Justices Strengthen Property Owners’ Rights to Challenge Blocked Plans for Development

The Supreme Court on Thursday strengthened the rights of property owners to challenge regulators who block them from building on their land.

Even if long-standing regulations forbid development, such as in a wetlands area, new owners can still go to court and sue for compensation if their development plans are denied, the justices ruled.

Landowners “have a right to challenge unreasonable limitations on the use and value of land,” Justice Anthony M. Kennedy said in reviving a Rhode Island man’s suit against state regulators.

Legal experts called the court’s 5-4 decision a small but potentially significant victory for landowners and developers in their perennial battle with local and state agencies.

“This opens the courthouse doors a bit wider for them,” said Pepperdine University law professor Douglas Kmiec.

Thursday’s decision is consistent with a long line of high court rulings that have tilted in favor of property rights over land-use regulation.

In 1987, Justice Antonin Scalia accused California’s coastal regulators of practicing “extortion.” To obtain a permit to build a beach house on their land, owners were forced unfairly to allow public pathways across their property, he said.

Repeatedly since then, the court’s conservative justices have taken up appeals from disgruntled property owners. In nearly each instance, the court has narrowly ruled for the landowner. Yet none of the rulings has been clear and sweeping in its effects, and they have virtually guaranteed more litigation.

Thursday’s decision was no exception.

It revives the lawsuit brought by a Rhode Island developer who has been fighting to build on his coastal property since 1978.

Anthony Palazzolo bought 18 acres near Westerly, much of which consisted of salt marshes and tidal pools. State law in the 1970s protected these coastal wetlands, and Rhode Island’s coastal council designated Palazzolo’s land as a protected zone.

Undeterred, he proposed to fill in the wetlands and build a beach club.

After the coastal council rejected the development, Palazzolo tried again with a revised plan. It too was rejected.

He then sued, claiming he was owed $3.1 million in compensation. He relied on the 5th Amendment’s clause that says “private property . . . shall not be taken for public use without just compensation.”

The Rhode Island Supreme Court tossed out his compensation claim for three reasons. First, it was not “ripe,” the state judges said, because he could have proposed a smaller development, such as building a few homes. Second, he was barred from suing because the earlier state regulation prohibited development in the wetlands. And third, he had not been denied all use of his land because two acres away from the wetlands could be developed.

Lawyers for the Sacramento-based Pacific Legal Foundation, which has led the fight for property rights in California, took Palazzolo’s case to the Supreme Court.

On Thursday, they won a partial victory. Kennedy said Palazzolo’s claim was ripe because it was clear that state regulators were not going to approve his development of the wetlands.

This alone is an important victory for property owners, said attorney Carter Phillips, who represented some California coastal property owners in the case.

“This is a source of great aggravation for them. If they propose a 12-acre development, the commission says no, try 10 acres. Then if they proposed a 10-acre development, they’d say no, ‘try again for 9.5 acres,’ ” he said.

That kind of rejection-revision-rejection cycle has prevented landowners from suing because their cases are considered not ripe.

Also, Kennedy said that existing wetlands regulations did not absolutely bar the owner from suing. New buyers of land may not know of all the restrictions on it, he said.

James Burling, the Pacific Legal Foundation attorney who represented Palazzolo, said the decision clears the way for landowners to press their compensation claims.

But a California state lawyer said he doubted whether many landowners will actually win such cases.

“Considering the number of takings claims you see, very few actually result in a favorable judgment for the landowner,” said Joseph Barbieri, a deputy state attorney general in Oakland. “I don’t think this will change that.”

Indeed, Kennedy’s opinion rejected Palazzolo’s claim for compensation since he was not denied all “economic” use of his land.

However, he agreed that Palazzolo could go back to court to argue that a total ban on development near the wetlands was unreasonable.

It was unclear how Thursday’s ruling might affect efforts by the California Coastal Commission to prevent home-building in the Bolsa Chica wetlands in Huntington Beach.

Environmentalists denounced the ruling and said it will encourage nuisance suits against state and local regulators.

“The ruling is anti-environmental judicial activism that jettisons one of the few bright-line rules of takings law,” said Timothy Dowling, counsel for the Community Rights Council in Washington. “The court bends over backward to resuscitate a claim that has no business being in court, and [it] has produced mush that will engender confusion and embolden developers for years to come.”

Kennedy’s opinion in Palazzolo vs. Rhode Island (99-2047) was joined by Chief Justice William H. Rehnquist and Justices Scalia, Sandra Day O’Connor and Clarence Thomas.