Regulatory "Taking" Claim Upheld on Less than Entire Parcel by Oregon Court of Appeals

By Eugene L. Grant and Dean M. Phillips
[March 2004]

Landowners and governmental entities may all feel the impact of a recent Oregon Court of Appeals decision relating to a regulatory “taking” (inverse condemnation). Coast Range Conifers, LLC v. State of Oregon, 189 Or App 531, 76 P3d 1148 (2003), hereinafter referred to as “Coast Range.” The decision reconsideration was filed Feb. 11, 2004. The court upheld its decision that a compensable “taking” occurred when a state forester denied logging on a nine-acre parcel based on an alleged bald eagle habitat which was no longer occupied. The decision is based on the Oregon State Constitution’s prohibition against a “taking” of property without the payment of just compensation. While this case also involves a number of other issues relating to jurisdictional and procedure issues, this advisory only deals with the state constitutional (inverse condemnation) aspect of the decision.

Summary of Facts: Coast Range Conifers, LLC (CRC) purchased a 40-acre parcel. Based upon two sightings of bald eagles and an unoccupied bald eagle nest by state and federal government employees, CRC filed a plan with the Oregon Department of Fish and Wildlife to restrict logging within a specified area of the nest leaving approximately 31 acres for logging. The state forester approved the plan. Following the nesting season, CRC observed that the nest was no longer occupied and filed a revised plan proposing to log the remaining nine acres. After a contested case hearing, the Board of Forestry upheld a denial of the plan to log the remaining nine acres (the “Board Decision”). CRC then sued for inverse condemnation arguing that there was no economic viability to the remaining nine acres.

Regulatory Takings In Oregon

To prevail on a regulatory taking claim, Oregon courts have historically held that a claimant must show that the subject regulation has deprived the claimant of all substantial beneficial or economically viable use of the subject parcel of property. The Oregon courts had not been clear on whether a regulation that impacts less than the whole parcel can result in a regulatory taking claim (inverse condemnation) or whether, to serve as the basis for an inverse condemnation claim, the regulation must deprive the claimant of all economic viable uses of the entire parcel.

In addition to the state constitutional claim, there may also be a federal constitutional claim based on a similar prohibition under the federal constitution. In Coast Range, the court reiterated its position that federal constitutional issues are not considered if the court can decide the matter on state constitutional grounds.

Significance of Coast Range Decision

Because Coast Range dealt with a nine-acre portion of a larger 40-acre parcel, the court discussed the “whole parcel” rule as it applies to Oregon. The state did not refute that the Board’s Decision resulted in a complete deprivation of value with respect to the nine-acre area. Instead, the state, relying upon federal case law, argued that there was not a compensable “taking” because the “whole [40-acre] parcel” was not deprived of value. The rule pronounced in the federal case law is often referred to as the “whole parcel” rule. Significantly, in Coast Range, the Court refused to apply the federal case law cited by the state and held that the “whole parcel” rule does not apply in Oregon. The Court found that Oregon courts consistently reject the “whole parcel” rule. Citing a prior holding of the Oregon Supreme Court, the Court of Appeals reasoned that courts in Oregon look to each parcel separately from the larger whole, examining only the individual portions of the claimant’s property that were subject to the use restrictions without reference to the use or value of the property as a whole. Based on this analysis, the court held that CRC has sustained its regulatory “takings” (inverse condemnation) claim under the state constitution.

This case may be appealed by the state, but if upheld by the Supreme Court, it will have a significant impact on existing as well as potential governmental regulations. Because the Coast Range decision cited prior Oregon Supreme Court decisions with respect to the “whole parcel” rule, it is anticipated that the Supreme Court will uphold the Court of Appeals decision. Of course, the Supreme Court could overrule its earlier decisions to align Oregon’s takings jurisprudence with federal law.

Why is the Coast Range Decision Important to You?

If you are a landowner and regulations restrict development of only a portion of your land, e.g., a wetland, then you might be entitled to compensation for such restrictions on use. Likewise, governmental agencies may want to exercise caution in enforcing or adopting new use restrictions that affect only a portion of parcels where such restriction would have the result of depriving the owner of all substantial beneficial and economical use of the portion of the parcel. Clustering of development density such as is common under planned unit development ordinances and transferable development rights may be necessary to avoid inverse condemnation claims due to natural resource protection regulations.

If you have any questions relating to this important case, please feel free to contact any of the following at Davis Wright Tremaine:

Eugene L. Grant, Portland, (503) 778-5427, genegrant@dwt.com
Dean M. Phillips, Portland, (503) 778-5284, deanphillips@dwt.com
Christopher P. Koback, Portland, (503) 778-5382, chriskoback@dwt.com

We remain ready to assist you with similar issues.

This Advisory is a publication of the Real Estate & Land Use Group of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in real estate, land use and construction law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2004, Davis Wright Tremaine LLP.

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