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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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