Real Estate & Land Use Advisory Bulletin
Oregon Supreme Court Accepts Review of Lower Court
Ruling to Consider Regulatory "Taking" Claim on Less than
Entire Parcel
By Eugene
L. Grant and Dean
M. Phillips
[Nov. 2004]
This is an update to a DWT Advisory Bulletin from
March about an Oregon Court of Appeals decision that held a compensable
“taking” occurred when a state forester denied logging
on a nine-acre parcel because of an alleged bald eagle habitat.
The State of Oregon asked the Oregon Supreme Court to review the
decision, arguing that the Oregon Constitution requires payment
of just compensation for a taking only when a governmental regulation
has deprived the owner of all economically viable
use of property. The Supreme Court allowed the petition for review
and will hear oral argument on Jan. 7, 2005 on that issue. The final
ruling will likely affect landowners and governmental entities.
Concerned parties may wish to consider filing an amicus curiae
(friend of the court) brief with the Supreme Court to have input
on this important issue.
The Decision: In Coast Range
Conifers, LLC v. State of Oregon, 189 Or App 531, 76 P3d 1148
(2003), the Oregon Court of Appeals considered a regulatory “taking”
(inverse condemnation) and held 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 ruling is based on the Oregon State Constitution’s prohibition
against a “taking” of property without the payment of
just compensation. While the case involves a number of other issues
relating to jurisdiction and procedure, this advisory only addresses
the state constitutional issue.
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, historically
Oregon courts have 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 have 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 economically 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, relying upon
federal case law, the state 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 of Appeals
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” claim under the state constitution.
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 that 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 upheld by the Supreme Court, the decision 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, the Supreme Court could rely on that precedent
to uphold the decision or could overrule or distinguish its earlier
decisions to align Oregon’s takings jurisprudence with federal
law. The Supreme Court may take this opportunity to reconsider its
analysis of the Oregon Constitution as that court has recently focused
on the Oregon framers’ intent when interpreting the state
constitution. In any event, this is an important case for the Supreme
Court to consider and its ruling could have broad implications for
property owners and governmental bodies. Parties interested in having
input should consider intervening in the case as soon as possible.
As a final note, this case and the issue of governmental
regulations may be affected by the November 2nd election and the
outcome of Measure 37. That initiative petition would require governments
to pay owners or forgo enforcement when certain land use restrictions
reduce property value. In any event, the Supreme Court’s action
in Coast Range will be an important decision with far reaching
effects.
The purpose of this article is to make the firm’s clients
aware of legal rulings that may affect the operation or value of
their real estate holdings and investments. If you have a question
regarding this ruling or the proceeding before the Oregon Supreme
Court, please do not hesitate to call DWT for assistance.
If you have any questions relating to this important case, please
feel free to contact any of the following at Davis Wright Tremaine:
Christopher
P. Koback, Portland, (503) 778-5382, ChrisKoback@dwt.com
Margarita
G. Molina, Portland, (503) 778-5262, RitaMolina@dwt.com
This Advisory is a publication of the
Real Property 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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