The water district's counsel, Paul R.Q. Wolfson of Wilmer Cutler Pickering Hale and Dorr, was asked by Chief John Roberts Jr. if there was any limit in the Constitution on what an agency can demand as a condition for the issuance of a permit. Wolfson said the due process and equal protection clauses may impose restrictions. And, he added, "If the conditions are so onerous that it would make it essentially impossible to derive any value from the land, that may very well call into question Penn Central or Lucas [v. South Carolina Coastal Council (1992)]." Koontz's case, he said, could have been litigated as a Penn Central case.
Wolfson faced a series of questions on whether a government demand for money could be a takings. Scalia said, "As I understand your position, cash is magical, right? The government can come into my house, take all of the cash that's there, and that is not the basis for takings claim, right?"
The problem with extending the takings analysis to money, said Wolfson, is that it has no logical stopping point.
Deputy Solicitor General Edwin Kneedler told the justices that extending Nollan and Dolan to permit denials would be a "radical change." He explained, "It is standard procedure when someone applies for a permit from the government, it is the permit applicant's burden to establish that he complies with the regulatory program. Nollan and Dolan shift that burden to the government. That has never been the case under regulation, including land use regulation."
Nollan and Dolan, he argued, apply to the specific situation where there is an exaction of a right of access, an easement for the public to enter the land as a condition. During Beard's rebuttal, Sotomayor raised her concern that if Nollan and Dolan apply to permit denials, there will be an "enormous floodgate," one in which "we are sending a signal that perhaps states should be more quiet rather than more engaging. They should just say no, because anything they offer is going to be seen potentially as an unconstitutional taking."
However, Beard responded, "I don't believe that negotiations will suddenly break down, and we will see a flurry of permit denials if the court rules in our favor. What will happen instead, it's true, I should say, they will lose flexibility in demanding whatever it is that they want under the takings clause."
Marcia Coyle writes for The National Law Journal, a Daily Report affiliate.