The U.S. Supreme Court on Tuesday struggled with a landowner’s claim that the denial of a permit to develop his land because he refused government suggestions to mitigate potential damage to wetlands amounted to an unconstitutional taking of his property. 

“What has been taken?” Justice Antonin Scalia asked Paul Beard of the Pacific Legal Foundation several times during arguments in Koontz v. St. Johns River Management District.

The high court case is being closely watched by property rights advocates, environmentalists and government officials because of its potentially major impact on the ability of government agencies to attach conditions to land development permits.

Beard represented Coy Koontz who, in 1994, sought to develop 3.7 acres of a 14.9-acre vacant lot in Orange County, Fla. The state had designated all but 1.4 acres of Koontz’s property as protected wetlands and uplands. Koontz had to obtain permits from the St. Johns water district to develop his land.

The district rejected Koontz’s conservation proposal as inadequate and then suggested nearly a dozen ways in which Koontz could mitigate the loss of wetlands, including additional off-site enhancement of 50 acres of wetlands anywhere within the river basin. When Koontz rejected the suggestions and declined to negotiate further, the district denied his permit applications.

In response to Scalia’s question about what was taken, Beard said, “What has been taken in effect is his funds that have to be put now to a public use, the enhancement of 50 acres of public wetlands.” He argued that the justices should apply two takings precedents to Koontz’ claim: Nollan v. California Coastal Commission (1987) and Dolan v. Tigard (1994). Those two decisions, he said, are “fundamentally about whether a property owner has been singled out to bear public burdens.”

However, Scalia rejoined, “[The money] hasn’t been taken. He turned [the suggestion] down.”

Nollan and Dolan deal with situations in which a government entity issues a permit with a condition requiring the landowner to dedicate some property to public use. The government must show an essential nexus between the condition and the regulatory purpose—a logical connection. It also must show a rough proportionality: What is demanded of landowner through the condition should be roughly proportional to the projected impact of the development that the condition is supposed to address.

Justices Stephen Breyer, Sonia Sotomayor and Ruth Bader Ginsburg also were skeptical of Beard’s argument. Breyer, in particular, said Beard’s argument was a form of regulatory taking that would fall under the court’s 1978 takings precedent, Penn Central Transportation Co. v. New York City. “So we simply look to see if [the regulation] went too far. The lower courts could do that.”

Ginsburg challenged Beard on his claim that the “crux” of Koontz’s taking claim was that the permit was denied because he refused to do off-site mitigation of 50 acres. “The record shows that it wasn’t one option,” she said. “They gave him a laundry list of things he could do, some of them having nothing whatever to do, anything off his own property.”

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 can be contacted at mcoyle@alm.com.