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Water Log 28.3, November, 2008

Louisiana Court Denies Takings Claim Based on Background Principles of Local Zoning Law

East First Street, L.L.C. v. Bd. of Adjustments, 2008 WL 2567080 (La. App., June 6, 2008).

Timothy M. Mulvaney, J.D.
(with research assistance from Moses Dewitt, 2010 J.D. Candidate, Florida State University College of Law)

In an unpublished opinion, a Louisiana appellate court upheld a trial court ruling rejecting a constitutional takings claim based on a city’s refusal to rezone property from residential to commercial use, holding that the zoning in place at the time Plaintiff acquired the property represented a “background principle” of state property law that barred the claim.

Background
In 1979, the City Council of Thibodaux, Louisiana (“City”) rezoned the relevant five adjoining tracts of land for residential use. However, a grandfather clause in the zoning ordinance allowed the landowner to continue utilizing the property for commercial purposes. Plaintiff, East First Street, LLC, purchased the property after 1979.

Plaintiff petitioned the City to rezone the area above the existing commercial establishments on these tracts from residential to commercial use. The City agreed with the recommendation of its planning board in denying Plaintiff’s petition to rezone.
     
The property owner challenged the City’s decision in district court, alleging that the City acted arbitrarily and capriciously in refusing to rezone the property as requested. In the alternative, Plaintiff alleged that the regulation, or zoning scheme, constituted an inverse, or regulatory taking, of its property by substantially reducing its value.

District Court Affirms City’s Decision
At trial, the City presented witnesses who testified as to their reasons for voting against the rezoning request, which included the character of the surrounding area, compliance with the zoning master plan, avoidance of spot zoning, the potential for more-conforming commercial uses, and the precedent of other rezoning requests. Plaintiff alleged that the decision bore no relation to health, safety or welfare, and that the City rejected the rezoning proposal merely based upon nearby residents’ speculation.

Generally affording deference to local zoning entities, Louisiana’s judiciary has defined “arbitrary and capricious” as acting in a “willful and unreasoning manner, absent consideration and in disregard of facts and circumstances of the case.”1 The courts have held, “[W]hen there is room for two opinions, action is not arbitrary or capricious when exercised honestly and upon due consideration, even though it may be believed that an erroneous conclusion has been reached.”2

The district court held that Plaintiff did not meet its burden of proving by a preponderance of the evidence that the City acted arbitrarily and capriciously in its zoning decision.3 The court also rejected Plaintiff’s allegation that it should be compensated for damages to the value of its property, in light of the fact that Plaintiff purchased the property after the 1979 rezoning. Plaintiff appealed these rulings.

Ruling Affirmed on Appeal
The appellate court upheld the district court’s decision with respect to the rezoning decision. The court held that the City acted in good faith and that the district court did not err in concluding that the Plaintiff failed to meet its burden of proof.

The court spent considerably more time addressing Plaintiff’s claim of an unconstitutional taking. In accord with the United States Supreme Court’s decision in Palazzolo v. Rhode Island,4 the court stated that acquisition of title after the effective date of the regulation does not bar, in and of itself, a takings claim. In Palazzolo, the nation’s high court explained that post-enactment transfer of title does not absolve the State from defending its land use regulations. To hold otherwise, the court asserted, a newly regulated landowner could not transfer the interest she recently purchased, which includes the right to challenge unreasonable restrictions on land without the provision of just compensation.

Here, Plaintiff presumed that the residential use restriction was not applicable to the property at the time of purchase because commercial activities had continued on the land for thirty-five years since the adoption of the zoning ordinance. When the City advised Plaintiff that it would be enforcing the residential use restriction, the court held that the Plaintiff had the right to challenge the regulation as applied to his property. Therefore, the court found the takings issue ripe for review.

The appellate court went on to explain that, under Louisiana law, private property “shall not be taken or damaged by the state or its political subdivisions except for public purposes and with just compensation paid.”5 However, the United States Supreme Court has indicated that this right to just compensation is not absolute. This court acknowledged that in Lucas v. South Carolina Coastal Council,6 the nation’s high court held that regulation cannot prohibit all economically beneficial use of land without compensation, unless the restrictions were never part of the landowner’s title to begin with in light of background principles of state property law.7

The Louisiana Supreme Court has found that valid zoning and land use regulations properly enacted under the state’s police power may constitute “background principles” of Louisiana law.8 Therefore, the appellate court ruled that the valid zoning scheme in place since 1979 constituted a “background principle” that is a defense to Plaintiff’s damage claims under Louisiana’s takings law.

Among other peculiarities in the decision, the court did not explain its application of Lucas in light of the fact that some commercial activity continued on the property, whereby the denial of the rezoning request surely did not prohibit all economic beneficial use of the land. When there remains some value in the land after regulation, takings jurisprudence ordinarily has relied upon the balancing test set forth in the United States Supreme Court’s decision in Penn Central Transportation, Co., et al., v. New York City, et al.9 to determine whether the government action unreasonably interferes with a landowner’s use and enjoyment of property.

Endnotes:
1.  See East First Street, L.L.C. v. Bd. of Adjustments, 2008 WL 2567080, *1 (La. App., June 6, 2008) (quoting Four States Realty Co., Inc. v. City of Baton Rouge, 309 So.2d 659, 664 (La. 1974)).
2.  Id.
3.  Id.
4.  533 U.S. 606, 632 (2001).
5.  East First Street, L.L.C., 2008 WL 2567080, at *4 (citing La. Const. Art. I, A7 4 (emphasis added)).
6.  505 U.S. 1003 (1992).
7.  See id. at 1029.
8.  East First Street, L.L.C., 2008 WL 2567080, at *4 (citing Avenal v. State, 886 So.2d 1085, 1107 n. 28 (2004)).
9.  438 U.S. 104 (1978).

University of Mississippi