$4,000,000 Increase is Made Possible by Defeating City’s Motion Asserting Failure to Exhaust Administrative Remedies

While this webpage focuses primarily on my work in my home state of Michigan, I also work with co-counsel in other states. A case in another state (that I’m not identifying to protect the client’s privacy) involved an offer of $51,537 to obtain approximately one acre from a forty acre property for a road project just entered a final order. The property was used for residential and agricultural purposes.

As part of the case, the owner also filed an alternative early date of taking counterclaim. The agencies defended it, in part, by asserting that the owner had failed to exhaust his administrative remedies.  If successful, the City’s motion would have gutted the owner’s claims.  However, the trial court denied that motion.

Factually, the agencies adopted a road construction plan for the entire project that limited access points to the road system. On one of the roads touching the property, access points would only be allowed every half mile – and the property did not enjoy half a mile of frontage – resulting in a loss of all access to that road. The pre-existing public road parallel to the replacement built as part of the project was physically closed immediately north and south of my client’s property. The condemnation lawsuit filed by one of the agencies explicitly closed all access points to the second road except for a partial right-in, right-out driveway that would be constructed as part of the road work. Despite my client begging for years to be allowed to retain at least some of his pre-project access, the agencies claimed that he needed to follow expensive and time-consuming administrative processes requiring creation of a formal site plan to obtain a final determination that access would be denied.

Generally, federal cases require property owners asserting certain types of regulatory takings to establish finality before filing suit. Finality essentially contemplates exhausting the agencies administrative processes (like seeking a variance) to obtain relief before resorting to the courts.  Originally, Williamson Cnty Reg'l Planning Comm'n v Hamilton Bank of Johnson City, 473 US 172 (1985), identified two steps required to establish finality to bring a Fifth Amendment taking in federal court, requiring exhaustion of both municipal variance requirements and state court litigation remedies.  Knick v Twp of Scott, Pennsylvania, 139 S Ct 2162 (2019), struck down the requirement to exhaust state court litigation remedies before pursuing a claim in federal court. However, the exhaustion of municipal variance requirements remains in place for federal claims. The question was whether that body of law applied to the claims raised by the owner in our case. They did not.

The City cited both Williamson Cnty and eighteen decisions from states around the country adopting the requirements in it for state court takings. However, the dispute in Williamson arose when “the county zoning ordinance was changed so as to reduce the allowable density of dwelling units.” Id. Neither it nor the 18 other cases cited by the City involved a physical invasion. For example, the Michigan case cited, Paragon Properties Co v City of Novi, 452 Mich 568 (1996), addressed a request “to rezone the property from a single-family residential zone to a mobile home district zone.” 

“The Takings Clause of the Fifth Amendment…prohibits the government from taking private property for public use without just compensation. The clearest sort of taking occurs when the government encroaches upon or occupies private land for its own proposed use. Our cases establish that even a minimal ‘permanent physical occupation of real property’ requires compensation under the Clause.”  Palazzolo v Rhode Island, 533 US 606, 617 (2001).

In our case, the government agencies physically invaded the property by filing a condemnation lawsuit seeking to acquire property rights and by altering the roads directly touching the property. As such, the law cited by the agencies did not apply. Indeed, multiple cases held that claims involving physical invasions did not require exhaustion of administrative remedies. For example, the agencies cited a Nevada case applying the finality requirement. Yet, a different Nevada case held that held that “ordinances” allowing aircrafts to fly less than “500 feet” above the owner’s property “constituted a per se regulatory taking, [and[ the court further concluded that [the property owner] was not required to exhaust his administrative remedies before bringing his claims for inverse condemnation.”  Hsu v Cnty of Clark, 173 P3d 724, 731 (2007).

Multiple federal cases reach the same result. “We conclude that Williamson County does apply to physical takings, with the recognition that the finality requirement is satisfied by a physical taking.”  Kurtz v Verizon New York, Inc., 758 F3d 506, 509 (2d Cir 2014)(installation of “telecommunications” devices on private property). “While Williamson County applies to regulatory and physical takings alike, a physical taking in itself satisfies the need to show finality.” Id, at 513.  “Takings involving physical invasions—such as the taking alleged here—are subject to a more streamlined inquiry.  We have held that a physical invasion constitutes a ‘final decision’ and thus satisfies Williamson County's first requirement” involving seeking a variance. Greenfield Mills, Inc v Macklin, 361 F3d 934, 958 (7th Cir 2004)(involving “discharge of pollutants”).

Since the agencies were physically invading the owner’s property, their defense was inapplicable.  The trial court denied their motion, paving the way for a negotiated settlement requiring payment of an additional $4,000,000 over and above the original, nominal $51,537 good faith offer.

Not all states have adopted the exhaustion standard. However, even in states that require it, damages or counterclaims involving physical invasions should not need to satisfy that test.

While I am based in Michigan, Clark Hill is a national law firm. I would be happy to work with either my colleagues in other states or experienced local counsel to evaluate your eminent domain issues.  Please feel free to contact me.