Latest On The Latest Hawaii Takings Case: Unconstitutional Conditions, Statutes Of Limitations, And Vested Rights

by Robert Thomas, InverseCondemnation, February 8, 2016

Here's the latest on a takings case that is winding its way through the U.S. District Court in Honolulu. Yes, you read that right: a takings case being litigated in federal court.

Intrigued? Read on.

We've covered this case and the related state court litigation several times here before, so this isn't entirely unfamiliar ground. This is a case in which a property owner (the developer of the Aina Lea project on the Big Island, just north of the Waikoloa beach area) filed a case in Hawaii state court seeking, among other things, just compensation for the temporary taking of its right to develop its property. The case ended up in federal court because the State of Hawaii Land Use Commission waived the State's 11th Amendment immunity and removed the case from state court under federal question jurisdiction.

The litigation began as two lawsuits originating in state court in the Third Circuit (Big Island). The first was an original jurisdiction civil rights lawsuit, the other an administrative appeal (that's a writ of administrative mandate for you Californians). 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.

Many of these issues were brought about as a result of Hawaii's unusual state-based zoning scheme, whereby all land in the four of Hawaii's five counties that exercise home rule was initially "classified" by the State into one of four classifications (urban, agricultural, rural, conservation). The four counties are allowed to zone the land within the "urban" and "agricultural" districts into the more familiar Euclidean zones that we're familiar with. What most folks would call a "rezoning" is called a "boundary amendment" or "reclassification" when dealing with the State land use designations, and the Land Use Commission is the agency that takes action, not the counties.

The cases themselves came about as a result of a reclassification of land from urban to agricultural, and, in the words of the latest federal court federal court order issued 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 background on the federal action, see this post, "Guest Post: Federal Courts Flashback - Takings And Vested Rights Challenge To Land Use Commission."

Initially, the District Court stayed the federal action to allow the administrative appeal to get resolved in state court. Eventually, the Hawaii Supreme Court held the Commission was wrong when it reclassified the land to agricultural, 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 and did not resolve the order to show cause within one calendar year), but rejected the owner's state and federal constitutional claims. The federal case, which by then was in the Ninth Circuit -- which held off its decision pending the ruling by the Hawaii Supreme Court -- was sent back to the District Court.

Last we checked in late in 2015, the U.S. District Court, in this order, had gotten rid of most of the federal case. It's a long decision (65 pages), but is full of the issues we are familiar with:

• The Hawaii Supreme Court's decision in Bridge's favor rendered its federal court request for an injunction preventing the reclassification moot. 
• An injunction is not an available remedy for a taking -- only just compensation. That's a due process claim. 
• Preclusion principles bar Bridge's due process and equal protection claims. "Those issues, contained in Counts I and III, were decided by the Hawaii Supreme Court in the state administrative appeal." Order at 34-35. 
• Hawaii law does not allow for money damages as a remedy for equitable estoppel, only equitable (injunctive) relief. And the court already held that injunctive relief is moot (see above). 
• And immunity. Lots of immunity. See Order at 45-60.
• You can't sue officials in their individual capacities for a taking. Order at 60-63.

After that, the only pieces left of the federal case are the takings claim seeking just compensation against the Commission and certain commissioners in their official capacities, as well as the vested rights claim for damages against the same parties.

In December, the State filed a Motion for Summary Judgment to get rid of these claims, arguing: (1) the affordable housing condition is not an "exaction" subject to Nollan/Dolan scrutiny (see, e.g., the San Jose case, in which a cert petition is now pending in the U.S. Supreme Court); (2) the plaintiffs missed the statute of limitations, and had two years from the date on which the condition was imposed to challenge it; (3) the only remedy for a state law vested rights claim is invalidating the government act and not damages; and (4) the State did not prevent the plaintiff from building, it was the lack of an EIS that prevented it (kind of a proximate or superseding cause argument). The property owner, of course, has its own view of the situation, and had responses to these arguments.

This morning, the District Court held a hearing on the State's motion for summary judgment, and we were fortunate enough to be able to pop in and observe. Deputy AG Bill Wynhoff ably argued for the State, while the property owners were represented by Bruce Voss. In our view, both advocates argued well -- zealously but also with great professionalism. (Ah, if only it could be so in all cases, no?).

The court did not issue a ruling, and took the motion under advisement/submission, stating that a ruling should be forthcoming by the end of the month. The arguments lasted for over an hour, and we won't go over all details, and will only hit some highlights:

• There's more than one way to plead a takings claim, and it looks to us like the property owner did so, alleging a taking under a variety of theories.
• Whether an unconstitutional conditions claim is really a takings claim, or is some kind of separate due process-ey claim, is still somewhat up in the air. Yes, the act complained of is the government making you made choices that you shouldn't be asked to make, but the definite flavor of every land-related unconstitutional conditions case is takings, takings, takings. See, e.g., Nollan, Dolan, Koontz. The Supreme Court's latest unconstitutional conditions case (Horne II) also has a takings flavor, even though it is not a case about land. But in our view, a property owner can plead and pursue both claims, separately.   
• Did the Hawaii Supreme Court reach out in its opinion and resolve the federal issues? According to the State, yes it did. The Supreme Court in a footnote upheld the affordable housing condition as "valid," and that means game over, and issue has been definitively litigated. We're not so sure. Seems like its dicta at best, and a case where the Hawaii Supreme Court was going out of its way to decide an issue that was not squarely before it, in order to cut off the plaintiff from pursuing it in federal court. We don't think the federal court owes the Hawaii Supreme Court any deference on this one, even if that court was acting "[i]n the interest of judicial economy" as it asserted when it reached out and decided the federal constitutional issues during the course of an administrative appeal. See DW Aina Lea Dev. LLC v. Land Use Comm'n, No. SCAP-13-00000091, slip op. at 70 (Haw. Nov. 24, 2014). 
• It's really kind of strange to see a takings case being litigated in federal court. Yes, the State removed the case from state court, as it had the power to do (even though the plaintiff could not have brought the claim originally in federal court under Williamson County). The court exhibited some understandable confusion about the nature and form of the claims which it is now considering: is this a § 1983 claim (remember, the 1983 claim has been dismissed)? Can a state be sued directly under the constitution? Is this a state law takings claim, or is this a federal Fifth Amendment claim?
• Here's how we see it: the plaintiff's federal Fifth Amendment takings claims were not ripe, so it filed a state law takings claim in state court seeking just compensation. The State removing the case to federal court had two consequences: first, it dragged the state compensation claim into federal court, which then must apply state takings law to determine whether the property owner is owed just compensation under the Hawaii Constitution; second, the State waived any claim that the federal takings claim was not substantively ripe under Williamson County, even though the state has not yet denied compensation. Put another way, we think that by removing the case, the State conceded that compensation has not been provided and is not available via state procedures. Thus, both the federal and state takings claims are squarely presented, and neither requires a statute like § 1983, or its state law equivalent, to state a claim for relief, because both constitutional provisions are self-executing, and an owner may recover compensation even in the absence of enabling legislation.

If all of the above makes your eyes water, you are not alone, and if you'd rather just wait until the end of the month to read the District Court's opinion, we really wouldn't blame you.

Sidebar: we snapped the picture above -- a view of the entrance to the project site -- from the pull-out on Queen Kaahumanu Highway during our last visit to the area last month. The Google Earth view shows better the extent of the mauka development, and even some of the construction that has been undertaken.

PDF: State of Hawaii's Motion for Summary Judgment, Bridge Aina Lea, LLC v. State of Hawaii Land Use Comm'n...

PDF: Plaintiff's Memorandum in Opposition to State of Hawaii's Motion for Summary Judgment, Bridge Ain...