Court Denies Regulatory Taking in Designated Port Area

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SandBar 7:1, Regulatory Takings Issue, April, 2008 Court Denies Regulatory Taking in Desginated Port Area United States Gypsum Company v. Executive Office of Environmental Affairs, 867 N.E.2d 764 (Mass. App. Ct. 2007). *Alicia Schaffner, 2L, Roger Williams University School of Law* A Massachusetts appellate court has concluded that there was no regulatory taking of property in a designated port area (DPA) when the Director of the Massachusetts Office of Coastal Zone Management placed requirements on a property owner as a condition of being excluded from the DPA. Background The Massachusetts Office of Coastal Zone Management (OCZM) has created designated port areas (DPA) in order to en courage proper use of coastal re sources in a manner that is consistent with the federal Coas tal Zone Management Act. These regulations are to promote “water dependent industrial uses” of the resources.1 The theory be hind these regulations is that non-industrial and non-marine uses have a “far greater range of lo cational options.”2 In 2002, five property owners in the DPA asked for the OCZM to conduct a “boundary review” to decide if their lands should remain within the DPA. All of these property owners wanted to use their land for non-water dependent uses such as residential condominiums. The OCZM found that one property could be excluded from the DPA, two should stay in the DPA, and two could be excluded once the owners complied with certain conditions. These conditions included an easement for a roadway that was to be built on the properties. The Director of the OCZM accepted the conclusions from the boundary review. Three property owners, United States Gypsum Company, LaFarge North America, Inc., and Charlestown Commerce Center (CCC), brought three separate suits, which were later consolidated. Two of the property owners requested the reversal of the conditional exclusions from the DPA on the following grounds: 1) the director exceeded his authority when making this decision and 2) he did not have substantial evidence when he made his decision. Additionally, the owner of CCC, Donato Pizzuti, requested “a boundary review leading to exclusion of the CCC from the DPA[,]” and challenged “the denial of an exclusion for the CCC in the proceedings under review” as a denial of due process and stated that the CCC’s “continued inclusion in the DPA constituted a regulatory taking.”3 The lower court concluded that the director’s decision was within his power to make and denied all of plaintiffs’ claims. All appealed. The Court’s Decision The Appeals Court of Massachusetts in Suffolk disagreed with the lower courts on all claims except those in regard to the CCC. The court first looked at the director’s authority. The DPA designation regulations state that a property must be included in the DPA when it meets the designation standards. The OCZM can only make “minor adjustments” to a DPA boundary and these adjustments should not have the consequence of a “net reduction in the total area of the DPA.”4 The court found that these regulations clearly limit the director’s discretion in designation. Furthermore, the purpose of the regulations is to preserve the coast for water-dependent industrial use to the greatest extent possible. The director admitted that the exclusion would cause a six percent reduction of the DPA’s land area, but found this to be acceptable. There are many regulations that limit directors’ discretionary power when it comes to DPA designation; however, the director was able to find a provision in the regulation that he felt afforded him wide discretion in this matter. The court did not find that this grant of discretion could be so broadly read. The court said that it “would be an extraordinary distortion of ordinary meaning to transform the discretion to condition a decision designating a property that must be included or remain in the DPA because it meets the designation criteria 85 into discretion to do precisely the reverse.”5 To allow the discretion to be utilized this way would mean that his decisions would work contrary to the goals of the regulations. The court also found that there was not substantial evidence to support the director’s decision. The court is not required to affirm the agency’s decision unless there is enough information from which an ordinary person could come to the same conclusion or if there is an overwhelming amount of evidence that cuts against the agency’s decision. In this instance, there was no way for the director to show that even if he had an easement that the road would be built, because there was no evidence that the road was going to be funded by anyone in the near future. Therefore, there was nothing that warranted the director’s decision to exclude otherwise suitable properties from being included in the DPA. The court then addressed the rest of the CCC’s claims. At this point the court agreed with the findings of the lower court. Regarding the inclusion of CCC in the DPA, the court found that the CCC met the regulatory criteria for classification as a DPA; therefore, the land must be included in the DPA. The court also found that Pizzuti’s due process claim was moot. He had claimed his due process right was violated because he was not allowed to negotiate for a conditioned exclusion from the DPA regulation, however, since the court already said that these exclusions were not valid, the claim was moot. Finally, the court looked at CCC’s regulatory taking claim. The court found no merit to Pizzuti’s claim that he had been “deprived of all ‘economically viable use’ of his land by virtue of its inclusion,” because he had failed to support this claim with the required facts.6 It is also worth noting that Pizzuti was never looking for compensation for his taking, but was instead trying to circumvent the findings of the agency by having the court reexamine the evidence under the guise of a constitutional claim. The court listed several other reasons why this is not a taking. The first is that DPA regulations allow twenty-five percent of the property to be used for non-water dependent and non-industrial purposes provided that these purposes are not incompatible with how the waterfront functions. Furthermore, the owner could not establish a “categorical taking” based on the deprivation of all economically viable use. Even if there was a diminution in market value of the CCC, it was not serious enough to warrant compensation for a taking. The court did not agree with the plaintiff that there was a taking based on Penn Central, a case that outlines factors to determine if regulation has gone “too far” and become an unconstitutional taking. The CCC’s claim does not satisfy any of the guiding factors used in Penn Central. These factors include: “the economic impact of the regulation; the extent to which it has interfered with the owner’s ‘distinct investment-backed expectations’; and the character of the government actions.”7 For example, the owner had no investment-backed expectation because the DPA regulation was in effect when he bought the property. Lastly, the court mentions that there was no “physical invasion” of the property; therefore, the government action involved here does not have the character which would seem to indicate a taking. With all of these considerations, the court found it proper to deny the petitioner’s takings claim. Conclusion The court concluded that there was no taking in this case and that all of the areas that met the requirements for DPAs must be classified as such. This is a decision that is consistent with the regulation and promotes the goals which the OCZM was meant to promulgate. Endnotes 1. United States Gypsum Company v. Executive Office of Environmental Affairs, 867 N.E.2d 764, 767 (Mass.App.Ct. June 4, 2007). 2. Id. 3. Id. at 768. 4. Id. at 771 quoting 301 Mass. Code Regs. A7 25.05(2) (1994). 5. Id. at 772. 6. Id. at 776-77. 7. Id. at 777-78.
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SandBar 7:1, Regulatory Takings Issue, April, 2008

Court Denies Regulatory Taking in Desginated Port Area

United States Gypsum Company v. Executive Office of Environmental Affairs, 867 N.E.2d 764 (Mass. App. Ct. 2007).

Alicia Schaffner, 2L, Roger Williams University School of Law

A Massachusetts appellate court has concluded that there was no regulatory taking of property in a designated port area (DPA) when the Director of the Massachusetts Office of Coastal Zone Management placed requirements on a property owner as a condition of being excluded from the DPA.

Background
The Massachusetts Office of Coastal Zone Management (OCZM) has created designated port areas (DPA) in order to en courage proper use of coastal re sources in a manner that is consistent with the federal Coas tal Zone Management Act. These regulations are to promote “water dependent industrial uses” of the resources.1 The theory be hind these regulations is that non-industrial and non-marine uses have a “far greater range of lo cational options.”2
            In 2002, five property owners in the DPA asked for the OCZM to conduct a “boundary review” to decide if their lands should remain within the DPA. All of these property owners wanted to use their land for non-water dependent uses such as residential condominiums. The OCZM found that one property could be excluded from the DPA, two should stay in the DPA, and two could be excluded once the owners complied with certain conditions. These conditions included an easement for a roadway that was to be built on the properties. The Director of the OCZM accepted the conclusions from the boundary review.
       Three property owners, United States Gypsum Company, LaFarge North America, Inc., and Charlestown Commerce Center (CCC), brought three separate suits, which were later consolidated. Two of the property owners requested the reversal of the conditional exclusions from the DPA on the following grounds: 1) the director exceeded his authority when making this decision and 2) he did not have substantial evidence when he made his decision. Additionally, the owner of CCC, Donato Pizzuti, requested “a boundary review leading to exclusion of the CCC from the DPA[,]” and challenged “the denial of an exclusion for the CCC in the proceedings under review” as a denial of due process and stated that the CCC’s “continued inclusion in the DPA constituted a regulatory taking.”3
            The lower court concluded that the director’s decision was within his power to make and denied all of plaintiffs’ claims. All appealed.

The Court’s Decision
The Appeals Court of Massachusetts in Suffolk disagreed with the lower courts on all claims except those in regard to the CCC. The court first looked at the director’s authority. The DPA designation regulations state that a property must be included in the DPA when it meets the designation standards. The OCZM can only make “minor adjustments” to a DPA boundary and these adjustments should not have the consequence of a “net reduction in the total area of the DPA.”4 The court found that these regulations clearly limit the director’s discretion in designation. Furthermore, the purpose of the regulations is to preserve the coast for water-dependent industrial use to the greatest extent possible. The director admitted that the exclusion would cause a six percent reduction of the DPA’s land area, but found this to be acceptable.
            There are many regulations that limit directors’ discretionary power when it comes to DPA designation; however, the director was able to find a provision in the regulation that he felt afforded him wide discretion in this matter. The court did not find that this grant of discretion could be so broadly read. The court said that it “would be an extraordinary distortion of ordinary meaning to transform the discretion to condition a decision designating a property that must be included or remain in the DPA because it meets the designation criteria 85 into discretion to do precisely the reverse.”5 To allow the discretion to be utilized this way would mean that his decisions would work contrary to the goals of the regulations.
            The court also found that there was not substantial evidence to support the director’s decision. The court is not required to affirm the agency’s decision unless there is enough information from which an ordinary person could come to the same conclusion or if there is an overwhelming amount of evidence that cuts against the agency’s decision. In this instance, there was no way for the director to show that even if he had an easement that the road would be built, because there was no evidence that the road was going to be funded by anyone in the near future. Therefore, there was nothing that warranted the director’s decision to exclude otherwise suitable properties from being included in the DPA.
            The court then addressed the rest of the CCC’s claims. At this point the court agreed with the findings of the lower court. Regarding the inclusion of CCC in the DPA, the court found that the CCC met the regulatory criteria for classification as a DPA; therefore, the land must be included in the DPA.
            The court also found that Pizzuti’s due process claim was moot. He had claimed his due process right was violated because he was not allowed to negotiate for a conditioned exclusion from the DPA regulation, however, since the court already said that these exclusions were not valid, the claim was moot.
            Finally, the court looked at CCC’s regulatory taking claim. The court found no merit to Pizzuti’s claim that he had been “deprived of all ‘economically viable use’ of his land by virtue of its inclusion,” because he had failed to support this claim with the required facts.6 It is also worth noting that Pizzuti was never looking for compensation for his taking, but was instead trying to circumvent the findings of the agency by having the court reexamine the evidence under the guise of a constitutional claim.
            The court listed several other reasons why this is not a taking. The first is that DPA regulations allow twenty-five percent of the property to be used for non-water dependent and non-industrial purposes provided that these purposes are not incompatible with how the waterfront functions. Furthermore, the owner could not establish a “categorical taking” based on the deprivation of all economically viable use. Even if there was a diminution in market value of the CCC, it was not serious enough to warrant compensation for a taking. The court did not agree with the plaintiff that there was a taking based on Penn Central, a case that outlines factors to determine if regulation has gone “too far” and become an unconstitutional taking. The CCC’s claim does not satisfy any of the guiding factors used in Penn Central. These factors include: “the economic impact of the regulation; the extent to which it has interfered with the owner’s ‘distinct investment-backed expectations’; and the character of the government actions.”7 For example, the owner had no investment-backed expectation because the DPA regulation was in effect when he bought the property. Lastly, the court mentions that there was no “physical invasion” of the property; therefore, the government action involved here does not have the character which would seem to indicate a taking. With all of these considerations, the court found it proper to deny the petitioner’s takings claim.

Conclusion
The court concluded that there was no taking in this case and that all of the areas that met the requirements for DPAs must be classified as such. This is a decision that is consistent with the regulation and promotes the goals which the OCZM was meant to promulgate.

Endnotes
1. United States Gypsum Company v. Executive Office of Environmental Affairs, 867 N.E.2d 764, 767 (Mass.App.Ct. June 4, 2007).
2. Id.
3. Id. at 768.
4. Id. at 771 quoting 301 Mass. Code Regs. A7 25.05(2) (1994).
5. Id. at 772.
6. Id. at 776-77.
7. Id. at 777-78.