Lunch And 15 Minutes: Federal Jury Finds State Land Use Commission Liable For Lucas And Penn Central Taking

by Robert Thomas, InverseCondemnation, March 28, 2018

As we reported here, the U.S. District Court for the District of Hawaii just finished a jury trial in a regulatory takings case (removed by the defendant State of Hawaii from Hawaii courts) involving a stalled development on the Big Island.

The jury has returned a verdict after 8 days of trial, concluding the State is liable under both Lucas and Penn Central theories, after only 15 minutes of deliberation after their lunch break. 

But there's more to this story, because here's the buried lede. The court yesterday made this entry in the docket: 

EO: The court proposes to enter an order awarding nominal damages of $1 to the plaintiff and then to enter judgment in this case. This will start the running of the clock not only for appeal but also for requests for fees and costs under Local Rule 54.3. If the parties have concerns about this timeframe, they should notify the court by letter no later than March 29, 2018. (JUDGE SUSAN OKI MOLLWAY)

Well, that's a drag. 

Why nominal damages? The court's earlier order granting the State judgment as a matter of law on the just compensation issue ("Granted as to just compensation portion of the motion. Denied as to the rest of the motion.") doesn't give us a clue. The State's motion and its later bench memo tell us: "No just compensation evidence was admitted." Why? The court excluded the property owners' expert witnesses, concluding the opinions of the plaintiff's damages were either irrelevant or didn't pass the Daubert test.

The jury was not informed that the court had already decided that the most the owner could recover as just compensation was $1. As the State noted:

The jury’s knowledge or belief that the whole case is about $1 will almost certainly affect its decision-making process. The jury sat through two weeks of (let’s face it) boring and confusing testimony. They will be disappointed and perhaps angry that two weeks of their valuable time is “wasted.” They will not understand that their decision remains very important (and any attempt to explain why will be disputed and possibly prejudicial in itself).

Effect on decision-making is unpredictable. Maybe the jury will just shrug their shoulders and say – “Why bother for a dollar? Let’s just find no taking and get done before lunch.” Or maybe the jury will say or think: “Bridge is only getting a dollar so it won’t hurt anyone for us to find a taking.” Either way the $1 introduces a wild card into the process and diminishes the chance of getting a true verdict.

Cheeky! The property owner agreed, and the jury was not informed of the court's $1 just comp judgment. 

So here we are: a jury verdict that the State took property, yet a court-ordered judgment that the owner gets a dollar as compensation.

We're guessing both the State and the property owner will likely be taking this case up the chain to the Ninth Circuit. 

This case came about after a property owner -- the developer of the Aina Lea project on the Big Island -- challenged the State Land Use Commission's reclassification of Aina Lea's land, just north of the Waikoloa beach area, from urban to agriculture. The owner also challenged the imposition of an affordable housing requirement. In the words of an order by the court last year, "Plaintiff Bridge Aina Lea, LLC ('Bridge'), the owner of the parcel, claims that, in reclassifying the land, the Commission and certain commissioners violated Bridge's rights under the United States Constitution, the Hawaii Constitution, and various Hawaii laws." Order at 1-2. For more detail on the claims, see this post, "Guest Post: Federal Courts Flashback - Takings And Vested Rights Challenge To Land Use Commission.

The litigation began as two lawsuits originally filed in state court in the Third Circuit. The first was an original jurisdiction civil rights lawsuit against the State Land Use Commission which originally sought, among other things, just compensation for the taking of the right to develop its property. The other case was an administrative appeal under the Administrative Procedures Act from the LUC's decision.

The State removed the civil rights lawsuit to U.S. District Court in Honolulu and promptly moved to dismiss, and this portion of the case nearly caused us to flash back to our Federal Courts class in law school, since it raised a host of procedural questions such as the effect of removal, whether certain defendants are "persons" under 42 U.S.C. § 1983, whether the federal court must have abstained from addressing the federal takings claim, whether there is a state damage remedy for deprivation of constitutional rights, and zoning estoppel under Hawaii law, among others. The federal courts (District and Ninth Circuit) delayed making any decisions pending the outcome of the administrative appeal as it wound it way up through the state court appeals process. 

Eventually, the Hawaii Supreme Court held the Commission was wrong when it reverted the land to its previous agricultural classification, but only because it did not comply with the requirements of state law (the Commission did not make specific findings of fact as required by statute). The court also rejected owner's state constitutional claims, and in a footnote, it arguably decided the federal constitutional claims, which had been reserved for the federal lawsuit, when it held the conditions were "valid." 

The federal case, which by then was in the Ninth Circuit -- which had held off its decision pending the ruling by the Hawaii Supreme Court -- was sent back to the District Court, which in late 2015 in this order, got rid of most of the federal case. The only claims left unresolved were the property owners claim for just compensation and damages for the temporary taking of its right to develop the property, and a claim for damages for the owner's vested rights claim. 

And as the District Court just concluded, all that amounted to was $1. 

Ninth Circuit, here they come. 

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PDF: Verdict Form, Bridge Aina Lea, LLC v. State of Hawaii Land Use Comm'n, Civ. No. 11-00414 (D. Haw. Mar. 23,...  

HTH: Aina Lea developer prevails in federal taking case