Happy New Year

Well, it has been almost a year since I updated the Grand Theft: Property Blog. So a brief review of our regulatory takings cases in the Florida Keys appears to be in order.

I should point out that, in 2009, we spent about six months getting our Collins and Galleon Bay regulatory taking cases out of the hands of a pro-government trial judge, David Audlin. Judge Audlin had dismissed four regulatory taking cases in 2007 -- Collins v Monroe County, Shands v City of Marathon, McCole v City of Marathon, and Beyers v City of Marathon -- and Judge Luis Garcia dismissed a fifth case, Sutton v. Monroe County. On December 31, 2008, the Florida 3rd District Court of Appeal reversed Judge Audlin's dismissals of Collins and Shands -- but that still left McCole, Beyer, and Sutton to be decided.

The 3rd District Court of Appeal (3rd DCA) affirmed Judge Garcia's dismissal of the Sutton case on December 23, 2009. We were surprised by the 3rd DCA's decision because it was completely contrary to the Collins and Shands decisions of a year earlier. We filed a Motion for Rehearing in Sutton. That was denied May 25, 2010. We then filed a Petition for Discretionary Review with the Florida Supreme Court. That petition was denied on December 18, 2010 -- less than two weeks ago. There are some other options available to Mrs. Sutton, but I will leave that for another day.

The 3rd DCA's decision in Beyers v. City of Marathon, on June 9, 2010, was consistent with its earlier decisions in Collins and Shands, and the Beyer case was remanded to the trial court. However, the 3rd DCA rejected the McCole v. City of Marathon appeal on April 21, 2010, based upon its logic in the Sutton appeal.

This left us with successful appeals in Collins, Shands, and Beyers, but with completely contradictory decisions in Sutton and McCole. Because of the conflict, we filed petitions for discretionary review, in Sutton and McCole, before the Florida Supreme Court in mid-2010. Two weeks ago, on December 18, 2010, the Florida Supreme Court denied review in Sutton and McCole.

The only fact that distinguishes Sutton and McCole from Collins, Shands, and Beyers, from Sutton and McCole is that Ms. Sutton and the McColes "asked" if they might be able to develop their property many years ago, and were told that it was "unlikely" that they could do so. Neither Ms. Sutton nor the McColes requested a Beneficial Use Determination after being told development was "unlikely." In our opinion, this does not rise to the level of "ripeness" required by the U.S. Supreme Court in Williamson County. For that reason alone, we believe the Sutton and McCole decisions are wrong.

Ms. Sutton's and Ms. McCole's remedies are somewhat limited. Both can file regulatory taking claims in Federal court now that they have "exhausted State judicial remedies." The 3rd DCA, in a footnote, also invited Ms. Sutton to file a new building permit application. This, too, is an option.

It is fair to say that the status of regulatory taking claims in the Florida Keys remains somewhat unclear, even where the landowner has only informally sought a development order or building permit more than four years ago. At least this appears to be true in the minds of the appellate judges in Miami. Perhaps a Federal District Court decision to the contrary will change their minds.

In short, that's what we've been doing this past year. We are also moving forward on the Collins case, which is set for a liability trial in April 2011, and on the Galleon Bay case, another lawsuit that Judge Audlin screwed up during his reign in 2007. But ... more on those cases later this year.

When will the Government Figure it Out?

Three weeks ago, the State of Florida deposited $8.85 million with the Clerk of Court for Monroe County to compensate the landowners in Florida DEP v. West for the condemnation of their North Key Largo properties in April 2004. When this eminent domain action was filed as a slow-take in 1995, the State offered a mere $160,000 for the subject properties. Our response to the slow-take was a regulatory taking counterclaim. That was our way to protect landowners from the State "walking away" from any jury verdict it did not like.

Land values began to rise in 2001 -- although not on these properties. In 2004 the State opted for a "quick-take." At that time, the State's estimated fair market value of the two parcels -- based on the confiscatory regulatory scheme -- was $630,000. But after executing the quick-take, the State could no longer walk away from a jury verdict that exceeded its budget. After all, nobody had been able to build on North Key Largo since February 8, 1982 (except at the Ocean Reef Club and a few existing subdivisions).

After the 2004 quick-takes, we re-cast the regulatory taking counterclaim into a jury instruction on condemnation blight. Even though the Florida Supreme Court has embraced condemnation blight on at least two occasions, the State's in-house attorneys could not grasp the concept. Fortunately we had a trial judge, Luis Garcia, who understands government cannot prohibit a landowner from using his property, and then benefit from its own actions by driving down the property's acquisition cost. (In 2001, Judge Garcia ruled the same way in another case, Shadek v Monroe County, where White & Case attorney Doug Halsey raised the same issues and Monroe County settled by paying $6 million in temporary taking damages.)

So ... the government goes down for the count again! I have remarked, on numerous occasions, that the reason for this waste of money is nothing more than the "tyranny of the majority" in small, attractive, relatively well-to-do communities such as the Florida Keys. Those who already own homes in the Keys will do everything in their power to prevent others from doing so. To that end, the "got-miners" elect like-minded County Commissioners, who respond by prohibiting new development wherever they find it. It's a self-perpetuating, downward spiral, that could well -- unless reversed -- bankrupt every owner of developed property in the Keys.

To got-miners: think about it!

Is the State Conceding its "Condemnation Blight" Battle in the Florida Keys?

Last Wednesday, December 2, 2009, the Third District Court of Appeal denied the State of Florida's Motions for Rehearing & Conflict Certification in the "condemnation blight" case, Florida DEP v. West, et al. (original opinion affirming trial court), Case No. 3D08-3185. Two days later, on December 4, 2009, the State's trial/appellate counsel asked us to pick a date in January for the State to write the checks in this case.

This suggests the State decided not to seek discretionary review from the Florida Supreme Court -- a wiser decision than their last one in Collins v. Monroe County & the State of Florida. But, in Collins, the State and County did not face the prospect of incurring almost $2,000 per day in interest costs, so they could waste the landowners' time and money at will.

For those considering a "condemnation blight" attack on value-reducing land development regulations, consider the following. The State deposited $550,000 for Parcel 1 and $80,000 for Parcel 7, as its "good faith" fair market value estimates, in April 2004. The 2008 jury verdicts were $5,060,000 (Parcel 1) and $450,000 (Parcel 7) -- based on the April 2004 real estate market. These verdicts were 9.2 times (820% over) and 5.625 times (462.5% over) the 2004 "good-faith" estimates.

The October 8, 2008, judgments included interest from 2004, bringing the just compensation values to $6,908,114 and $599,142, respectively, or $7,507,256. Presuming the case can be resolved by January 15, 2010, the State's appeal will add $682,398 in additional interest to the landowners' awards -- bringing their compensation up to $8,189,654, or 13 times the State's 2004 "good-faith" estimates (or, if you like your numbers inverted, the good-faith estimates were only 7.7% of the condemnation award, with interest).

Confiscatory Land Use Regulations are Unconstitutional in Florida: It is Time For the Kill

To the best of our knowledge, no local government in Florida -- other than Monroe County and its municipalities -- has ever been able to maintain confiscatory land development ("zoning") regulations. In 1984, the Florida Supreme Court held, in Dade County v. National Bulk Carriers, 450 So. 2d 213, 216 (Fla. 1984) that "if a zoning ordinance is confiscatory, the relief available is a judicial determination that the ordinance is unenforceable and must be stricken."

Government lawyers are wont to say that National Bulk Carriers was overruled, sub silentio, by the Supreme Court in First English Evangelical Church v. Los Angeles County, 482 U.S. 304 (1987), but that does not seem to be the case. In Joint Ventures v. FDOT, 563 So. 2d 162 (Fla 1990), a post-First English Florida Supreme Court held unconstitutional a statute that allowed the FDOT to "freeze" all development, for up to five years, and for a second five years if it wished, by recording a "reservation map" in the county records.

The 1990 supreme court invalidated Florida's "reservation map" statute, on Due Process grounds, after comparing its effect to the "condemnation blight" case of Bd. of Commissioners v. Tallahassee Bank, 1o8 So. 2d 74, 86 (Fla 1st DCA 1958), writ quashed, 116 So. 2d 762 (Fla 1959), stating "We perceive no valid distinction between "freezing" property in this fashion and deliberately attempting to depress land values in anticipation of eminent domain proceedings. Such action has been consistently prohibited."

In Joint Ventures, the supreme court sealed the fate of the Florida Keys' "Beneficial Use Determination" ("BUD") ordinances, when responding to FDOT's argument that "the property owner can always sue in inverse condemnation," as follows.

DOT contends that Joint Ventures' right to seek compensation through inverse condemnation cures the statute's failure to expressly provide for compensation. We disagree. ... [T]hat remedy is not equivalent to a property owner's remedy under the doctrine of eminent domain. Inverse condemnation affords the affected property owner an after-the-fact remedy, when there has already been a "taking" by regulation, and it is not a substitute for eminent domain protection facilitated by chapters 73 and 74 [Fla. Stat.]

The property owner who must resort to inverse condemnation is not on equal footing with an owner whose land is "taken" through formal condemnation proceedings. The former has the burden of seeking compensation, must initiate the inverse condemnation suit, and must finance the costs of litigation without the procedural protections afforded the condemnee.

In Joint Ventures (1990), as in National Bulk Carriers (1984), the Florida Supreme Court held the "reservation map" statute unconstitutional on Due Process grounds.

Fast forward to today. If it were not for the Keys' governments' "beneficial use" ordinances, many of these local land use regulations would have been declared unconstitutional 23 years ago. But let's take a look at those ordinances in the context of National Bulk Carriers and Joint Ventures -- the law in Florida.

• Not one of the Keys' BUD ordinances provides for the acquisition of a landowner's property by the exercise of eminent domain, if the property has been rendered unbuildable by the local government's zoning regulations. A first-year law student could see this is a Due Process violation that renders the underlying confiscatory regulations unconstitutional.
• Monroe County recently raised the "application fee" for a Beneficial Use Determination to almost $5,000. This is reminiscent of the $2 "poll tax" cases of the '60's. Is it remotely possible that a local government can assess the owners of land within its boundaries a "poll tax" of $5,000? If the government cannot assess a $2 fee for the right to vote, it cannot assess a $5,000 fee for the right to Just Compensation. Or any fee, for that matter.

There is a solution to this madness, and we are about to undertake it. We will soon file an action in the United States District Court for the Southern District of Florida, on behalf of several non-resident owners of Florida Keys property -- under the Federal court's "diversity jurisdiction" -- against the local governments and certain Florida state officials, to invalidate major portions of the Florida Keys' local government comprehensive plans and land development regulations, on Due Process grounds and Florida law.

Postscript: This situation reminds me of Pogo, who would say "we have met the enemy, and it is us." The reason the Florida Keys is up to its neck in "just compensation" liabilities is the classic tyranny of the majority problem. The people who own developed property in the Keys, and vote there, simply do not want anyone else to build anything within their driving radius. These cluckheads, who elect like-minded cluckheads to the County Commission and municipal Councils, have not yet figured out that they will be paying the bills for this fiasco for decades to come.

Has the Tide Turned?

Since 1986, the Florida Keys' confiscatory land use regulations have been imposed only on owners of undeveloped land. Two-thirds of those landowners reside outside the Florida Keys. They have no right to vote on the "got-miners" choices for the County Commission. Since the got-miners' "rate-of-growth" ordinance was imposed on the Keys in 1992, vacant landowners have been selling their property to the government at rock-bottom prices that rarely reached 15% of Fair Market Value.

In 1996, Andy Tobin and I sent Voice of Reason newsletters to just over 10,000 owners of undeveloped Keys' properties. Today there are only 4,000 such owners. The Keys' rate-of-growth ordinances have limited development to under 250 building permits/year since 1992 -- or less than 3,750 dwelling units in 17 years. This suggests about 2,250 parcels have been sold to government at unfair prices.

Now that the Florida DEP v. West, et al., decision has been released by the 3d District Court of Appeal, perhaps the remaining 4,000 owners of undeveloped Keys' land will realize that the State has been acquiring Keys' property -- for 17 years -- for about 10% of Fair Market Value. The 3d District Court of Appeal will issue its "mandate" on the West decision in two days (November 5th), and we assume the State is not dumb enough to lose another half-million dollars in interest on a high-risk petition for "discretionary review" by the Florida Supreme Court (only 11% are accepted for "review;" substantially fewer actually result in a reversal).

[This post replaces an earlier post.]

Landowners' Condemnation Blight Judgments Affirmed

Today, Florida's Third District Court of Appeal affirmed the trial court's judgments in Florida DEP v. West, et al, awarding nearly ten times the State's "good-faith" deposits when it condemned two North Key Largo properties in 2004. The trial (and chief) judge, Luis Garcia, should be pleased with his decision to require the jury to consider the "highest and best use" of these properties as of February 8, 1982 -- the last day they were "buildable" -- but valued in the 2004 real estate market.

Judge Garcia found, on the testimony of two former County Commissioners from the early 1980's, and from the voluminous paper trail, that Monroe County was made an "offer it couldn't refuse" in 1982, and again in 1986, and so on until the present day. Former Governor Bob Graham got his conservation land back in '82 ... but these landowners have yet to be paid, in 2009. Though the State DEP could seek "discretionary review" from the Florida Supreme Court, the odds of getting such a review are slim, and the State is running up interest to the tune of $1,468 per day. As of this date, the State's appeal has added $556,247 to the Landowners' compensation (at 11%/year, they should appeal forever).

All in all, this was a good day for those Florida Keys' landowners who have rebuffed the governments' 10-cents-on-the-dollar offers for all these years. For more details, see the West-Freeman section of my website.

(Edited 10/22/2009 to include interest information.)