUD") process did not "ripen" an as-applied taking claim. Following this train of thought, he ruled that the Plaintiffs had not filed their taking claims within the four-year statute of limitation.

On appeal, government counsel (including the County's multi-million dollar lawyers from Kansas City) argued that the BUD process was a meaningless exercise -- despite the fact that this same Court of Appeal had ruled otherwise in one of our earlier cases, Key West v Berg, 655 So. 2d 196 (Fla 3d DCA 1995), and despite the fact that Michael Berg, counsel in the companion Shands case (argued back-to-back with Collins), had successfully convinced the Third DCA in Key West v Berg that a landowner had to go through the BUD process to ripen a regulatory taking claim.

Given their propensity for obfuscation and delay, I guarantee government counsel will move for rehearings in both Collins and Shands -- without success -- and will seek discretionary review by the Florida Supreme Court -- which will be denied, in part because the Third DCA's opinions in these cases only affect a single Florida County. So we probably will not be back in the trial court for another six months.

Note added 1/1/09: Judge Suarez' opinions in Collins and Shands suffer slightly from some irrelevant dicta (dicta = statements made by the court that are not based upon the record, nor necessary to the decision in which they appear), perhaps intended to reduce the impact of his opinions on Monroe County's psyche. In particular, we note Judge Suarez' dicta that there were no zoning ordinances in Monroe County before 1986, leading to his suggestion that, just maybe, some landowners who bought before 1986 may have no investment backed expectations. Not only are these remarks outside the record, but they assume an incorrect premise. Monroe County's first formal zoning regulations were adopted on December 8, 1959, and became effective January 4, 1960. Prior to that, there were recorded, platted subdivisions that established residential land use densities as early as the 1920's. While there are times when dicta can be helpful, dicta based on erroneous assumptions are not helpful. We will probably bring this matter before the Court before the opinions become final.

Once the Third DCA denies the governments' motions for rehearing, the Collins and Shands decisions become final. At that point, we expect the Court will remand the Sutton v Monroe County, McCole v Marathon, and Beyer v Marathon cases to the trial court -- as they all suffer from the same wrong logic as Collins and Shands. McCole and Beyer are Audlin dismissals, and were expected. Sutton was dismissed by Judge Garcia, much to our surprise and dismay. There are also some housecleaning issues we need to take care of when these cases come back to the trial courts. Happy New Year, Everyone!

The Latest Voice of Reason is Online

You can download the latest issue of our newsletter, The Voice of Reason, today. We mailed thousands of newsletters in the 90's when we were challenging the 1996 Florida Keys Comprehensive Plan. We didn't like it then and we don't like it today, so we decided to resume publishing a newsletter.

There was a reason the drafters of the United States Constitution wanted a bill of individual rights in 1789. The first 10 Amendments -- the Bill of Rights -- were intended to protect the minority from the tyranny of the majority. Majority rule was presumed to lead to problems, and Alexander Hamilton and James Madison wrote extensively on the issue. Read The Federalist Papers, particularly Federalist 9 (Hamilton) and 10 (Madison), on "faction."

In the current issue of The Voice of Reason, we offer to create a web-based database that will reveal the governments' below fair-market-value offers for unbuildable property. Currently those offers are government "secrets," and nobody can obtain copies of these offers with public document requests. But nothing stops landowners from making their offers public.

Now we need to develop a strategy retroactively obtain supplemental compensation for former landowners who were paid only a fraction of what their property was worth. This may perturb homevoters and planners, but there is nothing in the Constitution that protects the government from such claims.

Big Three Bailout Drafters Stymied by 5th Amendment Taking Clause

Though the Big Three "Bailout" bill is apparently history, yesterday's Wall Street Journal ran a fascinating story on Capitol Hill's legislative drafting geniuses, who tried to move a bill that ignored the Fifth Amendment's "Taking" Clause. Here is the gist of the story.

Controversy erupted after a draft bill Monday stated plainly that the government loans would be "senior and prior to all obligations, liabilities, and debts of any such holding company or company that controls a majority stake in the eligible automobile manufacturer."

Loans backing Ford Motor Co. and General Motors Corp. slumped Wednesday amid concerns that the auto makers' existing senior secured loans could be subordinated to federal loans ....

"It really sounds like a clear violation of the taking clause of the Constitution, to put the government ahead of all the other lenders. To go this route is a treacherous path riddled with all sorts of constitutional issues," said Don Workman ....

The WSJ article correctly pointed out that the priority this language would have given the government "lender" was equal to the status of a DIP, or "debtor-in-possession" lender. In a Chapter 11 proceeding, the debtor submits itself to the oversight of the US Bankruptcy Court, establishes that its debts exceed its assets, and asks the Bankruptcy Judge to approve a DIP loan that will have super-priority status. By then, the debtor (failed company) has established, to the Court's satisfaction, the fact that the debtor's unsecured lenders, shareholders, bondholders, and to some extent the secured shareholders, have no chance of repayment -- unless the DIP can pull this business out of the ashes and turn it back into a profitable enterprise.

Then the DIP loan is approved and the debtor can buy raw materials, pay its workers, and ship product to its customers. Nobody would be a DIP lender unless their priority exceeded the debtor's former debt-holders' priority. What these Capitol Hill drafters were trying to do was to skip over the bankruptcy filing niceties, and establish the United States as the DIP loaner. According to the WSJ article, it is not clear that these drafters understood what they were doing. It is equally unclear why the car companies need Congress help to do what they should do: get rid of the non-working drones, shut down the non-functioning facilities, identify a niche where they can deal and make a profit.

The WSJ article notes that the drafting staff came up with some new language, but that nobody was ready to embrace their second effort. What is clear is that 40+ members of the Senate were not buying into this "prepackaged bankruptcy" deal, and would rather let the companies go through the usual bankruptcy process -- if that turns out to be necessary.

Monroe County Commission Warned State Loss in Condemnation Blight Cases Poses Major $$ Problem

On the Monroe County Commission's agenda for December 17, 2008, is a request from the County Attorney's office for permission to file an amicus curiae brief in the State's appeal of the $6.9 million (plus costs, post-judgment interest at 11%, and attorneys fees) West & Richardson Condemnation Blight judgments. To quote from the request:

On April 9, 2008 - prior to the jury trial on compensation - the trial court entered an "Order Granting Defendants' Motion In Limine on the Issue of Condemnation Blight." The property owners contended that precondemnation actions of the State and County blighted the property by preventing all, or substantially all, beneficial use of the property. The Order prohibited the parties from presenting any evidence regarding the effect of any County or State regulation promulgated, enacted or amended after February 8, 1982. The Order required that the jury be instructed to determine the Fair Market Value of each parcel as of the de jure takings in Spring 2004, according to the highest and best uses they would have had on February 8, 1982.

On October 8, 2008, the trial court entered final judgments awarding just compensation totaling $6,877,257 (plus costs and attorneys' fees). On October 30, 2008, the State of Florida filed Notices of Appeal of the two final judgments. This matter is of great importance to the County because the appellate court's decision will potentially set precedent applicable to the inverse condemnation actions currently pending against the County. In some of those actions, plaintiffs have similarly asserted theories of condemnation blight. The acceptance or rejection of those theories will impact how property is valued for purposes of determining just compensation awards, and either increase or decrease the County's liability exposure.

Other than having an incorrect date for the Condemnation Blight Order (it was April 9, 2007, not 2008), and omitting the fact that the judgments are earning 11% interest per year, we agree that the County could be in deep trouble here -- but so is the State.

Chief Judge David Gersten Breathes New Life into Property Rights in South Florida

Third District Court of Appeal Chief Judge David M. Gersten, appointed in 1989 by Governor Martinez, has given us few hints of his judicial philosophy. Apparently, the judges are assigned to the same number of panels (about 750) each year. But, as of mid-2008, Judge Gersten had averaged 11 signed opinions/year since he was appointed. Compare this to Senior Judge Alan Schwartz, who has averaged 45/year for 30 years, or to Judge Cortinas, who has been on the bench only three years, but has signed 46 opinions/year.

Two months ago, in CNL Resort Hotel v City of Doral, 991 So.2d 417, Chief Judge Gersten turned a lot of South Florida lawyers' heads in a remarkable decision. On the surface, the issue seemed pretty simple ... whether a property owner can challenge a comprehensive plan on the basis that it fails to protect [the owner's] property rights. Even the Florida Department of Community Affairs agreed that the property owner had a legitimate gripe. But the City of Doral and the ALJ disagreed.

Judge Gersten (with the apparent agreement of Judges Shepherd and Rothenberg), simply buried the ALJ -- and the City of Doral's lawyers -- with the following exposition on property rights.

Private property rights have long been viewed as sacrosanct and fundamentally immune from government interference. The strong tradition of protecting private property rights against governmental interference stems back to both English common law and Lockean philosophy. Lockean philosophy emphasized that property rights are a natural, pre-political attribute of human beings. See James W. Ely, Jr., The Guardian of Every Other Right: A Constitutional History of Property Rights 10 (2d ed. 1998).

Thus, it was only natural that our constitutional founders would safeguard property from governmental intervention. Our founders drafted the Fifth Amendment of the United States Constitution to provide that no person shall have property “taken for public use, without just compensation.” See U.S. Const. Amend. V. The Fifth Amendment, Takings Clause, is made applicable to the states through the Fourteenth Amendment. See U.S. Const. Amend. XIV. Florida’s state constitution also provides that “no private property shall be taken except for a public purpose and with full compensation.” See Art. X, §6, Fla. Const.

Florida further protects these sacrosanct private property rights when evaluating a comprehensive development plan. Florida zoning law requires that a governmental agency, such as the City, adopt a plan that coordinates with the state’s plan. See §163.3177(6)(h), Fla. Stat. (2006). Florida’s State Comprehensive Plan provides that “Florida shall protect private property rights and recognize the existence of legitimate and often competing public and private interests in land use regulations and other government action.” See §187.201(14)(a), Fla. Stat. (2006). Further, the goals and policies contained in the State Comprehensive Plan shall be reasonably applied where they are economically and environmentally feasible, not contrary to the public interest, and consistent with the protection of private property rights. See §187.101, Fla. Stat. (2006).

Without belaboring the point, Judge Gersten's opinion concludes that CNL had every right to challenge a Comprehensive Plan that did not consider its impacts on CNL's property rights (i.e., property value). If that isn't a major breakthrough in this day of planning "for the sake of planners" -- and damn the landowners who get in their way -- nothing is.

I confess that I did not feel positively about Judge Gersten when he joined the other two members of the panel (Levy and Goderich, JJ) in Monroe County v. Ambrose, et al., 866 So. 2d 707 (Fla. 3d DCA 2003), a 500+ plaintiff suit to establish statutory vested rights to build on platted lots in the Florida Keys. I was then, and remain, firmly of the opinion that this was part of a legitimate compromise made by the Florida Senate in 1972 when it adopted the Area of Critical State Concern statute, for the simple reason that no State Senator wanted part of his jurisdiction to be subjected to a State takeover of local zoning laws. It helped that a well-preserved legislative history conclusively proved our point. In Ambrose, Judges Gersten, Levy, and Goderich simply re-wrote the law the way they wanted it to be. Maybe they thought it would be too disruptive to overturn the "Save the Keys" applecart after 20 years of State tyranny, but I still believe their decision was wrong.

Now, if we could just get Judge Gersten to write faster. It took 385 days after oral argument, for this non-final order appeal to be decided. Presumably, there was even a longer delay in the administrative ComPlan proceedings below. The Ambrose per curiam decision was written in 308 days. Wars have been started, and won or lost; babies are conceived, born, and in bassinettes; or you can get an MBA; in 385 days. 385 days is just too long to wait for an eight-page opinion (especially when it's an appeal from a non-final order).

P.S. I admit that being on 750 panels/year -- that's 15/week, or 3/day if you get 2 weeks of vacation -- would drive most people crazy.

Condemnation Blight in the Florida Keys

From 1979 to 1986, the State of Florida forced a confiscatory land use regime on the landowners of the Florida Keys, through its woebegone facilitators, the Monroe County Commission. One of Governor Graham's targets, sure to pick up votes for his senatorial campaign, was the area between Jewfish Creek and the Ocean Reef Club. This area, known as North Key Largo, had been the locus of pre-development activities since the mid-1970's. Interest had picked up as the water and electricity utilities announced their intentions to serve North Key Largo. And Fritz Scharenberg, a successful Key Biscayne developer, announced his intentions to build a 2,500 unit development, called Port Bougainville, at the southern end of North Key Largo.

From the mid-1970's through 1983, Fritz Scharenberg received all the necessary development approvals for his project, and another half-dozen major developments had entered the development approval pipeline. Lawsuits were filed by environmental opponents, and the State of Florida placed its heavy thumb on the scale by demanding the County Commission adopt a "major development moratorium" -- which it did on February 9, 1983 -- precluding indefinitely any development approvals that involved more than five acres or 50 dwelling units. The alternative offered to the County Commission, was that the Florida Department of Community Affairs (its current name) would adopt the moratorium under the supervisory powers granted to it by the 1972 Legislature under the guise of protecting "Areas of Critical State Concern." (The State Legislature had so designated the Florida Keys in 1979.)

The February 9, 1983 moratorium was extended several times until it was replaced by a "one-year" moratorium on September 15, 1986. The 1986 moratorium was "intended" to allow the development of a Habitat Conservation Plan (HCP) for North Key Largo, said HCP to be completed within 6 months of September 15, 1986. The HCP was never approved by Monroe County -- and was actively opposed by state agencies anxious to keep the moratorium in place -- and the moratorium is still in place as I write this post, more than 21 years after it was to expire.

During the past 22 years, most North Key Largo landowners capitulated and sold their property to the state for 10 to 15 cents on the dollar. (I mean what it would have been worth if the County-State moratorium had not been in effect.) There were a few hard-shelled landowners who said "no" to every offer that came their way. Eventually the State had to commence eminent domain proceedings to get the curmudgeons out of the way.

In 1995, the State filed a "slow-take" condemnation action against two North Key Largo parcels. The first thing we did was file a counterclaim in inverse condemnation (since slow-takes can be abandoned by the condemnor), that also raised the Condemnation Blight issue. Fortunately, the real estate market went crazy in 2001. After watching those numbers for some time, the State converted its slow-take claims into "quick-takes" in 2004. When that happened, we asked the Court to rule on the Condemnation Blight issue we had raised in 1996.

That took three hearings and the testimony of two County Commissioners from the 1982-88 era. The Court agreed that North Key Largo was blighted, and ordered the parties to prepare appraisals that disregarded all land use regulations (State, County, and Federal) that were adopted after February 8, 1983.

The case finally went to trial in April 2007 and, given the Court's Condemnation Blight instructions, yielded verdicts that far exceeded the "good-faith" deposits of $550,000 for Parcel 1 and $80,000 for Parcel 7. The jury returned verdicts of $5,060,000 on Parcel 1 and $450,000 on Parcel 7. The State appealed both final judgments on October 30, 2008.

At the top of this blog entry is a miniature version of the convincing piece of evidence in the Condemnation Blight hearings. That chart, showing that private property transactions ended, and government ownership took off like a rocket, simultaneously, in 1982-84. This is the kind of evidence it takes to establish Condemnation Blight. And it is relatively easy to cull from the county property appraiser's database.

Government "intentions" don't matter. What the market does, matters. Our win in the West-Richardson case has been appealed, and we hope to come out of this with a written opinion from the Florida 3rd District Court of Appeal. There are another 3,500 owners of 7,500 parcels of land in the Florida Keys who will benefit from this decision.

No Decisions Yet in Collins or Shands

It's been 22 weeks since the oral arguments in the regulatory taking lawsuits Collins v Monroe County & the State of Florida (11 plaintiffs), and Shands v the City of Marathon. No "substantial" [my adjective] opinions in civil appeals were released today. Only three civil opinions were released, and they were certiorari decisions -- appeals from non-final orders that are usually decided quickly. The Collins and Shands cases are appeals from final judgments -- which take much longer to decide. For the past three months it has taken 111 days (16 weeks) after oral argument -- on average -- for the 3rd DCA to release "substantial" civil opinions. But 25% of those opinions took from 112 to 519 days.

I think there is a high probability that Chief Judge Gersten is writing the Collins and Shands opinions. Two of the three longest gestation times for opinions released the past three months (385 and 427 days) were opinions signed by Judge Gersten -- Levin v. Lang and CNL Resort Hotel v City of Doral. Compared to the District Court's current 111-day average release time, Judge Gersten's opinions take longer to see daylight. His average release times in the past three years are 129 days after oral argument when affirming, and 169 days when reversing. Today is the 156th day since the oral arguments in Collins and Shands.

We filed two more regulatory taking appeals last month, McCole and Beyer (vs the City of Marathon), and both were dismissed by Judge Audlin on Statute of Limitation grounds. A third will be filed as soon as a Final Judgment is signed by Judge Garcia (Sutton v Monroe County). Judge Garcia's decision is based on the same flawed reasoning that Judge Audlin applied in Collins, Shands, McCole, and Beyer.

For more information on these appeals, click on "Takings Appeals under "Labels" in the left-hand margin. Unless special circumstances exist, the Third DCA releases its decisions on Wednesdays by 10:45 AM. Clicking on the title of this post will take you to the Third DCA's website.

Update: December 10, 2008. No decision today either.